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, APRIL 24, 2003

9:00 A.M.

TIFFANY C. KRAFT, CSR, RPR

CERTIFIED SHORTHAND REPORTER

LICENSE NUMBER 12277

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APPEARANCES

BOARD MEMBERS

Dr. Alan Lloyd, Chairperson

Dr. William Burke

Mr. Joseph Calhoun

Ms. Dorene D\'Adamo

Supervisor Mark DeSaulnier

Professor Hugh Friedman

Dr. William Friedman

Mr. Matthew McKinnon

Supervisor Barbara Patricks

Mrs. Barbara Riordan

Supervisor Ron Roberts

STAFF

Ms. Catherine Witherspoon, Executive Officer

Mr. Tom Cackette, Chief Deputy Executive Officer

Mr. Mike Scheible, Deputy Executive Officer

Ms. Lynn Terry, Deputy Executive Officer

Ms. Kathleen Walsh, General Counsel

Dr. Alberto Ayala, Manager, Alternative Strategies

Section, MSCD

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APPEARANCES CONTINUED

STAFF

Mr. Craig Childers

Mr. Bart Croes, P.E., Chief, Research Division

Mr. Tony Dickerson, Engineer, Field Inspection/Testing

Section

Ms. Deborah Drechsler, Air Pollution Specialist, Research

Division

Ms. Annette Guerrero, Staff Air Pollution Specialist

Mr. Larry Hunsaker, Emission Inventory Analysis Section

Mr. Bob Jenne, Senior Staff Counsel

Mr. Chuck Shulock, Vehicle Program Specialist, MSCD

ALSO PRESENT

Tom Addison, Bay Area Air Quality Management District

Larry Armstrong, Quality Tune Up Shops

Chris Ervine, Coalition for Test and Repair Stations

Kathy Patton, Santa Barbara County

Charlie Peters, Clean Air Performance Professionals

Bob Larson, U.S. EPA

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INDEX

PAGE

Pledge of Allegiance 3

Roll Call 3

Item 03-2-4

Chairperson Lloyd 5

Executive Officer Witherspoon 11

Staff Presentation 12

Q&A 70

Motion 75

Vote 111

Item 03-2-3

Chairperson Lloyd 112

Executive Officer Witherspoon 112

Mr. Tom Addison 113

Motion 115

Vote 115

Item 03-3-1

Chairperson Lloyd 116

Executive Officer Witherspoon 116

Staff Presentation 117

Item 03-2-2

Chairperson Lloyd 123

Executive Officer Witherspoon 123

Staff Presentation 124

Motion 126

Vote 126

Item 03-3-2

Chairperson Lloyd 126

Executive Officer Witherspoon 128

Staff Presentation 129

Q&A 140

Mr. Charlie Peters 148

Mr. Chris Ervine 152

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INDEX CONTINUED

PAGE

Item 03-3-3

Chairperson Lloyd 164

Executive Officer Witherspoon 165

Staff Presentation 166

Q&A 176

Mr. Charlie Peters 190

Mr. Larry Armstrong 193

Mr. Chris Ervine 198

Motion 202

Vote 202

Item 03-3-4

Chairperson Lloyd 203

Executive Officer Witherspoon 204

Staff Presentation 205

Q&A 219

Bob Larson 227

Public Comment

Kathy Patton 235

Adjournment 248

Reporter\'s Certificate 249

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1 PROCEEDINGS

2 CHAIRPERSON LLOYD: Before we get started, I\'ve

3 got to read an announcement from the owners of the

4 building, and that is that throughout the month of May we

5 will be conducting safety preparedness drills that will

6 include evacuating this room. This drill may occur during

7 this meeting. In order to prepare us for unexpected

8 emergencies, we do not know what date or time the alarm

9 will sound.

10 And I thought this was an infrequent occurrence.

11 Yesterday in the meeting of the Fuel Cell Partnership just

12 next door, we did, in fact, get an alarms. We weren\'t

13 evacuated from that room because it occurred on the 20th

14 through 22nd floors. But it can happen. So don\'t be

15 surprised.

16 At that time please look for and note two

17 emergency exits. The exits are located inside the public

18 hearing rooms on the first and second floors in the

19 connecting halls outside the conference room within the

20 remainder of the building. If you do have to go out,

21 don\'t expect to go out and turn right. A wall will come

22 down and prevent you from going right out of this

23 building. You need to go left and then be directed out of

24 the building. My colleagues here will have to go through

25 here and get out there.

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1 So if the alarm sounds, evacuate immediately.

2 Take all valuables with you. Typically they\'ll indicate

3 what part of the building there\'s this exercise. So you

4 don\'t have to evacuate as soon as you hear the siren.

5 This doesn\'t apply \-- you\'re not using the elevators. If

6 you have mobility concern that would prevent you from

7 using the stairways, please let the host of the meeting

8 know so the arrangement can be made to have you wait

9 safely in the protected area. You\'ll be directed to a

10 safe stairwell vestibule, and an aide will stay with you

11 until you hear the all-clear announcement.

12 Then if you evacuate outside the building \--

13 there\'s some pretty mundane instructions. I\'ll skip

14 those. Stay at the relocation area until the all-clear

15 signal of the completion of the drill is given. Inside

16 the building the completion of the drill will be announced

17 by the public address system. You go in the park, the

18 all-clear signal will be given from the command center set

19 up on the stage. If you do not hear the announcement,

20 simply stay and follow the lead of your meeting host.

21 Thank you cooperating with the safety program.

22 BOARD MEMBER CALHOUN: Mr. Chairman, I missed

23 that. Can you read that again?

24 (Laughter)

25 CHAIRPERSON LLOYD: I will provide you a copy.

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1 BOARD MEMBER CALHOUN: Thank you.

2 CHAIRPERSON LLOYD: Well, with that, good

3 morning. I\'d like to bring the April 24th public meeting

4 of the Air Resources Board to order.

5 And Would please join me in the pledge of

6 allegiance.

7 (Thereupon the Pledge of Allegiance was

8 Recited in unison.)

9 CHAIRPERSON LLOYD: Thank you. Will the clerk of

10 the Board please call the roll.

11 BOARD CLERK DORAIS: Dr. Burke?

12 BOARD MEMBER BURKE: Present.

13 BOARD CLERK DORAIS: Mr. Calhoun?

14 BOARD MEMBER CALHOUN: Here.

15 BOARD CLERK DORAIS: Ms. D\'Adamo?

16 Board MEMBER D\'ADAMO: Here.

17 BOARD CLERK DORAIS: Supervisor DeSaulnier?

18 BOARD MEMBER DeSAULNIER: Here.

19 BOARD CLERK DORAIS: Professor Friedman?

20 BOARD MEMBER HUGH FRIEDMAN: Here.

21 BOARD CLERK DORAIS: Dr. Friedman?

22 BOARD MEMBER WILLIAM FRIEDMAN: Here.

23 BOARD CLERK DORAIS: Mr. McKinnon?

24 BOARD MEMBER McKINNON: Here.

25 BOARD CLERK DORAIS: Supervisor Patrick?

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1 SUPERVISOR PATRICK: Here.

2 BOARD CLERK DORAIS: Ms. Riordan?

3 BOARD MEMBER RIORDAN: Here.

4 BOARD CLERK DORAIS: Supervisor Roberts?

5 BOARD MEMBER ROBERTS: Here.

6 BOARD CLERK DORAIS: Chairman Lloyd?

7 CHAIRPERSON LLOYD: Here.

8 Again, we\'re going to start today\'s proceedings

9 with two carry-over items from last month. But before I

10 introduce the first item, I\'d like to make the following

11 notation for the record.

12 Supervisor Patrick was not present at the

13 March 27th, 28th Board meeting but was provided with

14 transcripts and comment letters received and has had the

15 opportunity to read the material in detail. Therefore,

16 she is prepared to participate in the discussion and vote

17 the two items that were continued; amendments to the zero

18 emission vehicle regulation and amendments to the

19 Proposition 40 Carl Moyer funds, both of those.

20 Similarly, Dr. Friedman was present on March 27th

21 for all of the Carl Moyer item and most of our

22 deliberation on this zero emission vehicle regulation,

23 departing at 7:45 that evening. He\'s also received the

24 transcripts and comment letters received and had the

25 opportunity to read the material. Therefore, he\'s

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1 prepared to participate in the discussion and vote on this

2 zero emission regulation.

3 I\'d also like to remind anyone in the audience

4 who wishes to testify on today\'s agenda items, except for

5 the zero emission for which the public record is closed,

6 to please sign up with the attendant at the entrance to

7 the Boardroom. Also if you have a written statement,

8 please provide 30 copies to the Clerk of the Board.

9 The first item on the agenda today is 03-2-4,

10 proposed amendments to the zero emission vehicle

11 regulation. Last month we began our deliberation on

12 changes to the ZEV regulation. At that time I shared my

13 personal perspective on the matter before us and what it

14 means to people of California, I would add today, to the

15 world as well. The reason being the ZEV mandate is the

16 most powerful idea and the most motivating force this

17 Board has ever unleashed on the vehicle sector.

18 For the last 13 years since the ZEV mandate was

19 first adopted we\'ve seen the near-impossible accomplished

20 with gasoline vehicle; zero evaporative emissions,

21 exceedingly clean exhaust, cleaner in some cases than the

22 outside air entering the vehicle for ventilation purposes,

23 and emission control system that twice as durable than the

24 conventional forebearers forecasted to last an astonishing

25 15 years or 150 thousand miles. That\'s a tremendous

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1 accomplishment.

2 I\'m speaking, of course, of the PZEVs, partial

3 zero emission vehicles which we also refer to as the

4 bronze category of the automobile. The Sacramento Bee ran

5 an excellent full-page story on these vehicles a week or

6 so ago essentially calling them the unsung heroes of the

7 ZEV regulation revolution or regulation. And, in fact,

8 they are. Maybe the Rodney Dangerfield of the cadre we

9 have of technology we have under the ZEV umbrella. In

10 this year alone 140,000 PZEVs will be sold to California

11 consumers, including the following makes and models: the

12 Honda Accord, Toyota Camry, Ford Focus, Nissan Sentra,

13 Volvo S60 and V70, BMW 325, Volkswagen Jetta, and more to

14 come.

15 The market penetrations of these vehicles will

16 continue to grow as manufacturers take full advantage of

17 the option we provided to them within the ZEV regulation

18 to satisfy up to 6 percent of the total 10 percent ZEV

19 requirement with ultra clean, ultra durable gasoline

20 vehicles.

21 In the silver category advanced technology PZEV

22 class, the progress has been equally tremendous. With

23 AT PZEVs we get the same underlying emission performance

24 and durability, plus the innovation of ZEV-enabling

25 componentry, reduced life cycle emissions, and zero

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1 emitting miles.

2 The entire nation is now familiar with the Honda

3 Insight and the Toyota Prius, the first mass production

4 gasoline electric hybrid vehicles to hit the market.

5 Initial demand for these vehicles exceeded all

6 expectations and is pushing the industry rapidly to expand

7 its hybrid offerings as quickly as possible.

8 The press coverage has been substantial for both

9 of those categories, including the more recently extensive

10 Honda Civic with both the hybrid and natural gas, examples

11 of tremendous progress. And most recently some of you

12 will have seen last week the announcement of the recent

13 version of the Toyota Prius, which has shown the

14 revolution is continuing that you can have larger,

15 cleaner, better performing vehicles. And this is

16 tremendously good news for the consumer and I think a

17 direct result of the piece of this regulation.

18 On another technology front, we see Ford and BMW

19 actively exploring the flexibility of the feasibility and

20 flexibility of the hydrogen internal combustion engine.

21 Again, this has come a long way in the last several years,

22 and we are now affording opportunities for that technology

23 to take its rightful place.

24 Studies are under way also to evaluate the

25 appropriate design and features of plug-in electric hybrid

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1 vehicles. Again, this is another exciting development.

2 As these vehicles complete certification process for AT

3 PZEVs, they\'ll be able to qualify for up to 2 percent of

4 the total 10 percent ZEV mandate. That is exactly what

5 this Board envisioned would happen in 2001. And what we

6 are now seeing and being realized in the real world.

7 Giving all the progress I just described, no one

8 described the California ZEV mandate as a failure. And,

9 in fact, having a tremendous benefit to clean air in

10 California for all citizens. To be sure, we\'ve had more

11 than our share of difficulty in achieving the ultimate

12 goal of pure zero emission vehicles. In fact, it was just

13 today that I was looking back at a publicized magazine in

14 the early \'90s looking at the promise of pure battery

15 electric vehicles.

16 We\'ve seen progress in the gold category. It\'s

17 been steady and sure. Batteries are, in fact, more

18 durable and higher performing than ever before. Range has

19 improved. Costs have come down. And consumers are

20 clearly excited about all the ZEV products they\'ve seen

21 and the potential they hold for the future. The only real

22 problem we\'re having, obviously, it\'s a formidable one, is

23 getting truly affordable, truly reliable, truly commercial

24 gold category products on the road. And that\'s a problem

25 we share fully with the automotive industry since mandates

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1 alone cannot overcome the nature of physics, the material

2 costs of precious metals, or some of the other technical

3 challenges that are bedeviling both the industry and us.

4 As I reread that article, the comment was made

5 here about the potential. But if, in fact, we weren\'t

6 able to drive those costs down or if we didn\'t get enough

7 consumer acceptance at those costs then, in fact, we

8 wouldn\'t be able to have a sustainable market.

9 So again, here we are, rightfully celebrating all

10 that\'s been accomplished, in fact, very humbled. And I

11 feel this also very personally compared to a few years

12 ago. Humbled by what has not, and also by the challenge

13 of what is still before us, but utterly committed to the

14 ultimate goal of zero emissions. And I think I can as

15 iterated last time most eloquently by my colleague,

16 Supervisor Roberts \-- in fact, there was never an intent

17 to stray from that commitment to the goal of zero

18 emissions.

19 As the Board debates today over the finer details

20 of the revised regulation, I ask all my colleagues and the

21 audience to keep in mind the historic nature of what we\'re

22 attempting to do. As we have seen repeatedly the action

23 of this Board echo around the world in almost every

24 program area. That makes this Board extremely

25 influential. But it also means in my view that we have a

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1 great responsibility to be thoughtful and judicious since

2 so many others may mimic what we do. And, again, I think

3 that\'s speaking more from the technical side. That, I

4 think, is a real responsibility for us to implement.

5 I\'d also like us to remember that we are not

6 running a marathon. We are running, in fact, a marathon,

7 not a sprint. Although obviously we need to go as fast as

8 possible because the quality of our air demand, in fact,

9 that we get as much of this technology on the road as fast

10 as possible.

11 When we lasted revisited the ZEV mandate in 2001,

12 we had a number of near-term concession that were balanced

13 again the longer term gains of growing the ZEV mandate

14 from 10 to 14 percent between 2003 and 2018. I would

15 suggest to my colleagues that we are in a similar position

16 today with one key difference. This time we have the

17 intermediate silver and bronze category achieved in the

18 real world that we were merely hoping for in 2001, which

19 means we are able to fully preserve or accomplish even

20 more emission reductions as we continue to refine

21 California ZEV regulation and get cleaner air to all

22 Californians as rapidly as possible.

23 At the end of last month\'s hearing, the Board

24 asked to staff to look into several specific issues and

25 provide an assessment of their implications for the ZEV

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1 program and for air quality in general.

2 So with that, at this time I\'d like to turn it

3 over to Ms. Witherspoon to begin the staff presentation.

4 EXECUTIVE OFFICER WITHERSPOON: Thank you,

5 Chairman Lloyd, and good morning members of the Board.

6 In response to the Board\'s direction, staff

7 developed additional information since the last hearing to

8 help clarify the issues before you. Staff has also

9 analyzed the impact and implications of various

10 alternatives that came up during your deliberations last

11 month.

12 In bringing this item back before you, we tried

13 to capture the sense of the Board regarding which features

14 of the proposed ZEV regulation were generally acceptable

15 to Board members and which needed further discussion and

16 resolution. We also made every effort to address the

17 Board\'s request for incentives that would keep existing

18 BEVs on the road in California, incentives to stimulate

19 new BEV production, and specific production targets for

20 2009 and later fuel cell vehicles for their equivalence.

21 The staff proposal before you today strengthens

22 the pure gold element of the ZEV regulation as compared to

23 last month presentation primarily due to the inclusion of

24 the specific targets on the alternative compliance path

25 for 2009 and beyond, which you all made clear was

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1 extremely important to the Board. Staff believes that the

2 ZEV program as proposed will continue to advance pure ZEV

3 technology, research, and development, support the

4 commercialization of ZEV-enabling advanced technology

5 vehicles, and will achieve significant criteria pollutant

6 emission reductions.

7 Chuck Shulock of the Mobile Source Control

8 Division will now make the staff presentation.

9 VEHICLE PROGRAM SPECIALIST SHULOCK: Good morning

10 Mr. Chairman and members.

11 Our staff presentation this morning will start

12 off with the recap of the March Board meeting, the

13 information presented to you at that time, and the

14 alternatives that were provided with regard to possible

15 numeric vehicle targets. We then will present the results

16 of the additional staff analysis that we have undertaken

17 since the Board meeting in response to your request. We

18 will conclude with a summary of the proposed regulation

19 including our response to the various open issues and our

20 staff recommendation.

21 (Thereupon an overhead presentation was

22 presented as follows.)

23 VEHICLE PROGRAM SPECIALIST SHULOCK: We will set

24 the stage for our recap of the March meeting by revisiting

25 what has brought us to today, why are amendments needed.

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1 We will give a very brief overview of the main features of

2 the proposed regulation, followed by an overview of the

3 testimony that you heard and what we took away from the

4 Board discussion. The recap will conclude by summarizing

5 the issues that were still outstanding at the conclusion

6 of the March meeting and the directives that you gave to

7 staff.

8 \--o0o\--

9 VEHICLE PROGRAM SPECIALIST SHULOCK: We are here

10 today because there is a need to amend the regulation.

11 First of all, there are legal challenges to the 2001

12 amendments that need to be addressed. Due to legal action

13 that has taken place, the ARB is prohibited from enforcing

14 the current regulation through the 2003 and 2004 model

15 years. Under the circumstances, 2005 is the earliest

16 practical restart date.

17 \--o0o\--

18 VEHICLE PROGRAM SPECIALIST SHULOCK: In addition,

19 as we discussed at some length in March, in staff\'s view

20 there is a need to modify the regulation to better align

21 with technology status and market demand. Despite all of

22 the efforts to date and the Board\'s continued emphasis on

23 zero, at present there is no pure ZEV that is

24 technologically and financially ready for mass deployment.

25 And although there is considerable investment in fuel cell

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1 technology and infrastructure both by auto makers and by

2 government, the pace of future ZEV development is quite

3 difficult to predict.

4 On the bright side, however, there has been

5 tremendous such as near-zero technology such as PZEVs in

6 the bronze category and advanced technology PZEVs in the

7 silver category. This is creating significant new

8 opportunities for air quality improvement.

9 \--o0o\--

10 VEHICLE PROGRAM SPECIALIST SHULOCK: Reinforcing

11 what the Chairman noted in his opening remarks, one good

12 example of progress newly announced since the March Board

13 meeting is the 2004 Toyota Prius that is pictured here.

14 Not only is the 2004 Prius cleaner than its predecessor,

15 it\'s also larger, has better acceleration, and is more

16 efficient. It features more advanced versions of key

17 ZEV-enabling technologies such as its electric drive

18 system. Our understanding is that all this will be made

19 available at roughly the same retail price.

20 \--o0o\--

21 VEHICLE PROGRAM SPECIALIST SHULOCK: PZEVs are

22 always making news. As the Chairman mentioned, the

23 Sacramento Bee recently ran a front page article on PZEVs.

24 This slide shows a graphic from that article listing the

25 different models of PZEVs available and explaining their

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1 cutting-edge technology. It is noteworthy manufacturers

2 are expected to sell some 140,000 PZEVs in the 2003 model

3 year. So as you can see, the near-zero side of the

4 program continues to develop at a rapid pace.

5 \--o0o\--

6 VEHICLE PROGRAM SPECIALIST SHULOCK: The next

7 element of our recap deals with the basic structure of the

8 proposed regulation. One factor that was of great

9 importance to staff as we developed the proposal was the

10 desire to preserve compliance under the 2001 regulation.

11 Some manufacturers have made good faith efforts to comply

12 by building, marketing, and placing ZEV products. This

13 resulted in their legitimate accrual of ZEV credits

14 sufficient in some cases to defer the need for additional

15 vehicles for a number of years. Although some have

16 suggested that the resulting ZEV blackout should be

17 addressed by devaluing such early credits, in staff\'s view

18 it was more important in the long run to recognize and

19 preserve the value of the early efforts that were

20 undertaken.

21 \--o0o\--

22 VEHICLE PROGRAM SPECIALIST SHULOCK: This desire

23 to recognize compliance under the 2001 regulation directly

24 led to the two-path concept embodied in the proposed

25 regulation. The base path allows manufacturers that

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1 invested early and have banked credits to continue to use

2 those credits to achieve compliance. The alternative path

3 provides an incentive for manufacturers to continue to

4 build new products. It requires manufacturers to produce

5 demonstration quantities of new vehicles but then allows

6 the remaining gold obligation to be back filled with

7 silver vehicles up to the full 4 percent. The progress of

8 the program and the ongoing requirements will be assessed

9 by the Board at a future date.

10 \--o0o\--

11 VEHICLE PROGRAM SPECIALIST SHULOCK: Testimony at

12 the March hearing raised few strong objections to the

13 continuation of the base path as an option. There was

14 some comment that several staff-proposed changes unduly

15 relaxed the program, but in general comment was

16 supportive.

17 The alternative path proposal as originally

18 defined by staff was another story. Here there was

19 significant opposition focused on vehicle totals in the

20 initial 2001 through 2008 time period, the need for firm

21 production targets in model years 2009 and beyond, the

22 role of battery electric vehicles, and the timing and role

23 of the independent expert review panel.

24 \--o0o\--

25 VEHICLE PROGRAM SPECIALIST SHULOCK: These next

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1 several slides present staff\'s interpretation of the sense

2 of the Board at the March hearing. We heard some areas of

3 clear agreement. The Board wanted to see specific future

4 targets for fuel cell production under the alternative

5 path as opposed to the to-be-determined approach

6 recommended by staff.

7 The Board also was interested in exploring all

8 feasible means to bring battery electric vehicles back to

9 the marketplace and more broadly encouraging the continued

10 availability of cars that have already been placed.

11 The Board also seemed to generally agree that if

12 plug-in hybrid technology were to be moved to the gold

13 category, the required minimum range and other aspects of

14 the definition would need to be adjusted.

15 \--o0o\--

16 VEHICLE PROGRAM SPECIALIST SHULOCK: With regard

17 to questions involving the independent expert review

18 panel, the Board seemed to be of the opinion that the

19 language in the draft resolution captured the appropriate

20 role of the panel and fully preserved the Board\'s

21 discretion. Finally, although there was some discussion

22 of the potential leakage of vehicles to other states, due

23 to staff\'s proposed treatment of the travel issue, there

24 seems to be consensus that the staff approach combined

25 with the 2011 sunset was workable.

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1 \--o0o\--

2 VEHICLE PROGRAM SPECIALIST SHULOCK: It was also

3 clear in March that there were several issues that were

4 not resolved. First among these was the target production

5 level for 2001 through 2008 on the alternative path.

6 Should it be 250 or 500 vehicles? Related to that is the

7 question of future minimum production levels for 2009 and

8 beyond and their rational.

9 There also were different views with regard to

10 the appropriate method to encourage battery EVs. Should

11 there be incentives or a mandate? And if a mandate is

12 favored, should it be a direct numeric requirement, or is

13 it better to indirectly mandate BEVs through an increase

14 in the fuel cell requirements.

15 Finally, the Board left open whether plug-in

16 hybrid vehicles should be moved to the gold category.

17 \--o0o\--

18 VEHICLE PROGRAM SPECIALIST SHULOCK: At the close

19 of the March hearing, the Board gave directives to staff.

20 You asked us to frame the remaining issues and discuss the

21 implications of the various possible alternatives. You

22 also made note of the fact that the regulation is complex

23 and there are interactions among it\'s various provisions.

24 So you asked that staff describe the combined effects of

25 the proposal in a comprehensive fashion so you would have

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1 clarity as to the complete package before you and what it

2 means.

3 \--o0o\--

4 VEHICLE PROGRAM SPECIALIST SHULOCK: The next

5 section of the staff presentation outlines the results of

6 our additional staff analysis. We will start by

7 describing some elements of the big picture, the key

8 factors that must be kept in mind during your

9 deliberation.

10 First of all, we must not lose site of the fact

11 we are aiming for here is long-term mass-market

12 penetration. Measures that address near-term vehicle

13 availability clearly have their place, but they ideally

14 should be steps on a path to sustainable

15 commercialization.

16 We also need to communicate clearly that zero

17 emissions is still the goal. Staff has recommended that

18 you take steps to capitalize on the near-term availability

19 of near-zero technology, but that must all be viewed and

20 communicated as transitional measures toward the ultimate

21 goal of zero.

22 As far as real world issues that stand in the

23 way, the biggest hurdles are vehicle performance,

24 affordability, wide-spread consumer acceptance, and in

25 some cases infrastructure.

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1 \--o0o\--

2 VEHICLE PROGRAM SPECIALIST SHULOCK: Turning

3 again to near-zero technology, we need to emphasize again

4 these vehicles represent tremendous progress.

5 Bronze vehicles provide extremely low tailpipe

6 emissions, zero evaporative emissions, and an extended

7 emission warranty.

8 Silver vehicles provide all of the above, plus

9 additional ZEV-enabling features such as electric drive,

10 low fuel cycle emissions, or zero emission VMT.

11 This progress bodes well for the future of zero

12 emission transportation. But in the near-term, practical,

13 affordable, pure ZEVs are still an illusive goal.

14 \--o0o\--

15 VEHICLE PROGRAM SPECIALIST SHULOCK: During the

16 2001 deliberations, staff said that one of our key goals

17 was a steady sustained grant towards commercialization.

18 What we have seen today, however, is closer to the

19 opposite. The existing regulation has not resulted in the

20 sustained ramp, but rather in work-arounds, litigation,

21 and intermittent product blackouts. This fundamentally is

22 due to the fact that the major manufacturers do not see a

23 business case for further battery EV development. Absent

24 a battery breakthrough, they do not see a future in which

25 some such vehicles meet a sustainable, profitable market

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1 demand. And, thus, they have expressed no interest in

2 moving toward larger volumes.

3 Rather, the OEMs have been voting with their

4 research and development dollars in favor of fuel cell

5 vehicles. This, of course, should not be the sole by

6 which options are evaluated, but in staff\'s view it needs

7 to be taken into account. Simply put, we see greater

8 potential for sustained progress towards our goal when the

9 chosen approach is one that accelerates already existing

10 momentum.

11 \--o0o\--

12 VEHICLE PROGRAM SPECIALIST SHULOCK: Finally,

13 there appears to be interest by third-party BEV

14 manufacturers, but only if price, taking into account the

15 market value of BEV credits, and/or subsidize are

16 sufficient and sustained. At present what is needed by

17 the third-party manufacturers is evidence will there be

18 future subsidies or credit values sufficient to make

19 long-term production appear to be profitable. In that

20 respect, the third-party manufacturers face many of the

21 same challenges faced by the OEMs, cost and the need for

22 widespread market acceptance.

23 \--o0o\--

24 VEHICLE PROGRAM SPECIALIST SHULOCK: With all

25 that as background we will now turn to the open issues.

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1 We will discuss four; whether the 2001 through to 2008

2 demonstration vehicle requirement under the alternative

3 path should be 250 or 500 vehicles; what can be done to

4 encourage BEV production; targets for fuel cell production

5 in 2009 and beyond; and the treatment of plug-in hybrid

6 vehicles.

7 \--o0o\--

8 VEHICLE PROGRAM SPECIALIST SHULOCK: The first

9 issue involves the number of vehicles to be required under

10 the alternative path for 2001 through 2008. Our staff

11 recommendation of 250 represents a stretch goal for fuel

12 cell production.

13 At the March hearing you discussed an alternative

14 goal of 500 vehicles. This increase does not appear to be

15 aimed at actually increasing the number of fuel cell

16 vehicles, but rather appears to be intended to indirectly

17 leverage increased battery vehicle production. The

18 thinking here is that a larger fuel cell requirement in

19 conjunction with BEV substitution would encourage

20 manufacturers to build BEVs or purchase BEV credits rather

21 than build the additional fuel cell vehicles.

22 \--o0o\--

23 VEHICLE PROGRAM SPECIALIST SHULOCK: At the March

24 meeting you asked us to work through the implications of

25 choosing 250 versus 500 as the initial fuel cell target.

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1 We first will look at the 250 level.

2 Under this approach, all manufacturers appear to

3 be able to formulate a viable compliance strategy either

4 on the base or alternative paths. The requirements on the

5 alternative path are higher than some would choose, but

6 our understanding is they are achievable. This approach

7 keeps open the option for some manufacturers to initially

8 choose the base path but then move over to the alternative

9 path if they make sufficient progress on fuel cell

10 development, thus increasing the number of new ZEVs.

11 With regard to BEV substitution, it is possible

12 given a requirement of 250. But in staff\'s view it is

13 unlikely.

14 \--o0o\--

15 VEHICLE PROGRAM SPECIALIST SHULOCK: Going to 500

16 would have several significant impacts. First of all, the

17 compliance cost to manufacturers would double. The cost

18 to build small numbers of fuel cells in 2006 to 2008 time

19 frame at the latter end of the initial period is

20 uncertain. But assuming that the cost remains at or

21 near current levels, the total cost of the requirement

22 would jump significantly from some 250 million to about

23 \$500 million.

24 Staff also concludes that the number of vehicles

25 required for manufacture under the 500 vehicle approach is

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1 in excess of that needed to maintain progress towards fuel

2 cell development at this stage. This could actually slow

3 advancement as manufacturers seek the lowest-cost approach

4 to meet the requirement.

5 BEV substitution clearly would be more

6 economically attractive with the requirement of 500 fuel

7 cells, but it still appears to be unlikely. This is due

8 to the fact, as we noted above manufacturers do not see a

9 commercial future for BEV technology. They, therefore,

10 wish to avoid any additional investment, either directly

11 on their own systems or indirectly through purchase of

12 credits from other manufactures.

13 You could, of course, address the situation head

14 on by imposing a specific requirement that manufacturers

15 build some minimum number of battery vehicles. In staff\'s

16 view, this is not an attractive option. It would require

17 manufacturers to simultaneously pursue two technologies

18 and would run counter to our underlying objective to

19 ensure that aggressive pursuit of fuel technology is

20 sufficient to ensure compliance.

21 \--o0o\--

22 VEHICLE PROGRAM SPECIALIST SHULOCK: Looking at

23 possible manufacturer responses, it appears first of all

24 that manufacturers would be motivated to seek to avoid the

25 alternative path completely. This could involve

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1 purchasing bank credits from another manufacturer. Or

2 manufacturers could delay action until 2008 and hope for a

3 change when the Board meets to consider future program

4 requirements. If this occurred, there could actually be

5 fewer new ZEVs than would be the case under the 250

6 vehicle approach. There also would be a reduction in the

7 number of AT PZEVs because the manufacturers would not

8 have the option to increase AT PZEV production to offset a

9 portion of their gold requirement.

10 \--o0o\--

11 VEHICLE PROGRAM SPECIALIST SHULOCK: Given all of

12 the above, our staff recommendation will come as no

13 surprise. We recommend that the Board select 250 as the

14 target for the 2001 through 2008 demonstration period. We

15 further recommend that the Board allow BEV substitution up

16 to 50 percent of the 250 vehicle requirement. And details

17 of our recommended BEV substitution approach will be

18 discussed in more detail later in the presentation.

19 \--o0o\--

20 VEHICLE PROGRAM SPECIALIST SHULOCK: The next

21 issue is the target for model years 2009 and beyond. The

22 staff originally recommended that the future requirement

23 be treated as to-be-determined following input from the

24 independent review panel. During the March Board hearing,

25 however, several witnesses argued and the Board clearly

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1 concurred that specific targets should be set now, even if

2 they are subject to revision later on.

3 \--o0o\--

4 VEHICLE PROGRAM SPECIALIST SHULOCK: Several

5 alternatives were put before you. Here I will describe

6 the rationale for each. The specific numbers associated

7 with each will be shown on the next slide.

8 The first approach involved growth in stages

9 which we refer to as the 10x approach. This alternative

10 is based on the principle that early production for new

11 types of vehicle precedes and defines stages where volumes

12 grow typically from ten to hundreds then to thousands.

13 The second approach was suggested by the

14 California Electric Transportation Coalition or CalETC.

15 It was based on annual doubling of the production amount.

16 This third alternative suggested by the Union of

17 Concerned Scientists grows in stages that are based on

18 Department of Energy national goals in the early years and

19 manufacture public and press statements in the later

20 years.

21 The final approach was outlined by staff from the

22 South Coast Air Quality Management District. This was the

23 most aggressive and involved maintaining a 2 percent gold

24 requirement that adding on top of it rather than as a

25 backfill the largest AT PZEV number projected in the March

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1 version of the staff proposal.

2 \--o0o\--

3 VEHICLE PROGRAM SPECIALIST SHULOCK: Looking at

4 the numbers, several things stand out. In the long term,

5 they all end up in the same place. All of these

6 approaches rejoin the original red line by 2018. The main

7 differences are in the early years. Even here, however,

8 the 10x and CalETC numbers are actually quite similar.

9 The major difference involves the 2015 time period where

10 the 10x target is 50,000 vehicles, but CalETC calls for

11 71,000. This difference is due to the fact our suggested

12 implementation of the 10x approach provides for a more

13 gradual ramp up to the original red line requirement.

14 The UCS proposal is somewhat higher in the

15 initial years, and the South Coast proposal is

16 dramatically higher. With respect to the South Coast

17 proposal, based on what we know today, it is very

18 optimistic. We also need to point out that it actually is

19 quite a bit more stringent than the base path in that it

20 requires the same gold production as the base path. But

21 in addition requires significantly more silver vehicles.

22 Therefore, as an \"alternative path\" it really has no

23 practical effect because there would be no incentive for

24 any manufacturer to choose it. They\'d be better off under

25 the base path.

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1 \--o0o\--

2 VEHICLE PROGRAM SPECIALIST SHULOCK: Taking all

3 of this into account, staff has several observations.

4 First of all, as we have noted all the approaches are

5 similar in the long term.

6 Secondly, all of the numbers in the time frame

7 are subject to Board review and could be modified up or

8 down based on new developments.

9 And finally, given the overall similarity and the

10 possibility of future adjustment, one key point today is

11 the rational for selecting one path over another.

12 \--o0o\--

13 VEHICLE PROGRAM SPECIALIST SHULOCK: As you no

14 doubt recall, our original staff recommendation was

15 to-be-determined. Recognizing that our suggested approach

16 has been soundly rejected, however, we have taken a look

17 at other alternatives that would accomplish the Board\'s

18 direction.

19 In that light, we would recommend that you follow

20 the 10x rational. It is consistent with the Department of

21 Energy targets when those targets are scaled to California

22 rather than national coverage. It also is consistant with

23 our discussions with both automobile and fuel cell

24 manufacturers. We would further recommend that the

25 production total align with the red line in 2018 and that

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1 BEV substitution be allowed to continue on in the 2009 and

2 beyond time frame similar to its use in the early years.

3 \--o0o\--

4 VEHICLE PROGRAM SPECIALIST SHULOCK: The next

5 major issue involves providing encouragement for battery

6 electric vehicles. Based on the discussion at the March

7 hearing, you had two different aspects of this question in

8 mind. First was a design to keep existing BEVs on the

9 road as long as possible. And secondly, a desire to bring

10 fresh or new BEVs to the market by any feasible means.

11 \--o0o\--

12 VEHICLE PROGRAM SPECIALIST SHULOCK: We first

13 have taken a look at incentives to extend the life of

14 existing BEVs. Here we recommend two separate actions.

15 First of all, we recommend that you increase the existing

16 credit for BEVs that are still on the road after three

17 years. The existing regulation says that vehicles that

18 are still on the road beyond a three-year placement are

19 eligible to receive fractional additional credit. This is

20 referred to as in-use credit, and we recommend it be

21 increased.

22 The second action involves the battery warranty.

23 Under the existing regulation a vehicle must have a

24 manufacture battery warranty in force in order to earn the

25 in-use credit. This requirement was put in place in order

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1 to provide a measure of protection to consumers who lease

2 such older vehicles. As it turns out, however, the

3 requirement to have a battery warranty in place may

4 actually get in the way.

5 \--o0o\--

6 VEHICLE PROGRAM SPECIALIST SHULOCK:

7 Manufacturers are reluctant to commit to having to

8 purchase a replacement pack, and customers may be

9 perfectly willing to lease the vehicle without a warranty

10 as long as it continues to meet their needs.

11 Therefore, we recommend that you drop the

12 requirement the vehicle needs to have a battery warranty

13 in force in years four and beyond in order to earn this

14 in-use credit. This would not effect warranties for the

15 initial three-year period.

16 \--o0o\--

17 VEHICLE PROGRAM SPECIALIST SHULOCK: The next

18 category of possible incentives involves measures to keep

19 new vehicles in the hands of drivers. In the previous

20 hearings you have heard testimony how drivers have been

21 unable to renew their leases even if they were delighted

22 with the performance of their vehicles. To provide an

23 incentive to manufacturers to give drivers an option,

24 staff recommends that the regulation provide a 1.25 credit

25 multiplier for Type 1 and 2 batteries EV that are sold or

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1 leased with a consumer option to purchase or re-lease.

2 This option would be effective with model year 2003 and

3 newer vehicles.

4 \--o0o\--

5 VEHICLE PROGRAM SPECIALIST SHULOCK: We have

6 previously mentioned our recommendation that you allow BEV

7 substitution within the minimum production requirement of

8 the alternative path. This slide shows our complete

9 recommendation. We recommend that BEVs be allowed to meet

10 up to 50 percent of the alternative path fresh

11 requirement. This would apply to 2003 and later new

12 vehicle placements.

13 We recommend that the credit ratios be based on

14 the relative cost of various technologies with a bias to

15 make BEV substitution more economically attractive.

16 Here we have looked at work undertaken by CalETC to

17 develop appropriate credit ratios. We have reviewed their

18 approach and believe it is reasonable, and therefore, for

19 the 2001 through 2008 time period would endorse the use of

20 the ratio shown here which they have suggested, 20 to 1

21 for city EVs and 10 to 1 for full-function EVs.

22 Appropriate ratios for 2009 and beyond would also need to

23 be established.

24 \--o0o\--

25 VEHICLE PROGRAM SPECIALIST SHULOCK: In summary,

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1 the recommended incentives would have the following

2 effect. They would encourage the continued availability

3 of used BEVs. They would encourage the sale and

4 open-ended lease any new BEVs that are brought to market.

5 They would provide incentives for new BEV production under

6 the BEV substitution approach, given that the cost per

7 credit is less than for fuel cell vehicles.

8 On the other hand, we must be clear there is no

9 guarantee these incentives would result in new BEVs being

10 marketed. That depends mostly on the availability of

11 third-party manufacture financing.

12 And finally, please bear in mind that higher BEV

13 credits along with BEV substitution would reduce the total

14 number of fuel cell vehicles needed and also reduce the

15 need for AT PZEVs to backfill any shortfall in the gold

16 obligation.

17 \--o0o\--

18 VEHICLE PROGRAM SPECIALIST SHULOCK: The final

19 issue involves the treatment of hybrid vehicles. The

20 first thing to note here is that plug-in vehicles are

21 highly incentivized under the existing proposal. This

22 graph compares the credit levels earned by plug-in and

23 non-plug-in hybrid electric vehicles along with some other

24 vehicles that I won\'t discuss.

25 \--o0o\--

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1 VEHICLE PROGRAM SPECIALIST SHULOCK: The

2 upward-pointing arrows show the credits earned by HEV 60

3 and HEV 20 vehicles which are vehicles with a 60 mile

4 all-electric range and 20 mile all-electric range

5 respectively. The downward-pointing arrow shows the

6 credit earned by HEV zero which is a hybrid with no

7 all-electric range, such as a Toyota Prius, Honda Civic

8 hybrid or Ford Escape hybrid. As you can see the plug-in

9 vehicles earn substantially higher credit.

10 \--o0o\--

11 VEHICLE PROGRAM SPECIALIST SHULOCK: Continuing

12 on with the current status, it also needs to be understood

13 that under the revised staff proposal manufacturers have a

14 significant need for silver credits. You may recall

15 manufacturer testimony at the March hearing stating the AT

16 PZEV option is quite ambitious. Thus, there is an

17 incentive for manufacturers to pursue options that can

18 earn additional AT PZEV credit. Using our best cost

19 information as shown in the table, plug-in hybrids are

20 more attractive than other hybrids on a cost per credit

21 basis through the 2008 model year.

22 \--o0o\--

23 VEHICLE PROGRAM SPECIALIST SHULOCK: A few other

24 things to keep in mind, if plug-in hybrids were to be

25 treated as gold, their credit level would need to be

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1 reduced. This occurs because their credit level as silver

2 has been boosted significantly in order to provide an

3 incentive for the technology, even though the vehicles are

4 in the silver category. This level would no longer be

5 appropriate if the vehicles moved to gold and were being

6 weighed against BEVs and fuel cell technologies.

7 \--o0o\--

8 VEHICLE PROGRAM SPECIALIST SHULOCK: In addition,

9 if the vehicles were placed in gold, you likely would want

10 to increase the minimal electric range beyond the ten-mile

11 level in the current regulation. These changes would add

12 cost to the vehicle and reduce its relative

13 attractiveness, possibly negating the effort.

14 In light of all of the above, staff recommends

15 leaving these vehicles in the silver category.

16 \--o0o\--

17 VEHICLE PROGRAM SPECIALIST SHULOCK: The final

18 section of our presentation provides a summary of the

19 staff proposal in light of the direction provided at the

20 last Board meeting. This is intended to give you an

21 overview of the entire regulation in order to assist you

22 in understanding what is before you today. This summary

23 is based on the various staff recommendations that we have

24 described so far. Obviously, the details of the package

25 would change in line with whatever modifications you

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1 choose to make to what we have suggested. We will first

2 describe the major elements of the proposal which include

3 the base and alternative paths, the credit calculation

4 methods, and the independent expert review panel. We then

5 will describe the effect of the program on the number of

6 vehicles required and on air quality.

7 \--o0o\--

8 VEHICLE PROGRAM SPECIALIST SHULOCK: The base

9 path preserves the 2001 regulation structure along with

10 other modifications that staff believes are appropriate in

11 light of today\'s circumstances. The base path uses the

12 2001 percentage requirements of 2 percent gold, 2 percent

13 silver, and 6 percent bronze and allows full use of Bank

14 credits subject to NEV caps in the gold and silver

15 categories.

16 To get on the alternative path, a manufacturer

17 must produce its market share of defined minimum

18 production totals. The industry-wide numbers under the

19 staff recommendation are 250 for model years 2001 through

20 2008; 2,500 for 2009 through 2011; 25,000 for 2012 through

21 2014; and 50,000 for 2015 through 2017. Beyond that, it

22 would return to red line numbers.

23 Manufacturers would be allowed to meet up to

24 50 percent of this requirement with battery electric

25 vehicles. The remainder of a manufacturer\'s gold

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1 obligation could be met with AT PZEVs.

2 \--o0o\--

3 VEHICLE PROGRAM SPECIALIST SHULOCK: The proposal

4 would modify the calculation of ZEV credits. It removes

5 the efficiency multiplier, extends the incentive for early

6 fuel cell vehicles, creates several categories of ZEVs

7 with appropriate credit levels, and adjusts those credit

8 levels over time.

9 \--o0o\--

10 VEHICLE PROGRAM SPECIALIST SHULOCK: The proposal

11 would also modify the calculation of AT PZEV credits. It

12 would remove the efficiency multiplier and all references

13 to fuel economy. It would modify the credit calculation

14 for advanced componentry credit by establishing three

15 levels of hybrid electric vehicle. It would also modify

16 the calculation of zero emission VMT, low fuel cycle

17 emissions, and CNG vehicles. The staff proposal would

18 also make a number of other modifications I\'ll list.

19 Several of them are significant here.

20 \--o0o\--

21 VEHICLE PROGRAM SPECIALIST SHULOCK: It would

22 provide incentives for early production of PZEVs in model

23 years 2003 and 2004. It would reaffirm the addition of

24 LDT 2 vehicles to the baseline against which manufacturer

25 compliance obligations are assessed. It would extend the

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1 sunset date for transportation system credit. It would

2 revise the deadline by which a vehicle must be placed in

3 service to earn credit in a particular model year. It

4 would delay the imposition of a NEV credit cap in the

5 silver category, and it would add severability clauses to

6 the regulation language.

7 \--o0o\--

8 VEHICLE PROGRAM SPECIALIST SHULOCK: The final

9 noteworthy feature of the staff proposal is the creation

10 of an independent expert review panel. The panel would

11 consist of independent experts without any conflicts

12 involving the automotive industry. The role of the panel

13 would be to access ZEV and AT PZEV technologies, including

14 fuel cells, battery EV, and advanced ZEV componentry. The

15 panel would assess technology status and market readiness

16 in each area and would provide the Board with data to

17 support the Board\'s review of future ZEV requirements.

18 \--o0o\--

19 VEHICLE PROGRAM SPECIALIST SHULOCK: With respect

20 to the number of vehicles required, the general effect of

21 the changes before you today as compared to the March

22 version of the staff proposal are as follows. This would

23 increase the number of new or fresh ZEVs on the

24 alternative path by adding targets for 2009 and beyond.

25 It would then decrease the number of AT PZEVs on the

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1 alternative path since fewer offsets against the gold

2 requirement would be needed. There would be no changes to

3 the base path, the alternative path requirement for 2001

4 through 2008, or the PZEV option.

5 \--o0o\--

6 VEHICLE PROGRAM SPECIALIST SHULOCK: This graph

7 shows the number of ZEVs in 2009 and beyond under the base

8 path and also shows for comparison purposes the number of

9 ZEVs under the alternative path for the March version of

10 the proposal versus the April version. The largest

11 numbers \-- the top line represents the base path. The

12 March version of the alternative path is the flat line at

13 the bottom shown as zero because under that proposal the

14 specific total is to be determined.

15 As you can see, the April version starts out

16 lower than the base path, then gradually increases,

17 rejoining it at 2018. The totals under the April version

18 correspond with to the 250, 2500, 250,000 progression

19 recommended by staff. The difference being that here the

20 numbers are shown year by year rather than in three-year

21 blocks.

22 \--o0o\--

23 VEHICLE PROGRAM SPECIALIST SHULOCK: This graph

24 makes a similar comparison of AT PZEV totals for 2009 and

25 beyond, again, showing the base path and the March and

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1 April versions of the alternative path. Here the lowest

2 totals are the base path. The March version of the

3 alternative path is the highest because it assumes zero

4 ZEV production in these years and, therefore, the maximum

5 AT PZEV backfill.

6 The April version of the alternative path is the

7 middle line which starts out higher than the base path,

8 then gradually rejoins it. As you can see under the April

9 version the maximum AT PZEV penetration in any single year

10 is around 200,000. This is down significantly from the

11 total shown for the March proposal which again assumes

12 zero pure ZEV production in those out years.

13 \--o0o\--

14 VEHICLE PROGRAM SPECIALIST SHULOCK: The final

15 slides address our air quality analysis. We first present

16 the emission reductions under the proposal. We then

17 discuss two environmental issues raised in public comment,

18 the fleet turn over effect and the air quality impact of

19 providing hydrogen infrastructure.

20 \--o0o\--

21 VEHICLE PROGRAM SPECIALIST SHULOCK: Staff has

22 estimated the emission impact of the April proposal for

23 the South Coast Air basin in 2010 and 2020 using the

24 impact emission model and our usual assumptions.

25 This slide shows the results of the April

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1 proposal as compared to the March proposal, the 2001 and

2 amendments, and the no-ZEV alternative. In this format a

3 plus sign means an air quality benefit.

4 The take-home message from this slide are as

5 follows. When compared to the March proposal, the April

6 proposal shows a slight increase in ROG in both 2010 and

7 2020 and a slight increase in NOx in 2020. This is due to

8 the reduced number of AT PZEVs under the April proposal.

9 Even though ZEVs are cleaner on a vehicle-by-vehicle

10 basis, under our credit ratios over the long-term one ZEV

11 must be replaced by about six AT PZEVs. Therefore, the

12 backfill of AT PZEVs for ZEVs results in a air quality

13 benefit, and the reduced amount of such backfill under the

14 April proposal slightly reduces the air quality benefits.

15 As the slide illustrates when compared to the 2001

16 amendments, the April proposal is roughly a wash.

17 Finally, when compared to the no-ZEV program, the

18 April proposal continues to show positive air quality

19 benefits. Please also note that although not quantified

20 here, the ZEV program also will result in decreased

21 emissions of CO and toxic air contamination.

22 \--o0o\--

23 VEHICLE PROGRAM SPECIALIST SHULOCK: Before

24 leaving the topic of air quality impacts, we would like to

25 touch on two environmental issues that have been raised in

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1 the context of CEQA compliance. The first has to do with

2 the fleet turn over effect. You may recall this argument

3 from the 2001 rule making. At that time commenters argued

4 that the ZEV program, by raising the price of new vehicles

5 sold in California, will reduce the sale of the new

6 vehicles. This then would mean that older, dirtier

7 vehicles are kept on the road longer such that the ZEV

8 program actually would have an emission disbenefit.

9 We reviewed this issue in 2001 and concluded that

10 when we use reasonable assumptions regarding the

11 incremental cost of the various technologies, the program

12 had only a minor effect on sales. Commenters have again

13 raised the fleet turn over ratio with respect to the March

14 staff proposal. At this point based on our analysis to

15 date, staff sees no reason to modify its previous

16 conclusion regarding the effect of the ZEV program on new

17 vehicle sales and resulting fleet-wide emissions.

18 In our previous analysis, as I mentioned, we

19 determined that the 2001 amendments would have only a

20 minor effect. The 2003 proposal is less burdensome to

21 manufacturers than 2001, so staff expects at this time

22 that it would likewise have only a minor effect.

23 The second issue raised by commenters has to do

24 with up-stream emissions for hydrogen infrastructure.

25 Commenters have argued that the air quality analysis does

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1 not account for excess emissions associated with the

2 production and marketing of hydrogen fuel. In the

3 near-term any such emissions will be insignificant because

4 the number of vehicles to be fueled is quite small.

5 Staff has preliminarily calculated, using the

6 commenters own assumptions that providing fuel for 2,750

7 vehicles, which is the number expected through 2011 under

8 the proposal that we have described, that providing fuel

9 for that number of vehicles would result in a 0.3 percent

10 change in the emission benefit of the program.

11 As the fleet expands, there will be a number of

12 refueling options to be explored, and there will be ample

13 opportunity to review and optimize their environmental

14 performance.

15 We should not forget one reason for the

16 widespread governmental and stakeholder interest in a

17 hydrogen economy is that it supports a long-term vision of

18 sustainable and renewable energy production. As is the

19 case with the ZEV program as a whole, when looking at

20 hydrogen infrastructure, we\'re taking early steps that

21 have the potential for a tremendous long-term pay off.

22 \--o0o\--

23 VEHICLE PROGRAM SPECIALIST SHULOCK: In

24 conclusion, staff recommends that the Board approve the

25 proposed amendments to the 2001 zero-emission vehicle

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1 regulation. The staff proposal maintains the air quality

2 benefit, addresses litigation issues, allow the ZEV

3 program to be implemented, and maintains progress towards

4 transforming California\'s vehicle fleet to zero emissions.

5 Thank you.

6 CHAIRPERSON LLOYD: Thank you, very much. At

7 this time before we go into discussion, do the colleagues

8 have any questions of the staff?

9 Thank you.

10 Well, last month we skipped over our ex parte

11 disclosure since we are continuing the Zev item today.

12 I\'d like to go through the disclosures at this time to get

13 that out of the way before we begin our deliberations on

14 the proposal regulatory changes.

15 And let me remind my colleagues in the public of

16 our policy concerning ex parte communications. While we

17 may communicate off the Board with outside persons

18 regarding Board rule-making, we must disclose the names of

19 contacts and the nature of the contents on the record.

20 This requirement applies specifically communications that

21 take place after notice of the Board hearing has been

22 public.

23 Starting at my far left with Supervisor Roberts

24 and working down, are there any ex parte communications

25 Board members need to disclose at this time? I know I

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1 have several.

2 SUPERVISOR ROBERTS: Mr. Chairman, I have several

3 also.

4 On March 19 I met with a number of people to

5 discuss the proposed issues. Among those are Kelly Brown,

6 Ford; Bob Cassidy, Nissan; Reg Modlin of DaimlerChrysler;

7 Al Weaverstadt, General Motors. And I\'m going to

8 mispronounce this, I\'m sure, Akimasa Yasouka \-- is that

9 close enough \-- okay \-- of Honda.

10 On March 20th I met with Dean Kato and Dave

11 Hermance of Toyota.

12 On March 21st I met with Bob Epstein representing

13 the NRDC.

14 On March 24th I had a telephone conversation with

15 Jason Mark representing the Union of Concerned Scientists.

16 And on April 23rd a member of my staff, Tony

17 Orlando, met with Dr. James Burns and Dean Taylor

18 representing San Diego State University and Southern

19 California Edison respectively.

20 The subject of all of these conversations concern

21 the pending regulations and in various aspects that have

22 been covered in staff\'s report today.

23 That\'s a complete list as best as I know it of

24 all of the contacts.

25 CHAIRMAN LLOYD: Thanks, Ron.

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1 Supervisor Patrick.

2 SUPERVISOR PATRICK: Thank you, Mr. Chairman.

3 I met \-- or I had a telephone conversation on

4 April 21 with Greg Hanssen and Bill Mason of the

5 Production Electric Vehicle Drivers Coalition.

6 And on April 22nd I had a conference call with

7 Kent Harris from PG&E; Linda Urata from the San Joaquin

8 Valley Clean Cities Coalition; and Bill West and Dean

9 Taylor of Southern California Edison. Both of those

10 conversations were regarding a compromised proposal where

11 they felt that 250 vehicles was too low and that they were

12 in favor of the CalETC compromise proposal.

13 Thank you.

14 CHAIRPERSON LLOYD: And just point out to my

15 colleagues, the reason we have these balls here. These

16 are stress balls courtesy of the California Fuel Cell

17 Partnership. So they\'re here for our use.

18 SUPERVISOR PATRICK: I\'ve used mine already,

19 Mr. Chairman.

20 CHAIRPERSON LLOYD: Mr. Calhoun.

21 BOARD MEMBER CALHOUN: Mr. Chairman, on the 26th

22 of January I had a telephone call \-- conversation with

23 Mr. Jim Ehlmann from the General Motors, and he talked

24 about the difference between the initial staff report and

25 the most recent one that was published at that particular

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1 time.

2 And I had a follow-up conversation with him on

3 the 21st of March. And that particular conversation

4 focused on credits for fuel cell.

5 On the 27th of January I talked to Mr. Kelly

6 Brown of Ford Motor Company. And our conversation was

7 about the impact of the latest staff proposal at that time

8 on the industry. I also \-- and he made a comparison

9 between the initial staff report and the one that was just

10 released.

11 On the 27th I also talked to Mr. Reg Modlin of

12 DaimlerChrysler and had a similar conversation with him

13 about the comparison of the two different staff proposals.

14 On the 18th of March I had a meeting with Bill

15 West and Ed Kjaer from Southern California Edison, and

16 their concern was focused primarily on keeping some

17 existing requirements out there for electric vehicles for

18 battery electrics.

19 And I had a similar meeting with them on April

20 the 21st. That was actually our last meeting after the

21 last Board meeting, and they talked about the need to

22 keep \-- maybe perhaps establish a credit market and

23 reemphasized the desire that we keep some battery electric

24 vehicles on the markets.

25 On the 24th of March I had a meeting with

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1 Dr. Larry Berg and Steve Kukucha from Ballard, and we

2 talked about the status of fuel cell technology and that

3 they thought the staff proposal at that time on the

4 required number of fuel cell vehicles was somewhat

5 reasonable.

6 And on the 21st of April I had a similar

7 telephone call from Dr. Larry Berg, and he informed me

8 that Ballards\' position had not changed.

9 On the 21st of April I had a telephone call from

10 Ben Knight of Honda, and he also expressed concern about

11 the impact of the proposed changes on the industry and on

12 Honda in particular.

13 That concludes my ex parte communication.

14 CHAIRPERSON LLOYD: Thank you.

15 Dr. Burke.

16 BOARD MEMBER BURKE: On March 17th, Mike Kane met

17 with my staff in my office.

18 On March 19th, Paul Scott met with my staff.

19 On April 21st, Bill West and Ed Kjaer and Scott

20 Briasco met with me in my office to discuss the reissuance

21 issue and credit market issue.

22 On April 21st, Ben Knight with Honda came to

23 discuss the same matters that he discussed with

24 Mr. Calhoun.

25 And on April 23rd, Greg Hanssen and Bill Mason

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1 spoke with my staff via phone.

2 And that\'s all my ex partes.

3 CHAIRPERSON LLOYD: Thank you. Ms. Riordan.

4 BOARD MEMBER RIORDAN: Yes. Thank you,

5 Mr. Chairman.

6 On January 23rd I met with Ron Wilson and Randy

7 Hasty from e-Motion.

8 On March 14th I met with Bill West, Ed Kjaer,

9 Felix Oduyemi from Southern California Edison.

10 On March 21st I met with Deigo Miralles with

11 REVA-EV.

12 And on March 24th I met with Dr. Larry Berg and

13 Steve Kukucha representing Ballard.

14 All of these discussions focused on the staff

15 report that was developed for the early meetings of what

16 would have been February and then March 27th.

17 CHAIRPERSON LLOYD: Yes. On January 23rd I met

18 with John Wilson, Randy Hasty of e-Motion Mobility. Again

19 similar to Barbara, all my discussions were focused on the

20 staff proposal and the alternatives to the staff proposed.

21 On February the 6th I met with members of the

22 Auto Alliance, the large manufacturers, Kelly Brown, Ford;

23 Reg Modlin, DaimlerChrylser; Bob Cassidy, Nissan; and Jim

24 Ehlmann from General Motors.

25 On the 6th of February I had a telephone

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1 conversation with Diane Ogilue from Toyota.

2 Then on the 7th of February I met with Dean Kato,

3 Dave Hermance, Joe Tomita, and Akihoto Hayasaka from

4 Toyota.

5 On February the 6th, met with CalETC

6 representatives Dave Modisette, Bill West, Ed Kjaer, Bill

7 Boyce, and Kent Harris. I guess I should say Dave

8 Modisette from Public Policy Advocates. Bill West and Ed

9 Kjaer from So. Cal. Edison. Bill Boyce from SMUD. And

10 Kent Harris from PG&E.

11 On 13th of February I met with Rick Woodbury from

12 Commuter Car Corporation, also called TANGO.

13 Had a telephone conversation February 19th with

14 EV Drivers Coalition, Greg Hanssen and Bill Mason.

15 Then had a meeting with part of the Auto Alliance

16 and environmental groups. This was Bonnie Homes-Gen, Lung

17 Association. This was January 29th in Sacramento. Jamie

18 Knapp with ZEV Alliance; Jason Mark from Union of

19 Concerned Scientists; Rolad Hwang from NRDC; Dave

20 Modisette, CalETC; Sandray Spelliscy, PCL; and Jason Mark,

21 UCS via telephone call.

22 Then on February the 24th and the 27th I had a

23 telephone conversation with Beth Lowery from General

24 Motors.

25 Then on the 28th I had a telephone call with

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1 Kelly Brown from Ford representing the Auto Alliance.

2 Same day I had a discussion with Reg Modlin, Auto Alliance

3 from DaimlerChrysler.

4 Then I had a telephone call on March 14th with

5 Paul Staples from HyGen.

6 Then on the 14th of March also had a telephone

7 conversation with Beth Lowery from General Motors.

8 I had a telephone conversation on the 18th with

9 Ben Knight of Honda.

10 I had a meeting on the ZEV Alliance on the 19th

11 in Sacramento with Bonnie Homes-Gen, Lung Association;

12 Jason Mark, UCS; and Rolad Hwang, NRDC.

13 Met the same day with CalETC, Dave Modisette;

14 Bill Warf from SMUD, and Bill West, So. Cal. Edison.

15 I had a telephone conversation with Greg Hanssen

16 and Bill Mason from the EV Drivers Coalition on March the

17 19th.

18 Had a meeting with Diego Miralles representing

19 REVA-EV on the 20th in Sacramento. And another meeting

20 with the Auto Alliance, the large auto manufacturers, in

21 the Sacramento on the 20th; Ben Knight, Honda; Aki Yasouka

22 from Honda; Bob Cassidy, Nissan; Reg Modlin,

23 DaimlerChrylser; Kelly Brown from Ford; Al Weaverstadt

24 from General Motors.

25 Had a telephone conversation on the 24th with

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1 Dean Kato from Toyota.

2 Another telephone conversation with Kelly Brown

3 on the 24th of March.

4 Had a meeting on the 24th with Jason Mark and

5 Rolad Hwang from the ZEV alliance.

6 Had a telephone conversation on to 25th with

7 Dr. Larry Berg, Ballard.

8 I had a telephone conversation on April the 9th

9 with Tim Carmichael, Coalition for Clean Air. On the same

10 day discussion with Bonnie Homes-Gen on the American Lung

11 Association.

12 April 9th, a telephone conversation with Rolad

13 Hwang.

14 I had a meeting on April 10th with Dean Kato in

15 Sacramento and Joe Tomita via video conferencing in a

16 similar meeting. That\'s right. On the 10th. That was by

17 Joe Tomita by video conference.

18 April 10th had a meeting with Kelly Brown, I

19 think this time representing Ford in Sacramento. Reg

20 Modlin, I had a phone call April 14th with

21 DaimlerChrysler.

22 Had a telephone conversation April 18th with Dave

23 Modisette representing CalETC.

24 Had two phone calls on the 2nd and the 8th of

25 April with John White representing Sierra Club.

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1 Had a meeting on April 22nd with Dr. Berg, Steve

2 Kukucha, and Firoz Razul from Ballard.

3 I think that\'s it.

4 Well, April 24th a telephone conversation with

5 Beth Lowery from General Motors.

6 Professor Friedman.

7 BOARD MEMBER HUGH FRIEDMAN: Prior to the revised

8 staff report in advance of the March hearing, I met in

9 Sacramento on January 30th with the ZEV Alliance Group,

10 Bonnie Homes-Gen and Jamie Knapp and David Modisette of

11 CalETC.

12 On February 6th I met with the Auto Alliance

13 so-called of the large auto manufacturers representatives

14 in Sacramento, Kelly Brown, Ford; Reg Modlin of

15 DaimlerChrysler; Bob Cassidy of Nissan; and Jim Ehlmann

16 for General Motors.

17 I would say with respect to all of these

18 disclosures that the content of the conversation and the

19 presentations by all of these folks with whom I met or

20 spoke by phone was the same as was presented by them or

21 their other representatives at the March hearing. And I

22 made a note of that at the time at the March hearing.

23 I met on February 6th in Sacramento again with

24 CalETC representatives including Dave Modisette, Ed Kjaer,

25 Bill Boyce, Kent Harris, and Mark Duvall.

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1 And I, by telephone, had a conversation with the

2 EV Drivers Coalition, Greg Hanssen and Bill Mason on

3 February 6th.

4 After the revised staff report in advance of the

5 March hearing, I had further meetings or conversations. I

6 was contacted again by Greg Hanssen and Bill Mason of the

7 EV Drivers Coalition.

8 March 17th I had a meeting in San Diego \-- March

9 19th with General Motors\' representatives Bob White, Beth

10 Lowery, Ray Buttacavoli. Again, their conversation with

11 me was to urge consideration of stationary fuel cell

12 systems as that would be interchangeable essentially with

13 mobile use or suitable for mobile applications to be given

14 some credits.

15 Auto Alliance large auto manufactures met with me

16 on March 19th. Again, that was Kelly Brown of Ford; Bob

17 Cassidy of Nissan; Reg Modlin of DaimlerChrysler; and Al

18 Weaverstadt of General Motors. And this time joined by

19 Aki Yasouka of Honda.

20 ZEV Alliance contacted me again by phone on March

21 20th, Bonnie Homes-Gen, Rolad Hwang, and Katherine

22 Philips.

23 Toyota met with me. I think that was with

24 Supervisor Roberts as well on March 20th in San Diego,

25 Dean Kato and Dave Hermance.

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1 And CalETC contacted me again in Sacramento on

2 March 26th. That was Dave Modisette, Public Policy

3 Advocacy; Ed Kjaer, Bill West, Southern Cal Edison; John

4 Wilson, e-Motion Mobility; and Randy Hasty of e-Motion

5 Mobility.

6 And finally, after our March hearing leading to

7 this meeting, I had the following contacts. CalETC,

8 April 16th and 18th phone calls by Dave Modisette.

9 Actually, the 18th was, I think, a letter.

10 On April 15th I received a CalETC compromise

11 general proposal that was discussed on the April 16th

12 phone conversation. This had to do with numbers.

13 And then the 18th phone call was regarding

14 another compromise proposal \-- revised compromise

15 proposal.

16 Toyota \-- I met with Toyota yesterday by video

17 conference, Dean Kato in Sacramento and Joe Tomita,

18 Mr. Kawai, general manager of the fuel cell division. And

19 this was done \-- I think I was joined by other members of

20 the Board who will identify themselves. And that was

21 based on an April 23rd letter we received from Toyota.

22 And then I had a letter dated April 10th from the

23 Sierra Club, finally. That\'s my final disclosure. John

24 White signing it for the Sierra club. And this letter

25 essentially congratulates or says, \"It\'s encouraging to

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1 hear Board members embrace staff\'s suggestions for

2 increasing the required number of AT PZEVs, particularly

3 hybrid electric vehicles.\" It says he believes \"the Board

4 has made it clear that the Board remains committed to

5 achieving a state-wide goal of emissions.\" With respect

6 to the unresolved issues that we\'re going to be resolving

7 today hopefully, his position was an unqualified

8 recommendation to support the staff\'s recommendation for a

9 minimum requirement in the alternative compliance pathway

10 of 250 zero emission vehicles for the 2005-2008 period.

11 His discussion points out that increasing that

12 number would not give any great health benefits and could

13 cause risk \-- put at risk some of the fuel cell or other

14 technology efforts and cooperative efforts.

15 He also addresses other matters. I don\'t know if

16 this is in the record or not. I think the record\'s been

17 closed. I don\'t know if I need to read the whole letter

18 or what I need to do. I think other Board members have

19 directly received this letter.

20 GENERAL COUNSEL WALSH: Professor Friedman, we

21 can make sure all of the Board members have a copy of the

22 letter. It will be made a part of the record as a part of

23 your disclosure this morning.

24 BOARD MEMBER HUGH FRIEDMAN: Then I won\'t

25 elaborate further on it at this time. Thank you.

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1 BOARD MEMBER WILLIAM FRIEDMAN: Mr. Chairman,

2 since mid-January my secretary informs me that I\'ve

3 received 218 phone calls from patients or family members

4 of patients and a slightly larger number of calls from

5 faculty or community doctors, none of whom chose to

6 discuss the ZEV regulation, I\'m pleased to say. I have

7 nothing to declare.

8 (Laughter)

9 CHAIRPERSON LLOYD: Thank you.

10 BOARD MEMBER D\'ADAMO: Lucky you. All right.

11 What I\'ll do with my list is only note where

12 additional issue or specific issues were discussed beyond

13 the staff proposals that were out and available for the

14 public at the time of the meetings that I\'ll be listing.

15 On January 21st, in Stanislaus County \-- I

16 believe this was in Modesto. I met with representatives

17 from e-Motion Mobility, John Wilson, Randy Hasty; and with

18 representatives from Stanislaus County, Reagan Wilson,

19 Mike Lynch; and with the representative from the

20 Stanislaus County Economic Development Board, Kirk

21 Lindsay.

22 On March 6th, I met in Modesto with the Auto

23 Alliance, several representatives from the Auto Alliance,

24 Kelly Brown from Ford; Bob Cassidy from Nissan; and Jim

25 Ehlmann from GM.

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1 February 6th, in Modesto met with representatives

2 from the ZEV Alliance, Bonnie Homes-Gen from the American

3 Lung Association, and Todd Dipaola from the Kirsch

4 Foundation.

5 February 7th, in Modesto I met with

6 representatives from Toyota, Dean Kato, Dave Hermance and

7 Kazuo Tomita, and Akihoto Hayasaka.

8 On March 12th and then again on March 17th I had

9 two separate telephone conversations with representatives

10 from Stanislaus County, Reagan Wilson and Mike Lynch.

11 On March 20th, in Sacramento I joined in the

12 meeting with other Board members and with representatives

13 from the Auto Alliance, Ben Knight from Honda, Akimasa

14 Yasouka from Honda; Bob Cassidy, Nissan; Reg Modlin,

15 DaimlerChrysler; Kelly Brown, Ford; Al Weaverstadt, GM.

16 On March 20th, in Sacramento, meeting with CalETC

17 representatives Dave Modisette, Scott Briasco, Bill Boyce,

18 and Serge Roy.

19 On the 20th of March I had a conference call with

20 representatives from the ZEV Alliance, Bonnie Homes-Gen,

21 Jason Mark, Rolad Hwang.

22 On the 25th of March, phone call with

23 representatives from the EV Drivers Coalition, Greg

24 Hanssen and Bill Mason.

25 On the 25th of March a phone call with

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1 representatives from CalETC and e-Motion Mobility, Dave

2 Modisette and John Wilson.

3 On the 27th of March I had a telephone

4 conversation with Reg Modlin from DaimlerChrysler and Dan

5 Surges, Mobility Labs regarding the specific issue of city

6 car transportation and neighborhood electric vehicles.

7 On the 25th of March, a telephone conversation

8 with Laurie David from NRDC.

9 On the 25th of March, a telephone conversation

10 with Bonnie Homes-Gen representing the American Lung

11 Association.

12 On April 3rd, in Modesto and then again on April

13 16th in Modesto I had two meetings with representatives

14 from Stanislaus County, Reagan Wilson and Mike Lynch.

15 On April 10th, a phone call with an interested

16 private citizen, Elaine Lissner. Additionally,

17 Ms. Lissner provided me with an e-mail communication

18 regarding her thoughts, again, regarding the staff

19 proposal.

20 On April 10th, I had a discussion \-- telephone

21 call with Alec Brooks who also provided additional written

22 materials to me regarding the staff proposal.

23 On April 16th, a phone call with Dave Modisette.

24 And in addition, I received \-- for the purposes of that

25 telephone call on April 15th I received CalETC compromised

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1 proposal, then a revised version of that on April 17th

2 from Dave Modisette. And again, a communication from Dave

3 Modisette in writing on April 21st regarding follow-up

4 material to the meeting that we had on \-- the phone call

5 we had on April 16th.

6 On April 23rd, a phone call with representatives

7 from CalETC, Dave Modisette, Bill West, Ed Kjaer, John

8 Wilson, and Randy Hasty.

9 On April 16th, phone call with the EV Drivers

10 Coalition, Greg Hanssen and Bill Mason.

11 On April 17th, in Stockton I had a meeting with

12 Dean Kato from Toyota. At that time I also received a

13 letter from him regarding Toyota\'s position.

14 On April 17th I had a phone conversation with

15 Kelly Brown from Ford.

16 On April 17th, a telephone conversation with

17 representatives from e-Motion Mobility, John Wilson and

18 Randy Hasty.

19 On April 18th, a phone call with representatives

20 from CalETC and Stanislaus County, Dave Modisette and Mike

21 Lynch.

22 On April 23rd, a telephone call with Ben Knight

23 specifically regarding hybrid issues.

24 On April 23rd, a phone call with John White. At

25 this time John discussed the letter that he has since

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1 provided to me, the same letter that Professor Friedman

2 mentioned.

3 On April 23rd, a phone call from Dean Kato

4 regarding \-- from Toyota regarding hybrid issues, and Dean

5 followed up with an e-mail written communication to me

6 regarding hybrid issues as well.

7 CHAIRPERSON LLOYD: Thank you. McKinnon.

8 BOARD MEMBER McKINNON: Okay. The first set of

9 ex parte was pre-March 5th revision of the staff report.

10 On the 23rd of January, I met with e-Motion

11 Mobility, John Wilson, Randy Hasty. Essentially they

12 described how their business works, their business

13 provides sort of transportation solutions to communities

14 and businesses where \-- and I hate to mischaracterize

15 this \-- where people essentially check out the appropriate

16 vehicle for the job that\'s needed. And certainly they see

17 ZEVs as a key ingredient. Their primary concern was the

18 ever-changing regulation and their ability to operate as a

19 business with the changes in the regulation that continue

20 to happen.

21 On the 6th of February I met with CalETC, Dave

22 Modisette, Ed Kjaer, Bill Boyce, Kent Harris, and Mark

23 Duvall. Essentially, they were opposed to the staff

24 report at the time, and their comments are pretty clearly

25 in the record.

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1 The EV Driver Coalition was my next meeting that

2 was also on the 6th of February, Greg Hanssen and Bill

3 Mason. Same comment, opposition to the staff proposal at

4 that point in time. Their comments are clearly reflected

5 in the record.

6 Auto Alliance \-- just those large auto makers in

7 the Auto Alliance minus Toyota met with me on the 7th of

8 February, Kelly Brown from Ford; Bob Cassidy from Nissan;

9 Jim Ehlmann of GM; and Reg Modlin from DaimlerChrysler.

10 Frankly, in this meeting the concerns were expressed about

11 the travel issue which is pretty clearly in the record.

12 And, frankly, I can say the concerns that were raised in

13 this meeting are in the record. The tone of the

14 conversation was more supportive to the proposal with a

15 few concerns.

16 Also on the 7th of February, I met with Toyota,

17 Dean Kato, Dave Hermance, Joe Tomita, and Aki Hayasaka.

18 In that meeting the very similar conversation, more or

19 less supportive of the staff proposal with a few concerns.

20 And it has \-- all of those issues are very clearly in the

21 record.

22 On the 11th of February I met with the ZEV

23 Alliance, Bonnie Homes-Gen from the Lung Association;

24 Jaime Knapp from the ZEV Alliance; and Todd Dipaola from

25 the Kirsch Foundation. Again, very clearly a conversation

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1 that was opposed to the staff proposal at that time, and

2 their comments are very clearly in the record from

3 hearings and letters.

4 The next meeting I had was also on the 11th of

5 February. It was with General Motors. I met with Beth

6 Lowery, Ray Buttacavoli, Dave Barthmuss. And I think

7 General Motors\' comments are in the record with two

8 exceptions. There was quite a bit of conversation about

9 their interest for stationary fuel cells. The other area

10 that was attempted to be discussed, and I want to be very,

11 very clear about this on the record \--

12 (Thereupon, a fire alarm drill occured.)

13 CHAIRPERSON LLOYD: We\'ll be okay, but we\'ll get

14 another interruption when they tell us we\'re okay.

15 SUPERVISOR DeSAULNIER: By that time you\'ll be up

16 to March.

17 (Laughter)

18 BOARD MEMBER McKINNON: On the 11th of February

19 in the General Motors meeting, the other subject that was

20 addressed that I want to make very clear in the record \--

21 because I\'m very concerned about the subject coming up.

22 On two occasions representatives of General Motors tried

23 to bring up the subject of fuel economy. And at the first

24 instance that the subject of fuel economy was brought up,

25 I asked that they refer that issue to the federal agencies

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1 that regulate fuel economy and that our Board had been

2 clearly let know that we are not in the fuel economy

3 business. That\'s a federal agency that regulates fuel

4 economy. It came up again after that, and I offered to

5 cancel the meeting if the subject came up again.

6 My next meeting also occurred on that day, the

7 11th. The Planning and Conservation League gave very,

8 very clear indication of opposition and concern for the

9 zero-emission mandate. They\'re clearly in the record.

10 After the March 5th staff proposal \-- revised

11 staff proposal came out, I had a meeting with the large

12 auto makers on the March 20th.

13 I\'m up to March, Mark.

14 Ben Knight of Honda; Bob Cassidy from Nissan, Reg

15 Modlin for DaimlerChrysler; Kelly Brown from Ford; Al

16 Weaverstadt from GM. Their comments are clearly in the

17 record.

18 CalETC and I met also on the same day, March

19 20th, Dave Modisette, Scott Briasco, Bill Boyce, Serge

20 Roy, Kent Harris, and Bill West. Their comments are

21 clearly in the record in opposition to that staff

22 proposal.

23 I received a phone call from Laurie David who

24 identified \-- on the 25th of March who identified herself

25 as part of the Natural Resources Defense Counsel\'s

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1 Hollywood chapter strongly opposed to the staff report and

2 clearly a zero-emission vehicle driver.

3 And also on the 25th I received a telephone call

4 from the EV Drivers Coalition, again, opposed. Their

5 comments are clearly in the record.

6 On the 26th, had a telephone conversation with

7 Dave Modisette. Again, clear opposition and a fairly

8 lengthy discussion about a proposal for a compromise, very

9 early discussion about that. Both his comments and the

10 compromise are clearly indicated in the record from the

11 hearing.

12 On the same day I met with Bonnie Homes-Gen from

13 the American Lung Association. She was clearly opposed to

14 the staff proposal, and her comments are in the record.

15 The same day I met with Ballard, Larry Berg and

16 Steve Kukucha. Essentially the meeting was on the subject

17 of fuel cells and the state of fuel cells. Their comments

18 are clearly in the record.

19 After the Board hearing ex parte I had a

20 telephone conversation with Elaine Lissner on the 14th of

21 April. Elaine with her phone conversation and e-mail that

22 followed clearly was proposing a very simplified approach

23 that was very, very strongly supportive of battery

24 electric vehicles.

25 Alec Brooks and I spoke on April 16th on the

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1 telephone, he as an individual interested private citizen.

2 And he followed up with e-mail which clearly argued that

3 the battery electric vehicle should be given more due

4 consideration in our deliberations with very clear

5 arguments about sort of the state of the fuel cell versus

6 the battery electric at this point in time, and that the

7 development of the battery electric over the last seven

8 years wasn\'t getting sort of due respect in the hearing.

9 The next \-- I had three conversations with CalETC

10 April 16th on the telephone, April 21st on the telephone

11 and April \-- also April 21st, a face-to-face meeting.

12 Those were with Dave Modisette. And then on April 23rd a

13 meeting with Dave Modisette, Bill West, Ed Kjaer, John

14 Wilson, and Randy Hasty. Those discussions were clearly a

15 development of a compromise proposal. Some of that

16 compromise proposal or portions of that compromised

17 proposal were talked about in the staff report, certainly

18 not in full. I would feel most comfortable if \-- in that

19 that sort of public disclosure that I disclose sort of the

20 written documents that are involved with that. So I\'d

21 like to offer them for the record.

22 (Thereupon, the public address system made an

23 all-clear announcement.)

24 BOARD MEMBER McKINNON: On the April 16th and

25 23rd I had telephone conversations with Greg Hanssen and

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1 Bill Mason. Those conversations were also continuing

2 opposition to the staff proposal and encouragement to look

3 at some of the compromise proposals that were out there.

4 On the 16th I met in person with John White, and

5 I received the letter that was referred to by Board Member

6 Hugh Friedman. I received that letter some time later, a

7 few days later.

8 But essentially the John White meeting was a

9 pretty strong departure from the position of the Sierra

10 Club in that \-- that\'s on the record. On the record the

11 position called for fairly high numbers of fuel cells and

12 the change in position changed to an agreement with the

13 250 number. He also gave due credit to the progress and

14 PZEV and AT PZEV area, and based his reasoning on that

15 progress in large part.

16 On the 21st of April I received a telephone call

17 from Larry Berg from Ballard. He reaffirmed Ballard\'s

18 position that they supported the staff proposal and the

19 250 fuel cell number.

20 On the 21st of April I received a telephone call

21 from Coalition of Clean Air and the Planning Conservation

22 League, Tim Carmichael and Sandray Spelliscy. They

23 strongly reaffirmed their opposition to the staff proposal

24 and the problems with the lack of near-term zero emission

25 vehicles.

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1 April 23rd I met with Toyota. Dean Kato was here

2 in Sacramento. In Japan via video conference were

3 Ms. Fugimoto, Mr. Kawai, and Mr. Matsuoka. The content

4 was very clearly a very thoughtful discussion about the

5 development of the fuel cell, about how Toyota was

6 thinking through what the steps would be in the

7 development of the fuel cell, including those factors that

8 may not be under their control, such as infrastructure and

9 social kind of view of the fuel cell and sort of the

10 decline of fossil fuels as a primary. It was a very, very

11 informative discussion.

12 With that, I think I\'ve covered it all. Thank

13 you.

14 CHAIRPERSON LLOYD: Thanks, Matt.

15 Supervisor DeSaulnier.

16 SUPERVISOR DeSAULNIER: For once people are glad

17 to hear me speak because I\'m at the end. Reminds me of a

18 really bad academy award acceptance speech when people

19 name everybody they\'ve talked to in the last 5 years.

20 On February 6th I meet with Dean Kato, Joe

21 Tomita, Akohoto Hayasaka in my Concord office. The

22 conversation was consistent with their correspondence and

23 their testimony.

24 On the 20th of February, I met with ZEV Alliance,

25 Jason Mark from the Union of Concerned Scientists and Todd

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1 Dipaola from the Kirsch Foundation.

2 On February 20th also I received a phone call

3 from Greg Hanssen and Bill Mason. Those conversations

4 were also consistent with their testimony.

5 On March 19th I met with Rick Woodbury from the

6 Commuter Cars Corporation. His conversation with me was

7 similar to his conversation with the Chairman.

8 On March 20th I had a phone call with Dave

9 Modisette, Scott Briasco from the Department of Water and

10 Power; Bill Boyce from SMUD; and Serge Roy from Capitech.

11 That was consistant with their testimony last month.

12 On the 20th I had a conference call with Bonnie

13 Homes-Gen and Jason Mark, again, consistent with their

14 testimony of last month.

15 The EV Drivers Coalition, Greg Hanssen and Bill

16 Mason, had a phone call with them on March 25th.

17 On the 26th I had another phone conversation with

18 Dave Modisette in regards to his attempts to put a

19 compromise proposal.

20 On April 16th in the Concord office I had a

21 conversation with Elaine Lissner an interested private

22 citizen who \-- our conversation again was consistent with

23 her testimony last month.

24 On April 17th I received a phone call from

25 CalETC, again from Dave Modisette updating me on his

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1 ever-going endeavors consistent with his submission that

2 we have in front of us.

3 On the 17th I received a phone call from the EV

4 Drivers Coalition, Greg Hanssen, Bill Mason, again trying

5 to argue that we not \-- or we support their positions.

6 On April 18th in Oakland I met with Dean Kato

7 expressing his concerns similar to the concerns expressed

8 in a letter from Toyota of April 23rd.

9 On Tuesday the 22nd I talked to Dean again.

10 And on Wednesday the 23rd I had a series of

11 messages from John White going back and forth, and they\'re

12 consistent with the conversations other Board members had

13 with Mr. White.

14 And I also had a conversation by phone with Rolad

15 Hwang.

16 And that\'s it, Mr. Chairman.

17 CHAIRPERSON LLOYD: Thank you very much,

18 Supervisor DeSaulnier.

19 I\'d also like to \-- I think it was referred to.

20 I just want to make sure, Ms. Walsh, that the letter of

21 April 23rd from Joe Tomita of Toyota is, in fact, in the

22 record. I think it was sent to me, to Ms. D\'Adamo, to

23 Supervisor DeSaulnier, Dr. Friedman, and Mr. McKinnon.

24 GENERAL COUNSEL WALSH: Yes. It will be made a

25 part of the record as the disclosures made this morning,

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1 and we did have copies made and they have been provided to

2 all the Board members.

3 CHAIRPERSON LLOYD: Again I think now that we

4 have completed our ex parte disclosures it\'s time to begin

5 the Board\'s decision on discussion process on the matter

6 before us.

7 Again, with my colleagues permission, I would

8 like to exercise the Chairman\'s prerogative and start us

9 off by sharing my own perspective on proposed regulation

10 before us before we get into detailed discussion.

11 I said at the outset of today\'s hearing we have

12 not failed in our quest for zero-emission transportation.

13 In fact, I stated it is, in fact, a marathon, not a

14 sprint. The task of achieving a revolutionary change in

15 motor vehicle technology is simply more difficult than

16 anyone anticipated when this effort began in the early

17 \'90s and, in fact, requires working closely with the

18 industries who are, in fact, expected to effect that

19 change.

20 In my judgment we need to be realistic about the

21 challenge that is still before us, but we should keep our

22 optimism and never, never give up. That\'s important. At

23 the same time we need to stay focused on what is

24 achievable in each time frame and about what constitutes

25 the progress towards our ultimate goal, which is advancing

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1 the technology and getting clean air and, in fact, our

2 drive to zero.

3 I think it\'s, again, important as we look to our

4 challenges for clean air that goal is very, very

5 important. But as we\'ve seen, the family of technologies

6 that are getting us to cleaner air are, in fact, a

7 critical portion of this overall regulation, although the

8 ZEV piece attracts the most attention.

9 Again, with all that being said the support in

10 general, the staff proposal for amending the ZEV

11 regulation as laid out today in particular just to

12 reiterate changes to the ZEV and hybrid electric vehicle

13 calculation to address the legal concerns. I think the

14 two-path compliance structure is important given that

15 flexibility.

16 The reliance on the California Fuel Cell

17 Partnership stretch goals to define the appropriate number

18 of fuel cell vehicles on the alternative path in 2001 to

19 2008 which brings up the 250 number. And again, since the

20 last meeting we have had that strong letter from Sierra

21 Club and John White endorsing that number. And I will

22 also say at this time being one of \-- ARB being one of the

23 founding members of California Fuel Cell Partnership,

24 being the Chairman for this year of that, again I have a

25 lot of faith and a lot of hope in that partnership to get

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1 us to zero-emission technology. Recognize there are many

2 challenges to be overcome, but I think we have a chance

3 to, in fact, turn the tide, if you like, to work together

4 with all the stakeholders here to bring us a technology to

5 California and working together with the energy partners,

6 government partners, technology developers, and the

7 industry, I think we will have a real opportunity and I

8 think with the increased effort at the national level and

9 international level.

10 That\'s not to say, obviously, that we are going

11 to continue with our other seeking of battery electric

12 technology to get to us to zero. I think on the 250

13 number \-- I\'ve learned a lot in the last two years about

14 the numbers. And I think that as we look at the

15 development program the cost it takes, while that may seem

16 a smaller number than I certainly would have approved

17 two years ago, I feel seeing firsthand what this industry

18 needs and takes, I think in a development process that\'s a

19 reasonable number. And, in fact, the stage growth in

20 terms of using the factor of 10 as defined by the staff

21 for 2009 and beyond is, I think, a realistic goal.

22 I think the creation of a new independent expert

23 review panel to assist the Board in evaluating the status

24 of ZEV technology, both fuel cell and batteries and hybrid

25 electrics, I think is a very important piece of this

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1 overall.

2 I would suggest that we maybe early on \-- staff

3 was talking about getting that started in 2005. I think

4 that\'s too early. I would like to see that being sort of

5 in the 2007/08 time frame or \'06, some flexibility there

6 to give us time to understand the technology.

7 But I would request that annually the Board

8 reports \-- the staff reports to the Board to give us a

9 status report as we have in some others about the progress

10 of how this regulation is being implemented. And I think

11 in the past we\'ve been surprised about maybe people have

12 taken advantage of this. Maybe that \-- the basically

13 unexpected consequences. So I think if the staff would

14 report back to the Board to make sure it\'s going along.

15 An annual basis would be helpful. Not a hearing, just an

16 informational one.

17 I think the suggested provision to address the

18 travel issue with other states, I think, is reasonable. I

19 think with regard to battery electric vehicles I, too, am

20 concerned that the manufacturers step away from this

21 technology at this time. And it\'s been deeply

22 disappointing. Two years ago I had great hopes. However,

23 I think that the staff has made every reasonable effort to

24 encourage and foster their participation in the

25 regulation.

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1 And I\'m pleased the additional incentives to the

2 proposal to encourage auto makers to keep BEVs on the road

3 as long as possible. And I\'m also satisfied with the

4 inclusion of BEVs and the alternative compliance path is

5 done so at a favorable ratio. So we\'re not turning our

6 back.

7 With regard to plug-in hybrids, I think we\'ve all

8 heard the response from auto makers from the question

9 posed regarding what incentives could be offered to induce

10 them to introduce plug-in hybrids. And, in fact, we

11 explicitly asked that question at the hearing of the auto

12 manufacturers. This response has ranged from clear

13 indifference to acknowledgement that the proposed

14 regulatory structure was attractive enough to look into.

15 With this information holding firm to my

16 principle that zero means zero, the tailpipe, I agree with

17 the staff\'s suggestion that plug-in hybrids continue to be

18 treated in silver category vehicles.

19 Again, to sum it all up, I think we should

20 seriously consider a motion to approve staff\'s proposal

21 essentially as is with the comments that I made. But I\'m

22 also keenly aware that some of my colleagues have

23 different views on individual elements of the proposed ZEV

24 modifications. I do not mean to cut the discussion short

25 in any way because it\'s a complex issue.

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1 BOARD MEMBER RIORDAN: Mr. Chairman.

2 CHAIRPERSON LLOYD: Ms. Riordan.

3 BOARD MEMBER RIORDAN: If I might, just to help

4 us frame our discussion this morning, I would like to move

5 that the Board approve the staff recommendations that are

6 before us today and to include your request for the staff

7 reports to follow on an annual basis and the delay of

8 your \-- at the Advisory Board to 2006 or after.

9 BOARD MEMBER HUGH FRIEDMAN: Second.

10 CHAIRPERSON LLOYD: Discussion. Yes.

11 BOARD MEMBER D\'ADAMO: I think we need to discuss

12 the staff proposal.

13 CHAIRPERSON LLOYD: Yes.

14 BOARD MEMBER McKINNON: Could I \-- we have a

15 number of documents that were talked about going into the

16 record. I\'m wondering if before we have the discussion if

17 we can have those documents copied so everybody has them

18 to look at. I don\'t mean to cut anybody off but \--

19 CHAIRPERSON LLOYD: I think that\'s fine.

20 GENERAL COUNSEL WALSH: They\'re being copied now.

21 And as soon as they\'re ready, we\'ll distribute them.

22 BOARD MEMBER D\'ADAMO: I\'m fine with going ahead

23 with what I have to say. I won\'t be referring to any of

24 them specifically.

25 Mr. Chairman, I would like to compliment how far

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1 we\'ve come in this staff report in a number of areas,

2 particularly regarding the structure of the base path and

3 the alternative compliance path. And some of the changes

4 that were made with regard to the silver and bronze

5 category. However, I haven\'t seen any \-- that\'s pretty

6 much where we were in March with regard to what I felt to

7 be the consensus that emerged at the last hearing. There

8 was strong consensus that battery electric vehicles be

9 incentivized by some sort of ratio, and there was also

10 strong \-- I felt strong consensus with regard to at a

11 minimum a number of 250 and higher numbers in the out

12 years. I\'m disappointed that what we have before us today

13 is the minimum level where I felt we left off at the last

14 hearing.

15 I think that we can do more. I think we can do

16 better particularly in the near term. And I think that we

17 need to be honest with ourselves when we look at just one

18 example, the number in the near term, the 250. We need to

19 be honest with ourselves that we are not talking about 250

20 fuel cells that will be built in that time frame in your

21 term because we know realistically there are a number of

22 auto makers that are going to remain on the base path. So

23 right off the top we can chop that figure roughly in half

24 or in a third, you know, depending on how many auto makers

25 choose to stay on the base path.

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1 Then, in addition, because of the concern that

2 was expressed by myself and a number of other Board

3 members and witnesses, there is a credit scheme that\'s

4 been added into the mix that wasn\'t originally envisioned

5 on the alternative path to provide for BEV incentives and

6 for new BEVs, new BEV production, and for release.

7 I\'ve been advised that realistically staff

8 believes that the auto makers believe that those

9 incentives are not enough to encourage new production of

10 BEVs. But they probably are enough to incentivize a

11 re-lease of existing BEVs that are already out there.

12 So I\'m in sort of a quandary. I feel like we

13 have an unattended consequence here as a result of an

14 issue I feel very strongly about, and that is BEVs. So

15 considering those additional incentives with regard to

16 re-leases, the number of 250 cut in half or cut down to a

17 third would be reduced even further. Plus, we also don\'t

18 have any complete assurances those vehicle are going to be

19 in the state of California, which gives me great

20 heartache.

21 I think that what we should have done is given it

22 a good college try. Sit down with the auto makers and the

23 stakeholders and see what could be done to increase that

24 number and keep the auto makers at the table. Keep them

25 working through the Fuel Cell Partnership. We already

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1 know they were committed to roughly 250 anyway. But with

2 the number that we have, it\'s going to be less than 250

3 realistically. I think we could have done better. We

4 could have pushed for \-- had staff and through their

5 discussions pushed for a higher number. I don\'t know what

6 the magic number is. I\'m not in the position to be able

7 to say what that should be, but I think it\'s got to be

8 more than 250.

9 Other alternatives we could have looked at would

10 have been a floor for BEVs. And I think we should have

11 done a better job at exploring a viable credit trading

12 program similar to the initial reduction credit system

13 that\'s in place with regard to stationary sources at the

14 district level.

15 I\'ve raised this issue several times over the

16 last couple of weeks with staff, and I just don\'t get a

17 sense there was any attempt to work with the auto makers

18 and come up with a creative approach. I know there was

19 some suggestions advanced by CalETC. That may not have

20 been the way to do it. But I feel that if we had tried

21 hard enough, we probably could have come up with

22 something.

23 Basically, my bottom line is I think we need to

24 have more fuel cell numbers, fuel cell equivalents so we

25 can have a meaningful incentive program for BEVs. I\'m

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1 just not ready to close the door on any technology that\'s

2 out there. I think we need to do everything we can to

3 keep optimistic, just as we are with fuel cells. Keep

4 optimistic with BEV production.

5 I\'m nervous about having BEV production

6 advancements frozen in time to this date while the other

7 technologies continue to advance, which is what we want.

8 We want to have fuel cell technologies advance, hybrid

9 technologies, plug-in hybrids. I think BEVs need to be in

10 that mix as well. So I reluctantly will be \-- unless

11 there are any changes, I\'ll be opposing the staff

12 proposal.

13 CHAIRPERSON LLOYD: Let me just comment on the

14 fuel cell. That\'s close to my area. I think that there

15 was not a commitment of the Fuel Cell Partnership 250

16 vehicles. In fact, that was a goal they put forward.

17 This regulation would actually put that into a specific

18 number. So I think it\'s incorrect to say that that was a

19 commitment.

20 I would also like to have seen that number

21 higher. But after talking to the manufacturers, seeing

22 what\'s involved, I cannot in good conscious require them

23 to put a greater number of vehicles out there, which are

24 expensive which we realize are in the development stage.

25 And it doesn\'t bother me a lot that the number

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1 may be smaller because as long as you\'ve got a reasonable

2 number out there because these are development vehicles.

3 And I feel assured also with the competition going on

4 there will be a significant development. This regulation,

5 however, ensures that we\'re getting this technology on the

6 road in California through the partnership as fast as

7 possible. And we\'re, in fact, developing the

8 infrastructure in a true partnership way which will

9 require them. And, in fact, we have the great leadership

10 by the South Coast Air Quality Management District in

11 putting hydrogen infrastructure already in the basin. So

12 the numbers don\'t bother me that much.

13 And I also feel that part of what I said earlier

14 on, I think what we\'re trying to do here, we have tried to

15 force batteries onto the road. We have not been

16 successful with the major manufacturers. And what we\'ve

17 had, as I think staff indicated, we had starts and

18 confrontation.

19 I\'m now convinced that our greatest benefit here

20 is to try to identify technologies that they have

21 identified that can be commercial successes, the hybrids

22 already and the fuel cells, but not ignoring the

23 batteries. Because if we can see that there are other

24 ways, if we can see that the cost changed significantly

25 trying to keep that open, the base path is there. We

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1 had \-- in 2001 we had people taking advantage of that base

2 path. We didn\'t get the vehicles we wanted. We got a lot

3 of smaller vehicles.

4 So again, I\'m not nearly as pessimistic as you

5 are in terms of the numbers and the consequences because I

6 think as we see this, this is tremendous potential.

7 BOARD MEMBER D\'ADAMO: Well, my only response \--

8 I know other Board members would like to speak. But I

9 would like to \-- I share your optimism on fuel cells, just

10 not to the extent. I think it\'s bait and switch strategy.

11 I hope I\'m wrong.

12 I just \-- as you indicated in your remarks,

13 Mr. Chairman, that you think we need to keep focus, keep

14 optimistic. I feel that way with regard to BEVs as well.

15 I think if they\'re incentivized enough, there will be

16 improvements. Will they be to the extent we had all

17 dreamed and hoped? Probably not. But I suspect that with

18 all the brain trust that\'s out there, there will be

19 improvements.

20 CHAIRPERSON LLOYD: Of course, there will be

21 improvements as a result of the hybrids because they\'re a

22 critical part of that, both for fuel cells and for

23 gasoline or the hybrids. I recognize they\'re a different

24 type of batteries there. I don\'t know if staff wants to

25 respond to that at this time.

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1 Dr. Burke and Supervisor Robert.

2 BOARD MEMBER BURKE: I\'ll concede to the

3 Supervisor.

4 SUPERVISOR ROBERTS: Thank you, Dr. Burke.

5 First, I\'m not disappointed, and I want to

6 compliment staff. This report has brought clarity to what

7 I was looking at as a Roubix cube of air quality issues.

8 There\'s an incredible number of different pieces here all

9 seeming to go in directions. And obviously a lot of

10 different interests. There\'s a lot of focus on the

11 numbers because numbers are an easy thing to grasp.

12 I\'m not disappointed in this number, not even in

13 the least. Talking about a number when we\'re talking

14 about the R&D that needs to occur over the next several

15 years is like requiring a chemist to use a certain number

16 of test tubes in his R&D. It\'s not critical. The number

17 is not critical. We need as a sustained effective

18 research and develop program. We need a commitment to

19 that. And then we have to hold the feet to the fire to

20 make sure that\'s happening.

21 I probably would have liked to have the report in

22 a couple years because it\'s \-- there\'s a lot that\'s

23 already happened that\'s going on, and we\'re not sort of up

24 to date on, at least I feel like I\'m not. And I would

25 like to have had that probably earlier rather than later.

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1 The main goal of cleaning up the air in

2 California, if not in the nation and the world, I think is

3 going to be very much an outcome of this proposal. And I

4 like it for that reason. But I also like it for some of

5 the secondary things that aren\'t necessarily part of our

6 official agenda.

7 I like the fact that hydrogen might be in a

8 position to displace the petroleum products. I like it

9 because of the potential for use in a distributed

10 generation solution to some of our other energy

11 requirements. I like what I see happening.

12 I also like the fact that the recommendation is

13 not to move the plug-in hybrids to the gold category.

14 They simply aren\'t gold. They shoudln\'t be in gold. You

15 know, it\'s a nice thing, and there\'s a place for it. And

16 it\'s been incentivized to the highest level it should be.

17 But they shouldn\'t confuse what that gold category is.

18 And it should be something that really is gold and

19 contributes in a significant way to the overall solution.

20 And the plug-in hybrids, in my mind, aren\'t there.

21 So I like this. I like the proposal. I like

22 what staff has done here. I\'m satisfied with the numbers

23 both in the early years. As I say, I don\'t think the

24 numbers in and of themselves are what\'s going to be

25 important. I mean, you can put 250 fuel cell vehicles out

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1 there, and if it\'s not really part of an effective

2 sustained research and development program, you won\'t get

3 anything out of it. You\'ll get numbers. And it isn\'t

4 numbers that are important. It\'s to get the actual

5 operating vehicles and to get the knowledge and to be able

6 then to be able to respond to the market and the cost and

7 the convenience and the range and the maintenance and

8 everything else to accomplish those goals.

9 So maybe I\'m overly optimistic at this point.

10 But based on what I\'ve seen, I think that we\'ve got a

11 great program here. Again, I want to compliment staff for

12 bringing the clarity to this that wasn\'t there at the last

13 meeting. There was so many loose ends here. I thought,

14 how are we going to get this stuff all put back together?

15 I think your recommendations are excellent, and I intend

16 to vote for the motion.

17 CHAIRPERSON LLOYD: Thank you, Supervisor

18 Roberts.

19 Dr. Burke.

20 BOARD MEMBER BURKE: The reason I seeded my time

21 to the supervisor because we spoke \--

22 CHAIRPERSON LLOYD: Would you speak up, Bill,

23 please.

24 BOARD MEMBER BURKE: Mumbles Burke here.

25 The reason I seeded my time to Supervisor Roberts

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1 is because we had discussed this at some length personally

2 over the last few days. And he reflects my personal

3 thinking.

4 There is some concern from South Coast as it

5 relates to what we hear as the domestic car manufacturers

6 are going to put all their cars in back east. And the

7 foreign car manufacturers are going to put all theirs in

8 California. We think that\'s a bad public policy

9 situation.

10 As far as the staff proposal, with that one

11 caveat, I plan on supporting it vigorously. And South

12 Coast District looks forward to helping with the

13 infrastructure at any point that we can, whether it\'s

14 intellectually or financially. We\'re going to be out

15 there supporting this. But I really would like to have

16 some further discussion of this travel issue.

17 EXECUTIVE OFFICER WITHERSPOON: On that point,

18 staff intends to monitor the placement of fuel cell

19 vehicles quite closely. If we see significant leakage to

20 other states, we\'ll be back before you with an amendment

21 to the travel provision.

22 But we think on the natural, we have all of the

23 right ingredients to make the fuel cells come to

24 California, including, of course, your own infrastructure.

25 BOARD MEMBER BURKE: Our concern\'s one of

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1 Congressal influence. And with the Chairman of \-- you

2 know, it\'s pretty easy for him to shift that way. And it

3 would seem to me that we would want to do something in

4 advance of the problem, rather than seeing it happen and

5 then trying to deal with it.

6 CHAIRPERSON LLOYD: I think this is \-- I would

7 say this is an opportunity \-- and I\'m looking to the back

8 of the room to our domestic manufacturers. In fact, we\'ve

9 heard many times that you know you don\'t like mandates.

10 This is an opportunity, in fact, to, in fact, work as a

11 true partnership so that, in fact, the concern that you

12 hear expressed, we don\'t get cars in California basically

13 is not a valid concern.

14 After talking about a number of you there, I have

15 confidence that we will get our share of cars. But,

16 again, I think you\'re hearing that \-- please help us.

17 Please make this a really two-way working relationship.

18 Because one of the reasons, obviously, for us asking staff

19 to report back to us on a regular basis is that we want to

20 develop a new relationship working together. But there\'s

21 not sufficient trust there yet, public trust that we want

22 that we see that moving ahead.

23 So I\'m hopeful, Dr. Burke, that can happen. And

24 I think we are in discussions with the companies. And I\'m

25 optimistic, and I want to keep it that way. At least at

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1 this time I would hope we wouldn\'t try to put something

2 more than we have there. But try to work together with

3 the companies. I think each are desirous of that. And if

4 no other reason, I don\'t think they would want to see

5 California roads be even more dominated by competitors

6 from overseas. And they would want to make sure their

7 technology is getting out there. As we see in the

8 partnership, they\'re all working well together. And we

9 see the various generation of vehicles getting better and

10 better.

11 I\'m not sure that addressed your concern, but

12 let\'s be positive.

13 BOARD MEMBER BURKE: I\'m willing to accept yours

14 and Katherine\'s assurance that you\'ll monitor that. And

15 trust me, our people will be in touch with you in

16 following up.

17 CHAIRPERSON LLOYD: I know. McKinnon.

18 BOARD MEMBER McKINNON: Yeah. I also join Member

19 D\'Adamo in opposition to the resolution. And I think it\'s

20 really hard to do that on this Board because there\'s a lot

21 of respect between the members of the Board and towards

22 the Chair and towards the staff. We have a bright,

23 hard-working staff that works hard to fix and negotiate

24 problem. And the Chairman brings experience and science

25 to every problem. And it\'s just really, really hard to

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1 come out with a different opinion, but I have a different

2 opinion.

3 So I want \-- I want to say what\'s positive, what

4 I think is really positive about the proposal. And what\'s

5 really positive in terms of clean air, which is the bottom

6 line, in the bronze category and silver is the AT PZEV and

7 the PZEV make a major contribution to cleaner air, big

8 time.

9 And I know Kelly Brown\'s been waiting for me to

10 say that forever. So I said it, Kelly. There you know.

11 It\'s a big deal, and it matters. And my

12 concern \-- we can play all sort of semantic games about

13 base path and alternative path. My concern, and the

14 reason I put a motion up last time, is that I\'m concerned

15 we\'re putting all our marbles into one basket, and that

16 being fuel cell. And the electric car is a proven

17 technology. Yes, there\'s battery difficulties, costs and

18 range. Fuel cell, you still have range problems.

19 I guess my bottom line is that we\'re weighing in

20 on technology unwittingly. We\'re saying this is the

21 course for the future, and we\'re weighing in pretty

22 heavily.

23 Between the paths and between the way that we

24 could have worked on resolving this, we could have left

25 the availability of multiple technologies. I don\'t think

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1 we did that. I think by setting the 250 number which is

2 some \-- it\'s sort of a deceptive number. It\'s sort of

3 like some will go to the base path and then some will use

4 other methods. We could get as few as 85 fuel cell cars

5 distributed throughout the United States. I mean,

6 that\'s \-- hopefully that doesn\'t happen. And I know with

7 the work that\'s gone on with the partnership, it\'s

8 unlikely that will happen. And I will grant that. But it

9 could go as low as that.

10 It seems to me that we should be developing this

11 without sort of the weakening of the 2001 course. I mean,

12 sort of how this starts is we weaken the 2001 path, and

13 then we have to be concerned about the alternative path

14 not being so strong that we don\'t get anything out of it.

15 Well, we need to go back to 2001 path. It should be as

16 close as possible to what the deal was in 2001. A deal\'s

17 a deal. That was what it was.

18 And then you have \-- from there you have the

19 discussion about what the alternative path is. 2001 \-- I

20 mean, we have cars that land in California for a year and

21 then they\'re gone that are ZEV. They\'re moved to New York

22 or they\'re moved to Massachusetts.

23 I really appreciate that CalETC did a lot of work

24 trying to figure out \-- and, actually, they halved their

25 proposal for compromise between the last meeting and their

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1 April 17th. They halved the number of electric cars that

2 could meet to match fuel cell.

3 And, you know, maybe this isn\'t the right scheme

4 to do it. But it seems to me there ought to be a scheme

5 that says we want in the mix in the near term

6 zero-emission vehicles. Zero. And that we\'ve given a

7 scheme where the auto makers can choose and pick how they

8 get there and what they do. I\'m not saying we mandate

9 battery electric vehicles. I can live with not mandating

10 fuel cell vehicles, if that was how you did it. That it\'s

11 a choice and it\'s a path that they determine what the mix

12 is. We just determine what the fair tradeoffs are between

13 the vehicles.

14 The only kind of other subject I want to address

15 is that part of the Modisette Proposal proposed setting up

16 a trading mechanism so that if a company was working on

17 fuel cells and they got down the line and they were having

18 difficulty and they said, \"You know, we want to delay

19 making ten more fuel cell cars because we\'re grappling

20 with a problem, a materials problem. And we want to find

21 a replacement to the rare metals that are being used\" so

22 that they can reduce the cost. They say, \"Let\'s work on

23 that for a while. Not produce any more fuel cells. We

24 will put battery electrics on the street to replace them,\"

25 during that interim period of time because it doesn\'t make

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1 sense to make more fuel cells before you fix that problem.

2 And if there was a trading mechanism where

3 companies could go to some of the people that want to make

4 battery electric vehicles and purchase them or purchase

5 credits from them, that would be a good approach, and I

6 think a valid approach.

7 My final comment is that when we talk about what

8 things cost, there\'s all sorts of numbers that have

9 floated around in the fuel cell development. And I have

10 to tell you from last hearing to most recently, the cost

11 numbers went from \$1 million per car to

12 half-a-million-dollars per car. And that\'s now. That\'s

13 not looking at over the next few years when everything

14 we\'ve seen \-- costs go down as thing are developed.

15 So when people talk about cost, that needs to be

16 considered, clearly. The other thing that needs to be

17 considered is there are other costs that are being wrapped

18 into the discussion. For instance, if a manufacturer,

19 which one is, has developed a car that is software

20 controlled to the hilt. Boeing did that with the 777.

21 And that\'s a great approach. You can fine tune all sorts

22 of factors in the vehicle, the airplane, or the car with

23 the software. It is not fuel cell development, however.

24 So when people talk about costs, if they want to

25 include that in the cost, it\'s introducing software into

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1 the controls of the vehicle. It\'s nothing else, and it

2 shouldn\'t be publicized as part of the cost. I\'m not

3 saying anybody\'s done that, but I know how this stuff

4 works. I want to put that on the record.

5 The other thing that\'s being discussed in one of

6 the fuel cell cars that\'s been developed is sort of this

7 modular construction where the fuel cell and the

8 electronics and the controls are sort of all in one piece,

9 and then the body is interchangeable. And that isn\'t fuel

10 cell development. What that is, is manufacturing process

11 development, and it is maybe a more efficient way to make

12 cars or to change product lines or whatever. It shouldn\'t

13 be counted as part of the cost of developing fuel cells.

14 It should be counted as smart development of a company at

15 a better way of manufacturing.

16 So with all of that said, I can\'t support it. I

17 have a lot of respect for the work and the decision making

18 that\'s gone into this process. But I think we\'ve gone

19 just a little bit too far in determining which technology

20 will move forward.

21 CHAIRPERSON LLOYD: Just a comment on the cost,

22 and I\'d like staff to respond.

23 The impression you give I don\'t think it is quite

24 right. And, in fact, if staff has been able to have the

25 cost of fuel cells in a month, then we got a number of

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1 people in the audience who would love to employee you

2 right away. So maybe you could clarify why, in fact, we

3 reduced \-- used a lower number.

4 EXECUTIVE OFFICER WITHERSPOON: We did not, in

5 fact, change our estimate of the cost compliance. From

6 everything we understand from the confidential

7 conversations with auto manufacturers, the expenses of a

8 hand-built fuel cell vehicle at the moment are in the

9 million-plus range. It\'s difficult for any of us to

10 project what they\'ll be by the end of 2008.

11 However, to make sure that we were not setting up

12 an unfavorable ratio for BEV substitution, in that

13 instance we assumed the cost would come down so that we

14 wouldn\'t leave BEVs more expensive than fuel cells in a

15 trading scenario.

16 So for the purpose of that analysis, we assumed

17 they\'d come down by half. That doesn\'t mean we know that

18 will or have any evidence they will. But we want to make

19 sure BEVs remain cheaper as a substitute to any fuel cell

20 vehicle.

21 CHAIRPERSON LLOYD: Thank you for that

22 clarification.

23 Supervisor DeSaulnier.

24 SUPERVISOR DeSAULNIER: Thank you, Mr. Chairman.

25 As you look down to your far right, I just first of all

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1 want to echo all of my colleagues\' comments so far, and

2 particularly the respect I feel for staff and for the

3 Chairman. I know it\'s been a difficult few months,

4 particularly few hours.

5 And I don\'t think from my perspective \-- you

6 know, Matt mentioned semantics. I do think it\'s a

7 question of degree up here, and truly it\'s a question of

8 trust from my perspective. This is an incredible bully

9 pulpit, as Teddy Roosevelt used to say about another

10 office. But when it comes to air quality, the value of

11 being a member of the California Air Resources Board is

12 really quite amazing. And one of the things I\'ve been

13 concerned is devaluing that in any way. And, of course,

14 we deal with perception. Optics is a favorite word now in

15 politics. And I think it\'s important that we all leave

16 here with a true commitment to whatever the reg is because

17 I don\'t think victory will be determined today. It will

18 be determined most likely in the coming decade, but really

19 in the next year, I think. And I see that in terms of

20 what the auto industry does with what happens today.

21 My difficulty with the staff recommendation and

22 why I agreed with D.D. and Matt a month ago was perhaps

23 somewhat simplistic. But as a generalist, maybe that\'s

24 the best thing to do. Was the 500 number or better was a

25 source of currency basically that would be, as staff put

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1 it, used to leverage BEV technology.

2 I don\'t think BEV technology in my own

3 experience \-- and it\'s largely intuitive \-- is we should

4 give up on it, as D.D. said and Matt said. I look at

5 vehicle miles traveled in the state of California from a

6 transportation perspective. And I\'ve mentioned this

7 before, and I know others up here who have sat on MPOs

8 metropolitan planning organizations. We realize we can\'t

9 provide the infrastructure over the next few decades for

10 single occupancy vehicle used the way we have in the past.

11 The California dream of super highways and that kind of

12 infrastructure doesn\'t exist. So the cars are going to

13 have to change by necessity. The land use is changing.

14 And the dependence on transit is changing.

15 I think there\'s an opportunity there that people

16 will begin to see things like city cars as a viable

17 alternative, the way they see them in Europe right now in

18 the smart car in particular, although that\'s an

19 alternative combustion engine. But I do think that

20 platform will have growing validity. And I think the

21 possibility for the battery technology is something my

22 friends at Toyota have led me to believe is there are more

23 and more mass-produced hybrids, there\'s greater

24 opportunity for that kind of use.

25 Now, the Chairman assures me, and I trust him,

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1 that that opportunity exists with this regulation. As I

2 read it, it does. But my level of trust is not as strong

3 with some of the other auto manufacturers who at the very

4 best I feel have been disingenuous. And unfortunately

5 those are American companies, one large American company

6 in particular.

7 So the reason I hesitate to support it is not

8 because I feel it\'s a step back or I don\'t trust staff or

9 I don\'t trust some of the manufacturers or I lack respect

10 for where the Chairman is coming from. It\'s that from my

11 experience \-- unfortunately, I\'ve been growingly skeptical

12 about certain of the people who are involved in the

13 regulated community.

14 And then, in addition, going back to Mr. Friedman

15 when he was here in his attempt to look like Cal and speak

16 like Cal Worthington, I think there\'s great opportunity

17 for fuel cells \-- or hydrogen, I should say, not just fuel

18 cells and internal combustion engines. But this \-- and

19 for lack of a better expression and I\'ve been corrected on

20 this \-- chicken and egg aspect, whether it\'s deliberate or

21 not, the fuels\' people, the petroleum industry, I don\'t

22 think are going to be terribly interested in providing the

23 infrastructure of the hydrogen either small scale or large

24 scale.

25 So I am interested \-- and maybe staff can respond

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1 when we come back in three months about not just

2 infrastructure but the trick to the infrastructure is

3 matching it so supply and demand and the possibility for a

4 very low emitter a PZEV or close to it that would be

5 hydrogen ice that may be captured in this regulation that

6 I\'m missing or perhaps we need to work with.

7 And then I appreciate the time \-- I\'ve gone back

8 and forth. Allen called me last night, and I do think

9 that if this motion passes, which I\'m inclined to think it

10 will, we all leave here expecting that there won\'t be

11 revisions backwards, that the auto industry will embrace

12 it and accept it for what it is and work with us and work

13 with us in the next year on other areas.

14 I won\'t support it because I\'ve unfortunately

15 grown skeptical. But I\'m willing to be proven wrong. And

16 I hope I will be proven wrong by those members of the auto

17 industry who chose to be responsible to California and its

18 public health.

19 Thank you, Mr. Chairman.

20 CHAIRPERSON LLOYD: Just a clarification, again,

21 for just reminding us I think in the resolution it does

22 require staff to come back with a report talking about the

23 appropriate process for incentivizing station cars and

24 hydrogen infrastructure and also how we might integrate

25 that into the related transportation management programs

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1 and also looking at the appropriate role for stationary

2 fuel cells.

3 SUPERVISOR DeSAULNIER: Mr. Chair, if I could

4 clarify. I appreciate that paragraph. I have it

5 highlighted. Also as part of that is the connection with

6 potentially that infrastructure with a growing demand

7 which would be perhaps hydrogen ice.

8 CHAIRPERSON LLOYD: As I mentioned before, I

9 think I had the \-- again, the opportunity yesterday to see

10 the progress made by \-- being made by South Coast with

11 various partners to deploy hydrogen infrastructure down

12 there. They\'re doing a really excellent job. We\'re

13 slower up north. But that\'s moving across from Auburn

14 through West Sacramento to the Bay Area and down. And we

15 will have links north and south. So that\'s coming on.

16 But obviously as I said before, that will be a slower

17 progress.

18 Dr. Friedman.

19 BOARD MEMBER WILLIAM FRIEDMAN: As usual as I

20 was trying to put my thoughts together about what to say

21 about this regulation, Ron Roberts said the things I was

22 thinking better than I could have said. I\'m not going to

23 repeat those things.

24 But both D.D. and Bill Burke did raise this issue

25 about out-of-state transport. And Catherine mentioned the

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1 fact that this would be monitored. I\'m curious why can\'t

2 we \-- I mean, of course, you\'ll monitor it. But can we at

3 some date \-- doesn\'t have to be today \-- get some notion

4 of what indices will be employed to raise a red flag.

5 It\'s one thing to monitor. It\'s another thing to know

6 what, indeed, will trigger some response that we need to

7 make.

8 CHAIRPERSON LLOYD: You want early warning?

9 BOARD MEMBER WILLIAM FRIEDMAN: I think that\'s

10 appropriate. And I\'d like to make sure that, you know,

11 indeed, we get some more clarification on that point.

12 EXECUTIVE OFFICER WITHERSPOON: Earlier today the

13 Chairman asked us to report back annually on how the

14 entire program is evolving. That\'s certainly one

15 mechanism.

16 But the things we would be looking at is actually

17 vehicle placements, the amount of time that California

18 vehicles reside in California. That\'s been an issue in

19 the Fuel Cell Partnership to date. And to the extent we

20 start to credit them under our regulation, we need to be

21 clear about how long we expect them to remain in our state

22 to count against the alternative compliance path.

23 BOARD MEMBER WILLIAM FRIEDMAN: That\'s my point,

24 Catherine. I agree with \-- those are the things you\'re

25 going to look at. But where\'s the line about when we

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1 really need to be \-- need to potentially do something when

2 the line is crossed?

3 EXECUTIVE OFFICER WITHERSPOON: It\'s your call,

4 of course, how much alarms you. I would say anything over

5 10 percent would alarm me. I would want to bring it to

6 your attention.

7 The vehicles only count if they\'re played in

8 another LEV state. So we\'re only talking about New York

9 and Massachusetts. Placements in Washington D.C. where

10 there\'s a lot of interest in getting Congressal attention

11 these vehicles or in Michigan would not count. Those have

12 to be vehicles produced separately for that purpose. And

13 the temperature situation in New York and Massachusetts

14 works against them. Getting cars early, cold weather

15 management is a problem with fuel cells. So California\'s

16 more temperate climate is the one of the biggest reasons

17 we\'ll get them first, along with the fact we have a very

18 well-developed partnership and early introduction of

19 hydrogen infrastructure and now a regulatory reason to

20 bring them here.

21 CHAIRPERSON LLOYD: And if you\'d like,

22 Dr. Friedman, we could \-- again, if there\'s anything that

23 staff want to elaborate on in three months time, we can

24 add to that.

25 Dr. Burke.

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1 BOARD MEMBER BURKE: South Coast is spending a

2 lot of money putting in hydrogen infrastructure. Some

3 people question if we\'re not spending more than we should.

4 And it\'s the basis probably of our concern of movement of

5 these cars. There are cities like Santa Ana who want to

6 establish a city free of hydrogen cars and have federal

7 indication that there may be some support there to do

8 that. This question nibbles at me because we\'re spending

9 millions and millions and millions on this infrastructure.

10 And I\'d think to be at the back side of the bell curve \--

11 and I know Catherine\'s going to watch it. But if there

12 was something we could figure out that would give us

13 rather than retrospective, prospective warning, we sure

14 would appreciate it. But we don\'t want to let that stand

15 in the way of the progress of what we\'re doing today.

16 CHAIRPERSON LLOYD: I think, Dr. Burke, we

17 will \-- staff will report back on that in three months. I

18 think that\'s a \-- plus the fact, just remind my

19 colleagues, that as we are developing the hydrogen

20 infrastructure as a result of one of the other regulations

21 we are having a demonstration of zero emission fuel cell

22 buses which we hope will grow in the latter part of this

23 decade. So that\'s also being an important part. These

24 are being developed in California.

25 EXECUTIVE OFFICER WITHERSPOON: Chairman Lloyd,

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1 Tom could get at another point he wanted to bring to the

2 Board\'s attention about early signal to where these cars

3 might go.

4 MR. CACKETTE: One other strong pulling factor

5 for these vehicles is that the Department of Energy has

6 announced a large amount of money to subsidize fuel cell

7 demonstrations. And there\'s an RFP on the street and

8 people are teaming up to bid on it. They do to have to be

9 in multiple states. So there would be some bids that will

10 include cars going to other states.

11 But that\'s one way that we will sort of get an

12 advance that something\'s happening. We\'ll see the results

13 of those, who gets awarded them. And if there\'s going to

14 be a problem because they\'re all going somewhere else

15 because of that money and not California, I think we could

16 react fairly quickly and let you know right away if

17 there\'s a problem. And you could take the action to

18 require more of them here.

19 BOARD MEMBER BURKE: I would just like to share

20 with you we have an intelligence which indicates that it\'s

21 not coming here. Already we know it\'s not coming here.

22 So if we want to protect our own, you don\'t have to wait

23 for that information. I\'m giving that to you now.

24 CHAIRPERSON LLOYD: I\'ve been talking to maybe

25 not the same source, but I\'m a bit more optimistic than

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1 you are that we can get them. But it is a concern, I

2 agree. I agree. And that\'s where I think we need to work

3 into true partnership with the partners in the Fuel Cell

4 Partnership to make sure that, if fact, what we\'re hoping

5 for here does happen.

6 EXECUTIVE OFFICER WITHERSPOON: Just one last

7 comment on the whole issue. The cure for the travel issue

8 is to take fuel cell vehicles out of regulation entirely

9 and have them administered under a memorandum of

10 agreement, which is how we did electric vehicles back in

11 1998. And staff believes that a regulatory approach is

12 preferable to a memorandum of agreement because it\'s

13 enforceable. But it has this leakage aspect to it, and

14 we\'ll see as we go whether we should switch to a different

15 mechanism which has its own drawbacks as well.

16 CHAIRPERSON LLOYD: Any other discussion on the

17 motion?

18 Supervisor Patrick.

19 SUPERVISOR PATRICK: Thank you very much.

20 As you know, I was not here at last month\'s

21 meeting. And I thought I had dodged a bullet, but

22 apparently I wasn\'t able to do that. I have read the

23 transcript, and I especially was interested in the

24 transcript of the discussion on the Friday of last month\'s

25 meeting and the issues of concern which I think were or

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1 well articulated.

2 And I would like to compliment staff on the good

3 job that you have done in addressing each and every one of

4 those issues. I think that I in looking at the proposal

5 that\'s before us today on a much higher comfort level with

6 it certainly than I did previously.

7 But I\'m very supportive of this proposal. I

8 think that it moves us into the future. And I do have to

9 agree, though, with Supervisor DeSaulnier, the proof of

10 this is going to be in the pudding. And so we\'re looking

11 forward to working with all of the stakeholders in making

12 sure this proposal is something that moves us forward in

13 the zero-emission area because that\'s critically important

14 to all of us here in the state, certainly in the Valley

15 where I represent quite a few folks.

16 But I think it\'s no more necessary in the Valley,

17 really, than it is in any other particular area. And that

18 we need to move forward and that this proposal does that

19 and look forward to seeing what happens in the next decade

20 as that proposal comes to fruition.

21 CHAIRPERSON LLOYD: Thank you.

22 Mr. Calhoun.

23 BOARD MEMBER CALHOUN: Mr. Chairman, members of

24 the Board, I guess I\'m not as pessimistic about the auto

25 industry as some of any fellow Board members. And maybe

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1 that\'s understandable.

2 We can\'t dictate technology. We have to set a

3 goal and expect the manufacturers to work toward meeting

4 that goal. I don\'t think we\'ve eliminated battery

5 technology. I don\'t think we\'ve eliminated any

6 technology. I think if the manufacturers can make

7 business case for a given technology, then obviously that

8 will be their preference. We\'ve heard over and over

9 comments about their inability to make a business case for

10 batteries. And hopefully if progress is made in the

11 future, maybe they can. And I\'d like to see the battery

12 technology survive also, but I don\'t think that it\'s up to

13 this Board to try to force the manufacturers to produce

14 battery-powered vehicle.

15 So I\'m going to support the regulation. And I

16 think it\'s essential that we get the auto manufacturers to

17 cooperate with us. In whatever is it we\'re trying to

18 accomplish, you can\'t head down one road and they head

19 down a different road because you\'re going to end up

20 having a battle on your hands. And you\'ll end up in

21 court. We\'re fighting them or they\'re fighting us. And

22 if I\'ve learned anything in the last 40 years it\'s that

23 you need them to cooperate. So hopefully they will take a

24 lead from this and the action taken by the Board they that

25 will encourage them to cooperate. So I will support the

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1 motion.

2 CHAIRPERSON LLOYD: Thank you, Mr. Calhoun.

3 Professor Friedman, you\'re the last.

4 BOARD MEMBER HUGH FRIEDMAN: I\'m used to having

5 the last word in my classes so \--

6 I, too, commend staff. There was a lot of

7 clarity in the presentation. And I know how hard you\'ve

8 worked to read what we said and try and get a proposal

9 that\'s rational, and I think you\'ve accomplished that. I

10 think this proposal is realistic of achievement. I think

11 it gives stability and continuity to what was long begun

12 before and to what lies ahead. I think it gives us some

13 sure and realistic progress in attaining cleaner air

14 through lower emissions. Especially while the early years

15 don\'t give us as many zero emissions, they give us a lot

16 of reduced emissions, earlier and more.

17 And some of this \-- and I, too \-- I, too, wish to

18 share the desire of Board Member D\'Adamo and my good

19 friend, Matt, my fellow public member, and the Supervisor

20 DeSaulnier that we could dictate technology or so

21 incentivize it they would have no choice but to build it.

22 But I do \-- I\'m pleased to see the incentivizing

23 for releasing, extending the \-- hopefully, the

24 availability and use and presence on our roads in

25 California of the some or hopefully most of the battery

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1 electrics that were made, and that those great people who

2 bought them early on because they believed in it and have

3 supported all of our efforts will be able to continue to

4 use those cars and show them, showcase them and create a

5 culture \-- further a culture in our society for the

6 battery zero, which is the only game in town at this point

7 that has been produced.

8 On the other hand, as has been said, I don\'t feel

9 comfortable and I probably never would writing on somebody

10 else\'s checkbook and telling them exactly what they have

11 to make or buy. Our goal is zero-emission vehicles. We

12 have been steadfast in that. How they get there is still,

13 I think, ultimately got to be left to those who make it.

14 And I realize that much of this is dependent on

15 good faith and a collaborative effort. And some of you

16 are closer than I am to the auto manufacturers. And I

17 think those of you who are closer, at least the Chairman,

18 and the partnership, Fuel Cell Partnerships and its

19 aspirations of its members have a lot of faith and feel

20 that that\'s important to preserve and to make this effort.

21 And I hope it\'s not misplaced. It would be a shame, a

22 tragedy if it is.

23 But we have every opportunity to monitor, to look

24 again at all of this. And it\'s a brave, brave kind of

25 faith. And there\'s some reasons to be skeptical, as has

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1 been pointed out. But let\'s hope that this works.

2 And if it doesn\'t, and there are good reasons on

3 both sides why it didn\'t work, we can always come back.

4 We don\'t have all the answers now. None of us does. And

5 all we can do is hold to the zero-emission goal and

6 continue our quest and our journey. And I think this is

7 advancing the progress toward it. It\'s a good balance.

8 And so I think I\'m prepared \-- as I second the

9 motion, I\'m prepared to support it. I do join in the

10 request, and I think the motion embraced it, that it

11 include the \-- at least annually reviewing \-- that is a

12 report from the staff to give us an opportunity to decide

13 whether we need to have another review and a hearing. And

14 I would also suggest that that report be at least annually

15 so that if the staff or the Chair, obviously, or anybody

16 else gets an idea that somebody\'s not working the way we

17 are all hoping it works in the spirit of what we\'ve said,

18 it can be brought back before us.

19 CHAIRPERSON LLOYD: Thank you very much,

20 Professor Friedman.

21 Before we go to go to \-- I guess we\'ve got a

22 motion. Again, I would like to thank my colleagues. I

23 would reiterate what Mr. McKinnon and Ms. D\'Adamo and

24 Supervisor DeSaulnier was saying. Again, I have the

25 utmost respect for all three of them. I continue to learn

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1 every day. It\'s painful also for me to not have that. We

2 really tried, and you can see from the amount of ex parte

3 that we\'ve had meetings with all stakeholders. It\'s been

4 the toughest job I\'ve had because I got the deep desires

5 to zero. I also don\'t want to give up on batteries, but I

6 also want to encourage other technologies. It\'s been

7 extremely tough and continues to be very, very tough.

8 I\'d also like to thank staff for the tremendous

9 hours they\'ve put in, many long hours, days, nights,

10 mornings. And you\'ve done a tremendous job. And it\'s not

11 easy, the issues. I think that the Board \-- I know I\'ve

12 been in some of those meetings where staff has been

13 battling amongst each other because you have advocates and

14 you have detractors within the staff so this gets hashed

15 out. So my hat\'s off to you doing this job.

16 And to Ms. Witherspoon for this mammoth job here.

17 I know \-- again, I thank you so much for the effort you

18 put in.

19 We really tried. It\'s much easier if you have a

20 clean sheet of paper when we started off. But we have

21 many people on different pieces of the path, different

22 parts of the path. And that\'s where the difficulties come

23 in. Whenever we\'ve looked at that, on the face of it

24 looks easy to do, somebody is impacted. And you have many

25 people making good-faith efforts, and you want \-- so

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1 that\'s made it very difficult. I\'d say if we started off,

2 it\'d have been much easier.

3 So with that, again, I want to express my true

4 gratitude to my colleagues for very thoughtful comments

5 here to the staff and the people we\'ve interacted with.

6 As Mr. McKinnon said, we\'ve got many thoughtful proposals

7 from many of the stakeholders. And it\'s really made our

8 job both easier and more difficult because everybody is

9 sincere.

10 So it\'s really a responsibility when part of it

11 comes down to it \-- and I remember Mr. Cackette saying

12 early on that people say well, we have a responsibility

13 and we have an obligation. But we have a credibility.

14 And he pointed out to me credibility works both ways. So

15 I also see that we have a technical credibility as well.

16 And you know, unfortunately, with some technical

17 understanding I\'ve had to make some tough choices here,

18 that two years ago I was probably looking at numbers and

19 higher numbers.

20 With that said, I\'d like to thank you all. And

21 maybe now we can \-- since we have a motion on the floor

22 proposal by Ms. Riordan, could I can the Clerk of the

23 Board the call the roll.

24 CLERK DORAIS: Dr. Burke?

25 BOARD MEMBER BURKE: Aye.

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1 CLERK DORAIS: Mr. Calhoun?

2 BOARD MEMBER CALHOUN: Aye.

3 CLERK DORAIS: Ms. D\'Adamo?

4 BOARD MEMBER D\'ADAMO: No.

5 CLERK DORAIS: Supervisor DeSaulnier?

6 SUPERVISOR DeSAULNIER: No.

7 CLERK DORAIS: Professor Friedman?

8 BOARD MEMBER WILLIAM FRIEDMAN: Yes.

9 CLERK DORAIS: Dr. Friedman?

10 BOARD MEMBER WILLIAM FRIEDMAN: Yes.

11 CLERK DORAIS: Mr. McKinnon?

12 BOARD MEMBER McKINNON: No.

13 CLERK DORAIS: Supervisor Patrick?

14 SUPERVISOR PATRICK: Yes.

15 CLERK DORAIS: Ms. Riordan?

16 BOARD MEMBER RIORDAN: Aye.

17 CLERK DORAIS: Supervisor Roberts?

18 SUPERVISOR ROBERTS: Aye.

19 CLERK DORAIS: Chairman Lloyd?

20 CHAIRPERSON LLOYD: Yes.

21 With that, the motion passes eight to three.

22 And, again, thank you all very much. I\'m sorry

23 for the court reporter. We\'ll have to take a break now.

24 Let\'s take a 15-minute break.

25 (Thereupon a lunch recess was taken.)

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1 CHAIRPERSON LLOYD: We\'ll recommence with the

2 next agenda item, 03-2-3, public meeting to consider

3 Proposition 40 and related amendments to the Carl Moyer

4 program guidelines.

5 This item was considered by the Board at our last

6 hearing on March 27th. At that time we approved the Prop.

7 40 school bus funding for this year but continued our

8 deliberation on the Carl Moyer funding in response to

9 issues and concerns raised by the Bay Area Air Quality

10 Management District. Since then, the Bay Area AQMD and

11 all of CAPCOA\'s membership have come together to discuss

12 this issue. And we decided collectively to leave the

13 current allocation formula intact for this year. Remember

14 it\'s a two-year program. For this year. There\'s still a

15 great deal of interest in modifying the formula, but all

16 parties agree it will take additional time to work through

17 the various options and implications.

18 So Ms. Witherspoon, staff\'s job looks relatively

19 straightforward. I presume we can go through this fairly

20 quickly.

21 EXECUTIVE OFFICER WITHERSPOON: Yes, Dr. Lloyd.

22 That\'s correct. Since the last hearing we received a

23 letter from the Bay Area District withdrawing their

24 request for the Board to consider a new Carl Moyer funding

25 distribution this year. However, they would like staff to

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1 carefully consider the issues they raise as we consider

2 funding allocations for next year. Staff is fully

3 committed to doing that and will begin those discussions

4 with all of CAPCOA\'s members immediately following this

5 hearing.

6 At this point all parties accept the existing

7 formula which is based 50 percent on population and

8 50 percent on the M4 SIP commitment to reducing NOx from

9 mobile sources. Again, that\'s just for this year.

10 And Dr. Alberto Ayala is prepared to cover some

11 of the items we discussed last time. But in the interest

12 of time you could dispense with that and go straight to a

13 vote.

14 CHAIRPERSON LLOYD: Unless you have a burning

15 desire to Dr. Ayala, reading the sentiments of the Board,

16 if you can contain those and we can have the first

17 witness.

18 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

19 I\'d be happy to try, Dr. Lloyd.

20 CHAIRPERSON LLOYD: Thank you very much. So with

21 that, we\'ll call the first and only witness on this. And

22 it\'s Tom Addison from the Bay Area who started this.

23 MR. ADDISON: Indeed, Dr. Lloyd. As staff know,

24 we started this four years ago. But it did certainly come

25 to a head at the last Board meeting. And I\'d just like to

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1 say that, you know, what you\'ve heard from your Executive

2 Officer is correct. The Bay Area Air District does not

3 want to cause any funds to not be spent. We realize your

4 staff was not \-- had not planned a distribution of 02/03

5 funds. So we\'re withdrawing our request for 02/03 funds,

6 and we look forward to a productive and fruitful

7 discussion for 03/04 in future years.

8 CHAIRPERSON LLOYD: Thank you, Tom.

9 Again, on the serious side \-- I was being a

10 little bit flippant. But the conversations you and I had,

11 this issue had been raised in the past, and I know it\'s an

12 ongoing issue. So I appreciate that. And, in fact, as

13 you heard from staff it\'s a commitment to work with you as

14 we look at the next round of funding. And we appreciate

15 your patience on that.

16 MR. ADDISON: And we commit to working together

17 to try to come up with something that makes sense for all

18 parties.

19 CHAIRPERSON LLOYD: Thank you very much.

20 SUPERVISOR DeSAULNIER: Mr. Chairman.

21 CHAIRPERSON LLOYD: Yes, Supervisor DeSaulnier.

22 SUPERVISOR DeSAULNIER: He hesitates to recognize

23 me. I just want to be on the losing end of everything

24 today. No. I appreciate \-- I do appreciate your comments

25 from staff and Tom. But it\'s a really important, I think,

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1 for this Board \-- and D.D. and I have had some of

2 this conversation, and Barbara \-- that we don\'t look at

3 this just in isolation, but we look at it collectively

4 between our relationship with the Bay Area and the our

5 downwind neighbors sort of globally.

6 So hopefully our staff can help facilitate with

7 us being able to do that with the CAPCOAs. Not just for

8 this, but for transport, some of what we talked about over

9 lunch.

10 So with that, I would move the staff

11 recommendation.

12 BOARD MEMBER McKINNON: Second.

13 SUPERVISOR DeSAULNIER: That\'s not part of a

14 motion. That\'s just a request.

15 CHAIRPERSON LLOYD: So the bottom line, so do we

16 have any objections to that proposal?

17 SUPERVISOR DeSAULNIER: I\'m sorry. Do you want

18 me to withdraw the motion? You seem startled.

19 CHAIRPERSON LLOYD: No. It\'s good. So do we

20 have any objections? It\'s unanimous approval. Thank you.

21 Thank you.

22 And thank you for that great presentation,

23 Dr. Ayala. Cost effectiveness was tremendous.

24 EXECUTIVE OFFICER WITHERSPOON: Chairman Lloyd,

25 we talked about juggling the next few agenda items, it

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1 turns out they\'re still working on the slides and the

2 copies for both the in-use motor vehicles and the smog

3 check items. So I would suggest that we proceed with the

4 health update after all.

5 CHAIRPERSON LLOYD: Do we have the same staff

6 working of ZEVs as this other stuff?

7 EXECUTIVE OFFICER WITHERSPOON: No.

8 CHAIRPERSON LLOYD: Okay. So what you\'re

9 suggesting is we actually go ahead with the health update

10 and the R&D.

11 EXECUTIVE OFFICER WITHERSPOON: I saw Bart Croes

12 walked into the room. I\'m wondering where the rest of the

13 research staff is. They\'re here.

14 CHAIRPERSON LLOYD: Again, just the recognition

15 we have several Board members who are going to be leaving.

16 I think again the third item on the agenda is

17 03-3-1, monthly public health update. And today\'s update

18 focus on the health effects of ozone, which obviously

19 important because staff is currently reviewing the

20 scientific literature on ozone in preparation from making

21 recommendation on a possible revision to the California

22 ozone standard.

23 With that, Ms. Witherspoon, would you start the

24 presentation and introduce this item.

25 EXECUTIVE OFFICER WITHERSPOON: Thank you,

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1 Dr. Lloyd.

2 This informational item will highlight recent

3 findings from a study on responses of allergic asthmatics

4 exposed to ozone. Today Dr. Deborah Drechsler from the

5 Research Division will update the Board on the findings

6 from this study.

7 Dr. Drechsler.

8 AIR POLLUTION SPECIALIST DRECHSLER: Good

9 afternoon, Dr. Lloyd and members of the Board.

10 The study we are discussing today deals with

11 ozone health effects in people with asthma. The health

12 effects of air pollution on people with asthma have been a

13 concern of the Board for some time due to the sensitivity

14 of this vulnerable population.

15 CHAIRPERSON LLOYD: Could you speak a bit closer

16 to the mic, please.

17 AIR POLLUTION SPECIALIST DRECHSLER: The result

18 of many epidemiological studies have demonstrated

19 statistical associations between ambient ozone exposures

20 and emergency room visits and hospital admissions for

21 asthma. To give you a perspective on the magnitude of

22 this issue, over 300,00 California residents visited the

23 emergency room during 2001 because of their asthma.

24 However, a biological explanation for why asthmatics may

25 be vulnerable to air pollution\'s effects is only just

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1 beginning to emerge.

2 (Thereupon an overhead presentation was

3 presented as follows.)

4 AIR POLLUTION SPECIALIST DRECHSLER: This

5 afternoon we would like to tell you about a recently

6 published paper entitled \"Ozone Exposure Increases

7 Eosinophilic Airway Response Induced By Previous Allergen

8 Challenge,\" by Vagaggini and colleagues from the

9 University of Pisa in Italy. The paper appeared in late

10 2002 in the American Journal of Respiratory and Critical

11 Care Medicine.

12 \--o0o\--

13 AIR POLLUTION SPECIALIST DRECHSLER: As I

14 mentioned, epidemiological studies have reported an

15 association between ozone exposure, asthma exacerbation,

16 and emergency room visits and hospital admissions for

17 asthma. However, in most studies of asthmatics who have

18 been exposed to controlled concentrations of just ozone,

19 the asthmatics have shown responses that were not

20 different from non-asthmatics. This raises the question

21 of how to reconcile these disparate findings.

22 Asthma is a chronic lung disease characterized by

23 airway inflammation that is primarily related to a type of

24 immune cell called the eosinophil. Eosinophils release

25 chemicals that induce inflammation of the lung tissues.

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1 These cells are also involved in allergic responses inside

2 the lungs.

3 Other features of asthma include reversible

4 airway constriction and hyperreactive airway muscle cells.

5 Allergy is a prominent feature in most cases of asthma.

6 Ozone is not an allergen. However, some researchers have

7 hypothesized that ozone may increase ongoing allergic

8 responses by increasing the intensity of airway

9 inflammation and thereby increasing bronchial constriction

10 and airway hyperreactivity in asthmatics.

11 The purpose of this study was to investigate the

12 effects of ozone exposure in allergic asthmatics who were

13 already experiencing allergen-induced asthma exacerbation.

14 \--o0o\--

15 AIR POLLUTION SPECIALIST DRECHSLER: The study

16 involved 12 mild allergics as who attended the laboratory

17 on four days. In order to induce an asthma exacerbation,

18 subjects were asked to inhale allergens on the first day.

19 24 hours later the subjects were exposed to either

20 filtered air or .27 parts per million ozone for two hours

21 and they performed 20 minutes of light exercise during

22 each hour of exposure.

23 At least four weeks later the subjects repeated

24 allergen inhalation and 24 hours after that completed a

25 two-hour exposure to the opposite atmosphere as

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1 previously, that is ozone or filtered air. All subjects

2 completed both exposures. The ozone concentration used

3 .27 parts per million is higher than has been measured in

4 California in recent years. It was chosen to maximize the

5 possibility of sedating the biological mechanisms involved

6 in the responses of interest while ensuring subject safety

7 and the relevance of the results to current ambient

8 conditions.

9 Further, the study involved mild asthmatics. It

10 is likely that more severe asthmatics would experience

11 similar responses with lower levels of ozone exposure.

12 The measures of respiratory health included lung function

13 tests and the presence and severity of a group of

14 respiratory symptoms, including among others cough, chest

15 tightness, pain on deep breath, and nose and throat

16 irritation. The number of the eosinophils in sputum

17 samples was used an as index of the degrees of allergic

18 inflammation in the lungs.

19 \--o0o\--

20 AIR POLLUTION SPECIALIST DRECHSLER: Two hours of

21 exposure to filtered air did not change lung function or

22 respiratory symptoms in this these subjects. In contrast,

23 a two-hour exposure to ozone resulted in reduced lung

24 function and increased respiratory symptoms, such as

25 cough, chest tightness, and pain on deep breath compared

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1 to the filtered air exposure.

2 In addition, exposure to ozone increased the

3 number of eosinophils in the lungs compared to the

4 exposure to filtered air. This means that ozone

5 inhalation increased the allergic inflammation that had

6 been induced by the allergen exposure the previous day.

7 \--o0o\--

8 AIR POLLUTION SPECIALIST DRECHSLER: These

9 results indicate that ozone exposure can intensify

10 allergic inflammatory responses induced by previous

11 allergen exposure in subjects with mild allergic asthma.

12 Further, the results provide biological explanation for

13 increased asthma systems, emergency room visits, and

14 hospital admissions for asthma exacerbation observed in

15 epidemiological studies.

16 Finally, this report illustrates that exposure

17 studies that do not include an allergen challenge may

18 underestimate the impact of ozone on the health of

19 asthmatics. Thank you. We would be happy to respond to

20 any questions at this time.

21 CHAIRPERSON LLOYD: Thank you, very much.

22 Dr. Friedman.

23 BOARD MEMBER WILLIAM FRIEDMAN: I don\'t have any

24 questions, but the Italians actually got this right.

25 Because in the past, people have done these experiments

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1 the opposite way. First they expose you to a lot of

2 ozone, and then they expose you to some allergen. And

3 that\'s not what happens in the real world. For example,

4 right now it\'s a big allergy season in California. You

5 know, so your exposure to allergens occurs, period. And

6 then if you\'re unlikely enough to be in an ozone

7 high-intensity area, then you really have a problem.

8 And what I like about the study, these

9 eosinophils they harvest \-- the eosinophils are the little

10 white blood cells that have all the histamine in them.

11 And that really is what triggers a lot of the

12 inflammation. So something \-- this is simple clinical

13 experiment, and it really makes a lot of sense. And it

14 shows a really powerful relationship, and it was done

15 sequentially the right way. So it\'s a nice study.

16 CHAIRPERSON LLOYD: The levels aren\'t that far

17 from ambient.

18 BOARD MEMBER WILLIAM FRIEDMAN: The ozone levels

19 are a bit higher than we\'re used to seeing. But you need

20 to get a response to know if there\'s going to be a

21 response.

22 CHAIRPERSON LLOYD: But not that far from the \--

23 BOARD MEMBER WILLIAM FRIEDMAN: Not too bad.

24 Thank you.

25 CHAIRPERSON LLOYD: Thank you very much indeed.

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1 Thank you.

2 So I guess since it\'s not a regulatory item. Not

3 necessary to close the record. Thank you.

4 And we\'ll move on to the next item, and that is

5 agenda item 03-2-2, public meeting to consider

6 appointments to the Research Screening Committee.

7 The statute creating the Board also authorized

8 the Board to appoint a Research Screening Committee to

9 advise the Boards on its extramural research activities.

10 Currently, the Committee has one vacancy to be

11 filled, and we would like to add one ex officio member,

12 each representing a scientific or technical discipline

13 that is relevant to review, and advise on our air quality

14 research program.

15 We have been privileged over the years to have a

16 host of eminent scientists serve on the committee. As you

17 know, the workload is significant, and the compensation is

18 definitely more symbolic than financial. The input has

19 been invaluable to the Board over the years. Nominations

20 for the Research Screening Committee along with the

21 candidates\' credentials and resume are before us today.

22 Ms. Witherspoon, would you like you and your

23 staff to provide names and their general affiliations and

24 areas of expertise.

25 EXECUTIVE OFFICER WITHERSPOON: Bart Croes is

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1 going read into the question the qualifications of the

2 nominated Research Screening Committee members.

3 RESEARCH DIVISION CHIEF CROES: Thank you,

4 Ms. Witherspoon, and good afternoon Chairman Lloyd and

5 members of the Board. We are very pleased that two highly

6 qualified candidates are willing to serve on the Research

7 Screening Committee.

8 The first nominee, Dr. Tracy Thatcher, is a

9 scientist with the Air Flow and Pollutant Transport Group

10 within the Indoor Department at the National Berkeley \--

11 at the Lawrence Berkeley National Laboratory. She

12 received her Ph.D. in civil and environmental engineering

13 from the University of California, Berkeley.

14 Dr. Thatcher has over ten years of experience in

15 the design and execution of aerosol and pollutant

16 transport experiments in the indoor environment. Her

17 expertise will be particularly useful for indoor air

18 quality projects that we will manage with the California

19 Energy Commission.

20 Dr. Thatcher\'s research interests have focused on

21 aerosol behavior indoors and the transport of pollutants

22 across the building. Dr. Thatcher is also a registered

23 professional engineer in civil engineering in the state of

24 California.

25 Dr. Michael Prather, an ex officio nominee for

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1 Climate Change Research, is a chaired professor in the

2 Earth System Science Department at the University of

3 California, Irvine. He received his Ph.D. in astronomy

4 from Yale University. His research interests include

5 simulation of the physical, chemical, and biological

6 processes that determine atmospheric composition and the

7 development of detailed numerical models of photochemistry

8 and atmospheric radiation, and global chemical transport

9 models that describe ozone and other trace gasses.

10 Dr. Prather has played a significant role in the

11 second and third assessments from the Intergovernmental

12 Panel on Climate Change and the World Meteorological

13 Organization\'s Ozone Assessments. He\'s served on several

14 National Academy of Science panels on climate change. His

15 expertise will assist with research projects supporting

16 AB 1493. The number of climate change research projects

17 is small and does not require attendance at every meeting

18 of the Research Screening Committee.

19 This summarizes the qualifications of the

20 candidates. Further details are available in your

21 information packages.

22 We recommend that you approve the appointments of

23 Dr. Tracy Thatcher and Dr. Michael Prather to the Research

24 Screening Committee. We\'ll be happy to answer any

25 questions that you may have.

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1 CHAIRPERSON LLOYD: Is Dr. Thatcher a student of

2 the Bill Nazaroff?

3 RESEARCH DIVISION CHIEF CROES: That\'s correct.

4 BOARD MEMBER WILLIAM FRIEDMAN: I\'d like to move

5 approval and then make a comment.

6 BOARD MEMBER RIORDAN: I\'ll second the motion.

7 BOARD MEMBER WILLIAM FRIEDMAN: I want to

8 congratulate Bart on identifying two truly imminent

9 scientists who will contribute importantly. Dr. Thatcher

10 because we really are going to be focusing on indoor air

11 in a very important way. Both of these people are

12 award-winning and renowned folks. I think these are great

13 complements to the Committee. I\'m very, very pleased.

14 Thanks for your help.

15 RESEARCH DIVISION CHIEF CROES: Thank you very

16 much.

17 CHAIRPERSON LLOYD: I reiterate those comments.

18 I don\'t know Dr. Thatcher. I do know Dr. Prather, so I

19 think that area\'s going to be a tremendous help to us as

20 we move ahead in those areas so good job.

21 We have a motion before us. All in favor say

22 aye.

23 (Ayes)

24 CHAIRPERSON LLOYD: Thank you very much. So a

25 unanimous approval.

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1 And thank you very much, Bart.

2 RESEARCH DIVISION CHIEF CROES: Thank you.

3 CHAIRPERSON LLOYD: Now we will move ahead to the

4 next item, and that is item 03-3-3 report on findings on

5 the effect of exempting additional vehicles from the

6 smog \--

7 EXECUTIVE OFFICER WITHERSPOON: We\'re doing

8 reducing in-use emissions first, 03-3-2.

9 CHAIRPERSON LLOYD: Sorry. Thank you. My zeal

10 to get this over.

11 EXECUTIVE OFFICER WITHERSPOON: It\'s an important

12 set up. That\'s why we\'re doing this one first.

13 CHAIRPERSON LLOYD: I\'m sorry. Next item,

14 03-3-2, strategies for reducing emission from in-use

15 gallons vehicles.

16 Some months ago I asked staff to report to the

17 Board what the effect of existing passenger cars on the

18 state\'s air quality. I\'ve been concerned about the

19 significant and continuing contribution of emission from

20 older cars and what, if anything, can we do about that.

21 That\'s the genesis of the item. And, actually, I

22 didn\'t realize that it\'s going to work out this way

23 because the concern that I had at the time was that we\'ve

24 been focusing so much on zero emission on new vehicles,

25 and we\'ve been criticized for not paying attention to

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1 vehicles on the road. So it turns out today we\'ve

2 actually finished up the new vehicles, and now we\'re

3 addressing the existing vehicles. So I think the timing

4 is great.

5 And I thank staff for bringing this item back to

6 us.

7 So with that, I\'ll turn it to Ms. Witherspoon.

8 EXECUTIVE OFFICER WITHERSPOON: Thank you,

9 Chairman Lloyd, members of the Board.

10 We\'ve made great progress in reducing vehicle

11 emission since catalysts were first required in the 1970s.

12 New light duty vehicles are now 99 percent cleaner for

13 non-methane-organic gasses and 95 percent cleaner for NOx.

14 Despite this progress, existing vehicles still

15 account for a significant portion of remaining emissions.

16 There are several reasons for this. First of all,

17 California\'s vehicle population keeps growing, as does the

18 total number of vehicle miles traveled each day. In

19 addition, cars last a long time in our climate, resulting

20 in a slower retirement rate than other states may observe.

21 Finally, deterioration of emission control

22 systems is a significant factor causing vehicles to emit

23 more as they age. By the time we get to 2010, 10-year-old

24 and older cars will be the dominant portion of the

25 light-duty inventory which forces us to concentrate now on

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1 how those in-use vehicles might be addressed.

2 Today staff presentation will be given by a

3 Annette Guerrero of our Mobile Source Control Division.

4 Annette.

5 (Thereupon an overhead presentation was

6 presented as follows.)

7 STAFF AIR POLLUTION SPECIALIST GUERRERO: Thank

8 you, Catherine.

9 Good afternoon, Chairman Lloyd and members of the

10 Board.

11 Today in response to a request by Chairman Lloyd

12 at the December Board hearing, I will be discussing excess

13 emissions from the in-use light duty vehicle fleet and the

14 potential to reduce these emissions. To clarify excess

15 emission are the portion that exceed the standards to

16 which the vehicles have been certified.

17 CHAIRPERSON LLOYD: Zero emissions.

18 MR. LUNA: That file doesn\'t look like it\'s going

19 to open for us.

20 STAFF AIR POLLUTION SPECIALIST GUERRERO: I\'ll

21 wave my hands a lot.

22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Just

23 say the slide number.

24 STAFF AIR POLLUTION SPECIALIST GUERRERO: This is

25 slide number 2. After providing you some background on

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1 our progress on reducing vehicle emissions, I will

2 quantify the impact of older vehicles on emissions,

3 followed by a discussion of several programs currently

4 being examined that can reduce these excess emissions from

5 in-use light-duty vehicles. Although we will present the

6 emissions in the South Coast air basin, the same trends

7 can be observed throughout the state.

8 Slide number 3.

9 \--o0o\--

10 STAFF AIR POLLUTION SPECIALIST GUERRERO: Since

11 the 1960s emissions from light-duty vehicles on a per-mile

12 basis have been dramatically reduced due to the adoption

13 of increasingly stringent emission standards. These

14 emission reductions have been possible due to the

15 development and use of catalysts, on-board computers, and

16 cleaner gasoline. Because of these efforts, hydrocarbon

17 plus NOx, emissions from cars were reduced by over

18 90 percent from the 1990 under controlled level \-- 90

19 percent by 1990 from uncontrolled levels.

20 Slide number 4.

21 \--o0o\--

22 STAFF AIR POLLUTION SPECIALIST GUERRERO: Despite

23 this accomplishment, continuing air quality problems

24 required emissions from light-duty vehicles to be reduced

25 even further. Consequently, in 1990 the Air Resources

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1 Board adopted the low emission vehicle program, or LEV I.

2 The Lev I program further reduces light-duty vehicle

3 emissions by 75 percent between 1994 and 2003.

4 The second phase of these regulations left to

5 expand the scope of the LEV regulations beginning in 2004.

6 The LEV program combined with cleaner-burning gasoline

7 will result in emissions from new light-duty vehicles on a

8 per-mile basis being reduced in 2010 to approximately

9 1 percent of their uncontrolled levels.

10 Slide number 5.

11 \--o0o\--

12 STAFF AIR POLLUTION SPECIALIST GUERRERO:

13 Reductions in cumulative emissions of light-duty vehicles

14 have, in general, followed the downward trend of new

15 vehicle emissions. This has occurred despite the

16 ever-increasing number of miles traveled by these vehicles

17 every day. For example, hydrocarbon emissions from

18 light-duty vehicles were reduced from more than 1200 tons

19 per day in 1970 to approximately 350 tons per day in 2000.

20 By 2020 we anticipate that hydrocarbon emissions will have

21 dropped below 90 tons per day. Similarly, NOx emissions

22 from light-duty vehicles will have dropped from

23 approximately 650 tons per day in 1970 to 380 tons per day

24 in 2000 and will be further reduced to below 75 tons per

25 day in 2020.

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1 Slide number 6.

2 \--o0o\--

3 STAFF AIR POLLUTION SPECIALIST GUERRERO: At this

4 point I would like to focus on the impact of excess

5 emissions from light-duty vehicles. It\'s often heard that

6 a very small portion of the fleet is responsible for a

7 disproportionately high percentage of vehicle emissions.

8 As you can see in 2000, pre-1993 or non-LEV

9 vehicles made up 53 percent of the vehicle fleet but

10 accounted for 87 percent of hydrocarbon emissions. By

11 2010 only 18 percent of light-duty vehicles are 1993 and

12 older models, but they are responsible for 62 percent of

13 hydrocarbon emissions.

14 In contrast, LEV I and LEV II vehicles will

15 comprise 82 percent of the light-duty vehicle fleet in

16 22010, yet only contribute 28 percent of the hydrocarbon

17 emissions. Clearly, older vehicles need attention in

18 addressing ways to reduce emissions, especially in the

19 near term.

20 Slide number 7.

21 \--o0o\--

22 STAFF AIR POLLUTION SPECIALIST GUERRERO: Older

23 vehicles emit a disproportionately high level emissions

24 for several reasons. First, these vehicles were certified

25 to less-stringent emission standards. Second, they employ

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1 emission control systems that are less durable than those

2 used on newer low-emission vehicles. And third, they lack

3 on-board diagnostic systems that can facilitate proper

4 maintenance of their emission control systems.

5 This display on your slide of the emissions from

6 the vehicle fleet in 2010 demonstrates the contribution of

7 each model year to the total light-duty hydrocarbon

8 emissions.

9 I don\'t know you have color slides, but the

10 bottom bars are green. They represent hydrocarbon

11 emissions if passenger cars just meet the emission

12 standard to which they originally certified.

13 I see we have the slide coming up.

14 \--o0o\--

15 STAFF AIR POLLUTION SPECIALIST GUERRERO: The red

16 bars show the excess emissions due to vehicles that exceed

17 emission standards in-use.

18 As you can see, excess emissions can more than

19 double the emission levels from a properly-maintained

20 vehicle fleet. Excess NOx emission from non-LEV vehicles

21 are similar in magnitude. These excess emission are the

22 target of the smog check program. As I will discuss

23 later, we are looking at other ways of reducing these

24 excess emissions. Also note that the excess emission

25 levels from LEV vehicles equipped with OBD II are

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1 projected to be much lower.

2 \--o0o\--

3 STAFF AIR POLLUTION SPECIALIST GUERRERO: By 2020

4 when most of the cars on the road are OBD II equipped

5 low-emission vehicles, excess emissions from the vehicle

6 fleet are projected to be minimal. By facilitating proper

7 vehicle maintenance, OBD II allows the very significant

8 emission reduction achieved by the low-emission vehicle

9 program to be maintained throughout the full life of the

10 vehicle.

11 I will now turn to a discussion of some of the

12 measures specifically designed to reduce in-use vehicle

13 emission.

14 \--o0o\--

15 STAFF AIR POLLUTION SPECIALIST GUERRERO: Three

16 of these measures include improvement to the smog check

17 program, voluntary vehicle scrapping, and an emission

18 control replacement program to examine the feasibility and

19 benefits of replacing critical emission control components

20 on pre-LEV vehicles.

21 \--o0o\--

22 STAFF AIR POLLUTION SPECIALIST GUERRERO: The

23 smog check program has been designed to reduce excess

24 emissions through requiring proper maintenance and repair

25 of high-emitting vehicles. As illustrated in the chart,

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1 the remission reductions currently being achieved are

2 large, approximately 90 tons per day in the South Coast.

3 Also illustrated is that even with the current

4 program in place, substantial excess emissions remain.

5 One way this is being addressed is by making improvement

6 to the smog check program.

7 \--o0o\--

8 STAFF AIR POLLUTION SPECIALIST GUERRERO: Three

9 significant improvements are being implemented to smog

10 check. The first requires heavier gasoline trucks between

11 8500 and 10,000 pounds GVW to undergo a dyamometer test

12 used for cars. This test allows measurement of NOx

13 emissions in addition to hydrocarbon NCO.

14 The second improvement increases the number of

15 vehicles tested at test-only smog check stations. BAR

16 studies have shown that greater emission reductions are

17 achieved at test-only stations, rather than at test and

18 repair station. Consequently, BAR lass recently increased

19 the volume of cars tested at test-only stations from

20 20 percent to 37 percent of the fleet.

21 The third improvement to be implemented in 2004

22 incorporates a more effective test of the integrity of the

23 evaporative control system. The emission benefit of these

24 improvements to the current smog check required is 14 tons

25 per day hydrocarbon plus NOx in the South Coast air basin

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1 in 2010.

2 \--o0o\--

3 STAFF AIR POLLUTION SPECIALIST GUERRERO: Another

4 program we have evaluated is voluntary vehicle scrapping.

5 This program aims to reduce the number of older vehicles

6 in the fleet. In doing so, the inherently high emissions

7 of those older cars is reduced when the vehicle is reduced

8 by a newer vehicle which meets more recent emission

9 standards.

10 Another benefit of scrapping older cars is these

11 vehicles often have the highest excess emissions as well.

12 There are several different programs that

13 encourage scrapping of older cars. In 2000 about 4,000

14 vehicles were retired through this program. BAR has also

15 offered to pay for scrapping vehicles which cannot pass

16 the smog check test, although funding for this program has

17 run out.

18 Private sector firms also pay for scrapping

19 vehicles in order to generate marketable emission credits.

20 To put the potential benefits of scrapping vehicles into

21 perspective if 75,000 vehicles were scrapped each year,

22 emissions would be reduced by 7 tons per day in 2010. The

23 cost for such a program would run between 70 and \$100

24 million per year.

25 \--o0o\--

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1 STAFF AIR POLLUTION SPECIALIST GUERRERO: The

2 third program under consideration addresses reducing

3 excess in-use emissions by replacing key emission control

4 components on older vehicles. Even when a vehicle passes

5 the smog check program cut points, its emissions may still

6 be well in excess of the emission standard to which it was

7 certified when it was new. Some evidence suggests that

8 replacing certain critical emission components, such as

9 the oxygen censor, will further reduce emissions.

10 ARB is currently conducting a test program to

11 evaluate the effectiveness and cost effectiveness of

12 replacing emission control components on older vehicles

13 that pass smog check cut points.

14 The components slated for replacements are the

15 oxygen censor and catalyst to reduce exhaust emissions and

16 the canister and associated hoses to reduce evaporative

17 emissions. Preliminary results from the test program

18 indicate that replacing catalytic converter and oxygen

19 censor is effective in reducing excess emissions.

20 However, the emission benefits from replacing the

21 evaporative canister and associated hoses are less clear

22 due to the limited number of vehicles tested to date and

23 high variability in test results. Further testing is

24 planned to better understand the potential of this

25 program.

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1 \--o0o\--

2 STAFF AIR POLLUTION SPECIALIST GUERRERO: This

3 chart illustrates the potential of the programs just

4 discussed to reduce excess emissions. The red part of

5 each bar is the excess emissions. The second and third

6 bars show that the smog check programs provide large

7 emission reductions and improvements under way will

8 provide additional reductions.

9 The component replacement program, should it turn

10 out to be viable, also has a potential to provide large

11 reductions. The AVR, the code name for vehicle scrapping,

12 shows a small benefit in this illustration, but it is

13 important to note that reductions can be bigger if more

14 money were available to fund scrapping.

15 Overall, the chart illustrates that it is

16 possible to eliminate most of the excess emissions.

17 With the implementation of all three in-use

18 vehicle programs previously discussed, improvements to

19 California smog check program, a voluntary accelerated

20 vehicle retired program, and an emission control component

21 replacement program excess emission could be substantially

22 reduced.

23 \--o0o\--

24 STAFF AIR POLLUTION SPECIALIST GUERRERO: In

25 summary, the biggest reduction in emissions is coming from

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1 the new vehicle emission standard as the fleet turns over

2 to lower emitting vehicles. We can look forward to a

3 75 percent reduction in fleet-wide emission from

4 light-duty vehicles over the next 20 years.

5 In the mean time, older vehicles emit a

6 disproportionate amount of pollution. Even by 2010 when

7 the fleet is made up of a majority of low-emission

8 vehicles, a small number of older vehicles will emit over

9 half of light-duty emissions. The smog check program and

10 vehicle scrappage which focus on older vehicles can be

11 effective in further reducing emissions.

12 \--o0o\--

13 STAFF AIR POLLUTION SPECIALIST GUERRERO: Excess

14 emissions are significant and will continue to be

15 significant until 2020 or beyond. While the latest

16 technology used to meet LEV II coupled with OBD II and

17 extended warranty will reduce or eliminate excess

18 emissions, the older vehicles will still have excess

19 emissions that need to be reduced through the smog check

20 program. We also hope we will find that replacement of

21 certain critical emission control components will further

22 restore the lower emitting capability of some of the older

23 vehicles. We will be able to share with you more on this

24 next year. That completes \--

25 CHAIRPERSON LLOYD: Thank you very much indeed.

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1 EXECUTIVE OFFICER WITHERSPOON: Just one final

2 comment from the staff to put that presentation in

3 perspective.

4 In the current draft plan for the South Coast Air

5 Quality Management District, we have a black box of 400

6 tons per day of ROG and NOx that we don\'t know how to

7 accomplish. And certainly coming up with the full

8 complement of controls for existing emissions from in-use

9 vehicles will be necessary. Anything we can do to reduce

10 those emissions will help us fill that black box and

11 achieve attainment.

12 BOARD MEMBER D\'ADAMO: Mr. Chairman.

13 CHAIRPERSON LLOYD: Yes, Ms. D\'Adamo.

14 BOARD MEMBER D\'ADAMO: Looking at slide 15, the

15 summary and older vehicle caused disproportionate amount

16 of emissions, 55 percent if we look at the older vehicles,

17 if all of the suggestions were implemented, the vehicle

18 scrapping program, for example, the potential benefits of

19 retiring \-- associated with retiring 75,000 vehicles per

20 year, et cetera, what would that number look like or could

21 you take \--

22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: If you

23 look back at slide 14, you can see the excess emissions

24 can be eliminated. But you still have the inherent

25 emissions of the older vehicles depending on how much

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1 scrapping you do.

2 So as we showed in that one illustration, it

3 costs a lot of money to scrap a lot of vehicles to get 7

4 tons per day. To some degree we\'re destined to waiting

5 for those vehicles to eliminate themselves from the fleet.

6 And there\'s \-- there\'s no other way of getting at that

7 other than a modernization of the fleet. Well-maintained

8 25-year-old vehicle puts out a lot more emissions than a

9 well-maintained five year old vehicle. That\'s just seems

10 like time. We\'re a very large scrapping program. It\'s

11 only way is to address that.

12 BOARD MEMBER D\'ADAMO: And could you elaborate on

13 the voluntary vehicle scrapping program, that the cost at

14 \$3 million, that\'s public expenditures on the local

15 district programs.

16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That

17 was the example of the local district programs. A lot

18 more vehicles were scrapped through the smog check program

19 which had an option if you couldn\'t pass that you could

20 get scrappage money. It was as much as \$1,000 a vehicle.

21 That money\'s run out. I think there may be as many as

22 20,000 vehicles scrapped there.

23 There\'s also scrapping going on for the purposes

24 of generating emission credits. That one doesn\'t bring

25 down the overall emissions very much because you scrap the

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1 vehicle and use most of those emissions to allow other

2 industry to expand or something like that. So \-- or site.

3 And that\'s still ongoing in the private sector right now

4 generating marketable emission credits from scrapping

5 vehicles.

6 BOARD MEMBER D\'ADAMO: And the smog vehicle

7 scrappage program as a result of not complying with smog,

8 what do those numbers look like?

9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think

10 there was about 20,000 scrapped. I\'m not sure over

11 exactly what time frame. Someone here would know that if

12 it\'s important to be more precise.

13 BOARD MEMBER D\'ADAMO: No. Just general.

14 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The

15 source of funding with the budget crisis has dried up so

16 they\'re not paying for scrap cars right now. But it could

17 restart. Right now all the money that is available is

18 going to pay for low income repairs assistance.

19 BOARD MEMBER D\'ADAMO: And same thing with the

20 district scrappage program.

21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think

22 district scrappage programs are still under way. But it

23 depends on \-- the money\'s coming out of things like the \$4

24 surcharge on your registration fee that districts have

25 adopted. It\'s not in all districts. And I\'m not

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1 personally aware of which ones are doing it right at this

2 point in time.

3 BOARD MEMBER D\'ADAMO: Sounds like there\'s not

4 much room. But I\'d be interested in seeing if there\'s

5 anything that can be done, short of just money falling out

6 of the sky.

7 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think

8 one of the observations that may be useful when we start

9 looking at the clean air plans, the SIPS later this year,

10 is that Catherine mentioned we\'re short hundreds of tons

11 of each pollutant. And we went through and showed you

12 smog check of 90 tons in the South Coast. That sounds \--

13 that\'s really big.

14 But the other once we\'re looking at like

15 improving the smog check program, scrapping cars, they

16 were getting like tens of tons. So we\'re facing this very

17 difficult situation where there\'s no more hundred-ton

18 things that we can do. And we\'re having to look at a lot

19 of ten-ton-type ones or less. And many of them \-- because

20 the goal is to get to 400 more tons of emission reduction.

21 So on one hand these look small. But on the other hand,

22 they\'re all the ammo we have in our arsenal at the moment,

23 and we\'re going to have to look in each one of them.

24 BOARD MEMBER D\'ADAMO: And on a similar line, in

25 looking at the proposals that the district will be

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1 presenting, do you see that the older vehicles are

2 concentrated in certain parts of the state, or are they

3 pretty well evenly distributed?

4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: There

5 is a distribution. It\'s different in different areas.

6 But in general, if you look at regional areas

7 it\'s not a whole bunch different. If you look at the

8 valley versus L.A., for example, you wouldn\'t see huge

9 differences in the age distribution. If you go to parts

10 of L.A. versus other parts of L.A., you see fairly radical

11 differences in age distribution. That would be true of

12 other areas too.

13 BOARD MEMBER D\'ADAMO: Thank you.

14 CHAIRPERSON LLOYD: Thank you.

15 Mr. McKinnon.

16 BOARD MEMBER McKINNON: If I follow, you know,

17 sort of the logic that\'s \-- we\'re doing very as well sort

18 of at reducing emissions sort of in recent times. And

19 getting older cars repaired is very important, and

20 hopefully them leaving the fleet is also important.

21 One of the things I often end up talking to

22 people about when they want to talk to me because I\'m an

23 Air Board member because of sort of other aspects of my

24 life is sort of the hot rodder car collector concern that

25 there are people that have cars that they don\'t drive a

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1 whole lot.

2 Have we ever sort of tried to figure out what is

3 sort of a fair amount of miles per year to talk about what

4 a collector car or hot rodder\'s car would be like? If you

5 start going after older cars, there is a constituency of

6 people that, I think, work hard on their cars. And I

7 think there\'s sort of an interest in figuring out a

8 solution for them. Have we ever considered sort of

9 variables in mileage?

10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yes.

11 The car collectors and car enthusiasts have been very

12 vocal in this whole issue of scrappage. They are very

13 concerned that someone might take their car away from them

14 in some manner or require them to do something that no

15 longer makes it a classic car or a collectible car.

16 The word I want to emphasize in that VAVR which

17 we were calling scrappage, the V is for voluntary. These

18 are only people that want to get rid of their car for

19 money that are in this kind of a program. No one has ever

20 suggested that there be a mandatory claiming of older

21 cars.

22 When the car collectors expressed concern about

23 things like smog check, it can be come from two angles.

24 One is they don\'t drive the car much so why do they have

25 to spend 50 bucks every two years. That\'s one angle. The

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1 other angle is a fear that some aspect of smog check will

2 be too stringent such as the older car could never pass,

3 and then it has no option. Maybe scrappage is its only

4 option.

5 That, I don\'t think, is really a genuine concern

6 because the standards as we showed for smog check allow a

7 lot of excess emissions. And the car collectors are the

8 people that, you know, make the car run perfectly. And

9 it\'s going to have this inherently low emission as it

10 possibly can. It\'s still going to be much dirty than a

11 new car. It\'s not going to be a gross emitter. Those are

12 pristine cars.

13 We\'re not aware of any evidence that collector

14 type car, well-maintained cars have any problem getting

15 past the smog check program. That shouldn\'t be a concern.

16 The scrappage is voluntary and shouldn\'t be a certain.

17 But there is a heightened concern by those members that

18 something will happen to their cars.

19 BOARD MEMBER McKINNON: They\'re required to be

20 tested at sort of the standard for their model year of

21 car?

22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yes.

23 The standard is typically at least a couple times what the

24 car could emit if all the components were in good working

25 order for a car of 100,000 miles. So if they can restore

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1 it to be something like a normal car at 100,000, they\'re

2 going to pass with flying colors. And they do.

3 BOARD MEMBER McKINNON: Thanks.

4 CHAIRPERSON LLOYD: Thank you.

5 BOARD MEMBER CALHOUN: What is your current

6 thinking about replacing of these older parts? Are you

7 thinking in terms of only when they fail smog check or

8 voluntary replacement?

9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well,

10 until we\'ve completed the study, we\'re not going to know

11 exactly which are the most effective and most cost

12 effective of the three parts to replace. And some of them

13 are simple to do like \-- and low cost like an oxygen

14 censor. And some of them are simple and higher cost, like

15 catalysts. Some of them are not so costly but hard to do

16 like evaporative canisters because on many cars they\'re

17 hidden somewhere in the car and very hard to get at.

18 So it will depend on which one sort of looms, if

19 any of them loom, as the most cost effective and practical

20 way of doing it. We are thinking very preliminary that it

21 could be done in smog check in some manner. As you know,

22 a mandatory repair if you do fail, for example, this would

23 be one of this things that has to be fixed because we know

24 from the study it would reduce emissions. There\'s other

25 options too to how this could happen.

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1 But it\'s hard to design until we know which the

2 components are. It\'s a \$300 part like a catalyst or

3 something that\'s going to be very hard to do because

4 that\'s a repair \-- that\'s in excess of what people pay

5 now. They only pay \$150, \$125 on average repairs for smog

6 check.

7 CHAIRPERSON LLOYD: Thank you.

8 SUPERVISOR DeSAULNIER: I had a question for you

9 anyway.

10 CHAIRPERSON LLOYD: I guess we have one witness

11 signed up.

12 Do you want to speak on this one or the next one?

13 MR. PETERS: I would love to speak on this one,

14 sir. Chairman Lloyd, Committee, and staff, I\'m Charlie

15 Peters, Clean Air Performance Professionals. And we

16 represent motorists.

17 I find it interesting \-- Matthew brought up the

18 issue of collector cars, et cetera because Hemming\'s Motor

19 News has honored us and had for most every month for about

20 the last seven or eight years put our letter reporting

21 on \--

22 BOARD MEMBER WILLIAM FRIEDMAN: Can you speak

23 up?

24 CHAIRPERSON LLOYD: We can\'t hear you very well

25 up here.

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1 MR. PETERS: Excuse me. I\'ll try to help that a

2 little bit.

3 I\'m Charlie Peters, Clean Air Performance

4 Professionals. We represent motorists. And for about the

5 last seven or eight years we have had a letter most every

6 month in Hemming\'s Motor news, which is considered the

7 Bible of the old car hobby. And Matthew brought up the

8 issue of concerns of some of the hobbyists. So we have

9 been trying to contribute to that and trying to report on

10 that.

11 We\'re quite concerned that there are significant

12 opportunities to improve how the public\'s being treated,

13 to increase their options, to improve performance of cars,

14 and to significantly improve the environmental performance

15 of cars by some appropriate supportive credit and support

16 for the providers of service in the marketplace to enhance

17 and improve compliance and improve how the public\'s being

18 treated.

19 I\'ve heard many times here today talking about

20 how, \"Gee, we got this great program called PZEVs and 15

21 year, 150,000 mile emissions warranties, and that\'s just

22 going to make all the flowers bloom and make it a great

23 day and make it a better world.\" Just because those are

24 free, all the car manufacturers are just going to be there

25 and just do it right every time. And every one of those

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1 cars is going to get fixed every time just right.

2 Let me say to you there are currently

3 downloadable free programs where you can go in and say

4 every monitor on the car is happy and just right when, in

5 fact, there\'s nothing on the car that\'s right. And that

6 warranty situations in the dealer depends upon having

7 options to the public where they can get their cars to get

8 a second opinion. And we have a market that\'s supported

9 by a regulatory process to improve performance.

10 So I believe that this \-- what I\'ve been hearing

11 here today, the technology and huge amounts of money and

12 huge costs, enforcing technology is the solution to all

13 the problems in the world, that maybe we need to consider

14 the possibility of this particular subject that huge

15 opportunities to improve air quality in California by

16 appropriate support and credit for an industry that serves

17 the public to see it gets done right more often.

18 The I&M Review Committee, yesterday the subject

19 came up \-- customer goes to one place, gets a smog check.

20 Fails. Goes someplace else, and it passes. We take care

21 of that complaint. Well, who\'s going to get the

22 complaint? The guy that failed the car. Who gets

23 addressed by the regulatory agency? The guy that got the

24 complaint. Who\'s the guy that did the job right? The guy

25 that got the complaint. Who\'s the guy that said it was

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1 okay? In this case it happened to be the new car dealer.

2 The car never got fixed.

3 So without a regulatory support, without some

4 credit, without starting to be concerned about the

5 breathers out here, the people that drive cars, and the

6 air, then all we\'re going to do in California is continue

7 to exacerbate the loss of credibility for our Governor,

8 the loss in opportunities to improve the air quality, and

9 we\'re not going to get where we should be able to

10 responsibly go.

11 We can cut fraud in half in the smog check

12 program in a year. We can cut the failure rate in half by

13 a year and reduce fleet emissions 2,000 tons a day. Oh,

14 gee, that would be expensive. We need to start by maybe

15 going out and finding out if we can improve performance

16 with one shop with a best guy in the state or the worst

17 guy in the state. Do a little pilot study to find out if

18 there is, in fact, a quantifiable real benefit to the

19 public that can take place by reduced fraud and improved

20 performance by the most important technology that has not

21 been discussed here at all today, that\'s the stuff between

22 people\'s ears. Empowering that to work and serve the

23 public. I would appreciate your consideration of a

24 possibility of accomplishing that.

25 We have an appointment to see a Senator who\'s

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1 thrown his hat in the ring to be the pro tem of the Senate

2 on Tuesday. We have heard that the Air Resources Board

3 and the Department of Consumers Affairs have been invited

4 to that meeting. That\'s extremely exciting. We\'ve

5 already met with the founder and author of \"Smog Check for

6 California,\" Senator Presley. He was fantastic. And

7 we\'ve met with the Secretary of State and Consumer

8 Services and the Chief of the Bureau of Automotive Repair.

9 Maybe it\'s time for us to consider the motoring public and

10 the air and create some support to do it better.

11 Thank you.

12 CHAIRPERSON LLOYD: Thank you. We have another

13 witness signed up, Chris Ervine. Recognize that \-- I know

14 you spoke in opposition. We don\'t have any resolution

15 before us on this item. This is an information item. The

16 next one is \--

17 MR. ERVINE: I understand that.

18 CHAIRPERSON LLOYD: Thank you.

19 MR. ERVINE: I\'m Chris Ervine. I\'m with the

20 Coalition of State Test and Repair Stations.

21 I\'m a little disappointed. We\'re hearing an

22 awful lot of talk about reducing emissions, and we have a

23 huge untapped reservoir of emissions out there that are

24 available for reduction. And this is in the basic area in

25 the change of ownership areas. We\'re talking about a very

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1 small percentage of vehicles here that are 19 \-- or older

2 vehicles. When you get into a change of ownership area \--

3 I just live in a change of ownership area. I just retired

4 a 1993 Nissan Maxima with 225,000 miles on it. Has never

5 been in a smog check station. Now, my car was well taken

6 care of. Passed with no problem at all.

7 But problem that we have in these outlining areas

8 is these people ignore the check engine light. As long as

9 that car gets them from point A to point B, they don\'t

10 care if that light\'s on or not. The vehicles are not

11 maintained properly. They\'ve never been checked in a smog

12 check station and probably upwards of 70 percent of those

13 vehicles are transit vehicles that go into the enhanced

14 areas and spew their pollution out there as computer

15 vehicles. So we have a large untapped resource of

16 emission reductions that nobody wants to talk about. And

17 I think this is something that needs to be looked into.

18 The other problem that we have is \-- it was

19 brought up we\'re shifting more and more vehicles to the

20 test-only stations. You\'re asking the test and repair

21 industry in the Bay Area right now to invest \$50,000 in a

22 piece of equipment that they\'re never going to get their

23 money out of because they\'re going to lose so much of

24 their business to the test-only industry when it really

25 gets going.

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1 In San Joaquin Valley my shop and other shops \--

2 I have \-- at this point I have 60 members in the San

3 Joaquin Valley. We have experienced an 80 percent

4 reduction in smog tests. You\'re now talking to us about

5 in 2004 we\'re going to have to invest in emission testing

6 for evaporative emission control system. You\'re taking

7 cars away from us to where we can\'t pay for the equipment

8 we have presently, and you\'re asking us to spend more

9 money towards testing vehicles that we\'re never going to

10 see.

11 It does not make good business sense, and I urge

12 the people in the Bay Area not to come on line with this

13 program because of these problems with the test-only

14 industry. They\'re never going to recover their

15 investment. And I think that everybody needs to look at

16 this. More and more test and repair stations are shifting

17 over to test only. And when this is all said and done,

18 who\'s going to reduce all your emissions when the test and

19 repair industry is out of business?

20 Thank you.

21 CHAIRPERSON LLOYD: Thank you.

22 Mr. McKinnon, comment.

23 BOARD MEMBER McKINNON: Yeah. The question for

24 staff, can you kind of quantify the sort of the older car

25 question versus those cars that are transiting between

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1 enhance \-- not enhanced areas into enhanced areas. That

2 was your \-- do you have a way of quantifying that.

3 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I don\'t

4 think we have information about exactly how many cars that

5 are in basic areas, which are the smaller cities rural

6 areas go to the smoggy areas or what fraction of the

7 vehicles in the smoggy areas are from these basic areas.

8 The one thing that has happened that\'s addressed

9 this is the number of ZIP codes or the subregions that now

10 have the enhanced programs, particularly in the valley

11 have been greatly expanded. I think they added 100,000

12 cars \-- over 700,000 cars were shifted from the basic

13 program to the enhanced program in the Valley. Like in

14 South Coast it\'s virtually all enhanced so. It wasn\'t

15 necessarily change. But that\'s one way it\'s been

16 addressed is to spread the enhanced program which is the

17 dyno testing, to more and more of the state that now

18 represents almost 90 percent of the cars that are in the

19 enhanced program. So it\'s to the extent this transfer of

20 vehicles from one basic area to the other one is

21 occurring, that\'s being reduced because there\'s less

22 opportunity for that. Certainly it still occurs.

23 EXECUTIVE OFFICER WITHERSPOON: Just as a follow

24 up. It\'s been the staff\'s preference for a long time that

25 we have a state-wide enhanced program. But it was a

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1 decision by the state Legislature to create a three-tier

2 structure where in very rural parts of the state it\'s

3 change of ownership only. In smaller towns it\'s a basic

4 inspection program. And then in federal, urban,

5 non-attainment areas in the urbanized portion it\'s

6 enhanced. And that\'s the structure we have to live with.

7 So most of the improvements we talked about in

8 this presentation are within the enhanced program. And we

9 just have to live with the fact that vehicles move across

10 boundaries. But as Mr. Cackette indicated, the number of

11 vehicles outside of enhanced areas represents roughly 10

12 percent of the whole fleet that might be subject to

13 inspections were we to have a state-wide enhanced

14 inspection program.

15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Just to

16 point out that while it\'s desirable, perhaps, to have a

17 uniform program throughout the state, the gentleman

18 mentioned it cost \$50,000 to go to enhanced. And if

19 you\'re a test station or repair station and you\'re in a

20 community of a couple thousand people who only get a

21 couple thousand inspections and it\'s out in the boonies

22 somewhere, it\'s going to be hard for someone to make that

23 decision to provide the equipment. If they don\'t provide

24 the equipment there, you\'ve got the person having to drive

25 50 miles or something to find a test station. That\'s not

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1 a good public policy.

2 So there\'s something on the positive side for

3 having some basic areas with less stringent, less costly

4 requirement in some. But I think what we had before was a

5 lot of urbanized areas with basic program what we\'re going

6 towards was really just the small towns and the rural

7 areas that will not have the fully enhanced program.

8 BOARD MEMBER McKINNON: Can I follow up?

9 CHAIRPERSON LLOYD: Yes.

10 BOARD MEMBER McKINNON: Did that shift happen so

11 recently that it wouldn\'t be felt by folks or \--

12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: A year

13 or so ago.

14 BOARD MEMBER McKINNON: A year or so ago. Okay.

15 Is there any \-- clearly, we had cars that were

16 old enough to be exempted and we have cleaner cars that

17 are going to pass tests for at least a few years. Other

18 than those two explanations, can you think of any reason

19 why 80 percent of the tests would be at test-only

20 stations?

21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: No. We

22 had the \-- if you talk about the total fleet \-- and very

23 roughly we\'ve got 36 percent being directed to test only.

24 We\'ve got a similar number that can go to test and repair,

25 and there\'s a similar number that are exempted, something

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1 around 30 percent. Those are the cars for the first four

2 years. I don\'t know the exact numbers precisely, but it\'s

3 kind of partitioned into threes.

4 When we went from 20 percent test-only to 36, it

5 certainly doesn\'t represent a potential loss of business

6 of 80 percent. We do know that many people do find

7 test-only more convenient. There\'s a fraction of people

8 that choose to got to test-only, even though they\'re not

9 directed. Maybe that\'s what\'s happening. I don\'t know.

10 But in any case, there is a business case for

11 those cars that are directed to test-only are the ones

12 with the high probability of failing. And the test

13 only-station won\'t fix them. They\'ve got to go somewhere

14 to be repaired. That\'s where one of the business

15 opportunities remains.

16 So I don\'t think the comment that the test and

17 repair business will go out of business probably is not

18 correct. But clearly they\'ve lost some test business when

19 the state directed more cars to test only.

20 BOARD MEMBER McKINNON: Mr. Chairman, I started

21 this. There was somebody testifying, and he walked away.

22 And I think he wants to be \--

23 CHAIRPERSON LLOYD: I saw both shoot up when

24 staff made a comment. So we owe it to them. So if one of

25 you could come up. And I assume from the reaction you

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1 disagreed with staff\'s comment.

2 MR. ERVINE: Yes.

3 As to his remark with 36 percent of the smog

4 fleet is directed to test-only, you have to understand

5 that four years of newer vehicles \-- we\'re talking about

6 enhanced areas with test-only. We\'re not talking bout the

7 basic area or the change of ownership area. Enhanced

8 area, this is where they\'re spending the big money for the

9 dynos. In the enhanced areas, four years and newer

10 vehicles are exempt from the program. This is 40 percent

11 of the smog fleet is exempt from the program. 1974 and

12 earlier makes up 6 percent of the program. They are

13 exempt from the program.

14 What VAR has done is they have taken 36 percent

15 of brand-new vehicles all the way to 1966 vehicles and

16 this is what their 36 percent is. And when you do the

17 fuzzy math, you come up with about 80 percent of the

18 vehicles are either exempt or going to test-only. And

19 that leaves a very small percentage of the vehicle to go

20 to the test and repair industry.

21 The test and repair industry, we need to keep our

22 dynos busy. I need to do six tests a day to pay for my

23 dyno. I have \$1,000 a month payment on it. I pay \$4,000

24 a year for the maintenance contract on it. My most

25 expensive technician runs that dyno. I have one stall

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1 dedicated solely to that smog test. I can\'t do anything

2 else in that bay because of the dyno being in the way.

3 And I need to keep that machine busy all day long in order

4 to make a profit on it. I have gone from 12 and 13 smogs

5 per day to less than two.

6 CHAIRPERSON LLOYD: Thank you.

7 BOARD MEMBER McKINNON: You certainly got me to

8 the 80 percent. Now I get how we\'re very close to that.

9 Thanks a lot.

10 CHAIRPERSON LLOYD: Is there a comment from staff

11 or is there \--

12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I just

13 have to say we\'ll sit down and go over the math with them.

14 But that\'s not our understanding of where the cars go.

15 That\'s not 80. You know, 20 percent of them don\'t go to

16 test and repair.

17 BOARD MEMBER McKINNON: I thought it was 36.

18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Test

19 and repair, the kind of business he runs.

20 BOARD MEMBER McKINNON: Maybe I misunderstood.

21 How many are referred to test-only? What percentage?

22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It\'s 36

23 percent of the vehicles subject to the program, which

24 includes the exempted newer vehicles, which when I

25 characterized it I said it was about a third. Maybe it\'s

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1 a little bit more. I\'m not sure what the exact number is.

2 He said it was 40 percent of.

3 But of the cars that actually get a renewal, I

4 think it\'s closer to 40 percent of them would end up in

5 the test and repair situation. Then you\'ve got 17 percent

6 of the cars that go through change of ownerships. They

7 can go anywhere they want on top of that. So I think the

8 best estimate we have is about half the cars seeking a

9 smog check go to test and repair. Half of them go to test

10 only.

11 BOARD MEMBER McKINNON: If you start out of 40

12 percent of exempt \-- that\'s where I was following his

13 number. But anyway \--

14 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Those

15 are exempted by the Legislature. They\'re not in the

16 program until they\'re four years old. And the old ones

17 too are exempted by the Legislature. So with the

18 remaining \-- I think the dispute there is that we called

19 it 36 percent which is in \-- the denominator has those

20 exempted newer cars in it. And the gentleman\'s saying,

21 well, take those out and it\'s different. It\'s more like

22 half at that point.

23 MR. ERVINE: If you have 100 vehicles, 46 of them

24 are exempted, and 36 of them go to test-only. That leaves

25 you 82 percent of the fleet is either exempted or going to

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1 test-only, which leaves roughly about 15 percent that are

2 going to the test and repair.

3 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We\'ll

4 have to sit down and go over the math because that\'s not

5 the way the math looks for us.

6 CHAIRPERSON LLOYD: It would be helpful if you

7 could get together.

8 Charlie, I see your hand, but what I\'d like to do

9 is move onto the next item because it\'s related. You

10 won\'t let me do that. Okay. Well, you may have a very

11 short time there.

12 MR. PETERS: I very much appreciate your

13 consideration of that, Dr. Lloyd.

14 I think some consideration of whether or not \--

15 just how it is testing a car on a dynamometer by itself

16 fixes cars. I don\'t think that\'s true. And as a matter

17 of fact, I think the real performance is test and repair

18 is more than twice as effective as test-only as a system.

19 Based upon observations comparing test-only

20 programs and test and repair programs for campers, for

21 emissions, and all factors, whether or not it passes in an

22 off-cycle test later, the test and repair is more than

23 twice as effective as test only. If, in fact, you have to

24 have test-only because you have fraud and cheating, which

25 certainly might be true, then an appropriate oversight

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1 demanding improvement in performance can improve that by a

2 significant factor.

3 The Clean Air Act doesn\'t require any test-only.

4 Doesn\'t require dynamometers. The California Legislation

5 statutes up until quite recently required no test-only.

6 It required the ability to test in test-only, but didn\'t

7 require any test-only. So this division of the industry

8 and abuse of the public with multiple tests that are not

9 necessary needs to be looked at and evaluated because this

10 requirement for test-only is not required by the federal

11 government or by the statutes of the Legislature until

12 quite recently. I think it needs some additional

13 consideration.

14 Thank you.

15 CHAIRPERSON LLOYD: Do you want to respond now?

16 Any other comments?

17 BOARD MEMBER D\'ADAMO: I just have a quick

18 question. Whether or not there\'s any further discretion

19 on the part of the San Joaquin Valley to expand a program

20 even further.

21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It\'s my

22 understanding they work with BAR to identify all of the

23 areas that would fit the definition mainly because they

24 grew and got \-- there\'s a threshold of population minimum

25 for doing enhanced. And they found all those areas that

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1 have grown since the last census included them. And then

2 they included a bunch of other areas that were adjacent.

3 So that you \-- instead of having these little pockets of

4 areas, they kind of made a smooth curve around it, around

5 the urban areas and included all those areas in the

6 enhanced, except some of those areas are not allowed by

7 state law to have the test-only feature.

8 I think it\'s been expanded roughly as far as it

9 can go under the current structure.

10 BOARD MEMBER D\'ADAMO: Okay.

11 CHAIRPERSON LLOYD: Thank you. Any other

12 comments? Since it\'s not a regulatory item, it\'s not

13 necessary to officially close the record.

14 So with that, we move on to the next item, the

15 time to change staff. The next item 03-3-3, report and

16 findings on the effect of exempting additional vehicles

17 from the smog check program, highly related to the last

18 discussion. And this is an item where we would also be

19 taking testimony.

20 During the last item we talked about the

21 contribution of in-use vehicles to California\'s air

22 quality problem and the general role of smog check

23 inspections. Now we\'re going to turn to a specific aspect

24 of the smog check program itself, namely the exception for

25 new vehicles and whether that can be expanded without

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1 causing us to move backward in our emission control

2 efforts.

3 AB 2637 provides that new motor vehicles shall be

4 exempted from smog check inspections for six years,

5 instead of the current four years, unless this Board finds

6 such an exemption would prevent California from complying

7 with the Federal Clean Air Act or meeting our state plan

8 commitments. So you can see there\'s a significant

9 obligation here.

10 So Ms. Witherspoon, please introduce the item and

11 begin staff\'s presentation.

12 EXECUTIVE OFFICER WITHERSPOON: Thank you,

13 Chairman Lloyd and members of the Board.

14 Last year AB 2637 by then Assemblyman Dennis

15 Cardoza was signed into law establishing the enhanced smog

16 check program in the San Francisco Bay Area. That program

17 is in the process of being implemented right now by the

18 Bureau of Automotive Repair with enhanced inspections due

19 to begin in July of this year.

20 As AB 2637 was being debated in the state

21 Legislature, the question came up could the state-wide

22 smog check program be modified to reduce the burdens on

23 all motorists. Lots of alternatives were discussed during

24 that process, and the Legislature eventually settled on

25 the concept of expanding the new car exemption for

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1 everyone but with one important caveat. They asked the

2 Air Resources Board to determine whether that change would

3 prohibit California from complying with federal law or

4 from meeting our state implementation plan commitments.

5 If the Board makes this determination, then

6 AB 2637 specifies that the increased exemption will not

7 occur.

8 I\'m going to steal staff\'s thunder and tell you

9 the bottom line. Exempting five- and six-year-old cars

10 would prohibit California from meeting its SIP commitments

11 and is, therefore, not recommended at this time for

12 enhanced smog check areas. However, that change could be

13 implemented in basic rather than enhanced smog check areas

14 without creating a SIP difficulty.

15 The Legislature is continuing to inquire whether

16 changes to the overall smog check program are warranted,

17 and we are continuing to evaluate any and all such

18 proposals. On July 1st, ARB and the Bureau of Automotive

19 Repair will be submitting a major joint report to the

20 Legislature on the status and effectiveness of the current

21 smog check program. In that report we will also be making

22 various recommendations for program improvements. So the

23 dialogue will continue beyond your deliberations here

24 today.

25 But at this juncture, we\'re here for just one

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1 narrow purpose, to present our analysis on the effect of

2 exempting five- and six-year-old cars from smog check

3 inspections. At the request of the Chairman, a

4 representative from the Bureau of Automotive Repair has

5 joined us today to answer any questions you may have.

6 David Amlin, the engineering chief for BAR, is present and

7 will be available to answer questions following staff\'s

8 presentation.

9 CHAIRMAN LLOYD: Has the Legislature been waiting

10 for this report?

11 EXECUTIVE OFFICER WITHERSPOON: This report? The

12 law requires that you make a determination. Otherwise,

13 the exemption would take effect January 1st of next year.

14 Staff\'s presentation will be made by Tony

15 Dickerson of the Mobile Source Operations Division.

16 FIELD INSPECTION/TESTING SECTION ENGINEER

17 DICKERSON: Thank you, Catherine.

18 Good afternoon, Dr. Lloyd and members of the

19 Board.

20 This afternoon I\'m presenting for your

21 consideration the results of an analysis on the emissions

22 impact of removing five- and six-year-old vehicles from

23 the state smog check program. This analysis was performed

24 in response to recent Legislation with state-wide smog

25 check implications.

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1 (Thereupon an overhead presentation was

2 presented as follows.)

3 FIELD INSPECTION/TESTING SECTION ENGINEER

4 DICKERSON: Assembly 2637 was signed in law in September

5 2002 providing for the establishment of enhanced smog

6 check program in the urbanized area of San Francisco Bay

7 Area \-- excuse me \-- San Francisco Bay Area basin. The

8 areas affected will be the counties of Alameda, Contra

9 Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara,

10 and portions of Solano and Sonoma Counties. These areas

11 are indicated in orange on the map. The enhanced smog

12 check program is to be implemented by January 2004.

13 \--o0o\--

14 FIELD INSPECTION/TESTING SECTION ENGINEER

15 DICKERSON: Another portion of AB 2637 has state-wide

16 impact on smog check, specifically the bill increased the

17 existing smog check exemption for new vehicles from four

18 to six years after purchase. The additional two-year

19 exemption from the biannual smog check program was

20 included in the law with the intent to decrease program

21 cost and improve efficiency and was based on a preliminary

22 emissions analysis which indicated that the reduction in

23 smog check emissions benefits might not be significant.

24 \--o0o\--

25 FIELD INSPECTION/TESTING SECTION ENGINEER

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1 DICKERSON: The increased exemptions are to be effective

2 in all basic and enhanced smog check areas beginning

3 January 1, 2004, unless the ARB finds that exempting the

4 additional vehicles would prohibit the state from meeting

5 the requirements of the Federal Clean Air Act or the state

6 implementation plan.

7 A detailed analysis of the emissions impact of

8 extending the new vehicle emissions from four to six years

9 has been performed. The purpose of the staff report and

10 this presentation is to provide the Board with the results

11 of this analysis and staff\'s recommendation regarding the

12 finding called for in legislation.

13 \--o0o\--

14 FIELD INSPECTION/TESTING SECTION ENGINEER

15 DICKERSON: Staff used the latest data available to assess

16 the emissions impact of additional vehicle exemptions. In

17 some cases multiple data sets were used to verify limited

18 California data, including those from other states. Also

19 staff decided to try to identify alternative exemptions

20 should the evaluation indicate significant adverse

21 emission impacts.

22 \--o0o\--

23 FIELD INSPECTION/TESTING SECTION ENGINEER

24 DICKERSON: This slide summarizes the different sources of

25 data we analyzed. For example, the Bureau of Automotive

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1 Repair has performed enhanced smog checks on randomly

2 selected vehicles at the roadside. Data on the frequency

3 of OBD II check engine lights that were illuminated has

4 been collected in California and during emission

5 inspections performed in Wisconsin and Arizona.

6 Testing in our El Monte laboratory allowed us to

7 convert the smog check data to on-road emissions. Testing

8 before and after repairs done at U.C. Riverside allowed us

9 to determine per-vehicle emission reductions that can be

10 lost due to exemptions. Computer models such as NVAC

11 allow us to calculate emissions in tons per day.

12 \--o0o\--

13 FIELD INSPECTION/TESTING SECTION ENGINEER

14 DICKERSON: This chart illustrates one of the findings of

15 our evaluation. Shown is the smog check failure rate of

16 vehicles by age based on OBD II failures. It is clear

17 that by age four, the age that most vehicles will receive

18 their first smog check, the failure rate has begun to

19 increase. This is also the age when the emission warranty

20 for most parts expire. By age six the failure rate is

21 five times higher than it was at age three.

22 \--o0o\--

23 FIELD INSPECTION/TESTING SECTION ENGINEER

24 DICKERSON: The results of the analysis indicated that

25 extending the new vehicle exemption for an additional one

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1 to two more years is projected to significantly increase

2 vehicle emission in enhanced smog check area.

3 As shown in this chart, exempting both five- and

4 six-year-old vehicles will increase emissions by about

5 four tons per day of ROG and NOx in 2005. Exempting only

6 five-year-old vehicles would increase 2005 calendar year

7 emissions by nearly two tons per day in enhanced areas.

8 The projected emission increases are lower in 2010 due

9 to lower baseline emissions levels. However, a five- or

10 six-year exemption is still estimated to increase

11 ozone-forming emissions by one- to two-and-a-half tons per

12 day respectively.

13 \--o0o\--

14 FIELD INSPECTION/TESTING SECTION ENGINEER

15 DICKERSON: In November 1994 California submitted to the

16 U.S. EPA a comprehensive SIP detailing how San Diego

17 County, San Joaquin Valley, Ventura County, the Sacramento

18 region, the southeast desert, and the South Coast areas

19 would attain the one-hour federal ozone standard by a

20 statutory deadline.

21 Enhanced smog check was included in the SIP for

22 each area and contributed emission reductions needed for

23 attainment. In fact, in the South Coast, enhanced smog

24 check provided about one-fourth of the emission reductions

25 needed. Smog check will also be very important in helping

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1 the state attain the new more stringent federal eight-hour

2 standard. In addition to being a key strategy for

3 attaining the one-hour ozone standard, smog check is a

4 critical element in the South Coast, San Joaquin Valley PM

5 10 attainment plans.

6 \--o0o\--

7 FIELD INSPECTION/TESTING SECTION ENGINEER

8 DICKERSON: In July 2000 ARB and BAR released a report

9 that concluded enhanced smog check was achieving emission

10 reductions, but the reductions fall short of meeting ARB

11 SIP commitment. In August 2000 ARB and BAR committed to

12 implement additional smog check improvement to remedy the

13 short fall. Most, but not all of these improvements, have

14 been fully implemented. This illustrates the difficulty

15 of achieving the full benefits of the enhanced smog check

16 program. Lost emission reductions through program

17 relaxations would make this an even more difficult task.

18 \--o0o\--

19 FIELD INSPECTION/TESTING SECTION ENGINEER

20 DICKERSON: In bringing SIP implications more into focus,

21 I\'ll outline the implications of a five- and six-year

22 exemption separately for areas of California in fall under

23 the enhanced program and the basic program.

24 Enhanced smog check has been implemented under

25 SIP commitments that areas that currently do not meet air

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1 quality standards. As mentioned previously, additional

2 emission reductions are needed in these areas from smog

3 check and other programs in order to insure that

4 California will meet its air quality objectives.

5 Therefore, staff believes the emission reductions

6 lost from the exception of five- or six-year-old vehicle

7 would jeopardize SIP commitments. And basic smog check

8 areas which in general have a lesser air pollution

9 problem, the emission increase due to additional

10 exemptions are not large enough to jeopardize existing SIP

11 commitments. Therefore, the staff believes a fleet-wide

12 exemption for new motor vehicles beyond current four years

13 would not prohibit the state for meeting California\'s

14 commitment with respected to the SIP in basic areas.

15 \--o0o\--

16 FIELD INSPECTION/TESTING SECTION ENGINEER

17 DICKERSON: In order to put staff\'s recommendation to

18 perspective, this map of California identifies the three

19 smog check program types. Also included is a breakdown by

20 percentage of vehicles in the state smog check program.

21 The enhanced program areas are shown here in orange.

22 85 percent of the total state fleet is concentrated in

23 these areas.

24 The program basic program areas shown here in

25 dark blue comprise only 12 percent of the state\'s total

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1 fleet. Lastly, the change of ownership areas are shown in

2 light blue with only 3 percent of the state\'s population.

3 \--o0o\--

4 FIELD INSPECTION/TESTING SECTION ENGINEER

5 DICKERSON: In summary, staff has reviewed the

6 requirements AB 2637 and has investigated the emission

7 impact of increasing the smog check exemption to either

8 five or six years for new motor vehicles.

9 The analysis shows that a significant adverse

10 emissions impact would result in enhanced smog check areas

11 from such a change. Therefore, the staff proposes that

12 the Board approve its report and find that a fleet-wide

13 exemption for new motor vehicles beyond the current four

14 years would prohibit the state from meeting California SIP

15 commitments in enhanced smog check areas. This means that

16 the exemptions would not occur in enhanced areas.

17 In basic smog check areas, the staff recommends

18 the Board find that five- and six-year exemptions would

19 not prohibit the state from meeting California SIP

20 commitments, clearing the way for exemptions to be

21 implemented.

22 The ARB staff in cooperation with BAR will

23 continue to study targeted new vehicle exemption options

24 for enhanced areas that offer promise to decrease smog

25 check testing costs while preserving the emission benefits

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1 of the program.

2 On the next few slides I\'ll give you a preview of

3 the alternatives staff is investigating.

4 \--o0o\--

5 FIELD INSPECTION/TESTING SECTION ENGINEER

6 DICKERSON: In evaluating other possible exemptions, staff

7 is seeking to improve the cost effectiveness of smog check

8 by exempting vehicles or vehicle classes that have a high

9 likelihood of passing a smog check inspection. This would

10 reduce consumer cost and inconvenience. It will also

11 minimize any lost emission reductions. We are currently

12 evaluating three different ways of exempting additional

13 vehicles.

14 \--o0o\--

15 FIELD INSPECTION/TESTING SECTION ENGINEER

16 DICKERSON: The first is to exempt all PZEVs. Because

17 PZEVs have a 150,000-mile warranty, we expect most owners

18 will seek out repairs whenever the check engine light come

19 on.

20 The second approach involves using remote censors

21 at the roadside to identify vehicles which repeatedly

22 demonstrate very low emissions.

23 Finally, BAR is evaluating whether there are

24 groups of vehicles, such as a specific model, which rarely

25 fail smog check and, therefore, could be exempted.

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1 We will inform you if any of these approaches

2 proves itself a viable way to exempt more vehicles from

3 the smog check.

4 Thank you.

5 CHAIRPERSON LLOYD: Thank you very much.

6 Questions. Ms. D\'Adamo.

7 BOARD MEMBER D\'ADAMO: Yes. The slide that you

8 provided results \-- lost emission benefits and enhanced

9 smog check areas. Do you have a similar chart for the

10 basic areas? Or regardless of whether or not you have a

11 chart, do you have that information on the basic areas?

12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: In the

13 chart here it showed the basic areas being 12 percent of

14 the cars in the state and 85, not 90 I said before, were

15 in the enhanced. Another 3 percent that were only subject

16 to change of ownership inspections. So I guess you could

17 use that ratio roughly to figure out what the tons would

18 be. I guess it would be 12/85th times these numbers.

19 BOARD MEMBER D\'ADAMO: The concern that I have \--

20 and this relates to our earlier conversations. I suppose

21 in certain areas of the state that are almost entirely in

22 basic areas it\'s not going to make that big of a

23 difference. But in areas such as the Valley \-- and I

24 don\'t know about South Coast. I imagine there\'s probably

25 not much of anything in South Coast that\'s in basic. So

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1 just for purposes of discussion here, looking at the

2 Valley, I imagine there\'s a fair portion of the rural

3 areas that would still be considered basic. And

4 especially if the Valley gets bumped up to extreme, I

5 would think, you know, anything that could come out of

6 that black box would make a difference in terms of meeting

7 the state\'s air quality standards.

8 So I\'m just wondering if the staff considered not

9 allowing the exemption to occur in certain areas \--

10 certain non-attainment areas extreme, severe.

11 EXECUTIVE OFFICER WITHERSPOON: We had the same

12 concern you did about whether \-- in the Valley in

13 particular if you look in the map and see how much basic

14 and enhanced coexist side by side whether we\'d be eroding

15 progress. But the standard that the Cardoza Bill gave us

16 was very narrow. It said we had to find it was going to

17 directly violate a SIP commitment or interfere with

18 conformity. And by that standard we could not reach the

19 finding that it would necessarily undercut what we were

20 legally committed to do because we had established one SIP

21 finding for basic areas and a separate one for enhanced

22 originally.

23 So where we\'re deficient in enhanced areas \-- and

24 certainly some vehicles will traverse back and forth \-- we

25 couldn\'t pin that down sufficiently to say it had risen to

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1 the level of the standard of the Cardoza Bill that we

2 could tell you to make this finding and stop the exemption

3 from going into effect. But we did weigh that.

4 BOARD MEMBER D\'ADAMO: Even in the event the

5 Valley goes extreme? We\'re looking at Title 5, for

6 example, remote areas of the Valley where farmers are

7 going to be required to get their diesel irrigation pumps

8 either permitted or replaced and in remote areas of the

9 state. So just \-- I realize this bill had nothing to do

10 with Title 5, but just drawing a comparison I think that

11 especially in an area \-- maybe Ms. Walsh can answer this.

12 But is the language so restrictive that it wouldn\'t allow

13 for some additional consideration if the Valley were to go

14 extreme and have the black box situation?

15 SENIOR STAFF COUNSEL JENNE: I think the issue is

16 whether we can make a finding that would prohibit the

17 state from meeting its SIP commitments. And the bottom

18 line I think when staff looked at the numbers, it just

19 looked like the numbers were very, very small. And we

20 couldn\'t make that legal finding that they were big enough

21 to prohibit the state from meeting SIP. I think in the

22 Valley when you go to extreme that the number is still

23 very small, and it\'s probably not enough to reach that

24 legal standard.

25 BOARD MEMBER D\'ADAMO: And the standard actually

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1 requires \-- it\'s tied to SIP commitments?

2 SENIOR STAFF COUNSEL JENNE: It says \"prohibit

3 the state from meeting their requirements of the state\'s

4 commitments with respect to the state implementation plan.

5 EXECUTIVE OFFICER WITHERSPOON: D.D., the other

6 factor \-- excuse me \-- Ms. D\'Adamo is the existing legally

7 enforceable SIP. So it\'s the 1994 SIP in the San Joaquin

8 Valley\'s case, not the one that\'s under preparation now,

9 or would be required under extreme designation.

10 I suppose could you construct a conflict by

11 setting up the SIP to depend on those emission reductions.

12 And later we could revisit this and make a finding under a

13 new SIP. But under the one we have on the books, we

14 didn\'t think we could reach the result.

15 BOARD MEMBER D\'ADAMO: Would the district have

16 the option as they reevaluate \-- as they evaluate the SIP

17 measures to include that as a measure that they would like

18 to have?

19 EXECUTIVE OFFICER WITHERSPOON: I think we can.

20 BOARD MEMBER D\'ADAMO: Just looking for any way I

21 can to have there be another inequity argument that we can

22 bring back to the Board later.

23 SUPERVISOR DeSAULNIER: I\'m prepared to ask

24 Senator Burton to write a bill so you don\'t have to have

25 enhanced areas at all in the valley. We keep giving and

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1 giving.

2 CHAIRPERSON LLOYD: I thought we should use

3 staff\'s creativity and have a partially-enhanced area, the

4 transition. I think it\'s a good point.

5 BOARD MEMBER D\'ADAMO: Right. I guess I\'m a bit

6 more sympathetic to the test-only situation. But basic

7 doesn\'t require that anyways. So, Mr. Cackette, what you

8 had mentioned earlier about someone in a remote area

9 having to drive in to go to a test-only station, that

10 wouldn\'t apply. These people are \--

11 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: To go

12 to an enhanced station which means one with a dyamometer.

13 It would be test and repair. But even in those areas, you

14 know, there may not be enough business to support a

15 \$50,000 dyamometer purchase. Not test-only, but enhanced

16 with the dyamometer.

17 BOARD MEMBER D\'ADAMO: But in the rural areas

18 they\'re required already. This would be an exemption with

19 regard to the newer vehicles under a basic.

20 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yes.

21 That\'s correct.

22 CHAIRPERSON LLOYD: The other area where it could

23 be helpful \-- and this context is getting back some of the

24 later comments from staff. If you\'re able to work the

25 district to identify makes and models which basically are

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1 more reliable more vital for that period of time, get some

2 preferred options there.

3 Mr. \-- Supervisor DeSaulnier and Mr. McKinnon.

4 SUPERVISOR DeSAULNIER: Matt says he wants the

5 last word this time.

6 As I read this, I don\'t know whether to ask staff

7 from the author\'s office or our staff. It doesn\'t seem if

8 as if we have any legal discretion, or very little.

9 EXECUTIVE OFFICER WITHERSPOON: With respect to

10 enhanced areas, you mean? I think that\'s correct.

11 SUPERVISOR DeSAULNIER: Just in terms of

12 philosophically, what the last speaker on the last item

13 said \-- I\'ve heard this from other people Dennis Dakota

14 amongst them. In an area like the Bay Area that

15 generally, as I understand it, for a metropolitan area has

16 a relatively new fleet, just the issue of we bring the

17 tested-only stations on and the amount of demand is going

18 to decrease. So you\'ve got these people putting out a

19 large capital investment considering the size of their

20 business and the demand may not be there, which would be a

21 good thing for air quality.

22 Could you respond to that? Or is that something

23 you can look at in terms of the ongoing look at how we can

24 improve smog check.

25 EXECUTIVE OFFICER WITHERSPOON: I would say there

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1 is a tension between trying to minimize burdens on

2 motorists and also trying to preserve market share and

3 business opportunities for the stations that have been

4 invested in equipment and wish to provide these services.

5 That, you know, to the extent more vehicles are exempt now

6 by any means, whether because there PZEV, because they\'re

7 super clean models, because they\'ve passed clean screen

8 remote censors, that will reduce business to \-- whether

9 it\'s test-only or test and repair. And the competing

10 public policy goal is why send someone to a test that

11 doesn\'t have a dirty vehicle that needs to be repaired?

12 And so the cost effectiveness \-- even if keeping

13 these vehicles in is at the high side of 45,000 a ton,

14 something to that effect, so the I&M Committee when they

15 looked at it they supported our determination but said we

16 really need to keep working on this problem because we\'re

17 wasting dollars. Now, granted, those are dollars we\'re

18 not viewed as wasted by the industry that\'s invested in

19 dynos and trying to recoup its investment. But in terms

20 of dollars spent to reduces pollution, it\'s wasted in

21 another sense if there is no pollution there to be

22 addressed.

23 So finding that balance point and not

24 undercutting the companys that are our partners this in

25 this effort is very challenging task and it has been

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1 challenging ever since smog check began.

2 SUPERVISOR DeSAULNIER: I\'m fine with this item,

3 Mr. Chairman. But I do think as staff reviews it, it

4 seems this tension will most likely get worse. And with

5 the risk of agreeing with Charlie, then you get into the

6 issue as this business operation becomes more difficult to

7 be profitable, it seems that you might have further

8 problems with fraud, with people trying to create an

9 underground business.

10 So when we look at this, it\'d just be nice if

11 staff would report on that and try to figure out as well

12 as you can without \-- just generally quantify if this is

13 an issue, if the issue\'s growing, if there\'s a way to stop

14 it or prohibit it.

15 Thank you.

16 CHAIRPERSON LLOYD: I think Mr. McKinnon had a

17 comment.

18 BOARD MEMBER McKINNON: Yeah. I\'m very

19 comfortable with the resolution. I also \-- I think as

20 warranties get better and better and as the cars get more

21 and more reliable, I think that it should be a benefit to

22 the person that\'s purchasing a car that they\'ve paid more

23 for emission controls that are warranted for longer and

24 long they should receive some of the benefit of that of

25 going less often. And I think eventually we have to as

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1 the cleaner and cleaner cars with the longer warranties

2 come into effect, we have to get good at figuring out

3 which cars fit that category and how reliable it is. But

4 it should be a benefit of buying one of those cars is that

5 you go less often, I think.

6 Now, as long-time advocate for defense workers,

7 when your market is developed by government, you are

8 subject to government changing and deciding that you have

9 less of a market. And you\'re also subject to things that

10 happen. And I think we were just talking about the

11 tensions. You know, we all know we need to deal with

12 older cars. We know that. And then there\'s sort of

13 another subject that enters in this area, and that is that

14 rule changes don\'t contemplate what it costs to do the

15 change. And sometimes it\'s the dyno in that example, and

16 sometimes it\'s rule changes that require training at a

17 frequency that is almost unfair to the people that do the

18 work.

19 And I don\'t \-- I\'m not on BAR\'s Board. I

20 don\'t \-- but I often talk to mechanics who have difficulty

21 with frequent rule changes having to take courses, course

22 availability being a problem, and certification being a

23 problem in such a frequent time frame. And I think, you

24 know, there are places where we could be better and fairer

25 as government. I mean, it may not be this agency. It may

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1 be BAR. But we could be a little more consider at of how

2 often we change to give people time to adjust to the

3 changes.

4 But I don\'t buy that when you create a regulated

5 market that you have a duty to protect that market if the

6 technology gets to the point where the cars are cleaner

7 for longer. I\'m comfortable with this decision where

8 there\'s evidence that the cars get dirty at four years.

9 But if we get to the point where cars don\'t get dirty for

10 ten years, we need to look at that, and we need to be fair

11 to the people that purchase the cars that stay in good

12 shape for ten years.

13 CHAIRPERSON LLOYD: Thank you.

14 Professor Friedman.

15 BOARD MEMBER HUGH FRIEDMAN: Would you correct me

16 if I\'m wrong. My understanding is that the Legislature,

17 not us, has imposed this smog check regime and made the

18 distinctions between test and \-- test-only and test and

19 repair. I\'m sure \-- or I assume we had \-- we or our

20 predecessors have some input on that. We can either

21 voluntarily testify or be asked and called upon for our

22 views.

23 But I\'m not sure that it is our ultimate decision

24 or responsibility, and I don\'t believe it is, to decide

25 what gets exempt \-- other than being referred this

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1 specific issue to extend the exception for two years.

2 Actually, we\'re just making a finding. But beyond that,

3 it\'s the Bureau of Automotive Repair. That\'s in a

4 different agency. And it\'s the Legislature. And I\'m \--

5 while I certainly that \-- I really like, Matt, your

6 putting the context on this in terms of what the test and

7 repair people are facing potentially. I\'m \-- other than

8 just being sympathetic, I\'m not sure we\'re the right forum

9 for any kind of action or decision other than what we have

10 before us. And I\'m comfortable with the recommendation.

11 GENERAL COUNSEL WALSH: I think that\'s an

12 accurate description of the situation that states law does

13 largely draw the design of the system we are looking at.

14 As Supervisor DeSaulnier indicated earlier, it\'s

15 accurate that this is not a discretionary decision in the

16 way that most of the decisions that come before you are.

17 This is making a factual finding, and that finding will

18 trigger a specific requirement that\'s already in state

19 law.

20 CHAIRPERSON LLOYD: Supervisor Patrick.

21 SUPERVISOR PATRICK: Thank you, Mr. Chairman.

22 Professor Friedman\'s comments, notwithstanding, I

23 think it\'s important that we go back to Board Member

24 D\'Adamo\'s point. As someone who\'s from the Valley and

25 recognizes, as all of us in this room do, the Valley\'s

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1 challenges, it concerns me that our basic areas will

2 get \-- they\'re already basic as opposed to enhanced. And

3 now they\'re going to get an additional two years. And our

4 charts show us that at year four the emissions start

5 rising. So I think your point is very well taken. And I

6 think that that\'s something that we have to be concerned

7 about.

8 Now, perhaps, it\'s not something that we have,

9 you know \-- under this piece of legislation that we have

10 the ability to do anything about. But I think that we

11 would be remiss if not at least acknowledging that in the

12 Valley we\'re going to need all the help that we can get.

13 And to give them a pass on advance versus basic, I think,

14 makes a lot of sense. Because they\'re in small

15 communities and, you know, perhaps it\'s an inconvenience.

16 Perhaps if we want to make sure that the folks that are

17 providing these tests in small communities, you know, that

18 they can stay in their community and do this.

19 So I\'m completely comfortable with that. But

20 then to give them an additional two years I don\'t think

21 makes a whole lot of sense. I don\'t know how you go about

22 acknowledging that, but I do think it\'s something that in

23 the Valley that we have to be concerned about, perhaps

24 some other areas as well.

25 But I appreciate you bringing it up and you beat

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1 me to the punch. Thank you.

2 CHAIRPERSON LLOYD: Thank you.

3 EXECUTIVE OFFICER WITHERSPOON: We\'ve been having

4 a furious discussion between all four deputies \--

5 SUPERVISOR PATRICK: I noticed.

6 EXECUTIVE OFFICER WITHERSPOON: \-- on this

7 question and whether we erred, whether we can construct a

8 different theory, how we might to get to the result, which

9 seems too obvious that the basic portions of the San

10 Joaquin Valley, because they are in an attainment area

11 somehow be included.

12 So what I think I would like to recommend at this

13 point is that staff go back and take another look at the

14 Valley specifically and see if we want to make a different

15 finding about them.

16 We have time. This law does not take effect

17 until January 1st of 2004, though we\'d certainly need to

18 decide relatively soon so BAR and the Department of Motor

19 Vehicles can take the appropriate steps to implement or

20 not implement this exemption. But there\'s enough dialog

21 going on between the four of us that we want to put our

22 best brains to it and see if we can\'t reach a finding that

23 the Valley should say stay in. And our preliminary

24 conclusion was they can\'t, but we\'ll take one more look at

25 it, if that would be amenable to Ms. D\'Adamo and

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1 Supervisor Patrick.

2 BOARD MEMBER D\'ADAMO: I\'m fine with that, or to

3 adopt what we have and bring that smaller piece back.

4 EXECUTIVE OFFICER WITHERSPOON: That\'s what I was

5 suggesting. Go ahead and make the finding in general. If

6 we need to refine it for the San Joaquin Valley, we\'ll

7 bring back the refinement on just that piece. Because

8 none of the other basic areas are non-attainment for

9 federal law, I don\'t think.

10 SENIOR STAFF COUNSEL JENNE: Ms. D\'Adamo, the way

11 the resolution is currently structured, the Board would be

12 making a finding today for enhanced areas and would

13 essentially be declining to make any finding right now

14 about the basic areas. So because the Board isn\'t making

15 a finding in the basic areas, the exception would into

16 effect. But the Board \-- we could certainly come back

17 later on about another finding for just the basic areas as

18 you suggested. And that wouldn\'t affect anything you

19 would do today, which would be just be making the finding

20 for the enhanced areas.

21 BOARD MEMBER HUGH FRIEDMAN: I just wanted to

22 clarify that too for Supervisor Patrick and anybody else I

23 might have misled. When I said \-- I indicated I

24 understood we had a limited role, it was to make findings

25 as referred by the legislation. And when I said I support

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1 the proposal, it did not take action with respect to the

2 basic areas on our part, and I didn\'t mean to preclude any

3 further consideration with respect to magnifying pollution

4 problems or non-attainment areas. So I certainly have no

5 problem with it coming back if there\'s some way that in

6 good faith a finding can be made with respect to that.

7 CHAIRPERSON LLOYD: Supervisor DeSaulnier.

8 SUPERVISOR DeSAULNIER: I\'d be happy to make a

9 motion. And if you need you need an amendment to the

10 resolution, D.D., you can do that, or if the direction is

11 sufficient for you to come back. But I\'ll move

12 resolution \--

13 CHAIRPERSON LLOYD: Supervisor DeSaulnier, I

14 appreciate your anxiety, but we do have three witnesses

15 signed up to \--

16 SUPERVISOR DeSAULNIER: I thought we had \--

17 sorry, Charlie. I know you\'ll get back at me some way.

18 Sorry Charlie. What commercial did that come from?

19 CHAIRPERSON LLOYD: So indeed, if there are no

20 more question from the Board, we do have three witnesses

21 signed up. Charlie Peters, Larry Armstrong, and Chris

22 Ervine. And then we will be ready for the motion.

23 Charlie.

24 MR. PETERS: Mr. DeSaulnier, Mr. Chairman, and

25 Board. Very much appreciate Mr. DeSaulnier\'s attention,

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1 him being a small businessman in the Bay Area with

2 significant efforts against small businesses \-- restaurant

3 businesses throughout the state of California currently

4 with unfair business practice situations where some

5 regulator might come in to Dr. DeSaulnier\'s business, in

6 spite of the fact of how important and powerful he is, and

7 put some minor correctional issue against his business.

8 And what can happen there can get pretty interesting, even

9 in spite of his power.

10 What I\'m here to talk to you about today is I

11 gave you a packet of information which includes \-- and I\'m

12 interested in the policy issues \-- includes a small

13 businessman in Southern California. There was no

14 opportunity to make corrections. An employee of his did

15 something inappropriate, which he immediately let go

16 before he found out what had happened.

17 He goes to his association, which is the largest

18 in the state supporting these issues, and the attorney

19 says \$20,000 to start and you lose. He said, \"Well, gee,

20 I\'m good guy.\" He goes before the regulator, and they

21 say, \"You\'re out of business.\"

22 That\'s an interesting place to start. He\'s

23 currently today out of business. He\'s 40 years old, AAA

24 approved shop, CAP approved shop, passed every test, every

25 standard there is. Has never had a citation in his life.

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1 Has had a perfect record with AAA. State of California

2 has him out of business today.

3 We are trying to mitigate that. He now has an

4 attorney. He\'s now a petitioned this to the Supreme

5 Court. He\'s now petitioned this to the Department of

6 Consumers Affairs. We\'re hoping he gets back in business.

7 We hope he gets some additional consideration. We hope we

8 can mitigate this.

9 But what\'s right behind that is immediately after

10 that they can take him to the district attorney. The

11 attorney general\'s got him now. Then the district

12 attorney comes for him. And then immediately after

13 that \-- because there\'s been some action against him, we

14 can have an unfair business practice suit against him that

15 can extract another 20,000, \$30,000 from this money.

16 Immediately as soon as that\'s done, the same attorney with

17 the same pseudo consumer can make another action, and

18 every attorney in the state of California can continue to

19 take action against this individual. And this guy never

20 did anything wrong.

21 What are we doing to small business in

22 California? What are we doing to the air, putting

23 somebody who\'s a professional that can fix the problem out

24 of business with no consideration. It\'s wrong. I want

25 your help. Say you have nothing to do with this. I\'ve

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1 had everybody tell me for 15 years it\'s ain\'t my problem.

2 Well, it\'s mine. I\'m the problem and my lack of ability

3 to communicate \-- I\'m working on trying to make it better.

4 I\'m petitioning you. I\'ll get on my hands and knees if it

5 takes it to help support small business and better air

6 quality in California starting today and to create some

7 protection for Mr. DeSaulnier and his business in the Bay

8 Area.

9 Thank you.

10 CHAIRPERSON LLOYD: Thank you for your written

11 statement.

12 We have Larry Armstrong and then Chris Ervine.

13 MR. ARMSTRONG: Yes. My name is Larry Armstrong.

14 I operate some automotive tune-up shops that participate

15 in the smog check program in both the Bay Area and one

16 left in the enhanced area.

17 I submitted a letter to the Chairman concerning

18 my concerns over the recommendation of the I&M Review

19 Committee. I\'d like to make a couple quick comments. I

20 sat back on the other issue.

21 First, Mr. McKinnon, I would like you to consider

22 maybe an alternative theory on relinquishing a need to

23 have a smog check. And I would suggest to you there\'s a

24 very strong possibility that the reason these cars keep

25 getting better is because they were subjected to smog

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1 check and they failed smog check and the manufacturers

2 went back and fixed those problems and made better cars.

3 So there\'s a reverse spin on this thing that I would wish

4 that you would consider.

5 I think that \-- I think that the smog check

6 program has caused vehicles to become a lot stronger and a

7 lot better in the things they do so that the manufacturers

8 could get out of the way of having their cars fail.

9 The issue of how many cars go to test-only, I

10 have strongly objected to this. Regulators have never

11 willingly admitted to what they\'re doing, and I listened

12 to Mr. Cackette over here, and I listened to him carefully

13 as to what he said. He told you the truth. But what he

14 really did was spin you a little bit. And it bothers me

15 when that gets done to me, and it bothers me when it gets

16 down to you folks. When he tells you that 36 percent of

17 the vehicles in the fleet are being sent to test-only, the

18 Senate Transportation Committee equated that one half of

19 all the directed vehicles. It\'s not 36 percent of the

20 vehicles being tested. Over 50 percent of the vehicles

21 are being directed to test-only.

22 Somebody talked about investment and return on

23 that investment. I finally gave away a smog check station

24 that I\'ve run since 1976 in Fresno. Virtually gave it

25 away to get away from the losses that I was continuously

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1 incurring because of the laws that we put in place that

2 took my business away.

3 If that serves the public somehow, I guess that\'s

4 the way it goes. But I don\'t see how it serves the public

5 to take away the ability to find and repair cars in need

6 of emission repairs in favor of what? So I would ask you

7 to at least be thinking about that.

8 I have asked the Bureau of Automotive Repair for

9 the data that was given to you today as an example that

10 somehow vehicles that go to test only are somehow treated

11 definitely and better and whatever. And the fact of the

12 matter is that to my knowledge that evidence has never

13 been available. I\'ve asked the Bureau of Automotive

14 Repair again a couple of weeks ago to provide me with that

15 evidence, and I\'ve seen none of that evidence.

16 The 36 percent factor that you\'re dealing with

17 was developed by a company under the direction of a fellow

18 named Rob Clausmyer, and it was done based on an arbitrary

19 50 percent discount to test and repair. They then

20 calculated up to 36 percent of the vehicles would have to

21 go to test-only to meet the requirements of this

22 50 percent discount. Well, there was no basis for the

23 50 percent discount so whole thing is bologna.

24 In a positive note, I would like to commend the

25 ARB staff for standing up to the subtle pressure from the

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1 Legislature on and Governor an AB 2637 to cave in and

2 figure out a way to do that, even though they know there

3 are detrimental effects on emissions from doing that.

4 I was very much concerned with the presentation

5 to the I&M Review Committee which then prompted a letter

6 that came to you folks expressing a lot of concern about

7 the cost of taking those vehicles out. I have asked the

8 Chairman of the Air Resources Board to provide me with the

9 documentation so that I can figure out how that was done

10 because it doesn\'t seem logical to me. It shouldn\'t seem

11 logical to you if older cars \-- makes sense to fix and

12 repair and \-- find and repair the broken ones. If ten

13 percent of that group of cars of those newer vehicles are

14 broken, how does it become this astronomical cost to fix

15 those cars.

16 And I question whether \-- and I don\'t know

17 whether the effect of the remainder of new car warranty

18 might be available to those consumers. If it is, the

19 additional cost factor is, in fact, zero because the new

20 car manufacturers have an obligation the fix those cars.

21 And if that cost moves over to the consumer because it

22 didn\'t get a smog check at a later date, then who\'s

23 responsible for that? If we as a society just allow those

24 cars to go out beyond the warranty so that the consumer

25 can be obligated to pay for those repairs, that doesn\'t

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1 make a lot of sense to me.

2 The other issue that I have with this, and it has

3 absolutely no effect on me except that as I sat back here

4 had little blue areas on the chart up on the wall, looked

5 like more geographical area to me than the enhanced areas.

6 And these were areas that we\'re going to say in the

7 enhanced area the removal of the five- and six-year cars

8 would cause this damage to our ability to maintain the

9 SIP, but in the blue areas we\'re \-- because of the way the

10 law was written, you folks as a group do not have the

11 ability to stand up and say wait a minute. If we\'re going

12 to leave these cars in the enhanced areas, we see

13 absolutely no sense in taking them out of the other areas.

14 So I would ask you to stand up and, if necessary,

15 ask the Legislature to correct that little loophole in

16 there. And as I say, it makes absolutely no difference to

17 me, except I think I drive through some of those basic

18 areas with my clean vehicle. And so I guess I\'m subjected

19 to the air. So it does make a difference to me.

20 To me the \-- removing those cars just because is

21 irresponsible. And I would hope that you would take the

22 responsible action. And I would \-- again, in writing I

23 requested the information that produced those cost

24 factors. I\'d like to have it in writing. I\'d like to

25 have the data behind it. And I will tell you folks that

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1 every single time since 1992 I\'ve asked for information

2 that I was concerned about, when I got the information it

3 was fairly easy to see how the numbers were maneuvered so

4 they look like something they weren\'t.

5 CHAIRPERSON LLOYD: Thank you very much. I think

6 staff heard from request from Mr. Armstrong.

7 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The

8 detailed data for this is publicly available now. The

9 report that backs up the staff report. So if you need

10 more than that we can get it.

11 CHAIRPERSON LLOYD: I think it would be

12 helpful \-- might available to send him the relevant

13 information so he doesn\'t have to work for it would be

14 great.

15 CHAIRPERSON LLOYD: And lastly, Chris Ervine.

16 MR. ERVINE: Exempting five-year new vehicles, I

17 have an example. We handle two fleets of \-- they happen

18 to be Ford Ranger and Mazda pickups. These vehicles range

19 in age from 1999 to 2002. And I can guarantee you that by

20 the time these vehicles reach 70,000 miles, they have had

21 three emission failures. The sale thing on the 2002,

22 which is only a one-year old vehicle. These are a typical

23 fleet vehicle. They\'re a low \-- well, I don\'t know

24 whether you want to call \$10,000 \--

25 CHAIRPERSON LLOYD: What were the two models?

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1 What was the latter model you mentioned?

2 MR. ERVINE: Ford Ranger and Mazda V2500.

3 CHAIRPERSON LLOYD: It\'s a good job Kelly came

4 back.

5 MR. ERVINE: In one fleet in particular by the

6 time they reach 80,000 miles, they\'ve had valve failures

7 in them and cracked cylinder heads. In one particular

8 case I contacted BAR because we had one that had 47,000

9 miles on it, and it had three bad valves in it and was

10 sending a misfire \-- intermittent misfire code. And BAR\'s

11 repy was to test the vehicle and then send it to the

12 dealership to be repaired under warranty. The dealership

13 would not repair it under warranty and BAR would not back

14 us up and make the dealership fix it. The consumer ended

15 up repairing that engine on their own.

16 Ford will not admit to this problem or any of the

17 other emission failures concerned with these vehicles.

18 So there are vehicles out there that, yes, will

19 go 200,000 miles without an emission failure. There are

20 other vehicles that are on the low end of cost that are

21 typically not maintained well that are typically a fleet

22 vehicle that will fail. And in the cases of these fleet

23 vehicles here, the owner of this fleet was more than happy

24 to repair these vehicles any time there was anything wrong

25 with them. But his employees never told him that there

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1 was anything wrong with these vehicles. And they

2 continued to drive them. And in some cases we found out

3 at a later date that it had been six months that this

4 thing had been on the road with a burned valve.

5 By extending it to six years, a lot of these

6 vehicles with emission failures are out of warranty. So

7 the consumer is being hurt in that they\'re not finding out

8 there\'s an emission problem with their vehicle until it\'s

9 out of warranty and then they\'re having to pay for the

10 emission repairs.

11 Consumers in San Joaquin Valley and Sacramento

12 Valley and other places are being penalized financially on

13 repairs \-- the cost of repairs. In these areas in the

14 enhanced area the cost of repairs has gone from a point

15 where we\'re dealing with spending this much money to

16 reduce this much emissions, to spending this much money to

17 get this much emission reduction. And by bringing in some

18 of the basic areas which are all up and down the central

19 valley on both sides and bringing in not the whole area as

20 an enhanced area but the high density population spots in

21 these basic areas into the enhanced area and bringing in

22 the change of ownership. I think the whole state should

23 be at least a biannual smog inspection.

24 The program is already in place. As far as

25 having people that have to travel further for their

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1 inspections, it\'s not going to happen because the smog

2 machines are out there, even though they\'re basic machines

3 and they\'re not the enhanced machines. By just bringing

4 these outlying areas on as a biannual inspection is going

5 to reduce emissions tremendously. And bringing in high

6 density areas that are in the basic area into it, we\'re

7 going to also reduce emissions.

8 We all know that the enhanced loaded mode testing

9 finds a lot more emissions than just the two-speed idle

10 test. And we also know that there\'s a huge percentage \--

11 as BAR showed, if there\'s no program what the emissions

12 were and by just having the basic program what the

13 emission reduction was, it was a big jump. And I think

14 that the name of this is not to reduce emissions just in

15 the high non-attainment areas, but to reduce emissions

16 worldwide.

17 CHAIRPERSON LLOYD: Thank you very much. Any

18 questions from the Board? Thank you.

19 So with that, it\'s not a regulatory item. It\'s

20 not necessary to officially close the record. However, we

21 do have a resolution before us. Resolution number 03-6

22 containing staff recommendation. Do I have the motion

23 seconded?

24 Sorry, Supervisor DeSaulnier.

25 SUPERVISOR DeSAULNIER: Is now okay? Thanks for

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1 all those comments, Charlie about all the power. I

2 certainly feel very powerful up here.

3 I move resolution 03-6. And D.D. \--

4 BOARD MEMBER D\'ADAMO: Yes. Do we have

5 sufficient direction? The only thing I probably should

6 add, I think we\'re probably just talking about the Valley.

7 But I wouldn\'t want the valley to necessarily be singled

8 out. So maybe non-attainment areas.

9 EXECUTIVE OFFICER WITHERSPOON: Federal

10 non-attainment areas. That would be where there would be

11 a SIP requirement.

12 BOARD MEMBER D\'ADAMO: Okay.

13 CHAIRPERSON LLOYD: You\'re going to speak to the

14 author about the limitations of the legislation?

15 BOARD MEMBER D\'ADAMO: Absolutely. Actually,

16 since you brought it up, I mentioned what we were going to

17 be doing. He said he was comfortable with it. Apparently

18 this was an amendment that was sort of \--

19 CHAIRPERSON LLOYD: But I think to me it

20 highlighted a very good discussion because it highlighted

21 many of the issues which \-- some which we can\'t control.

22 But I think it was a very good discussion.

23 BOARD MEMBER D\'ADAMO: In light of that then, I

24 second.

25 CHAIRPERSON LLOYD: All in favor say aye.

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1 (Ayes)

2 CHAIRPERSON LLOYD: Anybody against?

3 Thank you very much.

4 With that, I think we\'re going to take a

5 ten-minute break for the court reporter. I don\'t think we

6 can go to the next item without that ten-minute break. So

7 thank you very much.

8 (Thereupon a recess was taken.)

9 CHAIRPERSON LLOYD: I\'d like to continue with

10 agenda 03-3-4, public meeting to consider federal source

11 of air pollution in California.

12 This item is a timely one as the San Joaquin and

13 South Coast Air Quality District are in the process of

14 preparing new air quality plans for federal one-hour ozone

15 standard attainment. It\'s clear we can\'t meet our

16 attainment goals without federal action to complement both

17 the state and the local efforts.

18 The Federal Clean Air Act assigns U.S. EPA some

19 specific responsibilities for reducing emissions from

20 mobile sources and also preempts states from regulating

21 certain sources. There are also practical considerations

22 in the case of interstate trucks that make it necessary

23 for action at the national level. This shared regulatory

24 responsibility combined with the challenging emission

25 reduction targets we face makes it critical for continued

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1 action at the federal level. This needs to occur on a

2 parallel track as ARB and local district continue to

3 pursue every feasible measures for sources under state and

4 local jurisdiction.

5 I am pleased that had Mr. Bob Larson from the

6 U.S. EPA\'s Office of Transportation and Air Quality has

7 traveled from Ann Arbor to join us today. Good to see

8 you, Bob. It\'s been a while. I know Bob has worked

9 closely with ARB staff in the development of our

10 respective mobile source strategies, and he will provide

11 comments following staff\'s presentation.

12 And I would like then to turn it over to

13 Ms. Witherspoon to introduce this item and begin the staff

14 presentation.

15 EXECUTIVE OFFICER WITHERSPOON: Thank you,

16 Chairman Lloyd, members of the Board.

17 California has made significant progress in

18 reducing emissions and improving air quality as a result

19 of actions at the local, state, and federal levels. But

20 we also have a long way to go to meet health-based air

21 quality standards in all California communities.

22 Staff\'s presentation will highlight the relative

23 contribution of emission sources under federal

24 jurisdiction, key actions already taken, and further

25 opportunities we see to reduce emissions from these

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1 sources.

2 We want to continue our path of progress with the

3 inter-agency partnerships that have been successful in the

4 past, our technical and collaborative regulations have

5 resulted in the adoption of key measures from the 1994

6 ozone SIP and set the stage for future actions.

7 Over the past few years we have jointly tackled

8 issue such as excess NOx emissions from heavy duty trucks

9 with benefits being realized nationwide. For another

10 important group of sources, off road construction and farm

11 equipment, the U.S. EPA has just released a new regulatory

12 proposal. The emission reductions from this rule will

13 help reduce both ozone and particulate pollution from new

14 diesel engines. We want to build on these successes as we

15 move forward. One of the big challenges is to address

16 existing as well as new engines. This is critical since

17 federal sources include trucks, trains, ships, and other

18 equipment with long usable lives.

19 Mr. Larry Hunsaker will now make the staff

20 presentation.

21 MR. HUNSAKER: Thank you, Ms. Witherspoon. Good

22 afternoon, Chairman Lloyd, members of the Board.

23 Federal sources of air pollution are a

24 significant contributor to California\'s air quality

25 problem. This presentation is intended to provide a

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1 background on why these sources are important to control

2 and highlight opportunities for further emission

3 reductions.

4 (Thereupon an overhead presentation was

5 presented as follows.)

6 MR. HUNSAKER: Actions is to reduce emissions

7 from federal sources are essential to our efforts to meet

8 air quality standards. When we use the term federal

9 sources, we are referring to mobile sources that must be

10 addressed by the federal government for one of two

11 reasons. Either the federal Clean Air Act preempts our

12 regulatory authority or practical considerations make

13 national regulations necessary.

14 Under federal law only U.S. EPA can set emissions

15 standards for new locomotive engines and new construction

16 and farm equipment with less than 175 horsepower. In the

17 case of heavy duty trucks, ARB cannot set emission

18 standards for truck that are purchased and registered

19 outside of California. The interstate nature of the

20 trucking industry makes national standards the most

21 practical approach.

22 Lastly, engine standards for aircraft and

23 ocean-going ships are set at the international level with

24 the federal government representing the US.

25 \--o0o\--

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1 MR. HUNSAKER: The primary pollutants of concern

2 from federal sources are NOx and diesel PM. State-wide in

3 2010 emissions of reactive organic gasses are relatively

4 small at about 6 percent, whereas federal sources will

5 account for 28 percent of the NOx and 61 percent of the

6 diesel PM.

7 While we show state-wide emissions here, there

8 are some regional difference. In the South Coast federal

9 sources contribute about 32 percent of the NOx and 65

10 percent of the diesel PM, slightly more than the

11 state-wide percentage.

12 In the San Joaquin Valley there are no ship

13 emission. Federal sources contribute somewhat less than

14 the state-wide percentage, about 22 percent of the NOx and

15 46 percent of the diesel PM. For diesel PM localized

16 impacts from sources are important. Facilities such as

17 ports and rail yards are good examples of where local,

18 state, and federal cooperation is necessary.

19 \--o0o\--

20 MR. HUNSAKER: This slide shows the state-wide

21 breakdown of federal NOx sources into their major

22 components, ranging from 8 percent from construction

23 equipment to 3 percent for trains and aircraft. This

24 breakdown varies region in the state. For example, in the

25 San Joaquin Valley farm equipment contributes the most at

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1 9 percent, while aircraft contribute the least at 1

2 percent. In the South Coast construction equipment is the

3 top category at 11 percent, while farm equipment is the

4 lowest at 1 percent.

5 Now let\'s look at the breakdown for diesel PM.

6 \--o0o\--

7 MR. HUNSAKER: Federal sources are a big

8 contributor to diesel PM emissions. From a public

9 exposure standpoint, the toxicity of diesel PM combined

10 with its contribution to overall particulate pollution

11 makes these emissions important both regionally and

12 locally. Statewide emissions range from 28 percent for

13 construction equipment to 4 percent for trains and

14 out-of-state trucks. If we include all interstate trucks,

15 those that are registered both in California and in other

16 states, the contribution from trucks would be about

17 double.

18 Again, there are regional differences and

19 relative emission contributions. For the San Joaquin

20 Valley, the largest category is farm equipment at 25

21 percent, while in the South Coast the largest category is

22 construction equipment at 34 percent.

23 \--o0o\--

24 MR. HUNSAKER: This slide shows the projected NOx

25 emissions for preempted farm and construction equipment,

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1 out-of-state trucks, and trains based on current

2 requirements.

3 The big drop in farm and construction equipment

4 emissions is due to fleet turn over and implementation of

5 progressively tighter engine standards phasing in between

6 1997 and 2008. Out-of-state truck emissions show a steady

7 decline at the 2002 and 2000 search emission standard kick

8 in. There is also a decline in train emissions reflecting

9 national standards that phase in between 2001 and 2005.

10 And the agreement with the industry to reduce fleet

11 emissions in South Coast by 2010.

12 Diesel PM emissions generally follow those same

13 trends. These trends demonstrate how the benefits of

14 federal actions taken to date accrue over time. However,

15 significant emissions remain, and we must talk about

16 further reduction opportunities in a moment.

17 \--o0o\--

18 MR. HUNSAKER: This trend slide shows two federal

19 source categories, ships and aircraft whose emissions are

20 projected to increase rather than decrease. This reflects

21 a relative lack of progress in tightening engine standards

22 compared to other categories combined with growth and

23 other activities. Obviously, for aircraft emissions the

24 current industry problems will effect near-term emission

25 trends. But looking 15 or 20 years out, we do expect

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1 continued growth. This long-term perspective is important

2 for aircraft engines which remain in the service for

3 20 years or more.

4 The same problem applies to ships as growth

5 overtakes any benefit of current national and

6 international engine standards.

7 \--o0o\--

8 MR. HUNSAKER: The downward trends of emissions

9 shown in the previous slides are results of a joint effort

10 by U.S. EPA and ARB to adopt the controls called for in

11 the 1994 SIP. U.S. EPA and ARB adopted emission standards

12 for diesel trucks, off-road diesel gasoline, and LTD

13 powered engines and marine pleasure aircraft, such as jet

14 skis.

15 U.S. EPA also adopted standards for locomotives

16 and marine harbor craft. These regulatory efforts have

17 been complemented with memoranda of understanding signed

18 with the railroads to reduce locomotive emissions and with

19 the airlines to reduce emissions from airport ground

20 support equipment in the South Coast.

21 Voluntary approaches ever also been taken, such

22 as the voluntary shipping speed limit now in place in the

23 vicinity of the ports of Los Angeles and Long Beach. This

24 speed reduction results in lower NOx emissions.

25 \--o0o\--

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1 MR. HUNSAKER: Now let\'s look at where we stand

2 with current engine standard for heavy-duty diesel trucks.

3 This slide slows the progression of tighter emission

4 standards through the end of this decade. In 1997 U.S.

5 EPA adopted the two gram NOx for diesel trucks anticipated

6 in the 1994 SIP.

7 ARB adopted California standards in 1998 that

8 aligned with the national standards. These standards were

9 scheduled to take effect in 2004 but were accelerated to

10 2002 under the terms of the consent decree with the engine

11 manufacturers. In 2001 U.S. EPA adopted tighter diesel

12 truck standards which will be phased in between 2007 and

13 2010 and represent an overall reduction of 98 percent from

14 uncontrolled engine emissions.

15 Introduction of low sulfur diesel fuel in 2006 is

16 an integral part of the standards. ARB has adopted these

17 same engine standards for California.

18 \--o0o\--

19 MR. HUNSAKER: This is not the end of the story,

20 however. We are encouraging U.S. EPA to pursue strategies

21 to ensure that the benefits of tighter engine standards

22 are achieved in use. One strategy to ensure that

23 sophisticated emission controls perform adequately over

24 time is to require on-board diagnostic systems on new

25 engines.

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1 Another strategy is to adopt a manufacturer

2 in-use testing and recall program similar to the program

3 required for car manufacturers.

4 Also while diesel trucks will be much cleaner

5 starting in 2007, the long live of diesel engines slows

6 the introduction of cleaner vehicles into the fleet. This

7 makes it important to find ways to clean up the existing

8 fleet.

9 ARB is developing measures to implement our

10 diesel risk reduction plan. Last year ARB is scheduled to

11 consider a proposal to reduce diesel emissions from solid

12 waste collection vehicles. We are also working on

13 accelerated software up grade requirements to address the

14 excess NOx emissions resulting from the use of emission

15 control defeat devices in trucks engines during the 1990s.

16 \--o0o\--

17 MR. HUNSAKER: Over half the NOx and 75 percent

18 of the PM from off-road diesel engines come from preempted

19 farm and construction sources. We have cooperated with

20 U.S. EPA to address these engines, and our standards for

21 the engines we can regulate are harmonized with the

22 national EPA standards.

23 This slide slows the progress of adopted emission

24 standards for one category of off-road diesel engines,

25 those ranging from 100 to 175 horsepower. When the most

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1 stringent standards are fully phased in by 2008, new

2 engines will be up to 75 percent cleaner than uncontrolled

3 engines.

4 \--o0o\--

5 MR. HUNSAKER: Based on the current level of

6 control and the remaining emissions from off-road engines,

7 it\'s clear more needs to be done. Just last week U.S. EPA

8 proposed the anticipated next phase for federal off-road

9 engine standards. This proposal would reduce emissions by

10 an additional 90 percent by transferring on-road control

11 technology to off-road engines. The extension of lower

12 sulfur diesel fuel requirements to off-road engines

13 nationally is an integral part of the proposal.

14 We are very supportive of this proposal. And

15 following federal adoption, we will harmonize our standard

16 for that portion of the off-road fleet under state

17 control.

18 In terms of existing engines, ARB is pursuing

19 diesel PM risk-reduction measures and supporting incentive

20 programs to reduce NOx emissions from off-road engines.

21 \--o0o\--

22 MR. HUNSAKER: In 1998 U.S. EPA set emission

23 standards for new and remanufactured locomotives and

24 locomotive engines beginning in 2001 and phasing in

25 through 2005.

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1 In recognition of the severity of the South Coast

2 air quality problem and the contribution of locomotive

3 engines in the region, ARB reached agreement with the

4 railroads to further reduce their emissions in the South

5 Coast. This memorandum of understanding ensures that the

6 cleanest locomotive engines, those meeting 2005 standards,

7 are brought to the region.

8 With these programs, we project that locomotive

9 emissions in California will be cut in half between 2000

10 and 2010. However, we believe that there are further

11 opportunities for emission reductions from locomotives.

12 As technology continues to advance, U.S. EPA should

13 consider further tightening the standards for locomotives.

14 Use of cleaner fuels can also reduce emissions

15 and allow for application of additional control technology

16 and retrofits. And we support you U.S. EPA\'s proposal to

17 limit the sulfur content of locomotive diesel fuel to 500

18 parts per million of its off-road diesel proposed

19 announced last week.

20 \--o0o\--

21 MR. HUNSAKER: Commercial marine vessels include

22 both large ocean-going vessels, such as cargo ships and

23 passenger cruise ships, as well as smaller harbor craft.

24 The larger ocean-going ships travel internationally are

25 and predominantly foreign flag vessels.

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1 Harbor craft spends most of their time in

2 California coastal water. Standards for ocean-going ships

3 are set internationally through the International Maritime

4 Organization, or IMO. For American flag vessels the U.S.

5 EPA adopted standards based on the IMO levels.

6 U.S. EPA has also set standards for harbor craft.

7 However, these stands will achieve relatively modest

8 emission reductions in California. And with continued

9 growth in shipping activity, emissions are projected to

10 increase overall. The emission levels from these engines

11 remain well above those from other off-road or on-road

12 engines.

13 ARB established the Maritime Air Quality

14 Technical Working Group to work on air quality strategies.

15 The group includes stakeholders, such as the ports,

16 commercial shipping companies and industrial associations,

17 U.S. EPA, local air districts, and community and

18 environmental groups. The efforts of the working group

19 are starting to translate into programs to reduce

20 emissions, such as the speed reduction program I mentioned

21 earlier, and another program set to begin later this year

22 to test the effectiveness of promising retrofit control

23 technologies on ships.

24 \--o0o\--

25 MR. HUNSAKER: There is a lot more that can and

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1 should be done. In our draft state and federal element

2 for the upcoming California SIPS, we had laid out a number

3 of opportunities for emission reductions. We continue to

4 urge U.S. EPA to adopt more stringent new engine standards

5 for harbor craft and ocean-going ships working through the

6 IMO process.

7 We are looking at options for reducing in-use

8 emissions from marine vessels. We believe that close

9 coordination at the national, state, and local level is

10 essential in developing the most effective in-use control

11 strategies to reduce emission from maritime and port

12 activities.

13 Use of cleaner fuels and retrofit technologies

14 would cut emissions. Economic incentive programs could

15 also be implemented to encourage vessel owners to reduce

16 their emissions. Operational controls can provide

17 emission reductions through a broad array of potential

18 measures including speed controls, idling time limits, and

19 other changes to vessel activities.

20 Dock site strategies include the use of

21 electricity to provide power for ships while they are in

22 port. Currently vessels typically run diesel generators

23 when at rest in port to generate power for lights and

24 equipment on board.

25 \--o0o\--

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1 MR. HUNSAKER: While we realize the near-term

2 economic challenges facing the airline industry, a long

3 term strategy to reduce aircraft emissions is needed.

4 U.S. EPA works its standard-setting process through the

5 International Civil Aviation Organization, or ICAO,

6 because of the international nature of the industry.

7 With the current emission standards in place,

8 aircraft emissions are project to grow in the longer term

9 as the previous emission trend slide showed.

10 Consequently, aircraft will become an increasing piece of

11 the emissions pie as other sources continue to reduce

12 their emissions.

13 Since 1998 U.S. EPA and the Federal Aviation

14 Administration have jointly sponsored a national

15 stakeholder groups whose goal is to define emission

16 reduction targets for air carriers that include a longer

17 term goal for reductions in jet aircraft emissions. One

18 objective of this process is for ICAO to develop more

19 stringent aircraft emission standards. We need U.S EPA to

20 work closely with the federal aviation administration to

21 advocate for tighter emission standards.

22 \--o0o\--

23 MR. HUNSAKER: Before concluding, I want to speak

24 briefly about the importance of funding from the federal

25 government for emission control programs. Federal funding

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1 can provide for incentive-based programs or fill

2 regulatory gaps in the control of federal sources. Over

3 the last \-- over the past several years, California has

4 funded programs to clean up existing sources under state

5 and local jurisdiction in order to supplement our

6 regulatory programs. U.S. EPA could do the same as part

7 of its effort to reduce emissions from federal sources.

8 In conclusion, we need the federal government to do

9 its part to achieve clean air in California. The

10 substantial emissions contribution of federal sources and

11 the challenging emission reduction targets we face make it

12 impossible for California to do it alone.

13 Opportunity exists for technically-feasible

14 cost-effective reductions from federal sources. And U.S.

15 EPA needs to pursue them, whether through regulation,

16 federal funding, or other incentives. In conjunction with

17 local air districts, ARB and U.S. EPA need to continue to

18 partner to find new ways to reduce emissions, meet our

19 federal air quality planning requirements, and make

20 progress towards our mutual public health goals.

21 Thank you. This concludes my presentation.

22 CHAIRPERSON LLOYD: Thank you very much.

23 Colleagues have any questions before we move to

24 Mr. Bob Larson from EPA?

25 BOARD MEMBER CALHOUN: I have one question. What

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1 federal agency has responsibility for reducing emission on

2 federal property?

3 GENERAL COUNSEL WALSH: For federal properties

4 that are within the state of California, federal agencies

5 are responsible for meeting the applicable rules and

6 regulations that are set out in the California SIP. Under

7 the federal Clean Air Act, federal agencies are required

8 to comply with those rules and regulations to the same

9 extent as any private business or business.

10 BOARD MEMBER CALHOUN: So if I go out to the air

11 force base and LAX and see smoke incinerator or something

12 there, would I call the South Coast district if I wanted

13 to \--

14 GENERAL COUNSEL WALSH: That\'s correct.

15 BOARD MEMBER CALHOUN: What would they do about

16 it?

17 GENERAL COUNSEL WALSH: They would no doubt go

18 out and take a look at the situation. If there was a

19 violation of a district rule or a regulation, they would

20 follow up with appropriate enforcement action. And those

21 federal agencies are subject to those enforcement actions

22 as well as the rules and regulations themselves.

23 BOARD MEMBER CALHOUN: Is it generally true the

24 federal agencies are responsible for complying with the

25 local air quality standard?

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1 GENERAL COUNSEL WALSH: Well, it may be treated

2 differently under certain \-- different acts, federal laws.

3 The federal constitution provides supremacy to the federal

4 government, but that\'s supremacy can be waived. And,

5 indeed, in Section 118 of the federal Clean Air Act,

6 Congress has waived federal immunity from the application

7 of state law, rules and regulations, enforcement

8 activities and the like with respect to requirements that

9 relate to the control and abatement of air pollution. So

10 Congress has waived the federal immunity that would

11 otherwise apply under federal law.

12 BOARD MEMBER CALHOUN: What about the federal

13 vehicles that are used by the federal agencies in the

14 state? Do they meet California standard, or do they meet

15 federal standards?

16 GENERAL COUNSEL WALSH: They meet California

17 standards. There is a provision in Section 118 that

18 provides for exceptions if the president declares some

19 sort of national emergency related to the security of the

20 nation. That has never to my knowledge been implicated.

21 We have in some of our motor vehicle or non-road engine

22 regulations included specific exemptions for tactical-type

23 vehicles. But just vehicles that are generally used by

24 those federal agencies and on federal sites are subject to

25 our regulations.

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1 BOARD MEMBER CALHOUN: Okay.

2 CHAIRPERSON LLOYD: Mr. McKinnon.

3 BOARD MEMBER CALHOUN: I\'m through.

4 BOARD MEMBER McKINNON: It\'s my understanding

5 that there are cleaner and cleaner jet engines being

6 produced. The problem is that nobody\'s going to be buying

7 them any time soon because there\'s not a need to buy new

8 airplanes. Is that sort of \-- what\'s the direction of

9 clean air jet engines? Is that the case or \--

10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I can

11 take a stab at that. I know a little bit about it, not

12 all about it.

13 Within the current selection of engines that you

14 can put on a current jet, there is some variation in

15 emissions. It\'s not real big. But there are cleaner ones

16 and slightly higher emitting ones. I don\'t what the

17 variation is. But we might be talking 10 percent or

18 something like that.

19 There are engines under development and some of

20 them still in the research stage like at NASA that would

21 have like 50 to 70 percent more NOx emissions than current

22 engines. The problem is is that there is kind of an

23 inherent conflict in that the engine manufacturers and the

24 aircraft operators or looking for engines with higher and

25 higher pressure ratios to reduce fuel burner or increase

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1 the efficiencies of the engines. And that makes them

2 hotter, which makes NOx, which makes emissions goes up.

3 There\'s a trend in technology for higher NOx emissions,

4 and there is technology development to try to reduce that.

5 Those are sort of conflicting to some degree.

6 Without something pushing the aircraft

7 manufacturers to buy really clean engines, then I think as

8 the chart shows emissions go up from aircraft because

9 they\'re just getting higher pressure ratios for efficiency

10 and putting out more NOx as a result.

11 BOARD MEMBER McKINNON: My second question has to

12 do with rail engines. And my understanding is that at

13 least in California the railroads have purchased clean

14 engines more recently. Are they \-- is it the same?

15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: In the

16 South Coast.

17 BOARD MEMBER McKINNON: What about here in the

18 Roseville yard and that kind of thing? That\'s sort of

19 where I heard.

20 EXECUTIVE OFFICER WITHERSPOON: I think you might

21 have heard news reports about yard haulers retrofitting

22 for shifting the engines around. That was a Cummins West

23 project I think that was funded by the local air district

24 with Carl Moyer money and with the expectation if it

25 proved out and was cost-effective it would be replicated

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1 around the state. So it wasn\'t the trains passing

2 through, but moving the cars around in the yards

3 themselves.

4 BOARD MEMBER McKINNON: Okay.

5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: What\'s

6 important on \-- the federal government has stepped up and

7 required new locomotives to be much lower emissions. I

8 think probably roughly 50, 60, 70 percent reduction in

9 NOx. And they\'ve also had a provision when these things

10 are rebuild \-- since they last forever \-- they be build

11 down to the tighter standards. That\'s a good provision.

12 But it has stopped at a level that is way higher per unit

13 of work than the trucks or even the off-road equipment.

14 So there\'s a need for \-- we think the federal

15 government to drop the standard further now that the

16 technology is being developed for diesel trucks and

17 construction equipment. It could be applied. And we made

18 a comment in there about supporting \-- they have a

19 proposal or suggestion \-- they\'re asking for comments on

20 doing that in their new rule making for off-road trip

21 equipment in general.

22 I think there was a comment made we support a

23 cleaner fuel at 500 PPM, but we probably would end up

24 supporting cleaner fuel at 15 PPM because that would be

25 the level of sulfur that would allow locomotives to

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1 potential have particulate control which they don\'t have

2 right now. We\'ll have to figure out when we comment on

3 this rule whether that makes good sense or not. But it\'s

4 pretty clear we would definitely benefit from having much

5 cleaner locomotives as the new technology evolve.

6 BOARD MEMBER McKINNON: What\'s the life of a

7 locomotive of the engine considering that they\'re rebuilt.

8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

9 Probably 30 or 40 years at least.

10 BOARD MEMBER McKINNON: A long time. Okay.

11 BOARD MEMBER CALHOUN: One more question. All of

12 these standards are tied to getting the sulfur content in

13 fuel reduced. What\'s the status of that program?

14 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: When

15 you say all of the standards, you have bring it up by

16 category.

17 BOARD MEMBER CALHOUN: I shouldn\'t say all. I\'m

18 thinking in terms of \--

19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: On-road

20 fuel for trucks will be down to a level of sulfur that

21 will allow the use of particulate filters in the summer of

22 \'06 nation-wide. For off-road equipment the EPA proposal

23 is to have on that same fuel available and required

24 nation-wide in the summer of 2010, I think it is. So four

25 years later. I\'m think that\'s right. Bob can correct me

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1 if I\'m off by a year.

2 Then they\'re seeking comments on what the fuel

3 should be for locomotives 500 or 15 perhaps. And one

4 would tend to argue for the lower number because that

5 allows the use of particulate filters where the higher

6 number probably would not. And then on, you know, marine

7 vessels, they tend to use really high \-- ocean-going type

8 really high sulfur type fuel. I\'m not sure what\'s in jet

9 aircraft from a sulfur standpoint but \--

10 BOARD MEMBER CALHOUN: Thank you.

11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We\'re

12 scheduled to bring the Board in July a regulation change

13 for the diesel regulation for California that would align

14 for on-road fuel and off-road fuel with 15 PPM starting in

15 2006.

16 BOARD MEMBER CALHOUN: Is that the same as the

17 federal?

18 DEPUTY EXECUTIVE OFFICER SCHEIBLE: It\'s the same

19 sulfur level as the federal. But we would do the off-road

20 earlier in California because there really isn\'t a

21 separate market for off-road fuel. So once the on-road

22 fuel goes down, the off-road fuel could go with it in

23 tandem. It will not affect locomotives or ships.

24 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And the

25 parallel to it not affecting locomotives and ships is we

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1 do have a lot of interstate traffic. Even the heavy duty

2 equipment \-- construction equipment moves from state to

3 state. So you can get fuel \-- federal fuel being used in

4 California to some degree, especially on the trucks. So

5 we definitely get a benefit from having nation-wide

6 consistent low sulfur fuel compared to doing just by

7 ourselves.

8 CHAIRPERSON LLOYD: We will be getting a

9 nation-wide consistent diesel fuel? No need to answer

10 that.

11 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: For

12 sulfur \-- excuse me. That was a serious omission. For

13 sulfur.

14 CHAIRPERSON LLOYD: Any more questions?

15 BOARD MEMBER RIORDAN: Just a note. One of the

16 things that stood out \-- I always blamed a lot of other

17 sources for these diesel PM. But ships are significant,

18 are they not, in California. And many of those ships are

19 not flying American flags. So we have to rely on some

20 international source of \-- and how that\'s that working?

21 Is that successful?

22 EXECUTIVE OFFICER WITHERSPOON: Well, EPA can

23 address that when they come to the \--

24 BOARD MEMBER RIORDAN: Maybe I should leave that

25 for them.

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1 EXECUTIVE OFFICER WITHERSPOON: There are

2 international pressures to reduce the emissions from ships

3 because of protocol concerns which are probably

4 stimulating more activity than has been brought about in

5 the last ten years because we\'ve been trying to do

6 something about ships for a very long time. So \--

7 BOARD MEMBER RIORDAN: So if I could ask the

8 speaker from EPA perhaps to just touch on that, I\'d be

9 interested in that.

10 DEPUTY EXECUTIVE OFFICER TERRY: I just want to

11 add one thing. There was recently a national conference

12 on particulate pollution and a major new compilation of

13 the scientific evidence on particulate pollution was

14 displayed at NARSTO. It\'s Mexico, U.S., and Canada. And

15 Jeff Holmstead was there, and he\'s getting a lot pressure

16 both from Canada and Mexico, the entire west coast

17 corridor, to take a look at the shipping issue. And a

18 number of air districts in California have been pushing

19 hard. And I think you\'ll hear from Santa Barbara on this

20 point as well.

21 BOARD MEMBER RIORDAN: Good.

22 CHAIRPERSON LLOYD: Seeing no more questions, I\'d

23 like to call on Mr. Bob Larson from EPA.

24 Bob, thank for coming out.

25 MR. LARSON: Thank you for the opportunity to

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1 address you on behalf the Environmental Protection Agency.

2 (Thereupon an overhead presentation was

3 presented as follows.)

4 MR. LARSON: At the outset I\'d like to

5 acknowledge that we have had a very close and productive

6 working relationship with the ARB staff. We certainly

7 appreciated their professionalism. And we look forward to

8 continuing that cooperative effort into the future.

9 Much of what I have on my slides here \-- I have

10 just a few have already been touched on by previous

11 presentation. But \-- so this may not take too long. But

12 I have an opportunity to address a couple of points in

13 particular.

14 Certainly from my view I think the federal EPA

15 has been particularly aggressive, productive, and useful

16 from your perspective. Over the last few years we\'ve

17 adopted national standards that are very stringent and

18 impact those fleets that you\'re not able to control

19 yourself, starting with the tier two standard for

20 light-duty vehicles. Going on to the 2004 heavy duty

21 standards, there was some pull ahead for 2002 standards.

22 And then very significantly I think for your benefit is

23 the 2007 heavy duty standards where we do have combination

24 of very stringent reductions in emissions performance but

25 also then the necessary improvements in the fuel sulfur

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1 level of the fuel.

2 \--o0o\--

3 MR. LARSON: As has already been mentioned, we

4 have put standards in place for large spark ignition

5 engines, recreational vehicles, recreational marine

6 engines, and on the last point the large marine engines,

7 C1 and C2, category 1 and category two engines which are

8 more typical harbor craft using locomotive-size diesel

9 engine with medium at higher speed. And then the C3

10 engines which are more the ocean-going ships. As

11 Ms. Riordan points out they are almost entirely flagged in

12 other nations so, therefore, not under our direct control.

13 Nevertheless, we have adopted standards that

14 are \-- have been put in place through the international

15 maritime organization so called Marpole Annex 6 standards,

16 and those will be going into effect in 2004 in the

17 United States. And we expect around that same time frame

18 internationally. So there will be some standards in

19 place. Unfortunately, those standards also are not the

20 most stringent. There\'s a large number of the newer

21 engines that basically are meeting those standards.

22 At the federal EPA we are interesting in trying

23 to improve the emission performance of ocean-going ships.

24 The obvious problem, though, is they\'re not under our

25 control. So we are working very hard through our efforts

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1 with the international maritime organization to encourage

2 that international body to pursue more stringent

3 standards. And we hope to convince them that the types of

4 technologies that we\'re investigating that we plan on

5 pursuing for regulation here within the United States are

6 also technologies that would work elsewhere in the world,

7 including engine and fuel and perhaps after-treatment

8 types of technologies similar to what we\'ve been very

9 successful on the land-based side.

10 If we are successful, of course, those emission

11 reductions aren\'t going to be here in the next few years.

12 So we are talking about something that is a bit a longer

13 term.

14 \--o0o\--

15 MR. LARSON: It was mentioned that we have just

16 proposed a non-road NPRM which has very significant

17 emission reductions again and adopts the low sulfur

18 standard of 500 PPM cap in the \-- I think it starts in

19 September of 2007 and then 15 PPM cap that goes into place

20 in 2010. There is a hearing in several areas of the

21 United States. One is being held in the Los Angeles area,

22 here on June 17th, and we appreciate your support.

23 \--o0o\--

24 MR. LARSON: As part of that proposal we did

25 acknowledge a commitment on our part to have these revised

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1 locomotives and marine standards that will be two separate

2 rule makings. But I grouped them here because there are

3 fairly, for the most part a similar type of regulatory

4 path. We expect about a year from now to have an advance

5 notes of proposal rule making set out technical issues we

6 see that will help us frame the actual proposal which

7 would occur about a year later during the 2005 year.

8 Again, as I mentioned a moment ago, it will include both

9 fuel improvements both in sulfur and technology options

10 will be considered.

11 Implementation \-- well, it\'s not a real big \--

12 but it should be a big question mark there \-- noted that

13 perhaps 2012 that\'s my guess. That\'s no real prediction

14 of exactly when we\'ll be able to determine what is

15 technically feasible and what\'s the economic time for

16 phasing those things in. So, again, I would say certainly

17 that is not something that could be in place prior to

18 2010. But maybe in the early part of the following decade

19 we would hope to have these standards in place.

20 \--o0o\--

21 MR. LARSON: On the aircraft side there are two

22 activities that are going on. One is with the \-- on the

23 international side where we\'re working to try to get

24 international standards in place. The standards \--

25 investigating body there which we are a participant is

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1 looking at NOx reductions that range from 5 to 30 percent

2 compared to the existing standard. And they\'re analyzing

3 two different implementation years. One of them 2008, and

4 one of them 2012. I don\'t think we should be too much

5 into that \-- those implementation dates and anticipate

6 they would actually have standards in place that would be

7 effective beginning 2008. I think we all recognize not

8 only the technical lead times associated with getting more

9 stringent standards in place, but the economic

10 difficulties that are for the airline industry.

11 The second activity was also mentioned a moment

12 ago in the earlier presentation. That is stakeholder

13 activity within the United States that we\'re co-chairing

14 with the Federal Aviation Agency. And it\'s looking at a

15 range of options trying to improve emissions from

16 aircraft, airports in general.

17 A couple of them are mentioned here. One of them

18 is looking at options for improving the ground surface

19 equipment emissions and model that for the successful work

20 that was accomplished in the South Coast.

21 And the second one was to \-- even though there is

22 a small range of the emission performance of existing

23 engines, as Mr. Cackette mentioned, to look to encouraging

24 airlines to purchase those engines that are currently

25 available and are at the lower end of that range for what

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1 benefit we can get from those kinds of emission.

2 We\'re hoping also to encourage them to retire the

3 various portions of their fleet, not bring back engines

4 that are currently partnering with us in the desert.

5 Those kinds of things.

6 \--o0o\--

7 MR. LARSON: And lastly, I think it\'s important

8 to mention that we\'re not only working on the regulatory

9 aspect \-- although it\'s an area where we\'ve been

10 particularly successful. We also have launched a

11 nation-wide voluntary program. We think there is a role

12 for voluntary emission reductions and we\'re pursuing them

13 quite rigorously. The first one is named \"Best Workplace

14 for Commuters\" basically to try to encourage employers to

15 provide maximum benefits to their employees to discourage

16 single occupancy vehicle trips to and from work.

17 Telecommuniting\'s an obvious one, ride sharing, transit

18 passes, those types of things.

19 Through this program we try to recognize those

20 workplaces who are particularly aggressive there in

21 offering those benefits and bring up the rest of the

22 employment community to those levels.

23 Smart way transport program is focused on efforts

24 to reduce emissions the freight industry. Right now the

25 biggest emphasis in this program is on the trucking

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1 industry. And we\'re encouraged in looking towards things

2 such as reducing idling either through truck stops which

3 is one of the options that is being considered here in

4 California as well as auxiliary power units that would

5 Obviate the need for running big diesel engine to provide

6 heat and power the cooling to the cab.

7 The third voluntary program that we\'ve been \--

8 recognized here is we just launched less than a month ago

9 our school bus initiative, again, looking at reducing

10 idling. And a key component there \-- but also replacing

11 the older school buses. As you can appreciate, a lot of

12 the school buses are pre \'91 inversions of engines and are

13 quite dirty compared to what\'s available now.

14 Looking for financing to \-- we had some over the

15 \$20 million available right now to help that work. And

16 we\'re looking for other innovative financing options to

17 improve the turn over of fleet school buses, retrofitting

18 the more recent vintage buses hopefully to have the entire

19 fleet of school buses across the nation turned over

20 basically to clean technologies by 2010.

21 CHAIRPERSON LLOYD: Thanks very much, Bob.

22 Questions from the colleagues of the Board?

23 Thanks very much for coming out. Any other comments from

24 the staff?

25 EXECUTIVE OFFICER WITHERSPOON: Just there\'s one

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1 more witness signed up to speak. No more comments at this

2 time.

3 CHAIRPERSON LLOYD: We do have one witness signed

4 up for the public testimony. That\'s Kathy Patton from

5 Santa Barbara County.

6 Welcome.

7 MS. PATTON: Thank you very much.

8 I think I\'m supposed to have a clicker. If the

9 technology works, I\'ll get through this quickly.

10 I\'m Kathy Patton from Santa Barbara County Air

11 Pollution Control District.

12 (Thereupon an overhead presentation was

13 presented as follows.)

14 MS. PATTON: I\'m here to talk about just one

15 element of what your staff has presented today, that is

16 the impact of marine shipping. On a local area like ours,

17 I was saddened to hear the number of times that Mr. Larson

18 had to admit that the federal actions that are being taken

19 will be long-term actions. And I think you\'ll see in my

20 slides we need help now, and all of California right now

21 needs help with this particular sector.

22 \--o0o\--

23 MS. PATTON: So you may wonder, if you know

24 anything about Santa Barbara at all, why we would be

25 concerned about marine shipping when we don\'t have a port.

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1 If our 2001 clean air plan, we went through an emission

2 inventory process that was really quite a surprising

3 process to us when we started looking at the relative

4 emission impact from marine shipping.

5 Marine shipping is the largest uncontrolled

6 source of NOx in our county, and we believe probably in

7 most coastal areas throughout the nation. We\'re concerned

8 that failure to control this source is going to need \-- or

9 require that coastal areas compensate for the emissions

10 that we\'re receiving from off-shore.

11 \--o0o\--

12 MS. PATTON: Just to put our little county in

13 context, we are roughly halfway between San Francisco and

14 Los Angeles, closer to Los Angeles. We make up 130 miles

15 of the California coast line. Any ships traveling from

16 the ports of Long Beach or Los Angeles going to the north

17 or even to Asia will pass by our county and by most of the

18 California coast line. Just the way the great circle

19 route goes. The world is round. And they travel quite a

20 ways north before heading west.

21 \--o0o\--

22 MS. PATTON: In our county we have the Channel

23 Islands just off shore, which means most of these ships

24 are traveling within 10 to 15 miles of shore. These are

25 huge, huge ships. It\'s like having power plants traveling

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1 right off shore your coast line.

2 In our emission inventory efforts, we worked very

3 closely with the marine exchange from the ports of

4 Los Angeles and Long Beach and found that we have about

5 1300 making roughly 7,000 transits per year through our

6 Channel Islands. Surprisingly, even though we don\'t have

7 a port, our emission inventory is roughly equivalent to

8 the inventory that South Coast has with those two ports.

9 \--o0o\--

10 MS. PATTON: Just to show you how marine shipping

11 stacks up with our emissions inventory, your staff just

12 showed you that federal sources were roughly a third of

13 the state-wide inventory for NOx. Well, marine shipping

14 alone is roughly a third of our emissions inventory. It\'s

15 greater even than all of our on-road mobile sources. When

16 you factor in the increase that we\'re told from this

17 industry is going to happen over the years, it gets even

18 more alarming and more concerning for us.

19 \--o0o\--

20 MS. PATTON: This slide shows the top of \-- is

21 that \-- would you call that purple? Purple area there at

22 the very top is marine shipping. And when you forecast

23 out into the future, the growth in marine shipping \-- it

24 goes from being a third of our inventory to being almost

25 two-thirds of our inventory.

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1 All those other sources \-- all those other bars

2 that you see on this graphic are showing either reduction

3 or staying slightly the same. Those are those sources

4 that for the most part the state and local areas have

5 control other. This federal source where we do not have

6 control is projected to eat up all of the progress we

7 would have made in those other areas.

8 If any of our estimates going out into the future

9 are not accurate, then you can see that that bar we\'re

10 trying to stay under, which is the bar that we showed back

11 in our base year we could attain the federal standard

12 under \-- any of those sources not meeting these

13 reductions \-- and if marine shipping even goes up further,

14 we are in danger of not being able to maintain the federal

15 standard.

16 And although EPA has recently adopted standards

17 for U.S. flag ships, I would note those standards are

18 based on IMO, the International Maritime Organization,

19 levels which are already projected in the bars that you

20 see in front of you here. And also since EPA decided \--

21 and we believe it was a decision not a legal requirement.

22 Since they decided to only apply their regulations to U.S.

23 flagged ships, it will not provide very many reductions

24 for us at all.

25 \--o0o\--

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1 MS. PATTON: Again, in the inventory 90 percent

2 of the vessels that transit the California coast line \--

3 actually, it\'s over 90 percent \-- are foreign flagged,

4 and, therefore, not regulated by the recent EPA rule.

5 We also found \-- we call them our frequent

6 flyers. That roughly 10 percent of those 1300 vessels

7 mentioned make up about 50 percent of that NOx emission

8 bar that you say.

9 So if we could together with EPA just get at that

10 10 percent of our emissions and really focus on these

11 frequent flyers, we could cut in half that big purple bar

12 that you saw. And that\'s what we would like to do.

13 Also to put it just in a slightly different

14 perspective, you\'re all familiar with Title 5 permits.

15 Well, 40 of these ships alone for qualify under our

16 program of being 50 tons or more annually of NOx. They

17 would qualify for a Title 5 program if they were on shore.

18 Off-shore, they\'re uncontrolled.

19 \--o0o\--

20 MS. PATTON: We are hopeful that the

21 International Maritime Organization will reopen the NOx

22 provisions. We understand that they are slated to do that

23 sometime in the near future. The NOx provision of that

24 Marpole agreement, the treaty you heard the previous

25 speaker talking about \-- if that happens we need EPA, we

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1 need ARB, we need all of us at the table to say just how

2 important this source is to us.

3 However, those are long-term goals. In the mean

4 time, we think we have some short-term solutions. We\'ve

5 been working with your staff in the maritime technical

6 working group. EPA has been at the table, has been a

7 valuable partner with us in that. As you heard from your

8 staff, ship owners are there. Technology providers,

9 engine manufacturers, the Maritime Administration, air

10 agency. We are all at the table discussing this. It\'s

11 time now for us to put our money where our mouth is and

12 start to fund some retrofitting demonstration programs.

13 Your staff has done a marvelous job of pulling

14 the parties together and finding out there is some

15 interest in launching some demonstrations on these large

16 vessels. Unfortunately, we\'ve recently heard that while

17 EPA is supportive \-- you didn\'t see our name on the list

18 there at the end of the slide as a funding incentive

19 program. We want our name on that list. We need it now.

20 So while Santa Barbara may be one of the first

21 districts that have gone through the Clear Air Plan and

22 seen how these ship stack up, this shouldn\'t be a surprise

23 for other coastal areas. It\'s a large unregulated source.

24 We urge you to urge EPA to take a leadership role in the

25 international discussions, but also to take a local role

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1 in helping to fund incentive programs for marine vessels.

2 Thank you.

3 CHAIRPERSON LLOYD: Thank you very much.

4 Professor Friedman.

5 BOARD MEMBER HUGH FRIEDMAN: I\'m not sure I\'m

6 addressing this question to you. Perhaps our

7 representative of EPA or staff. What is \-- first of all,

8 what kind of transport for prevailing westerly winds or

9 winds coming off of the ocean carry that pollution, the

10 NOx and any particulate matter, to shore? And from how

11 far away does it need to be before it might dissipate

12 significantly?

13 MS. PATTON: Do you want me \-- your staff will

14 have a more technical \--

15 BOARD MEMBER HUGH FRIEDMAN: I\'ll tell you what

16 I\'m thinking. I\'m sure this idea has occurred to you. I

17 don\'t have very many original ideas anymore. But it does

18 occur to me if you could move those ships to go around the

19 islands, at least for Santa Barbara. I\'m not sure how far

20 off-shore they\'d have to be. And it seems to be the U.S.

21 has some say in that with respect to foreign ships. And,

22 again, I\'m not sure, but I think those are \-- at some

23 point they become international waters.

24 But I think, you know \-- I remember the old tuna

25 fleet used to get captured many, many miles from shore off

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1 Costa Rica. And some of these places are U.S. flagged

2 vessels. So with foreign vessels we get \-- maybe a

3 bargaining ship or something at the international level in

4 the organization or just U.S. Fiat or so disposed could

5 either clean these ships up on a time table or route

6 around. It will cost you more to go out, and that may

7 cost ultimately the consumer a little bit more business,

8 more \-- or both. But clean air is our goal. And I\'m just

9 wondering if the staff or somebody can respond.

10 EXECUTIVE OFFICER WITHERSPOON: Well, Professor

11 Friedman, that exact strategy was contemplated by the

12 Santa Barbara Air District and others as well.

13 In the case of the Channel Islands, what\'s on the

14 other side is a military testing zone for ordinances. And

15 it was not thought to be desirable to have ships

16 traversing where military exercises were taking place

17 so \--

18 CHAIRPERSON LLOYD: That would be an effective

19 mitigation strategy.

20 BOARD MEMBER HUGH FRIEDMAN: I walked right into

21 that.

22 EXECUTIVE OFFICER WITHERSPOON: Which caused us

23 to pursue the speed reduction strategies instead that were

24 easier to implement. They had a dramatic effect on NOx.

25 With respect to your broader question, California

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1 as a state is prevailing on-shore breezes. It\'s why our

2 ozone problem is so severs. We do trace them well out

3 into the ocean. I think our modeling domains for the

4 South Coast and now even for the Central California ozone

5 study extend out by more than 20 miles. So we would trace

6 some contribution always. And nearby transit, of course,

7 is, you know, almost as good as having been on the shore.

8 MS. PATTON: And just if I could add one other

9 item. In early \-- actually late \'80s when we were doing

10 modeling we did find that emissions out in our channels,

11 whether they be from off-shore oil rigs or marine

12 shipping, they differently did have an impact on us and on

13 Ventura.

14 So the numbers that I presented today of our

15 current plan were based on an emission inventory basis,

16 not necessarily on a model impact basis.

17 DEPUTY EXECUTIVE OFFICER TERRY: Just as a follow

18 up, a couple of thoughts. The idea of leverage is a good

19 one. We do have some improved science we didn\'t have in

20 1994 when we did this initial measure in SIP. That came

21 later with the speed limit. I think with some using the

22 current models, we could reevaluate the impacts and

23 perhaps make it an even stronger case.

24 CHAIRPERSON LLOYD: As I recollect, if my memory

25 serves me, when they were looking at the Grand Canyon,

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1 there was some creative accounting that said some of the

2 SOX emissions from the shipping was actually getting into

3 the Grand Canyon. Whether that was real or whether it was

4 to fill in for some modeling deficiencies \-- but I think

5 there is some long term transport as well as.

6 Mr. McKinnon.

7 BOARD MEMBER McKINNON: There is an area for

8 leverage and I\'ll address this to the representative of

9 the U.S. EPA. A couple of years ago I had to do a lot of

10 work looking at this industry. And there is a Defense

11 Department subsidy very large dollar figures that is

12 distributed for having capacity available in the event

13 there\'s a war to be able to transport large amounts of

14 equipment and materials to a theater of war.

15 And there\'s a huge subsidy that goes to shipping

16 companies every year, year in and year out, irregardless

17 of whether or not there\'s a war. And there\'s a

18 requirement that they be American flagged companies. And

19 there is currently a move afoot to change that requirement

20 and to allow it to be an American subsidy of a

21 foreign-owned company, something like that.

22 And it seems to me \-- and there\'s just some

23 really big bucks involved for really not doing anything

24 except being ready in case of a war. And it seems to me

25 that if the federal government wanted to exercise some

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1 leverage, there are some huge shipping companies involved

2 in that discussion that would be subject to that leverage.

3 CHAIRPERSON LLOYD: Thank you.

4 Supervisor DeSaulnier.

5 SUPERVISOR DeSAULNIER: Just a couple comments,

6 Mr. Chairman. Perhaps the Bay Area has found the source

7 of our problems. I wish D.D. was still here in terms of

8 our transport issues. Can we start to work on smog check

9 for a peaceful legislation at a federal level for enhanced

10 smog check for President Kennedy here.

11 CHAIRPERSON LLOYD: Well, I think Charlie Peters

12 could be usefully employed in that deal as well.

13 SUPERVISOR DeSAULNIER: Would it be a one-way

14 ticket?

15 In the Bay Area, some of you know, we spent a lot

16 of our money in the Carl Moyer on retrofitting tug boats.

17 And it was amazing to me how much bang for the buck we got

18 in that program. And it was one of the reasons why

19 hopefully in future years we\'ll get more money, both for

20 our sake and our downwind neighbors.

21 But for those few of us \-- Santa Barbara. Those

22 few of us who have been fortunate enough to ascend to the

23 region administrator for region 9\'s beautiful office on

24 the upper floor overlooking the bay \-- I know I have. The

25 former regional administrator I can remember teasing one

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1 as we looked out on to the freight just sitting in the

2 water waiting to go into the port of Oakland, wouldn\'t it

3 be nice if she could do something about that. I know the

4 current administrator has the same office so I know he has

5 the same view.

6 It would be really significant though, and I\'m

7 appreciative that we\'ve had this report. There\'s some

8 movement, but it would be tremendously significant, I

9 think, for the whole coastal region, not just to the Bay

10 Area, if we could be more proactive either with subsidies

11 or educational programs or looking \-- as Matt suggested,

12 other incentive in this age of globalism where perhaps

13 disincentive that collectively federal agencies \-- and I

14 assume you\'re doing some of that \-- can work with to

15 encourage, prod of some our trading partners.

16 And Matt was pointing out that Kennedy here used

17 to be American Shipping Lines, and it is now owned by a

18 Dutch company. Maybe there are things we can do to

19 convince them to could the right thing and help us with

20 some of our problems.

21 CHAIRPERSON LLOYD: Good point. Thank you. Any

22 other comments from staff? Board? No.

23 BOARD MEMBER HUGH FRIEDMAN: Well \--

24 CHAIRPERSON LLOYD: Yes.

25 BOARD MEMBER HUGH FRIEDMAN: We had \-- I think I

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1 heard a request from the speaker that we urge the U.S.

2 EPA, who apparently has exclusive jurisdiction here \-- and

3 I think not only should our comments, but I think they

4 should be collated, assembled, aggregated with as much

5 honest and sincere force be made into a appropriate urging

6 and emphasize the importance of speed, the need to do

7 something. Not just talk about it.

8 EXECUTIVE OFFICER WITHERSPOON: We would be happy

9 to do that.

10 CHAIRPERSON LLOYD: I think the second part of

11 that request was an invitation to go down to look at the

12 shipping liens and to observe the close proximity to the

13 islands.

14 SUPERVISOR DeSAULNIER: Where they\'re testing

15 emission or \--

16 BOARD MEMBER RIORDAN: He\'s going to do the

17 inside of the Channel and send us to the outer area.

18 SUPERVISOR DeSAULNIER: He was thinking the

19 Biltmore. I was thinking the tug boat.

20 CHAIRPERSON LLOYD: Thank you very much for the

21 information on both those items indicating the challenges

22 we have.

23 And thank you, Bob, for coming up.

24 Thank you, Kathy, for coming up. It was very

25 helpful, very constructive.

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1 I guess we have nobody for the open comment

2 period. So it\'s my great pleasure if there\'s no other

3 business to bring \-- the April meeting of the Air

4 Resources Board will now adjourn and see you next month.

5 And thank you again staff, colleagues, thank you.

6 (Thereupon the California Air Resources Board

7 adjourned at 4:14 p.m.)

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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:

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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

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13 IN WITNESS WHEREOF, I have hereunto set my hand

14 this 5th day of May, 2003.

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23 TIFFANY C. KRAFT, CSR, RPR

24 Certified Shorthand Reporter

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