MEETING 

 STATE OF CALIFORNIA

 AIR RESOURCES BOARD

 

 

 

 

 JOE SERNA, JR. BUILDING 

 CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY 

 BYRON SHER AUDITORIUM, SECOND FLOOR 

 1001 I STREET 

 SACRAMENTO, CALIFORNIA 

 

 

 

 THURSDAY, JANUARY 28, 2010 

 9:00 A.M. 

 

 

 

 

 TIFFANY C. KRAFT, CSR, RPR 

 CERTIFIED SHORTHAND REPORTER 

 LICENSE NUMBER 12277 

 

 

 

 

 
 

 APPEARANCES 

 

 

 

 BOARD MEMBERS 

 Ms. Mary Nichols, Chairperson 

 Dr. John R. Balmes 

 Ms. Sandra Berg 

 Ms. Doreene D'Adamo 

 Mr. Ronald O. Loveridge 

 Mr. Ron Roberts 

 Dr. Daniel Sperling 

 Dr. John Telles 

 Mr. Ken Yeager 

 

 STAFF 

 Mr. James Goldstene, Executive Officer 

 Ms. La Ronda Bowen, Ombudsman 

 Mr. Tom Cackette, Chief Deputy Executive Officer 

 Ms. Ellen Peter, Chief Counsel 

 Mr. Michael Scheible, Deputy Executive Officer 

 Ms. Lynn Terry, Deputy Executive Officer 

 Ms. Lori Andreoni, Board Clerk 

 

 

 

 

 

 

 

 
 

 APPEARANCES CONTINUED 

 

 STAFF 

 

 

 Mr. Joseph Gormley, Air Resources Engineer, Rule Evalution 

 Section, Stationary Source Division 

 

 Mr. Paul Henderick, Air Pollution Specialist, Retrofit 

 Assessment Section, Mobile Source Control Division 

 

 Ms. Lucille Van Ommering, Manager, Program Development 

 Section, Office of Climate Change 

 

 Mr. Jim Ryden, Chief, Enforcement Division 

 

 Ms. Annalisa Schilla, Air Pollution Specialist, Climate 

 Action and Research Planning Section, RD 

 

 Mr. Erik White, Senior Staff Counsel, Office of Legal 

 Affairs 

 

 

 

 ALSO PRESENT 

 

 Dr. Rasto Brezny, MECA 

 

 Deputy Attorny General Will Brieger 

 

 Mr. Skip Brown, Delta Construction Company 

 

 Mr. Anthony Brunello, Deputy Secretary, California Natural 

 Resources Agency 

 

 Mr. Julian Canete, CA Hispanic Chambers of Commerce 

 

 Ms. Brenda Colman, California Chamber 

 

 Mr. William Davis, SCCA 

 

 Mr. Michael Endicott, Sierra Club Ca 

 

 Mr. Arthur Fulton, Diamond Well Drilling 

 

 Mr. Randal Friedman, U.S. Navy 

 

 Mr. Bill Gaines, Transfer Flow, Inc. 

 

 
 

 APPEARANCES CONTINUED 

 

 

 ALSO PRESENT 

 

 Mr. Michael Graboski, American Rental Association 

 

 Mr. Josh Gruen, CMI 

 

 Ms. Bonnie Holmes-Gen, American Lung Association 

 

 Mr. Alex Jackson, NRDC 

 

 Mr. Andy Katz, Breathe California 

 

 Mr. Karl Lany, SCEC 

 

 Mr. Michael Lewis, CIAQD 

 

 Mr. Gary Liss, Local Government Commission 

 

 Mr. Edwin Lombard, Cal Black Chamber 

 

 Mr. Bill Magavern, Sierra Club Ca 

 

 Ms. Sabrina Means, California Transit Association 

 

 Mr. Mike Mortensson, California Groundwater Assocation 

 

 Mr. Brian Nowicki, Center for Biological Diversity 

 

 Mr. Alan Osofsky, West State Alliance 

 

 Mr. Joseph Partransky, Healthy Ports and Ships 

 

 Ms. Mary Pitto, Regional Council of Rural Counties 

 

 Ms. Betty Plowman, CA Dump Truck Owners Association 

 

 Ms. Catherine Reheis-Boyd, WSPA 

 

 Ms. Marisa Rimland, Public Health Institute 

 

 Ms. Erin Rogers, Union of Concerned Scientists 

 

 Ms. Patty Senecal, IWLA 

 

 Mr. Tom Swenson, Cleaire 

 

 
 

 APPEARANCES CONTINUED 

 

 

 ALSO PRESENT 

 

 Mr. James Thomas, Nabors Well Services Company 

 

 Mr. Doug Van Allen, BJ Services Company

 

 Mr. Matt Vander Sluis, Planning and Conservation League 

 

 Mr. Derek Walker, EDF 

 

 Mr. Barry Wallerstein, South Coast AQMD

 

 Mr. Mel Zeldin, CAPCOA 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 INDEX 

 PAGE 

 

 Item 10-1-1 

 Chairperson Nichols 3 

 Executive Officer Goldstene 3 

 Board Discussion 16 

 

 

 Item 10-1-2 

 Chairperson Nichols 19 

 Executive Officer Goldstene 20 

 Staff Presentation 21 

 Q&A 32 

 Mr. Gaines 36 

 Mr. Zeldin 38 

 Mr. Wallerstein 43 

 Mr. Graboski 44 

 Ms. Pitto 46 

 Mr. Van Allen 46 

 Mr. Thomas 48 

 Mr. Lany 50 

 Mr. Davis 52 

 Mr. Mortensson 55 

 Mr. Fulton 59 

 Mr. Lewis 61 

 Mr. Watson 64 

 Mr. Weiss 66 

 Board Q&A 68 

 Ex Partes 85 

 Motion 85 

 Vote 92 

 

 

 Item 10-1-3 

 Chairperson Nichols 93 

 Executive Officer Goldstene 94 

 Staff Presentation 95 

 Mr. Gaines 107 

 Dr. Brezny 109 

 Mr. Swenson 112 

 Board Discussion 115 

 Motion 116 

 Vote 116 

 

 

 

 

 

 
 

 INDEX CONTINUED 

 PAGE 

 

 10-1-5 

 Chairperson Nichols 118 

 Executive Officer Goldstene 119 

 Staff Presentation 120 

 Mr. Vander Sluis 135 

 Mr. Jackson 137 

 

 10-1-6 

 Chairperson Nichols 138 

 Executive Officer Goldstene 138 

 Staff Presentation 139 

 Board Q&A 155 

 

 10-1-7 

 Chairperson Nichols 159 

 Executive Officer Goldstene 160 

 Staff Presentation 161 

 Board Q&A 192 

 Mr. Liss 206 

 Ms. Coleman 209 

 Mr. Canete 212 

 Ms. Rogers 214 

 Mr. Magavern 216 

 Ms. Holmes-Gen 218 

 Ms. Means 221 

 Ms. Rimland 223 

 Mr. Katz 226 

 Mr. Jackson 228 

 Mr. Nowicki 231 

 Mr. Gruen 233 

 Ms. Senecal 236 

 Mr. Osofsky 238 

 Mr. Walker 240 

 Mr. Endicott 242 

 Mr. Lombard 244 

 Board Q&A 246 

 

 Public Comment 

 Mr. Brown 286 

 Ms. Reheis-Boyd 289 

 Mr. Partransky 293 

 Ms. Plowman 295 

 

 

 Adjournment 304 

 

 Reporter's Certificate 305 
 1 

 1 PROCEEDINGS 

 2 CHAIRPERSON NICHOLS: Welcome to the January 

 3 28th, 2010, public meeting of the Air Resources Board. 

 4 The meeting will come to order. And we will begin, as we 

 5 normally do, by saying the Pledge of Allegiance to the 

 6 flag. 

 7 (Thereupon the Pledge of Allegiance was 

 8 Recited in unison.) 

 9 CHAIRPERSON NICHOLS: The Clerk will call the 

 10 roll, please. 

 11 BOARD CLERK ANDREONI: Dr. Balmes? 

 12 BOARD MEMBER BALMES: Here. 

 13 BOARD CLERK ANDREONI: Ms. Berg? 

 14 BOARD MEMBER BERG: Here. 

 15 BOARD CLERK ANDREONI: Ms. D'Adamo? 

 16 Ms. Kennard? 

 17 Mayor Loveridge? 

 18 Mrs. Riordan? 

 19 Supervisor Roberts? 

 20 BOARD MEMBER ROBERTS: Here. 

 21 BOARD CLERK ANDREONI: Professor Sperling? 

 22 BOARD MEMBER SPERLING: Here. 

 23 BOARD CLERK ANDREONI: Dr. Telles? 

 24 Supervisor Yeager? 

 25 BOARD MEMBER YEAGER: Here. 
 2 

 1 BOARD CLERK ANDREONI: And Chairman Nichols? 

 2 CHAIRPERSON NICHOLS: Here. 

 3 BOARD CLERK ANDREONI: Madam Chair, we have a 

 4 quorum. 

 5 CHAIRPERSON NICHOLS: Thank you. 

 6 We have several members who have called to tell 

 7 us they're struggling to get here through the fog. So we 

 8 expect our numbers to increase as the day goes on. 

 9 One of our Board members called last night and 

 10 said she was ill, so we want to send our best wishes to 

 11 Barbara Riordan and hope she has a speedy recovery and 

 12 that it's not anything worse than a cold. 

 13 I have a couple of announcements that I need to 

 14 make. One is the reminder that the emergency exits are at 

 15 the rear of the room and that's the way we are to exit in 

 16 the event of a fire alarm. We're supposed to go outside, 

 17 downstairs, and outside the building until we get the 

 18 all-clear signal. 

 19 Also if there's anybody here who's not familiar 

 20 with our procedures, if you want to testify on any item or 

 21 to speak during the open session, we need you to fill out 

 22 a card and give it to the clerk of the Board. And we will 

 23 impose our usual three-minute time limit on speakers. So 

 24 it makes more sense if you're planning to speak if you can 

 25 give us your written remarks so that we can read them, but 
 3 

 1 then just summarize them quickly to keep within the 

 2 three-minute limit. 

 3 And beyond that, I think we're going to begin 

 4 this morning with a report and an overview by the 

 5 Executive Officer on the program priorities for the 

 6 upcoming year. Kind of a good way to start the new year 

 7 off is to focus on the overall agenda for the year. 

 8 And before I turn it over to Mr. Goldstene, I 

 9 want to comment that in the front row here today of the 

 10 staff that's in front of us, we have for the first time 

 11 appearing as the successor to the not departed but retired 

 12 Mike Scheible and taking up all of the myriad of 

 13 responsibilities, Bob Fletcher. So welcome, Bob. 

 14 All right. So for the first agenda item, Mr. 

 15 Goldstene, will you please begin the review of what I 

 16 expect, to put it mildly, is going to be a busy year? 

 17 (Thereupon an overhead presentation was 

 18 presented as follows.) 

 19 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 

 20 Nichols. 

 21 At the start, I'll take a few minutes to review 

 22 last year's major accomplishments and move on to this 

 23 year's highest priorities. Of course, there is a lot 

 24 going on that we must do this year to meet a variety of 

 25 state and federal requirements. 
 4 

 1 While I won't take the time to go through 

 2 everything we're doing, it's important to recognize the 

 3 broad scope of the technical, legal, and policy work that 

 4 goes on to support our program. 

 5 --o0o-- 

 6 EXECUTIVE OFFICER GOLDSTENE: In the climate 

 7 change arena in 2009, we can characterize last year as the 

 8 year in which we moved from planning to action. The Board 

 9 adopted the Low-Carbon Fuel Standard for transportation 

 10 fuels and seven other regulations to reduce greenhouse gas 

 11 emissions. 

 12 We also adopted the fee regulation authorized by 

 13 AB 32 to provide the necessary program resources. 

 14 The rules the Board has already adopted only one 

 15 year after approving the AB 32 Scoping Plan achieve almost 

 16 half the reductions needed to meet the 2020 emissions 

 17 target. 

 18 In 2009, the Board also took action to reduce 

 19 toxic air contaminants and ozone levels when it adopted 

 20 new emission limits for several categories of consumer 

 21 products. These amendments broke new ground by reducing 

 22 smog-forming gases from consumer products and 

 23 simultaneously establishing a cap on the use of high 

 24 global warming ingredients in these products. 

 25 --o0o-- 
 5 

 1 EXECUTIVE OFFICER GOLDSTENE: Last year, the 

 2 Board supported the distribution of a variety of incentive 

 3 funds for the purchase and development of clean 

 4 technologies. The Board revised its guidelines for the 

 5 use and distribution of Proposition 1B goods movement 

 6 funds, as well as the Carl Moyer Program guidelines. 

 7 The Board also adopted funding guidelines for the 

 8 distribution of $50 million provided by Assembly Bill 118. 

 9 Like the other incentive programs, the AB 118 Air Quality 

 10 Improvement Program is designed to reduce both criteria 

 11 and toxic pollutants from motor vehicles. These AQIP 

 12 funds can also be used to support related research 

 13 efforts, especially research related to the development of 

 14 alternative fuels. 

 15 --o0o-- 

 16 EXECUTIVE OFFICER GOLDSTENE: ARB staff was also 

 17 busy implementing recently adopted regulations in 2009. 

 18 Californians started to see air quality benefits from the 

 19 Board's Goods Movement Emission Reduction Plan, as several 

 20 of the pioneering rules in that plan took effect. 

 21 The clean fuels and shore power requirements for 

 22 ships became effective in 2009, as did the first phase of 

 23 the retrofit or replacement requirements for the drayage 

 24 trucks that service the ports and intermodal rail yards. 

 25 These rules are now reducing toxic particulates in the 
 6 

 1 communities near the ports and helping us meet regional 

 2 air quality goals for ozone and fine particulates. 

 3 The first phase of emissions standards for 

 4 transport refrigeration units on trucks also took effect. 

 5 This rule will reduce diesel emissions throughout the 

 6 state. 

 7 The Board staff has continued to work to reduce 

 8 rail yard emissions. ARB staff released its report on 

 9 options for further reducing emissions from locomotives 

 10 and is now refining its recommendations according to the 

 11 Board's direction. 

 12 ARB staff also secured an $8.9 million federal 

 13 grant that will be used to retrofit eleven switch 

 14 locomotives operating in California with new cleaner 

 15 engines. 

 16 --o0o-- 

 17 EXECUTIVE OFFICER GOLDSTENE: We also made 

 18 progress in several other programs. The first phase of 

 19 the Board's composite wood products regulation took effect 

 20 in 2009, limiting the levels of formaldehyde that can be 

 21 emitted from new products sold in California. This 

 22 regulation is important for reducing toxic emissions both 

 23 indoors and outdoors. It has had a national and 

 24 international impact as well, since many manufacturers are 

 25 now producing only ARB-compliant materials. 
 7 

 1 The enhanced vapor recovery regulations for 

 2 gasoline service stations also took effect last year. 

 3 Working closely with local districts, we were able to 

 4 ensure that implementation of this rule, which was 

 5 originally adopted in 2000, went smoothly. And we are 

 6 seeing a very high compliance rate with that rule. 

 7 California's largest industrial greenhouse gas 

 8 emitters reported their emissions for the first time in 

 9 2009. And electricity retail providers and marketers 

 10 reported their electricity transaction information. We 

 11 have a 97 percent compliance rate with this new rule and 

 12 we're working closely with other states, the National 

 13 Climate Registry, and U.S. EPA on the development of a 

 14 national reporting program. 

 15 Throughout the year, ARB also worked closely with 

 16 local air districts and have reviewed and processed 

 17 hundreds of applications for Proposition 1B and Carl Moyer 

 18 program grants. These programs can help the owners of 

 19 older trucks and off-road equipment retrofit, upgrade, or 

 20 replace their polluting equipment. 

 21 --o0o-- 

 22 EXECUTIVE OFFICER GOLDSTENE: Now moving on to 

 23 our plans for 2010. 

 24 This year the Board will consider a number of key 

 25 rulemakings to address both public health and climate 
 8 

 1 issues. 

 2 This slide provides an overview of the most 

 3 complex and significant rulemakings the Board will 

 4 consider this year, beginning with the proposed amendments 

 5 to the truck and bus rule to reflect the emissions impact 

 6 of the economic downturn. 

 7 Later this year, we will recommend major 

 8 rulemakings to ensure that passenger vehicles of the 

 9 future will be even cleaner than today, and support 

 10 long-term greenhouse gas reduction goals. 

 11 By July, we are to develop a renewable 

 12 electricity standard as outlined in Governor 

 13 Schwarzenegger's September 2009 Executive Order. And in 

 14 the fall, staff will propose a cap and trade rule. 

 15 --o0o-- 

 

 16 EXECUTIVE OFFICER GOLDSTENE: Disbursing Prop. 1B 

 17 bond funds and other incentive dollars as quickly as 

 18 possible is essential to accelerating air quality progress 

 19 by cleaning up diesel emissions. These expenditures are 

 20 especially important to single owner/operators and many 

 21 small fleets which have been given more time to comply 

 22 with ARB's diesel regulations. 

 23 As part of this effort, Board Member Berg is 

 24 guiding the review of the Carl Moyer Program incentive 

 25 program that is designed to ensure that this 12-year-old 
 9 

 1 program will continue to provide mobile source emission 

 2 reductions into the future. The goal of this review is to 

 3 reflect newly adopted regulations and changes in the 

 4 economy, to bring more sources into the 12-year-old 

 5 program, and to increase the program's flexibility. 

 6 Another major item the Board will consider is the 

 7 adoption of regional greenhouse gas emission targets for 

 8 local transportation planning agencies, as required by SB 

 9 375. Staff is making good use of the SB 375 Advisory 

 10 Committee recommendations that were presented to the Board 

 11 last November. 

 12 Another priority is to continue working closely 

 13 with the Western Climate Initiative on regional cap and 

 14 trade greenhouse gas reduction programs in the Midwest and 

 15 in the northeast. In the absence of national action, 

 16 representatives of these three programs have been meeting 

 17 regularly to discuss options for linking these programs 

 18 together. In addition, we are collaborating with U.S. EPA 

 19 staff on a number of greenhouse gas reduction strategies, 

 20 including vehicles, fuels, and high global warming 

 21 potential pollutants. 

 22 We are also working with our partner state 

 23 agencies on the Governor's third Climate Change Summit, 

 24 which will take place this fall. 

 25 And this year, we will continue our efforts to 
 10 

 1 improve our Enforcement Program, which you'll hear more 

 2 about later today. 

 3 Lastly, we must address a number of federal Clean 

 4 Air Act issues related to air quality planning, including 

 5 what we hope will be federal approval of the 2007 and 2008 

 6 SIPS. 

 7 --o0o-- 

 8 EXECUTIVE OFFICER GOLDSTENE: To follow up on 

 9 direction from the December Board meeting, staff is 

 10 preparing a new report on the health effects of 

 11 particulate matter pollution. The report will be released 

 12 for public comment and undergo an independent peer review. 

 13 On February 26, ARB will hold a public PM2.5 

 14 science symposium on the subject. Chairman Nichols and 

 15 other Board members will attend to hear the discussion. 

 16 Staff recently held three workshops to solicit 

 17 comment on possible amendments to the truck and bus rule 

 18 in the context of the Board's direction in December. A 

 19 public hearing on these amendments is scheduled for April. 

 20 Also, in April, staff will provide an 

 21 informational update on the effect of reduced economic 

 22 activity on emissions from construction and other off-road 

 23 equipment, and we'll have a more comprehensive review in 

 24 July. 

 25 As you can see, staff's updating the Board 
 11 

 1 frequently this year on the status of our diesel rules and 

 2 the impact of the economy on emissions. And we also will 

 3 provide updates on the financial incentive programs I 

 4 mentioned earlier as we go through the year. 

 5 --o0o-- 

 6 EXECUTIVE OFFICER GOLDSTENE: 2010 will be a 

 7 significant year for California's passenger vehicle 

 8 programs. Staff is developing new requirements affecting 

 9 our low-emission vehicle, Pavley, and zero-emission 

 10 vehicle regulations. 

 11 One proposal would strengthen the Pavley 

 12 greenhouse gas fleet standards for 2012 through 2016, as 

 13 well as strengthening the low-emission standards. This 

 14 rule will integrate our efforts to reduce greenhouse 

 15 gases, ozone-forming pollutants, particulate matter, and 

 16 toxics. 

 17 Another rulemaking is a revamping of the Zero 

 18 Emission Vehicle Program primarily to meet greenhouse gas 

 19 reduction targets into the future. 

 20 And we hope that last year's Rose Garden 

 21 commitments between the Obama administration, automakers, 

 22 and ARB set the stage for continued cooperation with the 

 23 auto industry and the federal government. It is important 

 24 that we continue to coordinate with our federal 

 25 counterparts on standards for both vehicles and fuels so 
 12 

 1 we can maximize emission reductions in California and the 

 2 rest of the nation. 

 3 --o0o-- 

 4 EXECUTIVE OFFICER GOLDSTENE: One important 

 5 element of our Scoping Plan is increasing the use of 

 6 renewable energy used to meet California's electricity 

 7 needs. 

 8 Last year, the Legislature passed a bill that 

 9 would have changed the renewable portfolio standard from 

 10 20 percent to 33 percent to meet the Scoping Plan goals. 

 11 The Governor vetoed that bill because of some of its other 

 12 provisions. 

 13 With the Executive Order that I referred to 

 14 earlier, the Governor directed ARB to adopt a regulation 

 15 requiring the state's electricity providers to meet a 33 

 16 percent renewable energy target by 2020. The rule is to 

 17 be adopted by July 31st of this year. We are working 

 18 closely with the Public Utilities Commission, Energy 

 19 Commission, and Cal ISO in developing this proposal. 

 20 We've held two workshops and received public 

 21 comments on concept paper as well as proposed approaches 

 22 for economic, technical, and environmental analysis. And 

 23 a third workshop will be held next week. 

 24 Given the accelerated rulemaking schedule, staff 

 25 will brief the Board on the status of this item at our 
 13 

 1 March meeting. In addition, we will keep the Board 

 2 apprised of any legislative action that may occur. 

 3 --o0o-- 

 4 EXECUTIVE OFFICER GOLDSTENE: This year's climate 

 5 change priorities are the renewable electricity standard, 

 6 which I just mentioned, and the cap and trade regulations. 

 7 ARB staff is developing a cap and trade proposal that 

 8 would establish a declining cap to ensure emission 

 9 reductions, while providing compliance flexibility through 

 10 trading of allowances and offsets. 

 11 We released a preliminary draft regulation late 

 12 last year to help focus the public discussion. Earlier 

 13 this month, the Economic and Allocation Advisory Committee 

 14 released its draft recommendations for the distribution 

 15 and evaluation of greenhouse gas allowance created under 

 16 this program. The Committee will discuss its 

 17 recommendations at the March meeting. 

 18 Staff has held numerous workshops and met with 

 19 many experts and stakeholders throughout the development 

 20 of this proposal. This outreach and consultation will 

 21 continue as we prepare the proposed regulation for the 

 22 Board's consideration in October. 

 23 As the rule is being developed, staff is also 

 24 proposing revisions to our current mandatory reporting 

 25 regulation so that it will meet the needs of a Cap and 
 14 

 1 Trade Program. And to avoid duplication, this update will 

 2 also be used to align our requirements with the new 

 3 federal reporting requirements to meet our AB 32 program 

 4 needs. 

 5 --o0o-- 

 6 EXECUTIVE OFFICER GOLDSTENE: AB 375 was landmark 

 7 legislation that aligns planning efforts for regional land 

 8 use, transportation, housing, and greenhouse gas 

 9 reductions. The Board's consideration of regional 

 10 greenhouse gas reduction targets has the potential to 

 11 achieve significant reductions through sustainable land 

 12 use and transportation planning. 

 13 Staff is working with metropolitan planning 

 14 agencies, or MPOs, to explore the greenhouse gas impacts 

 15 of different planning scenarios and to share the 

 16 information needed to set targets. This has been a very 

 17 good process so far. And moving forward, staff will be 

 18 holding workshops throughout the state over the next few 

 19 months. 

 20 Staff will propose draft targets by June for 

 21 public comment and the Board will consider final targets 

 22 in September. 

 23 A number of Board members have particular 

 24 interest and expertise in this subject, and we look 

 25 forward to your guidance as we proceed to develop draft 
 15 

 1 targets for your consideration. 

 2 --o0o-- 

 3 EXECUTIVE OFFICER GOLDSTENE: We will be taking 

 4 on this year's agenda amid significant fiscal, economic, 

 5 and legal challenges. The state of the economy and the 

 6 pace of California's recovery will be a consideration 

 7 every step of the way. As staff, we will do our best to 

 8 provide you with the most complete and accurate 

 9 information possible. 

 10 From a staffing perspective, the state budget 

 11 will continue to limit the resources available to deliver 

 12 on these program priorities. We expect a three-day per 

 13 month furlough to continue through June as proposed in the 

 14 Governor's budget and to be replaced with a five percent 

 15 cut in personnel expenditures. 

 16 This year's priorities reflect what must be done 

 17 to meet our public health and AB 32 goals. Staff 

 18 recognizes that how we go about it is important. We will 

 19 strive to ensure transparency and the comprehensive public 

 20 processes that have been an ARB hallmark over the years. 

 21 The Chairman's Offices of Legislation, Communications, and 

 22 the Ombudsman are working harder than ever to expand our 

 23 outreach efforts and to address questions raised in the 

 24 press and elsewhere. 

 25 We greatly appreciate the leadership of each of 
 16 

 1 our Board members and look forward to a challenging and 

 2 productive year. 

 3 Thank you. 

 4 CHAIRPERSON NICHOLS: Thank you, Mr. Goldstene. 

 5 Before we get into a general discussion, are 

 6 there any questions about any of the specific items that 

 7 were raised there as part of our 2010 agenda? 

 8 Obviously, those are the high level issues. 

 9 There will be numerous, I suspect, of the normal updates 

 10 and changes to existing rules and processes that are part 

 11 of what the Board does. 

 12 But in terms of the overview, I thought it was 

 13 really useful to have the staff's roadmap, if you will, 

 14 for what sometimes feels like it's going to be a long 

 15 journey through 2010. 

 16 You know, I might just add that we have had -- we 

 17 have enjoyed tremendous support from the Governor for the 

 18 ARB and our work, since I've been here at least. And I'd 

 19 like to say that, you know, from what I have seen in every 

 20 way possible, you know, in a very tough and challenging 

 21 budget time and also in a time when there's a great deal 

 22 of backlash and resistance against government in all 

 23 forms, some of which has been focused very specifically at 

 24 our Board and our programs, the Governor has really taken 

 25 it upon himself personally to be an advocate for the 
 17 

 1 importance of the work that we do. 

 2 And just as I think a lot of us were waiting 

 3 somewhat breathlessly last night to see if President Obama 

 4 would mention his support for doing something about 

 5 climate change, and we're very pleased to hear that high 

 6 up in his remarks was an affirmation of the need to focus 

 7 on energy and on climate, we're seeing the same thing here 

 8 in California. 

 9 Obviously, we all have to be smart about what we 

 10 do and how we do it. We all have to be careful not to do 

 11 things that either really don't make sense or that are in 

 12 any way unduly burdensome and to try to find ways to make 

 13 sure that we speak about what we're doing in ways that are 

 14 more comprehensible to people than I think often we end up 

 15 doing when we are caught up in our daily rounds of jargon 

 16 and our scientific expertise shows, but maybe not our 

 17 awareness, of the things that people actually care about. 

 18 So I'm actually thinking it's going to be a year 

 19 of an enormous amount of accomplishment, but I don't want 

 20 to minimize the effort it's going to take to get from here 

 21 to there. 

 22 And I'd just like to echo James's comments about 

 23 the Board. As the only person who gets paid to work here 

 24 full time, sometimes, you know, I know, too, the 

 25 Legislature think I'm the one they can point to whenever 
 18 

 1 there is anything that they would like to see changed or 

 2 done differently. But I'm very well aware of the fact 

 3 that in many parts of the state, in many communities and 

 4 constituencies, the face of the ARB is in fact the 

 5 individual Board members. 

 6 And I'm only aware, I'm sure, of a small portion 

 7 of what you all do, when I hear about it through Charlyn 

 8 because of speech requests or meetings that you're 

 9 outdoing or if you happen to call to check in with me or 

 10 give me good advice, which a few of you do from time to 

 11 time and which I really appreciate, even if I don't seem 

 12 grateful at the time. 

 13 (Laughter) 

 14 CHAIRPERSON NICHOLS: So with that, I would like 

 15 to say how pleased I am that we've had the activity that 

 16 we've had on the part of the Board members. 

 17 And if any of you feel inclined in the coming 

 18 year to take on more assignments, and particularly with 

 19 respect to fulfilling some of the invitations that we get 

 20 to go out and speak with groups around the state about 

 21 what we're doing, I am very happy and I know the staff 

 22 will be very happy to have you involved. 

 23 So with that, I'll open it up for any comments, 

 24 questions, remarks, speeches. 

 25 Okay. If you don't feel like weighing in right 
 19 

 1 now, that's okay, too, I guess. 

 2 Dr. Sperling, you looked like you were about to 

 3 say something. I'll call on you. 

 4 BOARD MEMBER SPERLING: I don't have anything of 

 5 great profoundness to say. 

 6 But I do support what you just said that this is 

 7 going to be an important year for us. And as I looked at 

 8 that list that James was providing us, it was pretty 

 9 overwhelming, the amount of actions that we're going to be 

 10 contemplating. And it is a difficult time. 

 11 I've just always been impressed with ARB with the 

 12 leadership of the staff and Chairman Nichols and the 

 13 Board. 

 14 And I think I would echo what Chairman Nichols 

 15 said is I think we are all sensitive to what's happening 

 16 with the state of the economy and the jobs and so on, but 

 17 at the same time, how important California has been in 

 18 leadership with a lot of issues in air pollution and 

 19 climate change now. So it's going to be an interesting 

 20 year. 

 21 CHAIRPERSON NICHOLS: That's for sure. 

 22 All right. If no one else feels moved to add, I 

 23 appreciate that. And we'll just move on to the next item. 

 24 Welcome, Dr. Telles. 

 25 So the next item is the proposed amendments to 
 20 

 1 the regulations applicable to portable equipment and 

 2 diesel engines used in off-road and on-road vehicles. 

 3 Mr. Goldstene. 

 4 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 

 5 Nichols. 

 6 The major purpose of today's proposed amendments 

 7 is to provide temporary relief for businesses that operate 

 8 smaller fleets of portable engines. 

 9 Under existing regulations, the oldest and 

 10 dirtiest portable engines must be replaced by January 1st, 

 11 2010. The proposed amendments provide a one-year 

 12 extension for a limited number of portable engines. While 

 13 providing some relief for about 90 percent of the 

 14 companies that operate older portable engines, the staff 

 15 proposal still retains about 70 percent of the first year 

 16 benefits. 

 17 In addition, staff is proposing to move water 

 18 well drilling rigs out of the portable engine ATCM and the 

 19 regulation for heavy-duty on-road vehicles and instead 

 20 make them subject to the in-use on-road vehicle 

 21 regulation, just as was previously done for cranes. 

 22 The replacement of the portable engine on these 

 23 rigs is extremely difficult and cost prohibitive. This 

 24 proposed move would allow owners of the drilling rigs more 

 25 flexibility for complying with requirements, while still 
 21 

 1 achieving the emission reductions for diesel PM and oxides 

 2 of nitrogen. 

 3 The proposed amendments provide a balanced 

 4 approach that allows businesses to continue to operate 

 5 while achieving the emission reductions needed to protect 

 6 public health. 

 7 I'd like now to ask Mr. Joseph Gormley of the 

 8 Stationary Source Division to present the staff's 

 9 proposal. 

 10 Joseph. 

 11 (Thereupon an overhead presentation was 

 12 presented as follows.) 

 13 AIR RESOURCES ENGINEER GORMLEY: Thank you, Mr. 

 14 Goldstene. 

 15 Good morning, Chairman Nichols and members of the 

 16 Board. 

 17 --o0o-- 

 18 AIR RESOURCES ENGINEER GORMLEY: This slide 

 19 presents an overview of the topics I will cover in today's 

 20 presentation. 

 21 --o0o-- 

 22 AIR RESOURCES ENGINEER GORMLEY: First, I have a 

 23 brief overview of today's proposed amendments. 

 24 --o0o-- 

 25 AIR RESOURCES ENGINEER GORMLEY: Today, staff is 
 22 

 1 proposing amendments that would extend the deadline for 

 2 replacing some older high-emitting engines by one year. 

 3 This will provide some economic relief for the owners of 

 4 smaller fleets. 

 5 Staff is also proposing to make water well 

 6 drilling rigs with two engines subject to the requirements 

 7 of the regulation for in-use off-road diesel vehicles. 

 8 This move will also provide relief to owners of water well 

 9 drilling rigs from the Tier 0 engine replacement 

 10 requirement. 

 11 In addition, staff is proposing some amendments 

 12 that would provide additional clarity to the regulations 

 13 and assist with the implementation of the statewide 

 14 registration program. 

 15 The proposed amendments were designed to provide 

 16 relief for most of the owners of uncertified engines, 

 17 while retaining about 70 percent of the emission reduction 

 18 benefits. 

 19 This relief is provided in recognition of the 

 20 fact that there has likely been a reduction in the use of 

 21 these engines due to the economy. 

 22 --o0o-- 

 23 AIR RESOURCES ENGINEER GORMLEY: The proposed 

 24 amendments affect several ARB regulations. The next set 

 25 of slides briefly describe these regulations and provide 
 23 

 1 some additional background information.

 2 --o0o-- 

 3 AIR RESOURCES ENGINEER GORMLEY: Portable engines 

 4 are used to provide power to generators, pumps, 

 5 compressors, and a variety of other equipment used in 

 6 industrial and construction activities.

 7 --o0o-- 

 8 AIR RESOURCES ENGINEER GORMLEY: The portable 

 9 equipment registration program regulations established a 

 10 voluntary registration program for portable engines and 

 11 equipment units. If an owner chooses to register in PERP, 

 12 they may operate that portable equipment statewide without 

 13 obtaining a separate permit in each air district. 

 14 Although the Air Resources Board issues the 

 15 registration, the local air districts provide the primary 

 16 enforcement for the program. 

 17 The PERP regulation was adopted in March of 1997 

 18 and started accepting applications later that same year. 

 19 --o0o-- 

 20 AIR RESOURCES ENGINEER GORMLEY: When the PERP 

 21 regulation was originally adopted in 1997, it contained a 

 22 requirement that all Tier 0 engines must be removed or 

 23 replaced by January 1, 2010, which effectively gave 

 24 registered businesses a maximum of 13 years to plan for 

 25 replacement. 
 24 

 1 At the time, this replacement requirement only 

 2 affected engines registered in PERP. The PERP regulation 

 3 also requires that registered Tier 0 spark ignition 

 4 engines be removed from service by January 1, 2010. 

 5 --o0o-- 

 6 AIR RESOURCES ENGINEER GORMLEY: The air-borne 

 7 toxic control measure for portable diesel engines came 

 8 about as a result of the Diesel Risk Reduction Plan, which 

 9 the Board adopted in September of 2000. It is designed to 

 10 achieve particulate matter emission reductions from 

 11 portable diesel engines through three main mechanisms: 

 12 First, it mandates the replacement of older 

 13 higher-emitting engines by January 1, 2010. 

 14 Second, it sets eligibility requirements for 

 15 newly permitted or registered engines. 

 16 And third, it establishes fleet emission 

 17 standards which take effect later this decade. 

 18 These requirements are applicable to all portable 

 19 diesel engines, whether registered in PERP or permitted by 

 20 the local air districts. The Board adopted the ATCM in 

 21 February of 2004, and it became effective in March of 

 22 2005. 

 23 The portable ATCM differs from the other diesel 

 24 engine regulations in that it requires the replacement of 

 25 all older higher emitting engines by a specific date. The 
 25 

 1 other diesel relations require a phase-out of older 

 2 engines over several years. 

 3 --o0o-- 

 4 AIR RESOURCES ENGINEER GORMLEY: The requirement 

 5 to replace Tier 0 engines is a key component of the 

 6 Board's strategy to reduce the emissions of toxic 

 7 particulate matter from portable diesel engines. 

 8 Currently, there are about 4400 Tier 0 engines 

 9 either registered with ARB or permitted by the local air 

 10 districts that are affected by this requirement. We want 

 11 people to replace their older Tier 0 engines with newer 

 12 certified engines, because the newer engines have 

 13 significantly lower emissions, as shown by the graphs on 

 14 the next two slides. 

 15 --o0o-- 

 16 AIR RESOURCES ENGINEER GORMLEY: This graph 

 17 compares the particulate matter emission rates from 

 18 uncertified engines to emission standards that certified 

 19 engines must meet. You can see from this graph the Tier 0 

 20 engines have significantly higher emissions than certified 

 21 engines. 

 22 --o0o-- 

 23 AIR RESOURCES ENGINEER GORMLEY: This graph 

 24 similarly compares the emissions of NOx from uncertified 

 25 engines to the emissions standard for certified engines. 
 26 

 1 As shown by these two graphs, the overall 

 2 emission levels from portable engines decrease with each 

 3 new tier. This is why we structured the regulation for 

 4 portable engines to require that industry to have the 

 5 newest tier available when seeking a new permit or 

 6 registration. 

 7 --o0o-- 

 8 AIR RESOURCES ENGINEER GORMLEY: The regulations 

 9 for in-use heavy-duty off-road and on-road diesel-fueled 

 10 vehicles are the most recent regulations to be adopted as 

 11 a result of the Diesel Risk Reduction Plan. 

 12 The off-road regulation was adopted by the Board 

 13 in 2007 and was recently amended to include requirements 

 14 for two-engine cranes. 

 15 The on-road regulation was adopted by the Board 

 16 in December of 2008 and became effective earlier this 

 17 month. 

 18 Our proposed amendments today only affect these 

 19 two regulations as they apply to two-engine water well 

 20 drilling rigs. 

 21 --o0o-- 

 22 AIR RESOURCES ENGINEER GORMLEY: With that 

 23 background, let's take a closer look at what we are 

 24 proposing. 

 25 --o0o-- 
 27 

 1 AIR RESOURCES ENGINEER GORMLEY: Several of the 

 2 owners of smaller fleets indicated that they experienced 

 3 difficulty with the requirement to replace Tier 0 engines 

 4 by January 1, 2010. So staff is proposing to provide a 

 5 limited extension for these engines. The extension will 

 6 be available to smaller fleets which contain no more than 

 7 25 portable engines as of December 31st, 2009. 

 8 If an owner of portable engines qualifies for the 

 9 extension, they must then choose either one engine of any 

 10 size or up to five engines that do not exceed 500 

 11 cumulative brake horsepower. The engines selected for the 

 12 extension may then operate until the end of 2010. 

 13 The extension is not being proposed for fleet 

 14 owners with more than 25 portable engines. These larger 

 15 companies generally have access to more resources, and 

 16 they typically have smaller percentages of uncertified 

 17 engines in their fleet. Therefore, they are not as 

 18 severely affected by the Tier 0 replacement deadline. 

 19 In an effort to preserve as much of the original 

 20 emission reductions as possible, ARB staff proposes the 

 21 extension only for the companies that need it in most. 

 22 --o0o-- 

 23 AIR RESOURCES ENGINEER GORMLEY: Under this 

 24 proposal, approximately 2,000 engines may potentially 

 25 receive the temporary operating extension. The proposed 
 28 

 1 extension maintains at least 70 percent of the original 

 2 emission reduction benefits from the Tier 0 engine 

 3 replacement requirement. The full emission reductions 

 4 will be achieved once the extension period ends at the end 

 5 of 2010. 

 6 It is important to note that the estimates do not 

 7 include any adjustments based on changes due to economic 

 8 conditions. The emission reduction estimate is based on 

 9 the number of currently permitted or registered portable 

 10 engines and the requirements of the existing regulations. 

 11 --o0o-- 

 12 AIR RESOURCES ENGINEER GORMLEY: Some of the 

 13 additional amendments staff are proposing include allowing 

 14 engines certified to the on-road emission standards to 

 15 operate after January 2010 if they are used as portable. 

 16 The current portable engine ATCM requires these 

 17 engines to be placed out of service the same way that Tier 

 18 0 engines are. It makes sense to allow these engines to 

 19 continue operating because they are clean certified 

 20 engines. 

 21 As stated previously, the portable engine ATCM 

 22 does settle eligibility requirements for engines seeking a 

 23 new permit. Currently, the portable engine ATCM and PERP 

 24 regulation allow only diesel engines certified to the 

 25 off-road emission standards to obtain either a permit or 
 29 

 1 registration. Because engines certified to the on-road or 

 2 marine standards are sometimes used in portable 

 3 operations, staff is proposing to allow these engines to 

 4 be eligible for district permits or registration in PERP. 

 5 --o0o-- 

 6 AIR RESOURCES ENGINEER GORMLEY: Staff is also 

 7 proposing some modifications to the recordkeeping and 

 8 reporting requirements contained in the PERP regulation. 

 9 Because certified engines are not subject to any hourly 

 10 operating restrictions, staff is proposing to remove the 

 11 requirement for tracking hours of operation and reporting 

 12 of annual hours of use for these engines. 

 13 To improve the enforceability of the requirement 

 14 that portable equipment not reside at a location for more 

 15 than 12 consecutive months, staff is proposing that the 

 16 specific location of all registered engines and equipment 

 17 units be recorded no less than once a month. Currently, 

 18 only the county or air district has to be recorded for 

 19 location. 

 20 Staff is also proposing to remove the requirement 

 21 in the PERP regulation that equipment dealers provide a 

 22 list to the Air Resources Board of all portable engines 

 23 sold in California. Because PERP is a voluntary program, 

 24 staff believes it is not appropriate to have a mandatory 

 25 notification requirement for equipment that is not yet 
 30 

 1 registered. And it has not proven to be a useful 

 2 mechanism to track equipment that may need a permit. 

 3 And, finally, we are making some minor wording 

 4 changes for clarity, which will improve the implementation 

 5 of the portable engine ATCM and statewide registration 

 6 program. 

 7 --o0o-- 

 8 AIR RESOURCES ENGINEER GORMLEY: Finally, I would 

 9 like to discuss why we are proposing to amend the off-road 

 10 and on-road diesel vehicle registration. 

 11 Currently, water well drilling regs are covered 

 12 by two regulations: The portable engine ATCM for the deck 

 13 engine and the on-road vehicle regulations for the truck 

 14 engine. 

 15 The California Groundwater Association has 

 16 indicated that replacing the portable Tier 0 deck engine 

 17 on two-engine water well drilling rigs as required by the 

 18 portable engine ATCM is extremely difficult. Our analysis 

 19 showed that these rigs face many of the same cost and 

 20 safety issues with engine replacement as with two-engine 

 21 cranes. Therefore, staff is proposing to move these 

 22 two-engine water well drilling rigs into the off-road 

 23 regulation, just as was done with two-engine cranes in 

 24 previous amendments. 

 25 Under this proposal, both the drive engine and 
 31 

 1 the portable deck engine will be subject to the 

 2 requirements of the off-road regulation and must be 

 3 reported into the diesel off-road on-line reporting 

 4 system. The deck engines still technically meet the 

 5 definition of portable and may be subject to district 

 6 permitting requirements. Therefore, under this proposal, 

 7 the deck engine will remain eligible for registration in 

 8 PERP. 

 9 --o0o-- 

 10 AIR RESOURCES ENGINEER GORMLEY: Before we move 

 11 on to discuss future actions, there is one issue that we 

 12 would like to bring to your attention. Currently, the 

 13 portable engine ATCM does not allow the permitting or 

 14 registration of Tier 1 or Tier 2 portable engines if they 

 15 have been found to be operating illegally. 

 16 To facilitate enforcement, the local air 

 17 districts have requested that we amend the ATCM to allow 

 18 the permitting of these engines. 

 19 As we have not yet reached an agreement on an 

 20 appropriate mechanism or proposed regulatory language, we 

 21 would like to continue to work with CAPCOA on this issue 

 22 to explore those options and may propose a regulatory 

 23 solution as part of a 15-day change, if necessary. 

 24 --o0o-- 

 25 AIR RESOURCES ENGINEER GORMLEY: If the 
 32 

 1 amendments are approved today, we will conduct outreach 

 2 activities to inform people of the new changes, which 

 3 include dedicating resources to assist the public with 

 4 questions and applications, updating folks on our website, 

 5 and sending out informational fliers to members of 

 6 affected industry that may be subject to the new 

 7 requirements. 

 8 Once the amendments are effective, we will start 

 9 processing the applications for engines that are affected 

 10 by the new requirements. 

 11 --o0o-- 

 12 AIR RESOURCES ENGINEER GORMLEY: Finally, we move 

 13 on to staff's recommendation. 

 14 --o0o-- 

 15 AIR RESOURCES ENGINEER GORMLEY: Staff recommends 

 16 that you adopt the proposed amendments. 

 17 Thank you. That concludes my presentation. 

 18 CHAIRPERSON NICHOLS: Okay. Thank you very much. 

 19 We have a list of ten witnesses here, so I think 

 20 we'll just begin with those, unless anybody has any 

 21 comments or questions. Okay. 

 22 BOARD MEMBER TELLES: When I read this, it wasn't 

 23 clear to me what the emissions reduction inventory is for 

 24 the sector. How big of emissions is this that we're 

 25 talking about? 
 33 

 1 AIR RESOURCES ENGINEER GORMLEY: Well, the total 

 2 population of engines registered in PERP currently is 

 3 about 30,000 engines, a little less than that. And that's 

 4 just private sector. The military has about 5,000 more 

 5 than that. 

 6 The only engines that are affected by the Tier 0 

 7 engine replacement requirement is just over 5,000. Some 

 8 of those can be designated as emergency use. So when you 

 9 really look at it, it's only about 4400 engines that are 

 10 actually subject to be replaced by the end of last year. 

 11 That's the total scope of the proposed amendments. 

 12 BOARD MEMBER TELLES: That's the number being 

 13 replaced. What's the actual emissions? How many NOx and 

 14 PM? 

 15 AIR RESOURCES ENGINEER GORMLEY: Oh, we have 

 16 that. 

 17 STATIONARY SOURCE DIVISION CHIEF FLETCHER: The 

 18 total emissions in 2009 are estimated to be about 115 tons 

 19 a day of NOx statewide and about somewhere around ten tons 

 20 a day -- nine to ten tons a day of PM. So it's a pretty 

 21 significant amount. 

 22 To put it in perspective, in the San Joaquin 

 23 Valley, probably about -- I would guess -- probably 30 to 

 24 40 of those tons in the San Joaquin Valley. So this is a 

 25 big category. Tier 0 represents about 40 percent of those 
 34 

 1 emissions. 

 2 BOARD MEMBER TELLES: Okay. And what's the total 

 3 cost to the industry as far as doing this 30 percent 

 4 replacement? 

 5 AIR RESOURCES ENGINEER GORMLEY: Well, with the 

 6 2,000 engines that would normally have to be replaced that 

 7 we're giving relief to, the cost delay is about $66 

 8 million. 

 9 BOARD MEMBER TELLES: All right. And you said 

 10 there wasn't an estimate of the reduction of emissions 

 11 based on -- surplus reduction of emissions based on the 

 12 decrease in economy. Do you have any estimate of that? 

 13 AIR RESOURCES ENGINEER GORMLEY: We have not 

 14 performed that analysis. 

 15 BOARD MEMBER TELLES: Have you performed any 

 16 analysis of how many jobs would be lost if you do this? 

 17 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Well, 

 18 two comments on that. 

 19 The first, if you assume that the construction 

 20 industry might be a surrogate for these, because many of 

 21 the engines are used in construction-type industries, that 

 22 would be a 30 percent or so reduction. 

 23 So, for example, on the PM side, instead of 3,000 

 24 tons a year, it would be around 2100 tons a year. 

 25 So if you consider that the Tier 0 engines 
 35 

 1 themselves account for 40 percent of the emissions, then 

 2 there is sort of a situation where if all of those Tier 0 

 3 engines were to operate, then we would probably be about 

 4 where we were in 2009. That is, we would see no emission 

 5 reductions associated with this measure. 

 6 What makes it difficult to estimate is that we're 

 7 not sure how many of the Tier 0 engines have already been 

 8 replaced. When we estimated the cost to replace those 

 9 engines of 66 million, that assumes that all of those Tier 

 10 0s have not already been replaced. 

 11 And the way that the Portable Engine Registration 

 12 Program is set up, those engines are registered in the 

 13 program, but there is no requirement once they're replaced 

 14 to notify us they've been replaced. The registration 

 15 essentially expires on that date. So we expect that many 

 16 of these engines have already been replaced. 

 17 On the second question in terms of jobs, the 

 18 impact of our proposed change is actually to make many of 

 19 these engines in the smaller fleets 25 or less. You can 

 20 now operate five or more of those engines. So we would 

 21 expect -- we haven't estimated what the job impacts are, 

 22 but a thousand -- or roughly 1100 companies of the 1200 

 23 companies that still have Tier 0 engines are now eligible 

 24 for some relief. And of those, I think 900 companies get 

 25 full relief. So it should have a positive impact on jobs. 
 36 

 1 CHAIRPERSON NICHOLS: Did that respond to your 

 2 question? 

 3 BOARD MEMBER TELLES: Yes. 

 4 CHAIRPERSON NICHOLS: Okay. We'll start with our 

 5 first witness. And I'll give you the next three in order 

 6 so people can be prepared to come forward. And as I said 

 7 before, we will be using our three-minute rule. 

 8 So starting with Bill Gaines and then Mel Zeldin 

 9 and Barry Wallerstein. 

 10 MR. GAINES: Thank you very much. 

 11 My name is Bill Gaines. I am the Chairman and 

 12 Senior Engineer at Transfer Flow, Incorporated. I have a 

 13 degree in mechanical engineering from CalPoly and in fluid 

 14 dynamics. I have been an engineer at General Motors and 

 15 now own my own manufacturing company. 

 16 We've been in the business for 27 years 

 17 manufacturing fuel systems for the niche market. And we 

 18 own 160 CARB executive orders. We have basically been 

 19 involved in developing and providing orders for new 

 20 vehicle, for aftermarket, and for SORE. So we have a very 

 21 good relationship with CARB. And when we started reading 

 22 the portable regulations, we found a lot of areas of 

 23 concern to us, since we are very familiar with writing 

 24 these regulations and trying to meet them. 

 25 In our opinion, there was no thought of 
 37 

 1 integration when writing these regulations. In other 

 2 fields, you basically have a General Motors or Ford or 

 3 Chrysler that you issue an Executive Order to. They are 

 4 literally the integrator for the vehicle. 

 5 In this particular scenario, the diesel 

 6 particulate filter manufacture is typically the person or 

 7 company that is held to the standard of the Executive 

 8 Order. They do not typically have the familiarity with 

 9 designing a complete system. Instead, they are very good 

 10 at building a diesel particulate filter. The controllers 

 11 that go along with it, the pressure transducers, the 

 12 thermal couples, et cetera, all have to work as a family. 

 13 And we don't believe that that's really been looked at. 

 14 We do believe -- we are an integrator and have 

 15 been doing that again for several years. One of the 

 16 problems that we see -- I just heard the testimony that 

 17 there are 4400 Tier 0 engines that are in the registered 

 18 program. Well, in Butte County, 49 percent of the ag 

 19 portable engines are Tier 0. And so we question that 

 20 number. And these are registered engines, by the way. 

 21 We are finding that the cost of these engines -- 

 22 these retrofits run from $11,000 to $43,000 to bring up a 

 23 Tier 0 engine to meet current emissions compliance. 

 24 Just retrofitting the Tier 0 by our estimates is 

 25 going to cost, in essence, $290 million. We don't 
 38 

 1 think -- we question that as well. We believe that if you 

 2 use the current -- 

 3 CHAIRPERSON NICHOLS: I'm sorry. Three minutes 

 4 is a very short time. 

 5 Have you met with staff and/or participated in 

 6 the proceedings up until now and conveyed your information 

 7 to them? 

 8 MR. GAINES: No. I have talked to John Lee and 

 9 talked to some of your Board members, but I have not 

 10 been -- I've not talked to staff. We got involved in this 

 11 late after the regulations were made. 

 12 CHAIRPERSON NICHOLS: Okay. Well, if you have 

 13 any written information to provide, I would really 

 14 appreciate it if you could further it now. And if not, 

 15 we'll see what we can do. 

 16 MR. GAINES: Thank you very much. 

 17 CHAIRPERSON NICHOLS: Mel Zeldin and Barry 

 18 Wallerstein. 

 19 MR. ZELDIN: Chairman Nichols, members of the 

 20 Board, I'm Mel Zeldin, Executive Director for the 

 21 California Air Pollution Control Officers Association. 

 22 Good morning. 

 23 CAPCOA appreciates this opportunity to express 

 24 our support for the proposed revisions to the portable 

 25 diesel engine ATCM and PERP regulations. We share ARB's 
 39 

 1 goals in reducing exposure to diesel particulate and 

 2 reducing the emissions of ozone-forming NOx pollution from 

 3 diesel-fueled engines. 

 4 We recognize, too, that the current economic 

 5 conditions would present difficult implementation issues. 

 6 We support the flexibility provided by the proposed 

 7 revisions and appreciate that the flexibility is 

 8 accomplished without giving up significant emission 

 9 reductions. 

 10 However, there are two yet unresolved issues with 

 11 which most but not all of CAPCOA members have concerns. 

 12 First, currently, it is illegal to operate Tier 1 and Tier 

 13 2 engines in many districts. If those engines have not 

 14 been issued a permit or PERP registration, this rule 

 15 revision does not provide a legal mechanism for operators 

 16 of previously unpermitted or un-PERPed engines to continue 

 17 operations after being discovered by district enforcement 

 18 personnel. 

 19 Secondly, the portable engine ATCM does not 

 20 contain a prohibition of sale provision which we are 

 21 concerned that illegal Tier 1 and Tier 2 engines will be 

 22 sold to unsuspecting buyers in California by unscrupulous 

 23 vendors. 

 24 We would request that you direct staff to work 

 25 with CAPCOA to incorporate these changes in the 15-day 
 40 

 1 comment period, and we're glad to see staff's willingness 

 2 to do so. 

 3 In summary, CAPCOA supports the revisions before 

 4 you today, and we thank ARB staff for working with us 

 5 during this process. Thank you. 

 6 CHAIRPERSON NICHOLS: Thank you for your 

 7 testimony. 

 8 Could I just ask you one question? I'm sorry 

 9 maybe I don't understand the issue. But why wouldn't 

 10 somebody who was cited and found to have an unpermitted 

 11 engine just get a permit? 

 12 MR. ZELDIN: As I understand it that they can't 

 13 get a permit. They're in violation of the ATCM so -- 

 14 CHAIRPERSON NICHOLS: They would never get it. 

 15 MR. ZELDIN: By state law, if they're in 

 16 violation, they can't get a permit. 

 17 CHAIRPERSON NICHOLS: Right. Okay. I get it. 

 18 BOARD MEMBER BERG: Chairman Nichols, I do have a 

 19 follow-up question. 

 20 It's my understanding they had an opportunity and 

 21 we gave an extension to register those Tier 0 engines. So 

 22 now if anybody was found, they would not be able to use 

 23 them now. 

 24 MR. ZELDIN: As it stands now, there's no relief 

 25 other than just -- 
 41 

 1 BOARD MEMBER BERG: Do not use. But that was the 

 2 intent of the regulation was my understanding. 

 3 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Let 

 4 me clarify this a little bit. There's a couple things in 

 5 play. 

 6 One is the extension we're proposing applies to 

 7 engines that are already in the program. 

 8 I think what Mel is talking about has to do with 

 9 engines that are not registered and are not permitted. So 

 10 they're currently operating illegally. 

 11 BOARD MEMBER BERG: I understand that, but we've 

 12 had this conversation a couple of times to my memory. And 

 13 so it sounds to me now that we're considering or we're 

 14 being asked to consider to allow unregistered -- 

 15 CHAIRPERSON NICHOLS: Illegal. 

 16 BOARD MEMBER BERG: -- illegal engines to come 

 17 into the program for a third time. We've already done it 

 18 originally and we gave an extension. 

 19 STATIONARY SOURCE DIVISION CHIEF FLETCHER: And 

 20 that's what we're trying to avoid. As Mr. Gormley said in 

 21 the presentation, we want to continue the discussion with 

 22 CAPCOA on this. 

 23 Our view is we do not want to provide a fourth 

 24 amnesty period for engines that have not registered or 

 25 have not been permitted in the program. 
 42 

 1 And the issue really has to do with how do you 

 2 affect an enforcement action against engines that are 

 3 found to be operating illegally? 

 4 And there is a difference of opinion right now in 

 5 terms of how an abatement order would work. And some of 

 6 the districts believe an abatement order, the way that 

 7 they have traditionally done abatement orders, the first 

 8 thing they do in an abatement order is bring the engine 

 9 under permit so it can operate. So it's really a very 

 10 limited -- 

 11 CHAIRPERSON NICHOLS: Regulatory issues. 

 12 STATIONARY SOURCE DIVISION CHIEF FLETCHER: -- 

 13 defined issue here that says they can't issue an abatement 

 14 order and these engines can't operate while they are under 

 15 an enforcement action unless they're under a permit. And 

 16 that's why we couldn't come to an agreement on what sort 

 17 of regulatory language we could introduce that would not 

 18 be an amnesty period, but would simply address the sort of 

 19 technical issue of how you issue an abatement order and 

 20 bring an engine in under permit so that you can then get 

 21 them to the newer cleaner engine. 

 22 BOARD MEMBER BERG: Can I just ask one clarifying 

 23 question? 

 24 From a layman's perspective on what you just 

 25 said, are we trying to understand how to bring something 
 43 

 1 under permit so we can tell them that they cannot use it? 

 2 STATIONARY SOURCE DIVISION CHIEF FLETCHER: We're 

 3 bringing them under permit so we give them a short period 

 4 of time to operate and replace the engine, because the 

 5 issue really is if they have to replace the engine, that 

 6 it costs money. If we take their ability to earn income 

 7 away by shutting down that operation, they have no ability 

 8 to generate resources to replace the engine to the newer 

 9 cleaner engine. 

 10 BOARD MEMBER BERG: Thank you. 

 11 CHAIRPERSON NICHOLS: I understand the issue. 

 12 This has been going on -- this type of problem has been 

 13 going on for many, many years. Okay. Thank you. 

 14 Barry Wallerstein. 

 15 MR. WALLERSTEIN: Good morning, Chairman Nichols, 

 16 members of the Board. 

 17 I'm Barry Wallerstein, the Executive Officer of 

 18 the South Coast AQMD. I'm before you this morning in 

 19 support of the staff's modest proposal to grant an 

 20 additional year to allow folks during this recessionary 

 21 time to accumulate some additional funds to be able to get 

 22 the new engines. 

 23 I did want to point out that just last week the 

 24 federal government proposed potentially a new range of 

 25 ambient air quality standard for ozone. In South Coast, 
 44 

 1 under our current ozone plan, we have to reduce oxides of 

 2 nitrogen by about 75 percent. Potentially, under the new 

 3 federal standard, that could become 90 percent. That 

 4 means that our agencies have to be working together to 

 5 look for every possible area of emission reductions as we 

 6 have in the past. 

 7 Regarding Board Member Berg's last question, it 

 8 really is an issue of how do you grant in this case for 

 9 this rulemaking temporary relief. The engines not only 

 10 have to be able to comply with your ATCM if it receives a 

 11 district permit, it has to meet best available control 

 12 technology. So Tier 1 or Tier 2 cannot meet BACT. So 

 13 really the only mechanism to provide this sort of relief 

 14 is the item that is before you today, and that's why we're 

 15 supporting it, given the extraordinary economic times that 

 16 we find ourselves in, and the fact that it is just a brief 

 17 one-year period and we will then be fully back on track. 

 18 Thank you for your time. 

 19 CHAIRPERSON NICHOLS: Thank you for that. 

 20 Michael Graboski, Mary Pitto, and Doug Van Allen. 

 21 MR. GRABOSKI: Good morning. I'm Dr. Michael 

 22 Graboski of the American Rental Association. 

 23 ARA has submitted detailed written comments, and 

 24 we hope that you'll review the totality of what we had to 

 25 say. 
 45 

 1 But we're here this morning to just take a 

 2 neutral position on the regulation. In particular, we 

 3 don't really see any or very much at all economic relief 

 4 for our membership in what has been proposed. 

 5 We do have a concern about Section 2458 on the 

 6 reporting requirements. Rental companies have no control 

 7 over where their rental equipment is located once it 

 8 leaves the yard. But in the new version of the 

 9 regulation, we basically are going to be required on a 

 10 monthly basis to provide an exact location of where our 

 11 equipment is, like UTM coordinates. 

 12 Previously, we were told and we understood that 

 13 what we had to do is ask our customers where they were 

 14 going to have the equipment, and we were going to note 

 15 that down. And in a best effort, we would provide that as 

 16 part of reporting. 

 17 But we now believe that, because as hearsay 

 18 knowledge and the way this is written in the regulation, 

 19 that we might leave ourselves open to a serious compliance 

 20 risk if we can't exactly know where the equipment is. 

 21 It's our understanding that the industry has 

 22 contacted both ARB and CAPCOA regarding this section of 

 23 the rule. And we would request the Board set aside action 

 24 on this until those discussions are completed. And we 

 25 would all feel that we would be more safe with regard to 
 46 

 1 compliance as far as the rule is concerned. 

 2 Thank you. 

 3 CHAIRPERSON NICHOLS: Thank you. 

 4 Mary Pitto. 

 5 Ms. PITTO: Good morning, and thank you for this 

 6 opportunity to address you. 

 7 I'm Mary Pitto with the Regional Council of Rural 

 8 Counties. I'm here to make one request, an additional 

 9 amendment for your consideration. 

 10 In the fleet rule for public agencies and 

 11 utilities and with the off-road equipment rule and the new 

 12 truck and bus regulation, you have exempted dedicated snow 

 13 removal equipment. We're requesting that for the snow 

 14 blower machines that have a dual engine, one to propel the 

 15 vehicle and one to power the snow blowing equipment, that 

 16 these also be exempt from this regulation, the portable 

 17 auxiliary ATCM. 

 18 The snow blowing equipment is used for public 

 19 service, a safety service to the general public. They're 

 20 used only seasonally and part time. So we would 

 21 appreciate that consideration. 

 22 CHAIRPERSON NICHOLS: Thank you. 

 23 Doug Van Allen, followed by James Thomas and Karl 

 24 Lany. 

 25 MR. Van ALLEN: Good morning. My name is Doug 
 47 

 1 Van Allen with BJ Services Company. 

 2 BJ supports all the changes that will help 

 3 relieve extra expenses on California businesses during 

 4 these hard times. 

 5 In 1997, BJ had 123 Tier 0 engines registered in 

 6 the PERP Program. As of December of '09, we've replaced 

 7 84 of the Tier 0 engines. That was 42,800 horsepower at 

 8 an actual cost of over $25 million to BJ. 

 9 On December 31st, '09, BJ still had 39 Tier 0 

 10 engines, totaling 22.5 thousand horsepower. Replacement 

 11 costs for those 39 engines would be $3.9 million according 

 12 to CARB's estimation of $175 per horsepower. So they're 

 13 right now out of business. 

 14 January '09, we had lay to off 30 percent of our 

 15 California employees due to the downturn in business. 

 16 This was our first layoff since 1986 for California 

 17 employees. 

 18 Since '08, we have reduced our on-highway truck 

 19 fleet by 15 percent. 

 20 Since '08, we've reduced our diesel engine 

 21 powered pumps by 31 percent operating in California, and 

 22 our sales of our pressure pumping services has decreased 

 23 around 30 percent as well. 

 24 Several of the air districts want to make changes 

 25 allowing Tier 0 engines to be permitted for future use. 
 48 

 1 If this recommended change is made, it must be allowed for 

 2 all businesses, not just small businesses, in order to 

 3 prevent creating a larger competitive disadvantage than 

 4 we've already had. 

 5 And if this recommended change is made, BJ has 

 6 22.5 thousand horsepower engine Tier 0s we'd like to 

 7 continue to operate in California. 

 8 Thank you. 

 9 CHAIRPERSON NICHOLS: Okay. Thank you. 

 10 James Thomas. 

 11 MR. THOMAS: I'm James Thomas with Nabors Well 

 12 Services. 

 13 Our company supports some of the proposals of the 

 14 amendments today. 

 15 We are greatly happy or greatly jubilated with 

 16 the reducing of the annual reports and the daily 

 17 recordkeeping. For the past, less than 20 percent of the 

 18 fleets filed the annual reports with CARB. And with that 

 19 data going in, no one has ever requested to look at that 

 20 data. So we're glad to see the red tape leave. 

 21 On-highway engines being allowed back into PERP, 

 22 we support that. But last summer, we received a 

 23 notification stating that our engines would have to be 

 24 replaced by the end of the year. In the cost analysis, it 

 25 talks about federal fleets and that they will be able to 
 49 

 1 save $510,000. Our company spent that money to replace 

 2 our five engines that were not going to be allowed. 

 3 Now, here today, we're talking about Tier 0 

 4 engines and allowing them to operate. In this repowering 

 5 process, we removed two Tier 0 -- two Tier 2 on-road 

 6 engines, which were very clean. 

 7 So our suggestion is in the future when you 

 8 decide to make some changes that you start sooner so all 

 9 companies can benefit from this proposal. 

 10 We support the relief for small fleets, but we 

 11 believe that if you're going to give it to small fleets 

 12 that you ought to give it to large fleets as well. 

 13 The last we'd like to talk about is the 

 14 competitive disadvantage that PERP regulations has created 

 15 on complying companies through modification, amnesty, lack 

 16 of inspection, for allowing companies to opt out of the 

 17 program and operate. 

 18 The comments of two of the air districts 

 19 acknowledged that these people do exist. And for 

 20 regulations to be fair for companies that are spending 

 21 large amounts of money, like my company that spent $14.8 

 22 million, we must make sure that we create a level playing 

 23 field for all affected people. 

 24 And we hope and pray that you will make sure that 

 25 the companies that do not get -- the engines that don't 
 50 

 1 get to be extended are inspected and make sure they 

 2 comply. 

 3 Thank you. 

 4 CHAIRPERSON NICHOLS: Thank you for your 

 5 testimony. 

 6 Karl Lany, followed by William Davis and Mike 

 7 Mortensson. 

 8 MR. LANY: Good morning. I'm Karl Lany with SCEC 

 9 Air Quality Specialists. I'm here on behalf of the 

 10 Caterpillar rental operations in California and 

 11 neighboring states who have approximately 1700 engines in 

 12 the PERP program. We've been very committed to this 

 13 program, have replaced our fleets, have very, very modern 

 14 fleets. 

 15 My comments reflect a lot of the comments you've 

 16 already heard today, specifically as it relates to 

 17 recordkeeping and reporting. I want to make sure it's 

 18 understood that while recordkeeping and reporting may have 

 19 been streamlined for owner/operator fleets through these 

 20 amendments, the proposed amendments will make 

 21 recordkeeping and reporting more onerous for rental 

 22 fleets. And we think it reflects a disconnect in 

 23 thinking, maybe something that's less than full awareness 

 24 of the intricacies of the rental transaction. 

 25 Specifically, in 2458(b), the inclusion of a monthly 
 51 

 1 log-in entry as to the specific location of the engine is 

 2 very, very problematic, primarily because it's something 

 3 that's enforced upon the owner of the engine and not the 

 4 operator of the engine. 

 5 As previously stated by the ARA representative, 

 6 we don't have that kind of control. We don't have the 

 7 ability to validate that kind of data. You may think if 

 8 CARB is going to have this type of restriction or 

 9 requirement, we need to recognize who is responsible for 

 10 which compliance actions, owners versus operators. And we 

 11 would ask that that provision be withheld until we can 

 12 have more communication with CARB and CAPCOA. 

 13 Also, CARB is proposing that certified engines be 

 14 removed from annual reporting requirements for 

 15 owner-operated fleets. But rental fleets and actual 

 16 essential public service fleets do not enjoy that same 

 17 luxury, and we would like to see that more evenly applied. 

 18 Finally, we do thank CARB for several of the 

 19 other provisions that are in the amendments very much so, 

 20 one of which is their willingness to provide registration 

 21 electronically. It's very important that we get engines 

 22 into the field and dispatched as soon as possible. That's 

 23 very welcome. 

 24 I would like to see additional language that 

 25 clarifies that for a limited amount of time we can operate 
 52 

 1 without the placards and labels, because those are going 

 2 to follow through the mail. 

 3 CHAIRPERSON NICHOLS: Thank you. Good comments. 

 4 William Davis, and then Mike Mortensson and 

 5 Arthur Fulton. 

 6 MR. DAVIS: Is there a button? We're in 

 7 business. 

 8 Good morning, Madam Chairman, members of the 

 9 Board. I'm William E. Davis, Executive Vice President of 

 10 the Southern California Contractors Association and Board 

 11 member with the Construction Air Quality Coalition. 

 12 But this morning, I'm here to discuss the idea of 

 13 William of Ockham, a 14th century -- 

 14 CHAIRPERSON NICHOLS: Bill, we'll let you 

 15 restart. This is a reset. 

 16 MR. DAVIS: Thank you. 

 17 William Davis with the Southern California 

 18 Contractors Association and CIAQC. 

 19 This morning I'm here to discuss the ideas of 

 20 another William however, William of Ockham, a 14th century 

 21 Franciscan friar and logician. The founder of Williams 

 22 Order of Saint Francis of the CC is the patron and saint 

 23 of the environment and environmentalist. I've actually 

 24 thought of bringing you all medallions for Saint Francis 

 25 just in case you might need them. 
 53 

 1 William of Ockham was a leading thinker in the 

 2 scholastic movement, which was a very important period in 

 3 intellectual life, and made it his life goal to strive for 

 4 simplification, a very Franciscan precept, especially when 

 5 church bureaucracies debated in those days over topics 

 6 such as how many angels can dance on the head of a pin. 

 7 When William of Ockham was man of many parts, he 

 8 is in our day associated with the principle known as 

 9 Ockham's razor, a philosophy he used to cut through 

 10 complexity and to get at the heart of the matter before 

 11 him. 

 12 In the 1330s, William expressed the idea -- and 

 13 I'm not going to butcher the Latin, but in the prepared 

 14 remarks you have it -- and you, Dr. Balmes, can read it 

 15 and several others. Entities must not be multiplied 

 16 beyond necessity. The way we say that today is that the 

 17 simplest explanation or strategy tends to be the best one. 

 18 In the case before you, we believe the staff 

 19 proposal unnecessarily complicates the issue of what to do 

 20 about Tier 0 portable engines. This staff approach 

 21 harkens back to the idea of angels dancing on the heads of 

 22 pins. 

 23 The simplest thing to do would be to extend the 

 24 operation of all registered Tier 0 equipment for a 

 25 one-year period. This simple thing would have virtually 
 54 

 1 no effect on emissions. 

 2 And, Dr. Telles, as your staff estimates, there's 

 3 no more than 4300 of these machines in the state. The 

 4 construction industry, which owns most of them, has 

 5 declined so dramatically over the last five years it's 

 6 essentially operating at about 50 percent of where it was 

 7 when this regulation was last discussed. So only half of 

 8 these machines would be operating at best. 

 9 Your cost estimates -- and I'm going to take just 

 10 a second to talk about this. At $66 million, our industry 

 11 will actually receive far greater cost savings just from 

 12 the elimination of the recordkeeping requirements that are 

 13 proposed. We do support that. 

 14 We had one company up here a moment ago that had 

 15 a cost of almost $30 million all on their own. We think 

 16 the cost estimates on these again are underestimated by a 

 17 factor of four or five. 

 18 Finally, when CAPCOA and CARB get together to 

 19 discuss their request, our industry would like a place at 

 20 that table. Since we're the regulated body for most of 

 21 this, we think we have something to contribute to the 

 22 discussion. 

 23 Thank you all very much. 

 24 CHAIRPERSON NICHOLS: Thank you. 

 25 I really am a sucker for anybody that quotes 
 55 

 1 Latin, especially medieval Latin. I started college as a 

 2 classics major. Appreciate your comments. 

 3 MR. DAVIS: Point of personal question. 

 4 Dr. Balmes is one of the nation's recognized 

 5 experts on the health effects of ozone. And since the EPA 

 6 has come out with these new recommendations, I was 

 7 wondering if it would be possible to contact you about 

 8 getting some information on that so our industry can 

 9 formulate a position. 

 10 BOARD MEMBER BALMES: You can contact me. 

 11 MR. DAVIS: Thank you. 

 12 BOARD MEMBER BALMES: The Board secretary, 

 13 Ms. Fraizer, always seems to be able to contact Board 

 14 members. 

 15 Mike Mortensson. 

 16 MR. MORTENSSON: Good morning, Chairman Nichols 

 17 and members of the Board. I'm Mike Mortensson, the 

 18 Executive Director of the California Groundwater 

 19 Association, commonly known as CGA. 

 20 CGA represents water well drilling contractors, 

 21 pump installing contractors and firms throughout the 

 22 state. The groundwater industry is not large in numbers, 

 23 but its functions are critical to the state's well-being. 

 24 And our industry is subject to multiple CARB rules. 

 25 We ask that the Board approve the proposed 
 56 

 1 amendments that will place two-engine water well drilling 

 2 rigs similar to the cranes in the off-road rule and to 

 3 allow additional compliance time for Tier 0 engines. Your 

 4 approval will prevent the loss of what we estimate to be a 

 5 third of the state's water well drilling rigs and give our 

 6 many small business owners in the industry time to comply 

 7 with the regulations in these hard economic times. 

 8 We have worked with CARB staff in the last year 

 9 on these matters, and we look forward to working with them 

 10 in the future to help our members improve air quality 

 11 while ensuring the continued reliability of the 

 12 groundwater industry to meet the water needs of all 

 13 Californians. 

 14 Thank you. 

 15 CHAIRPERSON NICHOLS: Thank you. 

 16 BOARD MEMBER BERG: Chairman Nichols, could I 

 17 just ask a question of the staff? 

 18 I do have on my list the time frame for bringing 

 19 these regs into compliance on the off-road rule, given the 

 20 fact that the off-road rule is in effect right now for 

 21 large companies and what type of additional time are we 

 22 looking at? 

 23 AIR RESOURCES ENGINEER GORMLEY: Well, Ms. Berg, 

 24 you know, there's three scenarios with the compliance 

 25 dates we're expecting for these water well drillings rigs. 
 57 

 1 The majority of these we're expecting to be small and 

 2 medium fleets when they enter into DOORS. So their 

 3 compliance dates are the 2013 and 2015 respectively for 

 4 medium and small. 

 5 Then you have a scenario of large fleets. If one 

 6 of these existing small to medium fleets becomes large, 

 7 then the off-road regulations provide them an additional 

 8 two years from the next compliance date to come into 

 9 compliance if they increase in size. So those fleets that 

 10 increase to large will get until March of 2013 as well. 

 11 We have the scenario of an existing large fleet 

 12 that it was already large in the off-road and they add 

 13 some water well drilling rigs. What will happen is their 

 14 compliance date will still be March 1st of 2010, but the 

 15 water well drilling rigs won't be part of that compliance 

 16 until the next year, which is March 1, 2011. 

 17 BOARD MEMBER BERG: And that's for registering 

 18 for the DOORS? 

 19 AIR RESOURCES ENGINEER GORMLEY: Yes, for the 

 20 off-road compliance. 

 21 BOARD MEMBER BERG: Isn't there some requirements 

 22 on 8 percent NOx and 20 percent PM, if my memory serves me 

 23 correctly? 

 24 AIR RESOURCES ENGINEER GORMLEY: No. The 

 25 compliance dates I was speaking of was for those 
 58 

 1 compliance emissions rates, the 8 percent NOx. We 

 2 actually extended the reporting date for all water well 

 3 drilling rigs until August 1st of this year. So then, you 

 4 know, the next year's compliance date would be in effect 

 5 for the existing large fleets, which is March 1st of 2011. 

 6 BOARD MEMBER BERG: So they would, in fact, have 

 7 a one-year delay and then there isn't a catch up? There 

 8 isn't a double down, so to speak? 

 9 AIR RESOURCES ENGINEER GORMLEY: Right. 

 10 BOARD MEMBER BERG: Is that correct? 

 11 AIR RESOURCES ENGINEER GORMLEY: For existing 

 12 large fleets, if they're adding in water well drilling 

 13 rigs, they get until next year to comply with those. 

 14 BOARD MEMBER BERG: Thank you. 

 15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Let me 

 16 add one other thing. For the larger fleets when they get 

 17 put in with the off-road rule, there's a longer phase-in 

 18 for a replacement of engines. So they're able to average 

 19 things out. So if these are really tough to comply with, 

 20 you can do other ones first, which buys you more time. 

 21 There's a lot more flexibility but having it in that 

 22 bigger pool for the larger fleets. 

 23 CHAIRPERSON NICHOLS: All right. Thank you. 

 24 Is Arthur Fulton here? 

 25 MR. FULTON: I'm Arthur Fulton. I'm a well 
 59 

 1 drilling contractor. I'm the owner of Diamond Well 

 2 Drilling Company. 

 3 In the beginning of 2008, I employed 30 people. 

 4 Right now, I employ 15. 

 5 Half of my fleet, four rigs, has been taken out 

 6 of service as a result of the portable equipment ATCM and 

 7 the compliance date of January 1, 2010. 

 8 I'm speaking in support of these amendments. 

 9 They'll help me a great deal. And I'd like to explain 

 10 why. I'd like to buy new drill rigs. I'd like to buy two 

 11 new higher tiered engine drill rigs to replace the drill 

 12 rigs that I have that are decommissioned that have Tier 0 

 13 engines. The rigs cost a little bit south of a million 

 14 dollars a piece. And I can't do that now. I'm hoping 

 15 that when business picks up that I can put these rigs back 

 16 into service and make some money and buy the new drill 

 17 rigs. If I can't do that, I'll go out of business and the 

 18 15 jobs that I lost will be compounded with the 15 jobs 

 19 that I still provide. And, therefore, I would encourage 

 20 you to pass these amendments. 

 21 I do have one question though. And it was said 

 22 today by Mr. Gormley, and I am a little bit confused about 

 23 where the jurisdiction is. It's my understanding the 

 24 off-road rule is administered by the state in general. 

 25 But you did mention that the old portable equipment 
 60 

 1 engines would still be administered and enforced by the 

 2 local districts. 

 3 And I'll take my answer in the seat. 

 4 CHAIRPERSON NICHOLS: Thank you. Do you want to 

 5 add a comment at this point about how the system actually 

 6 works? 

 7 AIR RESOURCES ENGINEER GORMLEY: Sure. I'll 

 8 expand on that a little bit. 

 9 We are proposing to move both engines and water 

 10 well drilling into the off-road regulation, which means 

 11 their emission control requirements for those two engines 

 12 are going to come from off-road reg. They're not going to 

 13 come from the on-highway truck rule or the portable ATCM 

 14 any longer. 

 15 However, the deck engine still meets the 

 16 definition of portable. So, therefore, the districts then 

 17 can still require permit for it. And so to satisfy that 

 18 permit requirement, they still have the option to come 

 19 into PERP if they want to or permit with the district. 

 20 But the emission control requirements will be set by the 

 21 off-road regulation. 

 22 CHAIRPERSON NICHOLS: Thanks. 

 23 MR. FULTON: Are you saying we'll have the choice 

 24 of whether to be in the state or with the local? 

 25 AIR RESOURCES ENGINEER GORMLEY: For the permit, 
 61 

 1 yes. 

 2 BOARD MEMBER BERG: And that means you do have to 

 3 register with a PERP in order to be with the state. 

 4 MR. FULTON: Yes, ma'am. 

 5 On those two rigs, I'm currently registered with 

 6 my district, because frankly I missed the deadline. I 

 7 woke up in 2006 on those two rigs, and I was able to 

 8 permit with the district, but not with the state. I'd 

 9 like to be able to permit with the state. Under the new 

 10 rule, would I be able to do that? 

 11 BOARD MEMBER BERG: Staff? 

 12 AIR RESOURCES ENGINEER GORMLEY: Yes. Once these 

 13 amendments become effective, he can apply to register the 

 14 deck engine with the PERP. And both engines will be 

 15 registered into DOORS. 

 16 BOARD MEMBER BERG: Thank you very much. 

 17 CHAIRPERSON NICHOLS: That was interesting and 

 18 useful clarification. 

 19 Michael Lewis. 

 20 MR. LEWIS: Good morning, Madam Chairman and 

 21 members of the Board. 

 22 I'm Mike Lewis, Senior Vice President of the 

 23 Construction Industry Air Quality Coalition. And we are 

 24 the organization that sponsored the legislation that 

 25 created the PERP program. You can either thank us or 
 62 

 1 curse us. 

 2 But we foresaw the problem that was pending at 

 3 the time with local districts with a myriad of rules and 

 4 requirements and fees and reporting for equipment that was 

 5 moving around the state in a fashion where a piece of 

 6 equipment could be in three different districts in three 

 7 different weeks. 

 8 The program has been very successful in 

 9 minimizing fees and providing an understandable and 

 10 uniform set of rules for portable equipment in California. 

 11 I would like to ask that you consider option two 

 12 in your staff report which would grant relief to all 

 13 companies with portable engines, not just small companies. 

 14 Every company in California, every construction company 

 15 certainly, is suffering equally in this economy. And most 

 16 of the equipment in this program is employed in 

 17 construction-related activities. 

 18 And most of you know by now that unemployment and 

 19 therefore emission reductions in construction industry is 

 20 pushing about 40 percent and growing still. 

 21 Emissions from this equipment is down 

 22 considerably. And I think granting relief across the 

 23 board is the appropriate way to deal with the issue that 

 24 you're trying to accommodate by granting some relief for 

 25 these Tier 0 engines. 
 63 

 1 I'd also like to ask that you take a second look 

 2 at the monthly reporting requirements for the rental 

 3 companies. The purpose of that report is to get at 

 4 equipment that stays in one place for 12 months or longer. 

 5 Having a company that has hundreds of pieces of equipment 

 6 out on rental, and they have to try to track it, 

 7 especially some of this equipment is second and third hand 

 8 rental, is almost impossible. If what you want is the 

 9 equipment that's going to stay in one place for 12 months 

 10 or longer, you can eliminate about 85 percent of the 

 11 reporting by just focusing on contracts that are 12 months 

 12 long or contracts that get extended to 12 months or longer 

 13 and then you know where that equipment is. 

 14 Finally, I'd like to ask, since you're going to 

 15 be extending this deadline and you have recently provided 

 16 some relief on the off-road rule and you're going to be 

 17 providing some on the on-road rule, and I wouldn't be 

 18 surprised if we're back here in 12 months doing this 

 19 again, that you look at the cumulative effect of these 

 20 rules on the industry. 

 21 As we've said before, companies are struggling to 

 22 comply with just one rule, let alone three. Most 

 23 construction companies have all three kinds of equipment: 

 24 Off-road, on-road, and portable. The deadlines for 

 25 compliance match almost identically for all of them. And 
 64 

 1 it makes it very difficult for a contractor to decide what 

 2 am I going to do when he has to deal with all three pieces 

 3 of equipment, rather than some emissions bubble which 

 4 might be a more effective way for them to do it by 

 5 aggregating their emissions and achieving some percentage 

 6 reduction across the board, but let them decide how 

 7 they're going to do it with what changes and modifications 

 8 to their fleet. 

 9 Thank you. 

 10 CHAIRPERSON NICHOLS: Thank you, Mr. Lewis. 

 11 That's an intriguing idea. I said you were the 

 12 last witness, but that was not true. I received two 

 13 additional cards. This is the end, however. We're not 

 14 going to take any more witnesses on this. So I've got 

 15 Fitts Weiss and Scott Watson; one in support, one oppose. 

 16 You're Mr. Watson? 

 17 MR. WATSON: Yes, I'm Mr. Watson. 

 18 I'm here today as simply an individual. I have 

 19 been on opposing sides of different regulations, primarily 

 20 with the ATCM regulation with formaldehyde and composite 

 21 wood products. And I'm here to ask the Board to help us, 

 22 the public, police this process. Because currently in the 

 23 Scientific Review Panel, it's my understanding that there 

 24 are six members of the Scientific Review Panel that are 

 25 not properly seated. And I think that it would be 
 65 

 1 important for us to follow those rules. There are nine 

 2 members. There are exhaustive rules on how these people 

 3 are appointed. 

 4 And the problem that I have is that there are 

 5 supposed to be three nominees for each of the nine 

 6 positions. And these are your own rules. I can go 

 7 through the code if you wanted me to, but I think it's 

 8 going to be a long and boring -- 

 9 CHAIRPERSON NICHOLS: Actually, Mr. Watson your 

 10 comments are appropriate, but not on this item. They are 

 11 not relevant to the item that we're considering here. 

 12 But for your information, we have requested 

 13 nominees from the University of California. I'm familiar 

 14 with the regulatory system here. And I just received a 

 15 letter from the President of the University of California 

 16 quite recently. And I think the process is, in fact, 

 17 underway that you're hoping for. But we can communicate 

 18 with you later on that. 

 19 MR. WATSON: Okay. And that's terrific. 

 20 I suppose I should just summarize by saying that 

 21 as a Board we have to live with the regulations that you 

 22 folks pass. We ask you to pass those with the rules that 

 23 are already provided. Otherwise, you're holding us to a 

 24 higher standard than we can hold you. 

 25 CHAIRPERSON NICHOLS: I appreciate your comment. 
 66 

 1 Thank you. 

 2 Mr. Weiss, I hope your comment is on the rule 

 3 we're considering here. 

 4 MR. WEISS: On the proposed amendment, yes. It's 

 5 in support with one -- basically in support of also 

 6 including for the one-time compliance agreements that were 

 7 signed with local air districts and I think the gentleman 

 8 was referring to in terms of the fourth amnesty. We're 

 9 not exactly sure, but when the decision was made -- I 

 10 represent Berkeley Concrete Pumping. And basically 

 11 similar to the water well rigs that are very extensive 

 12 large pieces of equipment, when the one-time compliance 

 13 agreements were made, no one really could foresee the 

 14 economic crisis that was going to be occurring. 

 15 And that was one of the options that was given by 

 16 the ARB and the air quality local districts. And then to 

 17 now exempt those one-time compliance agreements from 

 18 getting into the proposed extension we feel is an unfair 

 19 singling out of what at the time was considered an equal 

 20 option to joining the PERP program or getting permitted by 

 21 these local air districts. 

 22 CHAIRPERSON NICHOLS: I think understand the 

 23 point, but I'm not sure. Why do you feel you're being 

 24 singled out? 

 25 MR. WEISS: We're not sure the -- we've been told 
 67 

 1 by our local air district that the one-time compliance 

 2 agreements will not be included in the extension. 

 3 CHAIRPERSON NICHOLS: Oh, I see. 

 4 MR. WEISS: And we're not sure exactly why that 

 5 is. Because it's not exactly a permit with the local air 

 6 districts. 

 7 CHAIRPERSON NICHOLS: I'm going to ask Mr. 

 8 Fletcher to respond. 

 9 STATIONARY SOURCE DIVISION CHIEF FLETCHER: If I 

 10 understand, the issue that anybody that came into the 

 11 program as a result of the amnesty he's saying would not 

 12 be eligible for this extension, that is not our 

 13 interpretation. If they are registered in the program 

 14 right now through whatever means, they have to decide 

 15 what -- 

 16 CHAIRPERSON NICHOLS: You're not going to single 

 17 them out because they came in through this other door, 

 18 if you are registered. 

 19 STATIONARY SOURCE DIVISION CHIEF FLETCHER: 

 20 Right. If you were registered. 

 21 MR. WEISS: They're called the compliance 

 22 agreements signed with local air districts. 

 23 STATIONARY SOURCE DIVISION CHIEF FLETCHER: If 

 24 they're under an enforcement action, then it may be a 

 25 different situation and we'd have to evaluate it. We'd be 
 68 

 1 happy to talk to him after. 

 2 CHAIRPERSON NICHOLS: Why don't we have this 

 3 conversation off line if you don't mine. 

 4 But as a general rule, if you're registered, 

 5 you're registered. No matter how. Okay. Thanks. 

 6 That does conclude the list of witnesses on this 

 7 item. I'd like to take it back to staff if you have any 

 8 further comments at this point. 

 9 EXECUTIVE OFFICER GOLDSTENE: We're prepared to 

 10 do that. 

 11 CHAIRPERSON NICHOLS: Okay. 

 12 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I 

 13 just have a few comments that I'll walk through, some 

 14 common themes that came up. 

 15 From the rental industry, the issue of the 

 16 monthly provision. There are two requirements that apply 

 17 to rental fleets. One of them is for equipment units and 

 18 the other one is for engines. And they do have different 

 19 requirements. And we've modified both of those provisions 

 20 to essentially relax requirements in both cases. 

 21 I think the one issue that came up regarding the 

 22 fact that they have to do this annual report for engines, 

 23 even though we exempted other engines, the comment was 

 24 made that both rental engines and the public utility 

 25 engines are still subject to the annual report. 
 69 

 1 There is a case to be made that perhaps that is 

 2 not necessary, and we did look at that in the context. 

 3 The reason we didn't make the changes is that rental units 

 4 are more complicated than typically other business. We 

 5 did relax the requirement. The original requirement 

 6 required rental companies to identify the location of 

 7 every rental. We've struck that requirement and added the 

 8 once-a-month again to reflect the fact that in some cases 

 9 the rental industry is renting engines to people that keep 

 10 them in the same place for long periods of time. So we 

 11 thought once a month was not an undue burden to just check 

 12 in periodically that says where is the engine and where is 

 13 it located. 

 14 There was an issue about who is responsible for 

 15 doing that, because the owners don't really know. And we 

 16 believe in both for rental units and rental engines that 

 17 the operators can be brought into being responsible for 

 18 that as a condition of the contract itself. So they can 

 19 simply require the operators to report that information to 

 20 them, particularly for longer term rentals. 

 21 So the second issue or one of the issues that 

 22 came up was on snow blowers. This is a new issue to us, 

 23 but it certainly is consistent with what we have been 

 24 doing with other two-engine type units. 

 25 The one caveat that we would want to make is to 
 70 

 1 ensure that it is cost prohibitive to make these changes. 

 2 We've done it for street sweepers. We've done it for 

 3 cranes. We're proposing to do it for water well drilling 

 4 rigs. There's no reason why we wouldn't extend the same 

 5 benefit. And we can do that as a 15-day change to this 

 6 regulation if we find that, in fact, there is a 

 7 cost-prohibitive element to the replacement of the 

 8 portable engine on snow machines. 

 9 CHAIRPERSON NICHOLS: Board members? Yes, Dr. 

 10 Balmes, you had a question? 

 11 BOARD MEMBER BALMES: This is a question about 

 12 the reporting data. I took it from the one witness that 

 13 those data weren't actually even asked for from his 

 14 company. I mean, I don't think we should be collecting 

 15 data unless we're making use of it. So could you 

 16 enlighten me about that? 

 17 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I 

 18 agree. That's why we did drop the annual requirements for 

 19 many of the certified engines. 

 20 We have focused in the last two or three years on 

 21 bringing engines into the program. And so the districts 

 22 have been spending a lot of resources and trying to find 

 23 engines and get them into the program. If you recall, 

 24 several years ago, we adopted amendments to the regs that 

 25 set up an amnesty period with a back schedule of fees 
 71 

 1 associated with it to level that playing field. And over 

 2 the last three years, we've brought in an average of 800 

 3 engines a year. 

 4 So I think we're now turning the attention to 

 5 sort of the compliance with the people that have 

 6 registered in the program. But I think a lot of the 

 7 districts' efforts to date have been focused on that. 

 8 But we are dropping some of that recordkeeping 

 9 requirements. We have relaxed a lot of the requirements, 

 10 and in recognition of that, we are not using it. But the 

 11 reports we were not using. Even though we thought it 

 12 might be a useful piece of information, we were getting 

 13 very few of them and not using them. 

 14 So I think the question here is whether or not we 

 15 drop that annual report requirement for rental companies 

 16 and for the public utilities. That's really the decision 

 17 that needs to be made here. But in general all of the 

 18 reporting has been relaxed. 

 19 CHAIRPERSON NICHOLS: Ms. Berg. 

 20 BOARD MEMBER BERG: I'm not hearing from staff 

 21 though how they're going to use that information. Is the 

 22 information important to you? And if so, how for the 

 23 rental and the utilities on the annual report? 

 24 STATIONARY SOURCE DIVISION CHIEF FLETCHER: It's 

 25 the check-in to ensure that the districts have some 
 72 

 1 information about where these engines are operating within 

 2 their districts. That then provides them with a database 

 3 that they can go out and can check locations. They know 

 4 where to go. A lot of times we don't know where these 

 5 engines are being used, so it's really difficult to track 

 6 in and see. But if we get sort of common patterns on 

 7 where things are operating, they're in a better position 

 8 to go out and enforce on site than they would otherwise 

 9 be. 

 10 CHAIRPERSON NICHOLS: Having watched this evolve 

 11 a little bit, it seems to me the problem here is this is a 

 12 rule that really was not being enforced at all for a long 

 13 time. And we're gradually starting to clean it up and 

 14 make it enforceable. But I guess the staff is trying to 

 15 figure out what the best tool is to get the information. 

 16 BOARD MEMBER BERG: If we're getting back to the 

 17 monthly reporting, if owners have a responsibility to 

 18 report the equipment they own on a monthly basis, why 

 19 would we not include they also would report whatever 

 20 rental equipment they have? They're already submitting 

 21 the report. 

 22 STATIONARY SOURCE DIVISION CHIEF FLETCHER: It's 

 23 just the way that the rule is structured that there are 

 24 requirements for owners or operators of engines and then 

 25 there's separate sections for owner or operator of rental 
 73 

 1 equipment. So because rental equipment operations are 

 2 different than other types of operations is the equipment 

 3 is going out; sometimes it's going out to third party 

 4 rentals. Then we felt there was a necessity to have a 

 5 little different reporting requirement than what's in 

 6 place for normally registered engines. 

 7 BOARD MEMBER BERG: Is it true that what we're 

 8 trying to get at is long-term placement? 

 9 STATIONARY SOURCE DIVISION CHIEF FLETCHER: In 

 10 general, yes, that's true for rental equipment. 

 11 BOARD MEMBER BERG: Why aren't we having them 

 12 report their long-term equipment? 

 13 STATIONARY SOURCE DIVISION CHIEF FLETCHER: What 

 14 we were concerned about is -- and we can do that. We can 

 15 drop that requirement and restructure it in that way. 

 16 What we were concerned about is that as sort of a 

 17 condition of good business, we thought a check-in 

 18 periodically would be useful to ensure that they had an 

 19 indication of where that equipment was operating and to 

 20 provide service to their customers that if they were 

 21 approaching the 12-month limit, they would lose their 

 22 ability to be in the portable equipment program and would 

 23 need to seek a permit from the district. 

 24 BOARD MEMBER BERG: We probably wouldn't need to 

 25 do the short-term. Like anything under six months, we 
 74 

 1 would know that that would not apply. So we could 

 2 absolutely exempt some sort of time frame to lessen their 

 3 reporting burden. 

 4 STATIONARY SOURCE DIVISION CHIEF FLETCHER: We 

 5 could work with the districts to restructure something 

 6 along that line. I'd want to make sure that we got 

 7 district input on this, because they're the ones that are 

 8 doing the primary enforcement. 

 9 BOARD MEMBER BERG: I do think we do need to put 

 10 in a 15-day change, however, that we need to come up with 

 11 some mechanism that lowers the burden of the reporting for 

 12 things that do not meet the goal. 

 13 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Okay. 

 14 We'd be happy to do that. 

 15 CHAIRPERSON NICHOLS: We can certainly add that 

 16 to the list of things to put in the discussion when we get 

 17 to the actual voting on the regulation. 

 18 I wanted to actually ask a slightly different 

 19 question, which responds to Mike Lewis' comment. And this 

 20 may not be the time to deal with that. But it is true 

 21 that for the construction industry they are dealing with 

 22 different pieces of equipment that are being regulated 

 23 under different rules, all of which we're in the process 

 24 of considering. And I find myself being quite attracted 

 25 to the idea at least that -- and I realize this probably 
 75 

 1 only works for larger companies that a company which is 

 2 using a bunch of these different kinds of equipment could 

 3 take on the responsibility for managing the emissions 

 4 reduction across the whole company. 

 5 So it is a bubble concept, and we've used it 

 6 effectively in the past for stationary sources who never 

 7 tried to do it for mobile sources and obviously it's hard 

 8 to do. But in the case of the construction industry, they 

 9 might actually afford a unique opportunity to do something 

 10 like this. 

 11 I'd like to at least raise the question and see 

 12 if at least before we get to the next one of these 

 13 deadlines if the staff could take a look at the potential 

 14 for doing something like this. I really think it bears 

 15 further investigation. 

 16 STATIONARY SOURCE DIVISION CHIEF FLETCHER: For 

 17 example, the portable engine rule does go into the fleet 

 18 average mode in the 2013 time frame -- 

 19 CHAIRPERSON NICHOLS: But only for the portable 

 20 engines. 

 21 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Only 

 22 for the portable engines. 

 23 CHAIRPERSON NICHOLS: So we don't allow people to 

 24 trade across different types of equipment. I don't know 

 25 how advantageous it would be for many people in the 
 76 

 1 construction industry. But if they wanted to try it to go 

 2 under a cap, it would seem like it could. And there's all 

 3 the usual questions about reporting and enforcement and 

 4 all of that. It would be worth looking at. 

 5 EXECUTIVE OFFICER GOLDSTENE: We'll look at it. 

 6 CHAIRPERSON NICHOLS: Thank you. 

 7 Other comments? Questions? 

 8 Supervisor Roberts. 

 9 BOARD MEMBER ROBERTS: I wanted to hear the 

 10 response to the other part, the exempting all of the 

 11 companies but the same rule -- 

 12 CHAIRPERSON NICHOLS: The size issue. 

 13 BOARD MEMBER ROBERTS: They were saying who's 

 14 most able to pay. Most able to pay, means you still did 

 15 pretty bad. 

 16 And, you know, I don't think there's a 

 17 fundamental understanding of what's going on in the 

 18 construction industry. We're still putting heavy 

 19 requirements on and assuming that most able to pay means 

 20 they're in good shape. They're not. So I thought that 

 21 was a good recommendation. And I'd like to hear what 

 22 the implications are. 

 23 CHAIRPERSON NICHOLS: Emissions and other 

 24 implications, I guess. 

 25 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Well, 
 77 

 1 let me start with the issue of why we selected 25 or fewer 

 2 to begin with. And that was done basically because as we 

 3 were looking at the proposed amendments, we went through a 

 4 number of factors as to why we even decided this was 

 5 appropriate. And as we were going through it and when we 

 6 made the decision that some relief is appropriate, we then 

 7 looked at the companies that are in the program and what 

 8 they have in the way of engines. And we looked at what 

 9 percentage the Tier 0 were in each of those fleets. 

 10 And what we found was for engines -- for 

 11 companies that had 25 or fewer engines, 65 percent of 

 12 their engines were Tier 0. And as you went into larger 

 13 fleets, for example, if you went into let's say a medium 

 14 size fleet, it went down to 45 percent. And when you got 

 15 to larger fleets, it was 25 percent. 

 16 So we were then able to look at those 1200 

 17 companies that had at least one Tier 0 engine and break 

 18 that down in terms of what those companies typically were 

 19 doing and how they would be affected. And when we found 

 20 that 800 of those 1200 companies would be getting one year 

 21 relief completely, that all of their engines -- say, if 

 22 they were a tree trimming company, for example, they might 

 23 have five engines, all of those engines total would be 

 24 less than 500. So 800 out of the 1200 companies we felt 

 25 were completely -- we would get one year relief. 
 78 

 1 When we looked at the larger companies, you were 

 2 looking at companies that had in some cases hundreds and 

 3 hundreds of engines. So these were companies like 

 4 Halliburton and other people in the oil industry that 

 5 hasn't really seen necessarily that decline. So we felt 

 6 that the resources were there to be able to replace those 

 7 engines. And we believe, in fact, that many of those 

 8 companies probably have already. 

 9 So of the 4400 engines that were in the database 

 10 in 2009, we're providing relief for about 2,000 of those 

 11 engines. And then the other 100 companies are owning the 

 12 remainder of the 2400. 

 13 So we didn't want to -- and if you look at the 

 14 sort of the emissions impacts associated with that, you 

 15 know, those 4400 engines represent about -- what did I say 

 16 earlier -- about 40 percent of the total emissions from 

 17 portable engines. And so by our actions, we're retaining 

 18 most of those emission benefits without really affecting 

 19 the overall emission reduction. 

 20 BOARD MEMBER ROBERTS: It sounds very simple, but 

 21 you kind of jump from one extreme to sort of the biggest 

 22 exempt one. I guess I'm wondering when I get up -- I 

 23 don't know how many companies are falling just beyond the 

 24 reach here. 

 25 And these sort of attempts at regulations through 
 79 

 1 financial management in a sense kind of bother me, because 

 2 we're making all sorts of assumptions and drawing the 

 3 lines. And I feel like we ought to have one rule, period. 

 4 And I would be in favor of extending it just in those 

 5 categories in the same way you did at one engine. 

 6 You're saying we're going to capture most of them 

 7 in what we're doing. But there are going to be some that 

 8 are going to fall just outside this boundary, not the 

 9 example that you used. 

 10 I think most of the ones that are very big, not 

 11 only is it not going to make a difference, it's probably 

 12 not going to matter whether there is a rule or not. 

 13 They're going to start to phase those out. I'm more 

 14 concerned about the guys that aren't quite in that 

 15 position. And I'm not sure that drawing the line at 25 or 

 16 fewer is appropriate. 

 17 BOARD MEMBER BERG: The other question I would 

 18 have, on the emissions estimate, is that based on 

 19 pre-recession or post-recession numbers? 

 20 STATIONARY SOURCE DIVISION CHIEF FLETCHER: All 

 21 of the emission estimates are pre-recession numbers. 

 22 BOARD MEMBER BERG: So we could take the 

 23 reduction of business off of this. We wouldn't have 40 

 24 percent today because of the downturn in business? 

 25 STATIONARY SOURCE DIVISION CHIEF FLETCHER: 
 80 

 1 That's correct. 

 2 BOARD MEMBER BERG: Thank you. 

 3 STATIONARY SOURCE DIVISION CHIEF FLETCHER: For 

 4 some of the industries. For some of the industries, they 

 5 haven't seen that sort of downturn. 

 6 BOARD MEMBER BERG: But we heard two compelling 

 7 testimony today from large fleets who have spent a great 

 8 deal of money to bring a large percentage of their fleet 

 9 in compliance, and yet have also gone through layoffs and 

 10 reductions in business. And they do have a portion of 

 11 their equipment remaining. And they would be certainly 

 12 appreciative also of some consideration. 

 13 CHAIRPERSON NICHOLS: I think everyone would 

 14 appreciate the additional opportunity. I think the level 

 15 playing field argument is one that sort of works well for 

 16 me anyway. 

 17 Okay. Other Board comment or questions? 

 18 Dr. Telles. 

 19 BOARD MEMBER TELLES: I'm a little troubled by 

 20 the cost estimates where CARB estimates 66 million and 

 21 some of the speakers here say it's 200 million. 

 22 In front of me, I have a written comment, Comment 

 23 17, where it's estimated to be 290 million. Just kind of 

 24 using simple arithmetic. And so it seems like this may be 

 25 much more costly and more onerous to these industries than 
 81 

 1 what CARB is estimating. 

 2 CHAIRPERSON NICHOLS: Could I interrupt there? 

 3 Because that was the first commenter, Mr. Gaines, who 

 4 really made some very strong statements, kind of off there 

 5 from the perspective of the filter manufacturer. Without 

 6 interrupting your basic issue about cost, he raised a 

 7 whole bunch of challenges to this whole rule approach. 

 8 BOARD MEMBER TELLES: This is his letter. 

 9 CHAIRPERSON NICHOLS: We've got the letter. I'm 

 10 just asking the question if the staff wanted to give a 

 11 broader response when they responded to your point. 

 12 That's all. 

 13 BOARD MEMBER TELLES: Well, is his arithmetic 

 14 wrong? Simple question if you read his letter. And if 

 15 you wanted to look at this letter, it's page 3 halfway 

 16 down. That's one concern. 

 17 The other concern is in this letter they 

 18 addressed the fact that in certain counties, like Butte 

 19 County, 43 percent of the engines are Tier 0. And they're 

 20 wondering why you can't retrofit some of these Tier 0 

 21 engines at a much cheaper price, which would save this 

 22 industry about $200 million according to their estimates. 

 23 I wonder why that's not considered here if this letter is 

 24 accurate. 

 25 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 
 82 

 1 Couple responses on that. 

 2 On the first thing with respect to the cost, we 

 3 would estimate the cost to be at 175 per brake horsepower 

 4 hour, if you go through basically that's looking at what 

 5 information we received in the registration program and 

 6 all that. So we think ours is a good number. 

 7 The other thing I think you need to take into 

 8 consideration when looking at cost, the PERP regulation 

 9 for those registered in it, we told them 13 years ago that 

 10 you need to do this. These engines are at least 15 years 

 11 old, these Tier 0 or older. So while they may cost some 

 12 to replace, you would also assume, as you are a car, that 

 13 they are deprecating over time. 

 14 BOARD MEMBER TELLES: Let me just comment that's 

 15 the number they used to calculate this is $175. 

 16 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Dr. 

 17 Telles, I can answer the question. 

 18 The problem is simply with his math. And he did 

 19 not have the same access to the information, nor did he 

 20 ask us what information that we had, nor did he apparently 

 21 read the staff report. Because the estimate that we have 

 22 for the number of portable engines statewide is 4400. 

 23 But what he has done is taken the percentage of 

 24 Tier 0 engines in Butte County and applied that percentage 

 25 through the entire PERP database to get 18,000. So he's 
 83 

 1 overestimated the number of engines by over a factor of 

 2 four. And that represents really the difference in where 

 3 those numbers come from. 

 4 BOARD MEMBER TELLES: How about the concern about 

 5 the retrofitting the Tier 0 engines? 

 6 STATIONARY SOURCE DIVISION CHIEF FLETCHER: That 

 7 is the issue that Dan was speaking to. And Dan is correct 

 8 in that the retrofit of the Tier 0s is these are very old 

 9 engines. They have very high loading. The vendors have 

 10 really not looked at trying to address those issues 

 11 explicitly because of the age of the engines. 

 12 As you move to the certified engines and you do 

 13 as Mr. Gaines was talking about, which is looking at an 

 14 integrated system where you can reduce the PM and the NOx 

 15 simultaneously and incorporate a diesel filter as part of 

 16 that overall system, then you can systematically reduce 

 17 those emissions. 

 18 So to us, it seemed not a good idea to apply a 

 19 $15,000 piece of equipment to an equipment that may have a 

 20 value of two to $5,000 at this point. So you can do it, 

 21 but it does not simply make a lot of mistakes. 

 22 And Dan may have some other things to add. 

 23 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The 

 24 other thing Mr. Gaines is talking about is portable 

 25 irrigation pumps, and that is actually covered under the 
 84 

 1 stationary ag engine rule. Since the application is 

 2 similar, we tried to lump together both stationary ag 

 3 pumps and portable ag pumps, and they are under the same 

 4 program. 

 5 We have not seen very many verifications at all 

 6 for the Tier 0 engines for a couple reasons. One, they're 

 7 very old. They're very high emitters. And the other 

 8 thing is that we tend to see an awful lot of oil slip with 

 9 respect to those. And that really has caused a 

 10 significant challenge to those things. So there are 

 11 opportunities to qualify those and to use those on 

 12 stationary engines, but we have seen very few applications 

 13 of that in the thing. 

 14 But the issues -- as far as bringing the ag 

 15 engines in, how we establish the stationary portable 

 16 engine program on that, there was a lot of work with the 

 17 Nisei Farmers League and those things on what would be the 

 18 best way to handle those. And that regulation is set up 

 19 particularly along the line of looking at long-term 

 20 replacement, particularly for the very old engines, as 

 21 compared to the retrofit, because we just simply did not 

 22 have many takers in that technology looking at those Tier 

 23 0 engines. 

 24 CHAIRPERSON NICHOLS: That would seem to make 

 25 sense. Yeah. Thanks. 
 85 

 1 I'm going to close the record at this point since 

 2 we have the staff comments and the testimony and the 

 3 written comments in the record. We can close this record 

 4 and begin the discussion about what we want to do with the 

 5 proposed rule. 

 6 The understanding here then is that we would not 

 7 be receiving any more written or oral comments on this 

 8 item unless and until we deal with the 15-day comment 

 9 period; is that correct? Yes. Okay. 

 10 This is now -- before we move into actual 

 11 discussion on the rule, we need to make sure that we've 

 12 disclosed any ex parte communications that we may have 

 13 received on this. 

 14 I'll start off by saying I didn't receive any. 

 15 Did anyone receive any? 

 16 Supervisor Yeager. 

 17 BOARD MEMBER YEAGER: I met with Bill Gaines of 

 18 Transfer Flow and Glen Toney and Virginia Walker from the 

 19 Jamison Group talking about this item, this regulation, as 

 20 well as the next one as well. 

 21 CHAIRPERSON NICHOLS: Okay. Great. Thanks. 

 22 Anybody else? No. All right. That's that then. 

 23 We can move on to proposal on the regulation. 

 24 Should we -- I think the best process is to make a motion 

 25 and then add any amendments that people want to add to it. 
 86 

 1 Ms. Berg, did you want to move the resolution? 

 2 BOARD MEMBER BERG: I'll so move the resolution. 

 3 CHAIRPERSON NICHOLS: Do we have a second? 

 4 BOARD MEMBER BALMES: I'll second. 

 5 CHAIRPERSON NICHOLS: Okay. Now, let's think 

 6 about any possible changes we'd like to see. 

 7 BOARD MEMBER BERG: Could staff just remind me 

 8 what 15-day changes you're requesting? 

 9 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Yes. 

 10 We're proposing to add snow blowers, presuming they pass 

 11 the test for technical feasibility and cost. We're also 

 12 proposing to work with CAPCOA and the stakeholders to 

 13 address the issue of how to issue a permit in the context 

 14 of an enforcement action. 

 15 CHAIRPERSON NICHOLS: I'm glad you mentioned that 

 16 you would work with the stakeholders as well. That's a 

 17 good idea. 

 18 STATIONARY SOURCE DIVISION CHIEF FLETCHER: And 

 19 then those are the two that we had proposed. 

 20 And then the open questions had to do with 

 21 recordkeeping issues for the rental companies and then the 

 22 issue associated with larger fleets. 

 23 BOARD MEMBER BERG: Just so I understand that the 

 24 non-compliant Tier 0 engine issue would only come into 

 25 play if there was an enforcement action? 
 87 

 1 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Yes. 

 2 BOARD MEMBER BERG: Thank you. 

 3 CHAIRPERSON NICHOLS: Okay. Did you want to make 

 4 any proposed changes then? 

 5 BOARD MEMBER BERG: I would like to add the 

 6 proposed change for staff to work with the stakeholders 

 7 regarding the rental equipment and looking at the fact 

 8 that what we want is to capture data for long-term 

 9 contracts and at what point that gathering that data makes 

 10 sense and doesn't overburden the industry. 

 11 CHAIRPERSON NICHOLS: I think I can say that I 

 12 see general head nodding in the direction of trying to 

 13 further simplify this particular reporting requirement. 

 14 BOARD MEMBER BERG: I don't want to be 

 15 prescriptive, because that isn't my goal. 

 16 CHAIRPERSON NICHOLS: Good. So I think that 

 17 amendment should go in. 

 18 The last issue is really the one that was raised 

 19 by Supervisor Roberts. And that is the question of do we 

 20 want to try to extend this change to the entire industry 

 21 as opposed to singling out for the benefit of the smaller 

 22 companies. 

 23 And this is one of those great philosophical 

 24 dilemmas. I don't think there is a right answer from a 

 25 technical perspective or even an economic theory 
 88 

 1 perspective, although it would help to know more about 

 2 sort of how this industry works in detail probably, 

 3 whether the small companies really compete with the bigger 

 4 companies, and thereby would be getting an advantage that 

 5 would allow them to take business away versus just the 

 6 questions of generic fairness that always is a legitimate 

 7 issue. 

 8 But I think the staff has stated a good case for 

 9 focusing here on smaller businesses as opposed to the fact 

 10 that all businesses obviously are affected by the state of 

 11 the economy. 

 12 I don't know if there's any additional thoughts 

 13 or comments on this. I'm sorry. 

 14 BOARD MEMBER ROBERTS: I clearly support just 

 15 extending this across the board. I think the numbers -- 

 16 while we're capturing most of the numbers, it's not going 

 17 to add a lot of numbers. But I think there are going to 

 18 be some businesses that are going to be impacted by this, 

 19 and I think the relief would make a big difference in 

 20 their operations. For that reason, I would like to extend 

 21 the same rule for all. 

 22 CHAIRPERSON NICHOLS: Yes, sorry. I was pointing 

 23 down to the far end there to the mayor. 

 24 BOARD MEMBER LOVERIDGE: Let me agree with the 

 25 position but ask what is the argument against the premise 
 89 

 1 and recommendation? What is staff arguing against? 

 2 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Well, 

 3 part of the rational was to look at those that had the 

 4 resources or that were the least likely to be able to 

 5 comply. And so when we did the breakdown between the 

 6 small, medium, and large, we felt that we were capturing 

 7 most of those companies that were in the worst position to 

 8 be able to comply with the regulation. 

 9 BOARD MEMBER LOVERIDGE: This didn't include the 

 10 pain that everybody is now -- okay. 

 11 STATIONARY SOURCE DIVISION CHIEF FLETCHER: 

 12 Right. And we thought the other thing is that in part 

 13 because of the downturn in the economy that the larger 

 14 companies had enough engines they would not have to run 

 15 Tier 0 engines. If they didn't have a choice, they 

 16 wouldn't run them. They would run more efficient ones 

 17 anyway. 

 18 And we were looking at sort of the competitive 

 19 advantage/disadvantage issue for those companies that had 

 20 taken actions. We think that they're positioned to comply 

 21 with the regulation now and all this would simply do would 

 22 allow them to bring back in engines that shouldn't be 

 23 running right now anyway. 

 24 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The 

 25 other point is the potential health impact and the 
 90 

 1 emissions associated with Tier 0 engines that have NOx 

 2 emissions that are three to four times the cleaner engines 

 3 and PM emissions more than five times. 

 4 CHAIRPERSON NICHOLS: So we're trying to strike a 

 5 balance here between continuing progress on cleaning up 

 6 the air and allowing for a recognition of the fact that 

 7 there is particular hardships being experienced by this 

 8 sector of the industry as a whole that are at least 

 9 distinct from the whole industry. All right. I think we 

 10 better -- sorry. 

 11 BOARD MEMBER TELLES: In that last comment, you 

 12 mentioned that a company might run their Tier 0s instead 

 13 of their Tier 1s. Is this any economic reason why they 

 14 would do that? 

 15 If you look at the modern size businesses, you're 

 16 talking about 45, 50 percent of those companies have Tier 

 17 0 engines. Why would they deferentially run Tier 0s 

 18 instead of 1, 2, and 3s? 

 19 STATIONARY SOURCE DIVISION CHIEF FLETCHER: They 

 20 would only do it if it was a matter of convenience. A lot 

 21 of the larger companies have engines scattered at over the 

 22 state, whether they're supporting cell towers or whatever. 

 23 BOARD MEMBER TELLES: It's my understanding that 

 24 the newer engines are not only less emissions but more 

 25 fuel efficient. It seems like they would want to use 
 91 

 1 their Tier 1, 2, and 3, I mean, newer motors rather than 

 2 the older motors. And the argument is not too strong. 

 3 And I would kind of support the idea of the whole industry 

 4 wide. 

 5 STATIONARY SOURCE DIVISION CHIEF FLETCHER: You 

 6 would think so, but I think it's a location convenience 

 7 issue. If they have a Tier 0 that's available and they 

 8 don't have to move a Tier 1 as far to get to a location, 

 9 then the economic benefit of running a Tier 1 over Tier 0 

 10 is lost. 

 11 CHAIRPERSON NICHOLS: It's an anecdotal 

 12 observation. I don't think there's any scientific data 

 13 one way or the other on this point. All right. 

 14 Well, I think we have a motion and a second for 

 15 an amendment to extend the rule to the industry as a 

 16 whole. And I think the best thing to do is to just call 

 17 for a vote on the amendment before we take up the main 

 18 motion, unless there's any reason not to do it. 

 19 CHIEF COUNSEL PETER: Just if we do either a roll 

 20 call or hand vote so both the clerk and the court reporter 

 21 knows exactly what the vote was. 

 22 CHAIRPERSON NICHOLS: I was going to ask for 

 23 actually a roll call vote on this item. 

 24 And -- I thought it was you. You didn't 

 25 formally, but I was assuming that you were seconding the 
 92 

 1 motion. Taking it for granted. Okay. 

 2 We're not on the main motion or the rule. We're 

 3 just on the amendment that would extend the rule from 

 4 small businesses to all businesses that are covered by 

 5 this rule. 

 6 Okay. Clerk will please call the roll. 

 7 A yes vote means you want to extend the rule -- 

 8 open up the benefits of the extension to all firms that 

 9 are covered, as opposed to as the staff has made the case 

 10 for why it should be limited to small businesses. 

 11 BOARD CLERK ANDREONI: Dr. Balmes? 

 12 BOARD MEMBER BALMES: Yes. 

 13 BOARD CLERK ANDREONI: Ms. Berg? 

 14 BOARD MEMBER BERG: Yes 

 15 BOARD CLERK ANDREONI: Ms. D'Adamo? 

 16 BOARD MEMBER D'ADAMO: No. 

 17 BOARD CLERK ANDREONI: Ms. Kennard? 

 18 Mayor Loveridge? 

 19 BOARD MEMBER LOVERIDGE: Aye. 

 20 BOARD CLERK ANDREONI: Supervisor Roberts? 

 21 BOARD MEMBER ROBERTS: Yes. 

 22 BOARD CLERK ANDREONI: Professor Sperling? 

 23 BOARD MEMBER SPERLING: Yes. 

 24 BOARD CLERK ANDREONI: Dr. Telles? 

 25 BOARD MEMBER TELLES: Yes. 
 93 

 1 BOARD CLERK ANDREONI: Supervisor Yeager? 

 2 BOARD MEMBER YEAGER: Yes. 

 3 BOARD CLERK ANDREONI: Chairman Nichols? 

 4 CHAIRPERSON NICHOLS: No. 

 5 BOARD CLERK ANDREONI: Yes vote wins. Motion 

 6 passes seven to two without Kennard. 

 7 CHAIRPERSON NICHOLS: I think we can probably 

 8 adopt the Resolution on a voice vote then. So all in 

 9 favor please say aye. 

 10 (Aye) 

 11 CHAIRPERSON NICHOLS: Any opposed? 

 12 All right. Thank you. 

 13 (Thereupon a recess was taken.) 

 14 CHAIRPERSON NICHOLS: The other Board members who 

 15 are not sitting with me are in the back room where we have 

 16 a sound system available to them, in case anybody is 

 17 wondering. 

 18 Coming up next on the agenda are staff's proposed 

 19 amendments to the diesel emission control strategy 

 20 verification procedure. Since diesel particulate matter 

 21 was first identified as a toxic air contaminant back in 

 22 1998 and with subsequent approval of the Diesel Risk 

 23 Reduction Plan in 2000, this Board has had as one of its 

 24 primary goals the reduction of emissions of diesel 

 25 particulate matter from the existing fleet. 
 94 

 1 Meeting these emissions reduction goals had not 

 2 only required the Board to put in place emission standards 

 3 for new diesel engines, but also numerous regulations 

 4 specifically targeting emission reductions from existing 

 5 diesel engines because these engines are so long lived and 

 6 work so hard out there in our state. 

 7 To effectively support ARB's in-use diesel engine 

 8 regulations, in 2002, the Board approved a procedure for 

 9 verifying that diesel retrofits are effective and durable. 

 10 The verification procedure lays out the requirements that 

 11 retrofit manufacturers must follow if they wish to 

 12 participate in the California market. 

 13 Since it was originally approved, the 

 14 verification procedure has been subsequently amended by 

 15 the Board several times to improve its effectiveness and 

 16 strengthen the health benefits it provides. The procedure 

 17 was last amended in January 2008. Since that time, the 

 18 staff has identified a number of elements that could be 

 19 improved or clarified in order to improve our ability to 

 20 evaluate these retrofits while providing improved 

 21 performance for the end users. 

 22 To address this issue, staff is going to be 

 23 proposing several amendments. And Mr. Goldstene will 

 24 begin the staff presentation. 

 25 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 
 95 

 1 Nichols. 

 2 The verification procedure is used by staff to 

 3 verify that diesel retrofits achieve real and durable 

 4 reductions in emissions of particulate matter and oxides 

 5 of nitrogen. 

 6 The verification procedure supports numerous 

 7 in-use diesel emission control regulations by ensuring the 

 8 performance of emission control technologies to be 

 9 installed on in-use diesel engines. To date, staff has 

 10 verified over 150 diesel retrofits, including subsequent 

 11 extensions to existing verifications that can reduce 

 12 emissions of diesel PM and, in some cases, provide NOx 

 13 reductions as well. 

 14 Over the last two years, staff has worked with 

 15 industry to identify a number of improvements to the 

 16 procedure that will assist both manufacturers and end 

 17 users. These proposed amendments are intended to further 

 18 the objectives of the verification program while 

 19 strengthening protections for system purchasers. 

 20 The proposed amendments will improve the process 

 21 of matching retrofits with appropriate vehicles, 

 22 strengthen ARB's ability to quickly and effectively 

 23 address high warrantee claim rates, and provide additional 

 24 information to fleets on the maintenance of the retrofits. 

 25 The proposed amendments will require 
 96 

 1 manufacturers to demonstrate compliance with state 

 2 industrial safety requirements, provide better information 

 3 to staff regarding durability performance, and clarify 

 4 that a retrofit may only be sold if all the conditions of 

 5 the governing Executive Order and the procedures are met. 

 6 I'll now ask Paul Henderick of the Mobile Source 

 7 Control Division to provide the staff presentation. Paul. 

 8 (Thereupon an overhead presentation was 

 9 presented as follows.) 

 10 AIR POLLUTION SPECIALIST HENDERICK: Good 

 11 morning, Chairman Nichols and member of the Board. 

 12 Today, staff will propose a number of amendments 

 13 to the diesel retrofit verification procedure. These 

 14 amendments will improve the performance of diesel 

 15 retrofits in the field, provide better information to 

 16 staff during the verification process, and better support 

 17 the in-use diesel fleet rules. 

 18 --o0o-- 

 19 AIR POLLUTION SPECIALIST HENDERICK: First, I 

 20 will provide some background on the verification 

 21 procedure. 

 22 Next, I will discuss the proposed amendments, 

 23 followed by staff's assessment of economic and 

 24 environmental impacts. 

 25 My presentation will conclude with a 
 97 

 1 recommendation to the Board. 

 2 --o0o-- 

 3 AIR POLLUTION SPECIALIST HENDERICK: I will now 

 4 provide background information on the procedure as well a 

 5 status update on retrofits that are currently verified. 

 6 --o0o-- 

 7 AIR POLLUTION SPECIALIST HENDERICK: The 

 8 verification procedure was approved by the Board in May of 

 9 2002 to support the Diesel Risk Reduction Plan and its 

 10 associated fleet rules. It is critical to ensure that the 

 11 diesel retrofits used by fleets to comply with these rules 

 12 achieve real reductions in emissions of diesel PM and NOx. 

 13 The verification procedure fills this need. It is used by 

 14 staff to verify the performance of retrofits for a broad 

 15 range of diesel engines, including heavy-duty on-road 

 16 trucks, off-road vehicles and equipment, stationary 

 17 engines, and marine vessels. In addition to performance, 

 18 verification also ensures that retrofits are durable and 

 19 gives end users substantial warrantee protection. 

 20 ARB verification is not the only verification 

 21 program that evaluates diesel retrofits. Existing 

 22 programs run by U.S. EPA and VERT in Switzerland perform 

 23 similar functions, and ARB staff communicate regularly 

 24 with staff in these other programs. While neither of 

 25 these programs meets all of the needs of ARB's fleet 
 98 

 1 rules, they nevertheless have provided useful input and 

 2 experience over the years. 

 3 I will now give a brief overview of the 

 4 verification process to give you a better sense for how 

 5 our program works. 

 6 --o0o-- 

 7 AIR POLLUTION SPECIALIST HENDERICK: If a 

 8 retrofit manufacturer wishes to sell its product as a 

 9 compliance option in California, it must first obtain 

 10 verification from ARB. In order to do so, an applicant 

 11 must submit a complete application, including an 

 12 appropriate test plan. ARB staff then reviews this 

 13 information and approves the test plan. The applicant is 

 14 responsible for conducting all appropriate testing and 

 15 submitting the test data. ARB reviews all information and 

 16 issues an Executive Order if everything is complete and 

 17 supports the verification. 

 18 --o0o-- 

 19 AIR POLLUTION SPECIALIST HENDERICK: Many diesel 

 20 retrofits have gone through this process, and over 50 are 

 21 currently verified for a variety of applications. On-road 

 22 and off-road diesel engines each have over 20 systems 

 23 verified. Ten systems are verified for stationary 

 24 engines. And there is even one retrofit verified for 

 25 marine vessels. Two-thirds of these retrofits are diesel 
 99 

 1 particulate filters that achieve a PM reduction of over 85 

 2 percent. 

 3 --o0o-- 

 4 AIR POLLUTION SPECIALIST HENDERICK: I will now 

 5 discuss staff's proposed amendments. 

 6 Since the start of the program, staff has 

 7 continued to gain valuable experience and stakeholder 

 8 feedback that point out ways in which the program can be 

 9 improved. Today's amendments reflect this input. 

 10 --o0o-- 

 11 AIR POLLUTION SPECIALIST HENDERICK: To 

 12 summarize, staff's proposed amendments will improve the 

 13 matching of retrofits to vehicles, improve end-user 

 14 protections, improve design and data requirement, and 

 15 increase program flexibility. 

 16 --o0o-- 

 17 AIR POLLUTION SPECIALIST HENDERICK: To provide 

 18 background on the first of our proposed amendments, I will 

 19 discuss the importance of properly matching a retrofit to 

 20 a vehicle, which is a key factor in the retrofit's 

 21 success. 

 22 Each retrofit has certain conditions as listed in 

 23 the Executive Order, which must be met for it to function 

 24 properly. A poor match may occur if these conditions are 

 25 not met, resulting in a retrofit malfunction. A 
 100 

 1 malfunctioning retrofit may require additional maintenance 

 2 and potentially impair operation of the engine and 

 3 vehicle. Also, such a malfunction may not be covered by 

 4 the warrantee. Thus, the cost of a vehicle retrofit 

 5 mismatch is potentially high. 

 6 Currently, the verification procedure does not 

 7 address how a given vehicle must be evaluated prior to 

 8 installation of a retrofit. As a result, different 

 9 manufacturers and installers employ different methods. 

 10 --o0o-- 

 11 AIR POLLUTION SPECIALIST HENDERICK: Given the 

 12 ramifications of having a mismatched vehicle and retrofit 

 13 combination and the fact that the verification procedure 

 14 does not currently provide direction on how to assess a 

 15 candidate vehicle, staff is proposing to amend the 

 16 procedure to address this. 

 17 For retrofits with a temperature criterion, such 

 18 as passive DPFs and SCR systems, staff proposes that every 

 19 candidate engine must be assessed prior to retrofit. If 

 20 the retrofit reduces PM alone, staff's proposal allows for 

 21 an alternative approach which employs a representative 

 22 sampling scheme to reduce the number of similar vehicles 

 23 that need to be assessed. 

 24 Staff is also proposing that the installer must 

 25 ensure that the engine is well maintained prior to 
 101 

 1 retrofit. In particular, the installer must determine if 

 2 the engine is consuming excessive amounts of oil, which 

 3 can adversely impact retrofit performance. Finally, 

 4 engine assessment records must be maintained by the 

 5 installer. 

 6 This proposed amendment underscores the 

 7 importance of pre-installation assessment and will serve 

 8 to reduce problems in the field by establishing minimum 

 9 requirements. 

 10 --o0o-- 

 11 AIR POLLUTION SPECIALIST HENDERICK: Staff is 

 12 also proposing several amendments that will strengthen 

 13 end-user protections and provide better assurance for 

 14 successful retrofits. 

 15 First, staff proposes that retrofit manufacturers 

 16 be required to provide end users with sufficient 

 17 maintenance information to enable them to properly 

 18 maintain the retrofits themselves. This will give end 

 19 users more choices when it comes to deciding how to 

 20 fulfill their maintenance needs. 

 21 Staff is also proposing that when retrofit 

 22 manufacturers perform durability testing on their devices, 

 23 they demonstrate that they can fulfill all OSHA industrial 

 24 safety requirements for off-road vehicles. 

 25 Lastly, staff is proposing several clarifications 
 102 

 1 regarding the scope and coverage of the procedure's 

 2 warrantee protections. 

 3 First, staff is proposing to clarify that all ARB 

 4 verified retrofits must come with the same warrantee 

 5 protections, regardless of where they are sold. This will 

 6 ensure that out-of-state fleets get the same warrantee 

 7 protections that California fleets receive. 

 8 Staff also proposes to clarify that the 

 9 installation warrantee covers any swapped components, such 

 10 as spare filter bodies that are used by fleets to reduce 

 11 vehicle downtime when filters are removed for cleaning. 

 12 And, finally, staff is proposing to clarify the 

 13 potential remedial actions available to ARB in the event a 

 14 retrofit has excessive warrantee claims. These actions 

 15 could include modifying, revoking, or suspending a 

 16 verification. 

 17 --o0o-- 

 18 AIR POLLUTION SPECIALIST HENDERICK: To obtain 

 19 better information on the performance of retrofit systems, 

 20 staff is proposing several changes to retrofit design and 

 21 data collection requirements in the procedure. 

 22 First, staff is proposing that retrofits with an 

 23 exhaust temperature criterion must be able to measure and 

 24 record in-use exhaust temperature and back pressure data 

 25 as well as any error codes that occur. These additional 
 103 

 1 requirements will help to ensure that diagnostic data are 

 2 available to help in troubleshooting retrofit performance 

 3 and in the warrantee resolution process. Most retrofit 

 4 manufacturers already voluntarily incorporate this 

 5 functionality into their systems. 

 6 Staff also proposes to require that date, time, 

 7 and engine speed data be collected during demonstrations 

 8 and submitted as part of verification. Staff will use 

 9 this information to form a more complete picture of how a 

 10 retrofit performs when used in the field. This proposed 

 11 change is a small additional burden to applicants but 

 12 provides valuable information to ARB in its evaluation of 

 13 their products. 

 14 The final amendments I will discuss serve to 

 15 increase the flexibility of how retrofits are used in the 

 16 field. 

 17 --o0o-- 

 18 AIR POLLUTION SPECIALIST HENDERICK: Currently, 

 19 the procedure only allows component swapping within the 

 20 same common ownership fleet. Said another way, a fleet 

 21 may not share spare retrofit components with another 

 22 fleet. Staff proposes to remove this restriction by 

 23 allowing component swapping of identical retrofit 

 24 components across different fleets under certain 

 25 circumstances. This will give end-users more maintenance 
 104 

 1 options by allowing for the creation of a larger pool of 

 2 spare components, likely through a dealer network. 

 3 Second, the procedure currently provides no 

 4 guidance on how to repower a vehicle which has already 

 5 been retrofit. Staff proposes allowing such repowers, 

 6 provided the same basic conditions that applied to the 

 7 original retrofit are satisfied. This proposal thereby 

 8 defines a path for allowing the existing retrofit to stay 

 9 on the vehicle. 

 10 Staff notes that because of a manufacturer's 

 11 warrantee and in-use compliance obligations, both of these 

 12 practices would require approval from ARB and the 

 13 manufacturer. 

 14 Finally, staff is proposing to extend a 

 15 compliance deadline in the procedure. The procedure 

 16 currently requires that all retrofits be designed such 

 17 that they can only be installed in one direction as of 

 18 January 1, 2010. Retrofits that do not meet this 

 19 requirement currently cannot be installed. 

 20 Due to lower sales than expected arising from 

 21 market instabilities, there is an existing inventory of 

 22 retrofits that do not comply with this requirement and so 

 23 cannot be sold or installed. Staff therefore proposes a 

 24 sell-through period to December 31st, 2010, for this 

 25 existing inventory. 
 105 

 1 Note that this date is a six-month extension from 

 2 the original date of July 1, 2010, that was noticed in the 

 3 staff report. 

 4 All remaining amendments in staff's proposal are 

 5 minor clarifications that are described in the staff 

 6 report. 

 7 --o0o-- 

 8 AIR POLLUTION SPECIALIST HENDERICK: In 

 9 developing the proposed amendments, staff held a public 

 10 workshop last June in El Monte to solicit input from all 

 11 interested stakeholders. The workshop was well attended 

 12 by representatives from the emissions control 

 13 manufacturing industry, among others. 

 14 In addition to the workshop, staff also met with 

 15 the association for this industry, MECA, and its 

 16 individual member companies. Staff considered comments 

 17 brought forth by MECA and individual companies alike and 

 18 incorporated appropriate comments into the proposed 

 19 amendments. 

 20 --o0o-- 

 21 AIR POLLUTION SPECIALIST HENDERICK: Since the 

 22 initial release of the staff report, staff has identified 

 23 a number of minor 15-day changes. 

 24 First, where the performance of a retrofit system 

 25 will not be impacted, staff proposes to allow a retrofit 
 106 

 1 manufacturer to request that a system component not have 

 2 to comply with the unidirectional design requirement. 

 3 This option does not extend to diesel particulate filters. 

 4 As previously noted, staff is also proposing to 

 5 extend the deadline to sell non-unidirectional retrofits 

 6 by six months to December 31st of this year. 

 7 Another 15-day change proposed by staff is to 

 8 clarify that only routine maintenance information must be 

 9 provided to end users. This clarification is based on 

 10 comments from retrofit manufacturers and MECA. 

 11 Finally, staff does not want to potentially 

 12 expose end users to enforcement action if they fail to 

 13 keep records for oil consumption. Staff has modified the 

 14 proposed amendments to advise end-users to follow good 

 15 engine maintenance practices, which includes keeping oil 

 16 consumption records. The new language also reminds end 

 17 users that failure to keep the engine well maintained may 

 18 be grounds for denial of a warranty claim. 

 19 A copy of these proposed 15-day changes has been 

 20 provided to the Board and is also available on the table 

 21 outside the hearing room. 

 22 --o0o-- 

 23 AIR POLLUTION SPECIALIST HENDERICK: I will now 

 24 discuss the impacts of our proposal and then provide 

 25 staff's recommendation. 
 107 

 1 --o0o-- 

 2 AIR POLLUTION SPECIALIST HENDERICK: Staff does 

 3 not anticipate any significant impacts from the proposed 

 4 amendments. There is, however, some potential for 

 5 end-user cost savings and the creation of new services and 

 6 businesses. These potential benefits may result from 

 7 having fewer restrictions on the swapping of retrofit 

 8 components, better assessment of vehicles prior to 

 9 retrofit, an alternative to data logging each and every 

 10 engine, and end-user access to comprehensive maintenance 

 11 procedures. 

 12 --o0o-- 

 13 AIR POLLUTION SPECIALIST HENDERICK: In 

 14 conclusion, staff believes that the proposed amendments to 

 15 the procedure will improve the verification program and 

 16 enable it to better support the fleet rules. 

 17 Therefore, staff recommends that this proposal be 

 18 adopted along with the 15-day changes just described. 

 19 This concludes my presentation. Thank you. 

 20 CHAIRPERSON NICHOLS: Thank you very much. 

 21 Are there any questions before we go to public 

 22 comment? If not, let's proceed to the public. We have 

 23 three witnesses to sign up. If you want to speak and 

 24 didn't sign up, please see the clerk and fill out a card. 

 25 We have in order number one Bill Gaines once 
 108 

 1 again and then Dr. Rasto Brezny from MECA and Tom Swenson 

 2 from Cleaire. 

 3 MR. GAINES: Thank you, Madam Chairman. 

 4 Regarding the verification procedure, it was 

 5 first written in 2000. Since that time, technology has 

 6 increased substantially on DPFs, certainly on on-road. 

 7 One of the issues that we see is in the current regulation 

 8 is the use of method five testing. That's a test that has 

 9 been a 15-year-old test, been used to measure particulate 

 10 matter in industrial power stacks, and we believe that's 

 11 not necessary anymore. 

 12 The cost of method five tests to perform that 

 13 specific test is over $5,000. We've got two quotes from 

 14 two labs, certified California labs, to determine that. 

 15 The cost -- and we got the quote from one particular 

 16 testing lab to obtain verification procedure was $250,00. 

 17 We understand that number can go up as high as $1 million 

 18 If you notice in your own staff testimony, there 

 19 are only ten stationary retrofit kits currently available. 

 20 And there's good reason for that. There are a variety of 

 21 stationary equipment in the marketplace today. And to 

 22 spend a quarter of a million dollars up to a million 

 23 dollars for verifying a system makes the cost of that 

 24 system significantly more expensive. 

 25 Getting real world costs to replace a stationary 
 109 

 1 engine and DPF is $43,000. City of Chico has quotes on 

 2 that, and you're welcome to take a look at that. That's a 

 3 lot more than 175 per horsepower. 

 4 Regarding stationary engines, they are a low-use 

 5 engine. They are used 300 to 400 hours a year. Diesel 

 6 engines can last several thousand hours before they can be 

 7 modified. And they are very simple to be modified by the 

 8 way. If they are oil, you can change out the sleeves, et 

 9 cetera. 

 10 In Butte County, which is where I've got my data, 

 11 there are 13 different engines, 45 different horsepowers 

 12 on just stationary equipment. If you do the math, that's 

 13 a significant amount of different kinds of equipment that 

 14 are out there. 

 15 We do believe you can develop these systems using 

 16 current technology, for an example like a CMM machine. 

 17 And we believe if you except the on-road testing data for 

 18 DPFs, I think that should be acceptable, and in lieu of 

 19 following the verification for getting your OE. 

 20 I applaud the fact they're looking at more data 

 21 and that they have a diagnostic trouble code. That's 

 22 exactly what we suggest. Thank you. 

 23 CHAIRPERSON NICHOLS: All right. Thank you very 

 24 much. 

 25 Dr. Brezny. 
 110 

 1 DR. BREZNY: Thank you, Chairman Nichols and 

 2 members of the Board. Thank you for the opportunity to 

 3 speak today in support of this proposal. 

 4 I'm Rasto Brezny, the Deputy Director for the 

 5 Manufacturers of Emission Controls Association. 

 6 MECA is a nonprofit association made up of the 

 7 leading manufacturers of emission control technologies for 

 8 motor vehicles, including the majority of the verified PM 

 9 and PM plus NOx technologies that are available today for 

 10 in-use, on-road, and off-road vehicles and engines. 

 11 I want to start off by thanking ARB's 

 12 verification staff for their hard work and diligence in 

 13 putting together this proposal. I think it has a lot of 

 14 very good improvements. 

 15 We've submitted our detailed written comments, 

 16 and today I just want to highlight a few of our 

 17 recommendations. 

 18 Again, I want to thank staff for including in the 

 19 15-day changes the routine maintenance requirements for 

 20 cleaning these filters. We feel that there's certainly a 

 21 role for third party and end users to do the maintenance 

 22 and clean these filters. However, there are situations, 

 23 for example, where the engine or the device is not 

 24 maintained properly, in which case a cleaning will require 

 25 a more in-depth diagnosis by a trained technician in order 
 111 

 1 to avoid damaging these devices. 

 2 Along these lines, request that language be added 

 3 in the 15-day changes that outlines the responsibility of 

 4 the cleaning service provider in the event that damage is 

 5 incurred due to improper handling. 

 6 We also would support a filter cleaner registry 

 7 similar to what's available today for registered 

 8 installers on the ARB website for on-road and off-road 

 9 retrofit devices. 

 10 In the pre-installation compatibility section of 

 11 the proposal, installers are required to review specific 

 12 documents such as oil consumption records and parts 

 13 replacement records. And our members' experience has been 

 14 in most cases that the oil consumption records in 

 15 particular are not available, and that leaves the 

 16 installer with no choice but to reject the candidate 

 17 vehicle for retrofit. 

 18 We suggest these requirements be made flexible 

 19 enough to leave the specific assessment strategy to the 

 20 experience of the installer. So that if the oil records 

 21 are available, they can use that, but they have other 

 22 database and information that they have developed over the 

 23 years to assess the proper operation of the engine. 

 24 We also requested some flexibility in in-use 

 25 pre-installation assessment to allow experience across 
 112 

 1 fleets to be shared when doing the pre-installation 

 2 assessment, because primarily in off-road fleets very 

 3 rarely are there five of the same vehicle and model within 

 4 a specific fleet. And this reduces the cost for the 

 5 pre-installation assessment primarily for these fleets. 

 6 CHAIRPERSON NICHOLS: Thank you. Those sound 

 7 like renewable suggestions that the staff would entertain 

 8 during the 15-day process then. Thank you. 

 9 Okay. Mr. Swenson, and then we have one more 

 10 witness also. Randal Friedman has signed up. 

 11 MR. SWENSON: Thank you. Tom Swenson, Cleaire 

 12 Advanced Emission Controls. 

 13 We provided written comments. I wanted to just 

 14 cover two. 

 15 Rasto did a wonderful summary on the maintenance, 

 16 providing the maintenance practices. We have no issue 

 17 with providing those maintenance practices. But 

 18 consistent with the MECA comments, we would expect if 

 19 somebody breaks it that they would be responsible for the 

 20 cost and it wouldn't fall then back on our warranty. 

 21 The other is around the preinstallation. We're 

 22 being required under this proposal to check oil 

 23 consumption. In addition to that though is to be required 

 24 to review the specific maintenance records on each engine 

 25 to see if they were consistent with the manufacturer 
 113 

 1 requirements. That will be very burdensome, and we'll 

 2 have to go to the fleets and get individual records for 

 3 individual engines. And, frankly, it feels like we're 

 4 becoming sort of the maintenance police if you will about 

 5 whether or not they have maintained their engine properly. 

 6 And we believe that they should deliver us an engine that 

 7 is in good maintenance. 

 8 We have provided some basic checks that you can 

 9 do and, in fact, we are doing now to know whether or not 

 10 there are gross issues with the engines, such as visual 

 11 smokes and oil residue in the pipe, those sorts of things. 

 12 And we would encourage staff to review those and 

 13 potentially adopt them. 

 14 Thank you. 

 15 CHAIRPERSON NICHOLS: Thank you. 

 16 Mr. Friedman. 

 17 MR. FRIEDMAN: Madam Chairman, Board members, 

 18 Randal Friedman on behalf of the U.S. Navy. 

 19 As I'm sure you're aware from past appearances 

 20 here at the department, the Navy is one of the larger 

 21 users of biodiesel in the state. And, in fact, our new 

 22 Secretary of the Navy has issued a solid challenge to 

 23 significantly increase the use of biofuels. Along those 

 24 lines, the Department of Defense is one of the leading 

 25 funders of next generation research of biofuels from 
 114 

 1 cellulosic feedstocks to deal with non-food. 

 2 Where does this fit into this? We continue to 

 3 have a longstanding concern that we will be able to use 

 4 current biodiesel and future biofuels in our vehicles that 

 5 have retrofits. We've had longstanding concerns about 

 6 regulatory issues, warranty issues. I know this has been 

 7 dealt with before, but I guess I'm seeking some continued 

 8 assurance that this is still on your staff's radar and 

 9 that as you consider amendments to your verification 

 10 process that, in fact, those of us including cities, 

 11 universities, and others that are using biodiesel in their 

 12 fleets can continue to do future retrofits and not worry 

 13 about consistency and warrantee issues and the like. 

 14 Thank you. 

 15 CHAIRPERSON NICHOLS: Thank you. 

 16 Mr. Goldstene is nodding his head vigorously that 

 17 it's on his radar screen and it will continue to be on his 

 18 radar screen; correct? 

 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 

 20 WHITE: Madam Chair, yes. 

 21 I would add we already have an existing program 

 22 in place to allow biodiesel to be used with a number of 

 23 different retrofits that are verified today. And we will 

 24 continue to do so in the future. 

 25 CHAIRPERSON NICHOLS: All right. That's helpful 
 115 

 1 to know. 

 2 That concludes the public testimony. And so I 

 3 believe we can close the record on this item. It would be 

 4 reopened again when the 15-day notice is issued. And at 

 5 that point, people can comment on what's in the 15-day 

 6 notice. But this will close the record as far as this 

 7 proceeding is concerned. 

 8 And I guess I should ask for ex partes at this 

 9 point. Are there any ex partes on this item? 

 10 I believe Supervisor Yeager previously disclosed 

 11 his meetings. 

 12 No others. Okay. 

 13 Than let's proceed to the discussion. So this 

 14 issue about who bears the burden of making sure the engine 

 15 is in decent shape before a retrofit is put on it is 

 16 obviously an important question. And I wonder maybe, 

 17 Eric, if you can respond to that. 

 18 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 

 19 WHITE: Yes. 

 20 You know, certainly the goal here is to make sure 

 21 that it's a good candidate, the engine is a good candidate 

 22 to be retrofit. And one of the things we found as we've 

 23 started to see more and more retrofits be introduced into 

 24 the fleet is oil consumption can cause issues down the 

 25 line if it's excessive. So we're looking for a way in 
 116 

 1 which to try to identify that up front. 

 2 And I think the commenters, both today as well as 

 3 the comment letters, have provided some good suggestions 

 4 of alternatives we can go back and look at. So we are 

 5 committed to go back and during the 15-day process look at 

 6 some of those and look to incorporate some of those as 

 7 well into the regulation. 

 8 CHAIRPERSON NICHOLS: And in terms of the test 

 9 procedure itself, again Mr. Gaines is looking for 

 10 something simpler, cheaper, faster, I guess, 

 11 understandably so. 

 12 I guess my view on that would be that the staff 

 13 has certainly tried hard to fix the procedures so that 

 14 they're in not a bottleneck towards getting this program 

 15 done. But I think we as a Board have a long history of 

 16 being very, very careful about creating a market for 

 17 devices that will later on cause problems as well as 

 18 potentially not do the job they were certified to do. So 

 19 I think the balance really should be in favor of making it 

 20 as rigorous as possible for the benefit of the consumer. 

 21 With that, I guess I'll ask for the motion on the 

 22 resolution then. 

 23 BOARD MEMBER D'ADAMO: So moved. 

 24 CHAIRPERSON NICHOLS: Is there a second? 

 25 BOARD MEMBER BERG: Second. 
 117 

 1 CHAIRPERSON NICHOLS: Any further discussion on 

 2 the part of the Board? 

 3 If not, will all in favor please say aye. 

 4 (Ayes) 

 5 CHAIRPERSON NICHOLS: Any opposed? 

 6 Very good. Thank you very much. 

 7 Our next item is a fairly lengthy one I believe 

 8 and it's about noon time. So I'm going to declare it 

 9 lunch break time, and we'll resume at 1:00. Thanks, 

 10 everybody. 

 11 (Thereupon a lunch recess was taken 

 12 at 11:48 a.m.) 

 13 

 14 

 15 

 16 

 17 

 18 

 19 

 20 

 21 

 22 

 23 

 24 

 25 

 118 

 1 AFTERNOON SESSION 

 2 1:09 p.m. 

 3 CHAIRPERSON NICHOLS: All right, ladies and 

 4 gentlemen, we are ready to resume our meeting. 

 5 This is the seventh in a series of semi-annual 

 6 updates to the Board. And I think in the past the Board 

 7 has heard much of the evidence that climate change poses 

 8 risk to public health as well the economy and the 

 9 environment. California's ability to cope with climate 

 10 impacts depends in part on the pace and magnitude of the 

 11 global climate changes, as well on the success of global 

 12 mitigation efforts. 

 13 However, because we are already facing risks 

 14 associated with climate variability and because further 

 15 impacts are, we are now told, unavoidable, adaptation is 

 16 also needed to compliment mitigation. 

 17 For this presentation, we invited Tony Brunello 

 18 to share an overview of the 2009 California Climate 

 19 Adaptation Strategy with us. 

 20 Mr. Brunello serves as the Deputy Secretary for 

 21 Climate Change and Energy for the California Natural 

 22 Resources Agency, formerly known as the Resources Agency. 

 23 And the Natural Resources Agency has taken the lead in 

 24 developing the 2009 California Climate Adaptation Strategy 

 25 discussion report working with the Climate Action Team, of 
 119 

 1 which ARB is also a member. The Climate Action Team is 

 2 the administration-wide program that was created by the 

 3 Governor and which is chaired by our Cal/EPA Secretary 

 4 Linda Adams. 

 5 Mr. Goldstene, would you please introduce this 

 6 item? 

 7 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 

 8 Nichols. 

 9 Today's Climate Change Adaptation presentation 

 10 discusses statewide efforts to respond to the actual and 

 11 expected impacts of climate change. The development of 

 12 California's first comprehensive climate change adaptation 

 13 strategy was directed by Governor Schwarzenegger in an 

 14 Executive Order and spearheaded by the State's Natural 

 15 Resources Agency. 

 16 Tony Brunello, as Mary just mentioned, leads all 

 17 climate change and energy activity at the California 

 18 Natural Resources Agency. Prior to his current position, 

 19 he worked extensively on climate and energy-related issues 

 20 developing greenhouse gas mitigation projects and 

 21 conducting analysis around the world for public and 

 22 private sector clients. 

 23 I'm very happy to introduce Mr. Brunello. Tony. 

 24 (Thereupon an overhead presentation was 

 25 presented as follows.) 
 120 

 1 DEPUTY SECRETARY BRUNELLO: Great. Thanks, 

 2 James. 

 3 Chairman Nichols and honorable Board members, I 

 4 really appreciate the opportunity today to speak to you a 

 5 little bit about the topic of climate adaptation. I'm not 

 6 sure how much you have been familiar with it. I know that 

 7 many of the reports you have frequently talk about the 

 8 issue of climate impacts. And I've been on panels, et 

 9 cetera, with a number of you. So again I really 

 10 appreciate to talk a little bit more about this. I hope 

 11 to keep my presentation as tight and precise as possible 

 12 to answer any questions you guys might have. 

 13 A key thing about why I was excited to come today 

 14 is to highlight the fact of how important you all and your 

 15 staff are to the topic of climate adaptation. Whether you 

 16 know it or not, most of the actions you're pushing and 

 17 promoting are linked directly with climate adaptation. 

 18 Reducing water use, promoting renewable energy, all of 

 19 these things are climate adaptation strategies. 

 20 In a nutshell, what I'm going to talk about today 

 21 is a little bit on some of the climate impacts. I think 

 22 you guys have been flooded enough with that I'm sure with 

 23 plenty of presentations. But just to give a context of 

 24 where we got to where we are to talk a little bit about 

 25 the process for developing strategies to adapt to those 
 121 

 1 impacts and then what we're doing next and where I think 

 2 is the best place for ARB engaged. 

 3 Next slide. 

 4 --o0o-- 

 5 DEPUTY SECRETARY BRUNELLO: One of the things 

 6 that really helped drive the adaptation strategy from the 

 7 beginning was the fact we are already seeing climate 

 8 impacts. This is a graph you've probably seen frequently, 

 9 but it's showing in San Francisco we've already seen seven 

 10 inches of sea level rise there. We've seen an increase in 

 11 temperatures in certain parts of the state, changes in 

 12 precipitation, et cetera. But really the driver is to 

 13 show in the past we've already seen climate impacts. 

 14 What's more troubling is looking out to some of the 

 15 projections that we're seeing in the future where sea 

 16 level rise, just using one example, could be up to almost 

 17 55 inches by the end of the century. As you can see, 

 18 that's probably about almost ten times what we've already 

 19 seen. It's a similar issue -- next slide. 

 20 --o0o-- 

 21 DEPUTY SECRETARY BRUNELLO: This is now looking 

 22 out to projections for the future. This was put together 

 23 by -- funded by the California PEER Program, also in 

 24 cooperation with some of your researchers here at ARB. 

 25 But the PEER Program has been funding analyses over the 
 122 

 1 last ten years on climate change research. And what 

 2 they've been able to do is to fund a number of 

 3 universities across the state who have taken a lot of the 

 4 global climate impact models and downscaled it to 

 5 California. Probably just five years ago, if we had 

 6 looked at a map of California and how projections were 

 7 these climate models, essentially California would have 

 8 looked like four big boxes. And they try to predict how 

 9 the climate would shift in those boxes. 

 10 Today, I can say some of the models have we 

 11 actually downscaled to about a seven-by-seven square 

 12 kilometer radius, and I think we have some of the best 

 13 information anywhere in the world of climate impacts to a 

 14 specific geographic location. 

 15 So what this is showing here is that you can see 

 16 historical temperatures. And in the middle graph, they've 

 17 given us a range. But it basically says the projected 

 18 increase is around two to five degrees in the next 40 

 19 years. And then about four to nine degree change in 

 20 temperature on the average over the next century. 

 21 So temperature is what most of the science and 

 22 the scientists can agree on that it will increase. There 

 23 will be a range. But most of the adaptation measures that 

 24 we've developed have been based on these scenarios that 

 25 we've driven. And the temperature is the one that we 
 123 

 1 focus the most on. 

 2 The next slide. 

 3 --o0o-- 

 4 DEPUTY SECRETARY BRUNELLO: This is also just to 

 5 show one that has been very close to the administration's 

 6 minds and all of our minds as a lot of these projections 

 7 as we've projected on to actual impact shows that over the 

 8 next 50 years we could have about 40 percent less snow 

 9 pack and over the next century about almost 20 percent 

 10 remaining, losing 80 percent of our snow pack. Obviously, 

 11 as we look at a major restructuring of our water supply 

 12 system, the Governor has been very involved in that as the 

 13 Legislature and many of you I'm sure as well your 

 14 counties. 

 15 But this is something that was very much a driver 

 16 in looking at how we need to restructure our water supply 

 17 system. So as we look at these impacts, there's been a 

 18 lot of work on adaptation measures over the last decade. 

 19 But really what happened in looking at the water supply 

 20 system was that we realized there were three or four 

 21 different scenarios that were moving and looking at the 

 22 topic of sea level rise. And really that's a global 

 23 number. So we realized that we had to try to coordinate 

 24 among state agencies to ensure they were using similar 

 25 numbers, because some were using much higher numbers than 
 124 

 1 others. So we wanted to try to make sure if we were going 

 2 to have a policy on adapting, that we're using the same 

 3 numbers. And so we did an Executive Order with the 

 4 Governor in 2008 that directed the Resources Agency in 

 5 cooperation with multiple government agencies to look at 

 6 the science that we had right now. 

 7 Next, which I think is most important, is to 

 8 identify a portfolio of options on how to reduce the risk 

 9 from these climate change impacts. 

 10 And then finally, which is why this report has 

 11 caught much more attention, which I think most of the 

 12 states across the U.S. need to do much more of is to 

 13 actually move this to action so there are actual things 

 14 that we can guide State agencies to do. 

 15 And so what we worked on over the last year and a 

 16 half is we had seven different working groups -- and I 

 17 forgot all of them as I try to state them -- but basically 

 18 was forestry, agriculture, water, public health -- 

 19 transportation, energy, and biodiversity, and habitat. 

 20 And I'm probably missing one. 

 21 Each of these were led by different State 

 22 agencies. The Air Resources Board was fundamental in 

 23 helping Department of Public Health in developing their 

 24 air quality recommendations. So what we did is we asked 

 25 each of the different working groups in working with the 
 125 

 1 Climate Action Team and Cal/EPA to go through that effort 

 2 that we highlighted the science and figure out what were 

 3 the options available and then to identify what specific 

 4 strategies they would do. So what we came up with was a 

 5 report that we released -- next slide. 

 6 --o0o-- 

 7 DEPUTY SECRETARY BRUNELLO: Governor 

 8 Schwarzenegger was able to release the report, and we 

 9 released the final report after we had significant public 

 10 comment. We had over 80 different inputs to the final 

 11 report, the draft that we had out. We also had multiple 

 12 public meetings within the working groups and for the 

 13 overall report that we released. 

 14 But December 2nd, we did release our final report 

 15 in San Francisco. We also had the 23 members of the newly 

 16 announced Climate Adaptation Advisory Board, which Board 

 17 Member Dan Sperling sits on. We had Eric Schmidt, who's 

 18 the person in the orange tie, from Google. I'll get to 

 19 the point why it was very important to have both of those 

 20 figures there for this announcement. 

 21 I'm not sure if anything was provided to you, but 

 22 it's like the Scoping Plan. It's a difficult read. And 

 23 we have multiple strategies within that. And overall I 

 24 think there were probably about 60 or 70 that came out of 

 25 all the different working groups. 
 126 

 1 And then what we did though is we highlighted 12 

 2 in our executive summary, which I briefly want to go 

 3 through. I think you can read the report, but it will 

 4 give you a flavor for the types of recommendations we 

 5 pulled out and I wanted to relate specifically to the Air 

 6 Resources Board. 

 7 --o0o-- 

 8 DEPUTY SECRETARY BRUNELLO: So the first, which I 

 9 think is fundamental, is to get more people to be talking 

 10 about this just beyond state government. We did focus on 

 11 state government. What was established was a Climate 

 12 Adaptation Advisory Board from representatives from NGOs, 

 13 private business, government, and a very wide group that 

 14 even includes former Governor Pete Wilson and a number of 

 15 other luminaries. What we're asking that group is to 

 16 really build upon our strategies and come up with a report 

 17 this summer that will step outside the box and see what 

 18 else needs to be done. 

 19 Another fundamental issue, which is really 

 20 important in all the work that all of you do, is land use. 

 21 That was the biggest thing coming out of this is we need 

 22 to think differently about how we plan and how we develop. 

 23 So one of the issues that came up within CEQA that a lot 

 24 of the recommendations and comment letters that we had 

 25 really wanted us to re-write our CEQA laws to move around 
 127 

 1 climate adaptation. We thought it was still a little 

 2 early to have anything too in-depth, but what we did 

 3 identify was within CEQA you're already required to look 

 4 at impacts from the natural environment project. It's 

 5 typically thought of in terms of earthquakes. But our 

 6 lawyers also determined it's also directly relevant for 

 7 floods from sea level rise and other impacts. That's 

 8 something that came out new. 

 9 On the six recommendations here, another key one 

 10 is really important for a lot of the public health work 

 11 that you do, that one of the things that we're going to be 

 12 developing is working with our California Emergency 

 13 Management Agency to try and look much more in depth at 

 14 the local hazard mitigation plans, a lot of the plans the 

 15 counties are already required to develop, so we can help 

 16 them identify where some of the climate impacts are in 

 17 their communities and try to help develop different tools 

 18 to do that. 

 19 In particular, there's been a lot of concern 

 20 about the most vulnerable communities. Hunters Point is 

 21 the one always brought up, again sea level rise is the one 

 22 most people have latched onto. But that area is one of 

 23 the first that could go under, and there's been 

 24 predictions of numerous people that could lose their homes 

 25 in low-income communities. 
 128 

 1 Next slide. 

 2 --o0o-- 

 3 DEPUTY SECRETARY BRUNELLO: On this slide, I 

 4 wanted to highlight again we're looking at the Department 

 5 of Public Health and the Air Resources Board for as 

 6 temperatures increase -- as Board Member Balmes, I know 

 7 we've sat on working groups and can speak to this much 

 8 better than I -- but that as temperatures increase in 

 9 communities that we really see the diseases and things 

 10 that will already be there will be that much worse. So we 

 11 really need to work with those communities that we're 

 12 already identifying as areas that will be in areas where 

 13 the temperatures will go up much faster than other areas. 

 14 And the last one I just wanted to hit on was the 

 15 aspect on research. I think the work that the Air 

 16 Resources Board has done on looking at climate impacts and 

 17 looking at the research, specifically focusing on public 

 18 health, is something that we really wanted to try to 

 19 incorporate and link with as much as possible. I'm 

 20 sitting next to Bart Croes there, and they've done an 

 21 excellent job of coordinating with the Energy Commission 

 22 and across State government to really make the research 

 23 not only improve some of these adaptation strategies, but 

 24 also in working to get it out to the public so they can 

 25 actually change some of the planning they're doing right 
 129 

 1 now. 

 2 Another key aspect is less about doing more 

 3 research, more about getting information out to people on 

 4 what these impacts are and letting them make their own 

 5 decisions on looking at the science and incorporating that 

 6 in their own planning processes. So that was a reason 

 7 why -- next slide. 

 8 --o0o-- 

 9 DEPUTY SECRETARY BRUNELLO: This is a horrible 

 10 graph, but this is on our website, the 

 11 climatechange.ca.gov website. This linked with having 

 12 Eric Schmidt at our announcement with Governor 

 13 Schwarzenegger. What this was to release a beta 

 14 version of what we call Cal Adapt. And this is a tool 

 15 that we really hope that we can partner with ARB to 

 16 utilize much more that uses the Google Earth platform. 

 17 And what we've done is we've actually put the climate 

 18 science that we have established -- and again this is a 

 19 beta version that we'll be building and finalizing by the 

 20 end of the year. 

 21 But what's important, as I mentioned before, the 

 22 aspect when you try to look at the climate impact and 

 23 climate science information, previously you would see four 

 24 boxes and you would try to understand how that might 

 25 impact your region. 
 130 

 1 What we've done is once we had the climate 

 2 projections for the studies that I had mentioned, what we 

 3 then did is worked with Google to then put it into their 

 4 Google Earth platform so you can see each of the boxes. 

 5 Right now, you can go and click on and find out more what 

 6 the impacts are for what we projected to your region. 

 7 So somebody living in Tulare County, for example, 

 8 they're developing their general plan and need to know 

 9 more about information. They hear about this crazy topic 

 10 of climate change adaptation and they know they have to 

 11 look at some of the different measures for how to adapt 

 12 general plans. So what they can do is go specifically 

 13 onto this and realize quickly I don't have to worry about 

 14 sea level rise, but they may want to worry about 

 15 precipitation and others, and they may have their own 

 16 science they want to use. 

 17 But what the goal is with Google is to allow 

 18 anyone to go and link and find out specifically the 

 19 information and the science for their region. If you 

 20 click on these boxes, it goes down to another level that 

 21 reaches a seven-by-seven square kilometer radius. 

 22 This is really an area that we need much more 

 23 work on is the outreach side; making sure that people and 

 24 individuals get their own information to make their own 

 25 decisions. Because I know there is a lot of discussion 
 131 

 1 with what science to use. And instead of having us cram 

 2 it down people's throats is to give them the opportunity 

 3 to use this and see what they can do. 

 4 Next slide. 

 5 --o0o-- 

 6 DEPUTY SECRETARY BRUNELLO: So just to end, I 

 7 just wanted to bring back some of the areas that I really 

 8 hope that you in your powerful positions at the ARB can 

 9 help us with. 

 10 And one that we're working on very closely with 

 11 all of our climate action teams is to figure out what are 

 12 the links with mitigation. And, for example, the 

 13 renewable energy standard that you're developing is an 

 14 excellent example, where right now we in Resources Agency 

 15 and many folks across the state are figuring out where to 

 16 site large renewable energy projects in many in your 

 17 districts. And one area that we've known is an issue is 

 18 mitigation, natural habitat mitigation. 

 19 Climate change and some of the temperature 

 20 increases into these regions will significantly impact the 

 21 range of different species. And that could impact and 

 22 result in some of the large projects that are trying to be 

 23 sited right now. So it's something that we really have to 

 24 incorporate at this point in time. 

 25 Also in the 375, same thing. You can develop the 
 132 

 1 best community plan looking at how to reduce greenhouse 

 2 gas emissions. But if it's an area that we know might be 

 3 flooded in the next 20, 30, 40 years, it's something that 

 4 should be considered in those plans. 

 5 Second, I've already mentioned a little bit, but 

 6 there's so many resources here at the Air Resources Board 

 7 and so many invaluable tools that I really hope that there 

 8 is a way that we can try to link better since you're 

 9 focusing on adaptation with a lot of the mitigation 

 10 measures that you've been doing. 

 11 And third, the same thing, in looking at outreach 

 12 programs that you've been developing of how we can more 

 13 closely connect with all the great work that you've been 

 14 doing. I know we've been focused on the Google tool and 

 15 figuring out how we might use that more, but I do hope we 

 16 can find more ways to cooperate on that. 

 17 Thank you very much for the time and I look 

 18 forward to any questions. 

 19 CHAIRPERSON NICHOLS: Thank you for coming over 

 20 and for being such a good partner through the development 

 21 of this program. It's been a process that's taken place 

 22 over a period of almost a year. And the product that was 

 23 finally put forth is really a good one. 

 24 I've said to the point of being boring at CAT 

 25 team meetings that I believe that mitigation and 
 133 

 1 adaptation can't be neatly divided from each other and 

 2 that we need to focus on things that are actually part of 

 3 both. I mean, obviously there are some areas where we're 

 4 just looking to the future and planning for what the world 

 5 is going to be like under the range of likely scenarios 

 6 and then figuring out how to adapt to it. 

 7 But even there, the things we might do as 

 8 adaptation, if we are actually working on them now, also 

 9 become part of our mitigation strategies. And it's how we 

 10 talk about this and also how we actually do it, how we 

 11 incorporate it is obviously a tricky part. 

 12 I don't know if there's something new, different, 

 13 or better that we could be doing institutionally on this 

 14 front. But I tend to think that one thing that might help 

 15 us as at least a next step in terms of outreach would be 

 16 to develop some scenarios or some specific examples of 

 17 case studies of where climate thinking would potentially 

 18 have an impact in how we went about doing something in 

 19 California and a project to identify those things and then 

 20 to kind of look at what the range of options would be. 

 21 I'm sure there are people thinking about these 

 22 issues, you know, in other places, including the 

 23 universities. It's not something that's unique to state 

 24 government. But as government officials, we do have so 

 25 many opportunities on a day-to-day basis to affect how 
 134 

 1 things are going to be in the future that it seems like we 

 2 should be able to come up with some better tools than we 

 3 have right now. 

 4 And I think that finding a way to get beyond this 

 5 mitigation versus adaptation dichotomy would help in that 

 6 regard, because then it's just, you know, dealing with 

 7 climate. It's just the fact that climate is out there and 

 8 it's a problem and an issue that we're dealing with. And 

 9 it's got to be one more of those strands we factor into 

 10 our work. That's been the major thing that keeps coming 

 11 back to me as I look at the presentation as I've had an 

 12 opportunity to experience before. 

 13 I'm sure other members of the Board will have 

 14 thoughts, starting with you, Dr. Sperling. 

 15 BOARD MEMBER SPERLING: One thought -- I'm part 

 16 of that Adaptation Task Force. One of the ideas that's 

 17 been discussed to illustrate what you're talking about is 

 18 the use of the SB 375 entities, because they are dealing 

 19 with land use issues in the different metropolitan areas, 

 20 and it would be a very logical extension to also be 

 21 talking about incorporating adaptation issues, whether 

 22 it's where you put the airports or deal with the airports 

 23 and roads and so on. So we don't want to -- SB 375 is 

 24 enough of a challenge already. So I'm not proposing 

 25 anything specific here. I don't know what the Task Force 
 135 

 1 will say. But it's just an illustration of what you're 

 2 saying, Mary, that this is a way and a process to bring it 

 3 together. 

 4 CHAIRPERSON NICHOLS: Good idea. 

 5 Any other thoughts at the moment? 

 6 If not, this actually segues very nicely into our 

 7 next presentation. But before we get there, I think it 

 8 would be good to hear from the one person who did sign up 

 9 for comment on this report. I'm looking for Matt. There 

 10 you go. Matt Vander Sluis from the Planning and 

 11 Conservation League. 

 12 MR. VANDER SLUIS: Thanks so much for this 

 13 opportunity. 

 14 I just wanted to thank Tony for doing such a 

 15 great job on this report and for the Air Resources Board 

 16 for being engaged in this issue. It's a critical one that 

 17 affects a lot of the work that you all do, that we all do. 

 18 Some of the ways specifically that comes to mind as we 

 19 think about health impact assessment tool, as the Air 

 20 Resources Board works on developing that, adaptation will 

 21 be a critical component. 

 22 Again, as it was mentioned earlier, SB 375, are 

 23 we going to make sure that this round of regional 

 24 transportation plans do include climate impact 

 25 information? And I'm worried that we won't in this 
 136 

 1 particular round. So this is an area where the Board and 

 2 the staff can be particularly engaged to make sure we do 

 3 get some great case studies around the state as we make 

 4 those transportation and land use decisions. 

 5 And then thinking about the issue that you 

 6 wrestle with in terms of air quality from wildfires, so in 

 7 2003, San Bernardino County, San Diego County, $2 billion 

 8 from the wildfires from those particular years. As we 

 9 look at wildfires increasing dramatically, it's an air 

 10 quality issue that the State has to grapple with. I 

 11 encourage you to work on the integration of the two 

 12 issues. 

 13 And then particularly to make sure there is an 

 14 investment in dealing with adaptation issues. I think the 

 15 key area where we have that opportunity is to make sure 

 16 that as we put a price on greenhouse gas emissions, 

 17 allocate some portion of those revenues to wrestling with 

 18 these tough adaptation issues, particularly as they affect 

 19 natural resources and public health. 

 20 Thank you so much. 

 21 CHAIRPERSON NICHOLS: Thank you for that comment. 

 22 EXECUTIVE OFFICER GOLDSTENE: Chairman Nichols, 

 23 I'd take a moment to thank Tony, not just for his work on 

 24 this but also for the work he's been doing on forestry 

 25 issues, land use, and the renewable portfolio standards. 
 137 

 1 He's ever present and sometimes we think he should just 

 2 get an office over here. 

 3 CHAIRPERSON NICHOLS: Some of us have thought for 

 4 a while we should just annex him, but we haven't figured 

 5 out how to do that. Part of the territorial expansion of 

 6 ARB. 

 7 We have one other public commenter that we just 

 8 got the card, and that's Alex Jackson. 

 9 MR. JACKSON: Good afternoon. Thank you for 

 10 accommodating my late request. I just had a few brief 

 11 points. 

 12 Chairman Nichols, I just wanted to echo the point 

 13 that you were making that really mitigation strategies 

 14 almost are their own adaptation approach. And I think the 

 15 more we can be investing now in greenhouse gas emissions 

 16 reductions, obviously the less we're going to have to deal 

 17 with adaptation. 

 18 Along those lines, I'd just have to recommend the 

 19 Board later in the day when you talk about the cap and 

 20 trade design and the use of allowance value and I think 

 21 there's certainly some places that allowance value can be 

 22 used to get at some of those investments, some of that 

 23 preparedness that we can use to really lessen the later 

 24 more costly adaptation approaches we're going to have to 

 25 deal with. 
 138 

 1 That's it. Thank you. 

 2 CHAIRPERSON NICHOLS: Thank you very much. 

 3 Are there any other members of the audience who 

 4 wanted to speak on this? 

 5 All right. We will move along. 

 6 Thank you very much for coming over and doing 

 7 this with us. 

 8 We will now hear from the Climate Champions 

 9 Program and get an update on the Board's activities in 

 10 that arena. And coming to the floor are some of the 

 11 Climate Champions, who I recognize from previous events, 

 12 as well as one of their handlers or groupies -- or I'm not 

 13 quite sure what to call them -- the people who are working 

 14 with the Climate Champions Program from ARB. 

 15 Mr. Goldstene, do you have an introduction to 

 16 this item? 

 17 EXECUTIVE OFFICER GOLDSTENE: I do. Thank you, 

 18 Chairman Nichols. 

 19 The Climate Champions Program is part of ARB's 

 20 growing portfolio of voluntary programs to reduce 

 21 greenhouse gas emissions, which of course are a critical 

 22 element of reaching our 2020 goals. 

 23 The staff presentation will put the Champions 

 24 Program into the context of ARB's larger voluntary 

 25 efforts, provide an update on the accomplishments and 
 139 

 1 status of the program, and lay out the staff's vision for 

 2 the future of the program, including plans for building a 

 3 national program based on the California model. 

 4 Annalisa Schilla from our Research Division will 

 5 make the staff presentation. 

 6 (Thereupon an overhead presentation was 

 7 presented as follows.) 

 8 AIR POLLUTION SPECIALIST SCHILLA: Thank you, Mr. 

 9 Goldstene. 

 10 Voluntary programs that engage Californians in 

 11 greenhouse gas reduction through personal action are 

 12 critical to reaching and exceeding the 2020 target defined 

 13 in AB 32. 

 14 The California Climate Champions Program is one 

 15 key component in this voluntary actions portfolio. This 

 16 program engages young people as leaders and educators who 

 17 demonstrate practical solutions for greenhouse gas 

 18 reduction and who help lay the foundation for the very 

 19 significant greenhouse gas reductions necessary for 

 20 climate stabilization. 

 21 I will bring the Board up to speed on the 

 22 program's accomplishments to date and staff's vision for 

 23 future direction of the program. Staff hope that the 

 24 Board will increasingly recognize and utilize the Climate 

 25 Champions as a resource as we seek to raise Californian's 
 140 

 1 awareness of climate change and to engage citizens in 

 2 climate change solutions. 

 3 --o0o-- 

 4 AIR POLLUTION SPECIALIST SCHILLA: The AB 32 

 5 Scoping Plan points out that setting California on track 

 6 to a low-carbon future beyond 2020 will be a 

 7 multi-generational challenge and California will not reach 

 8 its greenhouse gas reduction goals without engaging our 

 9 citizenry in this critical effort. 

 10 The Scoping Plan recognizes that meeting our 

 11 greenhouse gas reduction goals requires a creative mix of 

 12 measures including: Regulations, market mechanisms, and 

 13 voluntary actions. 

 14 Within the broad realm of voluntary actions, ARB 

 15 staff are developing programs and resources to promote 

 16 greenhouse gas reduction in local governments, small 

 17 businesses, households, schools, and also programs 

 18 specifically targeting young people at school and beyond. 

 19 --o0o-- 

 20 AIR POLLUTION SPECIALIST SCHILLA: Just how much 

 21 greenhouse gas reduction can we expect to get from 

 22 voluntary programs? Much more research is needed, but 

 23 conservative estimates suggest that energy efficiency 

 24 alone could reduce projected energy demand in 2020 by 20 

 25 percent and reduce greenhouse gas emissions by more than 
 141 

 1 26 million metric tons of carbon dioxide equivalent. 

 2 Of course, tapping into the greenhouse gas 

 3 reduction potential of energy efficiency requires more 

 4 than technology and regulation. It requires the active 

 5 engagement of Californians in the vision of a low-carbon 

 6 future. 

 7 --o0o-- 

 8 AIR POLLUTION SPECIALIST SCHILLA: Young people 

 9 are critical to our low-carbon future. Youth have been a 

 10 catalyst for change in several areas, including political 

 11 campaigns and social movements, such as environmental 

 12 protection and continues to be influential activists, 

 13 voters, and spokespeople. 

 14 We also have a lot of other good reasons to 

 15 engage young leaders in our efforts to reduce our 

 16 collective carbon footprint now and in the future. For 

 17 instance, research shows that young people who make small 

 18 choices now to reduce energy consumption are more likely 

 19 to make more significant low-carbon choices later. 

 20 Young people spread information quickly 

 21 throughout large social networks. The average American 

 22 teenager spends seven hours a day online or texting versus 

 23 seven hours in class. 

 24 Youth are important influencers over the 

 25 climate-related behaviors of their families and peers. 
 142 

 1 And young people's energy and climate change behaviors and 

 2 attitudes can be strongly influenced by teachers and 

 3 school programs, reinforcing the need for programs like 

 4 the California Climate Champions to demonstrate practical 

 5 climate change solutions in schools. 

 6 --o0o-- 

 7 AIR POLLUTION SPECIALIST SCHILLA: California has 

 8 a number of efforts underway to engage young people in our 

 9 vision for a low-carbon future. And the Climate Champions 

 10 program is just one effort that seeks to cultivate young 

 11 leaders. This compliments other programs, such as 

 12 Cal/EPA's Education and the Environment Initiative, which 

 13 will provide K through 12 environmental curricula, 

 14 including some climate change units. The 

 15 coolcalifornia.org schools toolkit provides resources to 

 16 help school administrators, teachers, and students to save 

 17 electricity and reduce their school's carbon footprint. 

 18 And, of course, the State is actively engaged in efforts 

 19 to promote green jobs education and training. 

 20 --o0o-- 

 21 AIR POLLUTION SPECIALIST SCHILLA: Before I go 

 22 into more detail about the California Climate Champions 

 23 Program, I would like to provide a little bit of history 

 24 of the program and explain our partnership with the 

 25 British Council. 
 143 

 1 In the 2006, the U.K.'s Environmental Agency, 

 2 Defra at the time, launched a program called Climate 

 3 Change Champions aiming to engage young people as Climate 

 4 Change Ambassadors. Governor Schwarzenegger met some of 

 5 these young champions on a trip to the U.K. in the summer 

 6 of 2007, and the Governor agreed that California should 

 7 have the same kind of program. 

 8 The U.K. program was so successful that the 

 9 British Council, the U.K.'s cultural relations 

 10 organization, took over for Defra at the end of 2007 and 

 11 started spreading the Champions Program internationally, 

 12 at which point the British Council approached ARB to 

 13 become a partner. And California became the only 

 14 non-country to have a Champions Program. 

 15 Partnership with the British Council has provided 

 16 the California Champions access to a global network of 

 17 over 2,000 young people in more than 60 countries all 

 18 working on climate projects. The California Champions 

 19 developed a strong appreciation for the international 

 20 nature of the climate issue and have unparalleled 

 21 opportunities because of this partnership, including 

 22 participating in important international climate policy 

 23 events, such as the COP15 in Copenhagen. 

 24 --o0o-- 

 25 AIR POLLUTION SPECIALIST SCHILLA: The Champions 
 144 

 1 projects and activities are all part of our program goal 

 2 to promote voluntary action to stabilize the climate by 

 3 inspiring students, engaging classrooms and schools, and 

 4 helping young people make the connections among personal 

 5 action, curriculum, and the school itself. 

 6 This program goal strives towards our larger 

 7 mission of fostering voluntary behavior change to reduce 

 8 greenhouse gas emissions in California and aims to build 

 9 the capacity of young people to tackle complex 

 10 interdisciplinary problems and to incorporate an acute 

 11 environmental awareness into whatever career path they 

 12 follow. 

 13 We have seen our 25 California Champions make 

 14 great strides in their projects. And moving forward, we 

 15 plan to expand the program to work more closely with other 

 16 ongoing state efforts, such as the Education and the 

 17 Environment Initiative, also known as EEI, and to engage 

 18 more students and teachers by creating a competition that 

 19 provides an incentive for teachers to link champions 

 20 climate curriculum with classroom-based projects. 

 21 We will continue selecting individual champions 

 22 to serve as Climate Change ambassadors and to engage with 

 23 the international network of champions through the British 

 24 Council. 

 25 --o0o-- 
 145 

 1 AIR POLLUTION SPECIALIST SCHILLA: To fulfill our 

 2 program goal of linking personal action to curriculum in 

 3 the school, we have laid out these program objectives. We 

 4 aim to develop the leaders of the climate generation by 

 5 training champions from project management, climate change 

 6 policy, and media interaction to provide an opportunity 

 7 for youth to be heard on climate issues. 

 8 We also strive to instill in youth the need for 

 9 climate change initiatives by educating them on the 

 10 science, policy, and solutions to climate change by 

 11 promoting climate change education in schools through 

 12 project-based learning that will compliment EEI's ongoing 

 13 efforts. 

 14 And, finally, we intend this program to support 

 15 local, national, and international climate change 

 16 initiatives and policies as we continue to provide 

 17 opportunities for youth leaders to attend high level 

 18 events where they can provide a youth perspective in 

 19 keeping with our tradition of sending students to 

 20 Governor's Global Climate Summits, COP15, as well as air 

 21 districts, state agencies, and other events. 

 22 --o0o-- 

 23 AIR POLLUTION SPECIALIST SCHILLA: In order to 

 24 enable the Champions to be as successful as possible and 

 25 to fulfill our program objectives, program activities are 
 146 

 1 designed to support and train these young people. 

 2 Champion projects are a central and required component of 

 3 the program. And I will briefly share some of their work 

 4 with you in a moment. 

 5 Champions are selected as high school students, 

 6 but some begin college during their year-and-a-half in the 

 7 program, so many start projects when they start college or 

 8 bring their high school projects with them. 

 9 Champions receive training at an orientation day 

 10 and at climate camp where they learn about climate change 

 11 policy, visit climate science laboratories, and receive 

 12 training on communication, media interaction, and project 

 13 management. 

 14 The champions give climate change presentations 

 15 and media interviews over the course of their 

 16 year-and-a-half in office, and several report that 

 17 introducing themselves as California Climate Champions 

 18 lends legitimacy to their climate change work. 

 19 Champions have spoken at the Governor's Global 

 20 Climate Summits and at air district and other State agency 

 21 events and have been featured in a number of newspapers, 

 22 such as the Contra Costa Times and the San Diego Union 

 23 Tribune, as well as blogs such as KQUE's Climate Watch and 

 24 TreeHugger. Champions also have their own blog at 

 25 climatechamps.org and have a Twitter account and Facebook 
 147 

 1 page. 

 2 In collaboration with the British Council, 

 3 Champions have exciting international opportunities, such 

 4 as the COP15 where two California Champions were among 200 

 5 British Council youth delegates, and participate in a 

 6 variety of other high-profile policy and youth events as 

 7 well as other international climate camps and workshops. 

 8 Champions are also encouraged to form international 

 9 project collaborations with champions in other counties. 

 10 --o0o-- 

 11 AIR POLLUTION SPECIALIST SCHILLA: Champion 

 12 projects span a wide range of topics from scientific 

 13 research into new energy technologies and fuels, designing 

 14 hip clothing or writing plays to raise climate change 

 15 awareness, regular columns or segment in local news media, 

 16 promoting water conservation in arid parts of California, 

 17 connecting school environmental clubs so we can have a 

 18 bigger impact, and a whole host of projects designed to 

 19 raise awareness of climate change in schools, including 

 20 after-school programs, green events, demonstration 

 21 projects, campaigns, and classroom education. 

 22 Two of our Champions, Soraya Okuda and Adam 

 23 Raudonis, are here today to share their projects and 

 24 program experience with you. I will yield the floor to 

 25 them now and wrap up my presentation after their 
 148 

 1 presentations have concluded. Soraya? 

 2 --o0o-- 

 3 MS. OKUDA: Thank you, Annalisa. And thank you 

 4 Board members. 

 5 Hello. My name is Soraya Okuda, and I'm from 

 6 San Francisco. 

 7 At first, I geared my project toward composting 

 8 in a local mall with the hope that people's consuming and 

 9 waste habits would change over time. As my vision for the 

 10 project had started implementation, my project as a 

 11 Climate Champion took a different course. And it has 

 12 evolved into an education and gardening project with kids. 

 13 --o0o-- 

 14 MS. OKUDA: After volunteering and tutoring 

 15 children on my own time, I have realized that I can have a 

 16 much greater impact on people's behavior by focusing my 

 17 efforts on teaching children about conservation concepts. 

 18 Much like the Climate Champions Program puts emphasis on 

 19 teaching youth and actively encouraging us, I hope my 

 20 project will instill the same concept of nurturing young 

 21 kids as well as inspire them to conserve and take an 

 22 active role. 

 23 Over the next few months, I hope to collaborate 

 24 with a local school by creating lesson plans and educating 

 25 children in various basic environmental and gardening 
 149 

 1 aspects. 

 2 Last Saturday, I volunteered at San Francisco's 

 3 Garden for the Environment to get a better understanding 

 4 of basic gardening as well as ideas for lesson plan. 

 5 --o0o-- 

 6 MS. OKUDA: With the help of the Climate 

 7 Champions Program, I have begun to think more about 

 8 conservation practices even when traveling. I recently 

 9 went on vacation with my family to Buenos Aires, 

 10 Argentina. And although I was sightseeing, I couldn't 

 11 help but think about the various practices I observed. 

 12 For example, the process of taking out trash was 

 13 vastly different from those I've seen in San Francisco. 

 14 As seen in this slide above, rather than having a trash 

 15 collecting company dump bins into their truck, the trash 

 16 bags of residents were placed out on the streets every 

 17 night. And every night I saw people pushing carts, 

 18 rummaging, and sorting through the trash to find 

 19 recyclables to exchange for money. While the disparity in 

 20 wealth was sad for me to see, I learned later on that the 

 21 city of Buenos Aires had been hiring the knowledgeable 

 22 cart pushers as part of the recycling and waste management 

 23 initiative. 

 24 With this in mind, I felt hopeful seeing 

 25 governments working with the local people in adapting 
 150 

 1 eco-conscious practices and providing proper compensation 

 2 for their efforts. 

 3 While I had a main understanding of climate 

 4 change prior to joining this program, there wasn't much 

 5 that I felt I could do. But after being given the 

 6 opportunities to visit the U.C. San Diego labs, met with 

 7 numerous experts in various fields, as well as the work 

 8 they do every day, and get to know people my age who are 

 9 working on climate change projects worldwide, the process 

 10 for slowing climate change has become much more tangible 

 11 to me. 

 12 The Climate Champions Program has not only 

 13 provided the resources for youth like myself to start our 

 14 projects, but has inspired us to create them, which as 

 15 students otherwise might have seemed too daunting to 

 16 pursue. 

 17 I feel incredibly fortunate and thankful to be a 

 18 part of this Climate Champion Program, not only for the 

 19 great support it has provided me, but to be among a group 

 20 of bright students who are striving to make a difference 

 21 and are a model for others. 

 22 Thank you. 

 23 CHAIRPERSON NICHOLS: Thank you. 

 24 MR. RAUDONIS: Thank you, Board members. 

 25 Hi. My name is Adam Raudonis. I'm a senior at 
 151 

 1 West Lake High School, and I was selected in 2008 as a 

 2 California Climate Champion. What I thought would just be 

 3 another opportunity for environmental community service 

 4 ended up defining my high school experience. It has given 

 5 me the tools to reach my full potential as a student and 

 6 achieve what were only dreams just a few years back. 

 7 My Climate Champions project, Students for Solar 

 8 Schools, started with the simple ambition to put solar 

 9 panels on my high school, yet it has now grown into an 

 10 international effort that unites students under a common, 

 11 specific, and achievable goal. 

 12 For my high school, I have raised $5,900 in cash 

 13 and obtained an estimated 45,00 in labor and material 

 14 donations. If the local inspector permits the site, then 

 15 we will install a 6.3 kilowatt DC photovoltaic solar array 

 16 this semester, which will be the world's largest 

 17 student-led and funded solar installation on a school. 

 18 Yet, one project will not impact climate change, 

 19 but a movement might. What makes Students for Solar 

 20 Schools unique is its online network of currently over 15 

 21 schools that are now sharing knowledge, resources, and 

 22 making the task of installing solar on schools a whole 

 23 light easier. 

 24 Through the website I created, 

 25 studentsforsolarschools.org, I'm able to share success 
 152 

 1 stories, such as fellow California Climate Champion Jason 

 2 Bade who, behind the scenes, since ninth grade lobbied his 

 3 district to eventually invest $33 million in a solar and 

 4 roof upgrade, or Pam Chang, the Oak Park Students for 

 5 Solar Schools leader, who is now close to installing a 2.8 

 6 kilowatt array on her local elementary school's 

 7 greenhouse. And the whole time, the California Climate 

 8 Champions Program has been there to support the project by 

 9 regularly checking in, connecting me with key people, and 

 10 most importantly, allowing me to expand my audience. 

 11 I have had the opportunity to address the 

 12 Governor's Global Climate Summit both years, attend the 

 13 Copenhagen Climate Conference, and speak with some of the 

 14 writers of AB 32. Being so close to the individuals who 

 15 are actually making the key decisions when it comes to 

 16 climate change makes me recognize that I can assume that 

 17 role one day, too, which makes me conclude that what's 

 18 most important is not the watts of solar installed today, 

 19 but the leaders of tomorrow that are made. 

 20 The impact of the Climate Champions Program is 

 21 exponential in that it grooms bold leaders who are 

 22 networked, impassioned, and capable to meet the greatest 

 23 environmental challenges any generation has ever faced. I 

 24 do not know of a more solid investment than the very 

 25 mechanism that inspires and enables future leaders to 
 153 

 1 tackle climate change. All I can hope is that every 

 2 student gets the same opportunity I'm grateful that the 

 3 California Climate Champions Program has given me. 

 4 CHAIRPERSON NICHOLS: Thank you very much. 

 5 (Applause) 

 6 AIR POLLUTION SPECIALIST SCHILLA: Moving forward 

 7 with the program, staff will continue to foster Champion 

 8 projects that focus on energy, transportation, waste, and 

 9 education and will strive to encourage youth, teachers, 

 10 and school administrators to replicate Champion's projects 

 11 in other schools and promote new projects that support 

 12 Scoping Plan measures and network projects internationally 

 13 with other British council Climate Champions projects. 

 14 In order to continue to multiply the impact of 

 15 this program, we are working with the British Council to 

 16 engage key partners in California, including other state 

 17 agencies, air districts, and various NGOs to create the 

 18 most effective curriculum and project-based program to 

 19 launch in schools this coming fall, which will compliment 

 20 the EEI initiative curriculum with projects and additional 

 21 incentives for classrooms to engage in climate change 

 22 learning. 

 23 We aim to increase the program's impact and 

 24 participation significantly in the coming years. We are 

 25 also working to create a program model that could be 
 154 

 1 easily replicated at the national level or in other 

 2 states. 

 3 --o0o-- 

 4 AIR POLLUTION SPECIALIST SCHILLA: The California 

 5 Climate Champions Programs brings a new dimension to 

 6 California's consistent leadership on the issue of climate 

 7 change and innovation to reduce greenhouse gas emissions. 

 8 The current and future Champions are working to fulfill 

 9 ARB's goal of engaging all Californians in our collective 

 10 effort to reduce greenhouse gas emissions and protect our 

 11 climate. 

 12 We agree with Mary Nichols, who has pointed out 

 13 that, "We can't regulate our way out of climate change," 

 14 underscoring the critical importance of a multifaceted 

 15 approach to greenhouse gas reduction. In this complex 

 16 effort, the reach of young people is critical to the 

 17 fulfillment of ARB's mission. And it's critical that we 

 18 be successful in fostering this emerging generation of 

 19 climate conscious citizens. The more successful the 

 20 Champions are, the better the prospects for all of our 

 21 future. 

 22 We look forward to continuing and growing this 

 23 program as part of the state's larger efforts to engage 

 24 the emerging climate generation. We hope the Board will 

 25 increasingly recognize and draw on the Climate Champions 
 155 

 1 as a resource and engaging Californians in climate change 

 2 solutions and look forward to many future opportunities 

 3 for young people to contribute to the climate change 

 4 dialogue. Thank you. 

 5 CHAIRPERSON NICHOLS: Thank you very much for 

 6 that presentation. 

 7 You did mention some of the other voluntary 

 8 programs that are underway at the moment, but I think it's 

 9 worth noting that this is in many ways a great program to 

 10 talk about, because the Climate Champions themselves are 

 11 very engaging. And generally speaking, people are 

 12 enthusiastic about young people leading the way on big 

 13 problems. And we're very grateful to them for having been 

 14 willing to engage with us in this program as well. It 

 15 certainly is mutually beneficial. But you might just talk 

 16 about some of the other voluntary programs. I think you 

 17 slid over that perhaps a little quickly. 

 18 AIR POLLUTION SPECIALIST SCHILLA: In terms of 

 19 the other Champion projects? 

 20 CHAIRPERSON NICHOLS: Well, no. Really about the 

 21 other programs that your group is working with. 

 22 AIR POLLUTION SPECIALIST SCHILLA: So we have our 

 23 coolcalifornia.org web portal hosts toolkits for local 

 24 governments, small businesses, households, schools, and 

 25 young people. Includes tools and resources for all of 
 156 

 1 those different groups to reduce their greenhouse gas 

 2 emissions voluntarily. So those are definitely several 

 3 that we're involved in. 

 4 CHAIRPERSON NICHOLS: Okay. Go ahead. 

 5 RESEARCH DIVISION MANAGER MORA: So did you want 

 6 to know about the case studies that we're trying -- the 

 7 same with the Champions Programs is we're trying to show 

 8 schools, local governments, and small businesses that 

 9 greenhouse gas reductions are achievable on a voluntary 

 10 basis. So we have a whole effort on coolcalifornia.org 

 11 that show how to lead by the example and the others are 

 12 doing their part for the climate. 

 13 CHAIRPERSON NICHOLS: I think it's just helpful 

 14 to see that this is just one of a variety of different 

 15 approaches we're taking. And obviously it's very small, 

 16 because you can only work with a relatively small number 

 17 of students at one time. But it's a good showcase for 

 18 some of the other work as well. Thank you. 

 19 Questions? Comments? 

 20 Yes, Mayor Loveridge. 

 21 BOARD MEMBER LOVERIDGE: It really follows from 

 22 your question of scale. What Soraya and Adam presented 

 23 were really powerful and the multiplication of that I 

 24 think is important. But how many Climate Champions do we 

 25 have? 
 157 

 1 AIR POLLUTION SPECIALIST SCHILLA: We currently 

 2 have 25 Champions. We treat them as Champions for life. 

 3 So as we continue to select more, many of them remain 

 4 engaged with the program beyond their minimum commitment. 

 5 BOARD MEMBER LOVERIDGE: Each year -- 

 6 AIR POLLUTION SPECIALIST SCHILLA: We selected 15 

 7 in 2008 and 10 in 2009. And we have not selected any for 

 8 2010. 

 9 BOARD MEMBER LOVERIDGE: These are high school 

 10 students? 

 11 AIR POLLUTION SPECIALIST SCHILLA: Correct. We 

 12 selected 15 to 19-year-old students. 

 13 BOARD MEMBER LOVERIDGE: If I wanted to be a 

 14 Climate Champion, assuming I was in high school, how would 

 15 I do it? 

 16 AIR POLLUTION SPECIALIST SCHILLA: Our 

 17 application basically is a simple proposal of what you 

 18 would work on as a Climate Champion to reduce emissions 

 19 and raise awareness of climate change and also requires 

 20 some demonstration of basic understanding of climate 

 21 change and the importance of tackling this problem. We 

 22 select the best applicants that we get electronically and 

 23 we interview them in person. 

 24 CHAIRPERSON NICHOLS: And the British Council as 

 25 a partner has done I think most of the legwork in terms of 
 158 

 1 outreach to get people to apply. And they, I know, have 

 2 put up some funding for travel for the students and so on. 

 3 AIR POLLUTION SPECIALIST SCHILLA: All the 

 4 international travel is through the partnership with the 

 5 British Council. 

 6 BOARD MEMBER LOVERIDGE: Seems the number and 

 7 attention should be increased. 

 8 But could I ask Soraya and Adam, how did you 

 9 happen to hear about the program and apply? 

 10 MS. OKUDA: I heard about the program through my 

 11 high school environmental science teacher. She made a 

 12 brief announcement in class, and I thought it seemed like 

 13 an exciting opportunity, so I went for it. 

 14 MR. RAUDONIS: I heard about it from a friend 

 15 through a friend, who heard it from a teacher. 

 16 BOARD MEMBER LOVERIDGE: You know the science 

 17 project which really, I mean, sort of mobilize many 

 18 people. And it seems to me it would be helpful. This was 

 19 not simply a small number of Champions, but somehow we can 

 20 figure out how we can multiply the number. 

 21 AIR POLLUTION SPECIALIST SCHILLA: That's one of 

 22 our program goals moving forward is to really develop a 

 23 component of the program that incentivizes classrooms to 

 24 take on projects as a group so that more students can be 

 25 involved and the teachers are participating as well just 
 159 

 1 to really help spread the word and engage more students. 

 2 And our hope is to continue selecting individual Champions 

 3 who can participate in this international network and 

 4 other opportunities but to really have this program touch 

 5 and influence a lot more climate change learning through 

 6 schools. 

 7 CHAIRPERSON NICHOLS: Any other comments? 

 8 If not, I think you got a round of applause, 

 9 we'll give you another one. 

 10 (Applause) 

 11 CHAIRPERSON NICHOLS: Great work. Thank you. 

 12 Okay. 

 13 We are going to hear now from some of the ARB 

 14 staff who have been valiantly wrestling with the issues 

 15 related to creating a greenhouse Cap and Trade Program 

 16 Board members undoubtedly have been hearing a lot about 

 17 this issue from your friends and neighbors in the press. 

 18 And I think we all know that the very term has become kind 

 19 of loaded in some ways. And hopefully Kevin Kennedy, 

 20 who's the head of our Office of Climate Change, will be 

 21 able to give us some context and update us on the work 

 22 that's been going on at the staff level. This is kind of 

 23 a preview of coming attractions in terms of what the Board 

 24 is going to be dealing with this year. 

 25 Do you want to introduce this? 
 160 

 1 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 

 2 Nichols. 

 3 The purpose of this item is to brief the Board on 

 4 the progress in developing a Cap and Trade Program 

 5 consistent with your direction at the time you adopted the 

 6 AB 32 Scoping Plan in December 2008. We want to keep the 

 7 Board fully briefed as we continue to move this program 

 8 towards reality. 

 9 Under AB 32, the Global Warming Solutions Act of 

 10 2006, California must reduce greenhouse gas emissions to 

 11 1990 levels by 2020. The Scoping Plan calls for a 

 12 California Cap and Trade Program that links with other 

 13 regional partner jurisdictions in the Western Climate 

 14 Initiative to create a regional market system. A Cap and 

 15 Trade Program is one of the key measures that California 

 16 will employ to reduce the state's overall greenhouse gas 

 17 emissions. As adopted in the Scoping Plan, the Cap and 

 18 Trade Program would establish a cap covering about 85 

 19 percent of the state's greenhouse gas emissions. The 

 20 program provides incentives for industry to seek the most 

 21 cost-effective emissions reductions. The cap and trade 

 22 regulation will set up the framework and requirements for 

 23 participation in the program. 

 24 Today's overview is the first in a series of 

 25 briefings we'll provide the Board over the course of this 
 161 

 1 year on different aspects of the program. At your 

 2 February meeting, staff will present a brief overview of 

 3 how offsets would work in a Cap and Trade Program. 

 4 Offsets are emission reductions that entities in a Cap and 

 5 Trade Program would be able to use to help meet the 

 6 regulatory compliance obligations. At the March Board 

 7 meeting, staff will present its report on the economic 

 8 analysis update for the Scoping Plan, and the March 

 9 meeting will also include a presentation by members of the 

 10 Economic and Allocation Advisory Committee who will report 

 11 their recommendations for allocating allowances and 

 12 distributing allowance value from a Cap and Trade Program. 

 13 They will also comment on the revised Scoping Plan 

 14 economic analysis. We hope these presentations are 

 15 helpful for your consideration as we move towards October 

 16 and the regulations comes before you. 

 17 Ms. Lucille Van Ommering, the Manager of the 

 18 Program Development Section and our Office of Climate 

 19 Change, will now present today's item. Lucille. 

 20 (Thereupon an overhead presentation was 

 21 presented as follows.) 

 22 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 23 Thank you, Mr. Goldstene. Good morning, Chairman Nichols 

 24 and Board members. 

 25 Six months ago, staff briefed you on the Scoping 
 162 

 1 Plan's greenhouse gas cap and trade measure. Since then, 

 2 we have made significant progress on developing a 

 3 broad-based program that addresses the state's 

 4 contribution to climate change. 

 5 This is the first in a series of updates to you 

 6 on the cap and trade proposal that will culminate in a 

 7 proposed regulation we'll ask you to consider in October. 

 8 Today, I'll be updating you on staff's 

 9 preliminary draft regulatory proposal, which includes 

 10 staff's current thinking on the design elements of the 

 11 regulation. I will also describe how program development 

 12 is being supported through the advice and review of a Blue 

 13 Ribbon Committee of outside experts, the Economic and 

 14 Allocation Advisory Committee. 

 15 --o0o-- 

 16 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 17 The Scoping Plan you adopted in December 2008 called for 

 18 the creation of a broad-based Cap and Trade Program that 

 19 provides a fixed limit on GHG emissions in California. 

 20 Its design is geared to drive innovation and use market 

 21 forces to find least cost solutions to reducing greenhouse 

 22 gas emissions. 

 23 The Scoping Plan also calls for the California 

 24 Program to link with those of our partners in the Western 

 25 Climate Initiative. The Western Climate Initiative, or 
 163 

 1 WCI, is comprised of seven western states and four 

 2 Canadian provinces. 

 3 California has been actively engaged for the past 

 4 two years with our WCI partners in establishing a regional 

 5 program. The goal of a regional Cap and Trade Program is 

 6 to collectively reduce greenhouse gas emissions. Similar 

 7 to the California target, the regional program would cover 

 8 sources that encompass about 90 percent of the region's 

 9 emissions, and when fully implemented, would nearly double 

 10 the reductions of a California-only program. 

 11 Our collaboration with the WCI has contributed to 

 12 development of our thinking on the California cap and 

 13 trade proposal. In turn, ARB's development of a draft 

 14 rule is progress for all of WCI as the program moves 

 15 forward. We expect a subset of WCI partners to start in 

 16 2010 as we ourselves are proposing. Others will join as 

 17 they are ready. 

 18 The diverse views of the WCI partners are 

 19 resulting in a program with broad appeal that we expect 

 20 others will join. In fact, WCI is also in discussions 

 21 with representatives of the Midwest Governor's Initiative 

 22 and the Regional Greenhouse Gas Initiative in the 

 23 northeast about possible linkage to create an even broader 

 24 market. 

 25 California's Cap and Trade Program will be 
 164 

 1 designed to complement health-based air quality programs 

 2 and environmental justice policies. As with all of ARB's 

 3 regulations, staff will consider the effects of the 

 4 program on the California economy and public health. 

 5 To assist ARB in developing a Cap and Trade 

 6 Program, Cal/EPA Secretary Adams and Chairman Nichols 

 7 created a 16-member panel of economic, financial, and 

 8 policy experts to evaluate various cap and trade 

 9 allocation strategies and to review staff's economic 

 10 analysis update on the AB 32 Scoping Plan. The Economic 

 11 and Allocation Advisory Committee, or EAAC, started work 

 12 in May of last year by carefully considering various 

 13 options for freely distributing or auctioning allowances, 

 14 and if auctioned, for distributing auction revenues. 

 15 Their allocation recommendations were released earlier 

 16 this month. You will hear more about those 

 17 recommendations at your March meeting. 

 18 Broadly speaking, the Committee recognized the 

 19 need to use the allocation system to address possible 

 20 effects on the competitiveness of California's industries. 

 21 It also recognized the need to help address the potential 

 22 for increased pollution and to protect low-income 

 23 communities from adverse economic effects. 

 24 The Committee also recommended that the bulk of 

 25 allowances be auctioned with revenues being returned 
 165 

 1 directly to Californians and invested in ways that help 

 2 meet the overall objectives of AB 32. EAAC has been 

 3 working closely with staff on the economic analysis update 

 4 of the Scoping Plan and plans on holding a workshop on 

 5 ARB's economic analysis in February. 

 6 In March, EAAC will release an appendix to 

 7 staff's economic report to the Board for further public 

 8 discussion. 

 9 --o0o-- 

 10 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 11 This table, which is a simplified version of one in the 

 12 Scoping Plan, shows that the Cap and Trade Program works 

 13 in conjunction with many complementary policies that also 

 14 achieve reductions from the cap sectors. 

 15 The Scoping Plan calls for measures to reduce 

 16 emissions from sectors in the Cap and Trade Program by 

 17 more than 245 million metric tons, 110 of those would come 

 18 from complementary measures, and the remaining 35 would 

 19 come from additional reductions from the Cap and Trade 

 20 Program itself. 

 21 --o0o-- 

 22 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 23 The public has been an integral part of rule development 

 24 since day one, and we will continue to consult with all 

 25 affected stakeholders throughout the process. 
 166 

 1 In 2009 alone, staff held 21 public meetings and 

 2 received hundreds of comments on program concepts and 

 3 proposed design elements. ARB carefully considered both 

 4 written and verbal comments as we developed our initial 

 5 proposal, in which we sought to strike the right balance 

 6 between environmental effectiveness and the need to avoid 

 7 economic disruption as the program is implemented. 

 8 Staff worked with WCI partner jurisdictions to coordinate 

 9 our work with regional efforts. 

 10 Needless to say, the California Legislature has 

 11 also shown a keen interest in ARB's climate change 

 12 programs. Over the past year, Chairman Nichols and our 

 13 Executive Officers have participated in seven legislative 

 14 hearings on AB 32 and the cap and trade proposal. 

 15 In November 2009, staff released a preliminary 

 16 draft regulation holding a workshop on the draft in 

 17 December. This early look at the Cap and Trade Program 

 18 reflects many of the comments received by stakeholders 

 19 over the past year. It also reflects an emerging 

 20 consensus by WCI partners over what key elements of the 

 21 program should look like. 

 22 Since our December workshop and as of today, 

 23 staff has received 127 comment letters. Additional 

 24 comments continue to come in. We are also continuing to 

 25 meet with several stakeholder groups on their comments. 
 167 

 1 The EAAC has also had an active schedule over the 

 2 last year holding nine open business meetings in which the 

 3 public comment was invited and considered. 

 4 The EAAC's report on allocation strategies was 

 5 released earlier this month. As I mentioned, they will 

 6 present their recommendations to you in March. 

 7 Also, EAAC Committee members are reviewing 

 8 staff's economic analysis update for the Scoping Plan and 

 9 will hold a workshop on their review next month prior to 

 10 staff's presentation to the Board in March. 

 11 --o0o-- 

 12 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 13 Staff will encourage continued opportunities for public 

 14 involvement through the remainder of the rule development 

 15 process. 

 16 Throughout the course of this year, we will 

 17 continue to solicit public input on a variety of proposed 

 18 rule elements and technical analyses. This will include 

 19 discussions on how the cap would be set, how to minimize 

 20 the potential of emissions increases from unregulated 

 21 imports that compete with California covered sources, the 

 22 proposed allocation strategies under the cap, and likely 

 23 compliance strategies available to covered sources. 

 24 We also plan to hold public meetings on the 

 25 public health analysis and the economic analysis update to 
 168 

 1 discuss how these evaluations will be used in program 

 2 design. 

 3 Finally, we expect to hold workshops on revisions 

 4 to ARB's mandatory reporting requirements. These will be 

 5 needed to harmonize the existing requirements with the cap 

 6 and trade regulations. 

 7 --o0o-- 

 8 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 9 From now until October, staff will also be bringing 

 10 progress updates to the Board. 

 11 In February, we will provide an overview of the 

 12 creation issuance of and use of offsets in a cap and trade 

 13 program. 

 14 In March, the Board will hear from EAAC on their 

 15 recommendations for allocation distribution and the use of 

 16 auction revenues. 

 17 Also in March, staff will present an updated 

 18 economic analysis of the Scoping Plan. 

 19 In June, staff will brief the Board on setting 

 20 the emissions cap and proposed allowance allocation 

 21 strategies. 

 22 Finally, before you consider the rulemaking 

 23 package in October, we'll brief you again in September on 

 24 our rulemaking progress and stakeholder comments received 

 25 to date. 
 169 

 1 With each general update, staff will also keep 

 2 you apprised on ongoing work to establish a regional Cap 

 3 and Trade Program through the Western Climate Initiative. 

 4 --o0o-- 

 5 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 6 Staff released our preliminary draft regulation, or PDR, 

 7 in November 2009. This was nearly a full year before 

 8 we'll ask you to consider a proposed rule in October of 

 9 this year. 

 10 We did this to maximize the opportunity for 

 11 public comment and to advance the public dialog on the 

 12 proposed structure and content of a key Scoping Plan 

 13 measure. 

 14 The PDR includes preliminary regulatory language, 

 15 narrative text, and placeholders. Proposed regulatory 

 16 language details the administrative process and regulatory 

 17 structure of the program. Narrative text describes 

 18 concepts for discussion for regulatory provisions that 

 19 staff are still considering. 

 20 Placeholders are also inserted where language is 

 21 still under development or awaits staff consideration of 

 22 other work in progress, such as EAAC recommendations and 

 23 the public health analysis. 

 24 --o0o-- 

 25 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 
 170 

 1 The next several slides provide a general overview of the 

 2 Cap and Trade Program structure as reflected in the 

 3 preliminary draft regulation. 

 4 Cap and trade is a regulatory mechanism that 

 5 establishes a cap or upper limit on an amount of 

 6 greenhouse gas emissions allowed to be released into the 

 7 environment. The cap, which is also called an allowance 

 8 cap or allowance budget, is the total number of California 

 9 greenhouse gas allowances that ARB would issue over a 

 10 given period of time. The cap would be divided into 

 11 annual budgets, which specify the number of allowances ARB 

 12 would allocate each year from 2012 through 2020 and 

 13 beyond. 

 14 A covered source is an entity that would be 

 15 regulated under the Cap and Trade Program, such as a 

 16 cement plant or a distributor of natural gas. It is 

 17 important to note that the cap applies to the total number 

 18 of allowed greenhouse gas emissions that can be emitted in 

 19 the aggregate by covered sources in any one compliance 

 20 period. It is not a cap on individual emitting sources. 

 21 Instead, covered entities would be required to hold 

 22 sufficient allowances and offsets to cover their emissions 

 23 for each compliance period. 

 24 Annual allowance budgets will be contained in the 

 25 final proposed rule that is released for public review in 
 171 

 1 late September 2010 and will reflect the latest 2009 

 2 emissions reporting data. Our intent is to establish the 

 3 cap in 2012 at our best estimate of what emissions would 

 4 be that year, so that relatively few reductions would be 

 5 needed in the early years of the program. We believe that 

 6 this type of phase-in is an important element of avoiding 

 7 unacceptable near term economic costs. 

 8 --o0o-- 

 9 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 10 The staff is proposing to include the following sectors in 

 11 the Cap and Trade Program: 

 12 Large sources that are industrial sources that 

 13 emit 25,000 metric tons of CO2 equivalent per year or 

 14 greater; 

 15 Electricity delivered to the California grid 

 16 including imported electricity; 

 17 Natural gas and propane distributors and 

 18 providers and transportation fuels providers. 

 19 The November 2009 draft regulation leaves open 

 20 whether to bring all sectors into the program in 2012 or 

 21 stagger these sectors in over two compliance periods with 

 22 transportation and other fuel providers phased in in 2015. 

 23 CO2E or equivalent emissions include the six 

 24 greenhouse gases identified in the Kyoto Protocol as well 

 25 as nine nitrogen trifluridine which is identified in 
 172 

 1 Senate Bill 104, which was sponsored by Senator Oropeza. 

 2 Nitrogen trifluridine is a greenhouse gas used in the 

 3 semiconductor industry with a global warming potential 

 4 many thousands of times that of CO2. 

 5 --o0o-- 

 6 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 7 Allowances are finite tradable permits that ARB would 

 8 establish at the beginning of the program. Each year, ARB 

 9 would issue an aggregate number of allowances for a 

 10 one-time right to emit these gasses. At defined periods, 

 11 such as every year or every three years, ARB would require 

 12 covered entities to turn in allowances equal to their 

 13 greenhouse gas emissions. And sometimes you'll hear me 

 14 talk about turn in. Other times, I'll use the term 

 15 surrender. They're both the same. 

 16 Covered entities would also be permitted to use a 

 17 limited number of high quality offset credits for a small 

 18 part of this obligation, and we'll describe the concept of 

 19 offsets shortly. 

 20 Under a regional Cap and Trade Program, such as 

 21 the WCI, allowances issued by regional partners would also 

 22 be tradable among all sources covered under the regional 

 23 link, including covered entities in California. 

 24 While the WCI is the most likely opportunity for 

 25 linking to other jurisdictions, California is also engaged 
 173 

 1 in preliminary discussions with northeastern states who 

 2 have an active regional cap and trade program in place 

 3 today, that's the Regional Greenhouse Gas Initiative, or 

 4 RGGI, or states in the midwest who are seriously 

 5 contemplating such a move through a Midwestern Regional 

 6 Greenhouse Gas Reduction Accord. 

 7 --o0o-- 

 8 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 9 This graph illustrates what the allowance cap would look 

 10 like if we were to phase covered sectors into the program. 

 11 This is illustrative only. However, as you can see, the 

 12 cap does not set an emissions limit over any specific 

 13 sources. Rather, it sets an overall cap on the number of 

 14 allowances or permits to emit. 

 15 ARB would decrease the total number of allowances 

 16 each year and, thus, lower the emissions cap. Covered 

 17 entities could either reduce their emissions or compete 

 18 for increasingly scarce allowances. 

 19 --o0o-- 

 20 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 21 How would allowances be distributed in the California 

 22 program? ARB could either freely distribute allowances to 

 23 covered entities or auction them. 

 24 The Scoping Plan calls for a minimum of 10 

 25 percent of the total allowances to be auctioned in the 
 174 

 1 first year of the program, in 2012, when the program 

 2 starts and a minimum of 25 percent auction by 2020. 

 3 However, one of the EAAC's key recommendations is 

 4 to primarily rely on auctions for allowance distribution. 

 5 The EAAC also recommends that the program address leakage 

 6 possibly by distributing a portion of allowances for free 

 7 to some covered entities. 

 8 In the cap and trade context, emissions leakage 

 9 is a shift of greenhouse gas emissions from capped sources 

 10 to higher emitting sources not subject to one 

 11 jurisdiction's climate policies. This can occur when 

 12 climate policies in one jurisdiction result in companies 

 13 relocating to other jurisdictions without a climate policy 

 14 to take advantage of the economic benefits. 

 15 If public demand for the goods that are produced 

 16 remains the same, global greenhouse gas emissions could 

 17 actually increase while hurting the California economy. 

 18 Staff is considering the recommendations 

 19 contained in the EAAC report to minimize leakage. We're 

 20 also evaluating whether the EU's trading system and the 

 21 Australian proposal's way of addressing leakage would be 

 22 adaptable to a California model. 

 23 --o0o-- 

 24 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 25 What are offsets? 
 175 

 1 An offset is a credit that represents a 

 2 reduction, avoidance, or sequestration of carbon dioxide 

 3 or other GHG emissions that result from an activity not 

 4 covered by the cap and that can be measured, quantified, 

 5 and verified. This credit can then be sold and used by a 

 6 covered entity to meet a portion of its compliance 

 7 obligation under the Cap and Trade Program. Ensuring the 

 8 environmental integrity of offset credits is a major issue 

 9 associated with including them in cap and trade. 

 10 To ensure to the public and covered entities that 

 11 offset credits provide high environmental quality, the 

 12 broader Cap and Trade Program would establish offset rules 

 13 and quantification methodologies or protocols that 

 14 projects must meet in order to qualify for a credit. 

 15 These regulatory criteria and protocols must ensure that 

 16 emissions reductions, avoidance, and greenhouse gas 

 17 sequestration from such projects are real, additional, 

 18 quantifiable, permanent, verifiable, and enforceable. 

 19 A few examples of activities that could 

 20 potentially generate offsets include planting trees on 

 21 land not previously forested or capturing and making use 

 22 of methane from livestock operations. 

 23 This Board has approved protocols for voluntary 

 24 offsets from such project types. While Board approved, 

 25 these voluntary protocols may need to go through an 
 176 

 1 additional review before they meet criteria under the 

 2 regulatory Cap and Trade Program. 

 3 Once the criteria are met, these credits could be 

 4 used by covered entities to fulfill a portion of their 

 5 compliance obligation in addition to the use of offsets. 

 6 --o0o-- 

 7 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 8 What role would offsets play in a Cap and Trade Program? 

 9 Offsets can help to reduce the compliance costs 

 10 of cap and trade by offering an additional supply of 

 11 compliance instruments that may cost less than allowances. 

 12 In addition to increasing the cost effectiveness 

 13 of the program, a California offsets program can benefit 

 14 Cap and Trade Program goals by stimulating emission 

 15 reduction opportunities and technology innovation in 

 16 sectors outside of the capped sectors. It can encourage 

 17 early emission reduction activities, while providing a 

 18 transition period for industry to develop and deploy 

 19 low-carbon technology. 

 20 It can promote technology and knowledge transfer 

 21 between developed and developing countries, such as 

 22 helping to preserve rain forests in danger of 

 23 deforestation. And it can provide environmental, social, 

 24 and economic benefits, such as reduced air or water 

 25 pollution, through improved land management practices and 
 177 

 1 wildlife habitat. Staff will brief the Board on offsets 

 2 in more detail in February. 

 3 --o0o-- 

 4 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 5 Not only can a covered entity hold and surrender both 

 6 allowances and offsets for its own compliance, it can also 

 7 trade these two instruments to other entities in the 

 8 system. 

 9 Likewise, once linked to other programs, such as 

 10 in the WCI, allowances and offsets issued in the other 

 11 jurisdictions would also be interchangeable. 

 12 --o0o-- 

 13 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 14 Under staff's current thinking, various entities could 

 15 participate in the purchase and trading of allowances 

 16 subject to limits on the amount any individual entity 

 17 could hold. Clearly, we expect the vast majority of 

 18 traders will be covered entities. 

 19 Offset providers could also supply credits 

 20 resulting from projects that ARB has approved for use in 

 21 the California program. We are also proposing to allow 

 22 even private individuals or groups not covered under the 

 23 cap to purchase allowances that could either be traded or 

 24 retired, provided they register with the cap and trade 

 25 tracking system. 
 178 

 1 In order to provide safeguards against market 

 2 manipulation, staff is developing rule provisions that 

 3 will limit the number of allowances that any individual or 

 4 firm can hold, as well as trade data publication rules to 

 5 maximize transparency of these trades to the public. 

 6 --o0o-- 

 7 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 8 For trades to occur, staff is proposing that all traders 

 9 first register in the cap and trade tracking system. 

 10 Persons trading on exchanges, such as the New York 

 11 Mercantile Exchange, would also be required to register in 

 12 ARB's system before they could hold allowances for 

 13 trading. The regulations would also include rules to 

 14 ensure transparency in the markets and help prevent market 

 15 manipulation. 

 16 --o0o-- 

 17 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 18 So how would the integrity of the cap be maintained? 

 19 Covered entities will be required to report and verify 

 20 their emissions annually under ARB's mandatory reporting 

 21 requirements. 

 22 ARB is also proposing to establish a registration 

 23 and tracking system that would closely monitor trading 

 24 activities and establish a chain of custody for allowances 

 25 and offset credits that could be used in the program. 
 179 

 1 Under the registration and tracking system, ARB 

 2 would open accounts for each market participants or other 

 3 eligible registrants. Those accounts would include a 

 4 holding account that would hold allowances and offsets 

 5 until they are ready to be traded or used and a compliance 

 6 account in which allowances and offsets would be 

 7 surrendered for compliance or voluntarily retired without 

 8 trading it to a covered entity for use. 

 9 A covered entity's surrounded allowances and 

 10 offsets would than be compared to its reported emissions 

 11 to verify compliance. A quantitative limit on the use of 

 12 offset credits would also maintain the integrity of the 

 13 cap. As discussed in the next slide, the draft regulation 

 14 includes a limit on offsets set at four percent of a 

 15 facility's emissions. This was proposed to ensure that a 

 16 majority of reduction in the program come from covered 

 17 sources. 

 18 --o0o-- 

 19 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 20 Why limit the use of offsets? 

 21 Since staff's first public meeting on a cap and 

 22 trade proposal, the most contentious issue for 

 23 stakeholders was whether or not to limit the use of 

 24 offsets. Those who favor no limits argue that offsets 

 25 would reduce the cost of compliance to California 
 180 

 1 industries with savings passed along to California 

 2 consumers. These commenters also argue that since climate 

 3 change is a global problem, offsets would also result in 

 4 more effective emission reductions, especially in the 

 5 developing world where widespread reductions could be 

 6 achieved at a much lower cost than in California. 

 7 Others argue against the use of any offsets. 

 8 These stakeholders believe that offsets would allow 

 9 covered entities to emit at their facilities. And, 

 10 therefore, residents in already impacted communities would 

 11 see fewer co-pollutant benefits. Also these stakeholders 

 12 fear that most offset projects would occur outside 

 13 California and deprive the state from potential 

 14 co-benefits. Additionally, these stakeholders argue that 

 15 complimentary measures do not go far enough in achieving 

 16 greenhouse gas reductions and that more can be and should 

 17 be done. 

 18 Staff considered both positions in the context of 

 19 the Scoping Plan and concluded that a quantitative limit 

 20 on the use of offsets would help to provide the balance 

 21 needed between the need to achieve meaningful emission 

 22 reductions from covered entities with the need to provide 

 23 entities within capped sectors the opportunity for low 

 24 cost reduction that offsets can provide. 

 25 --o0o-- 
 181 

 1 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 2 ARB is proposing to apply a limit on offsets that is 49 

 3 percent of the emissions reductions expected from capped 

 4 sectors from 2012 to 2020. Since each individual facility 

 5 does not have a specific reduction goal under cap and 

 6 trade, this quantitative use refers to the total 

 7 reductions resulting for all uncovered sources between 

 8 2012 and 2020. 

 9 In the preliminary draft regulation, staff 

 10 translated the limit from 49 percent of the aggregate 

 11 emission reductions into something that could be applied 

 12 to each covered entity in the program, an individual 

 13 limited of four percent of a facility's emission. 

 14 We have heard that there is some confusion on 

 15 this point, so let me be clear about this: We did not 

 16 reduce the limit on offsets from 49 percent to 4 percent. 

 17 Rather, we translated the policy goal of no more than 49 

 18 percent of reductions coming from the offsets in the 

 19 aggregate to a proposal that no more than 4 percent of a 

 20 covered entity's emission could be covered through the use 

 21 of offsets. We can provide more information on how we 

 22 calculated the limit on emissions if the Board is 

 23 interested at the conclusion of this presentation. 

 24 In the draft regulation, we have proposed to 

 25 apply this limit on offsets equally across compliance 
 182 

 1 periods. Because fewer reductions are required in the 

 2 early years of the program, applying the limit uniformly 

 3 over time allows room for limited emissions growth in the 

 4 initial years of the program, providing additional 

 5 flexibility for companies concerned about how to comply as 

 6 the program starts in 2012. 

 7 --o0o-- 

 8 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 9 So what do all these parts mean for someone who would be 

 10 covered under the cap? 

 11 Once in the Cap and Trade Program, a covered 

 12 entity would need to do the following: 

 13 Register with ARB to create accounts that could 

 14 hold and surrender allowances and offsets; 

 15 Report its emissions each year and have its 

 16 emission verified by a third party; 

 17 Acquire and surrender sufficient allowances and 

 18 offsets equal to the amount of emissions over the span of 

 19 the compliance period; 

 20 Comply with recordkeeping, trading rules, 

 21 verification, and other requirements in the regulation. 

 22 Even before the system is ready the launch, we 

 23 will need to have enforcement mechanisms in place to 

 24 ensure the program's integrity and to prevent market 

 25 manipulation. 
 183 

 1 --o0o-- 

 2 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 3 The PDR contains a general description of enforcement 

 4 provisions that are contained in the California Health and 

 5 Safety Code which impose penalties. In the next 

 6 regulatory draft to be released this spring, staff will 

 7 provide more specific enforcement provisions that would 

 8 remove any financial incentive for noncompliance. We will 

 9 also include specific provisions that define what 

 10 constitutes a violation. 

 11 Finally, enforcement provisions will include 

 12 methods for calculating the number of violations. 

 13 --o0o-- 

 14 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 15 A robust enforcement program will play a vital role by 

 16 helping to discourage gaming of the system and deter and 

 17 punish fraudulent activities. 

 18 ARB staff has been consulting with legal and 

 19 enforcement staffs from state and federal agencies to gain 

 20 insights in this area. These agencies include the 

 21 California Attorney General's Office, the California 

 22 Energy Commission and the PUC, the Department of Water 

 23 Resources, Cal/EPA, as well as with academics including 

 24 U.C. Berkeley's Center for Law, Energy, and the 

 25 Environment. 
 184 

 1 We've also held regular interagency meetings of 

 2 legal and enforcement staff to discuss enforcement 

 3 challenges relating to the market-based program such as 

 4 cap and trade and coordination of state and federal 

 5 enforcement efforts. 

 6 --o0o-- 

 7 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 8 Now that I've described the basic structure of the staff's 

 9 proposal, I want to talk a little bit about the work staff 

 10 has underway to complete our regulatory development of cap 

 11 and trade. Staff is carefully considering the comments 

 12 that have been submitted on the preliminary draft rule. 

 13 These comments covered every aspect of the proposed rule 

 14 and rarely did we see consensus among stakeholders. 

 15 As I mentioned earlier, everyone had strong 

 16 opinions on limiting the use of offset credits. 

 17 Commenters also weighed in strongly on the portion of 

 18 allowances that should be auctioned, with most 

 19 environmental organizations favoring full auction, while 

 20 several covered entities argued for a greater portion of 

 21 allowances to be freely distributed to address emissions 

 22 leakage. 

 23 The utilities strongly favored an approach that 

 24 would allow them to redistribute allowance value to their 

 25 rate payers. The electricity sector and environmental 
 185 

 1 organizations favored bringing all sectors into the 

 2 program in 2012, while transportation and natural gas 

 3 providers advocated delaying their participation in the 

 4 program until 2015. 

 5 Some commenters questioned the rational for 

 6 incorporating transportation fuels into the cap, arguing 

 7 that adding the price for allowances on top of 

 8 complementary policies would not result in additional 

 9 reductions and would unnecessarily increase costs to 

 10 trucking, goods movement, and agriculture. 

 11 Public health and environmental advocates 

 12 emphasized the importance of addressing the potential 

 13 co-pollutant impacts within the program design, while all 

 14 stakeholders wanted to activity participate in a process 

 15 of establishing the cap and ensuring that staff's 

 16 methodology for setting the cap is transparent. 

 17 Environmental organizations want the cap set at 

 18 2012 emissions, while some covered entities felt that 

 19 setting a strict cap at 2012 emissions might reflect 

 20 recessionary levels and not allow room for a return to 

 21 economic growth. So you can see, it really spans the 

 22 whole spectrum and see some interesting collaborations 

 23 depending upon what the issue happened to be. 

 24 In April, we'll be releasing a second draft that 

 25 considers these comments and fills in most of the gaps 
 186 

 1 that exist in the current draft. 

 2 With regard to allowance distribution strategies, 

 3 staff will be considering the EAAC recommendations and 

 4 stakeholder input along with any direction or 

 5 considerations you wish staff to take into account. 

 6 --o0o-- 

 7 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 8 Also underway are technical analyses that will inform our 

 9 regulatory development up until we're ready to release the 

 10 final draft rulemaking package for the 45-day public 

 11 comment period in late summer. These analyses will 

 12 include an economic and fiscal analysis of the Cap and 

 13 Trade Program, a public health analysis, along with an 

 14 evaluation for the potential for localized emission 

 15 impacts and an environmental analysis. 

 16 We will continue to work with other State and 

 17 federal agencies on developing a robust enforcement 

 18 program as I described above. 

 19 Staff is also performing an analysis of the 

 20 compliance path options for different industries to lower 

 21 their greenhouse gas emissions and to work with them on 

 22 different compliance options. 

 23 --o0o-- 

 24 PROGRAM DEVELOPMENT SECTION MANAGER VAN OMMERING: 

 25 As the world's eighth largest economy, California is at 
 187 

 1 the forefront of real and submitted climate action and 

 2 working with other states in the U.S. and abroad to create 

 3 partnerships to fight global warming. 

 4 2010 will be a busy year culminating in your 

 5 consideration of probably the single most important 

 6 measure of this decade. We'll be coming back to you 

 7 frequently so you can observe and direct us at several 

 8 critical points in the process. 

 9 As mentioned earlier, EAAC will be holding a 

 10 workshop next month on their evaluation of the staff's 

 11 economic analysis to the Scoping Plan that will also be 

 12 released next month. EAAC will also present their 

 13 recommendations to you in March on cap and trade 

 14 allocation strategies. 

 15 In spring of this year, staff will release a 

 16 second draft tap and trade regulation for public comment. 

 17 In September, we expect to release the final 

 18 proposed draft and take the proposal to you in October for 

 19 consideration and adoption. 

 20 Thank you. That concludes my presentation. 

 21 CHAIRPERSON NICHOLS: Thank you very much for a 

 22 concise overview of a very complicated topic. Take a 

 23 breath or a drink of water. 

 24 As you might have expected, this topic has 

 25 attracted a good number of commenters. And I see they 
 188 

 1 span the gamut of views on this topic, which is actually 

 2 helpful I think in terms of the preliminary process of 

 3 getting all of us up to speed on what's going on. 

 4 I just want to make a couple comments, because 

 5 this is the first occasion I've had to meet with the Board 

 6 since returning from Copenhagen. And I think it's 

 7 important to set the context a little bit for what we're 

 8 doing here. 

 9 First of all, if you can remember back to 2008 

 10 when we adopted the Scoping Plan, there was a considerable 

 11 amount of controversy about whether we should include any 

 12 Cap and Trade Program in it at all. And if so, how big it 

 13 ought to be with generally speaking environmental 

 14 interests in favor of no cap and trade or very limited cap 

 15 and trade and businesses wanting it to cover much more of 

 16 the emissions reductions that were needed. 

 17 At this point, I think it's fair to say things 

 18 have shifted a little bit. If anything, there's more 

 19 comfort level on the part of the environmental community 

 20 with the concept that if you're going to find a way to 

 21 send a message through prices that carbon is something we 

 22 need to be budgeting very carefully that a cap and trade 

 23 system could work with caveats about offsets and so forth. 

 24 And businesses expressing a lot more concerns about 

 25 whether this program could work, whether it's too 
 189 

 1 complicated, too difficult, et cetera. So there's some 

 2 evolution clearly going on. 

 3 I think I can't overemphasize the amount of 

 4 interest that there is around the world in what California 

 5 is doing as well as the interest on the part of some 

 6 countries and certainly other states in participating with 

 7 us, not just with the Western Climate Initiative, but the 

 8 European Union, which has its own Cap and Trade Program 

 9 and after 2012 will be interested in linking up with other 

 10 entities that are involved in similar kinds of programs as 

 11 well as the eastern states. 

 12 So it's with the recognition that an 

 13 international treaty done through the U.N. is probably not 

 14 going to be the way forward, at least for the next few 

 15 years, towards tackling this problem, at the same time, 

 16 there's much greater recognition I thought from around the 

 17 world that this is a problem we have to tackle. But 

 18 people are struggling to find what the best and most 

 19 effective method is going to be. 

 20 We have been asked many times whether California 

 21 would launch a program that was only for the state of 

 22 California and do this all by ourselves. And I think I 

 23 have been careful in saying that we believe that the bulk 

 24 of the emissions reductions that California will take 

 25 responsibility for our share are going to come from 
 190 

 1 the specific measures that were in the plan, things like 

 2 the Pavley emissions limits on vehicles or the low-carbon 

 3 fuel standard. But that the Cap and Trade Program was 

 4 something that we would want to see done at a minimum with 

 5 other partners before we actually began handing out 

 6 allowances and enforcing limits and so forth. We'll hear 

 7 more I'm sure from staff as we go along about progress in 

 8 that endeavor. 

 9 But I think it just is worth remembering that the 

 10 reason why we started down this path in the first place 

 11 was that there is a very widespread belief that you can't 

 12 get to the myriad of different sources and the ways in 

 13 which carbon is so imbedded in everything we do in our 

 14 economy, unless you could find some method for allowing 

 15 those who get to make decisions about whether to invest in 

 16 new technologies or invent new technologies to see there 

 17 would be a market out there. And that the way to make 

 18 that happen, to incentivize that kind of a market, would 

 19 be through a cap and trade system. 

 20 The major alternative that people put forward is 

 21 a tax system. And I think we all know that there's a lot 

 22 of issues about doing any kind of a carbon tax as well. 

 23 Maybe it begins to look more attractive to people when 

 24 they see the complexities of cap and trade. But on the 

 25 other hand, I think both politically and from a shear 
 191 

 1 efficiency perspective, we know taxes have problems, too. 

 2 So anyway, there is a lot of work going on here 

 3 in California, not only on the part of our staff and 

 4 volunteers like the wonderful people from the EAAC 

 5 Committee who helped us with their report, but also all 

 6 the stakeholders who are investing so much time and effort 

 7 in this program. 

 8 And I think that even when we hear sometimes how 

 9 contentious a lot of the details of the program design 

 10 are, it's just worth remembering that it's hard because 

 11 we're tackling something that's really hard. And we are 

 12 doing it for the first time literally anywhere. But the 

 13 thinking that we do is clearly having an influence on 

 14 thinking elsewhere in the world as well, because as we saw 

 15 with the Waxman Markey legislation, many of the details in 

 16 that bill that has now passed the House of Representatives 

 17 were based on what we doing here in California. And we 

 18 get calls all the time from people in other jurisdictions 

 19 and people in Congress and the administration to try to 

 20 make sure that we're all in sync. 

 21 So it's a big responsibility this Board is going 

 22 to be facing, and I think it's great we have an 

 23 opportunity now to at least get somewhat of a taste of 

 24 where the thinking is today. 

 25 If there are questions of the staff before we 
 192 

 1 hear from the witnesses, feel free. 

 2 Yes, first Ms. D'Adamo and then Dr. Telles. 

 3 BOARD MEMBER D'ADAMO: I'm going to jump in here, 

 4 because I wish I could stay, but I have to leave right at 

 5 3:00. So I have to make a couple comments and I do have 

 6 questions. 

 7 First of all, just a general comment on the need 

 8 for us to rely on outside experts and have very thorough 

 9 and robust review before we launch. And I'm pleased to 

 10 see the report with the EAAC coming back. I've always 

 11 been kind of confused about auction distribution for free 

 12 and just where we ought to land. And it's very useful to 

 13 be able to rely on a Committee of that stature. So I'm 

 14 pleased with that. 

 15 And also looking forward to the economic analysis 

 16 that I guess is due out in April. I'd like to see the 

 17 Committee maybe do a little bit more and in the field of 

 18 offsets. That's an area that I think a number of us 

 19 commented on that we were a little uncomfortable with the 

 20 49 percent offset. I don't remember at what hearing it 

 21 was, but several months back. And I was of the impression 

 22 that staff was going to do a more thorough analysis of 

 23 that, and now I see coming back it's still 49 percent. So 

 24 I would feel much more comfortable if we could have a more 

 25 thorough review of that offset. 
 193 

 1 I think it ought to be lower. I don't really 

 2 know how much lower, and I'm not an expert. So it would 

 3 be useful to have information from others. 

 4 I do note that I received some letters on this, 

 5 and one of the environmental organizations did point 

 6 out -- I was aware that there was a piece of legislation 

 7 that the Governor vetoed providing a limit of offsets to 

 8 ten percent that in the Governor's veto announcement 

 9 indicated the EAAC Committee was going to be reviewing 

 10 this. And so it sounds like there might be interest 

 11 across the street for further review well. 

 12 The other thing that I wanted to just raise is 

 13 the issue of protocols in relation to the offsets. When 

 14 we have the forestry protocol before us, I was concerned 

 15 about the allowances for some clearcutting and at that 

 16 time it was made very clear that this was just -- these 

 17 were just standards for voluntary measures and that we 

 18 were free to adopt a higher standard, sort of a gold 

 19 standard so to speak, with regard to offsets. And from 

 20 what I can tell, it looks like we're not doing that. 

 21 So I don't know if there's going to be further 

 22 analysis on this or not if staff's already committed, but 

 23 we'd like to ask that question. And if you're not 

 24 planning on doing further analysis and looking at a gold 

 25 standard for the various sectors that we have these 
 194 

 1 protocols for, I would highly encourage it. Those are my 

 2 comments. 

 3 CHAIRPERSON NICHOLS: Thank you. I think offsets 

 4 is such an important issue that staff is planning a whole 

 5 special briefing just on that topic. But maybe you'd like 

 6 to respond now on an update on what you're working on. 

 7 EXECUTIVE OFFICER GOLDSTENE: First thing we'd 

 8 like to give you an update on is what the EAAC is looking 

 9 at in terms of the offset issue. Maybe Kevin or Steve. 

 10 PROGRAM EVALUATION BRANCH CHIEF KENNEDY: One of 

 11 the key issues to understand about the use of offsets is 

 12 what is the economic effect, because the argument in favor 

 13 of using offsets is that it provides a lower cost and 

 14 reduces the cost of the program overall. So that actually 

 15 is one of the things that we're specifically looking at in 

 16 the context of the economic analysis. Staff will be 

 17 putting out a draft of the analysis next month. The 

 18 Advisory Committee is actually helping us think through 

 19 that analysis overall. So they are helping us take a look 

 20 at that aspect of the program. 

 21 And as Mr. Goldstene indicated, we are intending 

 22 to come back with a much more thorough discussion of the 

 23 offset program piece of the Cap and Trade Program next 

 24 month. We are having very serious discussions about the 

 25 relationship of the voluntary protocols that have already 
 195 

 1 been adopted by this Board and whether those are good 

 2 enough and how do we structure the compliance offset 

 3 program so that we are sure that we are only allowing in 

 4 gold standards. So we'll have more opportunity to talk 

 5 about that next month. 

 6 CHAIRPERSON NICHOLS: Any other preliminary 

 7 comments? I think -- I'm sorry. Dr. Telles had his hand 

 8 up first and then Supervisor Yeager. 

 9 BOARD MEMBER TELLES: I was listening to Chairman 

 10 Nichols' comments about how important it is to have 

 11 partners. And the Western Climate Initiative is our 

 12 partners in this. And you mentioned that a certain subset 

 13 is prepared to go on board in 2012. And who are they and 

 14 how far along are they? And do they have a whole robust 

 15 cap and trade plan like this? 

 16 PROGRAM EVALUATION BRANCH CHIEF KENNEDY: We 

 17 actually had a meeting of the Western Climate Initiative 

 18 partners last week and where the partnership as a whole is 

 19 we're in the process of working on what we're calling 

 20 essential elements, which are similar to a model rule for 

 21 the overall Cap and Trade Program that the partners 

 22 collectively are working on to implement -- or to publish 

 23 by June. So there could be common understanding of what 

 24 the broader program would look like. 

 25 The different partners are at different stages in 
 196 

 1 terms of legal authority and sort of where they are in 

 2 terms of being able to get the pieces together in order to 

 3 start the program in 2012. I would say that the partners 

 4 that are furthest ahead and most likely to be able to 

 5 start right in 2012 would be California British Columbia, 

 6 Ontario, Quebec. But the other partners are participating 

 7 very much and are looking to start it as soon as possible. 

 8 BOARD MEMBER TELLES: I just have one follow-up 

 9 question. I understand that California's emissions per 

 10 capita, there's probably some of the lowest in the 

 11 country. It's somewhere around -- I don't remember the 

 12 numbers exactly, but somewhere around 12 to 10 tons per 

 13 capita versus the rest of the United States is somewhere 

 14 around 22 tons per capita. And in the Western Climate 

 15 Initiative, is that kind of disparity between California 

 16 and the other states? 

 17 Because the problem I'm having in dealing with 

 18 the cap and trade thing is if there's that much disparity, 

 19 it seems like the low-hanging fruit has been picked in 

 20 California. And all the offsets and allowances is going 

 21 to be purchased cheaper outside of California. That means 

 22 money from California leaving California going someplace 

 23 else versus the other way around. 

 24 Do we have anything allowance wise or offset wise 

 25 that would be something that one of our Western Climate 
 197 

 1 Initiative partners would be willing to buy because of the 

 2 expense? 

 3 PROGRAM EVALUATION BRANCH CHIEF KENNEDY: I don't 

 4 actually have any of those numbers offhand. I would have 

 5 to go and take a look. 

 6 But I would agree in general terms California is 

 7 much more energy efficient and generally our greenhouse 

 8 gas emissions per capita do tend to be lower than a lot of 

 9 other jurisdictions. 

 10 A lot of the idea of the Cap and Trade Program is 

 11 to allow sources to be able to seek out the lowest cost 

 12 emission reductions so you are able to get the 

 13 environmental benefit, which is a global environmental 

 14 benefit, at the least cost. 

 15 We are in the process -- one of the analyses 

 16 we're looking at is taking a look at what real 

 17 opportunities are in California for emission reductions 

 18 with this the particular programs. 

 19 As Chairman Nichols mentioned earlier, a lot of 

 20 the actual reductions we would expect to see from the 

 21 covered sources are things that would be driven by things 

 22 like the Pavley auto standards, energy efficiency programs 

 23 and standards, the LCFS, and other complementary measures. 

 24 So we think there is a lot of opportunity for reductions 

 25 happening in California. We think getting this program, 
 198 

 1 even if it's linked to WCI, will provide incentives for 

 2 people to invest in California in a way that will help 

 3 reduce their emissions either through developing new 

 4 technologies or becoming more efficient. So it is an 

 5 issue, but we do think this is still sending a signal in 

 6 the right direction. 

 7 CHAIRPERSON NICHOLS: And I think big picture 

 8 assessing whether this project is good for California or 

 9 not is kind of at the core of the overall economic 

 10 assessment that we're asking the Committee to do. If we 

 11 can't demonstrate to our satisfaction and that of the 

 12 Legislature and the public this is something that's 

 13 beneficial to us, I don't think we would be able to go 

 14 forward with the program. 

 15 So you know, at this point, we hear a lot of 

 16 allegations or assertions or fears or hopes, but either 

 17 way, it's still unknown, you know. What might actually 

 18 happen has to still be fleshed out. And I think when we 

 19 hear the report from the EAAC Committee on the modeling 

 20 that they're doing and how they're doing it, that will at 

 21 least help to put some boundaries around some of these 

 22 concerns about whether what California is doing might be 

 23 doing really makes sense. 

 24 EXECUTIVE OFFICER GOLDSTENE: Chairman Nichols, 

 25 maybe another way of looking at the context I think Dr. 
 199 

 1 Telles is getting at is that with regard to WCI, that 

 2 California is about 50 percent of the emissions within 

 3 WCI. So we're half. 

 4 CHAIRPERSON NICHOLS: Okay. Let's turn to 

 5 those -- oh, sorry. 

 6 BOARD MEMBER YEAGER: Speaking of the unknown, is 

 7 there a scenario where there would be action taken by the 

 8 federal government that would supercede or trump anything 

 9 we are either trying to do or at some point once we put 

 10 something into effect they take some sort of other action? 

 11 EXECUTIVE OFFICER GOLDSTENE: Yes. That's 

 12 certainly possible. 

 13 Congress was getting ready to act at the end of 

 14 last year again and, you know, yesterday the President was 

 15 encouraging action again. 

 16 The ideal scenario is to have the market as big 

 17 and as robust as possible. So a national program would be 

 18 better than even a regional program, which is one of the 

 19 reasons why we're talking about linking the two other big 

 20 markets linked together as possible in the future. 

 21 But that being said, one of the important things 

 22 that we've been advocating for is to make sure that we 

 23 still maintain the rights as a state to go further if we 

 24 needed to. And this is an important issue that we're 

 25 saying close attention to. 
 200 

 1 BOARD MEMBER YEAGER: As I remember, some of the 

 2 earlier discussion about the carbon tax and whether that 

 3 we as a nation went forward with rather than cap and trade 

 4 and trying to track all of that what's happening in 

 5 Washington and our actions now and keeping it all in 

 6 perspective. 

 7 EXECUTIVE OFFICER GOLDSTENE: That might be 

 8 something we should also consider presenting to the Board 

 9 in the near future is having Brian Turner come out and 

 10 give the Board an update on the activities in Washington, 

 11 particularly if things start up again as they had begun. 

 12 If things start getting active again, we can give an 

 13 update on what's going on. 

 14 BOARD MEMBER YEAGER: I appreciated what Lucille 

 15 mentioned where the groups were taking different 

 16 positions. And I don't know whether she's going to write 

 17 up some of that, but that would maybe help to have a 

 18 matrix just to see what issues all the various interests 

 19 have. 

 20 EXECUTIVE OFFICER GOLDSTENE: We are working on 

 21 developing a matrix or a high level summary of the 

 22 comments. We got lots of comments. And we will 

 23 distribute that to the Board. 

 24 BOARD MEMBER LOVERIDGE: Are we going to follow 

 25 up with suggestion of having the D.C. person? 
 201 

 1 CHAIRPERSON NICHOLS: Yes. Duly noted. I think 

 2 it's a really good idea. We'll figure out if we can get 

 3 him out here for the next meeting. The February meeting 

 4 would be a perfectly appropriately. 

 5 BOARD MEMBER TELLES: And in regards to the 

 6 federal plan, if it ever gets launched, has there been any 

 7 questioning of the federal government if California 

 8 launches this three, four, five years before the federal 

 9 government does? Will there be some credit for surplus 

 10 emissions before they start their program? 

 11 EXECUTIVE OFFICER GOLDSTENE: This is an issue 

 12 that's discussed quite a bit and we refer to it -- the 

 13 easiest way we refer it to is how we transition a program 

 14 that's already operating at the state level into a 

 15 national program. So there is discussion about that and 

 16 there is a great awareness about having to pay attention 

 17 to that. So if a national program does come in effect 

 18 after state or regional programs started, that transition 

 19 is critical. 

 20 CHAIRPERSON NICHOLS: I guess in fairness, you 

 21 know, California is the first state to be as far along as 

 22 we are in looking at an economy-wide cap. But the 

 23 northeastern states, 13 of them, are partners in a Cap and 

 24 Trade Program that deals with the electric utilities 

 25 sector, the RGGI program, which has been operational for 
 202 

 1 several years now. And they are also very anxious about 

 2 making sure they don't get penalized if and when a federal 

 3 program comes into effect. 

 4 This isn't just an issue for us. It is an issue 

 5 of these states that have been more progressive on some of 

 6 these energy issues versus those that have not and how you 

 7 achieve some level of fairness or equity, a topic we'll be 

 8 talking about today and will be talking about much more. 

 9 Dr. Sperling, do you have your hand up? 

 10 BOARD MEMBER SPERLING: Yes. 

 11 One thought I had and one concern I have is over 

 12 the next year there's going to be a lot of attention given 

 13 to cap and trade. It's the lightning rod of a lot of the 

 14 concerns about environmental regulation generally and 

 15 climate policy more generally. 

 16 And as I thought about it, you know, all these 

 17 presentations we get and the way we -- many of us think 

 18 about it, including myself, is kind of a top-down approach 

 19 in the sense of what's the theory. What's the overall. 

 20 And then we take that to the overall structure and even 

 21 take that to what are the overall economic impacts. 

 22 But, in fact, what's likely to be happening over 

 23 the next year is a lot of businesses, a lot of regions are 

 24 going to look at it in terms of what's the impact on us. 

 25 And a lot of the presentation talks about details 
 203 

 1 to be worked out. And I'm a little concerned that if we 

 2 keep being too vague, it allows a lot of different groups 

 3 or organizations to craft the most catastrophic scenario. 

 4 And just an example of that would be there's a 

 5 lot of concern with LADWP has a lot of coal-based 

 6 electricity. So you do a simple analysis, the rates are 

 7 going to go up in Los Angeles by 30 or 50 percent as they 

 8 have been saying. 

 9 And so my suggestion and as this moves forward is 

 10 generally thinking about this a little bit and what will 

 11 really be the impact on different business groups, on 

 12 different regions. And I'm not often an advocate of 

 13 getting into all the details. Being a professor, I like 

 14 the big picture. But I think in this case, you know, we 

 15 ought to be thinking along those lines much more than we 

 16 might otherwise do. 

 17 CHAIRPERSON NICHOLS: Interesting. We have a 

 18 brochure I'm sure we'll hear about later. I was looking 

 19 at it called "Climate for Success" from the Union of 

 20 Concerned Scientists, which is certainly one of our most 

 21 dedicated and active groups working on these issues. And, 

 22 you know, they have broken it down by the additional cost 

 23 of a bill for a meal on a particular restaurant under a 

 24 climate regime. We may not be able to get to that point, 

 25 but that's a really helpful kind of analysis. 
 204 

 1 BOARD MEMBER SPERLING: Well, that's one way. 

 2 But another is a lot of the details, for instance, on how 

 3 you treat the equity between different regions. You know, 

 4 there is the continuing discussion about this massive 

 5 wealth transfer from south to north. And that discussion 

 6 can go on, because there's no detail to counter that. 

 7 And so there are a few of these major issues that 

 8 I think that are out there already. And I think we can 

 9 try to -- you know, part of the question is I don't know 

 10 how far the staff proposal is actually go into detail. 

 11 But to the extent that it is and we can answer some of 

 12 those key issues that we know are already in the public 

 13 arena I think is all for the better in the coming months. 

 14 EXECUTIVE OFFICER GOLDSTENE: There is quite a 

 15 bit of detail in the draft that we released late last 

 16 fall. And we'll be narrowing that down based on the 

 17 public input we've just received for a spring release of a 

 18 more tightened up package where we're really narrowing in 

 19 on what the final rule will look like. And also the 

 20 economic analysis that we've been doing and that's being 

 21 reviewed by the EAAC, I think we'll get at least some if 

 22 not all what they're asking for. 

 23 I don't know if Steve or Kevin want to add to 

 24 that. 

 25 CHAIRPERSON NICHOLS: Dr. Balmes. 
 205 

 1 BOARD MEMBER BALMES: Well, I was just going to 

 2 sort of chime in after Professor Sperling. 

 3 Dr. Telles and I were talking at lunch, we were 

 4 asking each other how many of our patients will be able to 

 5 say what AB 32 was. And we didn't think very many. And 

 6 how many of our patients could talk about climate change 

 7 in the sense does California have a climate change plan. 

 8 And I think I'm even going beyond what Professor 

 9 Sperling was suggesting. I really think we have to have a 

 10 communications plan to try to get the average person in 

 11 California to understand what we are all about -- and I 

 12 know the staff has been trying -- on top of having to 

 13 craft the whole thing in the first place. 

 14 But I think especially in the current economic 

 15 climate and the fact that this is going to be a difficult 

 16 political year just because of the complexity of 

 17 everything that's going on that we need to be as clear as 

 18 possible about what we're about. 

 19 BOARD MEMBER LOVERIDGE: Two very quick things. 

 20 One is the importance of the general educational 

 21 focus is that you do all these -- people take poles and 

 22 they say does California support or doesn't. And those 

 23 pole interpretations become important. And the question 

 24 is how do we influence what people think in terms of 

 25 generally. 
 206 

 1 But let me go back to Dan Sperling's comment. It 

 2 seems to me if -- we need to hear from the people who are 

 3 here to speak. But if there is a number of sectors, a 

 4 number of sections, a number of groups which are angry and 

 5 upset and don't like it and take the message in 

 6 opposition, it may not make a difference what happens when 

 7 it comes to our end. There is a possibility of 

 8 discrediting this process by people marshaling their 

 9 opposition. So I think the point he makes is really an 

 10 important point strategically as we proceed. 

 11 CHAIRPERSON NICHOLS: All right. Now we are at 

 12 the maximum point of everybody being worried. So we have 

 13 nowhere to go but forward from there I think. 

 14 Thank you very much. 

 15 We will start hearing from the assembled 

 16 individuals. And we'll start with Gary Liss from Local 

 17 Government Commission, followed by Brenda Coleman and 

 18 Julian Canete. These are three-minute thoughts, 

 19 three-minute rule. 

 20 MR. LISS: Madam Chair, members of the Board, my 

 21 name is Gary Liss. I'm mayor of the town of Loomas, and 

 22 I'm here representing the Local Government Commission. 

 23 I'd like to say we're here to help you, want to 

 24 be your local partners. There is a reason for the slogan, 

 25 "Think globally, act locally," because things get done at 
 207 

 1 the local level. That's where the rubber hits the road. 

 2 And we've demonstrated that investing in improved 

 3 local planning will not only result in reduced greenhouse 

 4 gas emissions, it will also save money. The Sacramento 

 5 Region Smart Growth Plan is projected to save $9 billion 

 6 through the year 2050 with the result of reduced 

 7 infrastructure and consumer-driving costs. 

 8 As a result, we're here to ask you to support the 

 9 EAAC recommendation to include land use planning and 

 10 implementation of SB 375 and the investment options. We 

 11 ask that you set aside of the portion of the revenue to be 

 12 allocated for specific plans and zoning code updates to 

 13 help local governments meet the state targets through 

 14 smart growth, to create communities that are more compact, 

 15 walkable, and transit friendly. 

 16 Research has shown that smart growth and land use 

 17 plans can reduce vehicle miles traveled and the associated 

 18 greenhouse gas emissions from 20 to 50 percent. 

 19 We're pleased the Scoping Plan and SB 375 

 20 Regional Targets Advisory Committee saw that local 

 21 governments should be an essential partner in achieving 

 22 reductions in greenhouse gases. But local governments are 

 23 under the gun. The State keeps taking more and more of 

 24 our revenue. In order for us to take on a new 

 25 responsibility like this, we need your help to have this 
 208 

 1 be part of your program. 

 2 Local governments zoning ordinances make it 

 3 difficult to get approval to build sustainable smart 

 4 growth development at a time when improved land use 

 5 planning is required to implement AB 32 and SB 375. Local 

 6 government are reducing their planning due to budget 

 7 constraints. Without funding, they will not be able to 

 8 undertake the necessary updates of their codes to make 

 9 them consistent with the State's climate air quality and 

 10 energy conservation goals. 

 11 So the Local Government Commission encourages the 

 12 Board to adopt the EAAC Committee's recommendation to 

 13 invest cap and trade funds in the preparation of specific 

 14 plans and zoning code updates for small and large 

 15 communities. Dedicating a meaningful portion of allowance 

 16 value to smart growth planning would be a cost effective 

 17 investment that will reduce economy-wide greenhouse gas 

 18 mitigation costs. This will improve our communities, keep 

 19 money in the local economy, and reach the state's emission 

 20 reduction goals. 

 21 This is based on testimony that was submitted 

 22 earlier on January 26th, signed by 37 people, mostly 

 23 elected officials. 

 24 Thank you for the opportunity to present here 

 25 today. 
 209 

 1 CHAIRPERSON NICHOLS: Thank you. I did receive 

 2 that. Thanks very much. 

 3 Brenda Coleman and then Julian. 

 4 MS. COLEMAN: Good afternoon, Madam Chair, 

 5 members of the Board. Thank you for the opportunity to 

 6 comment today. 

 7 My name is Brenda Coleman. I'm the Policy 

 8 Advocate on climate change and energy for the California 

 9 Chamber of Commerce, the California Chamber of Commerce 

 10 participants as co-chair on the AB 32 Implementation Group 

 11 on whose behalf I'm speaking today. 

 12 You have our written comments that we submitted 

 13 on the proposed draft regulation for the Cap and Trade 

 14 Program, which notes our concern about the absence of a 

 15 sound economic analysis, the multi-billion dollar auction 

 16 tax that could cripple large industry here and cause more 

 17 leakage of jobs and economic activity and insufficient 

 18 evaluation of the economic impact of offsets as proposed. 

 19 We are also concerned that you are moving forward 

 20 on this rulemaking without having adequate information on 

 21 the low-carbon fuel standard program. 

 22 The staff report on the LCFS has been removed 

 23 from your agenda yet again. This means your cap and trade 

 24 discussion is occurring without the critical context of 

 25 how elements of the LCFS will affect not only emission 
 210 

 1 reductions but fuel costs and suppliers. 

 2 We are particularly worried that regulation of 

 3 transportation fuels under the cap, if adopted in addition 

 4 to the ambitious LCFS requirements, will result in 

 5 billions of dollars and duplicate costs that will place 

 6 California companies at an even greater competitive 

 7 disadvantage with out-of-state providers. 

 8 Considering the fact that California-only 

 9 policies for LCFS and cap and trade while costing billions 

 10 of dollars will have absolutely no impact on global 

 11 warming, this process becomes even more questionable. 

 12 The AB 32 Implementation Group urges you to take 

 13 a more deliberative approach to cap and trade and the LCFS 

 14 not only in relationship to each other within California, 

 15 but in the context of federal and global approaches to 

 16 climate change policy. Thank you. 

 17 CHAIRPERSON NICHOLS: Thank you. 

 18 BOARD MEMBER LOVERIDGE: Could I just ask -- 

 19 CHAIRPERSON NICHOLS: Question. Sorry. Hold it. 

 20 BOARD MEMBER LOVERIDGE: Just quick comment on 

 21 the group you're representing, you're part of it. But 

 22 tell us about the group you're representing. 

 23 MS. COLEMAN: The AB 32 Implementation Group is a 

 24 group that has been working with the California Air 

 25 Resources Board in the implementation of AB 32. Our 
 211 

 1 primary mission of the IG is to seek cost effective 

 2 technologically feasible mechanisms of advancing AB 32, 

 3 keeping in mind its primary goals of reducing greenhouse 

 4 gas emissions. 

 5 BOARD MEMBER LOVERIDGE: Can you give an example 

 6 of some of the groups? Who's a part of this group? 

 7 MS. COLEMAN: The California Chamber, as I said, 

 8 which I'm a Policy Advocate on behalf of the Chamber. We 

 9 are co-chairs of the organization. 

 10 Are you asking other -- to list other groups that 

 11 are -- 

 12 BOARD MEMBER LOVERIDGE: What's the letter -- 

 13 besides the Chamber -- 

 14 MS. COLEMAN: We have as well as our other 

 15 co-chairs is the California Manufacturers Technology 

 16 Association. So CMTS. 

 17 CHAIRPERSON NICHOLS: It's an association of 

 18 associations as I understand it. 

 19 MS. COLEMAN: Yes. There's several business 

 20 organizations that the IG is comprised of. 

 21 Thank you very much. 

 22 BOARD MEMBER SPERLING: Is WSPA a member of that? 

 23 MS. COLEMAN: Yes, they are. 

 24 CHAIRPERSON NICHOLS: Good afternoon. 

 25 MR. CANETE: Good afternoon, Madam Chair, Board 
 212 

 1 members. 

 2 Thank you for the opportunity for allowing us to 

 3 address the Cap and Trade Program. 

 4 My name is Julian Canete, and I'm director of 

 5 operations at the California Hispanic Chambers of 

 6 Commerce. The State Hispanic Chamber is the largest 

 7 hispanic business organization in the nation representing 

 8 over 720 hispanic-owned businesses through our network of 

 9 over 65 hispanic chambers and business associations. 

 10 We're here today to urge you to pay close 

 11 attention to the warnings of your Economic and Allocation 

 12 Advisory Council with respect to allocating emissions, 

 13 allowances under the California's Cap and Trade Program. 

 14 They are predicting significant job losses and higher 

 15 energy costs that will have a devastating and regressive 

 16 impact on low-income households throughout California. 

 17 With unemployment among hispanics higher than any other 

 18 group in the state, this is obviously of great concern to 

 19 us as well. 

 20 We are also concerned that the low-carbon fuel 

 21 standard has once again been taken off the agenda. 

 22 Gasoline diesel fuels will be among the most heavily 

 23 regulated impacted sector under Cap and Trade and the LCFS 

 24 with higher prices at the pump a result of that. 

 25 We sincerely hope that you will not make any 
 213 

 1 binding decisions on the Cap and Trade Program without 

 2 first answering the critical, technical, and economic 

 3 questions about the LCFS. Otherwise, you will run the 

 4 risk of doubling the financial burden of higher fuel costs 

 5 at a time when even moderate increases will inflict 

 6 serious harm on those least able to afford. 

 7 The State Hispanic Chamber of Commerce continues 

 8 to support the goals of AB 32. But piecemeal rulemaking 

 9 without thorough and objective cost benefit analysis is no 

 10 way to get there. Thank you. 

 11 CHAIRPERSON NICHOLS: Okay. I'm not sure which 

 12 warnings of our Economic Advisory Committee you're 

 13 referring to. Staff, are you -- 

 14 EXECUTIVE OFFICER GOLDSTENE: I'm not sure. 

 15 CHAIRPERSON NICHOLS: -- aware of citation for 

 16 that? 

 17 EXECUTIVE OFFICER GOLDSTENE: Maybe he can be 

 18 more specific. 

 19 CHAIRPERSON NICHOLS: He's left the podium. I 

 20 don't want to -- you know, people can come here and say 

 21 anything they want to, I guess. But it's always helpful 

 22 if they have something specific to back it up. 

 23 Erin Rogers, Union of Concerned Scientists; and 

 24 Bill Magavern, Sierra Club; Bonnie Holmes-Gen from the 

 25 American Lung Association. 
 214 

 1 And if you're not on the list and you wanted to 

 2 speak, I hope you'll give your information to the clerk 

 3 because we've got a long list here. 

 4 MS. ROGERS: Hi. Thank you. I'm Erin Rogers 

 5 from the Union of Concerned Scientists. I brought some 

 6 show and tell today. 

 7 I wanted to start off just mentioning the study 

 8 that Chairman Nichols mentioned. I wanted to make sure 

 9 you were all aware of it. There's been a lot of 

 10 controversy that's been stirred up in part by the AB 23 

 11 Implementation Group about how AB 32 may effect small 

 12 businesses. And we commissioned a report by a group of 

 13 independent economists. The report was peer reviewed and 

 14 it was done by the Braddle group that looks specifically 

 15 at how AB 32 may affect small businesses. And the results 

 16 were that even in sort of worst-case most expensive 

 17 scenario, the impacts would be marginal. 

 18 And as Chairman Nichols mentioned, we looked at a 

 19 case study, a restaurant in Los Angeles, and looked at if 

 20 they wanted to keep their profit margins the same 

 21 throughout 2020, what would they have to do to their 

 22 prices because of AB 32 to stay with the same profit 

 23 margins. And they would only have to raise the price of a 

 24 meal three cents in 2020, a $20 meal. We think that's 

 25 pretty manageable and pretty worth it for the dramatic 
 215 

 1 impacts we're going to get from AB 32. 

 2 I wanted to segue into the second topic I wanted 

 3 to address which is many businesses are calling for more 

 4 offsets in our program, because they think that the 

 5 offsets will help contain the costs of the program. We 

 6 think -- we disagree, first of all, that the costs will be 

 7 too hard to handle. We also think that the very large 

 8 amount of offsets that have been proposed in the PDR put 

 9 the integrity of the program in jeopardy. So, you know, 

 10 the use of offsets is controversial for many reasons, 

 11 including the loss of co-benefit effects that we get here 

 12 in California; cleaner air, more jobs. 

 13 And I wanted to -- I think you have a letter up 

 14 there that was passed out that was signed by 70 

 15 organizations and businesses, including 20 of the 

 16 legislators -- state legislators who work on the bill that 

 17 passed last session calling for the offset limit to be 

 18 strengthened. And I hope you can take a look at that 

 19 later. 

 20 One of the reasons that we are all concerned is 

 21 that we think that because so many offsets will be allowed 

 22 into the program, the Cap and Trade Program itself will 

 23 not actually achieve any emission reductions beyond those 

 24 that we're going to get from Pavley and the RES and energy 

 25 efficiency measures. 
 216 

 1 I brought this chart, because a lot of people are 

 2 confused about how we're thinking about this. But the 

 3 yellow bars here are the amount of offsets allowed into 

 4 the system. And these come straight from the PDR, CARB's 

 5 own numbers and the spreadsheet that was sent along with 

 6 the PDR. The green gars are how much reductions we expect 

 7 to get from cap and trade itself. And as you can see, 

 8 there are more offsets in the program than cap and trade 

 9 reductions all the way until the very end of the program. 

 10 CHAIRPERSON NICHOLS: If you can leave your 

 11 chart, I'm sure we would all welcome taking a look at it. 

 12 I think we understand the point though. Thank you. 

 13 Bill Magavern. 

 14 MR. MAGAVERN: Good afternoon. I'm Bill 

 15 Magavern, the Director of Sierra Club California. 

 16 And I want to say first that I thought the staff 

 17 presentation was both accurate and clear on a difficult 

 18 topic. 

 19 And secondly that I completely agree with the 

 20 comments of the Board members on the importance of being 

 21 able to really communicate the essence of this program to 

 22 the public, you know, which will take even more skill than 

 23 delivering the presentation today, which was to a more 

 24 informed audience. 

 25 But the global warming deniers and big polluters 
 217 

 1 and ideologues are spreading a lot of disinformation about 

 2 this program. So it's going to be important to really 

 3 convey the actual facts of what goes on here. 

 4 From the beginning of the implementation of the 

 5 Global Warming Solutions Act -- I sometimes use its name 

 6 instead of its number -- our position has been that we 

 7 could support a well-designed cap and auction system. And 

 8 it's very important that the design be sound in order to 

 9 avoid some of the mistakes that have been made with other 

 10 emissions trading programs. And we think that really the 

 11 best way to avoid those mistakes and have a well-designed 

 12 program is to take the recommendation of the EAAC and 

 13 auction off the allowances from the start, make the 

 14 polluters pay for their emissions. It's a fair and 

 15 transparent way to set up the system. The auction would 

 16 determine the value. And if the polluters have to pay, 

 17 then they will be really looking at ways they can decrease 

 18 their emissions and will also create revenues which, of 

 19 course, can go back to consumers and/or be used for 

 20 investments in a number of important clean energy 

 21 programs. So auctioning is I think what's most important. 

 22 We also need to make sure that we don't over 

 23 allocate the allowances, a mistake that was made in some 

 24 jurisdictions. So setting a tight cap from the start and 

 25 have that cap declining. 
 218 

 1 And then making sure that we don't have major 

 2 loopholes in the system. And so we do think there should 

 3 be stricter limitations on offsets. We agree with the 

 4 comments of UCS. And Michael Endicott later will be 

 5 making more specific comments for Sierra Club on the topic 

 6 of offsets. 

 7 And enforcement is crucial. I know you've been 

 8 talking with the attorney general's office, and I think 

 9 they have a lot of important lessons learned from the 

 10 electricity crisis and ways to avoid the gaming and 

 11 manipulation of the market. We think penalties need to be 

 12 strong and sufficient and include disgorgement of any 

 13 illgotten gains that are made through violations of the 

 14 system as well as surrendering of allowances in the next 

 15 compliance period to make sure that there are no excess 

 16 emissions. 

 17 Thank you. 

 18 CHAIRPERSON NICHOLS: Thank you. 

 19 Bonnie Holmes-Gen, followed by Sabrina Means and 

 20 Marisa Rimland. 

 21 MS. HOLMES-GEN: Thank you, Chairman Nichols and 

 22 Board members. I'm Bonnie Holmes-Gen with the America 

 23 Lung Association of California. 

 24 And we did earlier this month submit a letter 

 25 from 25 total public health organizations, state and 
 219 

 1 local. And I wanted to emphasize a few key points that 

 2 are in this letter that we've been communicating to staff 

 3 about the Cap and Trade Program. 

 4 The first key point is that the Cap and Trade 

 5 Program will have direct impacts, of course, on public 

 6 health. And the Board is entering into a process that's 

 7 very important to evaluate those public health impacts, 

 8 including the potential for impacts to disadvantaged 

 9 communities, communities that are already overburdened 

 10 with multiple pollution sources. 

 11 And this process is called a health impact 

 12 assessment, and it's been referred to in your staff 

 13 slides. But I want to emphasize the importance of this to 

 14 better understand how to design this program in a way 

 15 that's going to lessen inequities and promote options that 

 16 are the best from a public health perspective. 

 17 And as we're talking about this tension between 

 18 how much detail to put out in the street versus how much 

 19 we need to continue to analyze and develop the program, 

 20 this is a case where I think we do need to make sure that 

 21 we complete the public health analysis before we get all 

 22 the details of this program worked out. 

 23 The health impact assessment will be specifically 

 24 looking at the auctioning -- the benefits, how public 

 25 health benefits the auctioning of allowances, the impact 
 220 

 1 of offsets both inside and outside of the state, placing 

 2 quantitative limits on offsets, and what the impacts would 

 3 be of different limits, in trading restrictions of the 

 4 potential impact of trading restrictions for allowances 

 5 and for offsets, and of course, investment options for 

 6 allowance value. So these are all very key parameters of 

 7 the program. And I'm just concerned that we don't get 

 8 locked in on the design until we get some of this input. 

 9 And we would hope that -- we're very concerned 

 10 that the information from this analysis needs to be 

 11 integrated into the development of the regulation. 

 12 And we believe it's especially important for the 

 13 Board to have an update specifically on this HIA process 

 14 and to hear not only from your staff, but from your 

 15 partner in this process, the Department of Public Health. 

 16 And we think that should happen before the next draft 

 17 comes out in the spring that you've been talking about. 

 18 While we're watching this HIA and participating 

 19 and doing our best to help make this successful, we're 

 20 also urging the Board in the mean time to move toward 

 21 100 percent auction at the start of the program, to move 

 22 toward quantitative limits on offsets and to recommend 

 23 specific investment of allowance value in both mitigation 

 24 and adaptation, including specific investments in public 

 25 health preparedness and the public health infrastructure 
 221 

 1 that's vitally important to address our needs in 

 2 California. This would include assisting with the 

 3 emergency preparedness, identifying, prioritizing 

 4 vulnerable communities, disease surveillance systems, and 

 5 a number of other public health needs. 

 6 CHAIRPERSON NICHOLS: Thank you. 

 7 Sabrina Means and then Marisa Rimland and Andy 

 8 Katz. 

 9 MS. MEANS: Good afternoon, Madam Chair and Board 

 10 members. 

 11 I'm Sabrina Means here on behalf of the 

 12 California Transit Association, which represents over 80 

 13 transit agencies in the state as well as approximately 19 

 14 transit suppliers. Thank you for the opportunity to 

 15 provide comments on this item. 

 16 Our transit members have been following the cap 

 17 and trade regulation development process. And thus far, 

 18 we're supportive of a cap and trade system that allows for 

 19 some revenues from the system to be reinvested into 

 20 furthering the goals of AB 32, specifically by reducing 

 21 greenhouse gases from the transportation sector. 

 22 Transit is one of the avenues by which reducing 

 23 greenhouse gases in the state can be achieved. Therefore, 

 24 we ask the Board to recommend that transit investment be 

 25 built into the final cap and trade regulation having to do 
 222 

 1 with allowance allocations. 

 2 The Economic and Allocation Advisory Committee, 

 3 which has adopted its recommendations on allocating 

 4 allowances for the cap and trade system specifically, 

 5 includes public transportation as a consideration for 

 6 investment of allowances or allowance revenues. 

 7 Transit currently faces significant market 

 8 barriers. An example is that fares that transit agencies 

 9 charge, which are kept at a certain level to maintain 

 10 affordability to riders, are drastically insufficient in 

 11 comparison to what the overall cost is to transport people 

 12 from here to there. 

 13 Most importantly, due to recent state budgets, 

 14 the most recent being a proposal which completely 

 15 eliminates transit funding from the state, transit 

 16 operators have been forced to make devastating service 

 17 cuts and raise fares beyond affordability for riders, both 

 18 those that depend on transit and choice riders. The State 

 19 has diverted billions of dollars that should have gone to 

 20 transit agencies in the last several years. 

 21 Transit systems are in absolute dyer need of 

 22 investment by the State. And since transit is a key way 

 23 to reduce transportation emissions, as it takes people out 

 24 of their cars, investing in transit from the cap and trade 

 25 system is realistically the logical way to go. 
 223 

 1 The Regional Targets Advisory Committee which 

 2 recommended factors and methodologies for setting regional 

 3 greenhouse gas targets as part of SB 375 also recommended 

 4 in their report that the State must find a way to increase 

 5 funding for transit in the state. Therefore, they 

 6 acknowledge that transit is a key way for regions to 

 7 reduce their greenhouse gas emissions. 

 8 Including transit as a recipient of allocation 

 9 investments as part of the regulation will help achieve 

 10 the goals of AB 32 and the goals of the cap and trade 

 11 system. We also ask that fuels be included as part of the 

 12 cap and trade system. This will potentially provide 

 13 revenue for transit as transit has historically funded 

 14 through taxes on fuels. Thus, new any costs at the pump 

 15 as a result of cap and trade could go toward furthering 

 16 greenhouse gas reduction goals through transit investment. 

 17 Thank you. And we look forward to working with 

 18 you and staff as this process continues. 

 19 CHAIRPERSON NICHOLS: Thank you very much. 

 20 Marisa Rimland and then Andy Katz. 

 21 MS. RIMLAND: Good afternoon Madam Chair, members 

 22 of the Board. 

 23 My name is Marisa Rimland representing the Public 

 24 Health Institute. Thank you for the opportunity to 

 25 comment today. 
 224 

 1 The first topic I'd like to address is offsets. 

 2 We believe that the current proposed offset limit of 49 

 3 percent of reductions is too large. We urge CARB to 

 4 re-examine this and lower it to a more appropriate level. 

 5 PHI believes a lower allowance of offsets is 

 6 necessary to maximize health co-benefits resulting from 

 7 improved air quality and to verify that greenhouse gas 

 8 emissions are being reduced per AB 32 requirements. 

 9 Offsets, with their well known additionality, 

 10 verification, and monitoring issues, will not sufficiently 

 11 accomplish this. Greenhouse gas emissions reductions are 

 12 especially important in the first stage of the program 

 13 when the cap is only slightly below business as usual 

 14 emissions and every ton of carbon reduced is crucial. 

 15 PHI also urges CARB to create geographic 

 16 restrictions on a percentage of offsets and to incentivize 

 17 the location of offset projects within disadvantaged and 

 18 disproportionately impacted communities. This can be done 

 19 by weighing offsets based on their geographic location 

 20 using a policy design tool such as a multiplier or by 

 21 discounting offsets located outside of California. 

 22 Incorporating such protective measures into the regulatory 

 23 design will benefit these communities by simultaneously 

 24 improving their health and creating jobs. 

 25 The next topic I'd like to address is allocation. 
 225 

 1 PHI believes that 100 percent of emissions allowances 

 2 should be auctioned off. One of the primary benefits of 

 3 creating a market for carbon is the expectation that a 

 4 well-designed mechanism will set a price for greenhouse 

 5 gas emissions that accurately reflects the marginal cost 

 6 of abatement. This price signal determines the decisions 

 7 made by producers and consumers about the types of energy 

 8 and services they provide or use. 

 9 If emissions allowance are given away rather than 

 10 auctioned off, the pricing will be diluted and investment 

 11 in lower-emitting technologies or renewable energy 

 12 diminished, resulting in fewer co-benefits from improved 

 13 air quality as well as decreased opportunity to reduce 

 14 greenhouse gas emissions. 

 15 Auctioning all allowances will maximize the 

 16 revenue available to California to use in its work both 

 17 mitigating and preparing for climate change, as well as 

 18 helping to offset higher energy prices for low-income 

 19 families who are negatively impacted by price increases. 

 20 We ask that a significant percentage of allowance 

 21 value be invested in public health adaptation as well. It 

 22 is especially important that such investments be targeted 

 23 towards increasing preparedness and resilience in our most 

 24 vulnerable communities. In order to accomplish this, we 

 25 also request that a community benefits fund be created to 
 226 

 1 target effort within those communities once they've been 

 2 identified by CARB. 

 3 Thank you very much. 

 4 CHAIRPERSON NICHOLS: Thank you. 

 5 Andy Katz and then Alex Jackson. 

 6 MR. KATZ: Hi. Good afternoon, Chair Nichols and 

 7 Board members. 

 8 I'm Andy Katz representing Breathe California. 

 9 And I want to support and agree with the comments of my 

 10 environmental and health colleagues from the American Lung 

 11 Association, Sierra Club, and Union of Concerned 

 12 Scientists and Public Health Institute. 

 13 We have also signed onto the Public Health 

 14 Organization's letter and want to encourage the Board to 

 15 take care when approving and considering this cap and 

 16 trade regulation. It is important for the Board to move 

 17 forward on implementing AB 32. The cap and trade 

 18 regulation is included in the Scoping Plan and is 

 19 responsible for a large amount of the greenhouse gas 

 20 reductions, although not by any means the majority. 

 21 But it is important that in pursuing this that 

 22 the Board take care and maximize the public health 

 23 benefits. There is tremendous opportunity to either move 

 24 forward in a way that does not maximize these health 

 25 co-benefits or in a way that doesn't. So it's important 
 227 

 1 that many of these options be studied. 

 2 Right now, the California Department of Public 

 3 Health and the Air Resources Board have convened a public 

 4 health working group that I've been participating in. And 

 5 it does seem like many of these options are to be studied 

 6 in a health impact assessment. I think it's important 

 7 that this study be thorough and that this study accurately 

 8 convey to the Board the choices that you'll have about 

 9 what are the effects of reducing offsets from 49 percent 

 10 to a more appropriate level and a level that may provide 

 11 health benefits to communities that would otherwise see 

 12 those benefits outsourced outside the state of California. 

 13 That's a serious health concern that while the 

 14 greenhouse gas emissions around the world may go down, 

 15 communities won't actually see the toxic air contaminants 

 16 that they're exposed to on a daily basis in the 

 17 neighborhoods. They won't actually see those reductions 

 18 in their neighborhoods. So it's important that the health 

 19 impact assessment be real and be informative to the Board. 

 20 I'm very concerned that in the short time line 

 21 that we have within a month that that study will even be 

 22 done in as thorough enough a state to inform your 

 23 discussion, your workshop at the February Board meeting on 

 24 offsets. 

 25 So I do hope that the Board will ask your staff: 
 228 

 1 Will this report be ready for the Board's consideration? 

 2 And if not, perhaps you should have either a second 

 3 offsets workshop or postpone that offsets workshop. 

 4 Either way, please do not make a final decision on offsets 

 5 before you have the full and accurate information on 

 6 health impacts. That's a critical piece. 

 7 Similar concerns exist for the way allowances are 

 8 given out. That makes a big difference in whether these 

 9 reductions are real, how these reductions happen 

 10 throughout the state, and what the associated health 

 11 impacts or benefits might be. So we also agree with the 

 12 EAAC in terms of full auction, 100 percent auction, as 

 13 well as strong consideration for geographic restrictions 

 14 and trading. 

 15 For more reference, please look at those written 

 16 comments and please insist on a strong health impact 

 17 assessment before you make these decisions. 

 18 CHAIRPERSON NICHOLS: Thank you. 

 19 Alex Jackson and then Brian Nowicki and Josh 

 20 Gruen 

 21 MR. JACKSON: Good afternoon, members of the 

 22 Board. I'm representing the Natural Resources Defense 

 23 Council. 

 24 First, Chairman Nichols, I'd like to appreciate 

 25 your injection of a little bit of context and perspective 
 229 

 1 into this program and also for the Climate Champions who 

 2 have since departed to remind us about why we're all 

 3 dealing with this. 

 4 That said, I'm going to be wading into the weeds 

 5 on four issues. 

 6 The first is on the cap level. I'd like to echo 

 7 some of the points made earlier about the need for a 

 8 strong declining cap. I think there's two reasons for 

 9 that. 

 10 The first is really to send a strong market 

 11 signal early that it's going to be cost effective to be 

 12 making the investments we're going to need to get at these 

 13 greenhouse gas reductions. You know, setting a tight cap 

 14 in the initial period will really facilitate that price 

 15 discovery and make the price of the allowances meaningful 

 16 enough where people will be looking at ways to reduce and 

 17 not simply purchase allowances. 

 18 And the second is that getting to the end point 

 19 is not a whole ball game for cap and trade. The earlier 

 20 we can make reductions, the less warming we're going to 

 21 see and the less we're going to have to spend on 

 22 adaptation and all the impacts associated with that. 

 23 Second point I'd like to talk about briefly is 

 24 allowance value, which has come up several times before. 

 25 But, again, I'd like to add my voice to the chorus to pay 
 230 

 1 attention to the EAAC's report. They really put a lot of 

 2 efforts and careful analysis into their recommendations. 

 3 And we particularly support their views on 100 percent 

 4 auction and their general views on distribution of 

 5 allowance value. 

 6 The only point I think I'd like to raise where we 

 7 might differ is their breakdown on how to allocate between 

 8 giving back to consumers in some way and investment, which 

 9 is right now roughly 75 and 25 percent. And they do 

 10 appreciate in the report that maybe a little bit more 

 11 might need to go towards investment in the initial years. 

 12 And we think that is true. And perhaps a little bit more 

 13 than 25 percent is appropriate in the initial years of the 

 14 program where the market will not really be able to get at 

 15 some of these cost effective investments because of some 

 16 the barriers that the transit agencies, the local 

 17 government representatives have been talking about. So 

 18 there is a real need in these initial years to be making 

 19 those investments with the public wealth that generates 

 20 from cap and trade. 

 21 And, finally, I'd like to touch on enforcement 

 22 briefly. I can't really stress enough how important 

 23 enforcement will be to maintaining the integrity of the 

 24 cap. And I think at this point any attention that staff 

 25 and the Board can devote to really crafting the regulatory 
 231 

 1 scheme now will really pay dividends later in terms of all 

 2 the enforcement that's going to be needed. 

 3 So finding some simple approaches like a 

 4 multiplier we've been discussing and we submitted in our 

 5 comments that really send a clear signal willful 

 6 non-compliance will never be in the capped entity's 

 7 economic interest, and it is risky to wait until the end 

 8 of a compliance period to make those reductions. 

 9 Thank you for your time. 

 10 CHAIRPERSON NICHOLS: Thank you. 

 11 Brian Nowicki. 

 12 MR. NOWICKI: Thank you, Madam Chair and members 

 13 of the Board. 

 14 I'm Brian Nowicki with the Center for Biological 

 15 Diversity, a nonprofit environmental organization here out 

 16 of Sacramento. 

 17 I support previous comments and letters submitted 

 18 by -- previous comments by Sierra Club and Union of 

 19 concerned Scientists and have signed onto those letters. 

 20 I'm not going to recap those here, because what I would 

 21 say would not be as concise or articulate as what's 

 22 already been said and put forward in those letters. 

 23 So I'd like to take my time here to focus on just 

 24 the offsets portion with the two main points. 

 25 One is that aside from the need for the strong 
 232 

 1 reducing cap on offsets, there is also the need for 

 2 recognition that not all offsets are created equal. And 

 3 that's with regard to both within sectors as well between 

 4 sectors. 

 5 And in particular, I've been working on forest 

 6 offsets and using in a situation where there are very 

 7 loose restrictions/limitations on the number of offsets 

 8 flowing as we see in the current draft as well as no 

 9 restrictions on the geographic origin of those offsets, we 

 10 are in a position where we could see much lesser offsets 

 11 brought into the program than we could generate here in 

 12 California under California's laws. And it would be an 

 13 improvement in our own state forests. 

 14 In particular, talking about the forest offsets, 

 15 I would like to point out that you last saw me come before 

 16 you on this issue in the September meeting of the Board 

 17 where I brought comments, brought opposition to the 

 18 adoption of the forest project protocols that were the 

 19 methodology by which carbon credits would be assigned in 

 20 the forest sector. 

 21 At that time, I raised a number of questions 

 22 about clear cutting projects being included under the 

 23 forest sector as offsets -- as carbon credits and 

 24 eventually as offsets. At that time, there was discussion 

 25 among the Board and questions to the staff of ARB of 
 233 

 1 whether they would have another chance -- whether the 

 2 Board would have another chance to address the concerns 

 3 around clear cutting and other concerns about forestry 

 4 before those methodologies were adopted into the 

 5 compliance mechanism of the cap and trade regulation. 

 6 They were assured by Executive Officer Terry they would 

 7 have another chance. And, yet, in the preliminary draft 

 8 rag, we saw language that said they intended to roll the 

 9 voluntary action methodologies directly into the 

 10 compliance mechanisms. 

 11 I would like the Board to pay particular 

 12 attention to that methodology, especially given the 

 13 discussion and the attention you've are already given. 

 14 CHAIRPERSON NICHOLS: Thank you. 

 15 Josh Gruen and Patty Senecal and Alan Osofsky. 

 16 MR. GRUEN: Good afternoon, Madam Board and 

 17 Commission and staff. Thanks for the opportunity in 

 18 letting me speak. 

 19 I'm Josh Gruen, the Director of Operations for 

 20 CMI. We have a family of companies, 800 owner/operators 

 21 and contractors that work with our trucking groups in the 

 22 state of California. 

 23 We're opposed to the transportation related goods 

 24 movement and placed under a declining cap. Goods movement 

 25 sector cannot survive a complication of increased utility 
 234 

 1 rates, spikes, and higher California diesel prices, as 

 2 well as new trailer efficiency requirements. Placing 

 3 transportation under the cap and adopting a low-carbon 

 4 fuel standard and requiring utilities to use renewable 

 5 energy cost increases all of our costs. 

 6 We ask that you not consider placing 

 7 transportation under this cap and that you return to the 

 8 public process of the low-carbon fuel standard into a 

 9 process that includes the end users. 

 10 I have spoken now at three public workshops. 

 11 This is my fourth. Not only have our questions not been 

 12 answered, but the study due in 2007 to show if CARB diesel 

 13 is any cleaner than national fuel has yet -- the study is 

 14 more than two years old and it's overdue. And as yet the 

 15 fuel has been -- yet a new fuel now is being adopted 

 16 without testing, without proving the recipe. As we've 

 17 said in previous, the fuels in the past weren't tested on 

 18 diesel. We'll have a colleague, Allen, with Rogers 

 19 Trucking, our group, we'd love to test some of these 

 20 projects for you and see how they effect the diesels. 

 21 As you guys know, the trucking and the compliance 

 22 of the new trucks have completely changed. We now have a 

 23 whole group of liquid natural gas trucks. We've purchased 

 24 300 of them and are utilizing them. We have new diesels 

 25 we don't know how this will affect. We have also 1100 
 235 

 1 transportation professionals signed -- are sent to you 

 2 that are opposed to this regulation. 

 3 Appreciate your time today. Thank you. 

 4 CHAIRPERSON NICHOLS: You've kind of thrown a 

 5 whole bunch of stuff here, and it's mixed up in my mind. 

 6 I get it you don't want to be under the cap and 

 7 trade rule. I got it you've got a beef with CARB diesel 

 8 and you want it tested. 

 9 MR. GRUEN: Yes, ma'am. 

 10 CHAIRPERSON NICHOLS: So what's the deal on that? 

 11 MR. GRUEN: Meaning that -- 

 12 CHAIRPERSON NICHOLS: No, I'm not asking you. I 

 13 was speaking to staff. 

 14 MR. GRUEN: Sorry. 

 15 CHAIRPERSON NICHOLS: That's okay. 

 16 STATIONARY SOURCE DIVISION CHIEF FLETCHER: A 

 17 number of years ago, there was a Calderon bill that 

 18 authorized the testing of California diesel fuel versus 

 19 federal diesel fuel, but there was no appropriation of 

 20 money until fairly recently. So once we got the 

 21 authorization, we did start. We have done a considerable 

 22 amount of work already. There's been several public 

 23 workshops on that issue. 

 24 CHAIRPERSON NICHOLS: Have you been attending 

 25 these public workshops on the issue? So you're aware 
 236 

 1 testing is going on in response to your desire to see that 

 2 happen? 

 3 MR. GRUEN: We've been aware testing has gone on 

 4 for a long time. We haven't seen the completed studies 

 5 and haven't seen the ability to do it in a timely manner 

 6 before we start taking on additional processes. 

 7 CHAIRPERSON NICHOLS: I understand your attempt 

 8 to make the linkage here. I'm just trying to find out 

 9 what the facts are. 

 10 MR. GRUEN: Trying to help. 

 11 CHAIRPERSON NICHOLS: So what are we expecting in 

 12 terms of getting this study done? 

 13 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I'd 

 14 have to check and see what the final timing is on it. 

 15 I think we're pretty close to wrapping up the 

 16 testing. We have put out preliminary results so far that 

 17 do indicate that the California fuel is cleaner than 

 18 federal fuel. But we do need to wrap the study up. I'll 

 19 let you know. 

 20 CHAIRPERSON NICHOLS: Sounds like we've got an 

 21 eager audience out there awaiting it. So thank you. 

 22 Patty. 

 23 MS. SENECAL: Thank you. Represent the 

 24 International Warehouse Logistics Association, which are 

 25 three PLs distribution centers, Harbor Truckers for 
 237 

 1 Sustainable Future from L.A. Long Beach, and I'm also part 

 2 of the Western States Goods Movement Alliance. 

 3 We are opposed to having transportation with 

 4 trade-sensitive transportation put under a declining cap. 

 5 Putting transportation under a cap and mandating a 

 6 low-carbon fuel along with that is a double count for that 

 7 in the emission reductions and the goods movement sector. 

 8 In addition, the complications in the piling on a 

 9 lot of rules where the utilities and the refineries are 

 10 going to have additional cost upstream will trickle down 

 11 to its end users. End users meaning transportation, 

 12 trucking, warehousing distribution, et cetera. And we are 

 13 in a very trade-sensitive environment now and we're very 

 14 concerned about the piling on of the effect of all of this 

 15 cost to us. 

 16 Low-carbon fuel is a big cost factor for us. And 

 17 there is a white paper by the American Trucking 

 18 Association, a study about biofuels. And be happy to give 

 19 staff a copy of that, that is looking at biofuels being an 

 20 additional dollar per gallon with extended federal excise 

 21 tax; and without it, two dollars a gallon. Be happy to 

 22 share that with staff. 

 23 We would like to recommend expanding offsets to 

 24 25 percent from the four percent so that investment is 

 25 made in distributed energy within California and then, of 
 238 

 1 course, our nation to help lower cost. 

 2 I think Professor Sperling brought up a great 

 3 point, what really will impacts be. And again that is the 

 4 question that as end users having to work through these 

 5 regulations, what will the cost of our fuels be? Will it 

 6 be on-road tested? What is the reliability of the supply 

 7 and vehicle performance? Are we actually going to get 

 8 more emissions/less emission reductions and the per 

 9 gallon -- we know with diesel particulate filters our fuel 

 10 economy actually went down. So again reliability of our 

 11 engines, et cetera. And so these are really the questions 

 12 we're asking as end users about the impacts. 

 13 And again we're opposed to having transportation 

 14 for trade-sensitive transportation put under declining 

 15 cap. 

 16 Also for the record, we did submit comments 

 17 submitted on the 11th. 

 18 CHAIRPERSON NICHOLS: Alan Osofsky and Derek 

 19 Walker and Michael Endicott. 

 20 MR. OSOFSKY: Thank you very much for letting me 

 21 speak. 

 22 My name is Alan Osofsky, safety and compliance 

 23 manager for Rogers Trucking in San Leandro, California. 

 24 We have 150 employees, teamster drivers. We've dumped a 

 25 lot of money in the local economy; employee taxes, we buy 
 239 

 1 tires, so on, so forth. But our future is questionable. 

 2 The previous two speakers stole my thunder, but 

 3 I'll reiterate it anyway. We are opposed to placing 

 4 transportation and goods movement under the CARB cap and 

 5 trade rule. Again, we believe it's double counting and 

 6 double cost and causes leakage out of the state of 

 7 distribution centers, which we service. 

 8 I'd like to comment on the low-carbon fuel 

 9 standard. I'd hate to see that we'd be coming under both 

 10 regulations. We have personal experience with the 

 11 reformulation of a fuel back in 1994. Twelve of our 

 12 trucks went down when the diesel fuel pumps went bad. The 

 13 State was generous in helping us replace those, and we 

 14 appreciate that. Based on the Bill AB 3290 reimbursed 

 15 diesel owners. I have a copy of that here. But it didn't 

 16 compensate us for the down time. 

 17 But my point here is on the low-carbon fuel 

 18 standard, we'd like formal testing to be done. I've 

 19 offered our fleet as a test fleet at three different 

 20 meetings that I've attended between 2008 and 2009 and that 

 21 still stands. 

 22 Again, I'll summarize. We request that you not 

 23 place transportation under the cap and also allow offsets 

 24 of up to 25 percent, and hopefully that will include more 

 25 people and businesses in the program and bring the cost 
 240 

 1 down for everybody. 

 2 Thank you very much. 

 3 CHAIRPERSON NICHOLS: Thank you. 

 4 Derek Walker from EDF. 

 5 By the way, my machine was buzzing up here, 

 6 because there was a news alert from Washington that the 

 7 United States through Todd Stern, our climate negotiator, 

 8 has made a commitment at the U.N. that the U.S. is going 

 9 to reduce its greenhouse gas emissions about 17 percent 

 10 below 2005 levels in the next decade. So by 2020, a 17 

 11 percent reduction below 2005. 

 12 So just a point I think. I guess the President 

 13 is following up on his commitments and as of what he said 

 14 last night, but also just a reminder that there is a 

 15 context here that we're all working in. Thank you. 

 16 MR. WALKER: And this is Derek Walker, Director 

 17 of Climate Program and EDF, and certainly a reminder 

 18 California's leadership has stimulated a lot of aggressive 

 19 action and collaboration among countries and other states. 

 20 Cap and trade is the most effective tool that we 

 21 have for climate policy to generate quick reductions at 

 22 the lowest cost. And so EDF strongly supports CARB's 

 23 inclusion of the Cap and Trade Program as a core element 

 24 within AB 32 implementation. 

 25 We certainly appreciate the comments not only 
 241 

 1 earlier but just now by Chair Nichols about the context 

 2 here. The risk of California going off track right now, 

 3 especially when in D.C. things are not looking so 

 4 positively, California is -- the light is shining on us 

 5 and our actions carry tremendous weight. So this Board's 

 6 support for CARB staff and the process is very vital. And 

 7 we thank you for that. 

 8 I want to mention a couple of specific things 

 9 about why the Cap and Trade Program and the other policies 

 10 that ARB is working on are so vital. 

 11 You know, climate policies like the Cap and Trade 

 12 Program and the renewable energy standard are really the 

 13 backbone of innovation, promoting innovation, and also 

 14 helping with our economic recovery. And I know that you, 

 15 the Board, has seen a lot of materials that outline those 

 16 positive economic impacts. So I don't need to really go 

 17 over much of that right now. 

 18 In terms of the specific good ideas in the PDR, 

 19 expanding the program to include transportation fuels and 

 20 natural gas in the first part of the program is an 

 21 extremely positive development. We do urge the Board to 

 22 keep that in there. This makes the market larger. This 

 23 lowers the cost strain on other regulated entities. But 

 24 it also drives down an important part of the emissions 

 25 portfolio of California. 
 242 

 1 We also -- EDF strongly supports the inclusion of 

 2 offsets in the program. We do not have concerns about the 

 3 levels that CARB is proposing. We believe that there are 

 4 many examples of offsets promoting innovation in things 

 5 like sustainable agricultural and forestry projects, 

 6 waste, and other sectors. 

 7 And just to kind of address some of the comments 

 8 that we've heard earlier, this is a conversation about cap 

 9 and trade, but cap and trade is but one of the package of 

 10 policies that ARB is demonstrating leadership on. So 

 11 there are going to be lots and lots of benefits from ARB's 

 12 AB 32 implementation on a range of issues from criteria 

 13 pollution to energy sector innovation and investment. And 

 14 I would just urge everyone to keep that in mind and not 

 15 focus so much on cap and trade as if it's the only thing 

 16 ARB is doing. 

 17 Thanks a lot. 

 18 CHAIRPERSON NICHOLS: Thank you, Mr. Walker. 

 19 Michael Endicott and then Edwin Lombard. And 

 20 those are the last names on my list. So if you were 

 21 planning to speak and your name hasn't been called, please 

 22 make sure you turn in a card. Thank you. 

 23 MR. ENDICOTT: Good afternoon. My name is 

 24 Michael Endicott, Resource Sustainability Advocate for 

 25 Sierra California. 
 243 

 1 I'm going to go to one level below what Mr. 

 2 Magavern talked about, which was the overall design of 

 3 this program and look at the offsets component. 

 4 Only the laws of nature are immutable. Gravity 

 5 will do what gravity does all the time. If we don't put a 

 6 cap on our greenhouse gas emissions, we will get to the 

 7 tipping point. And the laws of man, which we're trying to 

 8 construct here, are often more a statement of intent. 

 9 Just because you put up a speed limit sign, it can effect 

 10 behavior, can get people to slow down, but doesn't mean 

 11 they'll actually drive 65 or 55 or 20. 

 12 So it's important that you pay attention to the 

 13 big details, but also the small components of your 

 14 program, include the offset program. 

 15 And to steal Mr. Nowak’s phrase, not all 

 16 offsets are created equal. Within even offset programs, 

 17 there are some that will get you actual certain 

 18 reductions, and those should be prioritized and launched 

 19 first. 

 20 Secondly, you could have the kinds of offsets 

 21 that might actually give money to disproportionately 

 22 impacted communities to purchase energy-efficient 

 23 refrigerators or air conditioners. Would also help reduce 

 24 emissions, because you wouldn't need to have that 

 25 increased power demand. 
 244 

 1 On the lowest of the totem pole, you get to 

 2 carbon sequestration. That one has the most presumptions, 

 3 the most modeling, the most assumptions built into it. So 

 4 in that, not all of them are created equal either. Some 

 5 of them will have some co-benefits. So that if we don't 

 6 get as much carbon reduction as we had planned, at least 

 7 we're getting something good. Some have bigger risks by 

 8 the practices, by encouraging those kinds of business 

 9 practices, say, that operate on the edges of regulatory 

 10 scheme that also push the boundaries of nature's carrying 

 11 capacity. 

 12 Within that, one particular one concerns us very 

 13 much. Mr. Nowicki referred to that. We do not think you 

 14 can clear-cut your way out of climate change and we ask the 

 15 Board not to try to do that at least in the first two 

 16 cycles of your role out of this program. We need to take 

 17 time to revisit that protocol. 

 18 So going back up and to finish this to give you a 

 19 little extra time as you close up, remember, please, that 

 20 all offsets are not created equal. And we really 

 21 shouldn't try to clear-cut our way out of climate change. 

 22 Thank you. 

 23 CHAIRPERSON NICHOLS: Thank you. 

 24 Edwin Lombard. 

 25 MR. LOMBARD: Thank you, Madam Chair and Board 
 245 

 1 members and staff. 

 2 I'm here today representing the California Black 

 3 Chamber of Commerce. Over the last year-and-a-half, I've 

 4 made public comments in front of the Board here a number 

 5 of times about the fact that we're alarmed by the 

 6 projected billions of dollars in costs of the 

 7 implementation of AB 32. 

 8 We're here today because we're even more alarmed 

 9 since the release of EAAC's recommendations relating to 

 10 the cap and trade proposal. The proposal projects higher 

 11 prices in electricity, natural gas, gasoline, and 

 12 recommends billions of taxes and compensation for job loss 

 13 and higher energy costs related to AB 32 seemingly before 

 14 factoring in the cost of the LCFS, which was not discussed 

 15 today. Cap and trade and LCFS are programs with cost 

 16 implications that will overwhelm all Californians, but 

 17 will disproportionately affect minority small businesses. 

 18 One cannot be considered without examining the 

 19 other and its impacts. We have seen cap and trade is 

 20 frightening, but even more frightening when you haven't 

 21 seen the cost of LCFS. 

 22 The rest of the nation and the world are taking a 

 23 more fiscally responsible approach to climate change and 

 24 carbon reduction. California could drastically reduce its 

 25 carbon and greenhouse gas emissions and still not put a 
 246 

 1 dent into world global warming. 

 2 Unemployment among African Americas in California 

 3 is over 15 percent higher than any other state group. 

 4 Before driving figures higher, we strongly 

 5 encourage that you get all the facts of the cost of 

 6 implementing cap and trade and the low-carbon fuel 

 7 standards and make sure that we're aware of the cost that 

 8 we're going to be facing in order to make this 

 9 accomplished. 

 10 CHAIRPERSON NICHOLS: Excuse me. I just want 

 11 to -- you made a reference to some other country that you 

 12 think is doing a more fiscally responsible job. 

 13 MR. LOMBARD: I said the rest of the United 

 14 States and the world are taking a more fiscal approach in 

 15 implementing reduction of greenhouse gases. I mean, you 

 16 just told us that the President is going to take a 17 

 17 percent reduction based on 2005. 

 18 CHAIRPERSON NICHOLS: From 2005. 

 19 MR. LOMBARD: Right. To me, that's a more fiscal 

 20 approach than what we're trying to get done. 

 21 CHAIRPERSON NICHOLS: I see. I didn't understand 

 22 what you meant. Thank you. 

 23 All right. Are there other witnesses on this 

 24 item? 

 25 I think one thing we've learned, if nothing else, 
 247 

 1 is the price of leadership is a lot of concern, if not 

 2 dissension on the part of people that need to come along 

 3 and be a part of this program. 

 4 Clearly, a number of groups are here today primed 

 5 to talk about low-carbon fuel standard, and we're unhappy 

 6 that we didn't get to talk about the low-carbon fuel 

 7 standard today. But that was not on the agenda. And it 

 8 will be on the agenda at some point in the future. But in 

 9 the mean time, we're expecting an update on that from the 

 10 staff. So maybe we can hear from you about what you're 

 11 planning to do with that. 

 12 STATIONARY SOURCE DIVISION CHIEF FLETCHER: We 

 13 intend to give you and the rest of the Board members a 

 14 memo on the status of where we are in the low-carbon fuel 

 15 standard. We expect to have that in the next two to three 

 16 weeks. That memo will be made public and will summarize 

 17 the status of all the direction that the Board has given 

 18 us where we're at. 

 19 We then intend to come back in the June/July time 

 20 frame with an update as well as any recommendations that 

 21 we have for regulatory changes to the LCFS. And, of 

 22 course, we'll be back at the end of the year for another 

 23 update. 

 24 CHAIRPERSON NICHOLS: Okay. So the Board when we 

 25 adopted the rule obviously set in motion a lot of 
 248 

 1 activity. But as of yet, decisions on many points really 

 2 are awaiting further work. And so we've got to take a 

 3 look at this report and see where we are. 

 4 STATIONARY SOURCE DIVISION CHIEF FLETCHER: 

 5 Correct. 

 6 CHAIRPERSON NICHOLS: Yes, please. 

 7 BOARD MEMBER TELLES: I wonder if you can maybe 

 8 research and give us some information on what other 

 9 jurisdictions have done with their allocations in the 

 10 public health sector and how successful they've been, if 

 11 Europe has done anything, if the east coast plan has done 

 12 anything. Because I think that's important, but it's 

 13 rather nebulous. And if there is any practical things 

 14 that have been done out there and some of the areas that 

 15 have already started cap and trade. 

 16 CHAIRPERSON NICHOLS: I think that's in the 

 17 public health analysis, isn't it? Or no? Are they 

 18 reviewing that as part of the analysis? 

 19 PROGRAM EVALUATION BRANCH CHIEF KENNEDY: I'm not 

 20 certain whether that was actually part of the plan for the 

 21 analysis already. But I do think that it is a good idea 

 22 to take a look at that if we weren't already -- if that's 

 23 not already in progress, I think we can do that. 

 24 CHAIRPERSON NICHOLS: If you could get a report 

 25 back to Dr. Telles. And I think all the Board members 
 249 

 1 would be interested to know what evidence there is out 

 2 there of any examples of this kind of an approach. 

 3 Mayor Loveridge. 

 4 BOARD MEMBER LOVERIDGE: Just three comments sort 

 5 of from 40,000 feet. 

 6 At the local level, one of our mantras is KISS, 

 7 keep it simple, stupid. This is the other end of the 

 8 continuum in terms of complexity and being comprehensive. 

 9 I think as we approach this the problem is that 

 10 it's seen as zero sum. People see themselves as losing 

 11 rather than winning in this effort. And I think for 

 12 effective presentation, we have to translate what we're 

 13 doing to the benefits for the economy, the benefits for 

 14 quality of life, for why this will enhance California's 

 15 economy, will enhance what happens to individuals. 

 16 Third comment, this is now as mayor of the city 

 17 of Riverside, a city which sees 30 percent increase 

 18 according to our public utility director, really 

 19 representing five million people in southern California 

 20 from SCPPA is 30 percent increase in its utility rates is 

 21 not something that five million people will except. 

 22 CHAIRPERSON NICHOLS: Well, I think from the 

 23 40,000 foot level, you can say global climate change is 

 24 real. And most people understand that, as science has 

 25 been telling us for quite a long time now. 
 250 

 1 On the other hand, it's not as present in their 

 2 minds as other things they're more worried about. And 

 3 most of the changes, if not all of the changes, that we 

 4 see coming as a result of having an effective 

 5 implementation of AB 32 or any other Global Solutions 

 6 Act -- I think is better to call it by its name, I agree 

 7 with that -- are things that most people recognize are 

 8 going to happen and need to happen anyway. The transition 

 9 to cleaner fuels, the transition to a more 

 10 energy-efficient lifestyle, the transition to cleaner 

 11 electricity, these are things that we know we need to do 

 12 for lots of reasons. People have been talking about it 

 13 for years, for the economy, for energy independence, for 

 14 national security, and for the environment, of course. 

 15 So global warming is just kind of one more reason 

 16 to do a lot of things that many people I think their 

 17 consensus is need to do anyway. I don't think there's 

 18 anybody who's advocating that we burn more gasoline or we 

 19 drive more miles or that we use energy less efficiently. 

 20 The issue is the transition and how fast it's 

 21 going to be and how we're going to pay for it, how we 

 22 generate the money to pay for it. 

 23 I think the irony of the cap and trade discussion 

 24 is that the people who invented this concept were looking 

 25 for a way to generate money to help with the transition. 
 251 

 1 The idea was instead of regulating people and saying use 

 2 less, burn less, whatever, the idea was that by putting a 

 3 cap on the bad stuff, which is the carbon, and then 

 4 selling the allowances by auction or whatever, that you 

 5 would generate resources that would then allow you to do 

 6 investments in good stuff that everybody wants. 

 7 But when people we actually start to look at the 

 8 fact that they might be the one who has to buy the 

 9 allowances or potentially at least initially deal with the 

 10 cost, then the fear factor takes over. And the natural -- 

 11 in a democracy, we all want to be winners and don't want 

 12 to be the ones to have to pay the cost. 

 13 So this is going to be a tough balance. It 

 14 really is. 

 15 I think the one thing we don't have the luxury of 

 16 doing is nothing. We could change the program. We could 

 17 fix it in various ways. We can do something different, if 

 18 we don't want to do cap and trade. Although every time 

 19 I've met with a group of business people and asked them, 

 20 you know, to work through what the options are and is 

 21 there something else they would rather see happen than cap 

 22 and trade, there's not a program that people really like a 

 23 whole lot better. But they do want to be -- they want to 

 24 make sure that somehow it doesn't cause too much 

 25 disruption right away. And I think we have to take that 
 252 

 1 into account. There's no question about it. We have to 

 2 be mindful of that. 

 3 Yes, sir. 

 4 BOARD MEMBER ROBERTS: If I dare make a comment, 

 5 but just sitting here listening, when we started out, it 

 6 was we were going to look at those businesses or agencies 

 7 that were emitting these greenhouse gases. And the whole 

 8 idea was instead of them reducing was to be able and find 

 9 the lowest cost ways to remove or to supplement, to trade, 

 10 in effect. 

 11 We've come a long way from there, and we're 

 12 creating a very complex model now. And I think people are 

 13 having trouble understanding it. And I think the 

 14 implications I think we're getting into -- we're already 

 15 starting to see the line up of people. We heard that 

 16 cities need the money to do their planning and that other 

 17 groups need it because they're going to be unfairly 

 18 impacted. 

 19 This thing is going in a direction that at least 

 20 wasn't clear when we started and sounded much simpler. 

 21 And I remember the discussion maybe having a 

 22 carbon tax instead. So it's all starting to sound very 

 23 simple in comparison to the issues that are being raised. 

 24 And I have some pretty strong concerns, because 

 25 this is not how high most people's radar scopes. It's 
 253 

 1 well behind the concerns over the economy and jobs. And I 

 2 think, you know, we live this every day, but there is a 

 3 world of people out there that are faced with issues that 

 4 are very different. 

 5 CHAIRPERSON NICHOLS: Oh, absolutely. 

 6 BOARD MEMBER ROBERTS: And, you know, I will sit 

 7 and listen, but I have some concerns from the 40,000 foot 

 8 level where this is going and the costs and the 

 9 complexities and perhaps the backlash. 

 10 CHAIRPERSON NICHOLS: Well, I think there really 

 11 needs to be a better way of describing what some of the 

 12 differences are and the assumptions that people are 

 13 making. 

 14 On the other hand, you see something that says a 

 15 three cents increase in the cost of a $20 meal in 2020. 

 16 And that doesn't take into account any of the possible 

 17 things that that business might do that would actually 

 18 benefit them, like putting in LED lights on their exit 

 19 signs or, you know, buying a more efficient refrigerator 

 20 or something, with help from their local utility. 

 21 And then, on the other hand, you hear about 

 22 impossibility of people operating their businesses. 

 23 There's something fundamental in the way these programs 

 24 would work that people are disagreeing about, and we need 

 25 to have a better way of at least articulating why one view 
 254 

 1 is the one that ought to prevail over the other before we 

 2 make a decision. And that is something that I think we 

 3 have not really seen. That's not what the economists do. 

 4 This is a much more down-to-earth kind of discussion that 

 5 we really need to be able to have. 

 6 So I share your concerns about the level of 

 7 discord that's out there right now. 

 8 Okay. I think we have no action to take. This 

 9 was intended to be educational. It has been educational. 

 10 Very much appreciate all the people who have come and 

 11 taken the time to help educate us. 

 12 STATIONARY SOURCE DIVISION CHIEF FLETCHER: This 

 13 is me. 

 14 CHAIRPERSON NICHOLS: Yes, you. 

 15 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I 

 16 just want to close a loop here. The AB 679 report on the 

 17 federal testing versus the California testing on the 

 18 fuels, we expect to get the final report in May. We still 

 19 have some testing to do, but that's in May. There is a 

 20 work group meeting actually on February 4th. So I just 

 21 wanted to mention that increase the gentleman would like 

 22 to -- 

 23 CHAIRPERSON NICHOLS: I think the gentleman who 

 24 was asking about that left right after he testified, but 

 25 maybe you can get the information to him. Thank you. 
 255 

 1 We'll take a five-minute stretch break and resume 

 2 our final action, which is a report and update on the 

 3 Board's enforcement program. 

 4 (Thereupon a recess was taken.) 

 5 CHAIRPERSON NICHOLS: We're getting ready to take 

 6 up our last item of the day on ARB's enforcement program. 

 7 I'm going to give Mayor Loveridge credit for 

 8 something that he said to me after the meeting broke up. 

 9 It's just a good reminder for all of us. And I would like 

 10 to have staff imprint this on your palm or your forehead 

 11 or something which is that what Obama said last night 

 12 what -- the President said last night about the country 

 13 that figures out this energy game is the country that's 

 14 going to be a winner is exactly what we're talking about 

 15 in California. It's why the Legislature passed the Global 

 16 Warming Solutions Act in the first place. It's the 

 17 success we've already had so far with our energy programs 

 18 and our environmental programs that have made the state 

 19 able to grow and retain its natural resources and 

 20 environmental quality at the same time. 

 21 And we're doing what we should be doing to build 

 22 on that success, and we believe that it's to our advantage 

 23 economically to be doing it. The Legislature would have 

 24 never have passed AB 32 in the first place if we weren't 

 25 convinced by being ahead of the game we were going to be 
 256 

 1 attracting investment here. It's already proven to be 

 2 true. But we cannot ever even talk about this topic 

 3 without mentioning those facts and the benefits that we 

 4 see in AB 32. 

 5 We're living in a time of bad budgets. We know 

 6 that the job picture is bad. We know the economy is bad. 

 7 We are the bright spot in all of that. We are the 

 8 solution, not the problem. Just need to remember that. 

 9 So thank you, Mayor Loveridge, for reminding me 

 10 when we were taking our break. 

 11 The next item is an update on ARB's Enforcement 

 12 Program. As I mentioned at the July Board meeting when we 

 13 were in San Diego, the Air Resources Board's then 

 14 relatively new Chief Counsel had already started working 

 15 with our Enforcement Division on a review of our 

 16 Enforcement Program, because it was one of the things I 

 17 had asked her to do when she came on board. 

 18 With a multitude of new regulations that have 

 19 been passed on a whole range of various subject areas, the 

 20 Air Resources Board needs to be sure that those we 

 21 regulate know about the requirements, that the 

 22 requirements are enforced fairly, and that the enforcement 

 23 process is transparent. 

 24 And, indeed, in terms of public understanding and 

 25 support for programs, one of the things that I've learned 
 257 

 1 over the years of working in this area is that enforcement 

 2 is key to how the public perceives the program. They need 

 3 to know that it's happening. They also need to know that 

 4 it's being done fairly. 

 5 In open comment periods at recent Board meetings, 

 6 a new industry coalition emerged and is voicing concerns 

 7 about the Board's Enforcement Program. So that was a good 

 8 opportunity for direction to staff to formally begin a 

 9 process to review these concerns and to invite the public 

 10 in as well. 

 11 The Air Resources Board reached out through an 

 12 open forum to solicit ideas about how to improve our 

 13 Enforcement Program. And I stepped into a small portion 

 14 of the meeting that took place here in Sacramento, and I 

 15 was very pleased at the diversity of organizations that 

 16 had taken the time. And we really do appreciate all of 

 17 those who gave us their views as part of this process. 

 18 So I'm now going to turn to Mr. Goldstene to 

 19 present the results of the process so far. 

 20 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 

 21 Nichols. 

 22 As you noted, we've undertaken extensive outreach 

 23 efforts, and we're going to present our preliminary 

 24 efforts today. 

 25 There are a number of ideas that we've received, 
 258 

 1 including the recommendation to develop penalty guidance 

 2 and other measures to increase the transparency of our 

 3 Enforcement Program. 

 4 Interested parties are encouraged to provide 

 5 their comments today in response to what we present to you 

 6 today. We look at this as an iterative process and would 

 7 like to continue to capitalize on the valuable dialogue 

 8 that this process has inspired so far. Staff will 

 9 continue to evaluate new comments as they come in, and we 

 10 plan on holding another public workshop and report back to 

 11 the Board in the next few months. 

 12 I do want to make one specific observation. All 

 13 though most commenters address the issue of how to enhance 

 14 and improve our Enforcement Program, few commenters have 

 15 been rather persistent in using this process as a platform 

 16 to resolve their own current pending violations. Our 

 17 view, of course, is that this approach is 

 18 counterproductive, and we hope that that effort will stop 

 19 because we really want to focus on the general policies. 

 20 This is not the forum to handle individual violations that 

 21 are under investigation. 

 22 Jim Ryden, Chief of ARB's Enforcement Division, 

 23 will brief the Board on the status of our efforts to date. 

 24 We were guided in our review by the attorney general's 

 25 office staff, and today Deputy Attorney General Will 
 259 

 1 Brieger is here and he'll make some brief comments after 

 2 Mr. Ryden concludes. 

 3 Jim will start by responding to the comments from 

 4 the -- he'll give an overview of where we are and respond 

 5 to other comments that have been made in Board open 

 6 sessions over the last few Board meetings. And then we'll 

 7 be available to answer any questions you have. 

 8 CHAIRPERSON NICHOLS: Okay. Thank you. So this 

 9 is a policy review. We're not talking about getting into 

 10 the specifics of individual enforcement cases. 

 11 EXECUTIVE OFFICER GOLDSTENE: That's right. 

 12 CHAIRPERSON NICHOLS: Okay. Good. Because I 

 13 really don't think this is the place to be doing that. 

 14 Okay. Thank you. 

 15 Let's begin. 

 16 (Thereupon an overhead presentation was 

 17 presented as follows.) 

 18 ENFORCEMENT DIVISION CHIEF RYDEN: Thank you. 

 19 And good afternoon, Chairman Nichols, Board members. 

 20 I'm Jim Ryden, Chief of ARB's Enforcement 

 21 Division. 

 22 --o0o-- 

 23 ENFORCEMENT DIVISION CHIEF RYDEN: We've worked 

 24 closely with the attorney general's office to review the 

 25 way we conduct enforcement at the ARB to ensure that it 
 260 

 1 complies with all legal requirements. 

 2 With that input as well as suggestions from the 

 3 regulated community and the public, we are implementing 

 4 some of the changes and continuing to look at issues. 

 5 First, I'd like to address the main comments you 

 6 heard from the new industry coalition by summarizing them 

 7 and providing our current thinking on them. 

 8 CHAIRPERSON NICHOLS: Is this the group that's 

 9 called CEERT? 

 10 ENFORCEMENT DIVISION CHIEF RYDEN: Yes. 

 11 CHAIRPERSON NICHOLS: Okay. Sounds like another 

 12 new organization. 

 13 ENFORCEMENT DIVISION CHIEF RYDEN: We're talking 

 14 about CEERT that's headed By Mr. Dunlap. 

 15 We are implementing several of the suggestions we 

 16 heard from this group, including a model penalty guidance, 

 17 looking at our administrative hearing process, and 

 18 augmenting our ability to take enforcement action against 

 19 illegal uncertified products imported into the 

 20 United States. 

 21 --o0o-- 

 22 ENFORCEMENT DIVISION CHIEF RYDEN: The first 

 23 comment you heard from this coalition was that the ARB 

 24 should loosen existing laws for strict liability for 

 25 violations of air quality requirements. Strict liability 
 261 

 1 for violations is established in statutes and regulations 

 2 we enforce. It is the typical standard in environmental 

 3 laws across the country, because environmental violations 

 4 involve ongoing business activity and are not usually 

 5 committed intentionally or even negligently. 

 6 Under strict liability, a violator's intent helps 

 7 determine the amount of penalty. The coalition commenters 

 8 urged ARB to adopt a system in which violators could avoid 

 9 strict liability. This would put the ARB out of step with 

 10 most environmental laws and leave many violations 

 11 unpunished. 

 12 --o0o-- 

 13 ENFORCEMENT DIVISION CHIEF RYDEN: The next 

 14 comment you heard from the new coalition urged ARB to 

 15 require mandatory administrative hearings, instead of 

 16 following the current ARB practice of working with 

 17 violators to reach mutually agreeable settlement based on 

 18 the facts and the law of each case. Allowing violators to 

 19 invoke mandatory administrative hearings instead of 

 20 working with us to settle cases would increase both 

 21 settlement costs and the time it takes to reach 

 22 settlements. Both would result in fewer violations being 

 23 addressed. 

 24 In addition to being long and costly, after an 

 25 administrative hearing, both ARB and the violator have the 
 262 

 1 option to challenge it all over again in court, adding to 

 2 the expense and burden of the process. 

 3 Instead, the ARB handles case settlements the way 

 4 most other agencies do. Our settlements are a product of 

 5 mutual agreement between the ARB and violators, and 

 6 neither side is able to dictate the terms to the other. 

 7 In fact, we settle 99 percent of our cases, so we do not 

 8 have much of a need for holding administrative hearings. 

 9 If we can't settle a case on those rare 

 10 occasions, ARB shoulders the burden and expense of proving 

 11 the violations in court. Litigation is seldom a winning 

 12 proposition for us, even if we technically win the 

 13 lawsuit, because litigation puts a huge strain on our 

 14 staff and resources. 

 15 Penalties must be deposited in the Air Pollution 

 16 Control Fund for appropriation by the Legislature, not in 

 17 our operating budget to compensate us for our litigation 

 18 expense. These are the realities of the situation. 

 19 That being said, we are looking at the 

 20 administrative hearing regulations that the ARB currently 

 21 has on the books. 

 22 --o0o-- 

 23 ENFORCEMENT DIVISION CHIEF RYDEN: The next 

 24 comment that you heard from the new coalition is that the 

 25 ARB should adopt a complicated U.S. EPA policy for 
 263 

 1 determining penalties in mobile source cases that is based 

 2 on federal law and is barely a year old. 

 3 The U.S. EPA mobile source penalty policy is not 

 4 a good fit for the ARB Enforcement Program, mainly because 

 5 California and federal mobile source penalty statutes are 

 6 entirely different. 

 7 Moreover, when implementing the U.S. EPA mobile 

 8 source penalty policy, the federal staff also uses its 

 9 discretion in applying certain factors, such as evaluating 

 10 the violator's intent. 

 11 The bottom line is, instead of adopting U.S. 

 12 EPA's penalty policy as suggested, ARB will continue to 

 13 evaluate the facts of individual cases and apply the 

 14 California statutory factors. 

 15 The 99 percent settlement rate reflects how well 

 16 ARB's existing process works. However, we believe that 

 17 there is merit to adopting a penalty guidance that is 

 18 consistent with California law and increases the 

 19 transparency of our Enforcement Program. Later in my 

 20 presentation, I will discuss the action we are taking in 

 21 more detail. 

 22 --o0o-- 

 23 ENFORCEMENT DIVISION CHIEF RYDEN: You also heard 

 24 comments from the new coalition that ARB should 

 25 concentrate on prosecuting emissions violations and either 
 264 

 1 ignore other violations or impose nominal penalties. 

 2 We do concentrate on emissions violations, but we 

 3 also prosecute other violations as well. Some coalition 

 4 commenters argue that the violations of ARB's engine 

 5 emission certification requirements are simply paperwork 

 6 violations. We disagree. ARB considers selling vehicles 

 7 that are not certified to ARB emission standards to be 

 8 emissions violations. The emissions that come out of 

 9 uncertified vehicles are illegal. They should not occur 

 10 at all. 

 11 The only way to protect our certification 

 12 programs, the emission standards they implement, and the 

 13 many law-abiding companies that spend their time and 

 14 resources to comply with ARB's certification requirements 

 15 is to impose substantial penalties for certification 

 16 violations. Since the Health and Safety Code provides 

 17 these substantial penalties for violations, the ARB is 

 18 merely reflecting the Legislature's decision. 

 19 These commenters also urged us to augment 

 20 enforcement against illegal uncertified products being 

 21 imported into the United States. We agree and have been 

 22 seeking to do this for several years, but we have made 

 23 less progress than we would like in discussions with 

 24 federal customs officials and others. We are working with 

 25 the coalition commenters to help obtain the necessary 
 265 

 1 authority to inspect products at the port. 

 2 --o0o-- 

 3 ENFORCEMENT DIVISION CHIEF RYDEN: You were also 

 4 told that the ARB should stop enforcing alleged 

 5 underground regulations, one of the coalition commenters 

 6 claimed had not been adopted through the Administrative 

 7 Procedures Act. 

 8 ARB does not enforce underground regulations. We 

 9 have our hands full enforcing the regulations this Board 

 10 adopts. The Office of Administrative Law recently 

 11 declined to rule on the underground regulation petitions 

 12 that these commenters, the California Motorcycle Dealers 

 13 Association and the Sand Car Association, brought to your 

 14 attention at open sessions of recent Board hearing. 

 15 CHAIRPERSON NICHOLS: Could I just -- I want to 

 16 clarify this, because I think this term "underground 

 17 regulations" sounds like something nefarious, and it 

 18 probably is. Basically, the idea is an agency would 

 19 attempt to enforce something that had never actually been 

 20 adopted as a regulation, is that -- 

 21 ENFORCEMENT DIVISION CHIEF RYDEN: Or should have 

 22 been adopted. 

 23 CHAIRPERSON NICHOLS: It should have been adopted 

 24 through a formal process, but they didn't do it, but 

 25 they're still trying to go after people for violating it. 
 266 

 1 And to do that would be illegal and it would be a defense 

 2 if we were to try to bring a case -- 

 3 ENFORCEMENT DIVISION CHIEF RYDEN: It would be an 

 4 absolute defense. 

 5 CHAIRPERSON NICHOLS: Then the defendant in that 

 6 case could say I'm not responsible, because they did not 

 7 adopt this regulation, and they would win. 

 8 ENFORCEMENT DIVISION CHIEF RYDEN: That's 

 9 correct. 

 10 CHAIRPERSON NICHOLS: Okay. Thank you. 

 11 --o0o-- 

 12 ENFORCEMENT DIVISION CHIEF RYDEN: Finally, you 

 13 were told the compliance assistance and training 

 14 activities currently housed in the Enforcement Division 

 15 should be transferred away; people are allegedly reluctant 

 16 to interact with ARB enforcement staff. 

 17 Over the years, we have trained thousands of 

 18 people from industry, academia, government agencies, other 

 19 organizations, and members of the public and have never 

 20 heard this concern expressed. In fact, our training is 

 21 the model for other states and nations and other 

 22 countries. Enrollment is, in fact, growing. 

 23 For example, in 2008, we trained about 4,000 

 24 people. In 2009, we trained almost 9,000 people. 

 25 Also, clients appreciate getting information from 
 267 

 1 the enforcement perspective. The ARB has other compliance 

 2 assistance programs that it's conducted by, for example, 

 3 the Ombudsman, other ARB staff through toll-free hotlines, 

 4 websites, problem resolution, program implementation, and 

 5 financial incentives. 

 6 --o0o-- 

 7 ENFORCEMENT DIVISION CHIEF RYDEN: ARB brought an 

 8 action against individuals selling sand cars. Sand cars 

 9 are essentially off-road dune buggies with extremely large 

 10 engines that were not certified to ARB emission standards. 

 11 After the sand car settlement was entered, an 

 12 individual complained to the Board. In response, we 

 13 opened an investigation into the allegations you heard. 

 14 This investigation is ongoing. But to date, the 

 15 allegations have not been substantiated. 

 16 Contrary to what you heard, we do give people 

 17 detailed explanations of how their penalties are 

 18 calculated. We issue citations, notices of violations, 

 19 and penalty evaluations based on the penalty amounts and 

 20 factors established in law, such as harm the violation 

 21 caused, how long it lasted, what the violator did to 

 22 correct, and the financial burden the penalty would place 

 23 on the violator. 

 24 --o0o-- 

 25 ENFORCEMENT DIVISION CHIEF RYDEN: In summary, 
 268 

 1 right now I'd like to summarize the other comments we 

 2 received and ways we are addressing them. 

 3 We always seek to improve the Enforcement Program 

 4 and these proposals came out of outreach efforts recently 

 5 taken in your direction. These outreach efforts have been 

 6 quite productive, thanks to the high level public 

 7 participation. 

 8 We'd like to think that the public's outstanding 

 9 response was due to ARB's outreach abilities, but there is 

 10 something bigger in play here. ARB's Enforcement Program 

 11 is receiving a great deal of interest lately because of 

 12 the ambitious regulations this Board has adopted. These 

 13 regulations will now impact industries and individuals who 

 14 have never before been subject to ARB compliance 

 15 obligations. 

 16 Based on these comments we received, now is an 

 17 excellent time to increase our transparency of what we do, 

 18 provide additional compliance assistance, especially to 

 19 the new regulated companies and individuals, and to 

 20 augment our efforts in environmental justice communities. 

 21 We look forward to continuing this dialogue. 

 22 Before I present the specific actions we are 

 23 taking, I would like to briefly summarize our outreach 

 24 activities. 

 25 --o0o-- 
 269 

 1 ENFORCEMENT DIVISION CHIEF RYDEN: We reached out 

 2 to all the parties interested in ARB's Enforcement Program 

 3 in various ways. Toward that end, staff held a public 

 4 workshop on October 12th, 2009. The workshop notice was 

 5 distributed widely by the largest e-mail broadcast in ARB 

 6 history and reached approximately 350,000 people, 

 7 businesses, and other organizations. 

 8 Enforcement Division staff followed up with 

 9 hundreds of direct calls to parties across a wide spectrum 

 10 of people interested in the ARB Enforcement Program. Our 

 11 efforts paid off. The workshop was attended by over 200 

 12 attendees in person, another 150 people online, and 30 

 13 parties testified in person, and many more submitted 

 14 written comments. 

 15 Since then, staff has followed up on meetings 

 16 with stakeholders. 

 17 Now I would like to summarize the comments we 

 18 received and the action we are taking to address them. 

 19 --o0o-- 

 20 ENFORCEMENT DIVISION CHIEF RYDEN: Many comments 

 21 suggested ways to increase the transparency of what we do, 

 22 requested that we provide additional compliance assistance 

 23 activities, and sought our increased presence in 

 24 environmental justice communities. 

 25 A number of comments requested that we stay the 
 270 

 1 course and, if anything, seek to strengthen our programs 

 2 and laws we enforce. 

 3 Some comments included many of the comments you 

 4 have heard in the open comment period at recent Board 

 5 hearings, and sought changes that we believe would have 

 6 the effect of weakening both our program and these laws. 

 7 These comments were not widely supported, 

 8 however, and they relate to issues some of the speakers 

 9 have raised in ongoing enforcement litigation with us. 

 10 I've already summarized these comments for you and our 

 11 thoughts on them, so I'll not repeat them here. 

 12 --o0o-- 

 13 ENFORCEMENT DIVISION CHIEF RYDEN: The main area 

 14 of consensus among the commenters is to increase the 

 15 transparency of ARB's Enforcement Program. Again, these 

 16 concerns are understandable, because the new ARB 

 17 regulations will affect people who previously were not 

 18 subject to regulation by ARB and are unfamiliar with the 

 19 ways we do business. We think many of these comments have 

 20 merits and are implementing them in several ways. 

 21 Increasing transparency should speed the resolution of our 

 22 cases and provide savings to us and the regulated 

 23 community. 

 24 Now I would like to discuss the specific actions. 

 25 --o0o-- 
 271 

 1 ENFORCEMENT DIVISION CHIEF RYDEN: Specifically, 

 2 we will prepare an enforcement penalty guidance and will 

 3 place it on the Enforcement Division web page. This 

 4 guidance document will list the ARB's regulatory programs, 

 5 the penalties available for violating their requirements, 

 6 and the factors we take into account in determining proper 

 7 penalties. The document will clarify that we emphasize 

 8 emissions violations, but that we seek appropriate 

 9 penalties for all violations for ARB requirements. 

 10 Once it is completed, the guidance document will 

 11 be available on the Enforcement Division web page. People 

 12 want to know more about the ARB's statutory penalty 

 13 authority, how ARB penalty checks are processed, where the 

 14 penalty funds the ARB collects are deposited, and how 

 15 supplemental environmental projects are identified and 

 16 funded. 

 17 --o0o-- 

 18 ENFORCEMENT DIVISION CHIEF RYDEN: To address 

 19 these comments, we are placing the following five things 

 20 on the Enforcement Division web page: 

 21 1. A plain language explanation of ARB penalty 

 22 statutes. 

 23 2. Cal/EPA guidance on supplemental 

 24 environmental projects and self disclosure policies. 

 25 3. A plain language explanation of these Cal/EPA 
 272 

 1 guidance’s. 

 2 4. An explanation of where ARB penalty moneys 

 3 are deposited and how they are processed. 

 4 We think it is important to emphasize to the 

 5 public that the penalties paid in ARB enforcement cases 

 6 are deposited in the Air Pollution Control Fund and are 

 7 spent only after appropriation by the Legislature. 

 8 5. A list of potential supplemental 

 9 environmental projects, including instructions for 

 10 requesting that a project be added to the list. 

 11 --o0o-- 

 12 ENFORCEMENT DIVISION CHIEF RYDEN: In conclusion, 

 13 we believe there is much value in this dialogue and we 

 14 plan to continue in the future. We found it beneficial. 

 15 We would like to afford people the opportunity to provide 

 16 written comments on what they heard today. 

 17 After we review these comments, we plan to report 

 18 back to you and will hold an additional workshop. 

 19 I would like to emphasize the ARB's Enforcement 

 20 Program has three main goals: To foster compliance, deter 

 21 violations, and create a level playing field for people 

 22 who have to comply with our regulations. 

 23 We do our job well, but believe there is always 

 24 room for improvement. These actions we are taking will 

 25 promote all of these goals. 
 273 

 1 I would like to thank the Board for the 

 2 opportunity to provide you with an update. I'm available 

 3 to answer any questions you may have. 

 4 CHAIRPERSON NICHOLS: Thank you very much. We 

 5 don't get to see you often at Board meetings. 

 6 ENFORCEMENT DIVISION CHIEF RYDEN: We're the only 

 7 division that doesn't do regulations. 

 8 CHAIRPERSON NICHOLS: That's right. Thank you. 

 9 That was actually very helpful. I think probably most 

 10 Board members never hear about enforcement. Or if they 

 11 do, it's only in the aftermath. 

 12 You do. Okay. And what do you hear about 

 13 enforcement people? 

 14 BOARD MEMBER BERG: I actually participate 

 15 sometimes on the other side of the table running a 

 16 manufacturing company. 

 17 CHAIRPERSON NICHOLS: So you've been subjected to 

 18 enforcement. And how was the experience? 

 19 BOARD MEMBER BERG: Actually, with ARB it was 

 20 very good. I could give you some DTSC stories, however. 

 21 CHAIRPERSON NICHOLS: Well, this is a very 

 22 sensitive area. I don't mean to put you on the spot too 

 23 much, but I knew you could take it. 

 24 It really is the place where most people probably 

 25 experience regulation, and that is those who are regulated 
 274 

 1 by us who need to both see us out there and also see that 

 2 they know that somebody is cheating one of their 

 3 competitors that they are going to hear from us and that 

 4 the laws are going to be enforced. So this is a highly 

 5 important area. 

 6 BOARD MEMBER TELLES: Just a question of 

 7 information. 

 8 In the enforcement penalties, I think I asked 

 9 this once before, but do you have a list of the penalties, 

 10 the size of the penalty for the degree of the violation? 

 11 I've looked on like a truck website and things 

 12 like that. If a guy drives without a particulate filter, 

 13 I don't see any penalties listed. 

 14 ENFORCEMENT DIVISION CHIEF RYDEN: The penalties 

 15 actually are specifically found in the Health and Safety 

 16 Code. That's part of our proposal to put on a 

 17 user-friendly list of the particular areas of violations 

 18 and the penalties that follow. 

 19 On the mobile source side, they're very specific 

 20 to certain violations. For example, 43151 prohibits the 

 21 sale of uncertified vehicles. 43016 is the fallback 

 22 position that covers things like small off-road engines 

 23 and gas cans. 

 24 And one of the proposals we had, since not 

 25 everybody is a lawyer -- and we resolve most of our 
 275 

 1 enforcement actions without lawyers at the staff level 

 2 with individuals. And like I said, what the initial 

 3 proposal to do is simplify so that you can find it and 

 4 everybody else who's interested in finding it can find it. 

 5 BOARD MEMBER TELLES: On the website I saw there 

 6 was a recent like $350,000 penalty for something some 

 7 entity did. The entity that did that, were they aware 

 8 there was going to be a $350,000 penalty for what they 

 9 did? 

 10 ENFORCEMENT DIVISION CHIEF RYDEN: I believe that 

 11 was one of the ones for the periodic smoke inspection 

 12 program. That's a program that's been on the books for 

 13 well over ten years. We've done extensive outreach in the 

 14 area and we conduct regular inspections. They're 

 15 notified -- actually in the DMV truck drivers handbook it 

 16 explains certain aspects of the requirements of the 

 17 periodic smoke inspection program. 

 18 That program is essentially like smog check for 

 19 trucks. It requires fleets of more than two to regularly 

 20 inspect their vehicles that are over four years old. 

 21 So what we would have done is conducted a regular 

 22 inspection probably of the fleet facility as we do 

 23 regularly. And during the audit process, we discovered 

 24 that, in fact, they didn't have the appropriate records. 

 25 So what we would have done with that is we 
 276 

 1 acquire the facts. We determine how many vehicles are 

 2 subject to the periodic smoke inspection program, bring in 

 3 the alleged violator. We discuss the violation. We show 

 4 them that, in fact, this is one of the fallback provisions 

 5 in 4301 -- Health and Safety Code 43016 which provides for 

 6 a $500 penalty for each vehicle for each year they didn't 

 7 do the penalty. 

 8 So they're fully aware of the basis of the 

 9 penalty structure. That's probably a lot longer 

 10 explanation -- 

 11 EXECUTIVE OFFICER GOLDSTENE: But our goal is to 

 12 make it easier to find that. 

 13 ENFORCEMENT DIVISION CHIEF RYDEN: That's our 

 14 first goal is to make it user friendly. Right now, I 

 15 think, oh, it's in the Health and Safety Code. But I've 

 16 been a lawyer for a quarter of a century. To me, it's 

 17 like reading a novel unfortunately. 

 18 CHAIRPERSON NICHOLS: You need a life. 

 19 (Laughter) 

 20 ENFORCEMENT DIVISION CHIEF RYDEN: Actually, I do 

 21 have a life beyond that. I don't spend time reading the 

 22 Health and Safety Code all day. 

 23 CHAIRPERSON NICHOLS: Just checking. 

 24 We've been laughing about this a bit, but 

 25 obviously it is an important topic. And I do particularly 
 277 

 1 want to call on John Dunlap representing CEERT. 

 2 EXECUTIVE OFFICER GOLDSTENE: Chairman Nichols, 

 3 Will Brieger from the AG's office was going to say a few 

 4 words. 

 5 CHAIRPERSON NICHOLS: Before you speak, Mr. 

 6 Dunlap, if we could hear from our colleagues and frequent 

 7 lawyer in these matters from the Attorney General's 

 8 Office. 

 9 DEPUTY ATTORNEY GENERAL BRIEGER: Good afternoon, 

 10 Chairman Nichols and Board members. This will be brief. 

 11 I know it's approaching 5:00. 

 12 My name is Will Brieger. I'm a Deputy Attorney 

 13 General specializing in environmental law enforcement. 

 14 And my years in law enforcement have included time as a 

 15 district attorney. I briefly filled in at Cal/EPA as the 

 16 head of the Enforcement Programs, but most of my career 

 17 has been in the attorney general's office working on a 

 18 variety of cases, hazardous waste, water quality, and of 

 19 course air quality. 

 20 But I'm not here to discuss specific cases. We 

 21 were recently asked to assist in a more general review of 

 22 enforcement practices. And appropriately so, as you may 

 23 know, the attorney general has a duty in the constitution 

 24 to ensure the uniform enforcement of law throughout the 

 25 state. 
 278 

 1 And as we proceed through that process, it's 

 2 clear that the Board's programs have a balance of 

 3 compliance assistance and a considerable deterrence 

 4 through enforcement. 

 5 There is a well-known enforcement maxim that 

 6 holds that 20 percent of the population will always comply 

 7 with any regulation. And then there's five percent that 

 8 will try to evade it. But the majority, that 75 percent 

 9 that remains, they'll comply also as long as they know 

 10 that that five percent is going to get caught and 

 11 punished. 

 12 Your Enforcement Programs know that. The Board's 

 13 fortunate to have an unusually experienced long tenured 

 14 group of savvy enforcement folks. And my office has 

 15 enjoyed a good collaboration with your staff reflecting, 

 16 I'm sure, a shared commitment to the air quality and in 

 17 recent years to climate change issues. And that 

 18 collaboration has gotten stronger since you hired away one 

 19 of our better lawyers as your Chief Counsel. 

 20 But I'm not saying that things can't be improved. 

 21 Every organization can streamline. Everyone can work a 

 22 bit smarter. The need is to improve on the ability to 

 23 educate that majority of people that want to comply with 

 24 the law and to catch that minority that don't. And that's 

 25 all in four days a week, most weeks. That can be done. 
 279 

 1 ARB's strength has always been its use of 

 2 science, experience, and public input to improve the air. 

 3 And likewise your enforcement programs draw on those 

 4 resources. The Enforcement Programs look at science, if 

 5 you will, in the form of research about what works in 

 6 enforcement. They draw on their experience and actually 

 7 experience from other agencies, and of course, public 

 8 input. The suggestions from the October workshop have 

 9 obviously resonated and are being listened to. 

 10 California sets high goals for itself. And it's 

 11 heartwarming to see how many businesses and people share 

 12 in those goals. We all benefit from the effort and the 

 13 ingenuity and frankly the real dollars that Californians 

 14 spend to keep our skies and our lungs clear. 

 15 Nobody wants those efforts to fail, and nobody 

 16 wants those investments to be undercut by laggards or 

 17 cheaters. So the attorney general's office is happy and 

 18 looks forward to a continued collaboration that's aimed at 

 19 fair and effective law enforcement. 

 20 CHAIRPERSON NICHOLS: Thank you. Thank you very 

 21 much. So are we your favorite client? 

 22 DEPUTY ATTORNEY GENERAL BRIEGER: Absolutely. 

 23 CHAIRPERSON NICHOLS: Thank you. I just had to 

 24 ask anyway. 

 25 I appreciate that. And appreciate your coming 
 280 

 1 over. Obviously, we depend on you not only for your 

 2 ability to take cases when we need to take them to court, 

 3 but also for the feedback. 

 4 And I had an opportunity to take a look at some 

 5 of the information that you provided in terms of an 

 6 overview, and it was really very helpful. I appreciate 

 7 all the work that the attorney general's office has put 

 8 into this. 

 9 Mr. Dunlap. 

 10 MR. DUNLAP: Good afternoon, Madam Chair and 

 11 members. It's a pleasure to be with you. 

 12 I'm not representing the laggards or the 

 13 scofflaws today, I want you to know. 

 14 The CEERT Coalition is a 20-trade associations 

 15 strong coalition from a diverse group of business sectors. 

 16 Some of them as Mr. Ryden pointed out in his remarks are 

 17 in tune savvy with being regulated. Others are new, and 

 18 some are facing pending compliance dates and the like. 

 19 And there is some concern, and that's why you 

 20 heard from various members of this coalition -- I think 

 21 four times in the last seven months of Board meetings. 

 22 This continues to be a priority for them. They're 

 23 interested in some reform. They want to see transparency, 

 24 predictability. We appreciate the overview that was 

 25 provided by Jim and Mr. Brieger. We support the need for 
 281 

 1 clarity and for consistency and to ensure there's level 

 2 playing fields. 

 3 One of the things I intended to say -- I had some 

 4 prepared remarks. I think I'll stray from them in the 

 5 short time I have and speak to perhaps a broader issue 

 6 that might bring home why we think this is so important. 

 7 The Air Resources Board has enjoyed unprecedented 

 8 public support and great cooperation over the past four 

 9 decades it's existed by setting tough, fair-minded, but 

 10 predictable regulatory goals. And you've noticed 

 11 particularly these days -- and we heard Madam Chair in 

 12 some of the commentary you offered in response to 

 13 industry -- because of the problems in the economy, people 

 14 are very sensitive to not only additional cost potential, 

 15 but unknowns through regulation. 

 16 And in the compliance area, it's important for 

 17 you to just pause a moment and reflect on it that it is 

 18 important to be perceived as not just fair minded and 

 19 consistent, but to provide resources for people to be able 

 20 to comply. And if they feel as if they're being rough 

 21 handled or the penalties are too high or they're not clear 

 22 to them, it is I think a real barrier to enjoying the 

 23 support that the Board has long had. 

 24 And so we take this seriously. We're delighted 

 25 in some of the changes and improvements that have been 
 282 

 1 promised by the staff. We appreciate that. We want you 

 2 to know that the more closely the Board pays attention to 

 3 these issues and asks staff to come back and tell them how 

 4 it's going, we think it will be strengthened. Your Board 

 5 is hands on and engaged and we only benefit from that. 

 6 A few things I must object to just briefly. 

 7 There was some characterization in how the staff looked at 

 8 some of the comments. And I just want you to know we're 

 9 not trying to reflect people getting away with things they 

 10 shouldn't. But at the same time, there needs to be some 

 11 detailed shared relative to the contents -- 

 12 CHAIRPERSON NICHOLS: I'm going to give you more 

 13 time, because you're representing a group. 

 14 MR. DUNLAP: And there's a half a dozen 

 15 gentleman -- 

 16 CHAIRPERSON NICHOLS: Rather than have them stand 

 17 up, go ahead. 

 18 MR. DUNLAP: I won't belabor that point, but I 

 19 want to focus on it for a moment, that if you can be as 

 20 transparent as possible, if you can provide a framework 

 21 that people know what they're facing and that you can 

 22 allow the framework to be accessed not just on websites, 

 23 but there can be some detail about units, number of units 

 24 that violated rules, what the penalties were per unit, the 

 25 SEPS, and the SEP being a way to contribute some fine 
 283 

 1 money for some mutually agreed upon programs, that I think 

 2 people will go into that process not so much fearing it 

 3 and being troubled. Nobody wants to go to court. So when 

 4 your staff says 99 percent of them settle, absolutely, 

 5 because people are motivated not to have legal 

 6 entanglements. I don't think that's necessarily the 

 7 greatest success statistic. It's people are worried about 

 8 going into the legal process. 

 9 So the bottom line is your Board expects quick 

 10 compliance, cost-effective compliance, fair treatment so 

 11 people can come out of the experience like Ms. Berg has 

 12 and her settlement case that she mentioned a moment ago 

 13 feeling that she was treated fairly. 

 14 So I would encourage the Board to keep after your 

 15 staff a bit. They're tough. Ms. Peter came from the AG's 

 16 office. They have a role to play there. We think this is 

 17 perhaps a little bit different role and a different 

 18 approach most times. 

 19 And so please understand our interest and 

 20 involvement to try to strengthen the program. We're not 

 21 trying to guide it, not trying to give people that 

 22 shouldn't be held to the high level of compliance an out. 

 23 So thanks for listening. We're going to continue 

 24 to work with your staff. 

 25 CHAIRPERSON NICHOLS: Thank you. 
 284 

 1 MR. DUNLAP: And we appreciate your attention. 

 2 CHAIRPERSON NICHOLS: Thank you. 

 3 I think the comment that Mr. Brieger made about 

 4 the need for always to be looking for ways to improve and 

 5 particularly at any given moment to see what the need is 

 6 and Mr. Reddens' recognition that we are in the process of 

 7 regulating people that had previously not had the pleasure 

 8 of dealing with us before and it isn't always something 

 9 people look forward to. So, you know, it's like visiting 

 10 the dentist I suppose. 

 11 MR. DUNLAP: But the idea of having the website 

 12 material and the like will be very helpful. And I think 

 13 you would want people to be able to represent themselves 

 14 whenever possible to come in and work with the staff and a 

 15 lot of them are inexperienced in that area. 

 16 CHAIRPERSON NICHOLS: Well, actually, that's one 

 17 of the reasons -- as I know you're very familiar with our 

 18 small business Ombudsman because she worked with you at 

 19 the South Coast District. And the district had a 

 20 reputation also that was somewhat scary. And I think part 

 21 of the work that you did and that she did there was to try 

 22 to help small businesses understand what they needed to do 

 23 and figure out how to make the process less scary. And 

 24 that was very important work. 

 25 MR. DUNLAP: And I think the idea that somebody 
 285 

 1 suggested that maybe a program be shifted from one 

 2 operation to another is more about optics than a failure 

 3 in people. Nobody is suggesting the program is failing, 

 4 but there has been some examples from clients I've had and 

 5 industry groups where they're reluctant to share 

 6 information perhaps or to participate when they know it's 

 7 being headed by folks from compliance. No matter how 

 8 public relations schooled they may be, they're concerned 

 9 about that. 

 10 CHAIRPERSON NICHOLS: I think there is a 

 11 difference between training, which I think the enforcement 

 12 does superlative job of from everything I've seen, and 

 13 this issue of sort of general compliance assistance or 

 14 counseling. And those are areas which are maybe sometimes 

 15 a little bit of a gray area. But I agree with you that a 

 16 different tone is sometimes called for. 

 17 MR. DUNLAP: And Mr. Goldstene made a quick call 

 18 to me and said there are a lot of things that are going to 

 19 be explained over the next few months and we appreciate 

 20 that. And we'll be pleased to continue to be as positive 

 21 as we can in the process. 

 22 CHAIRPERSON NICHOLS: Great. Thank you very 

 23 much. And you set something useful in the motion. It was 

 24 already -- I'd like to claim credit for having started the 

 25 process, but you definitely accelerated it and pushed it 
 286 

 1 up a notch. So thank you. 

 2 Do we have anything further on this topic? 

 3 EXECUTIVE OFFICER GOLDSTENE: No. 

 4 CHAIRPERSON NICHOLS: We do have four people who 

 5 have discovered the benefits in coming in the open comment 

 6 period to say whatever they feel like saying, and that's 

 7 what it's for. So we will close off the Enforcement 

 8 Program item and take the public comment period now. 

 9 We have four people: Skip Brown, Katherine 

 10 Reheis-Boyd, Joseph Partranski, and Betty Plowman. So 

 11 we'll start with Mr. Brown. 

 12 MR. BROWN: Good afternoon. Thank you for this 

 13 opportunity. 

 14 My name is Skip Brown with Delta Construction 

 15 Company. 

 16 In December, CARB had quite a broad side against 

 17 its credibility due to the Tran scandal. And I'd like to 

 18 talk about the fact that you possibly have some other 

 19 credibility issues. I'd like to bring them up at this 

 20 time. 

 21 The peer reviewers still stood behind the report, 

 22 but unfortunately six out of the nine peer reviewers have 

 23 compromised positions with CARB. Some of them were the 

 24 authors themselves. You know, what's up with that? We're 

 25 having the authors themselves doing the peer review group. 
 287 

 1 I don't think that's acceptable. 

 2 John Froins, Chair of the SCP, has been an 

 3 indirect recipient of funds that came from the State of 

 4 California and the federal EPA. And as Chair of the SRP, 

 5 who basically was a promoter of this back when it was 

 6 decided in 1998, 1999 to being a recipient of funds after 

 7 the fact, I think that -- certainly there's the appearance 

 8 of impropriety. 

 9 Gary Friedman was appointed as the epidemiologist 

 10 in 1988 and again in 1991, but has not -- there's been no 

 11 appointment since then. Since what we're doing is talking 

 12 about epidemiological studies, I would think that the 

 13 epidemiologist would be the key person to have on board. 

 14 And quite obvious I guess he's been retained in 

 15 perpetuity. 

 16 The studies used by CARB for doing this are 

 17 nationwide. There are no California-specific studies. 

 18 But California shows no premature death on six independent 

 19 studies, all discounted by CARB. What's up with that? 

 20 California is a fourth healthiest state in the 

 21 nation on age-adjusted death. So I don't understand 

 22 what's going on there. 

 23 No other state or county has declared or county 

 24 has declared diesel particulate matter to be attacked, but 

 25 California has that. 
 288 

 1 Asthma rates are up 75 percent. You're correct 

 2 about that. Between 1980 and 1996 in the children are up 

 3 almost 100 percent. But the air quality PM is down -- 2.5 

 4 is down 58 percent. In Riverside/L.A., one-hour ozone 

 5 exceeded 150 days in the 70s, down 25 days currently. 

 6 Here's a chart of the asthma going up and the air 

 7 quality improving by all the particulate matter and 

 8 everything going down. So we're blaming all this on 

 9 particulate matter. 

 10 CARB issued factoids after the December meeting I 

 11 guess to help support the premise that the studies are 

 12 good. Here's a list of their factoids. One of them says 

 13 each year in California diesel PM contributes up to 24,000 

 14 premature deaths. That's up from 3500 on the Tran report. 

 15 So now we're up to 24,000 premature deaths and thousands 

 16 of hospital emissions for asthma attacks and other 

 17 respiratory symptoms. 

 18 CHAIRMAN NICHOLS: Your time is up. I'm sorry if 

 19 you have a written presentation, you can submit it. 

 20 MR. BROWN: I didn't have time to do the written 

 21 presentation. I have very serious business problems 

 22 trying to survive in today's economy. 

 23 CHAIRPERSON NICHOLS: I understand, but you 

 24 obviously had time to do a lot of analysis. I would 

 25 invite you to come to our symposium on diesel, which is 
 289 

 1 being scheduled for a full day in February -- 

 2 RESEARCH DIVISION CHIEF CROES: February 26th. 

 3 CHAIRPERSON NICHOLS: And many of the people 

 4 whose work you agree with and as well as those whose work 

 5 you do not agree with and who you are here attacking will 

 6 be there. So please feel invited to come on February 

 7 26th. 

 8 MR. BROWN: Thank you very much. Will the 

 9 symposium offer a person more than three minutes? 

 10 CHAIRPERSON NICHOLS: Yes. For the speakers. 

 11 But the speakers are all going to be scientists. But 

 12 they're going to be scientists who agree with you as well 

 13 as scientists who don't agree with you. It's not just a 

 14 group of one-sided people or those who are on the take or 

 15 anything else. 

 16 MR. BROWN: That's excellent. I would like you 

 17 to look up the definition of factoids. I think you'll 

 18 find it entertaining. And my Latin offering for the day 

 19 is illegitimus non carborundum. 

 20 CHAIRPERSON NICHOLS: I agree with you on that 

 21 one. 

 22 Catherine. 

 23 MS. REHEIS-BOYD: Good afternoon, Chairman 

 24 Nichols, members of the Board. 

 25 I'm Catherine Reheis-Boyd, President of Western 
 290 

 1 States Petroleum Association. 

 2 I appreciate being able to talk with you today 

 3 under public comment on an extremely important regulation, 

 4 the low-carbon fuel standard. I had hoped to do that 

 5 under the agenda item. We all know that was pulled. 

 6 It's going here under public comment. The staff 

 7 is writing an update. I'm glad to hear that, because it's 

 8 important. And it's equally important that the Board 

 9 begin engaging with the stakeholders like us to hear the 

 10 concerns that we continue to have. 

 11 They are legitimate concerns. They are around 

 12 compliance, which you are very -- obviously we just got 

 13 done with a whole discussion on enforcement. But we have 

 14 concerns that we want to begin that conversation now 

 15 rather than later. We hope that maybe the next Board 

 16 meeting we can agendize this and use the staff report as a 

 17 basis for that beginning conversation like we just did in 

 18 cap and trade. 

 19 We're working every day with your staff on the 

 20 gaps that still remain, and again they are significant. 

 21 The questions remaining are significant. We just had a 

 22 workshop that demonstrated the challenges that are real 

 23 and they're present and they're today. They're not in 

 24 May. They're not in June. They're not next year. 

 25 They're now. 
 291 

 1 And we believe that obviously there's a lot of 

 2 implementation details that you'll be interested in. We 

 3 are happy to continue engaging the staff, but some of 

 4 those are short term. You have an advisory counsel that's 

 5 being set up to deal with our long-term concerns and we'll 

 6 be engaged in that process. Those are around technology 

 7 and vehicles and delivery systems that aren't invented yet 

 8 and not widely available. But you have a process for 

 9 that. 

 10 On the short-term issues, especially on the 

 11 reporting side, they're significant. This is a reporting 

 12 year. It is a compliance reporting year. We appreciate 

 13 the release of the CARB's advisory, Mr. Goldstene, 

 14 Ms. Ellen did a great job in at least getting us some 

 15 comfort in an advisory, give an extended period of May of 

 16 July. However, talking to the Board in June and July is 

 17 not adequate time. We need to engage now. We would like 

 18 to continue that conversation. We believe we can provide 

 19 you some ideas to allow some other enforcement protections 

 20 during this year of continued dialogue on a lot of these 

 21 implementation issues that are still on the table. So we 

 22 are looking forward to that. 

 23 We are looking forward to the Low Carbon Advisory 

 24 Committee getting kicked off this year. And we are 

 25 thankful that the Board sees that as an opportunity to 
 292 

 1 deal with fuel adequacy in vehicles and technology that 

 2 has to go around this regulation for the long term. 

 3 And then finally, as the hope of the Board 

 4 obviously is that this technology and availability of 

 5 non-petroleum liquid-based transportation fuels will come 

 6 over time, we don't feel it's our company's 

 7 responsibilities to be held accountable for the vehicles 

 8 and the combustion fuels technologies that are outside our 

 9 business control. And that being to make low-carbon 

 10 intensive fuel. So we'd like to talk about these issues. 

 11 Our goal is to ensure we can provide adequate, 

 12 reliable, affordable fuels while we work with you on your 

 13 goals to a transition to a different low-carbon economy. 

 14 CHAIRPERSON NICHOLS: Thank you for the comment. 

 15 In terms of follow up, I realize that what you 

 16 want is attention from the Board. I mean, that's why 

 17 you're here. Board time is scarce, as you snow. The 

 18 members of this Board are hard-working people who have 

 19 other lives. And they come from distances away, and they 

 20 tend to want to focus on things that they can take action 

 21 on. It's really hard to get people to sit and just 

 22 listen, you know, to a presentation unless there's 

 23 something that they can actually be engaged in. 

 24 And so I think once the report is here, we should 

 25 talk about what's the most effective way to get you an 
 293 

 1 open airing that you are seeking perhaps without having to 

 2 have an entire Board meeting devoted to that topic. 

 3 Perhaps there is a way that we can accomplish your goals. 

 4 We've had individual Board members in the past who have 

 5 been willing to spend extra time to work on an issue or 

 6 even subcommittees on the Board. I've been given some 

 7 thought how to work on those issue. I'm not making a 

 8 proposal right now but just suggesting we will get back to 

 9 you on this. 

 10 MS. REHEIS-BOYD: I really appreciate that 

 11 consideration. I thank you very much. 

 12 CHAIRPERSON NICHOLS: Thank you. 

 13 Joseph Partransky from Healthy Ports and Ships. 

 14 You've been with us all day, sir. 

 15 MR. PARTRANSKY: Yes, I'm Joe Partransky, and I'm 

 16 from the bay area. And I wrote a thesis back in '64 on 

 17 the politics technology of on-board ship automation. And 

 18 I'm concerned with health ports and healthy ships 

 19 currently. 

 20 Turns out that my understanding is that the 

 21 International Maritime Organization in March will be 

 22 dealing with a treaty which will have some impact on what 

 23 appears to be one of the major causes of Riverside's smog. 

 24 And that is ship diesel fuel being burned throughout the 

 25 whole world. Currently, the expectation by the year 2020 
 294 

 1 it will double. If it's not controlled by 2045, it will 

 2 double again. 

 3 Apparently, the diesel fuel burned in the ocean, 

 4 which is a concern that I think you should have as well as 

 5 I tried to find out if you had a subcommittee dealing with 

 6 it or what have you -- all I found so far is Lisa Williams 

 7 is one of your staff person who deals with harbors 

 8 community monitoring project, but there is no apparent 

 9 subcommittee or group that maybe you can direct me to that 

 10 is involved with the issues of the ships, not only within 

 11 the 20 miles, but within the 300 miles, within the whole 

 12 situation, because you are being effected by it. We are 

 13 being effected by it, not just in the ports. 

 14 The other question I have -- if you can provide 

 15 some help on that, I would appreciate that. 

 16 The other one is that in your area of outreach to 

 17 educational communities, may I suggest that every single 

 18 one of the district air quality management groups, can 

 19 they list on a very prominent place your website, that you 

 20 exist. It's not in the one that we have. And also list 

 21 the agendas when they're available, so everybody in the 

 22 state knows that your agenda is available. And they 

 23 should list besides the agendas that you actually have a 

 24 www.calspan.org repeat of this meeting so the people can 

 25 have access to that. 
 295 

 1 Every single one of the regional groups should 

 2 act cooperatively, collaboratively, and get information 

 3 out to the public, rather than us trying to find it, what 

 4 have you. 

 5 From the standpoint of a best practices in the 

 6 whole area of the California Air Quality Management Act 

 7 thresholds for significance, which will be done in our 

 8 area, the so-called measurements from the standpoint of 

 9 beyond greenhouse gases, we need to have involvement. 

 10 Thank you. 

 11 CHAIRPERSON NICHOLS: Your time is up, sir. But 

 12 thank you for coming and thank you for your comments. 

 13 Our final open comment period witness, Betty 

 14 Plowman. We have our letter, so you don't need to read 

 15 the letter. If you would just summarize it, that'd be 

 16 great. 

 17 MS. PLOWMAN: Yes. Thank you, Chairman Nichols. 

 18 And I did like your comments several moments ago 

 19 that the Board wants to take action. And I hope with this 

 20 letter that I presented they will take action, because 

 21 that's what we're asking for. 

 22 I have presented to each of you copies of letters 

 23 which were sent to you U.C. president Mark Yudof and U.C. 

 24 Professor Michael Jerrett requesting the California 

 25 specific relationship between PM2.5 and premature deaths. 
 296 

 1 These letters were sent both by regular and electronic 

 2 mail on January 6th, 2010, as well as numerous telephone 

 3 calls. And I sadly report today that there has been no 

 4 response. 

 5 There is serious disagreement among the 

 6 scientific community regarding the relationship between PM 

 7 2.5 and premature deaths. Evidence from six independent 

 8 sources indicate there's no relationship. Three of these 

 9 sources originate from the 2000, 2009 health effects 

 10 institute reports that Dr. Jerrett co-authored. 

 11 Clarification of the California-specific evidence from 

 12 these sources would resolve this issue. And Dr. Jerrett 

 13 is the California scientist in the best position to 

 14 clarify these results. 

 15 A detailed request was made to Dr. Jerrett on 

 16 July 11, 2008, and this request was repeated and expanded 

 17 upon in December 10th, 2008, public comment card. Dr. 

 18 Jerrett has failed to respond to these requests, in spite 

 19 of the fact that the underlining data used in his research 

 20 for Health Effects Institute is subject minimally to the 

 21 disclosure requirements of the federal data access. 

 22 Because of the lack of response from Dr. Jerrett, 

 23 the Hein Tran issue, as well as the catastrophic 

 24 consequences this rule is having on California businesses, 

 25 we urge you to assist us in our endeavor to bring 
 297 

 1 transparency to the science used that enacted this rule. 

 2 CHAIRPERSON NICHOLS: Thank you. 

 3 MS. PLOWMAN: Can I give the attorney general's 

 4 staff a copy also? 

 5 CHAIRPERSON NICHOLS: If he's willing to receive 

 6 it. I'm sure he would be happy to. Thank you. 

 7 Is there anybody prepared to comment at all on 

 8 the status of this matter? 

 9 RESEARCH DIVISION CHIEF CROES: Good afternoon. 

 10 Actually, Michael Jerrett from USC has published 

 11 an analysis of Los Angeles which shows a very strong 

 12 relationship between PM2.5 exposure and premature death. 

 13 That work was published in 2005. It's in the open peer 

 14 reviewed literature. And I'll make sure that's provided 

 15 to the person giving the testimony. 

 16 He does have a project with us to do an analysis 

 17 for all of California, not just Los Angeles. That's 

 18 ongoing. He's using data from the American Cancer 

 19 Society. They're the ones that hold that data, and it's 

 20 to protect the individuals that participate in the study. 

 21 It's really not available, something Michael Jerrett 

 22 cannot give to anyone on the outside. And if people 

 23 require that data, they should contact the American Cancer 

 24 Society directly. 

 25 CHAIRPERSON NICHOLS: My recollection, going way 
 298 

 1 back to the time when we first set the fine particle 

 2 standard at EPA in 2007, was there was demands on the part 

 3 of other groups -- outside groups who wanted American 

 4 Cancer Society data, that ACS refused to release because 

 5 of privacy type issues. And at the end of the day, there 

 6 was some process that was worked out through the Health 

 7 Effects Institute where they actually did find a way to 

 8 get some additional people to do some -- try to rerun the 

 9 studies that had been done. Is that what we're talking 

 10 about here? 

 11 BOARD MEMBER BALMES: If I might interject a bit. 

 12 The Health Effects Institute actually funded re-analysis 

 13 of some of the initial studies with regard to PM2.5 and 

 14 mortality that were done by Harvard investigators. Dr. 

 15 Jerrett was one of the group that was part of the 

 16 re-analysis. 

 17 So first of all, I wanted to say Michael Jerrett 

 18 is a colleague of mine at U.C. Berkeley. If that makes me 

 19 have conflict of interest in these statements, so be it. 

 20 But I can state that he's a scientist of great 

 21 integrity and believes in transparency of data. That's an 

 22 integral part of the scientist process. But I don't think 

 23 he believes in giving data without the permission of the 

 24 American Cancer Society, which I can tell you guards their 

 25 data very carefully. 
 299 

 1 On the basis of a publication that Dr. Jerrett 

 2 had earlier -- actually, in 2009, I wanted to follow up 

 3 with him and do a secondary analysis and we're still 

 4 waiting to get approval from the American Cancer Society 

 5 to do that. 

 6 And so I do think the data will eventually be 

 7 available. But it's the American Cancer Society that has 

 8 to be approached. And the Health Effects Institute may be 

 9 able to help convince the American Cancer Society to 

 10 release the data, but the American Cancer Society is very 

 11 difficult with regard to other investigators getting 

 12 access to their data. I'm a case in point in that regard. 

 13 CHAIRPERSON NICHOLS: Okay. 

 14 BOARD MEMBER TELLES: It's curious to me why the 

 15 American Cancer Society wouldn't release that. But in 

 16 your redoing the methodology report, are you not asking 

 17 for that information? I mean, that seems like it's almost 

 18 crucial to do what you need to do. 

 19 RESEARCH DIVISION CHIEF CROES: For our 

 20 re-assessment of the relationship between PM 2.5 and 

 21 health effects, we're relying on already published peer 

 22 reviewed literature, which in some of those studies do 

 23 rely on the American Cancer Society data. That data has 

 24 been re-analyzed by an independent group, the University 

 25 of Ottawa, I believe. So those studies have been 
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 1 reproduced. 

 2 The raw data that I think the testifier was 

 3 asking for includes information on individuals, where they 

 4 live, how old they are, diet, race, and so forth. And 

 5 that's just not data that the American Cancer Society can 

 6 share under the guidelines of acquiring the data in the 

 7 first place. 

 8 UNIDENTIFIED SPEAKER: You can wash the pertinent 

 9 information out. 

 10 BOARD MEMBER BALMES: The data could be 

 11 de-identified and then re-analyzed, I agree. 

 12 CHAIRPERSON NICHOLS: And that's what happened. 

 13 BOARD MEMBER BALMES: I'm in favor of having the 

 14 data be made available. I'm just saying that we don't 

 15 have the power to automatically make it available. 

 16 I do think at the February 26th symposium that 

 17 Dr. Jerrett will be there. And Dr. Enstrom who's been 

 18 very concerned about getting those data will also be 

 19 present, and perhaps we can get to some kind of way to 

 20 move forward at that meeting. 

 21 RESEARCH DIVISION CHIEF CROES: Also the Health 

 22 Effects Institute will be there, which funded the 

 23 re-analysis, as well as Dan Cruski, who's the Canadian 

 24 investigator that did the re-analysis, will be there. 

 25 BOARD MEMBER TELLES: That data that you are 
 301 

 1 getting, is it going to be California-specific or is it 

 2 just including the whole country and using the whole 

 3 country's data to kind of make a California -- 

 4 RESEARCH DIVISION CHIEF CROES: What we're 

 5 relying on primarily is the U.S. EPA integrated science 

 6 assessment which did look at the whole country. There 

 7 have been some California-specific studies which show a 

 8 whole range of results, and those will be discussed at the 

 9 symposium on the 26th. 

 10 BOARD MEMBER TELLES: I'm not trying to be the 

 11 devil's advocate, but I think it would be important to 

 12 know if there is a difference because of the different 

 13 type of particulate matter that's in California versus in 

 14 New York or Chicago or whatever. I mean, to me it's kind 

 15 of a scientific question that should be asked. 

 16 If the data is out there to get some information 

 17 in this regard, I think it would be very helpful for not 

 18 just us but the whole scientific community. Because one 

 19 of the questions I've always asked since I've been 

 20 involved in it is, is there a difference between the 

 21 particles between the different regions of the country. 

 22 In reviewing the cardiovascular literature, there's quite 

 23 a bit of difference when they talk about the composition 

 24 of these particles in Boston versus Los Angeles. A lot of 

 25 the cardiovascular literature comes out of Boston, which 
 302 

 1 is high in metals and whatever they do out there versus 

 2 what you see in the PM composition in Los Angeles. 

 3 To me, it's always been kind of a scientific 

 4 inquiry just kind of an interesting thing. Is there a 

 5 biological difference in what's actually happening. 

 6 RESEARCH DIVISION CHIEF CROES: That's a good 

 7 question. Certainly the transportation sources that 

 8 dominate the PM 2.5 are the same, but there are stationary 

 9 source differences. Coal combustion in the east versus 

 10 natural gas here. 

 11 CHAIRPERSON NICHOLS: Air quality, moisture 

 12 content of air, I mean, yes. Of course. This is a 

 13 flashback to 1996 at least as far as I'm concerned. 

 14 BOARD MEMBER BALMES: And correct me if I'm 

 15 wrong, Bart, but the current CARB support for Dr. 

 16 Jerrett's is to specifically look at the California 

 17 component of the American Cancer Society data. 

 18 RESEARCH DIVISION CHIEF CROES: That's correct. 

 19 BOARD MEMBER BALMES: So I think the Dr. Jerrett 

 20 will be at the February 26th symposium and it's fair game 

 21 for people to ask him what that analysis shows, so far 

 22 though. I know it's not completed at this point. 

 23 CHAIRPERSON NICHOLS: And I didn't mean my 

 24 comment to suggest that we shouldn't be pursuing it. I 

 25 think we should be pursuing it. Absolutely. Okay. 
 303 

 1 If that is the conclusion -- oh, sorry. Mayor 

 2 Loveridge. 

 3 BOARD MEMBER LOVERIDGE: I mean, obviously public 

 4 policy in this area has to be based on best science. But 

 5 I think the issue here is not so much science but the 

 6 choices we make in the public policy to implement. And so 

 7 even if we had the best science agreeing, I don't think 

 8 people whose names are on the list would be there if it 

 9 wasn't for the kind of impact public policy has on their 

 10 own business. It's not a scientific controversy as much 

 11 as a translation of science into public policy. 

 12 CHAIRPERSON NICHOLS: Well, yeah. Your comment 

 13 is relevant in this sense that the people who are 

 14 attacking the mortality studies may think that if there 

 15 were no mortality studies or no numbers about mortality 

 16 that would put an end to the obligation to regulate. 

 17 And, unfortunately, as we've discussed a few 

 18 times, but probably need to remind people, the regulations 

 19 that we have on diesels are based on air quality standards 

 20 that are federal air quality standards that we're required 

 21 to meet. So even if there was zero mortality, if there is 

 22 an air quality standard based on any public health issue, 

 23 we still have to come up with regulations to meet it. 

 24 So your quest is a perfectly acceptable one, and 

 25 it's not only within your rights, it's something you feel 
 304 

 1 strongly about and you should. But it isn't going to -- 

 2 it's a sort of a diversion in a way from the issue that 

 3 you presumably as a business person are the most focused 

 4 on. That's a fair point. Thank you. 

 5 Hearing nothing more, we will stand adjourned 

 6 then. Thank you, everybody. See you next month. 

 7 (Thereupon the California Air Resources Board 

 8 adjourned at 5:21 p.m.) 

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 1 CERTIFICATE OF REPORTER 

 2 I, TIFFANY C. KRAFT, a Certified Shorthand 

 3 Reporter of the State of California, and Registered 

 4 Professional Reporter, do hereby certify: 

 5 That I am a disinterested person herein; that the 

 6 foregoing hearing was reported in shorthand by me, 

 7 Tiffany C. Kraft, a Certified Shorthand Reporter of the 

 8 State of California, and thereafter transcribed into 

 9 typewriting. 

 10 I further certify that I am not of counsel or 

 11 attorney for any of the parties to said hearing nor in any 

 12 way interested in the outcome of said hearing. 

 13 IN WITNESS WHEREOF, I have hereunto set my hand 

 14 this 17th day of February, 2010. 

 15 

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 19 

 20 

 21 

 22 TIFFANY C. KRAFT, CSR, RPR 

 23 Certified Shorthand Reporter 

 24 License No. 12277 

 25