TITLE 13. CALIFORNIA AIR RESOURCES BOARD

NOTICE OF PUBLIC HEARING TO CONSIDER ADOPTION OF TH E 2008

AMENDMENTS TO THE CALIFORNIA ZERO EMISSION VEHICLE REGULATION

The Air Resources Board (the Board or ARB) will con duct a public hearing at the time and place noted below to consider adoption of amend ments to the California Zero Emission Vehicle (ZEV) regulation.

DATE: March 27, 2008

TIME: 9:00 a.m.

PLACE: California Environmental Protection Agency

Air Resources Board Byron Sher Auditorium, Second Floor

1001 “I” Street

Sacramento, CA 95814

This item will be considered at a two-day meeting o f ARB, which will commence at 9:00 a.m., March 27, 2008, and may continue at 8:30 a.m., March 28, 2008. This item may not be considered until March 28, 2008. Please consult the agenda for the meeting, which will be available at least 10 days b efore March 27, 2008, to determine the day on which this item will be considered.

If you have a disability-related accommodation need , please go to http://www.arb.ca.gov/html/ada/ada.htm for assistan ce or contact the ADA Coordinator at (916) 323-4916. If you are a person who needs as sistance in a language other than English, please contact the Bilingual Coordinator a t (916) 324-5049. TTY/TDD/Speechto-Speech users may dial 7-1-1 for the California R elay Service.

INFORMATIVE DIGEST OF PROPOSED ACTION AND POLICY ST ATEMENT

OVERVIEW

Sections Affected : Proposed amendments to title 13, California Code of Regulations (CCR), sections 1900, 1961, 1962, and 1962.1 and th e incorporated “California Exhaust

Emission Standards and Test Procedures for 2005 and Subsequent Model ZeroEmission Vehicles, and 2001 and Subsequent Model Hy brid Electric Vehicles, in the Passenger Car, Light-Duty Truck, and Medium-Duty Ve hicle Classes;” and the adoption of a new title 13, CCR, section 1962.1 and the inco rporated “California Exhaust

Emission Standards and Test Procedures for 2009 and Subsequent Model ZeroEmission Vehicles.”2

Background

In 1990, pursuant to authority granted in Health an d Safety Code division 26, part 5, chapter 1, section 43000 et seq., the California Ai r Resources Board adopted a far-reaching program to significantly reduce the en vironmental impact of light-duty vehicles through the introduction of zero emission vehicles (ZEVs) into the California fleet. The original program required that at least 2 percent, 5 percent and 10 percent of new vehicles have no direct emissions by 1998, 2001 and 2003, re spectively. Although the ZEV program did not require a specific technology, the expectation in the early 1990’s was that the requirements would be met through the introduct ion of battery electric vehicles (BEVs).

The ZEV program has been changed four times since i ts inception – in 1996, 1998, 2001, and most recently in 2003. While program req uirements have been changed to reflect the status of technology, the original obje ctive has not changed. California continues to maintain a strong commitment to the co mmercialization of zero emission passenger cars and light-duty trucks.

In response to program requirements, automakers hav e developed and demonstrated a limited number of ZEVs to evaluate their technologi cal and commercial feasibility. In addition, automakers have commercialized near-zero emission advanced technology vehicles that support ZEV program goals and signifi cantly reduce vehicle emissions.

The program was last modified in 2003 to address th e state of technology and to focus research and development on fuel cell vehicle techn ology. Given the uncertainty in the pace of technology development, the Board directed that an independent panel of experts be convened in the 2006 to 2007 time frame to report on the status of ZEV technologies and their readiness for commercializat ion.

The panel’s findings were presented to the Board in May 2007. Subsequent to presentations by the staff and panel, and after hea ring public comment, the Board adopted Resolution 07-18 directing ARB staff to ret urn to the Board with proposed changes that address the state of technologies need ed to meet the regulation. The Resolution affirmed the Board’s support for the pro gram and emphasized that any changes proposed must strengthen the overall object ives of the program.

The panel’s report has been central to ARB’s assess ment of the state of technology. The report, in combination with data presented at a n ARB ZEV Technology Symposium held in September 2006 and other information collec ted, provides the technical basis for the proposed amendments in this rulemaking.

Description of the Proposed Regulatory Action

In response to the Board’s direction, and in consid eration of the issues related to the commercialization of ZEV technologies, staff propos es to amend the program to reflect the state of technologies and to create an opportun ity for new ZEV enabling vehicle technologies to contribute to compliance. In propo sing these amendments, staff strives3

to sustain the objective of commercialization of ZE V technologies while recognizing the current state of the technologies and the cost impl ications related to their development.

Utilizing the current regulatory framework that pro mpts commercialization incrementally through ZEV production phase-in periods and through a credit structure for the production of increasingly more advanced technologi es, staff proposes amendments in the following areas:

Creation of the “New Path” for 2012. Combine the Base Path and Alternative Path requirements into a New Path where the ZEV obligati on and options to use other vehicle types are expressed as annual percentage of sales. While the Phase III target of 25,000 vehicles is retained, up to 90 percent of the pure ZEV requirement may be met by producing vehicles from a new category calle d “enhanced” Advanced Technology Partial ZEVs (AT PZEVs). Enhanced AT PZ EVs 1 are AT PZEVs with credit

allowances 2 totaling more than 1.0 that use fuels that can be used in a ZEV, like electricity or hydrogen. Example Enhanced AT PZEVs are plug-in hybrid electric vehicles (PHEVs) and hydrogen internal combustion e ngine vehicles. Because vehicles in this category are granted less credit p er vehicle than a pure ZEV, manufacturers choosing this option will have to pro duce a greater number of vehicles than if they complied without this option. The pro posed changes act to simplify the regulation while maintaining the overall outcome of the Alternative Path.

Create New ZEV Types. Create new ZEV Types to enable specific vehicle m arket sector opportunities with both mid range ZEVs and h igher range ZEVs.

Establish Carry-Forward and Carry-Back provisions f or ZEV credits. Modify the credit provisions under the proposed “New Path” to be cons istent with the existing provisions contained in the Alternative Path which allow compl iance over a three year window. Additionally, modify the way credits may be used af ter a specified time to avoid the difficulty experienced now with forecasting regulat ory outcomes because of amassed

credits.

Provide More Equal Treatment of Battery Electric Ve hicles. Eliminate the cap on the use of full-function and city battery electric vehi cles within the Alternative Compliance Path. Change the ratio for substitution for each v ehicle type to be consistent with the credits earned by each ZEV type.

Adjust Credits for AT PZEVs. Modify the AT PZEV requirements, primarily to addre ss PHEVs. The proposed amendments include addressing deployment of “blended” HEVs through an equivalent all electric range (EAER) cre dit, adjusting the credits for advanced componentry and fuel cycle emissions, and other conforming changes.

1 In discussion papers and conversations with stakeh olders, this classification of vehicles has been

referred to as Silver+.

2 Allowances are part of a vehicle’s credit calculat ion and credits are the sum of the allowances given

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Increase Credit for Neighborhood Electric Vehicles. Double the existing credit for neighborhood electric vehicles (NEV) to 0.3 credits per vehicle to reflect the vehicle’s positive environmental benefits but limited functio nality compared with full function battery or fuel cell EVs.

Extend the “Travel” Provision. Extend the provision that allows certain ZEVs plac ed in any state that has adopted California’s ZEV program to count towards California’s ZEV requirement through 2017. Include Type I and II ZE Vs within the provision but sunset the application of this provision for these vehicle s in 2014.

Modify Transition for Intermediate Automakers . Create a ramp up period of six years for

intermediate volume manufacturers who are transitio ning to large volume status. During this time, an automaker would be allowed to meet their ZEV requirements for increasing numbers of PZEVs of which a percentage m ust be AT PZEVs.

Public Availability of ZEV Credit Data . Require that all production data be publicly

available and release ZEV credit bank balance infor mation by a specified date.

Additional Conforming and Technical Amendments. Amend the ZEV regulations throughout to make addition modifications that prov ide for consistency with the above areas and that provide additional technical changes to improve the flexibility and the utility of the regulations. All amendments and add itions to the regulations are described in detail in the Staff Report: Initial Statement of Reasons (ISOR) for the proposed regulatory action, whose availability is described below.

COMPARABLE FEDERAL REGULATIONS

Currently, there are no comparable federal regulati ons mandating auto manufacturers to produce PZEVs, AT PZEVs, and/or ZEVs.

AVAILABILITY OF DOCUMENTS AND AGENCY CONTACT PERSON S

The Board staff has prepared a Staff Report: Initia l Statement of Reasons (ISOR) for the proposed regulatory action, which includes a su mmary of the economic and environmental impacts of the proposal. The report is entitled: “Initial Statement of Reasons for Rulemaking, 2008 Proposed Amendments to the California Zero Emission Vehicle Program Regulations.”

Copies of the ISOR and the full text of the propose d regulatory language, in underline and strikeout format to allow for comparison with t he existing regulations, may be accessed on the ARB’s web site listed below, or may be obtained from the Public Information Office, Air Resources Board, 1001 I Str eet, Visitors and Environmental Services Center, 1 st Floor, Sacramento, CA 95814, (916) 322-2990 at le ast 45 days prior to the scheduled hearing on March 27, 2008.5

Upon its completion, the Final Statement of Reasons (FSOR) will be available and copies may be requested from the agency contact per sons in this notice, or may be

accessed on the web site listed below.

Inquiries regarding the substance of the proposed r egulatory action may be directed to the designated agency contact persons, Dr. Elise Ke ddie, Manager, ZEV Implementation Section at (916) 323-8966 or by e-ma il at ekeddie@arb.ca.gov or Mr. Mark Williams, Air Pollution Specialist, at (91 6) 327-5610 or by e-mail at mwilliam@arb.ca.gov

.

Further, the agency representative and designated b ack-up contact persons to whom nonsubstantive inquiries concerning the proposed ad ministrative action may be directed are Ms. Alexa Malik, Board Administration & Regulat ory Coordination Unit, (916) 322-4011, or Ms. Amy Whiting, Regulations Coo rdinator, (916) 322-6533. The Board has compiled a record for this rulemaking act ion, which includes all the information upon which the proposal is based. This material is available for inspection upon request to the contact persons.

This notice, the ISOR, and all subsequent regulator y documents, including the FSOR, when completed, are available on the ARB Internet s ite for this rulemaking at http://www.arb.ca.gov/regact/2008/zev2008/zev2008.h tm

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COSTS TO PUBLIC AGENCIES AND TO BUSINESSES AND PERS ONS AFFECTED

The determinations of the Board’s Executive Officer concerning the costs or savings necessarily incurred in reasonable compliance with the proposed regulations are presented below.

Pursuant to Government Code sections 11346.5(a)(5) and 11346.5(a)(6), the Executive Officer has determined that the proposed regulatory action would not create costs or savings to any state agency or in federal funding t o the state, costs or mandate to any local agency or school district whether or not reim bursable by the state pursuant to part 7 (commencing with section 17500), division 4, title 2 of the Government Code, or other nondiscretionary cost or savings to state or local agencies.

In developing this regulatory proposal, the ARB sta ff evaluated the potential economic impacts on representative private persons or busine sses. The ARB is not aware of any cost impacts that a representative private person o r business would necessarily incur in reasonable compliance with the proposed action.

The Executive Officer has made an initial determina tion that the proposed regulatory action will not have a significant statewide advers e economic impact directly affecting businesses, including the ability of California bus inesses to compete with businesses in other states, or on representative private persons.6

In accordance with Government Code section 11346.3, the Executive Officer has determined that the proposed regulatory action woul d not affect the creation or elimination of jobs within the State of California, the creation of new businesses or elimination of existing businesses within the State of California, or the expansion of businesses currently doing business within the Stat e of California. A detailed assessment of the economic impacts of the proposed regulatory action can be found in

the ISOR.

The Executive Officer has also determined, pursuant to title 1, CCR, section 4, that the proposed regulatory action may affect small busines ses. Any business involved in manufacturing, purchasing or servicing passenger ca rs and light-duty trucks could be affected by the proposed amendments. Also affected are businesses that supply parts for these vehicles. Some affected businesses may b e small businesses. California accounts for only a small share of total nationwide motor vehicle and parts manufacturing. As discussed below, the Executive O fficer has determined that the proposed regulatory action will not have a signific ant cost impact on directly affected persons or businesses.

The cost savings estimated to result from the propo sed amendments for model year 2012 through 2014 are $1.3 billion annually, depend ent on compliance strategies, due to the reduction in the number of Type III ZEVs req uired to be produced, and the lower cost of the Enhanced AT PZEVs that would be produce d in their place.

Before taking final action on the proposed regulato ry action, the Board must determine that no alternative considered by the agency would be more effective in carrying out the purpose for which the action is proposed or would b e as effective as and less burdensome to affected private persons or businesse s than the proposed action.

SUBMITTAL OF COMMENTS

The public may present comments relating to this ma tter orally or in writing at the hearing, and in writing or by e-mail before the hea ring. To be considered by the Board, written submissions not physically submitted at the hearing must be received no later

than 12:00 noon, March 26, 2008 , and addressed to the following:

Postal Mail: Clerk of the Board, Air Resources Boa rd

1001 I Street, Sacramento, California 95814

Electronic mail: http://www.arb.ca.gov/listpub/co mm/bclist.php

Facsimile submittal: (916) 322-3928

Please note that under the California Public Record s Act (Government Code section 6250 et seq.), your written and oral commen ts, attachments, and associated contact information (e.g., your address, phone, ema il, etc.) become part of the public7

record and can be released to the public upon reque st. Additionally, this information may become available via Google, Yahoo, and any oth er search engines.

The Board requests but does not require that 30 cop ies of any written statement be

submitted and that all written statements be filed at least 10 days prior to the hearing so that ARB staff and Board Members have time to fully consider each comment. The board encourages members of the public to bring to the attention of staff in advance of the hearing any suggestions for modification of the proposed regulatory action.

STATUTORY AUTHORITY AND REFERENCES

This regulatory action is proposed under that autho rity granted in Health and Safety Code, sections 39500, 39600, 39601, 43013, 43018, 4 3018.5, 43101, 43104, and 43105; and Government Code section 6253.4. Thi s action is proposed to implement, interpret and make specific sections 390 02, 39003, 39667, 43000, 43009.5,

43013, 43018, 43018.5, 43100, 43101, 43101.5, 43102 , 43104, 43105, 43106, 43107, 43204, 43205, 43205.5, and 43211, Health and Safety Code; and section 6253.4,

Government Code.

HEARING PROCEDURES

The public hearing will be conducted in accordance with the California Administrative Procedure Act, title 2, division 3, part 1, chapter 3.5 (commencing with section 11340) of

the Government Code.

Following the public hearing, the Board may adopt t he regulatory language as originally proposed, or with non substantial or grammatical mo difications. The Board may also adopt the proposed regulatory language with other m odifications if the text as modified is sufficiently related to the originally proposed text that the public was adequately placed on notice that the regulatory language as mo dified could result from the proposed regulatory action; in such event the full regulatory text, with the modifications clearly indicated, will be made available to the pu blic, for written comment, at least 15 days before it is adopted.

The public may request a copy of the modified regul atory text from the ARB’s Public Information Office, Air Resources Board, 1001 I Str eet, Visitors and Environmental Services Center, 1 st Floor, Sacramento, CA 95814, (916) 322-2990.

CALIFORNIA AIR RESOURCES BOARD

/s/

James Goldstene

Executive Officer Date: January 29, 2008