F - 1

Appendix F: Cost Methodology 

This appendix explains the cost methodology used to estimate the costs of the 

proposed amendments to the off-road regulation. Section A below explains why the 

compliance costs for the current off-road regulation are different than those presented in 

the original staff report (ARB, 2007a). Section B outlines the cost methodology, and 

Section C lists references used. 

A. Updated Current Regulatory Costs 

The current regulation costs presented (in Chapter VII of this document) are different 

than those estimated in the original staff report (ARB, 2007a) for several reasons, 

including: 

• The current regulation costs presented in Chapter VII are in 2010 dollars; the 

original staff report cost estimates were presented in 2006 dollars. 

• The current regulation costs are the costs associated with vehicle turnover and 

retrofitting only; the original staff report estimates included additional costs for 

reporting, labeling, and retrofit operational and maintenance costs. It is 

reasonable to leave out the reporting and labeling costs because all fleets must 

report and label their vehicles, even under the proposed amended regulation; 

hence, it was not necessary to recalculate these costs for the purposes of 

comparing the current regulatory costs with the proposed amended regulation 

costs or for comparing regulation amendment proposals. Staff did not include 

retrofit operational and maintenance costs because these costs, when 

calculated, were insignificant compared to the overall compliance costs for the 

statewide fleet. 

• The current regulation costs in Chapter VII take into account the amendments 

made to the regulation since its initial approval in 2007. These amendments 

include the Assembly Bill (AB) 8 2X amendments, and the delay of enforcement 

of the March 1, 2010, compliance date which have resulted in a cost savings for 

many fleets. Because the regulation has already been amended to give 

economic relief to affected fleets, staff believed it was appropriate to recalculate 

the costs of the regulation, as it currently exists, and not how it was originally 

adopted. 

• The cost estimates for both the current regulation and the proposed amended 

regulation in this staff report were calculated using the most recent inventory of 

off-road vehicles, which includes fewer vehicles than previously estimated. The 

original staff report costs were calculated using an estimated statewide vehicle 

inventory. However, because more accurate reported data from the Diesel Offroad On-line Reporting System (DOORS) now exists, staff believes it is more 

appropriate to estimate statewide costs based on this updated inventory data. 

For the many reasons stated above, it was more appropriate to recalculate the 

statewide costs of the regulation, as it currently exists, than to compare the proposed 

amended regulatory costs to the original costs presented in the 2007 staff report. 
F - 2

B. Updated Cost Methodology 

As stated in Chapter VII, the methodology used to calculate the costs in this staff report 

were similar to the methodology used when originally estimating the costs for the offroad regulation. For a full description of the original cost methodology, please see 

Chapter XI of the original Technical Support Document (TSD) for the off-road regulation 

(ARB, 2007b). The subsections below provide a summary of the updated cost 

methodology, as well as the retrofit and vehicle costs used in the modeling. 

1. Statewide Costs 

The original methodology relied on the compliance modeling for 200 sample fleets, and 

required these costs to be scaled to reflect statewide costs. However, the updated 

methodology used to calculate costs for this report used the Off-road Simulation Model 

(OSM) to model the compliance paths of approximately 8,800 real fleets reported to 

DOORS (DOORS, 2010). For each fleet in DOORS, OSM calculated the costs the fleet 

would normally spend without the regulation in place. These costs are referred to as a 

fleet’s baseline costs, and depend upon a fleet’s average age and natural turnover rate. 

Once the baseline cost for a fleet was determined, a compliance cost was then 

calculated, based on a fleet’s anticipated compliance path. The difference between a 

fleet’s baseline cost, and a fleet’s compliance cost is the cost attributed to the off-road 

regulation. For more information on OSM, please see Appendix D. 

Once these costs were calculated for each fleet, they were summed to provide staff with 

the overall compliance costs for each year over the life of the regulation (for those fleets 

in DOORS). To determine the cost in 2010 dollars, the cost for each year was 

multiplied by the net present value (NPV)1

 factor. 

Although the fleets in DOORS represent a majority of the fleets affected by the 

regulation, there are still some fleets that have not reported to DOORS (and are 

therefore not in compliance with the off-road regulation). To account for these 

noncompliant fleets (estimated to be 10 percent of the statewide fleet), the costs for 

each year were multiplied by a 1.1 noncompliance factor. 

2. Compliance Costs 

The compliance path for each real fleet included the option of retrofitting or accelerated 

turnover (to new or used vehicles). Although repowering a vehicle with a new engine is 

a viable compliance option, it is not applicable to all vehicle types and horsepower 

categories and is expected to be a relatively rare compliance choice. Therefore, to 

simplify the analysis, staff did not include repowers as a compliance option in OSM. 

 

1

 NPV = 1/(1+r)^n, where r = the annual interest rate, and n = the number of years in the future. An 

annual five percent real interest rate is the basis of all economic impacts, assuming seven percent 

nominal interest rate and two percent inflation rate. 
F - 3

a) Vehicle costs 

The new and used vehicle costs were determined from for-sale prices of vehicles of 

various types. Prices were plotted by vehicle age and curve fit on a dollar per 

horsepower ($/hp) basis to represent the typical price for each vehicle type. For a 

majority of the vehicle types in the off-road inventory, this analysis had already been 

performed; these numbers are available in Appendix J of the original TSD of the offroad regulation (ARB, 2007b), and were used in this analysis. However, for various 

types of GSE vehicles, prices were compiled from used vehicles for sale on several 

websites, including Machinerytrader.com and Tradequip.com. The $/hp values used for 

GSE vehicles is included in Attachment 1. 

b) Retrofit costs 

Staff contacted several retrofit manufactures to collect current retrofit costs. These 

costs were used in OSM, and are shown below in Table F-1 (Aleixo, 2010, Halloran, 

2010, Machado, 2010, Swenson, 2010). 

Table F-1: Retrofit Costs 

Horsepower Range Retrofit Cost 

Less than 50 hp $16,750 

50 hp – 125 hp $17,588 

125 hp – 175 hp $19,733 

175 hp – 300 hp $24,796 

300 hp – 400 hp $28,763 

400 hp and Greater $52,333 

c) Additional costs 

When the costs for the original regulation were calculated, staff included a 

‘transportation cost’ of $10/hp to account for the potential price impact on changes in 

demand for clean and dirty vehicles (ARB, 2007b). This cost was also included in OSM, 

and was added to the price of every vehicle (new or used) purchased for compliance. 

An additional cost that was also included in the original regulation costs was the Tier 4 

premium. This cost was to account for the increase in cost for Tier 4 vehicles because 

of the exhaust aftertreatment technology expected to be used in those engines. The 

Tier 4 premium costs were estimated to be similar to the cost of a retrofit device, and 

are shown below in Table F-2. 
F - 4

Table F-2: Tier 4 Premium Costs 

Horsepower Range Retrofit Cost 

Less than 50 hp $8,000 

50 hp – 175 hp $12,000 

175 hp – 400 hp $18,000 

400 hp and Greater $30,000 

C. References 

Aeroservicios, 2010. Vehicle information from Aeroservicios. Last accessed October 

25, 2010. www.aeroservicios.com/system/ 

AeroTech, 2010. Vehicle information from JBT Areotech. Last accessed October 25, 

2010. http://www.jbtaerotech.com/ 

Aleixo, 2010. Personal communication between Joe Aleixo of DCL International Inc., 

and Cory Parmer, ARB; June 1, 2010. 

ARB, 2003b. California Air Resources Board. Carl Moyer Program Guidelines.

California Air Resources Board, September 2003. 

http://www.arb.ca.gov/msprog/moyer/guidelines/2003moyerguide.pdf 

ARB, 2007a. California Air Resources Board. Staff Report: Initial Statement of Reasons 

for Proposed Rulemaking; Regulation for In-Use Off-Road Diesel Vehicles. California 

Air Resources Board, April 2007. http://www.arb.ca.gov/regact/2007/ordiesl07/isor.pdf

ARB, 2007b. California Air Resources Board. Technical Support Document: Regulation 

for In-Use Off-Road Diesel Vehicles. California Air Resources Board, April 2007. 

http://www.arb.ca.gov/regact/2007/ordiesl07/TSD.pdf

DOORS, 2010. Diesel Off-road On-line Reporting System. 

https://secure.arb.ca.gov/ssldoors/doors_reporting/reporting.php

EEA, 1995. Memorandum from Sandy Webb of EEA to Bill Albee, FAA, and Rich 

Wilcox, EPA, entitled: Technical Data to Support FAA's Advisory Circular on Reducing 

Emissions from Commercial Aviation. September 25, 1995. 

Halloran, 2010. Personal communication between James Halloran of Caterpillar, Inc., 

and Cory Parmer, ARB; June 21, 2010. 

Machado, 2010. Personal communication between Crystal Machado of HUSS Inc., and 

Cory Parmer, ARB; June 12, 2010. 

MachineryTrader, 2010. Vehicle prices from Machinery Trader. Last accessed October 

25, 2010. http://www.machinerytrader.com/
F - 5

Mercury, 2010. Personal communication between Debbie Taylor of Mercury GSE and 

Stan Armstrong, ARB, August 9, 2010. 

Swenson, 2010. Personal communication between Tom Swenson of Cleaire Advanced 

Emissions Controls, LLC., and Cory Parmer, ARB; June 1, 2010. 

SunMachinery, 2010. Drilling rig prices from Sun Machinery. Last accessed on 

October 25, 2010. http://www.sunmachinery.com/ 

Sunnda, 2010. Workover rig vehicle information from Sunnda Corporation. Last 

accessed October 25, 2010. www.sunnda.com/ 

Tradequip, 2010. Vehicle prices from Tradequip International. Last accessed on 

October 25, 2010. www.tradequip.com/ 
F - 6

Attachment 1 – GSE Vehicle Costs 

New Vehicle Types Added

The table below identifies the new2 vehicle types for which the costs were included in

OSM. If not enough cost data could be found, the costs for a similar vehicle type were 

used, and are noted in Table F1-1 below. 

Table F1-1: Vehicle Types with Updated Costs 

Vehicle Type 

Aerial Lifts 

Forklifts 

Other General Industrial Equipment (used "Other Construction" costs) 

Other Material Handling Equipment (used "Other Construction" costs) 

Sweepers/Scrubbers 

Drill Rig (Mobile) 

Workover Rig (Mobile) 

A/C Tug Narrow Body 

A/C Tug Wide Body 

Baggage Tug 

Belt Loader 

Bobtail (used "Skid Steer Loader" costs) 

Cargo Loader 

Cargo Tractor (used "Tractor/Loader/Backhoe" costs)

Forklift (GSE) (used "Forklift" costs) 

Lift (GSE) (used "Aerial Lift" costs) 

Other GSE (used "Other Construction" costs) 

Passenger Stand (used "Aerial Lift" costs) 

Estimated Vehicle Costs

The costs used for estimating new and used vehicle prices are shown in the Table F1-2 

below (Aeroservicios, 2010; AeroTech, 2010; EEA, 1995; MachineryTrader, 2010; 

Mercury, 2010; SunMachinery, 2010; Sunnda, 2010; Tradequip, 2010). 

 

2

 Not included in the cost estimates for the original regulation (ARB, 2007b). 
F - 7

Table F1-2: Vehicle $/hp Cost by Vehicle Type (Ages 0 to 85) 

Vehicle Age (Years) Vehicle Type 0 1 2 3 4 5 6 7 8 9 1

Aerial Lifts 2368 1951 1608 1325 1092 900 741 611 504 415 3Forklifts 641 599 559 522 487 455 425 397 370 346 3Sweepers/Scrubbers 442 413 386 361 337 315 294 275 257 240 2Drill Rig (Mobile) 1766 1568 1392 1236 1098 975 865 768 682 606 5Workover Rig (Mobile) 1035 950 872 800 734 674 618 567 521 478 4A/C Tug Narrow Body 975 914 857 803 753 705 661 620 581 545 5A/C Tug Wide Body 975 914 857 803 753 705 661 620 581 545 5Baggage Tug 1016 904 804 716 637 566 504 448 399 355 3Belt Loader 551 516 483 452 423 397 371 348 326 305 2Cargo Loader 1051 1007 966 926 888 851 816 782 750 719 6

Vehicle Age (Years) Vehicle Type 13 14 15 16 17 18 19 20 21 22 

Aerial Lifts 191 158 130 107 88 73 60 49 41 34 Forklifts 263 245 229 214 200 186 174 163 152 142 1Sweepers/Scrubbers 183 171 160 149 139 130 122 114 106 99 Drill Rig (Mobile) 377 334 297 264 234 208 184 164 145 129 1Workover Rig (Mobile) 339 311 285 262 240 220 202 186 170 156 1A/C Tug Narrow Body 420 394 369 346 325 304 285 267 251 235 2A/C Tug Wide Body 420 394 369 346 325 304 285 267 251 235 2Baggage Tug 222 198 176 157 139 124 110 98 87 78 Belt Loader 234 220 206 193 180 169 158 148 139 130 1Cargo Loader 607 582 558 535 513 492 471 452 433 415 3
F - 8

Vehicle Age (Years) Vehicle Type 26 27 28 29 30 31 32 33 34 35 

Aerial Lifts 15 13 11 9 7 6 5 4 3 3 Forklifts 108 101 94 88 82 76 71 67 62 58 Sweepers/Scrubbers 76 71 66 62 58 54 50 47 44 41 Drill Rig (Mobile) 80 71 63 56 50 44 39 35 31 28 Workover Rig (Mobile) 111 102 93 86 79 72 66 61 56 51 A/C Tug Narrow Body 181 170 159 149 140 131 123 115 108 101 A/C Tug Wide Body 181 170 159 149 140 131 123 115 108 101 Baggage Tug 49 43 39 34 30 27 24 21 19 17 Belt Loader 100 93 88 82 77 72 67 63 59 55 Cargo Loader 351 336 322 309 296 284 272 261 250 240 2

Vehicle Age (Years) Vehicle Type 39 40 41 42 43 44 45 46 47 48 

Aerial Lifts 1 1 1 1 1 1 1 1 1 1 Forklifts 44 41 38 36 34 31 29 27 26 24 Sweepers/Scrubbers 31 29 27 26 24 22 21 19 18 17 Drill Rig (Mobile) 17 15 13 12 11 9 8 7 7 6 Workover Rig (Mobile) 36 33 31 28 26 24 22 20 18 17 A/C Tug Narrow Body 78 73 69 64 60 57 53 50 47 44 A/C Tug Wide Body 78 73 69 64 60 57 53 50 47 44 Baggage Tug 11 9 8 7 7 6 5 5 4 4 Belt Loader 42 40 37 35 33 31 29 27 25 24 Cargo Loader 203 194 186 179 171 164 157 151 145 139 1
F - 9

Vehicle Age (Years) Vehicle Type 52 53 54 55 56 57 58 59 60 61 

Aerial Lifts 1 1 1 1 1 1 1 1 1 1 Forklifts 18 17 16 15 14 13 12 11 10 10 Sweepers/Scrubbers 13 12 11 11 10 9 9 8 8 7 Drill Rig (Mobile) 4 3 3 3 2 2 2 2 1 1 Workover Rig (Mobile) 12 11 10 9 8 8 7 7 6 5 A/C Tug Narrow Body 34 32 30 28 26 24 23 21 20 19 A/C Tug Wide Body 34 32 30 28 26 24 23 21 20 19 Baggage Tug 2 2 2 2 1 1 1 1 1 1 Belt Loader 18 17 16 15 14 13 12 11 11 10 Cargo Loader 117 112 108 103 99 95 91 87 84 80 

Vehicle Age (Years) Vehicle Type 65 66 67 68 69 70 71 72 73 74 

Aerial Lifts 1 1 1 1 1 1 1 1 1 1 Forklifts 7 7 6 6 6 5 5 5 4 4 Sweepers/Scrubbers 5 5 5 4 4 4 4 3 3 3 Drill Rig (Mobile) 1 1 1 1 1 1 1 1 1 1 Workover Rig (Mobile) 4 4 3 3 3 3 2 2 2 2 A/C Tug Narrow Body 15 14 13 12 11 11 10 9 9 8 A/C Tug Wide Body 15 14 13 12 11 11 10 9 9 8 Baggage Tug 1 1 1 1 1 1 1 1 1 1 Belt Loader 8 7 7 6 6 6 5 5 5 4 Cargo Loader 68 65 62 60 57 55 53 50 48 46 
F - 10

Vehicle Age (Years) Vehicle Type 78 79 80 81 82 83 84 85 

Aerial Lifts 1 1 1 1 1 1 1 1 Forklifts 3 3 3 2 2 2 2 2 Sweepers/Scrubbers 2 2 2 2 2 2 1 1 Drill Rig (Mobile) 1 1 1 1 1 1 1 1 Workover Rig (Mobile) 1 1 1 1 1 1 1 1 A/C Tug Narrow Body 6 6 6 5 5 5 4 4 A/C Tug Wide Body 6 6 6 5 5 5 4 4 Baggage Tug 1 1 1 1 1 1 1 1 Belt Loader 3 3 3 3 3 2 2 2 Cargo Loader 39 37 36 34 33 32 30 29