State of California

Air Resources Board

Resolution 08

- 41

November 21, 2008

Agenda Item No.: 08-10-3

WHEREAS, sections 39600 and 39601 of the Health and Safety Code authorize the Air Resources Board (ARB or the Board) to adopt standar ds, rules and regulations and to do such acts as may be necessary for the proper exe cution of the powers and duties granted to and imposed upon the Board by law;

WHEREAS, Health and Safety Code sections 43013 and 43018 direct ARB to set emission control requirements for off-road mobile s ource categories including marine vessels, locomotives, utility engines, off-road mot orcycles, and off-highway vehicles;

WHEREAS, section 209(e)(1) of the federal Clean Air Act preempts states and their political subdivisions, including the State of Cali fornia and the local districts, from adopting or enforcing emission standards or other r equirements relating to the control of emissions of new nonroad engines less than 175 hors epower used in farm and construction equipment and vehicles;

WHEREAS, section 209(e)(2) authorizes California to adopt standards and to seek

authorization from the United States Environmental Protection Agency (U.S. EPA) prior to enforcing emission standards or other requiremen ts relating to the control of emissions from nonroad engines, not otherwise preem pted by section 209(e)(1);

WHEREAS, in 1998, the Board adopted certification e mission credits intended to provide flexibility to small off-road engine and eq uipment manufacturers and represent real and enforceable emission reductions beyond tho se required by regulation;

WHEREAS, in 1998, the Board also adopted production emission credits which were intended to be used to offset compliance problems, and were considered and rejected by U.S. EPA;

WHEREAS, in 2003, the Board adopted more stringent exhaust emission standards

which were based on reductions achievable with the use of a catalyst;

WHEREAS, manufacturers have requested that ARB harm onize with the federal certification fuel requirements in regards to the e thanol content, which may be up to ten percent of the fuel by volume;Resolution 08-41 2

WHEREAS, the existing program includes regulations and procedures for emission control labels, warranties, enforcement procedures, and compliance testing necessary to adequately enforce the exhaust emission standard s and test procedures;

WHEREAS, the California Environmental Quality Act a nd Board regulations require that no project which may have significant adverse envir onmental impacts be adopted as originally proposed if feasible alternatives or mit igation measures are available to reduce or eliminate such impacts;

WHEREAS, a public hearing and other administrative proceedings have been held in accordance with the provisions of chapter 3.5 (comm encing with section 11340), part 1, division 3, title 2 of the Government Code;

WHEREAS, the Board finds that:

Exhaust emissions from small off-road engines remai n a significant source of air pollution;

Manufacturers were able to earn a large amount of e mission credits by making small off-road engines incrementally cleaner than the Tie r 2 emission standards.

Excessive accumulation of emission credits has kept small off-road engines from achieving expected emission;

Despite the fact that the last of the Tier 3 emissi on standards went into effect in 2008, over seventy percent of small off-road engines do n ot meet the standards directly but only through the use of emission credits;

Certification emission credits are based on the dif ference between the emission

standards and the level at which the manufacturer c ertifies the engine;

Production emission credits are based on the differ ence between manufacturer’s compliance level and emissions certification level;

Production emission credits do not necessarily repr esent emission reductions beyond those required by regulation and may not, therefore , represent real emission reductions;

Production emission credits can be converted to cer tification emission credits with a slight discount;

Equipment with small off-road engines has a useful life of approximately five years of which benefits of credits are experienced;

Certification emission credits remain banked beyond the equipment’s useful life;Resolution 08-41 3

To meet the emission reduction requirements of Stat e and federal laws, ARB must ensure that expected emission reductions from mobil e sources, including small off-road engines are being achieved;

Promotion of zero emission equipment credits may ai d engine and equipment manufacturers in marketing zero emission equipment and encourage development of advanced cleaner technology, leading to possible re duced emissions;

Consumers often do not receive adequate warranty co verage due to language barriers between the warranty contact and the consumer;

Durability is currently defined in hours, even thou gh small off-road engines generally do not have hour meters;

Certification fuel requirements are not harmonized with U.S. EPA’s rules and may unnecessarily increase certification costs for the manufacturers;

WHEREAS, the Board further finds that:

Limiting the lifetime of certification emission cre dits is necessary to keep emission credits from accumulating indefinitely;

Elimination of production emission credits is neces sary to ensure real emission benefits;

Introduction of zero emission equipment credits wou ld encourage advancement in technology for cleaner small off-road equipment;

Requiring manufacturers to provide an American toll free warranty contact number with an English speaking contact would provide better wa rranty protection for the consumer;

Including a useful life definition in terms of year s of use at five years in addition to the hours of use definition would provide a more measur able useful life definition;

Allowing the use of fuel with an ethanol content of up to ten percent will more closely align with U.S. EPA procedure and will simplify the process of certification for industry;

The regulations would not result in any adverse env ironmental impacts;

The economic and cost impacts of the amendments hav e been analyzed as required by California law, and the conclusions and supporting documentation for this analysis are set forth in the Initial Statement of Reasons;

The amendments to the small off-road engine regulat ions are necessary, cost-effective, and technologically feasible to car ry out the purposes of the state and federal clean air laws;Resolution 08-41 4

No alternative considered would be more effective i n carrying out the purpose for which the regulation is proposed or would be as effective or less burdensome to affected private persons;

NOW, THEREFORE, BE IT RESOLVED that the Board hereb y approves sections 2403, 2405, 2406, 2408, and 2409, title 13, California Co de of Regulations and the “California

Exhaust Emission Standards and Test Procedures for 2005 and Later Small Off-Road Engines” as set forth in Attachment A-1 hereto, wit h the modifications described in

Attachment A-2 hereto.

BE IT FURTHER RESOLVED that the Board hereby determ ines that the regulations adopted herein will not cause California small off- road engine emission standards, in the aggregate, to be less protective of public health a nd welfare than applicable federal

standards.

BE IT FURTHER RESOLVED that the Board hereby finds that separate California emission standards and test procedures are necessar y to meet compelling and extraordinary conditions.

BE IT FURTHER RESOLVED that the Board finds that th e California emission standards and test procedures as adopted herein wil l not cause the California requirements to be inconsistent with section 202(a) of the Clean Air Act and raise no new issues affecting previous waiver determinations of the Administrator of the Environmental Protection Agency pursuant to section 209(b) of the Clean Air Act.

BE IT FURTHER RESOLVED that pursuant to the determi nations set forth above, the Board directs staff to file a request for authoriza tion from the United States Environmental Protection Agency pursuant to section 209(e)(2) of Title II of the federal

Clean Air Act as amended in 1990 to the extent nece ssary.

I hereby certify that the above is a true and correct copy of Resolution 08-41, as adopted by the Air Resources Board.

/s/

_______________________________ Monica Vejar, Clerk of the BoardResolution 08-41

November 21, 2008

Identification of Attachments to the Board Resoluti on

ATTACHMENT A-1: Proposed Amendments to the Californ ia Regulations for Small Off-Road Engines, section 2403, 2405, 2406, 2408, a nd 2409 within Chapter 9, Title 13, California Code of Regulations, as set fo rth in the attachment A to the Initial Statement of Reasons, released October 3, 2008.

ATTACHMENT A-2: Proposed Amendments to the “Califor nia Exhaust Emission

Standards and Test Procedures for 2005 and Later Sm all Off-Road Engines,” as set

forth in the attachment B to the Initial Statement of Reasons, released October 3, 2008.