# Final Statement of Reasons for Rulemaking

Including Summary of Comments and Agency Responses

PUBLIC HEARING TO CONSIDER THE ADOPTION OF PROPOSED

MODIFICATIONS TO THE REGULATION FOR IN-USE OFF-ROAD

DIESEL-FUELED FLEETS

Public Hearing Date: January 22, 2009

Agenda Item No.: 09-1-4-iTABLE OF CONTENTS

I GENERAL............................................

................................................... ..............1

II SUMMARY OF COMMENTS AND AGENCY RESPONSES........... .....................4

1. Requirements for Fleet Size Changes ................ .............................................7

2. Tier 1 Delay .......................................

................................................... ...........8

3. Monitor Emissions Losses from Amendments........... ......................................9

4. Double Credit Not Enough to Encourage Retrofitting . ...................................10

5. Modify the Regulation Due To the Current Economic D ownturn....................11

6. Modify the Regulation Due to the Lack of Technology ...................................26

7. VDECS Do Not Work and Are Not Reliable............. ......................................30

8. VDECS Are Not Appropriate for GSE .................. ..........................................32

9. VDECS Safety Issues................................

................................................... .33

10. Cost of VDECS ......................................

................................................... .....35

11. Cannot Afford the Regulation....................... ..................................................3 7

12. Re-do the Economic Analysis ........................ ................................................39

13. Regulation Will Affect the Economy................. ..............................................39

14. Cannot Pass on Costs ...............................

................................................... .40

15. Fleets are Downsizing..............................

................................................... ...41

16. Tier 4 Engines Are Not Available ................... ................................................41

17. Analyze the Impacts of Multiple Regulations ........ .........................................42

18. Alternatives to the Regulation.....................

................................................... 43

19. Labeling Amendment.................................

................................................... .44

20. Captive Attainment Area Fleet Extension ............ ..........................................47-ii--1- State of California

AIR RESOURCES BOARD

Final Statement of Reasons for Rulemaking Including Summary of Comments and Agency Responses

PUBLIC HEARING TO CONSIDER THE ADOPTION OF PROPOSED

MODIFICATIONS TO THE REGULATION FOR IN-USE OFF-ROAD DIESEL

FUELED FLEETS

Public Hearing Date: January 22, 2009

Agenda Item No.: 09-1-4

I GENERAL

In this rulemaking, the Air Resources Board (ARB, B oard) approved modifications to the regulation for In-Use Off-Road Diesel Fueled Fleets (off-road regulation), set forth in California Code of Regula tions (Cal. Code Regs.), title 13, sections 2449 through 2449.3. These modifications include amending:

• Section 2449.2(a)(2)(A)2.a.i to extend the deadlin e for receiving double credits for early installation of particulate matte r (PM) retrofits by 10 months from March 1, 2009 to January 1, 2010;

• Section 2449(d)(4)(A) to modify the changing-fleet -size requirements to not penalize fleets that change from small fleets t o larger fleets, and then subsequently become a small fleet again;

• Section 2449(h)(8) to clarify that all sellers, an d not just dealers, of offroad vehicles must maintain records of the disclosu re of regulation applicability;

• Section 2449.1(a)(2)(A)5. to clarify that the prov ision for delay of Tier 1 turnover exempts Tier 1 vehicles from turnover only until the March 1, 2012, compliance deadline; and

• Section 2449(g)(1)(D) to clarify the reporting req uirements for verified diesel emission control strategies (VDECS).

On December 4, 2008, ARB issued a notice for a publ ic hearing to consider the modifications to the off-road regulation at the Boa rd’s January 22-23, 2009 hearing. A “Staff Report: Initial Statement of Re asons” (Staff Report), describing the rationale for the modifications, was also made available for public review and comment starting December 4, 2008. The text of the modifications, which includes amendments to sections 2449, 2449.1, 2449. 2, and 2449.3 in title 13, CCR, was included as Appendix A, to the Staff Repor t. The Notice and Staff Report are incorporated by reference herein. These documents were also posted on the ARB’s internet site for the rulemakin g on December 4, 2008 at: http://www.arb.ca.gov/regact/2009/ordiesl09/ordiesl 09.htm (“ARB’s internet site”).-2-

On January 22, 2009, the Board conducted a public h earing to consider the staff’s proposal for adoption of the modifications to the off-road regulation.

Written and oral comments were received at the hear ing, and the Board adopted Resolution 09-3, approving the proposed modificatio ns to the off-road regulation with no changes.

This Final Statement of Reasons (FSOR) for this rul emaking summarizes written and oral comments the Board received on the propose d modifications to the offroad regulation during the formal rulemaking proces s and the ARB’s responses

to those comments.

Documents Incorporated by Reference. There are no documents incorporated by reference in title 13, Cal. Code Regs., section 2449, 2449.1, 2449.2, or

2449.3.

Fiscal Impacts. The fiscal impacts of the modifications to the off- road regulation

are discussed below.

Costs to State Government and Local Agencies

Pursuant to Government Code sections 11346.5(a)(5) and 11346.5(a)(6), the Executive Officer has prepared an estimate in accor dance with instructions adopted by the Department of Finance, and determine d that the regulatory action would not create overall costs or savings to any st ate agency or in federal funding to the state, costs or mandate to any local agency or school district whether or not reimbursable by the state pursuant t o part 7 (commencing with section 17500), division 4, title 2 of the Governme nt Code, or other nondiscretionary cost or savings to state or local agencies.

The modification to extend early double credit will provide fleets additional time to install early VDECS, and thereby the opportunity to accumulate additional credits and spread out their compliance costs over several years, without increasing or decreasing the total cost of the regulation. The a bility to spread out initial compliance costs will benefit the state, federal, a nd larger municipal fleets whose first compliance date is March 1, 2010, more than l ocal municipalities that are small or medium fleets, because their earlier first compliance dates mean their need for early credit is more urgent.

Effect on Private Persons and Businesses

Pursuant to Government Code section 11346.5(a)(9), ARB has evaluated the potential economic impacts on representative privat e persons or businesses and the Executive Officer has determined that a represe ntative private person and business would incur minimal, if any, cost impacts because of the modifications to the off-road regulation. The only amendment tha t would potentially result in additional costs is including all sellers in the di sclosure retention provision.-3-

However, the cost of retaining such records is expe cted to be negligible. In addition, it was staff’s original intent to include all sellers in the disclosure requirements, and thus any additional cost of maint aining these records was accounted for in the statewide cost analysis for th e in-use off-road regulation when it was originally adopted.

As discussed previously, the modification to extend early double credit is not expected to result in any additional costs or savin gs on businesses overall. Instead, it will provide a benefit to them by enabl ing fleets additional time to install early VDECS, and thereby accumulate credit that will enable them to spread out their compliance costs in later years.

The Executive Officer has also determined, pursuant to CCR, title 1, section 4, that the regulatory action may affect small busines ses.

Effect on State Economy

Pursuant to Government Code section 11346.5(a)(8), the Executive Officer has made an initial determination that the proposed reg ulatory action would not have a significant statewide adverse economic impact dir ectly affecting businesses, including the ability of California businesses to c ompete with businesses in other states, or on representative private persons.

In accordance with Government Code sections 11346.5 (a)(10) and 11346.3(b),

the Executive Officer has further determined that t he regulatory action would not affect the creation or elimination of jobs within t he State of California, the creation of new businesses or elimination of existing busine sses within the State of California, or the expansion of businesses currentl y doing business within the

State of California. A detailed assessment of the economic impacts of the regulatory action and its effect on California busi nesses can be found in the

ISOR.

Consideration of Alternatives. The modifications to the off-road regulation were the subject of discussions involving staff and the affected owners, operators, and sellers of in-use off-road diesel ve hicles in California. A discussion of alternatives to the proposed modifica tions to the off-road regulation is found in Chapter VII of the Staff Report. For t he reasons set forth in the Staff Report, staff’s comments and responses at the heari ngs, and this FSOR, the

Board has determined that none of the alternatives considered by the agency would be more effective in carrying out the purpose for which the modifications to the off-road regulation were proposed or would be a s effective and less burdensome to affected private persons than the act ion taken by the Board.-4-

II SUMMARY OF COMMENTS AND AGENCY RESPONSES

The Board received numerous written and oral commen ts in the formal 45-day rulemaking comment period leading up to the January 2009 Board meeting, beginning with the notice publication December 4, 2 008, and ending with the closing of the record on January 22, 2009. Comment s that were not pertinent to modifying the off-road regulation or to the propose d modifications were not

included in this document. Table II-1 below lists commenters that submitted timely, pertinent comments, and identifies the date and form of their comments. Following the table is a list of those comments tha t were wholly in support of the modifications to the off-road regulation.

Following those lists is a summary of each objectio n or recommendation regarding the proposed action, together with an age ncy response providing an explanation of how the proposed action has been cha nged to accommodate the objection or recommendation or the reasons for maki ng no change. The comments have been grouped by topic whenever possib le. Comments not involving objections or recommendations specificall y directed towards the offroad regulation, the current rulemaking, or to the procedures followed by the ARB in this rulemaking are not summarized or responded to. Additionally, any other

referenced documents are not summarized below.

Comments during the 45-day Comment Period Up to and at the Board Hearing

Table II-1 below lists the comments pertinent to th e rulemaking that were received during the 45-day comment period up to and at the Board Hearing and the Reference Code assigned to each.

Table II-1 Comments From Up To and At the Board Hea ring

Reference

Code Commenter Affiliation Date Received

AGC1 Corash,

Michelle Associated General

Contractors January 22,

2009

AGC2 Steel, Michael Associated General

Contractors January 22,

2009

ALAC Holmes-Gen,

Bonnie American Lung

Association of California January 22,

2009

ATA1 Pohle,

Timothy Air Transport

Association January 21,

2009

ATA2 Pohle, Tim Air Transport

Association January 22,

2009

BAYCITIES Michaelson,

Rod Bay Cities Paving and

Grading January 22,

2009

CAMARILLO1 Porcher, Dave Camarillo Engineering

Inc. January 5,

2009-5-

Reference

Code Commenter Affiliation Date Received

CAMARILLO2 Porcher, Dave Camarillo Engineering January 22,

2009

CIAQC1 Lewis,

Michael Construction Industry Air

Quality Coal January 21,

2009

CIAQC2 Lewis, Mike Construction Industry Air Quality Coalition January 22,

2009

CIAQC3 Miller, Clayton Construction Industry Air Quality Coalition January 22,

2009

CLEAIRE1 Edgar,

Bradley Cleaire Advanced

Emission Controls January 8,

2009

CLEAIRE2 Swenson,

Tom Cleaire Advanced

Emission Controls January 22,

2009

COLLINS Collins, Lesli Collins, Lesli January 20,

2009

CRAM Cram, Rob Cram, Rob January 21,

2009

DDGE Defty,

Spencer Diamond D General

Engineering January 21,

2009

DOWNS Ambrose,

Brant Downs Equipment

Rental January 22,

2009

ECCO Rohman, Gary ECCO Equipment Corporation January 22,

2009

GCI1 Pfeifer, Nick Granite Construction

Inc. January 20,

2009

GCI2 Pfeifer, Nick Granite Construction

Inc. January 22,

2009

KEY Key, Michael Key, Michael December 5,

2008

KNAPP Knapp, Greg Knapp, Greg January 27,

2009

LEWIS Lewis,

Michael Lewis, Michael January 27,

2009

MCCLELLAND McClelland,

John McClelland, John January 19,

2009

MCDONALD1 McDonald,

Steve McDonald, Steve December 10,

2008

MCDONALD2 McDonald,

Steve McDonald, Steve December 17,

2008

MECA1 Brezny, Rasto Manufacturers of

Emission Controls

Association January 21,

2009

MECA2 Kubsch, Joe Manufacturers

Emissions Control

Association January 22,

2009-6-

Reference

Code Commenter Affiliation Date Received

NETT Mannan, MA Nett Technologies January 21,

2009

NRDC Bailey, Diane Natural Resources

Defense Council January 22,

2009

NWS Thomas,

James Neighbors Well Services January 22,

2009

QUINN Shepherd,

Bob Quinn Group January 19,

2009

RCRC1 Pitto, Mary Regional Council of

Rural Counties January 27,

2009

RCRC2 Pitto, Mary Regional Council of

Rural Counties January 22,

2009

REED Reed MD,

John Reed MD, John December 29,

2008

SCCA1 Davis, Bill Southern California

Contractors Association January 27,

2009

SCCA2 Davis, Bill Southern California

Contractors Association January 22,

2009

SIERRA Bray, Andrew Sierra at Tahoe Ski

Resort January 22,

2009

SYBLON Hunt, Jim Syblon Reid January 22,

2009

UCS1 Anair, Don Union of Concerned

Scientists January 8,

2009

UCS2 Anair, Don Union of Concerned

Scientists January 22,

2009

VCMI Dietl, Bruno Vulcan Construction & Maintenance, Inc. January 21,

2009

WIPF Wipf, Ernest Wipf, Ernest December 11,

2008

Of the comments above in Table II-1, the following Reference Codes pertain to comments that were wholly in support of the modific ations to the off-road regulation. If a comment was partially in support of the modifications to the offroad regulation but also suggested changes to the p roposed modifications, it is not included below, but is responded to in the agen cy responses later in this

document.-7-

Reference

Code

ALAC

CAMARILLO1

CAMARILLO2

CLEAIRE1

CLEAIRE2

CRAM

MECA1

MECA2

NETT

NRDC

SIERRA

UCS2

Sections 1. through 4. below respond to those comme nts directly related to the modifications to the off-road regulation approved b y the Board in January 2009. In addition to these comments, some comments receiv ed did not directly pertain to the modifications to the off-road regulation, bu t were requests for additional

modifications because of the current economic downt urn. Although these comments do not pertain directly to the modificatio ns to the off-road regulation, because they are peripherally relevant to the rulem aking, staff has responded to them as well below. Finally, staff also received s everal comments pertaining to the costs, technical feasibility or other provision s of the regulation. Although many of these comments were responded to in the FSO R for the original regulation and do not pertain directly to the modif ications to the off-road regulation, staff has restated some of these respon ses below for completeness and because they are peripherally relevant to the r egulatory action covered by

this FSOR.

1. Requirements for Fleet Size Changes

Comment: The proposed requirement for fleet size changes is a step in the right direction. However, this change to the regulation should be afforded to the large fleets also. The large fleets will feel the negati ve effects of these regulations years before the medium and small fleets. These la rge fleets are also the largest contributors to the state’s income through taxes an d allowing them the ability to move from medium to large as their dormant fleets b ecome active again will

further assist them in this economic downturn and w ill help to support that tax base. (MCDONALD1)(MCDONALD2)

Agency Response: We (ARB staff) believe that the commenter above misunderstood the proposed revisions for the changi ng fleet size requirements. Under section 2449(d)(4)(A) of the regulation, a me dium fleet increases in size and becomes a large fleet, that fleet has two years to phase into the larger fleet-8-

requirements (which in some years are stricter than the medium fleet requirements). The same is true for a small fleet that increases in size and becomes a medium or large fleet. This is intended to give fleets time to adjust to and comply with the stricter requirements of the la rger fleet size category. Additionally, if a fleet ever shrinks into a smalle r fleet size category (for example, from large to medium, or from medium to small), tha t fleet is allowed to start complying immediately with the smaller fleet size r equirements. Overall, the changing fleet size provisions allow a growing flee t to have extra time to comply with the new, stricter requirements, while at the s ame time allowing fleets that shrink to take advantage of the smaller fleet’s les s stringent requirements immediately.

Originally, this provision also stated that if a sm all fleet grew into a medium or large fleet, and then subsequently reverted back to a small fleet, that fleet was required to keep meeting the medium or large fleet requirements for two years after shrinking back into the small fleet size cate gory. As stated in the Staff Report for these amendments, this provision was ini tially developed to prevent fleets from taking advantage of a potential loophol e under the regulation by deliberately growing and then shrinking a fleet’s s ize and being subject only to the small fleet requirements. However, after furth er review of this requirement staff has determined that the possible complexity o f this provision in practice, especially in situations where a fleet may frequent ly change in size over time, far outweighs the potential for fleets to abuse the cha nging fleet size provisions.

The commenter appears to want to relax requirements for large fleets that change fleet size; however, as described above, the current changing fleet size provisions already provides for this. This aspect of the provision was not affected by the amendments adopted in January 2009. Therefo re, staff believes that the commenter’s concern is already addressed in the cur rent provisions for changing

fleet sizes.

2. Tier 1 Delay

Comment: We do not support the changes to the Tier 1 delay . Whenever you repower a Tier 0 to a Tier 1, you realize a 58 perc ent reduction in PM and a 55 percent reduction in NOx.

Those Tiers 1s have been generating those reduction s for anywhere between eight and 12 years. During the time of the develop ment of the regulation, this

was a small incentive for the Tier 1 fleets and we believe it should remain the same. (NWS)

Agency Response: As stated in the Staff Report for these amendments, the intent of the Tier 1 delay provision in section 244 9.1(a)(2)(A)5. of the regulation as approved by the Board in 2007 was always to exem pt Tier 1 vehicles from the turnover requirements of the regulation until a fle et was required to meet their-9-

March 1, 2013, compliance deadline. That is, the o riginal regulation language was intended to require fleets to begin turning ove r their Tier 1 vehicles between March 1, 2012 and March 1, 2013, to meet the March 1, 2013, compliance requirements. The intent of these amendments was t o make that intent clear, rather than to change any requirements. A misunder standing of this provision is most likely why the commenter above believed this p rovision was changing. The fact that commenter NWS misunderstood the original language supports the need for clarifying the language, as the amendments to section 2449.1(a)(2)(A)5.

do.

3. Monitor Emissions Losses from Amendments

Comment: While we support the proposed amendments, we urge staff and the Board to build in requirements for monitoring their effects on emissions and allow for additional modifications if needed to preserve the regulation’s emission reduction benefits. Furthermore we strongly oppose any rollbacks of compliance

deadlines.

Specifically, we request that CARB consider the fol lowing:

• Double Credit Extension: Without data on the numb er of fleets that have taken advantage of the early compliance provision s o far, it is even harder to predict how many fleets would take advantage of the proposed extension going forward. This creates great uncert ainty on how the proposed extension would impact early PM clean up a nd how early

actions would influence future emissions reductions . CARB should monitor how this provision is affecting emission re ductions and adjust the

rule to reduce available credits if staff discovers that emissions goals are falling short.

• Fleet Size Modifications: CARB should monitor thi s proposed modification to ensure that in practice, fleets do not exploit t his provision. Emissions reductions could be lost. (UCS1)

Agency Response: We agree that the effects of these amendments shou ld be monitored, and will be doing so through the regulat ory implementation process. In addition, if it appears that these amendments ar e causing a shortfall in emissions reductions expected from this regulation, staff will report this information during one of the future scheduled upda tes to the Board.

We would also like to clarify that these amendments to the regulation do not lessen the overall requirements of the regulation.-10-

4. Double Credit Not Enough to Encourage Retrofitti ng

Comment: Allowing the extension of the double credit for e arly PM retrofits by 10 months will provide the additional time needed f or device manufacturers to sort out the additional requirements put on them by the ARB during the ever changing verification process. However, it will no t make cash available for those employers required to purchase and install those re trofit devices. Unlike our State and Federal Governments, employers usually do n’t spend cash that they don’t have or foresee as income and therefore the p urchase of these devices will be delayed until such a time as the work load will justify and pay for their purchase. Also, on pages 14 and 19 of the Staff Re port, I believe that staff has once again overstated their VDECS estimates. The b urden of installing VDECS to meet the staff projection of 30 percent by 2011 will fall largely upon the shoulder of the large fleets to the tune of approxi mately 59,500 units, as medium fleets first compliance is 2013 and small in 2015, and I would disagree that

medium and small fleets will find the double credit to be a large enough benefit to retrofit early. Particularly when cash flow is low . (MCDONALD1)(MCDONALD2)

Comment: We appreciate the proposal to extend double-credit for early PM retrofit, but those devices are not yet proven to b e safe or economically feasible at this point. I urge CARB to please DO MORE! The re are still too many flaws and unclarified questions that must be answered! ( COLLINS)

Comment: The double credit incentive does not seem to be e nough incentive to

overcome the obstacles to installation of the devic es and will not produce the results that ARB had anticipated. Without substant ial double-credit, the ARB cost analysis of cost of compliance with the rule n eeds to be revised. (CIAQC1)

Agency Response: Staff acknowledges the impact that the current ec onomic recession is having on some fleets, and realizes th at some fleets may not be able to take advantage of the early VDECS double credit because of a lack of funds. However, at the July 2009 Board Hearing, the deadli ne for receiving VDECS

double credit was extended further for small and me dium fleets, until March 1, 2012. Therefore, even if they choose to wait until after the current economic recession eases, small and medium fleets will still be able to take advantage of the early credit available to help spread out compl iance costs. For further discussion on VDECS costs, please see the responses in Sections 6 and 11

below.

Commenter CIAQC1 stated that the cost analysis of t he regulation needs to be

revised if substantial double credit is not receive d by fleets. However, as stated in the Staff Report and Technical Support Document (TSD) for the original regulation, no early retrofitting was modeled in th e original cost analysis. If any fleets take advantage of the early double credit pr ovisions, a cost savings for those fleets will result. Therefore, the statewide cost of the regulation in the early years of implementation could only decrease from wh at was estimated.-11-

Additionally, the commenters above suggested that d ouble credit for early VDECS installations was not enough to encourage fle ets to retrofit vehicles early; however, staff disagrees with this statement. Alth ough staff acknowledges that not all fleets will take advantage of the early ret rofit credit, we believe that the double credit will be enough to spur some additiona l and early VDECS installations. Staff did not propose to give any a dditional credit (beyond double credit) because offering more than double credit co uld result in a further delay of VDECS installations, which could result in overall emissions disbenefits.

See response in Section 10 below regarding VDECS fo r a discussion of how the regulation only requires the use of VDECS when they can be installed and utilized safely.

5. Modify the Regulation Due To the Current Economi c Downturn

Comment: CIAQC recognizes the need for the continued reduct ion of Particulate Matter, Oxides of Nitrogen and visible emissions from off-road diesel vehicles; we are convinced, however, that the staff proposed amendments to the regulation do not provide all that is needed at thi s time for it to succeed. (CIAQC1)

Comment: Today we come before you to make the case for addi tional amendments to the off-road diesel regulation, which is also far from perfect.

During this process -- and I was certainly an activ e participant in it, there were issues about the economic analysis that stated that the construction industry could easily afford to replace all of its equipment over the next ten years.

We have provided a chart that illustrates these eco nomic projections and the terrible reality that our industry faces today.

Madame Chairman, you described our current economic situation as recession. For the construction industry, it's a depression. W e have unemployment well in excess of 25 percent in most of our union trades, a nd it's going to get far, far worse. (SCCA2)

Comment: We filed a petition on December 15th to modify th e rule to reflect the dramatic change in the economic, technological, and for that matter, emissions conditions as contrasted to those that were anticip ated when you adopted the

rule in 2007.

The double credit modification is appreciated and i s helpful, but it is far short of what is needed today.

What we are seeking is simply your endorsement of o ur quest to the staff to engage in a process of looking at the rule and what modifications are necessary-12-

and are appropriate to reflect today's realities. A nd in order to keep our feet to the

fire. And because of the eminence of the short term deadlines, that you give us a short term deadline for getting back to you. And in fact that you have us report to you every month on our progress.

Those discussions should also include taking a look at what revisions might be appropriate to allow us to access federal and State funding from which we are currently barred, because we are talking about requ ired emissions reductions. And that seems to be counterproductive.

Now why is this? The fact is that while the staff h as described to you enforcement policies, the economic and technologica l realities that you're hearing about are forcing large parts of this industry to b e out of compliance by the time

the near-term deadlines come or to be out of busine ss. (AGC1)

Comment: Moreover, we believe it is prudent for the Board to consider an extension of the initial compliance dates of the re gulation concurrently with the

extension of the double credit deadline. While an extension of the initial compliance dates of the regulation may create a con cern as to a loss of emission reductions; the current state of the economy is cre ating its own emissions reduction. (GCI1)

Comment: When the In-Use Off-Road Diesel Fleet Rule was adop ted on July 26, 2007, California’s economy and California’s con struction industry were both booming. Since that time, we have seen the mortgage meltdown, the credit crunch, and the Wall Street bailout all contribute to the economic recession for California and the construction industry. This mean s that we are doing less work and contributing fewer emissions.

A reduction of construction work over the past 18 m onths has led to a significant decrease in equipment and utilization across Califo rnia. This decrease in utilization correlates directly with a reduction of emissions purely through economic factors. Adding to the absolute reduction in emissions is the fact that the equipment still being operating is newer and em its fewer pollutants than the equipment being parked.

CARB Staff and the Board should take into considera tion the current economically driving reduction of emissions relativ e to the modeling conducted for compliance with the Off-road rule and adjust th e initial compliance dates accordingly. (GCI1)

Comment: Re-evaluate the schedule and timing for the rule. The most appropriate approach for the ARB is to give itself time to redo the rule. Register the fleet, if you must, enforce the idling, identif ication and sales provisions. Fix

this before its failures undo the intent of the eff ort. (CIAQC1)-13-

Comment: ATA has consistently supported ARB’s emission red uction goals for the regulated vehicles, including airport ground su pport equipment (GSE), but cannot support the inefficient and unduly burdensom e approach for achieving those goals embodied in the ORD Rule.

As more fully explained in the attached, the propos ed amendments are welcome, but are not nearly adequate to reflect the real imp act of the economic downturn

and the lack of verified retrofits feasible for air port ground support equipment (GSE). As a result of the dramatic economic downtu rn, ATA believes equipment use has dropped far enough so that the near-term em ission reductions targeted by the ORD Rule already have been achieved. There is no emission or economic basis for imposing the Rule’s near-term re quirements on GSE.

In this environment, the emission requirements of t he Rule should be deferred, at least as applied to GSE, long enough to allow a com plete assessment of the measures needed to achieve emissions reduction targ ets in light of the economic downturn and empirical fleet data due in April, Jun e, and August, 2009 (for large, medium, and small fleets, respectively). ATA commi ts to work in full cooperation with Staff in this effort, so that it can be comple ted as expeditiously as possible. Deferring the ORD Rule’s requirements for GSE would be as effective in carrying out the purpose of the Rule as proceeding to implem ent on the present schedule, and would be less burdensome on the regulated commu nity. (ATA1)

Comment: As you well know, the California economy as a whole and the construction industry in particular, are in a deep recession. The detailed

comments below will illustrate how this downturn it self has caused emission reductions from the subject engines equal to or in excess of this regulation. Lehigh Hanson proposes that the full implementation of this rule be delayed until economic conditions make compliance feasible.

At this time in January 2009, the California Constr uction industry is recording significantly depressed activity levels, largely ca used by the worst housing market conditions in the US since the Great Depress ion. The related credit availability crisis has also contributed to the red uction in construction spending.

As the statistics describe, the drop in constructio n activity alone has equaled or exceeded the proposed ORD PM emission reductions re quired by the regulation. This reduction has come at a great cost to the Cali fornia economy.

It is proposed that the implementation of the ORD r egulation be delayed until Construction and Mining industry activity levels be gin to rise and then proceed at a pace that will allow attainment of the 2020 PM em issions target.

This delay will also allow the implementation probl ems discussed above (and others) to be addressed and hopefully solved. (KNA PP)-14-

Comment: I'd also like to make a comment that I would requ est that the Board consider postponement of the regulatory deadlines c oncurrently with the postponement of the early credit deadline. I don't make this comment lightly. I realize it's a huge shift in the regulation. But I think given the current economic downturn, the current decrease in operating hours, fuel consumption, the emissions coming out of the stacks of equipment acr oss the state has simply gone down since the regulation was adopted. (GCI2)

Comment: The good news is that the environmental impact of this economic downturn has been a positive one. Lower overall emi ssions. Fuel consumption for our fleet has dropped from 1.2 million gallons annually in 2006 to under 600,000 gallons annually last year. Our hours of ut ilization have dropped by more than 50 percent. Those are real emissions reduction s. But we get no credit for them. If we were to receive credit for them, that w ould be two-and-a-half years of PM credit and almost five years under the NOx porti on of the rule.

To conclude, in light of the current economic downt urn, soon to be known as the depression, I think that the Board should consider what AGC has suggested and delay the implementation of the rule. (DOWNS)

Comment: I think though that you really cannot deny that we are in a very severe economic crisis with a very severe downturn in construction activity.

We’re asking that given these changed circumstances that the staff work with the industry and other stakeholders to take a hard look at what the data yields in March or April, what the actual facts are, and that we make decisions about

whether this rule needs to be modified or can be mo dified based on facts.

The construction industry needs your help. It needs the staff to work with us to

evaluate this data and look at these near term dead lines and determine whether there is some flexibility there because of the econ omic downturn.

What we're saying is that given this current enviro nment, you actually have some room to breath, some flexibility here. And we ought to take that opportunity and take a hard look at whether there are ways the rule can be modified without impairing public health given the economic downturn to give some breathing room to these companies so they can survive. (AGC2 )

Comment: California Air Resources Board’s new emission stand ards have been out of reach for many contractors from the start. We feel that CARB’s efforts are noble, but over ambitious. Many companies were pro active and opted to purchase the highest tier equipment available throu gh the last decade. The current rules are punishing these firms who took a proactive position to clean up their fleets and lower their carbon foot prints far ahead of the state’s ruling. These efforts have come at great expense to these f irms with anticipation that they would be rewarded. While their competitors ha ve been rewarded by the-15-

state for their continued use of non tier high emis sion output equipment that is

low costs.

Proactive firms that have taken on debt for years t o come and are now faced with the dilemma of having to update their fleets once a gain as the technology has outpaced the life of their fleets. All this while s till having to pay off some of their existing debt on early tier compliant equipment. Th is early tier equipment has a low residual value due to the CARB’s ambitious goal s, thus further punishing proactive companies for their noble efforts. All th is has happened during this

economic down turn that has effected off road fleet s more than any other sector in the business community.

For these firms that have made a real attempt to do the right thing this has come as a shock. CARB should work with the companies tha t can demonstrate their proactive efforts to clean up their fleet emissions during the early stages. These companies have benefitted the state’s air quality f or the past decade, and should

be rewarded for these efforts.

Furthermore, CARB’s current goals are far over reac hing for our industries current economic time. The state will force quality companies to face hard decisions to either close their doors or have to gr eatly down size their companies to stay in business. These companies will also be f orced to pass this additional

cost on to their customer base that will further ad d to the economic crisis we are facing. (DDGE)

Comment: As a company, we're behind you. We don't have a p roblem meeting your requirements and your goals. We have a problem paying for them, especially in the next year or two.

So a lot of things are not going our way right now. Things will get better. But your

consideration and action on AGC's recommendations b efore you will go a long way towards ensuring our survival the next couple o f years. (SYBLON)

Comment: I would also ask that the ARB reconsider the time frames and the impact of theses regulations with respect to our cu rrent financial situation as a whole on the employer. (MCDONALD1)(MCDONALD2)

Comment: It is economically impossible for ECCO to consider the compliance mandates at this time. And ECCO is respectfully req uesting your help with this regulation so that we even have any possibility of making it. (ECCO)

Comment: Please don't force so many of us California Contr actors out of business during this down turn in the economy! (CO LLINS)

Comment: It is impossible to evaluate the impact of the of f-road regulation without examining the current economic state of the construction industry in-16-

California. The picture has changed dramatically s ince 2006 when the staff compiled their original optimistic assumptions abou t the future of the industry. Not only were the ARB assumptions way off base, but the framework of the existing rule goes well beyond the economy in cripp ling the industry in California. We believe that significant and substantial relief is warranted given these facts.

1. Currently there are 120,000 construction workers unemployed and the projection is for 200,000 to be unemployed by the e nd of 2009. ARB assumed only increases in the size and operation of the ind ustry and the fleet.

2. Emissions from construction activity have droppe d dramatically. Operating Engineers’ hours, the individuals who operate this heavy duty equipment, are down over 28%. Estimates place the hours at more t han a 35% reduction or more by the end of 2009. ARB’s assumptions never an ticipated a downturn in the economy, the industry or its capacity to emit.

3. Some of the largest contractors, with the larges t fleets, report having more than 50% of their fleets parked since August of 200 8. Small and medium size fleets are faring no better. This condition was not included in ARB staff’s original projections.

4. Off-Road diesel fuel consumption used by contrac tors has declined by over

30%. There is a virtual one-for-one correlation bet ween operator unemployment, machine utilization and fuel consumption. ARB staff recently assumed only a 10% reduction. By not attempting to corroborate the industry specific data with the Board of Equalization’s off-road fuel data to t ease out just the construction portion ARB’s emissions estimates are grossly overs tated.

5. Equipment sales and auction data indicate that m ore equipment has left the state than has been purchased new in California ind icating an overall shrinkage

in the number of vehicles in California. This is th e exact opposite of what ARB

staff estimated.

6. A sample of 12 fleets ranging in size from 16 to 1000 machines reveals that every fleet has shrunk in both the number of engine s and total horsepower, AND that the make-up of engine tiers matches what ARB p rojected it to be in 2010. ARB did not anticipate this rapid transformation of the fleet.

Put simply, things are not at all what ARB staff pr ojected. Emissions are down substantially, based on fuel usage, hours of operat ion, employment and numbers of idled equipment and will continue to decline for the next year or more. Further, the fleet is smaller than projected, by a substanti al margin and continuing to shrink. In addition, the fleet is reducing older eq uipment quicker and the percentage of newer equipment is increasing faster than ARB projected, putting the fleet ahead of ARB’s projections for emissions reductions.-17-

Given the smaller and newer California off-road fle et there is little likelihood that an overnight improvement in the economy (which isn’ t going to happen anyway) can produce a spike in emissions from the construct ion industry as the staff would have everyone believe, as older equipment is prohibited from re-entering

the fleet.

A re-examination of the economic and emission impac ts of the rule is warranted and necessary if ARB and the Administration are int erested in maintaining a healthy construction industry as well as a healthy environment. (CIAQC1)

Comment: I respectfully request that the rulemaking for Ne w Limits on Emissions from Existing Fleets of Off-Road Diesel E quipment be reopened and re-evaluated in light of the serious downturn in th e economy.

Decline in the Consumption of Diesel Fuel: Consumption of diesel fuel for our company has decl ined by 79% as compared to a normal year.

Resale Value of Equipment in an Existing Fleet: In anticipation of the new California Air Resources Board rules our company sold at an auction all except one Tier 0 equipment. Our observation has been that resale values of older equipment have drastically d eclined.

Credit Being Extended to Construction Contractors: We are experiencing severe restrictions on availabl e credits in addition to very tight covenants.

I strongly believe it would be in the best interest of Californians to revisit the costly new CARB rules, especially in light of the t roublesome economy automatically resulting in reduced emissions. Stric t enforcement will result in many contractor's going out of business. (VCMI)

Comment: ATA always has supported achieving the emissions reductions sought under the ORD Rule, but has not supported th e regulation as currently structured. The proposed amendments are welcome, b ut not nearly enough. As a result of the dramatic economic downturn, ATA believes equipment use has dropped far enough so that the near-term emission r eductions targeted by the ORD Rule already have been achieved. There is no e missions or economic basis for imposing the Rule’s near-term requirement s on airport ground support equipment (GSE).

The emissions requirements of the Rule should be de ferred, at least as applied to GSE, long enough to allow a complete assessment of the measures needed to achieve emissions reduction targets in light of the economic downturn and the empirical fleet data due in April, June, and August , 2009, for large, medium, and small fleets, respectively.-18-

The present regulatory structure cannot be justifie d economically, even in relatively good economic conditions.

The economic downturn has been and likely will cont inue to be very painful; the silver lining is that it has resulted in drasticall y reduced emissions as a result of the reduction in equipment activity.

The Near-Term Reductions in GSE Emissions Will be A chieved Even Without the

ORD Rule Due to the Dramatic Economic Downturn.

GSE does not operate unless planes are flying – whe n planes do fly, GSE does not operate at the same levels if servicing reduced passenger and cargo loads. The ORD Rule was premised on projected airline acti vity growth:

ARB Projected Growth in GSE Population (Percent)

2008 2010 2011

from 2000 Baseline 18.8% 23.1% 28.5%

from 2004 Baseline 7.9% 11.8% 16.7% Source: Growth Rates applied GSE in OFFROAD2007 Mo del In fact, aircraft operations in California have dro pped dramatically.

Change in Scheduled Aircraft Activity (Percent)

2008 2009

from 2000 Baseline -11.2% -19.5%

from 2004 Baseline 1.2% - 8.2% Source: ATA, based on Seabury APGDat airline sched ules.

Data from California’s large airports shows the dec line is even more dramatic at the airports in Non-Attainment Areas (data subject to update).

Actual Airline Activity as Reported by Large & Medi um Hub Airports (LAX, SAN, SFO, BUR, OAK, ONT, SJC, SMF, SNA) (YTD November)

2008

2004 2007 **∆** from

2004

Aircraft

Movement

s* 1,234,672 1,241,754 1,084,870 -12.1 %

Passenger

s 152,015,71

7 159,926,89

1 139,541,88

4 -8.2 %

Cargo (tons)* 3,245,333 3,196,645 2,367,975 -27.0 %

* Excludes Oakland because data not available-19-

Airlines do not anticipate restoring service levels in California in the foreseeable future, with further reductions possible, and alrea dy are reducing GSE fleet sizes.

The ORD Rule was intended to reduce PM emissions by 14% compared to the baseline in 2010. In 2011, the Rule was to achieve about a 25% PM reduction. See Initial Statement of Reasons for Proposed Regul ation of In-Use Off-Road Diesel Vehicles (April 2007) at 34 & 35, Figure VI- 2 (“ISOR”).

Under any reasonable scenario, GSE emissions will r emain below the levels targeted by the ORD Rule at least through 2010 or 2 011, even without the Rule’s requirements.



# ORD GSE PM Emissions

0.00 0.05 0.10 0.15 0.20 0.25

2004 2

0 0 5 2

0 0 6 2007 2008 2009 2 0 1 0

**Year PM Emissions, tpd** 

OFFROAD w/o Rule

OFFROAD with Rule

Predicted by Airline

Activity

The high penetration of electric GSE in the South C oast, and the de minimis GSE population in the San Joaquin, further ensure that deferring the Rule for GSE will not adversely effect South Coast and San Joaquin at tainment efforts.

ARB Staff Has Understated the Impact of the Economi c Downturn

After issuing the proposed Amendments, Staff used d ata from the California Board of Equalization (BOE) to conclude that regula ted vehicle activity in 2008 was slightly higher than in 2004, and is consistent with the assumptions underlying the ORD Rule.-20-

Staff correctly acknowledged that “the specific cha nges in fuel use by fleets affected by the regulation (for example, the constr uction industry) cannot be derived from this data,” but incorrectly assumed th at the data “is likely reflective of general trends from all users of off-road diesel fuel.” Staff Report at 39.

Fuel use data from the U.S. Energy Information Agen cy (U.S. EIA) establishes that diesel use in the sectors covered by the ORD R ule is down significantly.

Of the sectors covered by the ORD Rule, only off-ro ad construction diesel use is tracked as a separate category by the U.S. EIA. Th at data shows diesel use for off-road construction has declined steadily since 2 004 and, as of 2007, was 27%

below 2004 levels.1 This sector accounts for at le ast 50% of emissions covered by the regulation.

Data from the U.S. EIA shows diesel use in the rail sector has remained high and is now 2.5 times larger than construction use; mari ne use is 127% higher than in 2004. The inescapable conclusion is that the inclu sion of other sectors in the BOE data masks the dramatic declines in usage in th e construction sector.

Diesel Consumption Indexed to 2004

0% 20% 40% 60% 80% 100% 120% 140%

2004 2005 2006 2007 2008

YearConsumption Relative to 2004

Dyed Fuel (All Sources) - BOE Data

Off-Road Construction - USEIA Data

With the corroborating economic data from the airli ne and construction industry, one can only conclude that diesel use in these sect ors has declined dramatically.

The Rule’s Economic Basis is Gone -- Implementing i t Now Will Cause Needless

Economic Harm.

1 U.S. Energy Information Administration, data avail able here: http://tonto.eia.doe.gov/dnav/pet/pet_cons_821use_d cu_SCA_a.htm-21-

When adopted in July 2007, Staff concluded that the ORD Rule requirements were at “the economic limit of what industry could bear.” ISOR at 3 (emphasis added).

As the data above shows, airline economic activity has declined rapidly and the decline is accelerating.

Construction activity (50% of emissions covered by the Rule) has dropped at least as dramatically.

Given the economic crisis, the near-term Rule requi rements are now plainly beyond “the economic limit of what industry could b ear.”

Staff has not even estimated the job losses and eco nomic impact of the ORD Rule in the current economy. (ATA1)

Comment: I came here to ask the Board, given the extraordi nary economic circumstances that we find ourselves in, to step ba ck and consider the effort or

the effect of the economic downturn and how emissio ns reductions targeted by the rule can be achieved without afflicting unneces sary economic harm.

Let me be clear. The Air Transport Association has always supported the emission reduction targets of this rule. We underst and how important it is to work with you to protect public health and the environme nt. I think the staff will agree that we've done that throughout this process and we continue to want to do that. I'm not here to ask you for a handout or a free pas s. I'm asking you to take a

breath and assess what in fact is needed in these c ircumstances to achieve the emission reduction targets that we all support.

We've submitted comments that you all should have w hich include data on the effect of the economic downturn. When you all pass this rule, you expected, as we did, that the air transport industry would grow. The fact is that we've contracted. There are far fewer passengers being tr ansported, far less cargo, far fewer planes being operated. Even as we're speaking today, airlines are reporting their financial results and projecting th at they're going to reduce capacity even further.

This means that emissions are down. And they're far below what was anticipated. Coupled with staff's conclusion over a year ago tha t the rule imposes requirements at the limits what industry could bear , there's simply no reason to barge ahead with a rule without taking time to cons ider what is needed and economically feasible to achieve the reductions we all support.

Pausing now won't hurt the environment. I think pau sing will certainly cause unnecessary economic harm to our industry that's al ready hurting.-22-

It seems to me that staff today -- and I don't want to put words in their mouth -- but it seems they're saying they need more informat ion to assess the effect of the economic downturn. We agree with that. We don't thi nk that the remedy is to simply monitor the situation. Because the fact is t he first requirements are coming up quickly, and we need to work now to get o urselves in a position to comply. So if something needs to be done, its needs to be done now. (ATA2)

Comment: The projected ORD PM emission in 2010 were -26.2% f rom 2000
levels. The drastic reduction from 2000 levels in C alifornia Construction & Mining industry activity in 2007 -19.3%, and the projected levels for 2010, -26 to -32%, indicate that the economic conditions have equaled or exceeded the PM

emission reductions that would have been attributed to the ORD regulatory program. (KNAPP)

Comment: And so it is that we come before you today to make the case for additional amendments to the off-road diesel regula tion, which is far from perfect.

First among its flaws was the ludicrous economic an alysis that showed how the construction industry could easily afford to replac e all of its equipment over the
next ten years.

We support the amendments before you today, but we also petition the Board to consider CIAQC’s proposal to revisit this flawed re gulation and get it right before implementation and enforcement. To do otherwise is to compound the flaws and watch the rule fail to meet its objectives of clean ing up emissions from the construction fleet. (SCCA1)

Comment: Essentially, everything in the construction indust ry peaked in July of '06, which we tried to tell your staff back when th is rule was being adopted. And it's been going down and has shrunk considerably se nse.

Most importantly, if you want to know what's happen ing with emissions, you have to look at operating engineers hours, because those are the guys that drive the equipment. Their hours are currently down 40 percen t and expected to continue to drop for the next 18 months.

So if I can summarize, we think you need to make a very thorough and independent evaluation of economic impacts of the r ule and the industry's ability to comply, particularly with regard to the safety i ssues. (CIAQC2)

Comment: (Submitted in conjunction with comment CIAQC2 abov e)-23-

(LEWIS)

Comment: The last one I'd like to bring up is the current st ate of the economy. Our industry is changing drastically weekly. Our in dustry has reduced -- our customers have reduced their activity and the capit al that they are investing in

their facilities. This has resulted in a decline in our revenues, a decline in the utilization of our equipment, a decline in emission s. And our goal is just to survive this period of time.

Our capital budget has dried up to -- our capital b udget has been reduced by 75 percent. We cannot pass any cost on to our customer s. We're heading the other way. The compliance cost dollars are going away. An d we ask that you take some time and just re-evaluate the current economy. It's changing drastically. (NWS)-24-

Comment: Staff also stated in their rule back in July 2007 somewhere between 1400 and 3400 jobs annually will be lost under this rule. That could be as many as 71,400 jobs over the 21-year-period. I suggest t hat that is the wrong time to knowingly put people out of work. I believe staff w ould find there is a closer relationship between poverty and public health than PM emissions and public health. (DOWNS)

Comment: As far as financially, hopefully I will be able to stand with you next year giving you an update. I'm not sure. We've bid a Caltrans job. The engineering estimates used to be where you would st art was a $60 million job. We got the job, 43 million. But tenth bidder was 49 million. And that's not unusual right now. We are just out there trying to stay ali ve right now.

It is a recession. Our emissions are a lot lower. W e're not using our equipment. And we need your support to make sure we survive.

1989, the earthquakes, we were there taking apart t he bridge where the people were trapped. If we have a disaster, we need the co ntractors -- the heavy civil engineering contractors to be around to help us out . (BAYCITIES)

Comment: This delay will also allow the implementation probl ems to be addressed and hopefully solved. (KNAPP)

Agency Response: As stated in the staff report for these amendment s, we recognize that the economy is in a recession. Howe ver, at the time these amendments were proposed in January 2009, we did no t have adequate data to

determine the effect of this recession on off-road vehicle emissions. Because of the lack of data, we did not propose any additional amendments beyond extending the deadline for retrofit double credit t o further relax the requirements of the regulation, even though many commenters (inc luding CIAQC1, AGC2, ATA1, and ATA2) stated that the recession had downs ized the size of the state’s fleet of off-road vehicles, resulting in reduced fl eet emissions.

Overall, while staff found that lowered fleet activ ity has likely decreased emissions from staff’s previous estimates, changes in fleet turnover practices during an economic downturn, on the other hand, can result in increased emissions, that somewhat offset the reductions fro m reduced activity. Consequently, it was necessary to have a thorough u nderstanding of the makeup of fleets and vehicle turnover to accurately estima te the emissions impact. At the time of the Board hearing, staff did not yet ha ve adequate data to quantify the effect of changes in turnover practices, and is con tinuing to evaluate the data using fleets’ initial reporting information from 20 09 and data that will be reported

in 2010. Staff is committed to return to the Board in December 2009 and report

on current economic conditions and the most recent data reported during the 2009 initial reporting period of the regulation.-25-

Beyond staff’s commitment to evaluate and report on economic conditions and their effect of state fleets, shortly after the Jan uary 2009 Board Hearing, the California Legislature adopted Assembly Bill 8 2X ( AB 8 2X, which is also often cited as ABX2 8), which directed ARB to make severa l amendments to the offroad regulation, as part of the California budget. These amendments, referred to as the AB 8 2X amendments were then approved by the Board at the July 23, 2009 Board Hearing.

The stated legislative intent of AB 8 2X is to prov ide economic relief and to preserve jobs in the construction industry, and eff ectively allow fleets heavily impacted by the recession to delay compliance with the in-use off-road regulation’s requirements, especially in compliance years 2010 and 2011. The AB 8 2X amendments allow large fleets to claim both PM and NOx credits in 2010 and 2011 if they have experienced a reduction in fleet activity from July 2007 to March 2010. Additionally, the amendments a llow for PM and NOx credit (for all fleet sizes) if the fleet has reduced its total horsepower from March 1, 2006 to March 1, 2010.

The AB 8 2X amendments also provide additional comp liance flexibility by allowing large fleets the option of delaying a port ion of their compliance obligations for 2011 and 2012 until 2013. The AB 8 2X amendments will significantly reduce compliance costs for off-road fleets over the next several

years.

Although the commenters above requested the Board t o take more actions to modify the regulation at the January 2009 Board Hea ring, we believe the addition of the AB 8 2X amendments adequately addresses thei r concerns, but, as stated, staff is continuing to evaluate the issue. The com menters are correct that the regulation was developed during a period of industr y growth and that the current economic downturn was unforeseeable when the regula tion was developed. However, staff believes that the AB 8 2X amendments will give fleets additional flexibility during this downturn.

Commenter DDGE is concerned that ARB is punishing t hose fleets that have been proactive, and have upgraded their vehicles ov er the past several years.

Staff does not believe this to be true. For fleets that have complied, the regulation provides a large number of early credits for actions previously taken to upgrade vehicles; this includes credits for repower s, exhaust retrofits and vehicle replacements and/or retirements. In addition, flee ts that took action early to move to cleaner, higher tier vehicles have cleaner fleet averages and are therefore closer to meeting the regulation’s fleet average targets than other fleets. Additionally, as stated in Chapter III.A.3 of the FSOR for the original regulation, staff does not believe that the regulat ion will decrease the value of most vehicles. The off-road vehicle market is a gl obal one, and therefore the regulation alone is not expected to cause a drop in equipment value.-26-

Commenter DOWNS expressed concern regarding the num ber of jobs lost over the course of the regulation; however, staff believ es this commenter misinterpreted the original job loss estimates pres ented in Chapter XI of the TSD for the original regulation; these numbers were low er than the numbers presented by the commenter above. The original job loss analysis estimated that in its highest cost year, the regulation could resu lt in a loss of 1,000 jobs across the California economy. However, a job loss estima te of this magnitude is not expected each year. Additionally, this estimate di d not take into account jobs created by the regulation in areas such as exhaust retrofit manufacturing. Also, with the addition of the AB 8 2X amendments, many f leets will be able to spread out their compliance requirements (and costs) durin g the initial, more costly years of the regulation, therefore avoiding potential job losses.

Commenter KNAPP stated that delaying the regulation would allow ARB staff to solve any implementation problems that have arisen. However, staff believes that it is necessary to implement this regulation n ow to achieve necessary emissions reductions across the state, and does not believe there are severe implementation problems that justify delaying imple mentation of the regulation. Staff will continue to implement the regulation as scheduled, and will update the Board periodically on the status of any compliance issues that may have arisen during the course of implementation.

Commenter ATA2 argued that delaying the regulation now will not result in any harm to the environment; however, staff disagrees. As stated above, if it can not be definitively shown that emissions have decreased , delaying the regulation will

result in a decrease in emissions benefits. Theref ore, a delay in the regulation

could harm the environment if a lack of emissions r eductions occurs.

For a response to the comments requesting a change in the regulation due to the lack of current technology, please see the response in Section 6 below.

6. Modify the Regulation Due to the Lack of Technol ogy

Comment: The continuing lag in technology makes a postpone ment of compliance dates a necessary and logical step. (GCI1)

Comment: While it is encouraging to see the development of retrofit technology over the past few months, the six VDECS currently v erified for mobile off-road applications still only cover a fraction of Granite ’s fleet. Furthermore, the most recent verifications have only served to duplicate potential retrofit installations rather than to expand the pool of possible retrofit s.

Granite’s California fleet of off-highway diesel eq uipment is made up of approximately 1100 pieces of equipment totaling nea rly 220,000 horsepower. Even if Granite is able to take full advantage of t he double credit extension, the-27-

task of retrofitting 110 machines/22,000 horsepower in the next year with limited technology available is a huge challenge.

To break down Granite’s fleet, 600 of Granite’s 110 0 California machines (including most high-horsepower machines) do not ha ve a verified VDECS. Of the 500 machines that do technically fall under a v erification, 170 are in low-load applications that do not support the verification r equirements. Taking into account additional requirements such as turbocharger arrang ements, safety, operability, and feasibility, the number of machines in Granite’ s fleet that can realistically be retrofitted with a DPF falls to under 200, or less than 18% of Granite’s fleet.

With the extension of the double credit deadline, G ranite will be able to meet the 2010 requirements of the off-road regulation, but c ompliance beyond 2010 is not possible without extensive additional verifications . At this point, it is not possible for us to adequately plan or implement emissions re duction strategies beyond 2010 in the absence of viable technology. It impose s an oppressive burden if our industry is left to guess what technology may or ma y not become available in the next few years.

To conclude, Granite Construction is fully in favor of the proposed extension of double credit for compliance with the In-Use Off-Ro ad Rule. Additionally, we hope you will consider an extension of the initial compliance dates of the regulation to provide more technological certainty, since this extension can be offset through realistic modeling adjustments to re flect existing conditions in the marketplace. (GCI1)

Comment: Re-evaluate the schedule and timing for the rule. With the crushing pressure of economic, technical and safety failures weighing on this regulation, the most appropriate approach for the ARB is to giv e itself time to redo the rule. Register the fleet, if you must, enforce the idling , identification and sales provisions. Fix this before its failures undo the i ntent of the effort. (CIAQC1)

Comment: CIAQC supports the proposed changes in the regulati on but question whether or not they will achieve any signi ficant results due to conditions that will prevent contractors from taking advantage of the extended deadline for

double credit. Those factors include the lack of ve rified VDECS that can meet the industry’s rigorous performance requirements.

Reduce the VDECS requirements. At least until the s upply can equal demand.

This is not a free-market economic scenario—it is a command and control economic approach. VDECS manufacturers have no inc entive to reduce prices as they are guaranteed a market for their products— and they still can’t meet the artificial regulatory demand. Even if the manufactu rers could meet demand there are not a sufficient number of qualified installers to actually put the things on the machines. (CIAQC1)-28-

Comment: The second major error in the off-road diesel regul ation is its overreliance on promises of the VDECS suppliers that th ere would be adequate supplies of these devices to meet the requirements of the rule. Now, with the reality staring us in the face we know that there a re perhaps six suppliers who can cover less than 20 percent of the fleet. (SCCA 1)

Comment: I'd also like to express my concern about the avail ability of technology even given an extension of the double cr edit deadline to meet the requirements of the regulation. When you look at Gr anite's fleet and you start whittling away at the pieces of equipment that don' t have a verified device for that engine, you whittle away the older equipment, you w hittle away the new equipment, you whittle away the large equipment, yo u whittle away the low load equipment, and you whittle the equipment that need the specific requirements of each verification, you end up with some number unde r 20 percent of our total fleet horsepower that can be retrofitted.

There needs to be significant additional devices ve rified. There needs to be, you know, a wide variety of both active and passive dev ices for a wide range of engine horsepowers to meet the requirements of the regulation. And given where we stand now, that's just not available. (GCI2)

Comment: The current regulation will require VDECS to be ins talled on the

California construction fleet at the rate of 20% of the vehicles each year. By 2010 ARB estimates that 35,412 devices will need to be p urchased and installed in the statewide fleet. Currently, after five years of eff ort there are approximately 450 devices installed statewide. In addition, the ARB S howcase which was to have 250 devices installed over a year ago has less that one-dozen in place and little idea when the balance will be installed, if ever. S taff dismisses the very real obstacles (contracts, reduced usage, retirement, in ability to match devices to machines, manufacturers withdrawing) to implementin g the Showcase. Nevertheless, the hurdles encountered by the Showca se participants are being experienced by every contractor in the state and ar e very real impediments to installing VDECS. (CIAQC1)

Agency Response: Many of the commenters (including commenter GCI1) argued that the timeline of the regulation should b e delayed based on the lack of verified technologies. As stated in section 2449(e )(8) of the regulation, if a VDECS is not available, or one cannot be safely ins talled on a vehicle, that vehicle does not have to install a VDECS in that ye ar; no other action must be

taken on that vehicle because there is no available VDECS. Therefore, a fleet is not penalized if there is no VDECS available for a vehicle. Since there is no penalty for lack of VDECS, staff does not believe a postponement in the regulation is necessary.

Additionally, commenter GCI1 is concerned that ther e are VDECS available for only half of their vehicles, and stated that compli ance beyond 2010 would be-29-

impossible. However, as stated above, if no VDECS are available, a fleet will not be penalized, or considered out of compliance becau se of a lack of VDECS available. Therefore, commenter GCI1 should not be concerned about being out of compliance if there are no VDECS available for a ll vehicles in its fleet.

Additionally, staff disagrees that there are not en ough available, proven, or safe VDECS currently in the market. As stated in the st aff report for these amendments, 60 percent of the horsepower of affecte d off-road vehicles are capable of having a passive VDECS installed; an eve n larger percentage are capable of having active VDECS installed. Also, si nce the release of the staff report for these amendments, several new devices ha ve been verified and a few devices have expanded their verification. Therefor e, staff does not believe there is a lack of available technology, and does not agr ee that the regulation should be postponed for this reason.

Commenter GCI1 was also concerned that many of the new verifications serve to only duplicate potential retrofit installs. Howeve r, staff does not see this as a problem, rather, an opportunity to lower retrofit c osts by introducing more retrofit options for fleets into the market. Additional ver ifications in areas where there are currently verified devices do not directly addr ess the commenters concerns regarding the limited number of devices, but see re sponse to commenter’s concerns in first several paragraphs of this respon se. The commenter should be aware that this scenario will most likely result in more choices and potentially less costly devices for its vehicles that can be retrofi tted.

For a response to delaying or modifying the regulat ion due to the current economic downturn, please see the response to Secti on 5 above.

For a response to the safety issue raised by commen ter CIAQC1, please see the response to Section 10 below.

Comment: Deferring the GSE Requirements Will Not Compromis e Emission Reductions, and May Allow More Efficient Investment in Tier 4.

A deferral may allow airlines to invest directly in more new Tier 4 vehicles (the most efficient and best technology). Tier 4 nonroa d vehicles are expected to become available starting in 2011-2013 (depending o n horsepower). (ATA1)

Agency Response: Staff disagrees that deferring GSE requirements wou ld not lead to a lack of emissions reductions, and would a lso like to note that there are many provisions in the regulation which allow GSE v ehicles to comply with the regulation in ways that do not require the installa tion of VDECS. Therefore, a deferral of the regulation is not necessary. As st ated in Chapter III.A.3. of the FSOR for the original regulation, staff anticipates that many GSE fleets will use alternative compliance methods that will not includ e the use of VDECS. Airline stakeholders told staff several times during the wo rkshop process for the-30-

regulation that they prefer to comply without insta lling retrofits. The off-road regulation contains section 2449(d)(1)(A)3.b., whic h states that any electric

vehicles added to a fleet between 2010 and 2016 wil l receive double credit (i.e.,

all electric vehicles added to the fleet will count as double the horsepower with PM and NOx emission factors of zero). This provisi on, which was added to the regulation at the request of the Air Transport Asso ciation, will allow GSE equipment to be replaced with electric vehicles, an d potentially lower a GSE fleet’s PM averages enough to avoid installing PM V DECS. The electric double credit provision lasts through 2016, at which time Tier 4 vehicles will be available, allowing GSE fleets to upgrade to Tier 4 vehicles t hat do not require the installation of VDECS. Since the regulation alread y provides the flexibility for

GSE fleets to avoid VDECS until Tier 4 vehicles are available, a delay in the regulation is not necessary at this time.

7. VDECS Do Not Work and Are Not Reliable

Comment: There is ample anecdotal evidence from contractors that the devices do not perform to a level suitable for the duty cyc le of most off-road construction equipment. A device that performs for only two hour s before it requires the shutdown of the machine in order to regenerate is not s uitable for most applications in the industry. Unfortunately the ARB verification process only determines a device’s level of performance while it is operating , regardless of how short a period of time it actually operates. It gives a ver y misleading picture of how many verified devices are really available, when most ca nnot operate an entire work shift without regenerating. Contractors are not goi ng to install devices that will require work interruptions due to frequent regenera tion or unreliable operation. (CIAQC1)

Comment: If the SHOWCASE is any indication, the data logging , development of installation specifications and matching devices to the specific machine duty cycle is a time consuming exercise. In addition eac h installation requires a unique design. Merely grabbing a device off the she lf and slapping it on a machine is impossible. It takes months of analysis and review. No contractor is going to do more than one of these costly devices a t a time until it is proven that the device will actually work reliably on a give ty pe of equipment, something ARB has been unable to demonstrate with any degree of c ertainty. (CIAQC1)

Comment: In closing, we have been researching retrofit dev ices. In most cases, the devices presently available complicate t he operation of the equipment that they will be placed on. (WIPF)

Comment: The control effectiveness of the DPFs and their fre quent malfunctions are also testing the viability of this technology. (KNAPP)

Comment: I don't think you can deny that VDECS haven't per formed as predicted. How badly they're off that prediction is a matter of debate. (AGC2)-31-

Comment: On the technology front, I'd like to share an in- field experience. My company just installed a 2008 on-road engine that h as a passive diesel particulate filter. It has been installed for 60 da ys. And in that 60 days, it's regenerated every day. And we've had two manual reg enerations that require the use of a computer to tie into the brain of the engi ne. Our customer is not willing to pay for the down time. (NWS)

Comment: A device being verified is no indication that the device is applicable to a piece of equipment and safety issues need to b e resolved.

Another challenge for the construction industry is the ample evidence that the devices don't always perform with the duty cycles o f the engines, making the equipment not suitable for the construction industr y. And that has to do with the duty cycle and how often these active devices need to regenerate. We've heard instances where after just a couple hours the const ruction equipment needs to be

shut down while device or devices two in some insta nces or more independently need to regenerate. And that's a problem. (CIAQC3)

Comment: I think the fact that you need to do this is sort of symptomatic of the bigger problem that we've got with VDECS. There are n't sufficient options. The installations are problematic, particularly with re gard to safety. And I would encourage you not to show those photos to OSHA, bec ause many of those installations aren't going to pass the safety test.

And the devices simply don't work on the engines fo r which they're verified. The staff estimated originally they would need to insta ll 35,000 of these devices over

the next 13 months. That's a billion dollars. The c onstruction industry doesn't have that kind of money to spend in that period of time.

In the showcase, you were talking about doing appro ximately 250 engines over -- that program was supposed to be in place and fully done by over a year ago. You had the money. You had the machines. And you had th e devices. The fact that you've only been able to get nine of them installed ought to be a big red flag. You haven't been able to data log most of those machine s, and that's the first step and the easiest step in making what is a very compl ex device selection and machine pairing process.

You're going to hear from contractors today how dif ficult it is or impossible to match a device that will work with their equipment. And they have the added burden of not having money or the choice of options that you had in the

showcase.

And that's why we're going to be recommending that you take a good hard look at this program and reassess that burdens that you' ve placed on the construction industry. We don't concur with the staff's assumpti on that somehow they are-32-

going to get greater emissions as a consequence of any further changes in the rule. (CIAQC2)

Agency Response: Many commenters stated that VDECS are complicated t o use or install, and are unreliable. Similarly, som e of the comments mentioned the Showcase, and that this program has started out slow because of device installation and performance issues. Staff acknowl edges that some VDECS are complex; however, if passive devices are used, thes e VDECS can function as direct muffler replacements, which are more desirab le for the vehicle operator. When staff reported to the Board in January, it ack nowledged that fewer devices than expected had been installed to date through th e Showcase program; however, much of the delay was due to contract issu es with certain fleets participating in the program, not retrofit complexi ty.

Even though staff expected thousands of VDECS to be installed during the initial years of the regulation, this is not the only way f or fleets to meet their PM compliance requirements. For example, a fleet may elect to add cleaner vehicles to its fleet, replace older, dirtier vehicles with cleaner ones, or simply to retire the older, dirtier vehicles and thereby downsize the fl eet.

For a further discussion on why the regulation shou ld not be changed because of the issues with VDECS, please see the response to S ection 6 above.

8. VDECS Are Not Appropriate for GSE

Comment: The ORD Rule’s heavy reliance on retrofitting exi sting equipment with VDECS in early years is wasteful, since the re trofitted equipment must be replaced with new Tier 4 to meet the Rule’s later N Ox fleet average targets.

This is particularly true for GSE: VDECS are ill-suited to GSE, which are very special ized vehicles. To our knowledge, level 3 VDECS have never been successful ly installed on GSE, and airlines’ initial compliance efforts have confirmed the technical and safety problems.

GSE are less than 1% of the vehicles regulated by t he ORD Rule, and represent a very small and unprofitable sector for VDECS make rs because GSE’s specialization requires custom installation attempt s.

ARB’s stated interest in ensuring a market for retr ofit makers would not be impacted by a deferral for GSE. Only about 1,500 G SE are subject to the regulation (less than 1% of the total), and they ar e too specialized to provide economies of scale for retrofit makers. Further, G SE are subject to stringent safety protocols and procedures that do not apply t o other off-road equipment. Thus, GSE do not provide a profitable market for re trofit makers, and allowing-33-

GSE to reduce emissions by other means will not und ermine ARB’s goal of supporting retrofit makers. (ATA1)

Agency Response: Commenter ATA1 expressed concern that retrofitted equipment must be replaced by Tier 4 equipment by t he end of the regulation; however, this is not accurate. As presented by sta ff at the May 25, 2007 Board meeting, a fleet does not need all Tier 4 and Tier 4 Interim vehicles to comply with the final requirements of the regulation. Sta ff has shown that a fleet can comply with the final compliance requirements utili zing a mix of vehicles with Tier 2, Tier 3, and Tier 4 engines. Therefore, if a veh icle that is Tier 2 or 3 is retrofit now, it is likely that that vehicle can remain in t he fleet and still meet the final compliance requirements. For a more detailed respo nse to commenter ATA1’s concern about the appropriateness of VDECS on GSE e quipment, please see the response to Section 6 above.

9. VDECS Safety Issues

Comment: For nearly a year, CIAQC has been raising the issue of the safe installation and operation of the VDECS devices. Be cause of their size, heat generation, fuel consumption and weight, the instal lation of the devices raises serious safety issues for fleet owners. Since most VDECS retrofits are external to the engine compartment these issues are valid on al most every machine in the off-road fleet. Reductions in operator visibility a re a major concern for OSHA and MSHA and many of the existing installations have be en deemed a violation of those agencies’ regulations. Since 2000 there has b een one fatal or severe crushing accident, every month, without the install ation of these devices. Widespread enforcement by OSHA and MSHA could resul t in the removal of most of the existing installations. ARB staff dismi sses the seriousness of this issue and points to a cumbersome and yet-to-be-util ized appeals process as a way to resolve the issue. Contractors are not going to risk employee safety and/or potential OSHA violations without an advance determination of the safety of the installation. This issue stands as a signifi cant barrier to the early

installation of the VDECS and could undermine the e ntire retrofit element of the off-road rule. ARB, OSHA and MSHA are putting all c ontractors in jeopardy of double violations by not resolving the issue of the ir conflicting regulations. The double credit incentive does not seem to be enough incentive to overcome the

obstacles to installation of the devices and will n ot produce the results that ARB had anticipated. Without substantial double-credit, the ARB cost analysis of cost of compliance with the rule needs to be revised.

Safety has to be resolved. There is a significant d ifference between a theoretical “premature death” and the real death of constructio n workers crushed by a big yellow machine driven by an operator who simply can ’t see. The current exemption and appeals process will significantly sl ow the installation of VDECS while contractors await decisions of the “process.” Further, contractors are not going to apply for exemptions until it becomes time to install the device on their-34-

own machine. It is already clear that the certain d evices are unsafe on many machines. ARB should at least post warnings on thei r web site pending the decisions of the exemption process. (CIAQC1)

Comment: Another problem is the feasibility of applying DPFs to large horsepower equipment that were not originally desig ned for these filters. Safety concerns due to blocked visibility and higher opera ting temperatures are becoming apparent with these installations. (KNAPP )

Comment: During 2006-2007, we repowered 29 pieces of equip ment using Carl Moyer funding. For the last ten, we were required b y the Carl Moyer contract to put on DPFs which we did. We tried to get out of th e installations, and asked CARB to grant us a waiver so we wouldn’t have to in stall them. We also asked the district for a waiver, but we were not successf ul, therefore, we had to install

the DPFs.

And once we had the first one repowered, I could se e some real strong concerns. I requested CARB to come over and take a look at th ose, which they did. We never got a response from them. So we had to rent t hem we had needs for that equipment.

Once we got them out on the job site, I had calls f or safety concerns, operational concerns. One customer told us they are unsafe. As soon as that happened, I had to park all the machines. I wrote a letter to t he Executive Officer of CARB on June 11th asking for a waiver so we could get out o f those.

On June 11th, we had a meeting -- on August 1st, we had a meeting with CARB and OSHA. We had another one on August 1st -- on Se ptember 30th. We finally received a letter from CARB saying we don't find th em fundamentally unsafe. But if you do, you can take them off, which we did beca use we had to go to work. (ECCO)

Comment: I just wanted to address couple of the challenges that industry is finding and experiencing with the VDECS. That a de vice can be verified is no indication that the device is applicable to a piece of equipment. Also safety

issues need to be resolved.

Nobody wants to move forward with installing device s on their equipment if there's any sort of potential to harm or injure or in worst case kill somebody because of problems with heat or problems with visi bility, and we just think that it

needs to be resolved as to whether or not these dev ices are safe on a particular application.

And it needs to happen quickly, because in March of next year 35,000 devices are supposed to be in place, or at least that's the estimate for the regulation. (CIAQC3)-35-

Comment: I think the fact that you need to do this is sort of symptomatic of the bigger problem that we've got with VDECS. There are n't sufficient options. The installations are problematic, particularly with re gard to safety. And I would encourage you not to show those photos to OSHA, bec ause many of those installations aren't going to pass the safety test. (CIAQC2)

Agency Response: Staff would like to note that the regulation only r equires retrofits if they are verified under ARB’s verifica tion procedure and can be safely installed. If a vehicle does not have a highest le vel VDECS or if one cannot be safely installed, section 2449(e)(8) of the regulat ion exempts that vehicle from the retrofit requirements. Therefore, a fleet is n ever required to install a device that is not proven, or is unsafe.

Additionally, as stated in the staff report for the January amendments, staff recognized that some VDECS installations could pres ent potential safety hazards and that in some cases it would not be possible to install a VDECS safely. Because of this, staff is currently working with st aff from the California Occupational Safety and Health Administration (Cal\ OSHA), the Mining Safety and Health Administration (MSHA), the construction and retrofit industries, and organized labor to develop the protocol for evaluat ing claims of unsafe

installation of VDECS. Cal\OSHA and MSHA staffs ha ve been helpful in assisting staff in compiling a summary of all relev ant safety regulations. Cal\OSHA and MSHA staffs have also agreed to work w ith ARB as part of a group that will review safety appeals. Staff also anticipates working with this group to develop amendments necessary to Cal\OSHA r egulations to establish more objective criteria for determining whether a s pecific VDECS installation presents an unsafe condition.

10. Cost of VDECS

Comment: Staff has also conceded that the cost of the device s is higher than they originally estimated, (CIAQC pointed this out repeatedly since the early development stages of the rule) and many manufactur ers have chosen to abandon the off-road market. (Something CIAQC also predicted would happen

when manufacturers realized how small and difficult the market would be to serve.) Staff has provided no evidence for their co ntention that the cost of devices will be lower in the future. In fact, fewer manufacturers with fewer options would dictate that costs would in fact be higher, n ot lower. (CIAQC1)

Comment: CIAQC supports the proposed changes in the regulati on but question whether or not they will achieve any signi ficant result due to conditions that will prevent contractors from taking advantage of the extended deadline for double credit. Those factors include...the higher tha n anticipated costs of the devices...These issues coupled with the dramatic down turn in the economy and-36-

the devastating impact it has had on the constructi on industry make it nearly impossible for contractors to comply with the regul ation by 2010. (CIAQC1)

Comment: You folks have been touting this showcase. It's b een two years in the making with $4.9 million and a fleet of 202 machine s and you've done nine

retrofits so far.

We have a fleet that will require us to do 53 DPFs in the first year without double credit. And we don't have a budget of $4.9 million, nor do we have a staff of thousands to get this done.

This should speak volumes about this 20 percent ann ual requirement under BACT. This rule for our company without that double credit will require us to spend $1.18 million on DPF in the first year, and t hat does not include the NOx part of the rule.

Starting with the verified DPFs to date, they've ad ded DPF conditionally verified units in the last 18 months for a very limited numb er of rubber off-road equipment. Staff is reporting the costs are 30 perc ent higher than they were

estimated to be.

I want to remind everyone this is a 21-year rule. Y et, as stated in July 2007, 50 percent of the cost of this rule will be incurred b y those large fleets within the first three years of this rule. It's doubtful to me these future low cost DPFs are going to be much good to fleets when most of the costs co me up front. (DOWNS)

Comment: I just wanted to address a couple of the challeng es that industry is finding and experiencing with the VDECS. These are that the VDECS are more costly than originally promised.

The cost of the retrofit is proving to be more expe nsive than anticipated. We heard today 30 percent more. We haven't heard or se en anything that would lead us to believe that those prices are going to decrea se-- but will likely increase --

over time.

We don't see the evidence for a decrease in costs, and we also note that the staff report indicates that some of the manufacturers are limiting the resources that they are providing for off-road VDECS or verificati on and focusing instead of onroad systems. So that doesn't look too promising fr om this perspective. (CIAQC3)

Agency Response: Staff acknowledges that VDECS costs have been highe r than initially estimated in the staff report for th e original regulation. However, as stated in the staff report for the January amendmen ts, staff’s initial cost analysis was based on estimates of the average prices for VD ECS over the entire course of the regulation. Staff expects the volume of sal es, as well as the increased-37-

number of VDECS options fleets may choose from, to lower overall retrofits costs in the coming years. Additionally, the AB8 2X amen dments will postpone the VDECS installation requirements for many fleets, al lowing more devices to become verified, and for the prices of those device s to decrease.

Although the commenters above are concerned that ma ny retrofit manufacturers are leaving the off-road market, there are still ma ny companies supplying off-road devices pursuing verification, and staff does not b elieve that there will be a lack of off-road retrofit manufacturers, or off-road ret rofits, in the future.

11. Cannot Afford the Regulation

Comment: I am a contractor with approximately 30 Diesel En gines in my spread of equipment. My equipment ranges in HP from less than 10 HP to 100 HP. It also ranges in age from 1972 to 2006. The majority is within 15 years old. A majority of the equipment is on stand-by for when I may have a need for it. Many pieces only work 300 to 400 hours a year. This repr esents approximately 2 months out of a year.

I have been working the past 35 years to get to the point that most of my equipment is paid for and now I am being told that I must Retro-fit my equipment to meet or exceed the ARB (and Federal) Regulations . It would cost me MANY years PROFITS to retro-fit all my equipment. (KEY)

Comment: It should not require the "Small Business Owners" to go out of business to comply with the regulations. (KEY)

Comment: As a small excavation and trucking contractor, we will be heavily impacted by these regulations. The capital investm ent required to meet those regulations, within the time frames outlined, canno t be supported by most companies. Only the large multi-state or multi-nat ional companies will be able to survive. They will be able to accomplish complianc e, only by shipping their older trucks and equipment to other states to work, repla cing this equipment with new

in California. Smaller contractors will not have t he ability of having their older equipment support their new equipment as we have in the past. This will create a large competitive advantage for the very large co ntractors, putting most smaller

contractors out of business.

We have been in business for 20 years, and by best calculations, we would have to put 100% of our net profits into retrofitting or replacing our equipment for the next 20 years to become compliant. The regulations , as proposed, will require us to be compliant in less than 7 years. How can we be expected to remain in business when our rates would need to triple in ord er to pay off the capital investment that would be required, while the very l arge contractors will be mostly replacing their equipment as usual, moving old piec es out of state. Companies-38-

such as ours require our older equipment to support the new pieces we purchase, it is the only way we can compete and sur vive. (WIPF)

Comment: I have owned my own construction business in San Diego County for 30 years and am now facing some of the most difficu lt economic times that I can remember. ALL of my off-road equipment is Tier One and I am faced with phasing out my Backhoes long before their useful li fe is over. Though I am a Small Fleet and my compliance dates are more lenien t than others, it will be difficult if not impossible to meet the guidelines and still be able to afford to be in business. (COLLINS)

Agency Response: As discussed in Chapter III.A.3 of the FSOR for th e original regulation, staff recognizes that compliance with t he regulation may be financially challenging for owners of regulated vehicles. Many fleets may have to change how they allocate capital resources, and they may n eed to borrow money to purchase retrofits and repowers, or to upgrade thei r vehicles.

However, the regulation contains many provisions th at provide fleets with compliance flexibility. It includes options such a s NOx or PM retrofitting and repowering that can help fleets avoid the costs of replacing vehicles. Also, it gives credit for early repowers, turnovers and retr ofits to reward early actions and help fleets spread out their compliance costs and a void spikes in compliance costs in early years. The early credit provisions, including those provided by the AB 8 2X amendments, include:

• Double credit for any PM exhaust retrofits install ed before January 1, 2010 for large fleets, and March 1, 2012 for medium and small fleets;

• Single credit for any repower (to at least a Tier 1 engine) that was performed at any time before March 1, 2009, as long as that repowered vehicle is still in operation in the fleet;

• Credit for retirement/replacement of Tier 0 vehicl es in excess of 8 percent per year on average between March 1, 2006 and March 1, 2009; and

• PM and NOx credit if a fleet can show reduced flee t activity July 1, 2007 and March 1, 2010, or, if they have reduced their t otal fleet horsepower between March 1, 2006 and March 1, 2010.

Because a fleet has numerous options for complying with the regulation, the costs of compliance for every fleet will vary. In addition, early credit and financing options are also available to spread cost s in the early years for fleets.

Also, the regulation does have more a more relaxed timeline and requirements for small fleets; allowing them more time to access incentive funds, financing, and double credit for early VDECS installations.

Staff would like to note that commenter COLLINS may not fully understand the requirements for small fleets. COLLINS stated that they are faced with phasing out all of their backhoes long before their useful life is over. However, a small-39-

fleet (one with 2,500 horsepower or less) is never required to phase out their equipment; only the installation of VDECS is requir ed, and that requirement does not begin to phase in until 2015.

For more responses to the affordability or cost of the regulation, please see Chapter III.A.3 of the FSOR for the original regula tion.

12. Re-do the Economic Analysis

Comment: ARB needs to reassess the economic impacts of the rule, the current state of the industry especially with regard to the California and national economic conditions. An independent economic evalua tion should be done of the overall cost of the rule to the industry. ARB’s lac k of skill in economic analysis is the subject of academic and legal criticism through out the nation. Staff’s original assumptions and cost savings have not been realized and the cost of the rule has increased significantly at a time when the indu stry simply cannot afford it. (CIAQC1)

Agency Response: As stated in Chapter III.A.3 of the FSOR for the original regulation, staff did not solicit an independent ec onomic evaluation of staff’s economic analysis because our methodology was funda mentally sound and our results reasonable and accurate. Also, as discusse d in section a)i)1) of that Chapter, certain stakeholders did solicit such an a nalysis and it was supportive of

staff’s conclusions.

Additionally, with the addition of the adoption of the AB8 2X amendments in July 2009, many fleets will be able to postpone their co mpliance requirements. Therefore, staff believes that many fleets will not have to take any actions to comply with the regulation for at least a year or t wo. Because of this, staff does

not believe another economic assessment of the rule is necessary, due to fact that many fleets no longer have regulatory requirem ents in the beginning years of the regulation.

For a more details on the AB8 2X amendments, please see the response in

Section 5 above.

13. Regulation Will Affect the Economy

Comment: This overwhelming burden to repower, retrofit or replace equipment will only further diminish those much needed tax re venues by the state to meet budgetary requirements. (MCDONALD1)(MCDONALD2)

Comment: This state is in a financial crisis and needs to protect potential

revenues. While it is an undeniable fact that the air quality of California is a great concern for everyone, we must also balance this con cern with what is financially-40-

feasible at this time of economic crisis. Cleaning the air and saving lives is the goal, bankrupting the state and employers is not. I f we are to survive this

economic downturn we must all make concessions and that includes those at the regulatory level. (MCDONALD1)(MCDONALD2)

Agency Response: Staff acknowledges the current recession; however , due to the AB8 2X amendments to the regulation adopted in July 2009, staff does not believe further modifications to the regulation are necessary at this time but is continuing to review the issue. The AB8 2X amendme nts should provide several years of relief to fleets that must comply with the regulation in its early years of implementation and should offset the potential econ omic impacts associated with complying with the regulation. For more details on the AB8 2X amendments, please see the response in Section 5 above.

14. Cannot Pass on Costs

Comment: In the early stages of the regulations developmen t, staff argued that employers would cover the costs of compliance to th e regulation through increases in revenues from competitive bidding, ong oing housing development, business growth and increased infrastructure needs.

As we enter 2009 these projections by staff have no t come to pass. In fact with construction and housing starts in a tremendous dow nturn and banks unwilling or unable to extend credit, it becomes increasingly mo re difficult for employers to meet payroll let alone come up with the tens of tho usands of dollars required to meet the requirements set forth by the regulation. (MCDONALD1)(MCDONALD2)

Comment: Compared to a "normal" year our present constructio n volume has declined by 42%. We now see anywhere from 10 to 15 bidders on public projects where ordinarily there are 4 to 5 bidders. With suc h a competitive market it is impossible to pass on any higher cost. Like most Ca lifornia contractor's we are struggling to survive this serious downturn. (VCMI )

Agency Response: Staff acknowledges that due to the recession, the re may be greater competition for construction projects that may prevent some fleets from passing on the costs of the regulation to their cus tomers. However, for those that cannot absorb or pass on the costs of the regulatio n, the AB8 2X amendments will postpone and/or spread out the fleet’s initial compliance requirements over a number of years.

For a more details on the AB 8 2X amendments, pleas e see the response in

Section 5 above.-41-

15. Fleets are Downsizing

Comment: Most companies are in survival mode as they down s ize and lay off employees just to keep their balance sheets from go ing into the red. (MCDONALD1)(MCDONALD2)

Agency Response: Staff acknowledges that some companies may have t o downsize their workforce and sell off portions of t heir fleets to survive this economic recession. However, with the adoption of the AB 8 2X amendments, fleets that have had to reduce the amount that they operate their vehicles (by reducing operator hours, for example) and/or decrea se their total fleet horsepower (by selling and not replacing off-road v ehicles) will be able to earn both PM and NOx credits, thereby deferring their co mpliance requirements

further into the future.

For a more details on the AB 8 2X amendments, pleas e see the response in

Section 5 above.

16. Tier 4 Engines Are Not Available

Comment: The Construction & Mining Industry has been prepari ng for the implementation of the regulation as set forth in th e rule. However, discussion with the suppliers of ORD equipment and DPFs have reveal ed some implementation problems.

One assumption that CARB made was that Tier 4 engin es would be available by 2011. For the large horsepower equipment widely use d in the industry (>200 horsepower), equipment manufacturers are indicating that it is more likely that Tier 4 engines will not be available until 2015 or 2016. Tier 4 engines are expected to have lower emission rates than a Tier 3 engine controlled with the highest level DPF. This delayed availability will m ake compliance difficult, if not impossible, for this industry. (KNAPP)

Agency Response: Staff is not sure where commenter KNAPP read that final Tier 4 engines would be available in 2011, but beli eves that the technology to comply with the regulation does exist. Tier 4 inte rim engines will be available in 2011, and that for most horsepower groups, these en gines will have OEM filters, and have PM emissions equivalent to the Tier 4 fina l engines expected in the 2015 timeframe. Since most Tier 4 interim engines will have the same PM emission factors as Tier 4 final engines, they too will have lower PM emission rates than a Tier 3 engine controlled with the high est level DPF. Additionally, the regulation contains section 2449(e)(9), which state s that if there is a delay in availability of vehicles with engines meeting the T ier 3 or Tier 4 interim or final emission standards, the Executive Office may issue extensions to fleets that need these vehicles to comply with the regulation. Therefore, if the Tier 4 interim-42-

or final technology does not become available when expected, fleets will not find it impossible to comply with the regulation.

17. Analyze the Impacts of Multiple Regulations

Comment: Staff must also consider that this is not the onl y ARB regulation that employers are required to comply with. Most of thes e employers also must comply with the PERP, ATCM, and the upcoming On-Roa d Rule.

Employers that have the burden of meeting three or more regulations simultaneously will find it difficult at best to be come fully compliant. I believe we should look at the bigger picture when considering the compliance strategy for these employers. The goal is to reduce emissions an d therefore the overall reduction of the combined diesel fleet (PERP, ATCM, Off-Road and On-Road) should be an additional path to compliance. There m ust be a point to which everyone affected by the multitude of regulations a nd the quality of our air can find acceptance and practical applicability with al l of our endeavors. (MCDONALD1)(MCDONALD2)

Agency Response: As stated in the FSOR for the original regulation , staff is aware that many fleets will be subject to other reg ulations, such as the portable equipment Air Toxics Control Measure (ATCM), the of f-road regulation, and the Statewide Truck and Bus Regulation (on-road regulat ion). For fleets subject to the off-road regulation, we do not expect that the portable equipment ATCM would add significant costs. Although staff does n ot have adequate survey data from fleets to know how much portable equipment is owned by fleets also affected by the off-road regulation, as stated in t he Staff Report for the portable equipment ATCM, the total overall cost of the porta ble equipment ATCM for all fleets (both those subject to the off-road regulati on and those not subject to it) is expected to be $15 million per year. As stated in the original off-road Staff Report, the annual cost of the off-road regulation is approximately $243 million per year, on average. Thus, even if all portable e quipment covered by the portable equipment ATCM were owned by fleets also a ffected by the off-road regulation (which is not the case), the cumulative costs from the portable ATCM would not add significantly to the overall costs fa ced by off-road fleets.

When the off-road regulation was initially adopted, the on-road regulation was still in development, and therefore, at that time, a cumulative cost analysis including the on-road regulation could not be done. However, when the on-road regulation was adopted in December 2008, a cumulati ve cost analysis was performed and presented in the staff report and TSD for the on-road regulation. The Board considered this cumulative impact when ap proving the on-road regulation. Additionally, with the addition of the AB 8 2X changes to the off-road regulation, compliance costs for large construction fleets will be significantly reduced over the next several years. For more deta ils on these amendments, please see the response to Section 5 above.-43-

For construction fleets that are considered medium or small fleets under the offroad regulation, off-road compliance requirements d o not begin until 2013 or 2015, respectively. Therefore, for both medium and small off-road fleets, the compliance requirements for the off-road and on-roa d regulation may not overlap. Also, small off-road fleets are only requ ired to retrofit their off-road vehicles (no replacement/retirement necessary), res ulting in off-road compliance costs much lower than those of medium and large fle ets. Overall, as stated in Chapter XIV of the TSD for the on-road regulation, staff evaluated the potential cumulative costs of the on-road regulation for smal l fleets, and concluded that the on-road regulation will not impose any significant over lapping costs on small fleets. Also, many fleets will need to begin retro fitting or upgrading their on-road trucks before the compliance requirements for the o ff-road regulation come into effect, which will result in little overlapping com pliance requirements.

18. Alternatives to the Regulation

Comment: We would propose a plan to build more mass transi t, give people tax credits for utilizing mass transit, removing maybe 10 to 25% of the cars off the road. This would yield a 7.4 to 18.5 percent net b enefit in greenhouse gas emissions. This plan would also generate construct ion jobs in our sagging state economy, injecting capital helping us to update our fleets.

Why don’t we attack our greenhouse gases from anoth er angle, and allow our trucks and equipment to cycle out as age and wear r equire their replacement as it was done with passenger vehicles. (WIPF)

Agency Response: As stated in the FSOR for the original regulation , ARB’s mission is to promote and protect public health, we lfare and ecological resources through regulations that effectively and efficientl y reduce air pollutants where ARB has the regulatory authority to do so. Under s tate law, ARB has been directed by the Legislature to adopt airborne toxic control measures to address health risks posed by toxic air contaminants, inclu ding diesel particulate matter (PM), which has been identified as a known carcinog en (Health and Safety Code (H&SC) §§ 39650 et seq.). It has also been mandate d to adopt as expeditiously as practicable, regulations to control, among other things, NOx and PM emission controls for off-road vehicles and equipment (H&SC §§ 43013(b) and 43018). The commenter’s proposal to build more mass transit is outside the scope of ARB’s regulatory authority.

For more detailed information on why the off-road r egulation is necessary, please see the responses in Chapter III.A.18 of the FSOR f or the original regulation.

Comment: Turnover of heavy duty trucks, buses and equipmen t will NOT be rapid enough to attain the 2020 emissions goals. C onversion of existing in-use-44-

engines is the only practical way to attain this go al. Please level the playing field for Natural Gas conversion technology. (REED)

Agency Response: Staff disagrees. As stated in the staff report f or the original regulation, the off-road regulation is a necessary and integral part of California’s State Implementation Plan (SIP), and Diesel Risk Re duction Plan (DDRP) to reduce pollution throughout California. This regul ation in combination with several other ARB regulations (such as the on-road regulation adopted in December 2008), will help to lower pollution levels significantly by 2020. Additionally, the off-road regulation does allow th e conversion of diesel off-road vehicles to natural gas as one of many viable compl iance options.

19. Labeling Amendment

Commenter: Quinn Group, Inc., a Caterpillar equipment distri butor in California, respectfully requests an additional administrative amendment be added to the proposed changes for the off-road regulation to all ow flexibility for rental and leasing companies to comply with installation of EI Ns for equipment presently out

on rent or lease.

Currently, Section 2449(f)(2) of the regulation req uires Equipment Identification Numbers (EIN) to be installed on vehicles within 30 days of receipt of the ARBissued EIN. For reasons noted below, this requirem ent will be overly burdensome and virtually an impossible task for our large rental fleet of nearly 1,500 vehicles:

Many of our vehicles are out on rent or lease, and most at undisclosed locations. These machines, that are typically picked up at our facilities by our customers or delivered by hauler to a customer’s place of busine ss or jobsite, are often subsequently moved by the customer to an undisclose d location. In some cases the machines are moved multiple times during the re ntals. This hampers our ability to locate the vehicles and install the EINs

.

Machines out on rent can be anywhere in the State. We do not have the resources to feasibly contact all our customers and arrange for a machine to be available, and to install the EINs on all our machi nes out on rent within the 30- day period.

A machine out on rent or lease is under operational control of the lessee. Pulling a machine out of operation from the lessee introduc es several consequences:

• it disrupts a customer’s ability to perform the wo rk they have been hired to accomplish,

• it leaves their hired operator idle while the EIN is being installed,-45-

• it puts us in conflict with the terms of our renta l agreement putting us in a position of providing a payment concession to compe nsate for the down time,

In order to avoid a disruption to the lessee’s oper ation, it will require our company to schedule the EIN installation after-hours, there by increasing our costs and also creating a burden for the renter to provide after-h ours access to their property.

Our technicians are currently backlogged with produ ction and maintenance repairs on our customer’s machines. Scheduling the m for installation of these

EINs in the field on our own rental machines remove s them from providing the services we are required to perform for our custome rs as a distributor under our contract with Caterpillar, Inc.

Costs to perform the installations of the EINs whil e the machines are off rent and in our possession will be far less than those we wi ll incur for installing the EINs in

the field. These costs were not addressed in the I nitial Statement of Reasons.

While we will do our best to follow Staff’s recomme ndation to report early to get EINs assigned and installed in advance, with the la rge number of machines, even early reporting will not ensure we have the pr oper amount of time to locate all our machines in time, and install the EINs econ omically and without disruption to the renters. Additionally, even now we are stil l collecting engine data from non-Caterpillar vendors making it difficult to prov ide accurate data for early reporting.

Therefore, I would like to recommend the following administrative change be made to the regulatory language to allow flexibilit y for rental and leasing companies:

“2449(f)(3) Installation of Equipment Identificatio n Numbers for Rental Fleets and Leasing Companies – Owners of rental fleets and own ers with vehicles out on lease shall permanently affix or paint the EIN(s) o n the vehicle as per 2449(f)(2) in accordance with the following schedule for all v ehicles reported prior to the initial reporting date: Within 30 days of receipt of the ARB-issued EIN for all machines not out on rent or lease; If a machine is out on rent or lease, within 20 day s of the vehicle being returned to the rental/lease yard; For all rental or leased vehicles, no later than De cember 31, 2009.

All other rental or leased vehicles added to the fl eet subsequent to initial reporting shall follow requirements of 2449(f)(1) a nd (f)(2).-46-

Rental and leasing companies shall specify at the t ime of initial reporting their

intention to follow this schedule. Evidence must b e provided demonstrating the company operates as a rental or leasing company.”

On behalf of Quinn Group, Inc., and the other Cater pillar dealers operating in the State of California, I appreciate your consideratio n of this administrative request. We feel this request does not affect emissions redu ctions and it affords the

owners of these vehicles an economical and flexible solution for complying with the initial EIN installation. (QUINN)

Comment: The American Rental Association represents severa l hundred equipment rental businesses in California. Section 2449(f)(2) of the referenced regulation details when equipment identification nu mbers (EINs) must be affixed on vehicles. For the initial report, Staff has int erpreted this section to mean that EINs must be affixed within 30 days after the initi al reporting date of the fleet. The fleets with the largest amount of equipment, la rge fleets, must meet this requirement at the earliest date, April 1, 2009. A number of ARA member rental companies may have difficulty meeting this requirem ent because of the large

number of units in their fleets.

Our members are diligently collecting data and prep aring their initial reports. No

members have asked for an extension to the initial reporting date. However, there may be difficulty affixing EINs to equipment rented and in the field since that equipment is not always easily accessible to t he firm that owns it.

According to the rule, there are no emission benefi ts gained by the regulation in 2009. The first large fleet compliance date is Mar ch 1, 2010. Thus, there is no air quality benefit to be gained via enforcement du ring 2009 that results from affixing EINs.

We ask the Board to consider extending the time per iod for affixing EINs to the end of Calendar 2009 so as to not create a hardship on rental companies that have limited access to their fleet vehicles. (MCCL ELLAND)

Agency Response: Staff does not believe that this change to the re gulation is necessary; a fleet has 30 days to affix its EIN lab els if they report on its required reporting deadline. If a fleet reported before its reporting deadline, the fleet was not required to have its vehicles labeled until 30 days after its reporting deadline. Therefore, if a fleet reported early (i.e., before their reporting deadline), staff gave

those fleets additional time to label their vehicle s.

For example, the large fleet reporting deadline was April 1, 2009. If a large fleet reported on that date, it would have had only 30 da ys to affix its EINs. However, if a fleet reported any time before April 1, 2009, it would have had until April 30, 2009 (30 days after the reporting deadline for larg e fleets) to affix its EINs.-47-

The Diesel Off-road Online Reporting System (DOORS) , the reporting tool for the regulation, became active online and able to accept fleet reporting information beginning in late June 2008. Therefore, if a large fleet reported in late summer 2008, they would have had approximately 10 months t o label its reported vehicles. Many large fleets with hundreds of vehic les spent numerous hours reporting early, and were able to report and label their vehicles through DOORS during the end of 2008 and the beginning of 2009. Therefore, since many large fleets spent a significant amount of effort to repo rt and label their vehicles early,

staff believes that it would not be fair to those l arge fleets if additional time was given to some large rental fleets, but not all larg er fleets.

Staff also believes it is appropriate to keep the r eporting and labeling deadlines of the regulation as scheduled, and that they shoul d not be postponed until December 2009. Although both commenters believe th at it is not necessary to have all vehicles labeled and reported before the e nd of 2009, staff disagrees, and believes that is the current provisions are nec essary so that the enforcement of the reporting and labeling requirements may begi n during the fall of 2009. If not all fleets are reported and labeled, it will be difficult for ARB to enforce these provisions, since it may be difficult and time cons uming to distinguish between

rental and non-rental vehicles.

Staff would also like to note that both commenters above were active participants during the development of the off-road regulation, and have known for many years that the regulation would require the reporti ng and labeling of their fleets. Therefore, ample time has been given to these large fleets to report and label their vehicles before the labeling deadline occurre d.

Also, when estimating the costs of compliance for t he off-road regulation, staff did assume that reporting and labeling vehicles wou ld result in some costs to the affected fleets. However, these costs were expecte d to be minimal, and could be reduced if spread out over a larger amount of time. As stated above, staff believes that these fleets have had ample time to r eport their vehicles; time which

could have been used to reduce the resources necess ary to locate and report

each rental vehicle.

20. Captive Attainment Area Fleet Extension

Comment: We appreciate ARB staff’s efforts to understand a nd address the issues that have arisen during the implementation o f the Off-Road Rule and would like to express our support of the proposed a mendments.

However, many fleet owners will still have financia l distress complying with the proposed regulation, especially in rural areas. We ask the Board again consider extending the “Captive Attainment Area Fleet” to th ose rural counties that are

classified as nonattainment for National Ambient Ai r Quality Standards (NAAQS) for ozone and particulate matter (PM) 2.5 strictly due to transport.-48-

The regulation currently exempts fleets located in ozone and PM2.5 attainment areas from the NOx requirements, if the vehicles ar e used in only attainment

areas. Private fleets in a number of our rural cou nties will benefit from this provision. Meeting NOx reductions is a considerable financial impact to fleets, which will have a disproportionate negative economi c impact in our rural

counties. RCRC would ask ARB to reconsider that tho se counties in nonattainment strictly due to intrastate transport of air pollution also be exempt, (i.e., western Nevada, Amador, Calaveras, Tuolumne, Mariposa). Emissions reductions from the contributing upwind districts w ill lead to the downwind area attainment. (RCRC1)

Comment: We recognize that the proposed amendments do not address our comment, but I simply would like to state that we w ould still like to see the NOx exemption for the captive attainment area fleets ex tended to those rural counties who are non-attainment strictly due to transport. (RCRC2)

Agency Response: As stated in the FSOR for the original regulation , staff disagrees with extending the “Captive Attainment Ar ea Fleet” definition to include

areas that are classified as non-attainment as a re sult of transport. These areas have been designated by the U.S. EPA as violating t he federal 8-hour ozone standard, and the air quality in some of these area s is degrading, potentially warranting a future redesignation as severe non-att ainment for the federal ozone

standard. Local NOx contributions add to the sever ity of the ozone problem, and therefore, staff believes that actions must be take n within these areas to meet this standard, and at the regulation will provide i mportant emission reductions

towards that end.

For a more detailed response to the economic impact s of the regulation, please see the response to Section 5 above.