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- 7 0 8 7 ۰ www.ngvamerica.org Memorandum

March 30 , 2012

TO: EPA/NHTSA Docket 2017

- 2025 Rulemaking on Greenhouse Gas

& Fuel Economy Standards

From: Jeff Clarke, NGVAmerica

RE: March 26 Meeting at NHTSA HQ
The purpose of this memorandum is to summarize issues dis cussed at a meeting held at NHTSA‟s headquarters on March 26, 2012. EPA staff also participated by teleconference. This meeting was held at the request of NGVAmerica and its members.

Overview : NGVAmerica recognizes and appreciates that the agencies have included incentives for NGVs in the proposed rules. Providing incentives for NGVs is consistent with many other efforts by the Administration to advance the use of NGVs, including the President‟s “All of the Above Approach” to solving our energy dep endence problem using several alternative fuels. The President is clearly intereste d in advancing the use of light

- duty NGVs as evidenced by his support for the recent ARPA

- E announcement. That solicitation provides $30 million to develop lower cost

stor age options for passenger cars, and also provides funding for developing a low

cost home refueling device for NGVs.

NGVAmerica believes that the EPA/NHTSA rulemaking
, if properly structured
, could encourage manufacturers to greatly expand their offer ings of light

- duty NGVs. NGVAmerica provided handouts that showed the wide

- variety of light duty vehicles currently offered in Europe: http://www.ngvaeurope.eu/cars
, http: //www.ngvaeurope.eu/vans

. This illustrate s the potential for manufacturers to expand their gasoline offerings to also include NGV models.2

Our key issue with regard to the rulemaking is the likely inability of NGV manufacturers to take advantage of the i ncentives that have been proposed. The way the rules have been struc tured and the timing of phasing in and out of the incentives, places NGVs at a distinct disadvantage with electric vehicles ( EVs ) . In particular, the fact that we are tied to FFVs in the early years means that manufacturers in theory could earn very generous credits for NGVs but
, in reality
, likely can‟t use them because of the limitations or caps on credits.

Key Priorities for NGVs : NGVAmerica urges the agencies to provide a separate track for dual

- fuel NGVs so that the fuel economy (FE) credits are not limited or capped, and provide a longer duration for all NGV

- related incentives (both for dedicated and dual

- fuel) in order to aid in commercializing NGVs in the light duty sector. EV s are given until 2025, or 300,000 vehicles per manufacturer, i.e. until they reach market acceptance/maturity. It is appropriate that the agencies provide similar incentives to NGVs.

Specific Issues Addressed by NGVAmerica :

1. Utility Factor for Green house Gas (GHG) Emissions : We support the proposed use of the utility factors (in place of the 50/50 fuel consumption assumption) for 2012 forward for purposes of GHG emissions for bi

- fuel NGVs. However, we do not think this will actually be helpful unle s s also used for FE calculations.

2. 0.15 Factor/Divisor for GHG and FE 2012

– 2015 : The previously finalized 2012

– 2015 incentives fo r dual

- fuel and dedicated NGVs allowed the use of a 0.15 factor/divisor for both FE and GHG emissions. However, the fact that NGVs are tied to FFVs means that the FE credits are likely to be of no value since they are capped, and the GHG credits are only of value if they can be carried forward. With respect to dedicated vehicles, the timeframe is too limited as automakers alrea dy have set production plans. Automakers typically need at least three years to develop a new product. Because the automakers are just a few months away from Model Year 2013 start

- of

- production, any new plans to manufacture NGVs will most likely not begi n until at least MY2016. Moreover, be cause this is a light

- duty rulemaking, providing meaningful3

incentives for dual

- fuel (or bi

- fuel ) vehicles is much more important initially because consumers and fleets will want bi

- fuel until infrastructure matures. . The introduction of bi

- fuel vehicles is an absolutely critical bridging strategy towards the ultimate acceptance of dedicated NGVs.

3. Utility Factors and Use of 0.15 Divisor P ost

- 2019 : NGVAmerica supports the continued use of the 0.15 for fuel economy, a nd the use of the utility factors for FE and GHG after 2019 for bi

- fuel vehicles. However, the fact that a compara ble GHG credit is not provided (the rules do not allow use of the 0.15 factor for GHG calculation after 2015 ) puts NGVs at a distinct disadva ntage to EVs, which get 0 tailpipe emissions and very favorable FE calculations.

4. FE T reatment for NGVs: NGVAmerica supports the agencies‟ decision to continue the use of the 0.15 factor for FE because of the petroleum reductions provided by alternativ e fuels. This is in contrast to the heavy

- duty final rule where the agencies declined to use a 0.15 factor for purposes of calculating FE of alternative fuel vehicles. The extension of the 0.15 factor is legally supportable as an incentive for alternativ e fuel vehicles for the following reason: this incentive is distinctly different than the incentive previously offered such vehicles because now alternative fuel vehicles will be expected to actually operate on alternative fuels in order to qualify for th e incentive. For this same reason, we believe the agencies should extend this incentive (under a separate track) prior to 2020 for alternative fuel vehicles that actually operate on alternative fuels.

5. Heavy

- Duty Pickup T rucks : NGVAmerica recommends that the rules allow the use of the 0.15 factor for FE with respect to heavy

- duty pickup trucks. NGVAmerica did not explicitly state this in its comments filed on February 13 th but we discussed this at the meeting and think it is appropriate, parti cularly wit h respect to chassis

- certified pickup trucks. We also believe that the natural gas pickup trucks should benefit from any of the incentives provided to light

duty dedicated or bi

- fuel vehicles, e.g., use of utility factors for FE , and 0.15 factor for FE a nd GHG for a period of time to incentive increased sale of such vehicles. Alternatively, we did comment that the agencies should include NGV pickup trucks in the incentives proposed for advanced technology pickup4

trucks, but provide a lower market penetra tion threshold for such vehicles in order to qualify (e.g., tie penetration to percentage of fleet sales not to all pickup truck sales). We agree with the comments of some of the OEMs, including Chrysler, that requiring specific market penetration rates i s unnecessary and could actually discourage manufacturers from offering some certain improvements.

6. Sales Multipliers : In order to provide equitable treatment with EVs and PHEVs, NGVs should receive similar sales multipliers on par with EVs for dedicated NGVs and PHEVs for dual

- fuel NGVs.

7. Dedica ted V ehicles : We did not comment on the treatment of dedicated vehicles in our written comments but we support Chrysler‟s view that NGVs that have an emergency reserve or small (“limp home” or “pony”) gasoline

ta nk should be treated as dedicated vehicles. This is consistent with the European classification of mono

- fuel NGVs, which can have 15 liters or approximately 4 gallons of gasoline and still be considered mono

- fuel. For example, the GM Zafira is powered by natural gas and has small reserve gasoline tank, but is considered a mono

- fuel NGV (i.e., because the gasoline tank is exclusively considered a „backup‟ and not a primary mode of operation, it qualifies for incentives applicable to dedicated NGVs).

8. After market Sales: We support providing credits to OEMs who offer gaseous

prep engines to the marketplace, particularly in the case where the aftermarket systems are not subject to the FE or GHG rules. If the OEMs could earn credit for vehicles that are actua lly up

- fitted (not simply sold as gaseous

- ready), they are likely to provide additional assistance to the aftermarket industry and promote increased use of alternative fuel vehicles.