State of California AIR RESOURCES BOARD

Addendum to the Final Statement of Reasons for Rule making

ADOPTION OF THE “LEV III” AMENDMENTS TO THE CALIFOR NIA GREENHOUSE GAS AND CRITERIA POLLUTANT EXHAUST AND EVAPORATIVE EMIS SION STANDARDS AND TEST PROCEDURES AND TO THE ON-BOARD DIAGNOSTIC SYSTEM REQUIREMENTS FOR PASSENGER CARS, LIGHT-DUTY TRUCKS, AND MEDIUMDUTY VEHICLES, AND TO THE EVAPORATIVE EMISSION REQU IREMENTS FOR HEAVY-DUTY VEHICLES

Public Hearing Date: January 26-27, 2012 Agenda Item: 12-1-2 Addendum Prepared: August 7, 2012

I. Background

On June 25, 2012, the Air Resources Board (ARB or B oard) submitted the Final Statement of Reasons (FSOR) for the “ Adoption of t he “LEV III” Amendments to the California Greenhouse Gas and Criteria Pollutant an d Evaporative Emission Standards and Test Procedures and to the On-Board Diagnostic System Requirements for Passenger Cars, Light-duty Trucks and Medium-duty V ehicles, and to the Evaporative Emission Requirements for Heavy-duty Vehicles” to t he Office of Administrative Law (OAL) for its review and approval. In the course o f its review, OAL questioned several regulatory changes that it interpreted as being pot entially impermissibly retroactive, and identified a single incorrect reference to an incor porated test procedure. Each of these issues is addressed in turn below.

A. RETROACTIVITY

ARB understands there to be two types of retroactiv ity that regulatory text might present: a prohibited “primary” retroactive effect, and an allowable “secondary” retroactive effect. “Primary” retroactivity is alt ering “the past legal consequences of past actions.” (20th Century Ins. Co. v. Garamendi, (19 94) 8 Cal. 4th 216, 281, original italics, citing Bowen v. Georgetown Univ. Hosp., (1 988) 488 U.S. 204, 219). “Secondary” retroactivity is altering “the future legal consequences of past transactions.” (20th Century Ins. Co. v. Garamendi, (1994) 8 Cal. 4th 216, 281, original italics, citing Nat'l Med. Enterprises, Inc. v. Sullivan, (9th Cir. 1992) 957 F.2d 664, 671). “Secondary” retroactivity is “an entirely lawful consequence of rulemaking and hence does not itself offend any law, including the United States and Cal ifornia Constitutions and their respective due process clauses.” (20th Century Ins. Co. v. Garamendi, (1994) 8 Cal. 4th 216, 281-282).2

In fact, ARB has, with OAL approval, exercised this “entirely lawful consequence” several times in the last few years, primarily in r esponse to the economic downturn that began in 2008. Rulemakings in which ARB provided r elief shortly before or even during the compliance year include our Truck and Bus rule (OAL Regulatory Action No. 2011- 1028-04s), the In-Use Off-Road rule (OAL Regulatory Action No. 2011-1028-03s), and the Transport Refrigeration Unit rule (OAL Regulato ry Action No. 2011-0204- 06s). These rulemaking amendments were noticed bef ore the compliance year had begun but were formally adopted after it had begun. ARB has also provided some compliance relief for new motor vehicle manufacture rs having to comply with on-board diagnostic (OBD) requirements under both the light- and medium duty-vehicle OBD II regulation and the heavy-duty OBD regulation. Some of these OBD amendments were not noticed or adopted until the first model-year a ffected by the amendments was already underway. Like the amendments at issue her e, these prior ARB rulemakings address real world, future consequences of past tra nsactions as allowed, without changing the past legal consequences of past action s, as would be arguably prohibited.

As explained in Section II below, all regulatory ch anges OAL identified as potentially impermissibly retroactive have at most a “secondary ” retroactive effect and so are permissible.

II. Retroactivity

Subdivision 1961(b)(1)(B)(1)(c):

c. The applicable emission standards to be used in the above equations are as follows:

Model Year Emission Category Emission Standard Value

All PCs; LDTs 0-3750 lbs. LVW LDTs

3751-5750 lbs. LVW 2001 through 2014 and subsequent (§1960.5 “AB 965” vehicles only) All Federal Emission Standard to which Vehicle is Certified Federal Emission Standard to which Vehicle is Certified 2001 - 2003 (§1960.1(f)(2)) Tier 1 0.25 0.32

2001 - 2006 model year vehicles certified to the “LEV I” standards in §1960.1(g)(1) (For TLEVs, 2001 - 2003 model years only) TLEVs 0.125 0.160

LEVs 0.075 0.100

ULEVs 0.040 0.0503

Model Year Emission Category All PCs;

LDTs 0-3750 lbs. LVW LDTs 3751 lbs.

LVW - 8500 lbs. GVW 2004 through 2014 and subsequent model year vehicles certified to the “LEV II” standards in §1961(a)(1) LEVs 0.075 0.075

ULEVs 0.040 0.040

SULEVs 0.01 0.01

2004 through 2014 and subsequent model year vehicles certified to the optional 150,000 mile “LEV II” standards for PCs and LDTs in 1961(a)(1) LEVs 0.064 0.064

ULEVs 0.034 0.034

SULEVs 0.0085 0.0085

These amendments correct a long standing discrepanc y between the regulations and the test procedures for emission credits earned by vehicles certifying to optional 150,000 mile emission standards that can be applied by a manufacturer when calculating compliance with the fleet average non-m ethane organic gas (NMOG) requirements listed in section 1961(b)(1)(A). The emission standard values in section E.2.1.2 of the “California Exhaust Emission Standar ds and Test Procedures for 2001 and Subsequent Model Passenger Cars, Light-Duty Tru cks, and Medium-Duty Vehicles," last amended September 27, 2010, are cor rect in that they are expressed in three decimal places. The emission standard values in section subdivision 1961(b)(1)(B)(1)(c) of the California Code of Regul ations are in error in that they are expressed in two decimal places. These amendments do not change the emission standards to which these vehicles certify. Rather, they change the credits those vehicles earn towards the fleet average NMOG requir ement. These amendments would not require any manufacturer to make changes to any 2013 model year vehicle, or any previous model year vehicle, already produced. Thi s means that the aforementioned changes affecting model year 2013 vehicles only mod ify the value of credits a manufacturer may earn for vehicles meeting the opti onal emission standards, but would not require a manufacturer to make changes to the v ehicle itself. Consequently, there are only future legal consequences (treatment of cr edits) for past acts (production), but no past legal consequences for those past acts.

The Board has further determined that no alternativ e considered by the agency would be more effective in carrying out the purpose for w hich regulatory action was proposed or would be as effective and less burdensome to aff ected private persons than the action taken by the Board.