State of California

AIR RESOURCES BOARD

Resolution 06-11

May 25, 2006

Agenda Item No.: 06-5-4

WHEREAS, sections 39600 and 39601 of the Health and Safety Code authorize the Air Resources Board (the Board or ARB) to adopt standar ds, rules, and regulations and to do such acts as may be necessary for the proper exe cution of the powers and duties granted to and imposed upon the Board by law;

WHEREAS, sections 43013 and 43018 of the Health and Safety Code authorize the Board to adopt standards and regulations to control emissions from off-road or nonvehicle engine categories to achieve the maximum de gree of emission reductions possible at the earliest practicable date;

WHEREAS, section 209(e)(1) of the federal Clean Air Act preempts states and their political subdivisions, including the State of Cali fornia and the local districts, from adopting or enforcing emission standards or other r equirements relating to the control of emissions (other than in-use operational controls) of new nonroad engines less than 175 horsepower used in farm and construction equipm ent and vehicles;

WHEREAS, the United States Environmental Protection Agency (U.S. EPA) has adopted regulations at title 40, Code of Federal Re gulations, section 85.1601, et seq., to define the scope of preemption as those new engines used primarily in farm and construction equipment;

WHEREAS, section 209(e)(2) authorizes California to adopt standards and to seek authorization from the U.S. EPA prior to enforcing emission standards or other requirements relating to the control of emissions ( other than in-use operational controls) from nonroad engines (of which large spark-ignition engines are a subpart), not otherwise preempted by section 209(e)(1);

WHEREAS, because of federal preemption of control o f emissions from farm and construction equipment under 175 horsepower, ARB an d the U.S. EPA have worked together to develop a harmonized national program i n order to reduce emissions from equipment with new large spark-ignition engines;

WHEREAS, in 1998 the Board originally adopted regul ations to control exhaust emissions from off-road large spark-ignition engine s of 25 horsepower or more used in eleven agreed upon non-preempted categories, but th ese regulations do not containResolution 06-11 2

requirements for transient testing during certifica tion or compliance determinations or requirements for on-board diagnostics (OBD) systems ;

WHEREAS, in 2002 U.S. EPA promulgated emission stan dards for hydrocarbons (HC) and oxides of nitrogen (NOx) that harmonized with t he ARB’s 1998 regulations beginning in 2004, but required more stringent new engine emission standards and evaporative emission standards, transient test proc edures, and OBD systems requirements beginning in 2007 because U.S. EPA bel ieves that transient testing procedures better reflect actual emissions from off -road large spark-ignition engines, and OBD systems allow engine service personnel to e valuate the performance of the engine’s emission control system;

WHEREAS, federal test data have shown that evaporat ive emissions from gasoline-fueled off-road large spark-ignition engin es can be significantly reduced with the use of properly designed fuel tanks and fuel ho ses yet existing ARB regulations do not explicitly control evaporative emissions associ ated with off-road large spark-ignition engines;

WHEREAS, manufacturers have requested that ARB harm onize with the 2007 federal exhaust emission standards for off-road large spark -ignition engines and ARB seeks to harmonize with the federal power designation of kil owatt (kW) for off-road large spark-ignition engines;

WHEREAS, the State Implementation Plan for Ozone (S IP) adopted by the Board in

October 2003 directed ARB to harmonize with the mor e stringent 2007 federal requirements by adopting an exhaust emission standa rd for off-road large spark-ignition engines of 2.7 grams per kilowatt-hour (2.0 grams p er brake horsepower-hour) and an equivalent evaporative emission requirement and dir ected ARB to develop more stringent near-, mid-, and long-term standards for off-road large spark-ignition engines and equipment that reflected the availability and f easibility of zero- and near zero-emission technologies;

WHEREAS, test and certification data have shown tha t exhaust emissions from off-road large spark-ignition engines can be significantly r educed with the addition of an emission control system incorporating closed-loop f uel control systems, fuel injection systems, three-way catalysts, and combinations ther eof;

WHEREAS, the application of automotive-derived-cata lyst and fuel-delivery technologies have allowed commercially available la rge spark-ignition engines to achieve HC+NOx emission levels of 1.34 grams per ki lowatt-hour (1.0 gram per brake horsepower-hour) or less, with the cleanest engines having emissions of less than 0.134 grams per kilowatt-hour (0.1 gram per brake h orsepower-hour);

WHEREAS, the existing regulation divides off-road l arge spark-ignition engines into two categories based on engine displacement, with engin es in the first category having a displacement of less than or equal to one liter, an d engines in the second categoryResolution 06-11 3

having a displacement of greater than one liter and being typically derived from automotive engines;

WHEREAS, more stringent new federal exhaust emissio n standards for federal Class II engines (less than 19 kW) are expected to be promul gated prior to the end of 2007 and these standards also apply to engines greater than 19 kW, but with a displacement of

less than 1 liter;

WHEREAS, existing State regulations do not control exhaust emissions from off-road large spark-ignition engines manufactured prior to 2001 and only control 25 percent of those engines manufactured in 2001, 50 percent of t hose engines manufactured in 2002, and 75 percent of those engines manufactured in 2003, and emissions from uncontrolled in-use engines may exceed those of eng ines certified to the State and federal standards by 300 percent or more;

WHEREAS, test data show that many of these uncontro lled engines may be controlled to existing HC+NOx emission standards or better thr ough the use of retrofit emission control systems;

WHEREAS, a standardized procedure is necessary to v erify the performance level of retrofit emission control systems;

WHEREAS, small fleets, defined as fleets with less than four pieces of equipment, are least able to absorb the costs of in-use requiremen ts; it is believed that these users, in general, use their equipment fewer hours per year t han mid- or large-size fleets;

WHEREAS, many operators of off-road large spark-ign ition equipment can incorporate battery electric or “zero-emission” equipment, espe cially forklifts, sweeper/scrubbers, airport ground support equipment, and industrial to w tractors into their fleets;

WHEREAS, zero-emission equipment is readily availab le and is increasingly more capable as equipment manufacturers incorporate feat ures that enable the equipment to be used in a wider variety of environments; these f eatures include waterproof or sealed electronics compartments to make them water resista nt for outdoor conditions, alternating-current motors that enhance performance capabilities, batteries that allow for fast-charging, eliminating the need to swap out bat teries and maintain a battery charging room, and in the mid- to long-term, hydrog en fuel cell technologies that further extend the capabilities of electric equipment;

WHEREAS, zero-emission technology is suitable and c ost-effective in many applications and provides ongoing zero-emission ben efits for the life of the equipment;

WHEREAS, in late 2002, air carriers operating in th e South Coast air basin signed a Memorandum of Understanding (MOU) with ARB committi ng to reduce HC and NOx emissions from new and in-use ground support equipm ent used in airport operations;Resolution 06-11 4

the MOU included a requirement to have electric or zero-emission vehicles represent at least thirty percent of the 1997 baseline fleet, in aggregate, by December 31, 2010;

WHEREAS, the staff has proposed regulatory amendmen ts, set forth in Attachment A hereto, that include the adoption of new emission s tandards and test procedures for forklifts and other industrial equipment with 2007 and later model-year off-road large spark-ignition engines, requirements for fleet user s of such equipment, and verification procedures for retrofit control systems;

WHEREAS, the proposed amendments to existing Califo rnia standards and test procedures are designed to harmonize as closely as possible with the federal program to minimize administrative burden, complexity, and expenses that could result from different state and federal testing requirements fo r non-preempt engines while still maintaining the emission reduction benefits of the California program;

WHEREAS, adoption of procedures in close alignment with the U.S. EPA’s program for large spark-ignition engines would additionally sim plify the processes of certification and production line testing and reduce the compliance b urden placed on industry;

WHEREAS, optional lower-emission standards have bee n shown to provide an incentive for developing emission controls that per form beyond mandatory standards, and compliance with, and promotion of, optional low er-emission standards may aid engine and equipment manufacturers in their marketi ng of less-polluting products, thus harnessing competitive forces to spur research and development of cleaner technology;

WHEREAS, the Board has considered the effects of th e proposed standards on the economy of the State;

WHEREAS, the availability of high quality, motor-ve hicle-grade liquefied petroleum gas is critical to the efficient operation of fuel deli very and emission control systems;

WHEREAS, periodic reviews of industry’s progress, b oth in meeting current ARB regulatory requirements and in striving to meet req uirements with future effective dates, have helped the Board determine whether it needs to reevaluate those requirements;

WHEREAS, the California Environmental Quality Act a nd Board regulations require that no project that may have significant adverse enviro nmental impacts be adopted as originally proposed if feasible alternatives or mit igation measures are available to reduce or eliminate such impacts;

WHEREAS, a public hearing and other administrative proceedings have been held in accordance with the provisions of chapter 3.5 (comm encing with section 11340), part 1, division 3, title 2 of the Government Code;

WHEREAS, the Board finds that:Resolution 06-11 5

Exhaust and evaporative HC+NOx emissions from off-r oad large spark-ignition engines will account for approximately 35 tons per day in 2010 making the category a significant source of air pollution;

To meet SIP requirements, ARB must continue to seek proportional and incremental reductions from mobile sources, includi ng off-road large spark-ignition engines;

Cost-effective control technologies are available t hat can significantly reduce exhaust and evaporative emissions from new off-road large spark-ignition equipment and engines;

The greatest contribution to off-road large spark-i gnition engine emissions comes from uncontrolled in-use engines;

Cost-effective emission reductions are possible thr ough the retrofit, replacement or retirement of uncontrolled in-use off-road large spark-ignition engines and equipment;

The proposed exemption for small fleets significant ly reduces the economic impact on equipment dealers and small fleets while still controlling the majority of in-use engines;

Allowing industry to voluntarily certify engines to optional lower-emission standards and to promote the optional certification -level standards through equipment labeling could aid fleet operators in the purchase of lower emitting engines and could further reduce emissions;

The certification levels of several 2004 model year engines and the known capabilities of automotive-inspired emission contro l systems leads ARB to

believe that still lower emission standards on the order of 0.27 to 0.40 grams per kilowatt-hour (0.2 to 0.3 grams per brake horsepowe r-hour) are technologically feasible; however, manufacturers of off-road large spark-ignition engines have little experience certifying their engines to the m ore stringent transient test procedures required in the 2007 model year; additio nally, poor quality liquefied petroleum gas may have an adverse effect on the abi lity of the fuel delivery and emission control systems in these engines to operat e optimally; thus, ARB should review the industry’s progress in meeting th e standards and should assess the ability to adopt yet lower standards as well as the degree to which ARB and U.S. EPA have been able to achieve the goal of harmonization;

WHEREAS, the Board further finds that:

The off-road large spark-ignition engine exhaust an d evaporative regulations, procedures, and compliance programs are necessary t o adequately enforce theResolution 06-11 6

emissions standards, and will independently help to reduce emissions from such engines;

The requirements, procedures, and compliance progra ms for operators of off-road large spark-ignition engine fleets are als o necessary to adequately address emissions from in-use engines;

The retrofit verification procedures for manufactur ers of off-road large spark-ignition engine retrofit emission control sys tems are needed by operators striving to comply with the fleet requirements;

The regulations establish uniform, consistent and r easonable emission standards and fleet average emission level requirements for o ff-road large spark-ignition engines and associated equipment;

Adoption of the exhaust and evaporative standards, fleet standards, and test procedures would result in a reduction of more than 5.7 tons per day of combined HC and NOx emissions statewide in 2010, beyond the current ARB and federal programs addressing emissions from these engines;

The regulations will have no adverse impact on the environment;

The economic and cost impacts of the regulations ha ve been analyzed as required by California law, and the conclusions and supporting documentation for their analyses are set forth in the Initial Stateme nt of Reasons;

The cost-effectiveness for control beyond the curre nt ARB and federal programs would range from no cost (based on overall lifecycl e benefits) to $1.40 per pound of HC+NOx reduced for forklift equipment, with the cost effectiveness for control of other off-road large spark-ignition equipment es timated to be similar;

The cost of controlling evaporative emissions from new engines is already included in the cost of compliance with the 2007 U. S. EPA requirements;

The cost-effectiveness values of the regulations co mpare favorably with the values associated with other control measures adopt ed by the Board in furtherance of Health and Safety Code sections 4301 3 and 43018 and mobile source SIP measures;

The regulatory action will have some impact, althou gh not significant, on small

businesses that lease, rent, or sell new off-road l arge spark-ignition engine equipment;

The regulatory action will also have some impact, a lthough not significant, on small businesses that operate the three categories of new and in-use off-roadResolution 06-11 7

large spark-ignition engine equipment that are cove red by the fleet average emission level requirements;

Catalysts have been used safely in the control of e xhaust emissions from engines operating in a variety of large off-road ap plications, including forklifts and

generators;

Lower-emission off-road large spark-ignition engine s are feasible and readily available and near-zero-emission engines are feasib le and expected to be readily available in two to three years;

It is appropriate to encourage and promote through the adoption of fleet average requirements the use of zero-emission battery-power ed and fuel cell-powered electric forklifts, sweeper/scrubbers, tow tractors , airport ground support equipment, and other equipment in applications wher e off-road large spark-ignition equipment is currently used;

Air carriers operating in the South Coast air basin who signed the MOU with ARB committing to reduce HC and NOx emissions from new and in-use ground support equipment used in airport operations have a chieved the MOU requirement to have electric or zero-emission vehic les represent at least thirty percent of the 1997 baseline fleet, in aggregate;

The amendments to the off-road large spark-ignition engine regulations are necessary, cost-effective, and technologically feas ible to carry out the purposes of the State and federal clean air laws; and

No alternative considered would be more effective i n carrying out the purposes for which the regulations are proposed or would be as effective or less burdensome to affected private persons.

NOW, THEREFORE, BE IT RESOLVED that the Board hereb y approves the adoption and amendment of the following sections of title 13 , California Code of Regulations, and the documents incorporated by reference therein: di vision 3, chapter 15, Additional Off-Road Vehicles and Engines Pollution Control Req uirements; article 2, Off-Road Large Spark-Ignition Engine Fleet Requirements, sec tions 2775, 2775.1, and 2775.2; division 3, chapter 15, Additional Off-Road Vehicle s and Engines Pollution Control Requirements; article 3, Verification Procedure, Wa rranty, and In-Use Compliance Requirements for Retrofits to Control Emissions fro m Off-Road Large Spark-Ignition Engines, sections 2780 through 2789; division 3, ch apter 9, Off-Road Vehicles and Engines Pollution Control Devices; article 4.5, Lar ge Spark-Ignition Engines; sections 2430, 2433, and 2433, and the incorporated “California Exhaust Emission Standards and Test Procedures for New 2001 Through 2006 Off-Road Large Spark-Ignition Engines,” the incorporated “Californ ia Exhaust Emission Standards and Test Procedures for New 2007 through 2009 Off-Road Large Spark-Ignition Engines,” and the incorporated “California Exhaust Emission S tandards and Test Procedures forResolution 06-11 8

New 2007 and Later Off-Road Large Spark-Ignition En gines,” as set forth in the attachments to the Initial Statement of Reasons, an d as set forth in Attachment A

hereto, with the modifications described in Attachm ent B hereto.

BE IT FURTHER RESOLVED that the Board directs the E xecutive Officer to adopt the above regulations as set forth in Attachment A here to, with the modifications set forth in Attachment B hereto, and with such other conforming modifications and technical amendments as may be appropriate, after making the modified regulatory language and additional supporting documents and information ava ilable for public comment for a period of at least 15 days, provided that the Execu tive Officer shall consider such written comments regarding the modification and add itional supporting documents and information as may be submitted during this period, shall make modifications as may be appropriate in light of the comments received, and shall present the regulations to the

Board for further consideration if she determines t hat this is warranted.

BE IT FURTHER RESOLVED that the Board hereby determ ines that pursuant to section 209(e)(2) of the federal Clean Air Act that the emission standards and other requirements related to the control of emissions ad opted as part of these regulations are, in the aggregate, at least as protective of pu blic health and welfare as applicable federal standards, that California needs the adopte d standards to meet compelling and extraordinary conditions, and that the adopted stan dards and accompanying enforcement procedures are consistent with the prov isions of section 209.

BE IT FURTHER RESOLVED that upon final adoption of the regulations relating to standards of other requirements for control of emis sions, the Board directs the Executive Officer, to forward a request for authori zation, or confirmation that the regulations are within the scope of previous author izations, to U.S. EPA pursuant to section 209(e)(2) of the federal Clean Air Act.

I hereby certify that the above is a true and correct copy of Resolution 06-11, as adopted by the Air Resources Board.

_______________________________ Lori Andreoni, Clerk of the Boardi Resolution 06-11

May 25, 2006

Identification of Attachment A to the Resolution

ATTACHMENT A-1: Proposed Regulation Order, Part 1: Amend California Code of Regulations, Title 13, Sections 2430, 2433, and 243 4 for OffRoad Large Spark-Ignition Engines

ATTACHMENT A-2: Proposed Regulation Order Part 2: Amendments to the incorporated “California Exhaust Emission Standards and Test Procedures for New 2001 and Later Off-Road Large Sp arkIgnition Engines” (40 CFR, Part 86, Subpart A)

ATTACHMENT A-3: Proposed Regulation Order Part 3: Amendments to the incorporated “California Exhaust Emission Standards and Test Procedures for New 2001 and Later Off-Road Large Sp arkIgnition Engines” (ISO 8178)

ATTACHMENT A-4: Proposed Regulation Order Part 4: Adoption of incor porated

“California Exhaust Emission Standards and Test Pro cedures for New 2007 through 2009 Model-Year Off-Road Large SparkIgnition Engines” (40 CFR, Part 1048)

ATTACHMENT A-5: Proposed Regulation Order Part 5: Adoption of incor porated

“California Exhaust Emission Standards and Test Pro cedures for New 2010 Model-Year and Later Off-Road Large Sp arkIgnition Engines” (40 CFR, Part 1048)

ATTACHMENT A-6: Proposed Regulation Order Part 6: Adoption of incor porated

“California Exhaust Emission Standards and Test Pro cedures for New 2007 Model-Year and Later Off-Road Large Sp arkIgnition Engines” (40 CFR, Parts 1065 and 1068)

ATTACHMENT A-7: Proposed Regulation Order Part 8: Adopt California Code of Regulations, Title 13, Sections 2775, 2775.1, and 2 775.2 for Large Spark-Ignition (LSI) Engine Fleet Requirement s.

ATTACHMENT A-8: Proposed Regulation Order Part 9: A dopt California Code of Regulations, Title 13, Sections 2780, 2781, 2782, 2 783, 2784, 2785, 2786, 2787, 2788, and 2789 for Verification P rocedures for Retrofit Systems Verification Procedure, Warran ty, and InUse Compliance Requirements for Retrofits to Contro l Emissions from Off-Road Large Spark-Ignition Engine s.ii Identification of Attachment B to the Resolution

ATTACHMENT B: Staff's Suggested Modifications to th e Original Proposal (distributed at the Board hearing on May 25, 2006).