DEPARTMENT OF THE ENVIRONMENT

AIR AND RADIATION MANAGEMENT ADMINISTRATION

RESPONSE TO COMMENTS

for the

PUBLIC HEARING held on October 3, 2007 in BALTIMORE, MD

related to adoption of Maryland's Low Emissions Vehicle Program, new regulations under a new chapter COMAR 26.11.34

Purpose of Hearing : The purpose of the public hearing was to allow for public comment on the Department's proposal to adopt the California Cl ean Car Program in Maryland as required by the Maryland Clean Cars Act of 2007. These regulations require all new 2011 and subsequent model year passenger cars, light-duty trucks, and medium-duty vehicles having a gross vehicle weight rating (GVWR) of 14,000 pounds or less that are transferred in Maryland to meet the California

emissions standards.

Date and Location : The public hearing was held on October 3, 2007 at 10 a.m. at the Department of the Environment, 1800 Washington Boulevard, 1st Floor Auditorium, Baltimore, Maryland 21230.

Hearing Officer: Deborah Rabin, Regulations Coordina tor, Air and Radiation Management Administration, Maryland Department of the Environment.

Attendance : Approximately 100 persons attended the hearing. The majority were sight-impaired

citizens and members of the National Federation of the Blind of Maryland. Twenty-six (26) attendees testified at the hearing.

Statement : The Department's statement was submitted into the record by Mr. Tim Shepherd, Division Chief for the Engineering and Technol ogy Assessment Division of the Mobile Sources Control Program, Air and Radiation Management Administration, Department of the Environment.

Comments and Responses : The comments received by the Department at the hearing and during the 30- day comment period have been summarized and the Department's responses are given below.

COMMENT #1: The National Federation of the Blind of Maryland (NFB) expressed concern with regard to the ability of visually impaired individuals to identify the proximity or approach of certain “silent” vehicles and requests that the Department include specific (supplied) language in the California Clean Cars rulemaking to require vehicle manufacturers to maintain a minimum level of vehicle noise during all operating conditions.

RESPONSE: The Department respects the concern expressed by the commenter but must point out that the concern is independent of the California Clean Cars Program and is a safety issue best addressed at the federal level. The NFB concern is based on the performance characteristics ofvehicles currently on the road in Maryland and nationwide. These vehicles have been on the road prior to adoption of the Maryland Clean Cars Act of 2007 and their num bers will continue to increase regardless of whether Maryland adopts the Clean Car Program . For exam ple, Toyota is considering expanding hybrid electric vehicle production to all m odels. Hybrid vehicles have been, and will continue to be, an integral part of the current f e deral Tier 2 vehicle program

.

Vehicle noise profiles, especially at idle, ha ve been decreasing due to m a nufacturer design

improvem e nts and advancing technology and this trend is expected to continue regardless of whether Maryland adopts the California Clean Cars Program . W h ile hybrids are the vehicles of

m o st concern to the com m e nter since they have the ability to drive in electric m ode f o r short distances and are capable of essentially noiseless idling, it is im portant to recognize that technology to allow engine off at idle for even conventional vehicles is expected to be introduced in the near future. Such technology is designed to save fuel and will be introduced independent of the Clean Cars program . Noise m i nim i zation is an ongoi ng elem ent of vehicle design and m a nufacturing,

intended to m a xim i ze consum er satisfaction and com f ort. A significant increase in quiet vehicles can be expected regardless of Maryland’s adoption of the Clean Car Program

.

Even if the issue of silent vehicles were related to the Clean Car Program , adoption of vehicle audibility requirem e nts at the state level would not af f

ect vehicles registered in another state. Given that 14 states have either adopted or are in th e process of adopting California’s em ission standards (with several others considering adoption), and the fact that a substantial num ber of interstate travelers use Maryland roadways, there would still be a signif i cant num ber of audible vehicles confronting the visually im paired. This situation is only exacerbated when one recognizes that the issue is not tied to the Clean Car Program , but rather an increasing elem ent of national vehicle design and functionality. Rather than vehicles from 13 other states posing a potential problem , it

will be vehicles f r om 49 other states. Both situations clearly highlight the need f o r consistent, national standards. Maryland cannot independently regulate this issue away.

Nevertheless, we are respectful of the com m e nter’s concerns and are assisting the com m e nter in elevating this to the national level through contacts with the vehicle m a nufacturers, discussions with

other states and com m unication with the Nationa l Transportation Highway Traffic Adm i nistration, the federal agency charged with im plem enting m o tor vehicle safety requirem e nts, requesting consideration of this concern and adoption of appropriate national safeguards.

COMMENT #2: Mem b ers of the Association of Interna tional Autom obile Manuf acturers (AIAM) actively support the federal efforts currently underway to im prove fuel econom y and lower greenhouse gas em issions.

RESPONSE: The Departm e nt appreciates this position and encourages AIAM m e m b ers to continue to pursue fuel econom y im provem e nts and greenhouse gas reductions at the federal level. The adoption of the California Clean Car Program in Maryland does not conflict with these efforts.

COMMENT #3: AIAM opposed the “Maryland Clean Cars Act of 2007” which adopted

California em issions and greenhouse gas standards because they do not believe such actions will have any significant favorable im pact on the local air quality in Maryland.

2RESPONSE: The Departm e nt understands the position of the AIAM but disagrees with their conclusions. Analyses conducted by the Departm e nt using m e thodologies developed and approved by the U.S. Environm ental Protection Agency clearly dem onstrate the local criteria pollutant benefits of the California Clean Car Program

.

COMMENT #4: AIAM views a uniform federal greenhouse gas or fuel econom y standard as a better way to obtain the intended environm ental goals of the “Maryland Clean Cars Act of 2007” without creating a patchwork of differing state-by- state requirem e nts that will harm consum ers, dealers, and autom obile m a nufacturers.

RESPONSE: The Departm e nt encourages the AIAM to advocate for stronger federal

environm ental regulation. There are currently no federal standards for greenhouse gases and, although not an elem ent of the California Clean Ca rs Program , federal fuel econom y standards for passenger cars have not increased since 1985 and light truck standards have increased by less than ten percent since 1987. The federal Clean Air Act specifically prohibits Maryland from establishing or participating in a patchwork progr am of state-specific requirem e nts by lim iting state options to either the federal or California require m e nts. W h ile discussions of regulating greenhouse

gas em issions continue at the federal level, Maryland has elected to adopt the California requirem e nts to obtain greenhouse gas reductions (as well as additional reductions in em issions of the criteria pollutants). Maryland has not adopted the Clean Car Program on its own. Every state to our north and east, with the exception of Delaware and New Ham p shire, has also adopted the California requirem e nts. The Departm e nt has wo rked directly with AIAM and other industry

m e m b ers to f acilitate the sm oothest possible transition f r om the f e deral to the Calif ornia program

.

COMMENT #5: AIAM is concerned that differences in the im plem entation tim ing of the California Clean Cars Program in Maryland a nd California will cause problem s with NMOG (nonm e thane organic gases) averaging, ZEV (zero em ission vehicle) credit averaging, and greenhouse gas fleet averaging and, to alleviate these problem s, the Maryland regulations need to contain provisions to properly adjust the relevant cred it averaging and banking provisions of the program

.

RESPONSE: The Departm e nt recognized this tim ing issue and convened a stakeholder process to

address it. The autom obile industry actively participated in the process to ensure that m a nufacturers are not placed at a disadvantage in Maryland when the Clean Cars Program takes effect in m odel year 2011. As a result, the regulations include provisions to establish both NMOG (COMAR 26.11.34.07) and ZEV (COMAR 26.11.34.10) credits in Maryland that are equivalent to credits existing in California at the beginning of m odel year 2011, without requiring any corresponding

establishm ent based on any existing California debits. In addition, the Departm e nt has extended the lifespan of NMOG credits earned in m odel years 2011 through 2013 (COMAR 26.11.34.06C) and the reconciliation period of NMOG debits earned in those sam e m odel years (COMAR 26.11.34.06C). W ith regard to ZEVs, the Departm e nt has also extended the §177 state travel provision for fuel cell ZEVs through m odel year 2017 (COMAR 26.11.34.09C). Finally, with regard to California greenhouse gas standards, the Departm e nt has agreed to pursue the consideration of regional com p liance m echanism s and has included provisions for an associated

com p liance path in the adopted regulations if such m echanism s have been established. Together, these provisions ensure that m a nufacturers are not placed at any disadvantage in Maryland when the Clean Cars Program takes effect in m odel year 2011.

3COMMENT #6: The Maryland Autom obile Dealers Association (MADA) and the W a shington Area New Auto Dealers Association (W ANADA) reque st that the Departm e nt reconsider the

im pacts of the California Clean Cars Program in th e context of the regional nature of the Maryland

new vehicle m a rket.

RESPONSE: The Departm e nt understands the concerns of MADA and W ANADA and has

im plem ented the California Clean Cars Program in a m a nner that fully preserves the environm ental benefits of the program while m i nim i zing potentially adverse im pacts on the new vehicle

m a rketplace. The Departm e nt has included provisions in the Clean Car regulations that allow Maryland to determ ine com p liance based on regional vehicle sales and is working with neighboring states on this approach. The Departm e nt is also considering the im plem entation of incentive

program s to prom ote new vehicle sales within the state.

COMMENT #7: MADA and W ANADA assert that because of “legal challenges and concerns related to the interrelation between the greenhouse gas standards [of the California Clean Cars Program ] and the federal governm e nt’s CAFE (MPG ratings), auto m a nufacturers have not yet had

to comp ly [with the greenhouse gas standards].”

RESPONSE: It is true that m a nufacturers have not yet had to com p ly with the greenhouse gas standards of the California program [in California], but that is due to the fact that they do not take

effect until m odel year 2009 in that state. The legal challenges represent efforts by the autom obile industry to perm anently avoid com p liance; they are not relevant in any way to the industry’s current

comp liance status. Moreover, a recent judicial ruling in Verm ont found the autom obile industry legal challenge to be without m e rit. The greenhouse gas standards are scheduled to take effect in

California in m odel year 2009 as originally planned.

COMMENT #8: MADA and W ANADA are concerned that their m e m b er dealers have no input on the design and m a nufacture of m o tor vehicles and cannot determ ine the m i x of vehicles they receive to sell. In effect, they attem p t to sell whatever vehicles (m akes and m odels) that are

delivered to them for sale by their associated m a nufacturers.

RESPONSE: The Departm e nt recognizes and appreciates the position in which MADA and

W ANADA m e m b ers operate. W e believe, however, that this sam e recognition and appreciation

exists in the auto m a nuf acturing com m unity and that it is the goal of that com m unity to deliver vehicles to Maryland dealers that will ultim ately be sold to consum ers. Delivering vehicles, that cannot be sold, just used to dem onstrate regulatory com p liance m a y be a viable theoretical strategy,

but it is not a viable econom ic strategy. The Departm e nt believes that m a nufacturers and dealers will work together to m a intain a successful and pr ofitable vehicle m a rket in Maryland just as they

have in each of the northeastern states that have im plem ented the California Clean Cars Program to
date.

COMMENT #9: MADA and W ANADA assert that “it is com m only recognized that California’s new greenhouse gas em issions standards are equivale nt to the creation of a higher fleet average MPG rating for vehicles delivered for sale in Ca lifornia” and that states adopting the California

program “will also be enforcing a higher fleet average MPG rating.”

4RESPONSE: The regulations im plem enting the California Clean Car Program in Maryland include no requirem e nts im posing a higher fleet av erage fuel econom y (or MPG rating) on vehicles delivered for sale in the state. The prim ary purpose of these regulations is to reduce greenhouse gas and criteria pollutant em issions from m o tor vehicles. Moreover, the Departm e nt has no intention of enforcing any fuel econom y standard (or MPG rating). W h ile auto m a nufacturers m a y choose to reduce vehicle greenhouse gas em issions by increasing vehicle fuel econom y, the regulations

impose no specific com p liance path and treat vehicles with reduced greenhouse gas em issions and unchanged fuel econom y exactly the sam e as vehicles with sim ilar greenhouse gas em issions and

increased fuel econom y.

COMMENT #10: MADA and W ANADA assert that m a nufacturers will attem p t to circum vent the Clean Cars Program by delivering vehicles for sale in Maryland that are inconsistent with consum er dem a nds and then overcom e this m a rket inconsistency by delivering the desirable vehicles to dealers in neighboring states who will then sell them to Maryland consum ers unsatisfied with the vehicles available for sale in Maryland. In e ffect, an undesirable fleet (designed for regulatory

com p liance) is delivered to Maryland, supplem ented by a non-com p lying fleet delivered to surrounding non-Clean Car states, to the detrim ent of Maryland new vehicle dealers.

RESPONSE: The Departm e nt believes that the envisioned scenario, while theoretically possible, is highly im practical and econom ically disadvantageous to any vehicle m a nufacturer as it requires

fundam e ntally irrational decision-m a king. Although m o st vehicles are currently 50 state certified,

that m a y or m a y not be the case beginning in m odel year 2009 when the California certification requirem e nts expand to include greenhouse gas certifications, which currently have no federal counterpart. For this scenario to even be possible, m a nufacturers m u st first decide to include greenhouse gas certifications on all vehicles, even those not intended for sale in California.

W ithout such certifications, vehicles delivered fo r sale in states neighboring Maryland will not be saleable to Maryland residents even if they m eet “50 state” criteria pollutant (i.e., NMOG, CO,

NO

x , and PM) standards. Second, the scenario further assum e s that m a nufacturers will be content to either produce a large num ber of vehicles that will never be sold (these would be the vehicles delivered to Maryland for which there is no consum er dem a nd), which would be econom ically unsound. Or, the m a nufacturers will som e how “under-deliver” these sam e vehicles to dealers in neighboring states with the expectation that th is dem a nd will be m e t by having neighboring state residents purchase these vehicles in Maryland. W h ile the latter case would be practically difficult

to implem ent, it is theoretically possible -- but it would not leave Maryland dealers with an

unm arketable inventory. Only an econom ic decision to leave Maryland dealers with a fleet of vehicles that the industry actually does not expect to sell would place dealers in such a position, and the Departm e nt believes that the cost of program comp liance is far less expensive than the cost of producing vehicles for scrap purposes. Instead, the Departm e nt believes that the auto industry will

m a ke the econom ically rational decision to produce a m i x of com p lying vehicles consistent with

consum er dem a nd for delivery to all states im plem enting the California Clean Cars Program

.

COMMENT #11: MADA and W ANADA assert that the Departm e nt’s failure to account for the availability of California-certified vehicles in ne ighboring states results in an overestim ation of

program benefits.

5RESPONSE: The Departm e nt believes that auto m a nufacturers will m a ke an econom ically-based good faith effort to produce a full range of California-com p liant vehicles for sale in Maryland. Nevertheless, even under a scenario in which m a nufacturers produced a fleet of vehicles for sale in Maryland that were ultim ately sold to non-Maryland residents, counterbalanced by the sale to Maryland residents of California-certified vehi cles delivered by m a nufacturers to non-Maryland dealers, the net greenhouse gas reductions would be the sam e as if no out-of-state sales occurred.

W h ile it is true that som e of the vehicles m i ght not be used prim arily in Maryland, their prim ary use would accrue in the areas bordering Maryland and the net benefit to Maryland residents would be essentially unchanged.

COMMENT #12: MADA and W ANADA assert that the Departm e nt, in its willingness to consider regional com p liance options, has acknowledged that greenhouse gas fleet averaging is a problem for dealers and recom m e nds that the Depa rtm e nt adopt the Pennsylvania approach of not requiring com p liance based on a state-specific fleet average greenhouse gas standard.

RESPONSE: The Departm e nt’s willingness to consider regional greenhouse gas com p liance is

prem ised not on any specific issue, but rather in recognition of: 1) the fact that the m a jority of northeast states have adopted the program , which m a kes a regional com p liance m echanism m o re attractive, and 2) increased difficulty of having m a nufacturers dem onstrate individual comp liance in

a num ber of states as opposed to com posite com p liance over a larger geographic area. Regional

com p liance is quite different from the Pennsylvania approach. Moreover, one could argue that the only possible reason for not adopting a Maryland- specific greenhouse gas standard would be to

allow for reduced environm ental benefits. If th e benefits were achieved with or without the requirem e nt, then there should be no objection to im plem enting the requirem e nt itself as it would represent nothing but a pro form a backstop. The Departm e nt rem a ins com m itted to investigating regional com p liance options, but solely for the purpose of stream lining program im plem entation -- the Departm e nt is fully com m itted to putting a program in place that attains the full environm ental benefits of the California program

.

COMMENT #13: MADA and W ANADA take exception to the Departm e nt’s assertion (in the Maryland Register notice of proposed action) that Maryland dealers m a y recognize an increase in

sales of vehicles due to interest from environm entally conscious consum ers.

RESPONSE: W h ile the Departm e nt continues to believe that environm ental interest from

out-of-state consum ers m a y accrue as a benefit to Maryland dealers, we acknowledge that we have done no detailed analysis of the phenom ena. However, the benefits (and cost) of the California Clean Cars Program are fully independent of wh ether the increased interest does or does not

m a terialize. In short, the adoption of the program is unaffected.

COMMENT #14: MADA and W ANADA take exception to the Departm e nt’s assertion (in the Maryland Register notice of proposed action) that Maryland dealers can stock and sell non-California vehicles for sale to non-Maryland consum ers, stating that m a nufacturers will not ship such vehicles to Maryland “for fear that it [such a practice] m i ght affect their com p liance with the fleet averaging requirem e nts [of the California Clean Cars Program ].”

RESPONSE: W h ile the Departm e nt cannot require vehicle m a nufacturers to provide

6federally-certified cars to Maryland dealers, there is nothing in the California Clean Cars Program that prohibits such action. A vehicle that is clearly labeled as non-com p lying (via existing federal and California labeling requirem e nts) and is sold to an out-of-state resident represents a perfectly viable and legal transaction and im poses no threat of non-com p liance to m a nufacturers.

COMMENT #15: MADA and W ANADA take exception to the Departm e nt’s failure to discuss the potential effects of the vehicle price impacts of the California Clean Cars Program on vehicle

sales.

RESPONSE: The Departm e nt did not discuss the effect on sales associated with the vehicle price

im pacts of the California Clean Cars Program precisely because such effects were estim ated to be

m i nor through detailed econom ic analysis conducted by the California Air Resources Board (CARB) during that agency’s program adoption process in 2004. The Departm e nt did conduct an updated consum er payback analysis due to the fact that significant fuel price changes had occurred

since the tim e of the CARB cost analyses. The Departm e nt’s analysis has shown that consum ers who finance vehicles save m oney under the Ca lifornia Clean Cars Program im m e diately upon purchase. W h ile non-finance consum ers will fi nd a 2-3 year period before payback, industry surveys have consistently found consum ers willing to value fuel savings incurred during this period in their purchase decisions. In addition, it is estim ated that the consum er will experience an overall net savings of $1,000 for trucks and $2,000 for cars by 150,000 m iles due to lower operating costs.

COMMENT #16: MADA and W ANADA claim that the com b ined impact of a 20 percent increase in Maryland titling f ees and the price increases associated with the Calif ornia Clean Cars Program

m a y be substantial.

RESPONSE: The price im pacts of the California Clean Cars Program are discussed in the response to the previous com m e nt. Any im pacts asso ciated with increases in the state’s titling fees (which are independent of this rulem a king) will be entertained during the adoption process for such increases (should they occur).

COMMENT #17: MADA and W ANADA request that the Departm e nt defer adoption of the greenhouse gas requirem e nts of the California Clean Car Program until observing the effects of

such im plem entation in other states, claim i ng that such deferral does not affect the Departm e nt’s ability to m ove f o rward with the program

.

RESPONSE: The Departm e nt is f u lly com m itted to obtaining the m a xim u m environm ental benefits of the California Clean Cars Program . This requires adoption of the greenhouse gas provisions of the program . Since the im pacts of the program accrue gradually, and Maryland is already entering the program several years after its start in California, the Departm e nt m u st m ove forward with im plem enting the greenhouse gas provisions at this tim e, consistent with the statutory requirem e nt to start the program in m odel year 2011. As suggested by MADA and W ANADA, the Departm e nt will observe the im plem entation of the greenhouse gas provisions in other states beginning in 2009 and im plem ent program changes as/if necessary to alleviate any observed deficiencies prior to the im plem entation of the California Clean Cars Program in Maryland in m odel year 2011. In fact, the legislation m a ndating a doption of the Clean Cars Program specifically establishes a task force charged with m onitoring and reporting on issues related to the program

,

7including issues associated with the im plem entation of the California greenhouse gas standards.

COMMENT #18: The Alliance of Autom obile Manuf acturers (AAM) com m e nted that they recognize that the Departm e nt is fulfilling a legislative m a ndate in adopting the California Clean Cars Program . Nevertheless, AAM subm itted extensive com m e nts and lengthy docum ents on the

fundam e ntal propriety of the adoption decisi on already m a de by the Maryland legislature.

RESPONSE: The Departm e nt appreciates this recognition. A review of the various docum ents
concluded that m o st, if not all, of the detailed com m e nts subm itted by AAM were previously presented by AAM and other opponents of the Califor nia Clean Cars Program during the legislative adoption process. The Departm e nt, in fulfilling its adm i nistrative responsibilities to adopt a legislatively m a ndated program , proposed regulations to im plem ent the program and conducted a public hearing to obtain com m e nts specific to the proposed im plem enting regulations. Since the

m a jority of the subm itted com m e nts are not specific to the proposed regulations and it is not the purpose or intent of this rulem a king to determ ine whether to implem ent the program , or to revisit

the fundam e ntal program adoption decision, the Departm e nt does not believe it necessary to respond to them again through this rulem a king process. The full com m e nts of the AIAM, even though received after the close of the com m e nt period, have been entered into the public hearing

record.

COMMENT #19: AAM also requested that the Departm e nt m odify the establishm ent procedures for Maryland ZEV credit accounts to include no proportionality adjustm e nt for Type III ZEVs.

RESPONSE: The Departm e nt agrees with AAM in that no adjustm e nt of credits is appropriate in establishing a Type III ZEV credit account in Maryland. W e believe that our intent in this regard was clear in the proposed rulem a king through our extension of Type III ZEV allowances through

m odel year 2017 (COMAR 26.11.34.09C), but also agree that this intent could be m a de clearer by explicitly defining the credit account establishm ent procedures for Type III ZEVs. Therefore, we

have m odified the language in COMAR 26.11.34.10 to clarify this intention.

8