Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 1 1ENVIRONMENTAL PROTECTION AGENCY 2 3 PUBLIC COMMENT HEARING REGARDING CALIFORNIA'S REQUESTS FOR 4 AUTHORIZATION FOR: 5IN-USE OFF-ROAD DIESEL-FUELED VEHICLE REGULATIONS, 6DOCKET NO. EPA-HQ-OAR-2008-0691; 7 and 8YARD TRUCKS POWERED BY OFF-ROAD ENGINES AND AUXILIARY 9ENGINES ON TWO-ENGINE SWEEPERS REGULATIONS, 10DOCKET NO. EPA-HQ-OAR-2012-0335 11 12 Room 603 131310 L Street, NW 14 Washington, D.C. 15Thursday, September 20, 2012 16 17 The meeting was convened, pursuant to notice, at 18 10:04 a.m., JANET COHEN presiding. 19PANEL MEMBERS: 20JANET COHEN, Presiding Officer 21DAVID DICKINSON 22 MICHAEL HOROWITZMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 2 1P R O C E E D I N G S 2 (10:04 a.m.) 3PRESIDING OFFICER COHEN: Good morning. I would 4 like to welcome you to this public hearing on the 5 California Air Resources Board's, or CARB's, request for 6 EPA authorization of its off-road compression-ignition in7 use fleets regulation, which is otherwise known as the 8 off-road fleets regulation, and CARB's request for 9 authorization of its yard trucks powered by off-road 10 engines and auxiliary engines on two-engine sweepers, or 11 yard sweepers, regulation. 12 EPA announced in two separate Federal Register 13 notices issued on August 21, 2012, that it would be 14 offering an opportunity for hearing for each of these two 15 regulations. Today's single hearing is designed to offer 16 an opportunity for oral comment at each of the Federal 17 Register notices. 18My name is Janet Cohen. I'm Associate Director 19 of the Compliance Division within EPA's Office of 20 Transportation and Air Quality. I will be Presiding 21 Officer for today's hearing. On the panel today with 22 me are: David Dickinson, an Attorney Adviser within theMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 3 1 Compliance Division; and Michael Horowitz from our Office 2 of General Counsel. 3EPA previously held a public hearing in 4 Washington, D.C., on October 27, 2008, based on CARB's 5 initial authorization for its off-road fleets regulation. 6The written comment period for CARB's initial 7 authorization request remained open until December 19, 8 2008. 9On April 14, 2010, EPA held an additional public 10 hearing in Washington based on CARB's February 11, 2010, 11 letter to EPA in which CARB requested that its additional 12 amendments to its off-road fleets regulation be considered 13 by EPA. The written comment period on CARB's amended 14 request closed on May 18, 2010. 15On March 1, 2012, CARB again amended its request 16 to EPA by including amendments passed by the Board in 17 December 2010. Today's hearing is in response to CARB's 18 latest off-road fleets regulation request and the written 19 comment period will close on October 22, 2012. 20Today's hearing is also in response to CARB's 21 yard sweepers authorization request and the written 22 comment period on that request will also close on OctoberMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 4 1 22, 2012. 2 We are conducting this hearing in accordance 3 with Section 202(e) of the Clean Air Act, under which EPA 4 provides interested persons with the opportunity for oral 5 presentation of views and arguments, as well as the 6 opportunity to make written submissions relating to the 7 determinations to be made by the Administrator. This 8 hearing provides the forum for those oral presentations. 9Section 209(e)(2) of the Clean Air Act sets 10 forth specific criteria by which EPA evaluates CARB's 11 authorization request. We ask that those providing oral 12 and written comments direct their statements towards those 13 criteria. 14 The Administrator's determination regarding the 15 action to be taken with respect to California's 16 regulations will be based upon the testimony of this 17 hearing, information submitted by California, relevant 18 written submissions, and other information deemed 19 relevant. 20The hearing will be conducted informally and 21 formal rules of evidence do not apply. However, as 22 Presiding Officer I'm authorized to strike from the recordMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 5 1 statements which are deemed irrelevant or needlessly 2 repetitious and to enforce reasonable limits on the 3 duration of statements of any witness. 4 Witnesses will be allowed to make oral 5 statements, which they may later expand in writing for the 6 record. Witnesses are requested to state their name and 7 affiliation prior to making their oral statements. When a 8 witness has finished his or her presentation, members of 9 this panel may ask the person questions regarding the 10 issues raised in the testimony. 11We have received requests to present oral 12 testimony from the California Air Resources Board, Pacific 13 Legal Foundation, the American Road and Transportation 14 Builders Association, the Manufacturers of Emission 15 Control Association, the Associated General Contractors 16Association, the Construction Industry Air Quality 17 Coalition, and the California Trucking Association, and 18 independent consultant Steven Milloy. If any other party 19 in attendance wishes to present oral testimony at this 20 hearing, please inform us now. 21At the conclusion of all oral presentations, 22 CARB may respond briefly to the oral statements of otherMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 6 1 parties. 2 We are having this hearing recorded and the 3 transcript will be available for public inspection and 4 copying in EPA's Air and Radiation Docket at Docket No. 5 EPA-HQ-OAR-2008-0691. The transcript will be available 6 for Internet access on the Regulations.gov web site. 7 With that, we invite the representatives of the 8 California Air Resources Board to present their testimony. 9(Screen.) 10PRESENTATION OF THE CALIFORNIA AIR RESOURCES BOARD 11MR. WHITE: Good morning. It's a pleasure to be 12 here. My name is Eric White. I'm the Assistant Chief of 13 the Mobile Source Control Division of the Air Resources 14 Board. I'll be providing some background on the off-road 15 regulations, why the regulations are important for 16 California, the history of our request for authorization 17 from EPA, and a description of the regulation. 18Then I will hand the presentation over to Aron 19 Livingston, Assistant Chief Counsel of the ARB's Office of 20 Legal Affairs. Aron will review the criteria EPA is 21 required to consider when reviewing a request for a non22 road engine authorization for California. I know youMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 7 1 are familiar with these issues, as ARB staff gave a 2 similar presentation at previous hearings in October 2008 3 and April 2010. Aron will explain why the regulation 4 meets the conditions for granting California's 5 authorization request. 6(Screen.) 7 CARB adopted the in-use off-road regulation 8 under the authority granted to it by the California Health 9 and Safety Code to adopt all feasible measures to address 10 criteria pollutants affecting the state's health and 11 welfare and to adopt airborne toxic control measures to 12 address pollutants identified as toxic air contaminants. 13(Screen.) 14 CARB has identified particulate matter as a 15 toxic air contaminant. Under California law, CARB is 16 required to make every effort to achieve maximum possible 17 reductions in public exposure and to identify toxic air 18 contaminants using best available control technology. 19The in-use off-road regulation is also a major 20 element of the state's strategy to reduce off-site 21 emissions of nitrogen in order to reduce ambient ozone and 22 particulate matter levels. Under the California andMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 8 1 federal Clean Air Acts, California is under a mandate to 2 meet state emissions standards and national ambient air 3 quality standards. 4 (Screen.) 5CARB originally approved the off-road regulation 6 in July 2007. Then in January and July of 2009 CARB 7 approved amendments to the regulation intended to provide 8 additional flexibility and relief to affected fleets 9 during the recession. CARB approved further major 10 amendments to the regulation in December 2010, again in 11 response to the recession, as well as reduced estimates of 12 off-road emissions, which delayed the start of the 13 regulation by four years and reduced the requirements for 14 all fleets. 15I would note that during the development of 16 those final set of amendments CARB worked very closely 17 with industry, including the Association of General 18 Contractors of America, to develop its proposal that it 19presented to the Board. 20(Screen.) 21As with the off-road regulation, CARB adopted 22 the truck and bus regulation under its authority to adoptMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 9 1 all feasible measures to address criteria pollutants 2 affecting the state's health and welfare. Life the off3 road regulation, the truck and bus regulation is also a 4 major element of the state's strategy to reduce NOx 5 emissions in order to reduce ambient ozone and particulate 6matter levels. 7 ARB approved the truck and bus regulations for 8 adoption in 2008 and approved major amendments to the 9 regulation in 2010, again in response to the recession. 10(Screen.) 11In-use off-road vehicles covered by the 12 regulation are not preempted under Section 209(a) of the 13 Clean Air Act and a waiver is not required. In September 14 2011, after the amendments were formally adopted, 15 California submitted those parts of the regulation that 16 apply to in-use motor vehicles to EPA as a revision to the 17 California state implementation plan. EPA approved the 18 SIP revision on April 4, 2012. 19California submitted an authorization request to 20 EPA for those parts of the regulation that apply to in-use 21 off-road engines. No party requested that a hearing be 22 held today for that authorization request and thereforeMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 10 1 the remainder of our presentation will focus on the in-use 2 off-road regulation authorization request. 3(Screen.) 4 The in-use off-road regulation is one of a 5 number of in-use non-road regulations California has 6 submitted to EPA for authorization affecting non-road 7 engines. To date EPA has granted authorizations for the 8 airborne toxic control measure for transport refrigeration 9 units, TRU ATCM, in 2009, which was upheld in April 2010 10 by the Court of Appeals for the D.C. Circuit, as well as 11 authorizations for California's shore power and harbor 12 craft regulations in 2011, December 2011; cargo handling 13 equipment ATCM in February 2012; and the large spark14 ignited fleet regulation in April 2012. 15CARB's request for authorization for the off16 road regulation today was first submitted for 17 authorization -- was first submitted by California in 18 August 2008, and California filed supplemental comments on 19 June 12 and December 29, 2009, February 11, 2010, and 20 March 1, 2012. This is the third hearing on this waiver. 21The authorization is critical to California as 22 it would allow CARB to begin to implement the in-useMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 11 1 performance standards and associated enforcement 2 provisions of the regulation, thereby achieving critically 3 needed emission reductions. Authorization will also allow 4 affected fleets to plan and building for compliance. With 5 the first compliance date of January 1, 2017, affected 6 fleets need certainty today and need the authorization 7 now. 8(Screen.) 9I'm going to wrong way, aren't I. 10(Screen.) 11There we go, okay. 12 Now I will briefly describe the in-use off-road 13 diesel-fueled regulation and its current status. In our 14 presentation to the EPA at the October 2008 and April 2012 15 hearings and in our written submittals, CARB has described 16 in detail the specific provisions of the off-road 17 regulation. I'd like to give an overview of the 18 regulation here today. 19The off-road regulation addresses emissions from 20 in-use off-road diesel-fueled vehicles 25 horsepower or 21 greater and establishes a statewide program to reduce off22 road fleets emissions of NOx and diesel PM. TheMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 12 1 regulation requires all off-road fleets to report their 2 vehicles to CARB and to label them. It establishes in-use 3 performance requirements for off-road diesel-fueled fleets 4 that are strictest for the largest fleets. The regulation 5 provides numerous other flexibility provisions, including 6 various exemptions from having to meet in-use performance 7 requirements. 8The Surplus Off-road Opt-in for NOx program, or 9 SOON, is aimed at achieving additional NOx reductions in 10 areas that need greater emission reductions than other 11 areas of the state. For SOON to be effective in a region, 12 an air district's governing board must opt into the 13 program and provide incenting funding to fleets that fall 14 into the program. To date, only the South Coast Air 15 Quality Management District has opted into this program. 16(Screen.) 17 The off-road regulation applies to large fleets, 18 greater than 5,000 horsepower in total, beginning in 2014; 19medium fleets, with combined horsepower between 2500 20 horsepower and 5,000 horsepower, beginning in 2017; and 21 small fleets, 25 horsepower or less, beginning in 2019. 22 It imposes fleet average targets that then becomeMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 13 1 increasingly stringent over a ten-year period. 2 If a fleet cannot or chooses not to meet the 3 fleet average target, then it will have to fulfill the 4 best available control technology, or BACT, requirements 5 within a given compliance year. This requires a fleet to 6 retire, repower, designate for low use, or retrofit a 7 certain percentage of that fleet's horsepower each year. 8 These BACT rates start out at 4.8 percent of the fleet's 9 total horsepower beginning in 2014 and then increase to 10 10 percent annually thereafter over the compliance time line. 11The regulation also restricts the fleets from 12 adding older dirtier vehicles into their fleets. 13(Screen.) 14 Since CARB's staff's last presentation to EPA on 15 this issue, CARB in December 2010 approved major 16 amendments to the off-road regulation, which I'd like to 17 summarize here. The amendments were intended to provide 18 significant near-term economic relief for off-road fleets 19 covered by the rule. These amendments delayed the 20 regulation's start date for all fleets by four years. 21 Additionally, CARB simplified and reduced the annual 22 requirements of the off-road regulation so that in eachMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 14 1 compliance year a fleet would only have to meet a single 2 emissions target. The annual BACT requirements were 3 reduced from a 28 percent turnover and retrofit 4 requirement to a combined 4.8 to 10 percent turnover or 5 retrofitting requirement. This means that a fleet will 6 have both lower BACT requirements and more flexibility to 7 choose between turnover or retrofitting to meet -- to 8 establish compliance. 9 The amendments also removed all mandatory 10 retrofitting requirements in the regulation, so that 11 retrofitting is now a compliance option, not a compliance 12 requirement. 13 Additionally, the low-use threshold was raised 14 from 100 hours per year to 200 hours per year. This will 15 exempt an additional 10 to 12 percent of the least used 16 vehicles in the fleet from all cleanup requirements, 17 resulting in overall lower compliance costs. 18 (Screen.) 19 To further simplify the regulation, CARB also 20 included an optional simplified compliance path for the 21 smallest fleets in the state. Such fleets can simply 22 phase out their oldest vehicles as their sole means ofMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 15 1 compliance. 2 Finally, the credits for early actions were 3 expanded to encourage progress towards cleaner vehicles 4 made during this interim period before compliance actions 5 are required. 6Overall, the 2010 amendments made the regulation 7 simpler and less expensive to comply with, while still 8 maintaining the important emissions reductions benefits of 9 the regulation. 10I would now like to turn things over to Aron 11 Livingston to take us through the criteria that EPA must 12 consider in granting an authorization and applying that 13 criteria to California's request for authorization. 14 (Screen.) 15MR. LIVINGSTON: Thank you, Eric. 16Good morning to the hearing panel and audience 17 members. Section 209(e)(1) expressly preempts all states, 18 including California, from adopting emissions standards 19 for new locomotives and engines and new engines under 175 20 horsepower primarily used in farm and construction 21 equipment. 22 Section 209(e)(2) establishes an impliedMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 16 1 preemption that further prohibits states other than 2 California from adopting their own emissions standards and 3 other emission-related control requirements for other new 4 and in-use non-road engines. California has, however, 5 been vested by Congress with the right to adopt emission 6 standards for these other non-road engines, but must 7 obtain authorization from EPA. 8EPA must grant California's request for 9 authorization unless it can make the specific findings set 10 forth in Section 209(e)(2). 11(Screen.) 12 First, California in adopting the non-road 13 emission requirements -- 14 PRESIDING OFFICER COHEN: Just minimize. 15MR. LIVINGSTON: I guess we're safe. 16(Screen.) 17 First, California in adopting the non-road 18 emissions requirements must make a finding of 19protectiveness, that its standards are in the aggregate as 20 protective of the public health and welfare as applicable 21 federal standards. Section 209(e)(2) directs the 22 Administrator to grant the authorization request unlessMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 17 1 she finds that CARB in making its protectiveness finding 2 acted arbitrarily and capriciously, which is a high legal 3 standard. 4 (Screen.) 5The Administrator may also deny authorization if 6 she finds that California does not need its emission 7 program to meet compelling and extraordinary conditions, 8 and that's a test that we've met repeatedly, and I'll talk 9 about that in a minute. 10(Screen.) 11The third and final prong is that the 12 Administrator may deny authorization if the California 13 standards and accompanying enforcement procedures are 14 inconsistent with Section 209. EPA has long held that 15 "consistent with Section 209" means the regulation does 16 not conflict with Section 209(a) and that it's not 17 regulating new motor vehicles. 209(b)(1)(C) and 18 209(e)(1),l and I'll go through each of those. 19(Screen.) 20It's also well established that EPA can only 21 consider those three criteria set forth in 209(e)(2), that 22 EPA must give substantial deference to California's policyMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 18 1 judgments, and that the burden is on those who oppose the 2 granting of the authorization to show why it should not be 3 granted. 4 (Screen.) 5So back to the first prong, protectiveness. The 6 Board made its initial protectiveness finding for the off7 road regulation in Resolution 07-19 back in July of 2007. 8It was subsequently confirmed in the January and July 9 2009 resolutions and most recently in Resolution 10-48 in 10 December 2010. It was recognized by the D.C. Circuit in 11 EMA versus EPA and recently by the court in the TRU ATCM 12 decision that Congress has not granted EPA authority to 13 adopt emissions standards for in-use non-road engines, and 14 by providing that California is the only state that may 15 obtain authorization from the EPA to adopt standards for 16 in-use non-road engines Congress has effectively provided 17 that California is the only government agency with 18 independent authority to adopt and enforce its own 19 emissions standards and other requirements for these 20 engines. While other states may opt to adopt California's 21 standards, they may do so only after California has 22 received authorization, and the standards must beMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 19 1 identical to those adopted by California. 2 Because EPA cannot adopt its own standards for 3 these in-use non-road engines, California's standards are 4 necessarily as or more protective without question. 5 (Screen.) 6 On to compelling and extraordinary need, the 7 second prong. EPA has long held that "compelling and 8 extraordinary conditions" refers to the factors that tend 9 to cause pollution. With the unique geographical and 10 climatic conditions of the state, combined with high 11 numbers and concentrations of mobile sources, California 12 continues to have the worst air quality of any of the 50 13 states. The D.C. Circuit in the TRU ATCM decision 14 affirmed past numerous decisions that the statutory 15 language as well as the detailed legislative history of 16 the Clean Air Act affords California broad discretion in 17 assessing the state's regulatory needs. 18 (Screen.) 19 So California, as evidenced by the South Coast 20 and San Joaquin Valley Air Basins, continues to have the 21 worst air quality of any state in the Union. Even during 22 the midst of the recent economic downturn and recession,Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 20 1 both air basins continue to have numerous exceedances of 2 ozone and PM 2.5 state and federal standards. 3(Screen.) 4 So, moving on to the third prong of the waiver 5 criteria, the requirements of the in-use off-road 6 regulation do not conflict with Section 209(a) or (e)(1). 7 The regulations do not regulate new motor vehicles or 8 engines, new locomotives or engines, or new off-road 9 engines under 175 horsepower used in farm and construction 10 vehicles and equipment. To the extent that the regulation 11 require BACT for NOx, the regulation does not establish 12 emission standards for new engines used in such cleaner 13 vehicles. Those standards had previously been adopted by 14 EPA and CARB in other rules. Additional, the in-use 15 off-road regulation does not require turnover of any 16 vehicle less than ten years old. 17 (Screen.) 18So, the in-use off-road regulation meets the 19 first prong of the Section 202(a) test in that it is 20 technically feasible and provides significant lead time 21 and flexibility. CARB in 2007 fully considered cost of 22 compliance and found the requirements to be cost-effectiveMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 21 1 and affordable for most fleets and, in response to the 2 severe economic recession, the amendments adopted in 2010 3 relaxed the regulation's requirements, lowering the cost 4 significantly below what the 2007 version of the 5 regulation would have cost. 6(Screen.) 7 As to feasibility, the regulation provides 8 sufficient lead time and compliance flexibility, and we go 9 into some detail on that. Pending authorization, the 10 requirements commence in 2014 for large fleets and are 11 phased in over many years. For example, fleet averages 12 are gradually phased in over a ten-year period, and fleets 13 that cannot meet the fleet average targets are never 14 required to turn over more than 10 percent of their 15 horsepower in any one year. 16(Screen.) 17 Fleets may choose among many compliance options: 18retrofitting their vehicles with exhaust systems with 19 verified emission control devices, or VDECs, replacing the 20 engines in existing vehicles with cleaner engines, that is 21 repowering, replacing older, higher emitting vehicles with 22 newer vehicles equipped with cleaner engines, retiringMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 22 1 high emitting vehicles, and-or designating high emitting 2 vehicles as low use, those that operate less than 200 3 hours per year. 4 Compliance with the regulation is possible using 5 existing technology. For example, the stringency of the 6 fleet average is phased in over time and requires that 7 fleets meet the emissions requirements only through use of 8 existing certified off-road engines or the use of VDECs. 9 In the early years, the fleet average can be met by 10 phasing out the use of Tier 0 and Tier 1 engines, in that 11 the regulation only requires fleets to upgrade to existing 12 Tier 2 non-road certified engines. Only in later years 13 will Tier 3 and Tier 4 engines be needed to meet the fleet 14 average requirements. Fleets are not required to upgrade 15 to Tier 3 or Tier 4 engines if the engines are not 16 available. 17 Additionally, the use of VDECs is no longer 18 mandatory, and for small fleets if VDECs are not available 19 or cannot be safely installed in certain fleets, fleet 20 owners are exempted from compliance for those vehicles. 21(Screen.) 22 As to the SOON program, it's also feasible. ItMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 23 1 affects few fleets and utilizes incentive moneys. Most 2 fleets will not be affected at all by SOON because it only 3 applies in air districts that opt in and a district can 4 only make it mandatory for the largest and dirtiest 5 fleets. As stated, only the South Coast Air Quality 6Management District has chosen to participate in the SOON 7 program so far. 8(Screen.) 9On the new engine -- well, yes. As to 10 technology of the new engines, the regulation will push 11 fleets to upgrade to newer engines and vehicles. In the 12 initial statement of reasons and technical support 13 document, CARB fully described the state of technology for 14 compliance with both requirements. Interim Tier 4 engines 15 are available now and final Tier 4 engines will begin to 16be available for some horsepower groups in 2013. 17 (Screen.) 18As to VDECs, they're no longer mandatory. 19Although they might be a viable option for some fleets, 20 they are now a compliance option, and for small fleets if 21 a VDEC is not available or cannot be safely installed that 22 vehicle is exempt from the BACT requirements of theMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 24 1 regulation. 2 For those fleets that wish to use VDECs to 3 comply with the regulation, there are currently nine Level 4 3 PM systems verified for off-road use. Level 3 systems 5 are the most effective ones, those that reduce diesel PM 6 at least 85 percent. 7 (Screen.) 8So now I'll go into some detail on, in addition 9 to the technologies that can be applied, some compliance 10 flexibility provisions that were added to the regulation 11 after the last hearing. They include numerous provisions 12 that provide fleets with flexibility. For example, small 13 fleets do not need to begin to meet the emissions 14 requirements until 2013 and are not required to turn over 15 vehicles to meet the BACT requirements. Similarly, fleets 16 in counties that currently are in attainment and public 17 fleets that reside in rural counties with low populations 18 may comply as small fleets regardless of the total 19 horsepower in their fleet. 20As a result of the many early credits available, 21 many large fleets have accumulated significant credits 22 that will allow them to be in compliance during theMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 25 1 regulation's first years. The regulation also exempts 2 from in-use performance requirements low-use vehicles that 3 operate less than 200 hours per year, emergency vehicles, 4 vehicles engaged exclusively in agricultural operations, 5 as well as several other types of vehicles. 6Finally, the regulation allows compliance 7 extensions if there are manufacturer delays in making 8 retrofits or new vehicles or engines available. 9(Screen.) 10There are also BACT exemptions for large and 11 medium fleets. Vehicles less than ten years old, 12 specialty vehicles for which no used equipment or repowers 13 are available, vehicles retrofitted within the last six 14 years, vehicles equipped with OEM diesel particulate 15 filters, and vehicles with interim and final Tier 4 16 engines. 17 Additionally, if a fleet installs the highest 18 level PM VDEC before January 1, 2013, that vehicle is 19 exempt from the BACT requirements for life. The fleet is 20 only allowed to apply this exemption to up to 15 percent 21 of its fleet horsepower as of December 31, 2012. 22 (Screen.)Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 26 1As to BACT exemptions for small fleets, they're 2 very similar to the larger fleets. They're never required 3 to turn over the vehicles in order to meet the BACT 4 requirements. 5(Screen.) 6In summary, the regulation is technically 7 feasible and provides significant compliance flexibility 8 to fleets. To the extent that the regulation requires use 9 of technology anticipated for the future, it addresses the 10 issue by exempting stakeholders from taking action or 11 giving them additional lead time to comply. 12 (Screen.) 13While the regulation was being developed, 14 stakeholders raised concerns that some exhaust retrofits 15 could present safety hazards by impairing operator 16 visibility. To address this concern, the California 17 Division of Occupational Safety and Health, OSHA, and CARB 18 did a joint study of retrofit impacts on the operator's 19 view in 2010, and earlier this year CAL-OSHA issued a new 20 regulation to cover exhaust retrofits. 21Safety concerns do not impact the feasibility of 22 the regulation because: first, the regulation has alwaysMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 27 1 exempted vehicles that cannot be retrofitted safely; and 2 second, the regulation has now been amended to completely 3 remove mandatory retrofitting. 4 (Screen.) 5When EPA reviews the technological feasibility, 6 they give consideration to costs and, as indicated in the 7 previous slide, sufficient lead time exists to permit the 8 manufacturers of engine retrofit devices to develop the 9 technology necessary to meet the standards and other 10 requirements. 11In the context of in-use regulations, the crux 12 of the analysis on consideration of costs is whether 13 sufficient lead time exists for development and 14 availability of the technology by manufacturers that would 15 allow fleet operators to comply with the regulation. 16 Thus, the cost passed on to the purchasers by 17 manufacturers will be largely subsumed in the initial 18 consideration of the cost to the new engine manufacturers. 19EPA and CARB have respectively determined that 20 the manufacturers of those new off-road engines will be 21 able to comply within the time provided for their 22 compliance. Additionally, CARB in adopting a regulationMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 28 1 in 2007 further considered whether such costs could then 2 be passed on by the fleet operators to their customers and 3 determined that fleets will largely be able to absorb or 4 pass on the cost to the customers. 5As discussed below, due to the recession which 6 occurred since 2007, CARB has modified the regulation to 7 make it much more affordable and much less burdensome than 8 as originally adopted. 9(Screen.) 10Cost was one of the issues that CARB carefully 11 considered and analyzed during development and adoption of 12 the in-use off-road vehicle regulation in 2007. The staff 13 conducted a three-year-long public process discussing 14 various proposals for the regulation, held over a dozen 15 public workshops, and held two workshops focused solely on 16 how the cost of the regulation was estimated and whether 17 compliance was affordable. 18Moreover, the December 2010 amendments have 19 greatly reduced the compliance requirements and also 20 provided fleets with early compliance credits that will 21 allow fleets to significantly reduce their compliance 22 costs throughout the life of the regulation, especially inMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 29 1 the near term. 2 (Screen.) 3The amendments approved in December 10 will 4 result in a significant cost savings for affected fleets 5 versus the original regulation. The total cost over the 6 life of the off-road regulation will be reduced by 72 7 percent, a cost savings of over $1.5 billion versus the 8 original. The estimated cost of the off-road regulation 9between 2010 and 2015 would be reduced by 97 percent, from 10 over $1 billion to approximately $33 million in 2010 11 dollars. 12 Additionally, the peak year cost will be reduced 13 by almost 73 percent, from $542 million to $146 million in 14 2010 dollars, and the peak year cost delayed -- will be 15 delayed from 2013 to 2019. 16So this is a dramatic change from prior ARB 17 authorization submittals, in response to some of the 18 comments that we've heard in prior hearings. 19(Screen.) 20So has the recession affected the analysis? 21 Well, there's no dispute that the most serious economic 22 recession since the Great Depression has occurred inMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 30 1 California and elsewhere. But this should not change the 2 analysis that EPA applies when considering CARB's 3 authorization request. CARB has adequately addressed the 4 impact of the recession on off-road emissions and has 5modified the regulation accordingly to reduce the economic 6 impact on affected fleets. 7 Additionally, there has been no dispute that the 8 technology to comply presently exists in the time frame 9provided for compliance. 10Questions of how best to address the impact of 11 the recession on off-road fleets, how to delicately 12 balance the health and welfare needs of the state against 13 the financial costs of the regulation and the ability of 14 fleets to do business in California are, as EPA has 15 acknowledged, best left to the state to decide. 16The recession and its economic impacts raised 17 special cost concerns as opposed to broad feasibility 18 questions. The impact of the recession on the total costs 19 of the regulation and its effect on the emissions 20 inventory are questions related to cost-effectiveness, a 21 question that EPA has long deferred to California's 22 judgment, which California addressed in amending theMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 31 1 regulation in December 2010. 2 (Screen.) 3Sorry, I was behind on the slide there. 4 (Screen.) 5We're good. 6Okay. Moving on, the second prong of the 7 consistency test is whether the federal and state test 8 procedures are able to use the same test unit or engine. 9Manufacturers can use the same test unit or engine to meet 10 both. This test of consistency is satisfied here because 11 there is no issue as to whether the same in-use engine can 12 meet both federal and state test procedures since federal 13 regulations for in-use non-road engines do not exist. 14 To the extent that fleets voluntarily elect to 15 use new engines to meet the regulation's requirements, the 16 state certification test procedures are set forth in a 17 different regulation and are in basic alignment with 18 federal new engine test procedures. 19So in summary, California firmly believes that 20 the Administrator is required under 209(e)(2) to grant the 21 authorization. None of the three guiding criteria for 22 denial of an authorization can be met. Protectiveness hasMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 32 1 been clearly established. California's compelling and 2 extraordinary need for its own in-use off-road emissions 3 program is unquestionable. Finally as discussed above, 4 the regulation is consistent with Section 209 and is 5 technically feasible. Accordingly, California requests 6 that EPA act expeditiously to grant the authorization. 7 Now Mr. White and I are prepared to answer any 8 questions the panel may have and to respond briefly to the 9 comments that are raised. Thank you. 10PRESIDING OFFICER COHEN: I believe, yes, there 11 are some questions. 12 MR. DICKINSON: Thank you, Mr. Livingston and 13Mr. White. I appreciate your testimony. Several 14 questions. 15The first is, to your knowledge is this 16 regulation currently in any litigation anywhere? 17 MR. WHITE: I don't believe so, no. 18MR. DICKINSON: Okay, thank you. 19A question to Mr. White. On Slide 4 -- I don't 20 know if you can back up -- the last bullet, CARB submitted 21 authorization requests for several vehicle types that use 22 off-road engines. I think that carried over to Slide 5,Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 33 1 is that correct? 2 (Screen.) 3MR. DICKINSON: I think you were mentioning a 4 variety of other authorizations that EPA has issued. I 5 just didn't understand that last bullet on line 4. 6MR. WHITE: On Slide 4? 7 MR. DICKINSON: Yes. 8MR. WHITE: Yes, Slide 4 was specifically 9 referencing the in-use off-road diesel fuel regulation, 10 which has certain elements to it that include off-road 11 engines -- 12 MR. DICKINSON: Okay. 13MR. WHITE: -- that are used primarily on two14 engine sweepers, as well as agricultural first processing 15 facilities. 16MR. DICKINSON: Okay, and that was part of the 17 August 21 Federal Register notice announcing hearing and 18 comment on that? 19MR. WHITE: Yes, correct. 20MR. DICKINSON: We didn't specifically receive a 21 request for hearing on that? 22 MR. WHITE: Correct.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 34 1MR. DICKINSON: We are nevertheless allowing an 2 opportunity to comment today on that. 3MR. WHITE: We would be prepared to respond to 4 any comments that are on that, but did not include 5 anything additionally in our presentation on that, on that 6 request. 7 MR. DICKINSON: Thank you. 8With regard to the second prong of 209(e)(2) and 9 the need for the California program based on compelling 10 and extraordinary conditions, EPA is aware that, due to 11 the economic recession, questions of cost, that California 12 has continued to amend its regulations. You mentioned 13 also the deference that EPA has historically afforded 14 California to make its own policy judgments. Is there 15 still -- looking at -- this isn't necessarily the legal 16 test, but is there still a need for this standard per se 17 in the greater context of addressing NOx and PM emissions 18 in California? There have been these delays, but is there 19 still this need for the program at this point? 20MR. LIVINGSTON: There have been delays. There 21 have been reductions in the inventory to roughly 25 22 percent of what we thought originally. But even at thatMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 35 1 25 percent, we need every ton, every pound, basically we 2 can get in the Valley and the South Coast to meet both 3 current ozone and particulate matter standards and the 4 upcoming more stringent standards which we'll be having to 5 plan for in the next year or two. 6MR. WHITE: I think I would add to that, as we 7 look at attainment in those two air basins for 2023, the 8 state has still yet to identify emission reductions of NOx 9 that are necessary to attain that standard. That includes 10 the reductions that are anticipated from this regulation. 11So I think it's very clear that, as we look at all the 12 regulatory strategies that the state has already adopted 13 to achieve that standard, additional reductions of NOx are 14 still needed. So these are important NOx reductions to 15 achieve even though they are less than what we had 16 initially expected we would achieve in 2007 when the Board 17 first approved the regulation. 18MR. DICKINSON: I understand this regulation has 19 gone through several iterations and there have been a 20 variety of options for the affected industry and other 21 operators in California to attend hearings. Can you 22 generally characterize, either today or in your comments,Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 36 1 the number of workshops since the last time you've been in 2 front of us or the number of Board hearings? 3MR. LIVINGSTON: At least -- at least one Board 4 hearing and several workshops. Eric is looking it up. 5MR. WHITE: We had -- since the last time that 6 California was here to testify on our waiver request, I 7 think we've had ten workshops specifically on or in 8 conjunction with other measures, this rule. So as ARB 9 went back and looked at both the inventory and 10 opportunities for additional flexibility for cost 11 reductions while still preserving the protectiveness of 12 the rule, we had ten public workshops throughout 13 California on this issue. 14 My last question goes to the third waiver prong 15 of, I would call it, consistency of 202(a), the tech 16 feasibility question with consideration of costs. 17 Historically, when California has been in the regulatory 18 business of regulating new motor vehicles or new non-road 19 equipment, there are several court decisions that describe 20 how we would evaluate our own regulations or California's 21 regulations as it affects the new manufacturing. Sort of 22 the doubling or tripling of the costs of the vehicle mightMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 37 1 be considered prohibitive or potentially inappropriate 2 under that tech feasibility prong. 3 Here, as it affects the operators, the end use 4 operators, how would you suggest EPA consider that, that 5 cost question? You can submit it today or in the context 6 of your written follow-up. 7 MR. LIVINGSTON: I think we'll go into more 8 detail in the written comments, but certainly you could 9 start there, with those court decisions on new vehicles 10 and engines. As you've said, courts have said two or 11 three times the cost might be prohibitive and we're 12 nowhere close to that in this regulation. 13 MR. HOROWITZ: Two questions really quick. The 14 first one, just on the retrofit safety study, the PM 15 study. Is that in the docket? Do we have that? 16 MR. LIVINGSTON: I am not sure. 17 MR. WHITE: If not, we can ensure that it is. 18 MR. HOROWITZ: Please submit it for the docket 19 with your comments. 20 The second question. I'm not familiar as much 21 with the SOON program, so could you tell me how the SOON 22 program differs from the rest of the program? What areMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 38 1 the specific provisions for the SOON program? 2 MR. WHITE: Sure, yes. The SOON program is an 3 optional program that local air districts in California 4 can opt into, and it would compel operators within that 5 air basin to apply and accent incentive funding to 6modernize their equipment on a schedule that is ahead of 7 what would be the prescriptive standards that are included 8 in the regulations themselves. 9The provisions of SOON only apply to fleets of 10 20,000 horsepower or greater, so, as Aron noted in his 11 presentation, only the largest fleets, the largest fleets 12 in the state. And it is only required of those fleets to 13 apply when incentive funding is made available within the 14 local air district. So it provides an opportunity for 15 impacted air districts, such as the South Coast, which is 16 the only district that has opted into that program, to 17 achieve early NOx reductions ahead of what would otherwise 18 be required in the regulation. 19MR. HOROWITZ: Does it require any additional 20 technological -- are the standards different? I 21 understand that they are pulled ahead, but are they 22 different in any way?Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 39 1MR. WHITE: No. The equipment -- it requires 2 new replacement -- it requires cleaner equipment to come 3 in and replace existing dirty equipment that's in that 4 particular fleet. But it does not require that the 5 vehicles be retrofitted or otherwise modified to be 6 cleaner than what would be -- what would be available, 7 commercially available in the marketplace at that time. 8As a benefit impact of the SOON program, once 9 the contract period for that incentive money is over, that 10 fleet can then count that cleaner equipment that they now 11 have in their fleet towards their compliance with the 12 performance standards. So in that sense what they are 13 doing is they are pre-buying the cleaner equipment to 14 provide early emission reductions in that air basin, and 15 then they receive the benefit of having that cleaner 16 equipment in the fleet once the contract is ended for that 17 incentive funding. 18Most of that funding comes from our program in 19 the state of California, which is administered by the 20 local air districts predominantly. 21MR. HOROWITZ: Thank you. 22 PRESIDING OFFICER COHEN: Any questions?Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 40 1(No response.) 2 PRESIDING OFFICER COHEN: Thank you. Thank you 3 very much. 4 MR. HADZI-ANTICH: Will you take questions from 5 the participants here? 6PRESIDING OFFICER COHEN: No, that's not our 7 practice. I'm sorry. 8MR. DICKINSON: You can raise it in the context 9 of your comments and California can choose to reply. 10PRESIDING OFFICER COHEN: I'd like to invite Mr. 11 Ted Hadzi-Antich from the Pacific Legal Foundation. Thank 12 you. 13PRESENTATION OF THE PACIFIC LEGAL FOUNDATION 14 MR. HADZI-ANTICH: Good morning. My name is 15 Theodore Hadzi-Antich. I'm an attorney with the Pacific 16 Legal Foundation in Sacramento, California. I make this 17 presentation on behalf of Merit Oil Company, California 18 Construction Trucking Association, the Construction 19 Industry Air Quality Coalition, United Contractors, 20 Robinson Industries, the Loggers Association of Northern 21 California, Delta Construction Company, Dalton Trucking, 22 Inc., the Southern California Contractors Association, andMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 41 1 Ron Cinguini Farming. These companies and trade 2 associations conduct business in California and will be 3 adversely impacted if EPA grants California's waiver 4 application for emissions standards applicable to non-road 5 compression ignition engines for in-use fleets. I will 6 refer to these emission standards which are the subject of 7 today's hearing as the non-road diesel standards. 8In her opening remarks today, the chair asked 9 specifically for testimony regarding the criteria under 10 Clean Air Act Section 209(e) by which EPA must consider 11 the California waiver applications. My testimony today 12 directly addresses that request. I do have a copy of my 13 testimony which I would like to give for the record. 14 Section 209(e)(2) provides that EPA may 15 authorize California to adopt standards for non-road 16 engines and vehicles, but that, quote, "no such 17 authorization shall be granted if EPA finds that 18 California does not need such California standards to meet 19 compelling and extraordinary conditions." Close quote. 20 Hence, California must apply for waivers from federal 21 standards on a case by case basis. So held the D.C. 22 Circuit in two cases, Motor Equipment ManufacturersMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 42 1 Association v. EPA, a D.C. Circuit 1979 case, and Engine 2 Manufacturers Association versus EPA, a D.C. Circuit case 3 decided in 1996. 4 Now, the clear wording of the statute requires 5 that EPA not grant any California waiver application 6 unless California makes a specific showing that it has 7 compelling and extraordinary conditions necessitating the 8 particular standards for which the waiver is sought. The 9 statute states unambiguously, quote, "No such 10 authorization shall be granted if EPA finds that 11 California does not need such California standards," 12 emphasis on the word "standards," to meet compelling and 13 extraordinary conditions." Close quote. 14 In connection with the California waiver 15 application for the industry diesel standards, the issue 16 before us today, California has not shown that it needs 17 these particular standards to meet compelling and 18 extraordinary conditions in California. Because 19 California has not shown that it needs these standards to 20 meet compelling and extraordinary conditions, EPA must 21 under the statute deny the waiver application under the 22 clear language of Section 209(e)(2) of the Clean Air Act.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 43 1Now, in the past EPA has taken the indefensible 2 position that California's need for a particular standard 3 refers not to the need for the standard itself based upon 4 compelling and extraordinary circumstances in the state, 5 but rather the need for California to have its own motor 6 vehicle air emissions program as a whole, and EPA has 7 taken that position since 1967 when the Clean Air Act 8 first included the waiver application for that 9proposition. See Volume 74 of the Federal Register at 10 page 32761, March 6, 2008. 11EPA's position is that the statutory term 12 "compelling and extraordinary circumstances" refers to 13 circumstances requiring California to maintain a motor 14 vehicle emissions program separate from that of the 15 federal government. But the clear wording of the statute 16 requires a different conclusion. EPA must show a need for 17 the particular standard for which a waiver is being 18 sought. That's why in Section 209(e)(2) Congress used the 19 term "standards," not used the term "California program." 20It used the term "California standards" by which the 21 decision of EPA must be determined. Otherwise, it makes 22 no sense for California to file waiver applications forMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 44 1 each California standard that differs from the federal 2 standard. Yet it is clear that waiver applications are 3 required for individual regulations setting emission 4 standards. 5Congress provided in the Clean Air Act that 6 California should be given the option of promulgating 7 specific regulations that differed from federal ones, but 8 only upon a showing satisfactory to the Administrator that 9 California needs a particular regulation to meet 10 compelling and extraordinary conditions in the state. 11 Absent such a showing, EPA under the Clean Air Act must 12 deny any waiver application. 13Now, the legislative history of the Clean Air 14 Act shows that Congress intended the word "standards" in 15 Section 209 to mean specific quantitative levels of 16 emissions, rather than the California motor vehicle 17 program as a whole. The Senate Report on Air Quality in 18 1967, discussing the preemption provision, refers to 19 standards with specific reference to quantitative limits 20 for hydrocarbons, for nitrogen oxides, and for carbon 21 monoxide, in reference clearly to the numerical 22 limitations to be imposed on those pollutants.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 45 1There is no reference to "program" as an entire 2 statewide motor vehicle emissions regulatory program. See 3 Senate Report No. 403, 90th Congress, First Session, at 4 page 32, 1967. 5Moreover, in describing the change made in the 6 waiver provision in 1977 the House report discusses the 7 California -- that California may need to have specific, 8 again, quantitative standards that differ from the federal 9 ones. See House Report No. 294, 95th Congress, First 10 Session, at page 302, 1977. 11So the need for waivers is set forth in the 12 legislative history in terms of the need for particular 13 numerical, quantitative emissions standards. Congress 14 itself enacted the waiver provision and would not have 15 given EPA as an administrative agency authority to rescind 16 the waiver provision by reaching a regulatory conclusion 17 that California no longer needed its own motor vehicle 18 emissions regulatory program. 19Congress only gave EPA authority to determine on 20 a case by case basis whether, based on compelling and 21 extraordinary conditions in the state, California had a 22 need for the specific quantitative emissions standard forMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 46 1 which it was applying for a waiver. 2 Any contrary conclusion would put the question 3 of Section 209(e)(2) in issue in terms of the 4 constitutional principle of overbroad delegation. 5 Congress would not have delegated to EPA the legislative 6 authority to determine that California no longer needed 7 its own motor vehicle emissions program. That was a 8 legislative determination, a policy judgment that Congress 9made in 1967. That policy judgment can only be unmade, if 10 you will, by the Congress. And should EPA continue to 11 insist on an interpretation focusing on the program as a 12 whole, as opposed to whether there is a compelling need 13 for each particular standard, it puts in issue the Section 14 209(e)(2) in connection with the non-delegation doctrine 15 as applied by EPA. 16So in this waiver application for California's 17 industry diesel standard, EPA should reverse its past 18 errors and use the correct statutorily mandated test to 19 determine whether to grant the waiver. Rather than 20 focusing incorrectly on California's need for its own 21 motor vehicle program as a whole, EPA should focus on 22 whether California needs this industry diesel standard toMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 47 1 meet compelling and extraordinary conditions in the state. 2 When EPA applies the correct test, EPA will find 3 that California has not shown that it needs this industry 4 vehicles standard to meet compelling and extraordinary 5 conditions in California. 6That concludes my testimony today and I'll be 7 happy to take any questions you may have. 8PRESIDING OFFICER COHEN: Thank you. 9MR. HOROWITZ: I don't have any questions. Just 10 I guess you'll be sending in written comments? 11MR. HADZI-ANTICH: Yes, we will. 12 MR. HOROWITZ: And all the citations that you 13made, they'll be in there? 14 MR. HADZI-ANTICH: Yes, they will. 15MR. DICKINSON: My only question I guess is, I 16 think I understood your comments today, but I'm curious 17 whether you're solely questioning the need for this 18 particular standard in the context of the second waiver 19prong or are you also questioning whether California has 20 compelling and extraordinary conditions in general? Does 21 the standard go to address what may or may not be a 22 compelling and extraordinary condition? Are youMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 48 1 contesting that part of the prong? 2 MR. HADZI-ANTICH: What we're saying is simply 3 that EPA has been using an incorrect standard with regard 4 to that prong in Section 209(e)(2). EPA has been using 5 the standard as to whether there's compelling and 6 extraordinary conditions in California necessitating 7 California's continuing to have its own motor vehicle 8 program. My testimony today is geared toward the 9proposition that that is an incorrect standard, that the 10 correct standard is not to look to whether California 11 needs its own motor vehicle program, but whether 12 California has a need based on compelling and 13 extraordinary conditions within the state for the specific 14 standard for which this waiver application is made. 15 That's what my testimony addresses. 16MR. DICKINSON: Okay, thank you. 17 PRESIDING OFFICER COHEN: I have a follow-on 18 question to that, related. If I understood your testimony 19 correctly, you're asking us to take a look at California's 20 showing of specific quantitative evidence that this 21 standard is necessary for them to meet compelling 22 circumstances; is that correct?Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 49 1MR. HADZI-ANTICH: We are asking you to look at 2 the quantitative evidence through the filter, through 3 using the criteria of whether it supports a compelling and 4 extraordinary need for this regulation. 5PRESIDING OFFICER COHEN: Thank you. 6MR. HADZI-ANTICH: Thank you. 7 PRESIDING OFFICER COHEN: Thank you. 8I'd like to ask Mr. Nick Goldstein from the 9American Road and Transportation Builders Association to 10 testify. 11PRESENTATION OF THE AMERICAN ROAD AND 12 TRANSPORTATION BUILDERS ASSOCIATION 13MR. GOLDSTEIN: Luckily, I brought exactly four 14 copies. 15PRESIDING OFFICER COHEN: Wonderful. Thank you. 16MR. GOLDSTEIN: I had no idea. 17 PRESIDING OFFICER COHEN: We're impressed. 18 Thank you. 19MR. GOLDSTEIN: I also have it on a thumb drive, 20 or should I just email it to you? 21MR. DICKINSON: This is fine. That'll be great. 22 Thank you.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 50 1MR. GOLDSTEIN: Good morning. I'm Nick 2 Goldstein, Assistant General Counsel for the American Road 3 and Transportation Builders Association, or ARTBA. ARTBA 4 represents more than 5,000 members nationwide involved in 5 all sectors of the U.S. transportation design and 6 construction industry. 7 I'd like to begin my statement by thanking the 8 United States Environmental Protection Agency for the 9 opportunity to speak at today's public hearing regarding 10 the consideration of the California Air Resources Board's 11 request for a federal waiver from the EPA allowing 12 implementation of ARB's regulations for in-use off-road 13 diesel vehicles. 14 ARTBA's many California members rely heavily on 15 off-road construction equipment to perform core business 16 functions and would be directly impacted by ARB's in-use 17 off-road diesel equipment regulation. Similarly, if ARB's 18 regulation is eventually adopted by other states, ARTBA's 19members in those areas would also be impacted. 20The Clean Air Act grants special status to 21 California due to the state's unique air quality problems, 22 allowing California to set its own air quality standardsMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 51 1 in many areas subject to federal approval. If approved, 2 the Clean Air Act then gives other states the choice to 3 either stay with existing federal standards or opt in to 4 those passed by California. This could severely impact 5 efforts at improving our nation's infrastructure, as 6 transportation improvement projects often by necessity 7 involve moving construction equipment across state lines. 8A patchwork approach to state regulation could lead to a 9 scenario where equipment becomes usable on one portion of 10 a project and prohibited in another. 11The Clean Air Act does not give California 12 complete authority to enact its own standards. There are 13 limitations. Among these limitations, California may not 14 set its own standards or impose other emission-related 15 requirements for, quote, "new engines which are used in 16 construction equipment or vehicles or used in farm 17 equipment or vehicles which are smaller than 175 18 horsepower." 19This preemption lasts throughout the useful life 20 of the equipment. The ARB regulations would apply to all 21 in-use off-road diesel construction equipment with a 22 rating of 25 horsepower or more and are thus not allowedMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 52 1 by the Clean Air Act. 2 Further, the Clean Air Act states that any 3 proposed California standard must be, quote, "at least as 4 protective of the public health," end quote, as those at 5 the federal level. Protecting the public health is a 6 commendable objective and one shared by ARTBA. EPA, 7 however, must be cognizant of the impact of ARB's proposed 8 standards on public health both within California as well 9 as any other states that would choose to opt into the 10 California standards if they're enacted. 11Due to the enormous expense of replacing the 12 affected in-use off-road construction equipment, in some 13 cases more than one million dollars per each machine, the 14 cost of sorely needed transportation infrastructure 15 improvements would likely increase. This means that 16 either fewer roads, schools, housing, and levees will be 17 built or project owners will have to spend more. For 18 those projects that go forward, the pace at which they can 19be completed would be significantly slowed because the 20 pool of construction firms with the proper equipment to do 21 those jobs would likely be diminished. 22 Now, if I can end the monotone and just do theMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 53 1 verboten thing of going off the script for a second. 2 You're hearing from me now, but ARTBA has hundreds of 3member companies in the state of California. What is it, 4 the fifth largest economy in the world? I would just say 5 -- and I think one of the hallmarks of this 6 administration, because ARTBA has submitted numerous 7 comments to the EPA and we've participated in a variety of 8 different issues -- on a variety of public hearings, 9 excuse me, on different issues -- it's always been good at 10 having public hearings in a variety of locations. 11We're talking about California regulations here, 12 California regulation here, and we're having the location 13 -- I mean, the hearing -- in D.C. I'm screwing up all the 14 words because it's not written down. This is what I get. 15But if you think about it, a lot of our members, 16 we're talking about companies here with ten or fewer 17 employees, and they can't take two days, two days minimum 18 if they took a red-eye, to come here to this hearing to 19 talk about how this will affect them. I would implore EPA 20 to at least hold one hearing on this really substantive 21 issue, that will affect a lot of people, in California, in 22 Sacramento, in Los Angeles, in at least one place there,Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 54 1 because we have heard from members that really want to 2 talk to you. 3I'm going to continue with my statement, which 4 is three pages long and does not adequately represent the 5 feelings of all the contractors that I'm speaking on 6behalf of. So as you listen to this and sort of the 7 grandiose statements that I wrote really well and I hope 8 will sound really good throughout the next five minutes 9maximum, just keep that in mind. 10Nearly 33,000 people die on U.S. highways each 11 year and many federally funded highway improvements in 12 these states are specifically designed to address safety 13 issues. Allowing ARB's rule to go forward could delay 14 needed safety enhancements that would improve public 15 health because much of California's transportation 16 construction community would, as a result, be prohibited 17 from building them. 18Also, the Clean Air Act states that California's 19 standards should not be adopted if California's public 20 health protectiveness determination for the ARB rule is, 21 quote, "arbitrary and capricious," end quote, or if, 22 quote, "California does not need such standards to meetMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 55 1 compelling and extraordinary conditions," end quote. In 2 considering whether ARB's rule is arbitrary and 3 capricious, ARTBA respectfully submits that ARB's rule 4 prioritizes one public health issue at the expense of 5 another, and that on its face is the very definition of 6 "arbitrary." 7 While ARTBA is very supportive of both EPA and 8 ARB's goal of reducing both particulate matter and NOx 9 emissions, ARTBA does not believe that ARB has considered 10 fully some of the air quality improvements already 11 occurring in California and the nation. These 12 improvements in air quality undercut the need for measures 13 as severe as the ARB proposal. 14 Specifically, EPA's own findings demonstrate 15 that concentrations of fine particulate matter have 16 declined by 24 percent nationally and 28 percent for the 17 24-hour standard between 2001 and 2010, while 18 concentrations of NOx have declined by 33 percent 19 nationally in the same time period. This decline in 20 emissions becomes even more remarkable when compared to 21 additional EPA data explaining that since 1980 gross 22 domestic product has increased by 127 percent, vehicleMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 56 1 miles traveled have increased by 96 percent, population 2 increased by 36 percent, and energy consumption by 19 3 percent. Indeed, since 1980 the overall amount of 4 aggregate emissions, including PM, Particulate matter, and 5 NOx, has decreased by 67 percent. Thus air quality is 6 significantly improving without the ARB rule. 7 Finally, the Clean Air Act requires that 8 California standards comply with the, quote, "feasibility 9 constraints," end quote, when implementing its rule. 10 ARTBA has serious concerns regarding the specifics and 11 feasibility of ARB's off-road diesel rule. ARB's 12 regulation requires the use of technology which in some 13 cases may not be available for purchase until 2014. 14 Further, when technological technology is available, the 15 sudden increase in demand caused by the ARB rule could 16 cause supplies to be exhausted. Contractors simply may 17 not be able to purchase the necessary equipment and could 18 be barred from continuing their work. 19If ARB's rule is fully implemented, there could 20 be profound negative impacts on California's 21 infrastructure rebuilding efforts, the health of the 22 state's construction industry, and its overall economy.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 57 1 Instead, ARB must allow technology to catch up to its 2 regulatory goals by allowing more time to develop 3 equipment clean enough and available enough, with emphasis 4 on "available enough," to meet the standards mandated by 5 the demand that it's trying to create through its 6 regulation. 7 Many of California's larger construction 8 companies have already begun the process of repowering or 9 retrofitting their fleets in anticipation of these 10 regulations. However, smaller companies with less than 11 ten employees, which I mentioned before, make up nearly 80 12 percent of California's industry, and they'll be severely 13 hampered by the cost of repowering and retrofitting 14 equipment that in some cases are the sole asset of their 15 family-owned business. Additionally, many of these 16 smaller companies do not have the resources or access to 17 capital to repower or retrofit the engines and maybe 18 forced -- and as a result may be forced to park their 19 equipment, ultimately costing jobs and revenue to the 20 state's economy. 21Under the annual emission targets required in 22 ARB's regulation, many contractors will be required toMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 58 1 first repower or retrofit an engine, only to have to turn 2 around a few years later and replace the entire piece of 3 equipment when the technology to do to job right finally 4 hits the marketplace. The total industry-wide cost of 5 implementation of this rule is estimated to be between 15 6 and $30 billion over the life of the rule. 7 It should also be noted that ARTBA did appear 8 before EPA, and I think I saw some of you at that hearing, 9 in April of 2010 to discuss the federal waiver for the ARB 10 rule. Since that time, the nation's economy has shown 11 signs of what can at best be called a sluggish recovery, 12 but unemployment in the construction sector has become 13 even worse. Thus, the construction market is less 14 prepared to handle the ARB rule now than when I talked to 15 you before. 16With the recent passage of the federal surface 17 transportation reauthorization bill offering hope for the 18 construction sector, implementation of the ARB rule now 19 will cut off the reason for this optimism by denying small 20 and medium-sized California construction firms the chance 21 to take advantage of this bipartisan stabilization that's 22 been offered to the transportation sector.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 59 1In conclusion, the ARB rule does not satisfy the 2 requirements of the Clean Air Act because it attempts to 3 regulate equipment below 175 horsepower, could lead to 4 public health concerns, and is arbitrary and capricious. 5 EPA should recognize this and deny ARB's request for a 6 federal waiver. ARTBA looks forward to continuing to work 7 with both EPA and ARB in encouraging voluntary diesel 8 retrofitting at an attainable pace, rather than mandating 9 retrofits at a pace many companies will not be able to 10 meet. 11Thank you. 12 PRESIDING OFFICER COHEN: Thank you. 13MR. GOLDSTEIN: I'd be happy to answer any 14 questions. 15PRESIDING OFFICER COHEN: Any questions? 16MR. HOROWITZ: No questions. 17 PRESIDING OFFICER COHEN: David, any questions? 18MR. DICKINSON: No, thank you. 19PRESIDING OFFICER COHEN: I don't have 20 questions, just a comment, to please encourage your 21 members to submit written comments to us. 22 MR. GOLDSTEIN: We have.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 60 1PRESIDING OFFICER COHEN: The docket is open and 2 the public comment period is open yet for another several 3 weeks. 4 MR. GOLDSTEIN: We have on a number of 5 occasions. I'm just being frank -- 6PRESIDING OFFICER COHEN: I understand, but you 7 need to understand we read every single one and we respond 8 to every single one. It's very important for us to hear 9 from people. 10MR. GOLDSTEIN: And I will definitely do so 11 again. I would just again restate: at least one hearing 12 in California. I know it's something -- when I've asked 13 them for comments on the rule -- and a lot of it went into 14 my statement and the written comments that we'll be 15 submitting before the October 22 deadline. But a lot of 16 what I get back is: Why aren't they coming out here to 17 talk to us directly about this? 18PRESIDING OFFICER COHEN: Thank you. 19Mr. Antonio Santos for MECA, please. 20PRESENTATION OF THE MANUFACTURERS 21OF EMISSION CONTROLS ASSOCIATION 22 MR. SANTOS: Good morning. My name is AntonioMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 61 1 Santos. I am Director of Special Projects at the 2 Manufacturer of Emission Controls Association here in 3 Washington, D.C. MECA and its member companies would like 4 to thank the U.S. EPA for allowing us to speak today at 5 this hearing. We are pleased to provide comments in 6 support of the California Air Resources Board's request 7 that EPA grant a waiver for ARB's off-road diesel vehicle 8 regulation. 9MECA is a nonprofit association comprised of the 10 world's leading manufacturers of emission control 11 technology for motor vehicles. Our members have over 40 12 years of experience and a proven track record in 13 developing and manufacturing emission control technology 14 for a wide variety of diesel and gasoline on-road and off15 road vehicles and equipment. A number of our members have 16 extensive experience in the development, manufacture, and 17 application of particulate matter and nitrogen oxide 18 emission control devices for in-use diesel vehicles and 19 equipment, including a majority of the devices on ARB's 20 Verified Diesel Emission Control System, VDECS, list. 21MECA provided testimony in support of ARB's off22 road diesel vehicle regulation when it was first proposedMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 62 1 in May of 2007. The original rulemaking presented a 2 balanced, fair, and flexible approach that would achieve 3 significant PM and NOx emission reductions from in-use 4 off-road diesel vehicles and equipment in California in a 5 cost-effective manner. 6Since then, the regulation has been amended 7 three times, each time with the intent to provide economic 8 relief for the off-road industry. MECA supported the 9 amendments to the regulation that the Board adopted in 10 January of 2009 and June 2009 because MECA members shared 11 first-hand the economic hardships of the construction 12 industry, as well as the automotive and on-road truck 13 industries. 14 The December 2010 economic relief amendments, 15 however, made major changes to the original rulemaking, 16 delaying the first compliance date of the regulation to no 17 earlier than January 1, 2014, a four-year delay from the 18 original time line, and reducing the retrofit requirements 19 to a voluntary compliance option. To address these 20 concerns, MECA and its member companies have been actively 21 engaged with ARB staff on various approaches that would 22 provide economic relief to device manufacturers and wouldMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 63 1 ensure that retrofit technologies are available when they 2 are needed. 3Regulatory stability is critical for retrofit 4 manufacturers to justify and build a viable business that 5 generates green jobs for California. The technology 6planning, development, and verification cycle for retrofit 7 devices comes years ahead of a regulation. The economy 8 has put a significant strain on businesses of all sizes in 9 California, including manufacturers of retrofit 10 technologies. Our members have invested and continue to 11 invest significant resources in developing and verifying 12 diesel retrofit technologies for the whole range of in-use 13 diesel engines currently operating in California, 14 including off-road diesel engines. 15A number of advanced emission control 16 technologies exist today to significantly reduce PM and 17 NOx emissions for in-use off-road diesel engines. These 18 technologies include diesel particulate filters, diesel 19 oxidation catalysts, selective catalytic reduction, lean 20 NOx catalysts, exhaust gas recirculation, and crankcase 21 filters. 22 MECA has previously provided detailed writtenMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 64 1 comments to ARB on the capability of these technologies to 2 effectively reduce PM and NOx emissions from in-use off3 road diesel vehicles and equipment. Currently, there are 4 six passive DPFs, including one DPF plus lean NOx device, 5 and three active DPFs verified as Level 3 VDECs in 6 California for off-road vehicles and equipment. 7 Although off-road applications can pose 8 engineering challenges and special requirements compared 9 to on-road applications, the use of exhaust emission 10 control technology for off-road diesel engines is not new. 11Both PM and emission control technologies are being used 12 today on off-road applications in California and 13 elsewhere. 14 For over 30 years, off-road diesel engines used 15 in the construction, mining, and materials handling 16 industries have been equipped with exhaust emission 17 control technology, initially with DOCs and followed later 18 with DPFs. These systems have been installed on vehicles 19 number equipment both as original equipment and as 20 retrofit technology on over 250,000 off-road engines 21 worldwide, including construction and mining equipment 22 where vehicle integration has been challenging. OverMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 65 1 50,000 active and passive DPF retrofit systems have been 2 installed worldwide on off-road applications. More than 3 20,000 of these filters have been installed, have been 4 installed successfully in Europe on construction equipment 5 used in tunneling projects. A 2003 SAE survey of 3,848 6 construction retrofit installations from 2001 to 2003 in 7 Europe found a failure rate of only one to two percent. 8In California there have been a number of 9 successful off-road diesel retrofit projects, such as the 10 Off-Road Showcase Program, where 84 vehicles were 11 retrofitted with 52 devices, in the South Coast area, and 12 the subsequent Off-Road Showcase II Program that's 13 currently ongoing, as well as the runway expansion project 14 at LAX Airport, where 73 vehicles were retrofitted with 15 Level 3 DPFs. 16Regarding the safe installation of retrofit 17 devices, retrofit manufacturers h shown that off-road 18 retrofits can be installed to comply with the Cal-OSHA 19 retrofit visibility/safety requirements that were 20 finalized last year. Retrofit manufacturers are using the 21 best engineering judgment and installation practices to 22 ensure the safe installation of devices.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 66 1In response to California legislative action 2 earlier this year, ARB staff reviewed retrofit field 3 experience since 2002. Of the 35,000 DPFs deployed in the 4 state, less than 15 safety-related issues were identified 5 and all of these were shown to be attributed to poor 6 engine or device maintenance, misapplication of devices, 7 or the ignoring of warning alarms by the operator. 8In summary, although the amendments to ARB's 9 off-road diesel vehicle regulation have significantly 10 delayed the emission reduction goals of the original rule, 11 MECA commends ARB for taking important steps to reduce 12 emissions of PM and emission from in-use off-road diesel 13 vehicles in California. We ask EPA to grant ARB a waiver 14 for this comprehensive regulatory program. Furthermore, 15MECA urges EPA -- excuse me -- urges ARB to remain 16 vigilant on any further attempts to stay or delay the 17 overall goals of the agency's various in-use diesel fleet 18 rules or the agency's broader diesel risk reduction 19program. These important emission reduction strategies 20 not only protect the health of the citizens of California, 21 but also provide an important source of economic growth 22 and green jobs for the state.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 67 1Our industry is prepared to do its part to 2 deliver cost-effective, verified diesel emission control 3 devices to the market. 4 Thank you, and MECA will be providing written 5 comments prior to the closing of the comment period. 6PRESIDING OFFICER COHEN: Questions? 7 MR. HOROWITZ: Just two comments. You testified 8 that retrofit manufacturers have shown that off-road 9 retrofits can meet the Cal-OSHA visibility. Can you, I 10 guess with your written testimony, can you provide backup 11 for that? 12 MR. SANTOS: Yes. Obviously, the discussion of 13 retrofit visibility and safety is very long and protracted 14 over several years, and MECA in its comments over the 15 years to Cal-OSHA on that issue, there was a lot of going 16back and forth in terms of the issue of masking and 17 visibility. At the end of the day, the decision that was 18 made is something that MECA members have agreed with and 19 have shown, but obviously directly on what you're 20 commenting on, we can definitely provide within the 21 comments specific examples. 22 MR. HOROWITZ: The second comment, and thisMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 68 1 might be better directed to CARB: You mentioned that 2 there were less than 15 safety-related issues and they 3 were attributed to poor maintenance. Is that something 4 that can be put into the record? 5MR. SANTOS: Yes. This was based on a request 6 that was basically made by the legislature to ARB. We can 7 do that in our comments. 8MR. WHITE: We'll look into that. I'm not sure 9 what the numbers are with reference to this. We will go 10 back and provide that information. 11MR. SANTOS: Those numbers are for both on-road 12 and off-road. That 35,000 number is not off-road. 13PRESIDING OFFICER COHEN: Do you know when that 14 study was? 15MR. SANTOS: It wasn't a direct study. It was 16 just in response to a request from legislative staff. It 17 wasn't an official study per se in terms of we're going to 18 give you the specific number, not an overall full-fledged 19 report. 20PRESIDING OFFICER COHEN: Thank you. 21MR. HOROWITZ: Thank you. 22 MR. DICKINSON: Thanks for your time today.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 69 1PRESIDING OFFICER COHEN: Thank you. 2 I invite Michael Kennedy of Associated General 3 Contractors of America. 4 PRESENTATION OF THE ASSOCIATED GENERAL 5CONTRACTORS OF AMERICA 6MR. KENNEDY: Before I begin, I do want to just 7 -- by the way, my name is Michael Kennedy. I'm going 8 General Counsel of the Associated General Contractors of 9America. 10In response to some of the previous testimony, I 11 would like to just make two quick points before I begin. 12 First, it was suggested that California had delayed its 13 emissions reduction targets. I would suggest that is 14 incorrect. The targets that the agency originally 15 established when it first adopted the rule became the 16basis for discussions between AGC and California, and not 17 once in that process did we ask the state to raise its 18 targets. The entire discussion revolved around whether 19 the particular rule they had adopted at the time was 20 necessary to meet those targets. Throughout the process, 21 we were careful to respect to judgment of the California 22 Air Resources Board on what it thought was necessary toMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 70 1 protect the citizens of the state. 2 Secondly, with regard to retrofits and whether 3 they can be done safely, the only thing I would suggest is 4 that no categorical statement about the safety of 5 retrofits is going to be true. The fact is that off-road 6 diesel equipment comes in an almost infinite variety. 7 Some installations are safe, others are not. The 8 significant changes that CARB has made change the analysis 9 of that risk, and with the adoption of the new Cal-OSHA 10 standard and CARB's commitment to implementing in good 11 faith the safety exemption it has in its rule, we think 12 all of those things need to be taken into account. 13Again, I'm Michael Kennedy. I'm General Counsel 14 of AGC of America. I'm here today primarily to recount 15 the long history of the off-road rule. AGC is the leading 16 representative of the construction industry in the United 17 States. We were formed in 1918 and today we speak for 18 more than 30,000 companies in 95 chapters across the 19 United States. Among our members are approximately 7,000 20 of the nation's leading general contractors, 11,000 21 specialty contractors, and about 12,000 materials 22 suppliers and service providers.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 71 1AGC members construct office buildings, 2 apartments, condominiums, shopping centers, factories, 3 warehouses, highways, bridges, tunnels, airports, water 4 works facilities, and install utilities for housing 5 development. We are infrastructure. We are everything 6 other than the construction of single family homes. 7 In doing so, AGC's members purchase and operate 8 a considerable amount of off-road diesel equipment. AGC 9 understands that the construction industry has a 10 significant role to play in environmental protection. For 11 many years, AGC had a formal partnership with EPA. It 12 remains a leader in the field of green construction and, 13more importantly for today's purposes, AGC has long and 14 consistently supported EPA's clean diesel initiatives, 15 including its incentives to reduce emissions from existing 16 fleets of off-road equipment. 17 From the beginning, AGC has been actively 18 involved in the clean diesel campaign. AGC has a strong 19 working relationship with the Clean Air Task Force and it 20 continues to urge Congress to provide financial and 21 technical assistance for those seeking, searching for fair 22 and effective ways to reduce emissions from existingMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 72 1 fleets of off-road equipment. 2 California's rule also seeks to reduce such 3 emissions. It is, however, a mandate that requires 4 existing fleets of off-road diesel equipment to meet a 5 series of steadily declining emission standards over a 6period of approximately ten years. Each year, the 7 regulated fleets have to either meet the standard for that 8 particular year or turn over a certain percentage of their 9 horsepower. 10In addition, if necessary to meet the standard 11 for the final year, fleets have to continue to turn over 12 equipment until they meet the standard. After certain 13 periods of time, the rule forbids California fleets to add 14 Tier 0, Tier 1, or Tier 2 equipment. The rule also 15 imposes recordkeeping, reporting and labeling requirements 16 and restricts idling time. 17 Among AGC's members, California's off-road rule 18 has been and remains controversial. Many still consider 19 it fundamentally unfair for the state to require them to 20 retire, repower, rebuild, retrofit, or reduce their use of 21 equipment that met all environmental standards that 22 applied at the time the equipment came onto the market.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 73 1 There is no escaping the sense that California is trying 2 to change the rules halfway through the second quarter. 3California's construction contractors invested 4 enormous sums in their off-road equipment in the 5 reasonable expectation that they could lawfully operate it 6 and use it for the duration of its useful life. 7 Nor is there any escaping the reality that 8 emissions from California's off-road diesel equipment are 9 declining and would continue to decline even in the 10 absence of this rule. EPA's emissions standards for newly 11 manufactured equipment are taking effect and as the older 12 equipment wears out the newer and cleaner equipment is 13 replacing it. 14 Back in 2007, when it proposed its off-road 15 rule, California estimated that the emissions of nitrogen 16 oxides from off-road diesel equipment were already 17 destined to drop 68 percent over the 16-year period 18 between 2009 and 2025. The state similarly estimated that 19 emissions of particulate matter were already destined to 20 drop by 76 percent. 21Given the great stakes for both the construction 22 industry and the environment, AGC responded toMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 74 1 California's proposal. By 2008, when the original rule 2 took effect, AGC had already submitted comments, 3 affidavits, and expert reports to California's Air 4 Resources Board on four separate occasions. These 5materials exceeded 300 pages in length and collectively 6 they laid out the full range of the construction 7 industry's concerns, including the cost of compliance with 8 the rule, how badly the rule would damage contractors' 9balance sheets, the limits of the technology available to 10 the industry, and whether the engine manufacturers could 11 provide the support the industry would require. AGC also 12 warned of downstream effects on employment in the 13 construction industry and questioned how well California 14 had estimated its population of off-road diesel equipment 15 and its turnover rate. 16For much of the construction industry, this off17 road equipment is both critical and an enormous expense of 18 doing business. This equipment accounts for much, if not 19most, of the net worth of many companies engaged in heavy 20 and civil construction. Above and beyond the amount of 21 work that these firms can quite literally perform, this 22 equipment determines how much they can borrow and theirMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 75 1 bonding capacity. Any rule that restricts the use of this 2 equipment or diminishes its value will have an enormous 3 impact, particularly on companies being required at one 4 and the same time to make large investments in new 5 technology. 6So needless to say, AGC was disappointed with 7 the results of the original rulemaking. The state had 8 estimated that the cost of compliance would be somewhere 9between 3 and $3.4 billion. California's construction 10 industry put the number closer to $13 billion. And then 11 there were all the other issues. Was it even feasible to 12 comply? What about the safety of the men and women 13 working around this equipment? 14 In December of 2008, in its first effort to 15 address the many questions that surrounded the original 16 rule, AGC petitioned CARB to reopen its rulemaking and to 17 stay the deadlines for meeting the rule's requirements. 18 In a 55-page submission that included 9 declarations, AGC 19 explained that economic conditions had both suddenly and 20 dramatically changed, making it impossible for contractors 21 to pass along any of their costs of compliance, that 22 emissions had already dropped, that retrofitting equipmentMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 76 1 was proving to be far more difficult than expected, and 2 that financing was far tighter than expected. 3When state officials wrote the rule, they had 4 estimated that California's construction industry would be 5 adding jobs and expanding as the rule took effect. The 6 reality turned out to be just a bit different. Between 7 2006 and 2008, the industry lost 330,000 or 35 percent of 8 its jobs, and the real GDP originating in California's 9 construction industry dropped by $13 billion. 10At CARB's request, and in response to its 11 commitment to work with AGC to resolve the issues that the 12 petition had raised, AGC agreed to extend the deadline for 13 CARB to respond. AGC did not object to the rule's 14 reporting requirements, and it recognized that CARB would 15 start collecting new and better data on California's off16 road equipment in March of 2009. 17 By the following summer, better data on the 18 total population, age distribution, horsepower 19 distribution, and other attributes of the off-road diesel 20 equipment in California would be available to everyone. 21 Once it was, both CARB and AGC could more objectively 22 assess the economic downturn and its effects on emissions.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 77 1The following June, CARB provided AGC with the 2 data it had collected up to that point in time and a copy 3 of the OFFROAD computer model that it had used to estimate 4 emissions from the off-road equipment in California. In 5 September, CARB provided AGC with more data, and by the 6 end of November AGC had run all of the new data through 7 the state's model. 8That first look at the new data suggested that 9 CARB had overestimated 2009 emissions of both nitrogen 10 oxides and particulate matter you 36 percent. To AGC it 11 appeared that CARB had room to modify the rule without 12 compromising its original targets. In December of 2009, 13AGC met with CARB to make that very point. AGC was, 14 however, disappointed to learn later that month that CARB 15 was not yet ready to entertain any significant changes to 16 the rule. The first deadline for compliance was in March 17 of 2010 and as of December 2009 CARB was unprepared to 18 change it. 19In January of 2010, AGC therefore filed a second 20 petition to reopen the rulemaking. While the first 21 petition had sought permanent relief, the second merely 22 requested a delay in the enforcement of the rule. CARBMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 78 1 had yet to complete its own analysis of the new data and 2 AGC believed it reasonable to request CARB to delay 3 enforcement at least until it had completed that step. 4 CARB responded that it would delay enforcement 5 until EPA granted the approval that is the subject of 6 today's hearing. To its greater credit, CARB also 7 announced that in March it would hold a public hearing on 8 the economic downturn and whether it justified amendments 9 to the rule. 10AGC carefully prepared for and actively 11 participated in that hearing. At AGC's request, the 12 President of the National Association of Business 13 Economists delivered an independent report on the state of 14 the economy, including her forecast for the future of 15 California's construction industry. At AGC's request, 16 several other experts and contractors also testified. By 17 the time that hearing came to an end, more than 30 18 contractors and others had testified that the only way for 19 contractors to comply with the rule was to sell equipment 20 that they would otherwise keep, downsizing their 21 companies, and cutting the number of jobs they could 22 provide.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 79 1At the hearing, AGC also reported that it had 2 identified a potentially serious flaw in the OFFROAD 3 computer model that CARB had used to estimate emissions 4 from off-road equipment. It seemed that the model's 5 estimates of diesel fuel consumption were inconsistent 6 with the available data on the amount of fuel that the 7 equipment had actually consumed. If the state's original 8 estimates were correct, then in 2009 its off-road diesel 9 equipment should have consumed 581 million gallons of 10 fuel. The data for 2009 suggested, however, that this 11 equipment had only consumed 164 million gallons. 12 Something was obviously wrong. 13Activity levels and load factors for off-road 14 diesel equipment are very difficult to determine. By a 15 process of elimination, AGC came to believe that the 16 computer model's estimates of these critical factors were 17 wide of the mark. AGC then introduced a correction factor 18 and ran CARB's very latest data through the corrected 19model. 20By the following April, the results were 21 available, and they were astonishing. They suggested that 22 CARB had overestimated the emissions from the off-roadMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 80 1 diesel equipment in the state by 350 percent. They also 2 suggested that California's fleets were destined, without 3 any further regulation, to meet or exceed the state's 4 original targets for many years to come. 5To its great credit, the state took all of this 6 very seriously. This is a highly complex and technical 7 field and even the very best and brightest can easily make 8 mistakes. The agency quickly launched an independent 9 review of its computer model, and by September of 2010 10 CARB had independently reached the conclusion that its 11 original estimates from the emissions were off by 340 12 percent. 13What followed through the fall of 2010 was a 14 good faith and ultimately successful effort to reach 15 agreement on -- to reach an agreement that would both 16protect the environment and the construction industry. 17 The final agreement was to push back the original 18 deadlines for meeting the rule's emission targets and-or 19 turnover requirements for nearly four years. For large 20 fleets that was March 12 of 2010 to January 1 of 2014. 21CARB and AGC also agreed to cut the percentage 22 of horsepower that contractors and other fleet ownersMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 81 1 would have to turn over each year. In the first year, 2 that number dropped from 28 percent to 4 percent. In 3 years two and three it dropped from 16.8 to 8 percent. In 4 years four and five it dropped from 28 percent to 10 5 percent. And in all subsequent years, it dropped from 30 6percent to 10 percent. 7 The parties also agreed to double the number of 8 hours that vehicles could operate in any one year and 9 still qualify for special treatment as low-use vehicles. 10 And, critical to any other state that may also have an 11 interest in adopting California's rule, CARB and AGC also 12 agreed to do two other things. First, they agreed to 13 preserve a series of early action credits, giving 14 California's contractors an opportunity to get a 15 significant head start on compliance with the rule and 16 spread the cost over time. And second, they agreed to 17 give contractors a more reasonable amount of time to phase 18 out and salvage the value of their Tier 0, Tier 1, and 19 Tier 2 equipment. 20The net effect was to save California's 21 construction industry at least $1.5 billion and as much as 22 $9 billion. CARB estimated that the December 2010 changesMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 82 1 to the rule would reduce the total cost of compliance by 2 something on the order of 70 percent, and even today AGC 3 has no grounds for questioning that estimate. The 4 actual savings therefore depend on the cost of compliance 5 with the original rule. CARB put that -- originally put 6 that between 3 and $3.4 billion. Later it reduced that to 7 2.15. But the industry, on the other hand, put it at $13 8 billion. So if indeed the original industry estimate was 9 correct and we were looking at $13 billion, the 2010 10 changes reduced the cost by $9 billion. 11Even as amended in December of 2010, 12 California's off-road rule will, however, be a burden for 13 contractors. California's construction industry has yet 14 to recover from its sudden and dramatic downturn. 15 Nationwide, the construction industry continues to shed 16 capacity, which is just a polite way of saying that 17 contractors continue to go out of business. 18If I may step aside, the big picture is that at 19 its peak the construction industry was a $1.2 trillion 20 industry. Today in round numbers it is an $800 billion 21 industry. The work simply isn't there to support the 22 number of companies. It's a painful process we continueMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 83 1 to go through. 2 The anecdotal evidence suggests that contractor 3 defaults in 2012 will be higher than in any of the 4 previous three years. The result is that your review, 5 EPA's review of the latest and current version of 6 California's off-road rule, is a matter of grave interest 7 and even concern. 8From the very beginning, though, as it worked 9 with CARB, AGC encouraged EPA to expect future amendments 10 to the rule, and to be sure to take them into account. In 11 its very first letter to EPA in October of 2008, AGC 12 requested EPA to delay proceedings on California's rule 13 until the state had completed already announced plans to 14 revisit at least portions of the rule. 15In subsequent submissions to EPA, AGC went on to 16 explain how and why the rule, the original rule, did not 17 meet the standards of the Clean Air Act had established. 18 Among other things, AGC was deeply concerned about the 19 cost and other estimates that CARB had made, about the 20 technology that contractors would require to comply, and 21 about the lead time provided to them. AGC also questioned 22 whether the rule was ripe for review.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 84 1Over an approximately two-year period that began 2 in October of 2008, AGC made a total of eight submissions 3 to EPA, collectively exceeding 550 pages in length. AGC 4 also participated in the hearing that EPA held on April 5 14, 2009. AGC considered it important both to express its 6 views of California's request and to ensure that EPA 7 stayed abreast of the latest developments. 8In its notice of today's hearing, EPA states 9 that it will not be taking earlier comments and testimony, 10 based on earlier versions of the rule, into account. The 11 agency explains that "the December 2010 amendments are 12 likely to affect" the merits of California's request for 13 federal authorization to proceed. I am here today 14 primarily to report that AGC agrees. While the Clean Air 15Act has not changed, and the questions that EPA must 16 address are one and the same, the rule that CARB now seeks 17 the authority to enforce is very different from the rule 18 that CARB originally submitted to EPA. 19AGC is not prepared to support California's 20 request, but AGC does believe that the state's request can 21 be fairly submitted to EPA and left to the sound 22 discretion of the professionals who staff the agency. AGCMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 85 1 has been quite impressed by the fair and impartial 2 approach to this entire matter and AGC has confidence that 3 EPA will reach the right conclusions. 4 In the end, AGC remains very concerned about its 5members and worries that they will find it difficult to 6 afford the cost of compliance with even the amended rule. 7 The construction industry continues to suffer great 8 economic hardship. At the same time, AGC has an 9 obligation to give California credit for coming as far as 10 it has come. 11Thank you. 12 PRESIDING OFFICER COHEN: Thank you. 13Any questions? 14 MR. HOROWITZ: I guess the only question, the 15 only comment, is there anything you can provide in written 16 testimony about the cost? 17 MR. KENNEDY: Yes. 18MR. DICKINSON: Michael, I have an on the record 19but somewhat personal observation, that I've appreciated 20 your work throughout this and you've been very helpful to 21 EPA and myself in understanding the process in California 22 and understanding your members' concerns. So I justMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 86 1 wanted to express my appreciation for that. 2 MR. KENNEDY: Well, I will share with others who 3 have not taken the time to engage with EPA as much as AGC 4 has engaged, we were skeptical and concerned at the outset 5 of this process. It took time for us to gain confidence 6 in the agency and in the staff in particular, which 7 conducted itself in a very professional manner. That's 8 one of the reasons that we are content at this point to 9 say this rule is within the ballpark. Reasonable people 10 may disagree about whether it merits federal approval, but 11 we're not prepared to dispute a conclusion that goes 12 either way. 13MR. DICKINSON: I do have one question. This 14 gets to -- thank you, Michael. I do have one question 15 that relates to Michael's question about costs. Fair16minded people could differ, I suppose, on the original 17 cost estimates associated with the 2007 rule, whether it 18 was $2.5 billion to 3.5, $4 billion, compared to the 9 to 19 $13 billion. Where do you see it today? If I can be a 20 little more specific, where do you see it for the small, 21 medium, the average small, medium, and large manufacturer, 22 -- excuse me -- operator, fleet operator? What's theMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 87 1 average cost, do you think, per those operators? 2 MR. KENNEDY: We have not gone back and looked 3 at that, to be candid with you. We can look into that and 4 see what we can develop. We were satisfied at the time we 5 sat down with CARB. Again, I want to emphasize there was 6 a genuine effort to do the right thing in December of 7 2010. And it was very different for an agency like CARB 8 to acknowledge the mistake that it had made. But they 9 were prepared to do that and, as I told them at the time 10 and I believe today, it was an excellent example of good 11 government. Anyone can make a mistake. It's much more 12 difficult to correct it. 13At the time, from our members in California, 14 including the people responsible for assisting them with 15 compliance, the costs of the amended rule were considered 16 to be reasonable. We would not have agreed to that 17 package of amendments if that time if they were not 18 considered to be reasonable. 19MR. DICKINSON: Thank you. 20PRESIDING OFFICER COHEN: I don't have any 21 questions. I just want to reiterate the request to you, 22 but to everybody who has provided testimony today. If youMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 88 1 have data, if you have specific citations that you can 2 submit with your written comments to support what you've 3 said here today, that would be extremely helpful. 4 Larry Joseph, Construction Industry Air Quality 5 Coalition. 6PRESENTATION OF THE CONSTRUCTION INDUSTRY 7 AIR QUALITY COALITION 8MR. JOSEPH: I guess I'd like to start with an 9 aside. I hope I don't go as far afield as Nick got. One 10 of the things I've learned -- I've been working on the 11 non-road preemption since the '91 proposals. I'm a 12 lawyer. I'm here representing the Construction Industry 13Air Quality Coalition. In that whatever the number of 14 years that is, I've often worked with trade associations 15 as a client for large entities, automakers, locomotives, 16 airlines, the construction industry writ large. 17 This is the first rule or this series in the 18 last while where the regulated entity is not the 19manufacturers, but it's some guy down the street who has 20 to do these things. When you're working with a big player 21 -- I imagine this happens in the agency. I know you both 22 are lawyers. I don't know you.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 89 1PRESIDING OFFICER COHEN: I'm not. 2 MR. JOSEPH: You're not, good, because that's a 3 real helpful situation, where you're talking about law 4 applied to technology, you've got science people, you've 5 got lawyers, policy people as well. And it's a really 6productive batting around of ideas. 7 Here I don't think, with all due respect to ARB, 8 that the workshops are about getting it out from these 9people who are really far removed from the manufacturers, 10 the sort of art of what's possible. I certainly 11 appreciate Mike Kennedy's work representing what's 12 reasonable. But it really would help -- I think if you 13 went out to California for a hearing and everyone just 14 complained, a long line of people complained about how 15 burdensome this is, that might not be incredibly 16productive. But if you actually -- if industry encouraged 17 their members to sort of work with EPA on the real life 18 nuts and bolts technical issues, I think very fruitful 19 information could result from that. 20So one of my points that CIAQC asked me to make 21 is that, as Nick Goldstein mentioned for ARTBA, is that it 22 would be very useful to have hearings in California, andMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 90 1 if not hearings perhaps workshops. Just try and get some 2 information directly from the affected, the regulated 3 entities here. I think that might be illuminating. 4 PRESIDING OFFICER COHEN: Excuse me. Could I 5 just ask you to state your official affiliation for the 6 record. 7 MR. JOSEPH: Yes. I'm sorry. My name is 8 Lawrence Joseph. I am here -- I'm an attorney. I'm 9 representing the Construction Industry Air Quality 10 Coalition, who was one of the people the gentleman from 11 the Pacific Legal Foundation was also representing in his 12 coalition. As a coalition, CIAQC -- which is its acronym 13 -- represents the members of Mike Kennedy's group, 14 represents the local chapters of AGC and also ARTBA, as 15 well as the Building Industry Association of California, 16 the Engineering Contractors Association, Southern 17 California Contractors Association, United Contractors. 18 These are all some of the local chapters of these 19 nationwide organizations. And the national organizations, 20 of course, have every right to speak for them. 21CIAQC is perhaps even closer on the ground to 22 these affected member organizations. They have overMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 91 1 150,000 pieces of off-road equipment, nearly half of that 2 heavy-duty. So they have perhaps the most at stake in the 3 waiver request as an entity. 4 While we wish that we could do this in 5 California and still hope that that's possible, we 6 certainly appreciate the opportunity to comment here. I'm 7 going to be -- I actually was pulled in at the last minute 8 because someone couldn't make it. I am, as I said, a 9 lawyer. Some of these comments, almost all of these 10 comments, are technical and I'll try to do them justice, 11 and I can submit a written version as well. I'll have to 12 do that by email because I didn't bring it. 13The basic point we have here is that the rule is 14 at some level unnecessary, and this goes to what the 15 gentleman from Pacific Legal Foundation talked about, with 16maybe it's time to revisit EPA's longstanding 17 interpretation of the, I think it's the second prong of 18 the three prongs in Section 209. 19This rule in particular sort of screams for 20 that, we think. It was originally envisioned after an 21 inventory that they didn't really have down and it made 22 assumptions that it was far dirtier than it was. So youMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 92 1 have this sort of overkill approach -- well, maybe it was 2 the right-sized weapon for the thing they thought they 3 were facing, but they weren't facing that much. 4 Then on top of that, you have the economic 5 downturn, and that changes everything, to the point where, 6 as Mike Kennedy said, you're going to reach these same 7 numbers anyway. So the question is whether this 8 acceleration to reach them sooner is -- that also goes 9 into the technological feasibility, the cost of 10 compliance, all those. At some level the second 209 11 factor blends in with some of the consistency with 202(a) 12 factors as well. 13Again, this is one of the first retrofit rules. 14 At least as it was originally envisioned, this rule is 15 perhaps the most ambitious. But when you have something 16 new, it's time to consider what you've been doing. You've 17 been working with manufacturers, whether it's three or ten 18 or whatever it is. That's been your 209 experience with 19 waivers up until recently, and revisiting that when you're 20 opening it up to the guy down the street, not GM or Ford 21 or whomever, is appropriate and something within the 22 agency's discretion. Even if we can't force you to doMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 93 1 that, that doesn't mean you can't do it, and it certainly 2 would be good government to revisit that. 3Anyway, so we have inadequate data about fleet 4 size, horsepower, consumption, fuel consumption, load 5 factors. You get overestimated emissions. Then there's 6 the concern with reliability of the retrofits and the 7 safety issues, with retrofits. Again, it's a different 8 process than when you ask Ford in the future to install 9 something on an engine, a new engine, so they design it 10 into it and it's integrated. This is being tacked on, 11 sometimes well, sometimes not. And as again AGC said, 12 it's too varied an environment to say whether you're going 13 to get it right every time. As ARTBA said, that's public 14 safety, too; it's not just the NAC's. It's also someone 15 getting over, something blowing up, or something being so 16 expensive that you can't use it and you go out of business 17 and safer roads don't get built. And of course, there's 18 the money and jobs that are also important. 19Another thing that concerns CIAQC -- and this is 20 part of the ARB process -- is the original driver for this 21 in part was PM mortality, and there was I guess someone on 22 the ARB staff who faked their Ph.D. and cribbed data, andMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 94 1 a reanalysis of the data shows that some of the mortality 2 increases under the rule rather than decreases. So 3 there's very troubling things about the initial impetus 4 for this rule that again call into question, is this 5 needed. 6There are several other things. They didn't 7 decrease the value of a statistical life with age, which 8 is something you're supposed to do. That changes the 9public health, perceived public health benefit of this 10 artificially. The emissions reduction benefits are short11 lived because the fleets were going to get there anyway. 12 That again reduces the public health benefit. 13So that you've got suspect benefits and it 14 wasn't adequately considered. As AGC mentioned, the ARB 15model overestimated by 4.5, or a factor of 350 percent, 16 the emissions versus based on fuel usage. 17 One thing that EPA's done, CIAQC thinks, is made 18 it very difficult to pursue one of the key paths that the 19 rule envisioned. One is buy new equipment, which can be, 20 for large equipment like a scraper or a new bulldozer, it 21 can be a million dollars. That's very hard to do, 22 particularly when your equipment has been sort of devaluedMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 95 1 from under you. 2 So it's far easier to do repower, but -- and I 3 haven't had time to look at this. I'm sorry, I was pulled 4 in at the last minute. But CIAQC maintains that EPA's 5 replacement engine regulation, 40 CFR 1068.240, makes it 6 difficult to repower. So that's an issue where -- and I 7 believe CIAQC's going to be requesting formally that that 8 be widened so that people can meaningfully pursue a 9 repower rather than having to go out -- a repower for 10 $150,000, which maybe is attainable, rather than having to 11 buy something new. Because of the ARB procedure is 12 flexible but the EPA is not, it doesn't solve the problem. 13So that's a roadblock that EPA could fix and we'll 14 request that formally, as I said. 15Again, EPA -- 16MR. DICKINSON: Go ahead. We're talking about 17 that point. 18MR. JOSEPH: Okay, good. 19ARB's midcourse correction for the economy. 20 Even that, while it was necessary, was too optimistic. So 21 the new construction companies declined versus the 22 assumptions there by about 17 percent more. OperatingMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 96 1 hours are still down 40 percent from the peak. So while 2 they did do a midcourse correction, I guess we would 3 prefer that reasonable people come out on our side rather 4 than disagree or come out the other side. 5Even the corrected numbers are optimistic as far 6 as vis a vis what has actually happened in the ensuing two 7 years. And that again goes to -- even if that's -- that 8 goes to the cost of compliance, that goes to the economic 9 feasibility, that goes to something that is within EPA's 10 power to consider. 11On that, actually, there's no reason for EPA to 12 fast-track this. Even if you're not convinced you should 13 deny the waiver, that doesn't mean you have to grant the 14 waiver. The agency has lots of priorities and the D.C. 15 Circuit case was quite clear that you have the prerogative 16 to decide what you want to work on next, and there's no 17 compelling reason to do this now. 18So even if you can't deny it, it doesn't mean 19 you have to grant it. You can wait and see what's going 20 to happen with some of these data. 21Mike Kennedy covered the fuel consumption issue 22 well. CIAQC has data on that that they've been gatheringMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 97 1 from 2005. We'll be submitting data on that. 2 Another thing that's happened vis a vis 3 predictions is the fleet's a lot newer than anticipated. 4 So in 2005 it was 4 percent Tier 0 and Tier 1. Now it's 5 about 50 percent. That's faster than they anticipated 6 that happening, and again it means that there's less need 7 for this regulation in the first place. 8I mentioned there is some question about the 9premature death discoveries or analysis for PM 2.5, and 10 that again questions the reason for having this 11 regulation. 12 So basically, yes, this is a rule that doesn't 13 need to be adopted. It doesn't need to be approved by 14 EPA. We'll get there without it. It's a huge barrier to 15 jobs and recovery. And the agency's under no obligation 16 to grant the waiver even if you're not ready to deny it. 17 PRESIDING OFFICER COHEN: Thank you. 18MR. HOROWITZ: On that, the point you made about 19 EPA's regulations, we've been informed about it. We are 20 actively looking at that issue. 21MR. JOSEPH: May I ask a question? 22 MR. HOROWITZ: Sure.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 98 1MR. JOSEPH: What I was recommending -- I just 2 heard about this two days ago, sorry. I was recommending 3 they file a petition. Is that something that you'd not 4 welcome or would that be productive? 5MR. HOROWITZ: I think if you do it, if you did 6 it in the context of this, of your comments here, it would 7 be helpful. 8MR. JOSEPH: Okay. That's what we were planning 9 to do. 10MR. DICKINSON: I don't have any questions. 11 Thank you. 12 PRESIDING OFFICER COHEN: Thank you. 13MR. DICKINSON: Thanks for coming today. 14 PRESIDING OFFICER COHEN: Mr. Joe Rajkovacz. 15MR. RAJKOVACZ: Rajkovacz. 16PRESIDING OFFICER COHEN: Rajkovacz, thank you. 17 California Trucking. 18MR. RAJKOVACZ: Good old Irish name. 19(Laughter.) 20PRESIDING OFFICER COHEN: I thought so. 21PRESENTATION OF CALIFORNIA 22 CONSTRUCTION TRUCKING ASSOCIATIONMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 99 1MR. RAJKOVACZ: Hopefully -- I don't know if you 2 can hear me all right. I don't have half my hearing, so I 3 can't tell if I'm blasting out or not. 4 MR. DICKINSON: You're fine. 5MR. HOROWITZ: Loud is good. 6MR. RAJKOVACZ: Okay, good. 7 My name is Joe Rajkovacz, Director of 8 Governmental Affairs and Communications for the California 9 Construction Trucking Association, or CCTA, headquartered 10 in Upland, California. The CCTA is a 501(c)(6) nonprofit 11 trade association founded in 1941, and our members are 12 active in all facets of construction trucking in 13 California, including owning and operating non-road 14 diesel-powered equipment subject to CARB regulations that 15 are the focus of today's hearing. 16The CCTA asks that the Environmental Protection 17 Agency reject CARB's requested waiver to enforce its non18 road diesel standards since California in our opinion has 19 failed to meet the requirements of Section 209(e)(2) of 20 the Clean Air Act. Specifically, the CCTA believes CARB's 21 rule is arbitrary and capricious and that California does 22 not need such California standards to meet compelling andMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 100 1 extraordinary conditions, two key considerations for the 2 agency to make in deciding to grant California a waiver. 3According to CARB data from 2008, off-road 4 equipment accounted for less than four percent of total 5 particulate matter in the California on a list of the top 6 ten sources for PM. PM from off-road diesels ranked 7 number nine on that list. Most importantly, emissions 8 inventory data relied upon by CARB has failed to account 9 for the significant decreases in PM that were previously 10 attributed to non-road diesel-powered equipment that now 11 sits idle, unable to work in California. 12 It is no secret that our nation has been mired 13 in the worst economic recession since the Great 14 Depression. According to the U.S. Bureau of Labor 15 Statistics, California's current statewide unemployment 16 rate is 10.7 percent and it is the third worst in the 17 nation, behind the much smaller states of Rhode Island and 18 Nevada. Eight of our cities rank in the top ten 19 nationally for unemployment, with El Centro peaking out at 20 an astounding 29.9 percent. 21In California the economic recession has had a 22 devastating impact on many of our small business members.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 101 1Simply, for many small businesses there is little or no 2 work. For those fortunate enough to get some of the 3 public sector work that is available, it is not enough 4 steady work or revenue to secure financing needed to 5 service a mortgage for upgraded equipment. 6I'd like to ad lib here, at the same risk some 7 of the others have. There's a much more causal 8 relationship between poverty, lack of a job, and poor 9 health than any model related to air quality, PM exposure. 10The decrease in construction trucking activity - 11 - excuse me. The decrease in construction activity also 12 has had the ancillary effect of significantly reducing PM 13 previously associated with non-road diesels. Projections 14 of future economic activity to justify the regulations are 15 just best guesses. Nobody can truly estimate when the 16 California construction economy might recover to the point 17 where idle equipment might be placed back in service. 18 From our members' perspective, there is no economic 19 recovery and no silver lining in economic forecasts. 20Besides reductions in PM from economic factors, 21 other factors have been acting independently of CARB 22 regulation to already power PM associated with non-roadMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 102 1 diesels. Some larger contractors have been deploying 2 newer, lower emissions equipment into the market, and of 3 course in 2010 all diesels sold in the United States had 4 to comply with EPA's ultra-low sulfur diesel mandate. 5When properly factored together, California 6 cannot show any compelling and extraordinary reasons to 7 specifically target non-road diesels for regulation as a 8 major contributor to air quality issues in California. 9 The economic recession has already helped CARB achieve its 10 goal. 11PRESIDING OFFICER COHEN: Thank you. 12 MR. DICKINSON: I have one question. First, 13 thank you for traveling to Washington today. We 14 appreciate the time. 15MR. RAJKOVACZ: I did the redeye, as was 16mentioned. 17 (Laughter.) 18MR. DICKINSON: Well, enjoy the baseball game as 19 well. 20This question is really to both you and 21 potentially to California. In terms of the idle equipment 22 that the contractors or operators currently have, how doMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 103 1 you -- in your estimate, how does that play into 2 California's provisions that allow sort of an exception, 3 if you will, for low hours of use equipment? 4 MR. RAJKOVACZ: I think that's a great question. 5A lot of the off-road rules talked about it in terms of 6 hours that gets to permissibility. I have operated 7 equipment and I've hit 4,000 hours in a single year. So 8 it's 200 hours -- and this does get to an issue of the 9metering. You know, some people probably think an hour is 10 an hour on your clock. A lot of these meters -- this is 11 my own personal experience -- an hour can literally kick 12 off a half hour. It depends on the quality of the meter. 13What I'm getting at is there's not a consistency 14 of how those meters, hour meters, work on equipment. I'm 15 sure maybe some others might be a little bit more informed 16 than me on that. That's my own personal experience. 17 So for somebody, if they get the opportunity to 18 bid a job, from my own personal experience, they can hit 19 that 200 hours fairly quickly, and then they're done for 20 the year. How do you develop the financial resources in 21 an economy right now and with these rules? As someone 22 mentioned earlier, your equipment as a small business,Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 104 1 that's where all your assets are. And when you don't have 2 the ability to either work or that equipment's been 3 devalued, so nobody wants it, how do you go and 4 financially get a mortgage to operate? You're caught in a 5 Catch 22, a financial Catch 22. 6I recognize that you can't take -- that EPA 7 doesn't look at economic, the economic equation. But you 8 know, that's really going on here. You have a lot of 9 small businesses. I want to mention that it seems to me 10 that a lot of the environmental regulation of the 11 transportation industry that's going on, that one's 12 position is predicated on their size within the industry. 13I see that fairly consistently, that the larger players 14 in the industry tend to be supportive, more supportive 15 than smaller players. And it does get to the ability, the 16 feasibility of getting the financial resources to upgrade 17 equipment and then, more importantly, to be able to 18 consistently get the business to maintain the mortgage. 19I don't know if that -- 20MR. DICKINSON: That answered it, and I welcome 21 any additional written comments or thoughts you have. 22 MR. RAJKOVACZ: We will be submitting writtenMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 105 1 comments. 2 MR. DICKINSON: Thank you. 3PRESIDING OFFICER COHEN: Thank you. 4 Steven Milloy, an independent consultant. Good 5morning. 6PRESENTATION OF CALIFORNIA CONSTRUCTION 7 AND TRUCKING ASSOCIATION 8MR. MILLOY: Good morning. 9I only made two copies. I'm sorry. 10I guess it's good afternoon at this point. 11PRESIDING OFFICER COHEN: Yes, I guess so. 12 MR. MILLOY: My name's Steve Milloy. I'm the 13 publisher of JunkScience.com. I'm an attorney and a 14 biostatistician and a consultant, and I'm here on behalf 15 of the California Construction and Trucking Association. 16 So I make this presentation on behalf of CCTA, whose 17 members will be harmed if EPA grants California's waiver 18 application. 19Now, under the Clean Air Act California must 20 show that compelling and extraordinary conditions exist to 21 justify a waiver. In my view California has not and 22 cannot meet this standard in terms of public health. TheMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 106 1 key alleged component of concern in diesel exhaust is 2 airborne particulate matter, PM 2.5. CARB claims that PM 3 2.5 kills people on a short-term basis -- that means hours 4 and days after exposure -- and also on a long-term basis, 5 after years and decades of exposure. 6With respect to the short-term claim, I have 7 just completed the first ever California-wide study of PM 8 2.5 short-term mortality. My study is the largest, it's 9 the most recent examination of the potential relationship 10 between PM 2.5 and short-term mortality. It is the only 11 systematic study in existence, that is with no cherry12 picked data. 13My results cover the years 2007 to 2010 and 94 14 percent of the California population and show absolutely 15 no correlation, that is no statistical relationship, 16between daily PM 2.5 measurements and daily mortality, 17 even among the groups that CARB and EPA say are the most 18 vulnerable to PM 2.5. Of the approximately 377,000 people 19 who died statewide in California from heart and lung 20 causes during 2007-2010, the correlation between daily 2.5 21 readings and daily death tolls was 0.004. That is, the 22 correlation is zero.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 107 1For the approximately 310,000 people aged 65 2 years and older who died of heart and lung causes during 3 2007 to 2010, the correlation between daily PM 2.5 4 readings and daily death tolls was negative 0.004. So 5 that correlation is also zero. I intend to submit these 6 results for the record. 7 Significantly, the data for my analysis is 8 publicly available, so that my results can be verified by 9 others. The air quality data I used came from the 10 California Air Resources Board. The death data I used 11 came from the California Department of Public Health. The 12 publicly available nature of my data stands in stark 13 contrast to the usually publicly unavailable data that 14 CARB and EPA have relied on for 15 years with respect to 15 PM 2.5. 16It's indefensible that the state of California 17 hasn't already done this very same analysis, or has it and 18 it just doesn't want us to see the results? 19With respect to CARB's claim that PM 2.5 is 20 associated with mortality over the long term, as CARB and 21 EPA well know, none of the existing studies are systematic 22 or scientific in nature. All involve data from cherry-Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 108 1 picked geographic areas and data from cherry-picked time 2 frames. All involve undisclosed and unavailable health 3 data, thereby preventing independent review. 4 Even so, any fair reading of any of the existing 5 studies leads to this came conclusion as my California6 wide study. That is, that there is no demonstrable, 7 measurable, detectable relationship between PM 2.5 and 8 mortality. Moreover, it is epidemiologically improper to 9 assert that such a relationship can even be detected, 10 because in no study has any researcher ever measured how 11 much PM 2.5 any subject inhaled. No study has ever shown 12 that PM 2.5 has ever caused a single death or any other 13 health effect for that matter. No one in fact can explain 14 how PM 2.5 can biologically cause death or ill health 15 effects. 16Moreover, as any competent and honest 17 epidemiologist will tell you, epidemiology is only useful 18 for detecting high risks of rare disease, the classic case 19 of smoking. With PM 2.5, however, the supposed risks are 20 very low and the health point, mortality, is common to all 21 humans. The fact that CARB continues to assert that PM 22 2.5 is causally associated with mortality despite theMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 109 1 aforementioned fatal shortcomings means their claims are 2 without a foundation in fact. I am confident that if CARB 3 and EPA never undertook a valid systematic scientific 4 approach to studying PM 2.5 or ozone, SOx, NOx, or other 5 air pollutants, they would be forced to acknowledge that 6 there is no scientific evidence that U.S. ambient air 7 quality has any detectable effect on public health. 8The reality is that the air in California does 9 not require the stringent standard proposed here. 10 California's air is already clean and safe from the 11 standpoint of public health, and there is no credible or 12 truly scientific evidence to the contrary. Yes, we can 13measure particulate matter, ozone, SOx, NOx in the air, 14 but none of these airborne substances have ever posed a 15 detectable public health problem in California or the 16 U.S., and that's a matter of historical fact. 17 As levels of these pollutants in ambient air 18 have dropped dramatically over the past 50 years, it 19belies belief to assert, as CARB and EPA have, that 20 present day air quality resulting from PM 2.5 or NOx 21 emissions poses an ever-increasing public health risk. As 22 my California-wide analysis portends, the walls areMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 110 1 closing in on the scientific inaccuracies and fallacies 2 espoused by CARB and EPA. EPA should start unwinding the 3 dubious analysis and false conclusions of CARB and 4 determine that there is no valid rational whatsoever for 5 these rules, let alone a compelling and extraordinary need 6 for them. 7 PRESIDING OFFICER COHEN: Thank you. 8Questions? 9MR. HOROWITZ: No. 10MR. DICKINSON: Thank you for your time. 11PRESIDING OFFICER COHEN: Thank you very much. 12 It's our practice in these hearings to allow 13 California to testify a second time. But first I'd like 14 to ask if there's anyone else who wishes to present 15 testimony today? 16MR. HADZI-ANTICH: Very briefly. 17 PRESIDING OFFICER COHEN: Yes, please. Thank 18 you. 19MR. HADZI-ANTICH: The only thing I would like 20 to add is -- 21MR. HOROWITZ: Can you restate your name? 22 PRESIDING OFFICER COHEN: Restate your name?Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 111 1MR. HADZI-ANTICH: I'm sorry. Theodore Hadzi2 Antich of Pacific Legal Foundation, representing the ten 3 clients that I stated before. 4 The only thing I would like to add is just to 5 bounce off a couple of comments that were made earlier. 6My clients have submitted a request to EPA also for this 7 hearing to be held in California, preferably Sacramento, 8 which is a central location. My clients have members that 9 would very much like to testify personally. These are 10 members who own and operate the specific types of 11 equipment that are covered by these regulations. These 12 individuals have firsthand knowledge of the impact of 13 these regulations on their livelihood, their businesses, 14 their abilities not only to pay the mortgages for their 15 equipment, but also to pay for the mortgages on their 16 homes, because their businesses rely on the availability 17 of this equipment. 18So I would simply echo the sentiment that EPA 19 give serious consideration to conducting a supplemental 20 hearing on this waiver application in California. 21PRESIDING OFFICER COHEN: Thank you so much. 22 Thank you.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 112 1Would California like to make a further 2 statement? 3MR. WHITE: Yes. 4 MR. LIVINGSTON: There or here; it doesn't 5matter. 6PRESIDING OFFICER COHEN: You can tag-team. 7 MR. WHITE: I'll let him go first. Always let 8 the attorney go first. 9CLOSING PRESENTATION OF THE CALIFORNIA 10AIR RESOURCES BOARD 11MR. LIVINGSTON: I'm Aron Livingston, the 12 Assistant Chief Counsel. Mine will be very short. 13A number of commenters brought up the lack or 14 supposed lack of compelling and extraordinary conditions 15 in California. We have a two or three -- well, a two-part 16 response. First is that we'll likely submit and ask to be 17 incorporated by reference our prior comments on the issue 18 of the program as a whole, that the EPA should be looking 19 at our standards on the program as a whole. We submitted 20 extensive comments on that in the greenhouse gas 21 rulemaking and the reconsideration for the greenhouse gas 22 waiver submittal for on-road motor vehicles, but the sameMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 113 1 principles also apply here and in the reconsideration. So 2 we'll resubmit those. 3It was also extensively briefed in some of that 4 litigation and we'll try and find some relevant briefs 5 that will assist EPA in the review of that. 6The second part of that is that comments 7 basically ignored -- and this will be in some of the 8 briefing under other comments -- our prior comments on the 9 issue, but it pretty much ignores the significant 10 strengthening of the Clean Air Act of 1977 and the broad 11 interpretation that Congress gave to California's program. 12 So you have to review the use of the term "standards" in 13 that context. 14 Then third, I'm not even sure it's all that 15 relevant because the D.C. Circuit has already opined that 16 EPA's review of that particular prong in the off-road 17 sector specifically was upheld, and it's looking at the 18 program as a whole, and the TRU decision was upheld. So I 19 think that horse was beaten to death, but we'll beat it 20 some more and send you some more information on that. 21Secondly, even if you decided that you couldn't 22 look at the program as a whole, which we think would beMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 114 1 inappropriate, we would not urge you to do that, but if 2 you do look at it in the alternative, we have demonstrated 3 that a need for the quantitative amount of reduction that 4 we would be getting from this measure, even as amended, 5 and I will let Eric speak more to that. 6MR. GOLDSTEIN: Did the horse leave the barn or 7 get beaten to death? 8MR. LIVINGSTON: We're still beating it. 9MR. WHITE: I also wanted to respond to a couple 10 different comments that were raised today concerning the 11 problems. Concerning the comments from ARTBA, I think 12 many of the issues that were raised by ARTBA are well 13 documented in the administrative record that we provided 14 as part of the rulemaking, whether it relates to safety15 related issues and the changes that were promulgated in 16 response to that, whether it's the availability of 17 equipment, technical feasibility of Tier 3, Tier 4 18 equipment, availability for fleets to be in compliance 19 with the regulation, and associated provisions within the 20 regulation which provide relief from the regulation if 21 that technology does not become available, and issues 22 around costs and cost assessments that were done as partMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 115 1 of the 2010 rulemaking, really do address the issues that 2 are there. So I would encourage EPA staff to make sure 3 that you go back and relook at that record because I think 4 it does lay out a fairly good response to the issues that 5 were raised. 6One issue that I heard kind of raised over and 7 over is the need, the compelling need question: Does 8 California really need these, recognizing changes to the 9 inventory? And I want to thank Mike Kennedy for pointing 10 out I think quite well the historical process we went 11 through in terms of going back, reevaluating the inventory 12 from the initial inventory that we developed in 2007, 13 recognizing both substantial reduction in activity within 14 the state associated with the recession, as well as being 15 able to go back and look at the basic inputs into the 16 inventory model, whether it was how equipment is used, how 17 much equipment is there, those types of issues. 18Because as I tell people, I think as the state 19 has demonstrated over and over as it updates and does 20 other types of efforts to move towards compliance with 21 national air quality standards, inventories are moving 22 documents. They are constantly improved as new data comesMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 116 1 in. So what you see is a reflection in this rulemaking of 2 that process working and working well. Where there were 3 questions about whether or not the inventory was accurate, 4 ARB in California going back and relooking at that through 5 a very public process that included its own separate 6 series of workshops to engage stakeholders on the changes 7 that were being made to the inventory, to arrive at an 8 inventory that would be used to support the rulemaking 9 that we did. 10But even with the lower emissions, even with the 11 reduced emissions that we saw both in the base inventory 12 as well as from the recession, what we see is that in 2010 13mobile sources in California, about 71 percent -- let me 14 rephrase that -- non-light-duty, heavy-duty sources of NOx 15 in the state, are 71 percent of our mobile source 16 inventory in 2010, and that grows to 77 percent in 2020. 17 So clearly there is -- 18MR. HOROWITZ: I'm sorry. What about the 71 19percent? 20MR. WHITE: 71 percent of all emissions, mobile 21 source NOx emissions, come from non-light-duty 22 applications -- trucks, construction equipment, ships.Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 117 1 That number grows to 77 percent by 2020. 2 This regulation is important if the state is 3 going to meet its NOx obligations and achieve important 4 emissions reductions that we're going to need to 5 demonstrate attainment. We would estimate that this 6 regulation in 2023 will provide 9 tons per day, nearly 9 7 tons per day of NOx emissions, throughout the state, and 8 half a ton of PM emissions, PM 2.5 emissions. 9Again, all of this is -- this is all kind of 10 contained in the record, but I highlight those in terms of 11 not only this source category is an important contributor 12 to NOx emissions, mobile source NOx emissions in 13 California, but the benefits of this regulation even with 14 the reduced inventory are substantial and important. 15If you look at recent work that was done by ARB, 16 which we will submit as part of -- which we will submit to 17 EPA -- what we have titled "visioning," vision work, which 18 kind of looked at what does the state need to do to meet 19 its long-term ambient and GHG emission reduction targets? 20What we have seen is to meet national ambient air quality 21 standards in the South Coast is going to require an 22 additional 80 or 85 percent reduction in NOx emissions byMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 118 1 2023. So that presumes every regulation that has already 2 been promulgated is fully implemented, and yet we still 3 fall substantially short of the NOx emissions reductions 4 that we need. 5So clearly there is a compelling need for the 6 emission reductions that this regulation will provide, let 7 alone the benefits that it does to reduce diesel risk 8 throughout the state and address mortality. In all due 9 respect to the gentleman from CCTA, I think both ARB and 10 EPA have both clearly identified, and through thousands of 11 peer-reviewed documents, that there is a link between PM 12 2.5 exposure and mortality. 13So I would request that certainly you go back 14 and take a look at it, but I think the link is clear. 15 Poor air quality has adverse health impacts and can lead 16 to premature mortality, and I think that's an important 17 benefit of this. 18The last thing that I did want to just briefly 19 touch on is process. California has I think a long 20 tradition of engaging stakeholders in very meaningful ways 21 as it develops its regulatory process, certainly, as we 22 talk about regulations that have such far and wide-rangingMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 119 1 impacts on fleet owners. And I think throughout this 2 entire process the tens of workshops that we have had to 3 discuss, to gather information on impacts, to gather 4 information about -- to share regulatory proposals and get 5 feedback from them, I think has been very successful, has 6been very informative, and I think at the end of the day 7 has allowed us to arrive -- allowed us to arrive at a 8 proposal and a regulation that found that right balance 9between economic impact and environmental benefit. 10At the end of the day, that is a very difficult 11 policy decision that the state of California must weigh 12 and the California Air Resources Board did weigh in 13 approving this regulation. So while I think there have 14 been numerous calls to hold hearings in California, we 15 think that the public record that this regulation was 16 developed on provides the information U.S. EPA needs to 17 hear from affected fleets in California, to understand 18 what the impacts are going to be, and weigh those, as the 19 California Air Resources Board did in determining that 20 this was a necessary regulation to move forward to address 21 the extreme nonattainment areas that exist in both the San 22 Joaquin Valley and the South Coast Air Basins as itMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 120 1 relates to ozone, as well as the nonattainment status of 2 those two regions for PM 2.5. 3So I think with that I would like to certainly 4 close out our comments today, unless there's any further 5 questions. 6PRESIDING OFFICER COHEN: I have one. 7 MR. HOROWITZ: I have a couple. 8PRESIDING OFFICER COHEN: My question -- we 9 heard testimony today that one of the reasons this 10 regulation or these regulations aren't necessary is 11 because fleet turnover and investments that the industry 12 has already made will eventually get us to where we need 13 to be. So I would appreciate, if this is already not part 14 of the record, if you could submit information to us that 15 explains how long it would take to get to that nine tons 16 of NOx and a half ton of PM without these regulations? 17 MR. WHITE: Sure. Information on that is in the 18 2010 statement of reasons. What I would say is that, as 19 with any source category, whether you're talking about 20 light-duty cars or you're talking about heavy-duty trucks, 21 emissions go down with time as new standards take effect 22 and begin to permeate throughout the fleet. The challengeMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 121 1 that California faces is that the rate of penetration and 2 the rate at which those emission reductions from natural 3 attrition will be realized are insufficient to provide the 4 necessary NOx reductions that the state needs to meet 5 federal and state ambient air quality standards. 6So only through rules like this where we can 7 accelerate that turnover to the cleaner equipment as it 8 becomes commercially available, is the only way California 9 has identified to achieve the nearer-term emissions 10 reductions from those source categories that they need, 11 relative to simply allowing natural attrition to take 12 hold. 13PRESIDING OFFICER COHEN: Thank you. 14 MR. HOROWITZ: Two specific questions. There 15 was a specific reference to being required to repower an 16 engine and then replace it a few years later. How do you 17 respond to that? Is that something that the regulations 18 do require? 19MR. WHITE: My response would be that the 20 regulation does not require that. The regulation sets 21 fleet average targets which allow fleets to select the 22 compliance path that makes most sense for them,Meeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 122 1 recognizing differences within their fleet in terms of the 2 equipment that they have, costs that they might be able -- 3 that they would have to incur to comply with the 4 regulation, and the timing of the regulations, since it 5 does stagger based on fleet size. 6The regulation in its initial version I think 7 many argued did require replacement of vehicles or 8 repowering of vehicles multiple times. This regulation in 9 our view does not require that, and the structure of it 10 has been changed substantially so that with only a single 11 fleet average target to meet, the need to, we would say, 12 touch a vehicle multiple times is no longer a part of the 13 regulation. 14 MR. HOROWITZ: The second question. I believe 15 there was one commenter who talked about the issue of this 16 affecting fleets in other states. Putting aside 177 17 states or I guess Air 209(e)(2)(b) states, does the 18 regulation of fleets here -- are there fleets centralized 19 in California or does the regulation go to the fleets that 20 are centered in California? How is that done? 21MR. WHITE: The regulation applies equally to 22 all equipment that is operated in the state, regardless ofMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 123 1 where the fleet itself is located. So if you are a fleet 2 that is wholly contained within the state of California, 3 all of your equipment would be subject to this regulation. 4 If you're a fleet that is a multi-state, has a multi5 state presence, only the equipment that you would operate 6 within the state of California would be subject to this 7 regulation. So equipment that is used outside of 8 California is untouched and uncovered by the provisions of 9 the rule. 10MR. HOROWITZ: Okay. 11PRESIDING OFFICER COHEN: Thank you. 12 If no other party wishes to present testimony to 13 this hearing panel -- 14 MR. HADZI-ANTICH: Excuse me. May I just 15 comment for one moment? 16MR. DICKINSON: You can submit your comment by 17 written comment. Thank you. 18PRESIDING OFFICER COHEN: We will proceed to 19 close this hearing. As noted at the outset, the public 20 comment period for these matters will remain open until 21 October 22, 2012. 22 This hearing is hereby closed. Thank you allMeeting September 20, 2012 Washington, DC

1-800-FOR-DEPO Alderson Reporting Company Page 124 1 for coming and participating today. 2 (Whereupon, at 12:38 p.m., the hearing was 3 adjourned.) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22