BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA, JR. BUILDING CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY CENTRAL VALLEY AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA THURSDAY, DECEMBER 11, 2003 9:00 A.M. TIFFANY C. KRAFT, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Alan Lloyd, Chairperson Mr. Joseph Calhoun Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Professor Hugh Friedman Dr. William Friedman Mr. Matthew McKinnon Supervisor Barbara Patrick Mrs. Barbara Riordan BOARD MEMBERS EXCUSED Dr. William Burke Supervisor Ron Roberts STAFF Ms. Catherine Witherspoon, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Bob Cross, Chief, Mobile Source Division Control Ms. Diane Johnston, General Counsel Mr. Michael Scheible, Deputy Executive Officer Mr. Michael Terris, Staff Counsel Ms. Lynn Terry, Deputy Executive Officer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF Ms. Kathleen Tschogl, Ombudsman Mr. Bart Croes, P.E., Chief, Research Division Ms. Maribell De La Torre, Interpreter Mr. Dan Donohoue, Chief, Emissions Assessment Branch Ms. Stacie Dorais, Board Secretary Mr. Paul Henderick, Air Resources Engineer, Retrofit Assessment Section Ms. Annette Hebert, Chief, Heavy-Duty Diesel In-Use Strategies Branch Mr. Rod Hill, Air Resources Engineer, Emissions Assessment Branch, Stationary Source Division Ms. Lisa Jennings, Air Pollution Specialist, Planning and Regulatory Development Section, Mobile Source Control Division Ms. Renee Kemena, Manager, Planning and Regulatory Development Section Mr. Jack Kitowski, Chief, On-Road Controls Branch Ms. Karen Magliano, Manager, Particulate Matter Analysis Section Ms. AnnMarie Mora, Research Division Mr. Alex Santos, Staff Air Pollution Specialist, Technical Analysis Section Mr. Win Setiawan, Staff, Stationary Source Division Mr. Michael Terris, Staff Counsel Mr. Hien Tran, Research Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Don Anair, Union of Concerned Scientists Ms. Diane Bailey, NRDC Mr. Todd Campbell, Coalition for Clean Air Mr. Linus Farias, SBC Ms. Staci Heaton, CTA Ms. Bonnie Holmes-Gen, American Lung Association Ms. BJ Kirwan, Thermo King Dr. Joseph Kubsh, MECA Ms. Judith Lamare, Cleaner Air Partnership Mr. Jed Mandel, EMA Mr. Jason Mark, Union of Concerned Scientists Mr. Jay McKeeman, CIOMA Mr. David Modisette, Cal ETC Ms. Kathryn Phillips, CEERT Mr. David Pieche, International Truck Mr. Larry Robinson, CAPCOA Ms. Sharon Rubalcava, Motion Picture Association of America Mr. Dean Saito, SC AQMD Mr. Larry Sherwood, SAC AQMD Mr. Paul Smith, CA Grocers Association Mr. Mike Tunnell, American Trucking Association PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. Herman Viegas, Thermo King Mr. Bill Warf, Cal ETC Ms. Stephanie Williams, CA Trucking Association PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX PAGE Pledge of Allegiance 1 Roll Call 1 Item 03-9-2 Chairperson Lloyd 6 Executive Officer Witherspoon 7 Staff Presentation 7 Mr. Linus Farias 17 Mr. Jay McKeeman 24 Mr. Todd Campbell 30 Ms. Bonnie Holmes-Gen 33 Q&A 35 Item 03-10-1 Chairperson Lloyd 42 Executive Officer Witherspoon 43 Staff Presentation 43 Item 03-10-5 Chairperson Lloyd 48 Motion 48 Vote 49 Item 03-8-4 Chairperson Lloyd 49 Executive Officer Witherspoon 49 Staff Presentation 52 Q&A 66 Ms. Stephanie Williams 83 Mr. Mike Tunnell 90 Mr. Jed Mandel 102 Mr. David Pieche 121 Mr. Sharon Rubalcava 124 Mr. Larry Robinson 125 Mr. Larry Sherwood 125 Mr. Todd Campbell 127 Mr. Dean Saito 132 Ms. Judith Lamare 132 Ms. Bonnie Holmes-Gen 138 Ms. Diane Bailey 139 Mr. Jason Mark 142 Ms. Kathryn Phillips 144 INDEX CONTINUED PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii Item 03-10-2 Chairman Lloyd 150 Executive Officer Witherspoon 151 Staff Presentation 153 Ombudsman Tschogl 167 Q&A 169 Mr. Jed Mandel 171 Mr. Dean Saito 174 Ms. BJ Wirwan 174 Mr. Herman Viegas 176 Ms. Staci Heaton 186 Mr. Mike Tunnell 192 Dr. Joseph Kubsh 197 Mr. Paul Smith 199 Mr. Bill Warf 205 Mr. David Modisette 208 Mr. Todd Campbell 219 Mr. Jay McKeeman 223 Ms. Diane Bailey 238 Ms. Bonnie Holmes-Gen 240 Mr. Don Anair 242 Item 03-10-3 Chairman Lloyd 246 Executive Officer Witherspoon 247 Staff Presentation 249 Ombudsman Tschogl 257 Q&A 258 Ms. Stephanie Williams 264 Mr. Jay McKeeman 278 Dr. Joseph Kubsh 280 Mr. Albert McWilliams 285 Mr. Julian Imes 305 Mr. Marty Lassen 310 Mr. Brad Edgar 317 Mr. Dean Saito 323 Ms. Diane Bailey 325 Ms. Kathryn Phillips 327 Ms. Gretchen Knudsen 328 Mr. Tim McRae 330 Motion 333 Vote 333 INDEX CONTINUED PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii Item 03-10-4 Chairman Lloyd 335 Executive Officer Witherspoon 335 Staff Presentation 335 Q&A 341 Item 03-10-6 Chairman Lloyd 346 Executive Officer Witherspoon 347 Staff Presentation 347 Q&A 358 Adjournment 364 Reporter's Certificate 365 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. The December 3 11, 2003, public meeting of the Air Resources Board will 4 now come to order. 5 Supervisor DeSaulnier, will you please lead us in 6 the pledge. 7 (Thereupon the Pledge of Allegiance was 8 Recited in unison.) 9 CHAIRPERSON LLOYD: Thank you. 10 Will the clerk please call the roll. 11 SECRETARY DORAIS: Dr. Burke? 12 Mr. Calhoun? 13 BOARD MEMBER CALHOUN: Here. 14 SECRETARY DORAIS: Ms. D'Adamo? 15 BOARD MEMBER D'ADAMO: Here. 16 SECRETARY DORAIS: Supervisor DeSaulnier? 17 SUPERVISOR DeSAULNIER: Here. 18 SECRETARY DORAIS: Professor Friedman? 19 BOARD MEMBER WILLIAM FRIEDMAN: Here. 20 SECRETARY DORAIS: Dr. Friedman? 21 BOARD MEMBER HUGH FRIEDMAN: Here. 22 SECRETARY DORAIS: Mr. McKinnon? 23 BOARD MEMBER McKINNON: Here. 24 SECRETARY DORAIS: Supervisor Patrick? 25 SUPERVISOR PATRICK: Here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 SECRETARY DORAIS: Ms. Riordan? 2 BOARD MEMBER RIORDAN: Here. 3 SECRETARY DORAIS: Supervisor Roberts? 4 Chairman Lloyd? 5 CHAIRPERSON LLOYD: Here. 6 First of all, I'd like to thank the staff for the 7 very informative display we had at the loading dock this 8 morning. I think the Board got a chance to see firsthand 9 how straightforward it is to upgrade the software on 10 existing heavy duty vehicles to prevent excess emissions. 11 I think that was very important as we look at that issue 12 later today. 13 I'd also like to thank Raley's stores for making 14 one of their vehicles available so we could have this 15 public demonstration of the so-called chip reflash. Thank 16 you again very much indeed to all the staff. 17 This is an unusual proceeding. As a noticed 18 agenda for the meeting states, the Governor's Executive 19 S-2-03 calls for the review of all regulations passed 20 since 1999 and asks state agencies to cease processing new 21 rules until this review is completed. 22 In compliance with that order, the Board is not 23 voting on any new regulations until the review called for 24 by the Executive Order is completed. However, we are 25 continuing to hear and take public testimony on proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 regulations to give the Board a chance to weigh all the 2 evidence and all the input on those proposed regulations. 3 As my colleagues will recall, we heard but did 4 not vote on the proposed rule for stationary diesel 5 engines last month. That is the same procedure we'll be 6 following today. The stationary diesel engine rule is 7 back for an update on how staff responded to our 8 instructions last time. We'll be deferring the final vote 9 until a future meeting. 10 Again, I think for my colleagues on the Board, if 11 you look at the time allotted for this agenda item, don't 12 be alarmed. That was a carry-over from last month. We 13 expect this to be relatively short. 14 Again, the same will be for -- the same process 15 will be followed for all the proposed regulations on the 16 agenda today. The Board will be deferring its final vote 17 on the heavy-duty diesel engine software upgrade chip 18 reflash, the proposed air toxic control measure for the 19 transportation refrigeration units, and the proposed 20 modification to the diesel retrofit verification process. 21 Also the record will be held open on all the 22 proposed regulatory items so, in fact, any issues that 23 come up before the Board, and there's additional 24 information to come up after the meeting, the record will 25 be held open. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 In fact, the only official action ARB will be 2 taking today will be to direct the Executive Officer to 3 suspend part of an existing regulation that would 4 otherwise take effect on January 1, 2004. And I'd like to 5 come back to that one later. So you know, that refers to 6 the NO2, NOx ratio which we had in a proposed regulation. 7 And clearly as we got information, we have to modify that 8 piece of it. 9 In light of these deferred votes, some of you may 10 be wondering why we are conducting this hearing at all. 11 And in fact, we've had that question. And we had 12 significant internal discussions among the staff, also 13 with Secretary Tamminen. But we feel that the Board is 14 still meeting today because we believe there is value in 15 hearing the issues associated with each proposed rule. 16 The Board is interested in the status of each rule making, 17 what staff has proposed for the public review, and most 18 importantly how the various stakeholders feel about the 19 proposed regulations. 20 We recognize there are critical potential 21 regulations we're looking at for control of diesel. 22 Nobody, I think, feels that we should not be controlling 23 the exposure of the public to diesel particulate. The 24 question is how should we do it and how quickly. And 25 clearly I think that -- as I speak for myself and I'm sure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 for my colleagues, we need to also have the benefits of 2 all the public input. Staff does a tremendous job on 3 these issues, but we need to also be hearing from our 4 stakeholders. 5 So although the final decision will come later, I 6 hope that everyone who came today will stay and contribute 7 to this public dialogue. We expect to get a lot out of 8 the process. 9 As for the overall schedule today, we are 10 planning to break for lunch around 12:30 to 1:00, then 11 continue through the afternoon until about 6:00 p.m. when 12 we will break for dinner. If necessary, the Board will 13 reconvene tomorrow morning at 8:00 -- 8:30 to finish any 14 items we are unable to complete today. Now, clearly, if 15 approaching 6:00 we find that we're in the home straight 16 and we can finish then, we will finish that today. And I 17 know my colleagues have challenged me to, in fact, see if 18 we can, in fact, finish within one day. But when we set 19 this up, I didn't want to be in the situation we would 20 curtail input from the potential regulated communities and 21 others. And I think it's very important we give people 22 the opportunity to do that. As we move through the agenda 23 items and see how many people are signed up to testify, 24 we'll get a far better idea of how we stand. 25 I think if you have any additional questions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 about where specific items may fall or of time constraints 2 affecting when you must leave, please see Ombudsman, 3 Kathleen Tschogl, and she will, in fact, try the best she 4 can to work with you to address those constraints. 5 Now, in fact, we move on to the first agenda item 6 today, which is the update on stationary engines air toxic 7 control measures. 8 I'd like to remind anybody in the audience who 9 signed up to testify to please sign up with the Clerk of 10 the Board. And if they have any testimony, provide 30 11 copies of that to the Clerk. 12 The agenda item I mentioned is 03-9-2, proposed 13 airborne toxic control measures for stationary diesel 14 engines. As I said earlier, this was continued from last 15 month's Board meeting, and we're continuing this again per 16 the Executive Order. In the meantime, staff is reporting 17 back on the progress they've made in addressing issues the 18 Board discussed last month, such as the appropriate 19 boundary around schools for some requirements, how to 20 address day care centers and the whole dialogue we had, 21 interruptible service contracts, and how diesel engines 22 are handled. I think it's important as we move ahead and 23 leave the record open that we, in fact, get progress 24 reports on where we stand on these from staff so we don't 25 end in a month or a couple of months with a huge backlog. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 So at this time I'd like to ask our Executive 2 Officer Ms. Witherspoon to introduce the item and begin 3 staff's presentation. 4 EXECUTIVE OFFICER WITHERSPOON: Good morning, 5 Chairman Lloyd and members of the Board. And happy 6 holidays to all of you. 7 Just to elaborate a little bit on your thank you 8 to staff, we'd also like to express our gratitude to the 9 individuals from Cummins for the transportation 10 refrigeration unit -- I forget which company that was 11 exactly -- for helping us this morning in explaining those 12 technologies to you. 13 During last month's Board meeting, you heard 14 testimony from several witnesses supporting the proposed 15 airborne toxic control measure for stationary diesel 16 engines. However, along with that support, a few concerns 17 were identified. Today staff will address those concerns 18 and answer any lingering question that you may have about 19 the ATCM. Mr. Alex Santos of the Stationary Source 20 Division will give staff's update. 21 (Thereupon an overhead presentation was 22 presented as follows.) 23 STAFF AIR POLLUTION SPECIALIST SANTOS: Good 24 morning, Mr. Chairman and members of the Board. As you 25 know, at the November 20th Board hearing, staff presented PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 its proposed air toxic control measure, or ATCM, for 2 stationary diesel fueled engines. Although the testimony 3 heard from witnesses was in favor of adopting the proposed 4 ATCM, there were a few comments raised with aspects of the 5 measure. 6 --o0o-- 7 STAFF AIR POLLUTION SPECIALIST SANTOS: These 8 comments centered around establishing additional 9 restrictions on the operation of emergency standby engines 10 located near schools; establishing provisions that would 11 exempt or delay compliance for remotely located engines; 12 and the allowance of emergency standby diesel-fueled 13 engines to continue to participate in demand response 14 programs. 15 --o0o-- 16 STAFF AIR POLLUTION SPECIALIST SANTOS: Three 17 weeks ago at the November Board hearing, some witnesses 18 testified that they believed the ATCM should establish 19 additional requirements for engines located near school 20 sites. As we indicated in response to this testimony, ARB 21 staff believes that the current ATCM operating 22 restrictions are health protective for all persons, 23 including children. Our analysis indicates that the 24 potential cancer risk from an emergency standby engine 25 located near a school in complying with the ATCM would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 result in a risk of less than one in a million for 2 school-age children. 3 --o0o-- 4 STAFF AIR POLLUTION SPECIALIST SANTOS: However, 5 should the Board decide that additional requirements for 6 emergency standby engines located near schools are 7 appropriate, staff has prepared the suggestions shown on 8 this slide. Basically, ARB staff proposes that owners of 9 emergency standby engines located near schools be 10 permitted to conduct maintenance and testing operations 11 only during non-school hours, unless the engines meet a 12 diesel PM emission rate of 0.01 grams per break horsepower 13 hour. 14 Staff's suggested definitions for "school," "near 15 school," and "school hours" are shown on the slide. ARB 16 staff will refine these concepts into proposed regulatory 17 language that would be subject to public input. 18 --o0o-- 19 STAFF AIR POLLUTION SPECIALIST SANTOS: In 20 response to comments, ARB staff is also recommending that 21 a new provision be added to the ATCM that would give 22 districts the authority to delay the implementation of the 23 ATCM's requirements for remotely-located engines. ARB 24 staff is suggesting that a remotely-located engine is 25 located at least one mile from any location outside the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 facility boundary where people may be exposed to the 2 engine's exhaust. This delay would be until the year 3 2011. At that time, these engines would have to comply 4 with the requirements of the ATCM. 5 Along with the one mile from any receptor 6 location requirement, the ATCM would also identify minimum 7 risk-based criteria that must be met to qualify for the 8 delay. Staff's proposal is based on comments from CAPCOA. 9 And if the Board agrees, ARB staff will refine these 10 concepts into proposed regulatory language that would be 11 subject to public input. 12 --o0o-- 13 STAFF AIR POLLUTION SPECIALIST SANTOS: And 14 finally, ARB staff is recommending no changes to the 15 staff's proposal to allow diesel-fueled emergency stand-by 16 engines to be used in two types of demand response 17 programs: Interruptible service contracts, and the 18 San Diego Gas and Electric Company's rolling blackout 19 reduction program. However, in response to comments, we 20 will clarify that these programs are only to be used in 21 response to emergency situations. 22 This concludes my presentation. 23 CHAIRPERSON LLOYD: Thank you very much. So 24 you've worked -- following the last Board meeting, you 25 worked to address these issues with the community, et PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 cetera? 2 EXECUTIVE OFFICER WITHERSPOON: We had one 3 meeting with a number of environmental groups about 4 several of our diesel rules under consideration, and at 5 that time had a chance to talk about the stationary diesel 6 rule and believed that we had satisfied their concerns. 7 And just to remind the Board, the testimony was 8 asking for a 500-meter boundary -- I'm sorry -- 9 1,000-meter boundary, and staff came up with a compromise 10 of 500 feet instead. 11 CHAIRPERSON LLOYD: Dr. Friedman. 12 BOARD MEMBER WILLIAM FRIEDMAN: I just have one 13 comment with respect to the testing near schools and the 14 definition of school hours. You have 3:30 as the cut off, 15 and many, many, many schools, their playgrounds, their 16 school yards are used post-school for at least a couple of 17 hours for almost as many kids that go to the school. So 18 if you're going to have a reasonable number of hours to 19 protect kids, you ought to extend that to no earlier than 20 about 5:00 p.m. from 3:30 p.m. I think that's sort of a 21 no-brainer. 22 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Dr. 23 Friedman, this is Dan Donohoue. I'd like to respond to 24 that. The process, as we were looking through this, what 25 we were trying to look at is some way to cover the core PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 school hours because there have been issues raised as we 2 talked with the industry about the ability to be able to 3 test these during some time of the normal working day or 4 close to it. There are additional restrictions that 5 communities often feel about having those engines run 6 early in the morning or later in the afternoon. 7 So what we really tried to do, since we do 8 believe that the way it's currently structured is health 9 protective, is to still restrict the operation during the 10 time when most kids are there, with the understanding that 11 there may be other situations where later on in the day 12 there still are people present. But as we got to the 13 thing of trying to say when children are present, it 14 became a balancing act between the ability for the people 15 to go ahead and test their engines where they don't really 16 have control over the school hours. So that's kind of the 17 compromise that we've proposed, but you know, I do hear 18 your recommendation. 19 CHAIRPERSON LLOYD: Mr. McKinnon. 20 BOARD MEMBER McKINNON: The demand response 21 program, I want to go back to the example I used at the 22 last meeting and make sure I understand this correctly. A 23 glass manufacturing facility went to all electric to heat 24 the glass to make glass bottles. That's a good thing for 25 the air. Then in an effort to control the costs of their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 electricity to do that, they want to participate in a 2 demand reduction program. And the demand reduction 3 program includes a power plant being down for maintenance, 4 not an eminent blackout. A power plant being down for 5 maintenance. Would they have to add technology to the 6 engine if this passes or is that -- where are they at? 7 Are they out of the game? Have we put them out of the 8 game with this regulation? 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: If I 10 understand your example correctly, they would, like the 11 other participants, be required to meet the same emission 12 standards as a prime engine. So they would have to 13 control their PM emissions if they were to stay in the 14 program that they're currently in. 15 BOARD MEMBER McKINNON: And is that possible with 16 a diesel engine that's large enough to generate the 17 electricity for a glass factory in? 18 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yes, I think, 19 because even the very large diesel engines can have 20 particulate controls put on them. If you get a large 21 power load, then you have a bank of engines. You just 22 don't have one. 23 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: In 24 response to whether that, that's viable or not, we do have 25 a situation where there was a bank of five or six PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 two-megawatt per engine situation where diesel particulate 2 filters were put on those, and they were capable of 3 achieving less than .01. So it's possible. 4 The other thing with respect to the specific 5 situation, if they elected not to be in the demand 6 response program, their operation would be allowable under 7 the regulation as an emergency if, in fact, the power 8 coming into their facility was down. 9 BOARD MEMBER McKINNON: Well, in this case I 10 don't know if it's an imminent blackout, what the power 11 company would be doing is saying, "We need to reduce the 12 load because we're going to go down for maintenance at a 13 plant." And I think that before the energy crisis, so to 14 speak, it was a fairly common occurrence in rural parts of 15 California where plants would go down and demand reduction 16 programs would be used to facilitate doing grant 17 maintenance. 18 Now, all sorts of games got played with that. 19 But initially that's how it worked, and folks got a 20 reduction in their rates for participating. And it was 21 part of how -- the glass plant's a real plant. It really 22 exists. 23 So I guess, you know, we have more time, and I've 24 been sort of uncomfortable with this. We're meeting on 25 things and then maybe some day we're going to vote. But PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 I'll tell you, I guess I'm relieved because I am 2 uncomfortable with us inserting ourselves into the demand 3 reduction scheme. And maybe the Legislature is getting 4 rid of it. I don't know, you know. But I hope not 5 because I think it's a tool that we need. And I'm a 6 little concerned that we're inserting ourselves into it. 7 It's sort of a bigger thing. 8 But thanks for answering any question. And I'm 9 going to probably be looking at that some more. We don't 10 anticipate voting for some time? 11 CHAIRPERSON LLOYD: Indefinitely. I don't have a 12 time. 13 BOARD MEMBER McKINNON: Anyway, I've sort of 14 alerted you that's a concern for me. 15 CHAIRPERSON LLOYD: I think staff has time to 16 evaluate the concern more and come back and -- 17 EXECUTIVE OFFICER WITHERSPOON: We will look at 18 that specific example. But I do want to remind you, we 19 had lots of testimony from water districts who are also 20 active participates in the interruptibles program, and 21 they thought that staff had found just the right solution 22 that was achievable by them, did not interfere with their 23 access to low power rates, and that they could go on as 24 they had been doing so far. So I hope that's the answer 25 on the glass plant as well, but we'll take a look at that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 BOARD MEMBER McKINNON: And the glass plant may 2 have solved that problem. I haven't talked to them since 3 some time during the middle of the energy crisis. And I 4 just sort of heard second- or third-hand their story. So 5 maybe they've resolved it some other way too. 6 CHAIRPERSON LLOYD: And you don't own a glass 7 plant? 8 BOARD MEMBER McKINNON: No. Not likely. It's 9 not something a machinist's salary would buy. Some day 10 we'll negotiate wages high enough, but thanks. 11 CHAIRPERSON LLOYD: Thank you. 12 Ms. Riordan. 13 BOARD MEMBER RIORDAN: Yes, Mr. Chairman. I 14 wanted to thank the staff for working with CAPCOA on the 15 remote generators because that's something that slipped my 16 mind. Many of the smaller more rural districts or 17 mid-size districts have generators miles -- not one, but 18 many miles from any receptor. And I'm very appreciative 19 of your efforts to work with them and hope that we can 20 resolve some of their issues. Thank you. 21 CHAIRPERSON LLOYD: Thank you. Any other 22 questions from the Board? 23 I notice we do have two witnesses signed up, 24 Linus Farias and Todd Campbell. So I'd like to ask them 25 to come forward at this time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 I guess we did just get a piece from today's 2 paper, I guess, handed out to us talking about the 3 generators emission challenge. Parents say pollutants 4 from diesel back-ups can hurt kids. An article in today's 5 local paper by Walter Yost. 6 MR. FARIAS: Good morning Chairman Lloyd, members 7 of the Board. My name is Linus Farias. I'm here 8 representing SBC, and member of CCEEB. And firstly, I'd 9 like to compliment staff on the great work they've done. 10 The product they've produced is testimony for the 11 thoroughness of the regulation and their willingness to 12 address all the issues. 13 My purpose today is to provide comment on the 14 discussion that's been going on and staff's proposal 15 regarding the additional restrictions near schools. 16 SBC and CCEEB members are fully supportive of 17 health-based controls, and we believe that the regulation 18 as written prior to today's proposal is adequately 19 protective of health. Additionally, the risk assessment 20 that was done by staff indicates that the risk to children 21 over the time period they are all in schools is less than 22 one in a million, which is typically the standard used. 23 Our concern with additional restrictions is that 24 it will hurt our ability, as SBC, to provide reliable 25 service and also our ability to comply with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 regulation. We don't support additional restrictions. 2 Just a little perspective, SBC's role here is 3 primary network provider for telecommunication services in 4 the state of California. To that extent, we provide the 5 backbone of central office support. In order that we can 6 provide reliable service, we have emergency standby 7 engines at every one of our central offices. Proof that 8 that works is with our recent fire storm that occurred in 9 Southern California. We lost commercial power to about 10 eleven of our facilities. None of those offices were 11 unable to provide telecommunication services. The only 12 reason was because we had reliable backup service. This 13 is, you know, proof in and of itself that this is an 14 important aspect to our business, but also to many other 15 businesses that provide emergency standby engines. 16 Our typical operations for testing and 17 maintenance yield about 20 hours of operation a year, 18 typically one hour a month for routine runs and five hours 19 a year for more extended runs. We have about 1,000 20 engines statewide. We have over 200 that are near 21 schools. And when we say near schools, we look at that as 22 being within 1,000 feet of schools. In rural areas, of 23 course, we have most of our engines close to schools. In 24 addition, they're close to everything. 25 An example of our resource limitations that have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 been reducing over time because of the industry pressures 2 that we have about ten technicians who are responsible for 3 all our engines from about Marin up to Humbolt County. 4 The coverage, consequently, is very low. We don't have 5 offices that are fully staffed. There are individuals who 6 are responsible for many engines over a large area, and 7 that includes the routine testing and maintenance. 8 We believe that by establishing a 500 meter, 500 9 foot, 100 meter, or any other additional restriction would 10 not only cause another complication to us being able to 11 comply with this regulation, but it provides two different 12 standards: One is an hour limit, which is fully 13 protective; and the other is a distance. That, in and of 14 itself, will pose a logistical issue. And 15 scheduling-wise, that is self-evident in terms of what it 16 will do to us. 17 We also believe that the local districts have the 18 ability to look at individual situations and address them. 19 We have one situation in Butte County where we have an 20 engine adjacent to a school where the local district 21 looked at the engine and discussed the situation with us, 22 and we did put on additional controls. That met the need 23 of the community as well as the district. 24 So with that, I'd like to recommend that the 25 Board not put additional controls on the existing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 regulation as it stands and that we believe that the 2 regulation is adequately protective of human health. 3 Thank you. 4 CHAIRPERSON LLOYD: Thank you very much. 5 Any questions? Professor Friedman. 6 BOARD MEMBER HUGH FRIEDMAN: I just want to be 7 sure I understand what you're saying. You're addressing 8 what has been proposed here this morning as additional 9 potential -- 10 MR. FARIAS: That's correct. 11 BOARD MEMBER HUGH FRIEDMAN: -- restrictions? 12 And these have to do with engines located near or at 13 schools? 14 MR. FARIAS: These would be specifically for 15 engines located outside school property but within 500 16 feet of the school. 17 BOARD MEMBER HUGH FRIEDMAN: Yeah. The 18 definition of 500 feet. 19 MR. FARIAS: Correct. 20 BOARD MEMBER HUGH FRIEDMAN: And then the only 21 restriction there is that as to maintenance, right, 22 testing and maintenance? 23 MR. FARIAS: As recommended by staff in terms of 24 their option in providing, my understanding -- 25 BOARD MEMBER HUGH FRIEDMAN: In other words, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 they're proposing that a further restriction apply to 2 these emergency standby engines located at or near schools 3 meaning within 500 feet of a school. And the only 4 restriction there is with respect to testing and 5 maintenance. 6 MR. FARIAS: Yes. 7 BOARD MEMBER HUGH FRIEDMAN: And as to those, 8 those cannot be testified or maintenance performed during 9 normal school hours. 10 MR. FARIAS: Yes. And our concern is that we 11 have several engines that would be within that 500 foot -- 12 BOARD MEMBER HUGH FRIEDMAN: And you would want 13 to test or maintain during school hours? 14 MR. FARIAS: Yes. And we believe that testing as 15 we do today is shown to be fully protective within that 16 --the less than one-in-a-million risk that is provided. 17 BOARD MEMBER HUGH FRIEDMAN: Has the staff got 18 any response to that? If that's the case, why do we need 19 to restrict it? If the testing and maintenance doesn't 20 have any emissions -- 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Our 22 assessment is that there are emissions and exposure 23 associated with the testing of the engines to nearby 24 residents or to school children. 25 When we did the assessment for what kind of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 increase in lifetime risk would a school child get from 2 the hours they're at school if testing occurs during those 3 hours and otherwise meets the limit was it was under one 4 in a million additional risk. 5 The proposed or suggested way of dealing with 6 this issue, if the Board so chooses, was additional 7 protection can be added. You do have a place where 8 hundreds of children are coming and assembling for a given 9 period of time. If you can somehow get the testing to be 10 done outside the hours they are there, you will cut down 11 the risk -- a very, very small risk, but you will cut it 12 some more for those children. 13 So it's very much in our view a policy judgment 14 call as to how much -- do something more, which will 15 inconvenience and cause additional cost for some of the 16 engine owners to give additional protection to take it 17 from a low level to an even lower level. 18 BOARD MEMBER HUGH FRIEDMAN: These restrictions 19 also do not apply or would not apply as proposed if the 20 prime engine diesel PM is -- emission limits are 21 satisfied. 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: That's 23 correct. But our assessment is that relatively few of the 24 backup generators will meet those limits or choose to go 25 that route. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 BOARD MEMBER HUGH FRIEDMAN: So if what you're 2 saying is these are clean anyway, then this would not 3 apply? 4 MR. FARIAS: Well, this would apply in terms of 5 our engines at this point would be allowed at -- if you 6 call it -- our dirtiest engines would be allowed to 7 operate 20 hours per year for testing and maintenance. 8 Our cleanest engines would be allowed 100 hours per year 9 for testing and maintenance under the present regulation. 10 What this does -- it doesn't change the number of hours, 11 but it does affect our ability to do that testing during 12 school hours. 13 BOARD MEMBER HUGH FRIEDMAN: So you're losing 14 obviously flexibility? 15 MR. FARIAS: Yes. And the other concern is that 16 if we don't do it during school hours, we'll be doing our 17 testing during hours when residents are present, the 18 likelihood of nuisance complaints may increase because of 19 sound issues as much as anything else. 20 Our feeling is that it's really not a health 21 question. Because if it was, then yes, we would be 22 very -- we would be really eager to address that. But 23 it's really a policy decision. 24 BOARD MEMBER HUGH FRIEDMAN: I think I understand 25 now. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 CHAIRPERSON LLOYD: Supervisor Patrick. 2 SUPERVISOR PATRICK: Thank you, Mr. Chairman. 3 I would like the record to reflect that I have 4 read all of the testimony from last month's meeting, even 5 though I was not in attendance. 6 But I do have a question. It's a total of 20 7 hours that you have in a year to test and maintain these. 8 How many times do you do it per year and how long does 9 each procedure take? 10 MR. FARIAS: Typically, we will test our engines 11 one hour per month. 12 SUPERVISOR PATRICK: One hour per month? 13 MR. FARIAS: One hour per month. And then once a 14 year we have an extended test where we put various loads 15 on the engine to make sure they could take on a full 16 office load if there was a commercial power failure, and 17 that takes five to eight hours. 18 SUPERVISOR PATRICK: Thank you. 19 CHAIRPERSON LLOYD: Thank you very much. We've 20 got Jay McKeeman and then Todd Campbell. 21 MR. McKEEMAN: Good morning. I'm Jay McKeeman 22 with the California Independent Oil Marketers Association. 23 I apologize I haven't really been following this 24 regulation very closely, but there is an issue that came 25 to my mind during the discussion here today, and that's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 the issue of the availability of ultra low sulfur diesel. 2 If I understand it correctly, new engines will be required 3 to have particle traps. And the only way that particle 4 traps really work as well as they're supposed to is when 5 they're powered with ultra low sulfur diesel. 6 So if the requirements go into place before 2006, 7 when ultra low sulfur diesel is commonly available, the 8 delivery of ultra low sulfur diesel to the locations where 9 these newer engines are installed may be problematic. And 10 there's a tradeoff that's involved. That tradeoff is that 11 for our members, typically the ultra low sulfur diesel is 12 available only at refinery racks that are located in 13 central L.A. or the Bay Area. They're not located in the 14 outlining racks. So you would have extended trips made by 15 diesel trucks to go pick up the diesel and then deliver 16 it. It also adds to the cost. 17 That's an issue. I just thought it might be 18 worth it to consider that the requirements for the new 19 engines, if they're really going to utilize ultra low 20 sulfur diesel, would be best applied after 2006. 21 CHAIRPERSON LLOYD: Is there any response from 22 staff on that? 23 DEPUTY EXECUTIVE OFFICER SCHEIBLE: There are 24 relatively few new engines being placed in the service 25 prime that would come into service before 2006 to -8 when PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 the fuel is universally available. We would think that 2 requiring those engines to put the best control technology 3 on and then locate a source of low sulfur fuel and then 4 use that for the interval between when they start 5 operation and when they -- the fuel becomes universally 6 available makes sense, as opposed to delaying that 7 requirement and allowing the engine to not have the best 8 technology that can be put on it. It will not be a 9 massive workload for the engines in terms of numbers. It 10 will be a complicating factor. 11 CHAIRPERSON LLOYD: Thank you. 12 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The 13 only additional comment on that is we do have about 50 14 engines in the state that have diesel particulate filters 15 installed in those, and those that need the ultra low 16 sulfur diesel have been able to secure a market for those. 17 And with the small number of new ones coming is, 18 we don't see that as an issue. The regulation is set up 19 to require CARB diesel for these for both emergency 20 standby and prime engines as it unfolds. And when the 21 overall requirement on the fuel side changes to ultra low 22 sulfur fuel in the 2006 time frame, that basically will be 23 required on all the engines. So right now we haven't seen 24 that or it hasn't been raised as a significant issue 25 throughout the process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 MR. McKEEMAN: I just wanted to make sure the 2 Board was aware that there was a trade off involved. 3 You're increasing emissions to get lower emissions. 4 CHAIRPERSON LLOYD: I think we have to take that 5 into account. And I'm not sure whether you were here at 6 the beginning, but again, we are holding this in the 7 spirit of the Executive Order. We are taking testimony. 8 We are not voting. We are not closing the record. So I 9 just wanted to -- and in fact, it's valuable to have this 10 sort of dialogue so the Board can understand some of the 11 concerns of the community. Thank you very much. 12 MR. McKEEMAN: I appreciate it, especially 13 keeping the public record open. That's very important. 14 CHAIRPERSON LLOYD: Thank you very much, Jay. 15 BOARD MEMBER McKINNON: Mr. Chairman. 16 CHAIRPERSON LLOYD: Sorry. Mr. McKinnon. 17 BOARD MEMBER McKINNON: I was going to ask staff, 18 if this is a very small number of engines for a very short 19 period of time, a year and a half, isn't it possible to 20 put some language in the regulation to deal with that 21 issue? 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, I think 23 the issue is that the engine is going to be built and put 24 into service. And when that happens, you want it to have 25 the best technology you can put on it because it's going PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 to be operating for decades after that. 2 So I don't see how -- and the fuel is available. 3 And it's a matter of they will have to do extra efforts 4 and probably pay some more per gallon to get the fuel 5 delivered to their site. They'll have a dedicated fuel 6 supply. There's nothing other than the fuel cost -- 7 incremental fuel costs for probably a year or less period 8 that stops them from using the new technology. If you say 9 they don't have to use the new technology, then they'd 10 have to be retrofitted once the engine gets put in place, 11 which seems like its a more cumbersome and difficult thing 12 to do than use the fuel for the intervening period. 13 BOARD MEMBER McKINNON: If they can't find the 14 fuel, then delay the engine? 15 DEPUTY EXECUTIVE OFFICER SCHEIBLE: If they can't 16 find the fuel, we'll help them find the fuel. 17 BOARD MEMBER McKINNON: Okay. 18 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The fuel is 19 in the state -- 20 BOARD MEMBER McKINNON: It's just the cost of 21 getting it there. 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: It's just the 23 cost of getting it there, and it's going to be 24 incrementally higher. But relative to all the other costs 25 in the lifetime of this engine, it's not going to be a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 large, large cost. 2 CHAIRPERSON LLOYD: This regulation takes effect 3 when? 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: It takes 5 effect for new engines starting 2005, I believe. 6 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: New 7 engines, 2005. And the retrofit portion for existing 8 prime engines would begin in 2006, -7, and -8 based on the 9 older engines coming in first. 10 DEPUTY EXECUTIVE OFFICER SCHEIBLE: All of the 11 retrofit engines will not have to be retrofit until the 12 fuel is universally available. And the number of new 13 engines that come through for the permitting process is 14 pretty low. And actually we already have guides out there 15 to the districts that if you're going to permit a new 16 engine, it's got to have this technology on it. 17 CHAIRPERSON LLOYD: That's also based on 18 sufficient lead time to after the Board acts to when it's 19 implemented. And since the Board hasn't acted yet, we 20 don't know when the implementation may be. 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Right. 22 EXECUTIVE OFFICER WITHERSPOON: Well, there still 23 should be sufficient lead time. In terms of the 24 availability of diesel fuel, I believe 20 percent is low 25 sulfur already, and more every day as we make this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 transition over. 2 CHAIRPERSON LLOYD: That's right. And with 3 transition by 2006, everybody will have it. 4 MR. McKEEMAN: The only issue is really -- let's 5 just say, for example, in Oroville a hospital puts in a 6 new generator and they would have to get the ultra low 7 sulfur diesel. Instead of picking it up from the Chico or 8 Sacramento rack, our members are going to have to go down 9 to the Bay Area and pick it up and deliver it to -- 10 Oroville is probably just a one-shot run because the 11 demand out in the rural areas is small for that kind of 12 fuel. 13 So it's just the reality of the situation that 14 during this time between now and 2006, more and more ultra 15 low sulfur diesel is coming into play, but it's not going 16 to be available at the racks. That's just -- outside of 17 the refinery racks because there's contamination issues. 18 CHAIRPERSON LLOYD: Thank you. 19 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I do want to 20 clarify that if a hospital puts in a backup generator, 21 that would not require a particulate trap on it to meet 22 the standard in 2005. 23 CHAIRPERSON LLOYD: Todd Campbell and Bonnie 24 Holmes-Gen. 25 MR. CAMPBELL: Good morning, Dr. Lloyd and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 members of the Board. My name is Todd Campbell, policy 2 director for the Coalition for Clean Air. And the 3 Coalition for Clean Air is certainly grateful and thankful 4 we're able to speak on this item because we were not able 5 to do so last month. 6 The one thing I do want to say right off the bat 7 is that diesel generators do hurt kids. It's a proven 8 fact. The South Coast certainly has some very serious 9 issues with lung function loss. USC has done numerous 10 studies on this. And thanks to the Air Resources Board 11 funding those programs, we're measuring the actual impact 12 on children. 13 It's a very serious issue in Claremont. 14 Essentially a situation where a school is located next to 15 an elderly home. The elderly home has a diesel generator. 16 It has allegedly been running more than the time that's 17 allowed, and it's become a very big issue for the Air 18 Quality Management District. 19 I will tell you that the AQMD Board is looking 20 for your direction how to handle this situation. That's 21 why I think it's very imperative we move forward and take 22 staff's recommendation that we extend the operational 23 limits to bugs within 500 feet. Of course, we would love 24 1,000 feet, but 500 feet is a good start. And we think 25 it's a very good, very wise policy to adopt because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 children are out in play. They are breathing during times 2 while we're at work. They have different schedules than 3 we do. And they're operating a higher level of exercise 4 functioning. They have much more energy. They are 5 breathing faster. So these are all things that you know. 6 I think this is a very wise policy to adopt. 7 And I also want to add the availability of 8 fuel -- remember, these are supposed to be emergency 9 backup generators. Supply should not be an issue here. 10 Certainly, we do have the fuel in the state. And on top 11 of that, we don't want them running more than their 12 allowed hours of operation. So that I ask of you. 13 The second thing I wanted to state is, just for 14 the record, that we are opposed to the supplemental 15 provision to allow for the -- to fulfill the interruptible 16 service contracts. I think it comes down to 17 enforceability. You are going to enter a huge loophole 18 here allowing for bugs to operate under this condition. 19 And I'm worried not only that it's a bad precedent for 20 this state, but for the nation because we are often looked 21 to as the leaders in terms of reducing air quality. 22 And remember, there are various significant 23 impacts that are caused by bugs. The numbers are very 24 impressive. And we're trying to reduce emissions in the 25 face of very difficult circumstances for our state, not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 just in the South Coast, but in the Central Valley and 2 throughout. 3 And then, finally, although it may not be 4 addressed in this rule, I do hope you consider in-use 5 agricultural engines. Certainly, I'd like to see staff 6 revisit it and include it in this rule. But certainly, I 7 think SB 700 is going to help the Air Resources Board 8 regulate these resources. Because, as you know, the 9 Central Valley and the San Joaquin Valley is struggling, 10 not only from a smog standpoint but also from a toxic 11 standpoint. 12 With that, I thank you. If there are any 13 questions, I'd be more than happy to answer them. 14 CHAIRPERSON LLOYD: Thank you, Todd. 15 Bonnie Holmes-Gen. 16 MS. HOLMES-GEN: Thank you, Dr. Lloyd and Board 17 members. I'm with the American Lung Association of 18 California, and we gave testimony at the last hearing 19 detailing our issues and our support for this rule. But I 20 also wanted to indicate our support today for the staff 21 amendment to include a buffer zone of 500 feet from 22 schools and to require operating restrictions for bugs 23 within that distance. 24 We do believe this provides important additional 25 protection for children. I always want to remind you, as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 you know, in addition to the diesel cancer risk, there is 2 the PM mortality risk which is an additional risk of 3 deaths over time from exposure to diesel particulates. 4 And there's also the acute effects of diesel exposure, 5 including triggering asthma attacks and other respiratory 6 illnesses. We believe the extra protection is justified, 7 and we do urge you to move forward on this. 8 A bug on school grounds and when across the 9 street from the school, there's really just not any 10 difference in terms of exposure to the kids. We need to 11 deal with both. 12 I also want to just mention that last time we 13 discussed the issue of day care. I understand it's going 14 to take a little more time to look into that. But I hope 15 you do reference in your motion that the staff should 16 continue to look into the issue of day cares and how to 17 deal with bugs that are close to day cares. 18 And I'll remind you, again, enforcement is going 19 to be key to this reg, as you know. I encourage you to 20 closely monitor the enforcement of this reg and do 21 everything you can to enforce the districts to beef up 22 their local enforcement efforts. Thank you. 23 CHAIRPERSON LLOYD: Thank you very much. Thank 24 you. 25 Dr. Friedman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 BOARD MEMBER WILLIAM FRIEDMAN: I would just 2 like to weigh in in favor of these restrictions with 3 respect to close to school assessment of these engines. 4 The issue for me is not that there's a 5 one-in-a-million mortality risk associated with cancer in 6 these kids. The fact is we've been watching a 300 percent 7 increase in asthma. We've had six presentations to this 8 Board over the past year in which we have heard about all 9 the other health effects of PM from diesel. 10 And the fact is also that these kids are exposed 11 to a variety. We've been talking about portable 12 classrooms, what they get when they go to school in buses 13 and so forth. Everything is incremental. We have an 14 absolute obligation to look after the health of our 15 constituency. And it's all additive, and we should do 16 everything we can that makes sense. 17 I am completely unmoved by the issue put forward 18 by the SBC, which is just a scheduling problem, in terms 19 of when to go to schools to test these engines. Either 20 buy a small computer program to figure out how to get 21 there when the kids are not there or wait for the days 22 when schools are closed during the week to test these 23 engines. This is not rocket science to protect thousands 24 and thousands of kids from spewing some diesel generator 25 exhaust into the air. And the restriction is a modest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 restriction that just makes common sense. 2 So I'm in favor of it, and I think we ought to 3 just move on and exercise common sense. 4 CHAIRPERSON LLOYD: Professor Friedman. 5 BOARD MEMBER HUGH FRIEDMAN: In that vein, I was 6 just inquiring, what about preschools, child care 7 facilities? This covers K through 12. Are we looking 8 fairly broadly at all of this? These are little kids 9 whose lungs are just as tender and they're running around 10 burning just as much or more energy, probably on a more 11 sustained basis. They may not be indoors as much in 12 Southern California. 13 DEPUTY EXECUTIVE OFFICER SCHEIBLE: What we don't 14 have at this time is enough knowledge of where the day 15 care centers are, what types of size, how you implement 16 such a rule. So we have to look at that more. But to the 17 extent the Board wants us to, we will learn more about it 18 and we will try to design something that can be workable 19 in the context of -- 20 BOARD MEMBER HUGH FRIEDMAN: That is planned? I 21 mean, that kind of inquiry? 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: With school 23 sites, you know where the school sites are. You know what 24 happens if you say 500 feet around a school. You know 25 you're going to effect a pretty small percentage of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 engines or eliminate that. With day care centers, you've 2 got greater hours of operation. There may be a size, 3 where you say it's got to have more than X children before 4 it gets this extra degree of protection. We just have to 5 figure it -- what it does before we're in a position to 6 propose something specific. 7 BOARD MEMBER HUGH FRIEDMAN: And there may not be 8 as many bugs in or near the facilities? 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We don't 10 know. It all depends on where they are. We know the bugs 11 are located in many different sectors of the urban area. 12 What we don't know is where the day care centers are. 13 BOARD MEMBER HUGH FRIEDMAN: That would be a natural 14 further inquire. It is planned? 15 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We will look 16 at it. We did not have the time to come up with the 17 simple proposal now because we couldn't say what the 18 impact would be or how to design it so we can actually 19 implement it. 20 CHAIRPERSON LLOYD: I think last time we didn't 21 discuss in detail, but obviously we have a child care 22 center in this building. We have a bug in this building. 23 Have we done the calculations in terms of what the 24 exposure may be? 25 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, if it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 were, don't operate it when -- if it's on-site, we could 2 extend the same principle that we've had for the schools. 3 Basically don't operate a bug on site when the day care 4 center is operating. That would be a relatively simple 5 thing to do. So we could look at that. 6 CHAIRPERSON LLOYD: In those cases where we know 7 where they are, we could do that. 8 DEPUTY EXECUTIVE OFFICER SCHEIBLE: One would 9 hope you wouldn't operate it when the 3,000 employees are 10 in the building either. I think that is a situation for 11 this building. It is not tested during times when the 12 employees are here or the children are here. 13 CHAIRPERSON LLOYD: I've heard they test at 14 nights and you don't see any visible plumes anyway. 15 Yes, Mr. McKinnon and Supervisor DeSaulnier. 16 BOARD MEMBER McKINNON: Just following up to that 17 last, before I get on with what I was going to ask. 18 Is there -- and I recall in some of the reading, 19 there was an issue in the Bay Area where the testing was 20 just before the workday. Have we accounted for that? Is 21 there a period of time prior to the beginning of the day 22 that we should be allowing for? 23 EXECUTIVE OFFICER WITHERSPOON: The proposed 24 regulation only restricts how many hours bugs can be 25 tested for over the course a year. It doesn't, except in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 the proximity to schools, restrict when. And so what's 2 going to drive it is availability of labor, other 3 ordinances about noise, you know, preference of the owner 4 of the bug. But what we've done is capped the annual 5 hours they may operate. And only in the case of schools 6 said don't do it on the school site when the kids are 7 present. And what you're contemplating now is taking that 8 boundary out farther from the school grounds. 9 BOARD MEMBER McKINNON: Before the children are 10 present? 11 EXECUTIVE OFFICER WITHERSPOON: Before or after, 12 either one. They're noisy. That's where noise ordinances 13 tend to be just as constricting as the emission 14 constraints you're contemplating. 15 CHAIRPERSON LLOYD: Supervisor DeSaulnier and 16 then Dr. Friedman. 17 SUPERVISOR DeSAULNIER: I just wanted to 18 associate my comments with Dr. Friedman. I think you've 19 done a great job. 20 I think on the child care issue, since we talked 21 about this quite a bit last time, it's too bad you weren't 22 here, Dr. Friedman. My suggestion to staff, work maybe 23 with the state First 5 Commission. There may be revenue 24 there if there's an interest expressed. And there also 25 might be an opportunity to start partnering with them in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 terms of how they fund some local programs around 2 emissions and health standards. But I think staff has 3 done a great job. 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And we 5 recognize that they are early education centers in the Bay 6 Area. 7 SUPERVISOR DeSAULNIER: Yes, early education, not 8 child care. We have to be politically correct at all 9 times. 10 Also in terms of Dr. Friedman -- thanks for 11 reminding me. The issue of the hours. There's someone in 12 Sacramento now who is very interested in after-school 13 programs, as I understand. So the 3:30 may not be exact. 14 And recognizing the noise regulations -- and for those of 15 us who have been involved in local land use decisions and 16 their restrictions, in terms of balance, I think the noise 17 is more of a nuisance. This is a health standard. So I 18 would rather hear a generator after school -- and I live 19 near a school -- rather than have it operating when kids 20 are out in the playground in an after-school program, to 21 the degree that's possible. 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: But we very 23 much want to avoid a Catch-22 situation where we create a 24 set of restrictions that make sense on their own but when 25 you combine it with others actually eliminate the ability PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 of the operator to operate. So far I don't think we've 2 done that. 3 SUPERVISOR DeSAULNIER: Well, that's never 4 stopped us before, but we should be sensitive. 5 BOARD MEMBER WILLIAM FRIEDMAN: I just want the 6 record to reflect I did have an opportunity to read all of 7 the proceedings from the last meeting. I was very 8 familiar with the early education designation for child 9 care in San Francisco. 10 SUPERVISOR DeSAULNIER: It just would have been 11 interesting to hear your input during that because I'm 12 sure you wouldn't have been shy about sharing it. 13 CHAIRPERSON LLOYD: Thank you very much. Any 14 other comments from staff? 15 And since it's not necessary to close the record, 16 we'll continue the record until such time in the future 17 that we take this back up again. 18 So thank you very much, staff. 19 We'll take a moment while we move on to our 20 normal monthly health update. 21 I must say I'm a little bit more pessimistic now 22 about getting done in one day. This was the easy item, 23 and it's taken us an hour. So we'll see how it goes. 24 GENERAL COUNSEL JOHNSTON: If I may, Chairman 25 Lloyd. I think we were going to try to capture any ex PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 parte communications as we revisit these various items. 2 So if you would please -- 3 CHAIRPERSON LLOYD: Any ex parte communications 4 on this particular item? I have none. Seeing none. 5 GENERAL COUNSEL JOHNSTON: Thank you very much. 6 CHAIRPERSON LLOYD: The next item on the agenda 7 today is 03-10-1, our monthly public health update. 8 Today we're going to hear from the Economic Unit 9 of the Research Division. At various times it's been 10 looked at as an endangered species. Specifically the 11 methods we use to calculate the heath benefits and 12 economic value of air pollution control measures. 13 I think we routinely talk about cost and 14 cost-effectiveness of our regulations. It's just 15 important we consider the benefit side, since obviously we 16 do here save lives. We reduce the incidents of disease. 17 We lower the number of asthma attacks, and protect 18 children's developing hearts and lungs, and improve 19 obviously work of productivity overall. 20 We've seen many, many stories about these 21 relevant benefits. Just this week in the Bee we saw the 22 extensive story about the increase in asthma, et cetera. 23 So I think it's very important that we look at, in fact, 24 some of the benefits of economic value of reducing air 25 pollution. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 So with that, I'm looking forward to our 2 presentation today. And I'd like to turn it over to 3 Ms. Witherspoon to introduce the item and begin staff 4 presentation. 5 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 6 Lloyd. 7 This informational item summarizes the 8 methodology staff uses to calculate the health benefits 9 and economic value of reducing air pollution, especially 10 particulate matter. The key components in this 11 methodology have been peer reviewed by leading researchers 12 throughout the country. Our methodology is also quite 13 similar to the method employed by the U.S. Environmental 14 Protection Agency in the adoption of its regulations for 15 new on- and off-road diesel engine standards and to that 16 employed by the Office of Management and Budget who 17 recently reported in the national press that the benefits 18 of air pollution control significantly outweighed the 19 costs. 20 Staff's presentation on our methodology will be 21 given by Mr. Hien Tran from the Research Division. 22 (Thereupon an overhead presentation was 23 presented as follows.) 24 MR. TRAN: Thank you, Ms. Witherspoon. Good 25 morning, Dr. Lloyd and members of the Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 This morning's presentation focuses on a 2 methodology ARB staff uses to calculate the health 3 benefits and economic value of diesel particulate matter 4 control measures. 5 --o0o-- 6 MR. TRAN: The methodology dates back to the 7 1980s when U.S. EPA first developed it to analyze the 8 impact of regulations designed to reduce air pollution. 9 EPA used the methodology to estimate the benefits and cost 10 of the Clean Air Act. They estimated that from 1970 to 11 1990 the benefit-to-cost ratio was $40 in benefits to 12 every dollar of control. From 1990 to 2010, the ratio is 13 4 to 1. 14 Recently EPA has used it to analyze the impact of 15 their proposed rule for on-road diesel engines. ARB used 16 this methodology to support the proposed PM 10 and PM 2.5 17 ambient air quality standards in 2002. Also the method is 18 endorsed by the National Academy of Sciences, the World 19 Health Organization, World Bank, USIAD, and other 20 agencies. 21 --o0o-- 22 MR. TRAN: This slide shows the steps involved in 23 the methodology. With the proposed regulation, emission 24 reductions and air quality improvement are combined with 25 population data to estimate reductions in population PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 exposures to air pollutants. Health benefits that would 2 result from these reductions are then calculated based on 3 the concentration response information from health 4 studies. Finally, the economic value, these reductions 5 are estimated. 6 --o0o-- 7 MR. TRAN: The first step in the methodology is 8 to quantify the population exposures to air pollution. 9 Existing air quality measurements are used to estimate 10 current levels of human exposure. Future reduce exposure 11 levels expected for implementation of the proposed control 12 measures are calculated with air quality models. Using 13 air quality measurements, staff estimated the statewide 14 population weighted annual average concentration of PM 2.5 15 to be 18 micrograms per cubic meter in the year 2000. 16 Using the air quality models, staff estimated diesel PM 17 concentration to be 1.8 micrograms per cubic meter. 18 --o0o-- 19 MR. TRAN: With the given set of exposure 20 changes, the next step is to relate these changes to 21 impacts on health. For PM impacts, we rely on 12 22 epidemiological studies which provide concentration 23 response functions for 14 adverse health end points. A 24 concentration response function relates changes in 25 exposure levels to changes in health end points. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 In the case of mortality associated with PM 2 exposure, health information was analyzed for 300,000 3 individuals from 50 cities in the United States. When ARB 4 staff reviewed PM standards, we estimated on a statewide 5 basis about 6,500 premature deaths will be avoided per 6 year if the PM 2.5 ambient standards were achieved, 7 reducing the average statewide level from 18 micrograms 8 per cubic meter to 12 micrograms per cubic meters. 9 For diesel PM, about 2,000 deaths are associated 10 with exposure of 1.8 micrograms per cubic meter assuming 11 that the toxicity of diesel PM is at least equal to that 12 of ambient PM 2.5. The ACTM associated with these 13 mortality estimates is on the order of 50 percent. 14 --o0o-- 15 MR. TRAN: The final step in our methodology is 16 to estimate the economic value of the control measure. In 17 this benefit cost analysis based on year 2000 dollars, 18 U.S. EPA values the life at $6.3 million. This estimate 19 was based on 26 peer review studies that measure an 20 individual's willingness to pay to obtain a small change 21 in the risk of mortality. When we apply this value to the 22 mortality estimate presented in the previous slide, the 23 economic value of attaining the PM 2.5 standard is about 24 $41 billion annually. For diesel PM, the value is $13 25 billion annually. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 --o0o-- 2 MR. TRAN: Based on the previously discussed 3 methodology, staff assessed the health impact of the 4 proposed ATCM for stationary engines. Staff estimated the 5 proposed rule, when fully implemented, would result in 6 possibly 120 fewer premature deaths from year 2005 to 2020 7 with a range of 60 to 880 fewer deaths. This health 8 benefit would result from the estimated 1,000, 7,000 ton 9 reduction in diesel PM 2.5 during the period 2005 to 2020. 10 The benefit to cost ratio for this regulation is 11 about 20 to $28 of health benefit for every dollar of 12 control. This calculation shows us that the regulation is 13 cost effective in terms of furthering the goals of the 14 diesel PM risk reduction plan. 15 As we've discussed today, the methodology for 16 calculating the health benefits and economic value of 17 diesel PM control measures is based on the best scientific 18 and economic information available. It has been used in 19 numerous applications by other agencies and has been 20 published in peer review journals. 21 This concludes my presentation. I will be happy 22 to answer any of your questions and thank you for your 23 attention. 24 CHAIRPERSON LLOYD: Thank you very much. 25 Questions or comments from the Board? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 Thank you. Very clear presentation. Appreciate 2 it. 3 We'll move on to the next item, 03-10-5. That's 4 to talk about the six research proposals we have before us 5 today. 6 Mr. Croes, does the Research Division staff have 7 anything they wish to say about these? And I recognize 8 these have all been approved by the Research Screening 9 Committee that we met with last month. 10 RESEARCH DIVISION CHIEF CROES: These were 11 presented to you last month in preliminary form. If you'd 12 like to hear a presentation on each one, we can do that. 13 CHAIRPERSON LLOYD: I'm comfortable. I looked at 14 them. My colleagues have -- 15 BOARD MEMBER WILLIAM FRIEDMAN: I've looked at 16 them and discussed them in great detail with the Research 17 Division and am quite satisfied. 18 CHAIRPERSON LLOYD: So with that, then I'll 19 entertain a motion. 20 BOARD MEMBER WILLIAM FRIEDMAN: To accept? 21 CHAIRPERSON LLOYD: To accept staff's 22 recommendation. 23 BOARD MEMBER WILLIAM FRIEDMAN: So moved. 24 BOARD MEMBER RIORDAN: Second. 25 CHAIRPERSON LLOYD: All in favor say aye. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 (Ayes) 2 CHAIRPERSON LLOYD: I think unanimous consent to 3 move ahead, given the fact we've had significant 4 discussion on these. 5 The next agenda item today is 03-8-4 in the 6 proposed heavy-duty diesel engine software upgrade 7 regulation, also known as chip reflash. I mentioned this 8 one earlier and the fact we were able to go out and see 9 what it was all about and see how long it takes. And we 10 all got a better understanding of the issue. 11 On the other hand, I think I'd like to turn it 12 over at this time to Ms. Witherspoon to give us the 13 background and to introduce the staff presentation on this 14 item. 15 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 16 Lloyd. 17 Staff's proposal today addresses a serious 18 problem, namely excess emissions from 1993 through 1999 19 heavy-duty trucks. This problem exists because engine 20 manufacturers program these trucks to operate a certain 21 way during emission certification testing and a different 22 way when in actual service. As a result, the real life 23 emissions of these engines are significantly higher than 24 certification standards due to off-cycle computer 25 programming. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 ARB and U.S. EPA deem off-cycle programming to be 2 a defeat device and brought enforcement action against the 3 engine manufacturers in the mid-1990s. After lengthy 4 negotiations, ARB and U.S. EPA settled on a remedy with 5 the engine manufacturers in 1998, which included a 6 billion-dollar payment and the commitment to install new 7 computer software programming, also referred to as chip 8 reflash. And that programming was expected to occur at 9 the time of major engine rebuilds or whenever it was 10 requested by the vehicle owner. 11 Both ARB and U.S. EPA thought we had fixed the 12 problem and that most of the engines would be reflashed by 13 now. Instead, five years later, although low NOx software 14 has been developed and is readily available and can be 15 uploaded in less than an hour, as you witnessed in the 16 loading dock this morning, it has been installed on fewer 17 than 10 percent of the affected engines. And this is 18 primarily because the engine rebuild cycle turned out to 19 be longer than we all anticipated. 20 At the time the settlement was reached, engines 21 in service at that time tended to be rebuilt at 350,000 22 miles, and no one had experience with the engines just 23 coming on to the market, and they've actually been far 24 more durable and not been rebuilt until much later. So 25 you can characterize it as a mistake on both sides. But PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 the bottom line is we have excess emissions we expected 2 not to be in the atmosphere at this date. 3 Because of the delay in installing low NOx 4 software, California citizens are exposed to 30 to 50 tons 5 of excess NOx emissions each day, and the excess NOx as to 6 the state's already overburdened environment and 7 contributes to the serious ozone and particulate matter 8 exceedances we continue to experience throughout the 9 state. 10 Just last week, U.S. EPA announced the federal 11 non-attainment designations for the new, more stringent 12 eight-hour ozone standard, and I'm sure it will surprise 13 no one on the Board that all of California's urban areas 14 and many of its rural areas made the list of violating the 15 eight-hour standard. There are approximately 100,000 16 heavy-duty diesel vehicles on the road today that are 17 still operating with the original computer programming. 18 That's clearly too many. So it's staff's intent in 19 bringing you this proposed regulation to stimulate the 20 kind of action and response we need to get these vehicles 21 into proper operating mode by the earliest feasible time. 22 In our judgment, this is simply a matter of will. 23 There are no technological barriers, no extraordinary 24 costs, and no significant disruption to the end users. It 25 just needs to get done. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 I would now like to turn the presentation over to 2 Ms. Lisa Jennings who will present the details of the 3 proposal and staff's recommendation, 4 CHAIRPERSON LLOYD: Ms. Witherspoon, can I ask a 5 question? I know we have a translator here today for 6 people who are interested in getting some Spanish 7 translation. At what time do -- I have not addressed that 8 to date. What is the procedure on that? 9 EXECUTIVE OFFICER WITHERSPOON: Could we have her 10 come to the podium now and -- 11 CHAIRPERSON LLOYD: Maribel is the person. 12 (Thereupon an announcement was made in Spanish.) 13 CHAIRPERSON LLOYD: Thank you. For the people 14 who need some translation, Maribel is there to help on any 15 of these items. Thank you. 16 (Thereupon an overhead presentation was 17 presented as follows.) 18 AIR POLLUTION SPECIALIST JENNINGS: Thank you, 19 Ms. Witherspoon. Good day, Chairman Lloyd and members of 20 the Board. 21 Today we're proposing a regulation that will 22 significantly reduce NOx emissions through the 23 installation of low NOx software in eligible heavy 24 duty-diesel engines used in trucks, school buses, and 25 motor homes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 --o0o-- 2 AIR POLLUTION SPECIALIST JENNINGS: In my 3 presentation to you today, I will discuss the background 4 for this regulatory proposal which includes the 5 development of the federal consent decree and 6 California-specific settlement agreements, the elements of 7 the proposal, benefits of the proposal issues, and 8 finally, a brief summary of the proposal. 9 --o0o-- 10 AIR POLLUTION SPECIALIST JENNINGS: Now I will 11 present to you some background information to set the 12 stage for this regulatory proposal. 13 --o0o-- 14 AIR POLLUTION SPECIALIST JENNINGS: Beginning in 15 the 1990s, engine manufacturers introduced electronically 16 controlled-engines using advanced computer controls. The 17 software programming used by the manufacturers allowed 18 their engines to comply with the emission limits under 19 engine certification conditions. However, this 20 programming also increased NOx emissions during on-highway 21 driving, emission increases that did not show up during 22 the engine certification procedure. 23 --o0o-- 24 AIR POLLUTION SPECIALIST JENNINGS: The software 25 programs used by the engine manufacturers are sometimes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 called defeat devices or auxiliary emission control 2 devices. These devices cause the engines to emit two to 3 three times more NOx under certain drive conditions than 4 they did during engine certification tests. These excess 5 NOx emissions, or high NOx emissions, are referred to as 6 off-cycle NOx. Over a million engines were certified and 7 put into use throughout the nation that had significantly 8 higher NOx emissions than we expected. 9 --o0o-- 10 AIR POLLUTION SPECIALIST JENNINGS: The high NOx 11 emissions vary from one manufacturer's engine to the next 12 for two reasons. The first reason is that the amount of 13 time that the engine is in the high-NOx mode varies. The 14 second reason is that the amount of NOx that's emitted in 15 that high-NOx mode varies. 16 After the problem of high-NOx emissions was 17 discovered, the U.S. EPA, the ARB, and the U.S. Department 18 of Justice negotiated legally-binding agreements with the 19 affected engine manufacturers in 1998. The federal 20 agreements are called consent decree, while the 21 California-specific agreements are called settlement 22 agreements. 23 The key provisions of the federal and the 24 California agreements are the same. These agreements 25 require the engine manufacturers listed on this slide to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 partially mitigate the high NOx caused by their engines. 2 --o0o-- 3 AIR POLLUTION SPECIALIST JENNINGS: One of the 4 provisions in the consent decree and settlement agreements 5 is the low-NOx rebuild program. This provision requires 6 that the engine manufactures provide a fix to the high NOx 7 problem created by their use of computer-based strategies, 8 and the fix is software upgrade. Under the low-NOx 9 rebuild program, the software is to be installed at the 10 time of engine rebuild or upon request. The U.S. EPA and 11 ARB estimate anticipated NOx reductions of the low NOx 12 rebuild program based on engine rebuilds occurring after 13 350,000 miles for line hauls and 300,000 for non-line haul 14 trucks. 15 --o0o-- 16 AIR POLLUTION SPECIALIST JENNINGS: This slide 17 shows the off-cycle or excess NOx emission levels that 18 were expected to occur with the installation of low-NOx 19 software on applicable engines being rebuilt at 300,000 to 20 350,000 miles of service. The low-NOx rebuild program was 21 expected to eliminate most of the excess NOx emissions. 22 However, the low NOx rebuild program has not provided the 23 reductions we expected, and a significant portion of the 24 excess NOx emissions remain unmitigated. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 AIR POLLUTION SPECIALIST JENNINGS: Now I want to 2 clarify for you what the current situation is five years 3 after the signing of the consent decree and settlement 4 agreements. 5 During the 1990s, engines were built to be 6 increasingly durable, and rebuilds are now occurring at 7 750,000 miles to 1 million miles of service, not at the 8 300,000 to 350,000 miles expected under the low-NOx 9 rebuild program. Rebuilds are not happening when we 10 thought, and therefore the low-NOx software is not being 11 installed as we expected under the low-NOx rebuild 12 program. In fact, less than 10 percent of the eligible 13 engines have the low-NOx software installed at this point. 14 Based on the assumptions regarding rebuild 15 practices that prevailed at the time of the consent decree 16 and settlement agreement negotiations, we would expect 17 that nearly 100 percent of applicable engines in the 18 heavy-heavy-duty diesel category would have been rebuilt 19 and have had the low-NOx software installed. But this is 20 not the case. 21 --o0o-- 22 AIR POLLUTION SPECIALIST JENNINGS: This slide 23 shows the off-cycle or excess NOx emission levels that we 24 estimate are occurring with the current rate of low-NOx 25 software installation, and that's in green. The level of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 excess NOx emissions at the current installation rate are 2 significantly greater than what we expected under the 3 low-NOx rebuild program, and that's shown in red, the 4 low-NOx rebuild program emissions. 5 --o0o-- 6 AIR POLLUTION SPECIALIST JENNINGS: This graph 7 shows actual emission test data from the ARB's inspection 8 and maintenance development laboratory in Stockton. The 9 testing was done on a 1998 model year truck and 10 demonstrates the NOx emissions increase that occurs when 11 an engine switches to high NOx mode. And in this example, 12 the NOx emissions nearly double. 13 --o0o-- 14 AIR POLLUTION SPECIALIST JENNINGS: Increased NOx 15 emissions are emitted every day from about 100,000 16 California-registered vehicles. In addition, another 17 300,000 to 400,000 affected out-of-state vehicles travel 18 in California. About 90 percent of these vehicles are 19 still emitting excess NOx pollution. 20 --o0o-- 21 AIR POLLUTION SPECIALIST JENNINGS: The solution 22 to the high NOx remissions is to require the low NOx 23 software to be installed on every eligible engine soon. 24 With that, I'd like to present to you the key provisions 25 of our regulatory proposal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 --o0o-- 2 AIR POLLUTION SPECIALIST JENNINGS: After a brief 3 overview, I will present the components of the regulation 4 including the applicability, the implementation schedule, 5 enforcement, penalties, and recordkeeping. 6 --o0o-- 7 AIR POLLUTION SPECIALIST JENNINGS: 8 Implementation of this regulation is straightforward. The 9 low-NOx software is already available. We, the ARB, send 10 notices about the program to heavy-duty diesel vehicle 11 owners. Vehicle owners take their vehicles to qualified 12 dealers and distributors for installation of the low-NOx 13 software. The software is installed in 15 to 30 minutes 14 with approximately two hours' total vehicle down time. 15 This software reduces NOx emissions by about 25 percent 16 per each vehicle. 17 --o0o-- 18 AIR POLLUTION SPECIALIST JENNINGS: Our proposal 19 is applicable to 1993 through 1999 model year heavy-duty 20 diesel trucks, school buses, and motor homes that are 21 equipped with specific '93 through '98 model year engines. 22 We are including 1999 model year vehicles because some of 23 these use 1998 model year engines. The specific 24 heavy-duty diesel vehicle engines that our proposal 25 applies to are the engines for which the engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 manufacturers have already developed low-NOx software 2 under the low-NOx rebuild program in the consent decree 3 and settlements. 4 To assist with implementation, our proposed 5 regulation includes a list of the engines for which low 6 NOx software is available. Only vehicles with these 7 engines would be required to have the low-NOx software 8 installed. 9 Our proposal does not impose requirements for 10 low-NOx software on engines that are not included in the 11 low-NOx rebuild program. Finally, our proposal would 12 apply to all heavy-duty diesel vehicles with applicable 13 engines that operate in California. This includes 14 vehicles registered out of state that travel into and 15 within California. 16 --o0o-- 17 AIR POLLUTION SPECIALIST JENNINGS: Our proposal 18 provides the following schedule for compliance with the 19 requirement to install low-NOx software. The phased-in 20 implementation schedule is based on the model year of the 21 engine that's receiving the low-NOx software upgrade. As 22 you can see, we had 1993 and 1994 model year engines 23 expecting to have the low-NOx software installed by April 24 30th, 2004; '95, '96 would be August 31st; '97 and '98 25 would be December 31st. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 We are proposing a phased-in compliance schedule 2 in order to minimize the workload for engine dealers and 3 distributors. 4 --o0o-- 5 AIR POLLUTION SPECIALIST JENNINGS: As part of 6 our regulatory implementation of this proposal, we will 7 work very hard to notify vehicle owners of the requirement 8 to install low-NOx software. We will mail notification to 9 the California registered owners. We will post notices of 10 the requirement to install low-NOx software at truck stops 11 and rest stops and publish notices in targeted 12 publications. We will request assistance from the 13 California Trucking Association and the American Trucking 14 Association to ensure successful outreach. 15 --o0o-- 16 AIR POLLUTION SPECIALIST JENNINGS: We are 17 proposing that enforcement of this regulation be conducted 18 through the ARB's existing smoke inspection programs. 19 These are the roadside heavy-duty vehicle inspection 20 program and the periodic smoke inspection program. The 21 roadside program applies to both in-state and out-of-state 22 vehicles, while the periodic smoke inspection program 23 applies to California fleets only. 24 --o0o-- 25 AIR POLLUTION SPECIALIST JENNINGS: We are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 proposing a penalty of $300 for first-time violation if 2 repairs -- and in this case the repair is the installation 3 of the low-NOx software -- are completed and payment is 4 made within 45 days of the vehicle owner or operator 5 receiving a citation. The citation penalty increases by 6 $500 if the software is installed and payment is made 7 after 45 days of receiving the citation. California 8 registered school buses are exempt from the $300 penalty 9 if the installation of the correct low-NOx software is 10 completed within 45 days. However, the fine is imposed 11 should the installation of the correct low NOx software 12 take place after 45 days. 13 --o0o-- 14 AIR POLLUTION SPECIALIST JENNINGS: Vehicle 15 owners and operators must keep a record of the low-NOx 16 software installation. Those records must be available to 17 the ARB upon request. 18 --o0o-- 19 AIR POLLUTION SPECIALIST JENNINGS: The next 20 portion of my presentation will deal with the benefits 21 provided by the proposed regulation. 22 --o0o-- 23 AIR POLLUTION SPECIALIST JENNINGS: This slide 24 shows in blue the reduction in the excess NOx emissions 25 that will occur through implementation of our proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 regulation. 2 --o0o-- 3 AIR POLLUTION SPECIALIST JENNINGS: The proposed 4 regulation is a critical component of our formal plan, the 5 state implementation plan, for reducing ozone-forming NOx 6 emissions. When implemented, this regulation will assist 7 us in meeting our state implementation plan commitments 8 and will reduce NOx emissions by 41 tons per day statewide 9 in 2005. 10 Reductions in NOx improve air quality and provide 11 the health benefits associated with decreased smog and 12 secondary particulate matter formation. NOx and the ozone 13 and fine particulate matter it forms are especially 14 damaging to children, contributing to slower lung growth 15 and development and decreased lung functioning. 16 --o0o-- 17 AIR POLLUTION SPECIALIST JENNINGS: Now I will 18 present the issues associated with the software upgrade 19 proposal. 20 --o0o-- 21 AIR POLLUTION SPECIALIST JENNINGS: I will 22 discuss the following issues on the next few slides: Who 23 pays, consent decree and settlement agreements, interstate 24 commerce, and fuel economy concerns. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 AIR POLLUTION SPECIALIST JENNINGS: The first 2 question is, who pays? ARB and the U.S. EPA believe that 3 the consent decree and settlement agreements are clear 4 that the low-NOx software is to be provided free of 5 charge. The engine manufacturers disagree. ARB and the 6 engine manufacturers are working to resolve this issue. 7 --o0o-- 8 AIR POLLUTION SPECIALIST JENNINGS: The proposed 9 regulation requiring installation of low-NOx software is 10 designed to work within the existing provisions in the 11 consent decree and settlement agreements. The software is 12 to be provided at no charge upon request. We are only 13 requiring software upgrades for those vehicle engines that 14 have low-NOx software available. This proposal is within 15 the Air Resources Board's authority to reduce emissions of 16 pollutants into the air. 17 --o0o-- 18 AIR POLLUTION SPECIALIST JENNINGS: Some trucking 19 associations have questioned the ARB's authority to 20 regulate out-of-state registered vehicles through the 21 enforcement of this regulation. The ARB is already 22 exercising this authority through implementation of the 23 roadside smoke inspection program. 24 --o0o-- 25 AIR POLLUTION SPECIALIST JENNINGS: Under the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 consent decree and settlement agreements, manufacturers 2 were required to assess the fuel economy impact of low-NOx 3 software. Test data we have seen to date shows a fuel 4 economy difference of less than 1 percent on average, 5 which we would expect would not be noticeable to most 6 drivers. Several fleets have had the low-NOx software 7 installed prior to rebuild and have reported no noticeable 8 differences in their fuel use. Nationwide, about 90,000 9 low-NOx software installations have been performed. 10 --o0o-- 11 AIR POLLUTION SPECIALIST JENNINGS: To summarize, 12 NOx reductions are necessary to protect public health and 13 attain air quality goals. We need low-NOx software 14 upgrades now. The proposal to require low-NOx software 15 installations will reduce NOx emissions by 41 tons per day 16 statewide in 2005. 17 Thank you. That concludes my presentation. Now 18 Ms. Witherspoon will tell you about our ongoing 19 discussions with engine manufacturers. 20 CHAIRPERSON LLOYD: Thank you. 21 EXECUTIVE OFFICER WITHERSPOON: Actually, before 22 I do that, just one clarification about the staff 23 proposal. You saw an implementation schedule that was 24 premised on action being taken today. And of course, 25 that's not going to happen because of the Executive Order. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 So at the time that the Board finally adopts this 2 regulation, we'll be rolling the implementation schedule 3 somewhat forward to take account of that delay. 4 But on the broader point, there are multiple ways 5 of achieving our objective here, and the regulation is 6 just one of them. For months, we have been talking to the 7 engine manufacturers about the possibility of an amendment 8 to our original settlement agreements and sort of 9 exchanged views about where we are and how frustrated the 10 Air Resources Board is about needing the tons and them not 11 being produced, for whatever sets and facts and reasons 12 brought us to where we are today. 13 So the door is still open, and we're continuing 14 to have those discussions with the engine manufacturers, 15 both collectively with the engine manufacturers 16 association. And to the extent any of them want to talk 17 to us individually, we're doing that too. 18 In the past few weeks, additional proposals have 19 come forward about incentivizing either the dealers, the 20 engine manufacturers, or the end users, finding ways to 21 stimulate them to come in voluntarily and achieve the same 22 goal. Likewise, we're open to those ideas. Our only 23 hesitation is that we not embrace a new approach that 24 doesn't get the tons in the same way the one we have does. 25 But if we can come to an agreement that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 incentives are powerful enough that they'll generate the 2 response we're looking for and that the chip reflashes 3 will get done, it's possible we would come back to you a 4 few months from now and say we don't need this regulation. 5 There's another way of skinning the cat. So you'll hear 6 testimony to that effect from many of the witnesses, and I 7 just wanted to let you know that, in fact, staff is 8 entertaining those proposals and evaluating them 9 carefully. 10 CHAIRPERSON LLOYD: You're not just talking about 11 Caterpillar, are you? 12 EXECUTIVE OFFICER WITHERSPOON: No. All the 13 engine manufacturers. We've had several conference calls. 14 We had one this week. We've scheduled more for the months 15 ahead. And similarly, we've talked to some of the end 16 users too about their ideas about how to make this happen 17 quickly. Because the most important thing is just that it 18 happen, in our view. 19 CHAIRPERSON LLOYD: Ms. D'Adamo. 20 BOARD MEMBER D'ADAMO: Mr. Chairman, one of the 21 things that I think is maybe missing in the staff's 22 presentation, perhaps in their effort to be diplomatic, is 23 to just call it like it is. They're cheating devices. 24 They're defeat devices. I've even heard them being 25 referred to as deceit devices. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 We not only need these tons, we expected we were 2 going to get the tons. And unless the engine 3 manufacturers are interested in going back to the drawing 4 board, you know, on the settlement agreement, abiding by 5 the terms that were expected at the time as far as the 6 estimated time that it would take for these rebuilds to 7 occur, then I don't really see that we have any choice or 8 they have any choice as to the next step. 9 I feel pretty strongly about this and think that 10 getting the truckers all riled up about who's going to pay 11 for it -- you just have to look at the settlement 12 agreement. It's clear in the settlement agreement that 13 the engine manufacturers have to pay for it upon request 14 by the individual trucker. So this is a pretty clear call 15 as far as I'm concerned. 16 I don't really see any policy issues. A deal is 17 a deal. And any statement about concern about cost 18 doesn't quite add up to me because it was originally 19 expected that these engines were going to be rebuilt 20 during this time anyway. So it should be part of the 21 industry's plans all along. 22 CHAIRPERSON LLOYD: Well, I'm sure we will get to 23 hear about that. What I was going to do first of all is 24 ask Ombudsman if, in fact, she would like to share with us 25 the process so far. We haven't got the regulation at all. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 So far give us the benefit of your insights on the 2 process. 3 OMBUDSMAN TSCHOGL: Mr. Chairman and members of 4 the Board, the item before you has been developed with 5 significant input from the trucking industry, including 6 engine manufacturers and dealers, trucking associations, 7 and individual truck owners. Staff also received input 8 from environmental organizations, local air districts, and 9 the U.S. EPA. 10 The software upgrade item was originally proposed 11 publicly as a planned measure in March 2002. Almost a 12 year later, staff held the first workshop to kick off the 13 regulatory development activities. Two public workshops 14 were held in Sacramento. The first one was held on 15 February 24th, 2003, and the second on June 25th, 2003. 16 Twenty to 30 participants attended these workshops. Staff 17 also held several individual meetings. 18 Finally, at the World Truck Conference, which was 19 held March 3rd and 4th, 2003, in Monterey, staff met with 20 CTA representatives and members and truck owners. 21 Additionally, staff had numerous conference calls with 22 U.S. EPA, the engine manufacturers, and members. The 23 proposed heavy-duty diesel software upgrade regulation was 24 noticed via mail and e-mail. Several existing mailing 25 lists and list serves were used to notify stakeholders. A PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 new ARB mailing list was developed to notify truck dealers 2 since they were not on any of the existing lists. 3 After the first workshop, staff learned that the 4 owners of specific model year vehicles also needed to be 5 notified. Prior to the second workshop, a list was 6 developed to notify owners of California registered 1993 7 through 1999 model year truck and motor homes. At the 8 request of staff, the California Department of Education 9 e-mailed notices to school transportation coordinators. 10 In all, more than 43,000 stakeholders were notified of the 11 regulatory development activities. 12 Some of the remaining issues include the engine 13 manufacturers and ARB disagree as to who is financially 14 responsible for the installation of the software upgrade. 15 There is a concern that a fuel economy penalty is 16 associated with the software upgrade. The American 17 Trucking Association has concern with interstate commerce. 18 Lastly, the Board hearing notice was mailed September 5th, 19 2003. The list serve notice announced via e-mail that the 20 hearing notice had been posted on our website and was also 21 broadcast on Septembers 5th, 2003. 22 This concludes my comments. 23 CHAIRPERSON LLOYD: Thank you very much. 24 Any other comment from the Board? 25 Dr. Friedman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 BOARD MEMBER WILLIAM FRIEDMAN: I just have a 2 small question. On the slide that showed the regulation 3 overview, you talked about a 25 percent diminution per 4 vehicle in NOx. But I look at the graph that you showed 5 the total -- in tons per day, it looks as though there's 6 at least a 50 percent reduction with implementation in 7 tons per day of NOx with implementation of the regulation. 8 There's a disconnect. One is 25 percent per vehicle. The 9 other is over 50 percent tons per day total. How do we 10 account for that? 11 ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI: I 12 believe what you're seeing -- the graph is total 13 emissions. The graph is of the 25 percent that is excess. 14 And we are able to reduce a substantial portion of that 25 15 percent excess, but not all of that. 16 BOARD MEMBER WILLIAM FRIEDMAN: Doesn't make 17 sense. You've reduced the tons per day by 50 percent 18 based on 25 percent per vehicle? That's -- 19 EXECUTIVE OFFICER WITHERSPOON: There's a few 20 intersecting factors on the slide. First of all, you're 21 getting a per vehicle reduction. But as the vehicle ages, 22 it's being driven fewer miles. And so you have a lot of 23 tons -- it is how they aggregate over the time with the 24 amount of miles driven and the percentage reduction per 25 vehicle. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 BOARD MEMBER WILLIAM FRIEDMAN: Whatever it is, 2 it works both ways. But one is twice as much as the 3 other. 4 CHAIRPERSON LLOYD: Bob, did you want to say 5 something? 6 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: Were 7 you referring to the slide which showed the data from the 8 individual engine or just the inventory slides? 9 BOARD MEMBER WILLIAM FRIEDMAN: I was referring 10 to the figure with the original assessment of the 11 reduction, then without regulation, and then with 12 implementation of the regulation. When you do that, you 13 show about a 50 percent tons per day reduction over less 14 than a year. And you just mentioned in the overview that 15 you expected a 25 percent reduction. 16 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: I 17 saw the same conflict in the data that we took in 18 Stockton. If you look at the data for that specific 19 engine under that specific operating condition, it was 20 50 percent also. I think what you're seeing is that it 21 varies by engine. 22 CHAIRPERSON LLOYD: Bob, is your mic on? 23 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: It 24 should be. I'm not paying attention to the 25 directionality. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 It varies by engine model. That specific engine 2 saw 50 percent. But on average, you get 25 percent from 3 the population just from doing the installation of the 4 kit. 5 And then the second part is if you looked at the 6 total block of emission, which is what that slide you're 7 referring to is, and apply it 25 percent reduction to the 8 total of block of excess emissions and apply a 25 percent 9 reduction for those engines, the total -- let me back up. 10 The total block is the 25 percent excess. That's a better 11 way to say it. The total block is the 25 percent excess. 12 You're reducing the emissions incrementally very quickly 13 by that 25 percent average. And that takes care of most 14 of the block, but not all of it. 15 So I know I went around a big circle. There's 16 two pieces. The main thing to take into consideration is 17 that the average reduction from the engines is 25 percent. 18 And then the second thing to recognize is that that block 19 is the excess block. So if you had succeeded in reducing 20 25 percent -- all of them by 25 percent, it would have 21 zeroed that block out completely. 22 CHAIRPERSON LLOYD: I see. Okay. 23 CHAIRPERSON LLOYD: Mr. Calhoun. 24 BOARD MEMBER CALHOUN: Is it fair to say that we 25 entered into an agreement with the engine manufacturers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 thinking that we were going to get one thing and that 2 didn't happen? Is that correct? 3 EXECUTIVE OFFICER WITHERSPOON: Yes. 4 BOARD MEMBER CALHOUN: What we'd like to do now 5 is to modify that agreement? Is that also correct? 6 EXECUTIVE OFFICER WITHERSPOON: We're either 7 willing to modify the agreement or adopt this regulation 8 or whatever other strategy would accomplish the 9 reductions. 10 But it was more than that we didn't get what we 11 expected. It's that the record of the agreement 12 stipulated that the assumptions upon which it was premised 13 were a rebuild at 350,00 miles, 300,000 miles. 14 BOARD MEMBER CALHOUN: We accepted that, did we 15 not? 16 EXECUTIVE OFFICER WITHERSPOON: All parties 17 accepted that. It was not corrected by any of the parties 18 at the table. 19 BOARD MEMBER CALHOUN: Where did the data come 20 from? 21 EXECUTIVE OFFICER WITHERSPOON: It came from the 22 experience with the previous model years of engines, that 23 that was the cycle upon which they were rebuilt. So what 24 changed is that engines got more durable, and they got 25 rebuilt less frequently. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 GENERAL COUNSEL JOHNSTON: If I may add, the 2 number is consistent with the useful life in the U.S. EPA 3 program. That's where the information came from, I 4 believe. 5 CHAIRPERSON LLOYD: I'm sure we'll hear from some 6 of the engine manufacturers or EMA, their understanding. 7 EXECUTIVE OFFICER WITHERSPOON: There is a 8 disagreement from what difference in facts means, visive 9 the original settlement, and what we're proposing to do is 10 in breach of that settlement, you know, or consistent with 11 it. And so we've been having a legal dispute along with 12 sort of the problem we're trying to correct, too. You'll 13 hear about that from the witnesses. 14 BOARD MEMBER CALHOUN: Why is there disagreement 15 about who pays? Is that not spelled out in the settlement 16 agreement? 17 EXECUTIVE OFFICER WITHERSPOON: It is, but the 18 settlement says they'll pay upon the major rebuild or when 19 requested. The engine manufacturers contend if the 20 rebuild has not happened for whatever reason, they're not 21 obligated to pay if someone comes in and simply asks them 22 to. That the thrust of the overall agreement was to tie 23 everything to rebuild cycles. And our counter to that is, 24 no, the thrust of the overall agreement was to accomplish 25 it and the paying the cost goes also with the election by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 truck owners to ask for it. 2 And so what this regulation does is it directs 3 truck owners to go ask for the rebuild and trigger, in our 4 view, the part of the settlement that says they shall pay 5 when someone requests a rebuild, in addition to paying 6 when a major rebuild occurs naturally. 7 BOARD MEMBER CALHOUN: So what we're attempting 8 to do here today with this regulation is to get what we 9 started out trying to get; is that correct? 10 EXECUTIVE OFFICER WITHERSPOON: Yeah. To clean 11 up the problem that surfaced in the mid-'90s and protect 12 the health of Californians because this whole time we've 13 been experiencing the excess emissions. 14 BOARD MEMBER CALHOUN: This all could be solved 15 if we come to some agreement with the engine 16 manufacturers, would it not? 17 EXECUTIVE OFFICER WITHERSPOON: Yes, it could be. 18 I'd be very desirable to have an agreement going forward. 19 CHAIRPERSON LLOYD: But the other piece of that 20 is the fact -- as I read in the letters here, particularly 21 from some of the smaller business owners, one truck, what 22 happens to the time that their truck is taken out of 23 action? Because the engine manufacturers may pay for the 24 software hardware, but you know, what about the other 25 piece? And to me, that's a key piece here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 EXECUTIVE OFFICER WITHERSPOON: Well, it's 2 certainly inconvenient and it may have economic impacts 3 that it's lost work time where the truck is in the bay. 4 It's not out delivering goods. 5 But what we're recommending to you is that the 6 public health impacts here outweigh that modest cost of 7 two-hours' time and that the truck owner should be asked 8 or required to go get the chip installed. 9 And there are ways of minimizing costs, which the 10 trucking industry is already aware of. For example, in 11 large fleets, scheduling to do them all at once on site 12 and not at dealerships and having people come out to the 13 fleet. I think the problem's most acute in the example 14 you gave where it's one owner with one truck and what does 15 that individual do? It will be inconvenient and it will 16 be a cost. 17 CHAIRPERSON LLOYD: Professor Friedman. 18 BOARD MEMBER HUGH FRIEDMAN: If I understand 19 correctly, this reflashing, this upgrading of software 20 only takes 10, 15 minutes? 21 EXECUTIVE OFFICER WITHERSPOON: In most cases 22 that's true. But sometimes it's a little harder to get at 23 the computer. But it's scheduling time on a service bay, 24 if that's where you have to go to get it done. 25 BOARD MEMBER HUGH FRIEDMAN: But that could be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 done when they have an oil change. 2 EXECUTIVE OFFICER WITHERSPOON: It could be. 3 Many people do their own oil changes and they don't go to 4 the dealership. So it's changing that practice of going 5 to the dealership to do the oil change and the reflash and 6 anything else they might need. 7 BOARD MEMBER HUGH FRIEDMAN: Does the new 8 software have an impact of fuel efficiency or on 9 horsepower, power? 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 11 data that we received from the manufacturers indicate it's 12 less than 1 percent impact of fuel economy. Some have 13 described that as negligible. Other ones -- 14 BOARD MEMBER HUGH FRIEDMAN: How about just on 15 engine power? 16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: No. 17 BOARD MEMBER HUGH FRIEDMAN: There are some 18 correspondence in here claiming that people that bought so 19 many horsepower engines and this, this and this -- 20 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We 21 don't have any indication that would effect power. 22 CHAIRPERSON LLOYD: I agree with you. There's 23 one letter that says basically the owner paid to get a 24 more powerful engine. And as a result of this reflash, 25 he's going to lose 25 horsepower. So it's going to cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 him in fuel economy and cost him in overall power. 2 BOARD MEMBER HUGH FRIEDMAN: You have no evidence 3 of that? 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: No. 5 BOARD MEMBER HUGH FRIEDMAN: In fact, your take 6 is that's not the case? 7 EXECUTIVE OFFICER WITHERSPOON: I think the 8 engine manufacturers themselves thought there might be a 9 greater loss in fuel economy when they corrected the 10 problem. But obviously they're motivated not to do that. 11 And they found a way to have the software be fixed without 12 as big of a bite as everyone feared there might be in fuel 13 economy. 14 CHAIRPERSON LLOYD: But the reason they did this 15 was, in fact, to increase the fuel economy which led to 16 higher NOx. Now this is talking about reversing the 17 process. What's different now? Why, in fact, if we cut 18 back NOx aren't we impacting the economy more? What's 19 changed? 20 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think 21 the issue is largely one of changing injection timely by a 22 simple method of doing it, which became the defeat device. 23 But what they're doing in terms of reprogramming the 24 engines is a lot more sophisticated, adjusting other 25 parameters so they minimize any fuel economy impact and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 reduce emissions. We're not getting all the emissions 2 back, but we're getting some of them back too. So it's 3 not like it's completely reversed. 4 EXECUTIVE OFFICER WITHERSPOON: The original 5 defeat devices, you know, had sort of a simplistic 6 approach to just carve out these high-load 7 high-acceleration type engines. But when they went back 8 and looked at it, there's really only moments of that 9 process where they needed to leave that engine alone. 10 They were able to capture much more of what had gone 11 off-cycle. So we didn't capture 100 percent of the 12 off-cycle emissions, but a great deal of them -- 13 CHAIRPERSON LLOYD: How much did we capture? 14 EXECUTIVE OFFICER WITHERSPOON: -- and not 15 intruding on fuel economy so much. 16 PLANNING AND REGULATORY DEVELOPMENT SECTION 17 MANAGER KEMENA: Renee Kemena, Mobile Source Division. 18 You can see on your graph with the off-cycle 19 emissions that the off-cycle emissions come down, but 20 there's a fraction that's still remaining. So we're 21 coming down to -- the manufacturers desire to -- we're 22 required to design the software to meet -- I think it's 23 about a 6.9 or 7.5 gram per break horsepower hour 24 off-cycle level in cruise mode. And the certification 25 level in cruise mode is supposed to be at 4 grams. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 There's some off-cycle, but they're coming down from a 10 2 or 11 gram to around a 7 gram. 3 BOARD MEMBER D'ADAMO: Mr. Chair. 4 CHAIRPERSON LLOYD: Yes, Ms. D'Adamo. 5 BOARD MEMBER D'ADAMO: One of the things that 6 concerns me about this discussion is that the original 7 regulation that was adopted assumed compliance. And the 8 reason that we're in this bind is because some companies 9 chose not to follow the law. And now we're concerned 10 about making sure -- well, I don't want to put words in 11 anyone's mouths here -- but to be concerned about whether 12 or not some of these manufacturers can maintain an unfair 13 advantage that they took by installing these defeat 14 devices. 15 Now, I think it would be fine for us to have a 16 policy discussion about ways to capture fuel economy 17 benefits as long as we're meeting our original standard 18 that was adopted. But what about the fairness argument 19 regarding the companies that chose to follow the law. 20 They don't get any of this unfair advantage. So I'm not 21 particularly concerned about somehow maintaining that 22 advantage for those who chose to cheat. 23 CHAIRPERSON LLOYD: Again, we're trying to 24 separate out here also the engine manufacturers and the 25 recipients of those engines and how it's going to affect PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 those and how it's going to affect small businesses in 2 California. 3 BOARD MEMBER D'ADAMO: Absolutely. Right. 4 CHAIRPERSON LLOYD: That's a big concern I have. 5 And I'm delighted to hear staff say they are continuing 6 some of these discussions. Clearly the way I've seen this 7 as I've looked into this, on the face of it, it's very cut 8 and dry. The point is we need the tons. There was an 9 assumption that we would get those tons under the consent 10 decree. But the more you look into that, there's lots of 11 gray areas. And we had the potential of being mired in 12 the legal system here. So if there are opportunities to 13 work with EMA and work with the trucking associations, 14 both national and local, then I think I'm going to be very 15 interested to hear what they are. 16 But when we talk about some voluntary agreements, 17 that we also have to make sure that this is not promises 18 which are not fulfilled. We're going to have make sure 19 that doesn't happen. I'm glad that staff is open, and I'm 20 certainly very interested to see what we can carve out 21 here in a significant way. 22 Mr. McKinnon. 23 BOARD MEMBER McKINNON: Yeah, Mr. Chairman. I'm 24 sort of amazed that we're here. I think that the 25 manufacturers, when they sold their product were selling a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 product that the buyer would assume was a legal, 2 legitimate product. And to have to have a discussion 3 about who pays for making it legal and legitimate really, 4 really angers me. 5 And it isn't a question of service bays. I saw 6 the process today. You could have a mobile operation at 7 truck stops doing that. You could have all sorts of 8 approaches. And yeah, maybe it's 15 or 30 minutes, but it 9 doesn't require facilities. If it does, I'd be interested 10 in hearing today why it does. 11 But I really, really am amazed that the people 12 that bought trucks are having to argue this. I'm really 13 amazed that the people of California who breathe the air 14 are having to argue about this. And I'm reminded in labor 15 arbitration oftentimes you get to a point like this and 16 people say, "You know what? We're just going to fix it." 17 And I guess I'm dreaming. But I look at a situation like 18 this, and folks ought to just figure out how to fix it and 19 go out and fix it. Thanks. 20 CHAIRPERSON LLOYD: I think that's a good segue, 21 because very clearly at the moment we've had staff's 22 presentation and we've had the benefit of hearing the list 23 of witnesses. And we're going to hear all sides 24 represented here from the engine manufacturers, from the 25 trucking association, from the breathers, and others here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 So with that I would like to -- unless there are any 2 pressing questions from the Board, I would like to move 3 ahead with the first of the witnesses. 4 And we have Stephanie Williams, Mike Tunnell, and 5 Jed Mandel. 6 MS. WILLIAMS: Good afternoon. Stephanie 7 Williams with the California Trucking Association. 8 I'd like to start off by saying I'd hate to see 9 this go to an ugly litigation, because we weren't at the 10 table the first time around. And now there's a 11 regulation -- or a potential regulation that is going to 12 cost my members money. And it's not fair that we weren't 13 there the first time around. So I would hope that the Air 14 Resource Board and the engine manufacturers can get 15 together and come up with something that's reasonable. 16 I think this regulation isn't quite reasonable. 17 You cannot impact state interstate commerce. There's no 18 reason to go to court over that. The Constitution of the 19 United States does not allow you to. And it is an 20 impediment to interstate commerce to require someone that 21 might come into this state one time to have to pay a $300 22 fine. We don't know -- the national carriers do not know 23 if they're going to come into California once or if 24 they're not. So this is an impediment to interstate 25 commerce, and I don't think we should go down that path as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 a state. 2 And second, when we brought this to our members 3 at our Environmental Policy Committee, our truck 4 dealerships were unaware of this. And that they're 5 unaware of it means they're not taking these actions right 6 now. And there's OEM dealerships and there's dealerships 7 that just fix trucks. So there's some investigation and 8 some due diligence that needs to be done by the Air 9 Resources Board to make sure their education is out there 10 for the truck dealerships. 11 When we did bring it up, people were excited 12 about it, and my members came to a rather odd vote at our 13 Board. We are going to embrace this as a PR project this 14 year. And we're going the start today, and we're going to 15 encourage our members to do voluntary reflash. And we're 16 going to start in what we call our geographical units that 17 have non-attainment for ozone, which would be our 18 Sacramento unit, San Bernardino/Riverside unit, and our 19 L.A./Orange unit, and San Joaquin. So we would move 20 forward in those units. 21 If you got a copy of my letter, you saw the 22 survivor truck. We've taken the survivor truck idea, and 23 we have a graphic artist putting together a flasher truck 24 which will be a truck that opens its raincoat and has a 25 superman flash. So our members feel that they should get PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 some kind of public recognition for attempting to do this 2 in non-attainment areas early. And we're hoping that this 3 will encourage quickly fleets -- and not just California 4 fleets. We have a number of interstate fleets that are 5 part of our organization too. And we believe that we can 6 convince people to move ahead and do this in a 7 cost-effective way. 8 We also talked to the Air Resources Board about 9 possibly having the Mobile Source Division, Paul Jacobs' 10 group -- I guess Don's group go out and do this at truck 11 stops. It's not that difficult. 12 We also worry about our engine manufacturers. 13 They've taken some economic hits in the past. The sales 14 aren't what they could be or should be. And we worry that 15 a lawsuit or a mandate that would push them into doing 16 something that's costly would be detrimental for our 17 engine manufacturers. And 1,000 trucks a day would be 18 coming through in California to be retrofitted the way the 19 regulation is written, and we don't want you to do that to 20 our engine manufacturers. 21 What we'd like is for everybody to back up and 22 look at a reasonable way to get this done that doesn't put 23 the dealerships at risk, that doesn't put engine 24 manufacturers -- they're worried about the cost. Let's 25 face it. This is a huge liability for them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 So we're just asking if everybody can get 2 together on this one and try to work it out, without 3 litigation, without cost to truckers. We don't need any 4 more costs. Out of service is a whole day. When you're 5 out of service, your driver doesn't work that day. You're 6 out of service. Plus you've got to get somebody there and 7 get somebody to pick it up. So it's a costly endeavor. 8 We think there's a better way to do it. We think 9 voluntary is the way to go. 10 We also have made this a priority of our truck 11 show. We have moved the International Truck Show from Las 12 Vegas to California, to Anaheim, for this -- actually, 13 forever, it looks like. And we would like to have in 14 conjunction with that the software demonstration done 15 there at our -- there's 30,000 people that attend the show 16 walking through. We have a space that we've dedicated to 17 this where we'll have a demonstration on how the reflash 18 is done. We're taking this really seriously. We hope it 19 can be done in a voluntary way. Since you can't take 20 action for 120 days -- what is it? We're going to beat 21 the emission reductions this way, and we're excited about 22 that. So thank you. 23 CHAIRPERSON LLOYD: Stephanie, again, I 24 appreciate your offer. I think that's something we should 25 look at real seriously. As I said, what assurance do we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 have that, again, this is going to be real? And have you 2 talked to EMA about also working together on this? 3 MS. WILLIAMS: We have talked to EMA. We want to 4 stay out of their way. We realize the economic 5 consequences to this. We're really supporting their 6 wanting voluntary. They're willing -- it appears the 7 engine manufacturers, the dealers, are willing to not 8 charge if it's done the way the consent decree is done or 9 the trucker request. We don't want economic harm to 10 happen to our engine manufacturers. The Air Resources 11 Board needs to look at it the same way we are. They can't 12 do research and make engines cleaner if they're in 13 litigation all the time trying to make up for what's been 14 done in the past. This is one of those things where we 15 need to sit down and to figure out a way to do it where 16 nobody goes broke. 17 CHAIRPERSON LLOYD: Can we accomplish the same 18 thing for the voluntary program with you and EMA? 19 MS. WILLIAMS: We are willing to -- we would like 20 the Air Resources Board to count and collect the 21 information so we can get emission reductions now. Yes, 22 we're more than willing to do that. We're going to 23 actively go out and do the PR. And we have the little 24 flasher bumper stickers and window stickers that trucks 25 will get that have it done. So we would like to joint PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 venture with the Air Resources Board and the engine 2 manufacturers and the dealers. 3 The dealers are -- we're their customers. When 4 we ask them, they're saying yes. We haven't been rejected 5 by the dealers. So I think the legal issues and the who's 6 right and who's wrong is getting in the way of getting 7 this done. And there's a way to do this where everyone 8 doesn't have to go to court and the engine manufacturers 9 aren't put at risk and the truckers aren't taken out of 10 service. We need to think outside the box and do it. And 11 at this point I think we can. 12 CHAIRPERSON LLOYD: When is the show in Anaheim? 13 MS. WILLIAMS: It's in September. We're talking 14 about moving the World Truck Conference from Monterey to 15 Anaheim for that show. We would try to do that. So we 16 really want to put -- make it a center focus for the 17 trucking industry because 30,000 truckers walk through 18 that show. And that's the place where people get educated 19 on it and they know what's going on. 20 CHAIRPERSON LLOYD: If we proceeded with the 21 regulation, Catherine, when would it take effect? 22 EXECUTIVE OFFICER WITHERSPOON: It would take 23 effect immediately and has a rapid phase-in schedule 24 through the end of '04. 25 CHAIRPERSON LLOYD: What do you mean immediately? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 EXECUTIVE OFFICER WITHERSPOON: Immediately upon 2 action by Office of Administrative Law. 3 CHAIRPERSON LLOYD: Which would likely be? 4 EXECUTIVE OFFICER WITHERSPOON: Some months 5 later. 6 CHAIRPERSON LLOYD: But in the voluntary 7 agreement, we are talking about we could go tomorrow? 8 MS. WILLIAMS: We're going to start tomorrow. 9 EXECUTIVE OFFICER WITHERSPOON: Already we've got 10 10 percent of trucks reflashed just because rebuilds did 11 happen. And anything that happens is good and not in any 12 conflict with the regulation. 13 Our real end point for this whole process is the 14 SIP for the South Coast Air Quality Management District 15 which expects the tonnages by the end of '05. So that's 16 kind of the amount of time we have to play with here. 17 CHAIRPERSON LLOYD: And I heard Stephanie saying 18 she would work with her members to target the areas, and 19 an extreme would be in this area as well. 20 MS. WILLIAMS: Right. We have 60 percent of our 21 members in those two L.A. units. So we could target that, 22 if that's the high priority, although I think Sacramento 23 is in trouble too. 24 CHAIRPERSON LLOYD: Professor Friedman. 25 BOARD MEMBER HUGH FRIEDMAN: I think what the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 truckers are offering to do and stating and declaring 2 they're going to do immediately is just accelerating what 3 we are trying to achieve on a lot of voluntary basis. 4 And I take you will be keeping a record whenever 5 these reflashes occur, who did them -- 6 MS. WILLIAMS: Yes. 7 BOARD MEMBER HUGH FRIEDMAN: -- the date, so 8 there is some record so that they're really complying 9 ahead of our own ability to impose this schedule, even 10 should we do so. And I think that's to be applauded. And 11 I think you deserve all the credit in the world for that. 12 That doesn't solve the whole problem, of course. 13 MS. WILLIAMS: No, it doesn't. 14 BOARD MEMBER HUGH FRIEDMAN: And so we'll hear 15 other testimony from the EMA and others. But I think this 16 is very encouraging. 17 MS. WILLIAMS: Thank you very much. 18 CHAIRPERSON LLOYD: Thank you. Nice to be 19 getting a chance to be working together. 20 MR. TUNNELL: Good morning Chairman Lloyd, 21 members of the Board. My name is Mike Tunnell. I'm with 22 the American -- 23 BOARD MEMBER HUGH FRIEDMAN: Can you move that 24 mic up so I can hear you? Thank you. 25 MR. TUNNELL: Is that better? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 BOARD MEMBER HUGH FRIEDMAN: That's better. 2 MR. TUNNELL: My name is Mike Tunnell. I'm with 3 the American Trucking Association. 4 And I'd like to echo some of the Stephanie's 5 comments in the sense I think there's a solution out 6 there. And if we put our heads together, we can get 7 there. I don't think this proposed regulation is the 8 solution we're looking for, for a variety of reasons. And 9 I think from truckers' perspective in some sense we're 10 kind of like the '80s song, we feel like we're on the 11 outside looking in. 12 And, you know, our concern really revolves around 13 that we feel this proposed regulation will shift the 14 financial and compliance burden to the trucking industry. 15 And as you mentioned, Dr. Lloyd, lost productivity is a 16 real concern to us. And we feel that even though you saw 17 this demonstration, which I really appreciated staff 18 having there, the magnitude of this is you've got to do 19 1,000 trucks a day each and every day to reach your goal. 20 And if you think about that in terms of the burden that it 21 will place on manufacturers and trucking companies as well 22 in coordinating all this, it's not as easy as it looks. 23 That trucks -- I was talking to the driver. That 24 truck needs to be up the hill this afternoon. And you 25 know, it didn't get into some of the costs associated with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 it, which includes the vehicle down time. There is some 2 fuel economy penalty, which the technician said could be 3 up to 3 percent. And that is a significant concern. And 4 then shuttling the vehicle for those companies that have 5 to take them in outside of scheduled maintenance to the 6 bays, and you have drivers' time included in that. We 7 actually have a driver shortage. So we have a hard time 8 getting drivers. So those are some of the logistical 9 concerns we have about this, in addition to the concept of 10 who ends up paying for the software and installation. So 11 that kind of lays out some of the impact. 12 When you add it all together, the proposed 13 regulation really puts the lion's share of that cost on 14 the trucking industry, and we would like to see efforts 15 made to avoid that. 16 The other main concern we have is the 17 regulations' concept of regulating trucks involved in 18 interstate commerce. Now, having to comply with this 19 regulation really creates a de facto national standard. 20 If I own one of the affected vehicles, I essentially have 21 to have my vehicle reflashed to operate it in California. 22 And therefore, it really requires me to reflash all my 23 vehicles because I may not know if that vehicle is going 24 to operate in California. I may get a call and say I need 25 ten vehicles in California. I can't be saying okay can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 this vehicle go in California and can this one not? It 2 would definitely affect my operation. 3 So the other interstate commerce concern is these 4 vehicles, if they enter the state, very seldom, one time, 5 would need to have the reflashing done to comply with the 6 regulation. And it just doesn't -- it would share the 7 same compliance cost, but yet provide very little benefit 8 to the state. 9 So in summary, we feel we're opposed to the 10 regulation. We feel we should not end up paying for the 11 cost of reflashing. And we would like to, you know, 12 really focus on our interstate commerce concerns. 13 CHAIRPERSON LLOYD: Thank you. You mentioned, 14 again, the opportunity to work together and to avoid down 15 time. I was listening this week to some of the new rules 16 on truckers and how long they can operate. Would this be 17 maybe a chance for us if there's more down time that, in 18 fact, that could be turned into an advantage and the 19 trucks could be reflashed during that period? And I don't 20 know when those rules go into effect. 21 MR. TUNNELL: New hours of service rules take 22 effect January 4th. And you know, how those rules impact 23 our operation, we're still sorting that out. We're trying 24 to keep -- you know, the truck being in service is really 25 the name of the game. And any time we're out of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 service -- or down time I should say -- 2 CHAIRPERSON LLOYD: But this may be an 3 opportunity for us to work together to see how we could 4 turn that into a silver lining in terms of this particular 5 process? 6 MR. TUNNELL: I think it definitely needs to be 7 looked at, yes. 8 CHAIRPERSON LLOYD: Professor Friedman, Mr. 9 McKinnon. 10 BOARD MEMBER HUGH FRIEDMAN: Were you personally 11 around and involved when the consent decree was entered 12 into? I just wondered whether you were there at the time. 13 MR. TUNNELL: We were not a party to that. 14 That's why I say we're on the outside looking in. We're 15 definitely affected by this, but we had no standing or say 16 in any agreement. 17 BOARD MEMBER HUGH FRIEDMAN: Assuming at that 18 time the consent decree had been quite specific, that the 19 engine manufacturers would provide this software, that it 20 would be installed at the time of a rebuild, and that the 21 rebuild would occur either at 300,000 miles or some 22 specified mileage, 250,000, whatever was the assumption at 23 that time or earlier on request, is that something you 24 could have accepted at that time? 25 MR. TUNNELL: Rebuilds are a major service event, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 so we plan on those to the extent feasible. 2 BOARD MEMBER HUGH FRIEDMAN: But at this time the 3 estimate was at 250- or 300,000. Apparently that was -- 4 and then engines were made that lasted twice or three 5 times as long. 6 MR. TUNNELL: I can't attest to the mileage. 7 BOARD MEMBER HUGH FRIEDMAN: I understand. So 8 now you don't have to have it rebuilt for many, many more 9 years. And meanwhile, these defeat devices in 10 particular -- because this was all done in testing rather 11 than on real-road operating conditions, ends up with all 12 of this pollution being emitted by the trucks you drive. 13 So that's our predicament. 14 And I'm just wondering because you weren't party 15 to it and you weren't there. But it seems to me that 16 implicit in this agreement was the assumption and mutually 17 in good -- presumably in good faith assumed as fact that 18 engines were going to have to be rebuilt, the ones that 19 were being made at the time, by 250,000 or 300,000 miles. 20 And very shortly after that was entered into, engines were 21 built that didn't need to be rebuilt for twice or three 22 times greater mileage. 23 So what the state thought it was getting and the 24 EPA was a fiction. It was an illusion. It was either the 25 engine manufacturers knew that or knew on the drawing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 board they had coming along engines that were going to 2 last a lot longer and this would defer greatly any need to 3 install these devices to reduce emissions or -- in which 4 case they deceived or defrauded the other parties if they 5 knew that. And I don't have any information. But I would 6 surmise they had some idea what the rebuild cycle would be 7 of engines the very next year or two. Maybe not. 8 But at the best, in the best light, there was a 9 mutual mistake of fact, it seems to me. All the parties 10 were assuming in good faith and in error that the normal 11 rebuild time or cycle would be the 250- or 300,000 miles. 12 And at that time, that was when, if not on request, at 13 some other point, these devices -- the software would be 14 installed. And so, you know, we can battle that out in 15 court. And I'm sure Mr. Mandel has some comments on that. 16 But it seems to me that if the parties are in 17 good faith, then they've got to deal with what we're now 18 faced with. And we're faced with federal mandates and 19 other just human mandates, human health mandates to reduce 20 these emissions. And sadly, but truthfully, your people 21 are emitting. You're the ones that are doing it. You're 22 driving it. You're operating it. You didn't make the 23 engines. 24 There is readily available for a 15- or 20-minute 25 installation, the software that will curtail it and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 control it. And I think the engine manufacturers -- and I 2 haven't heard from them. But I'm assuming they'll provide 3 the software that they were obligated to. Maybe not this 4 soon if on their take of the settlement agreement -- and 5 so it's just the down time or the inconvenience. And 6 that's not to be sneered at, but we're dealing with 7 people's health and their lives. 8 So I, too, am hopeful that short of a five-year 9 litigation where only the lawyers get rich -- and I'm not 10 against that, being a lawyer. But in the long run, I'm 11 hoping people of good will figure this out. 12 It seems to me we're making some progress. I'd 13 like to hear a little more about the interstate issue, if 14 you have any comment on that. I know your letter 15 contained it. And maybe you could, just while we've got 16 you here. That seems to be your issue mostly. 17 MR. TUNNELL: Right. We don't feel -- as you 18 know, the commerce clause protects interstate commerce. 19 And our thinking along those lines are that this 20 regulation really if you -- because it affects trucks that 21 operate in California that may be registered out of state, 22 but yet if I happen to come into the state for any reason, 23 I need to comply with that. 24 Now, really that -- the ability to regulate 25 interstate commerce lies with Congress and the EPA. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 we feel that is the place where that gets regulated. If 2 you do it state by state, you have a patchwork of 3 regulations that would say, "Okay, here's what this 4 interstate truck has to require in this state and here's 5 what it requires here." You could -- the potential is 6 fairly limitless on what can happen. And so our concern 7 is that the authority is vested nationally and not at the 8 state level. 9 EXECUTIVE OFFICER WITHERSPOON: Professor 10 Friedman, if I might, there already is a de facto national 11 standard. U.S. EPA and ARB adopted identical agreements 12 for what should happen and had identical expectations 13 about what would happen. 14 And so, you know, I'll let our Chief Counsel 15 speak to this very narrow or legal question of, are we, by 16 attempting to ensure it happens now, somehow changing 17 interstate commerce clause issues? But there is the same 18 standard for everyone. There will not be a proliferation 19 of different state actions and agreements because there's 20 the national consent decree that affects all other trucks 21 in the nation and there's our settlement agreement that 22 affects the truck here in California. 23 GENERAL COUNSEL JOHNSTON: That exactly was going 24 to be my first point. Because of the federal consent 25 decree, the same reflash or correction to the low NOx PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 emission should be occurring federally. Of course, it 2 isn't occurring in any faster rate than it's occurring in 3 California. 4 And then on the issue of interstate commerce, the 5 effect of that constitutional prohibition is really to 6 restrict states from putting requirements on goods or 7 services or something coming in interstate commerce that 8 are more onerous on that interstate commerce than the 9 requirements that we have locally for locally-sited 10 businesses. So there is no disparate impact to interstate 11 commerce because the same requirements are required of 12 California-based vehicles. 13 CHAIRPERSON LLOYD: Mr. McKinnon and then Ms. 14 D'Adamo. Unless Ms. D'Adamo, do you want to -- 15 BOARD MEMBER D'ADAMO: If you don't mind, I 16 wanted to add to what you said. We have other 17 requirements -- safety requirements, weight requirements, 18 the number of trailers that have also survived interstate 19 commerce challenges; right? 20 GENERAL COUNSEL JOHNSTON: That is correct, Ms. 21 D'Adamo. 22 CHAIRPERSON LLOYD: Mr. McKinnon. 23 BOARD MEMBER McKINNON: Yeah. I guess I wouldn't 24 cry wolf with the interstate commerce argument because 25 there are certainly things that this state gives up not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 regulating some aspects of trucking that we used to 2 regulate. And when I look at situations like we have in 3 the Alameda corridor today, I almost beg for 4 re-regulation. And so if you cry wolf with that argument, 5 when what we're talking about is a 15- to 30-minute 6 software load -- look, I'm just a machinist. And I don't 7 want to give up -- I don't mind giving you the lawyers' 8 work. I do mind giving up mechanics and machinists work. 9 I'm kidding you. 10 But I'm just a machinist. But I think I can 11 figure out that there are other systems of maintenance in 12 this country that take care of 15- to 30-minute jobs for 13 thousands and thousands and thousands of systems. You 14 look at every part of our transport system, 15 transportation. It gets done. Tires get changed. Fuel 16 gets put in. There's all sorts of ways to approach this 17 that it could be done and it could be done in a reasonable 18 fashion. It could be done in a cost-effective fashion. 19 And I'm going to be really disappointed if you spend the 20 money on lawyers instead of mechanics and machinists. 21 MR. TUNNELL: I'm not sure -- 22 CHAIRPERSON LLOYD: You happened to be there. 23 (Laughter) 24 MR. TUNNELL: -- whether I should respond. 25 Like I started out saying, I think there's a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 solution out there. We feel -- my membership feels very 2 strongly about interstate commerce. And you know, I would 3 hate to see that be something that prevents a solution 4 from being developed. But I think there are 5 opportunities, like you said, that look at this, provide a 6 mechanism to make it done to minimize the impacts. And 7 this ultimately becomes something the engine manufacturers 8 and the Air Resources Board needs to work out. We're very 9 interested in it. 10 And we'd like to, I guess, have final buy off on 11 any agreement that is hammered out because we don't want 12 to -- you know, to the extent that that is a remedy to 13 something that happened between an organization that 14 improved engines that got sold to consumers and an 15 organization that manufactured those engines that were 16 sold to consumers, I would hate to see the consumers end 17 up carrying the lion's share of the cost. And so, you 18 know, yeah, there'll be inconveniences in whatever 19 ultimately is developed, but you know, what that is I 20 think is where we need to be. 21 CHAIRPERSON LLOYD: Are you willing -- are your 22 members willing to work with CTA and us and the EMA on a 23 rapid voluntary program? 24 MR. TUNNELL: We work quite a bit with CTA and 25 are more than happy to work with them and other parties on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 this. Yes. 2 CHAIRPERSON LLOYD: Thank you. We don't want to 3 use up all the Board's ammunition on you because we have 4 Jed coming up. Thank you. Jed Mandel, David Piechel or 5 Larry Levine, and Sharon Rubalcava. 6 MR. MANDEL: Good morning. Nice to see you all 7 again. My name is Jed Mandel. I'm here today on behalf 8 of the Engine Manufacturers Association. 9 EMA and its members have participated in the rule 10 making process for today's proposed reflash rule and have 11 devoted significant time and resources to developing an 12 alternative voluntary proposal that would provide 13 California with the legitimate means to achieve meaningful 14 emission reductions without the serious adverse 15 consequences associated with the current proposal. 16 EMA has submitted written comments detailing 17 problems associated with the proposed reflash rule. 18 Without attempting to repeat all of those concerns here, 19 let me just briefly summarize. 20 The 1998 settlement agreements referenced in the 21 proposed rule do not require what the reflash rule 22 proposes. To the contrary, adoption of the proposed rule 23 would be a direct breach of ARB's agreements. The time to 24 rebuild for 1993 to 1998 model year heavy-duty engines, as 25 previously acknowledged by both engine manufacturers and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 ARB, typically is in the 800,000 to a million mile range, 2 not the 300,000 to 400,000 mile range estimated in the 3 staff report. 4 The proposed rules preempted by both the Clean 5 Air Act and federal consent decree in the proposed rules 6 is not authorized by state law. From EMA and its members 7 perspectives, we could say those legal issues are both the 8 start and the end of our analysis. But we have worked 9 with ARB and its staff far too long and with far too many 10 successes. So we are trying to see past the ARB's 11 inability to adopt and enforce a mandatory rule and try to 12 work at a workable and meaningful voluntary alternative. 13 That is exactly what we have been doing, 14 especially in the last few days. The voluntary program we 15 have conceptualized will not provide all of the emission 16 reductions in the same time frame that were originally 17 projected for the proposed reflash rule. But it is 18 important to note that those projections were unrealistic 19 in the first place. And given the Governor's regulatory 20 stay order and the Board's inability to take action today, 21 there will be even further shortfalls in projected 22 emission benefits. And obviously as has been noted 23 already, those projections won't be achieved if the issues 24 devolve to a legal dispute. 25 Interestingly, the Governor's order staying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 regulatory activity may provide an opportunity for the 2 staff and the industry to develop a program that actually 3 could be a substitute for regulation and, more important, 4 could provide significant emission reductions in a 5 practical, implementable, and cost-effective way without 6 the delay and uncertainty associated with litigation. We 7 are prepared to work with you. We're prepared to work 8 with the staff and others on such a program if you believe 9 it is prudent and reasonable for us to continue those 10 efforts. 11 I'd be happy to answer any questions that you 12 might have. Thank you. 13 CHAIRPERSON LLOYD: Take an easy one first, Jed. 14 Strongly yes on the last one. It's very clear we need 15 your help. We all need your help, given the background 16 that we need these emission reductions, public health, all 17 those. So, yes, we need that very sincerely from all your 18 members. 19 But you raised some pretty strong things in your 20 brief in very pointed bullets you make here, which 21 basically -- the bottom line saying we can't do what we're 22 proposing to do anyway. So maybe staff could address 23 those, and I'm sure my lawyer colleagues on the Board will 24 also be addressing those. 25 Diane Johnston or Professor Friedman. Take it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 bullet by bullet here. And you can see in his comment 2 that settlement in the proposal does not require what the 3 reflash rule proposes. This is a simple yes or no. 4 GENERAL COUNSEL JOHNSTON: We at the ARB, both 5 staff and the legal staff, read the settlement agreement 6 as requiring the reflash upon request. And what our 7 regulation does is that it creates an impetus for making 8 the request. And the request would come from the 9 operators of the heavy-duty trucks. And it would go to, 10 you know, through the distributors and other maintenance 11 organizations for these trucks. They would go in there 12 and they would request a reflash. 13 And then according to the provisions of the 14 settlement agreement, the reflash would be provided. The 15 actual mechanism of computer software would be provided by 16 the manufacturers. And that's all provided for in the 17 settlement agreement. 18 I guess the point of contention on this 19 particular issue relates to whether or not the request can 20 be made at any time or that the request can only be made 21 upon rebuild. And we simply disagree with EMA about what 22 that provision in the settlement agreement means. We say 23 that our request can be made at any time, and they say 24 only the requests must come in conjunction with a rebuild. 25 CHAIRPERSON LLOYD: I think the other part there PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 is the expectation this would be done every 3- to 400,000 2 miles, but all along EMA felt, no, it was going to be 3 closer to a million miles. 4 GENERAL COUNSEL JOHNSTON: Right. And I stand 5 corrected. I made an earlier statement that the mileage 6 estimate that we predicated the settlement and consent 7 decree on came from regulations of the U.S. EPA. And 8 staff corrected me, no, that figure did not come from the 9 U.S. EPA's regulations. Rather, it came from studies that 10 had been made. 11 But in any case, there was a real 12 misunderstanding or miscommunication or some 13 misapprehension about when the rebuilds would occur. And 14 the settlement agreement and the projected emission 15 reductions, all of which all of the parties were 16 negotiating in terms of -- were for much sooner rebuilds 17 based on what, you know, probably is a range, you know, 18 depending on the engine and the usage and the type of 19 driving that was done. But in no case did, you know, we 20 anticipate that these engines would be lasting for 750,000 21 to a million miles because all of our projections on the 22 emission reductions were based on a very much shorter 23 period to rebuild. 24 EXECUTIVE OFFICER WITHERSPOON: Dr. Lloyd, also 25 these aren't assumptions people were carrying around in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 their heads. These were written down as part of the 2 formal federal publication of the settlement agreement. 3 The assumptions were clearly stated. The anticipated 4 emission benefits and the time frames were stated. So if, 5 in fact, the engine manufacturers had a different point of 6 view, they never expressed it. They allowed it to stand, 7 the two control agencies' assumptions that the rebuilds 8 would be happening more frequently than, in fact, has been 9 the case. 10 GENERAL COUNSEL JOHNSTON: And then on the 11 preemption issue, again, there's, you know, a disagreement 12 between EMA and the way that ARB interprets federal 13 preemption. 14 These engines, as you've heard, are engines that 15 were built in 1993 to 1998. The preemption in the federal 16 law only goes to new engines. We believe these are used 17 engines. There's no federal preemption. EMA disagrees. 18 I think their position -- although they haven't stated it 19 here, but elsewhere they've stated that they believe that 20 the engines are new until rebuilt. And we simply disagree 21 that that's the case. 22 CHAIRPERSON LLOYD: So if you go to a dealer and 23 you've taken an engine out to 500,000 miles and you say, 24 "It's new so you give me the same price as when I bought 25 it," I'm not sure that's going to hold up. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 GENERAL COUNSEL JOHNSTON: That's an interesting 2 question. 3 And then on their last point as to not being 4 authorized by law, well, they haven't sited anything 5 specifically. But you know, we have ample authority under 6 state law to regulate both, you know, new and used 7 engines. 8 MR. MANDEL: Just a couple comments. First of 9 all, the one thing obviously we can agree on is that we 10 disagree. 11 CHAIRPERSON LLOYD: Jed, on the mileage one. 12 That seems to be pretty simple. Was it in the consent 13 decree or not? 14 MR. MANDEL: It's not in the consent decree. 15 There's no place in the consent decree in which miles are 16 noted. 17 CHAIRPERSON LLOYD: Wait a minute. 18 Ms. Witherspoon, you just said there was. 19 EXECUTIVE OFFICER WITHERSPOON: I'm saying it's 20 in the federal registered notice describing the effect of 21 the consent decree. Within the language of the settlement 22 itself, it does not stipulate a mileage at which rebuilds 23 occur. 24 MR. MANDEL: To that point, again, there are a 25 number of issues we agree that we disagree. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 I want to remind the Board -- and I know staff 2 knows this. Despite these disagreements about what the 3 consent decree and settlement agreements state, what the 4 law requires, what you're hearing from me today on behalf 5 of engine manufacturers is a sincere interest and 6 commitment to try to work on a program that does provide 7 California with benefits on a faster time schedule than 8 otherwise would be occurring under the settlement 9 agreements. 10 But in approaching this issue, I do think it was 11 important to note to you -- and we have expanded on these 12 comments in our written statements, which was filed 13 electronically with you so I know you have them. And 14 again, not for purposes of debate, there are clear 15 differences of opinion here. 16 I cannot say what was in the Air Resources Board 17 staff and legal counsel's mind when they negotiated those 18 consent decreeS. I actually can't say what is in engine 19 manufacturers' minds when they negotiated this consent 20 decree. That was done by individual manufacturers, and 21 the association was not directly involved. 22 I do know from reading them that there is no 23 specific reference to a presumed rebuild point. I do know 24 there is in the record I believe filed with comments on 25 this proposal rule that shows in writing assumptions that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 were made by engine manufacturers with respect to the 2 million mile point. 3 I also know there was information on ARB's 4 website that acknowledges that the rebuild points are more 5 towards a million miles. To some degree that is not the 6 relevant point. I know it's been the focus. The relevant 7 point, I believe, is that we're all saying that the intent 8 of the settlement agreement was to link reflashes to 9 rebuilds. It makes -- it's cost-effective to do it that 10 way. And certainly that's what engine manufacturers 11 looked at in terms of their analysis. 12 We are now trying to find a way, and that is our 13 offer to the Board and to the staff, to incent our 14 customers, incent dealers, and individual manufacturers to 15 have those reflashes occur faster than they otherwise 16 might have occurred. You've heard from CTA and ATA both 17 supporting that concept. And I must say we are delighted 18 to hear that from the association's representing our 19 customers. 20 I think there's an opportunity here to avoid what 21 obviously will be an acrimonious proceeding for which 22 neither of us can guarantee the result, other than, as 23 Professor Friedman lawyer noted, the lawyers getting rich, 24 which I suppose I wouldn't object to either. And under no 25 scenario, I want to note for Mr. McKinnon, do the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 mechanics not get to work. It's the question of when they 2 get it in terms of doing the reflash. 3 But I do want to emphasize the interest on the 4 part of EMA and its members to try to work with this Board 5 as we have done countless times in the past with great 6 success to try to provide the emission reductions which we 7 understand the state needs. We are not here denying the 8 need for emission reductions. 9 CHAIRPERSON LLOYD: Professor Friedman. 10 BOARD MEMBER HUGH FRIEDMAN: I'm glad to hear 11 that. And as far as I'm concerned, though, I hope you do 12 understand -- I must be very clear -- that from my 13 perspective, I think many of us here, we can't wait until 14 the normal engine rebuild cycle, if it's now or upwards of 15 three-quarters of a million or a million miles. 16 South Coast particularly in its SIP -- we've got 17 to get this reduction much sooner. So the time line is 18 critical. And the mechanics are working it out, and the 19 incidental costs which I agree seem to be in the internal 20 scheme of things rather minor, given the ready 21 availability of this software. And going back frankly to 22 what I understand was the real genesis of the consent 23 decree was to settle an action against the engine 24 manufacturers for flaunting the law and violating it, and 25 by which they paid a billion dollars in the settlement in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 addition to these agreements. 2 These agreements obviously were not entered into 3 so that as new engines were built and it could take 5, 10, 4 20, 30 years before the software could be installed that 5 would catch the full cycles. You know, it's just -- I 6 don't want to keep replaying the record. But for those 7 reasons I think it is in everyone's interest -- certainly 8 the EMA's and certainly from our point of view to achieve 9 our objectives -- our health objectives, to sit down and 10 work this out and do it on a very accelerated time line as 11 soon as possible. 12 MR. MANDEL: Well, certainly to the last point, 13 you know I can't agree more. 14 I do feel I should note again while it was not a 15 legal proceeding in which EMA was involved, I have read 16 the settlement agreements. I have read the consent 17 decree. We're all very familiar with what was a very 18 important event. But also in reading them, I have to 19 remind the Board that the engine manufacturers entered 20 into them not admitting any guilt, not having agreed they 21 did anything wrong. And it was an agreement between two 22 parties -- between ARB, who believed there were issues and 23 problems, engine manufacturers who believed there were no 24 issues and no problems -- collectively sitting down and in 25 a quite lengthy document carefully negotiated, agreed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 together on what a course of action was. I think it's 2 important for both sides to live up to those obligations. 3 Obviously, there is a perception that engine 4 manufacturers are not living up to those obligations. I 5 have to assure you that engine manufacturers deeply 6 believe, strongly believe they are doing absolutely 7 everything that those settlement agreements require them 8 to do and they will do. 9 The offer today is to do more. And what we need 10 to figure out soon is what is a reasonable expectation. 11 What really can be achieved in a cost-effective way 12 without putting small businesses or large businesses in 13 California, the truckers, dealers, and engine 14 manufacturers, those who benefit from goods being shipped 15 into and within the state at any risk from this program. 16 I think that we can come up with a reasonable goal in a 17 reasonable time frame and through a voluntary program work 18 to get that goal, especially when we hear the kind of 19 support we've heard today from the truckers here in 20 California. I think that's very positive. 21 CHAIRPERSON LLOYD: And I think I'm pleased to 22 hear that. I must say so far in listening to your words 23 carefully and seeing what's going on, the desire of the 24 engine manufacturers to address this problem quickly seems 25 to be well disguised. I'd like to see that coming forward PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 a little more strongly. Because clearly, as you heard 2 from the colleagues here, the NOx issues are real. Not 3 only in South Coast, but as we go up the Central Valley, 4 NOx is a key. It's a precursor to ozone particulates in 5 this area as well. 6 So, again -- and trying to defend while you say 7 there was no admission of guilt, that's hiding behind 8 legalese. But I'm delighted to hear you say, "Well, okay, 9 we are willing." And I think what at least I sense from 10 my colleagues, we're willing to, in fact, put faith in 11 that with the cooperation of ATA and the CTA. But it has 12 to be real. And the point is that the idea that, you 13 know, we're talking about these numbers and whatnot, we 14 can't keep putting this off. What is EPA doing? 15 MR. MANDEL: I've had no discussions with EPA on 16 this issue. To the best of my knowledge, EPA believes and 17 understands, as does EMA's members, that the consent 18 decrees in their case are being met. That when vehicles 19 are being -- 1993 through 1998 vehicles are being brought 20 in for rebuilds, they are being reflashed, with that 21 reflash being at no charge to the customers who bring it 22 in. One point -- 23 CHAIRPERSON LLOYD: No charge. What about the 24 down time for the -- 25 MR. MANDEL: The down time, to the best of my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 knowledge, was never part of the expectation as to pay. 2 Because of -- and it's linked to the rebuild point. 3 Because, I mean, one of the benefits of having linked the 4 reflash event with the rebuild is the vehicle already for 5 other business reasons, that made very good sense to the 6 customer -- and as you heard ATA Mike Tunnell talked 7 today, an event that's well planned by the customer. They 8 were already bringing in the truck for down time. So 9 there was no additional down time. That's very critical. 10 The one point, Dr. Lloyd, that I also wanted to 11 mention in terms of the speed of these issues. I don't 12 want Board members to think that there are no reflashes 13 being done in California other than at the rebuild point. 14 While that is, I believe, the only obligation of 15 the settlement agreement, I can represent to you -- and I 16 believe the staff has some specific information that there 17 are engine manufacturers today who on their own -- when a 18 customer brings in a vehicle for a reflash unrelated to 19 reducing NOx, but because their electronics need to be 20 tuned up, there's another more upgraded set of -- as Tom 21 Cackette explained to me -- electronics that have to take 22 place, the customer is getting from their engine 23 manufacturer in many instances the NOx reflash upgrade as 24 well. So those are happening now in an accelerated time 25 frame, and we think we can do more of that to meet the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 state's clear needs for emission reductions. 2 CHAIRPERSON LLOYD: It's not that you can. You 3 have to. It's a matter of working together to do it. 4 Ms. D'Adamo. 5 BOARD MEMBER D'ADAMO: I would just suggest that 6 the reason you're installing the chip reflash at that time 7 is because you're required to under the settlement 8 agreement. Because it specifically says to any person who 9 requests it. So I think you're complying in that instance 10 with the settlement agreement. 11 MR. MANDEL: Just to comment. I didn't mean to 12 interrupt, but just so I can address that point. In the 13 example that I just shared with you, this is not a 14 customer who came in and asked for the NOx reflash. They 15 asked for something else and they're getting it, the NOx 16 reflash, free of charge. 17 BOARD MEMBER D'ADAMO: Okay. All right. 18 MR. MANDEL: It is beyond the consent decree, 19 settlement agreement. 20 BOARD MEMBER D'ADAMO: In that instance, I would 21 encourage EMA to be very creative about how to expand 22 those opportunities similar to what the trucking industry 23 is suggesting. This flier, it would have been nice if you 24 had come in with something like this. And hopefully in 25 the remaining time before this comes before us again on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 something -- 2 MR. MANDEL: I wouldn't have thought about the 3 flashing raincoat. That's not my thing. 4 (Laughter) 5 BOARD MEMBER D'ADAMO: One other little point, I 6 think we beat this to death, but I remember when I first 7 came on the Board and prior to that, reading a lot of news 8 accounts about this issue. And it's my sense that your 9 industry probably didn't enjoy getting beat up in the 10 press and would not welcome those news accounts in the 11 future. So just a little additional prodding to do 12 everything you can. And I'm concerned about a voluntary 13 program. I don't think it's going to cut it. So I want 14 to echo the Chairman's comments and Professor Friedman's. 15 We've got to get to our goal. However, we get there, 16 we've got to have those emission reductions. 17 CHAIRPERSON LLOYD: Thanks, Jed. 18 Mr. McKinnon. 19 BOARD MEMBER McKINNON: Jed, the poor guy from 20 the American Trucking Association got most of what I had 21 to say to you already. So I'll keep it short. 22 It seems to me that you're sort of dealing with 23 this in a unique period of time. There's going to be some 24 delay before we vote. 25 And you know, I guess I don't want to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 underestimate what it takes to get to this. But I really 2 think there's a lot of overestimating of what it takes to 3 get to this. It seems to me if they're delayed for 120 4 days, we ought to be able to hear 120 days from now how 5 other opportunities have been found when trucks are down 6 for other natural reasons, where they're stopped for 7 30 minutes, which there's a whole bunch of opportunities I 8 can think of to get this done. It's going to mean 9 positioning people there with laptops. Maybe with a truck 10 and some tools -- 11 MR. MANDEL: Our challenge -- I'm sorry. 12 BOARD MEMBER McKINNON: I don't know. What I'm 13 saying is I'm not real happy about this issue. That's 14 clear. I'm not beating you up further. The poor guy from 15 the Trucking Association got it already. But I'm saying 16 show me. I'm saying 120 days from now, we're going to 17 vote. We're talking about voluntary. You know, look, 18 your industry goofed. You don't agree to that. We think 19 your industry goofed. It seems like it's something that 20 can be squared away when there are other down times for 21 trucks. And we can turn it into something that's really 22 difficult to do, or we can find those opportunities and 23 just do it. And I think in 120 days you could probably 24 show some of it getting done that we haven't seen before. 25 MR. MANDEL: I appreciate the comments. And you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 know you can beat up on me any time. 2 Couple of things. One, I don't believe that we 3 have goofed. And I know how you mean that in a very broad 4 sense going all the way back to the events leading up to 5 the settlement agreement. But as I told you, I don't 6 believe the industry believed they goofed. I believe this 7 industry has an interest in reducing emissions in the 8 state. We've shown it before. We're showing it again 9 today. We do intend to be able to come forward with a 10 meaningful proposal for getting these reductions. 11 A couple of comments that I do want to make. We 12 do have to find a creative way when those vehicles have 13 some down time to getting them reflashed. One of the 14 things that you have to recognize is it's not just any 15 down time, any old place. It has to be at the dealership. 16 It's the dealers who do the reflashes. 17 I think what you also have to recognize as 18 impressed as I was out on the loading dock today to see 19 the reflash and how simple it can be, I think you also 20 have to appreciate -- and I don't want to be the technical 21 expert explaining all of the challenges of reflashes. 22 They don't all go as the one went on the loading dock. 23 There are many occasions where these are older vehicles. 24 They do have mileage on them, and the harnesses have to be 25 removed. They can be damaged. The ECM module has been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 damaged in many cases that have been reported to me. At 2 least I'm sharing that with you anecdotally. 3 I'm sure manufacturers can show you with concrete 4 evidence. It can be a much more elaborate and potentially 5 much more expensive and time-consuming event. I'm not 6 saying that in any way to suggest it shouldn't be done, 7 can't be done. But it's a little, I think, dangerous to 8 assume it's a 15-minute event and it's really sort of no 9 big deal. If it really were no big deal, a lot more of 10 them would have been done. It's a challenge. And we have 11 to find a way to address that challenge. We're not 12 backing away from it. But I don't want you to think it's 13 no big challenge and no big deal to get this done. 14 EXECUTIVE OFFICER WITHERSPOON: Mr. McKinnon, I 15 want to let you know we set an internal deadline of the 16 end of January to try to come to an agreement. The reason 17 for that is that although the Executive Order provided up 18 to six months, actually you'll be voting again as soon as 19 the review has been completed and there is some desire 20 here at Cal EPA for all of the BDOs to have the review 21 done as expeditiously as possible. So because you could 22 be voting as soon as February or March, we asked the 23 engine manufacturers to work with us aiming for an end of 24 January conclusion, if we can reach that, of our 25 discussions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 MR. MANDEL: And we support that time schedule. 2 CHAIRPERSON LLOYD: Well, again, it can't just be 3 with the EMA. We heard before that the truckers have 4 doubt so we need to be sure to include them. 5 EXECUTIVE OFFICER WITHERSPOON: We'll be talking 6 to all the parties. 7 BOARD MEMBER McKINNON: Then I'm sorry I offered 8 the suggestion show me in 120 days. It sounds like you're 9 going to move faster. But I hope there's a way of getting 10 there. This really shouldn't have to end up in court or 11 being acrimonious at all. But be clear, where I'm viewing 12 it. 13 MR. MANDEL: I heard you. 14 CHAIRPERSON LLOYD: Again, I think we just have a 15 unique opportunity, as I think you stated in your 16 comments. We have a window here. The industry doesn't 17 want to be regulated. We have wonderful opportunities. 18 Look at the voluntary program. But it has to be real, 19 meaningful, and enforceable. With that, thank you very 20 much. 21 MR. MANDEL: Thank you all for your time this 22 morning. I appreciate it. 23 CHAIRPERSON LLOYD: Now we'll hear from one of 24 the manufacturers, David Pieche or Larry Levine. There's 25 two or one? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 MR. PIECHE: Just one. 2 CHAIRPERSON LLOYD: Just one. 3 MR. PIECHE: I should say good morning. My name 4 is Dave Pieche. I'm Senior Staff Counsel for 5 International. International is submitting detailed 6 written comments on the issues associated with the 7 proposed chip reflash rules. And I'd like to thank the 8 Board for the opportunity to have this oral statement. 9 The major focus of these comments are really 10 two-fold. As an acknowledgement that International's 11 alleged excess emissions were significantly less than the 12 other settling parties, International's settlement 13 agreement is substantially different than the other 14 settlement agreements. Unlike these other agreements, 15 International's settlement agreement requires 16 International to provide a compensating environmental 17 benefit against all of International's alleged excess 18 emissions. 19 Moreover, this Board specifically noticed in 20 paragraph 17 of International's settlement agreement that 21 the environmental benefit provided by International is 22 "substantially more than the NOx emissions which 23 California alleged maybe attributable to International." 24 International will meet the requirement by 25 January 1st, 2004. Therefore, the alleged "excess PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 emission" does not continue to go unchecked. Further, 2 while International understands the Board's interest in 3 these emission reductions, the chip reflash rule runs 4 afoul of International's settlement agreement, federal and 5 state law, and most importantly fail to produce actual 6 emission benefits that the Board so desired. 7 International supports the Board's goals and has 8 had fruitful discussions with the Air Resources Board 9 staff to develop solutions to the issues raised by the 10 reflash rule. International and ARB are working to create 11 a reasonable and meaningful program to meet the goals of 12 the ARB. 13 International requests that the Board allow the 14 staff and affected parties -- and we will be having these 15 continuing discussions over the period of time. But we 16 need to have enough time to come up with a reasonable 17 solution. Thank you. If you have any questions, I can 18 take those. 19 CHAIRPERSON LLOYD: Staff's comment on that. 20 EXECUTIVE OFFICER WITHERSPOON: Just that we're 21 happy to continue those conversations. And International 22 has been very forthcoming with us about how to solve the 23 problem. 24 CHAIRPERSON LLOYD: Great. And you're moving 25 ahead very rapidly. That's good. Thank you very much, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 indeed. 2 Sharon Rubalcava, Larry Robinson. It's been many 3 years. 4 MS. RUBALCAVA: It has. Good morning, Chairman 5 Lloyd, members of the Board. I'm here today -- I'm Sharon 6 Rubalcava from the law firm Weston, Benshoof in 7 Los Angeles. I'm here today representing the Motion 8 Picture Association of America which is probably not one 9 of your typical commenters on ARB regulation. 10 CHAIRPERSON LLOYD: The timing is interesting. 11 Now we have a new Governor so -- 12 MS. RUBALCAVA: Yes, that is interesting, isn't 13 it. 14 Our member companies are the major motion picture 15 and television production studios. They're listed on the 16 bottom of our written comments that were submitted to you 17 earlier and then handed out again today. And we, in our 18 industry, use many trucks, many heavy-duty trucks that 19 will be subject to this proposed regulation. 20 Based on what I've heard today from Chairman 21 Lloyd and Ms. Witherspoon, it appears to me our issue has 22 been addressed. We had simply asked for a little more 23 time on that first compliance date. It looks like right 24 now that it's unlikely the compliance date will be as 25 early as April of this year. And so with that, I think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 our comments have been addressed. Thank you. 2 CHAIRPERSON LLOYD: Thank you very much indeed. 3 That was easy. 4 Larry Robinson, Larry Sherwood, Todd Campbell. 5 MR. ROBINSON: Good morning Mr. Chair, Board 6 members. My name is Larry Robinson. I'm here 7 representing the California Air Pollution Control Officers 8 Association, or CAPCOA. 9 Now, at the risk of using yet again another 10 musical reference, we believe the time has come today to 11 hold the line and end this flash dance once and for all. 12 Actually, CAPCOA has authorized me to express 13 thanks to the ARB staff in incorporating most of our 14 recommendations. And now we come here to support the ARB 15 recommendation and hope this can go forward. If some 16 agreement can be reached where we still make the emission 17 reductions necessary to clean up the air, especially here 18 in Sacramento but in South Coast and the Central Valley as 19 well, we would not stand in the way. 20 So once again, thanks to the ARB staff for 21 helping us out and putting together a regulation we can 22 support. Thank you. 23 CHAIRPERSON LLOYD: Thank you very much, Larry. 24 MR. SHERWOOD: My name is Larry Sherwood. I'm 25 the manager of the Mobile Source Division for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 Sacramento Metropolitan Air Quality Management District. 2 The Air Districts of the Sacramento region strongly 3 support the Board's proposed rule making for the 4 heavy-duty reflash. We're in the process in our region of 5 updating our SIP. And as part of that, we've done some 6 analysis. And this strategy alone is worth 3 tons per day 7 to us. So this is very valuable. 8 We feel so strongly about this and wanted to take 9 action immediately and felt like the citizens here deserve 10 that, that we've used our own funding for paying outright 11 for a number of reflashes on over 700 vehicles so far. 12 And in addition to that, we've gotten with the fleets that 13 we work with, an additional 300 trucks have done the 14 reflashes. 15 To my knowledge, there are no issues that are 16 obstacles here, with the exception of the money. And so 17 we paid outright for a number of these. 18 And in that regard, we would strongly urge you to 19 adopt this measure as soon as you can. 20 CHAIRPERSON LLOYD: Appreciate your leadership 21 very much. We heard this morning during the reflash how 22 successful your program had been. So congratulations. 23 MR. SHERWOOD: Thank you. 24 CHAIRPERSON LLOYD: And in living here also I 25 recognize how much is needed in terms of NOx reduction PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 given all the truck traffic coming through. 2 Todd Campbell, Dean Saito, and Judith Lamare. 3 MR. CAMPBELL: It's almost noon. I'm going to 4 say good afternoon, Chairman Lloyd. 5 CHAIRPERSON LLOYD: If you look behind you, it's 6 already past noon. 7 MR. CAMPBELL: Thank you. Todd Campbell, policy 8 director for the Coalition for Clean Air. 9 The Coalition for Clean Air stands before you 10 today to support the proposed staff proposal to move 11 forward with its regulation. I couldn't agree more with 12 you, Board Member D'Adamo, when you said that these are 13 defeat devices. They are deceit devices. And I would 14 actually argue that the engine manufacturers acted in bad 15 faith with the settlement, and I'll explain why. 16 For seven model years, the engine manufacturers 17 knowingly produced engines that violate standards, and 18 these vehicles are continuing to pollute our air for 11 19 years and counting. The engine manufacturers supposedly 20 negotiated in good faith to perform reflash at 300- or 21 400,000 miles, assuming that was the proper rebuild date, 22 when it actually turns out the rebuild date is 750- to 23 1 million miles. 24 So the question is do the engine manufacturers 25 actually believe that they can convince the public that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 they had no idea, no clue what their own product was 2 capable of when that rebuild date was? And remember, we 3 are talking about their product. We're not talking about 4 someone else's product. This is the product they make. 5 They have been doing research and development for years 6 before they produce this product. 7 According to the U.S. EPA, the public health toll 8 from these trucks equipped with defeat devices includes an 9 estimate of 2500 premature deaths, 5,000 hospitalization, 10 and public health costs from 6 to $21 billion over the 11 lives of these vehicles. 12 This assumes that we have the useful life 13 correct, of course. Forget about when the rebuild is. 14 But what about the useful life? Assuming that, that is 15 correct. That's the cost. That alone is a significant 16 cost. 17 Assuming the $6.1 million per life, as the 18 presentation before us demonstrated, just the 2500 19 premature lives alone is equal to the cost $15.25 billion. 20 And how much does it cost to reflash the total market, the 21 300,000 vehicles that are in violation? $30 million. How 22 many lives are we talking about here? What are the costs? 23 Let's put the costs into perspective. And I think the 24 answer is very clear. 25 Bottom line, it is not unreasonable to assume PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 that model year 1999 vehicles have traveled 340,000 miles, 2 given these vehicles have been on the road from three to 3 four years. And also taking into account that CTA, or the 4 California Truckers Association, has made several 5 arguments on the warranty issue that trucks at least 6 travel 100,000 miles a year. I don't think this is a hard 7 assumption to make, that these trucks, even the latest or 8 the last model year that we're talking about in terms of 9 doing a reflash, they've been on the road for three to 10 four years and that they're already at the point where the 11 engine manufacturers have agreed in the settlement to do 12 the reflash because we assumed that's when we were going 13 to do the repower. 14 So if EMA or the general manufacturers agree to 15 reflash at this period, what's the problem? What is the 16 problem with moving ahead right now? I think the problem 17 here is that the game is up and the truth is out. The 18 engine manufacturers don't have the supposed reflash 19 centers in place to do the job, do they? No. That's what 20 they're arguing, they don't have the capability right now 21 to do it. And the time frame would be very costly. 22 The engine manufacturers, if they did, would have 23 had these centers in place today, and they don't. And we 24 didn't catch them by surprise because I honestly believe 25 they knew. I think they knew. And this is just another PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 one of those tactics, shameless. The engine manufacturers 2 standing up here today not accepting responsibility and 3 threatening lawsuits that will undoubtedly cost human 4 lives is shameless. To assume that a taxpayer or the 5 truckers should bear the cost and be responsible for 6 something that is directly linked to their violation of 7 the law is outrageous. Outrageous. Ladies and gentlemen, 8 respectfully to the engine manufacturers, this is your 9 mess, you clean it up. 10 This makes me so mad. 11 I just -- people are paying the price with their 12 lives every day. And the engine manufacturer is what's 13 standing in the way of doing the right thing here. I hope 14 the press picks up on this because the people of 15 California -- no -- the people of the United States should 16 know who we're dealing with here, because this is bad 17 faith. 18 With respect to the testimony that was provided 19 by the American Truckers Association and the California 20 Truckers Association, I want them to know that I feel for 21 you. And I understand exactly what you mean by worrying 22 about what potential cost and ramification this has on 23 your companies. I just want to remind you of the fact 24 that the people who are unnecessarily dying today 25 whether -- and let me back up. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 When you say that you are concerned about taking 2 time for your drivers to stop and get your trucks 3 repowered, I understand that costs money. But I hope that 4 you will understand that also the time that we're taking 5 off people's lives also is more valuable than money. And 6 I think that you are very responsible companies. And I 7 know you'll do the right thing. That's why I'm going to 8 ask the American Truckers Association and the California 9 Truckers Association to stop putting the heat on the Air 10 Resources Board. Back away from this lawsuit that's being 11 threatened against this agency and join the Air Resources 12 Board in finding a solution and making sure that the 13 engine manufacturers follow through with their agreement. 14 Forty-one tons per day. We have a big crisis. 15 Just alone in Southern California, $12.1 billion of 16 federal fund threatened for not making attainment in 2010. 17 We are well over our limit. We have at least 400 tons per 18 day in NOx to reduce between now and 2010. 2500 premature 19 deaths, 5,000 hospitalizations, public health costs 20 ranging from 6 to $21 billion because the engine 21 manufacturers won't spend $30 million, an amount they 22 agreed in a fair settlement for which they had signed. 23 In closing, the Coalition for Clean Air believes 24 you should move ahead and adopt this regulation. And I 25 want to remind the engine manufacturers that you are not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 the only ones considering legal action here. Thank you. 2 CHAIRPERSON LLOYD: Thank you. I hope again we 3 can get the support of the environmental groups to help 4 this program be implemented. 5 MR. CAMPBELL: You got it. 6 CHAIRPERSON LLOYD: Dean Saito, Judith Lamare, 7 Bonnie Holmes-Gen. 8 MR. SAITO: Good afternoon, Chairman Lloyd, 9 members of the Board. Now I know what it's like to follow 10 Todd Campbell down at South Coast hearings. 11 For the record, my name is Dean Saito. I'm the 12 fleet rows manager down at South Coast Air Quality 13 Management District. The AQMD staff fully supports ARB 14 staff's proposed heavy-duty chip reflash and urges its 15 adoption. Emission reductions generated by this 16 regulation will offset the excess NOx emissions currently 17 being generated by the on-road diesel-powered heavy-duty 18 vehicles. 19 AQMD staff believes this control approach is one 20 of the few remaining strategies that will be inexpensive 21 to implement, while providing substantial and immediate 22 reductions. AQMD appreciates the opportunity to provide 23 these comments to the Board and urges adoption of this 24 proposal. Thank you. 25 CHAIRPERSON LLOYD: Thank you very much, Dean. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 MS. LAMARE: Good afternoon, Mr. Chairman, 2 distinguished members of the Board. I'm Judith Lamare, 3 and I represent the Cleaner Air Partnership. That's a 4 joint project of the American Lung Association of 5 Sacramento Immigrant Trails and the Sacramento 6 Metropolitan Chamber of Commerce. So I'm here to talk to 7 you about how this regulation affects a community. And we 8 strongly support the proposed regulation. 9 There are both public health and economic 10 consequences in the Sacramento region if you do not act to 11 implement the regulation. I know you're aware of the 12 Sacramento situation. I just want to hit a couple of high 13 points. And a previous witness mentioned the conformity 14 clause of the Federal Clean Air Act and the fact that we 15 can lose our transportation funding if we're not in 16 compliance with our air quality standards. Our attainment 17 date on the one-hour ozone standard is 2005. We 18 desperately need this measure to reduce NOx emissions in 19 our region. 20 I wanted to add that our community since 1994 has 21 made a concerted effort to reduce 3 tons of NOx from 22 on-road vehicles that we took on as a region because our 23 region is heavily impacted by mobile sources, and ARB has 24 not completely cleaned up that problem. I think you're 25 aware that our community got together in a public-private PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 partnership and win-win fashion to implement a voluntary 2 program to get rid of these 3 tons. 3 In the few minutes, I want to address the success 4 of that voluntary program. But my point at the moment is 5 this, we've done a good faith effort. We have raised and 6 spent over $40 million to reduce 3 tons of NOx in our 7 region. At the same time these vehicles are on the road 8 with excess emissions have added 3 tons back in. To keep 9 faith with our community, we really believe that the Air 10 Resources Board must address successfully and completely 11 these 3 tons of excess NOx emissions by 2005. You really 12 need to hold the Sacramento community harmless from the 13 effects of this vehicle chip reflash issue. 14 As we approach this 2005 deadline, it's obvious 15 that we have very little time to fill that gap. And I 16 wanted to address some of the issues that have been raised 17 by previous speakers. Being aware that we're going to 18 have ozone violation in 2004, 2005 unless we can get these 19 emissions down. The 3 tons of NOx are very significant in 20 our region, and that's the number that your regulation 21 would address by 2005 down time productivity. 22 In our region, the Cleaner Air Partnership 23 interviews people the day after "spare the air" days and 24 asks them about the previous day. Obviously, we're 25 interested in whether they knew about the air quality PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 situation, whether they reduced their driving, and if so, 2 if they reduced it for air quality reasons. 3 We have a number of questions, but at the end of 4 the interview we ask people did anyone in your household 5 have trouble breathing yesterday because of poor air 6 quality? We've used this question in a number of surveys, 7 and we noticed that we have very consistent results on 8 that question. And in fact, on the average "spare the 9 air" day, 15 percent of our respondents tell us that 10 someone in their household had trouble breathing the day 11 before because of poor air quality. 12 I didn't bring all my numbers with me today, but 13 you know, we have 1.5 million people in this region, and 14 that's 80,000 to 100,000 households where they have to 15 cope with that kind of productivity and down time on 16 "spare the air" days. We're averaging about 20 "spare the 17 air" days per summer on average. 18 Now let me say this is unscheduled down time. 19 This is something that happens to people that they have 20 absolutely no control over. Their kid has to go to the 21 doctor. They have to stay home from work. Somebody 22 doesn't do what they want to do. Somebody doesn't get 23 done the work they promised they would do. This is 24 productivity and down time in our metropolitan area. 25 For the last nine years we've implemented PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 voluntary approaches in a win-win fashion. We've had some 2 great successes, and the California Trucking Association 3 has been with us every step of the way to implement 4 voluntary programs to reduce mobile source NOx in heavy 5 duty vehicles. 6 I don't think this has been a total success. We 7 had money that was not spent. We lost money in the budget 8 crisis. Part of the reason for that is that voluntary 9 programs with incentives are not as compelling as 10 regulations. And while you can promise a person, "Hey, 11 you get a new truck out of this deal. You'll get a better 12 running truck. You'll get better fuel mileage. You have 13 less chance of being stopped on the road for smoke 14 violations." 15 There is still a lot of skepticism about 16 government helping private sector. This program did 17 reduce a lot of NOx. It reduced a lot of particulate 18 matter. We did not spend the money before the state 19 budget crisis took part of it away. We cannot claim total 20 victory on that. We had 700 engines reflashed. That's 21 great. We didn't get to all the engines we needed to get 22 to before the time expired. So I would very strongly 23 caution the Air Resources Board in developing any kind of 24 voluntary program to look at that timing and to not 25 sacrifice our region for timing. The time is up. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 Sacramento's compliance date 2005. 2 I want to just mention that in this context of 3 what we're dealing with, this isn't just about a consent 4 decree. I think it's a mistake to look at this as a 5 consent decree item or a legal issue. It's not a legal 6 issue. Go back ten years. Look at the demand for diesel 7 fuel in our state and in the nation. We're talking about 8 5.5 percent increase in diesel fuel used in our state and 9 in our nation during this period. During the same period, 10 gasoline has gone up 1.7 percent. In California during 11 this period, population has gone up 1.3 percent. 12 There's some very important economic dynamics 13 going on in which travel is increasing by heavy-duty 14 vehicles and fume is increasing. And our emission 15 inventory for California, the heavy-duty side, the diesel 16 side, the NOx and particulate matter consequences of the 17 heavy-duties vehicles have gone up dramatically. People 18 have paid the price for their cars to be cleaner. People 19 are driving cleaner and cleaner cars. But they're looking 20 out on the road. They're seeing trucks. They're seeing a 21 lot more trucks than they used to see. 22 I think to delay and kind of stall this and try 23 to be cooperative is a good faith show of diplomacy on the 24 part of state government. But I, for one, do not want to 25 let you forget about what is going on in the community and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 why we have to have this now. Thank you. 2 CHAIRPERSON LLOYD: Thank you very much. 3 Bonnie Holmes-Gen, Diane Bailey, Jason Mark, and 4 Kathryn Phillips. 5 MS. HOLMES-GEN: Bonnie Holmes-Gen with the 6 American Lung Association of California. Thank you, 7 Mr. Chairman and Board members, for the chance to speak on 8 this. 9 We, of course, strongly support the staff 10 recommendation today. The Lung Association views this as 11 a very cut and dry issue. The engine manufacturers 12 cheated. They disobeyed the law. The breathers have 13 suffered. For over ten years, the breathers have 14 suffered. You've heard the facts and figures on premature 15 deaths, hospitalizations, asthma attacks, and other 16 problems. Now it's fallen into your laps to fix this 17 problem, to make the engine manufacturers live up to their 18 responsibilities, and to get this done as quickly as 19 possible. 20 You know how desperately we need these tons of 21 NOx. We need them to meet the near-term goals in 22 Sacramento. We need them to meet SIP obligations in the 23 South Coast. We need them all over the state. We 24 especially need them to cut ozone that is harming the 25 breathing of kids with asthma. We are concerned about the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 3.9 million people in California with asthma, the one in 2 eight kids in the central valley with asthma. They are 3 wondering what California's going to do to fix this 4 problem now because they can't live with these excess 5 emissions from diesel trucks. It's harming their health. 6 It's harming their quality of life, their ability to excel 7 in school and just live normal lives. 8 We need you to move ahead as quickly as possible 9 on the reg. I understand that you cannot officially adopt 10 it today, so in a sense there may be a little bit of time 11 for some discussion. But you know, we would rather see 12 absolutely no delay. We hope that you will vote to adopt 13 this as absolutely quickly as possible. And we would want 14 to see as a criteria that any voluntary agreement that is 15 reached that, is a course of action that is taken, would 16 happen in the exact same time as you had laid out in this 17 regulation. We can't afford to wait any longer. 18 Thank you for the chance to speak to you today. 19 CHAIRPERSON LLOYD: Thank you very much. I'm 20 sure as always the staff will involve all stakeholders as 21 we move ahead on that. 22 Diane Bailey, Jason Mark, and Kathryn Phillips. 23 And after this, we will break for lunch, after 24 this item. 25 MS. BAILEY: Good afternoon Chairman Lloyd, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 members of the Board and staff -- 2 CHAIRPERSON LLOYD: Can you pull that mic closer 3 down? 4 MS. BAILEY: Thank you for the opportunity to 5 comment here today. 6 My name is Diane Bailey. I'm a scientist with 7 the Natural Resources Defense Council. And I'm here today 8 to urge you to move forward as quickly as possible with 9 this measure. I realize you can't vote today, but we 10 would urge you to move as quickly as possible. And 11 joining me in support in written comments are ten other 12 environmental health and environmental justice 13 organizations who feel strongly in support of this measure 14 as well. 15 We feel that the measure is an extremely 16 cost-effective way to reduce significant amounts of NOx 17 statewide, and that's 40 tons a day of NOx which are much 18 needed tons for the state with so many ozone 19 non-attainment areas. 20 In addition to aiding in the regulatory 21 challenges, this measure will also reduce pollutants with 22 particularly severe health impacts, such as NO2 or 23 nitrogen dioxide. Not only does NO2 lead to reduced lung 24 function in children, it also has severe respiratory 25 health impacts. And new research shows a link between NO2 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 and lung cancer as well. 2 These potent pollutants called NOx would have 3 been reduced from trucks a decade ago had engine 4 manufacturers simply complied with the standards. 5 Instead, manufacturers chose deceptive practices, 6 installing defeat devices to cheat on their certification 7 tests. Nationwide, these excess emissions, as you have 8 already heard from Todd, have led to an estimated 2,500 9 premature deaths, 5,000 hospitalizations, and billions in 10 health care costs according to the EPA. 11 In 1998, the consent decree was supposed to fix 12 all of this and treat these high polluting trucks. 13 However, most of these trucks have gone untreated and 14 continue to pollute in excess. And this is despite the 15 fact that fixing the problem using chip reflash takes less 16 than a half an hour and costs truckers nothing more than 17 their time. 18 Engine manufacturers should have sent traveling 19 technicians out to fix these high polluter trucks years 20 ago directly to the sites. But instead, the engine 21 manufacturers have chose to avoid taking responsibility. 22 After deceiving EPA on certification tests, actually 23 cheating on them, and after lying about it and now 24 attempting to escape responsibility on this, they're now 25 opposed to the measure. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 We urge the Board to put an end to the excess 2 emissions and fix these polluting trucks and moving 3 forward with this rule as quickly as possible. We also 4 urge the Board to stop the negotiations and move forward 5 straight with the rule. Thank you. 6 CHAIRPERSON LLOYD: To stop negotiations? 7 MS. BAILEY: Right. We believe that the rule 8 without further negotiations is perfectly acceptable and 9 reasonable. 10 CHAIRPERSON LLOYD: Okay. Thank you. 11 MS. BAILEY: As proposed by staff. 12 CHAIRPERSON LLOYD: Thank you. 13 Jason Mark and Kathryn Phillips. 14 Question, Jason. If these trucks were powered by 15 fuel cells, would we have this problem? 16 MR. MARK: Excellent question, Dr. Lloyd. No, we 17 would not. Sorry for taking a little time. I was 18 speaking with my good friend, Stephanie Williams. 19 Momentarily, I want to thank you, Mr. Chairman 20 and members of the Board. My name is Jason Mark. I'm the 21 Clean Vehicle Director at the Union of Concerned 22 Scientists. I'm pleased to be here to comment on the 23 latest -- let's say -- conversation on the clean air 24 struggle between the state of California and the engine 25 manufacturers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 I guess I don't quite remember it quite as rosy 2 and cooperative of a history as some previous speakers 3 have suggested, and I think we're in no different 4 situation today. I guess I want to focus in today a bit 5 on the issue of credibility as we move forward. There may 6 be some legitimate questions on whether or not engine 7 manufacturers have met the letter of the consent decrees. 8 But I think there is clear evidence they haven't met the 9 spirit of the consent decree. 10 To put it simply, they got caught cheating. EPA 11 and the Air Resource Board didn't force a recall, although 12 perhaps in retrospect they should have. And instead we 13 entered into a voluntary program, and the engine makers 14 haven't made up for the loss created by the cheating from 15 their emission practices. 16 Caterpillar, for example, failed to meet the 17 October 2002 deadline for offering the pull-ahead -- 18 18 month pull-ahead on the engines and instead decided to pay 19 non-compliance penalties. Well, that doesn't necessarily 20 help breathers out. 21 DDC and Cummins Engine company have taken the 22 loophole in the consent decrees to not offer a reflash on 23 the transit bus engines, which I think is highly 24 problematic in densely, highly populated urban areas. 25 Here we are today with the challenge focused around the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 very slow rate of chip reflash. 2 Ultimately, I think this does amount to a 3 credibility problem, not only affects the engine 4 manufacturers, but quite honestly effects the parties who 5 entered into the consent decrees. And I think as you 6 consider moving forward with yet another voluntary 7 agreement like the consent decrees, we have to seriously 8 consider whether or not you can actually deliver on the 9 potential emission reductions. 10 So while we strongly support the proposal as-is 11 from the staff today, recognize that you're about to enter 12 into conversation with the engine manufacturers and 13 perhaps other parties. We urge you to set firm targets to 14 deliver -- with a goal of delivering similar emission 15 reductions on a similar schedule as what this regulation 16 would require. And most importantly have a regulatory 17 backstop so we can be certain at the end of the day we 18 deliver on the emission reductions and make up for the 19 losses that were created by the engine manufacturers. 20 Thank you. 21 CHAIRPERSON LLOYD: Thank you. 22 Kathryn Phillips. 23 MS. PHILLIPS: Thank you, Chairman Lloyd. I'm 24 Kathryn Phillips with the Center for Energy Efficiency and 25 Renewable Technology. We're a coalition of environmental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 organizations, renewable technology companies, and other 2 companies. 3 As I've been listening to this today, I come from 4 a slightly different perspective than I come to many of 5 the regulations you make. I'm a daughter of a trucker. 6 As I've been listening, I haven't heard the truckers' 7 point of view presented. So I'd like to just tell you a 8 little bit about that -- 9 CHAIRPERSON LLOYD: Where's Stephanie? 10 MS. PHILLIPS: That's the Trucking Association. 11 These are the trucking -- 12 CHAIRPERSON LLOYD: She doesn't represent the 13 truckers? 14 MS. PHILLIPS: That's the trucking companies. 15 But I'm talking about people like my dad -- 16 CHAIRPERSON LLOYD: Like Kathleen Tschogl. Okay. 17 MS. PHILLIPS: -- my dad who was an independent 18 trucker. And in about 15 years of trucking, he bought two 19 trucks, both of them International trucks. The second 20 truck he bought cost just slightly less than our house 21 cost. Trucks are expensive and they're huge investments 22 for independent truckers. 23 When a manufacturer then comes forth -- and when 24 you buy a truck, you think you're getting what you're 25 getting. When somebody like International, which is who PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 my father's trucks were manufactured by, then is forced to 2 reveal later what you were buying you didn't get, as an 3 independent trucker you don't have a whole lot of clout to 4 force the manufacturer to give you the truck you wanted, 5 the truck you thought you were buying, the truck you 6 thought was complying with the current regulations. 7 I think that what's really important to remember 8 here is that the people who are exposed most to diesel 9 emissions from trucks are the truckers themselves. When 10 the NOx emissions come out and they mix and form the smog, 11 that's a problem for people who are down stream. But when 12 a trucker is sitting in a truck stop in Minnesota on a 13 sub-zero day and he has to keep his truck operating, which 14 would horrify air quality emissions people, but he has to 15 keep the heater going, those NOx emissions make a 16 difference, personally, to that trucker in that truck. 17 I think it's horrible. It's horrendous. It's 18 disgusting. I'm trying to keep my words clean. What the 19 manufacturers have done to the truckers who bought these 20 trucks, who invested in these trucks, who thought they 21 were getting the truck they thought they were getting. I 22 think it's imperative that the Air Resources Board keep 23 these people in mind when you start negotiating with 24 cheaters, cheaters who have shown that when they had a 25 voluntary opportunity to fix this since the consent decree PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 and the settlements were come to, cheaters who have shown 2 they are unable to act voluntarily and to do the right 3 thing in a timely manner. 4 When you sit down and negotiate with them, 5 remember people like my father on the sub-zero days in 6 Minnesota who's looking for a load to carry home to 7 California so he can get home in time for Christmas. 8 Remember people like that who sit there and they have to 9 keep that engine going to keep their heater going and keep 10 those NOx fumes coming in at a higher rate than they would 11 normally. 12 One more thing. I think it's very nice that the 13 Trucking Companies Association's are willing and have 14 stepped forward to volunteer. It is a little late, but 15 it's good to volunteer to help educate truckers about this 16 issue. It would be nice if you could have -- I know the 17 Trucking Association Convention isn't until September. 18 I'm hoping that these voluntary efforts to inform truckers 19 about the need to take this action comes a lot sooner. 20 But I think it's important to remember those 30,000 21 truckers who work for companies who can afford to allow 22 them to go to these trucking conventions isn't 23 representative of all the truckers out there. It's also 24 not representative of the people who bought RVs and motor 25 homes and school buses. These are people that expected to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 get the vehicles that they were actually buying. 2 And with that, I urge the Air Resources Board to 3 negotiate strong and hard. Remember you're dealing with 4 cheaters. And remember that if you don't get the best 5 deal you can get and if there isn't some way to hold them 6 to that deal, you're not going to be doing anything for 7 those truckers who don't have CTAs and others like them 8 speaking for them. Thank you. 9 CHAIRPERSON LLOYD: Kathryn, thank you. And tell 10 your father you did a great job representing graphically 11 some of his obstacles. The other thing in terms of 12 getting people here sooner, of course, Stephanie has been 13 known to be able to attract trucks to the Capitol 14 essentially at will. Maybe that's not such an obstacle as 15 we expect. 16 With that, I think again we had a real excellent 17 spectrum of presentations, which I can understand, you 18 know, some of the challenges the staff is having putting 19 this all together. 20 I think we go back to what Ms. D'Adamo said and 21 many of the witnesses. Of course, our job is to protect 22 clean air. We do have a very serious job ahead of us and 23 a critical job. And I think Kathyrn's point at the end 24 reminds us not only do we have the regional, but also the 25 local. So we really do have a tremendous, tremendous job. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 But also we have a wonderful opportunity. I 2 think the industry is hearing the tremendous skepticism 3 that why should we enter and give the industry an 4 opportunity to voluntarily do something rather than go 5 with the regulation. Besides the fact we can't set a 6 regulation at this time, which is a very good reason. We 7 do have an opportunity to work together to try to 8 demonstrate this can work. I think this could be a unique 9 opportunity which could, again, set us on a path of doing 10 more of these things. 11 But on the other side of it, if it doesn't work, 12 then this whole idea of trying to enter into voluntary 13 agreements will again be set back maybe indefinitely. So 14 I'm looking forward to the opportunity here of seeing what 15 staff can put together with the industry over this period 16 of time and, as typical, working with all the 17 stakeholders. Are there any other comments from the 18 Board? 19 I do have to ask, I guess, about any ex parte 20 communication on behalf of the Board. 21 Mr. McKinnon. 22 BOARD MEMBER McKINNON: Yeah. I had a brief 23 conversation yesterday with Jay McKeeman about the 24 warranty issues involved in this rule making. 25 CHAIRPERSON LLOYD: Anyone else? Any other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 comments from the staff at this time? 2 EXECUTIVE OFFICER WITHERSPOON: None. 3 CHAIRPERSON LLOYD: Again, we are going to leave 4 the record open on this item due to the fact the review 5 called for by the Governor's Executive Order has not been 6 completed. Once the latter occurs, the Board will take up 7 this item again, along with any change or adjustment that 8 comes out of the review process, at a separate noticed 9 public hearing. 10 Persons wishing to comment on this item in the 11 meantime are welcome to do so, and those comments will be 12 part of the official rule making. And of course, when we 13 take the item up again, the record will also be open so 14 people have a chance to comment on that. 15 So with that, we'll adjourn this item to a time 16 to be specified in the future. And I would like to 17 take -- see if we can take a 30-minute break for lunch. 18 If you go by that clock, it will be just after 1:00. 19 (Thereupon a recess was taken.) 20 CHAIRPERSON LLOYD: The next agenda item today is 21 03-10-2, the proposed airborne toxic control measure for 22 diesel fueled transportation refrigeration units, TRU 23 generator sets, and facilities where so-called TRUs 24 operate. This is another part of ARB's comprehensive plan 25 for reducing the public health impacts and risks PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 associated with diesel particulate emissions. 2 As I said at the outset, the Board will not be 3 voting on this item today. That vote will occur after the 4 regulatory review called for by the Governor's Executive 5 Order S-02-03 has been completed. 6 In the meantime, we think it's valuable for the 7 Board to hear the staff's proposal, hear public testimony 8 so that the Board can fully be up to speed on the status 9 of the proposal and any concerns that the affected 10 stakeholders may have. 11 For anyone who is signed up on this item today, 12 thank you very much for coming, and we look forward to 13 your participation in the dialogue today. 14 With that, I'd like to turn it over to our 15 Executive Officer Ms. Witherspoon to introduce the item 16 and begin staff's presentation. 17 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 18 Lloyd. 19 Transportation refrigeration units, or TRUs, are 20 cooling systems powered by diesel engines to refrigerate 21 temperature-sensitive products. TRUs are located and 22 operated throughout California at distributions centers, 23 cold storage warehouses, and wherever perishable goods are 24 transported. 25 The display that you saw this morning was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 provided to us by Thermo King to demonstrate what a TRU 2 looks like, and Thermo King will be testifying later on 3 this item. 4 Many of the facilities where TRUs congregate are 5 located in or near residential neighborhoods where the 6 potential for near-source health risks are a concern. In 7 fact, it is the near-source health risk that is the 8 driving factor behind the proposed TRU rule, although it 9 has broader emission benefits. 10 Staff is proposing this ATCM to reduce public 11 exposure, the associated cancer risker, and other adverse 12 health effects. The proposed rules establishes 13 performance standards that rely on elements contained in 14 other diesel rules that have already come before you. 15 Those elements include accelerated replacement of TRUs 16 with cleaner engines, retrofit of existing TRUs with 17 verified diesel control strategies, and the potential use 18 of alternative fuels or advance non-diesel technologies. 19 Mr. Rod Hill of the Stationary Source Division 20 will now present the proposed ATCM. 21 CHAIRPERSON LLOYD: Before starting the 22 demonstration, some of my colleagues complained the 23 demonstration has gone too far. So we have a 24 demonstration of a refrigeration unit in this building, in 25 this room. So maybe anybody who's in charge of this we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 could have a little bit more attempt but not so similar. 2 Thank you. 3 (Thereupon an overhead presentation was 4 presented as follows.) 5 AIR RESOURCES ENGINEER HILL: Thank you 6 Ms. Witherspoon. Good morning, Mr. Chairman and members 7 of the Board. 8 As Ms. Witherspoon said, I will be presenting 9 staff's proposed airborne toxic control measure for in-use 10 transport refrigeration units and TRU generator sets. 11 Today we're going to refer to both of these as TRUs 12 throughout this presentation. 13 The proposed ATCM for TRUs is designed to reduce 14 diesel PM emissions for a 13 year phased implementation 15 period. This ATCM focuses on in-use TRUs, not new TRUs. 16 New TRUs will have to meet the federal Tier 4 engine 17 standards which should be final in April 2004. ARB plans 18 to adopt these standards in late 2004. 19 As most of you saw, there is a full-sized TRU 20 down at the loading dock. That unit is a show room 21 display of a trailer TRU. Hopefully, you were able to 22 look at the engine which is the focus of today's 23 discussion. 24 --o0o-- 25 AIR RESOURCES ENGINEER HILL: Shown here are the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 items that I'll be discussing today. 2 --o0o-- 3 AIR RESOURCES ENGINEER HILL: As background, 4 California identified diesel particulate matter as a toxic 5 air contaminant in 1998. The diesel risk reduction plan, 6 which was approved by the Board in 2000, included a 7 planned control measure for reducing diesel PM from TRU 8 engines. 9 --o0o-- 10 AIR RESOURCES ENGINEER HILL: As shown here, the 11 proposed regulation was developed in an open public 12 process with extensive outreach activities. 13 --o0o-- 14 AIR RESOURCES ENGINEER HILL: TRUs are 15 refrigeration systems powered by a diesel engine. TRUs 16 control the environment of temperature-sensitive products. 17 They are used on insulated trailer vans, truck vans, 18 shipping containers, and rail cars. 19 I'd like to make it clear the diesel engine we 20 are addressing in this ATCM is separate from the engine 21 that drives the vehicle. Even though TRU engines are 22 small, all less than 50 horsepower, they typically emit 23 more diesel PM than a heavy-duty diesel truck engine emits 24 at idle. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 AIR RESOURCES ENGINEER HILL: Some pictures of 2 TRUs follow. This is what a refrigerated trailer would 3 look like that you might see on a highway. 4 --o0o-- 5 AIR RESOURCES ENGINEER HILL: This shows the 6 semi-trailer equipped with a TRU but without the truck 7 tractor. This is what you see at distribution centers. 8 --o0o-- 9 AIR RESOURCES ENGINEER HILL: This slide shows a 10 trailer TRU less the trailer. Components are very 11 compactly arranged into these units. The engine is shown 12 in the lower right corner. 13 --o0o-- 14 AIR RESOURCES ENGINEER HILL: This picture shows 15 a truck van equipped with a TRU mounted on the front of 16 the van above the cab. These units are typically used in 17 local urban delivery routes. 18 --o0o-- 19 AIR RESOURCES ENGINEER HILL: This is a rail car 20 that is refrigerated by a TRU. You can see part of the 21 TRU on the left upper corner. This type of unit is used 22 for long distance transport of perishable goods, such as 23 potatoes and melons. 24 --o0o-- 25 AIR RESOURCES ENGINEER HILL: Here we see two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 refrigerated shipping containers on a container rail car. 2 The top shipping container has a TRU mounted on the left 3 end. The bottom shipping container has a TRU generator 4 set attached to the left end to provide electric power to 5 an electrically-driven refrigeration system. The top unit 6 typically stays on land, while the bottom unit would go 7 through port where it is loaded or unloaded from 8 ocean-going ships that transport perishable goods 9 worldwide. When the refrigerated containers go to a ship, 10 the TRU generator set is removed and the refrigeration 11 system is plugged into the ship's on-board electric power. 12 --o0o-- 13 AIR RESOURCES ENGINEER HILL: Now I'll talk more 14 about the emissions from TRUs. 15 --o0o-- 16 AIR RESOURCES ENGINEER HILL: We believe we need 17 to control diesel PM emissions from TRUs because the 18 emissions per unit are high, resulting in high risk near 19 facilities. These emissions contribute to overall diesel 20 emissions exposure. Large emission reductions are 21 possible, and these reductions are cost effective. 22 --o0o-- 23 AIR RESOURCES ENGINEER HILL: In the year 2000, 24 there were about 40,000 -- in the year 2000, there were 25 about 40,000 TRUs operating in California. The greater PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 than or equal to 25 horsepower category amounted to 84 2 percent of the total. On average, about 5 percent of 3 these were from out of state. The remaining 16 percent of 4 the total were in the less than 25 horsepower category, 5 which are used on truck TRUs. 6 --o0o-- 7 AIR RESOURCES ENGINEER HILL: TRUs emitted two 8 tons per day of PM in 2000, which was about 3 percent of 9 the total statewide diesel PM emissions. If left 10 uncontrolled, PM and NOx emissions are expected to 11 increase significantly due to the increases in numbers of 12 TRUs operating in California. 13 --o0o-- 14 AIR RESOURCES ENGINEER HILL: This chart compares 15 TRU engine emission standards for PM to the standards in 16 effect during the same times for heavy-duty diesel on-road 17 engines. The middle and right blue bars represent U.S. 18 EPA's proposed Tier 4 off-road standards. The middle bar 19 is the interim Tier 4 standards. The right bar is the 20 long-term Tier 4 standard. 21 Relying only on historic turn over, the average 22 fleet emissions rate for greater than or equal to 25 23 horsepower TRU would not reach .02 grams per break 24 horsepower hour until after 2030. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 AIR RESOURCES ENGINEER HILL: TRUs concern us 2 because in addition to having relatively high diesel PM 3 emissions, TRUs congregate at facilities in large numbers. 4 Many of these facilities are located near populated areas. 5 This creates a significant potential risk for excess 6 cancer cases near these facilities. 7 --o0o-- 8 AIR RESOURCES ENGINEER HILL: This picture shows 9 a relatively smaller facility with 11 doors serving 10 refrigerated areas. 34 trailer TRUs were operating at 11 this facility. The engine was operated on site an average 12 of three hours per day, six days per week, which amounts 13 to about 600 hours per week total TRU engine operating 14 time. 15 --o0o-- 16 AIR RESOURCES ENGINEER HILL: This picture shows 17 part of the 40 doors serving refrigerated areas at this 18 facility. We consider this a large facility since it has 19 more than 20 doors. 20 --o0o-- 21 AIR RESOURCES ENGINEER HILL: This is an aerial 22 picture of a facility that has more than 60 loading dock 23 doors serving refrigerated areas operating hundreds of 24 TRUs. The building with the light colored roof near the 25 middle of the triangular area and the two buildings PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 immediately to the right are refrigerated. You can see 2 that this facility has residential areas nearby. 3 --o0o-- 4 AIR RESOURCES ENGINEER HILL: Staff modeled some 5 generic facilities. The potential cancer risk near these 6 facilities was significant as shown going out 1.8 miles 7 from the larger facility. 8 --o0o-- 9 AIR RESOURCES ENGINEER HILL: Now I'll talk about 10 the options available to reduce diesel PM emissions. 11 --o0o-- 12 AIR RESOURCES ENGINEER HILL: One control option 13 is to use a new engine that is certified to meet the U.S. 14 EPA's proposed Tier 4 off-road engine standards. This 15 would result in a 50 percent reduction in PM emissions in 16 2008. Similarly, an operator could replace the entire TRU 17 with a new unit that has an engine that meets the Tier 4 18 standards. No retrofit devices are currently verified. 19 We've looked at many control technologies, and there are 20 several promising options, like water fuels plus an 21 oxidation catalyst, alternative fuels, actively 22 regenerated diesel particulate filters, and fuel-borne 23 catalysts with catalyzed wire mesh filters. We believe 24 that verified systems will be available as an option in 25 time for compliance with this ATCM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 --o0o-- 2 AIR RESOURCES ENGINEER HILL: Alternative 3 technologies are those which would eliminate diesel engine 4 operation while a TRU is at a facility. Examples are 5 shown here. 6 Staff is planning to conduct two technology 7 reviews to check on the progress of diesel emissions 8 control system verification for TRU engines. 9 --o0o-- 10 AIR RESOURCES ENGINEER HILL: Next I will discuss 11 the proposed ATCM. 12 --o0o-- 13 AIR RESOURCES ENGINEER HILL: Listed here are the 14 key elements of the ATCM, which I will discuss in more 15 depth in subsequent slides. Once again, this ATCM focuses 16 on in-use TRUs. The goal of the ATCM is to use 17 aggressively more stringent in-use performance standards 18 on a compliance schedule that accelerates the replacement 19 or retrofit of in-use TRU engines. The compliance options 20 all result in emission reductions achieved through 21 accelerated engine and TRU replacements, retrofits of 22 existing engines, or the use of alternative technologies. 23 --o0o-- 24 AIR RESOURCES ENGINEER HILL: Listed here are the 25 key elements of the ATCM, which I'll discuss in more depth PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 in subsequent slides. Other elements of the ATCM are 2 recordkeeping and reporting, a registration and 3 identification numbering system for all TRUs based in 4 California, and early compliance incentive for 2002 and 5 older units, and technology reviews planned for 2007 and 6 2009. 7 Now I'll discuss each of these elements in more 8 depth. 9 --o0o-- 10 AIR RESOURCES ENGINEER HILL: The goal of the 11 proposed ATCM is to accelerate the retrofit and 12 replacement of in-use TRU engines that operate in 13 California by 30 percent. The average useful life of a 14 TRU is about ten years. To reduce diesel PM emissions, 15 staff is proposing to accelerate the replacement or 16 retrofit of TRUs on a seven-year retrofit or replacement 17 schedule. 18 --o0o-- 19 AIR RESOURCES ENGINEER HILL: This slide shows 20 the greater than or equal to 25 horsepower category in-use 21 performance standards. The in-use performance standards 22 include two levels: Low emission and ultra low emission. 23 The low emission standards begin in 2008. The ultra low 24 emission standards begin in 2010. 25 There are three options for complying with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 low emission and ultra low emission standards. The first 2 option is to use a TRU engine that has been certified to 3 meet the PM performance standards. The second option is 4 to use an engine that is equipped with a verified retrofit 5 control division. The third option is to use an 6 alternative technology as listed previously. 7 The in-use performance standards for less than 25 8 horsepower engines are similar but less stringent. Also, 9 the ultra low emissions certification standard has not 10 been specified at this time. We will be working with U.S. 11 EPA and engine manufacturers to determine if a more 12 stringent standard is feasible. 13 --o0o-- 14 AIR RESOURCES ENGINEER HILL: This slide shows 15 the phased compliance schedule staff is proposing. The 16 easiest way to look at the compliance schedule is that an 17 operator would have to meet a more stringent in-use 18 standard every seven years on a model year plus seven year 19 basis until ultra low in-use emission standard is met. 20 For example, looking at the second line on the 21 table, a 2002 model year TRU would have to meet the low 22 emission in-use standards in 2009 and the ultra low 23 emission standards in 2016. 24 --o0o-- 25 AIR RESOURCES ENGINEER HILL: The early PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 compliance provision only applies to 2002 and older engine 2 model years because these are the only model years that 3 have to meet the low in-use standards. Each year of early 4 compliance with the low emission in-use performance 5 standard would extend the compliance date for the ultra 6 low emission standard by one year. There is a maximum 7 three-year extension allowed under this provision. 8 This provision is designed to provide early 9 emission reductions and stimulate early development of 10 diesel emission control technologies for TRU diesel 11 engines. It also provides operators an incentivized 12 option to comply early to reduce the numbers of units that 13 would need to comply by the end of 2008. 14 --o0o-- 15 AIR RESOURCES ENGINEER HILL: Operators of TRUs 16 based in California would have to submit an initial report 17 in 2009 that provides information on TRUs that operate -- 18 they operate that are based in California. Update reports 19 would be required as information about the operator fleet 20 was changed. Large facilities with 20 or more loading 21 dock doors serving refrigerated areas would submit a 22 one-time report in 2005 to ARB. Recordkeeping and 23 reporting is necessary to implement and enforce the ATCM. 24 --o0o-- 25 AIR RESOURCES ENGINEER HILL: As mentioned PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 earlier, California-based TRU owners operator would have 2 to register the TRUs and TRU gen sets that they operate. 3 This would occur as part of the operator reporting. The 4 registration and numbering system is mandatory for 5 California-based TRUs and voluntary for non-California 6 based TRUs. 7 Staff believes that the use of an identification 8 number would speed up field inspections and will be an 9 integral part of monitoring the implementation and 10 effectiveness of the ATCM. This will be enforced through 11 our current heavy-diesel inspection program carried out by 12 our enforcement division. 13 --o0o-- 14 AIR RESOURCES ENGINEER HILL: As mentioned 15 earlier, two technology reviews are planned to assure 16 technology is available and cost effective for a broad 17 range of TRU engines in time for the compliance dates. 18 --o0o-- 19 AIR RESOURCES ENGINEER HILL: Now I will discuss 20 the environmental and economic impacts of the proposed 21 ATCM. 22 --o0o-- 23 AIR RESOURCES ENGINEER HILL: The ATCM would 24 result in significant emissions and risk reductions. We 25 estimate that with implementation of the ATCM, there will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 be a 65 percent reduction in PM emissions in 2010 and a 92 2 percent reduction in 2020 relative to 2000 baseline. 3 Depending on which control options are chosen, we 4 also believe there will be from 10 percent to 50 percent 5 potential reduction in nitrogen oxide emissions. In 6 addition, we believe that in the process of reducing 7 diesel PM emissions there will be about a 30 percent 8 reduction in reactive organic gas emissions. 9 --o0o-- 10 AIR RESOURCES ENGINEER HILL: With the 11 restrictions in diesel PM, we anticipate health cost 12 savings due to the reduced mortality, incidences of 13 cancer, PM-related cardiovascular effects, and chronic 14 respiratory symptoms. We estimate the ATCM will help 15 avoid 211 premature deaths by 2020. 16 --o0o-- 17 AIR RESOURCES ENGINEER HILL: For TRU 18 owner/operators, there will be costs associated with 19 installing after-treatment controls on their engines or 20 replacing an old engine with a compliant engine or 21 replacing the entire TRU unit. The total costs for 22 implementing the ATCM statewide would be between 5 and $15 23 million per year and between 90 and $160 million over the 24 13-year life of the program. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 AIR RESOURCES ENGINEER HILL: The cost 2 effectiveness of the proposed ATCM when attributing all 3 the costs to reduction in diesel PM is between $10 and $20 4 per pound of diesel PM reduced. This is similar to the 5 cost effectiveness of the stationary ATCM which was 6 estimated to be $15 per pound and compares favorably to 7 the solid waste collection vehicle regulation which was 8 approved by the Board in September 2003 and had a cost 9 effectiveness of about $67 per pound. 10 --o0o-- 11 AIR RESOURCES ENGINEER HILL: Once the Board acts 12 on the proposed ATCM, we intend to work on a number of 13 projects related to the implementation of the ATCM. 14 --o0o-- 15 AIR RESOURCES ENGINEER HILL: We will seek a 16 Title 1, Section 209(e) waiver from U.S. EPA. Staff will 17 follow the development and verification of diesel emission 18 and control systems and conduct technology reviews in 2007 19 and 2009. We'll work with U.S. EPA to develop a long-term 20 Tier 4 PM emission standard for less than 25 horsepower 21 TRU engines. And during implementation, staff will 22 monitor TRU engine compliance and evaluate the control 23 measures' effectiveness. 24 This concludes my presentation. Thank you for 25 your attention. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 CHAIRPERSON LLOYD: Thank you very much. 2 Madam Ombudsman, would you please share with us 3 the public participation process that was followed as this 4 item was being developed and share with us any concerns or 5 observations you may have at this time. 6 OMBUDSMAN TSCHOGL: Mr. Chairman and members of 7 the Board, the proposed ATCM was developed after an 8 extensive public input process of two-and-a-half years. 9 The following is a summary of that effort. 10 Staff interviewed operation staff during 25 11 facility visits where TRUs and TRU generator sets operate. 12 These visits included large and small and medium-size 13 businesses. 14 Staff kept TRU and TRU generator set operators 15 and facilities apprised of the progress of the proposed 16 ATCM through the ARB website, trade associations, and 17 trade journals, like the Refrigerated Transporter, a trade 18 journal with a circulation of 15,000. In addition, staff 19 assisted in the preparation of a presentation to the 2003 20 annual meeting of refrigerated division of the Truckload 21 Carrier Association. 22 Staff also held many meetings with stakeholders, 23 such as manufacturers and dealers, to obtain information 24 about the numbers of TRUs and TRU generator sets operated 25 in California and to provide information and encourage PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 testing and demonstration of available and emerging 2 control methods. 3 Staff also worked with other public agencies and 4 organizations to resolve issues as well as to obtain 5 information and comments from places like the University 6 of California Riverside, U.S. EPA, USDA, the South Coast 7 Air District, and CAPCAO. 8 Staff participated in public consultation 9 meetings which were followed by a number of work group 10 meetings and public workshops specific to the proposed 11 ATCM. All meetings and workshops were noticed on the ARB 12 website and approximately 750 subscribers received 13 electronic mail messages. Nine work group meetings were 14 held in Sacramento, from 21 to 65 persons attended or 15 participated by phone in each of those work group 16 meetings. 17 In addition, staff held four separate facility 18 electrification work group meetings, each attended by 8 to 19 18 persons. Five public workshops were held in 20 Sacramento. From 14 to 59 persons attended or 21 participated by telephone in each of these workshops. On 22 June 5th, 2003, the public workshop was also accessible 23 via simultaneous webcast. Also, staff discussed the 24 diesel -- the Board's diesel PM risk reduction efforts, 25 including the proposed TRU ATCM during community meetings PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 held in Boyle Heights and Wilmington. Thank you. 2 CHAIRPERSON LLOYD: Thank you very much. 3 Comprehensive report. Clearly staff did an excellent job 4 with the outreach there. 5 Any questions from the Board members at this 6 time? 7 I had one question. When we talk about 8 registration, I think the comment was made that 9 California-based TRUs required to register and apply for 10 ID numbers and out of state are voluntary. How do you 11 classify when they come back in terms of the truck TRUs, 12 you've got 6600 and the trailer nearly 34,000. Of those, 13 how many are in California and how many are outside? And 14 then -- so what I'm trying to get at is how many of those 15 will have to be registered? For example, if you have a 16 container ship -- I notice some of those there -- where 17 does that operate? 18 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 19 First off, I'll take the first part of your question. On 20 any given day, there's about 7,500 TRU trailers operating 21 in California that are coming in from out of state. With 22 respect to the ocean-going ones, when they come on shore 23 is when they need to put on a TRU generator set, because 24 on the ships, those are all plugged into the grid on the 25 ship where the generators -- where it's going. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 CHAIRPERSON LLOYD: They have the diesel on 2 board? 3 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: They 4 have the engines on board that do that. We're going to be 5 looking at those pretty soon too. 6 So the issue is that the overall number we're 7 giving you, about 40,000, 83 percent of those are the ones 8 that go either on the train that are the pin-on generators 9 that go -- 10 CHAIRPERSON LLOYD: How do you decide whether 11 they're California or out of state? 12 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 13 Well, the ones with respect to the pin-on, when those are 14 put on is when they come onto shore. So they're -- those 15 are captured. 16 CHAIRPERSON LLOYD: California? 17 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 18 They're captured here. They don't carry them on the ship 19 with it. The other ones, both the rail and the 20 out-of-state trailer traffic, are the ones that 21 periodically come into California. We estimate 7500 in 22 any one day. Certainly, there's more than that out there, 23 you know, that are coming in. It's not the same one 24 coming in every day. 25 CHAIRPERSON LLOYD: We'll have more discussion, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 but I'd like to go to our witness list. 2 We have Jed Mandel, Dean Saito, and BJ Kirwan. 3 MR. MANDEL: Good afternoon. I'd like to report 4 that I had a reflash over lunch and I'm here to support 5 the staff's recommendation. 6 CHAIRPERSON LLOYD: Thank you, Stephanie. 7 (Laughter) 8 MR. MANDEL: It's Jed Mandel speaking on behalf 9 of the Engine Manufacturers Association. EMA has been 10 actively participating in the rule making process on this 11 rule. And we are supportive of the staff's open and 12 productive dialogue that led to the proposal today. 13 Going into the process, EMA and its member had 14 two principal concerns. First, EMA felt it was critically 15 important to work to develop an ATCM that did not impose 16 requirements on new TRU engines, different than the 17 requirements being developed under the U.S. EPA's Tier 4 18 non-road engine program. Second, EMA believed it was 19 fundamentally important for ARB to revise the measurement 20 test methods applicable to TRU engines to reflect their 21 unique duty cycle. 22 The staff has worked diligently to both assess 23 and address EMA's principal concerns. The result is an 24 ATCM for TRUs that avoids the fundamental pitfalls that 25 could have frustrated the development of a workable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 emissions reduction program for TRU engines. 2 With respect to EMA's main point of concern, 3 alignment with the Tier 4 non-road emission limit, the 4 general degree of alignment achieved by the rule promotes 5 ite feasibility and potential cost effectiveness. It also 6 helps to prevent the unwarranted cost prohibitive result 7 of compelling manufacturers to build unique TRU engines 8 solely for the California market. The resolution of this 9 fundamental issue has been a key factor in developing a 10 well-reasoned ATCM for TRUs, and we're very appreciative 11 of staff's support of that. 12 Turning to EMA's second principal concern, we 13 were especially appreciative of the manner in which the 14 ARB staff undertook to analyze and address the appropriate 15 test methods for assessing emissions from TRUs. TRUs 16 operate under a different and unique duty cycle. They do 17 not operate at low idle, high load, rated power, or peak 18 torque. The staff worked closely with industry to develop 19 a more representative test cycle that recognizes these 20 characteristics. 21 With the new test cycle, results from emission 22 tests will more closely match actual emissions, and hence 23 more accurate assessment of emissions inventories and 24 impacts can be made. Furthermore, engine manufacturers 25 can work to develop tailored cost-effective emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 control solutions for TRUs and will not have to 2 over-design emission control systems to operate in areas 3 that the TRU engines will never see in actual operation. 4 As a final matter, EMA does have a number of 5 concerns relating to the risk and cost analyses that are 6 included in the staff report which are detailed in written 7 comments that we had prepared for us. 8 EMA urges the staff to amend any final statement 9 of reasons for the TRU ATCM so it comports with those 10 technical comments and recommendations. 11 In conclusion, we greatly appreciate the 12 opportunity to have worked with the staff on the 13 development of this rule. Their attentiveness, 14 professionalism, and hard work has led to a rule which we 15 think can successfully achieve the desired emission 16 reductions. 17 If there are any questions, I'd be pleased to 18 answer them. 19 CHAIRPERSON LLOYD: Of your members, which make 20 the largest number of the units? 21 MR. MANDEL: The companies that are principally 22 affected are Yanmar and Kubota in terms of I think the 23 highest volume. There are other manufacturers who make 24 them as well, but they are the principal manufacturers of 25 these engines. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 CHAIRPERSON LLOYD: Thank you. Thank you very 2 much. Appreciate it. Dean Saito, BJ Kirwan and Herman 3 Viegas. 4 MR. SAITO: Good afternoon, Chairman Lloyd and 5 members of the Board. Dean Saito, South Coast AQMD fleet 6 rules manager. 7 The AQMD staff fully supports the staff's 8 proposed ATCM for the in-use diesel fuel transport 9 refrigeration units. The adoption of the proposal is 10 supported by ARB's identification of diesel as a 11 particulate, as a toxic air contaminant, and it's 12 supported by the AQMD's 1999 study which demonstrated that 13 71 percent of the cancer risk is attributed from diesel 14 particulate matter. The near-term PM reductions from this 15 proposed regulation is essential in protecting public 16 health from the toxic mobile source air contaminants. The 17 AQMD appreciates the opportunity to provide these comments 18 and urges you to adopt this proposed ATCM. Thank you. 19 CHAIRPERSON LLOYD: Thank you, Dean. 20 MS. KIRWAN: Good afternoon. 21 CHAIRPERSON LLOYD: Good to see you. 22 MS. KIRWAN: Thank you. My name is BJ Kirwan. 23 I'm a lawyer at Latham and Watkins in Los Angeles, and I 24 represent Thermo King which makes cryogenic as well as 25 diesel TRUs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 CHAIRPERSON LLOYD: I'd like to again thank you 2 for -- follow-up of staff, for Thermo King, your client, 3 and for coming today and providing us with that very 4 effective demonstration. 5 MS. KIRWAN: Thank you. It's their pleasure. 6 I'm so pleased to be here representing a company 7 that is part of the solution and not opposing the staff 8 proposal. And just as a quick aside. I want to tell you 9 what a great job your staff has done. I have never been 10 participating in rule making where there has been more 11 requests for input and more attention paid to what 12 everyone participating has been saying. It was just 13 phenomenal. 14 CHAIRPERSON LLOYD: Make sure their bonus is 15 doubled at Christmastime. 16 MS. KIRWAN: Governor Schwarzenegger's action 17 plan for California, as you all know, listed as a top 18 priority to cut air pollution by 50 percent. And the 19 action plan suggests that can be accomplished in part by 20 dedicating support and money to advanced environmental 21 vehicle technologies. 22 You'll next hear from Herman Viegas who is the 23 manager of emerging technologies at Thermo King about the 24 company's cryogenic -- that's liquid -- CO at Thermo 25 King's products. They also make diesel products. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 And let me steal his thunder just because it's so 2 neat to say so that the TRUs -- the cryogenic TRUs are 3 100 percent emissions free. I mean, basically not only do 4 they eliminate emissions in the hot spot areas, the 5 distribution areas, but they eliminate emissions on the 6 road. 7 Thermo King's cryogenic TRUs have been available 8 for some years, and you'll hear they're in use in some 9 parts of Scandinavia and in Houston, Texas. And they are 10 more expensive than diesel technology at this point in 11 time to operate. And they would certainly need some 12 highway infrastructure, the kind of thing that the 13 Governor talked about in his environmental proposal. And 14 they need government endorsement which is, of course, 15 where you all come in. 16 Thank you very much for listening to me, and I'd 17 like to give Thermo King's representative the rest of my 18 time. 19 CHAIRPERSON LLOYD: Thank you very much. And 20 after that, we have Stacie Heaton, Mike Tunnell, and Dr. 21 Kubsh. 22 MR. VIEGAS: Good afternoon. 23 CHAIRPERSON LLOYD: Thank you for coming again. 24 Thank you for the display. 25 (Thereupon an overhead presentation was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 presented as follows.) 2 MR. VIEGAS: My pleasure. 3 Thermo King started on this cryogenic technology 4 development more than ten years ago, and we've spent well 5 over $10 million in the development of this technology. 6 We started working on this project because of the 7 emissions regulations that we knew were coming. And the 8 bigger reason was because of the CFCs of the ozone, 9 depletion problems of the CFCs that we were using at the 10 time in 1992. And we were not so sure whether the 11 alterative refrigerants would be ready in time. So we 12 embarked on this project which uses liquid carbon dioxide. 13 There is no engine. The cooling comes from the liquid 14 carbon dioxide itself. Liquid carbon dioxide is used 15 quite a bit and liquid nitrogen. They inject it directly 16 into the trailer. This technology does not inject it into 17 the trailer. It is let into the atmosphere. 18 --o0o-- 19 MR. VIEGAS: A few of the main benefits. There's 20 no diesel engine so the emissions are zero. No 21 fluorinated refrigerants. Carbon dioxide is a naturally 22 occurring refrigerant. It is a refrigerant, by the way. 23 Extremely quiet operation. Very few moving parts. It's 24 got extremely high cooling capacities compared to diesel 25 technology, so that allows you to recover a temperature PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 very quickly after a door opens. And it's safe. The CO2 2 does not enter the cargo space. 3 --o0o-- 4 MR. VIEGAS: What we have right now in commercial 5 production are truck and trailer refrigeration units. And 6 we have developed -- here we had to develop from scratch 7 fully automated filling technology because CO2 liquid is 8 under pressure about 10 bars, around 150 PSI. So you have 9 to -- the liquid is very cold minus 55 degrees Fahrenheit 10 to minus 60 degree Fahrenheit. So the filling technology 11 we had to develop from scratch. It is in commercial use 12 now. And an infrastructure to dispense it to the vehicle. 13 --o0o-- 14 MR. VIEGAS: This is a picture of a trailer unit. 15 This particular installation is in France. You have to 16 hook up two hoses to the liquid and the gas hose to fill 17 up the tank. There's a vacuum inserted vessel that's on 18 board. That takes the place of the diesel engine and 19 where the compressor is. 20 --o0o-- 21 MR. VIEGAS: This is a truck installation that's 22 in Finland. We have both versions of it, single 23 temperature or multi-temperature. A lot of the local 24 delivery operations -- they deliver frozen and fresh goods 25 from the same vehicle so you have more than one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 compartment. 2 And incidentally, Thermo King, as BJ mentioned, 3 they're the world's largest producer of transport 4 refrigeration air conditioning equipment. So we're not 5 knocking the diesel technology. This technology has a 6 niche. It really shines in the inner city where the noise 7 is an issue. In the Netherlands, for instance, they have 8 noise ordinances after 11:00 p.m. you can not exceed 60 9 DBA, which is very quiet. 60 DBA is very quiet. This 10 one, there is no noise at all. So some of the places that 11 have the noise regulations love this unit. 12 --o0o-- 13 MR. VIEGAS: This one here has what we call a 14 hybrid. It's similar to the Toyota car which uses a 15 battery. Our battery here is a CO2. That provides a 16 boost for cooling. We have customers that they are not 17 able to meet the temperature in the truck when they make 18 local deliveries. If you make 20, 30 door openings, the 19 temperature inside gradually creeps up and winds up out of 20 specifications. So some customers have purchased this 21 option where we take and actually retrofit the unit. They 22 stick in the CO2 coil and give it exceptional temperature 23 management capability. 24 --o0o-- 25 MR. VIEGAS: Now, the validation of this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 technology. Back in 1999, the South Coast Air Quality 2 Management District funded demonstration for testing two 3 of these CO 2 trailer units and two diesel units side by 4 side. And this was tested at the In and Out Burger in 5 California. And In and Out Burger, you know, was a 6 successful operation. They did not have any issues as far 7 as technical problems go. 8 They did -- their test was supposed to last for 9 one year. And at the end of the test, the test program 10 was over. But it did demonstrate -- at that time -- that 11 was four years ago, and we have made improvements since 12 then. 13 Temperature control is very similar to TRUs. And 14 it has a sensitivity to price and availability of CO2. We 15 kind of shifted our attention to Europe because in the 16 U.S., diesel fuel is relatively inexpensive compared to 17 some countries in Europe. And that shifts the equation on 18 whether or not this is economical in some regions. 19 We actually tested this for four years, first in 20 Chicago in 1995. Then we moved on to Sweden. And the 21 Department of Energy in Sweden had funded a study to do a 22 total life cycles emission study. And briefly what they 23 found was that there's a 10 to 1 advantage for the CO2 24 cryo unit to the diesel technology. A copy of the report 25 has been made available to the staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 And they also funded a fleet of 21 of these truck 2 units in Sweden where the end user was given a 25 percent 3 rebate on the cost of the unit. And their conclusions 4 were that -- in Sweden, by the way, the cost to operate is 5 about even with diesel unit. Diesel fuel is about 3 1/2 6 to $4 dollars a gallon. Their conclusion, of course, is 7 CO2 infrastructure needs further development. And 8 refueling time was an issue at the time, and they said it 9 needs the reduction. 10 --o0o-- 11 MR. VIEGAS: This is the installation. We've 12 teamed up with Hydrogas of Norway. They're the largest 13 producer of liquid CO2 in Europe, liquid CO2, that is. 14 And they operate diesel refilling stations. So we teamed 15 up with them and we put in the CO2 tank. You can see it 16 has the Thermo King logo on it. That is an unmanned 17 station. The driver pulls up there and swipes a credit 18 card. And you can select if you want CO2 or diesel fuel. 19 And then he gets a monthly bill. 20 The nice thing about this is several users, 21 especially if they're small users, one or two units, they 22 all share the infrastructure of this. The cost to 23 maintain this is spread out over a bunch of users. 24 We have 15 of these currently in operation in 25 Europe. 15 stations. One in Houston, and we're going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 have one more in Austin in January. The company, Cisco, 2 incidentally, is running one of our truck units right now 3 in Houston and three more in January. The Cisco chairman 4 is sold on this technology, by the way. He is on the 5 board in Houston to reduce emissions or smog in the 6 Houston area. 7 --o0o-- 8 MR. VIEGAS: Now, this is another proposal we 9 have, and we've discussed this with the Board, with staff. 10 This same technology can be used for precooling the 11 vehicles at a depo. One of the issues is -- one method is 12 you equip the diesel unit with the standby electric motor, 13 and we have that. That's an option that's available. Has 14 been for years. We plug it in at the depo. It's 15-hours 15 for electric motor and it can cool. You don't have to run 16 a diesel engine. The down side is it doesn't have the 17 cooling capacity. You have about half the cooling 18 capacity. And you also, of course, have to spend the 19 money to put in an infrastructure for the 230 volt 20 three-phase power. That's not an insignificant cost. 21 But this one here, this proposal here, it does 22 not require any modifications to the existing fleet. It's 23 independent of the TRU. And it's also independent of the 24 vehicle's state of registration. No diesel emissions 25 during the time that you are precooling using the CO2 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 concept. There's zero noise. And you minimize operating 2 costs because we use -- the CO2 technology costs more to 3 operate. We do that only at the depo. On the highway, 4 the low-cost diesel technology takes over. 5 --o0o-- 6 MR. VIEGAS: This gives you a sketch of what the 7 concept is. You'd have a CO2 tank, a big storage tank, a 8 30-ton vessel. And then we have the transfer station 9 which converts the pressure from -- the CO2 industry 10 infrastructure pressure is 300 PSI. We have to convert to 11 125 PSI to fill up our tank. And then it fills it 12 automatically. The same guy that dispenses diesel fuel 13 can dispense the CO2. You don't need any tools to hook it 14 up. 15 The idea is you have the cooling unit mounted on 16 the wall or on the loading dock. The guy opens the back 17 door and backs up to the wall. And you turn on a CO2 18 unit. You can precool the truck when you're ready to go 19 unload. Close the doors. Go and load it up and turn on 20 your diesel and you're on the road. 21 We made a presentation to the staff last summer 22 where we showed one of our truck cryo units right here in 23 Sacramento at our dealership. And one of the staff 24 members said, "Hey, if you have this hybrid technology, 25 you could downsize a diesel unit which would reduce the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 emissions" and use so -- 2 --o0o-- 3 MR. VIEGAS: We can estimate based on some of our 4 other hybrid units we have run. If we designed the units 5 specifically for this, we can project emission 6 reductions -- percentage I show up there, 47 percent NOx 7 and PM of 71 percent. Essentially we designed the diesel 8 unit that could be optimized for the average load. Most 9 of the time the unit runs on low speed. And if you've got 10 a frozen load, it runs more -- a large percentage of the 11 time is at high speed. But with this, the cryo system 12 would only boost the capacity for the peak periods. So 13 the cost disadvantage of the CO2 is minimized if they are 14 designed for units specifically for this. And, again, you 15 can see the magnitudes of the emission reductions. 16 --o0o-- 17 MR. VIEGAS: That's my presentation. I don't 18 know if you have any questions. I'd be glad to answer 19 them. 20 CHAIRPERSON LLOYD: Thank you. How much loss of 21 CO2 do you have in the unit? 22 MR. VIEGAS: It's a vacuum-insulated vessel, and 23 the loss is less than 1 percent per day of what's -- of 24 the tank capacity. Now, when the unit is actually 25 running, the pressure is dropping. So we have a built-in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 pressure building coil. So during the time it is actually 2 running, that 1 percent loss does not occur. If you 3 filled up your tank and let it sit there for a whole 4 weekend, you'd be losing at a rate of 1 percent per day. 5 It's actually .08 percent per day. 6 CHAIRPERSON LLOYD: I know we're looking at CO2 7 for cars for the global climate change. So I guess we're 8 looking at the vehicles, I guess, for a smaller size unit. 9 MR. VIEGAS: Could you repeat? 10 CHAIRPERSON LLOYD: We are looking at similar 11 technology because it's very effective to replace CFCs as 12 a way of addressing the requirements we have under the gas 13 bill for automobiles. 14 MR. VIEGAS: That's glow cycle. What you're 15 talking about is glow cycle CO2. A lot of development 16 work has been going on on that. This is an open cycle, 17 and CO2, of course, is recycled CO2. 18 CHAIRPERSON LLOYD: And I notice you offer 19 two-year warranties. 20 MR. VIEGAS: This is two-year warranties on our 21 diesel units, but this has a two-year warranty. On our 22 truck units, there is no moving parts on there except for 23 the valves so -- 24 CHAIRPERSON LLOYD: It wasn't related as much to 25 this as -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 MR. VIEGAS: Usually our warranty is in hours. 2 CHAIRPERSON LLOYD: In hours. So in hours, not 3 years? 4 MR. VIEGAS: I'm sorry? 5 CHAIRPERSON LLOYD: You say in hours, not years? 6 MR. VIEGAS: No. The hours are the switch-on 7 time, when the switch is on. 8 CHAIRPERSON LLOYD: But it says here the two-year 9 warranty. 10 MR. VIEGAS: The two-year warranty, for instance, 11 on the tank. If the vacuum goes bad in two years -- it 12 usually goes about ten years. That's what the 13 manufacturer tells us. There's nothing -- you could get 14 structural damage and you could lose your vacuum. 15 CHAIRPERSON LLOYD: Thank you very much. Thanks 16 for working with the staff on this. 17 MR. VIEGAS: Thanks. 18 CHAIRPERSON LLOYD: Stacy Heaton, Mike Tunnell, 19 Dr. Kubsh. 20 (Thereupon an overhead presentation was 21 presented as follows.) 22 MS. HEATON: Good afternoon, Chairman Lloyd and 23 members of the Board. My name is Stacie Heaton. I am the 24 Director of Environmental Affairs for the California 25 Trucking Association. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 CTA is pleased that Board action has been delayed 2 on this measure today, and we're pleased for many reasons. 3 But mainly because we don't believe that this regulation 4 is ready. We believe there are still a lot of issues with 5 this regulation. And especially since it's not up for 6 implementation until 2008, we believe that adoption of 7 this measure could be delayed in order to allow time for 8 things such as the preemption waiver to be obtained from 9 the Clean Air Act and that type of thing and also for the 10 technology to catch up to what this regulation wants to 11 do. 12 I have a few slides that kind of gather my 13 thoughts, but I guarantee I'm going to deviate from those. 14 So we'll see how this goes. 15 --o0o-- 16 MS. HEATON: Our position on the current rule is 17 that CARB does not have authority to retrofit TRUs. It's 18 the same argument we've been making about CARB's authority 19 to retrofit for the last two years that is preempted by 20 state law and the Federal Clean Air Act. We're glad CARB 21 staff acknowledged the need to obtain the Clean Air Act 22 preemption waiver because we believe that should be done 23 before this regulation goes up for Board action. 24 We believe that CARB lacks authority over 25 interstate trucks. And I'm going to touch on that a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 little bit more in a few minutes, but I believe our 2 affiliate association, the ATA, is going to go into more 3 detail on that issue. 4 The cost analysis we believe is incomplete due to 5 technology uncertainties. And we believe and we know this 6 proposal as it stands right now is cost prohibitive to the 7 industry. 8 --o0o-- 9 MS. HEATON: As it stands, this isn't actually a 10 scrappage regulation. Because the retrofit technology is 11 not available, this regulation actually requires owners of 12 TRUs to either scrap the engines that are in their TRUs or 13 to buy a completely new TRU. The California Trucking 14 Association brought a scrappage bill before the 15 Legislature in 1996, AB 1675, and we were not allowed to 16 go forward with the legislation because we were told 17 California didn't have the authority to require scrappage. 18 At the moment, this is a scrappage regulation. 19 It puts a seven-year life span on TRUs and TRU engines. 20 It's a mandated life span so most TRUs can go for up to 21 14, 15 years. This cuts their life span in half and 22 requires purchase of new TRU or a new engine for TRU in a 23 seven-year time period. We believe CARB lacks the 24 authority to retrofit and re-engine TRUs and that they 25 will need that preemption waiver that state law preempts PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 retrofit. And this is a violation of the commerce clause 2 for interstate commerce. 3 Next slide, please. 4 --o0o-- 5 MS. HEATON: Interstate commerce issues. CTA 6 supports the regulatory parity among the states. We 7 worked with the Air Resources Board to lobby the national 8 fuel standard. We worked with the Air Resources Board to 9 lobby the national engines standards with the federal EPA. 10 That is why this interstate commerce issue concerns us. 11 We don't believe that CARB has the authority to 12 regulate out-of-state vehicles, much less containers -- 13 intermodel containers that come over on ships that are 14 owned by foreign countries. We don't believe that CARB 15 has the authority to regulate those. Out-of-state trucks 16 hauling in California right now outnumber intrastate 17 trucks by more than a 3-to-1 margin. 18 So as this regulation is adopted, we believe this 19 is going to wind up being a state-only regulation, just 20 like our diesel fuel. Just like the waste hauler rule. 21 We believe this is going to be another single-state 22 regulation because interstate commerce clause preempts 23 CARB from proposing this on interstate trucks. 24 Next slide, please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 MS. HEATON: On another issue as well is that the 2 CHP has been preempted from putting terrorism defeat 3 devices on tank trucks because of the interstate commerce 4 issue. So they're not allowed to move forward. We 5 believe CARB falls under similar constraints. 6 We have issue with the retrofit technology 7 because as of right now it does not exist. We believe 8 this regulation would be better suited to wait until the 9 retrofit technologies have actually caught up with what 10 CARB wants to do with this proposed mandate. 11 The retrofit devices would probably be the 12 cheapest way for the trucking industry to comply with this 13 regulation and would be a much preferable choice to having 14 to put a new engine into a TRU or to buy a new TRU 15 altogether to scrap current equipment. But the reality is 16 that the technology is just not there. It's just not 17 available. The devices, as CARB staff has said, have not 18 been verified by CARB for use on TRUs, nor have they been 19 demonstrated to even work on TRUs. We would like to see 20 this postponed until we have all of the technology 21 available to comply with the regulation. 22 We believe that the cost analysis is also 23 questionable since these retrofit devices are not market 24 ready as of right now. If they're not market ready, we 25 don't see how a cost estimate can be assigned to them in a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 cost analysis. And once the retrofit devices are 2 available, we are going to have to have issues, I'm sure, 3 with the warranty requirements as we do with other 4 retrofit regulations in California that have not yet been 5 satisfactorily resolved in CTA's eyes. 6 Next slide, please. 7 --o0o-- 8 MS. HEATON: There are considerable cost issues 9 that also go to the interstate commerce issue of this 10 regulation. This regulation is going to impose a 11 considerable cost on the trucking industry, the part of 12 our trucking industry that hauls TRUs. CARB staff 13 estimates in their staff report that 80 percent of 14 affected industry is made up of small businesses. And 15 these are businesses that are even less likely to turn 16 over their TRUs in a short amount of time. They're the 17 ones that are more likely to hold onto those units because 18 they can't afford to buy new units every seven years. 19 That's why they don't do it already. 20 CARB staff sites a cost per TRU in 2008 at $2,000 21 to $20,000 per unit based on the choice of the complier on 22 how they choose to comply. It's going to go more towards 23 that $20,000 high end of that estimate because the $2,000 24 retrofit unit is not available at the moment. And we 25 don't believe that a cost analysis done by CARB staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 should be able to include technology that is not market 2 ready and not available for use at the moment. 3 Next slide, please. 4 --o0o-- 5 MS. HEATON: So in conclusion, we believe that 6 the TRU regulations change the ownership requirements of 7 trailers already in use. CARB does not have legal 8 authority to mandate, retrofit and regulate interstate 9 trucks; that the CARB cost analysis is definitely 10 incomplete due to the lack of market availability of the 11 retrofit devices; and that this regulation should be 12 postponed until the most cost-effective technology is 13 ready and verified for use. Thank you. 14 CHAIRPERSON LLOYD: Questions from the Committee? 15 Thank you. 16 You shared these concerns with staff during the 17 workshops, et cetera? 18 MS. HEATON: Yes. 19 CHAIRPERSON LLOYD: Mike Tunnell, Dr. Kubsh, Paul 20 Smith, Tom Nartker. 21 MR. TUNNELL: Good afternoon. I'm Mike Tunnell 22 with the American Trucking Association. And I would like 23 to start out just by saying ATA appreciates the effort of 24 staff. They've done an excellent work on workshopping 25 this. I think they've made some improvements, mainly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 harmonizing the new engine standards for TRUs with the 2 recently proposed federal non-road engine standards. 3 These will ensure a level playing field for TRUs purchased 4 in California. And once implemented, these standards will 5 reduce TRU emissions throughout the nation as well as 6 California. So I think where we started -- we weren't 7 sure if we were going to be in harmony with the federal 8 standards, but we are. So we want to commend staff for 9 that. 10 Some areas we disagree. We share many of the 11 same concerns that were expressed by CTA on the technology 12 side of this proposal. It's just -- we can't go out and 13 test the retrofit technology today. It's got to come 14 along quite a bit in the next several years. And given 15 some of the obstacles facing the movement forward of this 16 technology, we have real concerns whether it will be ready 17 in time. And you know, I guess you can look at it two 18 ways. It will either be there or it won't. We're very 19 skeptical whether it will be there. 20 In addition to that, we feel California law 21 prohibits use of retrofit devices, with regulations 22 mandating it. Specifically Section 43600 of the Health 23 and Safety Code states that "the installation of certified 24 devices on used motor vehicles shall not be mandated 25 except by statute." We don't -- we're not aware of any PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 statute that mandates these devices on TRUs, and therefore 2 we do not feel -- we feel it's prohibited by state law. 3 Having said that, that really makes this rule 4 early retirement and replacement rule, and that beautiful 5 TRU that was down in your basement is basically outlawed 6 in the state beginning in 2010, unless you put a new 7 engine in it. Now, given that that's a mechanical engine 8 and the technology will probably be more in line with some 9 of the advances in on-road technology, which are 10 electronic controls, there may not be an engine compatible 11 with that unit. 12 So the next step is to replace the entire unit. 13 And that's a very expensive proposition. That unit costs 14 $20,000 today. And when you get to a level of reduction 15 that's 85 or 90 percent lower than what it is today, I 16 don't even want to guess what the price tag will be on 17 that piece of equipment. 18 So having said that, technology is a major 19 concern. And the other side of major concern we have is 20 interstate commerce. And as I tried to express earlier, 21 but I'm not sure I did a very good job of it, we feel this 22 regulation violates the commerce laws. 23 And forgive me, but I just will briefly read a 24 section of testimony, if you'll allow me to, that 25 addresses that because I think it succinctly captures our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 concerns. 2 It says, "As the Supreme Court observed in BIB, 3 it is impossible for a carrier operating in interstate 4 commerce to determine which of its equipment will be used 5 in a particular area. So many motor carriers will be 6 required to retrofit or replace all of their TRUs. 7 California will be creating a de facto national standard 8 that will require TRU owners, on the chance their units 9 may some day service California, to retrofit or replace 10 TRUs that may never enter the state. Plainly the proposed 11 regulation will have the practical effect of regulating 12 conduct that occurs wholly outside of California, and as 13 such, would be to suggest to a strict rule of invalidity." 14 As I've said, we feel it violates the commerce 15 clause. And I'll leave it at that. 16 CHAIRPERSON LLOYD: Thank you. Addressing your 17 concern on technology, staff is proposing a technology 18 review. As I understand from your letter, one year ahead 19 of time is too close? 20 MR. TUNNELL: You know, I would say with our 21 experience that we've had with engines, what the fleets 22 like to have is as much time as possible to field test the 23 equipment. And that requires validated equipment to be 24 available to the fleet. And they would like to have at a 25 minimum about 18 months, because then can you get winter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 operations and summer operations in. And to test 2 equipment and try to figure out what works, what doesn't 3 work, de-bug it, so to speak. 4 And I'm concerned that if you do it just one year 5 ahead, it will -- maybe it's validated by the 6 manufacturers at this point, but the fleets may never have 7 seen that equipment. And then to tell us to go buy that 8 equipment when we've never tried it, it will delay 9 probably purchases considerably. 10 CHAIRPERSON LLOYD: But on the other hand, I 11 think there's probably flexibility with staff if they see 12 those concerns. This is far enough down the line that I 13 think your concerns -- it's a valid concern. I think it 14 can be addressed though. Your point about one year may be 15 also too close. But, again, given that we're looking 16 several years down the line, there's probably flexibility 17 there. 18 EXECUTIVE OFFICER WITHERSPOON: We were just 19 having the same conversation. We want to be clear that 20 staff believes the rule is supportable, even if no 21 retrofit devices emerge, that it passes cost-effectiveness 22 tests, even if the ultimate control strategy is to replace 23 the engine or to convert to a new engine. And so we don't 24 want the Board to think that if the technology review 25 turned up no retrofit devices, that it would be our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 recommendation to stop the rule. We hope some emerge. We 2 hope there are lower cost alternatives, but the rule 3 passes cost effectiveness without them. 4 CHAIRPERSON LLOYD: My point was that somewhere 5 down the line we can address those issues. 6 EXECUTIVE OFFICER WITHERSPOON: That's true too. 7 I just thought there was a fundamental assumption here we 8 want to be clear. And were something tantalizing, 9 promising right there that would cut everybody's cost in 10 half, of course, we try to make the adjustments when 11 needed to, but -- 12 CHAIRPERSON LLOYD: We've still got some time to 13 keep the record open. 14 Any other comments? 15 Thank you. 16 Joe and the Paul Smith and Tom Nartker. 17 DR. KUBSH: Good afternoon, Dr. Lloyd and members 18 of the Board. My name is Joe Kubsh. I'm Deputy Director 19 of the Manufacturers Emissions Control Association. And 20 I'm pleased to provide comments today in support of this 21 important ATCM for transportation refrigeration units. 22 In particular, I want to stay a few words about 23 retrofit technology. Although it is true that to date no 24 technology has been verified for these applications, we 25 agree with staff's assessment that there will be verified PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 emission control technologies available when the 2008 time 2 frame reaches us and that the technology review process 3 that has been built into this proposal does provide staff 4 with the opportunity to review the situations twice, in 5 2007 and 2009, and make appropriate adjustments if they 6 are necessary. 7 And to that respect, we'd also ask staff as part 8 of that review process to potentially consider the role of 9 Level 1 retrofit technologies, as well as an opportunity 10 to provide some reductions of PM on these classes of 11 engines, either as part of an early incentive program or 12 as in the case where Level 2 or Level 3 technologies are 13 not available for implementation on certain engine 14 families, for example. 15 Both particulate filters and oxidation catalysts 16 have already been designed and implemented on engines very 17 similar to these TRUs, but not exactly in the TRU 18 application. In the diesel engine class between 25 and 50 19 horsepowers, for example, there are numerous examples of 20 active filter systems and/or oxidation catalysts that are 21 already being used in applications such as materials 22 handling or small construction equipment, small mining 23 equipment. So we feel that there can be available 24 retrofit technologies for these kinds of engines. 25 And it's important to have the regulatory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 certainty there, to have the rule in place to provide our 2 members with the ability to shift resources and to make 3 decisions about the spending money to do the verification 4 that's required to have these kinds of technologies in 5 place. 6 So we would urge that this regulation go forward 7 as proposed and be approved when that time is available to 8 you. And we fully support this rule making. We want to 9 commend you for your continued actions to reduce the 10 exposure of particulate matter to the California public in 11 general. And we want to thank staff for their diligent 12 work in putting together their proposal. 13 CHAIRPERSON LLOYD: Thank you, Joe. Will you be 14 here for the next item too? 15 DR. KUBSH: Yes, sir. 16 CHAIRPERSON LLOYD: Thank you. 17 Paul Smith, Tom Nartker, and Bill Warf. 18 MR. SMITH: Good afternoon, Mr. Chairman, 19 Members. I'm Paul Smith, Vice President for government 20 relations with the California Grocers Association. 21 CGA is the statewide trade association 22 representing over 500 retail and supplier members 23 operating in California and Nevada. Simply put, we 24 represent the largest retail members who operate trucking 25 fleets that rely on transportation refrigeration units, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 Safeway, Albertsons, Ralphs, Stater Bros., Raleys. We 2 also represent suppliers such as Kraft and Nu-Cal foods 3 which move product throughout the state in a refrigerated 4 environment. We believe that no other industry in the 5 state will be more impacted by the proposed ARB 6 regulations than the grocery and food products industry. 7 Simply put, TRUs are the life blood of our industry. 8 First, let me apologize. Hoping that Dr. Tom 9 Nartker would be joining me in my testimony today -- and I 10 know he's scheduled to give testimony after me. He had to 11 leave. Tom Nartker is a logistics person with Safeway and 12 one who can handle questions and concerns on 13 technicalities of the regulations, especially as it 14 relates to the retrofit issue. But I apologize. His 15 testimony I've given to your staff if you want to take a 16 look at that as well. 17 First of all, I'd like to mention that the ARB 18 staff has been very cooperative with CGA and our members. 19 They have worked with folks like Tom Nartker and our 20 diesel task forces throughout the last few months to 21 address our concerns. I believe that through our 22 collective dialogues we have mitigated a number of 23 Burdensome, unworkable and impractical options to reduce 24 diesel emissions from our facilities and our TRUs. 25 However, I don't believe we are at a point where we can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 say we have achieved a compromise. While staff has been 2 receptive to many issues over the past two years, we must 3 continue to express our strong reservations with the 4 proposed regulations. 5 Our biggest concern remains with the in-use 6 compliance date mandate. Simply put, this requires our 7 members to retrofit and replace all of their pre-2001 TRUs 8 by 2008. In other words, a seven-year retrofit cycle. It 9 is our belief and experience that the proposed seven-year 10 replacement and retrofit cycle is far too stringent and 11 will be very, very costly to our members. 12 We urge the Board to adopt a standard that better 13 reflects the useful life of the equipment. Because the 14 average life of a TRU is ten to twelve years, we would 15 suggest to the Board that a minimum ten-year cycle be put 16 in place, or we suggest the cycle be based on the hours 17 the TRU operates. 18 In addition, overall technology issues 19 surrounding the proposed regulation gives CGA concerns. 20 Most of our members agree that harmonizing with the 21 federal EPA standards makes sense. However, there's still 22 concern with relying on yet unproven technology in setting 23 such emission standards. 24 We're grateful that staff has built in technology 25 review points during the life of the regulations, but we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 believe the final rule should reflect sufficient 2 flexibility to ensure the regulated community is not 3 forced to purchase equipment until alternative 4 technologies are thoroughly evaluated and can be 5 cost-effective. 6 Let me shift gears. I know there have been some 7 concerns about closing the record for today's proceedings, 8 and I know the decision has already been reached on that. 9 But for the record, I'd just like to make a couple points 10 on that. We would strongly encourage you to not close the 11 record and keep it open for further deliberations, 12 especially if there are some changes to the regulations 13 pertaining to retrofit cycles. I believe by this Board 14 choosing not to hold a vote today is an indication that we 15 are far from complete on this package. We support the 16 Board's decision not to hold a vote. 17 Furthermore, we believe Governor Schwarzenegger's 18 Executive Order, S-02-03 of November plays an important 19 role in today's discussion. We do not believe the Board's 20 proposed TRU regulation is exempt from the order with or 21 without a previous court settlement agreement. We are 22 troubled by the assertion of an exemption, especially when 23 the court settlement occurred without gathering any input 24 from the regulated community. Nevertheless, closing the 25 record would undoubtedly be a betrayal of the spirit in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 which the Governor proclaimed his order. 2 In closing, Mr. Chairman, CGA recognizes the 3 importance of the pending regulations. However, it must 4 be recognized that they will still have a staggering 5 impact on our industry. Our industry would like to see 6 some type of incentive programs built into any retrofit 7 schedule. And while fiscal constraints exist for the 8 state, it should be balanced with the understanding that 9 there exists an equal fiscal constraint on the operations 10 of our members. 11 Finally, I'd just like to also echo many of the 12 concerns that were raised by the trucking association as 13 they asserted, especially on the retrofit mandate and on 14 the technology there. We fully support their comments as 15 well. Thank you for the opportunity to comment, 16 Mr. Chairman. 17 CHAIRPERSON LLOYD: Thank you very much. 18 And again, I think as you heard earlier, we did 19 address the Governor's Executive Order. Clearly, we all 20 work for him. So the record is not being closed. We also 21 know very much from the meeting of the Thursday group how 22 close this item is a concern to the Grocers Association. 23 So we take this very seriously, obviously. 24 But on the other hand, as the Governor and 25 Secretary Tamminen has said that it's critical we reduce PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 public exposure to diesel particulate. So I think we want 2 to get to the same place. It's the matter of getting the 3 fastest way there. It gives us some additional time to 4 work with you on this effort and this regulation. And so 5 we hope that can be worthwhile. Thank you. 6 Bill Warf. And thank you, by the way, for the 7 testimony from Tom Nartker. 8 BOARD MEMBER CALHOUN: Can I ask staff a 9 question? He indicated in his report and his statement 10 that the price range for the technology is somewhere 11 between -- the price range I guess that you specified 12 2,000 to $20,000, he thinks that's on the low end. Is 13 there any reaction to that at all? 14 EXECUTIVE OFFICER WITHERSPOON: The staff's 15 analysis does show an upper cost of 20,000, which is to 16 replace the unit entirely. And our cost effective 17 calculations are based on maximum cost for complying with 18 the regulation. We would have lower costs than that if 19 retrofit devices are certified for this application. And 20 what they're suggesting to you is we shouldn't have even 21 told you what the costs should be until such time as one 22 is certified. But we are giving you our rough sense of 23 what it would be if one comes down the pipeline, one or 24 more. 25 BOARD MEMBER CALHOUN: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 CHAIRPERSON LLOYD: Hi. 2 (Thereupon an overhead presentation was 3 presented as follows.) 4 MR. WARF: Hi. Good afternoon, Mr. Chairman and 5 members of the Board. I'm Bill Warf. I'm speaking today 6 on behalf of California Electric Transportation Coalition. 7 I'd like to state that electric TRUs should receive some 8 incentives to encourage expanded use and I'd like to tell 9 you why. I'm speaking in support of the CARB -- proposed 10 CARB regulation. 11 --o0o-- 12 MR. WARF: Electric standby TRUs are compliant 13 today and they reduce a broad range of emissions. They're 14 proven technology, and they've been offered for decades. 15 Electric operation is fully a capable TRU 16 operation that works for dairy, deli, meat, frozen food 17 and produce loads. Electric operation is cost effective 18 in reducing NOx, ROC, PM, CO, and CO2. 19 The TRU pictured on the right-hand side is an 20 electric standby TRU that has a 15 horsepower motor. The 21 motor is kind of blue and it's up in the upper left-hand 22 quadrant of the system. You can see here some electric 23 standby trailers that are plugged into the grid. 24 --o0o-- 25 MR. WARF: There are about 6,000 electric diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 TRUs in California in TRU inventory today. 100 percent of 2 the shipping containers use electric standby. They use a 3 hermetic electric compressor, electric TRU in the 4 container, and they have a clip-on generator, as has 5 already been discussed. Between 40 and 80 percent of the 6 truck and box trailers that deliver milk and frozen food 7 use electric standby today and a small number of the 8 semi-trailers TRUs. That's 17 percent of the current 9 vehicles in the inventory. And I note that there's a 10 large percent of electricity used in Europe and other 11 parts of the world. 12 --o0o-- 13 MR. WARF: Electric shipping containers TRUs are 14 a good example of this technology. They're plugged into 15 the ship's electric supply while on board the ship. 16 They're plugged into grid in port. That's what this 17 picture shows. It shows the infrastructure where these 18 containers are plugged in while waiting to be delivered 19 from the port. There are about 1850 gen sets in the 20 California inventory, and there's estimates of around 21 70,000 refrigerated containers worldwide. What we need is 22 infrastructure at unload points, perhaps at rest spaces, 23 but certainly unload points. 24 --o0o-- 25 MR. WARF: These electric capabilities need to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 incentivized to other industries and other parts of the 2 TRU industry. Electricity is a viable option for TRU 3 operation. The electric motor extends engine life and 4 reduces the maintenance and fuel cost of operating the 5 TRU. Often, only infrastructure is needed. There's 6 hardware out there, but they can't plug it in because they 7 don't have a place to plug it in. 8 Cost is a barrier for the grocery customers, as 9 our friend from CGA just mentioned. Those are our 10 customers too. Dual fuel operation diversifies energy 11 sources, reduces all emissions, and electricity may 12 present a cost savings. New designs offer promise for the 13 future. We'd like to see some incentives to help expand 14 the use of this electric option. 15 --o0o-- 16 MR. WARF: And finally, I wanted to show this 17 slide of a prototype -- well, it's not a prototype. This 18 is a hybrid TRU built by carrier, apparently available in 19 Europe. It operates with a diesel engine driving a 20 generator and it uses a semi-hermetic electric driven 21 compressor similar to what's in the container TRUs. But 22 this unit was designed for trailers and would be 23 complementary to infrastructure that allowed plugging in 24 of ship-borne containers. 25 I'd be happy to entertain any questions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 CHAIRPERSON LLOYD: Thank you, Bill, for 2 reminding us. That's a very attractive technology. Thank 3 you. 4 Dave Modisette, Todd Campbell, Jay McKeeman. 5 (Thereupon an overhead presentation was 6 presented as follows.) 7 MR. MODISETTE: Mr. Chairman, members of the 8 Board, thank you very much. I'm Dave Modisette with the 9 California Electric Transportation Coalition. And I'm 10 going to give you some comments now directly on the 11 proposed regulation. There is a hard copy of my overheads 12 too, which may be a little easier to look at. 13 --o0o-- 14 MR. MODISETTE: The overview of my statement is 15 really, first of all, we do support the proposed 16 regulation. And I would encourage you to adopt it as soon 17 as possible. However, we would like to identify what we 18 consider to be a significant flaw in the regulations, 19 which we think is going to impede its effectiveness. I'm 20 going to recommend a couple of solutions to deal with that 21 flaw, and then we'd like to recommend a structure to come 22 back to the Board with some specific staff and stakeholder 23 recommendations. 24 --o0o-- 25 MR. MODISETTE: The flaw we think in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 regulation is that the proposed regulations really have 2 particulate matter blinders. They're focusing exclusively 3 on particulate matter. It really ignores the benefits of 4 reductions in ROx and NOG. 5 (Laughter) 6 CHAIRMAN LLOYD: That's a new one. 7 MR. MODISETTE: -- that accompany for some 8 technologies the reductions in PM. And the result is the 9 businesses are forced to make regulatory choices that do 10 not result in the capturing the most emissions reductions 11 or the most cost-effective emissions reductions. The 12 result is also there's an unlevel playing field for 13 electric standby and for other clean technologies that 14 provide benefits across the full spectrum of emissions. 15 --o0o-- 16 MR. MODISETTE: And just to illustrate that, 17 here's a theoretical example, and then I'm going to give 18 you a real world example. But the bars here illustrate 19 emissions reductions. And so Technology A, you can see, 20 provides a level of PM reduction, which doesn't meet the 21 staff's standards, but relatively smaller levels of NOx 22 and hydrocarbons. And Technology B provides about the 23 same level of PM reduction as Technology A. It has much 24 larger reductions in NOx and hydrocarbons. 25 So we asked two questions with this. Which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 technology is best for society? Well, clearly Technology 2 B is better for society. It provides much greater 3 emissions reductions across the board. 4 The next question is under the proposed 5 regulations, which technology will companies choose? And 6 I want to submit you the answer to that is because 7 Technology A does less, it's going to be less expensive. 8 And therefore, businesses are going to choose Technology A 9 instead of the technology which provides the greater 10 benefits to society. 11 --o0o-- 12 MR. MODISETTE: Here's a real world example. The 13 first horizontal row there is a semi-trailer diesel TRU 14 retrofit with a fuel-borne catalyst and wire mesh filter. 15 It meets the proposed standards. And over on the far 16 right-hand side, you can see that the PM reduction is .23 17 tons. And then just to the left of that, the combined NOx 18 and hydrocarbon reduction is also .23 ton. Now compare 19 that with the electric standby technology which is just 20 below it, provides about the same level of PH reduction, 21 .22 tons. But the reduction in NOx and the hydrocarbons 22 is huge. It's 2.32 tons, much, much larger than the 23 reduction of the retrofit diesel alone. 24 There's also a delivery van unit example there, 25 which is a much smaller engine. But the point there is it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 provides the same ratio of hydrocarbon and NOx benefits as 2 the larger trailers do. 3 --o0o-- 4 MR. MODISETTE: Then the next slide I actually 5 graphed this same real world example in the same way we 6 graphed the theoretical example. You can see it looks a 7 lot like the theoretical example. It's providing very, 8 very large NOx and hydrocarbon reductions in addition to 9 the PM reductions. Again, the problem is that industry is 10 not going to choose that. They're going to choose the 11 less expensive retrofit with fuel-borne catalyst and 12 filter. And the reason they do that is that the 13 regulation does not even recognize or provide any value or 14 benefit for those NOx and hydrocarbon reduction? 15 --o0o-- 16 MR. MODISETTE: I'm not going to read this, but I 17 did look through the statutes to see if there was any 18 description of legislative intent on this issue. I did 19 find one in a bill that was just passed this year, SB 656 20 by Senator Sher. And we think it's clear from that 21 language when the ARB and the air districts are developing 22 control measures to control particulate pollution, they 23 also have to give consideration to control precursors, 24 such as NOx, ROG, sulfur oxide, et cetera. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 MR. MODISETTE: The solution. We think there's a 2 couple possible solutions here. The first solution, which 3 is actually described there under 1(b) would be to go back 4 and rewrite the reg to include consideration of those 5 pollutant reductions. However, we actually don't think 6 that's the best method. One, it's actually more 7 complicated. It sounds easy to do, but it's very, very 8 complicated to do. Secondly, we think delay is a problem. 9 Our recommendation to you is to adopt what is 10 before you as soon as possible, rather than going back to 11 the drawing board and trying to rewrite the regulation in 12 a way that includes these other criteria pollutants. 13 So we actually kind of like the 1(a) solution 14 better, which is that CARB should give value to or 15 monetize the emission reductions that are greater than 16 that required by the proposed regulations. And we think 17 the best way to do this is some kind of emissions credit 18 trading mechanism for the emissions that are greater that 19 are required by the proposed regulation. 20 --o0o-- 21 MR. MODISETTE: And I'm not going to spend a lot 22 of time on this, but the concept here is a concept that is 23 being put forward by Bob Wyman, who has been very 24 successful with some emission credit trading mechanism in 25 the South Coast. And he is putting together a proposal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 called the "blue chip emission reduction credit program" 2 for select technologies. 3 The idea here is for the ARB to pick a very small 4 select number of technologies -- you might even call it a 5 demonstration program -- for a credit trading mechanism 6 where the ARB would pre-certify credit trading, and the 7 purchase or use of this technology would generate that 8 credit. The credit could be used to comply with 9 applicable mobile or stationary source rules. And of 10 course, only a percentage of the total emission reduction 11 could be traded. The rest would go and would benefit the 12 needed SIP reductions. The implementation would be done 13 at the local district level in conjunction with some of 14 the trading rules that are already in place. 15 --o0o-- 16 MR. MODISETTE: Two other quick regulatory 17 recommendations. We would urge that the Board do create 18 additional regulatory incentives for emissions reduction 19 in areas which have concentrated emission levels or hot 20 spots, such as ports, urban distribution centers, et 21 cetera. We did not see that specifically in the 22 regulation. And then lastly, that you include reduction 23 in criteria pollutants in future CARB regs for new TRUs. 24 In other words, we're urging you to do more than simply 25 adopt the federal regulations once those come to you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 --o0o-- 2 MR. MODISETTE: So in conclusion, it's our 3 recommendation that CARB direct staff and stakeholders to 4 work together over the next six months to develop 5 recommendations and options which will reward or give 6 value to the emissions reductions greater than that 7 required by the proposed regulations, both PM and criteria 8 pollutants. We would recommend these recommendations come 9 back to the Board for your consideration at that time. 10 Thank you very much. 11 CHAIRPERSON LLOYD: Thank you. In fact, one of 12 my questions to staff at the end is how can we capture NOx 13 as well as PM. You did a better job than I outlining that 14 very well. I think you gave us a great deal of 15 information here to think about. I don't like all the 16 details, but I like the concept of how can we capture both 17 in this case. 18 MR. MODISETTE: Thank you very much. 19 CHAIRPERSON LLOYD: Question, Dr. Friedman. 20 BOARD MEMBER WILLIAM FRIEDMAN: I was just going 21 to ask if staff would like to respond. 22 EXECUTIVE OFFICER WITHERSPOON: With respect to 23 trying to capture NOx when we do diesel particulate 24 control measures, it is staff's objective, particularly on 25 the heel's of the Board's action on the South Coast plan PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 where we cannot afford to be cracking these sources open 2 twice. 3 Something that has been happening with our diesel 4 rules as we've evolved is that they've included more 5 engine rebuild and accelerated turnover than we once 6 thought they would. We thought at the beginning they 7 would be mostly the application of filters. And now 8 that's turing out to be just one compliance strategy. And 9 every time we change the engine itself or accelerate 10 retirement, we're getting multiple pollutant benefits. If 11 that ends up being the compliance strategy for TRUs, there 12 will be NOx and ROG benefits on the order of 30 percent 13 average is what we were calculating for the trash truck 14 rule you adopted a couple months ago and other kinds of 15 strategies that rely on accelerated retirement. 16 We have not yet included in any of these rules a 17 mandatory NOx retrofit requirement, preferring to get the 18 NOx benefits from the turnover. But we're continuing to 19 evaluate that and its cost-effectiveness for each source 20 category. 21 This is the first we've heard at least in this 22 context of this particular emission trading proposal. 23 There have been many over the years and the slide -- last 24 slide talked about Bob Wyman's concept. So of course it's 25 been around a while. And it's all about how you find the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 balance between what you allow to be recycled as credit 2 back in the atmosphere and what you apply to public 3 health, whether it's -- we're much more sensitive about it 4 when we're doing a cancer reducing rule than when we're 5 phasing in a multi-year criteria pollutant rule where you 6 can use credits in the early years and then they're 7 ultimately overtaken by the rule itself. But it's a 8 germane concept that's always been there. And we try to 9 offer any incentive we can that helps people comply with 10 our regulations. 11 CHAIRPERSON LLOYD: Thank you very much. 12 Professor Friedman. 13 BOARD MEMBER HUGH FRIEDMAN: Just a quick 14 question to come back to an early comment. Are we okay 15 administratively in adopting retrofit rules of this sort, 16 or does that require legislation? 17 GENERAL COUNSEL JOHNSTON: Well, you heard from 18 me this morning. And actually this afternoon I'm going to 19 defer your questions to our Counsel, Michael Terris. 20 STAFF COUNSEL TERRIS: I believe we have 21 authority to require retrofit. Section 43013 provides the 22 ARB with authority to adopt emission standards and doesn't 23 specify just new engines, but it is broadly worded to 24 apply to both new and in-use. 25 BOARD MEMBER HUGH FRIEDMAN: New means new and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 in-use? 2 STAFF COUNSEL TERRIS: No. It does not provide 3 for new specifically. It's just basically says the ARB 4 has authority to adopt emission standards for off-road 5 engines. 6 BOARD MEMBER HUGH FRIEDMAN: Okay. 7 EXECUTIVE OFFICER WITHERSPOON: We're also 8 relying on air toxics air contaminant control authority, 9 which is far broader and sweeping in its scope than the 10 narrow statutory prohibition for retrofit devices which 11 was adopted 15 years prior. 12 So under the basic interpretation of subsequent 13 legislation and had the Legislature meant to carry forward 14 prohibitions on our retrofit authority, they would have 15 stated so again, but gave this Board very expansive 16 authority for identifying and controlling toxic air 17 contaminants. 18 CHAIRPERSON LLOYD: Mr. Calhoun. 19 BOARD MEMBER CALHOUN: Do you have any response 20 to Catherine's statement that she made a few moments ago? 21 MR. MODISETTE: Like I said, I heard two things. 22 I guess first of all I think we would like to clarify that 23 we're not saying that the ultimate solution is emission 24 credit trading. It should be done through a demand and 25 control approach. We're just saying that the rule before PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 you, you know, doesn't even recognize these benefits. And 2 you know, last time I looked we still needed a lot of NOx 3 and ROG benefits. So whether it's commanded control or 4 some kind of a credit trading mechanism or maybe there's a 5 third mechanism where we can somehow give value to those 6 true emission reduction benefits. 7 I don't think there's any question that there's 8 NOx and ROG benefits that are generated here that are not 9 given any value. So if there's a way that we can do that 10 and capture that, then what that means is industry will be 11 making the correct decision, the decisions that result in 12 the most and the most cost-effective emission reductions. 13 I think it's true that what staff did is they 14 said, you know, we're really not sure what the spectrum of 15 technology is going to be that people are going to use 16 here. So we're going to say there's between 30 and 17 50 percent additional reductions in NOx that are going to 18 come along with this. But you know, I think we're saying, 19 you know, let's try to provide some additional incentives 20 for additional NOx and ROG benefits above that, above 21 whatever, you know, you are assuming. Let's try to give 22 that some value so industry is going to make the right 23 choice. 24 EXECUTIVE OFFICER WITHERSPOON: Dr. Lloyd, slide 25 36 of the staff's presentation summarizes our estimate of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 benefits for particulate, 65 percent by 2010, 92 percent 2 for 2020. For NOx 10 to 50 percent. And of course, that 3 figure is reliant on whether it's retrofit devices or 4 turnover. That's most of the compliance strategy. And 5 for ROG about a 30 percent reduction. So we are 6 attempting to describe what it is. 7 CHAIRPERSON LLOYD: Thank you, Dave, for putting 8 a Christmas touch on the NOG. 9 Tom Campbell, Jay McKeeman, and Diane Bailey. 10 MR. CAMPBELL: Good afternoon, Dr. Lloyd, members 11 of the board. Todd Campbell, policy director for the 12 Coalition for Clean Air. 13 The Coalition for Clean Air wants to strongly 14 support the proposed rule before you. Estimated pollution 15 from roughly 40,000 TRUs is very significant in the state. 16 It's equal to 2 tons of particulate matter per day and 20 17 tons of NOx per day. And it's growing. Obviously, we're 18 probably going to be increasing those numbers, not 19 decreasing. 20 Three thousand tons of PM emissions reduction are 21 targeted or expected with this rule. That's a lot of 22 emission reductions. And this rule has a special meaning 23 to me because when I started out originally with the 24 Natural Resources Defense Council, I regulated facilities 25 that operated hundreds of TRUs. And I have to say that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 probably the difference between us going after these 2 facilities versus other distribution centers that did not 3 have TRUs is significant. In fact, these are the only 4 facilities that we went after because we had an extremely 5 clear case, no questions asked. 6 TRUs can have a significant impact, and their 7 cleanup would enhance environmental justice efforts in 8 California. I think that's a big point. 9 We are a little disappointed that the TRU cleanup 10 will not happen until 2008, and I think that everyone in 11 this room can understand that. But we are very pleased by 12 the proposed 100 percent compliance of pre-2008 model 13 years by 2008. We also ask that the Board consider an 14 acceleration of compliance for the oldest TRUs with no 15 controls. That would be pre-1998 model. And I don't 16 think we really understand the full emissions impact with 17 these TRUs sets. And that is a very large concern for us. 18 We also ask the Board to direct staff to explore future 19 TRU regulations that would require electrical standby 20 options on all new TRUs. 21 And I would also state the Coalition for Clean 22 Air supports Cal ETC's position, minus the credit trading 23 aspect. I feel that TRUs really have an impact to 24 environmental justice. As you know, our position with 25 emission trading, that would have a reverse impact. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 would just hate to see communities not benefiting from 2 what we're trying or attempting to do here. 3 We would also like to see the development of 4 electrical power hookups at ship terminals, rail yards, 5 and large facilities for very obvious reasons. As a 6 counsel member, stepping away from my policy director 7 role, I'm very concerned about idle emissions, not just 8 from TRU emissions, but from truck idling emissions, 9 particularly when it occurs to nearby residential 10 neighborhoods. 11 Officials more and more are being asked to 12 perform smarter land use. That's typically mixed use. 13 When you have a diesel truck with a refrigeration unit 14 idling down below on the ground floor to deliver goods to 15 a market or a facility and you have residents above, it 16 becomes a very bad scenario. 17 We already have these problems, not necessarily 18 with TRUs, but with trucks with some of our mixed use 19 properties in the downtown of Burbank. It's a very 20 important issue for our residents because they complain 21 about it. If you want to sell people on moving into mixed 22 use, which is a good thing because it reduces vehicle 23 miles traveled, you're going to have to find ways to make 24 sure that they enjoy living there. Otherwise, we're going 25 to have nothing but sprawl. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 And the other thing I would like to emphasize is 2 whether or not you believe our congestion problems down in 3 South Coast, the Southern California Air Association of 4 Governments is rejecting a 70 percent to 216 percent 5 increase of truck trips by 2030. They are trying to 6 compensate for the growth because of the lack of dollars 7 to increase our infrastructure to go to a 24-hour 8 operation, means that there will be more deliveries at 9 night, which means this is going to be a bigger issue for 10 mixed use development for years to come. 11 Bottom line, we cannot afford to backlash or 12 provide reasons why transit areas of mixed use projects 13 are undesirable to the general public. We need to adopt 14 measures that will enhance livability of these beneficial 15 land uses that protect public health. Please adopt the 16 proposal before you today. And if you have any questions, 17 I'd greatly appreciate it. I would like to say that our 18 counsel has adopted guidance or direction to our staff to 19 meet with your staff as well as the Air Quality Management 20 District staff to look into ways that we can help you 21 achieve your emission in reducing idling where we have 22 commercial and residential zones. And I certainly hope 23 you will help us achieve that goal because I think we 24 really need it. 25 CHAIRPERSON LLOYD: Thank you, Todd. I'm sure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 staff will work with you on that issue. 2 Questions or comments? Thank you. 3 Jay McKeeman, Diane Bailey, Bonnie Holmes-Gen, 4 and Don Anair. 5 MR. McKEEMAN: Good afternoon. It's me again. 6 We oppose this regulation, not on technical grounds, but 7 on some broader principles. Although many of the issues 8 that have been discussed today resonate with us, we're 9 basically next in line to be regulated under this series 10 of programs that has been coming before you, the fuel 11 delivery truck program. And so we do have concern about 12 the regulations that are being adopted before that one is 13 being considered. 14 The issues that resonate with us are the 15 technology availability obviously. We want to see 16 technology that is proven and actual, not something that 17 we become guinnea pigs to be tested upon. And believe me, 18 that's happened to us before in air quality regulations 19 significantly with the vapor recovery requirements where 20 we get -- we get to test the equipment. And if the 21 equipment fails, we're liable for air quality violations. 22 So we don't like being in that position, and we want to 23 make sure that the technology that's being suggested or 24 applied in regulation is being well thought out and 25 commonly available. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 Another problem that we have is the inaccurate 2 cost estimates. It has been our common experience with 3 Air Resource Board regulations that the costs estimated in 4 the staff reports is off often by orders of magnitude. So 5 we just caution the Board in looking at these costs to 6 consider the past record and take a look at cost estimates 7 that have been done in the past and what the real costs to 8 the people that have to pay for them turns out to be. 9 CHAIRPERSON LLOYD: On that comment on that 10 particular issue, we do have time obviously we before we 11 vote on this. Could you provide staff specific instances 12 or data that they made some estimates and -- 13 MR. McKEEMAN: Yes. Be glad to. 14 Another issue that resonates clearly with this is 15 the California differential that these regulations put 16 onto California businesses. We do compete with 17 out-of-state businesses and any cost that's applied to our 18 businesses, especially small businesses, makes its 19 increasingly difficult for our members to compete 20 effectively with out-of-state businesses. 21 Let me address the broader issue, though, that 22 we're opposing this regulation on. There was an excellent 23 presentation about the public outreach that's occurred 24 with this regulation, and we're not complaining about the 25 outreach. We're not complaining about the efforts of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 staff to attempt to engage the regulated community in 2 discussions. We wonder, though, whether these 3 discussions, in fact, are valuable in terms of the final 4 outcome of these regulations. 5 This regulation and many others that you are 6 considering or have recently considered are directly 7 mentioned in a settlement agreement that the Air Resources 8 Board made with three environmental groups in 1999 and 9 have subsequently been amended since that point. In that 10 settlement agreement, there are specific adoption dates, 11 specific programs, specific implementation dates and 12 calculations on tons to be reduced in a chart. And if our 13 participation in this process is merely to justify a 14 settlement agreement, I suggest that is not an honest 15 effort on our part or your part to establish accurate and 16 legitimate public dialogue in the adoption of regulations. 17 I think this morning we heard a lot of problems 18 that occur when regulations stem from settlement 19 agreements. There are a limited number of parties that 20 participate in the settlement agreements. Many aspects of 21 the regulated community are not involved in the 22 discussions or negotiations that occur for settlement 23 agreements. They result in specific agreements where a 24 technology and economic issues have not been fully 25 discussed. They bind public agencies into deadlines and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 actions that may not be the best way to proceed. They 2 result in the potential for expanded and extended argument 3 through the court process because if the settling parties 4 don't agree, regardless of what the regulated community is 5 saying, the option is there to just continue the argument 6 in court. 7 Finally, I suggest this is not a good way to do 8 public policy, that these settlement agreements are 9 allocating the Air Resources Board resources and financial 10 commitment prior -- without the benefit of public input or 11 decision making or debate over priority or 12 appropriateness. So I just want to raise the issue 13 because I will be raising it again as these different 14 regulatory proceedings occur that if we're here just to 15 rubber stamp what's in a settlement agreement, we are not 16 effectively participating in a process. And we're wasting 17 a lot of time and valuable energy that we need to be 18 investing in helping our members deal with their financial 19 issues. If there is a legitimate reason for us to be 20 here, we want the hear that, and we want to be assured 21 that the settlement agreement isn't the guiding principle 22 in these discussions, that there is an open and honest and 23 effective debate that we're engaging in, and the 24 regulations can be designed to meet not only the interest 25 of environmental groups, but the interest of the broader PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 public and the regulated community. 2 CHAIRPERSON LLOYD: Does staff want to respond to 3 this? 4 EXECUTIVE OFFICER WITHERSPOON: I'm going to 5 start and then call on legal counsel if I need them. 6 A key aspect of the settlement agreements is that 7 they do not tie the Board's hands on any specific 8 regulation or on any issue of feasibility. You have 9 ultimate discretion in weighing the evidence before you 10 and deciding what regulations are appropriate and 11 cost-effective to adopt. 12 What you have also, though, is an obligation in 13 the settlement to take an issue up for consideration. 14 There are deadlines for hearing rules and proposed 15 regulations for particular source categories. And you 16 have a separate obligation, with or without the 17 settlement, in the Clean Air Act to achieve certain 18 tonnage adoptions through rules. These are annualized 19 through the end of '03, by the end of '04, by the end of 20 '05 that you shall have adopted enough rules or taken 21 enough action, whatever it may be, that adds up to the 22 tonnage targets in the settlement, in legally binding SIP 23 commitments, et cetera. 24 So they are sort of a higher authority binding 25 you, the Clean Air Act, the SIPS you enact that become PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 legally enforceable, the settlement agreements we enter 2 into. And then with respect to the diesel risk reduction 3 rules, what's binding you, though it's less constricting, 4 is your own goal of accomplishing 75 percent reductions in 5 diesel PM risk by 2010 and the 85 percent by 2020. 6 And so staff uses that as a parameter when we 7 develop regulatory proposals, whether they're good enough 8 under the policies this Board has embraced and directed us 9 to follow. That's the kind of rule we bring to you. 10 But once again, when we're in this hearing room 11 and you're considering any specific regulations, you have 12 discretion. And we have on many occasions deemed 13 something that was in a legal settlement to be infeasible 14 and you did not adopt it or we couldn't do it by the date 15 we thought perhaps we could. And then we go back and 16 negotiate an amendment to the settlement. 17 So you are not absolutely bound. You are never 18 obligated to adopt something you consider too costly or 19 unfeasible. 20 CHAIRPERSON LLOYD: Professor Friedman. 21 BOARD MEMBER HUGH FRIEDMAN: I think that partly 22 responds, but if I heard the comment it was -- is this 23 process that we're engaging in merely cosmetic or 24 fictional or is it real and meaningful? And to the extent 25 that it may be triggered in part or in whole by prior PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 agreements or understandings or settlements, whatever. I 2 think that's what I heard. 3 I don't know why he feels that way, but he's 4 raised the question and I think -- 5 EXECUTIVE OFFICER WITHERSPOON: We would say it's 6 absolutely meaningful, the facts matter. And to the 7 extent the industry has facts to share with us, we're very 8 eager to learn from them what's doable. 9 What I was also trying to explain is that there 10 are broader constraints here which are the Clean Air Act, 11 the state implementation plans, the policies of the Board. 12 And so there is sort of always an underlying objective 13 we're trying to reach and only certain rules will reach it 14 that are stringent enough. 15 But what's meaningful is your evaluation of the 16 facts and whether or not we're asking to do too much, it's 17 too costly, we're past the boundary of what's reasonable. 18 BOARD MEMBER HUGH FRIEDMAN: What's meaningful, I 19 take it, is -- otherwise we aren't sitting here -- is 20 hearing in a public forum, as well as in workshops and 21 other opportunities, getting all the input we can from all 22 of the constituent members in all cases. 23 I think the only thing that we do out of the 24 public eye is deal with pending litigation. And even 25 there we report. I'm not sure whether we've ever had -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 well, do you -- you got the answer. I don't know if you 2 accept it or not. 3 CHAIRPERSON LLOYD: Let me just say one of the 4 areas that I think Jay's comment resonated with me, and I 5 want to just follow through on here, but I'm not concerned 6 when you think it through, and that's when you come up 7 with a settlement, you come up with, say, 25 tons, you've 8 got to get that measure. 9 Without going through all the workshops and 10 without going through all the public process, how do you 11 know that you can get 25 tons from that thing? So that 12 does resonate. 13 On the other hand, being on this side of it, I 14 know that the staff works that through, and maybe you 15 start out with an estimate, but in the end maybe you're 16 not going to get 25 tons, or maybe you can get more or 17 less. 18 I think that was part of what he was saying. 19 MR. McKEEMAN: That was part of what I was 20 saying. I was -- what this stemmed from is that we're a 21 small association. And we're getting rained upon with 22 regulatory issues right now. I mean, literally dozens of 23 regulatory action coming out that directly affect -- 24 CHAIRPERSON LLOYD: We're not taking any 25 regulatory action here, let's be sure. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 MR. McKEEMAN: No. No. In workshops, in 2 hearings, in investigations -- I mean, I can name a list 3 of things that we're working on right now and they're all 4 in the settlement agreement. My frustration stemmed from 5 the fact that we were getting hammered -- we are getting 6 hammered with a number of regulatory actions in a very 7 short period of time and we're not capable of keeping up 8 with all that's going on and effectively communicate in 9 the process. When I saw that -- 10 CHAIRPERSON LLOYD: Is that all from us, or -- 11 MR. McKEEMAN: Yes. We got other -- I mean, I 12 can take -- yes that's just from CARB and their water 13 Board and DOE and a number of other agencies that are 14 working on regulatory actions, too. 15 But the frustration that encouraged me to find 16 out what was stimulating this activity took me to the 17 settlement agreement and the list of activities that 18 are -- have been pre-committed to by CARB to adopt in 19 certain time frames and to implement in certain time 20 frames and to reduce certain amounts of tons. 21 So I just -- I'm posing a problem to you and I'm 22 also posing something to you going forward. And that's 23 that settlement agreements between a few parties are not a 24 good way to do public policy. I just -- they do not 25 include people that need to be included in the discussions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 by the nature of the legal constraints on those things. 2 And I would suggest that -- going forward that the Board 3 try the avoid at all costs going into settlement 4 agreements, or if they go into settlement agreements make 5 sure that the affected parties, all affected parties are 6 included in those discussions. 7 CHAIRPERSON LLOYD: Good point. 8 Mr. McKinnon. 9 BOARD MEMBER McKINNON: Mr. Chairman, I feel like 10 we're being a little bit defensive here. And I think 11 that -- I think there's sort of real good discussion to 12 have about how we get in these corners. And I think it's 13 really valid that he raises it. 14 Number one, this particular item -- I don't feel 15 that Jay -- I don't feel that the three environmental 16 organizations -- I don't know who they were, but I don't 17 know what drove that there. I don't feel like they're 18 changing my ruling on this particular item. 19 What they change, though, is that this item was 20 taken up, correct? I mean it was agreed to. Is that -- 21 was there an agreement which items -- that's my number one 22 question. 23 And the other thing I want to say, and I want to 24 be -- and it came up in our October SIP meeting and it's 25 nobody here. Jay, you've got to know when the settlement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 agreement happens, this staff is miserable that their 2 options are cut. They're miserable, because it's the same 3 for everybody. Okay. But what gets us into that corner 4 is during SIP negotiations we feel pressure to say, "Well, 5 yeah, we can get a little more reductions out of this or 6 that," or, "We have a bad estimate," or, you know, I'm not 7 sure. 8 I mean, this happened sort of before my time. 9 But I certainly saw the pressure during the last SIP 10 meeting, where it was like, well, you can get more tons 11 this way or that way. And what we ended up talking about 12 was settling on an area where we're going to figure out 13 how to get the tons, which is sort of an honest way. 14 We're saying we don't know how to get the tons. We're 15 going to figure it out. 16 When we commit to tons, in a specific direction, 17 where it isn't possible, then we have made the mistake 18 where we've set it up so we get sued. Three entities get 19 to determine how we solve that problem and we take that 20 choice away from the public. I don't think anybody on 21 this staff doesn't understand that, Jay. 22 But let's be open about how it happened and 23 not -- and maybe I misunderstand, maybe I'm being open and 24 I don't understand it. 25 But it's a good reason not to be pressured into PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 unrealistic commitments. And I think this staff knows 2 that. But we have to be honest that it does take the 3 choices away from the public when we do that, because 4 courtrooms don't do a very good job of asking the public's 5 input on how you solve the problem. 6 CHAIRPERSON LLOYD: I'm going to ask staff also 7 when -- again, since Jay started out by saying he's got 8 some concerns, but really he's concerned about what this 9 builds up to, so when the train is on the track coming 10 down at him. When do we expect, I want you to get real 11 focused on his clients and on rules -- 12 MR. McKEEMAN: I'm focused already. 13 CHAIRPERSON LLOYD: Bad choice of words, but in 14 terms of when are our rules likely to impact his clients. 15 EXECUTIVE OFFICER WITHERSPOON: I'd be happy to 16 distribute to the Board the SIP settlement agreement that 17 you entered into on June of this year. I think it was in 18 closed session. And it's a table that has deadlines for 19 the Board to consider certain emission categories for 20 regulation. And then the anticipated tonnages that will 21 be achieved when you take those rules up, which you are 22 not bound by specifically, but you are bound in the 23 aggregate by the end of '04, end of '05, end of '06 and 24 the settlement agreement reaches through '08. How many 25 tonnage reductions you need to achieve -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 CHAIRPERSON LLOYD: I was trying to be specific. 2 Jay is clearly saying he's being rained on by all this. 3 He doesn't have the staff to address his issues, so -- 4 EXECUTIVE OFFICER WITHERSPOON: The diesel 5 retrofit control rules, just as they were in our own 6 schedule for hearing by the Board in this year and '04 and 7 '05 are replicated in the settlement agreement. 8 We tried not to agree to any more rule making 9 than we had planned to undertake by the dates we intended 10 to do it. That was staff's goal in negotiating with 11 environmental groups. So it is our diesel risk reduction 12 strategy, and along with some additional ROG control 13 measures, which were the original subject of the 14 litigation. 15 I don't have it with me. I have to go get it. 16 Jay might have it with him. 17 MR. McKEEMAN: I don't have it. I have the 18 issues that we're working on. 19 CHAIRPERSON LLOYD: On his clients, are we likely 20 to address his clients in two months, six months, 21 two years? 22 EXECUTIVE OFFICER WITHERSPOON: I'm sorry. The 23 fuel -- I misunderstood your question. 24 The fuel tanker delivery rule was supposed to 25 have been done by the end of this year -- brought to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 Board. We are late. And so our new tentative schedule 2 was to get that done by February. But we've also opened 3 up negotiations with the environmentalists who sued us to 4 say to them wouldn't it be better to roll this regulation 5 into our comprehensive private fleet rule, which we are 6 not obligated to do until the end of '05. 7 They need to agree to that change to the 8 settlement agreement. They understand the issues that we 9 have with doing that rule ahead of the others. When we 10 first planned it, we believed that most of those fuel 11 delivery trucks were under the ownership of oil companies, 12 that we had an environmental justice issue with where 13 they're being driven, that we had some unique 14 opportunities to accelerate their turnover. 15 That is not an accurate assessment of the 16 industry. Instead, these trucks are mostly in the hands 17 of small businesses. They are not owned and operated by 18 the oil refineries. We will have small business 19 considerations to work our way through, and they're more 20 like the rest of the private on-road fleet than they are 21 different, and so that's why we recommended to the 22 environmental groups that we renegotiate this portion of 23 the settlement, not just because we were late, but because 24 we want to take a different approach. 25 Now they want something in return. So we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 talking about that. We've just joined those discussions. 2 But that's what we're attempting to accomplish. 3 CHAIRPERSON LLOYD: I think it's a wonderful 4 example of what really what's happening here. Staff is 5 trying to understand that is plowing that information back 6 reflecting that. So we really are taking that input 7 seriously. 8 MR. McKEEMAN: I appreciate it. And believe me, 9 I'll take a solution to my problem. But I think there is 10 a larger problem here. And the fact that I'm not talking 11 with parties about a settlement that directly affects my 12 industry I have a problem with. 13 CHAIRPERSON LLOYD: Well, be our guest, talk to 14 the environmental community. Convince them that they 15 should be nice to you, delay that and roll it in with the 16 other ones. You have an opportunity. 17 EXECUTIVE OFFICER WITHERSPOON: Or help us figure 18 out what the payback is for getting that degree of 19 flexibility from them. That's really the issue that we're 20 trying to sort out. 21 CHAIRPERSON LLOYD: I appreciate that. And I 22 think if we have no more questions here, we do get a 23 chance to have three representatives from the 24 environmental community coming up. So we can see if they 25 have some sympathy with your case there, Jay. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 So we have Diane Bailey, Bonnie Holmes-Gen, and 2 Don Anair. 3 MS. BAILEY: Good afternoon, Chairman Lloyd and 4 members of the Board and staff. 5 My name is Diane Bailey, and I am with the 6 Natural Resources Defense Council. And I just wanted to 7 take an opportunity to address some of these last 8 comments. I can speak for NRDC -- 9 CHAIRPERSON LLOYD: Can you speak up a little 10 bit -- 11 MS. BAILEY: -- and I think that this is true for 12 other environmental groups as well. We don't enjoy taking 13 people to court, that's not our goal. We would really 14 rather that public agencies meet their legal commitments 15 and obligations. 16 And through our settlements we don't intend to 17 inflict any unfairness on any individual industries. All 18 we're seeking to do is get the original pollution 19 reductions that were committed to. Every day, every month 20 that goes by that those original pollution reduction 21 commitments are not met, more people are sick than need to 22 be and more people die than need to be. And I think it's 23 important to note that. 24 And now I'd like to address the TRU rule 25 specifically. We are joined by eleven other environmental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 health and environmental justice groups in supporting this 2 rule. And Joe Lieu of the California Environmental Rights 3 and Lands asked to be added to that list. He was not on 4 the comments that we submitted yesterday. 5 TRUs represent some of the highest risk mobile 6 diesel sources in the state that staff has evaluated so 7 far. The cancer risks are over 100 per million. Many of 8 the facilities that TRUs frequent impact neighborhoods and 9 many of these neighborhoods are communities of color and 10 lower income. 11 This presents a major environmental justice 12 issue. These TRUs need to be cleaned up now without 13 further delay. 14 Of course, we are disappointed that the 15 implementation dates have been delayed. However, we 16 realize this rule is important and must go forward. 17 However imperfect, we strongly support this rule 18 to clean up the TRUs. However, we would urge that the 19 staff consider moving up the implementation of the 20 dirtiest TRUs, the oldest TRUs, and possibly in exchange 21 for this there could be some incentives to those TRUs -- 22 possibly later implementation for the newer TRUs. 23 Additionally, we would like to see staff 24 periodically review the progress of the largest high risk 25 facilities and how they're complying with the rule and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 particularly those that are operating in or close to 2 residential areas. 3 And finally, we would like ARB in the future to 4 explore other alternative options, such as requiring 5 electric standby for new TRUs and looking into the other 6 alternatives that we've heard today. 7 In summary, while we recognize that this rule is 8 not perfect, we would urge your support when the 9 opportunity arises to adopt this rule. 10 Thank you. 11 CHAIRPERSON LLOYD: Thank you. 12 Bonnie Holmes-Gen, Don Anair. 13 MS. HOLMES-GEN: Good afternoon, Mr. Chairman and 14 members. 15 Bonnie Holmes-Gen, American Lung Association of 16 California. And we're pleased to be here again to 17 strongly support the proposed measure before you today on 18 transport refrigeration units and to urge you to move 19 forward as quickly as possible. 20 This is a very important public health measure. 21 And as you've heard, it's an important environmental 22 justice measure, and we view this as the key next step in 23 the diesel risk reduction program. And as you know, 24 there's a lot of work to do in the diesel risk reduction 25 program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 There's a lot of measures you need to work on 2 over the next couple of years and we need to move quickly, 3 so we can get to that 75 percent reduction point by 2010 4 as you have in that plan. And we're very anxious to see 5 that move along quickly. 6 As stated by Diane Bailey, we'd like to see more 7 rapid cleanup of TRUs, if possible, especially for the 8 older TRUs. And we would also like to see a greater focus 9 on nitrogen oxide reduction in the rule and be interested 10 to see what you can propose to accelerate and expand on 11 NOx reductions. 12 But in no case should you delay any further or 13 weaken the regulation. Clearly, there are technologies 14 available and technologies under development to assist in 15 meeting the proposed standards, and we believe the 16 requirements are reasonable and achievable, and as soon as 17 this whole regulatory freeze issue is resolved, hopefully 18 quickly, we hope you will adopt this and move forward. 19 I just want the make a comment about the whole 20 argument that you received today and you receive every 21 time you hear a diesel rule about the business climate and 22 how this is going to adversely affect the business climate 23 and cause businesses to move out of California, or 24 whatever else. 25 And I'm sure you're aware of many studies that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 constantly show that expenditures on pollution control do 2 not hinder economic growth. In fact, expenditures on 3 pollution control are consistent with periods of strong 4 economic activity, and in fact, strong environmental 5 pollution controls are necessary to a strong economy. 6 As you know, you have to have good quality of 7 life, good -- improved public health, improved quality of 8 life and less people getting sick from asthma attacks and 9 getting sick from other lung and heart illnesses because 10 of pollution. This is consistent with a strong economy. 11 And the costs of compliance are well worth it for 12 this rule, especially given the tremendous health benefits 13 that you've heard about. Over 200 premature deaths 14 avoided and so many other health benefits. 15 Our bottom line we're here to support this. We 16 want to work with you. We joined the coalition, the 17 groups that sent this letter yesterday, and we strongly 18 support this measure. 19 CHAIRPERSON LLOYD: Thank you, Bonnie. 20 Don Anair. 21 MR. ANAIR: Good afternoon, Mr. Chairman, members 22 of the Board. 23 My name is Don Anair. I'm with the Union of 24 Concerned Scientists. 25 I'd like to voice our strong support for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 regulation proposed by the ARB staff addressing the PM 2 emissions from transportation refrigeration units. 3 TRUs are responsible for two tons per day of 4 diesel particulate matter in the year 2000. Is more than 5 any other mobile source thus far addressed under the 6 diesel risk reduction plan. The health consequences of 7 these emissions should not be overlooked or under valued. 8 Diesel PM is responsible for premature death. As we've 9 heard, the number 200 will be prevented by the proposed 10 rule, as well as risk of lung cancer and numerous other 11 respiratory illnesses. 12 The rule as proposed is expected, as I said, to 13 prevent 200 prematures deaths through the reduction of 14 3,000 tons of diesel PM. This is a significant reduction 15 of diesel particulate matter and it's extremely important 16 this rule is implemented for the health of all 17 Californians. 18 The rule as proposed would require 100 percent of 19 pre 2002 model year TRUs to comply with the low emission 20 standards by 2008. This implementation date is actually 21 much later than originally proposed by the staff in some 22 draft proposals. We feel that there is a high probability 23 that retrofit devices will be available before 2008 and we 24 would encourage the Board to phase in compliance meeting 25 100 percent by 2008. We feel that early compliance is a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 possibility and should be addressed. 2 Also, the rule is focused on PM reductions, which 3 obviously is the goal of the ATCM's, but other pollutants 4 should not be overlooked. Staff has noted in the report 5 that significant reductions of PM emissions will be 6 achieved, but total emissions of NOx will actually 7 increase over the life of the regulation. 8 We would like to encourage staff to incentivize 9 the use of technology that reduces both PM and NOx and 10 other criteria pollutants. 11 We'd also like to see stronger incentives for low 12 emission or zero emission technology used at facilities 13 that are near residential communities. These communities 14 near courts, rail yards, and shipping terminals are the 15 most at risk for TRU diesel pollution. 16 Overall, this rule achieves significant 17 reductions of PM and we encourage and support the adoption 18 of this rule without further delay. This rule represents 19 a step forward in achieving the goal set forth in the 20 diesel risk reduction plan and will benefit all of 21 California. 22 I also want to thank staff for a very 23 comprehensive report that followed with the proposed 24 regulation and the well document environmental and health 25 benefits that are associated with the proposed regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 CHAIRPERSON LLOYD: Thank you very much. Thank 2 you. 3 Ms. Witherspoon, do you have any further staff 4 comments? 5 Thank you. 6 As I mentioned before, we are going to leave the 7 public record open on this item, due to the fact that the 8 regulatory review called for by the Governor's Executive 9 Order S-2-03 has not yet been completed. Once the review 10 occurs, the Board will take up this item again, along with 11 any change or adjustment process, separate notice public 12 hearing. 13 Persons wishing to comment on this item in the 14 meantime are welcome to do so and those comments will be 15 part of the official rule making record, as well as we 16 will keep it open for the next time it comes before the 17 Board. 18 Now before we bring this item to a close -- 19 during the item I'd like to ask for any ex parte 20 communications on this item. 21 Seeing none -- oh, sorry. Mr. McKinnon. 22 BOARD MEMBER McKINNON: I had a very general 23 discussion with Jay McKeeman about the issue we sort of 24 discussed here at the end yesterday. 25 CHAIRPERSON LLOYD: Thank you very much. With PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 that, I say the Board has a resolution before it, number 2 03-37 containing staff recommendations. However, in 3 consideration of the Governor's Executive Order S-2-03, 4 the Board will defer its vote on that resolution until a 5 future public hearing, and the resolution is likely to get 6 revised based on the discussions today and any future 7 comments coming up before the next Board meeting and at 8 the next Board meeting itself. 9 So, having come to the end of our discussion on 10 the proposed TRUs, we will take a ten-minute break, until 11 3:30 by that clock to give the court reporter time on 12 that, and then we'll start with the last item for the day. 13 (Thereupon a recess was taken.) 14 CHAIRPERSON LLOYD: The next item today is 15 03-10-2, proposed amendment to the verification procedure 16 warranty and in-use compliance requirements for diesel 17 emission control strategies. 18 The Board initially adopted this procedure in 19 2002. Since then, it has come to staff's attention a 20 number of adjustments are needed. Again, Jay, this is a 21 visible manifestation that, in fact, staff does come back 22 to the Board with issues. 23 The most controversial of these has to do with 24 the warranty requirements which apparently neither of the 25 affected industries like. I know personally how much PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 staff has struggled with this part of the regulation, 2 trying to find the most appropriate balance between all 3 the stakeholders. It hasn't been easy and we're still 4 working. I have confidence we'll eventually find our way 5 through this, because we simply have to. 6 Bringing up diesel emissions is too important and 7 everybody is going to have to pitch in and do their 8 respective part. 9 With that, I'd ask Ms. Witherspoon to introduce 10 the item and begin staff's presentation. 11 EXECUTIVE OFFICER WITHERSPOON: Thank you, 12 Dr. Lloyd. 13 The verification procedure you are considering 14 today is used by staff to determine how affected each 15 diesel emission control strategy is in reducing emission. 16 We also use this procedure to ensure that products are 17 durable and will work well in the field. 18 Finally, the verification procedure includes 19 warranty requirements to protect consumers who purchase 20 and install ARB certification devices. 21 As of this date, ARB has -- staff have verified 22 several hundred applications of diesel particulate filters 23 for both mobile and stationary applications. Diesel 24 oxidation catalysts and the system that combines a filter 25 with a catalyst technology. These emission control PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 devices are being installed and used on diesels today. 2 Our experience in implementing the verification 3 procedure has led staff to propose several improvements 4 and revisions. 5 The most important change we're proposing and the 6 the only one the Board will act upon today is to 7 temporarily postpone the 20 percent nitrogen dioxide limit 8 that would otherwise take effect on January 1st, 2004. We 9 need to delay the NO2 provision because no product on the 10 market today can comply with that limit. 11 For your future action, staff also believes that 12 revisions to the warranty requirements are desirable. As 13 you will hear today, the users want extended coverage and 14 the suppliers believe the current warranty is too onerous 15 and may cause some to withdraw from the market. 16 Our proposal attempts to address both parties' 17 concerns, although not to the full satisfaction of either 18 one. 19 Finally, the proposed amendments would further 20 harmonize the verification procedure with other programs, 21 both internal with ARB and with the U.S. EPA. 22 Mr. Paul Henderick of the Mobile Source Control 23 Division will now provide staff's presentation. 24 (Thereupon an overhead presentation was 25 presented as follows.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 AIR RESOURCES ENGINEER HENDERICK: Thank you. 2 Good afternoon, Dr. Lloyd and members of the Board. 3 My name is Paul Henderick, and I'm on the staff 4 of the Heavy-Duty Diesel End Use Strategies Branch. I 5 will present staff's proposed amendments to the diesel 6 emission control strategy verification procedure. 7 --o0o-- 8 AIR RESOURCES ENGINEER HENDERICK: The 9 verification procedure supports the diesel risk reduction 10 plan by providing a method for evaluating the performance 11 of diesel emission control strategies. 12 The procedure was adopted by the Board in May of 13 2002 and became effective this past June. It ensures that 14 a product achieves real and durable reductions of diesel 15 particulate matter and oxides of nitrogen and includes 16 warranty coverage requirements. 17 Once a product is verified, it can be used by 18 vehicle and engine owners to satisfy the requirements of 19 end use emission control rules, such as the trash truck 20 rule that was adopted in September. 21 One of the requirements in the procedure that is 22 not yet effective is the 20 percent nitrogen dioxide 23 emission limit. It will become effective on January 1st, 24 2004. The proposal today mainly deals with the NO2 limit 25 and the warranty requirements. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 I will begin by discussing the NO2 limit. 2 --o0o-- 3 AIR RESOURCES ENGINEER HENDERICK: Our current 4 regulation requires that diesel emission control 5 strategies meet a 20 percent NO2 emission limit by the 6 first of January, which is only three weeks away. 7 Staff proposes that the effective date be delayed 8 by three years to January 1st, 2007. The primary reason 9 for the proposed delay is there are currently no verified 10 particulate filters that can meet the limit. 11 I will now review the background on NO2. 12 --o0o-- 13 AIR RESOURCES ENGINEER HENDERICK: NO2 became a 14 topic of discussion for the diesel risk reduction plan 15 when data showed that heavily catalyzed diesel particulate 16 filters can significantly increase the fraction of NO2 in 17 diesel NOx emission. Such filters rely on the production 18 of NO2 to burn off the PM that they collect over time. 19 --o0o-- 20 AIR RESOURCES ENGINEER HENDERICK: Increased NO2 21 emissions are a concern because they can increase ozone 22 ambient NO2 and nitric acid concentrations. While staff 23 acknowledges the enormous PM and toxic hydrocarbon 24 reductions that are achieved by catalyzed filters, we do 25 not want to solve one air quality problem at the expense PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 of another. 2 Staff's analysis showed that engines emitting 20 3 percent NO2 or less would cause no adverse air quality 4 impact. As a result, the Board adopted a 20 percent NO2 5 emission limit in 2002. 6 --o0o-- 7 AIR RESOURCES ENGINEER HENDERICK: The problem 8 today is that there are no verified filters that meet the 9 NO2 limit. Therefore, in three weeks time, California 10 will not have any verified filters available unless the 11 NO2 limit is delayed. 12 --o0o-- 13 AIR RESOURCES ENGINEER HENDERICK: This table 14 shows NO2 emission data for filters currently available 15 from several manufacturers. As you can see, none meet the 16 20 percent NO2 limit. This range of NO2 fractions was 17 considered in the modeling staff performed to estimate the 18 effects of the proposed delay. 19 The modeling showed that there will be no adverse 20 air quality impacts in 2007 as a result of the delay. To 21 the contrary, the delay will allow us to continue 22 installing filters that achieve significant diesel PM 23 reductions. We have reviewed our proposal with the 24 International Diesel Retrofit Advisory Committee and the 25 consensus was that a delay is warranted. Additionally, a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 delay will give manufacturers more time for product 2 development aimed at reducing NO2 emissions. 3 This concludes our discussion on NO2. 4 I will now turn your attention to the warranty 5 issue. 6 --o0o-- 7 AIR RESOURCES ENGINEER HENDERICK: Under the 8 current regulation, retrofit manufacturers must provide a 9 warranty that covers the product itself, as well as any 10 damages the product may cause to the owner's engine and 11 the vehicle or equipment. 12 Staff proposes no change to the current warranty 13 periods or the coverage of engine damage. However, staff 14 proposes that vehicle or equipment damage be removed from 15 the required coverage. Retrofit manufacturers and 16 consumers have differing perspectives regarding this 17 proposal. 18 --o0o-- 19 AIR RESOURCES ENGINEER HENDERICK: Some retrofit 20 manufacturers express concerns that the potential warranty 21 liability is too great for them to sell products in 22 California. They indicate that there is significant 23 potential for owners to make inaccurate and spurious 24 warranty claims. 25 The cost of disproving such claims could be high, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 to say nothing of the cost of actually replacing engines 2 and vehicles. These manufactures request, therefore, that 3 the explicit warranty liability be limited to replacement 4 of the retrofit device and not include the engine or 5 vehicle. If retrofit manufacturers choose not to do 6 business in California, meeting the goals in the diesel 7 risk reduction plan will be difficult. 8 Retrofit manufacturers believe that the current 9 warranty period provides sufficient consumer protection. 10 They point out that the new engine emission control 11 warranty is five years, 100,000 miles, and that any 12 extension of retrofit warranty coverage beyond the current 13 five-year, 150,000-mile period should be market driven and 14 not mandated. 15 --o0o-- 16 AIR RESOURCES ENGINEER HENDERICK: The trucking 17 industry has another perspective on the retrofit warranty 18 requirements. It believes that the mandated retrofit 19 warranty period should match commercial new engine 20 warranties. 21 There are two types of new engine warranties that 22 should be distinguished. The first is the basic 23 mechanical engine warranty that comes with the purchase of 24 a new engine or vehicle. Its warranty period is typically 25 two to three years and can sometimes include unlimited PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 mileage. 2 The second is an extended warranty which may be 3 purchased by the truck owner at extra cost. It typically 4 extends the new engine warranty to 5,000, 500,000 miles, 5 although various options exist. The trucking industry 6 also understandably believes that if a verified emission 7 control system causes any damage to an engine or vehicle, 8 that damage should be covered by the retrofit warranty. 9 --o0o-- 10 AIR RESOURCES ENGINEER HENDERICK: To assess the 11 potential that filters have for causing engine or vehicle 12 damage, staff looked at experience with the technology in 13 the field. Today approximately 2,400 of New York's 14 transit buses are using the same filters that are verified 15 in California. The Boemer Truck Center, which is a 16 distributor for the International Truck and Engine 17 Corporation, has installed about 1,500 filters primarily 18 on school buses and trash trucks in California. 19 International itself has experience with an 20 additional 1,200 filter retrofits nationwide, most of 21 which are on southern California school buses. 22 None of the three parties mentioned here have 23 found any instances of engine or vehicle damage caused by 24 filters. While filters do not appear to be a real 25 concern, there may be some potential for other retrofit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 technologies, such as EGR, to have an effect on the 2 engine. 3 Therefore, staff believes that it is important to 4 retain coverage of engine damage in the retrofit warranty. 5 --o0o-- 6 AIR RESOURCES ENGINEER HENDERICK: We have 7 continued to discuss the conditions and length of warranty 8 with all stakeholders. This chart shows there is no 9 consensus on our proposal or on the positions of various 10 stakeholders. 11 Several retrofit manufacturers agree that 12 retaining engine coverage is appropriate. All retrofit 13 manufacturers support staff's proposal to remove vehicle 14 coverage and retain the current length of warranty 15 coverage. 16 The California Trucking Association's position is 17 that 150,000 miles is too short, and should be extended to 18 two years unlimited miles. Several, but not all, retrofit 19 manufacturers find that acceptable. With no consensus at 20 this time, the current warranty as amended by our proposal 21 provides the best balance. 22 I will now move on to describe the other 23 amendments included in staff's proposal. 24 --o0o-- 25 AIR RESOURCES ENGINEER HENDERICK: Although the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 procedure explicitly applies to products that use sound 2 principles of science to control emissions, it has no 3 process for handling products that do not upon first 4 review appear to meet that criteria. Staff proposes 5 adding a process to give an applicant two chances to 6 provide information and to notify applicants that staff 7 will suspend the applications if the scientific basis 8 cannot be proven. 9 Staff also proposes to harmonize durability 10 requirements with those in the U.S. EPA's verification 11 protocols and to make several changes to harmonize with 12 the proposed stationary engine ATCM. 13 There are other minor proposed amendments to 14 clarify provisions of the regulations as described in the 15 staff report. 16 --o0o-- 17 AIR RESOURCES ENGINEER HENDERICK: The next step 18 will be for staff to convene the NO2 working group that 19 was formed at the last meeting of the International Diesel 20 Retrofit Advisory Committee and further study the issues 21 identified earlier. Staff will report back to the Board 22 with any conclusions, and if necessary, propose changes to 23 the NO2 limit in time to allow retrofit manufacturers to 24 meet the 2007 compliance deadline. 25 Thank you for your attention to this item. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 will be happy to answer any questions you have at this 2 time. 3 CHAIRPERSON LLOYD: Thank you. 4 Before we get to questions, could I ask Madam 5 Ombudsman to describe the process during which this 6 proposed regulation before the Board today and share with 7 us any concerns or observations you may have at this time. 8 OMBUDSMAN TSCHOGL: Mr. Chairman and members of 9 the Board, the amendments have been developed with input 10 from the Manufacturers Emission Control Association, MECA, 11 and the California Trucking Association, and the Engine 12 Manufacturers Association, among others. 13 In July of this year, staff began their efforts 14 to modify the regulation. On September 12th, staff both 15 mailed and electronically e-mailed a request for comments 16 on proposed amendments to the stakeholders. 17 In October, staff presented the amendments to the 18 International Diesel Retrofit Advisory Committee and a 19 lengthy discussion ensued on the two most important 20 proposed amendments, warranty and delay of the NO2 limit. 21 Before bringing the amendments to you today, 22 staff also held numerous teleconferences and meetings with 23 individual stakeholders. On October 24th, 2003, staff 24 mailed out the 45-day public hearing notice to all 25 stakeholders. More than eleven hundred notices were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 mailed and nearly 750 notices were sent via e-mail. 2 In addition, the notice for this hearing and the 3 staff report were posted to the ARB's website on October 4 24th. 5 That concludes my comments. Thank you. 6 CHAIRPERSON LLOYD: Thank you very much. 7 Questions from the Board? 8 Mr. Calhoun. 9 BOARD MEMBER CALHOUN: I want to go back to the 10 question. Go back to the NO2 limit. And on your 11 background slide, it's the third item and it says no 12 significant impacts at 20 percent or less of the NO2. 13 What do you mean by that? I think it's the fourth slide. 14 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: When we 15 originally identified the problem that filters were 16 putting out fairly high fractions of NO2 compared to the 17 total NOx, we did some modeling and we found that while 18 the -- of course, the filters always reduce PM. This 19 extra NO2 could actually increase ozone, increase nitric 20 acid and NO2 as an ambient pollutant. 21 So we went and did modeling to try to figure out 22 how much of an increase, if any, in NO2 compared to 23 engines without filters could we absorb without increasing 24 the other pollutants while still gaining -- 25 BOARD MEMBER CALHOUN: Ozone, and what's the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 other one? 2 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 3 ones we were concerned about were nitric acid, ozone and 4 ambient NO2, which sometime occurs as kind of a hot spot 5 in various parts of the L.A. basin, was particularly where 6 we modeled. 7 We also modeled the Valley, so what we found was 8 that the 20 percent number would prevent any increases or 9 any significant increases in those pollutants and at the 10 same time allow us to have the benefits of PM control from 11 the filter. 12 So that's what we proposed to the Board and set 13 that limit of 20 percent. But now as we find out, given 14 the lead time, the manufacturers have not been able to 15 verify filters that meet that. So they're all higher than 16 that right now. But the advantage that we have is that 17 the rate at which filters are being installed is still two 18 or three years away before there is a large number of 19 filters. So with only a few filters on engines, even with 20 the higher NO2, there's not any kind of air quality impact 21 that would affect health. 22 But through the years the rate will go up and we 23 need to get hardware that will control it to 20 percent or 24 something like that in the future. So what we're 25 proposing is delay and we'll come back and propose a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 different standard or revised standard, if necessary, to 2 you in time for 2007. 3 BOARD MEMBER CALHOUN: My next question goes to 4 the experience of the system that already is in the field. 5 I think you mentioned that Boemer put 15,000 units out in 6 the field -- 7 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Not 8 15,000, I don't believe, but 1,500. 9 BOARD MEMBER CALHOUN: 1,500 in school buses. 10 And I assume that there's been no problems to date? 11 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 12 vast majority of the experience is extremely positive. We 13 have filters operating on some engines in Los Angeles that 14 have nearly 600,000 miles on them. The engine's been 15 taken out of the vehicle and replaced and rebuilt and 16 filter put back on a new engine and it's still running. 17 That's very positive. 18 There's over 100,000 filters in the world in 19 operation without problems. You can run into certain 20 problems, though. One is if you put a filter on an engine 21 that doesn't have high enough exhaust temperature, it will 22 plug. And so that kind of experience has happened where 23 we've tried to extend their application to maybe marginal 24 application. 25 We found out that you can can't do that. You've PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 got to stay within engines that have enough exhaust 2 temperature to make the filters work. 3 So, you know, that's the only limitation we've 4 seen. There have been no engine failures or truck 5 failures because of this problem. There is a problem 6 with -- that has developed in the last few months with new 7 engines sold in new transit buses in 2000 model year 8 engines that are plugging at a fairly high rate, but the 9 manufacturer of the bus engine and the filter manufacturer 10 think they have no lie and have a solution under 11 development for it. 12 But in terms of retrofit market, there's been no 13 experience, when you get it on the right vehicle, these 14 things work. 15 BOARD MEMBER CALHOUN: In the case of retrofits, 16 if there is a problem in the field, who's held responsible 17 for it? Is it the manufacturer or the person that we 18 granted certification to? 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It 20 depends on obviously the timing. If the manufacturer puts 21 a filter, for example, on a vehicle, sells it to that 22 vehicle owner and it turns out there's not enough exhaust 23 temperature to make it regenerate, then that filter will 24 cause some kind of problem. The monitoring will turn on a 25 light in the vehicle and tell them to shut the vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 down. In that case, the suppliers will provide another 2 one or take it off and not charge them if that was the 3 case, because it's not going to work on that piece of 4 equipment. 5 On the warranty that covers the longer period 6 which is okay, now that it's on there and it's operating, 7 what happens if something goes back to that individual 8 filter, it cracks or something like that, it's covered 9 under the warranty. 10 After the warranty expires, then it's the owner's 11 responsibility. That's what you'll hear from the 12 California Trucking Association. They think it should be 13 longer to remove any risk that there's failure in the 14 field, although we have not seen those long-term failures 15 at all. 16 If you have problems, you find them right away. 17 And that's application oriented, not that the filter 18 designs are bad. 19 BOARD MEMBER CALHOUN: I guess I'm concerned 20 about the end user and what he would have to do in order 21 to be compensated for any damage to his engine or to the 22 catalyst itself. Would he have to go after the person 23 that developed the system or made the system or would he 24 go after the person that was granting certification? 25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 within 150,000 miles it's covered by warranty. 2 BOARD MEMBER CALHOUN: For those systems that 3 are -- 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: For 5 retrofit. Each retrofit is warranted for 150,000 miles. 6 BOARD MEMBER CALHOUN: But who is responsible? 7 Is it the person that we granted certification to? 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yes. 9 They must honor the warranty. And the dealer that 10 installed it may be a Cummins dealer or it may be somebody 11 else that would be the person that would help resolve the 12 issue. 13 BOARD MEMBER CALHOUN: Thank you. 14 CHAIRPERSON LLOYD: In terms of the -- Tom, 15 refresh me. Maybe it's been covered. But suppose we had 16 50 of these trucks running and they stopped. Have we 17 calculated the near-term NO2 impact? 18 BRANCH CHIEF HEBERT: Yes. We're in the process 19 now of doing micro scale modeling as part of the 20 overall -- 21 CHAIRPERSON LLOYD: Seeing no questions of my 22 colleagues, ask the first three witnesses, Stephanie 23 Williams, Jay McKeeman and Jed -- Jed doesn't look to be 24 here. He's gone. 25 So Jay McKeeman and then Dr. Kubsh. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 MS. WILLIAMS: Our position on the current rule 2 was very well presented by your staff. We are opposed. 3 I just want to point out NO2, which our Board has 4 not taken a position on the NO2 issue, but this was a rule 5 that was an ozone measure for NOx that went to a lawsuit 6 that was negotiated that became the PM measure. Now it's 7 the PM measure that's going to increase NOx. That's kind 8 of an interesting ordeal when you get out of the public 9 realm of allowing due process for the trucking industry 10 you end up with the very pollution you're trying to solve. 11 And you're increasing it. I just want to point that out. 12 As far as our position on the rule current rule, 13 we believe you lack the authority to do retrofit. And if 14 you did have the authority, we would have been at the 15 Legislature making sure we were protected, the consumer, 16 the end user was protected. 17 There is a statute that specifically denies you 18 retrofitting, unless by statute and the statute that your 19 staff is referring to is a statute that the California 20 Trucking Association promulgated worked on -- the snap 21 belt statute, which also has the pay back money for when 22 the fuel damaged our engines. 23 So it is very clear to us that that statute does 24 not give you authority to retrofit. It gives you 25 authority to have engines modified at the time of rebuild, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 which is reasonable. But -- and that's if they fail the 2 snapout test. 3 So I think that before we go down this path of 4 exciting the truckers, which is happening, and exciting 5 the Air Resources Board, which is happening, because we 6 don't feel that we're not constructive. We feel that you 7 don't have the authority and you're acting without the law 8 behind you. 9 You only are given the authority delegated by the 10 Legislature and they specifically said no. So if you'd 11 like the authority, we should back together so we make 12 sure that our warranties cover consumer protection. 13 That's what laws are for, consumers, and that's 14 what we are in this case. 15 Also, the federal law does not allow you to work 16 on an engine, modify an engine when it's new. It's new 17 until the first rebuild. It would be clear it wouldn't be 18 fair to truckers who bought engines to have best available 19 control technology every single year, because we'd be 20 modifying our engines every year. 21 I want to remind that you we work on two cents on 22 a dollar margin and the cost of most of these rules are 23 more than the revenue on the truck. 24 The commerce clause, as we heard earlier, these 25 old statutes, that new statute that we haven't been really PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 clear on preempts -- the commerce clause is really old 2 too. It's called our Constitution, the United States 3 Constitution. Although it's really old, it's in place and 4 it counts. 5 When we start looking at the age of statutes, 6 let's just remember they're put in by legislature, it's a 7 democratic process. That's what keeps our country as 8 wonderful as it is. And when we start going underground 9 with settlements where the truckers aren't at the table 10 when we decide what we're going to do on off-cycle 11 emissions, when we start going underground with 12 settlements, when the environmentalists and the ARB decide 13 what's the best thing to do to reduce NOx and we end up 14 with particulate measures on petroleum trucks and garbage 15 haulers. 16 When these things start happening underground, we 17 undermine democracy and that's what's happening here. So 18 although the U.S. commerce clause of the Constitution is 19 old, it is intact. 20 The warranty and field testing to support 21 equipment liability in this method of going about 22 warranties is transferred to us. It's the same as telling 23 the car owner, "I'm sorry, but we used to have warranties 24 for your emission control, but we don't any more. So if 25 something happens, we're going to require to you put this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 gadget on from Wal Mart, and when something happens, 2 you're going to have to replace it, or you need to go 3 after this company in some other state to figure out how 4 to get that done." 5 We are completely naked in this process. We have 6 absolutely no way to remedy problems to our engines. 7 That's not good for our environment. We do not want to 8 leave the end user responsible for making sure equipment 9 is field tested and equipment stays in operation in the 10 field. 11 Consumer protection is also about environmental 12 protection. The cost analysis to the warranty issues is 13 incomplete. We already know that the warranties aren't 14 going to be provided and there's a cost. We talked to 15 different manufacturers, and they're coming in at about 10 16 percent of the price of the product. These products range 17 from 10,000 to $18,000 today. The ones that are verified 18 and for sale. And just so you know, that's what we pay 19 for a brand new engine. 20 So when you're paying 16,000 for a brand new 21 engine and possibly $18,000 for a device that reduces 22 particulate to put on the engine, we need a warranty that 23 is significant. 24 As we said before, for many vehicles this is a 25 nine-month warranty. Manufacturers of the emission code PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 devices have not committed to offering extended 2 warranties, and they're not going to unless you ask them 3 to, mandate them to, because they can sell more devices if 4 our device fails more often. 5 The retrofit mandates, and this is a very 6 important issue, changed the ownership standards and 7 warranty obligations. This a drastic change in the 8 trucking industry. This is as big a change as hours of 9 service. This is a new way we look at truck ownership and 10 warranties. 11 If you look at the Washington Post article that I 12 stapled to my letter that you have there, you can see that 13 these devices aren't working. They're not working. Bus 14 companies back east have stopped putting them on. That's 15 enough. We keep hearing from the people who make these 16 devices and the people that want to mandate these devices 17 that they're fine, don't worry about it. You don't need a 18 warranty. 19 You should go with us, then. You should go with 20 the maximum warranty, because if they're so sure that 21 there's no problem, then it won't cost them anything to 22 give us warranties that are like engine warranties. 23 We believe the proposed amendment actually 24 relaxes the warranty requirements rather than addressing 25 the industry concerns. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 In Europe we are part of the international 2 retrofit diesel emissions group and the Europeans were 3 very indignant that we should have a two-year unlimited 4 mile warranty just like in Europe. 5 Now in Europe the reason they have a two-year 6 unlimited miles warranty is because the government 7 subsidizes the traps. Subsidizes. These aren't mandates 8 in Europe. It's their equipment. So of course they want 9 to protect their equipment. They're acting as we would 10 act as a consumer. They want to to make sure they have a 11 warranty that keeps the emission control in place and 12 protects their engine. 13 And it does include collateral damage. If these 14 devices cause our trucks to catch on fire, and they're 15 saying they're not going to, so we shouldn't be worried 16 about warranties, since it's never going to happen. We 17 need the truck to be protected. We need the engine to be 18 protected, and we need to replace the emission control 19 device. 20 It's done in other countries this way. There's 21 no reason these very same companies Johnson Mathey, 22 Corning, who make these devices should have a standard 23 that they have for Europe and a different standard than 24 the United States, and they're the very same devices. It 25 makes no sense. We should have maximum standards in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 California. 2 And with that, I just want to close with the cost 3 calculations. I would like to see the cost calculations 4 put back in here. There are cost warranties. There are 5 costs to these devices. Separating the different 6 petroleum trucks, waste haulers, TRUs, makes it look cost 7 effective to this program. 8 This is the most aggressive, most costly business 9 killing for trucking in California, regulation that's ever 10 been proposed. If it's not subsidized, there will be more 11 Channel 10 interviews of trucks -- every week there's 12 something on Channel 10 or NBC and CBS about trucks 13 leaving the state. 14 You don't have the authority to control 15 interstate commerce. You can't stop trucks at the border. 16 We already know that or we wouldn't be allowing the 17 Mexican trucks in either. And you're going to hurt us if 18 you move ahead and pretend like you have the authority 19 when the American Trucking Association goes in and puts a 20 stay and lawsuit on the it. We'll be the only ones doing 21 it and we'll be out of business, and that's not good for 22 the state of California. 23 Thank you. 24 CHAIRPERSON LLOYD: Clearly the legal piece has 25 to be, otherwise we're wasting our time. I don't presume PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 the staff has come to us wasting our time. 2 MS. WILLIAMS: Could we get it in writing? 3 GENERAL COUNSEL JOHNSTON: I think many of these 4 issued are covered at least briefly in the initial 5 statement of reasons. And we can address them, you know, 6 more at length if the Board would like. 7 CHAIRPERSON LLOYD: So they're already in 8 writing? 9 GENERAL COUNSEL JOHNSTON: Yes. 10 MS. WILLIAMS: They're in writing saying they 11 have brought authority over here in toxic air contaminant. 12 They do not go in and say we have authority here based on 13 this. There is nothing in writing. 14 GENERAL COUNSEL JOHNSTON: If I may differ. Each 15 of the regulations sections at the bottom of the 16 regulation sites the specific authority and the statutes 17 which we are implementing. So there are, you know, a list 18 of half a dozen to a dozen statutes for each regulatory 19 section. 20 CHAIRPERSON LLOYD: Clearly, since we're not 21 closing the record, you'll get a chance to hear more of 22 this and see if it comes to your satisfaction. 23 MS. WILLIAMS: Thank you. 24 BOARD MEMBER CALHOUN: One question of staff. I 25 thought I heard you say that they were having trouble with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 these devices in New York and some other place? 2 MS. WILLIAMS: I gave you a copy of the article. 3 It was the Washington Post, Friday, November 21, 2003, 4 "Metro buses plagued by reliability problems." 5 Also, I talked to the transit people here in 6 California and the engines they're buying that came with 7 the traps, they usually had a five-year warranty. They've 8 been notified that their vehicles only have a two-year 9 warranty now and they cannot buy extended warranties. 10 So there is a huge problem, big consumer 11 protection problem. One in twelve people are in the 12 trucking industry. California already has problems with 13 jobs. This is something we really need to look at. We're 14 hoping for a business-friendlier state. 15 CHAIRPERSON LLOYD: Clearly, we will be looking 16 at this. And Tom, I think, is equipped to answer the 17 question vis-a-vis the DC buses. 18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: 19 Mr. Calhoun, that was the example where I was referring to 20 where the new buses that are being sold right now are 21 coming equipped with a filter for 2003 model year buses. 22 Some were sold in Washington, DC. Many of them 23 sold in California, and they are having an unusually high 24 failure rate. The failure rate is at the filter plugs, 25 and there is a safety system that causes, when it gets too PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 plugged, for the bus to shut down they have to take the 2 filter off it. There's nothing wrong with the filter at 3 that point, it's clean, put back on the bus. 4 The feedback I'm getting is that the engine 5 manufacturer and filter manufacturer are being very 6 responsive to dealing with the problem and they have 7 identified potential solutions which involve perhaps 8 changing the makeup of the filter and recalibration of the 9 engine, some combination like that. 10 They've identified why it's happening. And I 11 think they have a solution in place. There's no analog 12 here to retrofit per se. The filters themselves are not 13 failing. It's a question of improper design, I guess, of 14 the bus's engine control system vis-a-vis what filter it 15 has on it. 16 MS. WILLIAMS: I think I'm talking about 17 something different. In the article it says -- 18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It's in 19 the Washington metro buses. They asked to have cleaner 20 buses than are required nationally. So they were sold the 21 California model bus that comes required, because of our 22 regulations, with a particulate filter on it in 23 Washington, DC, metro. That's what has happened. 24 MS. WILLIAMS: In this article, 300 out of 900 -- 25 there's not 300 new buses -- out of 900 were fitted with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 filters and there was existing filters. They stopped 2 installing them after the filter manufacturer stopped the 3 warranty. So I think this is different. There's not 300 4 new buses of 900. No bus agency has that much money. 5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We'll 6 look at your thing. But I know the new buses were having 7 problems in Washington, DC, as well. So that's where the 8 problem was first identified. 9 CHAIRPERSON LLOYD: We can get to the bottom of 10 that. I think clearly there is a certain concern, we 11 don't want to be guinea pigs, I understand that issue 12 there, but I have faith we'll look at the bottom of this. 13 And so we will provide to Stephanie the written pieces on 14 the -- that allows us to go ahead with the regulation, if 15 we go ahead. 16 GENERAL COUNSEL JOHNSTON: We'll be happy to work 17 with her and answer any specific questions she has about 18 authority. 19 CHAIRPERSON LLOYD: Professor Friedman. 20 BOARD MEMBER HUGH FRIEDMAN: I notice at the end 21 of each statement of reasons there is a source of 22 authority and it cites the statutory sections, but it 23 doesn't directly acquaint the reader without reading each 24 of those sections and having him or her make his or her 25 own legal analysis. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 It doesn't really directly respond to what we've 2 heard repeatedly here today about the allegations that we 3 lack authority either under the Constitutional Interstate 4 Commerce Clause or the Clean Air Act or other statutes in 5 California that are being read as stating that we don't 6 have any authority over modifying engines and so forth. 7 And I think it would be useful to have a legal 8 opinion. I don't think it should be addressed to anybody 9 there. But I think it should be addressed to us. I think 10 we're entitled to some definitive legal value. It doesn't 11 have to be this minute. This is an open record. But I 12 think there have been enough challenges here that we ought 13 to get the best legal response to these issues before we 14 actually come to grips finally with these issues. 15 I do notice that there's the slide dealing with 16 no vehicle or engine damage from filters in the field. 17 This references other New York City transit. I think 18 that's what you were talking about and international -- 19 EXECUTIVE OFFICER WITHERSPOON: The key part of 20 that slide is the title, "No engine or vehicle damage," 21 because that's what this warranty debate is in part about, 22 the engines are equipped with a shut down device so that 23 when back pressure gets to an unacceptable level, it will 24 just turn off, so they avoid damage. 25 So what we've had is inconvenience, a lot of it, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 as the filters clog. Because then buses have even stopped 2 mid route with passengers on them and the transit district 3 had to send out another bus to get them to their 4 destination. But the engine in the vehicle did not get 5 damaged. 6 BOARD MEMBER HUGH FRIEDMAN: Would the warranty, 7 the traditional new car warranty or new truck warranty, 8 cover that sort of thing if it were from an original piece 9 of equipment? Would it cover the delay, the loss of use, 10 the inconvenience? As opposed to damage -- 11 EXECUTIVE OFFICER WITHERSPOON: I don't think so. 12 We've talked about the analog with light duty cars. When 13 something goes wrong with your car, you are not generally 14 reimbursed for the time you lost out of your day. 15 Depending on the dealership you go to, they may have 16 loaner cars and other courtesies for you, but there's not 17 an economic recompense. 18 So in the case of heavy duty vehicles, it's 19 analogous. What happens when it's within the warranty 20 period is that the technicians from the engine 21 manufacturer come out to the transit districts. They 22 diagnose the problem. They provide a fix. But there's 23 not an exchange of dollars for any inconvenience at the 24 transit district while that's going on. 25 BOARD MEMBER HUGH FRIEDMAN: Also, I believe -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 am I correct we adopted this earlier rule on PM reductions 2 and so forth in June, didn't we? 3 EXECUTIVE OFFICER WITHERSPOON: In 2002 we 4 adopted the procedure for how to verify devices and then 5 we've also adopted other regulations for PM control. 6 BOARD MEMBER HUGH FRIEDMAN: So the only change 7 that's being proposed here is with respect to, in addition 8 to the NO2 and the delay, is the warranty issue, am I 9 right? 10 EXECUTIVE OFFICER WITHERSPOON: And little 11 harmonization things, yeah -- 12 BOARD MEMBER HUGH FRIEDMAN: But the warranty is 13 the big crunch -- 14 EXECUTIVE OFFICER WITHERSPOON: Is the big one, 15 right? 16 BOARD MEMBER HUGH FRIEDMAN: But the objections 17 go to everything, the whole, going back to the original 18 action, as I'm hearing it. 19 EXECUTIVE OFFICER WITHERSPOON: That's true and 20 Stephanie -- 21 MS. WILLIAMS: We're only interested in the 22 two-year, unlimited 500,000 miles. 23 BOARD MEMBER HUGH FRIEDMAN: If the warranty 24 issue -- 25 CHAIRPERSON LLOYD: We don't have the authority PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 anyway, so according to Stephanie, we don't have the 2 authority anyway. 3 MS. WILLIAMS: That set aside, you don't have the 4 authority to mandate, but can you have a voluntary program 5 where you should have the same provision for a voluntary 6 program that EPA has. 7 Can I ask one more thing? For that earlier NOx 8 software thing, there's a rule at DMV now because of that 9 privacy law we can't go get the vehicle addresses by year 10 unless the ARB asks for them and signs a privacy with us. 11 So for us to get the data and move quickly on the 12 software thing, could we get the Air Resources Board to 13 write a letter to DMV that we're jointly working on this, 14 or that you can get data, because we need the vehicle 15 model years and they have that, and then we'll need the 16 addresses to get to everybody. 17 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We can 18 certainly try to help. I don't know exactly what the 19 restrictions are in giving out people's addresses and 20 things like that, but we'll see what we can do. 21 CHAIRPERSON LLOYD: Okay. Thanks, Stephanie. 22 Jay McKeeman, Dr. Kubsh and then Albert 23 McWilliams. 24 MR. McKEEMAN: I promise this is the last time. 25 Actually, we're in front of you today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 CHAIRPERSON LLOYD: Today. 2 MR. McKEEMAN: Today. That's correct. We're in 3 front of you on a technical issue, not a broad issue at 4 this moment. 5 So we had the same concerns that CPA has about 6 the engine warranty issue. And beyond the engine warranty 7 issue, we believe that the truck needs to be warranted as 8 well. 9 We're dealing with emission control devices. 10 These don't necessarily reside in the engine block. There 11 is a path for the exhaust to get out of the truck and it's 12 that path that concerns us that these devices may interact 13 with truck parts around that exhaust path that we can't 14 foresee right now. One -- 15 BOARD MEMBER CALHOUN: Give us an example. 16 MR. McKEEMAN: An example? 17 BOARD MEMBER CALHOUN: Yes, please. 18 MR. McKEEMAN: The exhaust pipe comes out of the 19 truck, off the engine block. It is -- a cannister is 20 placed someplace between the place where it comes off the 21 engine block and the point where the exhaust, you know, 22 the exhaust stack -- the end of the exhaust stack. And 23 that's someplace on the truck chassis away from the engine 24 block. 25 So there is a issue of truck chassis or possibly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 even the truck body that might be affected by an 2 overheating exhaust element. And that's -- so that's why 3 we think there needs to be chassis protection, as well as 4 engine protection. 5 The other thing is the testing that's gone on has 6 been in fairly controlled conditions, bus fleets, and 7 urban situations. Our members deliver out to farms and 8 out in the mountains for home heating oil and a lot of 9 different scenarios. And I think we need to have a good 10 representation of how these devices may perform in a 11 variety of environments, not just an urban setting where 12 you have fleet controls and that kind of close control of 13 the fleets. 14 So our proposition is that the chassis should 15 also be protected by the warranty. 16 CHAIRPERSON LLOYD: Thank you. Dr. Kubsh and 17 then Albert McWilliams. 18 MR. McWILLIAMS: I thought you called me. 19 CHAIRPERSON LLOYD: I did, but after Joe. And 20 then Julian Imes. 21 DR. KUBSH: Dr. Lloyd, members of the Board. 22 Joe Kubsh with the Manufacturers Emission Controls 23 Association. 24 MECA is pleased to provide comments today in 25 support of the staff proposal and with respect to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 verification changes that have been summarized in the 2 presentation today. 3 First, I'd like the thank ARB for their efforts 4 at bringing all the elements of the diesel risk reduction 5 program before the Board for their consideration. This 6 has served to stimulate significant efforts on the parts 7 of many of our members to develop, optimize, manufacture 8 diesel retrofit and emission control technologies. And 9 I'd like to specifically mention our comments with respect 10 to the key points. 11 First, with respect to the NO2 limit, MECA 12 strongly supports postponing this NO2 emission limit by 13 the three years that was indicated in the staff proposal. 14 This will give, not only give our members more time to 15 develop products to address this issue, but also provide 16 all parties additional time to better understand this 17 complex issue and appropriate limits. 18 Although manufacturers continue to develop 19 catalyst formulations and systems to try to minimize this 20 NO2, the currents requirements, which also include engine 21 out NO2 emissions, not only NO2 associated with retrofit 22 devices. In part takes meeting the requirement outside of 23 the -- takes it outside the bounds of what our own 24 technology manufacturers can do. But we are strongly 25 committed to try to develop products that will provide the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 PM controls that are required at the minimum amount of NO2 2 produced. 3 Delaying this requirement will have little, if 4 any, adverse impact on California's air quality and will 5 allow the continued introduction of diesel emission 6 control strategies and provide the associated air quality 7 benefits. We look forward to working with ARB as a part 8 of the NOx NO2 working group that was mentioned in the 9 staff presentation to effectively address this issue. 10 With respect to the harmonization issues that 11 were mentioned in the presentation, we also strongly 12 support these efforts to harmonize verification 13 requirements with the U.S. EPA, and would welcome the 14 opportunity to work with staff and EPA to fully harmonize 15 these two verification programs. 16 Full harmonization of these two different 17 retrofit technology verification programs would greatly 18 streamline and minimize the resources required by 19 technology developers to bring verified technology to the 20 marketplace. This in turn ensures the widest range of 21 verified technologies is available to the broad spectrum 22 of diesel engine applications here in California and 23 elsewhere. 24 Now with respect to the warranty requirements. 25 As indicated in the staff presentation, our members have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 diverse opinions on the warranty requirements. But in 2 general, our members continue to believe that details of 3 providing a product warranty should be left to the 4 marketplace and the commercial activities. However, if a 5 mandatory warranty is required, our members' opinions do 6 differ and you'll be hearing from several of our members 7 who have their own opinions that they've shared with staff 8 on the kinds of warranty requirements they would like to 9 see in the marketplace. 10 We do strongly support the proposal to remove the 11 vehicle equipment from the mandatory warranty and we think 12 this is a step in the right direction. As indicated in 13 the staff presentation and comments from Mr. Cackette, the 14 actual track record for filters that have been applied in 15 the field has been very exemplary with respect to any 16 problems associated with engines and/or vehicles. There 17 are, as Mr. Cackette mentioned, more than 100,000 filters 18 that have been installed worldwide. And the number of 19 vehicle-related problems, I'm not aware of any 20 vehicle-related problems that have been traced back to 21 filter problems. 22 And in general, when there have been some engine 23 problems, they usually have been traced back to problems 24 with injectors that have caused resulting problems with 25 the way the filter operates. There have been some cases PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 of failures of brackets, for example, or the plugging 2 phenomena that was mentioned here that our members have 3 been actively working with their customer base to resolve. 4 But we feel that removing that there's no need to 5 have a vehicle and equipment component to this mandatory 6 warranty language. 7 And finally, then, I would just in closing like 8 to commend the Board for its continuing efforts to provide 9 the people of California with healthy air quality and 10 demonstrating true leadership in implementing this diesel 11 risk reduction plan. 12 I'd be happy the answer any questions you might 13 have. 14 CHAIRPERSON LLOYD: Do any of your members feel 15 that the warranty issue is not a problem? 16 DR. KUBSH: You will hear testimony, I think, 17 from a couple of the members here today that are 18 comfortable with the provisions as they were adopted and 19 put on the books in June of 2003. There are other members 20 who are not comfortable with what's on the books today. 21 CHAIRPERSON LLOYD: Is there more than one? 22 DR. KUBSH: Yes. 23 CHAIRPERSON LLOYD: Thank you. Thank you very 24 much. 25 Albert McWilliams, Julian Imes, and Marty Lassen. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 MR. McWILLIAMS: Good afternoon. My name is 2 Al McWilliams. I'm the director of governmental affairs 3 of Engelhard Corporation. We are pleased to provide 4 comments to the Board today on the support proposed 5 amendments to this verification procedure. 6 First of all, I'd like the take this opportunity 7 to thank the ARB staff for its extraordinary efforts to 8 develop this program. They've worked very hard with all 9 of the stakeholders involved. I've had a couple meetings 10 with them myself and I think you acknowledged that 11 earlier, Mr. Chairman. 12 Engelhard is a world leading expert in surface 13 and material science. We've been at the forefront of 14 clean air technology for more than 60 years. Engelhard 15 pioneered the development of the first catalytic converter 16 for automobiles which, as you know, was one of the most 17 important pollution abatement devices ever invented. 18 Englehard is also one of the top manufacturers of 19 environmental catalysts that are used around the world 20 today to minimize pollution from buses, trucks, 21 motorcycles, mopeds and even small engines such as lawn 22 mowers. 23 We certainly want to be a full partner with the 24 ARB in achieving the goals of your diesel emissions 25 reduction plan. Numerous trucks, buses and other diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 engines were put into service long before the dangers of 2 PM emissions were as well understood as they are today. 3 Those problem vehicles were made to be in use for 4 many years, and they can be brought into compliance in one 5 of three ways: By replacing their engines with a newer 6 version fitted with diesel PM filters, by replacing the 7 entire vehicle with a current model fitted with diesel PM 8 filters, or by retrofitting the existing vehicle with the 9 diesel PM filter. 10 This third option of retrofits is the most cost 11 effective of the three alternatives. The cost 12 effectiveness of retrofits is one reason they have become 13 a popular means of addressing this serious health concern. 14 Retrofitted diesel filters can reduce PM emission by 97 15 percent and they cost only a fraction of these other 16 options. The thousands of them that have been put into 17 service around the world evidence their effectiveness and 18 their durability. 19 Now, it's our business to know how well our 20 diesel filters, and actually how well the filters of other 21 manufacturers, perform in the field. We submit to you 22 this afternoon that world wide experience with retrofitted 23 diesel PM filters has not shown any risk of damage to 24 vehicles origins. You've heard this same conclusion 25 echoed this afternoon by the staff and also was very PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 clearly stated in their report of October 24th, 2003. 2 We also understand very clearly why the staff is 3 trying to recommend this warranty. They want to strike a 4 balance between what they see as legitimate interests of 5 the equipment owners and also legitimate interest of 6 filter suppliers such as ourselves. 7 However, the line the ARB staff would draw is so 8 far afield of what is reasonably within our control. In 9 other words, an engine has a lot of different things going 10 on in it. The filter is just one part of that. And to 11 try to put the burden on us to prove that any time 12 something goes wrong it wasn't that one part means that we 13 have to be in control of a lot of things that we in 14 reality do not control. 15 So we would not be able to supply products 16 pursuant to this warranty that is suggested by the ARB 17 staff. 18 Standard industry practice is to provide a 19 warranty that allows for replacement or repair of a part 20 that fails to meet specifications. It's highly 21 unlikely -- in the highly unlikely event an end users 22 vehicle was to be damaged by a part, the end user could 23 avail himself of well established legal remedies that he 24 could have, regardless of the warranty provided. 25 However, a part supplier, if required to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 guarantee an entire engine or vehicle, would have to 2 assume a liability that is several times the work of the 3 parties supplied, and would have to take responsibility 4 for components that it did not provide. 5 You heard testimony earlier that these parts cost 6 16,000 dollars or something like that. I'm not sure if 7 that number is accurate in terms of the total cost of 8 installation. But it certainly is not accurate with 9 respect to the part. You know, whatever the final number 10 is it includes the installation charges that, you know, do 11 not accrue to manufacturers such as ourselves. 12 Engelhard has long-standing corporate policies 13 against giving these types of warranties precisely because 14 of the unreasonable burdens they pose. In this case, 15 those burdens would be multiplied countless times when one 16 considers the impact that ARB's action will have on other 17 states that will model their programs on yours. 18 As I stated earlier, Engelhard wants to be ARB's 19 partner in this program, and I trust I have made it clear 20 that Engelhard fully understands the difficult choices ARB 21 faces in its efforts to protect the health and well being 22 of the residents of California. 23 Accordingly, we pledge our commitment to work 24 with ARB, its staff and its end users to establish 25 reasonable alternatives to the proposed warranty that will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 provide a greater degree of comfort to the end users of 2 retrofitted diesel particulate matter filters during an 3 introductory period, while at the same time ensuring that 4 reputable suppliers continue the supply the California 5 market, thereby enriching the choices available here. 6 Basically, what we would like to see is when the 7 staff put up that slide that said "next step," have 8 another next step that says convene a working group of, 9 you know, including manufacturers and end users and the 10 staff to look at some alternatives, and we think there are 11 some alternatives out there. 12 Thank you very much. 13 BOARD MEMBER RIORDAN: Mr. Chairman, could I ask 14 a question? 15 Englehard is making a filter now, and have we 16 certified that filter? 17 MR. McWILLIAMS: I'm not sure if ours is -- yes. 18 BOARD MEMBER RIORDAN: I'm going to assume, 19 because you're such a large company with a wonderful 20 reputation, that's being sold also in Europe? 21 MR. McWILLIAMS: Oh, yes. Europe, Asia. 22 BOARD MEMBER RIORDAN: The warranty period on 23 that in Europe, what is your warranty? 24 MR. McWILLIAMS: The warranty period in Europe 25 is, I think it may be two years, but it only covers repair PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 or replacement of the part, and that's a part that's been 2 confusing here. 3 The -- and there are also other requirements that 4 go with it. For example, the engine has to be operated 5 within certain parameters, you know, temperatures and 6 certain calibrations, et cetera. 7 So it is not a situation where it's two years 8 unlimited miles or anything like that. It's two years 9 that it will perform as long as all these other conditions 10 are appropriate, and it only extends to repair or 11 replacement of the part. 12 BOARD MEMBER RIORDAN: If we were to consider 13 some of those requirements, and maybe we have and maybe 14 it's not been acceptable, and I don't know that 15 background, would that make you more comfortable with the 16 recommendation? 17 MR. McWILLIAMS: Yeah. The thing that really 18 causes us the problem is, you know, potentially taking on 19 a liability for such a large part of, you know, the 20 equipment that we don't have any control over. The only 21 thing we can control is the specifications of our one 22 part. 23 BOARD MEMBER RIORDAN: And I can understand that 24 issue. But I can also understand the other part. However 25 -- and let me now ask the staff -- have we ever PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 considered that you would have this warranty, but you 2 would operate the engine -- you'd have to operate the 3 engine under certain circumstances? 4 EXECUTIVE OFFICER WITHERSPOON: We have talked 5 about that at length about modifying the manuals, about 6 stipulating the conditions under which the engine warranty 7 applies or the vehicle warranty applies. But I think that 8 even with conditions stipulated that the manufacturers 9 have sent back to us, we're uncomfortable with this 10 extending to the vehicle at all. And we were 11 uncomfortable -- we the Air Resources Board -- with taking 12 it off the engine. 13 So we sorted of stopped there and left unresolved 14 is whether we can find a way to extend time or mileages 15 further than where we are right now, which is the 16 five-year, 150,000 mile. 17 We had hoped, based on some conversations we had 18 at the International Diesel Retrofit Advisory Committee 19 that the two-year extension was not going to be a big 20 deal. But as we got into it with individual manufacturers 21 they were split pretty evenly for -- well not for, they 22 don't like longer warranties, but accepting and outright 23 opposing. 24 So we're continuing to have these conversations, 25 because we also sympathize with the truckers about more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 coverage is better for them. 2 And we think it won't be invoked anyway, but it 3 causes a lot of corporate concerns for the device 4 manufacturers. 5 BOARD MEMBER RIORDAN: I can understand that. 6 But if you have a requirement of certain operational 7 things that, you know, I just don't know, because I'm not 8 mechanical enough to make a determination and I'm going to 9 have to leave it to who know better than I. 10 But I can understand both sides and I think 11 perhaps some ability to require certain -- maybe it's 12 through maintenance records, I don't know. I mean, I 13 don't know how that works. 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 HERBERT: I would just like to clarify, Ms. Riordan, for 16 the record, is that the existing adopted regulation does 17 stipulate in there that if the vehicle owner does not 18 maintain the vehicle, neglects it, et cetera, it can be -- 19 may be reasons for exclusion of the warranty, and in 20 addition the manufacturer that certifies the equipment, 21 verifies the equipment, I should say, can put in their 22 owner's manual which conditions those are that could lead 23 to voiding of the warranty. So that is already in there. 24 It does stipulate in there that in the vehicle owner does 25 not maintain the vehicle neglected it, et cetera, it can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 be, may be reasons for exclusion of the warranty, and in 2 addition, the manufacturer that certifies the equipment, 3 verifies the equipment, can put in their owner's manual 4 which conditions those are that could lead to voiding of 5 the warranty. So that is already in there. 6 CHAIRPERSON LLOYD: Professor Friedman. 7 BOARD MEMBER HUGH FRIEDMAN: I'd like to continue 8 the -- Ms. Herbert, when you're finished, I want to ask 9 you a question. 10 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 11 HERBERT: I'm sorry. 12 BOARD MEMBER HUGH FRIEDMAN: That's all right. 13 My memory isn't too good and I wanted to understand the 14 second slide here of the staff presentation says that we 15 adopted the original proposal in May of 2002. That is the 16 verification procedures. That's the background. And it 17 was to be effective in June of 2003. And it ensured that 18 there were diesel PM and NOx reductions that were real and 19 it includes I'm quoting warranty coverage. 20 And at that time, if I skip over to slide -- I 21 guess it's not numbered. But it's warranty requirements 22 in the presentation and you have here current and then 23 proposed. And I took current to mean what was adopted in 24 May of 2002, effective June of 2003. And it called for a 25 five-year, 150,000-mile warranty that would cover engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 damage and vehicle and equipment damage with the caveat 2 and the exclusions and so forth. 3 Now, all that I understand as being proposed now 4 is to modify this warranty to eliminate vehicle and 5 equipment damage which benefits the manufacturers to do 6 their part, and I understand the truckers are not happy 7 with losing that. And in fact, they would like a more 8 extended warranty. 9 But I just wanted to understand where were the 10 objections or is this plowing old ground and I just don't 11 remember it. Back in May of 2002 or even June of 2000, or 12 whenever we may be -- I mean, where were -- why wasn't 13 this all argued out then? Or are we reopening it? 14 EXECUTIVE OFFICER WITHERSPOON: Well, in 2002 the 15 engine manufacturers thought that our warranty 16 requirements were too aggressive. And we adopted them, 17 you adopted them, anyway, and in 2002 the truck industry 18 thought they were too lenient and you adopted them anyway. 19 So we were right down the middle back then and 20 we're still kind of in the middle. And since then, the 21 engine -- excuse me, not engine, the device manufacturers 22 have continued to besiege us for relief. And to say what 23 we adopted, really and truly they weren't kidding, is 24 going to affect their business ability -- 25 BOARD MEMBER HUGH FRIEDMAN: Ability to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 provide -- 2 EXECUTIVE OFFICER WITHERSPOON: -- and so Johnson 3 and Mattey, for example, has simply stopped certifying 4 devices with us before the date on which the new warranty 5 requirements took effect. And Englehard and others said 6 if they don't change soon, we'll quit California and go 7 elsewhere with our devices, which is something staff does 8 not wish to have happen. 9 So we've proposed a modest amendment to what the 10 Board adopted previously, which is to pare back the 11 vehicle and equipment part, but retain the engine part. 12 Some of the device manufacturers still really 13 want us to drop the engine warranty too, which staff has 14 been unwilling to do, not because of filters, but because 15 of what's coming -- exhaust gas recirculation, selective 16 catalytic reduction. We think it's a bad policy not to 17 anticipate interactions between engines and after 18 treatment. 19 And then the other place where we got you 20 confused, I'm sure, is when we started talking about 21 something that's not in staff's proposal, which is the 22 continuing desire on CTA's part to have a two-year 23 unlimited warranty, which we would have liked to have 24 given them, we would have liked to have -- 25 BOARD MEMBER HUGH FRIEDMAN: That's the trucker's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 desire. 2 EXECUTIVE OFFICER WITHERSPOON: We would have 3 like the put that in this proposal, but we could not get 4 enough buy in from the device manufacturers. We're 5 working back in the wrong direction again in their view. 6 So we stopped at just taking away the vehicle equipment 7 piece. 8 BOARD MEMBER HUGH FRIEDMAN: But just so I'm 9 clear then, apparently for at least a year or more, much 10 more, somewhat more onerous and draconian from the 11 manufacturer's point of view, warranty has been on the 12 books as proposed and was, in fact, adopted. And now 13 you're getting relief at least from coverage for the 14 vehicle and other equipment. 15 But there is still proposed the engine, as well 16 as the device, the engine. Now, you said that the burden 17 is too intolerable reasonably to be imposed because the 18 burden is on the manufacturer to somehow prove that 19 whatever occurred to the engine and other parts of the 20 car, but not the vehicle, that's out. I mean it's out 21 now. The truckers want it back in. 22 To prove that wasn't due to any defect in the 23 design or the product that you sold, the filter. Why 24 would that be your burden? I mean, the warranty -- you 25 warranted something, but the burden is always on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 claimant, isn't it, to show -- 2 MR. McWILLIAMS: What we did is we would warrant 3 that the part works correctly. But in a situation where 4 the truck breaks down for whatever reason, we would 5 anticipate getting a claim. And what we know is that, you 6 know, it's not at the end, you know, it's not after the 7 claim is resolved that the bills start to come due. The 8 bills actually start as soon as the claim is filed. 9 So what we would anticipate if we had a warranty 10 that covered the engine or something broader, the entire 11 vehicle, that we would wind up, you know, incurring lots 12 of legal fees, claim fees, et cetera, to defend against 13 every situation where someone had a problem with a truck. 14 And, you know, in the case -- I believe that your 15 warranty requirements where an engine is replaced under 16 these verification rulings -- I think I have this right -- 17 covers the engine. Or if the whole vehicle is supplied, 18 obviously the vehicle is covered by the warranty. 19 Usually the warranty pertains to what has been 20 supplied. If it was the vehicle or the engine or the 21 part. 22 BOARD MEMBER HUGH FRIEDMAN: I understand. If 23 they can show you the part, but if, in fact, it is 24 recognized, and generally in the industry these filters is 25 retrofitted -- diesel PM filters have not had any great PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 experience in damaging or causing injury to other parts of 2 the vehicle, even when they don't work or they -- then it 3 seems to me even more the burden would have to be 4 understood to be on the trucker to somehow show or make a 5 preliminary demonstration or showing that the diesel 6 filter that was the cause or was related in some way to 7 the claimed damage, whatever it is -- the breakdown of the 8 truck or the -- and, I mean, because that's the aberration 9 rather than the rule, right? It's the exception -- 10 MR. McWILLIAMS: Well, yes, but you have to get 11 to a point first of all, to prove that. 12 BOARD MEMBER HUGH FRIEDMAN: Wait a minute. 13 Well, you've made that assertion. You said that we submit 14 this morning a worldwide experience with retrofitted 15 diesel PM filters has not shown any risk of damage to the 16 vehicle or engine. 17 MR. McWILLIAMS: What I'm saying in the context 18 of a claim, you have to get to a point where you can prove 19 it. 20 You're saying to me that's our defense, that we 21 can show that, you know, worldwide we've had, you know, 22 zero experience with damage to vehicles or engines as a 23 result of these -- 24 BOARD MEMBER HUGH FRIEDMAN: Well, I guess what 25 I'm saying and I don't want to argue the point. What I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 saying is that anybody asserting a claim, and this would 2 be a claim under a warranty, and let's assume a warranty 3 covers engine damage due to the filter defect or 4 non-performance. The claimant has the burden of 5 establishing that. Not you, the warrantor. And they have 6 to submit something that indicates why they think it was 7 due to your filter. 8 MR. McWILLIAMS: But the reality is they'll come 9 in and they'll say Mr. and Ms. Engelhard, you made a 10 promise, that was the warranty -- you promised. 11 BOARD MEMBER HUGH FRIEDMAN: Well, all right. 12 But you see, I have trouble, you can tell me all kinds of 13 things people will say, but I can't believing Engelhard 14 will take that and assume they're legally liable simply 15 because somebody says you are. 16 MR. McWILLIAMS: No. I'm not saying that. What 17 I'm saying to you, though, is we will begin to incur costs 18 as soon as that -- 19 BOARD MEMBER HUGH FRIEDMAN: Well of course, 20 you'll look into it. You'll write a letter back or make a 21 phone call from your claims department or your analyst and 22 say, "Submit something. Tell us what makes you think 23 that." 24 Do you have a repair person or a tow truck or -- 25 who told you, or what makes you think that the engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 damage or this collateral damage which we have warranted 2 against was caused by our filter? 3 And that begins the process. And then you're 4 entitled like any other insurer, in effect, to say, "Make 5 a judgment." And you may decide discretion is the better 6 part of valor and pay something to get rid of them or you 7 may not. 8 If it's a good customer. There's all kinds of 9 things that enter into it, cost benefit. But it isn't 10 going to be automatically anybody writes a postcard or 11 makes a phone call and says, "I want my money for a new 12 truck" -- 13 MR. McWILLIAMS: You're right about that. 14 BOARD MEMBER HUGH FRIEDMAN: I'm just trying to 15 put it into perspective. 16 MR. McWILLIAMS: You mentioned this two years in 17 Europe for warranty. I believe first of all that that 18 only applies the Germany, not the entire EEC. But I do 19 have one of our warranty statements that we've used in 20 Germany. I don't -- if you want me to leave it? 21 CHAIRPERSON LLOYD: Leave it would be good. 22 MR. McWILLIAMS: I'll leave it with the clerk. 23 CHAIRPERSON LLOYD: Mr. Calhoun. 24 BOARD MEMBER CALHOUN: Mr. Williams, Engelhard 25 has been around for a long and they've made a lot of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 catalysts and sold a lot of them. Do you sell them to the 2 OEM, the car and truck manufacturers? 3 MR. McWILLIAMS: Yes. 4 BOARD MEMBER CALHOUN: What's Engelhard's 5 relationship with the OEM relative to the situation that 6 some damage that may have occurred to the engine? 7 MR. McWILLIAMS: You know, we've worked closely 8 together. If any problem comes up that may possibly be 9 attributable to a part we supplied, we work closely with 10 them to try to find out. 11 BOARD MEMBER CALHOUN: Well isn't that in effect 12 the same thing we're asking here? 13 MR. McWILLIAMS: No, because here we're talking 14 about putting a part. When you make a new vehicle, the 15 vehicle manufacturer is the one that has liability for the 16 whole vehicle or for the engine. Even when we supply the 17 OEM we don't take liability for the whole vehicle or the 18 engine. 19 And so -- but if a problem comes up, in the 20 spirit of customer relations, of course, we will try to 21 work to find out what the problem is, because we always 22 want our product to be better. And it's the same thing 23 and you're right, it would be the same sort of situation 24 in the case of the retrofits. 25 But the big difference with retrofits is that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 you're talking about vehicles that have been in use for 2 some period of time. They have, you know, a lot of 3 different things already have occurred to the vehicles. 4 And, you know, all we can do is make sure for the type of 5 vehicle concerned our part would be expected to work under 6 appropriate conditions. That's all we can do. 7 Now of course we would work with whoever we 8 supplied these products to to determine the nature of any 9 problem. But it's one thing to do it on a customer 10 service basis, and it's another thing to do it when you 11 have this warranty out there that covers this whole thing, 12 because then that brings in the lawyers, potentially, 13 brings in the lawyers and all that and just makes it a 14 different ball game. 15 BOARD MEMBER CALHOUN: I believe the -- at least 16 the way I envision it, is that the company that receives 17 certification from the Air Resource Board would have 18 system responsibility, and if your part -- they will come 19 back to you, not the individual owner. Isn't that what 20 normally happens in a warranty case? 21 Let's take it you sold something to one of the 22 OEM manufacturers. The person is going to go to the 23 dealer and the dealer, if it's your product that's caused 24 the problem, then the manufacturer is going to get to you, 25 isn't that correct? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 MR. McWILLIAMS: It will come back to us. That's 2 correct. 3 BOARD MEMBER CALHOUN: So don't you envision this 4 working the same way? 5 MR. McWILLIAMS: You know, it could work the same 6 way. I think it probably would work that way. But it 7 should work that way as a matter of customer relations, 8 not because we gave a warranty that covers the whole 9 vehicle and the whole engine, or the whole engine, because 10 that is the way it works now. 11 We do not give a warranty to an OEM that covers 12 anything other than repair or replacement of our parts. 13 BOARD MEMBER CALHOUN: But if an OEM discovered 14 or found that part that they got from you is causing a 15 problem, something is going to happen. 16 MR. McWILLIAMS: Oh, yeah. Yes. Definitely. 17 And it would happen in these cases as well. 18 BOARD MEMBER McKINNON: I'm getting somewhat 19 uncomfortable hearing that -- I mean, essentially this is 20 an industry that was created by regulation. And the 21 arguments that I'm starting to hear are arguments like let 22 the market decide, and we could deal with this as customer 23 service rather than a regulated warranty. 24 There's got to be a better way to get at this. 25 You know, you all wouldn't be here, I think, without this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 Board over the years. And in many cases we listened very 2 carefully to your industry. Maybe too carefully on 3 occasion. 4 There's been, you know, in this whole diesel 5 experience since I've been on the Board we made some 6 decision that maybe reached further than the technology 7 was ready for, in many cases by listening to your 8 industry. And so I get very, very uncomfortable hearing 9 from your industry, you know, sort of "We're going to take 10 our ball and go home." And there's got to be a way to 11 work this out. 12 MR. McWILLIAMS: And I'm sorry that's all you 13 heard, because I did try to be clear that I think there 14 are ways that -- alternatives that we can find here that 15 give a higher degree of comfort to the equipment owner and 16 satisfy our concerns. And I'm looking forward to, you 17 know, sitting down with all the parties involved and 18 discussing some idea. 19 We've kicked some around internally. We believe 20 there are some alternatives that are possible here to 21 address this. And I didn't mean to come across as, you 22 know -- 23 BOARD MEMBER McKINNON: I think you were careful 24 about it, but it came through. 25 MR. McWILLIAMS: But I would urge to you listen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 to whole thing because, you know, we believe there are 2 alternatives here that can address the situation. If I 3 could be blunt, I mean, what I heard coming from the CTA 4 basically is that they don't want this regulation in any 5 shape or form. And that is not what I'm saying to you. 6 What I'm saying to you is that I believe we can work 7 together and we can find a solution to this. And I 8 believe we can work together with the CTA and all the 9 other players and find an alternative that addresses all 10 of our concerns. 11 BOARD MEMBER McKINNON: Thank you. 12 CHAIRPERSON LLOYD: Thank you. We look forward 13 to that. 14 Julian Imes, Marty Lassen, Brad Edgar. 15 Julian, you're in the support box. 16 MR. IMES: Yes. That's true. That's true. 17 Good afternoon. My name is Julian Imes. I'm 18 Director of Exhaust Emissions Technology with Donaldson 19 Company. 20 I'd like to indicate Donaldson desires to provide 21 comments in support, as you just mentioned, of ARB's 22 proposed amendments to the diesel control verification 23 procedure. 24 Just to give you a little bit of background of 25 what Donaldson -- we're a leading world-wide provider of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 filtration systems and replacement parts, particularly in 2 a heavy duty arena. We serve customers in the industrial 3 and engine markets with a product mix which includes air 4 and liquid filters and exhaust and emission control 5 products for mobile equipment and implant air filtration 6 systems. 7 So if you think of a diesel engine and you think 8 of air filtration, liquid filtration. And then on the 9 exhaust side, that's what Donaldson's engine business on 10 the mobile equipment is about. 11 Donaldson is also an active member of MECA and 12 has also worked closely with ARB staff for the past 13 several years to develop and provide diesel retrofit 14 control technology in support of ARB's diesel risk 15 reduction plan. We presently have verified retrofit 16 technologies for both ARB's risk reduction plan and for 17 EPA's voluntary diesel retrofit program. 18 Just a brief comment that Donaldson does support 19 MECA's overall comments or positions regarding the 20 proposed ARB amendments on the NO2 limit, the verification 21 testing protocol and harmonization of durability 22 requirements with EPA. 23 Concerning ARB's warranty requirements, however, 24 Donaldson wishes to provide independent clarifying 25 comments. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 Number one, Donaldson, or just in general, 2 Donaldson does believe in general that the details of 3 providing product warranty should be left to the 4 marketplace and related commercial activities. However, 5 if a mandatory warranty is required the following is 6 indicated. 7 Number one, Donaldson does supported ARB's 8 present written warranty procedure and amendments which 9 indicate that mandatory warranty coverage extend only to 10 the engine and not to the vehicle or equipment. So you 11 can start to identify where we are related to that box 12 that was presented by ARB staff. 13 Furthermore, we strongly believe that compliance 14 to this amended warranty, which includes the engine, but 15 not the vehicle or equipment should take effect 16 immediately for all verified retrofit technologies. 17 We do not support extended time for compliance to 18 this amended warranty. We believe that any warranty 19 compliance date extensions perpetuate an unfair warranty 20 position and economic advantage for those with past 21 verified technologies which are prior to the more recent 22 ARB verification procedures. 23 The more recent new verification request or 24 approvals have been required that Donaldson is in this 25 position required to agree to the new mandated ARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 warranty to gain verification. We believe that a level 2 playing field of the same ARB warranty for all suppliers 3 needs to be established as soon as possible. 4 There has been significant time -- six months to 5 a year, I think maybe even longer, for supplier review of 6 the new ARB warranty. There's been a lot of discussion in 7 the past. The latest written proposed changes are only to 8 eliminate liability exposure for equipment. I think that 9 was covered briefly before. 10 Our second point is that most recently there have 11 been significant industry and stage holder dialogue 12 concerning retrofit technology suppliers offering extended 13 warranties to the present minimum ARB warranty 14 requirements, either on a voluntary or on a mandatory 15 basis. Donaldson strongly believes that extended 16 warranties are best left to the marketplace and the 17 related market activities and does not support any 18 mandated extended warranties beyond the present ARB 19 minimum warranty. 20 Having said that, at the present time Donaldson 21 does not plan in the near future to offer any extended 22 warranties on a voluntary basis to this minimum ARB 23 warranty. Why is that? There is a great deal of 24 uncertainty surrounding the current warranty as required 25 by the procedures, and all the ramifications of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 required warranty are yet known. I think you saw some of 2 that in a dialog that just happened -- how is this really 3 going the play out? 4 Donaldson will continue to assess the situation 5 as the verification program proceeds as to whether 6 extended warranty should be made available. We further 7 recommend that the present mandated minimum ARB warranty 8 should be retained on all application segments, and we 9 think it would be beneficial to limit or focus any 10 extended warranty dialog to those vehicle engine segments 11 where it may be most appropriate. 12 An example would be perhaps a voluntary extended 13 warranty for high annual mileage, newer trucks and the 14 on-road heavy, heavy duty segment where the present 15 minimum warranty is five years or 150,000 miles. 16 Specific details would be developed through 17 future stakeholder discussions and commercial 18 negotiations. 19 In closing, Donaldson intends to continue 20 providing cooperative effort with ARB staff and other 21 stakeholders to finalize any needed changes that come 22 about to the ARB retrofit warranty. But Donaldson has 23 placed a great deal of effort to position ourselves to 24 support ARB's program and will continue to do so. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 CHAIRPERSON LLOYD: Thank you very much. 2 Questions or comments? You've exhausted those 3 last time, I think. Thank you. 4 Marty Lassen, Brad Edgar, Dean Saito. 5 MR. LASSEN: Good afternoon, Mr. Chairman and 6 members of the Board. 7 My name is Marty Lassen and I'm the Commercial 8 Development Manager for Johnson Mattey's heavy duty diesel 9 business in North America. 10 Johnson Mattey appreciates the opportunity to 11 provide comments on the proposed amendments to the diesel 12 emission control strategy verification modification 13 regulation. 14 As a technology company that provides advanced 15 catalytic solutions to reduce emissions from both mobile 16 and stationary sources, Johnson Mattey has long been a 17 proponent of cleaning up our environment. We have worked 18 for than than 30 years with both the EPA and state 19 agencies to provide technology solutions for both 20 regulated and non-regulated efforts with much success. 21 And in California, with the efforts of CARB and its many 22 partners, aggressive goals have been set and these goals 23 have been met or exceeded. 24 Today's effort to clean up emissions from diesel 25 engines is no different than what has happened in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 past. In consultation with many stakeholders, aggressive 2 goals have been set and technology providers once again 3 are bringing forth solutions to meet these goals. But, as 4 with any new and sweeping efforts there are questions and 5 concerns. 6 Things such as are the standards too stringent? 7 Or are they stringent enough? Can technology meet the 8 requirements? Is technology proven and durable? Are 9 there adequate protections in place for the users, or has 10 that protection gone far beyond typical practice and is it 11 precedent setting? That is dangerous. 12 We can answer some of these, but still 13 uncertainties remain. However, we can point to a 14 successful track record as a partner with CARB, EPA and 15 industry in supplying technology solutions. And our 16 policy and practice is to stand behind our technology 17 solutions. 18 Johnson Mattey recognizes and appreciates the 19 efforts that CARB staff has made in trying to find a 20 balance between the needs of verified retrofit device 21 manufacturers like Johnson Mattey and the needs of users 22 of diesel engines that are or will be required to install 23 these same retrofit devices. We are quite willing to 24 continue our tradition of working as a partner with CARB 25 and industry to bring to market technology solutions that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 meet all of the requirements. 2 The ultimate goal of the diesel risk reduction 3 plan is to reduce PM emissions from a broad range of 4 diesel engines in California. Some might question if all 5 parties are in agreement with this, but to reduce these 6 emissions with confidence and certainty, CARB must ensure 7 that the technologies to be utilized demonstrate prudent 8 performance and durability. 9 That's why the verification procedure exists. To 10 verify these technologies do perform as the manufacturers 11 claim and that these claims are substantiated by both data 12 and field demonstrations. Further, the manufacturers of 13 verified technologies must warrant their products to 14 perform as they claim. Reputable manufacturers would 15 certainly agree with this position, but the key point is 16 that the manufacturers should warrant the products that 17 they supply. 18 This is what a product warranty is, a warranty on 19 the product you supply. If there is a problem that goes 20 beyond this product, the legal system provides an avenue 21 to determine fault and decide on a remedy without 22 pre-judgment the current warranty requirement and the 23 verification procedure requires verifiers to warrant their 24 product for up to five years or 150,000 miles. This is 25 50,000 miles or 50 percent more than the standard emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 control component requirement of 100,000 miles. 2 Additionally, there is a requirement for 3 verifiers to provide progressive consequential warranty 4 coverage for both the engine and the vehicle, although it 5 has been proposed to limit it to engines. This as a 6 regulated mandate is unprecedented. 7 The CARB staff proposal to reduce the warranty 8 liability from engine and vehicle to engine only is a 9 positive step. However, it is Johnson Mattey's position 10 that CARB needs to go further and return to the original 11 warranty liability language that was used to initially 12 verify diesel retrofit devices during the interim 13 verification procedure. That warranty is limited to the 14 retrofit device only. 15 Johnson Mattey's CRT particulate filter was the 16 first of two particulate filters verified by CARB. The 17 warranty requirement for that verification was limited to 18 the filter only and for five years or 150,000 miles. 19 To date, more than 1,500 CRT filters have been 20 supplied in California under this product-only warranty. 21 Some of these filters have been in service for four years, 22 exceeding 400,000 miles in service. The only warranty 23 claim that has been out there was on one unit and it was 24 related to a support bracket that failed. Johnson Mattey 25 investigated the failure and promptly remedied the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 problem. There have been no engine-related or 2 vehicle-related issues. 3 You have heard several comments or statements 4 regarding warranties from everyone in the European union 5 has a two-year warranty to the engine manufacturers 6 providing a standard warranty of 500,000 miles. 7 To the first point Germany, not the European 8 union, requires a flat two-year consumer product warranty 9 on all products sold in Germany, not just particulate 10 filters. 11 And addressing the second point, even though 12 comparing the warranty of new engines to retrofit is 13 comparing apples and oranges. The engine manufacturers 14 must provide 100,000-mile warranty on emissions-related 15 components, substantially less than the existing CARB 16 requirement of 150,000 miles. The engine manufacturers do 17 provide longer warranties on the product that they supply, 18 the engine. But it is typically at cost to the purchaser 19 or to gain market advantage. 20 As I've stated previously, Johnson Mattey is 21 willing to work with CARB to find a way to make this 22 program successful. This includes the potential to extend 23 warranties for certain classes of vehicles, like long haul 24 trucks, that accumulate many miles in a short time. But 25 remember, we may be retrofitting vehicles that are already PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 several years old with hundreds of thousands of miles on 2 it, not new vehicles. 3 The existing requirement to extend the warranty 4 liability to engines as proposed is preventing us from 5 offering this warranty coverage. In fact, the mandated 6 warranty liability that extends to a level higher than the 7 product we supply is a serious concern to Johnson Mattey 8 and our ability to continue to participate in the CARB 9 diesel retrofit program. 10 The warranty as written sets a precedent. It 11 mandates warranty coverage that goes far beyond the 12 product we provide. This mandate does not only involve 13 California diesel retrofit, it is influencing other 14 markets and programs to do the same. 15 One of Stephanie's lasts comments was that she 16 wants the same warranty that the EPA voluntary program 17 has. Well, I'm happy to offer her that warranty, because 18 EPA requires that a warranty for a verified product be 19 supplied, but the commercial terms of the warranty are 20 left up to the verifier and the purchaser. 21 Related to the extension of the liability to 22 engine and vehicle, a major concern to us is a potential 23 liability cost that will have to be carried on my 24 company's balance sheet. 25 Let's step back for a moment. At first glance, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 it may appear that the broad warranty liability 2 requirement is a good thing. I would argue this is not 3 necessarily so. This warranty requirement will 4 undoubtedly increase the cost of systems. 5 Increased cost of systems will be the result of, 6 or will be the result of, one, the need to review and 7 respond to every claim that is raised, whether it is 8 ultimately validated or not, the need to extend coverage 9 to more than just our products supplies, and the reduced 10 competition in the market. 11 Reduced competition may occur when large 12 companies choose not to participate due to this liability 13 risk. Smaller companies with fewer assets may choose to 14 participate, but may not have the resources to honor these 15 extended warranty obligations if there is a problem. 16 Please do not mistake our concern with the 17 warranty liability requirement to our having concerns 18 about our products and their ability to reduce PM on 19 engines and the many applications that will be covered by 20 this rule. Johnson Mattey is fully confident that the 21 products we supply, when correctly used, will work. 22 As support for my comment, there are more than 23 80,000 CRT filters operating successfully around the 24 world, and the same types of applications that will be 25 controlled by CARB's diesel risk reduction rule. There PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 have been a small percentage of filter-related claims, 2 about 1 percent, but there have been no engine or 3 vehicle-related claims. 4 In conclusion, Johnson Mattey believes that the 5 diesel risk reduction program, its individual fleet rules 6 and the verification procedure will result in a new era, 7 the era of clean diesel. We support this effort. We are 8 fully prepared to continue working with CARB to develop 9 the solution to address the concerns surrounding the 10 various elements of the diesel retrofit program. 11 Thank for this time, and I'd be happy to answer 12 any questions. 13 CHAIRPERSON LLOYD: Thank you. I think you made 14 your position pretty clear. 15 MR. LASSEN: Thank you. 16 CHAIRPERSON LLOYD: Brad Edgar, Dean Saito, 17 Diane Bailey. 18 (Thereupon an overhead presentation was 19 presented as follows.) 20 MR. EDGAR: Good evening, Chairman Lloyd and 21 members of the Board. 22 My name is Brad Edgar. I'm the executive vice 23 president and chief technology officer of Cleaire Emission 24 Controls based in San Leandro, California. 25 We are a developer verifier and California-based PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 manufacturer of retrofit emission control systems. 2 Currently, Cleaire has three diesel retrofit emission 3 control systems that are CARB verified. To date, we have 4 over 850 diesel retrofit systems operating in the state of 5 California, with many more planned over the next few 6 years. 7 Our devices are essentially a muffler replacement 8 that have little interaction with engines or the vehicle. 9 Cleaire has partnered with Cummins and its 10 subsidiaries and its distribution systems to bring our 11 product to market. The customer purchasing the Cleaire 12 product will be buying a Cummins validated product from a 13 Cummins distributor and can be confident of the same level 14 of customer service, product support and reliability that 15 they would expect from any other Cummins product. 16 The distributor would be well qualified to 17 diagnos and assess warranty issues. To that end, Cleaire 18 and the Cummins distribution network are prepared to go 19 beyond the minimum warranty requirement set forth in the 20 current verification guidelines. 21 We are proposing the following extended warranty 22 coverage: Five years unlimited miles for solid waste 23 collection vehicles and five years, 300,000 miles for 24 heavy, heavy duty vehicles. The details are presented in 25 the following slide, which I think is both on the monitor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 and on the overhead. 2 The way we've chosen to break down the warranty 3 is both with the base warranty and an extended warranty we 4 would offer. We've segmented the market by heavy, heavy 5 duty on-road vehicles and separated out solid waste 6 collection vehicles simply because they have a 7 significantly different duty cycle. And a note there that 8 the solid waste collection vehicle warranty does not 9 include roll off and transfer trucks, but those would be 10 covered on the other side or the other column here as 11 heavy, heavy duty on-road vehicles. 12 So essentially what we have elected to offer is a 13 five-year, 150,000 mile warranty that would cover 14 emissions parts, labor, and progressive engine damage. We 15 feel confident in offering progressive engine damage 16 because, one, our confidence in our technology, and two, 17 because of the confidence we feel with our affiliation 18 with the Cummins distribution network and their ability to 19 diagnose and assess warranty issues, and also with their 20 longstanding relationships that they hold with customers 21 today. 22 On the extended warranty side of things, we 23 extend the mileage on the heavy, heavy duty on-road cover 24 to extend out the 300,000 miles for parts and progressive 25 engine damage and on the solid waste or refuse vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 side we will offer a five-year unlimited mile warranty to 2 cover again parts and progressive engine damage. 3 Thank you very much for your opportunity to 4 present this information. I'll take any questions you 5 might have. 6 CHAIRPERSON LLOYD: Professor Friedman. 7 BOARD MEMBER HUGH FRIEDMAN: Now that's specific 8 cooperation and progress, if I hear it correctly. 9 I'm wondering, what is your view, if you have 10 any, on the extent to which somebody might make a claim 11 that your filter failed or had a defect, and somehow not 12 only the engine but the vehicle suffered damage? This 13 would not be warranted under your proposal. I understand 14 that. The vehicle is not covered. But would there be 15 language or could there be language that would preserve 16 any rights at common law, that is outside of a warranty, a 17 contract claim that somebody would make a claim -- user 18 could make a claim for the vehicle damage as well? 19 MR. EDGAR: Unfortunately, I'm a technologist and 20 not an attorney. 21 BOARD MEMBER HUGH FRIEDMAN: That had come up 22 earlier. That was probably unfair of me to ask you. I'm 23 just wondering. Everybody said they want to help and they 24 want to cooperate and they're sure there is going to be a 25 solution while they're saying that this is where they draw PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 the line in the sand. 2 I'm wondering if there's any avenue for further 3 dialogue, because we have some time on this warranty issue 4 with the manufacturers, and whether, if there was explicit 5 language that -- nobody's waiving any legal rights they 6 may have outside of the express contract warranty for 7 damage. But then again the burden of proof would be on 8 them, the claimant, to show it and make the case and so 9 forth. 10 If they have that anyway, the only question would 11 be to make sure that they're not waiting or losing such 12 rights, if they have them, outside of the warranty. And 13 that could be maybe part of the -- I'm just struggling 14 here for common ground. 15 CHAIRPERSON LLOYD: So maybe one of the things 16 that Brad would be any comment -- reflect on this and get 17 back to staff on that would be good. 18 MR. EDGAR: Certainly. I would just emphasize 19 the I think the way we would deal with any warranty issue 20 would be very similar to the way an engine manufacturer 21 and distributor would deal with a warranty issue outside 22 of the engine. In other words, if an engine had an issue 23 with the vehicle, there's a track record of how that's 24 handled and I think this would be very similar. 25 CHAIRPERSON LLOYD: There's a tradition there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 Mr. McKinnon. 2 BOARD MEMBER McKINNON: Did I understand 3 correctly that -- and part of how you do this that may be 4 different than a manufacturer is that you're relying on 5 the service departments of the Cummins, the Cummins 6 service throughout the country. So you have sort of a 7 known quantity in terms of who's doing the repairs, how 8 they're doing the repairs, what the specs are to do the 9 repairs. So is that a fair characterization of how it's 10 done? 11 MR. EDGAR: Absolutely. I think that that's key 12 that we have a built in network of professionals who 13 diagnose warranty claims every day. Not necessarily, 14 maybe the after treatment is a new aspect of that, but the 15 whole nature of warranty and fault diagnosis is well known 16 through the distribution network, and I think oftentimes 17 that gets lost when we talk about a part supplier and a 18 vendor working to the end users. There's a relationship 19 with the distributor that's key in this. 20 BOARD MEMBER McKINNON: I got it. Thank you. 21 BOARD MEMBER CALHOUN: Who's the manufacturer of 22 your product? 23 MR. EDGAR: We are. 24 CHAIRPERSON LLOYD: And located? 25 MR. EDGAR: Cleaire is headquartered and located PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 in San Leandro, California, which is just south of 2 Oakland, and currently the devices are manufactured in 3 San Diego. 4 We are partnered with Fleetguard, which is a 5 subsidiary of Cummins, so ultimately taking over larger 6 scale manufacturing and production of the devices. So 7 it's a partnership -- Cleaire has a partnership with a 8 Cummins subsidiary, Fleetguard. 9 BOARD MEMBER CALHOUN: Thank you. 10 CHAIRPERSON LLOYD: Thank you. Dean Saito, Diane 11 Bailey. 12 I don't see Todd out there. I presume Todd's 13 flown back. 14 MR. SAITO: Thank you, Chairman Lloyd and members 15 of the Board. 16 The South Coast AQMD has specific comments on the 17 following amendments regarding the 20 percent limit and 18 the January 1, 2004, effective date. I think specifically 19 the AQMD staff would like the ARB staff and the Board to 20 consider not granting a three-year extension, but rather a 21 one-year extension. 22 Secondly, the staff would also like to request 23 that some kind of cap, NO2 cap, be established during this 24 interim period, whether its's three years or one year, 25 rather than unlimited. We'd like the staff to consider PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 establishing some kind of cap limit for the interim period 2 of time. 3 Thank you. 4 CHAIRPERSON LLOYD: I think we should at least 5 take a look at that. I presume staff had a good reason 6 for three years. 7 EXECUTIVE OFFICER WITHERSPOON: Yes. The Diesel 8 Retrofit Advisory Committee thought we would need that 9 amount of time to work our way through this, because it 10 isn't just the devices and how they're engineered, there 11 is an engine out NO2 problem that people didn't anticipate 12 that NO2 is coming out in the significant fraction from 13 the straight exhaust, and then adding to what the trap is 14 doing to NOx as it's burning off the particulate. 15 And so it's a complex technological problem that 16 we have to unravel. So I think one year is not realistic. 17 With respect to cap and the interim, as we showed 18 you, the devices that have been certified thus far, go up 19 as high as, I think it was 60 some percent NO2 fraction, 20 and it would depend in setting that cap how many of them 21 you wished to decertify. Because we can set the cap at 22 what the maximum is now, set it lower, you know, on down 23 and we would be pulling traps off the market. 24 We think that that is unduly alarmist. There 25 aren't enough of them additively to contribute to large PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 NO2 problems. 2 CHAIRPERSON LLOYD: Let me ask you a question. 3 If South Coast wanted to say that they would support 4 installation of traps in their territory with a certain 5 cap, presuming they can do that? 6 EXECUTIVE OFFICER WITHERSPOON: I don't believe 7 that they can. I think only we can regulate the mobile 8 sources with the trap retrofits. It's not like the 9 natural gas fleet rule. 10 CHAIRPERSON LLOYD: Could we recommend an extreme 11 areas or -- 12 EXECUTIVE OFFICER WITHERSPOON: It would take a 13 change in legislation, I believe, to authorize -- 14 CHAIRPERSON LLOYD: If we encourage it without 15 regulating. 16 EXECUTIVE OFFICER WITHERSPOON: We'll take 17 another look at that before we come back to you. 18 CHAIRPERSON LLOYD: That's fine. Thank you. 19 Diane Bailey, Kathryn Phillips, and Gretchen 20 Knudsen. 21 MS. BAILEY: Good afternoon. This is Diane 22 Bailey with the Natural Resources Defense Council. 23 BOARD MEMBER HUGH FRIEDMAN: Once again, would 24 you be willing to speak -- put that microphone as close as 25 you can. Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 MS. BAILEY: Excuse me. Yes. 2 The Coalition for Clean Air did submit comments 3 yesterday that numerous groups, including NRDC, did sign 4 on too, and unfortunately Todd had to leave. 5 We are all very supportive of these rules, 6 because they are such an integral part of the diesel 7 retrofit rules and so necessary for the diesel retrofit 8 rules to move forward cleaning up the air in California 9 and alleviating the health impacts of diesel that are 10 associated with the diesel sources. 11 We're hopeful that the parties involved on the 12 warranty issues can work those issues out so that this 13 verification process can move forward smoothly. 14 We do not have a position on the warranty issues. 15 We're concerned about the NO2 requirements and 16 the delay of those requirements. We would urge staff to 17 look into the health impacts, the very severe health 18 impacts that we detailed in our comment letter of NO2, 19 especially the emerging research that's coming out and 20 linking NO2 with lung cancer and pay attention to those 21 impacts. Do the research and make it more of a priority. 22 I think that is the second draft meeting in a row 23 that the issue came up a with near source NO2 impacts, and 24 the response has been that the staff is looking at it. We 25 would just urge that priority be elevated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 And ultimately, despite the proposed delays on 2 the NO2 requirements, we're very supportive of these 3 proposed amendments to the verification process. 4 Thank you. 5 CHAIRPERSON LLOYD: Thank you. I know the staff 6 is working on it. They'll give high priority to solve the 7 issue. They've got so many high priority issues to deal 8 with. 9 Thank you, Diane. 10 MS. PHILLIPS: Kathryn Phillips with the Center 11 for Energy Efficiency. 12 I just want to echo essentially what Diane has 13 said and draw your attention to the letter of December 14 10th signed by CEERT and a number of our environmental 15 colleagues. 16 As to the warranty again, we are supportive of 17 the staff's proposal that a mandatory coverage extend only 18 to the engine and not to the the vehicle or equipment with 19 which the control system is used, and we think -- we're 20 confident the staff will work out a good compromise. 21 And we'd also like to congratulate Cleaire for 22 being able to step up to the plate and present the kind of 23 product and warranty that the market demands. And we 24 think that may help them get more customers. So thank 25 you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 CHAIRPERSON LLOYD: Thank you. 2 Gretchen Knudsen and Tim McRae. 3 MS. KNUDSEN: Good evening. My name is Gretchen 4 Knudsen. I'm with International Truck and Engine 5 Corporation. 6 We weren't prepared today to make statements, but 7 I think it's become necessary, given some of the previous 8 comments. 9 CHAIRPERSON LLOYD: I figured that. 10 MS. KNUDSEN: As you know, International has been 11 very supportive and very excited about retrofit. In fact, 12 we launched a new division. We got our dealers excited 13 about it. We've gotten our customers excited. We 14 facilitated ultra low sulfur diesel fuel becoming 15 available to our customers, and we've been out there 16 trying to make this work. 17 It's imperative that because we want this to 18 succeed we want customer satisfaction, and certainly if 19 there is a failure -- which we've had just some very minor 20 failures, you know -- we sort of treat this as a customer 21 issue, you know, we don't want them in a finger pointing 22 situation. We want to get in there and get it fixed as 23 quickly as possible. 24 I think our major concern comes with some of the 25 comments made previously on the warranty for the engine, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 and we really appreciate staff's understanding about the 2 necessity to have the engine warranty language included in 3 the verification procedure. 4 Something to note -- the way that our program 5 works, we don't get to make a determination whether or not 6 a retrofit device is appropriate on an engine. That is 7 something that we work with our dealers and with our 8 supplier to data log, to collect information, to determine 9 if there are engine exhaust temperatures that are hot 10 enough and if the duty cycle is appropriate. 11 It is then up to the supplier to decide whether 12 or not they feel comfortable installing that device on the 13 vehicle. And I think given that fact that we have no 14 control over whether or not vehicles can be retrofitted, 15 it's really imperative that the suppliers have the 16 liability. 17 And I also think it's important to note that 18 because they do have the liability, we have witnessed them 19 taking a little bit longer with data collection and being 20 a bit more conservative in which vehicles they choose to 21 retrofit. 22 So I don't think this is a situation where they 23 have no control over where these devices are going on the 24 vehicles. They're the ones that are making the decisions. 25 And I just really wanted to clarify that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 As far as the warranty language on the vehicle 2 damage, you know, we hope that the manufacturers and CTA 3 can work out on agreement. This program is certainly, you 4 know, there's a need to strike a perfect balance with all 5 the issues and concerns and we just are behind staff and 6 hope we can find a workable solution. 7 Thank you. 8 CHAIRPERSON LLOYD: Thank you very much. 9 Tim McRae. 10 MR. McRAE: Good evening. My name is Tim McRae. 11 With the -- am I close enough to the microphone? 12 My name is Tim McRae and I'm with the Planning 13 and Conservation League. And I'm a special projects 14 director. And I thank the staff for its work on this 15 subject and I and the thousands of Planning and 16 Conservation League members that I'm here to represent 17 support the staff's recommendations on this issue. 18 The crux of the issue -- I'll keep my comments 19 brief here -- is that these proposed amendments are the 20 predicate for all of Air Resources Board's efforts to 21 regulate diesel particulate emissions in California. 22 Tens of thousands of particulate emissions every 23 year, which I believe the number is 2,900 lives every year 24 that could be saved if these diesel particulate emissions 25 are able to be effectively regulated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 Air Resources Board can't adopt the proposed 2 verification protocol. It won't be able to enforce the 3 regulations that are already on the books, which means 4 buses and trash trucks already, and the regulations that 5 are considered, though I recognize not voted on today, 6 regarding the transportation refrigeration units and 7 further potential diesel emission particulate matter 8 reduction strategies in the future. 9 So we hope that you, when you vote, vote for 10 this. 11 And we thank you for the staff for doing the 12 work. 13 CHAIRPERSON LLOYD: Thank you very much, Tim. 14 Thank you. 15 Does staff have any more comments at this time? 16 EXECUTIVE OFFICER WITHERSPOON: Nothing further. 17 CHAIRPERSON LLOYD: We are leaving the public 18 record open on this item due to the fact that the record 19 review called for by the Governor's executive order S-2-03 20 has not been completed. Once the latter occurs, the Board 21 will take up this item again at a separate noticed public 22 hearing. Persons wishing to comment on this item in the 23 meantime are welcome to do so and those comments will be 24 part of the official record. And they will also have an 25 opportunity when we reopen the record. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 Any ex parte communications from my colleagues? 2 BOARD MEMBER RIORDAN: Mr. Chairman, do you 3 have -- 4 CHAIRPERSON LLOYD: I'm getting to that. 5 BOARD MEMBER RIORDAN: Okay. All right. 6 CHAIRPERSON LLOYD: The Board has before it 7 Resolution 03-38 containing staff recommendations. 8 However, in consideration of the Governor's executive 9 order 2-2-03, the Board will defer its vote on that 10 resolution until a future public hearing. 11 However, because of the imminent implementation 12 of a requirement the staff proposed we amend, the Board 13 will consider a motion that our General Counsel, Diane 14 Johnston, will read to the Board, as I mentioned in my 15 comments much earlier today. 16 We'll turn to at this time to Ms. Johnston. 17 GENERAL COUNSEL JOHNSTON: As you mentioned, 18 Chairman Lloyd, among staff's recommendations for this 19 regulatory item, staff has proposed that the Board amend 20 the effective date for the nitrogen dioxide or NO2 21 emission limit in Section 27-06 of the verification 22 procedure, amending the effective date from January 1, 23 2004, to January 1, 2007. 24 Without this postponement, all existing 25 certifications will lapse on the first of next year, this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 January 1. It is doubtful that additional diesel emission 2 control strategies would be able to obtain verification 3 after that date. 4 Therefore, as your General Counsel, and in 5 consideration of the Governor's Executive Order, I'm 6 recommending that the Board take a limited action today to 7 temporarily suspend the NO2 limit in the verification 8 procedure. 9 The precise motion that you may consider would be 10 as follows: Motion of the Board to direct delay in the 11 implementation of the NO2 requirement in Section 27-06 of 12 Title 13 California Code of Regulations. 13 In order to avoid any adverse consequences to the 14 regulated public and to the public health, safety and 15 welfare, the Board directs the executive officer to 16 suspend the implementation of the NO2 emissions limit in 17 Section 2706 until the Board considers and acts upon the 18 proposed amendments to the diesel emission control 19 strategy verification procedure at a future public 20 hearing. 21 CHAIRPERSON LLOYD: Thank you. So we're voting 22 to give -- 23 BOARD MEMBER CALHOUN: So moved. 24 SUPERVISOR PATRICK: Second. 25 CHAIRPERSON LLOYD: Aye. It's unanimous. So PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 with -- 2 BOARD MEMBER HUGH FRIEDMAN: Mr. Chairman, also 3 did somebody propose we adopt the next steps or authorize 4 staff to take the next steps that they recommend? 5 CHAIRPERSON LLOYD: I think that will be partly 6 because since this is ongoing, this was only a limited 7 part that we're looking at there. 8 BOARD MEMBER HUGH FRIEDMAN: And with that next 9 step could a third bullet that continues to explore the 10 warranty issue with the stakeholders? 11 EXECUTIVE OFFICER WITHERSPOON: Absolutely. 12 We'll keep talking and endeavoring to find an even better 13 middle ground. 14 CHAIRPERSON LLOYD: Better than middle is tough 15 going. Thank you. 16 With that let's take a five-minute break. Until 17 25 to, and then we've got two items to come back and 18 hopefully we can finish today. 19 So with staff's cooperation and witnesses' 20 corporation, we could make it. 21 (Thereupon a recess was taken.) 22 CHAIRPERSON LLOYD: Next agenda item is 03-10-6, 23 status report on the San Joaquin Valley -- which one is 24 coming first? 25 BOARD MEMBER RIORDAN: I think it's the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 reformulated gas. 2 CHAIRPERSON LLOYD: Too anxious. 3 03-10-4, status report on the implementation of 4 the California reformulated gasoline regulation. 5 Today we will hear a report by staff on the 6 status of the implementation of phase three gasoline 7 regulations. 8 In 1999 this Board approved these regulations in 9 response to the Governor's Executive Order D-5-99, 10 directing the phase MTBE from California gasoline. At its 11 July 2002 hearing, the board adjusted the phase out date 12 to December 31, 2003. 13 Staff will report on how the phase out is going 14 and update on the board on other issues that relate to 15 ARB's gasoline regulations. 16 I'll turn this over to Ms. Witherspoon. 17 EXECUTIVE OFFICER WITHERSPOON: I'll just skip 18 any remarks and go straight to Mr. Win Setiawan of the 19 Stationary Source Division. 20 (Thereupon an overhead presentation was 21 presented as follows.) 22 MR. SETIAWAN: Thank you, Ms. Witherspoon. Good 23 evening, Mr. Chairman and members of the Board. 24 Today, I will be presenting an update on the 25 progress of our full implementation of the California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 Phase 3 gasoline regulations which span the use of 2 gasoline additive MTBE to California gasoline beginning 3 December 31st, 2002. 4 However, to the supply concerns, at the hearing 5 in July 2002, you amended the California Phase 3 6 reformative gasoline regulations to extend the timetable 7 to remove MTBE by one year to December 31, 2003. 8 As part of this update, I will also discuss 9 ethanol demands, supply and pricing for California, the 10 current status of California's oxygen waiver request to 11 the U.S. EPA, and the progress report on the status of the 12 ongoing ethanol permeation study. 13 --o0o-- 14 MR. SETIAWAN: Now I will begin by providing an 15 update on the implementation effort by refiners and 16 terminal operators. 17 --o0o-- 18 MR. SETIAWAN: As you know, in December 31st, 19 1999 Governor's executive order you approved the 20 California Phase 3 gasoline regulations on December 9th, 21 1999, to prohibit the addition of MTBE to California 22 gasoline beginning December 31 of the 2002. However, due 23 to the supply concerns at the hearing in July of 2002, you 24 amended the California Phase 3 reformative gasoline 25 regulation to MTBE by one year to December 31st, 2003. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 --o0o-- 2 MR. SETIAWAN: While the MTBE phaseout update was 3 several companies proceeded with an early voluntary 4 transition to California reformulated gasoline without 5 MTBE, resulting in above 70 percent of California's 6 gasoline dispatched year being MTBE free. 7 --o0o-- 8 MR. SETIAWAN: The remaining four refineries, one 9 in southern California and three in northern California, 10 have completed all the remaining necessary modifications 11 and have begun the transition to Phase 3 gasoline. 12 --o0o-- 13 MR. SETIAWAN: As the transition to Phase 3 14 gasoline occurs, a significant quantity of ethanol will be 15 used. The delivery of this ethanol into the state as 16 required modifications to fuel storage and distribution 17 facilities. 18 Kinder Morgan, the state's largest common 19 carrier, has been receiving, storing and blending ethanol 20 into California Phase 3 gasoline since December 1st. 21 Likewise, with the exception of one terminal in 22 Eureka, all proprietary terminals have completed the 23 necessary modifications. The Eureka facility is expected 24 to be ready by March of next year. And we'll receive 25 non-oxygenated reformulated gasoline in the interim. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 --o0o-- 2 MR. SETIAWAN: I will now present to you some 3 information on ethanol fuel demand, supply, and price. 4 --o0o-- 5 MR. SETIAWAN: As ethanol is the only viable 6 option to replace MTBE, California is expected to consume 7 about 900 million gallons of ethanol in 2004. With such 8 demand, California has become the largest market for 9 ethanol in the nation. 10 In addition to the California market, two 11 Northeastern states, New York and Connecticut, also follow 12 California's MTBE ban beginning January 1st, 2004. These 13 two states are projected to annually consume 400 to 700 14 million gallons of ethanol, depending on whether the 15 obstinate with 5.7 or 10 volume percent of ethanol. 16 According to the United States Department of 17 Energy, preliminary indications are this state will use 18 ethanol at the 10 volume percent level. 19 --o0o-- 20 MR. SETIAWAN: United States ethanol fuel demand 21 will be almost exclusively supplied by the United States 22 domestic ethanol producers that concentrated in the 23 Midwest corn producing states. Based on California Energy 24 Commission data, over the last two years, the production 25 capacity in those states has increased by approximately 40 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 percent to 3.2 billion gallons per year by the end of 2 2003. 3 Another 800 million gallons capacity is 4 anticipated to be on line next year, bringing the total of 5 annual ethanol supply to around 4 billion gallons in 2004. 6 This chart compares the anticipated demand and 7 supply of ethanol in 2004. As you can see, California and 8 New York and Connecticut will consume slightly less than 9 half of the total projection with the remaining being 10 consumed generally in the Midwest. 11 --o0o-- 12 MR. SETIAWAN: This looming MTBE bends and the 13 result increase in ethanol demand have put an upward 14 pressure on ethanol price as can be seen on the top line 15 in this graph. It should be noted that the ethanol 16 supplies as shown on the graph do not include the 52 cents 17 per gallon subsidy provided by the federal government. 18 As the full transition to non ethanol gasoline 19 draws near, the price of ethanol has increased more than 20 30 cents a gallon in the last two months. This means that 21 even with the subsidy as a gasoline blending component, 22 ethanol is more expensive than the base fuel to which it 23 is added. 24 --o0o-- 25 MR. SETIAWAN: In June 2001, the U.S. EPA denied PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 California's oxygen waiver request. In response to this 2 denial, California sued the U.S. EPA. This past July, the 3 United States Court of Appeals for the Ninth Circuit 4 vacated the U.S. EPA's decision. 5 Currently, staff is in the process of supplying 6 new information on the 2001 ARB comingling study and 7 permeation study from off-road sources as part of a 8 renewed request for a waiver. 9 --o0o-- 10 MR. SETIAWAN: Regarding the current ethanol 11 permeation study -- 12 --o0o-- 13 MR. SETIAWAN: -- ARB is cofunding a test program 14 with coordinating research counsel to investigate the 15 effect of ethanol in gasoline on permeation emission from 16 California's fleet. Ten vehicles from model year 1990 -- 17 excuse me -- 1978 to 2001 will be presented in the study 18 that includes three fuels. MTBE, non oxygenated and 19 ethanol gasoline. The preliminary findings are to be 20 released in the report early next year and are expected to 21 confirm that the addition of ethanol increases permeation 22 for evaporative emissions. 23 --o0o-- 24 MR. SETIAWAN: In summary, all refiners and 25 terminal operators have completed the necessary PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 modifications to their facilities to comply with the 2 California Phase 3 reformulated regulations and MTBE free 3 gasoline is being supplied ahead of the December 31, 2003, 4 deadline. 5 This concludes my presentation. Thank you. 6 CHAIRPERSON LLOYD: Thank you very much. 7 Any questions from the Board? 8 Yes, Mr. McKinnon. 9 BOARD MEMBER McKINNON: On the waiver, I'm 10 unclear. Were -- it was -- the EPA was thrown out by the 11 Ninth Circuit? 12 EXECUTIVE OFFICER WITHERSPOON: For failing to 13 consider all the arguments that we made about the 14 emissions impact of including ethanol. They said they 15 didn't have to look at certain aspects and the court ruled 16 that yes, they did. It's back before EPA for a more in 17 depth evaluation. 18 BOARD MEMBER McKINNON: Okay. 19 EXECUTIVE OFFICER WITHERSPOON: And EPA was 20 waiting to conduct that evaluation until the energy bill 21 was resolved, because the energy bill had in it different 22 mandates for ethanol that California might have been able 23 to live with -- still not like, but live with, less volume 24 that we would have to consume, more flexibility and 25 averaging it over time. But that didn't happen either. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 And so Senator Feinstein has continued to write 2 repeatedly to EPA to jog them on the waiver request and we 3 are freshening our initial request with more data showing 4 yet more evidence of adverse emission impacts if the 5 waiver is not awarded. 6 BOARD MEMBER McKINNON: The other thing I 7 gathered out of the report is that the capacity in 8 producing ethanol has only increased about half of what 9 the new demand created by MTBE. 10 What -- where are we if we get a waiver granted 11 in terms of refinery capacity? Would we end up using 12 ethanol for a while just to get -- 13 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think the 14 report shows the anticipated increases in ethanol 15 production occurring this year. We had some last year 16 that covered last year's use in California by and large. 17 If you go back two or three years before we 18 started becoming big users of ethanol there's been a lot 19 more increase than what that graft shows. 20 BOARD MEMBER McKINNON: It's not as bad -- 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Right. And 22 basically -- now correct me if I've got it wrong -- but we 23 are going to see mostly ethanol gasoline in California 24 with probably some areas that are still allowed to use 25 non-oxygenated fuels to continue to do so. But most of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 the gasoline in California will be ethanol. 2 If we got the waiver, I think we'd see at least a 3 steady shift of that. So more and more parts of the 4 market would just use non-oxygenated gasoline, but we'd 5 still see a very large volume of ethanol being used just 6 on the -- they're using it now and the economics would 7 probably support for much of the gasoline supply. 8 BOARD MEMBER McKINNON: Okay. 9 CHAIRPERSON LLOYD: Ms. D'Adamo. 10 BOARD MEMBER D'ADAMO: Couple of questions on the 11 waiver. First of all, where is staff on the additional 12 information and how long before you'll be submitting it? 13 DEPUTY EXECUTIVE OFFICER SCHEIBLE: About the 14 third rewrite. Making sure our case is as strong and 15 complete as possible and we see doing it in the next 16 couple of weeks. 17 BOARD MEMBER D'ADAMO: And setting aside 18 politics, did the court provide any information in its 19 ruling that would strengthen our case, assuming that the 20 evidence had been submitted -- 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The court 22 clearly said, "EPA, you have to consider the effects on 23 PM," and PM is a very strong case technically. If we are 24 granted the waiver we will see benefits with PM that will 25 help us attain and maintain PM standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 The other thing that's changed is that we now 2 have more information to show EPA's previous assessment 3 that VOC levels may go up under certain scenarios is 4 unlikely to be true. So we're in a stronger position 5 technically now. 6 The court really didn't do anything to say that 7 EPA the analysis they did they didn't opine whether it was 8 right or wrong. They simply said, well, EPA has a lot of 9 technical expertise and they've got a lot of discretion 10 under the law to make the call. But we've got -- with PM 11 we have a very strong case to make. 12 EXECUTIVE OFFICER WITHERSPOON: There's nothing 13 in the law that tells EPA when they have to act, however, 14 so the next lawsuit we might have the file is to compel a 15 decision by them on our latest request. 16 CHAIRPERSON LLOYD: Ms. Riordan. 17 BOARD MEMBER RIORDAN: My question would be on 18 the waiver and the information that follows. And you 19 mentioned Senator Feinstein's office. 20 What about the rest of our delegation? How do we 21 keep them abreast of this that is happening? Because I 22 think that's very important. 23 EXECUTIVE OFFICER WITHERSPOON: I would agree. I 24 mean, she's claimed ownership of the issue for the 25 delegation. But certainly engages us in conversations PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 about what do we need to do next, what sort of press 2 release issue we have. She calls often -- her office 3 calls, not the Senator herself seeking help on new 4 letters. 5 And I would think that when we're prepared to 6 submit our new revised request, expanded upon request, 7 that we send it simultaneously to the California 8 delegation and engage Senator Feinstein's office and 9 others in publicizing that another milestone has been 10 reached in this ongoing debate. 11 BOARD MEMBER RIORDAN: And I think it would be 12 helpful to have them abreast of this as well. Obviously, 13 you have to coordinate it with her office. But I don't 14 want to ever lose sight of the fact that, for instance, my 15 Congressman not know about what is happening, because I 16 think it's very important. 17 We have a very strong delegation back there. 18 Just count the numbers. And I just think they need to be 19 brought into the loop. 20 BOARD MEMBER D'ADAMO: This is actually one of 21 the few issues they all agree on. It's one of the rare 22 instances in which they all signed the letters. I don't 23 know that they always sign it, that it's unanimous on 24 every single letter, but I've seen several letters where 25 it is unanimous for the delegation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 EXECUTIVE OFFICER WITHERSPOON: I think that's 2 right and what's growing in importance to the delegation 3 are the tax consequences of ethanol and that with these 4 subsidies being provided and the gas tax being reduced, 5 California is losing dollars, large amounts of dollars, 6 and can project huge loses into the future, and that's 7 becoming really compelling in the transportation 8 community. 9 CHAIRPERSON LLOYD: Thank you very much. Seeing 10 no one signed up, thank you, staff. 11 I guess this is not a regulatory item, we don't 12 have to officially close the record. So thank you very 13 much. 14 Again, congratulations. The way this has 15 happened -- there's been no shortage and none of the 16 feared happenings here, so good job. Good job. 17 Thank you, staff, for not automatically going off 18 at 6:00. 19 The next agenda item is 03-10-6. Staff is 20 reported on San Joaquin Valley particulate matter plan on 21 the role of ammonia. 22 At the June Board meeting a number of people 23 expressed concerns about the contribution of ammonia to 24 high particulate levels in the valley. The Board directed 25 staff to come back to us with an update on ammonium PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 particulate pollution. 2 I believe it is critical that even as we 3 implement the valley's new particulate matter plan we 4 continue to advance our understanding of ammonia and 5 particulate matter pollution. I look forward to staff 6 discussing how the scientific studies underway today will 7 lead us to appropriate control decisions. 8 If the results tell us that ammonia control will 9 effectively reduce particle levels, we must develop them 10 sooner rather than later. 11 I know this Board is committed to doing all that 12 is needed to ensure clean air in the valley. Again, as 13 we've seen increasing attention paid to the valley, and 14 again we had two people down there -- Rob with a hearing 15 and with Lynn down there yesterday -- two meetings, so 16 staff is devoting a lot of attention to the valley. 17 With that, I'd like to turn it over to 18 Ms. Witherspoon to introduce the item and begin the 19 presentation. 20 EXECUTIVE OFFICER WITHERSPOON: I'm going to turn 21 it right over to Karen Magliano with the Planning and 22 Technical Support Division. 23 PARTICULATE MATTER ANALYSIS SECTION MANAGER 24 MAGLIANO: I believe I can still say good afternoon 25 technically for a few more minutes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 Good afternoon, Chairman Lloyd and members of the 2 Board. 3 Today's presentation will discuss efforts that 4 are under way to understand the roll of ammonia and 5 particulate matter formation in the San Joaquin Valley and 6 surrounding regions. 7 CHAIRPERSON LLOYD: Can you speak a bit closer? 8 PARTICULATE MATTER ANALYSIS SECTION MANAGER 9 MAGLIANO: This roll is complex, and depends upon a number 10 of factors, including the magnitude and location of 11 ammonia sources, the amount of other particulate matter 12 precursors and the movement of pollutants. 13 Fortunately, a number of research programs are 14 being conducted to address this issue. In addition to 15 several national research efforts, the Central California 16 particulate study is specifically focused on providing 17 this scientific information needed for the San Joaquin 18 Valley. The results from these efforts will be used to 19 refine control strategies for reducing particulate matter 20 concentrations in the Valley and throughout Central 21 California. 22 --o0o-- 23 PARTICULATE MATTER ANALYSIS SECTION MANAGER 24 MAGLIANO: The Central California particulate study also 25 known by the rather unwieldy acronym of CCRAPS, is a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 comprehensive program to provide an improved understanding 2 of the nature and sources of both PM10 and PM2.5 in 3 Central California. 4 The particulate matter problem in the San Joaquin 5 Valley is one of the most challenging in the nation, due 6 to the valley's diversity of climates, complexity of 7 terrain and variety of emissions sources. 8 Because of this challenge, the scope of CCRAPS 9 represents the largest and most comprehensive particulate 10 matter study in the country. This $27 million effort 11 leverages funding from all levels of government and the 12 private sector through a cooperative partnership. The 13 study was initiated in the early 1990's and includes air 14 quality monitoring, emission inventory development, data 15 analysis, and air quality modeling. 16 A core objective of the study is to provide 17 products and study results to support state implementation 18 plan development and the regulatory process. However, the 19 results from the study will also have national 20 significance and transferability. 21 --o0o-- 22 PARTICULATE MATTER ANALYSIS SECTION MANAGER 23 MAGLIANO: The first phase of the study has already been 24 completed with Phase 2 well under way. The first phase 25 has produced a wealth of information to improve our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 understanding of particulate matter in the valley. 2 Planning studies, emission inventory work and an 3 initial field monitoring element of CCRAPS conducted in 4 the fall and winter of 1995 and 1996 has substantially 5 advanced our knowledge base. This information was used to 6 develop the control strategy in the valley. 7 The next few slides will summarize our current 8 understanding of the roll of ammonia based on this work. 9 --o0o-- 10 PARTICULATE MATTER ANALYSIS SECTION MANAGER 11 MAGLIANO: Particulate matter is composed of many 12 different constituents that can vary throughout the year. 13 However, the focus of today's presentation is on ammonia, 14 which has the greatest role in particulate matter 15 formation during the winter. 16 The highest concentrations of both PM10 and PM2.5 17 are generally found during the winter months from November 18 through early February. The pie chart on this slide 19 depicts typical source contributions on a day with high 20 PM10 concentrations during this winter period. The 21 largest contribution, nearly 50 percent, is from secondary 22 ammonium nitrate. 23 We use the term "secondary" when referring to 24 ammonium nitrate because it is not directly emitted into 25 the atmosphere as a particle, but is instead formed from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 the two gaseous precursors, ammonia and oxides of 2 nitrogen, or NOx. 3 --o0o-- 4 PARTICULATE MATTER ANALYSIS SECTION MANAGER 5 MAGLIANO: So how is this ammonium nitrate formed? In a 6 very simplified representation, the process begins with 7 emission of ammonia and NOx. Two gasses undergo a series 8 of atmospheric reactions and eventually combine to form 9 ammonium nitrate, a particle. The cool, damp conditions 10 of winter favor the formation of ammonium nitrate in the 11 valley. These conditions occur frequently and one- or 12 two-week long cold, foggy and stagnant periods can produce 13 widespread exceedances of the federal PM10 and PM2.5 14 standards throughout the valley. 15 --o0o-- 16 PARTICULATE MATTER ANALYSIS SECTION MANAGER 17 MAGLIANO: The emissions of NOx are well known. However, 18 we have undertaken substantial efforts as part of CCRAPS 19 to better understand the emissions of ammonia. 20 This pie chart depicts the current ammonia 21 emission estimates for the San Joaquin Valley. Based on 22 our current estimates, livestock produces about 85 percent 23 of the ammonia emissions in the valley. The remainder of 24 the emissions come from a variety of smaller sources as 25 shown. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 These emission estimates are regularly updated as 2 new information and research becomes available. For 3 example, the emission estimates for dairies, the largest 4 source category, were recently updated based on research 5 conducted by the University of California Davis specific 6 to conditions and management practices in the valley. 7 --o0o-- 8 PARTICULATE MATTER ANALYSIS SECTION MANAGER 9 MAGLIANO: The amount of ammonium nitrate formed depends 10 upon a complex interplay between the sources of ammonia 11 and NOx. Factors including the relative amount of ammonia 12 and NOx emitted into the atmosphere from various sources, 13 the location of these sources in relation to each other, 14 and the movement of air in the valley bringing these two 15 precursors together. 16 In aggregate, the relative abundance of NOx 17 versus ammonia at a given location will determine the 18 amount of ammonium nitrate formed limited by ingredients 19 in the shortest supply. 20 As part of the first phase of CCRAPS, data 21 collected during the initial monitoring program has been 22 used to assess these factors in the valley. This 23 assessment included evaluation of actual concentrations of 24 NOx and ammonia in the atmosphere at a number of 25 locations. Air quality modeling was also used to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 supplement evaluation of the measure data. 2 These analyses all indicate that ammonia is more 3 abundant than NOx in the valley. Therefore, reducing NOx, 4 the least abundant precursor, has the greatest impact and 5 provides the best opportunity to reduce particulate matter 6 levels. 7 --o0o-- 8 PARTICULATE MATTER ANALYSIS SECTION MANAGER 9 MAGLIANO: These initial findings from CCRAPS have already 10 been used to develop the San Joaquin state implementation 11 plan. 12 The next portion of the presentation will discuss 13 additional efforts that are being undertaken as part of 14 the second phase of CCRAPS to further refine and expand 15 upon this knowledge base. 16 --o0o-- 17 PARTICULATE MATTER ANALYSIS SECTION MANAGER 18 MAGLIANO: Continuing efforts as part of CCRAPS are 19 occurring in three areas: Analysis of the ambient data 20 that was collected during Phase 2 field monitoring, 21 emission inventors improvements and air quality modeling. 22 --o0o-- 23 PARTICULATE MATTER ANALYSIS SECTION MANAGER 24 MAGLIANO: As a follow-up to the initial 1995 monitoring 25 program, a much more extensive field study was conducted PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 from December 1999 through January 2001. Air quality data 2 on particulate composition and precursor species were 3 collected at over 70 sites throughout Central California 4 during the 14-month long program. Enhanced measurements 5 were also conducted during the fall and winter months when 6 particulate concentrations are the highest. 7 The map on the left-hand side of the slide 8 illustrates both the density and broad regional extent of 9 measurements in the field program study area. 10 During late December 2000 and early January 2001, 11 we captured an extensive particulate episode with numerous 12 exceedances of both the federal PM10 and PM2.5 standards. 13 Maximum PM10 concentrations reached 208 micrograms per 14 cubic meter with peak PM2.5 concentrations reaching 179 15 micrograms per cubic meter. These levels are nearly 16 one-and-a-half times greater than the PM10 standard and 17 more than double the PM2.5 standard. 18 This episode therefore provides a solid 19 foundation for further assessment. We've begun analysis 20 of this database to examine the distribution and variation 21 of ammonium nitrate and precursors in both time and 22 location. This analysis is expanding upon previous work 23 by including a larger number of sites encompassing a 24 broader time period and addressing a more severe 25 particular episode. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 --o0o-- 2 PARTICULATE MATTER ANALYSIS SECTION MANAGER 3 MAGLIANO: The ammonia inventory is being improved on an 4 ongoing basis. We are continuing to collect better 5 activity data such as livestock populations and 6 incorporate new emission factors as they become available. 7 We are also developing methods to create improved 8 location specific ammonia emission estimates for input to 9 our air quality models. 10 Research is now being performed by Fresno State 11 University and the University of California Davis to help 12 us improve our ammonia emission estimates for dairies over 13 the next two years. We are also working with the poultry 14 industry to improve their ammonia emission estimates. 15 While some previous ammonia research was funded by 16 separate efforts, ongoing research is now being conducted 17 under the umbrella of CCRAPS. 18 This approach provides the benefit of 19 coordination with overall CCRAPS programs, as well as a 20 means of peer review for the research results. We are 21 also keeping ARB's Agricultural Advisory Committee updated 22 on this research. 23 --o0o-- 24 PARTICULATE MATTER ANALYSIS SECTION MANAGER 25 MAGLIANO: In addition to the ambient data analysis and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 emission inventory efforts, we are updating and refining 2 the previous modeling work through new modeling of the 3 extensive winter 2000-2001 episode. The objectives of the 4 updated modeling are to improve the scientific 5 formulations of several air quality model components and 6 to refine our understanding of the role of ammonia in 7 particulate matter formulation. 8 The modeling of this new data will provide a 9 means to reassess the effectiveness of pneumonia and NOx 10 controls. It will also allow us to assess the relative 11 benefits of controls in different areas of the region. As 12 discussed previously, the new modeling work will address a 13 larger region and will simulate a longer time period than 14 the Phase 1 modeling. 15 --o0o-- 16 PARTICULATE MATTER ANALYSIS SECTION MANAGER 17 MAGLIANO: CCRAPS is designed to provide a continuum of 18 products over the next two years to support regulatory 19 time frames. While originally intended to address future 20 PM2.5 state implementation plans, a number of study 21 products have been accelerated to be responsive to the 22 earlier PM10 deadlines. 23 Significant milestones will occur between now and 24 the end of 2005. Air quality modeling of the new field 25 study data will be initiated in early 2004. By the end of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 2004, we will complete the analysis of the ambient data 2 and refinements to the ammonia inventory. 3 Modeling of the winter episode will be completed 4 in mid 2005 and provided to ARB and district staff for use 5 in the San Joaquin Valley PM10 state implementation plan 6 update that's due in March 2006. 7 Finally, we'll be examining potential ammonia 8 control strategies throughout this time frame, with full 9 integration of the data analysis and air quality modeling 10 results and final evaluation of control strategies in late 11 2005. 12 Longer terms, this work will provide the 13 foundation for our development of PM2.5 state 14 implementation plans due in late 2007. 15 --o0o-- 16 PARTICULATE MATTER ANALYSIS SECTION MANAGER 17 MAGLIANO: As we continue to move forward with our 18 evaluation of ammonia emissions, we are working to 19 implement the recent recommendations by the National 20 Academy of Sciences regarding measurement and estimation 21 of ammonia emissions from livestock. 22 We are also compiling and analyzing national 23 research on ammonia from cars and trucks. In 2004 we will 24 update our mobile source ammonia inventory with this data. 25 To maintain coordination and avoid duplication of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 effort, we consistently work with members of the U.S. 2 Environmental Protection Agency regarding ammonia issues 3 and research. We're also seeking ammonia research from 4 other states or countries applicable to California 5 practices and conditions. 6 --o0o-- 7 PARTICULATE MATTER ANALYSIS SECTION MANAGER 8 MAGLIANO: In conclusion, the central California 9 particulate study results provide the central focus for 10 refining our understanding of the role of ammonia in 11 particulate control strategies for the San Joaquin Valley. 12 The study is providing a comprehensive and integrated 13 framework for coordinating research. 14 Research products from CCRAPS have been 15 accelerated to support the valley's PM10 state 16 implementation plan updates and are on target to be 17 completed over the next two years. These efforts will 18 provide a sound science-based path towards cleaner air in 19 the San Joaquin Valley. 20 Thank you, and that concludes the staff 21 presentation. 22 CHAIRPERSON LLOYD: Thank you, Karen. Again, I'm 23 impressed with the amount of work going on. I think it's 24 pretty exciting by the time we pull all of it together. 25 You're right, it's going to be a very important study as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 we grapple with these issues. I don't know if there is 2 anything else of its kind around. When you couple that 3 with the ozone I think it's tremendous. 4 So I'm looking forward to that, of course we are 5 always impatient, but I realize it takes a long time to 6 put all the data together. 7 One question I had, you mentioned earlier on you 8 updated the ammonia inventory from dairies. And then 9 later on you said you will update it again. When you 10 mentioned early on it's reflected some newer data, has the 11 inventory increased, decreased, remained the same? The 12 percentage from dairies I was looking at -- 13 MR. GAFFNEY: Patrick Gaffney with the Emissions 14 Inventory Branch. 15 CHAIRPERSON LLOYD: So Manual was right. He said 16 you know everything. 17 MR. GAFFNEY: When it comes to cows, I know more 18 than I want to know. That's for sure. 19 The other number that we had in the past was 20 lower than what we put in now. So the UC Davis emission 21 factor is higher than our previous number. 22 CHAIRPERSON LLOYD: How much percentage? 23 MR. GAFFNEY: 20, 30 percentage. 24 CHAIRPERSON LLOYD: Oh, that much? 25 MR. GAFFNEY: Well, not in the overall -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 CHAIRPERSON LLOYD: But higher than that. Okay. 2 MR. GAFFNEY: Our number is like 74 pounds per 3 animal. The other number was like 50. 4 CHAIRPERSON LLOYD: Pounds per animal? 5 MR. GAFFNEY: Pounds per animal. 6 CHAIRPERSON LLOYD: What's it in pounds per 7 chicken? 8 MR. GAFFNEY: Chickens are very small, but 9 there's a lot of chickens. Actually, I don't have that 10 number right off the top of my head for chickens. It's 11 like .4 for chickens. 12 BOARD MEMBER RIORDAN: Mr. Chairman, may I ask a 13 quick question? 14 Have you, though, had -- now that you figured out 15 how many pounds per cow -- how many cows? Have you seen 16 an increase in cows? 17 MR. GAFFNEY: Sure. There's an ongoing increase 18 of cows in the San Joaquin Valley. 19 BOARD MEMBER RIORDAN: Because we're sending them 20 all from San Bernardino -- 21 MR. GAFFNEY: Everyone is very aware of that. 22 That's creating some of the issues that are coming up in 23 lawsuits and other issues that are occurring because of 24 the dairies growing, becoming larger and more dairies in 25 the San Joaquin Valley. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 1 BOARD MEMBER RIORDAN: They're out of the Ontario 2 area. And the sad part was I think some of the dairy 3 people had thought they could go into our desert areas and 4 we didn't have the water to support the crops that are 5 needed to support the dairies. Because you don't just 6 have dairies, you have the alfalfa and all of the other 7 things that go along with that. 8 So unfortunately, it didn't work, I think, as 9 many of the dairy men thought, which would have been to 10 continue to stay in the county of San Bernardino, they 11 just couldn't say there. 12 MR. GAFFNEY: Did that project go away? They're 13 going the make like a gated community for cows in the 14 desert at one point. 15 BOARD MEMBER RIORDAN: It went away, because 16 people were wild about their water wells dropping as just 17 a couple of dairies went out there. 18 CHAIRPERSON LLOYD: What about emissions in 19 steers against cows? Who comes out ahead? 20 MR. GAFFNEY: Well, there's some conflicting 21 information. The UC Davis data shows that steers are 22 putting out more ammonia than dairy cows. And 23 conceptually, it doesn't really make sense to us. So 24 there needs to be some more work on that. 25 CHAIRPERSON LLOYD: I would prolong that. Thank PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 362 1 you very much. Thank you very much. 2 Diane, I'm delighted to see that you're here, 3 because I know you made a specific request to get this 4 item covered. And again I'm delighted you did, because 5 I've learned something and I'm impressed with the amount 6 of work going on. You don't see all of it here, but I 7 know there's a lot close under the surface, and a lot of 8 cooperation. 9 And thank you, Barbara, for your work on this for 10 raising money. 11 SUPERVISOR PATRICK: Well, thank you, 12 Mr. Chairman. And I certainly hope over the course of the 13 next few years we will have occasional updates, because 14 they're certainly important to this Board. 15 This, as everyone knows, has been a major 16 investment in air quality and certainly a lot of our 17 constituents are very concerned about it as well. So this 18 is a great forum to share information. So we really 19 appreciate that you have done this today. And we look 20 forward to hearing more about it tomorrow at 1:00. 21 BOARD MEMBER D'ADAMO: Mr. Chairman, if I might 22 add, I just want to compliment staff for all of their 23 interest and effort in this area through the AG advisory 24 committee and with the numerous subcommittee meetings that 25 have occurred with the industry and I think you going out PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 363 1 to the valley and visiting the dairies really made a big 2 difference. 3 They think that that we're after the science here 4 and not after the industry, which has made a big 5 difference. There are water quality issues coupled with 6 air quality issues, and I think that it's fair to say the 7 industry is beginning to see the need for them to get 8 ahead on this issue. 9 CHAIRPERSON LLOYD: Thank you. And again, all of 10 us that went out there, I think we were impressed with the 11 magnitude of the problem. But also in a sense the 12 commitment of the people that once there was good 13 technology, good approaches, but they're very impatient 14 for anything that's proposed that didn't make sense. 15 I guess I pushed my luck too much. And Diane 16 Bailey does have a question. 17 MS. BAILEY: I wanted to thank the Board for 18 hearing this item. That's really important to us and 19 suggest that staff follow up with the interested 20 stakeholders. And I did have a lot of questions on it, 21 but I'm going to hold them, because I know it's late. 22 CHAIRPERSON LLOYD: You would be very popular for 23 holding them. Thank you very much indeed. 24 Thank you very much staff, indeed, for that. 25 Thank you all for today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 364 1 I wish a happy holidays to everybody and a great, 2 great job. 3 With that, I officially close the record for 4 December Board meeting of the Air Resources Board. 5 Have I done something wrong? 6 GENERAL COUNSEL JOHNSTON: Well, on the 7 regulatory items, as you mentioned earlier, the record 8 will remain open. 9 CHAIRPERSON LLOYD: Officially close the end of 10 the day. Adjourn the day. Thank you. 11 (Thereupon the California Air Resources Board 12 adjourned at 6:17 p.m.) 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 365 1 CERTIFICATE OF REPORTER 2 I, TIFFANY C. KRAFT, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing hearing was reported in shorthand by me, 7 Tiffany C. Kraft, a Certified Shorthand Reporter of the 8 State of California, and thereafter transcribed into 9 typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said hearing nor in any 12 way interested in the outcome of said hearing. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 29th day of December, 2003. 15 16 17 18 19 20 21 22 TIFFANY C. KRAFT, CSR, RPR 23 Certified Shorthand Reporter 24 License No. 12277 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345