CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY

AIR RESOURCES BOARD

STAFF REPORT: INITIAL STATEMENT OF REASONS

PROPOSED AMENDMENTS TO THE EXHAUSTEMISSION STANDARDS FOR 2007-2009 MODEL-YEAR HEAVY DUTY URBAN BUS ENGINES AND THE FLEET RULE FOR TRANSIT AGENCIES

Date of Release: July 29, 2005 Scheduled for Considerati on: September 15-16, 2005

This report has been reviewed by the staff of the California Air Resources Board and approved for publication. Approval does not signi fy that the contents necessarily reflect the views and policies of the Air Resources B oard, nor does menti on of trade names or commercial products constitute endorsement or recommendation for use.State of California California Environmental Protection Agency AIR RESOURCES BOARD

PROPOSED AMENDMENTS TO THE EXHAUSTEMISSION STANDARDS FOR 2007-2009 MODEL-YEAR HEAVY DUTY URBAN BUS ENGINES AND THE FLEET RULE FOR TRANSIT AGENCIES

Staff Report

July 29, 2005i TABLE OF CONTENTS

EXECUTIVE SUMMARY ......................................................................................1 I. INTRODUCTION ...........................................................................................1 A. Background ................................................................................................1 1. ARB's Regulations Affecting Transit Agencies .......................................2 2. SCAQMD Rule 1192 ...............................................................................3 3. Amendments to be Considered by the Board .........................................4 a. Amend the Statewide Urban Bus Emission Requirements .................4 b. Alternative Fuel Path Mandate for All Transit Agencies in the District 5 B. Regulatory Authority ...................................................................................5 C. Current Regulations and Voluntary Programs ........................................6 1. Federal Regulations ...............................................................................6 a. Current Standards ...............................................................................7 b. 2007 and Later Standards ...................................................................7 2. California Regulations .............................................................................8 a. General New Heavy-Duty Engine Regulations ...................................8 b. General In-Use Heavy-Duty Engine Regulations ..............................10 c. In-Use Urban Bus and Transit Fleet Vehicle Regulations .................11 3. Local Regulations .................................................................................13 a. General Air District Authority .............................................................13 b. Specific South Coast Air Qua lity Management District Authority ......13 4. Voluntary and Incentive Programs ........................................................14 a. Federal Incentives .............................................................................14 b. State Incentives ................................................................................15 c. Local Funding ...................................................................................15 II. PUBLIC OUTREACH ...................................................................................16 A. Environmental Justice ..............................................................................17 B. Outreach Efforts .......................................................................................18 1. Amend the Statewide Urban Bus Emission Requirements ...................18 2. Alternative Fuel Path Mandate for all Transit Agencies in the District ..19 III. NEED FOR EMISSION REDUCTIONS ....................................................20 A. Ozone ......................................................................................................21 B. Particulate Matter (PM) ............................................................................21 IV. NEED FOR A POLICY DECISION BY THE BOARD TO AMEND ARB’S CURRENT REGULATIONS ................................................................................21 A. Amend the Statewide Urban Bus Emission Requirements ......................22 B. Alternative Fuel Path Mandate for All Transit Agencies in the District ......22 V. ASSESSMENT OF THE POLICY DECI SION TO BE PRESENTED TO THE BOARD ...............................................................................................................24 A. Amend the Statewide Urban Bus Emission Requirements ......................24 B. Alternative Fuel Path Mandate for All Transit Agencies in the District ......26 VI. Inventory of Urban Buses and Emissions .................................................27 A. Inventory of Urban Buses .........................................................................27 B. Emission Inventory for Urban Buses ........................................................28ii VII. SUMMARY OF THE CONTROL MEASURES TO BE CONSIDERED BY THE BOARD .......................................................................................................30 A. Scope and Applicability ............................................................................31 B. Amend the Statewide Urban Bus Emission Requirements ......................31 C. Alternative Fuel Path Mandate for All Transit Agencies in the District, Amend Section 1956.2 ....................................................................................32 D. Comparison of ARB’s Fleet Rule for Transit Agencies and Rule 1192 .32 VIII. ENGINE TECHNOLOGY AND AVAILABILITY ........................................33 A. Current Engine Availability .......................................................................33 1. Diesel Fueled Engines ..........................................................................33 2. Alternative Fuel Engines .......................................................................34 B. Mid-term Future Engine Availability (2007 – 2009) ..................................34 1. Diesel Fueled Engines ..........................................................................34 2. Alternative Fuel Engines .......................................................................34 C. Long Term Engine Availability (2010 and beyond) ...............................35 IX. END-USER EXPERIENCE: ALTERNATIVE FUELS ...............................35 A. Description of the Survey .........................................................................35 B. End-User Experience with Alternative Fuels ............................................36 1. Propane ................................................................................................36 2. Compressed and Liquefied Natural Gas (CNG/LNG) ...........................36 a. Fueling ..............................................................................................36 b. Maintenance Shop Modifications for Alternative Fuel Vehicles .........36 c. Maintenance and Down Time for Alternative Fuel Vehicles ..............37 d. Training Staff for Alte rnative Fuel Vehicles: ......................................37 3. Conclusion ............................................................................................37 X. REGULATORY ALTERNATIVES ................................................................37 XI. ECONOMIC IMPACT ...............................................................................38 A. Legal Requirement ...................................................................................38 B. Affected Businesses .................................................................................39 C. Potential Impact on Businesses ............................................................39 D. Potential Impact on Business Competitiveness ....................................39 E. Potential Impact on Employment ..............................................................40 F. Potential Impact on Business Creat ion, Elimination, or Expansion ..........40 G. Estimated Costs to Local Transit Agencies ..........................................40 1. Cost Estimates for Statewide Alignment ...............................................41 2. Cost Estimates Associated With the Alternative Fuel Path Mandate for All Transit Agencies, Statewide ...................................................................41 3. Cost Estimates Associated With the Alternative Fuel Path Mandate for All Transit Agencies in the District ...............................................................41 XII. ENVIRONMENTAL IMPACTS AND COST-EFFECTIVENESS ...............41 A. Benefits within the District and Statewide .................................................41 1. Impacts on the Air Quality Management Plan .......................................42 2. Emission Benefits .................................................................................42 a. Statewide Alignment .........................................................................45 b. Alternative Fuel Path Mandate fo r All Transit Agencies, Statewide ..45iii c. Alternative Fuel Path Mandate for All Transit Agencies in the District 48 B. Cost and Cost-Effectiveness ....................................................................49 1. Amend the Statewide Urban Bus Emission Requirements ...................49 a. Statewide Alignment .........................................................................49 b. Alternative Fuel Path Mandate fo r All Transit Agencies, Statewide ..49 2. Alternative Fuel Path Mandate for All Transit Agencies in the District ..50 C. Toxics from Diesel and Alternative Fueled Engines .............................51 XIII. ISSUES ....................................................................................................53 A. Statewide Alignment ................................................................................53 B. Alternative Fuel Path Mandate fo r All Transit Agencies, Statewide ..........53 C. Alternative Fuel Path Mandate for All Transit Agencies in the District ..54 D. Issues Related to Federal Cl ean Air Act Waiver of Preemption ............55 E. Waiver Process Will Delay Rule Implementation and Reduce Benefits Achieved .........................................................................................................56 XIV. STAFF CONCLUSION .............................................................................57 XV. REFERENCES .........................................................................................59 XVI. AVAILABILITY OF TE CHNICAL SUPPORT DOCUMENT .......................61

TABLE OF FIGURES

Figure 1. NOx Emissions – Original Estimate and Current Estimate ................44 Figure 2. PM Emissions – Original Estimate and Current Estimate .................44 Figure 3. NOx Emissions – Comparison of Options .........................................47 Figure 4. PM Emissions – Comparison of Options ...........................................47

TABLE OF TABLES

Table 1. Federal Emission Standards for New Heavy-Duty Trucks and Buses .6 Table 2. California Emission Standards for New Heavy-Duty Trucks and Buses 9 Table 3. California Optional, Low NOx Emission Standards for New HeavyDuty Trucks and Urban Buses ............................................................................10 Table 4. Fleet NOx Averag e Requirements for Trans it Agencies (g/bhp-hr) ...12 Table 5. Fleet Diesel PM Reduction Requirements for Transit Agencies ........12 Table 6. Workshop Locations and Times. .......................................................19 Table 7. Transit Agencies in the SCAQMD .....................................................26 Table 8. Reported California Urban Bus Inventory as of January 1, 2005, by the Selected Fuel Path of the Transit Agency .....................................................28 Table 9. NOx Statewide Diese l Emissions Inventory (tpd) ..............................30 Table 10. PM Statewide Diesel Em issions Inventory (lbs/day) ......................30 Table 11. Diesel Versus Alternative Fu el Path NOx Fleet Averages for Agencies in the District (g/bhp-hr) .......................................................................42 Table 12. NOx Emission Benefits (tpd) in the District - Man datory Alternative Fuel Path 48 Table 13. Emission Comparison - Diesel Bus vs Natural Gas Bus ................52iv TABLE OF APPENDICES

APPENDIX A: PROPOSED REGULATION ORDER

APPENDIX B: URBAN BUS SURVEY

APPENDIX C: INVENTORY AN D EMISSIONS MODELING

APPENDIX D: COST ANALYSIS METHODOLOGYES 1 EXECUTIVE SUMMARY

The following provides a summary of policy decisions to be considered by the Air Resources Board (ARB or the Board). The modifications, as described herein, are consistent with the Ca lifornia authority to contro l emissions from mobile

sources.

What vehicles would be impacted?

Staff has developed amendments to the regul ations that affect emissions from urban buses owned or operated by transit agencies.

What regulations currently apply to these vehicles?

The ARB has two programs specifica lly designed to reduce emissions from urban buses. One program establishes emission standards that new urban buses must meet. The other program a ffects emissions from in-use urban buses that are already in service. In addi tion, the South Coast Air Quality Management District (SCAQMD or the District) has adopt ed its own rule related to new transit bus purchases.

Long-term emission reductions are achiev ed through establishing more stringent new engine standards. California has ad opted standards that affect new urban buses which are more stringent than federal new engine standards for urban buses and heavy-duty trucks.

For nearer-term emission reductions, the AR B Fleet Rule for Transit Agencies is designed to reduce emissions from in-u se urban buses by increasing turnover and through the application of re trofit particulate filters.

The District has adopted various fleet rule s, one of which, Rule 1192, “Clean OnRoad Transit Buses,” applies only to transit agencies operating in the South Coast air district. Rule 1192 dictates that transit agencies may only acquire alternative-fuel buses when procuring or leasing buses. The rule applies to government agencies and private compani es under contract to government agencies.

What regulatory changes are staf f requesting the Board consider?

Staff has identified two policy decisions for the Board’s consideration, and has developed proposed regulatory amendments to support decisions the Board may make. First, staff is presenting three opt ions for the Board to consider regarding the appropriate emission standards for new urban bus engines in 2007 through 2009. The three options are: 1) k eep the current new urban bus emissions standards as they are, 2) change the ox ides of nitrogen (NOx) emission standardES 2 for 2007 through 2009 model year new urban buses from 0.2 grams per brake horsepower-hour (g/bhp-hr) to 1.2 g/b hp-hr, which would align it with the equivalent model year heavy-duty truck NOx emission standard, and 3) require all transit agencies to purchase/l ease only alternative fuel buses.

The second policy decision for the Board’ s consideration is whether to require that all transit agencies operating in the South Coast Air Quality Management District follow the alternative-fuel compliance path, as defined in ARB's regulations. Under ARB's current regulations, transit agencies made a non-revocable election to follow either the diesel fuel path or the alternative-fuel path, as of January 1, 2001. Of the 17 transit agencies in the District, 11 chose the alternative-fuel path, and six chose t he diesel path. If the Board adopts the new requirement, the six transit agencies in the District currently on the diesel fuel compliance path would be required to change to the alternative-fuel path effective January 1, 2006. This change would lock these transit agencies into purchasing alternative-fuel engines through 2015, consistent with the District's Rule 1192.

FIRST POLICY DECISION: Whether to revise the emission standards for new urban buses

California’s current 2007 and beyond NO x requirement for new urban bus engines is 0.2 g/bhp-hr. The Californi a and national heavy-duty truck new engine standard for 2007, which includes urban bus es for all but California, is also 0.2 g/bhp-hr, but flexibilities in the heavy-duty truck rule, result in the option of certifying all engines to an average NO x standard of 1.2 g/bhp-hr between 2007 and 2009. This is what engine manufacturers have stated they plan to do, so it is unlikely that diesel engines meeting California’s urban bus NOx standard will be available.

Staff Assessment

Staff has assessed urban bus engine avai lability based on the current 2007-2009 standard versus what could be available if the Board modifies the standard to align with the current 2007-2009 model year heavy-duty truck standards. Without alignment, there are essentially three scenarios that could occur. The first is that manufacturers could certify both diesel and alternative-fuel engines for sale in California in time to meet the standard of 0.2 g/ bhp-hr NOx in 2007. Discussions with diesel engine manufacturers, however, have convinced staff that this scenario is highly unlikely.

The second scenario is that manufacture rs make only alternative fuel engines available to meet the 0.2 g/bhp-hr NOx standard in 2007. Multiple manufacturers have stated publicly that they intend to produce alternative fuel urban bus engines that meet the California 2007 st andard. Staff has reviewed development plans for these engines and agrees these engi nes will be available in 2007 if allES 3 goes as planned. Therefore, staff believes that there is a reasonable likelihood that one or more urban bus engines usi ng alternative fuels will be commercially available by 2007, although there is some risk that these engines will be delayed or will not be certified and marketed bec ause development of the new technology engines is not complete at this time.

The third scenario is that there will be no diesel or natural gas engines available for California urban buses for 2007-2009. In this case, California transit agencies would not be able to purchase new engi nes until 2010, at which time staff expects both diesel and alternative fuel engines will meet the 2010 heavy-duty truck NOx standard of 0.2 g/bhp-hr. As noted above, staff’s assessment is that no diesel urban bus engines will be availabl e in 2007 through 2009, but is likely alternative fuel urban bus engines will be available.

There are 76 transit agencies statewide t hat report to ARB under the Fleet Rule for Transit Agencies. The 28 agencies on the alternative fuel path will continue to purchase complying engines in 2007 through 2009, because staff believes complying engines will be available. However, if the current 2007 urban bus emission standards are not modified, t he 48 agencies on the diesel path will not be able to purchase new diesel buses until 2010. These diesel path transit agencies operate 62 percent of the Califor nia urban buses, and if they continue on the diesel path the result is that these agencies will keep their older diesel buses longer or repower their buses. Em ission reductions staff anticipated from the original rule due to fleet turnover will not be realized from diesel path transit agencies.

Staff expects that manufacturers will ce rtify diesel urban bus engines that meet the 1.2 g/bhp-hr NO x level if the Board relaxes t he NOx standard to that value for 2007-2009. Staff also expects that, even with Board adoption of alignment, some manufacturers will produce alternat ive fuel engines t hat meet the 0.2 g/bhp-hr NOx level in 2007 an d that transit agencies on the alternative fuel path will purchase these engines because of t heir lower emissions and the potential for the availability of incentive funds for the lower emitting engines.

How would the three options impact emissions?

The impact on emissions depends on the emission level of the engines purchased and replaced, and in scenar ios where diesel engines are not available, if purchases are deferred or foregone. Staff has concluded that no diesel engines will be available for purchase in 2007 to 2009, and that alternative fuel engines meeting a 0.2 g/bhp-hp NOx standard will be available. For transit agencies required to purchase alternativ e fuels (those on the alternative fuel path), staff assumes they will purchase t hese engines. For diesel path agencies, staff assumes they will purchase diesel engines in 2007 to 2009 if the NOx standard is changed to 1.2 g/bhp-hr. If t he NOx standard is k ept at the current 0.2 g/bhp-hr, staff assumes the diesel path agencies will not buy any engines inES 4 2007-2009, and that they will make up fo r these deferred purchases in 2010- 2012, when diesel engines are again available.

Compared to the option 1 (no change in t he standards), option 2 (revise the NOx standard to 1.2 g/bhp-hr) provides em ission reductions in each year 2007 through 2010, reaching about 1.6 tons per day (tpd) in 2009. This occurs because 1.2 g/bhp-hr new engines replac e higher emitting older engines, whereas in option 1 no new engines are purchased by diesel path agencies until 2010 or later, and higher emitting buses remain in operation. However, once the deferred purchases are made in 2010 and beyond, no change option 1 provides slightly greater reductions than opti on 2 from 2012 on, reaching up to about 1.2 tpd. This occurs because by defe rring purchases until 2010 or after, all purchases are 0. 2 g/bhp-hr engines, w hereas the buses purchased in 2007- 2009 (option 2) have higher emissions (1.2 g/bhp-hr). Staff estimates that by 2025, there will be no difference in emissions because all engines remaining in the fleet are 0.2 g/ bhp-hr (i.e. any 1.2 g/bhp-hr engi nes are over 15 years old and have been replaced).

Option 3 (require all diesel path agencies st atewide to switch to the alternative fuel path) provides the lowest emi ssions. Compared to option 1, option 3 provided emission reductions in eac h year 2007 through 2011, reaching about 2.6 tpd in 2009. This occurs because staff assumes all agencies will purchase alternative fuel engines emitting at0.2 g/bhp-hr beginning in 2007, and no deferred purchases will occur. It shoul d be noted that agencies previously on the diesel path will have to invest in new alte rnative fuel infrastructure, and this could result in deferred or forgone purchases , which would reduce the emission benefit of this option. Compared to option 2, option 3 will provide lower emissions until 2025, reaching a maximum of about 1.0 tp d in 2009. This occurs because option 2 allows for 1.2 g/bhp-hr engines to enter the fleet during 2007 through 2009. However, staff estimates thatby 2025, there will be no difference in emissions because all engines remaining in the fleet are 0.2 g/bhp-hr (i.e. any 1.2 g/bhp-hr engines are over 15 years old and have been replaced).

Staff estimates that by 2025, the st atewide NOx emissi ons will be equivalent under all three options because all engines remaining in the fleet will meet a 0.2 g/bhp-hr NOx standard.

What are the costs associated withmodifying the statewide urban bus emission requirements as outli ned in staff’s three options?

Staff has determined there is no additional cost of the option to revise the new urban bus engine emission standards to a lign with the current truck standards. This option will allow purchase of diesel engines by diesel path agencies in 2007- 2009, and may reduce operating and maintenance costs by replacing older engines. If the currentstandards are retained, diesel path agencies are expected to defer purchases until 2010 and beyond. These engines will costES 5 more than the engines that could be purchased in 2007-2009 if the standards are aligned

. If the Board chooses to adopt a state wide alternative-fuel purchase mandate, capital and operations and maintenanc e costs would be increased for those engines now on the diesel path. The Federal Transportation Administration (FTA) provides 80%-83% of the capital cost of new buses, so transit agencies must fund the remainder. As a conser vative estimate, staff assumed a 20 percent transit agency share of capita l costs, in addition to operation and maintenance costs associated with the bus, fueling facilities, labor and training. Thus, staff estimates a typical increment al total cost of $76,517 per bus funded by the local transit agency.

In order to determine cost-effectiveness, ARB took the typical total incremental cost of the buses to be purchased, wit h FTA funding, and divided by the total NOx emission reductions for the life of the regulation. These values were based on NOx emission reductions only. The expected cost-effectiveness ratio is $119,030 per ton ($59.51 per pound). These values are much higher than other mobile source regulations, which typi cally have cost-effectiveness values of $10,000 per ton, or less.

SECOND POLICY DECISION: Whether to mandate the alternative-fuel path for transit agencies operating in the South Coast Air Quality District?

Shortly after the District adopt ed its fleet rules, including Rule 1192.2, the Engine Manufacturers Association and the Wester n States Petroleum Association sued the District regarding its aut hority to adopt these rules. On April 28, 2004, the United States Supreme Court ruled that the purchase requirements in the District rules were an emission standard that requi red a waiver of federal preemption prior to implementation. The Court retur ned the case to the federal district court for further proceedings consistent with its decision. In response to this decision, the District requested that ARB submit t he District's rules to the United States Environmental Protection Agency (U.S. EPA) for a waiver of preemption pursuant to section 209(b) of the Clean Air Act. On October 1, 2004, ARB requested public comment on the District's request. ARB staff completed a thorough review of the comments submitted in response to the notice, and consulted with the U.S. EPA regarding the legal requirem ents for obtaining a waiver of a rule adopted by a local government.

Based on ARB review, staff concluded thatthese fleet rules, as written and adopted by the District, would not receive a Section 209(b) waiver because these rules have not been adopted by the ARB as st ate regulations (applicable in the South Coast). For this reason, staff has initiated a state rulemaking process to cover some of the fleets subj ect to the District rules. This process requires a newES 6 public record that updates relevant in formation on the effectiveness and costs of these rules.

Meanwhile the federal district court has continued its proceedings on the District rules. On May 5, 2005, the federal district court ruled that t he District’s authority is not preempted under the market partici pant doctrine for the aspects of the District fleet rules that relate to purchasing decisions made by state and local governments. Most trans it agencies are considered local government. The order, however, noted that it did not addre ss whether other aspects of the District rules may still be subject to preemption.

If the Board chooses to amend the ARB’s Fleet Rule for Transit Agencies to mandate that the six diesel path transit agencies in SCAQMD switch to the alternative fuel path, the st ate rule would achieve the alternative fuel objectives of the District’s Rule 1192. The ARB’s adopt ion of a unique fleet requirement for the transit agencies in the District woul d address concerns that the Court’s decision may change or weaken.

Staff has developed amendments that the B oard may adopt if the Board wishes to assure that alternative fuel urban transit buses are purchased throughout the District, and determines it wise to prov ide a backstop to the current District Rule 1192 in case litigation overturns the District rule.

How will the alternative-fuel manda te for transit agencies in the District impact emissions?

Eleven of the transit distri cts in the District have chos en the alternative fuel path under the ARB transit fleet rule, and this decision in not revocable. Thus the Board’s decision affects the remaini ng six transit districts, who operate 10 percent of the transit buses in the SCAQ MD. If the SCAQMD prevails in legal challenges, alternative fuel buses will be purchased by the six transit districts regardless of ARB’s action, and no federal waiver would be needed. However, if the SCAQMD’s rule is invalidat ed, several outcomes are possible.

Five of the six transit districts have been planning alternative fuel bus purchases notwithstanding their election of the diesel path under ARB’s fleet rule. Thus one outcome is they could continue to purchas e alternative fuel buses in the absence of a SCAQMD or ARB rule.

Another outcome is they could also decide to purchase diesel fuel buses. In 2007-2009, these diesel buses would have higher emissions than available alternative fuel buses. (Beyond 2009, em issions of diesel and alternative fuel bus engines are expected to be equivalen t.) Note however that purchase of diesel buses in 2007-2009 would only be possible if the Board also acts to align the statewide emission standard for buses. If it chooses not to do this, no diesel buses will be available for purchase in 2007.ES 7 To quantify the emission benefit of mandat ing the six transit agencies change to the alternative fuel path, staff assum ed the SCAQMD rule is invalidated, the Board aligns the statewide standard for new bus engines so that diesel engines are available for purchase, and all six transit agencies choose to purchase diesel engines in 2007-2009. Adoption of the ARB rule requiring alternative fuel purchase would prevent purchase of diesel engines by these districts, and staff assumed they would purchase alternat ive fuel engines in 2007-2009 instead. NOx emissions would be reduced by a sm all amount - up to 0.02 tons per day. There would be no impact on PM emissi ons because all engines meet the same PM standard from 2007 on.

What is the cost-effectiveness of th e District alternative-fuel path mandate option?

Staff expects that the six transit providers affected bythis option will be able to obtain fuel from facilities that are al ready, or will soon be, available, based on staff’s survey of transit agencies. Mo st transit agencies that plan to purchase compressed natural gas (CNG) buses have al ready either built a fueling station or have one planned and financed. In addition, transit agencies that are purchasing gasoline hybrid-electric buses (H EBs) will use existing facilities. Staff based the cost-effectiveness analysis on estimates of expected emissions reductions and costs for implementation of an alternative fuel mandate. In order to determine cost-effectiveness, ARB used the typical incremental cost of the buses to be purchased, including FTA funding, and divided by the total NOx emission reductions for the life of the regulation. These values were based on NOx emission reductions only as there is no PM benefit from this option. The cost-effectiveness is $67,837 per ton ($33.92 per pound). 1 These values are much higher than other mobile source regulations, which typically have cost-effectiveness values of $10,000 per ton, or less.

1 Actual cost-effectiveness values could be higher if the transit agencies choose to purchase alternative fuel buses during 2007 through 200 9 with NOx emissions higher than 0.2 g/bhp-hr thereby decreasing the emissions benefits.1 I. INTRODUCTION

The Air Resources Board (ARB or Board) seeks to provide clean, healthful air to the residents of California. ARB is t he state agency responsible for protecting public health and the environment from the har mful effects of air pollution. ARB oversees all air pollution control efforts in California, including the activities of 35 independent local air districts, and works in cooperation with the districts and the U.S. Environmental Protection Agency (U.S . EPA) on strategies to attain State and federal ambient air quality standards and to reduce air toxic emissions.

The South Coast Air Quality Management Dis trict (SCAQMD or District) is the local governmental agency primarily res ponsible for air quality assessment and improvement in the South Coast Air Basin and the desert portion of Riverside County in the Salton Sea Air Basin. T he South Coast Air Basin, which includes Orange County and the non-desert portions of Los Angeles, Riverside and San Bernardino Counties, is designated as a serious nonattainment area for particulate matter (PM10 - particulate matter under 10 microns) and an extreme nonattainment area for ozone. The Coac hella Valley, located in the desert portion of Riverside County, is classified as a serious nonattainment area for PM10 and a severe nonattainment area for ozone.

A. Background

Public transportation has important societ al benefits, including providing access to work and education, reducing traffi c congestion, and meeting the mobility needs of the public, including the elderlyand disabled. California’s transit agencies are responsible for providing basic transportation services for the public. Transit agencies provide both fi xed-route service within urban places, such as traditional urban bus and ne ighborhood routes, and between urban places such as commuter routes, and non-fixed-route services such as paratransit, dial-a-ride and charter services.

Most types of public transportation, howev er, are also sources of polluting engine exhaust emissions. Significant amounts of both particulate matter (PM) and oxides of nitrogen (NOx) are emitted from mobile sources, including urban buses. NOx and hydrocarbons (HC) contribute to the atmos pheric formation of ozone and fine particles. NOx is a reactive, ox idizing gas that contributes to the atmospheric formation of ozone and fine particles, and causes respiratory illness and impaired lung function. Carbon monoxide (CO) is a colorless, odorless gas that reduces the ability of the body to transport oxygen to cells. Diesel PM is classified as a toxic air contaminant (TAC) because it is a cancer-causing pollutant that also has significant s hort- and long-term negative cardiovascular impacts.2 Following the identific ation of diesel PM as a to xic air contaminant, ARB staff spent two years working with stakehol ders to determine the best control measures for diesel PM. The resultwas the “Risk Reduction Plan to Reduce Particulate Matter Emissions from Diese l-Fueled Engines and Vehicles” (Diesel Risk Reduction Plan, or DRRP), which was approved by the Board in September 2000 (ARB 2000a). This plan directs staff to develop measures to reduce diesel PM emissions from all new and in-use diesel-fueled engines and vehicles. Included are, “new retrofit requirem ents for existing on-road, off-road, and stationary diesel-fueled engines and v ehicles where determined technically feasible and cost-effective.”

The ARB adopted the 2003 State and Federal Strategy for the California State Implementation Plan (SIP) for ozone in S eptember 2003. Most of the existing near-term SIP measures have been adopted, along with additional controls to reduce emissions. The baseline emission inventory in the 2003 SIP reflects the benefits of State and federal meas ures adopted since the 1994 ozone SIP.

1. ARB's Regulations Affecting Transit Agencies

The ARB has adopted two programs specif ically designed to reduce emissions from urban buses. One program affect s emissions from new urban buses and the other program affects emissions from in-use urban buses operated by transit agencies (Fleet Rule for Transit Agencies). Long-term emission reductions are achieved through establishing more stringent new engine standards. California has adopted standards that affect new urban buses, which are more stringent than federal new engine standards fo r urban buses and heavy-duty trucks.

In February 2000, the Board adopted a fleetrule for transit agencies operating urban buses, and more stringent emission standards for new urban bus engines and vehicles (ARB 1999; ARB 2000b). The rules were designed to reduce emissions of NOx and PM by setting fl eet emission reduction requirements that require the purchase of cleaner engines and the retrofit of existing engines. By January 1, 2001, transit agencies were required to make a non-revocable decision to follow either a diesel pat h or an alternative-fuel path, which established purchasing requirements for the transit agencies through 2015.

The rule also promoted advanced technologies by adopting requirements for zero-emission bus (ZEB) demonstrations and acquisition that are applicable to larger transit agencies. New, morestringent mid- and long-term emission standards were also adopted that apply to new urban bus engines, and the rule encourages the purchase of diesel hybrid electric buses from 2004 through 2006 by diesel path agencies. On Febr uary 24, 2005, the B oard amended the fleet rule for transit agencies to reduce emissions from buses and vehicles not covered by the original fleet rule for transit agencies.3 In 2000, the SCAQMD adopted various fleetrules, including Rule 1192, “Clean On-Road Transit Buses” (adopted on J une 16, 2000). Rule 1192 requires that public transit agencies with 15 or more public transit vehicles or urban buses operating in the SCAQMD may only acqu ire alternative-fuel vehicles when procuring or leasing these vehicles (SCAQMD 2000). The rule applies to government agencies and private compani es under contract to government agencies. Despite this rule, six transit agencies in the SCAQMD chose the diesel path under ARB's fleet rule for transit agencies.

As a result of the ARB and SCAQMD rules, many transit agencies have made significant changes in their operations to incorporate natural gas and other alternative-fuel buses into their fleets. They have installed natural gas refueling infrastructure and purchased alternative- fuel urban buses; repowered old diesel engines to engines meeting cleaner exhaus t emission standards; installed diesel particulate filters on diesel engi nes; and experimented with developing technologies, such as hybrid-electri c buses, NOx aftertreatment systems and cleaner fuels. Many of California’s transit agencies consider themselves to be innovators and incubators for advanced technologies.

2. SCAQMD Rule 1192

Under its Clean Fleets Program, the Dis trict adopted seven fleet rules during 2000 and 2001. The rules were developed to gradually shift public agencies and certain private entities to lower emission and alternative-fuel vehicles whenever a fleet operator purchases or leases a vehicl e for replacement or addition to a fleet. The District adopted these rules based on le gislative authority [Health & Safety Code (HSC) section 40447.5(a)], which rest ricts the scope of any rules to public and certain commercial operators of fleets of 15 or more vehicles. The adopted rules apply to transit buses, school buses, refuse collection vehicles, airport shuttles and taxis, street sweepers, light and medium-duty publicly owned vehicles, and heavy-duty publicly owned vehicles.

As noted above, one of the fleet ru les adopted is Rule 1192 - Clean On-Road Transit Buses. The Rule was developed in an effort to reduce public exposure to air pollution emitted from transit buses , including toxic particulates and ozone precursor emissions. Many of these fleet s emit pollutants, including air toxics, into heavily urbanized areas, where improvem ents in air quality are critical given environmental justice and other concerns.

Shortly after the District adopted its fleet rules, including Rule 11922, the Engine Manufacturers Association and the Wester n States Petroleum Association sued the District regarding its aut hority to adopt these rules. On April 28, 2004, the United States Supreme Court ruled that the purchase requirements in the District rules were an emission standard that requi red a waiver of federal preemption prior to implementation. The Court retur ned the case to the federal district court for further proceedings consistent with its decision. In response to this decision,4 the District requested that ARB submit t he District's rules to EPA for a waiver of preemption pursuant to section 209(b) of the Clean Air Act. On October 1, 2004, ARB requested public comment on the Distr ict's request. ARB staff completed a thorough review of the comments submi tted in response to the notice, and consulted with the U.S. EPA regarding t he legal requirements for obtaining a waiver of a rule adopted by a local government.

Based on ARB review, staff concluded thatthese fleet rules, as written and adopted by the District, would not receive a Section 209(b) waiver because these rules have not been adopted by the ARB as st ate regulations (applicable in the South Coast). For this reason, staff has initiated a state rulemaking process to cover some of the fleets subj ect to the District rules. This process requires a new public record that updates relevant in formation on the effectiveness and costs of these rules.

Meanwhile the federal district court has continued its proceedings on the District rules. On May 5, 2005, the federal district court ruled that the District’s authority is not preempted under the market partici pant doctrine for the aspects of the District fleet rules that relate to purchasing decisions made by state and local governments. Most trans it agencies are considered local government. The order, however, noted that it did not addre ss whether other aspects of the District rules may still be subject to preemption.

3. Amendments to be Considered by the Board

The amendments presented in this report m odify the ARB rules that affect urban buses owned or operated by transit agencie s. Staff has identified two policy decisions to be considered by the B oard and has developed proposed regulatory amendments to support decisions the Board may make.

a. Amend the Statewide Urba n Bus Emission Requirements

Staff is presenting three options for the Board to consider regarding the appropriate emission standards for new urban bus engines in 2007 through 2009. The three options are: 1) k eep the current new urban bus emissions standards as they are, 2) change the NOx emission standard for 2007 through 2009 model year new urban buses, from 0. 2 g/bhp-hr to 1.2 g/bhp-hr, which would align emission standards with the equivalent model year heavy-duty truck NOx emission standard, and 3) require all transit agencies to purchase/lease only alternative fuel buses.

The amendments provided in this report (s et forth in the proposed regulation order in Appendix A) set forth the l anguage necessary to implement the option of aligning the urban bus standards with the heavy-duty truck standards beginning with the 2007 model year. Should the Board favor the option to keep the urban bus standards as they are, no regulatory changes are necessary. Should the5 Board decide that all transit agencies st atewide should be required to purchase alternative fuel, a 15-day modification to ARB’s Fleet Rule for Transit Agencies would be needed to accomplish this (and no change to the urban bus emission standards would be necessary).

b. Alternative Fuel Path Mandate for All Transit Agencies in the District

Staff has also developed an option to m andate that all transit agencies operating in the District be required to follow t he alternative-fuel compliance path, as defined in title 13, CCR, section 1956.2. 2 Under the current regulations, transit agencies made a non-revocable election to follow either the diesel fuel path or the alternative-fuel path, as of January 1, 2001. Of t he 17 transit agencies in the District, 11 chose the alternative-fuel path, and six chose the diesel path. Under the new option being presented to the Board for consideration, transit agencies in the District currently on the diesel fuel compliance path would be required to change to the alternative-fuel path effe ctive January 1, 2006. This change would lock these transit agencies into purchasing alternative-fuel engines through 2015.

The scope of this option overlaps wit h the District’s Rule 1192, and ARB has worked closely with the District to craft the amendments. The District has assisted ARB staff in the information gat hering process and with other logistics such as stakeholder meetings, identific ation of affected fl eets, and understanding the current District rules. Great efforts have been taken by ARB staff to obtain current, objective information on the c hallenges, cost-effectiveness, and emission benefits from the various technology options.

B. Regulatory Authority

The California Legislature enacted the Ca lifornia Clean Air Act of 1988, which declared that attainment of state ambient air quality standards is necessary to promote and protect public health, particularly the health of children, older people, and those with respiratory diseases . The Legislature directed that these standards be attained by the earliest practicable date.

The Federal Clean Air Act grants Calif ornia, alone among the states, the authority to adopt more stringent controls of emissions from new mobile sources. The California Clean Air Act establishe s the ARB as the state agency that sets standards for mobile sources. The Calif ornia Legislature also granted ARB the authority to identify TACs and establish ai rborne toxic control measures (ATCMs) to reduce risk.

2 The existing Fleet Rule for Transit Agencies is located with engine emission standards in title 13, CCR, sections 1956.2-1956.4. At the February 2005 hearing, the Board approved staff's proposal to move the existing sections for the Fleet Rules for Transit Agencies to new sections which cover rules for cont rolling diesel emissions from existing in-use engines or fleets. As a result, upon final approval by the Office of Administrative Law, section 1956.2 will be moved to section 2023.1.6 C. Current Regulations and Voluntary Programs

Both the Federal government and the Stat e of California have adopted rules that reduce PM and NOx, among other pollutants, from on- and off-road vehicles. The following sections briefly describe the ex isting federal, state, local and voluntary programs that currently apply to diesel -fueled engines and vehicles operating in California.

1. Federal Regulations

Standards for smoke emissions from on-road heavy-duty diesel vehicles were first set by the United States Environmental Protection Agency (U.S. EPA) in 1970. New engines were subject to PM and NOx exhaust emission standards beginning with model year 1988 (Table 1) . Over the years, more stringent emission standards have paral leled improvements in control technology. Recent amendments to the on-road standards regulate the hea vy-duty vehicle and its fuel as a single system, including dies el-fuel sulfur content requirements.

Table 1. Federal Emission Standard s for New Heavy-Duty Trucks and Buses

Emissions Standards (g/bhp-hr) Heavy-Duty Truck Urban Bus Model Year NOx PM NOx PM 1988 10.7 0.6 10.7 0.6 1990 6.0 -- 6.0 -- 1991 5.0 0.25 5.0 0.25 1993 -- 0.25 -- 0.1 1994 -- 0.10 -- 0.07 1996 5.0 -- 5.0 0.05 (c) 1998 4.0 -- 4.0 -- October 2002 2.2 (a) -- 2.2 (a) 0.05 (c) 2004 2.2 (a) -- 2.2 (a) -- 2007 1.2 (b) 0.01 1.2 (b) 0.01 2010 0.2 (b) -- 0.2 (b) --

a. Nominal NOx value of 2.2 g/bhp-hr is based on emission standards of 2.4 g/bhp-hr for NOx plus non-methane hydrocarbons (NMHC) or 2. 5 g/bhp-hr NOx plus NMHC with 0.5 g/bhphr NMHC cap, which took effect in October 2002 for those engines subject to the U.S. EPAConsent Decrees and the California Settlement Agreements. The Consent Decreecomplying engines had to comply with 2004 standards by October 1, 2002. b. Between 2007 and 2009, U.S. EPA requires 50 percent of heavy-duty diesel engine family certifications to meet the 0.2 g/bhp-hr NOx standard. Averaging is allowed, and it is expected that most engines will conform to t he fleet NOx average of approximately 1.2 g/bhp-hr. c. In-use standard or 0.07 g/bhp-hr.7 a. Current Standards

The current federal heavy-duty vehicle standards apply to 2004 and subsequent model years. The current federal PM engine emission standard for new on-road heavy-duty diesel truck engines is 0. 1g/bhp-hr and the current federal PM emission standard for new urban transit bus engines is 0.05 g/bhp-hr. The current NOx emission standard for both new on-road heavy-duty diesel truck and new urban transit bus engines is 2.4 g/bhp-hr for NOx plus non-methane hydrocarbons (NMHC) or 2.5 g/bhp-hr NOx plus NMHC with 0.5 g/bhp-hr NMHC cap. Only engines subject to the U. S. EPA Consent Decrees signed in 1998 had to comply with this 2004 standard in October 2002; for all the rest the requirement began with the 2004 model year engines.

On April 23, 1993, the U.S. EPA fi nalized the Urban Bus Retrofit/Rebuild Program to reduce the ambientlevels of diesel PM in urban areas. The program was limited to 1993 and earlier model year urban buses operating in metropolitan areas with 1980 populations of 750,000 or more, whose engines are rebuilt or replaced after January 1, 1995. Approximately 40 urban areas are affected. Operators of the affected buses were required to choose between two compliance options: Program 1 set PM emissions requirements for each urban bus engine in an operator's fleet which is rebuilt or replaced; Program 2 was a fleet averaging program that establishes s pecific annual target levels for average PM emissions from urban buses in an operator's fleet.

Other than the Urban Bus Re trofit/Rebuild Program, no other federal regulations mandate reducing emissions from in-u se urban buses or other heavy-duty engines.

b. 2007 and Later Standards

The particulate standard that takes effe ct with 2007 model year heavy-duty diesel engines is 0.01 grams per brake-horsepow er hour (g/bhp-hr), which is a 90 percent reduction from the existing standard. That standard is based on the use of high-efficiency exhaust emission cont rol devices or comparably effective advanced technologies. Because these devices are less efficient when used with the current formulation of diesel fuel, refiners are also required to reduce the level of sulfur in highway diesel fuel by 97 percent to 15 parts per million by weight (ppmw) by mid-2006.

The NOx standard in 2007 for new heavy- duty diesel engines, both trucks and buses, is 0.2 g/bhp-hr. However, between 2007 and 2009, U.S. EPA requires that only 50 percent of the heavy-duty diesel engine family certifications to meet this standard; the remaining 50 perc ent may meet the applicable 2006 model year engine standard. Through the use of the federal averaging provision, the result is a nominal NOx standard of 1. 2 g/bhp-hr from 2007 through 2009. Some engine manufacturers will meet this by producing all or most of their engines to a8 NOx standard of 1.2 g/bhp- hr; others will use averaging to produce engines certified to levels both abov e and below this NOx standard.

Beginning in 2010, there is a family emission limit cap of 0.5 g/bhp-hr NOx. Engines will be required to meet t he 0.2 g/bhp-hr st andard for all engines produced, however some manufacturers ma y have accumulated credits in prior years, resulting in some engines being certified above this standard, to as high as the family emission limit cap.

2. California Regulations

California is the only state granted the authority in the Federal Clean Air Act to set standards for new motor vehicles. While its passenger car standards are more stringent than federal standards, in the area of new heavy-duty diesel engines California has generally harm onized with federal rules since 1988.

a. General New Heavy-Duty Engine Regulations

For new engines, long-term emission reductions are achieved through establishing more stringent new engine standards. California has adopted standards that affect new heavy-duty vehicles and urban buses (Table 2).9 Table 2. California Emission Standa rds for New Heavy-Duty Trucks and Buses

Emissions Standards (g/bhp-hr) Heavy-Duty Vehicles Urban Bus Model Year NOx PM NOx PM 1988 6.0 0.6 6.0 0.6 1990 6.0 -- 6.0 -- 1991 5.0 0.25 5.0 0.1 1993 -- 0.25 -- 0.1 1994 -- 0.10 -- 0.07 1996 5.0 -- 4.0 0.05 (c) 1998 4.0 -- 4.0 -- October 2002 2.2 (a) -- 2.2 (a) 0.01 (f) 2004 2.2 (a) -- 0.5 (d) , 2.2 (e) -- 2007 1.2 (b) 0.01 0.2 0.01 2010 0.2 (b) -- 0.2 --

a. Nominal NOx value of 2.2 g/bhp-hr is based on emission standards of 2.4 g/bhp-hr for NOx plus non-methane hydrocarbons (NMHC) or 2. 5 g/bhp-hr NOx plus NMHC with 0.5 g/bhphr NMHC cap, which took effect in October 2002 for those engines subject to the U.S. EPAConsent Decrees and the California Settlement Agreements. The Consent Decreecomplying engines had to comply with 2004 standards by October 1, 2002. b. Between 2007 and 2009, U.S. EPA requires 50 percent of heavy-duty diesel engine family certifications to meet the 0.2 g/bhp-hr NOx standard. Averaging is allowed, and it is expected that most engines will conform to t he fleet NOx average of approximately 1.2 g/bhp-hr. c. In use standard of 0.07 g/bhp-hr. d. Standard applies to urban bus equipped with diesel-fuel, dual fuel, or bi-fuel engines. e. Standard applies to urban bus equipped with al ternative-fueled engines. Nominal expected NOx level of 2.2 g/bhp-hr is based on ARB emission standards of 2.4 g/bhp-hr NOx plus NMHC or 2.5 g/bhp-hr NOx plus NMHC with 0.5 g/bhp-hr NMHC. f. Standard applies to urban bus equipped with diesel-fuel, dual fuel, or bi-fuel engines. Urban bus equipped with alternative fueled engines may certify to optional standard of 0.03, 0.02, or 0.01 g/bhp-hr.

California also has optional low-emi ssion standards for new heavy-duty vehicles and urban buses. In general, vehicles that are eligible for incentive funding have been certified to an optional lo w-emission standard (Table 3).10 Table 3. California Optional, Low NO x Emission Standards for New HeavyDuty Trucks and Urban Buses

Model Year Optional Standards (g/bhp-hr) Increment (g/bhp-hr)

2000 2.5-0.5 0.5 October 2002 1.8-0.3 (c) 0.3 2004-2006 (a,b) 1.8-0.3 (c) 0.3

a. For urban buses, emission standards apply only to alternative fueled engines. Diesel-fuel, dual fuel and bi-fuel e ngines may not exceed 0.5 g/bhp-hr. b. For urban buses, engine manufacturers may sell diesel hybrid-electric buses certified at 1.8 g/bhp-hr standard to diesel path transit agencies with approved NOx offset plans. c. Optional emission standards of 1.8 – 0.3 g/bhp-hr are for NOx plus non-methane hydrocarbons (NMHC). Engines certified to the optional NOx standard are excluded from participating in the Averaging, B anking, and Trading (ABT) program.

ARB has adopted regulations to ensure compliance with smoke standards, or visible emissions. California’s Hea vy Duty Vehicle Inspection and Periodic Smoke Inspection Programs reduce excess ive smoke emissions and tampering with diesel-fueled vehicles over 6,000 pounds gross vehicle weight rating (lbs GVWR) traveling within California. The regulations impose limits on the opacity of smoke from diesel engineswhen measured in accordance with a snap-acceleration test procedure, and have been in effect since 1991, with amendments adopted in 1997.

b. General In-Use Heavy-Duty Engine Regulations

In recent years, California has adopted regulations for in-use buses and trucks operated by transit agencies, in-use solid waste collection vehicles (collection vehicles), transportation refrigeration units and portable engines. California has also developed guidelines establishing cr iteria for the purchase of new school buses and retrofits of existing school buses called the Lower-Emissions School Bus Program. Emission reductions are ac hieved through retiring or retrofitting the existing engines or repower ing with a newer cleaner engine.

California has also adopted idling limits for buses and heavy-duty trucks. California’s school bus idling requirements became effective July 16, 2003. California limits school bus idling and idli ng by heavy-duty diesel trucks at or near schools to only when necessary for safety or operational concerns. A driver of a transit bus or other commercial motor v ehicle is prohibited from idling more than five minutes at each stop within 100 feet of a school. Idling limits applicable to all other buses and heavy-duty trucks were ef fective February 1, 2005 and restrict idling, in most cases, to no more than 5 minutes. Ex amples of some exemptions include buses while passengers are on board and trucks doing work that requires the engine to be idling.11 c. In-Use Urban Bus and Tran sit Fleet Vehicle Regulations

California has adopted specific fleet rule s that impact transit agencies. In 2000 the Board adopted the Fleet Rule for Trans it Agencies to reduce emissions from urban buses. At the F ebruary 24, 2005 hearing, the Board amended the Fleet Rule for Transit Agencies to include transit fleet vehicles.

Statewide Fleet Rule for Transit Agencies - Urban Bus Requirements

The urban bus part of ARB's statewide Fl eet Rule for Transit Agencies regulates urban buses that are owned or leased bypublic transit agencies and meet the definition of an urban bus. An urban bus is a bus that is normally powered by a heavy heavy-duty diesel engine, or of a type that would normally be powered by a heavy heavy-duty diesel engine. These buses are generally 35 feet in length or longer and weigh more than 33,000 lbs GVWR. Urban buses usually operate on a fixed route consisting of frequentstops and starts as passengers are routinely picked up and delivered to their destinations. A transit agency is a public entity responsible for administering and managing transit services.

California's urban bus fleet rule has fleet-wide requirements for urban buses applicable to each transit agency, requiri ng each transit agency to consider its urban bus fleet as a whole to meet emission reduction goals. Each transit agency was required to select a non-revocable compliance path – either the “diesel” path or the “alternative-fuel” pat h – by January 1, 2001. Path selection establishes the fuel type for new urban bus purchases or leases through model year 2015 and is a non-revocable election. Transit agencies on either path were required to achieve a maximum NOx fleet average of 4.8 g/bhp-hr as of October 1, 2002. The requirement was typicallymet by retiring older buses or bus engines.

The rule has a multi-step PM emission reduction requirement that is being met by replacement of older buses and bus enginesand retrofit of diesel engines with particulate filters. Additionally, the FleetRule for Transit Agencies requires ultra low sulfur fuel to be used in urban buses beginning July 1, 2002 to facilitate the use of particulate filters. For the larger transit agencie s, 15 percent of their future bus purchases must be zero-emission buses (ZEBs). Large diesel path agencies are also required to conduct a demonstrati on of ZEBs prior to implementation of the purchase requirement.

Statewide Fleet Rule for Transit Agencies - Transit Fleet Vehicle Requirements

On February 24, 2005, the B oard amended the Fleet Rule for Transit Agencies to expand its scope. 3Per the amendments, a transit fleet vehicle is defined as an

3This rule amendment has not been finalized as of the date of this staff report.12 on-road vehicle greater than 8,500 lbs GVWR powered by a heavy-duty engine fueled by diesel or alternative-fuel , owned or operated by a transit agency, and which is not an urban bus. These vehicl es include small buses and trolleys, paratransit, dial-a-ride vehicles, large commuter buses, and non-revenue generating trucks. A commuter service bus is defined as a bus that would otherwise meet the definiti on of an urban bus except t hat its operations include very little of the stop-and-go operations of an urban bus. Gasoline-powered vehicles operated by transit agencies are not subject to the amendments.

The amendments establish a fleet average NOx standard and PM emission reduction requirement for transit fleetvehicles owned or operated by transit agencies. The rule requirements implementin two steps. For the fleet average NOx standard, transit agencies must m eet an average of 3. 2 g/bhp-hr NOx by December 31, 2007 and 2.5 g/bhp-hr by December 31, 2010 (Table 4). Transit agencies will likely meet the fleet average NOx standards through fleet turnover, purchasing alternative-fuel vehicles, repow ering older trucks, or retrofitting with a verified diesel emission control st rategy (DECS) that reduces NOx.

Table 4. Fleet NOx Average Requireme nts for Transit Agencies (g/bhp-hr)

Compliance Date Fleet Type October 1, 2002 December 31, 2007 December 31, 2010 Urban Buses 4.8 --- --- Transit Fleet Vehicles --- 3.2 2.5

A transit agency is also required to reduce diesel PM emissions from its transit fleet vehicles by 40 percent as of December 31, 2007 and 80 percent as of December 31, 2010, compared to total em issions as of January 1, 2005 (Table 5). Transit agencies will achieve thes e reductions by purchasing new, cleaner transit fleet vehicles, retrofitting with a particulate filter, or repowering with a cleaner engine.

Table 5. Fleet Diesel PM Reduction Requirements for Transit Agencies

Fleet Type Percent Reduction From Baseline Baseline Year 2004 2005 2007 2009 2010 Urban Buses Alternative Path 2002 20 40 60 85 1

---

Diesel Path 2002 40 60 85 1

--- --- Transit Fleet Vehicles 2005 --- --- 40 --- 80 1

1. In the final year of compliance and beyond t he transit agency can meet a fleet average of 0.01 g/bhp-hr times the number of vehicles in the fleet.13 3. Local Regulations

Local Air Pollution Control Districts and Air Quality Management Districts (air districts) have authority to regulate stationary sources and some area wide sources, but also participate in programs to reduce emi ssions from mobile

sources.
a. General Air District Authority

Air districts participate with local transportation agencies to develop and implement transportation control measures aimed at reducing vehicle activity and emissions. Some air districts have dev eloped model ordinances to reduce idling of trucks and buses, to encourage the purchase of low-emission vehicles for public fleets, and to require public agency c ontracting that is "green." Other air districts have reduced the number of smoki ng vehicles by mailing letters to the registered owners to request t hat the vehicle be repaired.

Air districts also have programs to di stribute revenue to cities and counties to fund transportation-related projects thatreduce air pollution. Funds are also available for the air districts to dist ribute to private business and public agencies that use heavy-duty vehicles to defra y the costs of new lower emission technologies for diesel engines. These m onies are available to projects, such as cleaner transit buses, trash trucks, sc hool buses, and street sweepers, that go beyond established regulatory requirements.

Public outreach is an import ant component of the air dist ricts’ programs to reduce emissions from mobile sources. Publicoutreach can include forums to present new technologies, programs, and opportuni ties to reduce emissions. These opportunities might also include encouraging bicycle use and exchanging gasoline lawn mowers for electric la wn mowers, in addition to programs that provide funding for purchases of cleaner engines and vehicles.

b. Specific South Coast Air Quality Management District Authority

The District implements manyof the programs identified above. Additionally, to reduce both toxic and smog-forming air po llutants, the Legislature granted the District special authority to adopt fleet ru les, as was discussed earlier, in Health and Safety Code Section 40447.5. Based on this authority, the District adopted seven fleet rules during 2000 and 2001. The rules were developed to gradually shift public agencies and certain private entities to lower emission and alternative-fuel vehicles and apply when ever a fleet operator with 15 or more vehicles purchases or leases a vehicle for replacement or addition to its fleet.

The District defines alternative fuels slight ly differently in each of its rules, but generally follows the definition adopted by ARB, in its fleet rule for transit agencies. In Rule 1192 for transit buses, alternative fuel is defined to include14 “compressed or liquefied natural gas , liquefied petroleum gas, methanol, electricity, fuel cells, or other advanc ed technologies that do not rely on diesel fuel.” A more detailed description of t he Rule 1192 is provided in Section IV.B of this report.

There is variation among the District fleetrules due to the different functional demands and accompanying circumstances for each type of fleet vehicle. For light and medium-duty vehicles and comme rcial airport ground access vehicles, the fleet rules require the acquisition of low-emitting gasoline or alternative-fuel vehicles. For transit buses and sweepers, the fleet rules specify the acquisition of alternative fuel vehicles only. For re fuse collection vehicles, the rules provide the choice of acquiring alternative-fuel, p ilot ignition, or for a limited time frame, dual-fuel vehicles. For heavy-duty public fl eet vehicles, the rule provides the option of acquiring alternative-fuel, dual-fuel, or dedicated gasoline vehicles. For school buses, many compliance options are available depending on the fleet size, bus type, and availability of funding.

It is critically important tonote that each rule also provides specific exemptions and alternative compliance or offsetting options. For several rules, the requirements also vary depending on the availability of incentive funding. Additionally, each fleet rule has alter native compliance provisions for cases in which the requirements are demonstrat ed to be technically infeasible.

4. Voluntary and Incentive Programs

Voluntary efforts play a key role in helpi ng to achieve air quality goals. Incentives can induce vehicle owners to reduce vehicle emissions prior to compliance deadlines or to reduce emissions beyond regulatory requirem ents. Owners and operators of transit buses, collection vehicles, school buses, and street sweepers are eligible for available funding for vehicles that go beyond the established requirements.

a. Federal Incentives

On the federal level, the U.S. EPA established a Voluntary Diesel Retrofit Program in 2000 to address pollution from diesel construction equipment and heavy-duty on-highway vehicles. This program allows fleet operators to choose appropriate, U.S. EPA-verified technologies that will reduce the emissions of the vehicles and engines in their fleets and identify potential funding sources to assist air quality planners and fleet operators as they create and implement retrofit programs. The program assist s air quality planners in determining the number of State Implementat ion Plan credits produced by their retrofit projects. The U.S. EPA has also established a program to fund school bus retrofits and replacements from penalty revenues.15 Additionally, the Federal Transit Admi nistration (FTA) pays 80 to 83 percent of the purchase cost of a new urban bus. The remaining cost can be made up from local and state transportation funds.

b. State Incentives

In 1998, the Governor and Legislature appropr iated $25 million to implement the Carl Moyer Memorial Air Quality St andards Program (Car l Moyer Program.) Administered by the ARB and the local air districts, the program provides grants to local air districts to fund the extra capital cost of cleaner-than-required dieselpowered heavy-duty vehicles and equipment. During the first five years, the Carl Moyer Program received budget appropr iations totaling $153 million.

In 2000, the Legislature approved new funds to reduce emissions from school buses. The ARB, in coordination with the California Energy Commission and the local air pollution control districts, established guidelines for the Lower-Emissions School Bus program. The goal of this incentive program is to reduce the exposure of school children to both cancer-causing and smog-forming compounds. This program utilizes two stra tegies to attain these goals: pre-1987 model year school bus replacement and in -use controls for later model year diesel-fueled school buses. Over fiscal years 2000/2001 and 2001/2002, program funding was $66 million total.

Voters approved Proposition 40, the Ca lifornia Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002, which granted additional funding to reduce diesel emis sions. The measure provides about $50 million over two years to ARB, 20 perc ent of which is to be spent for the acquisition of “clean, safe, school buses for use in California’s public schools.” The remainder is allocated to the Carl Moyer Program.

In 2004, the Governor and the Legislature approved Assembly Bill (AB) 923 that provided up to $140 million a year of l ong-term incentive funding. The bill also modified requirements governing the funds to include:

• Expanding pollutants from NOx-only to include particulate matter (PM) and reactive organic gases (ROG).

• Adjusting Smog Check, tire, and Departm ent of Motor Vehi cle (DMV) fees to provide an ongoing source of funding through 2015.

• Including fleet modernization, light -duty vehicle projects, and an expanded agricultural assistance program as proj ects eligible for incentive funds.

c. Local Funding

The revenue that air districts distribute to cities, counties, public agencies, and businesses to fund projects that reduc e air pollution comes from DMV fees and the incentive programs previously discu ssed. State law authorizes districts to16 impose a registration surcharge of $4 dollar per vehicle upon adoption of a resolution that provides for both the fee and the program to reduce air pollution from motor vehicles and for related planning monitoring, enforcement and technical studies. The DMV collects the fees at the request of the district.

AB 923 allows some local districts to vote to approve an additional $2 dollar per vehicle fee in addition to the $4 dollar per vehicle DMV fee. These funds can be used for Carl Moyer Program projects , Lower-Emission School Bus Program purchases, accelerated vehicle scrap, and some agricultural projects.

The SCAQMD has imposed the $4 dollar per vehicle fee (as provided under AB 2766) and adopted the additio nal $2 dollar per vehicle fee (as provided in AB 923) for the south coast air district . In the South Coast, the $4 dollar per vehicle fee is distributed 30 percent to the district’s general fund, 40 percent to cities and counties, and 30 percent to the Mobile Source Reduction Review Committee (MSRC) to contribute a funding match towards qualifying projects. MSRC has funded $42 million dollars for school buses, transit buses, street sweepers, and refuse trucks since the 1995-1996 fiscal year. The cities and counties portion of the DMV fees has funded some infrastructure needs for alternative-fuel school buses.

The SCAQMD anticipates $22 million dollars annually from the $2 dollar increase in DMV fees in the South Coast district. Over the next 18 months (to the end of calendar year 2006), the district has designated $14 million dollars for Clean OnRoad School Buses, $4 million dollars fo r accelerated vehicle scrap, $11 million for Carl Moyer projects, and $4 million for agricultural sources. The SCAQMD has distributed approximately $28 million dol lars of Carl Moyer funding to transit buses, refuse trucks, and street sweepers. The Carl Moyer Program has not been a significant source of funding for sc hool buses due to the very low mileage of those vehicles contributing to a higher cost effectiveness. Funding for alternative school buses, cleaner diesel school buses, and diesel school bus particulate trap retrofits have come from the Lower-Emissions School Bus Replacement Program and the SCAQMD Go verning Board school bus initiatives.

South Coast Rule 2202 - Air Quality Investment Program (AQIP) allows employers with 250 or more employees toparticipate in an air quality investment program in order to meet their emission reduction targe t. An employer may elect to participate in the program by investi ng annually $60 per em ployee or triennially $125 per employee into an AQMD administe red restricted fund. Since 2000, over $1.6 million dollars from AQIP has funded alternative fueled street sweepers and refuse trucks.

II. PUBLIC OUTREACH

The ARB is committed to ensuring that all California communities have clean, healthful air by addressing not only the regional smog that hangs over our cities17 but also the nearby toxic pollution that is generated within our communities. The ARB works to ensure that all individuals in California, especially the children and elderly, can live, work and play in a healthful environment that is free from harmful exposure to air pollution.

A. Environmental Justice

On December 13, 2001, the Board approved Environmental Justice Policies and Actions, 4 which formally established a framew ork for incorporating environmental justice into the ARB's programs, consist ent with the directives of State law and policy (ARB 2001). “Environmental justic e” is defined as the fair treatment of people of all races, cultures, and inco mes with respect to the development, adoption, implementation, and enforcement of environm ental laws, regulations, and policies. These policies apply to all communities in California, but environmental justice issues have been rais ed more in the context of low-income and minority communities because of past land use policies and the cumulative impact of a concentration of emitting facilities in some neighborhoods.

To achieve this ambitious goal, the ARB established a Community Health Program and emphasized community health i ssues in our existing programs. To provide people with the basic tool s and information needed to understand and participate in air pollution policy plan ning, permitting, and regulatory decisionmaking processes, ARB has published “The Public Participation Guide to Air Quality Decision Making in California.” 5

In addition, at its April 28, 2005, publicmeeting, the Board adopted the "Air Quality and Land Use Handbook: A Community Health Perspective" This document was developed to provide technical information to local land use and transportation agencies for considering impacts of local sources of air pollution in the land use decision-making process.

The Environmental Justice Policies are in tended to promote t he fair treatment of all Californians and cover the full spectrum of ARB activities. Underlying these Policies is a recognition that we need to engage community members in a meaningful way as we carry out our activities. People should have the best possible information about the air they breathe and what is being done to reduce unhealthful air pollution in their communiti es. The ARB recognizes its obligation to work closely with all stakeholders; communities, environmental and public health organizations, industry, business owners, other agencies, and all other interested parties to successfully implementthese Policies. Our outreach efforts, described below, facilitate this objective.

4 Complete information for these programs ca n be found at http://www.arb.ca.gov/ch/ej.htm.
5Complete information on this program can be found at http://www.arb.ca.gov/ch/pu blic_participation.htm18 The amendments presented in this report for the Board’s consideration may provide air-quality benefits byreducing NOx and diesel PM emissions from urban buses that operate in neighborhoods in t he District. NOx emissions contribute to respiratory impacts in children, to the fo rmation of fine particulate matter, and to the formation of ozone, a criteria pollutant, as discussed in Section III.A. Diesel PM has been identified as a TAC and is discussed in Section III.B. The actions we have taken in applying these policies in our rulemaking reflect the Board’s commitment to the fair treatment of all people throughout California.

B. Outreach Efforts

Consistent with ARB's environmental just ice policy for strengthening our outreach efforts in all communities, staff ut ilized many avenues to engage stakeholders in the rulemaking effort.

1. Amend the Statewide Urba n Bus Emission Requirements

Staff conducted six public workshops and additional focused meetings to discuss modifying the statewide urban bus emi ssion requirements (Table 6). Those workshops held in Sacramento were webcas t for individuals who could not travel to the meeting locations. Notices for the workshops were mailed to more than 3,700 individuals and companies and were posted to ARB’s Public Transit Agencies web site 6 and e-mailed to subscribers of ARB’s electronic listserves related to this item.

6http://www.arb.ca.gov/msprog/bus/bus.htm19 Table 6. Workshop Locations and Times. Date Location Time Topics Discussed December 2, 2003 El Mont e 1:30 – 3:00 PM Statewide Rule December 3, 2003 Sacrament o 1:30 – 3:00 PM Statewide Rule March 29, 2004 Sacramento 1 :30 – 3:00 PM Statewide Rule March 30, 2004 El Monte 1:30 – 3:00 PM Statewide Rule April 7, 2005 El Monte 1 :30 – 4:00 PM Statewide Rule/ District Rule April 27, 2005 Sacramento 1 :00 – 4:00 PM Statewide Rule/ District Rule

Attendees of the workshops included representatives from environmental organizations, transit agencies, engine m anufacturers, bus manufacturers, air pollution control districts, cities and c ounties, the California Association for Coordinated Transportation, Regional Co uncil of Rural Counties, Manufacturers of Emission Control Association, Engine Manufacturers Association, California Department of Transportation, California Natural Gas Association, California Energy Commission, consultants, and ot her parties interested in urban bus emissions.

Staff also met with a number of stakeholders in focused meetings throughout the rulemaking process to get feedback on modifying the current emission requirements. These stakeholders in cluded manufacturers of engines and buses; natural gas advocates; and environm ental organizations. Staff attended and made presentations at the California Transit Association conference in November 2003 and 2004 and the Californ ia Association for Coordinated Transportation conferences in Apr il and September 2004, and April 2005.

2. Alternative Fuel Path Mandate for all Transit Agencies in the District

In October 2004, ARB posted a request for public comment concerning the District’s fleet rules on its website. We requested comment on whether ARB should submit the District’s fleet rules toU.S. EPA for a waiver of preemption, pursuant to section 209(b) of the Clean Air Act.

ARB received thousands of comment s, including over 4,800 electronic submittals. After a thorough review of the comments and consultation with U.S. EPA, staff made a decision to purs ue a new rulemaking process for some20 fleet rules, as discussed earlier, with t he generation of a new public record that would update relevant information on the effectiveness and costs of these rules.

Staff generated a webpage dedicated to the rulemaking effort. 7On this webpage, ARB provided notice of t he rulemaking process with relevant background and contact information. Then staff generated a list serve from all those who had provided electronic comment s. Along with those on ARB’s mobile sources listserve, over 5,700 emails were sent to inform stakeholders of the rulemaking activity.

Staff conducted one public workshop in El Monte and one in Sacramento to discuss urban bus fleet requirements in t he South Coast Air Basin (see Table 6 above). These workshops also covered modifying the statewide urban bus emission requirements. Notices for thes e workshops were mailed to more than 2000 individuals and companies and were posted to ARB's Fleet Rules for the South Coast Air Basin web site, as well as e-mailed to over 5,000 list serve subscribers.

With regard to the requirem ent that all transit agencies operating in the District be required to follow the alternative-fuel compliance path, staff also met with over fourteen stakeholders in focused meeti ngs throughout the rulemaking processl. These stakeholders included manufacture rs of engines and buses and natural gas advocates. In addition, staff conducted telephone interviews with the transit agencies operating in the District to discuss the amendments presented in the report and obtain specific fleet information.

To generate additional publicparticipation and to enhance the information flow between ARB and interested persons, st aff made all documents, including workshop presentations, available via the Public Transit Agencies web site and/or the Fleet Rules for the South Coast Air Basin web site. In addition, these web sites provide background information and serve as portals to other web sites with related information.

III. NEED FOR EMISSION REDUCTIONS

Many regions of California have serious to severe problems with air quality. In particular, the South Coast Air Basi n, which includes Orange County and the non-desert portions of Los Angeles, Riverside and San Bernardino Counties, is designated as a serious nonattainment area for PM 10 (particulate matter under 10 microns) and a severe nonattainment area for ozone. The Coachella Valley, located in the desert portion of Riversi de County, is classified as a serious nonattainment area for PM 10 and a severe nonattainment area for ozone.

7http://www.arb.ca.gov/msprog/scfleet/scfleet.htm21 A. Ozone

Ground-level ozone is created by the phot ochemical reaction between NOx and reactive organic gases (ROG). Breathing ozone can trigger a variety of health problems including chest pain, coughing, th roat irritation, shortness of breath, and congestion. It can worsen bronchitis, emphysema, and asthma. Ozone can also reduce lung function and inflame the linings of the lungs. Repeated exposure may permanently scar lung tissue. The elderly, children, and people with compromised respiratory systems are among those persons who may be most affected by exposure to ozone.

Ground-level ozone also damages vegetat ion and ecosystems. It leads to reduced agricultural crop and commercial forest yields, reduced growth and survivability of tree seedlings, and increas ed susceptibility to diseases, pests, and other stresses such as harsh weat her. Ground-level ozone also damages the foliage of trees and other plants, affe cting the landscape of cities, parks and forests, and recreational areas.

B. Particulate Matter (PM)

PM emissions result primarily from inco mplete combustion of fuel in the cylinder and lubrication oil that has entered t he cylinder incidentally. Secondarily produced diesel PM is formed as a resultof atmospheric reactions with diesel NOx emissions. The majority of diesel PM, approximately 98 percent, is smaller than ten microns in diameter. Diesel PM is a mixture of materials containing over 450 different components, including vapors and fine particles coated with organic substances. More than 40 chemicals in diesel exhaust are considered TACs by the State of California.

Diesel PM has been linked to a wide range of serious health problems. Particles that are deposited deep in the lungs can resu lt in lung cancer, increased hospital admissions; increased respiratory symptoms and disease; decreased lung function, particularly in children and indivi duals with asthma; alterations in lung tissue and respiratory tract defense me chanisms; and premat ure death. Longterm ambient concentrations of PM 10 are associated with increased risks of all natural-cause mortality in males, mo rtality with any mention of nonmalignant respiratory causes in both sexes, and l ung cancer mortality in males (Abbey, et al., 1999; McDonnell, et al

. , 2000).

IV. NEED FOR A POLICY DECISION BY THE BOARD TO AMEND ARB’S CURRENT REGULATIONS

Public transportation has important soci etal benefits, providing access to work and education, reducing traffic congestion, and meeting mobility needs of the public. However, this service is generally performed by heavy-duty urban buses that run on diesel fuel and make multip le trips with frequent start/stop operation22 through residential and business communiti es. Since diesel exhaust has been identified as contributing to both to xic PM and ozone-generat ing NOx emissions it remains in society's best interest to reduce diesel emissions to the maximum feasible extent.

A. Amend the Statewide Urba n Bus Emission Requirements

One of the major strategies used to reduce emissions of both NOx and PM from urban buses is the acceleration of bus replacement with newer buses. While transit agencies may receive funding to replace urban buses once they are 12 years old, staff has found that transit agencies will keep these buses in the fleet years longer. Fleet turn over – that is, transit agencies replacing their older buses with new buses using cleaner engi ne technologies – reduces emissions.

The California market for new urban bus engines is small, and meeting the California 2004 and 2007 NOx urban bus engine exhaust standards proved to be technologically challenging for diesel engines. In addition, the U.S. EPA adopted new heavy-duty engine standards for tru cks and urban buses that were less stringent than the urban bus standards previ ously adopted by ARB. As a result, diesel engine manufacturers decided not toattempt to comply with California’s new urban bus engine standards but instead to work towards achieving the less stringent, but still technologically chal lenging, national heavy-duty truck engine standards.

At the time the Board adopt ed California’s rule, engine manufacturers told ARB they would not certify engines to meet the 2006 engine exhaust emission standards. In response, the Board adopted an alternative strategy that transit agencies could use to purchase urban bus eng ines certified to the 2002 emission standards so long as they reduced fleet NO x emissions as if they had purchased engines certified to 0.5 g/bhp-hr NOx. Only seven transit agencies completed the application process and qualified fo r the “alternative NOx strategy exemption.”

In June 2004, staff, with concurrence of the Board, postponed a decision on a staff proposal to align the urban bus engine standards with the California 2007 heavy-duty standard because of an ongoing ev aluation of available 2007 urban bus engine technology. Of particular intere st to the Board was if natural gas engines would comply with the 2007 urban bus NOx emission standard.

B. Alternative Fuel Path Mandate for All Transit Agencies in the District

On June 16, 2000, the SCAQMD adopted Rule 1192 - Clean On-Road Transit Buses. Rule 1192 requires public trans it fleets operating in the SCAQMD to acquire alternative-fuel vehicles when proc uring or leasing transit fleet vehicles. The rule applies to government agencie s and private companies under contract to government agencies, with fleets of 15 or more public transit vehicles or urban23 buses that are providing passenger transportation services including intra- and intercity shuttle services. The scope of the rule includes: 1) vehicles having a GVWR of at least 14,000 pounds but no greater than 33,000 pounds, that are used for the express purpose of transporting passengers; and 2) buses having a GVWR greater than 33,000 and defined by ARB as "urban buses." Paratransit vehicles, as defined in Sections 226 and 462 of the California Vehicle Code, are excluded from Rule 1192.

SCAQMD defines an alternative-fuel heavy-duty vehicle as one that uses compressed or liquefied natural gas, propane, methanol, electricity, fuel cells, or other advanced technologies that do not rely on diesel fuel, and meets the emission requirements of title 13, CCR, section 1956.1, as adopted February 24, 2000. Rule 1192 does not cons ider diesel-based hybrid-electric and dual-fuel vehicles that use diesel fuel to be alternative-fuel vehicles.

Fleet operators of 15 or more transit vehicles or urban buses, except for municipal or included muni cipal operators with fewer than 100 transit vehicles or urban buses, were required to meet t he requirements of Rule 1192 beginning July 16, 2000. This implementation deadlin e was July 1, 2001, for fleet operators that are considered munici pal operators or included municipal operators with 15 or more, but less than 100 transit vehicl es or urban buses. SCAQMD allowed additional lead time for the smaller fleets to identify funding sources as well as to construct the necessary infrastructure tosupport the operation of alternative-fuel transit vehicles. SCAQMD also provided an exemption for vehicles for which purchase or lease contracts existed prior to June 16, 2000.

In this rulemaking, the Board will have the option of amending the ARB’s Fleet Rule for Transit Agencies to mandate thatthe six diesel path transit agencies in SCAQMD switch to the alternative fuel path, in order to have the state rule achieving the alternative fuel objectives of the District’s Rule 1192. The ARB’s adoption of a unique fleet requirement fo r the transit agencies in the District would have the effect of addressing t he Court’s decision regarding preemption while reflecting the Legislature’s intent that SCAQMD be authorized to establish an alternative fuel fleet rule for transit districts within the District.

The Board may adopt the District fleet requi rement presented in this report if the Board wishes to assure that alternativ e fuel urban transit buses are purchased throughout the District, and determines it wise to provide a backstop to the current District Rule 1192 in case lit igation overturns the District rule.24 V. ASSESSMENT OF THE POLICY DECISION TO BE PRESENTED TO THE BOARD

This report presents two policy decisi ons to be considered by the Board.

A. Amend the Statewide Urba n Bus Emission Requirements

Staff has assessed urban bus engine avai lability based on the current 2007-2009 model year standard versus what could be available if the Board modifies the standard to align with the current 2007- 2009 model year heavy-duty truck engine standards. There are essentially three sc enarios that could occur. The first is that manufacturers could certify both dies el and alternative-fuel engines for sale in California in time to meet the standard of 0.2 g/bhp-hr NOx in 2007. Discussions with diesel engine manufacturers, however, have convinced staff that this scenario is unlikely. Since 2001 the Engine Manufacturer’s Association (EMA) has been warning ARB that the major urban bus engine manufacturers would not meet Californi a’s 2007 NOx standard of 0. 2 g/bhp-hr and requested that ARB align its 2007 urban bus st andards with the federal 2007 standards, adopted in 2001. More rec ently, the engine manufacture rs have reiterated their position in verbal and written comments atthe various public workshops for this rulemaking. Engine manufacturers have informed ARB that they plan to produce diesel engines nationwide that meet a nominal 1.2 g/bhp-hr NOx standard and that they do not plan to produce diesel engines meeting the 0.2 g/bhp-hr NOx standard until 2010.

The second scenario staff assessed is t hat manufacturers will make alternative fuel engines available to meet the 0.2 g/bhp-hr NOx st andard. Multiple manufacturers have stated publicly that they intend to produce natural gas or other alternative fuel urban bus engines that meet the California 2007 standard (CalNGV News 2004; Cummins-Westport 2005) . Therefore, staff believes that there is a reasonable likelihood thatone or more urban bus engine will be commercially available by 2007 for users of alternative fuels. There is some risk that these engines will be delayed or will not be certified and marketed, as these are all engines that require new technology.

The third scenario is that there will be no diesel or natural gas engines available for California urban buses for 2007-2009. In this case, California transit agencies would not be able to purchase new engi nes until 2010, at which time staff expects all engines, both diesel and al ternative fuel, will meet the 2010 heavy-duty truck NOx standard of 0.2 g/bhp-hr. As noted above, staff’s assessment is that no diesel urban bus engines will be available in 2007 through 2009, but it is likely alternative fuel urban bus engines will be available.

There are 76 transit agencies statewide t hat report to ARB under the Fleet Rule for Transit Agencies. The 28 agencies on the alternative fuel path will still continue to purchase complying engines in 2007 through 2009, because staff25 believes complying engines will be availabl e. However, if the current 2007 urban bus emission standards are not modified, the 48 agencies on the diesel path will not be able to purchase new diesel buses until 2010. These diesel path transit agencies operate 62 percent of the Califor nia urban buses, and if they continue on the diesel path the result is that these agencies will likely keep their older buses longer or repower their buses until complying diesel buses are available in 2010. Emission reductions staff anticipat ed from the original rule will not be realized from diesel path transit agencies.

There is the potential that, with no diesel buses available in 2007 through 2009, a transit agency on the diesel path could purchase alternative fuel engines. However, based on their workshop comments and purchasing practices as reported to ARB annually, most agencies are unlikely to voluntarily replace their existing diesel buses with alternative-fuel engines for two reasons. The first is that the diesel path agencies expect there to be diesel engines available no later than 2010, and they have stated that theyhave the ability to forgo purchasing new buses until 2010. The second reason is that switching to alternative fuel requires a significant investment in infrastructure, training, and modifications to facilities. Transit agencies are unlikely to make these investments and changes in order to purchase buses for a short, three-year period. Therefore, it is unlikely that leaving the 2007 through 2009 mode l year urban bus NOx standard at 0.2 g/bhp-hr would cause diesel path transitagencies to switch to the alternative fuel path.

Staff expects that manufacturers will ce rtify diesel urban bus engines that meet the 1.2 g/bhp-hr NOx leve l if the Board relaxe s the NOx standard for 2007 through 2009 model years. Staff also ex pects that, even if the Board changes the NOx standard to 1.2 g/bhp-hr for 2007, some manufacturers will offer alternative fuel engines t hat meet the 0.2 g/bhp-hr NOx level in 2007. Staff believes this to be the case because thes e manufacturers profess to have the technology to meet the 0.2 g/bhp-hr level, and will be requ ired to meet this level by 2010. Thus, to avoid another design cycle and to capture sales resulting from incentive funds available for early-int roduction engines, it is likely that some manufacturers will instead opt to produce 0.2 g/bhp-hr engines early.

Within these various scenarios, staff believes the most likely outcome for the 2007 through 2009 model years is that ther e will be 0.2 g/bhp-hr NOx alternative fuel engines available, and that transit agencies on the alternative fuel path will purchase these engines. By aligni ng the 2007 through 2009 model year NOx standard to the heavy-duty truck standard, diesel path agencies will also be able to purchase new engines in 2007 through 2009. If a requirement were adopted that required all transit agencies to follow the alternative fuel path, staff believes transit agencies would be forced to purchase alternative fuel engines in 2007 and later.26 B. Alternative Fuel Path Mandate for All Transit Agencies in the District

As discussed earlier, there are 17 trans it agencies that fall under Rule 1192 in the District (Table 7). All but one of these transit agencie s operates urban buses and is subject to ARB’s Fleet Rule for Transit Agencies. One transit agency, Commerce, has fewer than 15 buses and is therefore not subject to Rule 1192, but is subject to ARB's cu rrent transit fleet rule.

Of the 17 transit agencies in the District s ubject to ARB’s Fleet Rule for Transit Agencies, eleven are on the alternativ e fuel path and under current state law must continue to purchase alternative fuel buses through 2015. These agencies represent 90 percent (4120 buses) of the transit buses in the District. Under ARB's Fleet Rule for Transit Agencies, the six transit agencies on the diesel path have the ability to purchase diesel eng ines, although Rule 1192 prohibits them from doing so.

Table 7. Transit Agencies in the SCAQMD Transit Agency Urban Buses 1
Commerce 2 9 Culver City 46 Foothill Transit 306 Gardena Municipal Bus Lines 3 47 Glendale 26 Long Beach Transit 3 191 Los Angeles County MTA 2473 Los Angeles DOT 142 Montebello 3 72 Norwalk 3 30 Omnitrans 176 Orange County Transportation Authority 612 Pasadena 4 0 Riverside Transit Agency 114 Santa Clarita Transit 3 64 Santa Monica Big Blue Bus 174 Sunline Transit Agency 42 Torrance Transit System 3 53 Total 4577

1 Based on annual reports to ARB and March 2005 survey of SCAQMD transit agencies.
2 Commerce’s fleet is below the 15 bus limit and is thus not subject to Rule 1192.
3 Agencies on the diesel compliance path.
4 Pasadena operates no urban buses; all of it s buses are transit fleet vehicles regulated under ARB’s February 24, 2005, amendments to the Fleet Rule for Transit Agencies.

In February and March of 2005, staff cont acted each transit agency in the District on the diesel path to determine their fu ture purchasing plans. Based on the27 survey, staff estimates that all but one transit agency, Torrance, plans to purchase alternative-fuel buses ( CNG or gasoline hybrid-electric).

Gardena expects to complete a new facility with a CNG refueling station by the end of 2006, but is currently purchasing gasoline hybrid-electric buses (gHEB). Santa Clarita has contracted to purc hase 14 CNG buses, but obtained a waiver from the SCAQMD for purchasi ng diesel-fueled commuter buses.

Long Beach Transit and Montebello are purchasing gHEBs and neither agency intends to upgrade its facility to handle CNG. Norwalk is purchasing gHEBs, and may update its facility to accommodate CNG in the future. Both Montebello and Norwalk are interested in diesel hybrid-electric buses, however under Rule 1192 they cannot be purchased.

Thus, staff expects that without Board adopt ion of an alternative fuel requirement in the District, five of the six agencies on the diesel path will purchase alternative fuel buses, regardless. However, these agencies would have the ability to purchase diesel buses, and therefore st aff's analysis assumes that, without an alternative fuel mandate in the District, all six of these transit agencies will purchase diesel buses if available.

VI. Inventory of Urban Buses and Emissions This section discuses the inventory for urban buses and their emissions.

A. Inventory of Urban Buses

As part of the Fleet Rules for Transit Agencies, transit agencies must submit an annual report to ARB listing all their ur ban buses, including fuel use. Based on these reports, the state wide 2004 population was 9, 845 urban buses, of which 3,764 were operated by transit agencies on the alternative-fuel path and 6,081 were operated by transit agencies on the di esel fuel path (Table 8). Note that alternative-fuel path agencies operate di esel buses, which are mostly older diesel. Also, some diesel path agencies op erate alternative-fuel buses; these are mainly transit agencies located in the Distr ict. Most of the electric buses are operated by San Francisco MUNI, which is on the diesel path.28 Table 8. Reported California Urban Bus Inventory as of January 1, 2005, by the Selected Fuel Path of the Transit Agency

Statewide SCAQMD Fuel Type Alt Fuel Path Diesel Path Alt Fuel Path Diesel Path Diesel 1947 3758 1321 452
LNG 269 0 269 0 Propane 175 2 41 0
CNG:H2 2 0 2 0
CNG 3378 55 2477 0
Electric 5 366 0 0
Gasoline HEB 19 0 2 0
Diesel HEB* 2 4 2 2

Total 5657 4187 4114 454

*Operating with an urban bus engine or with an experimental permit, not certified as an HEB.

The major manufacturers of urban bus engines currently in operation are Cummins and Detroit Diesel, although Caterpillar and John Deere have also recently begun to enter the urban bus marke t. ARB provides a website to obtain information on California certified engines fo r use in urban buses. For the current 2005 model year, the web address is: http://www.arb.ca.gov/msprog/onroad/cert/mdehdehdv/2005/2005.htm

B. Emission Inventory for Urban Buses

The California on-road vehicle emission inventory data consists of two elements: emissions-related and activity-related. The emissions-related data reflect new vehicle testing information and the latest vehicle registration data from the DMV. The activity-related data are updated by the regional transportation agencies that estimate of the daily vehicle miles of travel, the distribution of travel by speed, and the number of starts per vehicle per day by year. The on-road emission inventory is then derived using the EMFAC model (Appendix C).

ARB staff calculated the urban bus emi ssion inventory using a model developed from EMFAC specifically incorporating t he turnover rates from their reports and emission factors for urban buses. Gasoline vehicles were not included in the emissions analysis.

Under California’s current urban bus emission standards from 2004 through 2009, staff assumed urban bus turnover in most diesel path transit agencies to be almost non-existent. Transit agencies t hat repower existing diesel buses will use engines meeting the same engine standards as the existing engine. The29 consequence of this mismatch betw een California’s urban bus engine exhaust emission standards and the statement s by the major urban bus engine manufacturers is that emissions from Calif ornia’s urban buses will remain high for many years. Transit agencies on the diesel path are unwilling to purchase alternative fuel buses to turn over thei r old diesel buses, but instead are waiting to purchase new, cleaner emission diesel urban buses in 2010.

At the June 24, 2004, and February 24, 2005, hearings, the Board adopted modifications to the standards for dies el HEBs. The modifications enabled manufacturers to certify diesel HEBs for 2004 through 2006. With prior approval from the executive officer, these buses are available for purchase or lease to transit agencies on the diesel path. Se ven agencies have already qualified for the "alternative NOx strategyexemption" and a total of ten diesel path agencies have applied to purchase a total of approximately 190 diesel HEBs for 2006. These diesel HEB buses will meet a standard of 1.8 g/ bhp-hr NOx and 0.01 g/bhp-hr PM. In addi tion, approximately sevent een ISE Corporation (ISE) gasoline HEBs are on order for Cent ral California transit agencies, and approximately 70 are on order for South Coast fleets.

Modeling these assumptions suggests thatCalifornia’s urban bus engine exhaust emission standards for 2007 through 2009 have the unintended consequence of keeping urban bus emissions artificiallyhigh. The predicted emission reductions as a result of the 2000 rule are unlikely to be achieved. Staff estimates that there will be a shortfall between the NOx reduc tions expected if engine manufacturers had produced diesel urban bus engines m eeting California’s standards from 2004 through 2009 of 2.06 tpd in 2010; 1. 31 tpd in 2015; and 0.72 tpd in 2020 (Table 9). For particulate matter (PM) , the predicted emission reduction shortfall is 80 pounds per day (lbs/day) in 2010; 30 lbs/day in 2015; and 24 lbs/day in 2020 (Table 10). The baseline emissions for urban buses gradually decline over time because of turnover from dirtie r engines to cleaner engines, along with the NOx and PM reductions mandates in the Fl eet Rule for Transit Agencies. See Appendix C for an explanation of t he emissions inventory methodology.30 Table 9. NOx Statewide Diesel Emissions Inventory (tpd)

2010 2015 2020 2000 Regulation Projected 5.87 2.41 0.65
Current Estimate – No Turnover 1 7.93 3.72 1.37
Shortfall -2.06 -1.31 -0.72

1 Assumes no turnover of diesel engines from 2004-2009.

Table 10. PM Statewide Diesel Emissions Inventory (lbs/day)

2010 2015 2020 2000 Regulation Projected 240 112 76
Current Estimate – No Turnover 1 320 142 100
Shortfall -80 -30 -24

1 Assumes no turnover of diesel engines from 2004-2009.

VII. SUMMARY OF THE CONTROL ME ASURES TO BE CONSIDERED BY THE BOARD

Staff has identified two policy decisions for the Board’s consideration and has developed proposed regulat ory amendments to support these decisions the Board may make. First, staff is presenting three options for the Board to consider regarding the appropriate em ission standards for new urban bus engines in 2007 through 2009. The three options are: 1) keep the current new urban bus emissions standards as theyare, 2) change the NOx emission standard for 2007 through 2009 model year new urban buses from 0.2 to 1.2 g/bhp-hr, which would align it with t he equivalent model year heavy-duty truck NOx emission standard, and 3) require all transit agencies to purchase/lease only alternative fuel buses. The rulemaking documents prepared in connection with this report contain amendments to title 13, CCR, sections 1956.1, 1956.8 and 2023.1 (Appendix A), and se t forth the following:

• Language to implement the option to align the 2007 and later emission standards for new urban buses with the 2007 and later emission standards that apply to new heavy duty tr ucks (for NOx this results in an average level of 1.2 g/bhp-hr in 2007 and 0.2 g/bhp-hr in 2010);

• Language to require that transit agencie s operating within the jurisdiction of SCAQMD follow the alternative- fuel compliance path under Title 13, CCR, Section 2023.1.

The amendments provided in this report (s et forth in the proposed regulation order in Appendix A) set forth the l anguage necessary to implement the option of aligning the urban bus standards with the heavy-duty truck standards beginning with the 2007 model year. Should the Board favor the option to keep the urban31 bus standards as they are, no regulatory changes are necessary. Should the Board decide that all transit agencies st atewide should be required to purchase alternative fuel, a 15-day modification to ARB’s Fleet Rule for Transit Agencies would be needed to accomplish this (and no change to the urban bus emission standards would be necessary). The language modifying the fleet rule for transit agencies applies to the purchase of urban buses by transit agencies operating in the District, and assures that alternat ive fuel transit buses are purchased throughout the District.

A. Scope and Applicability

Staff is requesting the Board to cons ider regulatory amendments that affect urban buses and transit agencies. Califor nia's standards for urban buses are set forth in title 13, CCR, se ction 1956.1 and the fleet requirements for urban buses are covered under Fleet Rules for Trans it Agencies - Urba n Bus Requirements title 13, CCR, sections1956.2 – 1056.4 [to be recodified as 2023.1, per Board action on February 24, 2005].

B. Amend the Statewide Urba n Bus Emission Requirements

Staff is presenting three options for the Board to consider regarding the appropriate emission standards for new urban bus engines in 2007 through 2009. The three options are: 1) k eep the current new urban bus emissions standards as they are, 2) change the NOx emission standard for 2007 through 2009 model year new urban buses from 0.2 to 1.2 g/bhp-hr, which would align it with the equivalent model year heavy- duty truck NOx emission standard, and 3) require all transit agencies to purchas e/lease only alternative fuel buses.

Should the Board favor the first option, to keep the current standards as they are, no regulatory changes are needed.

Should the Board favor the second opti on, to align the California urban bus engine exhaust emission standards with the current California truck engine exhaust emission standards for t he 2007 through 2009 model years, the corresponding urban bus regulations and heavy-duty truck regulations will need to be modified. The truck engine regul ations include standards for NOx, PM, carbon monoxide and non-methane hydrocar bons. Currently the standards for urban buses are located in title 13, CCR, section 1956.1. Specifically, the 2007 and later model year standards for urban buses are provided in subsection (a)(12). The heavy-duty engine and vehicle standards are located in title 13, CCR, section 1956.8. Pa ragraph (a)(12) of section 1956.1 would be deleted. Section 1956.8 would concurrently be m odified to include urban buses for the 2007 and later model years. Thus, 2007 and later model year urban bus engines would be certified as heavy-duty engines.32 Should the Board decide that all transitagencies statewide should be required to purchase only alternative fuel buses, language would need to be included into the ARB’s Fleet Rule for Transit Agencies (section 1958.2) mandating this requirement. The requirement would mandate that 85 perc ent of a transit agency's annual purchases must be alternative fuel through 2015.

C. Alternative Fuel Path Mandate for All Transit Agencies in the District, Amend Section 1956.2

As discussed earlier, there are current ly 17 transit agencies operating in the District that are subject to ARB’s Fleet Rule for Transit Agencies (see Table 7). The amendments developed by staff are designed to increase the number of alternative-fueled urban buses operating in the District by requiring all of the transit agencies on the diesel path to change to the alternative-fuel path. This requirement mandates that 85 percent of a transit agency's annual purchases be alternative fuel through 2015. Those six transit agencies on the diesel fuel path must change to the alternative-fuel co mpliance path effective January 1, 2006. Multiple manufacturers have stated that t hey intend to have alternative fuel buses available in 2007 that meeta 0.2 g/bhp-hr level for NOx. Therefore, staff believes that this requirement will likely re sult in the purchase of buses meeting a 0.2 g/bhp-hr NOx level begi nning in 2007 by the six transit agencies on the diesel path. However, because of the alignmentoption outlined above, alternative fuel buses meeting a 1.2 g/bhp-hr NOx leve l or higher may also be available.

D. Comparison of ARB’s Fleet Rule for Transit Agencies and Rule 1192

While SCAQMD's Rule 1192 and ARB's fl eet rule for transit agencies, for the most part, affect the same set of vehi cles, there are some differences between them. Pasadena's fleet is not subject toARB's Fleet Rule for Transit Agencies because Pasadena does not operate any ur ban buses, although it is subject to the new requirements for transit fleet vehicles. Pasadena does, however, have a large enough fleet of buses over 14,000 pounds GVWR that it falls under the authority of Rule 1192. Commerce, whic h is on the alternative-fuel path under ARB's rule, is not included under Rule 1192 because it has fewer than the fleet minimum of 15 vehicles.

In addition, Rule 1192 only affects vehicles at or above 14,000 pounds GVWR. 8 The Board amended the Fleet Rule for Transit Agencies on February 24, 2005, to expand its scope to all heavy-duty buses and vehicles (greater than 8,500 lbs GVWR) owned or operated by a transit agency. ARB’s rule also includes vehicles not included in Rule 1192, such as paratransit and non revenue producing vehicles. As a result, over 35 additional fleets operating in the District

8SCAQMD adopted an additional rule, Rule 1191, "Clean On-Road Light- and Medium-Duty Public Fleet Vehicles" which includes requirement s for transit fleets operating trucks and buses below 14,000 pounds GVWR.33 are subject to ARB's fleet rule. Thes e fleets, consisting primarily of non-urban buses, would not be subject to the al ternative-fuel purchase requirement.

VIII. ENGINE TECHNOLOGY AND AVAILABILITY

This section discusses the current and expected availability of engines for urban buses. The information was obtained from engine manufacturers and other published sources. We have omitted info rmation that engine manufacturers have indicated is confidential. A more in-dept h discussion is included in the Technical Support Document for this rule. Info rmation on how to access the Technical Support Document for this rule making can be found at the end of this report.

Conventional diesel engines use co mpression-ignition to generate power, whereas engines that operate on an alter native fuel, such as compressed natural gas (CNG), liquefied natural gas (LNG), and liquid petroleum gas (LPG), are typically spark-ignited. In the hea vy-duty engine market, CNG and LNG are the most commonly used alternative fuels. Diesel hybrid-electric, dual fuel and bifuel trucks and buses are not considered to be alternative-fueled, although they can have significantly lower emissions than a straight diesel engine. Alternativefueled engines are typically certified to lower engine exhaust emissions than same model year diesel-fueled engines, although a diesel engine equipped with exhaust aftertreatment may have emissi ons comparable to an alternative-fuel engine.

A. Current Engine Availability

Manufacturers have been able to meet the current heavy-duty truck engine exhaust standards without the use of aftert reatment technologies, relying instead on modifications to engine and combus tion-related components. Engine modifications include such changes as improved electronic controls, improved turbocharger systems, and im proved exhaust gas recirculation. Combustion modifications include improved engine ti ming, improved fuel injection systems, and improved cylinder design.

1. Diesel Fueled Engines

California has no urban bus diesel engine certified to its standards of 0.5 g/bhphr NOx and 0.01 g/bhp-hr PM for the 2004 to 2006 model year. California regulations provide for an exception to this standard for the seven transit agencies that applied for and received a so-called “alternat ive NOx strategy exemption.” Engine manufacturers can certify urban bus diesel engines to the standards for 2003 in the 2004 to 2006 model year for sale to those transit agencies only. There is one diesel urban bus engine family, the Caterpillar C9 that is certified to 2.3 g/bhp-hr NOx + NMHC and 0.004 g/ bhp-hr PM, via the alternative NOx st rategy exemption.34 In 2004 California adopted new engine st andards of 1.8 g/ bhp-hr NOx and 0.01 g/bhp-hr PM for diesel hybrid-electric buses (dHEB), applicable only to the 2004 to 2006 model year. Transit agencies on the diesel path were allowed to apply for permission to purchase these buses, subj ect to certain requi rements. Based on conversations with manufacturers, the staff expects that there will be one or more engine families certified and available for purchase in 2006, thus providing some transit agencies with an additional option for a diesel engine purchase.

2. Alternative Fuel Engines

For urban buses, there are cu rrently two natural gas engi ne families certified by Cummins, two certified by DDC, and one certified by John Deere.

The outlook for natural gas urban bus engi ne availability in 2006 is the same as for 2005. However, Deere is currently involved in a demonstration project with U.S. DOE's National Renewable EnergyLaboratory (NREL) and the SCAQMD to certify an oxidation catalyst equipped engine for use in urban buses to the 1.2 g/bhp-hr NOx st andard. Deere intends to hav e this product available by October 2005.

B. Mid-term Future Engine Availability (2007 – 2009)

The California diesel urban bus engine particulate emission standard is 0.01 g/bhp-hr, which applies to engines produced after October 1, 2002. Urban buses equipped with alternative fuel engines may certify to optional standards of 0.03, 0.02, or 0.01 g/bhp- hr. However, beginning in 2007, these engines must also meet the particulate standard of 0.01 g/bhp-hr. All alternative fuel urban bus engines currently are certified at a 0. 01 g/bhp-hr level. The current NOx standard for urban bus engines is 0.2 g/bhp-hr for 2007 and beyond.

While most manufacturers have releas ed details about their 2007 engines, some have not. Thus the information that follows is necessarily incomplete and includes general information where spec ifics are unavailable for publication. Staff’s evaluation includes both publicly available and confidential information.

1. Diesel Fueled Engines

As mentioned above, manufacturers have indicated that they do not intend to make diesel urban bus engines available that meet the 0.2 g/bhp-hr NOx level until 2010. It is also unlikely that any dHEB would be able to meet this standard.

2. Alternative Fuel Engines

Two engine manufacturers, Cummins, through its joint partnership with Westport Innovations, Cummins Westport Inc.; and John Deere plan to offer alternative fuel urban buses that m eet the 2007 emissions standards of 0.2 g/bhp-hr NOx35 and 0.01 g/bhp-hr PM. J ohn Deere intends to produce a 250-325 horsepower, 9 liter natural gas engine. Cummins Westport Inc. has partnered with NREL to develop a lower emission version of the L Gas Plus (8.9 L) natural gas engine. This engine is scheduled to be commercially available in early-2007. The SCAQMD is also currently sponsoring a project with Cummins to commercialize the C Gas Plus engine (8.2 L) to 0.2 g/bhp-hr NOx by 2007.

C. Long Term Engine Availability (2010 and beyond)

In 2004, U.S. EPA published its second revi ew outlining the status and progress of engine and vehicle technology toward meeting the federal 2007 standards for heavy-duty diesel vehicles (U.S. EPA 2004) . In its report, U.S. EPA concluded that manufacturers will meet the 2007 and 2010 standards in a two step process and that “engine manufacturers' 2007 compli ance plans are a building block for the technology package they plan to use to meet the 0.20 g/bhp-hr NOx standard in 2010." Thus, it is likely that selective catalytic reduction (SCR) and NOx adsorbers for NOx reduction, along wit h further improvements in engine technology, such as Clean Diesel Combusti on, will play a large role for diesel technology in 2010 and beyond. Additi onal information on long-term engine availability is found in the Technica l Support Document for this rule.

IX. END-USER EXPERIENCE: ALTERNATIVE FUELS

In March 2005, ARB staff surveyed maintenance managers of all 11 transit agencies in the District that operate all or a portion of their fleets on alternative fuel and that are subject to the ARB's Fleet Rule for Transit Agencies. The survey collected information on the experiences transit agencies have had to date with buses operating on alternative f uel. The cost data collected by this survey was used in the cost analysis and is discussed in Appendix D. Electric buses were not included in this survey.

A. Description of the Survey

Questions 1 through 4 were designed to elicit specific information on the number of buses in the fleet by fuel type, how long various fuels had been used, and whether the ability existed to re-fuel buses in the field. Questions 5 through 9 dealt with issues of maintenance and main tenance facilities for alternative fuel vehicles and additional staff traini ng that might be needed to deal with maintenance of these vehicles. Question 10 was open-ended, asking for any additional comments the respondent wanted to make in connection with topics mentioned or not mentioned in the survey. A copy of the survey can be found in Appendix B.36 B. End-User Experience with Alternative Fuels

Transit agencies rely mainly on three types of alternative fuels to power their buses: CNG, propane, and LNG. Many transit agencies will be purchasing gasoline HEBs that are arriving in 2005 through 2007. Since the gasoline HEB is a new technology, there was no in-use ex perience available at the time of the survey.
1. Propane

Only one transit agency in the survey was using propane or liquefied petroleum gas (LPG) to fuel their buses. Of t heir 189 buses, only 45 met the definition of urban bus. The transit agency contract s out for fuel and therefore had no experience with the maintenance or costof the fueling equipment. The transit agency did not express any concerns or issues and plans to purchase over 50 more buses in the next 3 years.

2. Compressed and Liquefied Natural Gas (CNG/LNG)

In-use experience with alternative fuels, primarily CNG, was initiated in the mid1990's. Of those surveyed, experience with CNG ranged from 3 to 11 years and LNG five years.

a. Fueling

Nine of the eleven transit agencies maintain their own fueling stations on site, of which four are expanding their fueling sites. Fueling times are based on the equipment available. On-site operations c an “quick fill” a bus in 8 to 15 minutes, or choose to slow fill a bus over night (6 hours). One facility uses an off-site station operated by the city, where fueli ng can take up to an hour per bus. The operator uses this time to clean the vehicl es while waiting for the vehicle to fuel. Another facility contracts to privat e operations to provide their fuel.

Of the nine transit agencies wit h fueling stations, four reported that fuel storage was more complex and expensive with al ternative fuel. One transit agency reported that CNG storage t ook six times the space as diesel, but one transit agency reported that fuel storage for diesel and CNG were about the same.

b. Maintenance Shop Modifications for Alternative Fuel Vehicles

Transit agencies must upgrade their maintenance facilities when working with gaseous or "lighter than air" fuels to meetfire code and safety regulations. These facilities require modification of the st ructure to prevent "pockets" where gases can pool, installation of sensors to detect buildup of gas and fire alarm systems, and up-grading air circulation systems. S pecialized tools are also required for working on alternative fuel vehicles. Fac ilities that do not modify repair shops37 must work on alternative fuel vehicles outside in the open air or send them to other repair facilities. Eight of the 11 agencies have modified their facilities; the other three contract out their maintenance work.

c. Maintenance and Down Time for Alternative Fuel Vehicles

Seven of the 11 transit agencies reported increased maintenance time and downtime with alternate fuels (six with CNG; one with LNG). Two transit agencies reported 15 to 20 percent increas es in maintenance time. One transit agency stated that by increasing t he maintenance schedules, downtime was close to what they experienced with dies el buses. Two transit agencies reported no difference between CNG and diesel. One transit agency experienced significant breakdowns with CNG buses. Two transit agencies stated that CNG technology has improved over the years to be equivalent to diesel buses.

As a result of increased maintenance, two transit agencies stated that they maintain a higher spare parts and bus ra tio. Four transitagencies reported that parts for CNG fueled buses were more expensive.

d. Training Staff for Al ternative Fuel Vehicles:

Nine of the 11 transit agencies that use al ternative-fuel buses said staff must receive special training to operate and/or service these vehicles. Mechanics must be certified every 3 to 5 years. Drivers require specific training on alarms and manual shut off systems. One transit agency that c ontracts out for the work requires a demonstration of experienc e with CNG. Five of the 11 transit agencies reported ongoing training annually.

3. Conclusion

Strong opinions exist regarding the use of alternative fuels. For those transit agencies that have embraced the technol ogy, they consider any increased maintenance or costs as marginal or a part of doing business and have adjusted their practices to meet any operational changes. Engine reliability issues appeared to be focused on older engine m odels, where the newer models are more reliable. For fueling and maint enance facilities, all the transit agencies consider diesel easier and less expensive.

X. REGULATORY ALTERNATIVES

Staff has provided three options for the Board’s consideration regarding potentially amending the stat ewide urban bus emission requirement. Therefore staff has not evaluated any additional alte rnatives for the Board to consider.

With regard to the District specific fleet rule staff evaluated an alternative to not require transit agencies in the District to follow the follow the alternative-fuel path.38 This alternative, in conjunction with B oard adoption of statewi de alignment of the urban bus and heavy-duty truck emission st andards, would allow transit agencies on the diesel path, including the six in the District, to purchase diesel engines in 2007 through 2009. If the SCAQMD Rule 1192 were to be invalidated, the six transit agencies on the diesel path loca ted in the District would be able to purchase diesel urban buses. There is some benefit associated with this alternative because of the turnover of older diesel engines to new, cleaner engines. However, this alternative woul d not provide the additional benefit in the District of mandating the purchase of alte rnative fuel buses for the six transit agencies currently on the diesel fuel path. It is worth noting that staff expects that without Board adoption of an alternative fuel require ment in the District, five of the six agencies on the dies el path will likely purchase alternative fuel buses, regardless. However, these agencies wo uld have the ability to purchase diesel buses, and therefore, staff's analysis a ssumes that, without an alternative fuel mandate in the District, these transit agencies will eventually purchase diesel buses if available.

It should also be noted that this alternativ e is only viable if the Board chooses to also adopt the statewide alignment of the urban bus emission standards with the heavy-duty truck emission standards. If t he Board chooses to leave the state urban bus standards as they are, or if the Board chooses to require all transit agencies statewide to follow the alternativ e fuel path, then Board adoption of a specific alternative fuel purchase require ment in the District is not necessary.

XI. ECONOMIC IMPACT

Staff is presenting to the Board for its consideration a require ment that transit agencies operating in the jurisdiction of the SCAQMD be mandated to follow the alternative-fuel compliance path, under se ction 2023.1, title 13, CCR. Six transit agencies operating in the District are cu rrently on the diesel compliance path, and therefore would be required to change to the alternative-fuel compliance path.

In addition, staff is presenting to the B oard for its consideration amendments that would modify the urban bus new engi ne standards or require the use of alternative fuel buses statewide.

Staff believes that the regulatory amendments presented here for Board consideration would cause no noticea bly adverse impacts in California employment, business status, or competitiveness.

A. Legal Requirement

Sections 11346.3 and 11346.5 of the Gove rnment Code require state agencies proposing to adopt or amend any adminis trative regulation to assess the39 potential for adverse economic impact on California business enterprises and individuals. The assessment shall include consideration of t he impact of the proposed regulation on Califor nia jobs; on business expansion, elimination, or creation; and on the ability of California businesses to compete in other states.

State agencies are also required to estimate the cost or savings to any state or local agency or school district in acco rdance with instructions adopted by the Department of Finance. This estimate is to include nondiscretionary costs or savings to local agencies, and the costs or savings in federal funding to the state.

B. Affected Businesses

Businesses that may be affected as a result of the regulatory amendments presented in this report include manufactu rers of diesel urban bus engines and alternative fuel technologies such as CNG, LNG, dual-fuel and hybrid-electric urban bus engines, manufacturers of urban buses, alternative fuel providers, and distributors and installers of bus engines. Most manufacturers of buses, trucks, and engines are located outside of Ca lifornia. One manufacturer of hybrid-electric systems is located in Califor nia. There is at least one company in California that specializes in conversions of standard diesel buses to alternative fuel buses.

C. Potential Impact on Businesses

The statewide alignment option should have a positive impact on engine and bus manufacturers by allowing them to cert ify and sell their products in California in 2007 through 2009. This regulatory modifi cation does not impose a mandate but would open up the market for diesel and diesel hybrid-electric urban buses, benefitting engine manufacturers, bus m anufacturers, and system integrators.

The statewide alternative fuel mandate option could impact engine manufacturers that only produce diesel engines. These manufacturers would need to produce alternative fuel buses or risk losing urban bus engine sales in California. Currently, only one manufactu rer that certifies engines for use in urban buses, Caterpillar, does not produce alternative fuel engines for urban buses. Caterpillar is headquartered outside of California.

Should the Board elect to require the alte rnative fuel path for all transit agencies in the District the amendment is expected to have a positive impact on the alternative fuel engine and bus manufacture rs. Any negative effect on the sales volume of diesel engi nes would be negligible.

D. Potential Impact on Business Competitiveness

The regulatory options presented in this report would have no significant impact on the ability of California urban bus engine and vehicle manufacturers to40 compete with manufacturers of similar products in other states. This is because all manufacturers that produce urban bus engines and vehicles for sale in California are subject to the emission requirement regardless of their location. Furthermore, all of the engine manufac turers, and most of the vehicle manufacturers, are locat ed outside of California.

E. Potential Impact on Employment

The statewide alignment option is expected to benefit manufacturers, who will be able to produce and sell diesel urban buses outside of the District in 2007 through 2009.

The statewide alternative fuel mandate option could impact engine manufacturers that only produce diesel engines. These manufacturers would need to produce alternative fuel buses or risk losing urban bus engine sales in California. Currently, only one manufactu rer that certifies engines for use in urban buses, Caterpillar, does not produce alternative fuel engines for urban buses. Caterpillar is headquartered outside of California.

Should the Board elect to require the alte rnative fuel path for all transit agencies in the District there may be some im pact on employment for those transit agencies currently following the diesel co mpliance path in the District, however the impact is expected to be small. Fi ve of the six agencies currently on the diesel path are already intending to purchase alternative-fuel vehicles. In addition, any added costs are expected to be recovered through appropriate fare increases.

F. Potential Impact on Business Creat ion, Elimination, or Expansion

The regulatory options presented in this report are expected to have no impact on business creation, el imination or expansion.

G. Estimated Costs to Local Transit Agencies

This section discusses the costs that transit agencies may occur as a result of the regulatory options presented in this report.41 1. Cost Estimates for Statewide Alignment

Staff has concluded that there are no signi ficant adverse fiscal impacts on any state or local agencies. The statewide alignment option should have a positive impact on transit agencies outside the Distr ict by allowing the purchase of new diesel buses in California in 2007 through 2009 that are typically cheaper than comparable alternative-fuel buses. Therefore this option should result in a cost savings to a transit agency.

2. Cost Estimates Associated With the Alternative Fuel Path Mandate for All Transit Agencies, Statewide

This requirement would impact the 48 transit agencies currently on the diesel path. These agencies will be required to purchase or lease alternative fuel buses in place of diesel buses. The higher co st of alternative fuel buses along with costs associated with infrastructure m odifications may result in a decreased budget for other operations.

3. Cost Estimates Associated With the Alternative Fuel Path Mandate for All Transit Agencies in the District

This requirement would have some im pact on the six transit agencies operating in the District that are currently following the diesel fuel compliance path. These agencies will be required to purchase or leas e alternative fuel buses in place of diesel buses. The higher cost of alternat ive fuel buses may result in a decreased budget for other operations. However, sinc e five of the six affected transit agencies are already planning to purchase alternative fuel buses, the impact of this amendment will be minimal.

XII. ENVIRONMENTAL IMPACT S AND COST-EFFECTIVENESS

Described in this section are the air quality benefits and the cost-effectiveness of the regulatory options staff is requesting the Board to consider.

A. Benefits within the District and Statewide

The implementation of California's ex isting new engine standards and urban bus fleet requirements has resulted in a dras tic decrease in the state and local fleet average NOx levels. On J anuary 1, 2001, t he statewide and the District median urban bus fleet average NOx emissi ons were 5.16 and 5.28 g/bhp-hr, respectively. As of January 1, 2005, t he statewide and the District median urban bus fleet average NOx emissions have dropped to 3.63 and 3.53 g/bhp-hr, statewide and in the District, respectively. This represents a decrease in the statewide and District urban bus fleet average NOx emissions of 30% and 33%, respectively.42 1. Impacts on the Air Quality Management Plan

Staff's analysis shows that the weighted average NOx fleet levels of agencies on the diesel-fuel compliance path are much higher (well over 1.0 g/bhp-hr higher) than those on the alternative-fuel compli ance path (Table 11). Therefore, there has been an emission benefit associated with having fleets comply using the alternative-fuel path.

Table 11. Diesel Versus Alternative Fuel Path NOx Fleet Averages for Agencies in the District (g/bhp-hr)

Rule Path Ave. Alt. Fuel 3.01 1192 Diesel 4.26 Alt. Fuel 3.14 ARB (Includes more Transit Agencies) Diesel 4.26

2. Emission Benefits

The emission benefits of the policy decis ions staff is requesting be considered by the Board are discussed in this section.

When the emission standards for new urban bus engines were adopted in 2000, staff believed diesel engines meeting these standards would be available for purchase. For NOx, the standard dropped from 2.4 g/bhp-hr HC+NOx (about 2.2 g/bhp-hr NOx) to 0.5 g/ bhp-hr NOx in 2004-2006, and to 0.2 g/bhp-hr NOx in 2007 and beyond. As discussed earlier, engine manufacturers are not offering for sale diesel urban buses that m eet the 2004-2006 standards, and will not offer diesel engines that meetthe 0.2 g/bhp-hr standard until 2010. Thus no diesel engines have been available for purchase, and will not be available until 2010. As a result, little or no fleet turnover has occurred for diesel path transit agencies. (Seven agencies received an exemption to buy higher emitting diesel engines through 2006, and have been doing so. T hese agencies took other steps to reduce their fleet average NOx emissions).

Figures 1 and 2 show the urban transitemissions of diesel path agencies 9staff expected as a result of the original ru le, and an updated analysis that reflects the unavailability of diesel engines for purchase. Emissions are higher than had been expected, and will remain so even after purchases of diesel engines resumes in 2010.

9The following four figures show emissions for only those transit agencies on the diesel path. Staff assumes that transit agencies on the al ternative fuel path will continue to purchase alternative fuel engines.43 Staff has also estimated the emissions of the diesel path agencies should the board decide to change the statewide requirements and/or require the six SCAQMD diesel path agencies to swit ch to the alternative fuel path.44 Figure 1. NOx Emissions – Original Estimate and Current Estimate 

# Diesel NOx Emissions - Statewide

0 2 4 6 8 10 12

2 0 06 2007 2 0 0 8

2009 20

1 0

2 0 11 2012 2 0 1 3

2014 20

1 5

2 0 16 2017 2 0 1 8

2019 20

2 0TPD Orig. Est.- 2000 Rule Current Est.

Figure 2. PM Emissions – Original Estimate and Current Estimate 

# Diesel PM Emissions - Statewide

0 50 100 150 200 250 300 350 400 450

20

0 6

2007 20

0 8

2009 2 0 10 2011 2 0 12 20

1 3

2 0 14 20

1 5

2016 2 0 17 2018 2 0 19 20

2 0Lbs/Day Orig. Est.- 2000 Rule Current Est.45 a. Statewide Alignment

This option relaxes the NOx standard in 2007-2009 to align with the current diesel trucks standard. This will result in the availability of diesel bus engines in 2007-2009 that emit at 1.2 g/ bhp-hr NOx. As a result purchases of diesel bus engines will resume in 2007, replacing older , dirtier engines. Emissions will be lower by up to about 1.6 tpd NOx and 80 pounds per day PM in 2009, compared to retaining the current0.2 g/bhp-hr NOx standard.

In determining the emissions resulting if the Board does not change the current emission standard, staff assumed thatfunds that would have been used to purchase diesel buses in 2007-2009, had di esel engines been available, will be saved and deferred purchases will be made, in addition to normal purchases, beginning in 2010. Thus all new purchases of diesel buses will comply with the 0.2 g/bhp-hr NOx standard, whereas if the standards are aligned in 2007, some buses purchased in 2007-2009 will emit 1.2 g/bhp-hr. As a result, the no change option results in greater NOx emission reductions beginning in 2012 (by up to about 1.2 tpd NOx). Staff estimates that by 2025, emissions will be the same for both scenarios because the 1.2 g/bhp-hr NO x engines from the alignment option have been retired. Figures 3 and 4 illustrate these findings.

b. Alternative Fuel Path Mandate fo r All Transit Agencies, Statewide

Staff analyzed the emissions benefit of requiring diesel path transit agencies statewide to follow the alternative fuel pat h. This option would result in slightly lower tons per day NOx emissions t han the option to align the standards. Emissions will be lower by up to about 1.0 tpd NOx 2009. This occurs because transit agencies would be purchasing bus es that meet a 0.2 g/bhp-hr NOx standard beginning in 2007, as opposed to a 1.2 g/bhp-hr NOx level under the alignment option. This emissions benefitwill continue, past 2020, until the entire fleet of 1.2 g/bhp-hr engi nes are turned over to new engines meeting the 0.2 g/bhp-hr level. However, should the Board decide to require that all transit agencies follow the alternative fuel path, some agencies currently on the diesel path may defer replacing their diesel engines while they prepare fueling infrastructure. If this occurs, there w ould be a short-term emission disbenefit to this option as compared to the alignmentoption until these engines are replaced.

In the short-term this option would also re sult in lower emissions than if the Board decides to retain the current urban bus standards. Emissions will be lower by up to about 2.5 tpd NOx and 80 pounds per day PM in 2009. This occurs because if the current standards are retained, dies el path agencies would defer purchasing new buses until 2010, thereby keeping older , more polluting buses in their fleet.46 However, after 2010, once the engines whose replacement was deferred are replaced, the emissions associated wit h these two options will be similar.47 Figure 3. NOx Emissions – Comparison of Options 

# Diesel NOx Emissions - Statewide

0 2 4 6 8 10 12

2 0 06 2007 2 0 0 8

2009 20

1 0

2 0 11 2012 2 0 1 3

2014 20

1 5

2 0 16 2017 2 0 1 8

2019 20

2 0TPD Current Est. Alignment All Alt. Fuel

Figure 4. PM Emissions – Comparison of Options 

# Diesel PM Emissions - Statewide

0 50 100 150 200 250 300 350 400 450

20

0 6

2007 20

0 8

2009 2 0 10 2011 2 0 12 20

1 3

2 0 14 20

1 5

2016 2 0 17 2018 2 0 19 20

2 0Lbs/Day Current Est. Alignment All Alt. Fuel48 c. Alternative Fuel Path Mandate for All Transit Agencies in the District

Small emission reductions of NOx will be achieved if the six transit agencies on the diesel path purchase cleaner, alte rnative fuel buses beginning in 2006 (Table 12). This assumes that the District cannot implement its current Rule 1192, and the six agencies would hav e switched to purchasing dirtier diesels in the absence of an ARB rule forc ing them onto the alternative fuel path. If the District rule can be implement ed, as now appears to be the case, no additional emission reductions wo uld be achieved from adopting this requirement.

Several manufacturers have stated that t hey intend to have alternative fuel buses available in 2007 that meet a 0.2 g/bhp-hr level fo r NOx. Staff believes it is very likely that transit agencies on the alte rnative fuel path will purchase these engines. Therefore, staff's emissi on analysis assumed that the District alternative fuel requirement will resultin the purchase of buses meeting a 0.2 g/bhp-hr NOx level begi nning in 2007 by the six transit agencies currently on the diesel path. The benefits present ed here are the incremental benefits of requiring the purchase of alternative fuel buses, assumed to meet a 0.2 g/bhp-hr NOx level, instead of purc hasing diesel engines meet ing 1.2 g/bhp-hr NOx level (as would be allowed with alignment and no Distr ict rule were in place) for the six transit agencies.

Table 12. NOx Emission Benefits (t pd) in the District - Mandatory Alternative Fuel Path Year Baseline Alt. Fuel Mandate Reduction

2010 7.37 7.36 0.01* 2015 5.86 5.84 0.02* 2020 3.34 3.34 0 *If the Board adopts the statewide alignment opt ion, and if the six transit agencies chose to purchase alternative fuel buses that m eet the 1.2 g/bhp-hr NOx level during 2007 through 2009, there would be no benefit as sociated with purchasing alternative fuel buses over diesel buses. Therefore, act ual benefits could range between zero and the tons per day shown here.

Requiring transit agencies in the District to switch to the alternative fuel path will result in NOx benefits, but will not resultin any change in PM emissions. A PM emission standard of 0.01 g/bhp-hr for diesel urban bus engines has been in effect in California for engines produced after October 1, 2002, all current alternative fuel urban bus engines are certified at a 0. 01 g/bhp-hr level.49 B. Cost and Cost-Effectiveness

The following section discusses the co st-effectiveness associated with each decision the Board may consider.

1. Amend the Statewide Urba n Bus Emission Requirements

Staff is proposing three options for the Board to consider. There is no cost associated with the option to keep the em issions standards as they are. The other two options have been analyzed separately, and presented below.

a. Statewide Alignment

Staff has determined there is no additional cost of the option to revise the new urban bus engine emission standards to a lign with the current truck standards. This option will allow purchase of diesel engines by diesel path agencies in 2007- 2009, and may reduce operating and maintenance costs by replacing older engines. If the currentstandards are retained, diesel path agencies are expected to defer purchases until 2010 and beyond. These engines will cost more than the engines that could be purchased in 2007-2009 if the standards are aligned

.
b. Alternative Fuel Path Mandate fo r All Transit Agencies, Statewide

This option would mandate that at l east 85 percent of a transit agency's annual purchases be alternative fuel through 2015. This requirement should have no cost impact on those transit agencies al ready on the alternative fuel path. However, transit agencies on the diesel path will be required to switch to alternative fuel. The additional cost to these transit agencies would include the incremental cost increase of alternative fuel bus compared to a diesel bus as well as the cost to upgrade infrastructure.

Staff estimated the incremental cost of this option by determining the difference between the capital and operations and ma intenance costs of diesel urban buses and alternative-fuel urban buses. Staff es timates the total per bus cost increase to be $76,517. A discussion of the cost breakdown follows.

The FTA provides 80%-83% of the capita l cost of new buses, so transit agencies see only a portion of the per-bus additional capital cost. As a conservative estimate, staff assumed a 20 percent transit agency share, although the cost to society is the full incremental cost diffe rence. Thus, staff estimates a typical incremental purchase cost of for a CNG bus is $10,000 funded by the local transit agency.

If a transit agency does not already have an al ternative fuel fueling facility, this option may make it necessary for the transit agency to upgrade its fueling facility50 to handle alternative fuel. Staff assum ed that half of the natural gas fueling facilities constructed would be L/CNG stati ons (gasification) at a cost of $25,000 per bus and that half would be CNG (compression) stations at a cost of $36,712 per bus. Upgrades to bus maintenance facilities for handling CNG buses are also required at the cost of $23,870 per bus.

Staff believes that maintenance costs fo r natural gas buses are likely to be somewhat higher than for diesel buses. Staff estimates the extra maintenance costs to be about $4,300 per year. In additi on, there are cost associated with the maintenance of fueling facilities ata cost of $2,245 per bus per year.

Labor costs for natural gas buses and gasol ine HEBs are expected to increase modestly over typical diesel bus costs. Initial training costs, and ongoing training associated with regular recertification of technicians for natural gas maintenance, are primarily responsible for expected minor increases in labor costs of about $18 per year per bus.

The estimated incremental bus cost does not include any costs associated with the difference between the cost of alternative fuel versus diesel fuel. Fuel cost differences are economically highly uncertain over the life of the regulation. Although at present natural gas is less expensive than diesel, it is impossible to be certain about fossil-fuel market conditi ons between now and 2020. To explore the sensitivity of fuel cost, staff analyz ed both a lower and higher natural gas fuel cost relative to diesel. The result isthat purchase incremental per bus costs could range from $28,227 (low cost) to $107,141 (high cost) per bus.

In order to determine cost-effectiveness, ARB took the typical total incremental cost of the buses to be purchased, wit h FTA funding, and divided by the total NOx emission reductions for the life of the regulation. These values were based on NOx emission reductions only. The expected cost-effectiveness ratio is $119,030 per ton ($59.51 per pound).

2. Alternative Fuel Path Mandate for All Transit Agencies in the District

As with the option to mandate alternative fuel statewide, for the option to require the District agencies to switch to the alte rnative fuel path, staff based the costeffectiveness analysis on estimates of expected emissions reductions and of costs for implementation of this option.

Staff estimated the incremental cost of this option by determining the difference between the capital and operations and ma intenance costs of diesel urban buses and alternative-fuel urban buses. Staff es timates the total per bus cost increase to be $26,745. This cost is different than the per bus incremental cost given above for the statewide alternative fuel mandate for the following reasons.51 Staff surveyed the six transit fleets on the diesel path and requested their purchasing plans for 2005 to 2009. The re sults showed that a majority of the buses that would be purchased would be gasoline HEBs. Staff estimates that gasoline HEBs have an increment al purchase cost of $24,546.

In addition, staff expects that the six transit providers affected by this option will be able to obtain fuel from facilities t hat are already, or will soon be, available, based on staff’s survey of transit agencies. Most transit agencies that plan to purchase CNG buses have already either built a fueling station or have one planned and financed. In addition, transitagencies that are purchasing gasoline HEBs will use existing facilities. Theref ore, this analysis does not include capital costs of new fueling facilities.

In order to determine cost-effectiveness, AR B took the typical incremental cost of the buses to be purchased, with FTA funding, and divided by the total NOx emission reductions for the life of the regulation. These values were based on NOx emission reductions only. The expected cost-effectiveness ratio is $67,837 per ton ($33.92 per pound) 10

C. Toxics from Diesel and Alternative Fueled Engines

Historically diesel engines were perce ived as having higher PM emissions and other deleterious compounds known to hav e adverse health effects than similar natural gas engines. Natural gas engines were typically thought of as “low emission”, as emitting less PM and NOx, t han their diesel counterparts (Ahlvik et al 2000; Clark et al 1995; Clark et al 1999; Ayala et al 2002). However, with the advent of aftertreatment te chnologies such as diesel oxidation catalysts and diesel particulate filters, and the fa ct that vehicle exhaust is a complex composition of many compounds, not ju st PM and NOx, the assumption that natural gas engines are inherently le ss polluting than diesel equipped with aftertreatment was called into question.

To this end the ARB led a multi-agency re search effort to compare emissions from diesel and natural gas engines. The study evaluated natural gas (NG) and diesel bus engines with and without exh aust aftertreatment. Summarized in Table 13 is a comparison of emissions based on this study. For NOx, natural gas engines are cleaner until 2010 (a ssuming a 0.2 g/bhp-hr NOx engine is certified in 2007). Beginning in 2002, di esel bus engines were equipped with a particulate filter, and natural gas engines utilized an oxidation catalyst. As a result, PM emissions are equivalent. Si nce both the oxidation catalyst and the diesel particulate filter oxidize mosttoxic compounds, natural gas bus engines since 2002 have roughly equivalent toxi c emissions as diesel engines.

10 Actual cost-effectiveness values could be higher if the transit agencies choose to purchase alternative fuel buses during 2007 through 200 9 with NOx emissions higher than 0.2 g/bhp-hr thereby decreasing the emissions benefits.52 Table 13. Emission Comparison - Diesel Bus vs Natural Gas Bus



### Bus Emission Standards (g/bhp-hr) Natural Gas, Compared to Diesel, Is Typically: Model Year Bus

NOx PM NOx PM Other Toxics Mid-1990s to 2002 (diesel w/o filter and NG w/o catalyst) 4 0.05 50% cleaner 40% cleaner Varies

Today (2003 - 2006) (diesel w/ filter and NG w/o catalyst ~2.2 1 0.01 25% cleaner Same Same

2007 (diesel w/ filter and NG w/ catalyst 1.2 0.01 80% cleaner2 Same Same

2010 (diesel w/ filter + absorber and NG w/ 3-way catalyst 0.2 0.01 Same Same Same

1) NOx standard applies to alternative fuel engine s and diesel engines available to seven transit agencies that provided NOx offsets. In 2004 through 2006, for transit agencies without an offset plan, the bus NOx emission standard is 0. 5 g/bhp-hr - no diesel bus engines have been certified to this level. 2) Several natural gas bus engines are expect ed to comply with the 2010 0.2 g/bhp-hr NOx standard by 2007, in which case they would be about 80% cleaner. For other natural gas bus engines the NOx emissions will likely be the same as diesel.53 XIII. ISSUES

Over the course of development of t he regulatory options presented in this report, staff has met many times with various stakeholders and received written and verbal comments. Although staff has considered each comment, not all issues could be resolved. The following is a discussion of major outstanding issues.

A. Statewide Alignment

Staff has included an option for Board cons ideration to change the NOx emission standard for new urban bus engines from it current 0.2 g/bhp-hr to align it with the California new diesel truck engine st andard of 1.2 g/bhp-hr . The benefit of this change is diesel engines will become available for purchase. Without this change diesel engines will be unavailabl e until 2010. Changing the standard will allow new diesel engine purchases and re tirement of older, higher emitting engines, during these years, thus agencie s on the diesel path favor this option.

During the public process, staff rece ived comments from environmentalists and natural gas providers that ARB should keep the current standard. They stated a relaxation of the standard would send a si gnal that Californi a did not want or value natural gas engines. As a result investment in developing a 0.2 g/bhp-hr CNG engine for 2007 might be in jeopardy. Their position also seemed to be based on a belief that in the absence of new diesel engines being available for purchase in 2007-09, transit agencies on the diesel path would choose to purchase natural gas engines, resulting in greater emission reductions than if the Board aligned the standards. However, as discussed previously, information provided to staff by transit agencies on the diesel path indicates they are prepared to forgo purchases of new buses until 2010 if the only bus engine available is alternative fueled. In 2010 diesel engines meeting the current standard will be available.

Regarding whether investment in low emission natural gas engine development will continue, staff points outthat transit districts on the alternative fuel path account for nearly 60% of all California transit buses, and they will provide a continuing demand for natural gas and other alternative fuel engines through at least 2015.

B. Alternative Fuel Path Mandate fo r All Transit Agencies, Statewide

Another option for the Board’s considerat ion is to require all transit agencies, including those currently on the diesel pat h, to purchase alternative fuel buses. Transit agencies currently on the diesel pat h, particularly those in the Bay Area, strongly oppose this option because they be lieve the use of alternative fuel buses results in less reliable service, and diesel buses that are as clean as alternative fuel buses will be available in 2010 for purc hase. They also point out they were54 allowed to make a choice of fuel type when the ARB Fleet Rule for Transit Agencies was adopted in 2000, and they should not be forced to change now at great cost and disruption, for little air quality benefit. Smaller transit agencies in less urbanized areas have expressed concer n about the cost of alternative fuel engines, and the lack of alternative fuel availability. Proponents of alternative fuel strongly favor this approach because it creates a growing demand for their products and a strong incentive to develop new engines.

C. Alternative Fuel Path Mandate for All Transit Agencies in the District

The Board is also being asked to consid er requiring the six transit agencies in the SCAQMD to switch from the diesel path tothe alternative fuel path. This action would assure that the goal of District Rule 1192 is implemented regardless of the outcome of pending court actions.

Staff received comments from transit agencies that the ARB rules should be uniform statewide. Commenters suggested that requiring transit agencies in the SCAQMD to purchase alternative fuel is not fuel neutral, a policy they suggest the state has and should continue to practice. They also suggested that purchasing alternative fuel buses is notthe most cost effective expenditure of transit district funds.

Staff points to legislation aut horizing the district to im plement rules requiring the use of alternative fuel vehicles as an important consideration. The effect of ARB adoption of a unique fleet requirement for the transit agencies in the District has the effect of addressing the Court’s decision while remaining true to the Legislature’s intent. Staff acknowledges thatat this point in the court process, it appears that the District has the authority to implem ent Rule 1192 because the affected agencies are all local government s and the court has ruled that the District may impose requirements that affect local government purchasing choices. Although ARB adoption would re move any uncertainty regarding the final outcome of legal action, it does br ing with it a new uncertainty regarding obtaining a waiver of federal preemption from U.S. EPA.

Regarding fuel neutral policy, it is true that most AR B regulations are performance based and do not favor one fuel over another. There are exceptions, however. In the past spec ial light-duty vehicl e emission standards were adopted for diesel engines. The ZEV mandate clearly favors electricity and hydrogen over petroleum fuels. Re commendations in the AB 2076 “Reducing Petroleum Dependency” report to the legislature suggest greater use of alternative, non-petroleum fuels has benefits for California. Given these examples, staff does not believe there isa hard fast rule that dictates no regulation should favor a specific fuel, and believes that the Board should look at each situation and the objective being soughtin deciding whether fuel neutrality should be a guidin g consideration.55 One final consideration is, of the 17 transit agencies in the District, 16 are using and/or purchasing alternative fuel buses, in cluding five of the six agencies on the diesel path. This is a result of AR B’s fleet regulations and District Rule 1192. Thus the adoption of this regulatory amendment will have little affect on the status quo, and will serve mainly as a backstop to prevent any of the six agencies from purchasing higher emitting diesel engines during 2007 through 2009 should the District’ s authority be invalidated.

D. Issues Related to Federal Clean Air Act Waiver of Preemption

Some workshop commenters challenged California’s authority to adopt and enforce fleet regulations in the SCAQ MD based on federal st atutory preemption. Federal Clean Air Act (CAA) section 209( a) preempts states and localities from adopting or enforcing any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines. Notwithstanding this general preemption of state author ity for new engines and new vehicles, CAA section 209(b) expressly authorizes the U.S. EPA’s Administrator to waive the preemption for California.

One challenge is based on the view that ARB will not be able to obtain a waiver of preemption for state standards under CAA section 209(b) because the Board’s regulations are subject to the requirements of CAA sect ion 202(a)(3)(C). Section 202(a)(3)(C) requires that in adopting st andards, U.S. EPA’s Administrator is to provide specified periods of lead-time and stability to classes or categories of new heavy-duty vehicles or engines. As the text of the provisi on itself dictates, the provision is not appl icable to California:

Any standard promulgated or revised under this paragraphand applicable to classes or categories of heavy-duty vehicles or engines shall apply for a period of no less than 3 model years beginning no earlier than the model year commencing 4 years after such revised standard is promulgated. [Italics added for emphasis.]

The text states that “standards promul gated or revised under this paragraph,” that is, under CAA section 202(a), mustprovide the specified lead-time and stability. In the person of the Administrator, U. S. EPA prescribes standards under 202(a). Clearly the provisions apply to U.S. EPA.

California, however, does not promul gate its standards under the grant of authority in section 202(a). California promulgates vehicular emission standards under grants of author ity in state law 11 and under the waiver of federal preemption of state standards contained in CAA section 209(b). Since section 202(a)(3)(C) is only applicable to st andards promulgated under section 202(a) and since California does not promulgate its standards under 202(a), the

11 California Health & Safety Code Division 26.56 provision does not apply to California. A nd, if the provision does not apply, its specified lead-time and stability requi rements do not apply to California.

The inapplicability of CAA section 202(a )(3)(C) to the standards that California promulgates is also consistent with the legislative history of the CAA and the waiver of federal preemption. The legisl ative history of the waiver provision has emphasized that California is to have “the broadest possible discretion in selecting the best means to protect the health of its citizens.” H.R.REP No. 95- 294, at 302-02, quoted in Motor and Equipm ent Manufacturers Association, Inc. v. Environmental Protection Agency. 12 Other courts have also frequently noted that Congress consciously chose to permit California to blaze its own trail. 13

A second challenge is based on the vi ew that U.S. EPA will need to grant waivers of preemption under CAA section 209(b) prior to the enforcement of any aspect of the proposals. ARB already has waivers of preemption for all of the types of emissions and categories of new engines and new vehicles to which the proposed regulations would apply. For th is reason, any new waiver would be needed only for those aspects of the regul ations for which California has never before been granted a waiver of preemption. For any aspect of the regulations for which waivers have already been granted, ARB’s practice has been to request confirmation that t he regulations are within the scope of the previous waivers and to pursue enforcement against new engines and vehicles already covered by the waiver of preemption. For those aspects of the proposal that apply to in-use engines and vehicles, no waiver of preemption is needed since the preemption applies only to new vehicles and new vehicle engines.

E. Waiver Process Will Delay Rule Implementation and Reduce Benefits Achieved

When the U.S. Supreme Court ruled that a purchase re quirement is in fact an emission standard under the federal Clean Air Act, implem entation of the District rule required a waiver of federal preem ption. The ARB determined that only the state can request a waiver of federal preem ption, and that the ru le subject to the request must be adopted by the state. Th is is the principle reason for this proposal being brought before ARB for consideration.

Stakeholders have pointed out that it c an take several years following board adoption before a waiver is received from U.S. EPA. This does not usually create a problem because most requests for a wa iver involve a regulation that includes

12 627 F.2d 1095, at 1110 (D.C.Cir. 1979).

13 Ford Motor Co

. v. EPA

, 606 F.2d 1293, at 1297 (D.C.Cir. 1979); Engine Manufacturers Association v. U.S. EPA , 88 F.3d 1075, at 1080 (D.C.Cir. 1996), Motor and Equipment Manufacturers Association, Inc

. v. Nichols , 142 F.3d 449, at 463 (D.C.Cir. 1998).57 lead time to develop new knowledge and wi ll be implemented in three to four years. In the case of t he District rule outlined in th is report, the benefits of the rule accrue only from now until the end of 2009. If the waiver process takes several years, much of the benefit of the rule will be lost.

The ARB staff believes the rule qualifie s as "within the scope" of a previous waiver. In such instances, ARB can impl ement the rule immediately. However, the Engine Manufacturers Association di sagrees with the staff's position, and may challenge our waiver request. Discussions with U.S. EPA also have not resulted in a definitive picture of how it will approach ARB's waiver request. Thus, there is uncertainty regarding when the rule, if adopted, can be implemented, and any substantial dela y will reduce the emission reductions achieved.

XIV. STAFF CONCLUSION

Staff has identified two policy decisions for the Board’s consideration and has developed proposed regulatory amendments to support these decisions. First, staff is presenting three options for the Board to consider regarding the appropriate emission standards for new urban bus engines in 2007 through 2009. The three options are: 1) k eep the current new urban bus emissions standards as they are, 2) change the NOx emission standards for 2007 through 2009 model year new urban buses from 0.2 to 1.2 g/bhp-hr, which would align it with the equivalent model year heavy- duty truck NOx emission standard, and 3) require all transit agencies to purchase/ lease only alternative fuel buses. The amendments provided in this report (set fo rth in the proposed regulation order in Appendix A) set forth the language necessaryto implement the option of aligning the urban bus standards with the heavy- duty truck standards beginning with the 2007 model year. Should the Board fa vor the option to keep the urban bus standards as they are, no regulatory c hanges are necessary. Should the Board decide that all transit agencies stat ewide should be required to purchase alternative fuel, a 15-day modification to ARB’s Fleet Rule for Transit Agencies would be needed to accomplish this (and no change to the urban bus emission standards would be necessary).

Staff has also developed for the Board’s c onsideration a new requirement that all transit agencies operating in the District follow the alternative-fuel compliance path, as defined in ARB's regulations. U nder this new requirement, the six transit agencies in the District currently on the diesel fuel compliance path would be required to change to the alternative-fuel path effective January 1, 2006. This change would lock these transit agencies into purchasing alternative-fuel engines through 2015, consistent with the District's Rule 1192.

If the Board wishes to assure that alte rnative fuel urban transit buses are purchased throughout the District, and dete rmines it wise to provide a backstop to the current District Rule 1192 in case litigation overturns the District rule, the58 amendments provided in this report (set fo rth in the proposed regulation order in Appendix A) include regulato ry language that would amend ARB’s Fleet Rule for Transit Agencies to require diesel path transit agencies in SCAQMD to switch to the alternative fuel path.59 XV. REFERENCES

1.Abbey, David E., Nishino, Naomi, McD onnell, William F., Burchette, Raoul J., Knutsen, Synnove F., Beeson, W. Lawrence, Yang, Jie X. 1999. "Long-term Inhalable Particles and Other Air Pollutant s Related to Mortality in Nonsmokers." Am J Respir Crit Care Med. 159:373-382.

2.Ahlvik, P.J.E., Brandberg, A.R.L. 2000. “Relative Impact on Environment and Health from the Introduction of Low Em ission City Buses in Sweden,” SAE Tech. Paper 2000-01-1882.

3.ARB 1999. Staff Report: Initial Statem ent of Reasons, Proposed Regulation for a Public Transit Bus Fleet Rule and Emission Standards for New Urban Buses, December 10, 1999. http://www. arb.ca.gov/regact/bus/bus.htm

4.ARB 2000a. Risk Reduction Plan to Redu ce Particulate Matter Emissions from Diesel-Fueled Engines and Vehicles, October 2000. http://www.arb.ca.gov/d iesel/documents/rrpapp.htm

5.ARB 2000b. Final Statem ent of Reasons for Rulemaking, including Summary of Comments and Agency Responses, Public Hearing to Consider Adoption of a Public Transit Bus Fleet Rule and Emission Standards for New Urban Buses, December 8, 2000. http:// www.arb.ca.gov/regact/bus/bus.htm

6.ARB 2001. Policies and Actions for Environmental Justice. http://www.arb.ca.gov/c h/ejpolicies_121301.pdf

. 7.Ayala, A., N.Y. Kado, R.A. Okamoto, B.A. Ho lmen, P.A. Kuzmicky, R. Kobayashi, and K.E. Stiglitz 2002. “Die sel and CNG Heavy-duty Transit Bus Emissions over Multiple Driving Schedules: Regula ted Pollutants and Project Overview.” Journal of Lubricants and Fuels , SAE Transactions, Vol. 111, pp. 735-747 (Also SAE Tech. Paper 2002-01-1722)

8.CalNGV News 2004. The newsletter of the California Natural Gas Vehicle Coalition, March 22, 2004. 3 pp.

9.Clark, N. N., Gadapati, C. J., Kelly, K., White, C. L., Lyons, D. W., Wang, W., Gautam, M., and Bata, R. 1995 “Comparat ive Emissions from Natural Gas and Diesel Buses.” SAE Tech. Paper 952746.

10.Clark, N. N., Gautam, M., Rapp, B.L., Lyons, D.W., Graboski, M.S., McCormick, R.L., Alleman, T.L., and No rton, P. 1999. “Diesel and CNG Transit Bus Emissions Characterization By Two Chassis Dynamometer Laboratories: Results and Issues.” SAE Tech. Paper 1999-01-1469.60 11.Cummins-Westport 2005. News Release: Cummins-Westport, DOE, and NREL Partner to Deliver Next Generat ion Natural Gas Engine Three Years Ahead of U.S. Regulatio ns. February 09, 2005.

12.McDonnell, William F., Nishino-Ishika wa, Naomi, Petersen, Floyd F., Chen, Lie Hong, Abbey, David E. 2000. "Relat ionships of mortality with the fine and coarse fractions of long-term ambient PM 10 concentrations in nonsmokers." Journal of Exposure Analysis and Environmental Epidemiology. 10: 427-436.

13.SCAQMD 2000. Staff Report: Proposed Rule 1192 - Clean On-Road Transit Buses, June 2000.

14.U.S. EPA 2004. United States Environmental Protection Agency, Assessment and Standards Division, Office of Transportation and Air Quality. Highway Diesel Progress Review Report 2. EPA420-R-04-004, March 2004. http://www.epa.gov/ot aq/regs/hd2007/420r04004.pdf61 XVI. AVAILABILITY OF TE CHNICAL SUPPORT DOCUMENT

An electronic version of the technical supp ort document for this report is available at http://www.arb.ca.gov/regact/ sctransit/sctransit.htm . If you would like a hard copy of these documents please fill outthis form and mail or fax it to:

Public Information Office California Air Resources Board P.O. Box 2815 Sacramento, CA 95812 Fax: (916) 445-5025

Please send or fax the TECHNICAL SUPPORT DO CUMENT: PROPOSED REGULATION FOR THE PROPOSED SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT FLEET RULES to:

Name:__________

___________________ Address:_____

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