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 BOARD MEETING

 STATE OF CALIFORNIA

 AIR RESOURCES BOARD

 JOE SERNA, JR. BUILDING

 CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY

 CENTRAL VALLEY AUDITORIUM, SECOND FLOOR

 1001 I STREET

 SACRAMENTO, CALIFORNIA

 FRIDAY, OCTOBER 26, 2007

 8:30 A.M.

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 TIFFANY C. KRAFT, CSR, RPR

 CERTIFIED SHORTHAND REPORTER

 LICENSE NUMBER 12277

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 APPEARANCES

 BOARD MEMBERS

 Ms. Mary D. Nichols, Chairperson

 Ms. Sandra Berg

 Ms. Judith G. Case

 Ms. Dorene D'Adamo

 Ms. Lydia Kennard

 Mr. Jerry Hill

 Mr. Ronald O. Loveridge

 Dr. Daniel Sperling

 STAFF

 Mr. Tom Cackette, Chief Deputy Executive Officer

 Mr. Tom Jennings, Chief Counsel

 Mr. Michael Scheible, Deputy Executive Officer

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 Ms. Lynn Terry, Deputy Executive Officer

 Ms. Kathleen Quetin, Ombudsman

 Ms. Lori Andreoni, Board Secretary

 Mr. Bob Cross, Chief, Mobile Source Control Division

 Ms. Monique Davis, Staff Air Pollution Specialist,

 Stationary Source Division

 Mr. Dan Donohoue, Chief, Emissions Assessment Branch

 Mr. Bob Fletcher, Chief, Stationary Source Division

 Mr. Todd Sterling, Air Pollution Specialist, Control

 Strategies Section, SSD

 Mr. Floyd Vergara, Senior Staff Counsel

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 APPEARANCES CONTINUED

 ALSO PRESENT

 Mr. James Baker, Roof Coatings Manufacturers Association

 Ms. Diane Bailey, NRDC

 Mr. Howard Berman, Zinsser

 Mr. Greg Bombard, Catalina Express

 Mr. Jeff Browning, Sause Brothers

 Mr. Tim Carmichael, Coalition for Clean Air

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 Mr. David Darling, National Paint & Coatings Association

 Mr. Kyle Frakes, Tnemec Company, Inc.

 Ms. Madelyn Harding, Sherwin-Williams

 Mr. Henry Hogo, South Coast AQMD

 Ms. Carolyn Horgan, Blue & Gold Fleet

 Mr. Andrew Jaques, American Chemistry Council

 Mr. John Kaltenstein, Friends of the Earth

 Mr. Dave Laucella, ACC Solutions Industry Group

 Mr. Martin Robbins, Vallejo Baylink

 Mr. Richard Smith, Westar Marine Services

 Mr. Jim Swindler, Golden Gate Ferry

 Mr. Joe Wyman, Hornblower Cruises & Events

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 INDEX

 PAGE

 Pledge of Allegiance 1

 Item 7-10-8 2

 Item 7-10-6

 Chairperson Nichols 6

 Chief Deputy Executive Officer Cackette 6

 Staff Presentation 9

 Ombudsman Quentin 29

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 Q&A 30

 Mr. Swindler 49

 Mr. Browning 50

 Mr. Smith 58

 Mr. Kaltenstein 64

 Ms. Horgan 66

 Mr. Robbins 68

 Mr. Wyman 71

 Mr. Alard 74

 Mr. Bombard 78

 Mr. Bailey 82

 Mr. Carmichael 85

 Mr. Hogo 95

 Item 07-10-5

 Chairperson Nichols 99

 Chief Deputy Executive Officer Cackette 100

 Staff Presentation 100

 Mr. Carmichael 107

 Ms. Davis 108

 Ms. Harding 110

 Mr. Frakes 111

 Mr. Laucella 113

 Mr. Jaques 116

 Mr. Baker 118

 Mr. Berman 120

 Motion 123

 Vote 123

 Adjournment 124

 Reporter's Certificate 125

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 1 PROCEEDINGS

 2 CHAIRPERSON NICHOLS: Good morning. We're going

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 3 the open the meeting and then go into our closed session

 4 and resume after we're ready to come back out and announce

 5 the results of the closed session. And the rest of the

 6 meeting will continue from that point on.

 7 So without further ado, I declare this meeting

 8 open.

 9 And I think we'll do the Pledge of Allegiance and

10 call the roll.

11 (Thereupon the Pledge of Allegiance was

12 recited in unison.)

13 CHAIRPERSON NICHOLS: Let's call the roll.

14 SECRETARY ANDREONI: Ms. Berg?

15 BOARD MEMBER BERG: Here.

16 SECRETARY ANDREONI: Supervisor Case?

17 BOARD MEMBER CASE: Here.

18 SECRETARY ANDREONI: Ms. D'Adamo?

19 BOARD MEMBER D'ADAMO: Here.

20 SECRETARY ANDREONI: Supervisor Hill?

21 SUPERVISOR HILL: Here.

22 SECRETARY ANDREONI: Ms. Kennard?

23 BOARD MEMBER KENNARD: Here.

24 SECRETARY ANDREONI: Mayor Loveridge?

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25 Mrs. Riordan?

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 1 Supervisor Roberts?

 2 Professor Sperling?

 3 BOARD MEMBER SPERLING: Here.

 4 SECRETARY ANDREONI: Chairman Nichols?

 5 CHAIRPERSON NICHOLS: Here.

 6 SECRETARY ANDREONI: Madam Chair, we have a

 7 quorum.

 8 CHAIRPERSON NICHOLS: As indicated in the notice

 9 of this meeting, we are holding a closed session today.

10 Health and Safety Code Section 39515(a) directs the Board

11 to appoint an Executive Officer who shall serve at the

12 Board's pleasure. The purpose of this closed session will

13 to be to consider the appointment of a new Executive

14 Officer. This is a personnel matter that may be

15 considered in a closed session pursuant to Government Code

16 Section 11126(a).

17 At the conclusion of the closed session, we'll

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18 resume in open session and announce any results of the

19 decision of our discussion.

20 So thank you to those who are not going to be in

21 the closed session. The Board is going to retire to a

22 back room, and we'll come out as soon as we're done.

23 Thanks, everybody.

24 (Thereupon the Board recessed into closed

25 session.)

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 1 CHAIRPERSON NICHOLS: The Board has concluded its

 2 closed session meeting pursuant to Government Code Section

 3 11126(a) to discuss the appointment of a new Executive

 4 Officer. And the Board has unanimously voted. And I'm

 5 very pleased to announce that our new Executive Officer is

 6 James Goldstein.

 7 James, where are you? There he is.

 8 And so he's already been notified of the decision

 9 and is expected to take office immediately. And we have

10 such confidence in him that actually we've asked him to

11 represent us at a meeting that's going to be taking place

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12 in the next few minutes out at Mathur for the executive

13 team dealing with the fire emergencies. The Governor had

14 asked us to send a representative, and obviously we have a

15 Board meeting going on. But they need somebody there to

16 help them with the planning for the aftermath of the

17 fires.

18 I just want to take one minute to say how pleased

19 I am that we've been able to choose a person with the kind

20 of depth of experience in state government and

21 environmental issues that James brings to us. It's a

22 terrific signal I think for the people who work at the Air

23 Resources Board and for all of the community that we found

24 somebody with his kind of talent and commitment in our own

25 midst. And we're very much looking forward to his

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 1 leadership.

 2 I'm personally looking forward to having a

 3 partner to work with as we move forward on our mission to

 4 clean up the air and save the global environment.

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 5 And I think I speak for all of us in saying this

 6 is a great moment. And I would like to give my colleagues

 7 an opportunity if they want to add anything.

 8 BOARD MEMBER KENNARD: Thank you.

 9 Congratulations to James. We look forward to great

10 leadership from you.

11 But I also wanted to thank Tom Cackette and the

12 entire management team for stepping in and assisting us

13 over these months. And it's been extraordinary. We look

14 forward to continuing great work with you.

15 (Applause)

16 CHAIRPERSON NICHOLS: So James, before you have

17 to run off, would you like to say a couple of words?

18 MR. GOLDSTEIN: Thank you. I'm honored and

19 excited to have the opportunity to be part of the

20 leadership of this organization as we move forward you

21 know through very exciting and tremendous time.

22 We have our work cut out for us on what we've

23 been doing for 40 years on criteria pollutants and with AB

24 23 and the Global Warming Solutions Act we have even more

25 opportunities to do great things. And I'm excited to be

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 1 here to work with the management team and the Board. So

 2 thank you for your support. It's greatly appreciated.

 3 I'm looking forward to getting started in five minutes.

 4 CHAIRPERSON NICHOLS: Thank you. And godspeed.

 5 And thanks to Tom Cackette for once again

 6 stepping in and leading the organization and for

 7 continuing through this meeting to serve in his acting

 8 capacity. We really appreciate that, Tom.

 9 Before we get on with the rest of our meeting,

10 wanted to say two things.

11 First of all, Mayor Loveridge has had to leave us

12 because of the fires to go back to the Riverside area

13 where they are experiencing total outage of electricity

14 and some pretty serious consequences of that. So we're

15 very sorry to lose him, but understand where he has to be.

16 I also need to ask our counsel Tom Jennings to

17 clarify something from yesterday's meeting. There appears

18 to have been some confusion about the effect of the

19 aftermarket catalyst resolution 07-48. So, Tom, could you

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20 clear that up, please?

21 CHIEF COUNSEL JENNINGS: Thank you. As you heard

22 the staff presentation yesterday, the staff recommended

23 that the Board adopt the proposal as originally proposed.

24 There wasn't any 15-day language that was distributed.

25 Through an oversight, the resolution that you had before

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 1 you, however, the 15-day language where we would put out

 2 additional modifications for comment. And I just wanted

 3 to clarify our understanding that the Board voted to adopt

 4 the regulations as proposed.

 5 CHAIRPERSON NICHOLS: I believe that's correct,

 6 yes. Thank you.

 7 Okay. So our first item for this morning's

 8 agenda is a regulation respecting commercial harbor craft.

 9 This regulatory measure has an important effect because it

10 will deal with the exposure levels in neighborhoods around

11 ports which experience extremely high exposures to diesel

12 particulate matter. This will help alleviate some of the

13 concerns of those communities, and it will also have major

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14 impacts on the port related emissions at the regional

15 level for both particulate matter and ozone.

16 So I'm going to ask you, Mr. Cackette, to

17 introduce the item.

18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Thank

19 you. If I can take just a segue back to the last

20 discussion, I really wanted to point out that Lynn and

21 Mike and Tom Jennings also shared the responsibility of

22 acting EO many, many times during summer, letting me still

23 take my vacation. We all chipped in to that. And I think

24 on all of our part, it was a pleasure to do so. We're

25 looking forward to having an EO, I can assure you.

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 1 So to the subject here today, we're proposing for

 2 your consideration a regulation that will significantly

 3 reduce emissions from commercial harbor craft that operate

 4 within the port's inland waterways and within 24 nautical

 5 miles of the coast lines. As you know, these ports and

 6 waterways are often located in densely populated areas

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 7 exposing residents to unhealthy levels of pollutants.

 8 In 2004, staff completed an exposure assessment

 9 study of the ports of Los Angeles and Long Beach. And

10 that study revealed that the emissions from port

11 operations which includes commercial harbor craft can

12 affect a very large area and result in elevated potential

13 cancer risks, premature mortality, and other non-cancer

14 health threats to the residents.

15 Diesel PM emissions from commercial harbor craft

16 represent a significant portion of the overall emissions

17 and cancer risk. In fact, at the ports of Los Angeles and

18 Long Beach, it's the only sources that expose more persons

19 to a cancer risk of greater than ten in a million are the

20 transiting and hoteling emissions from oceangoing vessels.

21 In April of last year, we brought the Goods

22 Movement Emission Reduction Plan to you for consideration,

23 which you approved. And in that plan, we identified a

24 variety of measures aimed at reducing emissions associated

25 with moving goods via the state's highways, rails and

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 1 ports. Cleaning up the engines of commercial harbor craft

 2 was one of the measures to be investigated.

 3 The state's voters agreed that cleaning up goods

 4 movement emissions is a top priority. Last year, they

 5 approved a one billion dollar bond to provide incentive

 6 funds for cleaner equipment and technologies associated

 7 with rate movement. ARB's draft plan for allocating these

 8 funds include $60 million for commercial harbor craft.

 9 These funds which will be administered through local

10 agencies would be introduced to replace the oldest,

11 dirtiest, and highest used engines on tug and supply

12 boats.

13 Those bonds funds will be used in concert with

14 our proposal today in order to supplement the reduction

15 obtained by this regulation. As you will see in the

16 staff's presentation, the regulation would reduce the

17 public's exposure to diesel PM emissions and result in

18 cancer and non-cancer health effects. In addition, the

19 regulation will continue to improve regional air quality

20 by reducing important precursors to ozone and particulate

21 matter.

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22 The regulation will achieve this by accelerating

23 the turnover of engines for those vessel types that

24 generate a large portion of the emissions and work closest

25 to shore. The regulation provides an even faster turnover

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 1 schedule for the South Coast in order to provide

 2 additional NOx and PM benefits to help meet the 2014

 3 deadline for PM2.5 attainment in the South Coast air

 4 basin.

 5 I'd now like to have Todd Sterling of our

 6 Stationary Source Division present the staff's proposal.

 7 (Thereupon an overhead presentation was

 8 presented as follows.)

 9 AIR POLLUTION SPECIALIST STERLING: Thank you,

10 Mr. Cackette. Good morning, Madam Chairman and members of

11 the Board.

12 Today, I will be presenting staff's proposed

13 regulation for commercial harbor craft. We have been

14 working on developing this proposal since early 2004. As

15 the Ombudsman will report, we have held many workshops and

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16 community meetings in an effort to involve stakeholders.

17 We have also visited and worked with several vessel owners

18 from various harbor craft including ferries, tug boats,

19 pilot boats, and commercial fishing vessels.

20 --o0o--

21 AIR POLLUTION SPECIALIST STERLING: This slide

22 presents the topics I'll be discussing today.

23 --o0o--

24 AIR POLLUTION SPECIALIST STERLING: First the

25 background.

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 1 --o0o--

 2 AIR POLLUTION SPECIALIST STERLING: Commercial

 3 harbor craft are generally U.S. flagged vessels. They

 4 vary in size from small dive boats to large ferries, but

 5 are smaller than oceangoing vessels.

 6 Commercial harbor craft include ferries, tug

 7 boats, commercial fishing vessels, and other vessel types

 8 as shown on this slide.

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 9 --o0o--

10 AIR POLLUTION SPECIALIST STERLING: Staff

11 estimates that there are 4,200 harbor craft operating in

12 California and about twice as many diesel engines. While

13 commercial and charter fishing vessels make up about 75

14 percent of the total harbor craft population, they tend to

15 have smaller engines than other vessel types and often

16 have a single propulsion engine.

17 Ferries excursion vessels, tug boats, and tow

18 boats have larger engines and often have two propulsion

19 engines. As we will show in the following slides,

20 ferries, excursion vessels, tug boats, and tow boats are

21 responsible for the largest share of emissions from harbor

22 craft. Consequently, the regulation that we are proposing

23 focuses on reducing emissions from ferries, excursion

24 vessels, tug boats, and tow boats.

25 --o0o--

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 1 AIR POLLUTION SPECIALIST STERLING: Almost 70

 2 percent of the ferries, excursion vessels, tug boats, and

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 3 tow boats are located in South Coast and the bay area.

 4 The remainder is split between San Diego and other parts

 5 of the state.

 6 --o0o--

 7 AIR POLLUTION SPECIALIST STERLING: Up until

 8 2000, there were no state or federal emission standards

 9 for marine engines used in harbor craft. Beginning in

10 2000, marine engines began meeting U.S. EPA Tier 1

11 emission standards. Engines meeting Tier 2 standards

12 began entering the market in 2004.

13 In April of this year, U.S. EPA proposed Tier 3

14 and 4 emission standards for marine engines. According to

15 the U.S. EPA's proposed rulemaking, engines meeting Tier 3

16 standards would become available starting in 2013 to 2014

17 for most harbor craft engines.

18 Engines meeting Tier 4 standards would become

19 available in 2016 to 2017. Tier 4 standards are expected

20 to require aftertreatment technology.

21 U.S. EPA has proposed Tier 4 standards for all

22 engines except those under 800 horsepower. Nationwide,

23 800 horsepower and larger engines are a significant

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24 portion of the engine population. However, in California,

25 80 percent of the commercial harbor craft fleet are

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 1 smaller than 800 horsepower and will not be subject to

 2 these Tier 4 standards.

 3 ARB has commented to the U.S. EPA that this is

 4 important to California that Tier 4 standards apply to

 5 these smaller engines in order to obtain needed

 6 reductions. U.S. EPA expects to finalize these standards

 7 by the end of the year.

 8 --o0o--

 9 AIR POLLUTION SPECIALIST STERLING: Commercial

10 harbor craft are a large source of diesel PM and NOx

11 emissions. The emissions from these vessels are estimated

12 at 3.3 tons per day of PM and 73 tons per day of NOx.

13 Many of the engines currently in service are unregulated

14 engines, some of which have been in service for many

15 decades as these engines have useful lives of 20 to 35

16 years.

17 --o0o--

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18 AIR POLLUTION SPECIALIST STERLING: As previously

19 mentioned and shown in this slide, fishing vessels make up

20 the largest share of commercial harbor craft population.

21 Ferries, excursion vessels, tug, and tows make up about 15

22 percent of the vessel population.

23 --o0o--

24 AIR POLLUTION SPECIALIST STERLING: However, as

25 you can see from this slide, this 15 percent of the vessel

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 1 population, the three pie slices on the right-hand side of

 2 the chart, contribute about 50 percent of the engine

 3 emissions.

 4 --o0o--

 5 AIR POLLUTION SPECIALIST STERLING: Also,

 6 ferries, excursion vessels, tug boats, and tow boats

 7 generally work within the harbor, close to shore,

 8 producing greater health impacts. This chart shows how

 9 close to shore the various vessel types operate.

10 The blue bar shows the amount of PM emissions

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11 generated by vessel types while operating in harbor.

12 The maroon bar shows emissions generated from 3

13 to 24 miles.

14 And the yellow bar shows emissions generated more

15 than 24 miles from shore.

16 At the left side of the chart, as you can see,

17 the most emissions from ferries, excursion vessels, tug,

18 and tow boats occur in harbor and very little occur more

19 than 24 miles from shore.

20 --o0o--

21 AIR POLLUTION SPECIALIST STERLING: In 1998, the

22 Board identified diesel PM as a toxic air contaminant with

23 no Board-specified threshold exposure level. The purpose

24 of the proposed regulatory action is to reduce emissions

25 from diesel PM and NOx in order to reduce the potential

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 1 cancer risk and other adverse effects from PM exposure.

 2 Staff has evaluated the health impacts of the PM

 3 and NOx emissions from commercial harbor craft and found

 4 that these emissions contribute to elevated cancer and

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 5 non-cancer risk. Statewide, approximately 90 premature

 6 deaths per year are associated with emissions from

 7 commercial harbor craft. Other non-cancer health impacts

 8 are also listed on the slide.

 9 --o0o--

10 AIR POLLUTION SPECIALIST STERLING: I will now

11 discuss the proposed commercial harbor craft regulation.

12 --o0o--

13 AIR POLLUTION SPECIALIST STERLING: The proposed

14 regulation will focus on reducing emissions from ferries,

15 excursion vessels, tug boats, and tow boats by requiring

16 engines to be replaced with new certified engines meeting

17 the most stringent U.S. EPA marine engine standards. We

18 are not modifying these standards, just requiring that

19 engines meeting them be used in certain situation.

20 All new harbor craft, including commercial

21 fishing, will need to install new certified engines.

22 Engines being replaced in all existing harbor craft will

23 also need to be new certified engines meeting new

24 standards. All vessels will be subject to monitoring,

25 recordkeeping, and reporting requirements.

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 1 --o0o--

 2 AIR POLLUTION SPECIALIST STERLING: First, we

 3 will review the proposed requirements that apply only to

 4 ferries, excursion vessels, tug boats, and tow boats.

 5 Later, we will discuss requirements that apply to all

 6 commercial harbor craft.

 7 --o0o--

 8 AIR POLLUTION SPECIALIST STERLING: The proposed

 9 regulation will require vessel owners of ferries,

10 excursion vessels, tug boats, and tow boats to replace

11 unregulated or Tier 0 and Tier 1 engines with engines

12 meeting Tier 2 or Tier 3 emissions standard, whatever is

13 current by the time the engine is replaced.

14 The schedule by which the engines are to be

15 replaced is based on the engine model year and yearly

16 hours of operation.

17 The schedule specifies replacement dates for

18 ranges of model years starting with the oldest highest

19 used engines first. There are two compliance schedules, a

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20 statewide schedule and an accelerated schedule for the

21 south coast.

22 Tier 0 engines will be replaced with engines

23 meeting the Tier 2 standards or Tier 3 when these engines

24 become available.

25 Tier 1 engines will be replaced with engines

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 1 meeting the Tier 3 standards.

 2 --o0o--

 3 AIR POLLUTION SPECIALIST STERLING: As you can

 4 see, replacing Tier 0 and Tier 1 engines with Tier 2 and 3

 5 engines achieves significant emission reductions per

 6 engine, ranging from 60 to 80 percent.

 7 --o0o--

 8 AIR POLLUTION SPECIALIST STERLING: The proposed

 9 regulation will require vessel owners to start replacing

10 their engines in 2009.

11 For engines subject to the statewide schedule,

12 all Tier 0 engines will be replaced by 2016 and all Tier 1

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13 engines by 2022. We have proposed an accelerated schedule

14 for vessels in the South Coast which will remove Tier 0

15 and 1 engines two to three years earlier replacing Tier 0

16 engines prior to 2014. This will provide early reductions

17 to help meet the federally mandated PM2.5 air quality

18 standards.

19 --o0o--

20 AIR POLLUTION SPECIALIST STERLING: As mentioned

21 earlier, the compliance schedule is based on the engine

22 model year. There are two situations where alternative

23 model year may be used. The first situation is if a

24 vessel engine has been rebuilt to a cleaner standard

25 through Carl Moyer type programs or owner initiative. In

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 1 this case, the rebuild date can be used as the model year.

 2 The second situation is included in order to

 3 encourage the development and demonstration of emission

 4 control strategies for harbor craft. If an emission

 5 control strategy which achieves a decrease in PM or NOx of

 6 at least 25 percent is implemented with an engine, then an

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 7 owner or operator can add five years to the engine model

 8 year, extending the compliance date one to five years.

 9 --o0o--

10 AIR POLLUTION SPECIALIST STERLING: The proposal

11 also offers two alternatives for complying with the in

12 use-requirements. There are used to demonstrate that the

13 existing engine is already meeting the current standard or

14 that the engine is operating less than 300 hours annually.

15 --o0o--

16 AIR POLLUTION SPECIALIST STERLING: This slide

17 lists four situations where the ARB Executive Officer may

18 allow a compliance date extension of either six months to

19 one year depending on the situation. For example, a

20 one-year compliance date extension is allowed if no

21 suitable engine replacement is available.

22 --o0o--

23 AIR POLLUTION SPECIALIST STERLING: Another

24 compliance option for vessel owners would be to

25 participate in an alternative control of emission plans.

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 18

 1 We would allow the alternative control of emissions option

 2 provided that equal or greater emission reductions would

 3 be achieved. This could include engine modifications,

 4 exhaust after treatment control, engine re-power, and

 5 using alternative fuels.

 6 The regulation establishes an application process

 7 that requires ARB Executive Officer approval and includes

 8 public review and comment.

 9 --o0o--

10 AIR POLLUTION SPECIALIST STERLING: Previously, I

11 have discussed regulation requirements applies to ferries,

12 excursion vessels, tug boats, and tow boats. I will now

13 discuss requirement for all commercial harbor craft

14 vessels, including fishing boats, crew and supply, and

15 other commercial harbor craft.

16 --o0o--

17 AIR POLLUTION SPECIALIST STERLING: We'll start

18 with the requirements for all new harbor craft vessels,

19 including fishing, crew and supply, and work boats, as

20 well as ferries, tugs, and others.

21 Starting in 2009, the regulation will require the

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22 most current U.S. EPA marine engine, either Tier 2, 3, or

23 4, to be installed on new vessels.

24 The propulsion engine on new ferries will have an

25 additional requirement. In addition to installing an

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 1 engine meeting the most current standard, the best

 2 available control technology, or BACT, must be applied.

 3 The determination of what is BACT for each new ferry will

 4 be made on a case by case basis. ARB will make BACT

 5 determinations in consultation with the local air

 6 district.

 7 --o0o--

 8 AIR POLLUTION SPECIALIST STERLING: When

 9 re-powering an in-use vessel, the most current U.S. EPA.

10 marine engine standards must be installed. Engines

11 meeting the Tier 4 standard would be required only in

12 those cases where the engine being replaced was a Tier 4

13 engine.

14 --o0o--

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15 AIR POLLUTION SPECIALIST STERLING: All harbor

16 craft will be required, if not already installed, to

17 install a non-resettable hour meter to each engine to

18 monitor engine activity and also keep records for engine

19 operation. All harbor craft will be required to submit a

20 report providing engine and operation information.

21 For harbor craft other than ferries, excursion

22 vessels, tugs and tows, this is a one-time report.

23 However, ferries, excursion vessels, tugs, and tows are

24 required to report how they plan to comply with engine

25 replacement requirements and also how they have complied

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 1 once compliance is complete.

 2 --o0o--

 3 AIR POLLUTION SPECIALIST STERLING: The

 4 regulation applies to vessels that operate within all

 5 California waters, including internal waters and within 24

 6 nautical miles of the coast line.

 7 --o0o--

 8 AIR POLLUTION SPECIALIST STERLING: Listed in

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 9 this slide are the different vessel types that are exempt

10 from the entire regulation such as temporary emergency

11 rescue and recovery vessels, oceangoing vessels, and U.S.

12 Coast Guard vessels.

13 --o0o--

14 AIR POLLUTION SPECIALIST STERLING: Additionally,

15 there are some ferries, excursion vessels, tug boats, and

16 tow boats that are exempt from the engine replacement

17 requirements. These include temporary replacement

18 vessels, registered historic vessels, and near retirement

19 vessels.

20 --o0o--

21 AIR POLLUTION SPECIALIST STERLING: This next

22 section will provide a review of the projected emission

23 reductions from the proposed regulations.

24 --o0o--

25 AIR POLLUTION SPECIALIST STERLING: The

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 1 regulation's accelerated replacement schedule for the

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 2 South Coast provides early reductions of about .2 tons per

 3 day PM and 3.6 tons per day of NOx by 2013 helping them

 4 meet the 2015 federal PM2.5 air quality deadline. This

 5 represents a 30 percent reduction of PM and 25 percent

 6 reduction in NOx.

 7 The statewide schedule provides a .7 tons per day

 8 reduction of PM and 10 tons per day reduction of NOx in

 9 2020, representing a 40 percent and 25 percent reduction

10 of PM and NOx respectively.

11 With the implementation of this regulation, the

12 2015 and 2020 goods movement emission reduction goals for

13 harbor craft will be achieved.

14 --o0o--

15 AIR POLLUTION SPECIALIST STERLING: Here are the

16 anticipated statewide PM reductions for the entire harbor

17 craft inventory in tons per day.

18 The pink upper line is the base line emissions,

19 and the orange lower line is the projected statewide

20 emission reductions from the proposed harbor craft

21 regulation.

22 The declining base line is attributed to mainly

23 normal engine turnover and a decline in the commercial

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24 fishing fleet. Historical data shows about a six percent

25 decline per year in commercial fishing vessels.

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 1 Although uncontrolled PM emissions are projected

 2 to drop through 2025, the proposed regulation would

 3 accelerated these emission reductions. In fact, over the

 4 life of the regulation from 2009 through 2022, there will

 5 be reductions of about five million pounds of diesel PM

 6 emissions due directly to this regulation.

 7 --o0o--

 8 AIR POLLUTION SPECIALIST STERLING: The NOx chart

 9 shows a similar trend as the previous PM chart with

10 increased emission reductions due to the required engine

11 replacements.

12 Again, note the many years of early reductions.

13 Over the life of the regulation from 2009 through 2022,

14 there will be a reduction of 39,000 tons of NOx emissions

15 due directly to this regulation.

16 As I stated earlier, the South Coast will be

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17 subject to an accelerated schedule. This graph shows the

18 emission reductions in the South Coast.

19 The pink upper line is the base line emissions.

20 The green middle line are the emissions of the

21 South Coast vessels if on the statewide schedule.

22 And the orange lower line shows the drop in

23 emission due to accelerated schedule as shown by the

24 arrow.

25 In 2013, the accelerated schedule provides

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 1 significant reductions for the South Coast.

 2 --o0o--

 3 AIR POLLUTION SPECIALIST STERLING: The

 4 reductions resulting from the regulation will reduce near

 5 source cancer risk from harbor craft by about 65 percent

 6 in the Los Angeles and Long Beach areas.

 7 It will also provide numerous non-cancer health

 8 benefits as shown in this slide. These non-cancer health

 9 benefits are estimated to result in a cost savings of 1.3

10 to $2 billion.

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11 --o0o--

12 AIR POLLUTION SPECIALIST STERLING: Staff has

13 evaluated the impact the proposed regulation would have on

14 global warming. The accelerated phase-in of cleaner

15 engines with less polluting technologies along with the

16 reduction of black carbon, which is a likely contributor

17 to global warming, would result in a reduction of

18 greenhouse gas emissions.

19 However, to the extent that the exhaust

20 aftertreatment technologies are used to comply with this

21 regulation, there may be an increase in carbon dioxide

22 emissions due to the increased vessel power usage.

23 --o0o--

24 AIR POLLUTION SPECIALIST STERLING: ARB estimates

25 that this regulation will cost industry about $460

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 1 million. However, because the vast majority of the

 2 engines that the regulation will require to be replaced

 3 are past their useful life, only about a third of this

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 4 amount is attributed to the cost of complying with the

 5 regulation.

 6 This third, approximately $140 million, is the

 7 cost of replacing engines before they reach the end of

 8 their useful life. The impact of the return on owners'

 9 equity ranges from 0.5 to 3.5 percent decline.

10 Overall, most businesses will be able to absorb

11 the cost of the proposed regulation by increasing the

12 costs of service. And the regulation should not have a

13 significant adverse impact on their profitability.

14 --o0o--

15 AIR POLLUTION SPECIALIST STERLING: The

16 regulation would achieve very large emission reductions

17 compared to the cost of those reductions. If the total

18 cost of the regulation is attributed to reducing diesel PM

19 alone, the diesel PM cost effectiveness is $29 per pound

20 it is estimated. If the cost is split between reducing PM

21 and NOx, the cost effectiveness is approximately $15 per

22 pound of diesel PM reduced and about $1800 per ton of NOx

23 reduced.

24 --o0o--

25 AIR POLLUTION SPECIALIST STERLING: As shown, the

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 1 cost effectiveness for the proposed harbor craft

 2 regulation is consistent with recently passed regulations.

 3 --o0o--

 4 AIR POLLUTION SPECIALIST STERLING: There are

 5 some potential funding sources for harbor craft engine

 6 replacements. For example, Carl Moyer funding and the new

 7 Proposition B Goods Movement Emission Reduction Program

 8 bond funds. Additional funds may be distributed by the

 9 port of Los Angeles mitigation funding and the Federal

10 Transit Authority grants.

11 --o0o--

12 AIR POLLUTION SPECIALIST STERLING: As currently

13 proposed, $60 million will be available for harbor craft

14 engine replacements through the goods movement bond fund.

15 To qualify for these funds, the replacement

16 engine would need to be installed two years prior to any

17 applicable regulation compliance date. This funding is

18 available in only certain vessel types, including tug and

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19 tow boats, crew and supply vessels, and commercial

20 fishing. It is estimated that these funds could purchase

21 over 500 propulsion engines.

22 To qualify for Carl Moyer funds, there would need

23 to be a three-year lead time for the engine replacement

24 prior to the regulatory compliance date for regulated

25 vessels. There are no timing restrictions related to

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 1 compliance dates for unregulated vessels. The

 2 availability of these funds varies by local air district.

 3 --o0o--

 4 AIR POLLUTION SPECIALIST STERLING: We're

 5 proposing two changes to the regulatory language proposed

 6 with the notice. If approved by the Board, these will be

 7 subject to a 15-day public comment period. The proposed

 8 regulation requires that ferry, excursion, tug and tow

 9 boat vessel owners to report how they would comply with

10 the engine replacement requirement in 2009 at the time of

11 the initial reporting.

12 The proposed 15-day change would require vessel

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13 owners to report how the vessel would comply by February

14 28th of the year of compliance. Requiring this report

15 within a year of compliance allows the vessel owners to

16 develop a plan based on current technology available and

17 their current economic status.

18 The second change would be to restrict the engine

19 model year determination method based on installing an

20 emission control device to vessels located outside the

21 South Coast area. This change is to prevent any delay in

22 engine replacement emission reductions in the South Coast.

23 --o0o--

24 AIR POLLUTION SPECIALIST STERLING: This slide

25 lists four issues that have been raised either in comments

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 1 received or during the regulation development process.

 2 The first issue regards extending the South Coast

 3 accelerated compliance schedule to the rest of the state.

 4 Staff evaluated the capacity of engine

 5 replacement facilities within the state and calculated

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 6 that the current engine replacement schedule is about the

 7 maximum that these facilities can handle.

 8 Also, an accelerated schedule for the entire

 9 state would increase the cost to the regulated community

10 and reduce the time window for Carl Moyer and bond funding

11 opportunities.

12 Additionally, since more Tier 2 engines would be

13 installed as replacement engines instead of Tier 3

14 engines, long term emission benefits would be reduced.

15 The second issue regards a suggestion that we

16 require in-use crew and supply vessels to replace their

17 engines. For this proposal, we are focusing on the

18 largest emitters of near-source risk. We will be

19 evaluating other vessel types for possible controls in the

20 future. In the meanwhile, both Carl Moyer and bond

21 funding is available to help clean up the crew and supply

22 boat fleet.

23 The third issue involves a request that ARB

24 completely remove the option to extend compliance by one

25 to five years for engines which employ emission control

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 28

 1 strategy to reduce PM or NOx by 25 percent.

 2 As mentioned in the previous slide, this option

 3 would only apply to vessels located outside the South

 4 Coast. By keeping this option in the regulation, we hope

 5 to encourage the development of emission control

 6 strategies for harbor craft that could be used for other

 7 unregulated vessel types such as commercial fishing.

 8 Currently, there are no verified controls for harbor craft

 9 engines.

10 Finally, it has been suggested that we require

11 vessel owners to replace their engines with Tier 4 engines

12 when they become available, unless they prove that the

13 engine is not suitable for their vessel.

14 Since Tier 4 engines will be aftertreatment based

15 designs, we believe that requiring these installations on

16 in-use vessels would be difficult due to the increased

17 weight and size as compared to earlier tiered engines they

18 would be replacing.

19 --o0o--

20 AIR POLLUTION SPECIALIST STERLING: In summary,

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21 the proposed commercial harbor craft regulation meets the

22 goods movement goals 2015 and 2020. It achieves the early

23 reductions in the South Coast air basin and is cost

24 effective.

25 It addresses in-use emission reductions for the

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 1 segment of the fleet, it addresses a segment that poses

 2 the greatest health risk. Additionally, there will be

 3 opportunities in the future.

 4 Therefore, staff recommends that the Board adopt

 5 the proposed regulation. This concludes my presentation.

 6 At this time, we would be happy to answer any questions.

 7 CHAIRPERSON NICHOLS: Thank you, Mr. Sterling.

 8 Before we open it up and I have a couple

 9 questions myself, I believe we need to hear the statement

10 from the Ombudsman about the public participation process.

11 OMBUDSMAN QUETIN: Chairman Nichols and members

12 of the Board, this proposed regulation has been developed

13 with considerable input from environmental organizations,

14 engine and diesel emission control associations, and other

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15 interested parties.

16 Staff began their efforts to develop this rule in

17 December 2004. Since March 2004, staff has held 12 public

18 workshops in Sacramento and Los Angeles with approximately

19 10 to 40 people in attendance. They also held three

20 community outreach meetings in Moss Landing, Los Angeles,

21 and Bodega Bay.

22 In addition, ARB staff participated in numerous

23 industry and government agency meetings presenting

24 information on the Diesel Risk Reduction Plan, the Goods

25 Movement Emission Reduction Plan, and the proposed

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 1 regulatory approach for commercial harbor craft.

 2 The staff report was released for public comment

 3 on September 4th, 2007. Was noticed on the ARB website

 4 with hard copies available in the Cal/EPA library. An

 5 internet message was sent to 1,089 people on the

 6 commercial harbor craft list serve and hard copies were

 7 mailed out when requested.

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 8 Thank you.

 9 CHAIRPERSON NICHOLS: Thank you.

10 To kick off the questions, I have a question

11 first about the exclusion of all Coast Guard and military

12 harbor craft. Do you have any idea what proportion of the

13 inventory those represent within the category of harbor

14 craft? I would imagine it's quite significant.

15 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Is

16 it listed in the other category or not?

17 AIR POLLUTION SPECIALIST STERLING: No.

18 CHAIRPERSON NICHOLS: Well, the reason I'm

19 raising the issue is, you know, it's always very difficult

20 obviously to get a handle on anything that's owned by

21 federal government and especially when it's military. So

22 I understand there's a matter of prudence why you wouldn't

23 start there.

24 But historically California has been able to get

25 a handle, occasionally at least, on federal operations.

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 1 And if it's a big piece of what's causing the problems

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 2 that are effecting people's health on shore, it would I

 3 think be worth making an effort to try to see if there's

 4 not a way that we could move in that area, difficult

 5 though it may be politically.

 6 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: This

 7 is Dan Donohoue.

 8 What we can do on that at least as part of what

 9 we're doing overall on the emissions inventory development

10 that we were getting additional data for is that we could

11 in fact initiate at the same time and effort to look at

12 both the military and the Coast Guard area on that as part

13 of the overall development when we're going to look at

14 what can we do in additional areas.

15 CHAIRPERSON NICHOLS: It's one thing to talk

16 about naval oceangoing vessels. But when craft are

17 operating primarily inside the harbor area, it seems to me

18 there should be some ability to work with them.

19 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: To

20 the extent that they are military tug or tow boats in

21 there, they would be subject. We don't have any

22 restrictions for them in the regulations. So to the

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23 extent they are those vessels, they would not --

24 CHAIRPERSON NICHOLS: They're not exempt.

25 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: They

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 1 are not exempt.

 2 CHAIRPERSON NICHOLS: That's good to know.

 3 My second question, I just didn't understand the

 4 third bullet that you presented under the issues, the

 5 point that you were trying to make. If you could just go

 6 back to that momentarily, the issue of removing an

 7 emissions control strategy model year. I'm sorry. If you

 8 could just explain that.

 9 AIR POLLUTION SPECIALIST STERLING: One of the

10 options to extend the compliance year would be to install

11 a diesel emission control strategy on their vessel. So

12 that would by doing that -- so say put a DPF on a vessel.

13 That could extend your compliance year one to five years.

14 So it's a 2000 engine. It would add five years to the

15 model year that would add onto the compliance five years.

16 CHAIRPERSON NICHOLS: That was the recommendation

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17 you got from some commenters.

18 AIR POLLUTION SPECIALIST STERLING: Right. Some

19 commenters want to leave it in. Some wanted to take it

20 out.

21 CHAIRPERSON NICHOLS: Okay. And then the last

22 point that I think is actually more significant than the

23 other two is on the slide on page 18 of the paper that we

24 have, I just want to clarify the issue here, overall

25 effect on global warming. Because given the world that we

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 1 are now living in, I don't think the Board wants to be

 2 adopting any regulations where there's a net negative

 3 impact on greenhouse gas emissions. I think I understand

 4 what you're trying to say here, but could I please have

 5 some assurance that overall we're not going backwards with

 6 this regulation?

 7 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, we

 8 believe we're going forward so in general the new engines

 9 will have better efficiencies than the engines that are

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10 replaced. And the vast majority of compliance with the

11 regulation will be through replacement of older less

12 efficient engines with more efficient engines.

13 However, since there is the option to apply

14 control devices -- or in the case of ferries we may

15 actually, say, take a better engines and apply an

16 additional control device, that will have some adverse

17 energy consequence. So we will lose some of the benefit.

18 And then in addition, there's an uncounted

19 benefit that doesn't come into greenhouse gases from the

20 diesel PM reductions. So we are reducing the emissions of

21 a substance that is forming and harmful. And we don't

22 have the calculation worked out to make the benefits.

23 So when you look at it, we have two things that

24 should produce significant benefits in one aspect of the

25 regulation that may have an energy cost. We think that's

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 1 necessary for criteria pollutant reduction.

 2 CHAIRPERSON NICHOLS: Well, I think I wouldn't

 3 hold up this obviously important rulemaking proceeding on

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 4 this grounds. But I would really like to see going

 5 forward on any rules that we're looking at some attempt at

 6 a calculation, even if it's within a range, you know, as

 7 opposed to a hard number on what we think the impact is

 8 likely to be on our goals under AB 32. If there's any way

 9 the staff can develop to do that. I think Mr. --

10 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We can always

11 give you a range as long as you're willing to except some

12 are not precise.

13 CHAIRPERSON NICHOLS: There's uncertainty in all

14 of it. I think we can except that. But I think for the

15 Board not to at least show it's tracking the issue would

16 appear to be indifferent to kind of an overarching mandate

17 we now have.

18 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And we can

19 incorporate that into our Final Statement of Reasons

20 that's now on the table as a comment. We can address it

21 there.

22 CHAIRPERSON NICHOLS: That would be good, too.

23 That's enough from me.

24 Other Board members have comments?

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25 Ms. D'Adamo.

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 1 BOARD MEMBER D'ADAMO: I have a question

 2 regarding the accelerated time schedule. And this goes to

 3 other areas of the state.

 4 I see here on slide 43 that one of the issues

 5 apparently raised by the commenters and some of the

 6 witnesses today will be proposing that the accelerated

 7 engine replacement schedule extend to the entire state.

 8 In particulate, I'm concerned about the near risk exposure

 9 of passengers on ferries and excursions. If the engines

10 are available, why not have the Bay Area, San Diego, and

11 the rest of the state benefit from these cleaner engines

12 sooner?

13 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: This

14 is Dan Donohoue.

15 Basically what we're trying to do here is to put

16 in new engines in existing vessels. Certainly if it's a

17 new ferry, we have additional standards with respect to

18 those.

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19 What we've had to do here in this regulation is

20 balance the useful life of these engines versus an

21 accelerated schedule. Right now for the rest of the state

22 the engine life has been -- we have reduced the useful

23 service life of those engines by about seven years. We're

24 providing for the most part 15 year service for the newer

25 fleet.

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 1 To reduce it an additional number of years does

 2 result in a fairly significant additional increase in

 3 expenses. But the biggest issue is the installation

 4 capacity that exists for shops to be able to install new

 5 engines within those. So basically in balancing the

 6 economics, the available installers, and the engines that

 7 can be replaced in there, the overall schedule is what we

 8 feel is technically doable and economically feasible.

 9 BOARD MEMBER D'ADAMO: I would think there's not

10 much of a difference in terms of ages of the fleet in

11 South Coast as compared to other areas, unless, say, Bay

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12 Area, for example, has newer engines.

13 And then as far as installers, I would assume

14 they're regionally based. They're not traveling around

15 the state, are they?

16 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: No,

17 they are not traveling around the state. What we looked

18 at is what is the capacity to install those engines. And

19 we think if we move the entire state to an accelerated

20 schedule, there is insufficient capacity to be able to

21 make those engine replacements.

22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: There is also

23 an emissions trade off that with the accelerated schedule

24 you get more emissions reductions by 2014 which the South

25 Coast desperately needs as part of its attainment plan.

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 1 But you actually have a little bit less in the subsequent

 2 years because some of the replacements have to be done

 3 with Tier 2 engines rather than Tier 3 engines. So

 4 there's kind of economics at work. There's the ability to

 5 make all of the transitions with the capacity to take the

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 6 boats out of service and put them in dry dock. And

 7 there's that emission trade off that you have to make.

 8 We thought the case was very clear in the South

 9 Coast. We have this overriding consideration we have to

10 do everything we have committed to and can to get down to

11 the overall level of NOx reductions needed for PM by 2014.

12 And the rest of the state we felt the other balancing act

13 argued for the schedule we proposed.

14 BOARD MEMBER D'ADAMO: What in minor adjustments

15 were made with the rest of the state, not fully

16 accelerated schedule as proposed, but shaving off a year,

17 for example?

18 DEPUTY EXECUTIVE OFFICER SCHEIBLE: It's a

19 balancing act. So obviously those are all possible

20 options.

21 I don't know what the emission consequences are.

22 Is there's something definitive about the 2017 year and

23 the availability of the better engines?

24 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

25 There would be some trade off with respect to the

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 38

 1 availability of the Tier 3 engines. So as you move that

 2 up, you will end up replacing existing Tier 0 engines with

 3 Tier 2, rather than Tier 3, which the Tier 3 is going to

 4 get you, you know, significantly additional reductions.

 5 The staff recommendation would be if we are going

 6 to move it forward, then from an enforceability and a

 7 consistency standpoint, it would be best to do it for the

 8 entire state, not do it differently in various areas.

 9 STATIONARY SOURCE DIVISION CHIEF FLETCHER: This

10 is Bob Fletcher. I wanted to clarify one of the points on

11 the rebuilds. We are looking at capacity within

12 California. So just because the tug is located in the

13 South Coast doesn't mean it will be replaced -- the engine

14 replaced in the South Coast. We did look at all of

15 California capacity when evaluating the ability of the

16 people to reinstall the engine.

17 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Ferrying of

18 the tug to the Bay Area is not a large amount of time

19 compared to the engine rebuild and the dry dock.

20 SUPERVISOR HILL: If I could follow up on Dee

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21 Dee's comments. There was one question related to the

22 alternative emission control strategies that are

23 available. I think it's my understanding that there are

24 no control strategies that can be added to these current

25 engines that will reduce NOx and PM. Is that true?

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 1 AIR POLLUTION SPECIALIST STERLING: Currently,

 2 there are no verified emission control technologies for

 3 marine.

 4 SUPERVISOR HILL: So we're assuming if they do

 5 create those and put them into operation, there would be

 6 some exemption or alternative benefits from that that we

 7 would be able to give them an extension of time to work?

 8 DEPUTY EXECUTIVE OFFICER SCHEIBLE: They would

 9 have significant emissions reductions earlier than

10 required by the rule. And in light of those, they would

11 be able to delay the most expensive thing which is the

12 replacement of the entire engine.

13 SUPERVISOR HILL: That's the one-year exemption

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14 issue. How is that related? That's on slide 22 we're

15 talking about. If an engine is not available, it would be

16 a one-year extension, is that --

17 AIR POLLUTION SPECIALIST STERLING: There might

18 be some cases where a one-off vessel, which most of these

19 are, if an engine would not be available. We give them a

20 year extension to provide them some extra time to get an

21 vessel engine to match up with that vessel.

22 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: This

23 is Dan Donohoue.

24 What we've seen in a number of the regulations is

25 when the new engines are scheduled to come out, depending

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 1 on what category the manufacturers really are marketing

 2 those engines for, they may not -- the engines for certain

 3 categories may not come up be available until later on.

 4 So as long as the individual has put in the purchase order

 5 in time and through no fault of their own the engine is

 6 simply not available, it has not been delivered, they can

 7 petition that the EO on a case by case basis look at that

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 8 information and make a determination that a delay is

 9 appropriate.

10 SUPERVISOR HILL: So there are two issues we're

11 looking at. One is the availability of engines, and the

12 second is the availability of locations and mechanic shops

13 that can do the work.

14 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Both

15 delay there and the delay in the actual ability to the

16 extent it has to be dry dock, dry dock space that's

17 available. To the extent it's an equipment installer that

18 can install the particular type of engine, CAT engine or

19 whatever, those are things that we've seen in some of the

20 other diesel regulations where those type of issues come

21 up. And we're trying to address those with very limited

22 exemptions for those appropriate situations.

23 SUPERVISOR HILL: Thank you.

24 CHAIRPERSON NICHOLS: Ms. Berg.

25 BOARD MEMBER BERG: Thank you, Chairman.

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 1 On slide 5, what percentage of the Tier 0 engines

 2 make up the total inventory out of the 4200 vessels and

 3 the 8300 diesel engines, what percentage are Tear 0s?

 4 AIR POLLUTION SPECIALIST STERLING: Eighty

 5 percent of the engines.

 6 BOARD MEMBER BERG: So 80 percent of the engines

 7 then actually are going to be replaced by 2016.

 8 AIR POLLUTION SPECIALIST STERLING: Of the

 9 ferries, tugs, and tows, excursion vessels, right.

10 BOARD MEMBER BERG: And the inventory is

11 available to accomplish that, the replacement engines? We

12 really haven't talked about availability of inventory or

13 how long it takes to get these vessels out of the water

14 and how long they're in dry dock. It isn't the same as

15 trucks that make an appointment and drive over and it

16 takes a few weeks.

17 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Two

18 comments there.

19 Number one, as far as the availability of

20 engines, Tier 0, Tier 3 engines, the Engine Manufacturers

21 Association, you know, has indicated that they believe

22 that those engines will be available on the timing.

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23 Tier 2 engines are available right now. So they

24 anticipate that there is not an issue with respect to

25 that.

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 1 Tier 3 engines are actually part of the new EPA

 2 proposed regulation. So the availability of that is still

 3 a bit in question. But right now they believe those will

 4 be offered.

 5 The issue about the installation capacity dry

 6 dock time and all that is the issue that we talked about

 7 before as to why we felt that we do feel there is

 8 sufficient capacity to handle an accelerated schedule for

 9 the South Coast, that we have the installers there. But

10 we do have questions about that being able to handle that

11 for the rest of the state.

12 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Just

13 one clarification that while 80 percent of these engines

14 are Tear 0, we are not addressing 8300 diesel engines in

15 this regulation. We're only addressing 15 percent of

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16 the -- we're only dealing with ferries, tugs, and tows.

17 So 80 percent of them would be replaced in the categories

18 we're covering in this regulation.

19 BOARD MEMBER BERG: Thank you very much for

20 clarifying that.

21 And also in clarification, I think I missed how

22 an individual company determines their turnover schedule.

23 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

24 Could you bring up that extra slide on the schedule?

25 --o0o--

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 1 BOARD MEMBER BERG: For example, on the off-road,

 2 we had the eight or ten percentage of horsepower, and so I

 3 was confused on how that was determined.

 4 AIR POLLUTION SPECIALIST STERLING: This is Todd

 5 Sterling.

 6 This slide here shows the statewide schedule. So

 7 a vessel owner owning a vessel from -- owns a ferry that's

 8 a 1990 ferry. He would look at the engine model year,

 9 determine how many hours of annual -- hours of operation

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10 he had last year, and would either fall into the 2013 or

11 2014 time range for compliance.

12 BOARD MEMBER BERG: That explains why we need

13 that recordkeeping, so now I understand that.

14 And then also is there a registration process so

15 that the local districts are aware of the inventory? And

16 then if an inventory piece is being added or replaced, is

17 there a permitting process that then would drive the BACT

18 decision on which vessel they could purchase?

19 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The

20 implementation and enforcement of this regulation is with

21 the Air Resources Board. The initial phase of the

22 regulation requires that all vessels, all harbor craft

23 provide information with respect to the vessel, location,

24 age of the engine and all that. So there is an initial

25 registration of all harbor craft beyond these.

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 1 The actual implementation of the engine

 2 replacement schedules would be under ARB's enforcement

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 3 division would be carrying out that.

 4 The decisions with respect to BACT determinations

 5 for new ferries, again that would be Air Resources Board

 6 staff making that decision in consultation with the local

 7 air district and with the EO approval of that

 8 recommendation.

 9 BOARD MEMBER BERG: So for a company to purchase

10 a new vessel, then they would submit the vessel that they

11 wish to purchase and get approval of that? How are they

12 going to know what is the current BACT standard?

13 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: For

14 all vessels other than ferries, what they would have to

15 ensure is that they install the current model year U.S.

16 EPA certified marine engine. That is very straight

17 forward.

18 With respect to a new ferry, what the

19 owner/operator would need to do is to submit a review of a

20 BACT determination to the Air Resources Board. And we

21 would work with them in that process of identifying what

22 for that particular ferry application they believe that

23 would be best available control technology. We would

24 review that in consultation with the district and make a

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25 determination as to whether it constitutes best available

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 1 control technology.

 2 One of the issues here is that all ferries aren't

 3 the same. I mean, we have slow speed ferries. We have

 4 high speed ferries. We have different size associated

 5 with those and different types of systems. So we were

 6 unable to make a broad determination of what's technically

 7 feasible, cost effective for ferry applications in

 8 general. So we elected in this case to go on a case by

 9 case basis. We're talking probably about three or four

10 ferries a year at most. So I mean, it's not going to be a

11 tremendous amount of workload.

12 BOARD MEMBER BERG: Thank you very much.

13 SUPERVISOR HILL: One follow up.

14 You mentioned that if engines are not available

15 then there would be an exemption or one-year extension

16 until that engine is available for that model. Could that

17 work if we were to go statewide with the accelerated

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18 schedule? And if an engine were not available, then would

19 you get an extension but you have a purchase order in

20 place to show you're in good faith working towards that

21 goal. Couldn't you do the same thing with a facility or

22 be in the cue for the dry dock facility or replacement

23 facility usage and then be in that cue and have the

24 registration and signed up and whatever purchase orders

25 are a contract is necessary with that facility then shows

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 1 a good faith? And if it can't be met because there aren't

 2 facilities available or the previous job is delayed it, if

 3 that could keep it moving in an accelerated fashion rather

 4 than delaying it. Is that something that --

 5 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I guess we

 6 could have a system like that. But our assessment is that

 7 rather than the infrequent lack of availability of a new

 8 engine that meets the right tier for the vessel, that that

 9 would become commonplace. So the real risk is knowing

10 what we know about the capacity is that we would overload

11 the system. And then we would have competition with who

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12 do we make go first and how do we make sure that the ones

13 that go first are in the area that we've targeted for the

14 earliest emission reductions.

15 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: I

16 think one more comment. When we looked at this overall

17 process, we were able to look at what we felt was the --

18 we called everybody that we could figure out was

19 potentially involved in the marine installation

20 application.

21 What we are not able to evaluate is what

22 additional installations are going to need to be done

23 under the bond program, what additional installations that

24 the districts may elect to do under Carl Moyer, what

25 additional early reductions within the marine vessel fleet

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 1 might come about by specific port action.

 2 In addition, just the ongoing repair and

 3 maintenance of a fleet of 8,300 engines overall. And so

 4 those were hard to do.

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 5 Right now, when we looked at most of those, they

 6 were clearly three months out of being able to have a

 7 space to do anything. So that and with the additional

 8 emphasis that we believe is coming on getting additional

 9 things that are not covered by this regulation marine

10 harbor craft into the program, we think there is going to

11 be even additional constraints on the capacity to do these

12 installations and to do them right.

13 SUPERVISOR HILL: Thank you.

14 CHAIRPERSON NICHOLS: Any other questions? Yes.

15 BOARD MEMBER SPERLING: One small question. That

16 is a technical one in terms of these emissions numbers

17 that we see on slide 17 and onward. How much confidence

18 do we have in these numbers? You know, I know how it

19 works with cars and trucks in terms of test procedures and

20 test cycles and sampling and so on. And, you know, part

21 of it is the deterioration issue.

22 First of all, are these numbers for new

23 engines -- for when the engines are new? Do these take

24 into account deterioration? And how much confidence are

25 there in these numbers?

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 1 CONTROL STRATEGIES SECTION MANAGER RAINFORTH:

 2 These numbers are for in-use engines. It was based --

 3 since most of these engines are developed from off-road

 4 engines, the model was based on the off-road. And then

 5 there is deterioration that's included, and it's been

 6 adjusted for marine application.

 7 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The

 8 test cycle on these is basically a steady cycle with

 9 weightings of various modes anywhere from mainly five

10 mode, you know. So there are those factors associated

11 with it. We have had some additional testing data done on

12 this. So at this point in time, these are the best that

13 we have available.

14 BOARD MEMBER SPERLING: Thank you.

15 CHAIRPERSON NICHOLS: Do you use the same

16 information that EPA is using in their proposed rules?

17 Are we taking advantage of whatever is there?

18 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

19 Basically, this overall proposal is the base engine is

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20 based on the U.S. EPA emission standard, the test method

21 and all that. I think we do have a slightly different

22 possible way on deterioration in here I think. But

23 overall, the numbers are consistent with EPA approach and

24 reflect the EPA base engine type of information.

25 CHAIRPERSON NICHOLS: Thanks.

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 1 All right. I think at this point we're ready to

 2 hear from the public. So we have eleven witnesses who

 3 have signed up. The first three are Jim Swindler, Jeff

 4 Browning, and Richard Smith. And we will be imposing a

 5 three-minute time limit on testimony in addition to your

 6 written comments, of course.

 7 MR. SWINDLER: Good morning. My name is Jim

 8 Swindler. I'm with the Golden Gate Bridge Highway and

 9 Transportation District. And I'm the Deputy General

10 Manager of the Ferry Division.

11 By way of background, we operate five passenger

12 ferries Larkspur to San Francisco and Sausalito to

13 San Francisco.

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14 I first would like to compliment your staff on

15 all the work they've done on this regulation. While we

16 still believe there is some improvements to be made, I

17 want to note that they worked with us over the past

18 several months. They've heard us. They visited a couple

19 ferry operations and seen firsthand some of the issues

20 here.

21 There's been a lot this morning talked about the

22 best available control technology. And I'd just like to

23 add that we would like to see the word "proven" involved

24 in this. Because the technology that we tried in the past

25 that one of my other colleagues will speak about just

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 1 didn't work. There was some problems with it. We'd like

 2 to see the word "proven" in there as well.

 3 So with that and in the interest of time, thank

 4 you for the opportunity to speak.

 5 CHAIRPERSON NICHOLS: Thank you.

 6 Mr. Browning, Mr. Smith, and then John

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 7 Kaltenstein.

 8 MR. BROWNING: Good morning, Madam Chairman and

 9 members of the Board. I'm Jeff Browning from Sause

10 Brothers. I also represent AWO, an international trade

11 organization for tug boats and ferries and the barge

12 industry.

13 And I was also hoping to get five minutes. I

14 have a lot here. Hopefully I won't get the red light.

15 The areas that we work in the member companies

16 work in and protection of the environmental is important

17 to us. We have many members who have already started in

18 the 90s, late 90s and the 2000s, to bring the boats up to

19 Tier 1 compliance.

20 We're the most efficient way to transport things.

21 Our tug boats, the inland barges can carry 60 truckloads

22 with a similar type fuel burn. Oceangoing barges, 750

23 with similar fuel burn.

24 I'm skipping around here, because I've got less

25 time.

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 1 Unfortunately, AWO's concerns with the previous

 2 draft of harbor craft regulation have in large part gone

 3 unaddressed. We now are presented a draft regulation that

 4 will have enormously negative economic impact on the tug

 5 and barge industry. AWO has no choice but to strongly

 6 oppose the California Air Resources Board regulation

 7 harbor craft vessel for the following reasons.

 8 It doesn't accurately address the economic impact

 9 of us and unfairly requires ocean tugs to comply.

10 It does not explicitly accept existing engine

11 hours meters.

12 It sets unrealistic compliance dates.

13 Contains a burdensome application process.

14 And we believe some sections are unconstitutional

15 based on interstate trade.

16 First part I have is oceangoing tug boats.

17 Notwithstanding the provisions of this Title Section 13 to

18 Section 229, the section shall not apply to any oceangoing

19 tug boats and tow boats that shall supercede the

20 requirements of 13 CCR 22991 and 17 CCR 93118 in their

21 entirety for oceangoing tug boats and tow boats. The

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22 purpose of this paragraph oceangoing tug boats and tow

23 boats shall mean tug boats and tow boats with a registry

24 foreign trade and endorsement on the United States Coast

25 Guard documentation.

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 1 AWO strongly recommends that oceangoing tug boats

 2 be removed from the harbor craft regulation and placed in

 3 oceangoing regulation.

 4 Oceangoing tugs operate in a similar fashion to

 5 ships. They do not work close to neighborhoods or close

 6 to shore. They make calls to California ports, but home

 7 ports are outside of the California waters. These vessels

 8 are involved in interstate commerce and not utilized in

 9 ship assist work or duties generally assigned to harbor

10 craft. The growing demand on the national transportation

11 system means oceangoing tugs will be a major component on

12 the future of commodity transportation. Including them in

13 the harbor craft regulation will only limit the numbers of

14 vessels it will serve in the California ports.

15 Economic impact. We don't believe the

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16 ramifications of this regulation have been adequately

17 addressed by CARB staff in the true economic impact. For

18 example, imposing a short life cycle on marine engines

19 will be so costly it will push smaller vessel operators

20 out of business.

21 Typically, main engines on tugs will last many

22 rebuild cycles. Sause Brothers' core fleet all are

23 averaged at 1975 and have been rebuilt many times.

24 Most of the engines have pre-1980 original build

25 dates. To repower those engines can cost and

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 1 two-and-a-half to three-and-a-half million dollars per

 2 tug, sometimes exceeding the total value of the tug. The

 3 current compliance schedules will decimate oceangoing tugs

 4 and ship assist business in the California waters.

 5 My part three engine hour meters I want you to

 6 refer to my comments.

 7 CHAIRPERSON NICHOLS: If you could sum up, I

 8 would appreciate it. I'm letting you use up some of the

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 9 unexpired time of the previous speaker.

10 MR. BROWNING: I heard the staff talk quite a bit

11 about engine replacements. I've consulted our

12 manufacturers. And right now lead time of one year is for

13 EMD engines, and that's our core engine. And we have nine

14 boats look that to repower.

15 You've completely blown my thing with the time

16 limit.

17 AWO requests automatic compliance for the

18 extension dates on replacement engines due to the

19 manufacturers, not a one year, six month. We need

20 automatic compliance or automatic extension for

21 compliance.

22 CHAIRPERSON NICHOLS: I think we understand your

23 concerns.

24 MR. BROWNING: That would be in line with when we

25 can get the engines.

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 1 CHAIRPERSON NICHOLS: And you've explained it in

 2 the letter. We appreciate that. Sorry for the time

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 3 pressure.

 4 MR. BROWNING: The one thing I didn't hit, if I

 5 could have one more minute, is the oceangoing tug

 6 incorporation in this regulation. They do not belong in

 7 it. They don't operate as harbor craft. They operate as

 8 ships. And this fleet was recently added to the

 9 regulation this year, and we haven't had time to even

10 address or look at any of this.

11 If there's 25 to 30 of these tugs running up and

12 down the coast, all of which have to be repowered. And

13 they don't even operate in harbors. They come in and do

14 ports calls and leave and should not be included in the

15 regulation.

16 CHAIRPERSON NICHOLS: Thank you. We understand

17 your point.

18 Do you have a comment?

19 BOARD MEMBER KENNARD: I have a question for the

20 city attorney. In Mr. Browning's letter, there was an

21 assertion that this proposed regulation violates the

22 Submerged Lands Act and is in fact unconstitutional. I'd

23 like a clarification.

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24 SENIOR STAFF COUNSEL VERGARA: This is Floyd

25 Vergara, the attorney on this case.

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 1 With regard to the Submerged Lands Act, we don't

 2 believe this violates the Submerged Lands Act. That act

 3 was specifically designed to address the rights between

 4 the states and the federal government with regard to the

 5 subsoil and mineral rights. And it had nothing to do with

 6 control of air pollution or other forms of air pollution.

 7 So we don't believe that this would violate that statute.

 8 CHAIRPERSON NICHOLS: Thanks.

 9 BOARD MEMBER CASE: Madam Chair, one other

10 question of staff.

11 The comment about oceangoing tugs they shouldn't

12 be in this regulation, and I don't know what potential

13 connection is with this. But one of the proposals within

14 the San Joaquin Valley is to look at short sea shipping.

15 And that is moving truck good movements out of the central

16 part of California and hopefully going along the coast

17 line as a more efficient way to move goods and get them

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18 off the roads and get their pollution out of the valley.

19 How is that connected or is it connected? Can somebody

20 give a little bit of some background there?

21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, the

22 proposals I've seen for that are use fairly large vessels

23 where the trailer would roll on and roll off of the

24 vessel. So that vessel size might be large enough so it

25 didn't apply to our harbor craft rule.

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 1 BOARD MEMBER CASE: Is there any element in terms

 2 of the oceangoing tug boat that they're actually moving

 3 goods and actually not in the harbor environment to impact

 4 adjacent populations?

 5 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

 6 Todd, would you respond to why we included --

 7 AIR POLLUTION SPECIALIST STERLING: Sure. We've

 8 worked with Jason Lewis and Jeff Browning, who just spoke,

 9 with AWO for a while. And they did a survey for us of

10 oceangoing vessels of oceangoing tug boats. They visit

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11 California about 500 times a year, move up along the

12 coast. We think that they belong in this regulation, not

13 in oceangoing vessel regulation. They're the same type

14 and size as regular harbor tugs. So we think they fit

15 better in this regulation.

16 BOARD MEMBER CASE: Is the majority of their

17 travel time out in the open water, or is it actually they

18 spend a fair amount of time in the harbors contributing to

19 that pollution?

20 AIR POLLUTION SPECIALIST STERLING: They spend

21 most their time traversing along California's -- whether

22 outside or inside 24 miles along the coast of California,

23 say going from Oregon down to Oakland or down to the South

24 Coast area. They move all along California's waters.

25 CHAIRPERSON NICHOLS: But it sounds like your

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 1 reason for including them has more to do with the nature

 2 of the engine and the vessel than it does with the duty

 3 cycle; is that right?

 4 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Just

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 5 a couple things. One, they are similar to oceangoing

 6 vessels in that they traverse, come in, drop off their

 7 cargo and leave. They generally do not -- you know, most

 8 of them -- now there are some are in dual service. But

 9 most of them come in and do that.

10 To the extent their certain loads they will

11 traverse within the 24 mile. If they're pushing a barge

12 that has fuel, it will be outside 24 miles. But in

13 looking at the thing, you know, we are dealing with -- we

14 looked at the number. These vessels are coming into the

15 ports 500 times a year here.

16 The other issue associated with them is that the

17 vast majority of these are older engines. Those are 1975

18 engines on a majority of these vessels. Under the

19 oceangoing vessel regulation, what they would be required

20 to do is burn distillate fuel which they are required to

21 do as is and there will be no additional opportunity for

22 emission reductions from those if they're under that --

23 counted as an oceangoing vessels.

24 CHAIRPERSON NICHOLS: Thank you.

25 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We believe

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 1 the emission reductions when they are in port are

 2 significant, and they're in port and close to shore fairly

 3 often. And they're quite different from a vessel that

 4 comes and is in a California port one percent of the time

 5 while it's doing its normal around-the-world journeys.

 6 CHAIRPERSON NICHOLS: Thank you. Okay.

 7 Richard Smith followed by John Kaltenstein and

 8 Carolyn Horgan.

 9 MR. SMITH: Good morning. My name is Richard

10 Smith. I'm General Manager for Westar Marine Services in

11 San Francisco. I'm also a Board member of the American

12 Waterways Operators as part of my company's membership

13 within that organizations.

14 Westar is a woman-owned family business that

15 operates 18 tug boats, 9 crew boats, and 20 barges in

16 San Francisco Bay Area. And we employ about 100

17 employees. And the proposed regulations will have a

18 significant effect on our operations and our ability to

19 stay in business.

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20 Westar certainly supports efforts to reduce air

21 emissions and has in fact utilized the Carl Moyer program

22 since 1996 to re-engine almost our entire fleet. We've

23 replaced more harbor craft engines in the San Francisco

24 Bay Area than any other company. However, legitimate

25 concerns of the tug boat industry presented during

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 1 development of the regulations have mostly not been

 2 addressed. Of particulate note are the unrealistic

 3 compliance dates and the gross underestimation of total

 4 costs involved. Many vessels are going to have to be

 5 re-engined.

 6 And there's going to be disruptions in commerce

 7 when tug boats are unavailable due to time out of service,

 8 engine delivery delays, and limited shipyard resources.

 9 This is going to cost the California consumer much more

10 than is estimated in this proposed rulemaking.

11 And many smaller tug boats companies with limited

12 financial resources will sell their boats outside of

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13 California and just go out of business in our estimation.

14 We have two specific issues we'd like to

15 highlight and request changes in the proposed regulation.

16 First in regards to the December 31st, 2007, date for

17 voluntary compliance retrofitting engines from Tier 0 to 1

18 with resulting change in engine model year, we request a

19 year and a half extension on that date to July 1st, 2009.

20 That will enable us to meet the requirements of the entire

21 rulemaking.

22 Secondly, we also request the extension for same

23 fleet vessels that share compliance dates be broadened.

24 Due to our extensive re-engining under the Carl Moyer

25 Program, Westar has seven vessels that will have a

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 1 compliance date of 2015 and seven vessels with a date of

 2 2017. We would have to re-engine 14 vessels over a four

 3 year period if we took advantage of the one-year extension

 4 that's available.

 5 And based on our experience -- we've done quite a

 6 few of these now. About 36 engines all together. We

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 7 don't believe that we can manage that many re-engines

 8 within that time period. And the single one-year time

 9 extension is just not adequate. We request that this

10 extension be limited to one use.

11 I heard some questions in regards to engine

12 availability. Let me give you a real life example. We

13 ordered two Tier 2 engines under the Carl Moyer grant and

14 the delivery time was one and a half years. We just

15 received these engines. So I'm not really sure why the

16 Engine Manufacturers Association is telling you there's no

17 problem with them being available right now.

18 Finally, I'd like to say we strongly support the

19 comments and changes submitted by the American Waterways

20 Operators regarding these proposing regulations. And we

21 hope that the Air Resources Board will take industry's

22 concerns and comments seriously. Thank you very much.

23 CHAIRPERSON NICHOLS: Thank you.

24 BOARD MEMBER BERG: Madam Chair, I do have a

25 question of staff.

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 1 I appreciate you reminding me that I was going to

 2 ask about the issue of small company versus large company.

 3 And I notice in this rule there is no distinction or

 4 categories for company size. Could you comment on that?

 5 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: As

 6 we went through the process of looking at this particular

 7 category, we were not able to differentiate the economics

 8 associated with the large or the small companies. And so

 9 there wasn't any clear way that we saw different economics

10 to address this.

11 There's fairly limited cost data available on

12 company size. We felt that from a consistency standpoint

13 it was best to have all of these engines replaced on the

14 same schedule, and we're not able to differentiate out

15 anything additional.

16 BOARD MEMBER BERG: I don't know if I'm very

17 comfortable with the fact that 14 vessels in a year seems

18 to be a significant impact to me.

19 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: I

20 mean, there is -- under the current proposal, there is a

21 provision that allows for a one-year extension if you have

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22 engines in the same model year. It would be possible to

23 amend that to allow for a one-year extension for each of

24 those that would extend that time line greater.

25 But right now if you add seven engines in '14 and

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 1 seven engines in '15, it's correct, you could have four

 2 years, if that provision could be re-worked somewhat to

 3 allow for a greater time on that.

 4 BOARD MEMBER BERG: What is the turn around time

 5 for the craft being out -- the vessel being out of the

 6 water? How long does this take? Is this a three-week

 7 process, a month process?

 8 CONTROL STRATEGIES SECTION MANAGER RAINFORTH: I

 9 think it's more on the order of -- we looked at three to

10 six weeks I think for per engine I believe is what

11 information we have.

12 BOARD MEMBER BERG: I just need to state that I'm

13 not very comfortable with this. Thank you.

14 CONTROL STRATEGIES SECTION MANAGER RAINFORTH:

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15 Could I comment on --

16 BOARD MEMBER BERG: Please do.

17 CONTROL STRATEGIES SECTION MANAGER RAINFORTH: If

18 there is $60 million in bond funding as currently proposed

19 for commercial harbor craft and specifically for tugs,

20 tows, and fishing, now to qualify for that, they have to

21 re-engine two years earlier.

22 Now, yes, they have -- their compliance dates are

23 all in one year. But if they were looking for incentive

24 funds, they would have to do that earlier. And would it

25 make sense that they would spread that out over time.

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 1 They do have -- it's in 2015. That is they have, you

 2 know, from like seven years until they need to do that.

 3 So yes --

 4 BOARD MEMBER BERG: But they need to start in

 5 2009. I mean, am I -- I don't think we have two years.

 6 CONTROL STRATEGIES SECTION MANAGER RAINFORTH:

 7 For the very oldest high use vessels for the pre '75s,

 8 they don't have the two years. The first year they would

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 9 miss out on the bond funding.

10 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: In

11 South Coast, but not in the rest of the state.

12 BOARD MEMBER BERG: We're talking 80 percent of

13 the engines are going to be under this rule from 2009 to

14 2016. They're not going to be available for the bond

15 money.

16 CONTROL STRATEGIES SECTION MANAGER RAINFORTH:

17 Everything, but the ones that need to comply in the first

18 year. The others will be. The bond funding will be

19 available to them.

20 BOARD MEMBER BERG: Okay. Thank you.

21 CHAIRPERSON NICHOLS: Mr. Kaltenstein, Carolyn

22 Horgan, and Martin Robbins are next.

23 MR. KALTENSTEIN: Chairman Nichols, Board

24 members, thank you for the opportunity to speak today,

25 staff members. I want to commend you first of all, you do

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 1 an excellent job in this process. I realize it's been a

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 2 few years and we are going to move forward.

 3 My colleague, Terry Shore, could not make it.

 4 She's in Austrailia. I'm here in her stead.

 5 I'd like to address four points and hopefully be

 6 fairly quick on this.

 7 We'd like to see division of the rule into two

 8 parts addressing PM and NOx. And this will facilitate the

 9 adoption by other states in the country of this method so

10 that they can push forward with their progressive option.

11 And that's under federal court precedent we'd like to see

12 that accomplished.

13 This allows for a lot of flexibility for other

14 states to consider the adoption of this rule depending on

15 their particular air quality situation. So we ask that

16 you do that. And we realize it's more work on your part,

17 but we would appreciate that.

18 Secondly, the accelerated compliance schedule,

19 there's been some debate over the issue and I think it's a

20 good one. I think the consensus by the environmental

21 coalition is that we can -- we would like to see the South

22 Coast compliance schedule replicated on a statewide basis.

23 We understand capacity is an issue. We'd like to see any

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24 means used at our disposal, Carl Moyer, ratcheting up

25 that, perhaps looking at other capacity options on the

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 1 west coast, bond funding to move that forward. We think

 2 it could be potentially significant. And it is only

 3 two years, but a lot of that work will change, you know,

 4 transfer dirty engines to clean engines quicker and help

 5 facilitate and advance the air quality in these port

 6 communities that right now is having significant issues.

 7 The third issue we'd like to address -- with

 8 regard to that second one, in the technical report there

 9 is some discussion about a table in fact dealing with the

10 replacement of propulsion engine. And it appears in 2011

11 and 2012 and 2014 there's some space to shift around these

12 numbers. I know the capacity number that was references

13 is 150. And if possible, we can use any means at our

14 disposal to move that around so that we can go forward on

15 the statewide replication of that at the South Coast

16 level. So I don't know if I'm reading that wrong or I

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17 could be just misunderstanding that. So perhaps some

18 clarification from the staff to that issue.

19 Lastly, we feel that oceangoing tug boats should

20 be included under the regulations for the reasons given

21 and also the reasons included in our letter.

22 And, lastly, this is an issue solely on behalf of

23 Friends of the Earth. We'd like to see the Board advance

24 a more progressive position with regard to ferries beyond

25 the Tier 2 BACT to either 85 percent of Tier 2 or Tier 4

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 1 if feasible. And I appreciate your time. Thank you.

 2 CHAIRPERSON NICHOLS: Thank you. Did you want to

 3 respond to the question or the comment?

 4 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: With

 5 respect to the first question, the first comment, on

 6 splitting the regulation, staff is a little confused on

 7 that. This regulation basically requires the installation

 8 of federally approved certified engines. And the

 9 standards for both PM and NOx go together at one time.

10 So it's different than number of the other regs

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11 we've done that have maybe a retrofit system available for

12 PM, so therefore -- so in this case, it would seem to me

13 that a different state could adopt the regulation and say

14 we're adopting it for the NOx and get the PM at the same

15 time or could adopt it for the PM and get the NOx at the

16 same time. So we were a bit confused --

17 CHAIRPERSON NICHOLS: Maybe you can talk off

18 line.

19 Carolyn Horgan, followed by Martin Robbins, and

20 Joe Wyman.

21 MS. HORGAN: Good morning. My name is Carolyn

22 Horgan, and I'm the Vice President of Operations for the

23 Blue and Gold fleet. We operate ferries and excursion

24 vessels in the Bay Area.

25 And I'd like to commend the California Air

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 1 Resources Board and your staff for listening to the

 2 concerns of the California ferry operators. Your decision

 3 to have California regulations for diesel engines on

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 4 vessels built after January 1st, 2009, comply with EPA

 5 standards, ensure that vessel operators in California will

 6 not have to have one set of regulations while operators in

 7 the rest of the country have a different set of

 8 regulations.

 9 Blue and Gold is a privately held company who

10 cares about the environment. In fact, in 2005, Blue and

11 Gold won the Governor's award for our sustainability

12 practices. We have acted proactively by replacing all of

13 our two stroke engines with cleaner burning Tier 1

14 four-stroke engines. The eight main engines and eight

15 auxiliary engines have been replaced over the past seven

16 years at a cost of almost $2 million.

17 The Carl Moyer program financed a portion of the

18 cost of these engines. We feel that we acted in good

19 faith by replacing our polluting engines. In the case of

20 our three Oski class vessels, the reduction of PM meets

21 the Tier 2 engine requirements and the NOx have been

22 reduced by 180 tons over the last seven years.

23 We believe there are a few ways CARB may

24 accommodate operators like us. Possible remedies would

25 either be to ask CARB to allow 20 full years of operation

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 1 for any engine and any vessels installed under the Carl

 2 Moyer Program before the engine would be required to be

 3 replaced. Or a Tier 1 engine installed since 2001,

 4 particularly one that was funded from the Carl Moyer

 5 Program, could have a phase out of 15 years from the

 6 effective date of the regulation.

 7 Thank you for giving me this opportunity to

 8 comment.

 9 CHAIRPERSON NICHOLS: Thank you.

10 Martin Robbins, followed by Joe Wyman, and

11 Richard Alard.

12 MR. ROBBINS: Good morning. Thanks for the

13 opportunity to speak. My name is Martin Robbins, the

14 Marine Services Manager for the city of Vallejo's Baylink

15 Ferry Service. We operate four high speed passenger

16 ferries in San Francisco Bay.

17 I've brought some written comments and I've

18 attached them to any speaker card. I hope those make it

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19 to you. I'm not going to spend time going over all those

20 points.

21 But I want to take a moment to tell that you the

22 California ferry operators do care about the environment

23 and want cleaner air and healthy air for everyone to

24 breathe.

25 We do want to thank the CARB Board for taking our

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 1 input over the past several months. And your re-writing

 2 of the legislation as now proposed certainly reflects they

 3 listened to us and took what we had to say in earnest and

 4 we want to thank the staff for that.

 5 I do want to touch on a couple key points that

 6 will reflect the dialogue we've heard here already this

 7 morning.

 8 One regards I wanted to commend you for removing

 9 the requirement for existing vessels to meet Tier 4

10 requirements. We felt that that was a very onerous

11 potential regulation. We don't think that that -- we

12 think that would have led to a lot of very fine vessels

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13 being sent to the wrecking yard. Tier 4 is going to

14 involve aftertreatment and involve extensive impact to

15 vessels. Putting Tier 3 engines on those vessels will

16 certainly make them cleaner, and we want to commend that

17 effort.

18 With regard to the current regulation where it

19 calls for best available control technology, I'd like o

20 relay a little bit of a personal story -- but our

21 particular story. In 2004, the city of Vallejo

22 voluntarily purchased a vessel with aftertreatment control

23 technology. At that time, we purchased the best available

24 control technology. That technology has failed, and your

25 staff has been given those reports and has seen the

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 1 pictures and the data.

 2 In this case, it would have been better to do

 3 nothing than do something. And I think until we can

 4 include the phrase "proven" along with best available

 5 control technology, we risk the same risk. And case and

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 6 in point, the vessel Solano today produces more pollutants

 7 than our sister vessels do simply for the fact she's

 8 carrying a system that no longer works. I think

 9 reliability and durability are going to be key objective

10 measures that should somehow be written into this

11 regulation to quantify in some way what's best in a proven

12 technology for vessels. So I'd like to sum that up.

13 I'd also like to comment briefly on engine

14 availability and second what you're hearing that it takes

15 a year or so to get the engines.

16 And finally talk about retrofit. We're going to

17 schedule six months for our ferries to be re-powered. And

18 we're going to have to take it to a shipyard in

19 Washington. I know every vessel is a little bit

20 different. But replacing an engine is not a simple task.

21 And if somebody can do it in three or four weeks, I'd like

22 to see it. Thank you.

23 CHAIRPERSON NICHOLS: Okay. Thank you.

24 BOARD MEMBER BERG: Could I ask the speaker what

25 is your experience on how much time it does take?

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 1 MR. ROBBINS: We're scheduling six months. It's

 2 really not a matter of simply unbolting the engine,

 3 unhooking some pipes and wires and lifting an engine out

 4 and putting an engine back in. Because these more

 5 efficient, more environmentally friendly engines are going

 6 to be a lot heavier than they are in existing vessels, we

 7 are actually having to modify the hull of the vessel in

 8 order to accommodate the added weight of the new engine.

 9 And that's going to involve significant shipyard time.

10 BOARD MEMBER BERG: How many projects a year are

11 you expecting your company will have to do under this

12 regulation?

13 MR. ROBBINS: We have two ferries that will

14 require re-powering in 2012. That's the type of impact

15 we're looking at.

16 BOARD MEMBER BERG: Thank you.

17 BOARD MEMBER D'ADAMO: I have a question. How

18 many passengers a day on average?

19 MR. ROBBINS: We're carrying about 2500 to 3,000

20 passengers a day in San Francisco from north bay.

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21 CHAIRPERSON SAWYER: Okay. Martin Robbins, Joe

22 Wyman, Richard all and Greg Bombard.

23 MR. WYMAN: Good morning. My name is Joe Wyman.

24 I'm the Manager of Planning and Development for Hornblower

25 Cruises and Events. We are a 27-year-old California-based

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 1 company that owns about 40 vessels in the state of

 2 California.

 3 The questions that you've asked this morning

 4 about number of vessels in any one year of the program is

 5 valid. We have about 14 vessels that would need to have

 6 their engines replaced within the first two years of this

 7 legislation. And looking at the economic impact on our

 8 company, we don't believe that the staff has done an

 9 adequate analysis to determine the ROE on our company. In

10 fact, we think it could jeopardize our viability as a

11 company to serve the public of California.

12 We think that the -- well, I've given you some

13 written comments, and I hope you'll take a look at that.

14 The one example I've shown in my analysis is involving

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15 historic vessels.

16 The regs that are in front of you say that if an

17 owner can go get his boat on the National Register, then

18 he could be exempted from an engine replacement. We don't

19 know the viability of that. We don't know how many

20 vessels can actually be placed on the National Register.

21 If you look at the National Register, the types of vessels

22 that you have there are masted ships, historic vessels of

23 limited operations. Our vessels, you know, run on a

24 weekly basis and are not of the same caliber and quality

25 those vessels are.

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 1 We would encourage the staff and the Board to

 2 look at maybe defining what would be called a classic

 3 vessel, something short of being on a National Register

 4 and comparable to a classic car under DMV regs where more

 5 flexibility could be given to the boat.

 6 The one boat that I point out -- we also have six

 7 of these -- is the Wild Goose, which was owned by John

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 8 Wayne in Newport Beach. It was originally designed as a

 9 wooden hull mine sweeper. And the engines themselves are

10 large enough that it acts as its balance. When you take

11 this boat into dry dock, you'd have to basically destroy

12 two or two-thirds of its interior hull to get a new engine

13 in it. It jeopardize its design. It jeopardizes its

14 stability certificate with the Coast Guard. And it adds,

15 you know, innumerable amount of time in dry dock. We have

16 about eight vessels that would qualify for what we

17 consider a classic vessel.

18 The other thing I wanted to point out is the

19 modification in terms of duty cycle and in terms of

20 operations. We don't understand or want an understanding

21 of where the 300-hour rule of justification comes from.

22 Excursion vessels are quite different than ferry

23 vessels. Ferry vessels operate a huge number of hours.

24 They burn a lot of fuel. Whereas excursion vessels

25 operate a limited number of hours in a given week and go

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 1 at very slow paces. They have a different kind of duty

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 2 cycle where they will drift around in the inner harbor for

 3 three to four hours burning smaller amounts of fuel.

 4 We think that to be lumped into larger duty cycle

 5 vessels, such as commuter ferries and tug boats, is an

 6 onerous implication for an excursion vessel operator.

 7 CHAIRPERSON NICHOLS: Your time is up. But I

 8 understand you have someone else we've with you.

 9 MR. WYMAN: Richard Alard is here, who's the

10 Director of Marine Operations.

11 MR. ALARD: First, I'd like to thank you for

12 giving us the opportunity to speak.

13 My name is Richard Alard. I'm the Bay Area

14 Marine Director of Operations.

15 There's just one point I wanted to clarify as far

16 as the duty cycles of a dinner cruise boat. Historically,

17 that has not allowed us to get Carl Moyer funding. In

18 fact, on the occasions we've applied, we did not get it.

19 From the criteria I hear today from this future bond

20 funding, I don't think we'll get it either.

21 We are confused or actually concerned that a

22 dinner charter vessel that has a very low duty cycle would

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23 be included in other excursion crafts and probably more

24 concerned that we're included with ferries and tug boats

25 that produce a much more larger quantity and are available

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 1 to this other subsidy. Thank you.

 2 BOARD MEMBER BERG: Madam Chair, I do have a

 3 question of the speaker. You know, one of the concerns is

 4 the fact that because you carry so many passengers and

 5 what emissions that the passengers might be exposed to.

 6 We understand that it is a light-duty vessel. But you

 7 have so many more passengers on board. And could you

 8 address the exposure to the emissions while eating dinner?

 9 MR. ALARD: In Hornblower, we have a wide variety

10 of vessels. In fact, we have a small 50-foot carry craft

11 that will have just a few people on who wouldn't fall

12 under this regulation because they're under 50 horsepower.

13 On the other extreme, we have converted casino

14 vessels with 2200 passengers of which wouldn't fall under

15 this regulation because they're international tonnage and

16 registry.

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17 What we're concerned about are those boats that

18 go around at three knots for the comfort and enjoyment of

19 our passengers. And I can tell you we're extremely

20 concerned about their comfort as far as emissions and so

21 forth. We turn our engines off at the dock so as not to

22 disturb our customers as they come on the boat. We are

23 stewards of the environment. And it's that class of

24 vessels that I'm speaking today.

25 BOARD MEMBER BERG: Well, I've had pleasure of

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 1 being on one of your boats. So it is a lot of fun. But

 2 staff could you --

 3 MR. ALARD: Pleasure to serve you.

 4 BOARD MEMBER BERG: Could you address this

 5 concern?

 6 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: In

 7 the regulation development process, when we started out

 8 lumping all ferries together, we then tried to identity

 9 whether there was some lower type of emissions standard

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10 that could apply to certain types of vessels based on more

11 limited service.

12 What we ended up coming up with was the fact that

13 while these vessels may operate under a lower load, they

14 spend a tremendous amount of time in and around the

15 harbor. They operate a lot of hours overall. We did up

16 come up with a 300-hour lower limit exemption that we felt

17 at this point in time was a reasonable low use limit in

18 those situations. But we were unable to craft a way to

19 allow for these cells that do operate a tremendous amount

20 of time in and around the port area to come up and treat

21 them under a different schedule or different standard than

22 any of the other ferry tugs and tow boats.

23 CHAIRPERSON NICHOLS: Thank you.

24 Mr. Bombard, followed by Diane Bailey, Tim

25 Carmichael, and then Henry Hogo is going to be our last

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 1 speaker.

 2 BOARD MEMBER CASE: Madam Chair, one more follow

 3 up on the issue with dinner boats.

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 4 It seems appropriate that they're included in the

 5 regulation because of the exposure issue. But what's the

 6 issue with them not able to take advantage of what other

 7 regulated industries or regulated boats would be able to

 8 with either the bond money or the Carl Moyer money? It

 9 seems like we should be allowing them the same

10 opportunity.

11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: They have the

12 opportunity, but they have to pass -- in the case of Carl

13 Moyer -- a cost effectiveness test, which depending on

14 their amount of emission and emission reduction

15 opportunity they may not be able to pass.

16 In the case of the goods movement bonds, the way

17 the bond is structured it says goods movement. And

18 therefore we have said we cannot see how something that is

19 basically moving passengers are providing -- a meal

20 opportunity qualifies under that bond.

21 CHAIRPERSON NICHOLS: I think you've put your

22 finger on the dilemma is that they're too small a source

23 to qualify as being very cost effective to use public

24 money on, but they do still cause exposure. So it's a

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25 problem.

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 1 BOARD MEMBER CASE: And 2200 people on a boat I

 2 would think that somehow we should pursue a quantification

 3 of the exposure. It may not have the cost effective based

 4 on the engine and how many miles it's traveling. But

 5 based on the exposure element, it does seem to have a good

 6 argument that they should have that opportunity.

 7 CHAIRPERSON NICHOLS: Okay. Mr. Bombard.

 8 MR. BOMBARD: Good morning. I'd like to talk a

 9 little bit here about Catalina Express. My name is Greg

10 Bombard. I'm President of Catalina Channel Express. We

11 operate under the authority of the California Public

12 Utilities Commission. We operate eight high-speed vessels

13 between four mainland ports, southern California and

14 Catalina Island, which is about 22 miles off the coast of

15 Los Angeles.

16 Our vessels range in size from 149 passengers to

17 450 passengers. Of the fleet of eight vessels, seven of

18 them have been repowered between the years of 2001 and

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19 2005 to meet the minimum Tier 1. And some of them are

20 absolutely better than Tier 1.

21 We currently have the eighth vessel in transit to

22 a shipyard in Washington where four Tier 2 Caterpillar

23 engines, the first four I know of, are going into this

24 vessel.

25 With the finalization of this eighth vessel, the

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 1 total cost for repowering of all eight vessels is

 2 approximately $11 million. 5.5 million of that is

 3 contributed by Catalina Express. The other five is

 4 provided by agencies interested in emissions funding.

 5 I just want to say on top of that we've never

 6 seen funding available that will do the complete job.

 7 When you replace this engine, you don't just replace the

 8 engine. You do a lot of what Marty talked about. You

 9 redo the engine beds. You have to replace transmissions.

10 You have to replace drive lines. And you may end up

11 replacing water jets and everything else. They just don't

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12 come out the same. They either run at a different RPM

13 that changes torque levels.

14 There's much more to this exchange of engines

15 than I think what I've heard talked about today. There's

16 no way you can complete this task within a three week

17 period. It's been a minimum of three months per vessel.

18 The total emissions reductions, we had Ocean Air

19 Environmentalists help us with this. Our NOx reduction

20 has been eight tons per year. Thirty tons per year of PM.

21 Greenhouse gas reductions of 10,000 per year, 10,000 tons.

22 And these reductions our understanding is equivalent to

23 10,000 vehicles being taken off the road.

24 For those of us who were pre-active in installing

25 Tier 1 or better, we believe that the regulation cuts our

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 1 life cycle in those engines and that dollars that were

 2 expended by at least 25 percent, we believe all of these

 3 engines went in with the thought in mind of at least

 4 lasting 20 years. That's the normal turn over period of a

 5 good engine. It should go through at least three major

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 6 overhauls. And I don't mean top end overhauls. I mean

 7 major overhauls.

 8 CHAIRPERSON NICHOLS: Mr. Bombard, your time is

 9 up.

10 MR. BOMBARD: I'd like to press one more piece.

11 And that is when it comes to Tier 4, we'd like to

12 acknowledge the fact that the staff has taken a look at

13 that. I think they see the viability of that system. And

14 we need to actually add into that equation where it talks

15 about best available control technology, the word "proven"

16 needs to go in there. I know you've heard that.

17 Again, I'd like to thank the staff for allowing

18 us to work with them over the last few months. I think

19 they've done a good job of taking a look at what we have

20 to do and what's in front of us here?

21 CHAIRPERSON NICHOLS: Thank you. Question.

22 BOARD MEMBER KENNARD: I have a question for

23 staff. This is the second speaker who said they've

24 invested recently in Tier 1 and now are concerned about

25 the time horizon replacing those. Can you speak to that,

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 1 please?

 2 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

 3 Basically under the regulation, you know, what we're doing

 4 is moving all 0s and 1s out of the equation and having

 5 those replaced with 2 or 3.

 6 They are correct that basically a Tier 1 engine

 7 will have to be replaced with a Tier 2 engine in 15 years

 8 from its original model year. And that is an accelerated

 9 schedule. In the cost analysis that we've prepared here,

10 we've identified what portion of the cost associated with

11 the regulation has to do with removing useful years off of

12 the life of those engines. And that's exactly what the

13 proposal does.

14 CHAIRPERSON NICHOLS: Diane Bailey.

15 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The

16 only other thing I mention when we talk about Tier 1

17 standards is that the Tier 1 standards really were only

18 NOx standards. They did not address PM. So that's an

19 issue when we're looking at one of the primary reasons why

20 we are moving also for further reduction of Tier 1

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21 engines.

22 BOARD MEMBER BERG: Madam Chair, can I ask a

23 follow-up question? Had they not done these re-powers at

24 this time but had waited, how much useful life would they

25 have gotten out of their Tier 0 or -- they would have gone

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 1 to Tier 2; is that correct?

 2 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

 3 That's right. Beginning in essentially 2004, Tier 2

 4 engines would be available. And so if they went to a Tier

 5 2, then the regulation does not require another step after

 6 Tier 2.

 7 CHAIRPERSON NICHOLS: But in addition to the

 8 regulation, you could make a decision to re-power because

 9 you wanted to get a more efficient engine or just because

10 your old engine was in need of being replaced. So I mean,

11 yes, this is a regulation. And it is forcing action. But

12 it's doing it at a pretty moderate pace. Fifteen years

13 versus 20.

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14 Ms. Bailey.

15 MS. BAILEY: Good morning, Chairman Nichols,

16 members of the Board and staff. My name is Diane Bailey,

17 and I'm a scientist with the Natural Resources Defense

18 Council.

19 Thank you so much for this opportunity to speak

20 here today. I'm here in strong support of this

21 regulation. We've been working with staff for the past

22 three years on this rule.

23 I do want to note that we are disappointed that

24 there's a long list of concerns that we've voiced

25 throughout the process, I think none of which have been

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 1 addressed. And my colleague, John Kaltenstein with

 2 Friends of the Earth, has raised some of these.

 3 I don't want to dwell on these issues. I think

 4 this is a really important rule with major public health

 5 benefits. And I urge you to move forward and adopt this

 6 rule today.

 7 However, I do think that there are some very

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 8 small modifications that you can adopt today to

 9 significantly improve the public health benefits.

10 As you know, the harbor craft impacts some

11 shore-side communities in California that are already so

12 heavily impacted. These environmental justice communities

13 really need this relief in the form of pollution

14 reductions from these vessels. And unfortunately,

15 representatives from these communities could not be here

16 today. But they are concerned with this pollution source.

17 And they are looking forward to the adoption of this rule.

18 I'll speak somewhat on their behalf today that their

19 staggering health concerns need to be addressed. So we

20 appreciate this effort.

21 We sent some detailed comments, so I want to

22 highlight one of the best modifications that you could

23 make today to improve this rule would be to synchronize

24 the compliance time frames for the South Coast with the

25 rest of the state.

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 1 I believe the compliance time frame for the South

 2 Coast is eleven years. And that's a really long time.

 3 And for the rest of the state, there's even more time

 4 through 2022. And I think there is a lot of room to speed

 5 up that compliance and offer the earlier public health

 6 benefits to these impacted communities.

 7 I also want to note that there are significant

 8 safeguards already in place in the existing regulatory

 9 language that's proposed here to make sure that we don't

10 run up against the problems of capacity in terms of

11 getting enough vessels replaced or repowered in a year.

12 And that if that did happen, compliance extensions would

13 be possible. So I don't think that that's a significant

14 issue.

15 Another issue I want to raise is shore side

16 power. This is something that was not considered within

17 this rule, because shore side power for tug boats or

18 harbor craft was supposed to be part of the greater shore

19 side power regulation. It's not currently contained in

20 that proposal.

21 So I would urge you to direct staff to include

22 shore side power for harbor craft directly in this shore

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23 side power regulation.

24 And I want to note that if it were included in

25 the harbor craft regulation today, that the greenhouse gas

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 1 impacts would be very positive. And it's worth

 2 considering that impact.

 3 I also want to note there's a significant

 4 opportunity with this rule to get similar emission

 5 reductions in other states. And I hope that the attorneys

 6 can pay close attention to the final regulatory language

 7 to ensure that or facilitate the adoption of this rule by

 8 other states. I don't have direct suggestions on how to

 9 do that, but I hope that the attorneys can give it a close

10 look and try to do that.

11 I want to thank staff for their very hard work on

12 this rule.

13 CHAIRPERSON NICHOLS: Thank you. Thank for

14 keeping to three minutes.

15 Tim Carmichael and then Henry Hogo.

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16 MR. CARMICHAEL: Good morning, Chairman Nichols,

17 members of the Board. Tim Carmichael, Coalition for Clean

18 Air.

19 I echo the comments of Diane Bailey from NRDC and

20 John Kaltenstein from Friends of the Earth.

21 I want to focus on just one piece, which I think

22 is the piece that we're asking for the Board to change

23 from the staff proposal, which we have said in our written

24 comments is a good proposal overall. And we are pleased

25 by the work the agency has done today.

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 1 But I want to highlight the strongest argument

 2 that the staff has for not requiring an accelerated

 3 turnover for the rest of the state on the same time line

 4 as the South Coast is they're concerned about the capacity

 5 of the industry to be able the change over the engines on

 6 time. That's the primary argument against it.

 7 From our perspective, to Chairman Nichols' point,

 8 this is a long time line. Even the accelerated South

 9 Coast version is a long time line. If you're in this

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10 business or in a related business, you're not looking at a

11 one-year or two-year window of opportunity to cash in if

12 you will on this business opportunity. You're looking at

13 a ten-year window of opportunity to either increase staff

14 or expand a facility to enable additional engine turnover

15 or replacement.

16 From our perspective, with the language that's in

17 the regulation already allowing the Executive Officer to

18 give a delay if there is a problem identified in the

19 future, and extension that is, the Board should feel

20 empowered to require the whole state to go with the South

21 Coast time line.

22 I want to emphasize something I don't think

23 anybody has mentioned today. There's a huge emissions

24 benefit associated with that. Six million pounds of

25 diesel PM would be reduced statewide and almost 20 percent

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 1 additional reduction in NOx emissions. Those are

 2 significant emission reductions. And I think they justify

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 3 the Board going with the South Coast time line that's a

 4 two or three year acceleration to the overall program with

 5 the understanding that if problems are identified in the

 6 future and they're real, the Executive Officer will have

 7 the ability to give an extension. Thank you very much.

 8 BOARD MEMBER D'ADAMO: Yes.

 9 CHAIRPERSON NICHOLS: Question.

10 BOARD MEMBER D'ADAMO: It was a question of

11 staff. On the issue of -- well, Tim, you raised capacity.

12 But I think that Mr. Scheible raised another issue. And

13 that is loss of benefits of transferring over to I guess

14 it would be Tier 2 instead of being able to take advantage

15 of Tier 3.

16 The question I have of staff is could we

17 accelerate the time frame perhaps not as much as South

18 Coast so that we could take advantage of those Tier 3

19 engines? And I don't know enough about the time frame in

20 which they'd be available and how much we could shave off

21 on the ultimate implementation in order to achieve that,

22 achieve the benefits without any loss.

23 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The

24 schedule for the Tier 3 engines come on line for this

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25 category are 2013 and 2014. If I recall, I think under

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 1 the statewide schedule about 20 percent of the Tier 0s

 2 would be replaced with Tier 3's under that schedule. The

 3 additional emission reductions associated with those

 4 engines is about 20 percent additional PM and 10 to 15

 5 percent additional NOx associated with those.

 6 So if you're accelerating the schedule one or

 7 two years, you know, you will lose about half of that or

 8 whatever.

 9 The broader issue still is that when you look at

10 this, you are removing useful life from the engine of an

11 additional two years. So we're going from an engine

12 useful life in the range of 20 years down to 13 years and

13 that, you know, some of the other testimony that you've

14 heard with respect to the economics associated with that

15 and the fact that you are removing those engines from

16 service early is going to be a real issue.

17 BOARD MEMBER D'ADAMO: That would apply in South

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18 Coast as well. That's an across the board issue.

19 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

20 That's true. It does apply in the South Coast. But the

21 fleet you're looking at here, the ferry fleet, is not

22 predominant in the South Coast. The ferry fleet is

23 predominant in the Bay Area and outside of the South

24 Coast.

25 BOARD MEMBER D'ADAMO: But the concern I have on

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 1 the ferry fleet is we're talking about exposure. We're

 2 talking about workers who have chosen to utilize to get

 3 their cars off the road, go on a ferry. And if they're on

 4 that ferry every day, I don't feel as compelled on

 5 excursions. You know, you take one of those boats once a

 6 year. But if you're on that boat every day, I'm just very

 7 concerned about the exposure to individuals.

 8 So if we could go back to -- I guess I'm looking

 9 at slide 18. I want to make sure I have a better

10 understanding here.

11 Statewide begin replacing by '09 replace Tier 0,

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12 you're saying Tier 3 would be available in the 2013-2014

13 time frame. If we were to shave off some time on Tier 0

14 to -- giving enough time for the tier -- is it Tier 3

15 engines that would be available by 2013, 2014? So

16 arguable we could shave off two years? Instead of 2016,

17 say 2014. I just want to make certain we wouldn't have

18 any loss with that time frame.

19 CONTROL STRATEGIES SECTION MANAGER RAINFORTH:

20 Are you compressing all the earlier years? Because as you

21 do that, then what you're doing is moving some of those

22 engines into Tier 2 rather than Tier 3s. And is that what

23 you're proposing?

24 BOARD MEMBER D'ADAMO: I don't know what I'm

25 proposing. I'm looking for --

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 1 CHAIRPERSON NICHOLS: We need some help.

 2 CONTROL STRATEGIES SECTION MANAGER RAINFORTH:

 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We're

 4 shrinking the target. I mean, the policy we'd like is to

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 5 say as soon as these better engines are available, as soon

 6 as possible, we'd like to get them in service. And the

 7 window is relatively small as it is because there's no

 8 guarantee.

 9 The way the federal rules work is any engine

10 produced after a certain date has to meet the standard.

11 They can sell engines out of inventory. They don't have

12 to produce it on that date. So there is a delay in the

13 availability of the engines.

14 So there's probably some period of time that can

15 be there. But I think if we make the assumption that we

16 can move them all up and get them done in a year, you're

17 going to find out the new Executive Officer, who hopefully

18 will still be there, will be very busy with this program.

19 This deputy will not be doing it.

20 BOARD MEMBER D'ADAMO: I'm just maybe suggesting

21 in between now and the time that we end up debating and

22 voting on this, if staff -- I wouldn't want to be the one

23 to make the proposal. But from a policy point of view, it

24 seems we can shave some time off.

25 But it sounds like the Executive Officer has the

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 1 discretion on the capacity issue. I just wouldn't want in

 2 an effort to shave time off losing associated emission

 3 benefits with the Tier 2 versus the Tier 3 engines.

 4 CHAIRPERSON NICHOLS: So we understand that

 5 you're trying to balance some complicated issues and

 6 you're not deliberately going slow. But I think we're

 7 pushing you to go back and see if you can sharpen your

 8 pencils and shave any amount of time off in a way that

 9 would benefit people and the rest of the state and not

10 hurt the South Coast. Because that's where I'm from.

11 So --

12 BOARD MEMBER D'ADAMO: Madam Chair, one other

13 point as well. And my focus is more so the ferries. And

14 I don't know how complicated this change would be if we

15 included all types, tugs and tows, excursions as opposed

16 to just ferries.

17 CHAIRPERSON NICHOLS: It might be easier to just

18 focuses in on the ferries. That's another possibility,

19 obviously.

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20 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We can

21 clearly explore these. I think we understand what the

22 Board would like to do. It's okay if the rule gets a

23 little lit more costly, but let's design it in a way we

24 can do it earlier. But let's do it in a way that we

25 doesn't lose emission benefits.

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 1 CHAIRPERSON NICHOLS: Yes. But I think it's been

 2 stated very eloquently by several people on these vessels

 3 that many people are using over significant periods of

 4 time. So it's not just -- we're not just concerned about

 5 the on-shore communities being exposed. We are concerned

 6 about the vessels that have a lot of ridership, you know,

 7 on a daily basis.

 8 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I guess in

 9 going through the process with 15-day changes, if the

10 Board would give us leeway to investigate that and figure

11 out a mechanism that accelerates it and has a safety valve

12 in case we find out that it can't be done.

13 I think some of the testimony we heard, ferries

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14 are among the more difficult vessels to retrofit. So

15 there will not only need to be engine availability, there

16 will need to be enough time so that the fleet gets turned

17 over. On the ferries, we'll have the additional BACT

18 determination.

19 CHAIRPERSON NICHOLS: But it's exactly that kind

20 of thinking that always ends up having public

21 transportation having the worst emissions. We can't

22 except that as an okay thing. We have to try to find a

23 way to deal with it if we can.

24 BOARD MEMBER KENNARD: Madam Chair, let me add

25 another wrinkle of concern in this. Although I fully

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 1 support accelerating this, I don't want us to be in a

 2 position of penalizing people that have made a recent

 3 investment in Tier 1.

 4 So to the extent you can create that balance and

 5 not penalize those -- I don't know if that's possible. I

 6 don't know how many near-term Tier 1 investments have been

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 7 made. But that's a concern of mine that we are shortening

 8 the useful life of those who just made an investment.

 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Can staff

10 tell me under the rule if someone, for example, installed

11 an engine in 2004 it's Tier 1, when is the compliance date

12 for replacing that with a Tier 3?

13 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE:

14 2019.

15 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The people

16 who have used to Carl Moyer money and done investments

17 fairly recently under the proposal have the full 15 years

18 of life that we think is reasonable, not 20 years. And

19 they wouldn't be affected by a provision that tinkered

20 with the 2017 date.

21 SUPERVISOR HILL: I think, Madam Chair, if I

22 could. You're also looking at the fact that Carl Moyer

23 funds are public funds that we used to expedite the

24 emissions reductions, but also not paid for by the

25 corporation, the company, and the ferry firm themselves.

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 1 So I think it's an important consideration when we look to

 2 the future. And the amortization of that cost over 10

 3 years, 12 years, or 15 years or 20 years.

 4 BOARD MEMBER BERG: Also Madam Chair.

 5 CHAIRPERSON NICHOLS: We have many considerations

 6 here.

 7 BOARD MEMBER BERG: Well, I think I have a large

 8 concern over how many vessels a company has to deal with

 9 in an annual period of time. And I'm in agreement with my

10 colleagues on the full time frame.

11 But I am concerned about if your fleet is such

12 that you have to turnover all of your fleet in a

13 three-year period and not be able to take advantage of the

14 time frame, because of the number of hours -- or I'm not

15 quite sure I understand the scheduling.

16 I am concerned about the companies that have 14

17 vessels to turn over in one year. I physically do not

18 understand how that's possible. So I would like to have

19 my colleagues consider that we have this time frame, even

20 if we shorten it from 2009 to whatever time frame we have

21 at the end, but that there is a limit to annually how much

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22 you have to do.

23 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: I

24 appreciate these discussions, because these are the ones

25 we've had.

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 1 CHAIRPERSON NICHOLS: This is going to be painful

 2 if we have to try to engineer a bunch of amendments right

 3 on the spot. But I think it would be best if we not do

 4 that but allow room for a little bit of tinkering, if

 5 that's doable based on the considerations that we've made

 6 here.

 7 We still have to hear from Henry Hogo. Sorry,

 8 Henry. Maybe you have some additional wisdom to add to

 9 this discussion, and then we're going to have to bite the

10 bullet here.

11 MR. HOGO: Good morning, Madam Chair and members

12 of the Board. I'm Henry Hogo with the South Coast Air

13 Quality Management District.

14 The South Coast AQMD staff is in full support of

15 the proposed regulation as presented today. And we urge

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16 your Board to adopt the regulation.

17 I did want to make a couple comments relative to

18 BACT and on the ferries in particular. We have firsthand

19 experience in visiting some of the ferry lines in the

20 Baltic Sea. And they've been using SCR technology as well

21 as other water emulsification and water injection

22 technologies for many years now.

23 And to me, at least, it's a proven technology.

24 It was just unfortunate that the tests on the one ferry

25 that's out here was using a particular technology and we

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 1 hadn't had a chance to look at it very closely. But we

 2 have given to your staff several reports relative to some

 3 of the experiences with the technology. So we think when

 4 staff evaluates BACT it will be proven technology.

 5 The other point I wanted to make on the Catalina

 6 ferry, couple of those vessels actually came in under our

 7 emission credits program. So they came in. They received

 8 funding to clean up their engines and the emission

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 9 reductions were sold as credits. Some of it in the

10 reclaim market.

11 So I think there were early adopters who saw an

12 advantage to having cleaner vessels and also to make up

13 for the costs. So some of these comments, you have to

14 hear the full story about.

15 So with that, I would urge your Board to adopt

16 the regulation as proposed by staff. And I would want to

17 acknowledge the cooperative efforts that we have had with

18 your staff. Thank you.

19 CHAIRPERSON NICHOLS: Thank you.

20 I'm going to make a proposal fellow Board

21 members. This is an important rule, and I don't want to

22 delay it. But I think that it might be smart to continue

23 this item for a month. I think we could actually close

24 the hearing portion, if I'm not mistaken, and simply ask

25 staff to address the principle policy concerns that Board

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 1 members have raised here which have to do with the

 2 possibilities for accelerated turnover, the issue of

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 3 equity or of acknowledgement of early investment and

 4 whether that's being treated fairly and the issue of fleet

 5 size and impact of the program on operators' ability to

 6 actually to manage their businesses. I think those were

 7 the three principle concerns that were raised. And

 8 they're all important concerns.

 9 I think you guys have answers to all the

10 questions. But the fact is we still want to push further

11 on those questions. And given that we have a relatively

12 less onerous schedule coming up next month, we could just

13 bring it back at that point with any recommended changes

14 by staff and have a vote next month.

15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We

16 could essentially do that, and it would give us a chance

17 to put some numbers and simple tables and make the issues

18 that you've raised a little more analytically clear.

19 SUPERVISOR HILL: The emphasis on ferries.

20 CHAIRPERSON NICHOLS: I'm sorry. With that

21 addition, the focus was on the ferries.

22 BOARD MEMBER KENNARD: Madam Chair, can I add one

23 more thing? I think Henry talked about this. If you can

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24 confirm the proven technologies issue and whether or

25 not --

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 1 BOARD MEMBER CASE: If we could ask staff to come

 2 back on the potential -- if we're going to regulate a

 3 group, it doesn't seem in the sense of fairness they

 4 should be excluded from the opportunity to use Carl Moyer

 5 moneys if we're regulating them and they're willing to do

 6 it on an accelerated basis.

 7 CHAIRPERSON NICHOLS: Applicability of Moyer and

 8 whether that would make an amendment to program rules or

 9 whether we can interpret the rules.

10 BOARD MEMBER CASE: Exposes a significant number

11 of people directly.

12 CHAIRPERSON NICHOLS: Okay. Any more? Any other

13 considerations while we're kicking this back to the staff

14 for more work?

15 If not, I want to thank everybody who

16 participated. Clearly, the Board was paying attention and

17 reflecting your concerns. I have no doubt we're going to

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18 move forward and adopt the rule at our next meeting, but

19 we may be making some modest changes to improve it

20 overall.

21 I think there's a widespread recognition that the

22 staff has done an extraordinary amount of work to get us

23 to this point. And we're very grateful to you. So please

24 don't take this as a sign of weakness, but a sign of

25 strength that we're anxious to get this as good as we can

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 1 before it goes out. Thank you very much.

 2 STATIONARY SOURCE DIVISION CHIEF FLETCHER:

 3 Chairman Nichols, can I ask for one clarification? We are

 4 going to focus on ferries, but not excursion vessels; is

 5 that correct?

 6 CHAIRPERSON NICHOLS: That was the request. If

 7 we have to narrow the focus in order to avoid the

 8 disbenefits, the priority would be on the vessels that

 9 have the most people for most of the time.

10 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Thank

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11 you.

12 CHAIRPERSON NICHOLS: Thank you. Any other

13 questions or clarifications? If not we need to take a

14 break, and then we've got one more item to deal with.

15 Take a ten-minute break, please.

16 (Thereupon a recess was taken.)

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