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, JUNE 23, 2011

9:09 A.M.

TIFFANY C. KRAFT, CSR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 12277

CALIFORNIA REPORTING, LLC (415) 457-4417APPEARANCES

BOARD MEMBERS Ms. Mary Nichols, Chairperson Dr. John Balmes Ms. Sandra Berg Ms. Dorene D'Adamo Mrs. Barbara Riordan Dr. Daniel Sperling Mr. Ken Yeager

STAFF Mr. James Goldstene, Executive Officer Ms. La Ronda Bowen, Ombudsman Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Bob Fletcher, Deputy Executive Officer Ms. Ellen Peter, Chief Counsel Ms. Lynn Terry, Deputy Executive Office Ms. Analisa Bevan, Chief, Sustainable Transportatio n Technology Branch, Mobile Source Control Division Ms. Mary Alice Morency, Board Clerk Ms. Bonnie Soriano, Staff Air Pollution Specialist, Technical Analysis Section, SSD Ms. Gayle Sweigert, Manager, Air Quality Analysis S ection, PTSDAPPEARANCES CONTINUED

ALSO PRESENT Mr. Bill Aboudi, AB Trucking Ms. Diane Bailey, NRDC Ms. Rosario Berretta, Daimler Mr. Tim Brown, University of California, Irvine Mr. James Boyd, Commissioner, California Energy Commission Mr. Fernando Corral, Plug Power Captain Aaron Cudnohufsky Mr. Steve Eckhardt, Linde, North America Mr. Stephen Ellis, American Honda Motor Company Mr. Randal Friedman, Navy Region Southwest Ms. Katrina Fritz-Intwala, UTC Power Mr. Cooper Hanning, Natural Resources Defense Counc il Mr. Henry Hogo, South Coast AQMD Ms. Bonnie Holmes-Gen, American Lung Association Mr. Edward Kiczek, Air Products and Chemicals, Inc. Mr. Dan Krokosky, Chevron Shipping Company Mr. Dominick Lee, VA Transportation, Inc. Mr. Jaimie Levin, Alameda-Contra Costa Transit Dist rict Mr. Marty Lico, Whole Foods Market Mr. Ronald Light, West State Alliance Ms. Kathy Long, Ventura County Supervisor Ms. Joan Ogden, Co-Director, Hydrogen Pathways Prog ram, Institute of Transportation Studies, University of California, DavisAPPEARANCES CONTINUED

ALSO PRESENT Mr. Henry Pak, Hanjin Shipping Dr. Scott Samuelsen, National Fuel Cell Research Ce nter Mr. Martin Schlageter, Coalition for Clean Air Mr. Jonathan Sharkey, Councilmember of Port Hueneme Mr. John Shears, Research Coordinator, Center for E nergy Efficiency and Renewable Technology Mr. Miguel Silva, Horizon Freight System Ms. Gloria Stockmyer, Stockmyer Trucking, Inc. Dr. Andreas Truckenbrodt, Automotive Fuel Cell Corp oration Mr. David Tulauskas, General Motors Mr. Mike Upp, ClearEdge Power Mr. Michael Villegas, Ventura County Mr. Justin Ward, Toyota Technical CenterINDEX

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Item 11-4-1 Motion 4 Vote 4 Item 11-4-2 Motion 6 Vote 6 Item 11-4-3 Chairperson Nichols 6 Executive Officer Goldstene 7 Staff Presentation 9 Mr. Corral 137 Item 11-4-4 Chairperson Nichols 141 Executive Officer Goldstene 141 Staff Presentation 142 Q&A by Board 150 Item 11-4-5 Chairperson Nichols 154 Executive Officer Goldstene 156 Staff Presentation 157 Navy Presentation 174 Mr. Villegas 183 Ms. Long 185 Mr. Sharkey 187 Mr. Schlageter 188 Mr. Hogo 190 Mr. Hanning 192 Ms. Bailey 193 Mr. Friedman 195 Mr. Krokosky 197 Ms. Holmes-Gen 199 Q&A by Board 201 Motion 213 Vote 214INDEX CONTINUED

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Public Comment Mr. Schlageter 215 Ms. Stockmyer 217 Mr. Silva 218 Mr. Aboudi 220 Mr. Lee 223 Mr. Light 226

Adjournment 238 Reporter's Certificate 239this context where they're estimating the fence lin e or

near-term concentrations of SO 2 . In the industrial audits measure what they're doing is going through and loo king at the emissions of various units within the facility, whether it's a refinery or cement plant, and lookin g at ways -- you know, first of all what is the energy efficiency of the individual units within there? And then looking at the technology that could be applied to reduce that both from a greenhouse gas and a criteria pollutant -- criteria and toxic pollutant.

So I don't think there's a conflict here in terms of what's required.

CHAIRPERSON NICHOLS: But there is a connection. And the question is --

DEPUTY EXECUTIVE OFFICER FLETCHER: There's a connection but not a requirement.

CHAIRPERSON NICHOLS: -- is there some potential --

BOARD MEMBER BALMES: Synergy. BOARD MEMBER BERG: I just think we need to be mindful as the same people are popping up, you know , because they're the ones that are going to be the l arger emitters. And I just think we need to be mindful h ow can we look at our roles to be able to get the most ban g for their buck. And I just would appreciate if staff c ould 153

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25keep that in mind. CHAIRPERSON NICHOLS: No, I think that's a good point, especially when you're even just about multi ple communications coming from us; you know, first it's this and then it's that. I can -- from the perspective of the facility owner, it's going to look like something uncoordinated and potentially more burdensome than it has to be. So I guess the question, or maybe direction to staff, would be to take a look at how we're rollingout these two items and see if there's some potential t o coordinate.

DEPUTY EXECUTIVE OFFICER TERRY: Maybe just one quick comment.

The only requirement really imposed on California that's new as a result of this process is the requi rement to do the air quality modeling specific to SO 2 for those 34 facilities. In this particular case, the air di stricts will be doing the modeling or else ARB. So there's pretty limited impact on the facilities themselves.

BOARD MEMBER BERG: Thank you for that clarification.

CHAIRPERSON NICHOLS: Okay. Good. All right. If there's nothing more on this item, thank you very much for the report. 154

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25And we will move on to our last item, which is

also a regulatory item, which is proposed amendment s to the Oceangoing Vessel Clean Fuel Regulation. This regulation has been in the process of being impleme nted since July 2009 and requires ships within 24 nautic al miles of the California coastline to use cleaner bu rning fuels. The amendments that we're considering today were developed with information that was learned during the first year and a half of implementation. As many o f you will remember -- well, when this regulation was ori ginally adopted in 2008, the Navy raised a concern at the t ime about the impacts of changes in vessel routing that might occur as a result of the regulation. And at the ti me the staff was directed to monitor the situation and rep ort back to the Board if ships posed a potential proble m for the operations at the sea range.

Unfortunately, it did. And the staff has worked closely with the Navy and other stakeholders to dev elop amendments that address the Navy's concerns, as wel l as preserving the essential public health and air qual ity benefits from this regulation, some of which you al ready heard about just a minute ago when we were talking about our progress on SO 2 .

So the situation that we're facing is that there 155

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25has been a change in vessel routing that's resultedin the

significant increase in the number of ships that ar e making their way through the Navy's Point Mugu Sea Range in southern California. And we're now in the proce ss of trying to address that.

For your information, I thought it would be useful to ask the Navy to come join us today and gi ve us a short presentation about the sea range prior to the staff presentation of the proposed amendments.

We have with us I, believe - I'm looking out here - Capt. Sinofsky, who's here to make this presentation. And I want to thank him for coming t oday.

And I'll ask Mr. Goldstene first to just introduce the item.

EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman Nichols.As with any regulation adopted by the Board, ARB staff monitor implementation. If information becom es available to indicate that amendments are needed, w e work with stakeholders to develop amendments for your consideration. This is the case for the OceangoingVessel Clean Fuel regulation, as Chairman Nichols just ind icated.

Amendments are needed to help address the change in channel traffic patterns that have occurred -- i n vessel traffic patterns that have occurred in south ern 156

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25California and that are creating the potential for vessels

to interfere with Navy operations in the Point MuguSea Range. ARB staff worked closely with the U.S. Navy, U.S. Coast Guard, and other stakeholders on this issue. Based on the work, staff will propose amendments today th at we believe will reduce the potential for vessels to in terfere with Navy operations in the sea range and will helpensure a successful transition to low sulfur fuels by alig ning the implementation dates of the regulation more clo sely with recently adopted federal requirements.

These amendments retain the health protective and air quality benefits originally anticipated from th e regulation.

I'll now ask Bonnie Soriano of the Stationary Source Division to present the staff's proposal.

Bonnie. (Thereupon an overhead presentation was presented as follows.)

STAFF AIR POLLUTION SPECIALIST SORIANO: Thank you, Mr. Goldstene.

Good morning, Madam Chairman and members of the Board. Today we are proposing for your consideration amendments to the Oceangoing Vessel Clean Fuel regu lation. 157

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25--o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: I have a brief presentation that will provide a background o n the regulation, describe the amendments we believe are warranted, discuss the impacts from those amendment s, propose one 15-day change, and then provide conclus ions and recommendation. --o0o--

STAFF AIR POLLUTION SPECIALIST SORIANO: Now a brief overview of the regulation itself. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: The Oceangoing Vessel Clean Fuel Rule was approved by t he Board in 2008 and began implementation in July 2009 , and that's about two years ago. It requires ships to u se cleaner marine distillate fuels instead of the dirt ier residual fuel that they typically use. Ships are r equired to use the cleaner fuels within a clean fuel zone t hat is approximately 24 nautical miles off the California coastline. And that is shown in this figure on the slide as the lighter blue region along the California coa stline.

The fuel requirements are implemented in two phases having progressively lower fuel sulfur limit s.

Phase 1, which began July 2009, requires the use of either marine gas oil or marine diesel oil. The marine 158

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25diesel oil is capped at .5 percent sulfur. Both of these are distillate fuels. We are finding that on average the marine distillate fuels that the ships are using to comply with this regulation average about .3 percent sulfur.

Phase 2 is scheduled to begin in January of next year, 2012, and establishes a fuel sulfur requireme nt of .1 percent. --o0o--

STAFF AIR POLLUTION SPECIALIST SORIANO: This regulation is a critical measure in our efforts to improve air quality and protect public health. It contribu tes over half of the reductions from new measures in th e South Coast's 2014 PM2.5 attainment demonstration.

It is also a key measure in the ports of Los Angeles and Long Beach clean air plan and reduces t he public's exposure to diesel PM from ships by over 8 0 percent.Because it is a clean fuel requirement, the benefits of the regulation begin immediately upon implementation. And over the past two years, the u se of cleaner fuels has reduced emissions of sulfur dioxi de, which I'm going to short cut as SOx through the res t of my presentation, by 73 tons per day; PM, which is part iculate matter, by 8 tons per day; and NOx by 8 tons per da y. 159

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25This translates to about 6,000 tons of both PM

and NOx and 50,000 tons of SOx reduced over the las t two years.

While about 90 percent of the emissions benefits are realized with the Phase 1 fuels, the Phase 2 fu el requirement will also provide additional benefits o f about 2 tons per day PM and 17 tons per day of SOx.

When you approved this regulation, it was the first comprehensive ship fuel requirement in the wo rld. And as I'll discuss a little later, since that time federal and international fuel requirements have be en adopted.California's regulation is a critical bridge to these federal requirements that will be equivalent to our Phase 2 0.1 percent requirement in 2015. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: Now I'll discuss the proposed amendments. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: Overall, the implementation of this regulation has been goin g very well. We estimate that there have been over 19,000 ship visits since July of 2009, and we are seeing well o ver a 95 percent compliance rate. However, we have encou ntered some challenges that warrant the need for amendment s. 160

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25One of the things that has happened is that the

traffic patterns have changed in southern Californi a. This is because many vessel operators have elected to use a route outside the regulatory zone where they're n ot required to use the cleaner fuel. This has resulte d in a significant increase in traffic through the Navy's Point Mugu Sea Range and according to the Navy has increa sed the potential for vessels to interfere with naval testi ng and operations.

There have also been some operational challenges that have resulted in a small number of temporary l oss of propulsion incidents, mainly related to the lower viscosity of the clean fuel.

And, last, as I mentioned before, there are new federal and international requirements. While this is not necessarily a challenge, it does present an opportu nity to better align the California program with federal requirements, which we think will facilitate succes sful implementation of both programs. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: Over the past two years, we have worked closely with the mar itime industry, the Navy, the U.S. Coast Guard, and local districts in implementing the regulation and in dev eloping the proposed amendments to address the issues that I have 161

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25described. Our objectives in proposing the amendments are: To minimize the impacts on the Point Mugu Sea range; To facilitate a more successful transition to the cleaner .1 percent sulfur fuel; and

To make other minor adjustments to the regulation that we believe will help with implementation.

In the next few slides, I will describe the amendments we are proposing and our rationale. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: First, we think that it is very important to do what we ca n to minimize the potential impacts to the Navy's Point Mugu Sea Range from the increased vessel traffic. To do this, we are proposing to expand the clean fuel zone in s outhern California. By expanding the clean fuel zone, we eliminate the cost advantage of using routes throug h the Point Mugu Sea Range. If this is done, we believe that the vessels will return to the historical routes th ey used before the regulation was implemented, lessening th e potential for vessels to interfere with the militar y operations.

In addition, because the vessels will be using the cleaner fuel, the emission reductions originall y 162

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25anticipated in this region will be regained. And now I'll provide you with some background on the need for this amendment. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: In this slide, I will walk you through the changes in traff ic Patterns in southern California. So I'm starting h ere with the region, which is about from the tip of San ta Barbara to the ports of Los Angeles and Long Beach. The Channel Islands are shown. And the large overwater areas shown in bright blue are the Navy's Point Mugu Sea Range.

The Santa Barbara Channel route is now shown as the dark blue double line. This route is a long-st anding traffic separation scheme that extends the length o f the Santa Barbara Channel and is listed on NOAA and nau tical charts. It is the only International Maritime Organization-approved routing measure in this area. And it was established to reduce the risk of collisions by separating arriving and departing traffic.

This route is also typically the shortest route for both traffic arriving from Asia on the Great Ci rcle route and traffic to and from northern California.

As shown in the gray area, the current clean fuel rule extends out to about 24 nautical miles off the coastline. Vessels operating in this zone must use the 163

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25cleaner fuels. After implementation of the rule, many shippers have increasingly chosen to transit through the Poi nt Mugu Sea Range outside the clean fuel zone. We have dep icted the transit through the sea range and called it the outer route. It is the red line on the southwest side of the islands. --o0o--

STAFF AIR POLLUTION SPECIALIST SORIANO: As shown in this figure, since implementation of the regulat ion began there's been a steady increase in the number of vessels that have elected to transit through the Po int Mugu Sea Range.

This chart shows the change in the percentage of vessels to the ports of L.A. and Long Beach that tr ansit through the sea range. As you can see, historicall y about seven percent of the traffic used to transit throug h the sea range. That has now increased to about 50 to 6 0 percent of all port vessel visits. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: We believe the changes in vessel routing are primarilydriven by the fuel cost difference between the two routes. The cost of the channel route is about $3,000 higher si nce the more expensive fuel is required for that entire por tion. 164

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25As you will hear in their presentation, the U.S.

Navy has raised concerns about the higher number of vessels transiting in the sea range, as it has incr eased the potential for vessels to impact exercises and operations that take place in the sea range. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: In this map, I will describe the proposed amendments to the clean fuel zone. So we are starting here at the same pla ce we left off in the last map slide. And this shows the current clean fuel zone in gray, the channel route in the double line in blue, and the outer route in red.

We propose to expand the zone out past the Channel Islands in southern California. The expand ed zone is consistent with the contiguous zone, which is a well realized zone on nautical charts.

We also propose to exclude a small area of the contiguous zone from the clean fuel requirement. W e have referred to this area as a window.

The purpose of the window is to equalize the distance that the clean fuel is required for the tw o routes and correspondingly equalize the fuel costs.

With these changes to the boundary in southern California, we believe vessel operators will returnto the Santa Barbara Channel route and lessen the potentia l 165

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25impacts on the Point Mugu Sea Range. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: The second amendment I will discuss is a proposal to ex tend the Phase 1 fuel requirement by two years and to be gin Phase 2 in 2014. While we are fully committed to r eaching the Phase 2 limit of .1 percent sulfur and believe it to be technologically and operationally feasible and c ost effective, we do think that there are valid reasons to adjust the timing for the implementation of the Pha se 2 requirements.

We believe that taking a little longer will help facilitate a successful transition to the cleaner 0 .1 percent fuel and still allow us to meet our SIP commitments. It will simplify integration of state and federal requirements and provide additional time to address operational and fuel issues. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: Since the adoption of the OGV rule, as I mentioned before , federal and international standards have been estab lished. And just to give you some idea of these standards, in March of 2010, a North American Emission Control Ar ea - or I'll call this the ECA - was approved. The ECA requires 1 percent sulfur fuel, and it can be either heavy fue l or 166

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25distillate, beginning in August 2012 and then a 0.1

percent sulfur fuel beginning in January of 2015. The ECA zone is about 200 nautical miles from the U.S. And Canadian coastline. --o0o--

STAFF AIR POLLUTION SPECIALIST SORIANO: Moving the Phase 1 out by two years will more closely alig n our Phase 2 implementation date with the ECA Phase 2 requirement, and also it will help to avoid having vessel operators manage different federal and state fuel requirement changes in 2012.

The extension will also allow time for coordination with the U.S. EPA, U.S. Coast Guard, a nd others during the transition to the 0.1 percent sul fur fuel requirement.

The extension will not impact the significant benefits that are achieved with the Phase 1 fuels. And as a reminder, over 90 percent of the emission reducti ons from the regulation are realized with the Phase 1 f uels.

The two-year extension is also consistent with our 2014 SIP commitment for South Coast. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: The proposed Phase 2 extension also provides additional time to address operational issues such as temporary los s of 167

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25propulsions. And I'll call those LOPs. With about 19,000

successful vessel visits since the regulation began , the Coast Guard has reported that a small number of ves sels - and this is about 2 percent of all vessel visits or about 38 vessels - have experienced loss of propulsion in cidents related to the use of distillate fuel.

During the last two years, ARB has worked closely with the Coast Guard, Harbor Safety committees, the Office of Spill Prevention to address these operational is sues.

Under contract to the Air Resources Board, the California Maritime Academy investigated the LOPs a nd identified primary areas of concern. CMA identifie d that an area of concern was low fuel pressure related to the low viscosity of the distillate fuel.

The extension in Phase 1 provides additional time to investigate causes and determine solutions for t he loss of propulsion incidents prior to implementing more restrictive fuel requirements.

The extension also provides more flexibility to find fuels with higher viscosity levels since Phase 1 is less restrictive, and provides more time for recent viscosity related enhancements to the fuel specific ations to more fully reach the marine fuels market.

And that leads me on to our third objective. --o0o-- 168

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25STAFF AIR POLLUTION SPECIALIST SORIANO: To

further assist implementation, we are also proposin g other minor amendments, such as the incorporation of a re vised fuel standard that has enhanced viscosity and lubri city specs, that I just mentioned in the last side, and an updated nautical chart.

We are also proposing changes to the noncompliance fee provision, which I'll discuss mor e in the next slide. --o0o--

STAFF AIR POLLUTION SPECIALIST SORIANO: The noncompliance fee provision allows vessel operators to pay a fee instead of direct compliance. And it is limi ted to very special circumstances that are beyond the mast er's reasonable control, such as unplanned redirection a t sea or purchase of defective fuel. This provision is n ot a fine or a violation, and it has only been used five times since the rule began. It also requires ARB approva l prior to use. We are proposing to restructure the fees to encourage purchase of a compliant fuel on arrival t o California by having the fee in that situation.

We propose to retain the same fee for a single port visit, but adjust the fee structure for multip le port visits. 169

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Staff believes that the proposal is a more

reasonable fee structure. And even with these prop osed amendments, all noncompliance fees are at least one and a half times higher than the cost of direct complianc e would be if the vessels were using the fuel.

We do not think that these changes will result in increased use of this provision, as we are not prop osing any changes to the criteria that specify when the noncompliance fee can be used. And these criteria are very restrictive. --o0o--

STAFF AIR POLLUTION SPECIALIST SORIANO: So now I'll go over the impacts of the proposed amendments

. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: The charts on this slide show the projected PM on top a nd the SOx emissions on the bottom until 2015. The base l ine with no rule is shown in green, the current regulat ion is shown in blue, and the proposed amendments in red.

As you can see from the charts, the proposal retains the emission reductions projected for the c urrent rule for both PM and SOx, and emissions continue to decline in subsequent years. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: We also 170

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25saw in the previous slide the protected emission

reductions are greater statewide with the proposed amendments than with the current rule. However, du e to the Phase 1 extension, the benefits are slightly lo wer in 2012 and 2013. In that two-year period, the emissi ons will still continue to decline, just not as quickly . And the remaining emissions are far lower than original ly anticipated, in part due to the recession.

Staff has also evaluated the potential impacts to whales in the southern California region due to the anticipated increase in vessel traffic using the ch annel route. We found that the impact will be similar to what it was before the regulation where the vessels prim arily used the channel route. --o0o--

STAFF AIR POLLUTION SPECIALIST SORIANO: The total estimated costs of the proposed amendments ar e $10 million per year in 2012 and 2013 and $47 million p er year in 2014.The proposed amendments do provide cost savings compared to the original rulemaking primarily due t o the extension of the Phase 1.

The cost effectiveness of the proposed amendments is about $16 per pound of diesel PM reduced, which compares favorably to many other regulations adopte d by 171

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25the Board. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: I will now cover our proposed 15-day change. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: We have identified one 15-day change that will help further integrate our regulation with the ECA. To align California's Phase 1 with the ECA Phase 1 sulfur requirement, we propose to include a 1 percent fuel sulfur limit for our Phase 1 marine gas oil. We propose t hat this requirement begins August 1, 2012, to coincide with the ECA Phase 1 implementation date.

We do not expect this change to impact the regulated industry since Phase 1 complaint marine g as oil averages .3 percent, well below the one percent pro posed limit. And inspection records show that 98 percent of the Phase 1 compliant fuels sampled by our enforcement staff are below 1 percent sulfur. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: In conclusion, we believe the proposed amendments will assist in the successful transition to 0.1 percent sulfur fuel. The amendments will lessen the potential for impact s on the Point Mugu Sea Range by removing the economic 172

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25advantage that drives the route changes in southern

California.

The amendments will also provide the benefits of additional time to address operational issues that have been encountered and better integrate state and fed eral programs.

The amendments before you today also continue to fulfill our 2014 SIP obligation and are cost effect ive. --o0o-- STAFF AIR POLLUTION SPECIALIST SORIANO: We recommend that the Board adopt the proposed amendme nts with the suggested 15-day change.

We also recommend that you direct staff to work with the Navy to monitor vessel traffic trends thro ugh the Point Mugu Sea Range, and also to continue to work with the U.S. Coast guard and the maritime industry to m onitor, investigate, and evaluate any fuel-related issues.

This ends our presentation. And I would now like to thank you for your attention.

And now Richard Corey will introduce the U.S. Navy's personal.

STATIONARY SOURCE DIVISION CHIEF COREY: Yes, now we're asking Tony Parisi, Randy Friedman, and Capta in Cudnohufskyto join us for a presentation on the Poi nt Mugu Sea Range. 173

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25And it will be Captain Sinofsky with the Naval

Air Systems Command that will give the presentation

.

CHAIRPERSON NICHOLS: Thank you. Welcome. CAPTAIN CUDNOHUFSKY: Good afternoon. How are you? CHAIRPERSON NICHOLS: Good afternoon.

CAPTAIN CUDNOHUFSKY: So what I'll be doing this afternoon is just talking about our mission as NAWC WD as well as the sea range and how this is impacting our operations.

(Thereupon an overhead presentation was presented as follows.)

CAPTAIN CUDNOHUFSKY: So the first slide shows an overview of the Point Mugu Sea Range. And it's par t of the NAVAIR West Coast ranges systems, a very integr al part. The connecting part is what we call the IR 2 00 corridor that we can activate at different times to support missions when required.

The sea range provides safe, operational, and realistic environment for us to test and training - - testing and training for mainly naval air systems, but we also cater to all weapon systems for DOD and our al lied counties as well.

Our core mission is mainly testing, training, and experimentation associated with primarily air warfa re 174

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25systems. --o0o-- CAPTAIN CUDNOHUFSKY: So as I said, it's primarily providing a realistic open-air-range environment. It's 36,000 square miles of sea range . And it can be expanded as required to accommodate addit ional testing. For example, the Missile Defense Associat ion when we work with some of their programs requires amuch larger range. So we'll expand the range to accommo date those type of tests.

We have operations and range control complexes that support the operation of the sea range and we have extensive instrumentation throughout the sea range. The TSPI is time, space, and position instrumentations.

We have sophisticated data processing and display systems, as well as air and sea targets that we can incorporate throughout the range.

Range safety and security and environmental support is extensive throughout the range complex s ystems, and we have a whole host of support aircraft for ou r missions. --o0o--

CAPTAIN CUDNOHUFSKY: We're the nation's largest and most capable instrumented sea range. We're ide ally suited for our missions that we perform out there t o 175

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25provide the nation with its air and sea weapons to defend

our nation.

It's ideal location where we are supported by the natural features such as the islands, San Nicolas I sland, Santa Rosa Island, the Laguna Peak where our instrumentation is elevated well above the sea leve l, over a thousand feet, and look well into the range.

Supports a broad array of testing and training scenarios. And I'll talk a little bit more about t hat later. But, again, primarily we're supporting the research, development, acquisition, testing and eva luation of our weapons, our nation's weapons.

Not only do we support and test and train our Navy's weapon systems, but also all of DOD - Air Fo rce, Army, Marine Corps as well as other international countries that are our allies. --o0o-- CAPTAIN CUDNOHUFSKY: This cartoon provides you a little bit of insight into the type of -- a typical type of a mission we would do out on the sea range. We' d have the flight test vehicle performing out in the range and we'd have multiple instrumentation that would trackit.

And the TM is telemetry. That provides us the health and welfare and safety aspects of that vehic le. And that's all sent back to our range control back at 176

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Point Mugu and then San Nicolas Island. And then t hrough

fiber optics and microwave connections, we're compl etely integrated with all of the instrumentation and sens ors. --o0o-- CAPTAIN CUDNOHUFSKY: This depicts a little bit of a typical type of a hazard pattern that would be associated with a test or a mission that we would d o out there. So different colors would indicate differen t type of tests that we would do. So when we're testing a particular air vehicle perhaps, launching it from P oint Mugu, there would be an associated hazard pattern t hat would be associated with that weapon. So before th e launch of that weapon, we'd clear that air zone andthe sea zone, make sure it's completely clear of ships, nonparticipants, and ensure that it would be cleare d for however long the window that our mission would take place.

So, you know, a ship typically moves 12 to 15 knots. We'd go out -- if it was a two-hour window, we'd go out 30 miles beyond the hazard pattern and make sure that no ship would be able to move within that patt ern as we had cleared it.

So some of them are smaller hazard patterns. Some are quite large and extensive. --o0o-- CAPTAIN CUDNOHUFSKY: This is a depiction of the 177

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25type of operations that we would do it out on the s ea

range. We'd typically have about 17,000 events per years.

The red is training events. The blue, operations. And green is RTD&E, research, test, development, and experimentation. And the yellow w ould be maintenance, maintenance of our sea range boats or aircraft that we'd need to do out on the sea range. --o0o-- CAPTAIN CUDNOHUFSKY: Of course with any type of an operation we'd do out there, safety is paramount , and we're very serious about that and have a very good safety record. And it's very -- we take great pains to make sure that the evolution is safe. And part of that is cl earing that range with our aircraft, making sure no one -- no nonparticipants are within there. And if we do hap pen to get what we call an interloper, somebody that doesn 't belong in there, we'll cease all operations until w e can clear the range and make sure we have a safe enviro nment to conduct our tests.

And we have extensive instrumentation to be able to help us do that and monitor what's out there andwhat should and should not be out there. --o0o-- CAPTAIN CUDNOHUFSKY: So this is very similar to 178

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25the chart you had seen in the previous presentation , with

the channel in green. And then what we've been obs erving with the red alternate shipping route that we've se en that interferes with the operations that the Navy does o ut on the sea range. As the ships divert out of the chan nel, they transit across the sea range, which then impac ts our operations, causing either delays or cancellations in our operations. --o0o--

CAPTAIN CUDNOHUFSKY: And to that extent, this next chart shows, again very similar to the chart y ou'd seen on the previous presentation, what we've obser ved on that behavior. So on the far left what we are seei ng is one inbound and one outbound ship per day. And sin ce that time of 1 July in 08 until present it is now up to seven to seven and a half times what we had seen historic ally. So a significant increase in shipping across the se a range. --o0o--

CAPTAIN CUDNOHUFSKY: To help mitigate some of this, we've done extensive coordination with the sh ipping industry through L.A. and Long Beach, a marine exch ange from our Ops conductors.

Through our surveillance of the sea range, we have redirected the ships that were in the area. And that 179

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25typically results in quite a delay into the mission

.

Ships moving at 12 knots, it takes sometime to tran sit across the sea range. They can't just turn around or, you know, accelerate there. So typically it's an hour or several hours of delay into a mission, which repres ents a significant cost.

And we tried to minimize operational impacts. But to that extent there's only so much we could do to mitigate that. --o0o--

CAPTAIN CUDNOHUFSKY: And our concerns obviously in the future, what we see if we're unable to get t he shipping behavior back into the channels, we're goi ng to see increased transits through the sea range, which obviously have impacts into our mission.

As hopefully our economy recovers, I think it will be more incentive perhaps if we don't get this regulation in place, that these ships will continue to divert the channel.

Some of the delays and cancellations will be inevitable, will increase costs to the programs. A s the economy and our budgets are all shrinking, that's a significant impact into our programs and our abilit y to bring these needed weapons online.

And the perhaps intangible costs are the training 180

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25events that are taking place out there for our mili tary

are unable to be completed. So we deploy our milit ary without the really benefit of the needed training t hat would have been accomplished, if they're impacted a nd are unable to do their training due to ships through th e sea range. --o0o--

CAPTAIN CUDNOHUFSKY: And, in summary, again Point Mugu Sea Range and the missions that we compl ete out there and the testing and evaluation, support that acquisition programs for the weapon systems that we bring online, it's critical that we are able to conduct t hose tests and evaluations and training on time and when needed. As an example, the Joint Strike Fighter Program operates at a burn rate of about $30 million a day. So every day that they're unable to collect the neededdata to continue to progress the program, it essentiallywill cost the program $30 million. Obviously not every program is such a substantial program. But all programs ha ve a limited budget in order to operate and complete the ir programs and bring these weapons online. So it is a significant impact.

Increase in ship traffic through the sea range is impacting our ability to test and train. We've bee n 181

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25working with the shipping industry and there's sign ificant

coordination that's been taking place to try and mi tigate these impacts. But as you can see, the data says t hat it still is an impact for us.

And as the economy improves, the shipping industry will probably -- we'll see more and more t raffic. And if we're unable to keep them in the channel, th e results will be more impact into our mission.

So our recommendation is to approve the modification to the low sulfur regulation.

CHAIRPERSON NICHOLS: Thank you very much. CAPTAIN CUDNOHUFSKY: More than happy to take my questions you might have.

CHAIRPERSON NICHOLS: Thanks. I want to express my appreciation. I understand this has taken a lot of time and effort on your par t, on the Navy's part, as well as on our staff. And the fact that you were willing to work together with us to t ry to achieve our mutual objectives here is really much appreciated. I know that in the past sometimes we' ve seemed like the two agencies were just not able to get on the same page. And I really appreciate how hard yo u've worked to try to make sure that that can happen.

I know it was really tough for the staff to face the possibility of a loss of the emissions benefits from 182

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25this rule. And the fact that I think we've been ab le to

design a way to do this that does not involve a sac rifice there is really terrific. It's a great outcome.

So I don't know if anybody has any questions now or we can just hear from the witnesses. If that's okay, we'll just go straight to the witnesses.

We do have a number of people who've signed up to testify.And you're welcome to stay up here if you would like. We'll start with Michael Villegas from Ventura County APCD and then Kathy Long and Jonathan Sharke y.

And we do have your written, Supervisor Long. MR. VILLAGES: Chair Nichols, members of the Board. I'm Mike Villegas, Air Pollution Control Of ficer for Ventura County.

Ventura County APCD staff is pleased to support the California Air Resources Board staff proposed c hanges to the regulations for oceangoing vessel fuels. Th ese proposed amendments will achieve nearly all the emi ssion reductions that were envisioned when this rule was originally adopted in 2008.

The 83 percent reduction in toxic diesel particulates will provide a significant health bene fit to Ventura County residents. Further, we will be achi eving 183

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25reductions in sulfur dioxide and nitrogen oxides. In addition, the proposed amendments will do away with the economic incentive for vessels to pass thr ough the Navy's test range. And this should prevent dis ruption of the Navy's operations.

We've also reviewed the rationale for the delay in the Phase 2 sulfur standards. And we believe th e delay is reasonable based on the fact it will better harm onize CARB's requirements with the ECA requirements. Als o will give time for the development of additional fuels t hat will comply with the new ISO standards, which are g oing to address viscosity and lubricity for those engines, which should help with loss of power.

In addition, we reviewed the proposal to reduce the noncompliance fees. And we believe this propos al once again makes sense. These provisions have been usedonly five times in over 18,000 port visits. Further, th ere's is no cost advantage to using the noncompliance fee s versus complying with the rules, so we believe it m akes

sense. Lastly, I need to note that the Air Pollution Control board for Ventura County has submitted a le tter of support for these regulations.

CHAIRPERSON NICHOLS: We have that. MR. VILLEGAS: Thank you. 184

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25CHAIRPERSON NICHOLS: Thank you very much. Supervisor Long. SUPERVISOR LONG: Yes, good afternoon. And thank you, Madam Chair and Board members.

It is my pleasure to be here to speak to this and to certainly support the staff recommendation stron gly on behalf of Ventura County. I thank the staff, appla ud them for their efforts in working with the stakeholders. I believe we have a win-win recommendations with the amendments.

I'm here representing as Co-chair of the Regional Defense Partnership for the 21st Century, RDP-21. It's a community-based organization in Ventura County that has been around for over ten years supporting our naval base in Ventura County for the many assets, both the mil itary strategic importance of the base, but also for the economic driver that the base is for all of us, andthe environmental stewards that they are.

And so the RDP-21 represents both public and private. It has all ten cities in the county. It has other electeds, such as Senator Fran Pavley is very supportive, and our Congressmen, both Capps and Gal legly.

And certainly our goal is to provide and educate our community, engage them in understanding what th e values of the base are. And as the base has been, and as 185

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25all bases in prior BRACs have been, threatened with

closure for a variety of reason, the reason that we 've been able to stand so strong with our base is the s ea test range and the value that it brings both again for t he military importance but also the economic engine th at it is for all of our county.

We have more than 19,000 personnel, military and civilian, who are working at that base. So you can understand what the multiplier of that is to our lo cal economy: Over 20,000 at least jobs and the multipl ying benefit of $1.2 billion in goods and services, and the fact that it continues to be such an important part in bringing new business to the base. And that does o ccur with the test range.

RDP-21 is very supportive of the oceangoing vessel fuel rule. We certainly are supportive of everyone's goal to have clean air. And as I said a t the beginning, this is a win-win to be able to carry th is amendment through with the good work and the cooper ation of the stakeholders to applaud that effort and to a sk for a strong "yes" vote in support of this.

Thank you for your time and your work on this. We appreciate it. Thank you.

CHAIRPERSON NICHOLS: Well, thank you for coming. Jonathan Sharkey, a council member from Port 186

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Hueneme. Welcome. MR. SHARKEY: Yes, good afternoon, Madam Chair, members of the Board. I'm Jon Sharkey, Port Huenem e City Council, member of the Ventura County Air Quality C ontrol Board, and a member of the Regional Defense Partner ship.

And coming third in the group, it's all been said. But I would like to personally thank the sta ff here, who's done a marvelous job in solving a probl em. Clearly the previous rule did not achieve its objec tives. We believe this new rule will achieve the air quali ty objectives and will reduce the impacts on naval bas e, Ventura County, a large part of which sits in my ci ty.

So thank you all. CHAIRPERSON NICHOLS: Thanks for coming. Henry Pak from Hanjin Shipping, followed by Martin Schlageter and Henry Hogo.

MR. PAK: Good afternoon, Chairwoman Nichols and all the Board members.

First of all, on behalf of our company, Hanjin Shipping Company, I'd like to thank you for allowin g us to express our concern. And it's going to be very sho rt.

We are not opposing to anything else but the implementation date of Phase 2. I understand that it's been pushed back to 2014 January from the initial s tarting 187

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25date of 2012 January. But we believe that -- or we feel

that the implementation date should be conformed wi th the further requirement, which is 2015 January, which a llows one more year -- or one additional year for carrier s to prepare.And in line with that, considering fuel suppliers comment and our company's research, there is no fue l supplier that can supply 0.1 percent sulfur distill ate fuel in the region of eastern Asia and in America. In this regard, be advised that sufficient market surv eys and technical verifications should take precedence in o rder to confirm the possibility and availability of the lowsulfur fuel in those regions by 2014.

And, in addition, we need to ensure that there is sufficient infrastructure to supply low sulfur fuel without difficulties. And that is our concern, andI would appreciate it if you give second thought to t hat.

Thank you. CHAIRPERSON NICHOLS: Thank you. I'll ask staff to respond later. Martin, Welcome. MR. SCHLAGETER: Thank you so much. Martin Schlauggeter with the Coalition for Clean Air. Tha nk you, Madam Chair and Board members and staff for conside ring this today. 188

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25This ship fuel rule since it was initiated a few

years ago is one of the most impactful things this Board has done in my view, in part because it has helped shape globally shipping practices. And there's been a lo t of reference here to aligning with ECA standards. I d on't want to lose sight of the fact that one of the main reasons we have this ECA adoption is because of wha t California's been doing under your leadership.

So I'm very much in support of the extension of this clean fuel zone and appreciate the fact that s taff acted so promptly in addressing the issues of carri ers avoiding that zone.

This change will, we expect, help bring into -- essentially bring into compliance and gain the emis sions reductions that were expected from carriers who are now skirting this zone, interfering with the Navy, and unnecessarily polluting.

Certainly, we are not excited about a delay to 2014. We and the public health and environmental community are impatience. We like to see emissions reductions that are on the table and that we had ho ped would be achieved immediately. What I -- sort of t he lemonade that I'd like to suggest we make out of th at delay, if we could, is to complete the rulemaking o f which initial steps were taken back in 2008 on vessel spe ed 189

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25reduction. By setting speed limits on ships, we ca n

control some of the unnecessary pollution, we can o ptimize fuel use and reduce greenhouse gas pollution and in deed hopefully minimize some of the whale strikes that w as also referenced here today.

It's my belief that if we get to work on that - and this has been something languishing over the pa st couple of years - it's my belief with Board directi on, if we can complete this rulemaking on vessel speed red uction, then at 2014 when carriers comply with fuel rules, they can also plan simultaneously for their timelines, t heir ship speeds, their logistics in that regard. And much was referenced by Ms. Berg in the last presentation, be giving a clear and concise package of instruction to carri ers.

And I thank you so much. I encourage your action on that.I have already submitted to the clerk a petition of more than 450 signatures that we've gathered ove r the past month out of interest in this speed limits iss ue.

So thank you so much. CHAIRPERSON NICHOLS: Thank you. All right. Henry Hogo, followed by Cooper Hanning and Diane Bailey.

MR. HOGO: Good afternoon, Chairman Nichols and members of the Board. I'm Henry Hogo, Assistant De puty 190

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Executive Officer of the South Coast Air Quality

Management District.

I'm here to express the South Coast AQMD staff's support for the extension of the regulatory boundar y beyond the current 24 nautical miles to ensure that oceangoing vessels use the cleanest fuel possible. And we would encourage you to adopt that today.

Relative to the delay in the use of .1 percent, we just want to express caution in this delay. We would want to encourage that marine vessel operators use the .1 percent as early as possible so we can understand s ome of the issues related to it and closely monitor it. B ut we don't want to see this delay go beyond 2014 because it is a critical element of our 2007 AQMP.

Thank you. CHAIRPERSON NICHOLS: Thank you. I appreciate that. And it's just useful to observe that we've h ad examples in the past of at least one major shipper that introduced lower sulfur fuel long ahead of a requir ement. So it is possible for that to happen or to be encou raged, and we should try to make that happen.

MR. HOGO: Thank you. CHAIRPERSON NICHOLS: Okay. Mr. Hanning. MR. HANNING: Good afternoon, Chairman Nichols and members of the Board. My name is Cooper Hannin g and I 191

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25represent the Natural Resources Defense Council. We thank the Air Resources Board for acting to reduce emissions from oceangoing vessels by expandi ng the clean fuel zone beyond the Channel Islands and for providing incentives for ship operators to bunker w ith clean fuel as soon as possible upon arrival at a California port.

We also encourage the Board to consider additional regulations such as vessel speed reducti on, which can reduce pollution in our communities and p rotect residents' health while decreasing California's gre enhouse gas emissions.

Oceangoing vessels account for a tremendous amount of toxic pollution in our state. In 2006 sh ips were estimated to contribute 18 percent of diesel particulate matter in California. Diesel particula te matter is associated with a growing list of adverse health outcomes, and these outcomes are most common in chi ldren and the elderly. The negative health impacts are concentrated in neighborhoods closest to the ports and these communities are disproportionately bearing th e burden of pollution from oceangoing vessels.

This pollution can be considerably reduced via vessel speed reduction. The Board should promulgat e a regulation to limit ship speeds to 12 knots within 40 192

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25nautical miles of shore for all ship traffic in Cal ifornia

waters. Slower ship speeds will reduce harm to mar ine life, cut greenhouse gas emissions, and reduce toxi c air pollution in California.

In 2009, Air Resources Board staff estimated emissions reductions for a 12 knot speed limit appl ied to all vessels within 40 nautical miles of shore. Suc h a regulation would decrease diesel particulate emissi ons by 5.2 tons per day. California would also see daily reductions of 40 tons of nitrogen oxides and 43 ton s of sulfur oxide.

The Board should combat this pollution by preserving existing regulations and adopting furthe r measures such as vessel speed reduction.

CHAIRPERSON NICHOLS: Thank you. Ms. Bailey. MS. BAILEY: Good afternoon, Chairwoman Nichols, members of the Board, and staff. My name is Diane Bailey. I'm a senior scientist with the Natural Resources D efense Council. And as my colleague Cooper noted, we're h ere today in very strong support of the clean shipping fuel regulation and particularly the amendment to extendthe clean fuel zone.

As you know, NRDC has been to court with you to help defend these very important regulations severa l 193

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25times. And we're happy to say that the courts

resoundingly agree that California has the right to protect its coastal residents from the major health hazards associated with oceangoing vessels and the toxics laid in bunker fuel that has been used in the past.

California's clean fuel zone for international ships is one of the cornerstones of statewide emiss ion reductions from this shipping sector, and it's real ly an important step to curb the pollution that comes int o our state with the shipping to our ports, our rail yard s, our distribution centers. This was really one of the b iggest steps in reducing premature deaths from exposure to the pollution. And so we applaud the effort to extend the clean fuel zone and stem the 50 percent or so of sh ips that were evading this requirement in the past ente ring the ports of L.A. and Long Beach.

I want to note that we do have some concerns over the proposed amendments. The tier delay of course does carry somewhat of a penalty in terms of lost emissi on reductions and health benefits. And I don't want t o exaggerate that, but I think that there are ways to make up for it, as my colleague Martin offered that ther e are ways to make lemonade today. And I really encourag e you to look at other measures. As Martin noted, the ve ssel speed reduction measure has really languished. Thi s is a 194

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25measure that can deliver tremendous environmental b enefits

from significant greenhouse gas reductions to marin e mammal and wildlife protections, avoiding whale str ikes and such. And I encourage this Board to take up th at measure and really get it going.

We look forward to working with staff on further implementation of the clean shipping fuel zone as w ell as vessel speed reduction.

Thank you very much. CHAIRPERSON NICHOLS: Thank you. Randall Friedman, did you wish to testify again? And Dan Krokosky and Bonnie Holmes-Gen. MR. FRIEDMAN: Madam Chairman and Board members. Randall Friedman on behalf of the Navy Region South west.

The Navy's long-standing position has been that shipping regulation in the Santa Barbara Channel wo uld move ships into the sea range and threaten its miss ion capability.

Today we are supportive of your staff's recommendation to amend this rule and take action t o protect the Point Mugu Sea Range, as you indicated in the final statement of reasons you would do in the init ial regulation.

We ask for ARB's continued commitment to work with all stakeholders, for example, the ports of Lo s 195

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Angeles and Long Beach, to take all feasible measur es to

further support the return of shipping to the Santa Barbara Channel.

Finally, just a quick comment in response to the vessel speed reduction. I would just strongly urge you that in any consideration of this, please remember that if you only do this in the Santa Barbara Channel, we'l l be right back here with the same problem. Anything to do with regulation of shipping needs to be done global ly and consistently and take full accounting of the econom ics of shipping, the time, and the value; and needs to not create any sort of incentive that would make a transit thr ough our sea range more attractive than staying in the S anta Barbara Channel where we all believe they belong.

Thank you. And again thanks to your staff for all the work they've done.

CHAIRPERSON NICHOLS: Thank you. You could have said, "I told you so."

(Laughter.) EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: He has said that to us.

CHAIRPERSON NICHOLS: It was very nice. (Laughter.) MR. FRIEDMAN: I thought that was privileged. CHAIRPERSON NICHOLS: It was appreciated. 196

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25All right. MR. KROKOSKY: Good afternoon. I'm Dan Krokosky from Chevron Shipping. I'm the global bunker fuel and efficiency manager for the fleet.

Chevron Shipping has a wide variety of ships that are operating in and out of the zone on utra-low su lfur diesel. We've been doing this in order to develop the lubricants and technical expertise in order to be r unning on this fuel.

We're in favor of all of the changes you're going to make and we've been in support of the fuel chang e for the entire time.

The one comment we'd like to add is to move this change from 2014 out to 2015. One of the reasons i s for practicality of using this sort of three-fuel schem e, which is really practically hard to deal with both in and out of the zone.

It's also unlikely that anybody's going to sell this 1 percent fuel. So that -- we'd also like youguys to take a strong look at this idea of viscosity of fuel. This is a very important safety aspect and ones tha t not all shipping companies have the expertise that we d o in order to ensure they have the right viscosity. Thi s could lead to a lot of problems with reliability of the s hip, especially when you're maneuvering the ship. One o f the 197

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25big dangers is the ship will not start. And of cou rse the

starting and stopping of the ship is what gives the ship its brakes. So again we'd really like to see a goo d look at this viscosity issue.

The other comment is, to overcome some of the shortfall in that one year is -- use this idea of v irtual arrival, where you actually don't let any of the sh ips in to wait around the port. We found this to be very effective in just our own energy efficiency program . And by actually timing the ship's arrival all in so tha t the berths are open, you can save a lot of energy and f uel on that. So please take these comments under consideration. Thanks again.

CHAIRPERSON NICHOLS: Thank you. Just one question before you leave. BOARD MEMBER D'ADAMO: Can you explain what you are looking for in viscosity of fuels. Are you say ing that this additional time will give you the abilityto look into that, or is there something more that youthink that staff needs to do on this?

MR. KROKOSKY: I think you have an opportunity to set a viscosity. You set the sulfur level. You co uld also set a viscosity -- a safe viscosity level.

We use -- you know, I like 2.8 is a good 198

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25viscosity. Anything below that, you know, it's out of my

comfort range. And I think by setting this standar d, you could, you know, do a lot to ensure the safety of t he ships themselves. Because not everybody -- you kno w, whatever limit you set or don't set, they will use it anyway, right?

BOARD MEMBER D'ADAMO: Thank you. CHAIRPERSON NICHOLS: Okay. Bonnie Holmes-Gen. MS. HOLMES-GEN: Good afternoon, Madam Chair, Board members. Bonnie Holmes-Gen with the AmericanLung Association in California.

And the American Lung Association strongly supported this oceangoing vessel regulation when it was first adopted. We appreciate your hard work on thi s. We believe this regulation is extremely important to a ddress the public health impacts from exposure to diesel s hip emissions. And we're very pleased with the success that has been achieved to date, and we appreciate that 9 0 percent of the emission reductions have been achiev ed.

And we wanted to again thank you for the work that you've done in coordinating with the Navy and the Coast Guard and achieving some consensus and moving forward.Three quick points. That we strongly support the proposal for the extended fuel zone -- clean fuel z one to 199

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25regain lost emission reductions. And I appreciate the

presentation. It's made extremely clear how import ant that is. So that's a very positive step forward.

And as with some of our colleagues with Coalition for Clean Air and NRDC, we are strongly supportive of implementing the .1 percent standard as soon as possible -- the .1 percent sulfur.

And in light of the proposed delay, we would encourage the Air Board to do everything possible t o work with the Coast Guard to address these loss of power issues as soon as possible to make sure we can get back ontrack.

We do agree with the proposal to move ahead quickly with the vessel speed reduction regulation. And I think that is another very positive step we can tak e to move forward, because it does look like there are significant benefits from that regulation.

And I appreciate you, Madam Chair, raising again that the vessels certainly comply early. And we wo uld certainly like to work with you and do everything p ossible to promote early compliance with the .1 percent sul fur standard to get these early health benefits. So I think that was also a very important suggestion, and we w ould like to look at ways we can try to encourage that e arly compliance to move ahead.

Thank you again for your hard work. And this is 200

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25a critical part of the Diesel Risk Reduction Progra m. CHAIRPERSON NICHOLS: Thank you. That concludes the list of witnesses that I have. And so I think we can close the record at this poin t. Just remind people that the record will be reopenedwhen we issue a 15-day notice of public availability. And at that time we will be again accepting comments. But in between there won't be any comments after this hear ing date. And when the record is reopened, then there' ll be an opportunity for more comments on the proposed ch anges that will be addressed in the final statement of re asons.

Before we move to a vote on this item, I do just really want to say how proud I am that the staff ha s been able to successfully navigate, if I may, a very, ve ry difficult issue here. I understand that our friend s in the environmental and public health community do no t lightly come to support this kind of a change. AndI really appreciate it, because they are tough critic s and I think they have realized that we've actually done apretty good job here of making, as somebody said, lemonade out of lemons. But I also -- I do want to ask the staff to just briefly address a couple of the points that we've h eard more than one time. One is the question of whether the fuel will be available on the time frame that we're now 201

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25projecting. Another is the question of whether we' re

looking at this issue of vessel speed reduction in a serious way and if there's a plan to bring that for ward.

Also, I know you are looking at the fuel viscosity issue. But maybe you'd like to report a little bit more on where that's at, what kind of work is g oing

on. And then, finally, on the last point that was raised by Mr. Krokosky, this issue about vessels wa iting for berths and running their engines offshore. I k now that's been addressed in some ports as a -- I mean it's like the air traffic control, a scheduling issue wa s an important issue. And I don't know that we have any jurisdiction on it. But I'd be interested to hear if there's anything going on or anything that we coulddo.

So I'm not quite sure who would like to address these, but --

EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Let me kind of -- this is Dan Donohoue. Let me kind of orchestrate that.

On the virtual arrival, Peggy, could you kind of talk to that at least as far as that is part of the T6 goods movement area that we can look at. We've not been involved in it, but that's an area that there proba bly are opportunities that would fall into the work that we 're 202

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25doing on the overall freight transportation thing. TECHNICAL ANALYSIS SECTION MANAGER TARICCO: Yes, as part of the measure in our climate change plan t o try to improve the efficiency of freight operations in the state, we will be looking at a broad range of measu res to see, you know, how to implement them and working wi th, you know, the ports and the maritime industry to see wh ich ones make the most sense.

Seeing if we can move things quicker through the ports is clearly one aspect of that, and we will lo ok at the virtual arrival aspects as well.

CHAIRPERSON NICHOLS: Okay. So you'll add that to the list of things that are part of the discussi on or part of the review?

TECHNICAL ANALYSIS SECTION MANAGER TARICCO: Yes, uh-huh. CHAIRPERSON NICHOLS: Okay. Good.

EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: And, Bonnie or Paul, on the issue of what we're doing an d what we have done with respect to viscosity, would you a ll like to respond to that one?

STAFF AIR POLLUTION SPECIALIST SORIANO: I'll start with that one. And then if Paul has some add itions to it, he can add them at the end.

In my presentation, I did mention that viscosity 203

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25is one of the key issues in the distillate fuel. And it

does have significantly lower viscosity than the he avy fuel oil. And so we have been looking at it -- we' ve looked at it a number of ways, in terms of we have -- our Enforcement Division, we have gotten all their reco rds, which is over, at the time, 4 to 500 samples, and w e looked at the viscosity of all those samples. And that was one of the things that led us to propose this extension, because we did find that the viscosity l evels of the fuels from .1 to .5 percent sulfur were 25 p ercent higher than the viscosity for the fuel at .1. So t hat's one of the issues.

Also, I talked about that enhanced fuel specification. And I continued to give the wrong n umber for the fuel specification, because I work on a tes ting spec too. But there's a new fuel grade called DMZ, and it has a three centistoke minimum fuel viscosity.

So we believe that this viscosity issue is being addressed in a number of different ways by our Phas e 1 extension and by these enhanced fuel specifications

.

We also -- I think we would have to be very careful in specifying a minimum viscosity level. I t's very dependent -- the engine manufacturers do have a minimum that they specify for their engines. But i t's very -- the fuel viscosity is very specific on temp erature 204

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25and operation. And so for us to provide a minimum, I just

think it's too specific to the type of vessel.

So I think in terms of extending the Phase 1 and the enhanced fuel specifications are two prongs tha t have been used to approach that issue.

CHAIRPERSON NICHOLS: Well, obviously this is of great interest to the shippers, to every -- it's a safety issue. You know, loss of power is not something to take lightly.It seems to me that everybody's sort of converged on viscosity as the answer or the problem. Are we clear that that's the only thing that could be responsibl e for the problems that have been experienced?

STAFF AIR POLLUTION SPECIALIST SORIANO: It is one of the key issues. When California Maritime Ac ademy did the study, they found some other -- training, w hether the vessels operated in an automatic kind of settin g or whether there's an engineer that's actually down at the engine. That can change some parameters.

But viscosity is one of the key fuel issues. EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: But as we've talked about this whole thing, there's a n eed to continue to investigate this closely. That's one o f the reasons why it makes so much sense to have a delay right now and not have another change within that. As we look 205

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25at this more closely, we do think there may be othe r

things that will come up. But as we have, all thes e people together, the experts both from the fuel, fr om the engine side and all that, we think we can work thro ugh this issue and certainly address the issues of boththe loss of propulsion and other operational issues tha t they're seeing. And that's why we just think it ma kes

sense. We from here -- you know, we have in place a very concerted effort with all of the effected things, particularly with the Coast Guard on working very c losely on these. We have a lot of additional things that we are going to be requesting and following up on to see, as we can delve deeper into this issue, to make sure that we really are addressing it, particularly before we ma ke the next step down to the .1 sulfur fuel.

CHAIRPERSON NICHOLS: Well, Any time there's a change in fuel, there's always a need for a very ca reful rollout. So I'm glad to hear that you're working o n that.

EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Now, would -- TECHNICAL ANALYSIS SECTION MANAGER TARICCO: I just wanted to add one more thing.

The Coast Guard has been very helpful in this matter. And we do have someone here today, Michael 206

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Boyce -- Do you want to raise your hand, Michael. He's

been excellent to work with. And they've been work ing to get the word out too. As they learn things when th ey investigate, like loss of propulsions, you know, th ey get that information back out to the industry. And the y have a vested interest in making sure this works too, be cause the ECA is right around the corner. And, you know, we have the benefit now of we're learning. We're kindof the pilot here. And the more we can understand this, t he more successful the ECA will be too, and I think we all want that to happen.

EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: The next one with respect to the VSR issue, Peggy, can you respond to that one?

TECHNICAL ANALYSIS SECTION MANAGER TARICCO: Yeah, I'll try to respond, and then you can add thi ngs that I might miss.

Well, I think the Chairman is very familiar with this, because I think the concept of slowing vessel s down has been around for a long time. I think we first started looking at this back in the 90s. So we did make a commitment to do a technical evaluation of vessel s peed reduction programs in the AB 32 Scoping Plan in our SIP and a diesel risk reduction plan, that we would see , you know, if it can work, how to implement it. Because of 207

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25resource issues that's been delayed a little bit. The good news is that even though it's been delayed, there's a very successful program being implemented at the two largest ports in the state, the Port of Long Beach and Los Angeles, where they are slowing vessels down. They have a very high rate of compli ance in part because they've incentivized the Vessel Speed Reduction Program, that vessel operators will get a reduced dockage fee if they slow their vessels down

.

So I think a big chunk of the benefits that we could get from a VSR program here in California is already occurring, thanks to the ports.

We will still complete the technical report. We've committed to do that, and we'll get going on that later again this year. There's going to be some re ally tough questions to answer though as we look at this

. Because, you know, what's the best way to implement this type of a program? Is it voluntary? Is it regulat ory? Is the state the best agency to be mandating speeds for ships? Or is another agency, an international bodyor the Coast Guard? Are they in a better position to esta blish those ship speeds?

The other thing we need to keep in mind here is that what we're asking today is to try to keep the vessels out of the sea range and get them back in the chann el. A 208

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Vessel Speed Reduction Program could undo that workhere

today and incentivize vessels to go back through th e sea range. So we need to keep that in mind.

We also have to keep in mind our longer term air quality goals. As you look to the future, we know we're going to have to get more reductions from ships. S o we're going to have to look at -- when we look at VSR, ki nd of look at it in the context of a broader range of mea sures, what's going to be the best way to get the next set of reductions from vessels? And we will do that. We think it's a little premature at this point to commit to adopting a regulation to mandate vessel speed reduc tions, but we do think there's merit in continuing to lookat it as a one way to reduce emissions, and we will do th at as we look at our program.

CHAIRPERSON NICHOLS: I understand the explanation and I think it makes good sense. I jus t think, you know, it would make also sense to includ e the advocacy groups that have been working with us on t rying to defend this regulation and our authority in a ve ry difficult area to, you know, have them involved in looking at the same kinds of analyses that you are. So I t hink that will help us come up with something more susta inable in the long run.

EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: We 209

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25certainly will. I think there's just two real short questions left. One had to do with the .1 sulfur fuel availa bility. And there were some comments made about early compl iance. About 40 percent of the samples that we've done so far is at or less than .1 fuel. So there is a fair amount out there. There are people using it. Looking at the regional basis from where these came, we are seeing.1 fuel available in most of those regions, probably i n fairly limited quantities. Except for South Africa , we're not seeing too much come out of there.

So we're doing pretty well on that. We are going to follow this .1 sulfur fuel availability very clo sely, because it's also linked to other fuel properties t hat we're concerned about. So that's something that we 're going to be following. And if there is an issue onthat, we're certainly going to, you know, bring that backto you all and let you know what's happening.

Then the final one was really why not go out to 2015. That does make a lot of sense from actually dovetailing with the ECA. The issue is, as you sawin the previous presentation, these reductions are very cr itical SOx reductions. These are, as we talked about, ess ential for achieving the PM SIP commitments, which come inin 2014. This regulation has provided about -- as is has 210

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25provided about 50 percent of those reductions neede d. So

that's -- you know, originally we looked at that as the most practical way. But we have some air quality requirements that we need to meet. And so that's w hy we're recommending 2014.

CHAIRPERSON NICHOLS: All right. Thank you. Dr. Balmes. BOARD MEMBER BALMES: I just wanted to echo your comments about the vessel speed reduction issue. I appreciate from staff the complexity of this issue. And I also appreciate from the Navy they don't want to se e -- if we're hoping to get the vessels through the channel corridor not to reverse that by vessel speed reduct ion concept that's not well thought through.

But I would encourage staff along with the Chairman to try to navigate this difficult issue wi th the various agencies. And, you know, maybe we're not t he right agency to spearhead this. But I think it wou ld be useful if we could figure out a way to amplify what 's already being done by the ports in Long Beach and L .A.

EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Just one final comment on that. We are seeing additiona l movement on the international level to look at gree nhouse gas reductions from shipping. In fact, at the JulyIMO meeting coming up, they are going to initially star t 211

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25looking at the idea of is it reasonable to try and get

emission reductions by some type of international v essel speed reduction. So at least they're beginning rig ht now to start looking at that. I know the time line is probably longer than what we usually like. But at least it's up there for consideration, which is a good th ing.

CHAIRPERSON NICHOLS: Considering how long it took to get the IMO to address the sulfur issue, it 's practically warp speed.

BOARD MEMBER BALMES: I would just encourage us to be actively engaged in those discussions.

CHAIRPERSON NICHOLS: We should be encouraging that. If there are no further questions -- we've already closed the record. I should ask for any expartes communication. Yes, down here.

BOARD MEMBER BERG: I did have one phone call with Coalition for Clean Air with Candice Kim and M artin Schlageter. I should say that was on June 20th.

BOARD MEMBER BALMES: And I also had a phone call on June 20th with Candice Kim, Coalition for Clean Air, and John Kaltenstein, Friends of the Earth.

BOARD MEMBER D'ADAMO: Same phone call, June 20th, but adding Steven Sanders.

CHAIRPERSON NICHOLS: All right. Thank you all. 212

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25May I have a motion to approve Resolution 11-25

which contains the staff recommendation?

BOARD MEMBER D'ADAMO: So moved. BOARD MEMBER RIORDAN: Second. CHAIRPERSON NICHOLS: All right. All in favor please say aye.

(Ayes) CHAIRPERSON NICHOLS: Any opposed? Great. Thank you all very much. Good work. Successful.

We are not quite done, although I think we may lose a quorum. That doesn't prevent us from finish ing what we need to do.

We do have several persons who have requested to testify during the open comment period, most of who m are here to talk about the drayage truck regulation, al though Martin Schlageter had asked to talk to us about eco nomic benefits of the regulation.

So I'm going to ask our Vice Chair Ms. Riordan to take the gavel such as it is. To take charge and t hank everybody for their attendance. And she and/or our counsel will explain if we need to what the status of these public comments is. Thank you.

ACTING CHAIRPERSON RIORDAN: Thank you, Madam Chairman. 213

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25First of all, let me invite people that are going

to speak under public comment, Martin Schlageter, G loria Stockmyer, Miguel Silva, Bill Aboudi, Dominick Lee, and Ron Light to come down to the front row, please, an d then we will proceed.

Those of you who have participated under public comment, remember that you do have our traditional three-minute rule, just as we do during the hearing s. And so I'm going to ask that you observe that with the lights as we have them.

And also to remind you that under public comment, these are items that the Board has jurisdiction ove r but that are not on the agenda. And we cannot take anyformal action today as a result of your testimony.

However, we can ask staff to investigate or work with you or make some disposition perhaps of those issues that you bring to us. Some are simply informationa l, and I would assume that our first speaker is going to b e more of an informational one. And others may have some requests. And we will handle it that way.

Martin, I'm going to begin with you. If you'd give us your name, as all of you who are testifying , if you would begin with your name. And if you're representing an organization or a company, if you w ould give us that information as well. 214

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25So, Martin, let's start with you. MR. SCHLAGETER: Thank you so much. Martin Schlageter with Coalition for Clean Air. I submitted through the Clerk to you an executive s ummary of a paper the Coalition for Clean Air recently rel eased.

ACTING CHAIRPERSON RIORDAN: We have that. MR. SCHLAGETER: I wanted to share that with you because it's a series of case studies showing busin ess and economic benefits from greenhouse gas and other pol lution regulations that have been initiated here at CARB.

The shipping clean, growing green, how companies are earning more by polluting less at California po rts. Goes through a wide variety of sources in the ports of freight transportation sector and gives case studie s where economic benefits are being achieved, efficiencies are being found, new markets are being opened up, and g reen technologies are being developed. And that is the vision of greening the economy that is I know a part of ou r California mandate here, of which CARB is so import ant.

One of the findings I want to highlight there in this report to you is that it is a call for us collectively to be resilient and committed to the deadlines that we set when we set forth regulation. Emerging companies and investors and green technolo gy developers and workforce training programs are all reliant 215

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25upon the commitment you make when you set clean air

regulations. These clean air regulations are creat ing markets. They're improving efficiencies, as I said . And they're creating jobs here in California.

And so to stay committed to your deadlines and stay committed to your standards allows investors a nd emerging companies to plan and to be assured of the marketplace that they are planning for and gaining investment around. As we came across today, certai nly there are necessary changes that occur.

But know that to stay committed to your regulations is one way of helping ensure that the g reen economy continues forth. And these emerging compan ies, which are feeding companies that are trying to comp ly with your regulations, they need to be protected by a commitment to those regulations. Companies that ar e investing to comply need your continued vigilance i n rooting out companies that are trying to skirt comp liance.

So these are -- this is a report that I think you'll find useful and encouraging and I wanted to share with you today as a way to raise my pom-poms as the cheerleader for clean air regulations.

Thank you. ACTING CHAIRPERSON RIORDAN: Thank you very much, Martin. And we do have that and we will keep that. 216

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Okay. Next speaker will be Gloria Stockmyer. MS. STOCKMYER: Good afternoon. My name is Gloria Stockmyer, Stockmyer Trucking.

I'm here today to comment on the Board's decision in December to dismiss staff's recommendations to o ffer the same concessions and delayed rules to drayage t rucks that you have given to trucks governed by the truckand bus regulations. Your decision shows your failure to acknowledge the substantial investments made by man y of the 5400 drayage trucks that visit the Port of Oakl and regularly.

Based on information that CARB published, a lot of the trucks went and purchased 2004, '05, and '06 engine model trucks with the plan of retrofitting them. And now they're being told that there are no certified filt ers or retrofit devices. So these men and women are stuckwith trucks that are worthless. And they're stuck with payments and they can't sell them. And if they wer e able to sell them, they couldn go buy a 2007 model truck . But because they've been de-valued by this decision, th ey're going to be jobless.

And, you know, I really ask that you reconsider and revisit this issue. Very important to a lot of drivers. Thank you.

ACTING CHAIRPERSON RIORDAN: Thank you very much 217

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25for your presentation. I think we'll take it all. And

because all of the speakers are on this subject, th en we'll respond at the end.

The next one speaker will be Miguel Silva. MR. SILVA: Hi, members of the Board. My name is Miguel Silva, and I work with Horizon Freight Syste ms in the port of Oakland.

First of all, I wanted to thank you for responding to my comments regarding your decision n ot to send Phase 2 of the drayage truck rule back in Dece mber. Unfortunately, the letter that I received from the Board was extremely disappointing, not only because you d enied my request to reconsider your decision, but because the reasons were inadequate. It failed to justify the decisions to potentially put thousands of port driv ers out of business for minimal environment benefit, while granting relief to non-port truckers.

You tell us that the Board found it necessary to retain Phase 2 requirements to protect residents of the impacted communities from exposure to diesel PM andozone. Yet, you failed to recognize the cleanest trucks inthose communities currently are the drayage trucks.

A 2010 air district study found an anticipated 40 percent in reduction in NOx emissions at the port d ue to the replacement of many older polluting trucks that had 218

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25occurred in Phase I implementation. But yet you co ntinue

to allow significant emissions from non-port trucks through those same communities and freeways.

The balance of emissions today has changed. And there is no valid justification for widening the di sparity between the trucking rules. If the goal is to prot ect communities like West Oakland, Phase 2 will not ach ieve that goal.

You also say that the Board concluded that retaining existing Phase 2 requirements would provi de fairness within the drayage truck industry to the t ruck owners who have made greater investments in new tru cks; that delaying Phase 2 requirements would have favor ed truck owners who have not yet invested in pollution controls and penalizes the owner/operators of fleet s driving cleaner trucks.

This statement is elitist. It favors wealthy companies and punishes the poor. Every truck that currently serves the port of Oakland has made inves tments in pollution control, be it by retrofitting the tru cks or by purchasing newer year model trucks that they cou ld afford. All have made sacrifices commensurate to t heir economic situation. Phase I already has played a h eavy financial burden on port truckers. To ignore that seems to be deliberately contemptuous of the plight of th e 219

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25working class. Many have gone out of business. Ma ny have

incurred high interest rate loans and large amount of debt. Port truckers have done their share and more to meet State clean air regulation at a great personal cost.

Not delaying Phase 2 to favor a handful of wealthy companies at the expense of thousands of owner-operators made up of mostly low income minori ties is discriminatory. The Civil Rights Act of 1964 requi res your agency under State law to conduct your program , policies, activities in a manner that ensures the f air treatment of people of all races, cultures, and inc ome levels, including minority populations and low-inco me population of the state.

I think it would be inappropriate and unlawful to proceed to implement these policies without mitigat ing or even looking at the impending devastating impact of your decision.

Thank you for the time. ACTING CHAIRPERSON RIORDAN: Thank you Mr. Silva. Mr. Aboudi. MR. ABOUDI: We've been here since 9:00. And my name is Bill Aboudi. I'm with AB Trucking. I workat the port of Oakland. I've been there since 1988.

And I've learned over the years that before you punch somebody because they're stepping on your toe , you 220

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25better tell them. So I want to tell you, you guys are

stepping on all of our toes at the port of Oakland. We've had enough.

I've gone from 13 trucks to six trucks. We've been suffering for the last three years. The promi ses that were made to us are not kept. The money didn' t come. Then you call us something like an actor that came late to the show, that we didn't apply early. It's bull. We applied when the outreach was done. The money ran out. Didn't run out for one or two. It ran out for 1300 people; 1300 people that stood in line day and nigh t to try to go through this process.

You've overcomplicated the system. I've attended every drayage workshop that was in Oakland. We've participated in everything. We tried to do everyth ing. This is not the way it was supposed to go. We were going one year ahead of on-road rule. We're being backedby the money, because we're the guinnea pigs. And we're b eing slaughtered right now.

And you have to look at it. This is a very dangerous situation. You can talk to Cynthia Marvi n. You can talk to Diane Bailey from NRDC. We have done o ur best to comply with everything. We want to reduce pollu tion. We live in those communities. We interact with tha t community. 221

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25But your decisions and what you're doing is not

correct. The 2004, '05, and '06, that rule was cha nged after people were led to believe that that's an opt ion that they had. The years were shortened. Then we were told that we didn't promise you that there was goin g to be a DPF that would reduce NOx. We had hoped. What d oes that mean? How do you make a law hoping that someb ody was going to do something? You have to make sure. Jus t like with the earlier regulation, you're mandating. You 're watching. You're adjusting. You've adjusted it fo r on-road rule. Why not adjust it for the port draya ge trucks that reduce the pollution by 50 percent, NOxby 40 percent?We did that already. We upgraded our trucks. We upgraded it on our own dime; 2700 of us upgraded onour own dime. Didn't take a penny. 1300 got -- instea d of 20,000, we got 5,000.

So we can always ask the military to go ahead and give them some efficiency so they can do their test a little faster and give us that $30 million that the y burn in one day. If you have that kind of money, we'll buy brand-new trucks or the two-million-dollar bus.

ACTING CHAIRPERSON RIORDAN: Thank you. Dominick Lee. MR. LEE: Members of the Board, my name is 222

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Dominick Lee. I'm with VA Transportation in Oaklan d,

California. There's about 90 owner-operators worki ng there. As you can probably already tell, we are a little bit upset in Oakland at this decision that was made in December. We are all, of us here, work in Oakland. We are not one-time visitors. Especially like my guys , 90 owner-operators, 80 percent of my guys stay at the port all day.If you want to talk about emissions to problem that were there previously and the correction that was done is largely due to the community of truckers li ke me and me colleagues here based in Oakland itself.

I also had the pleasure the past year to be on the Truckers Work Group in Oakland where you sent y our staff members down on a monthly basis to talk about amendments to be made to the drayage rule based on the affects of the economy.

And I'm kind of a little bit -- not upset -- I don't know if you were misinformed, but some of the basis that we got from Mr. Goldstene on behalf of Chairma n Nichols was based upon drayage industry or the port industry is rebounding. I don't know where you rea lly got that. We haven't responded or rebounded at all. I went from having about 170 trucks in about 2006 to runni ng 223

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25about 80 trucks in the port of Oakland. There's ab out

half of that.

Now, if you look at Journal of Commerce, we may have rebounded last year, but all steamship lines - - and I believe my customers estimate money for us to trick le down and be economically better. They've all lost hundr eds of millions of dollars in the first quarter. They're all bracing for another 2009 where some steamship lines have lost over a billion dollars. If there is to be anyrelief made to the trucking community, it should come to t he drayage. It should come to the guys that have alre ady invested house payments and are seriously looking f or relief. The gentleman here earlier talked about you need to keep deadlines and technology and all that. I t hink sometimes we jump ahead of the schedule and propose deadlines when don't have technology. There is the se guys that went out there and bought 05-06 trucks with th e promise of technology to keep on working until 2020 . You don't have that available. And at this point, you' re proposing options for them that are just not viable at this point.

It's a promise. If it's not there, then some changes need to be made to make accommodations for these truckers that want to stay at work. It's about fai rness. 224

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25And I think sometimes we all sit here and play a ze ro sum

game. I think there could be compromises that coul d be made and keep everybody working.

I am seriously asking you guys to reconsider and keep Oakland's port drivers working. Thank you.

ACTING CHAIRPERSON RIORDAN: Thank you, Mr. Lee. Mr. Lee, the Committee that you mentioned just briefly, how many are on that Committee that you ju st mentioned?

MR. LEE: You're talking about the Truckers Work Group? ACTING CHAIRPERSON RIORDAN: Yes.

MR. LEE: Well, Truckers Work Group is a monthly meeting put on the trucking community in the Port o f Oakland and is open to all terminal operators, stea m ship lines, and all trucking companies that serve the po rt of Oakland, including truckers who come in from the va lley as well. ACTING CHAIRPERSON RIORDAN: But individual truckers can be there?

MR. LEE: Yes, ma'am. And actually, that's really been the misinformation. I mean, for a year , you sent staff down saying there's going to be amendmen ts made, extensions made to the filters, extension mad e to their trucks. And, you know, within ten minutes, y ou guys 225

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25change your mind as to take that away from them. T hat's

what I'm asking you --

ACTING CHAIRPERSON RIORDAN: But the group represents pretty fairly all of the interests in th e area?

MR. LEE: All of Oakland truckers, yes. ACTING CHAIRPERSON RIORDAN: Thank you. Appreciate that.

Mr. Light. MR. LIGHT: Good afternoon, Madam Vice Chairman -- is it -- and Board members. My name is Ronald Light. I'm Executive Director of West State Allian ce, which is the Port of Oakland Truckers Trade Associa tion. I'd like to try to hit a few high points, if I may.

Our organization over the past six months has submitted comments to Chairman Nichols, to the Boar d members individually, to the Board collectively dur ing the last 15-day open comment period. We can only hope that you avail yourselves of our written comments where we go into great detail and analysis and documentary supp ort of our various positions.

I was coming here, I raised the question -- I posed the question to myself what would be the best course of action at the point in which to address all of y ou today? What I believe that it is, is to question w hat your intentions were on December 17th and whether o r not 226

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25the Board was fully aware and fully apprised of the

consequences of their actions and of their intentio ns when you made the decision not to enact the delay to the Phase 2 NOx regulation, which would have postponed the ru le from 2014 to 2020. So it's within that vein that I woul d like to continue.

As a couple of my colleagues have alluded, a research scientist at U.C. Berkeley, Dr. Rob Harley , was commissioned by the ENAQMD to conduct a study this last year to determine to what extent there had been emi ssion reductions from 2009 to the advent of the Phase I P M regulation in January 1st -- or actually, it's more like June of last year.

And as my colleagues have alluded, there was a 50 percent reduction in PM diesel emissions and an unanticipated 40 percent reduction in NOx. And tha t's extremely significant, because what it reflects is the fact that as older trucks were phrased out and newe r trucks were purchased largely at the expense of the port truckers themselves, it's created a vast unanticipa ted improvement in NOx reductions, thereby eliminating the need to remain consistent with the implementation s chedule for Phase 2 that had been adopted.

And in fact, staff had proposed, as you well know, a delay in implementation of the Phase 2 rule until 227

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 252020, in part to reflect the fact that there were f ar

fewer emissions being emitted into the atmosphere d uring this period.

As my colleagues also have intimated, one of the big issues was the fact that when the Phase 2 rule was originally adopted by this Board, it was predicatedon the existence of not only PM filters, but of NOx reduct ion filters. And in the case of vehicles of 2004, '05, and '06 engines, the idea was that as those trucks requ ired diesel filtration that a dual purpose diesel and NO x emission reduction filter could be purchased and retrofitted. In fact, that does not exist. It has not been developed. It's not been submitted to the CARB Board. It's not been approved. It's not on the ma rket.

So all of those 2700 truck owners have no option when it comes time for them to retrofit their truck s. They would do so -- this is with PM emissions filte rs. They would do so with the fore knowledge that on Ja nuary 1st, 2014, that their trucks would no longer be compliant due to the NOx emissions rule. That means they nee d to purchase a $20,000 filter and keep them in complian ce for perhaps one year.

I'm sorry I've gone over. I did have a few more points to make.

ACTING CHAIRPERSON RIORDAN: I felt that because 228

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25you represented a larger group, you could have 15 s econds

extra. Mr. Light, I appreciate your comments. And I thank you. And I'm going to have to tell you I hav e to review your submittals. And maybe other Board memb ers will have some questions.

And I'm sorry, Board members, I didn't ask if there were any questions on your behalf for any of the other speakers. But this would be the time. And t hen I'm going to ask staff to perhaps make some remarks andmake a suggestion about where we might go from here.

But first let me just invite any questions, if there are any, Board members.

BOARD MEMBER BERG: I'd be interested in what staff has to say.

ACTING CHAIRPERSON RIORDAN: Mr. Goldstene. EXECUTIVE OFFICER GOLDSTENE: Thank you, Ms. Riordan.We'll ask Cynthia Marvin to provide a brief overview and provide context of where we are. She can respond to some of what you just heard.

ACTING CHAIRPERSON RIORDAN: And then perhaps some direction what the next step might be. Why do n't do you the overview and response.

ASSISTANT DIVISION CHIEF MARVIN: Thank you. 229

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25We certainly are very well aware of the level of

concern in Oakland. Have spent a fair amount of ti me listening to those concerns, looking ourselves at w hat was possible from the system standpoint, and also tryin g to assess what the impact is in terms of the number of trucks. So the letter that Chairman Nichols had sent back to Miguel Silva and the West State Alliance on beha lf of many of the truckers who spoke today really attempt s to go through each of the substantive issues that they ra ised and provide the facts as we understand them.

I think in terms of overall context, we absolutely are making progress, and happily so, in reducing diesel pollution at west Oakland.

As Dr. Harley's study confirms, I think it's important to note those improvements are due to a combination of cleaner trucks, cleaner ships, clean er ship fuel, cleaner cargo handling equipment, really the whole spectrum of sources that operate in that community. So many of those are cleaner due to the Board's regula tions, but it's not solely trucks that are driving that improvement. We're certainly happy for it, regardl ess.

In terms of where we go in the future, many of these folks did submit comments in the 15-day comme nt process on the changes to the drayage rule. So sta ff will 230

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25be going through the prescribed process to evaluate and

respond to those comments.

Separate from the regulatory process, I've been in some discussions with the city counsel member fr om Oakland who has raised many of the same financial c oncerns and expressed an interest in looking at how we can find new ways to help finance additional upgrades at the port of Oakland. And what we've talked about doing is t rying to combine the State's loan and loan guarantee prog rams that are expanding right now, as Ms. Berg is well a ware, and perhaps combine those with funds generated or developed by the city of Oakland so that there is a stronger financing program available.

In the letter back from Chairman Nichols to the West State Alliance, we did note the recovery or th e rebound at the Port of Oakland. That was not in th e analysis of any one company's economic state. It w as a statistical look at the amount of cargo that's flow ing through the Port of Oakland. And what we see by th e Port of Oakland's own statistics is that the cargo volum es have returned to the pre-recessionary levels. So that t ells us that there is a need to stay vigilant in terms of requiring cleaner trucks and also that ultimately t hat business will provide a source to help finance thos e cleaner trucks. 231

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25ACTING CHAIRPERSON RIORDAN: Mr. Goldstene. EXECUTIVE OFFICER GOLDSTENE: I think at this point we are in the middle of the process of the 15 -day process where we will respond to the comments we've received.

I agree with Cynthia that the letter from Chairman Nichols already responded to the issues ra ised here. And what we can do is make sure we distribut e that to the Board so you have that information.

ACTING CHAIRPERSON RIORDAN: Yes, Dr. Balmes. BOARD MEMBER BALMES: Well, I appreciate your comments, Cynthia.

But being from Berkeley, I know that the City of Oakland is in a great financial straits. When you talk about partnering with the city to try to generate s ome more funds, is there any reality there on the city side? Not to mention the State budgetary issues.

ASSISTANT DIVISION CHIEF MARVIN: Excellent question. And that was part of my discussion with the city counsel member.

I think I'm realistic enough not to expect the city itself to provide funding. But what she was t alking about was looking at some of the economic developme nt funds that may be available for the city or some of its subsidiaries, non-profits to apply for as a financi ng 232

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25mechanism. So I can't answer the question. I can just tell you that there is a local elected official who want s to go for that, try it, and we committed to work with her

.

EXECUTIVE OFFICER GOLDSTENE: I've been corrected by Mr. Fletcher. We did send the letter that Mary sent to the Board already, but we can re-send it.

MR. ABOUDI: Can I have a rebuttal? ACTING CHAIRPERSON RIORDAN: No. I think based on fairness --

MR. ABOUDI: But there's wrong information being dished out.

ACTING CHAIRPERSON RIORDAN: I realize there's a disagreement --

MR. ABOUDI: It's not a disagreement. It's inaccurate information that's been dished out to th e Board. EXECUTIVE OFFICER GOLDSTENE: We'll finish the rule making process. In that forum and in that con text, we will reply to the comments.

ACTING CHAIRPERSON RIORDAN: And I think, Mr. Goldstene, then what -- after you've done that, I t hink because of the interest shown by the speakers that then the -- it would be helpful if you then made that information available to us. Lots of times after t he 233

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2515-day comment period is over or the period is over , then

we just -- that moves on. I think in this case per haps we'd like to be a little bit more aware of the resp onse.

In terms of looking at opportunities for funding, realistically, cities are in straits now. State is in a straight.

If the port has come back financially -- well, not financially. Let's say the trade or the commer ce there has come back, is the port doing anything to help in this regard at all? No. All right. No.

ASSISTANT DIVISION CHIEF MARVIN: Unfortunately, no. But that would certainly be another potential source of funding to help the sort of financing program.

ACTING CHAIRPERSON RIORDAN: Have we contacted -- forgive me, because you probably have told me this and I just don't remember.

Have we contacted them? Have we asked them? Have we worked with them at all to see if there was any interest in helping?

ASSISTANT DIVISION CHIEF MARVIN: We've certainly had that discussion, both the Air Resources Board s taff and the Bay Area Air Quality Management District st aff have had that discussion repeatedly with the port o f Oakland. But we are willing to have that again.

ACTING CHAIRPERSON RIORDAN: I think it would 234

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25bear, you know, doing it again. I think sometimes if people are presented as we have been today with some of the individual stories , you know, maybe there would be an interest.

I don't know if there is a model to follow in the ports of Long Beach and L.A. Maybe there is a mode l there. Do I not remember they did something?

ASSISTANT DIVISION CHIEF MARVIN: Down in southern California, the two big ports were very aggressive in both setting their own requirements f or access to the port for cleaner trucks. They establ ished a dirty truck fee. They raised money by allowing tho se dirty trucks to come to the port prior to the ARB regulation. And they took that money, and then a n umber of port operators revenues and greatly subsidized t he transition to cleaner trucks.

The port of Oakland contributed $5 million to the overall funding program that was implemented in 200 9 and 2010. But it is a much smaller contribution propor tional than the southern California ports. They considere d doing a gate fee and a similar program to the L.A. and Lo ng Beach situation, and the Oakland Port Commissioners declined to pursue that approach.

ACTING CHAIRPERSON RIORDAN: Are they governed similarly -- the three ports -- in other words, is there 235

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25any difference in the governance and the way it's s et up? ASSISTANT DIVISION CHIEF MARVIN: I think there are some technical differences. But from a general sense, I would say each of the ports are run by an appoint ed Board of Commissioners or the Port of Harbor Commis sioners generally appointed by the cities where those ports are located. So in Oakland, the Mayor appoints the Boa rds of Port Commissioners.

BOARD MEMBER BERG: But they do run independently.

ACTING CHAIRPERSON RIORDAN: But I'm trying decide where to put the -- I mean, we obviously nee d to have a discussion, we and Bay Area and all. But I' m looking at those who are in the audience and I'm th inking where would their time be best spent if we were loo king for some additional resources that would mirror wha t's happening down in the other two ports.

And I'm going to make a suggestion -- not knowing the exact governance and how they're set up. But u sually the Port Commissioners or Board members, however th is governance is designed, they need to hear from you. And you may have been there many times. But if we go a nd talk, you go and talk, maybe something can happen b ased on our belief that commerce has returned to that port.

Now, if it hasn't, then that's a different story. 236

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25But if it has, then I think the case could be made that

you need to be there along with us, not physically in the same room at the same time, but there at their publ ic meetings and we at our meetings. And that's what I 'm going to suggest to everybody.

But I would like our staff -- if the Board agrees with me -- to go back and have another conversationwith them and explain to them what has happened in the o ther ports and that there is a real interest on our part to see some effort being made to help with the finances.

EXECUTIVE OFFICER GOLDSTENE: We'll talk to the port and the air district. And we'll also keep the Board informed as we move forward on completing the 15-da y process.ACTING CHAIRPERSON RIORDAN: Thank you. Thank you, Mr. Goldstene. Any other comments, Board memb ers?

With that, then we'll adjourn our meeting. And I thank you very much.

(Thereupon the California Air Resources Board meeting adjourned at 3:43 p.m.) 237

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25CERTIFICATE OF REPORTER I, TIFFANY C. KRAFT, a Certified Shorthand Reporter of the State of California, and Registered Professional Reporter, do hereby certify:

That I am a disinterested person herein; that the foregoing hearing was reported in shorthand by me, Tiffany C. Kraft, a Certified Shorthand Reporter of the State of California, and thereafter transcribed int o typewriting.

I further certify that I am not of counsel or attorney for any of the parties to said hearing nor in any way interested in the outcome of said hearing.

IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of July, 2011.

TIFFANY C. KRAFT, CSR Certified Shorthand Reporter License No. 12277 238

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