Good morning, my name is Lee Wallace and I am representing Southern California Gas

Co.

We want to acknowledge the tremendous work the SCAQMD and CARB staff have done in bringing before you a path to attainment of our clean air goals. For this air basin, some might look at the problem, and conclude it is impossible to solve. However the staff have worked very hard and are presenting to you today a reasonable path forward.

In my remarks today, I want to focus on this larger challenge and in particular the shape of the problem.

1This is a very important chart to understand the multi

- layered air quality

challenges we face here in southern California. I will explain this further, but pay particular attention to the two black dots in the lower left quadrant.

On June 28 of this year, CARB staff presented the “Vision for Clean Air,” a joint effort with the South Coast AQMD and the San Joaquin Valley APCD. The Vision’s objective was to take a broader view of air quality planning
from a multi

- pollutant perspective. Specifically it sought to integrate planning efforts (1) for SIPs under the Clean Air Act, (2) AB 32 Scoping Plan Updates, e.g. in 2013, and (3) freight transport planning.

This graph shows data from the Vision, and illustrates the problem identified by the Vision. Looking at the red line, the chart shows that it is relatively “easier” to achieve the state’s GHG goals for 2050 [the dashed horizontal line], compared to attainment of ozone standards that must be met in 2023 and 2032. The path laid out by the Vision achieved the necessary GHG emission reductions before 2050.

2However now look at the two black dots in the lower left quadrant. The

NOx reductions needed were too late by 12 years, in the case of the 2023 target [the first black dot from the left], and over 10 years too late in the case of the 2032 target [the second black dot from the left].

What is needed is a strategy, or path to zero emission transportation options, that not only achieves the state’s GHG goals for 2050, but also achieves significantly more criteria pollutant reductions, much sooner.

The slope of the curves on this chart are driven by the rate of penetration
of ultra clean technologies, such as electric vehicles and fuel cell vehicles. To get to the level of emissions needed in 2023 and 2032, there must be more rapid penetration of cleaner transportation technologies. Trying to
introduce brand new electric or fuel cell trucks even earlier than the Vision contemplates would be very difficult. Therefore the path must start with, and rely upon existing technologies. We believe natural gas is poised to be a major part of most paths to zero emission transportation options.

2This chart shows what the emission reduction curve will look to achieve the 2023 and

2032 goals. It illustrates the fact that the emission reductions needed here in the SCAQMD are heavily front loaded.

In 2010 the NOx Emissions Planning Inventory is approximately 624 tons per day

. [Interpolated value based on 2008 and 2014 numbers from Draft Final 2012 AQMP (November 2012) Appendix II Tables B

- 1 and B

- 2.] To reach the carrying capacity for the 1997 8 hour ozone standard of 115 tons per day will require a reduction of 509 tons per day over a decade. SCAQMD has identified about 60% of the needed reductions, but that still leaves almost 200 tons per day to be found.

In order to reach the next ozone standard, the 2008 8 hour standard, the District will
have to reduce NOx emissions by a relatively smaller amount of 35 tons per day, over a period of a little less than a decade.

Reliance upon “over the horizon” technologies is ill advised to address a heavily front loaded emission reduction challenge. To introduce new technologies, even though they have tailpipe emissions of zero, will require a rapid build out and deployment of manufacturing, infrastructure, maintenance and other support functions that is unprecedented.

A sounder approach is to build on existing technologies, but starting with even cleaner

3versions of these existing technologies. Natural gas can meet this challenge to provide

even cleaner versions of natural gas vehicles, and become part of a “path” to zero emission transportation options.

3Developing a range of alternative fuel and electric passenger vehicles that

will fulfill consumer needs for all of the various needs we have is difficult enough. But turning to the task of moving freight or other large cargoes, the problem of developing a range of alternative fuel and electric vehicles
that fulfill these needs becomes several times more difficult.

The South Coast AQMD must rely heavily upon the introduction of zero
and near

- zero emission technologies. The staff have recognized the difficulty in fulfilling the demand for the range of vehicles that will be needed in the time frames we have. We support the way that the SCAQMD staff have defined the problem that will allow flexibility to address the many demands on vehicles used to move freight or other large cargoes, and also allow existing technologies to develop or support a path to zero emission transportation options.

Natural gas vehicles in development show that NGVs can be more than a “bridge,” and can readily play a role on the path to zero emission transportation options. I’d like to discuss some examples.

4The idea here is to take a natural gas truck and outfit it to be able to use a

catenary system. This system can grow from near

- dock facilities to the I

710 corridor and eventually comprise a zero

- emission electric container

movement system sought by the ports. It has the ability to use natural gas
in extended off

- Catenary operation, completely eliminating diesel emissions wherever it goes.

5The purpose of this project is to address the range anxiety of long haul

truckers, while still allowing them to reap the economic advantage of using natural gas instead of diesel. The vehicle operator will likely use natural gas because of the significant cost savings, but when the truck is required to travel outside its normal territory or when CNG fueling is not readily available, the engine will seamlessly transition to operate on liquid fuel. This will give truckers and fleet operators the opportunity and confidence
to use low

- cost natural gas in an expanded territory.

6This purpose of this vehicle is to address the constant idling typical of Port

facilities where drayage trucks often queue for long periods. This hybrid truck will operate in electric mode (EV mode) around 25% of time (30 miles), and then, in hybrid mode with charge sustaining. It will overcome the perceived issue of lack of power from CWI 8.9 liter engine currently in use. There is no practical limitation of the range and usage, and it will have higher operating hours than a diesel truck.

7These are a few examples of very low emission natural gas heavy duty

trucks that can be the starting points for “paths” to achieve zero emission transportation options, as envisioned in the SCAQMD definition discussed
earlier. (These examples are in the vertical box on the right along with other relevant examples for freight .)

But what is a path to zero emissions? First we must recognize that there must multiple paths, or choices, to match the variety of work demands and duty cycles, especially for vehicles that haul freight or other large cargoes. To deal with this more complicated problem, regulators are developing new ways of thinking about zero emission options as they consider the demands that the vehicles must satisfy.

Looking at the vertical box on the right, we see what the goals of some of these paths might be.

• Zero Emissions Equivalent takes into account associated air emissions. For example if an electric vehicle is the zero emission technology model, air regulators try to calculate the additional emissions associated with generation of the electricity used by the vehicle in its duty cycle to get

8an equivalent emission rate.

• Net Zero is a concept that looks at the generation and use as a system,
and considers non

- traditional options. For example a CNG hybrid passenger train could be powered by a turbine that emits at the same

rate as a base load electric generation plant. For this type of freight transportation that may travel through numerous air basins, the equivalent might the base load generation emission rate that would have supplied the electricity used by an electric locomotive.

• Zero Emission Miles Travelled is an interesting concept being considered by the SCAQMD staff in particular. This is based on the idea that a vehicle’s miles traveled at zero emissions are their real objective in certain very important uses, such as drayage trucks.

Now looking at the vertical box in the middle, we see how different strategies might be applied to some of these natural gas truck examples on the right to get to the zero emission option goals on the left.

• Advanced NG engines . Natural gas engines are being made with very low emission rates, and manufacturers are investigating strategies to achieve even more impressive emission rates.

• CNG/H2 Infrastructure . As noted in the recent EPA rulemaking, the CNG infrastructure can support and even lead to creation of a hydrogen fuel
infrastructure.

• NG/H2 blends . Engine manufacturers have for a long time known that mixtures of hydrogen and natural gas used in engines can reduce NOx
emissions even further.

• Hybridization of a low emission natural gas engine can make the overall system even cleaner.

• Biogas can contribute significantly to the achievement of the state’s GHG goal.

And most important, these paths leave room for innovation. In any technology development, we know that not everything works out. But utilizing existing technologies will allow manufacturers to learn from mistakes and take advantage of the ingenuity they possess, based on the experience they have with existing technologies, to come up with solutions
that we can’t even envision now.

8I want to thank the Board for this opportunity to testify.

8