MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD HEARING ROOM CALIFORNIA AIR RESOURCES BOARD 2020 L STREET SACRAMENTO, CALIFORNIA THURSDAY, MARCH 28, 1996 9:40 A.M. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT John D. Dunlap, III, Chairman Eugene Boston, M.D. Joseph C. Calhoun Lynne T. Edgerton M. Patricia Hilligoss John S. Lagarias Jack C. Parnell Barbara Riordan Ron Roberts James W. Silva Staff: Jim Boyd, Executive Officer Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Mike Kenny, Chief Counsel Peter Venturini, Chief, Stationary Source Division Dean Simeroth, Chief, Criteria Pollutants Branch, SSD Gordon Schremp, Associate Energy Specialist Tom Jennings, Staff Counsel Bob Cross, Assistant Chief, Mobile Source Division Tom Evashenk, Staff, MSD Jack Kitowski, Chief, On Road Control Regulations, MSD Catherine Lentz, Staff, MSD Kathleen Walsh, Staff Counsel Patricia Hutchens, Board Secretary Wendy Grandchamp, Secretary Bill Valdez, Administrative Services PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii I N D E X PAGE Call to Order 1 Pledge of Allegiance led by Ms. Edgerton 1 Roll Call 1, 2 Opening Remarks by Chairman Dunlap 2 AGENDA ITEMS: 96-2-1 Public Meeting to Update Board on Status of California Cleaner Burning Gasoline Regulation Implementation Efforts Introductory Remarks by Chairman Dunlap 3 Staff Presentation: Jim Boyd Executive Officer 3 Mike Scheible Deputy Executive Officer 4 Questions/Comments 11 Closing Comments by Mr. Boyd 15 96-2-2 Public Hearing to Consider Amendments to ZEV Requirements for Passenger Cars and Light-Duty Trucks Introductory Remarks by Chairman Dunlap 16 Staff Presentation: Jim Boyd Executive Officer 18 Tom Evashenk Staff Mobile Source Division 24 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX, continued. . . PAGE AGENDA ITEMS: 96-2-2 Tom Cackette Chief Deputy Executive Officer 40 Kathleen Walsh, Esq. Staff Counsel 47 Tom Evashenk Staff, MSD 49 Written Comments Entered into the Record by Jack Kitowski Chief, On Road Control Regulations, MSD 50 Questions/Comments 51 PUBLIC COMMENTS: John Schutz Nissan Motor Limited 57 Questions/Comments 61 John Grimley for Senator Ray Haynes 71 Questions/Comments 76 Valory Brown for Assemblyman Steve Baldwin 79 Jerome F. Cole ALABC 80 Questions/Comments 84 Janet Hathaway Natural Resources Defense Council 89 Questions/Comments 95 Eric Ridenour Chrysler Corporation 106 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX, continued. . . PAGE AGENDA ITEMS: 96-2-2 Questions/Comments 116 Luncheon Recess 128 Afternoon Session 129 CONTINUED PUBLIC COMMENTS: Andrew Frank, Ph.D. U. C. Davis 129 Questions/Comments 133 Presentation of Resolution to Honor Don Drachand on his Retirement Division Chief, Mobile Source Division 136 CONTINUED PUBLIC COMMENTS: Cecile Martin CalETC 140 Questions/Comments 145 Judy Mikels Southern California Association of Governments 147 Questions/Comments 148 Lloyd Dixon Rand 150 Questions/Comments 156 Tim Carmichael Coalition for Clean Air 157 Questions/Comments 161 Dave Hermance Toyota 169 Questions/Comments 170 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX, continued. . . PAGE AGENDA ITEMS: 96-2-2 Joe Caves Union of Concerned Scientists 176 Questions/Comments 182 Mike Miller California Motor Car Dealers Assn. 208 Questions/Comments 214 Marc Chytilo Environmental Defense Center CalPIRG 217 Questions/Comments 230 Kelly Brown Ford Motor Company 232 Questions/Comments 234 Stephen Heckeroth MendoMotive 235 Questions/Comments 240 Doug Henderson WSPA 242 Larry L. Berg, Ph.D. Ballard Power Systems 245 Questions/Comments 249 Ben Knight Honda 259 Questions/Comments 261 Jamie Phillips Planning & Conservation League for Gary Patton 264 Rock Zierman for Assemblyman Tom Bordonaro, Jr. 266 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX, continued. . . PAGE AGENDA ITEMS: 96-2-2 Paul Haluza MEMA 269 Richard E. Wilmshurst Forty-Niner Sierra Resources, Inc. 274 Daki Venetolis Berkeley 277 Barbara George Peoples Energy Matters 281 Jerry Mader Advanced Battery Task Force 286 Paul Knepprath American Lung Association 290 Questions/Comments 294 John W. Burton Integral Design 295 Ed Maschke CalPIRG 299 Questions/Comments 305 Jason Grumet NESCAUM 308 Questions/Comments 314 Samuel A. Leonard General Motors 319 Tohru Aihara Mazda 322 Questions/Comments 323 V. John White Sierra Club California 336 Anita Mangels Californians Against Hidden Taxes 348 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX, continued. . . PAGE AGENDA ITEMS: 96-2-2 Questions/Comments 358 Paul Edison Pulliam Citizen 360 Bill Wason BAT International 363 Record Officially Closed to Await Notice of 15-day Comment Period 369 Ex Parte Communication Disclosures by Board Members 369 Evening Recess 377 Reporter's Certificate 378 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 --o0o-- 3 CHAIRMAN DUNLAP: Will the March meeting of the 4 California Air Resources Board please come to order. 5 Would the audience please rise and join Ms. 6 Edgerton as she leads us in the Pledge of Allegiance. 7 (Thereupon, all those in the hearing room 8 rose to recite the Pledge of Allegiance.) 9 CHAIRMAN DUNLAP: Thank you, Lynne. 10 Would the Board Secretary please call the roll? 11 MS. HUTCHENS: Boston? 12 DR. BOSTON: Here. 13 MS. HUTCHENS: Calhoun? 14 MR. CALHOUN: Here. 15 MS. HUTCHENS: Edgerton? 16 MS. EDGERTON: Here. 17 MS. HUTCHENS: Hilligoss? 18 MAYOR HILLIGOSS: Here. 19 MS. HUTCHENS: Lagarias? 20 MR. LAGARIAS: Here. 21 MS. HUTCHENS: Parnell? 22 MR. PARNELL: Here. 23 MS. HUTCHENS: Riordan? 24 SUPERVISOR RIORDAN: Here. 25 MS. HUTCHENS: Roberts? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 SUPERVISOR ROBERTS: Here. 2 MS. HUTCHENS: Silva? 3 SUPERVISOR SILVA: Here. 4 MS. HUTCHENS: Vagim? 5 Chairman Dunlap. 6 CHAIRMAN DUNLAP: Here. 7 All right. Good morning. I would to remind those 8 of you in the audience who would like to present testimony 9 to the Board on any of today's agenda items to please sign 10 up with the Board Secretary. 11 If you have a written statement, please give 20 12 copies to her, and she sits on our left. 13 I'd like to give some instructions to those of you 14 in the audience. Please save the middle front row seats for 15 the speakers who will be presenting testimony today. We're 16 planning to call your name in groups of four or five to 17 await your turn at the podium. 18 After you turn, please leave the front row seats 19 available for the next speakers. We're expecting a pretty 20 good crowd over the next two days. And because there's 21 limited space here in the hearing room, we would like those 22 not addressing the Board to consider moving to one of the 23 listening rooms on the first through the fourth floors. 24 They've been prepared for your use today. 25 Please ask one of the hall guides or guards to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 direct you, and they can also provide information about 2 restrooms and drinking fountains. 3 So, I'd ask your consideration in that regard. 4 The first agenda item today is 96-2-1, public 5 meeting to update the Board on the status of the California 6 cleaner burning gasoline regulations implementation efforts. 7 For this item today, staff will provide us with a 8 status report on the transition to cleaner burning gasoline. 9 As of March 1st, all gasoline produced for use in our State 10 must be cleaner burning gasoline. 11 Because of the great interest in our second agenda 12 item, this report will be quite brief, and staff will 13 provide us with a more detailed update next month in April. 14 Before hearing from staff, I want to note that the 15 transition to cleaner burning gasoline is proceeding 16 extremely well. All of the affected refiners produced the 17 fuel ahead of or on schedule, and they have been shipping to 18 the terminals and service stations. 19 About one billion gallons of cleaner burning 20 gasoline have made its way into the distribution system 21 since March 1st. And at this point, I'd like to ask Mr. 22 Boyd to talk about the successful implementation program. 23 Mr. Boyd. 24 MR. BOYD: Thank you, Mr. Chairman. Good morning, 25 Board members. Good morning to our audience. Welcome to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 this, the March Board meeting. 2 Today, we want to provide to you, the Board and 3 the audience, only the highlights of the transition to 4 cleaner burning gasoline. 5 I've provided each of you members of the Board 6 with a more comprehensive memorandum on the subject that I 7 believe is in the material you have before you. 8 Mr. Mike Scheible, my Deputy Executive Officer, 9 will present the update. I want to echo the Chairman's 10 remarks, in that the transition is proceeding as planned and 11 smoothly. But I knock on wood -- there's wood under this 12 plastic somewhere -- because there are always unanticipated 13 contingencies. 14 The next two dates in the program are April 15th, 15 when terminals in California will have had to completely 16 transition to cleaner burning gasoline; and, finally, June 17 1st, when service stations will have to have completed their 18 transition to the fuel. 19 As you will hear from Mr. Scheible, March 1st date 20 has gone quite well. But with that, I'll turn it over to 21 Mr. Scheible to give you the details. 22 Mike? 23 MR. SCHEIBLE: Good morning, Chairman Dunlap and 24 members of the Board. 25 Today, I'm just going to give you a brief PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 presentation on what has happened to date with the 2 transition to cleaner burning gasoline. As is our habit, 3 the next slide will show an overview of the presentation. 4 We'll cover briefly performance, supply and demand, price, 5 our public outreach effort, and a summary, which Mr. Boyd 6 said -- so far, so good. 7 We can't be complacent at all about the program, 8 but it's gone about as well as we can could have hoped for 9 to date. 10 On the first issue, performance, the major point 11 to note is that we have observed no problems we can take 12 back to the cleaner burning gasoline. We are watching the 13 situation closely. We receive a few calls on our 14 information line about people who are concerned about 15 performance. 16 Several of the oil companies have issued warnings 17 on their pumps that there could be a problem, and they are 18 also dealing with the issue. 19 We've investigated fears of claims and, to date, 20 have not found any problem. But we continue to watch this 21 closely to make sure that there's no unknown out there. 22 In terms of our comprehensive evaluation that we 23 performed last year, we have now completed our performance 24 report. It is available, and we are sending it out to all 25 parties that desire it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 Again, the bottom line is that our testing showed 2 that cleaner burning gasoline performs just the same in 3 terms of fuel system reliability and driveability as the 4 fuel it replaces, and with a very minor, about 1 percent, 5 change in fuel economy. 6 The next slide deals with the supply and demand 7 situation. All of the refiners that were scheduled to 8 produce cleaner burning gasoline -- which are all the majors 9 and one small refiner in California -- successfully made the 10 conversion by March 1st and have been putting cleaner 11 burning gasoline out since that date. 12 In reality, many refineries put out fully 13 complying fuel or nearly complying fuel for a good part of 14 the month of January and for much of the month of February. 15 The pipeline system is distributing the fuel 16 throughout the State. All the terminals, with the exception 17 of one, are fully complying by today's date in terms of the 18 flush-through of the older fuel in the system. 19 We have gone out and confirmed that at the retail 20 level it is relatively difficult to find fuel that doesn't 21 comply with our limits. There'll be some improvement in 22 fuel quantity as the remaining older fuel is flushed out of 23 the system. 24 About 35 million gallons of cleaner burning 25 gasoline are being produced daily, which is very important PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 from a fuel supply standpoint. As of March 1st, we were 2 within the historical average of supply for that date, but 3 on the low side. 4 In the intervening month, the refiners have been 5 successful in building up supplies; so that, as of last 6 week, we actually were above the historic high average for 7 the period. So, the supply situation looks very good. 8 Another thing we've learned from our experience to 9 date is that the flexibility that the Board provided in 10 terms of the averaging and the predictive model are paying 11 off greatly. The majority of refiners in the State are 12 using the predictive model in order to qualify batches of 13 gasoline. 14 We have gone out and done enforcement efforts and 15 found out that they are doing so very successfully. 16 And now to the next issue, which is price. If any 17 of you have bought gasoline in the last month or so, you've 18 probably noticed that there's been a substantial price 19 increase at the pump. This is reflective of the wholesale 20 increase in price. 21 The price at wholesale in the last week was about 22 73 cents a gallon. That's up 8 cents a gallon over the past 23 month. That compares to an average of about 68 cents a 24 gallon in other markets where Federal reformulated fuel is 25 sold. So, there seems to be about a five cents differential PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 between the California market today and the other markets, 2 such as Milwaukee, or Chicago, or Philadelphia where Federal 3 reform is sold. 4 Historically, our market's been two three cents 5 above that. So, we haven't seen a big differential built 6 in. At retail, as of the end of last week, the average 7 statewide was $1.26 a gallon, up about 10 cents. 8 So, the bad news is the prices have gone up. The 9 good news is that, by and large, the price increase has not 10 been a reflection of a differential because of cleaner 11 burning gasoline. 12 For the same period of time, the price of crude 13 oil, if any of you have been watching that, has hit a record 14 high since the Gulf War, and is up more than 10 cents a 15 gallon. 16 Nationwide, prices were reported up last month by 17 five cents a gallon. So, what we're seeing is that we had 18 the unfortunate coincidence of introducing our new fuel at a 19 time when the base thing that drives gasoline prices, crude 20 oil, is also going up. 21 The good news is that most analysts think that 22 this is a temporary situation. There is no structural 23 reason in terms of worldwide supply as to why that should 24 continue. So, hopefully, as the summer comes, we'll see 25 some retreat in the crude oil price and gasoline prices will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 go down. 2 We still don't know how much of the cost, which we 3 estimated to be 5 to 15 cents a gallon, depending on the 4 refiner, will be reflected in the final price of cleaner 5 burning gasoline. 6 To date, we haven't seen a reflection of too much 7 cost because of our program. Most of the increase in price 8 that we've seen at the retail level is tied more to the 9 crude prices. 10 In terms of public outreach, again, we believe our 11 program has been very effective. We have had stories in 12 virtually every major newspaper. All of them have, in our 13 view, been very balanced and positive on the program. The 14 public is getting a good description of the facts. 15 We've had editorials written by the majority of 16 the major newspapers in the State. All but one were very, 17 very supportive of the program. 18 Our information line has been busy. We've handled 19 to date approximately 1400 calls. In peak weeks, we've 20 handled 200 to 300 calls. The calls follow a pattern very 21 much of coming in shortly after a newspaper article, or 22 Motorland, or an oil company makes a mailing where they give 23 out our 800 number. 24 Staff on the line say they have a very high 25 success rate with providing people with information they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 need. So, if they call up with concerns, after the phone 2 call, they seem to feel much better. 3 Many of the concerns are about the testing of the 4 fuel and, "What effects will it have on my car?" 5 Again, when we relay to them the extensive testing 6 program and the results, we seem to be doing a good job with 7 satisfying their fears. We're continuing the outreach 8 effort. We've to date gone out and briefed all of the prime 9 audiences -- the air pollution districts, the business 10 groups, and others that we intended to reach, and we're now 11 doing followup. 12 We're now going out and extensively trying to 13 reach out towards mechanics. We have a mechanics video 14 that's oriented to their questions and the questions they 15 could get from their customers on the fuel. 16 So, in summary, again, so far, so good. We remain 17 ever diligent on the program, are closely watching prices 18 and supply situations. But the transition has proceeded 19 smoothly to date, I believe, in making the transition. 20 At the refinery level, we did the hardest part of 21 the job in terms of no technical glitches in producing 22 enough fuel. 23 There's been no performance problems, despite the 24 fact that clearly hundreds of millions of gallons of this 25 fuel have been delivered at the retail level to the State's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 24 million vehicles. 2 The supply is adequate. The price increase to 3 date related to our fuel has been well within the range that 4 we expected, and our outreach efforts are continuing. 5 If the Board members have any questions, I and 6 staff are here and available to answer them. 7 Thank you. 8 CHAIRMAN DUNLAP: Supervisor Roberts. 9 SUPERVISOR ROBERTS: Thank you, Mr. Chairman. 10 Not a question, but I wanted to thank Mike. He 11 recently came to San Diego and made a presentation for the 12 air pollution control district board, and I think was very 13 helpful. 14 There's still a lot of people that aren't aware of 15 what's going on, and we were not only able to have that 16 presentation at the meeting, but it went out over our local 17 cable service, and I think helped to reach a lot of people 18 and helped them understand that there is indeed a major and 19 significant improvement that's going to occur in air quality 20 because of these efforts. 21 So, I appreciate. You did a very good job 22 representing the Board. 23 CHAIRMAN DUNLAP: Thanks for hearing that. I 24 appreciate the chairman of that board inviting him as well. 25 Thanks, Ron. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 SUPERVISOR ROBERTS: He's a good friend. 2 CHAIRMAN DUNLAP: Yes. Supervisor Riordan. 3 SUPERVISOR RIORDAN: I just would like to echo 4 Supervisor Roberts' comments. We appreciate what the staff 5 has done to do the outreach. And I think people are 6 absolutely overwhelmed and amazed at the significance of the 7 change and what it will mean for the improvement in the air 8 quality, particularly for my region in Southern California. 9 So, we very much want to thank you on behalf of 10 Southern California for the outreach that you've done in the 11 last few weeks. 12 CHAIRMAN DUNLAP: Thank you. 13 MR. SCHEIBLE: Just a little bit of good news that 14 we've seen to date. We get very detailed information from 15 the refineries in terms of what they're producing, because 16 when they declare a batch as a predictive model or 17 averaging, the have to give us exactly what they made. 18 To date, we're seeing benzene levels down around 19 the half percent; whereas, the reg requires one percent. 20 So, we're expecting bigger benefits for some aspects of this 21 regulation. 22 The predictive model comes in with some of the 23 pollutants being two, or three, or four, or five percent 24 better than required by the regulations. We're going to go 25 back and do an analysis and see whether or not it's possible PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 to quantify the better-than-expected benefits of this 2 program. 3 CHAIRMAN DUNLAP: Okay. I don't want to put my 4 colleagues on the spot, but Mr. Lagarias and Mr. Calhoun 5 have participated and led the Advisory Committee effort, and 6 it's my understanding that the cooperation's gone quite 7 well. 8 I wonder if either of those two gentlemen would 9 want to say a word or two about that. 10 Jack? 11 MR. LAGARIAS: Well, I've been impressed with the 12 manner in which all the affected organizational groups have 13 worked together to see that we get this cleaner burning 14 gasoline program off successfully. And this includes the 15 environmental groups, the public interest groups, the 16 automobile manufacturers, the refinery owners, and the 17 general -- interested public organizations -- the Energy 18 Commission as well as the Air Resources Board. 19 And to see all of them at the same table trying to 20 make a program come off successfully is a truly remarkable 21 situation. And I and Joe have been impressed with this. 22 I do have one question, though. I think the 23 public outreach program has been quite successful in many 24 ways. The Press response has been very positive. 25 When I go to service stations and I ask the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 jockeys that pump -- the people pumping the gas, what they 2 think about the cleaner burning gasoline, they're either not 3 knowledgeable about it, or they have some wildly distorted 4 stories of what they've heard. 5 And I think we still have to get to the people 6 that work at the service stations to make them understand 7 exactly what is coming about. 8 MR. SCHEIBLE: We'll follow up on that, and get 9 back to you on what we learn and what the companies are 10 doing. I know a number of the companies have education 11 efforts, but the reality is the fuel's flowing through the 12 system faster than required. And I think it's pushing some 13 people's schedules. 14 CHAIRMAN DUNLAP: Yes. Ms. Edgerton. 15 MS. EDGERTON: I wanted to reflect on -- when I 16 joined the Board in 1993, and was originally briefed as to 17 this particular program and the likely introduction of 18 reformulated gas in 1996, it was right on the heels of the 19 diesel fuel introduction. 20 And I was very impressed to see a tremendous 21 determination on behalf of the staff and all of the affected 22 industries to make this work differently. 23 I'd like to thank the staff, but I'd also like to 24 thank the petroleum industry for working with us and for 25 putting your shoulder and enormous talents to the wheel. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 CHAIRMAN DUNLAP: Great. Mr. Calhoun. 2 MR. CALHOUN: I have one question. Did I 3 understand you to say that all of the refiners are using the 4 predictive model? 5 MR. SCHEIBLE: Virtually all the refiners are 6 using the predictive model or using the averaging provision 7 of the regulation. 8 MR. CALHOUN: That's interesting. Thank you. 9 CHAIRMAN DUNLAP: Okay. We have no witnesses that 10 have signed up to speak to us today. 11 Were there any letters that need to be summarized? 12 Mr. Simeroth? Mr. Scheible? 13 MR. SIMEROTH: no. 14 MR. SCHEIBLE: I'm not aware of any letters that 15 came in on this issue. 16 CHAIRMAN DUNLAP: Okay. Nothing. 17 Mr. Boyd, any final comment before we move on? 18 MR. BOYD: Mr. Chairman, just to echo all that has 19 been said, the cooperation -- frankly, the partnership that 20 has existed between this organization and the oil industry 21 on this issue has been outstanding and precedent setting. 22 And we look forward to seeing more of that in the future. 23 One has to remind oneself again of the incredible 24 significance of this issue. I know our media and our 25 educational material talks about being equivalent to 3.5 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 million cars being removed from the road. 2 But when you think about the tons that are removed 3 by this program, it's hard to think of anything in the last 4 two decades or anything perhaps since the catalytic 5 converter that has the emissions reduction potential of this 6 program. 7 And the beauty of it all is it's instantaneous. 8 There's no two- to three-year leadtime waiting for product, 9 you know, products to change as within some stationary 10 source and in the vehicular emission controls. It's there 11 when you start fueling your vehicle. 12 And we look forward to some significant 13 improvements in air quality. 14 CHAIRMAN DUNLAP: Okay. Very good. Thank you, 15 Mr. Boyd. 16 With that, we'll move on to the second item, and 17 I'll ask staff to give up their seats and let the ZEV team 18 come forward. 19 Again, just to remind those of you in the audience 20 that wish to speak or that have written statements, please 21 provide them to the Board Secretary, who sits to the left of 22 the Board. 23 The second item on the agenda today is 96-2-2, a 24 public hearing to consider amendments to the zero emission 25 vehicle requirements for passenger cars and light-duty PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 trucks. 2 Today, the Board will hear the staff's proposed 3 changes to this zero emission vehicle program. This meeting 4 represents the culmination of an enormous amount of work 5 over the past year on the part of many people to ensure that 6 California remains on the path to clean air. 7 I think the most significant aspect of this 8 process has been the commitment of people from all sides of 9 this issue to bring forward critical information regarding 10 zero emission vehicle technology and the prospect for its 11 implementation. 12 I want to thank each and every one of you that has 13 participated in this effort in good faith. 14 The staff last came before the Board on this 15 subject at the December, '95 meeting. At that time, the 16 staff recommended a general concept for program 17 modifications to ensure the long-term success of the ZEV 18 program. 19 This recommendation was based on the findings of a 20 series of public forums and stakeholder meetings held during 21 1995, and the results of an expert Battery Technical 22 Advisory Panel that the Governor directed us to convene. 23 The Board directed staff to develop a proposal 24 based on this general concept, with the stipulation that no 25 emission benefits shall be lost. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 Since the December meeting, the staff also met 2 with automakers to negotiate agreements which will result in 3 the introduction of ZEVs later this year, and a continuing 4 of fast-track advanced battery development. 5 Most importantly, the agreements also contain 6 automakers' commitments that assure the equivalent emissions 7 reductions from national low-emission vehicles or 8 alternatives that will be fully achieved to address the 9 enforceability of these MOAs, or contracts. 10 The staff has included provisions that specify 11 damages for violations. Furthermore, not only can heavy 12 damages be imposed if a manufacturer fails to demonstrate 13 good faith in implementing the agreement but, as the 14 agreements recognized, they retain the authority reinstate 15 mandated requirements, if that is deemed necessary, to 16 assure electric cars and clean air for California are 17 achieved. 18 With that, I'd like to ask Mr. Boyd to introduce 19 this item and begin the staff's presentation. 20 MR. BOYD: Thank you, Mr. Chairman. As the 21 Chairman indicated, today's -- I think I'd have to call it 22 "momentous" -- Board meeting does represent the culmination 23 of an enormous amount of work. 24 However, the work for some of us began actually in 25 the 1980s when the initial concept for the ARB's low- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 emission vehicle, zero-emission vehicle, and clean fuels 2 programs were formulated. 3 In response to this Board's own findings that more 4 emission reductions were needed from motor vehicles in 5 California if there was to be any hope of obtaining the 6 public health-based ambient air quality standards in the 7 State of California, in the face of what was proving to be 8 incredible growth in population and equally incredible 9 growth in the number of vehicles, which tracks the 10 population directly, and the almost doubling rate of growth 11 of the vehicle miles that are traveled and the number of 12 trips that the citizens of this State were taking in those 13 motor vehicles, the Board responded to that particular 14 challenge with the passage of the low-emission vehicle and 15 zero-emission vehicle program requirements in 1990, finding 16 that not only did we need to reduce the emissions of the 17 California vehicle fleet, but that some fraction of that 18 fleet would have to be virtually pollution free -- or ZEVs, 19 in effect, zero-emission vehicles. 20 Hence, the goal of two percent ZEVs in 1998 was 21 born. What many seem to regularly lose sight of is the fact 22 that, in 1990, the Board recognized the magnitude of the 23 technological challenge it had presented to the automobile 24 industry with this low-emission/zero-emission vehicle 25 program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 At that time, the Board requested staff to 2 undertake biennial reviews of the progress of development of 3 both low-emission and zero-emission vehicle technology, and 4 to assess the ability of the automobile industry to meet the 5 requirements. 6 As you know, reports were presented to the Board 7 first in 1992, and again in 1994. And a virtually 8 continuous review was undertaken throughout 1995, 9 culminating this 1996 Board meeting. 10 The continuing series of workshops and forums in 11 1995, accomplished their goal of obtaining information and 12 presenting information both to and from concerned parties on 13 specific issues relating primarily to the zero-emission 14 vehicle program and the requirements of that program. 15 This information has been utilized by the staff, 16 first, in reaching the conclusion: Although incredible 17 zero-emission vehicle technological progress has been made 18 since enactment of the ARB program, it was doubtful that the 19 two percent in the 1998 goal could be met in a manner that 20 would not jeopardize the future of the program. 21 In other words, the lack of sufficient advanced 22 technology batteries in 1998 and the succeeding early years 23 of the program could result in a less than acceptable 24 product or less than acceptable products, frankly, being 25 forced onto the market, and a potentially resultant public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 backlash or, frankly, disenchantment with perceived inferior 2 products. 3 So, reinforced by the findings of the battery 4 panel, staff felt that short-term challenges were 5 acceptable, since long-term stability was the need, was the 6 goal. We had to change the program to save it. 7 The information gained from our workshops was also 8 used to formulate three alternative approaches that were 9 presented to the Board for discussions last fall. And with 10 directions from you to formulate a recommended approach that 11 we reviewed with you in December, this in turn led to your 12 request that we develop in detail and bring forward to you 13 at this meeting a program proposal. 14 And we have done that. We believe that there will 15 be more winners with the scenario we are recommending than 16 within any other possible. 17 While any change is perceived by some as bad, the 18 reality is evident only if we look at the facts. Some who 19 oppose the staff's recommendation utilize as the basis of 20 their analysis the original 1990 goal, two percent in 1998. 21 But in spite of the fact that more technological 22 advances have been made in battery and electric vehicle 23 technology in the last five years than the previous 95 24 years, reality is reflected in the technology assessments of 25 the battery panel and the ARB staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 We sincerely believe that the recommendations we 2 have presented to you for consideration today provide for a 3 successful future for the zero-emission vehicle program, 4 particularly in the context of today's world. 5 We have moved from a situation where the affected 6 regulated industry, the auto industry, has changed from the 7 position of being an active and vocal opponent to the ARB's 8 program requirements, ostensibly over the issue or the 9 principle of a numerical mandate in the early years of the 10 program. 11 They have changed to a posture of agreeing to 12 produce and sell electric vehicles in quantities sufficient 13 to meet public demand or market demand, as is stated, in the 14 early years. 15 They have agreed to market EVs actively and 16 positively. They have agreed to enter into binding 17 contracts that assure that electric vehicle research and 18 development activities will be continued; that advanced 19 battery technologies will be demonstrated; that technical 20 information -- some of it confidential -- and access to 21 facilities will be provided to ARB staff to help us assess 22 if contract commitments are being met and if good-faith 23 efforts are being made to meet market demand and to ramp up 24 to year 2003 requirements. 25 They have committed to take steps to assure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 California that the air quality goals that we established 2 for the ZEV program would be met, and that is through the 3 introduction of the national low-emission vehicle program. 4 They have agreed to stringent noncompliance 5 penalties. And I could go on and on, but you'll see that in 6 the staff report. 7 The point I'd like to make is that, in other 8 words, the auto industry's offering to join with us in a 9 positive, cooperative partnership to make the ZEV program 10 succeed rather than continue to actively resist and possibly 11 to succeed in having rescinded this important air quality 12 program. 13 And I might note here the efforts that have 14 already been initiated by the companies upon learning of the 15 intent to recommend change. They have initiated steps to 16 sell EVs. And, as you know only too well, one major company 17 announced its intention to begin marketing their EV this 18 year, with others following close behind with comments on 19 the availability of their own EVs. And I just invite your 20 attention to the parking lot to see evidence of that. 21 I see this partnership and these marketing 22 announcements as a win for California. 23 With that, Mr. Chairman, I'd like to introduce the 24 staff presentation. It's a fairly comprehensive 25 presentation. It'll be initiated and led off first by Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 Tom Evashenk of the Mobile Source Division, but Mr. 2 Cackette, my Chief Deputy, and Kathleen Walsh of our Legal 3 Office will also have comments to make during the course of 4 the presentation. 5 With that, I'd like to call on Mr. Evashenk to 6 begin the detailed presentation. 7 MR. EVASHENK: Thank you, Mr. Boyd. 8 Mr. Chairman, members of the Board, the staff 9 today proposes modifications to the ARB's requirement that 10 the seven largest automakers produce zero-emission vehicles, 11 or ZEVs, beginning in 1998. This requirement, as part of 12 the larger low-emission vehicle regulations which the Board 13 adopted in 1990, is a cornerstone of California's plan to 14 attain healthful air quality in our State. 15 It has been the impetus for a number of 16 technological advances, including the rapid acceleration of 17 developments in batteries and other zero-emission vehicle 18 technologies, such as fuel cells. 19 The staff believes that the proposal before you 20 today will strengthen the long-term viability of the ZEV 21 program and provide for these vehicles in the marketplace. 22 The proposal allows for market-based introduction, 23 coupled with a commitment by manufacturers to demonstrate 24 advanced vehicles in the near term, while still retaining a 25 long-term requirement for manufacturers to produce ZEVs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 Today's presentation will begin with background 2 information related to the ZEV program. A review of the 3 activities that have occurred during the year leading up to 4 today's hearing, a description of the proposed regulatory 5 changes, and a summary of the elements within the proposed 6 memoranda of agreement. The presentation will also 7 summarize additional nonsubstantive changes the staff is 8 proposing today before concluding with staff's 9 recommendations. 10 As previously mentioned, the zero-emission vehicle 11 program is part of the ARB's low--emission vehicle 12 regulations. This program establishes an increasingly 13 stringent fleet average emission requirement for nonmethane 14 organic gases, as shown in this group, for the years 1994 15 through 2003, and beyond. 16 To meet this requirement, the regulations allow 17 manufacturers to offer any mix of new vehicles listed on 18 this slide. However, the regulations do require that the 19 seven largest auto manufacturers also produce and deliver 20 for sale two percent of their 1998 model year light-duty 21 fleet as ZEVs. 22 This percentage increases to five percent in the 23 2001 and ten percent in 2003. Intermediate volume 24 manufacturers are subject to the requirement at the 10 25 percent level beginning in 2003. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 Although the primary technology to meet the ZEV 2 requirement in the early years is expected to be 3 battery-powered electric vehicles, over the long term, other 4 alternatives -- notably, fuel cell vehicles -- have a strong 5 potential to command substantial market share. 6 From its adoption, the requirement to produce ZEVs 7 has been controversial, not only because it is technology 8 forcing, but also because it is perceived to be 9 qualitatively different from other mobile source regulations 10 previously adopted by the Board. 11 The impetus for its adoption, however, was the 12 Board's realization that with ever-increasing numbers of 13 cars on the road, each driving more and more miles each 14 year, ZEVs would be essential to obtaining the long-term 15 emission reductions needed from the mobile source sector. 16 The introduction and commercialization of ZEVs is 17 necessary if California is to meet both Federal and State 18 ambient air quality standards. 19 When the ZEV requirement was adopted in 1990, the 20 Board was aware of the General Motors' stated plans to 21 introduce a commercial electric vehicle based on the Impact. 22 To pull additional vehicles and technology into the market, 23 and to develop the infrastructure needed to fully 24 commercialize the technology, the Board established 25 percentage requirements for the largest vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 manufacturers. 2 Because there were questions regarding technology 3 and implementation issues, the Board included the 4 requirement with the understanding that it could be modified 5 at a later date if necessary. 6 To remain fully aware of the technological and 7 implementation status of new vehicle technologies, the Board 8 directed staff to present biennial progress reviews 9 beginning in 1992. Progress towards commercializing the 10 technology was found to be on track for the 1998 11 introduction during reviews in 1992 and 1994. 12 However, as 1998 neared, greater attention and 13 resources were committed to fully evaluate technology and 14 commercial readiness. 15 I'd now like to discuss the process we have 16 undertaken during the past year to arrive at the proposal 17 before you today. 18 At the end of the May, 1994 review of the ZEV 19 program, the Board directed the staff to pursue a number of 20 implementation issues that had been raised. To address 21 these issues and to obtain the most detailed and relevant 22 information possible, the ARB staff held eight public forums 23 during 1995. 24 Shown here are the major topics of each forum. 25 These forums provided the ARB staff with a large volume of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 information regarding the key aspects of the ZEV program. 2 In addition to the forums, the ARB established a 3 Battery Technology Advisory Panel, which was comprised of 4 four experts with extensive experience in science and 5 battery technology development. 6 The purpose of the panel was to evaluate the 7 readiness of battery technology for the 1998 implementation 8 of the program. The main findings of the panel were: 9 That the ZEV regulation had substantially 10 accelerated investment and progress in developing advanced 11 batteries; that while lead-acid batteries will be available 12 for use in vehicles in 1998, automakers believe that their 13 limited energy storage capabilities will restrict them to a 14 market share less than required by the current regulations; 15 that advanced batteries are on the immediate horizon; pilot 16 quantities are expected by 1998, and barring unexpected 17 development programs, production quantities could be 18 available in 2000 to 2001 time frame; and, finally, that 19 pilot-scale production of these batteries is needed to 20 refine production processes, and in-vehicle testing is 21 needed to evaluate the performance, reliability, safety, and 22 life of these batteries while in use. 23 In late 1995, after assimilating the vast amount 24 of information received through the public forums and the 25 battery panel report, the staff provided the Board with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 several informational updates. 2 At the conclusion of the November meeting, the 3 Board directed the staff to solicit public comment on 4 alternatives to the existing requirements that would ensure 5 the long-term success of the program. 6 The staff returned to the Board in December to 7 update the Board on this last forum and to present a 8 conceptual outline of the staff's proposed changes to the 9 ZEV program. 10 In considering potential changes to the existing 11 program, the staff strived to promote flexibility, ensure 12 ongoing ZEV development, ensure that the emissions benefits 13 are realized, use market-based strategies, and send clear 14 signals to technology developers regarding the ARB's strong 15 commitment toward ZEVs. 16 At the final public forum in early December, the 17 staff heard proposals that would achieve these objectives. 18 Three general concepts were presented to the Board at the 19 December meeting, and the Board directed the staff to fully 20 develop one of these into the proposal I will now describe. 21 I would now like to address the key components of 22 the staff's proposal. 23 The staff's proposal is comprised of two main 24 elements. First, the staff proposes regulatory changes that 25 would modify the ZEV program for the 1998 through 2002 model PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 years and, second, the staff recommends the ARB enter into 2 memoranda of agreement with the major automakers to ensure 3 that no emission benefits are lost, to promote a market- 4 based introduction of ZEVs, to accelerate the 5 commercialization of advanced battery technologies, and to 6 work cooperatively on implementation issues. 7 Specific to the regulatory modifications, the 8 staff proposes to amend the LEV regulations to eliminate the 9 percentage ZEV requirements for 1998 through 2002 model 10 years. The 10 percent ZEV requirement would be retained for 11 2003 and beyond. 12 The staff also proposes to amend the regulations 13 to allow manufacturers to earn multiple ZEV credits for 14 producing longer-range vehicles or vehicles that use 15 advanced batteries prior to 2003. 16 These credits, as illustrated in the following 17 table, could be used to meet the percentage ZEV requirement 18 in 2003 and beyond. 19 By allowing multiple ZEV credits, the regulations 20 would provide incentives for manufacturers producing 21 efficient vehicle designs. The credits proposal could also 22 help secondary vehicle manufacturers who have been advancing 23 technologies that increase vehicle range. 24 This proposal is consistent with the staff's 25 belief that, while advanced batteries are needed to fully PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 develop the consumer ZEV market, well-designed vehicles 2 using lead-acid batteries can meet the needs of many 3 consumers. 4 To draw these vehicles into the marketplace, early 5 vehicles could receive two to three credits depending on 6 range as shown in this table. 7 the proposed amendments would also provide 8 multiple ZEV credits for vehicles using batteries with 9 greater specific energy to incentivize their early use. 10 Under either credits scenario, when combined with incentives 11 already contained within the ZEV program, ZEVs produced 12 prior to 2003 could generate up to 6 vehicle credits for use 13 in 2003. 14 I will now present a summary of the key elements 15 within the memoranda of agreement. 16 In addition to the proposed regulatory changes 17 just described, the staff proposes that the ARB enter into 18 memoranda of agreement, or MOAs, with each of the seven auto 19 manufacturers subject to the 1998 through 2002 ZEV 20 requirements. 21 These MOAs would ensure that the emission benefits 22 of the existing ZEV program are maintained, while allowing 23 for a market-based introduction of vehicles in the early 24 years. 25 Provisions within the MOAs also commit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 manufacturers to accelerate the commercialization of 2 advanced battery technologies and to work in cooperation 3 with the State to ensure the smooth implementation of ZEVs. 4 To maintain the emission benefits of the current 5 ZEV program, the MOAs include a commitment by the automakers 6 to produce and sell cleaner cars nationwide beginning with 7 the 2001 model year. 8 This is three years before the United States 9 Environmental Protection Agency can require introduction of 10 cleaner vehicles under Federal law. California would 11 benefit from the sale of these vehicles nationwide as out-of 12 state residents move and register their vehicles in 13 California. 14 By participating in the national low-emission 15 vehicle, or NLEV, program, manufacturers would agree to meet 16 California exhaust standards and achieve a nationwide annual 17 fleet average value equal to 0.075 grams per mile nonmethane 18 organic gas for passenger cars. These vehicles would be 19 about 60 percent cleaner than vehicles currently meeting 20 Federal requirements. 21 As I just mentioned, California will ultimately 22 benefit from the sale of cleaner cars nationwide as these 23 vehicles migrate to California. The staff used historical 24 data to estimate that 18 percent of all new registration 25 transactions in California for the years 2001 to 2003 will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 be from vehicles that originate outside the State. 2 This estimate is the average of the percentage 3 migration into California during the period 1980 to 1994. 4 This slide illustrates several important points. 5 The graph compares the annual emission benefits of the 6 original two, five, and ten percent ZEV program with the 7 annual emission benefits of the staff's proposed program 8 that incorporates the NLEV program plus the introduction of 9 10 percent ZEVs in 2003 and beyond. 10 Some important points to note: In the early 11 years, the NLEV program does not fully substitute for the 12 ZEV benefits lost. However, by 2006, the benefits of the 13 NLEV program have reached parity with the ZEV benefits. And 14 by 2010, the NLEV benefits exceed the benefits of the 15 original ZEV program by approximately 20 percent, creating 16 the annual emissions premium that Secretary Strock has 17 emphasized in many of his remarks. 18 To determine if the cumulative benefits of the 19 staff's proposal are equivalent to the benefits of the 20 original program between 1998 and 2010, the staff also 21 analyzed the area under the curves and determined that the 22 program staff is proposing today will maintain the emissions 23 benefits of the original ZEV program. 24 It should be noted that t his analysis is not a 25 /// PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 true apples-to-apples comparison, because the power plant 2 emissions associated with EVs are included in this analysis, 3 while the refinery and other upstream emissions associated 4 with conventional vehicles are not. 5 However, power plant emissions are so small that 6 they do not significantly bias the comparison of the 7 benefits attributable to ZEVs. 8 The technology development partnership is a key 9 element within the MOA. Under this partnership, the 10 automakers have agreed to provide continued funding for 11 advanced battery technology research and development; 12 demonstrate EVs powered by advanced batteries. 13 Each manufacturer will be required to introduce 14 their pro rata share of 750 advanced battery-powered ZEVs in 15 1998, and 1500 advanced battery-powered ZEVs in 1999 and 16 2000. 17 While multiple credits for better performing 18 battery technologies could reduce this total to 1275 19 vehicles, the staff expects that at least 2,000 vehicles 20 will participate in the program. 21 And, finally, the partnership will provide 19 22 million towards Phase II of the USABC's battery technology 23 program. 24 Given today's staff proposal for a market-based 25 introduction of zero-emission vehicle technology, it is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 important to note that several manufacturers have already 2 announced plans to market vehicles within the next few 3 years. 4 These include the General Motors EV1, a two-seat 5 sports car that will debut in late 1996 in four cities; 6 electric versions of the Chevrolet S-10 pickup, the Ford 7 Ranger electric truck, and Chrysler's EPIC electric minivan. 8 In addition, up to 3750 vehicles using advanced 9 battery technologies will hit California roads beginning no 10 later than 1998 as manufacturers meet the requirements of 11 the technology development partnership. 12 These vehicles may include the Honda CUV4, shown 13 here, and the Toyota RAV4 electric sedans equipped with 14 advanced batteries. 15 It is expected that secondary manufacturers will 16 also continue to develop and offer products for sale. 17 Products from companies such as Solectria, BAT 18 International, and Electricar will provide additional 19 options to both demonstration programs and consumers. 20 Under both the existing and proposed ZEV program, 21 secondary vehicle manufacturers could generate marketable 22 ZEV credits toward the 10 percent requirement in 2003. 23 The staff believes that market forces and 24 technology development will stimulate the introduction of a 25 wide variety of vehicle technologies from manufacturers as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 well, such as the Solectria Sunrise shown here, a composite 2 body electric vehicle. 3 Other technologies include hybrid-electric 4 vehicles, demonstrated here by the Volvo Environmental 5 Concept Car; extensive research and development of fuel 6 cells for passenger car use. 7 This slide does demonstrate a Ballard fuel cell 8 stack used in a bus, as well as a vehicle using the Ballard 9 fuel-cell technology shown in this slide. 10 To acknowledge the environmental benefits of these 11 technologies, the staff has committed to return to the Board 12 later this year with a proposal to properly address advanced 13 vehicles not powered by electrochemical batteries. 14 Specifically, the staff's proposal to provide ZEV 15 credit to vehicles capable of meeting power plant emission 16 levels will open up the regulations to alternatives such as 17 fuel cell powered vehicles with on-board reformers. 18 To assist in the commercialization of electric 19 vehicles, the MOAs also commit the ARB to work with the 20 State, and local governments, and others to help ensure the 21 development of ZEV infrastructure and the removal of 22 barriers to ZEV introduction. These activities include 23 working with industry and other government agencies to 24 assist in the development of battery recycling programs, 25 work with local governments to plan for and permit public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 charging, and remove potential institutional barriers 2 pertaining to insurance and financing. 3 In addition, the ARB would also continue to 4 participate in and support the efforts of the Infrastructure 5 Working Council, continue to work with the State Fire 6 Marshal and other emergency response officials, maintain the 7 commitment to observe the activities of the USABC regarding 8 the development of advanced technology batteries, and 9 support the development and implementation of reasonable 10 incentive programs that enhance the near-term marketability 11 of ZEVs. 12 To provide an early market-based ZEV launch, 13 manufacturers will offer ZEVs for sale according to their 14 estimate of market readiness. To very progress toward the 15 2003 requirement, manufacturers will provide the Board with 16 annual reports containing information regarding the purchase 17 of advanced battery prototypes prior to 1998, and the number 18 and types of vehicles placed each year, including battery 19 specifications and performance. 20 The ARB staff will also conduct onsite reviews of 21 activities and hardware related to the manufacturer's 22 program. Every two years, manufacturers will submit ZEV 23 product plans for model years through 2003, including 24 information regarding model types, vehicle features and 25 specifications, production capacity, prospective battery PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 suppliers, capital allocation, and vehicles that will be 2 produced for 2003. 3 The benefits contained within the MOAs will be 4 achieved only if all signatory manufacturers strictly adhere 5 to the provisions of the agreements. Since failure to 6 comply with these requirements will compromise the overall 7 effectiveness of the MOAs and jeopardize air quality, the 8 MOAs establish significant consequences for noncompliance. 9 Substantial liquidated damages may be incurred for 10 failure to meet any of the requirements of the MOA. The 11 maximum amounts specified in the agreements include a pro 12 rata share of $100 million for failure to implement the NLEV 13 program, $93,750,000 for failure to place vehicles in 14 demonstration projects, and $19 million for failure to 15 continue ZEV-related research and development. 16 The MOAs also include penalties for failure to 17 provide annual and other reports which include 18 manufacturers' production plans for the years leading up to 19 2003. 20 The staff believes the amounts established will 21 ensure that manufacturers meet their commitments. Moreover, 22 the Board retains its authority to reinstate the ZEV 23 requirement if a manufacturer fails to meet its obligations 24 under the MOA. 25 Any amount paid under these provisions would go to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 a third-party escrow holder approved by the ARB and be used 2 to fund projects to develop a sustainable market for ZEVs. 3 The staff projects the proposed amendments will 4 have both adverse and positive impacts to industry. If 5 manufacturers produce fewer ZEVs in the near term, economic 6 growth in California's advanced transportation industries 7 may be slowed and some small businesses may suffer. 8 However, the staff believes that, in its current 9 form, the ZEV program may not result in a successful ZEV 10 launch, which could also slow the growth of these 11 businesses. 12 The staff believes that the proposed modifications 13 to the ZEV regulation are likely to have overall beneficial 14 impacts to manufacturers subject to the regulation and 15 California consumers. 16 By providing added flexibility regarding when and 17 how ZEVs are introduced to the California market, the 18 proposed modifications would reduce total program costs by 19 allowing manufacturers to avoid the product costs of 20 near-term technologies, improve manufacturing processes, and 21 achieve greater economies of scale. 22 Though it is possible that certain small 23 businesses may be adversely affected by the proposed 24 regulatory action in the short term, the staff anticipates 25 no broad negative impacts on employment and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 competitiveness of California businesses overall. 2 The long-term potential for economic benefits and 3 job growth still exists, and should be more certain due to 4 the increased market potential of higher-performing ZEVs. 5 MR. CACKETTE: Mr. Chairman and members of the 6 Board, during the development of the memorandum of 7 understanding and the regulatory proposal that you're 8 considering today, a number of issues repeatedly came up, 9 and I'd like to address the first two of these, and then Ms. 10 Walsh will address the third one dealing with 11 enforceability. 12 The first issue that came up was: Will the 13 proposed action lead to a sustainable market for ZEV 14 technologies? And this was sometimes referred to as the 15 ramp-up issue. 16 Staff believes that the proposal being considered 17 by the Board today offers the best chance for development of 18 a sustainable market for ZEVs. We base our conclusion on 19 the following considerations: 20 First, market development and growth depends on 21 the availability of good vehicles which meet consumer 22 demands. You saw in our presentation and out in the parking 23 lot today some examples of good electric vehicles. 24 However, we believe there is too great a risk that 25 these limited-range vehicles will fail to find a market for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 either two or five percent of new car purchases in the late 2 nineties and early 2000 time period. Forcing too many cars 3 on consumers who are not ready for them or seeing these 4 vehicles sit on the showroom floors unsold could poison the 5 car buyers' interest in zero-emission vehicles. 6 The softer and more flexible launch of ZEVs into 7 the marketplace that we are proposing today will help keep 8 consumer demand and vehicle supply in proper balance, help 9 assure consumer satisfaction, and pique buyer interest. 10 A positive ZEV owner experience spread through 11 word of mouth helps fuel a growing market for ZEVs. 12 The technology partnership we are proposing in the 13 MOA well also help assure and accelerate the offering for 14 sale of advanced emission vehicles whose longer driving 15 range capabilities will meet the needs of a growing number 16 of car buyers. This is essential to achieving a sustainable 17 market for ZEVs. 18 The proposal also focuses the energies of the 19 vehicle manufacturers on marketing zero-emission vehicles 20 and developing new models for introduction. It is hard to 21 imagine a market for ZEVs growing if the negative campaign 22 against the ZEV program we experienced last year were to 23 continue. 24 Over the past year, we've seen a growing interest 25 by vehicle manufacturers around the world in electric PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 transportation. You may recall the comments of Robert 2 Eaton, the CEO of Chrysler, made last year here in 3 California, which went something like, quote, "Honk when you 4 pass an electric vehicle, and you will be passing them." 5 As he explained, that we would all be paying huge 6 subsidies to support the introduction of zero-emission 7 vehicles. In a recent interview in automobile magazine, Mr. 8 Eaton offered a very different view in response to a 9 question on how cars will differ in the year 2006. And I 10 quote, "You will start to see electric vehicles, most likely 11 with lithium batteries. The internal combustion engine 12 isn't going away. It will be used in probably 75 percent of 13 cars." 14 The suggestion here is that by the year 2006, one 15 in four new vehicles sold will be propelled by other than an 16 internal combustion engine, and that many of these will be 17 zero-emission vehicles. 18 The proposal that you have before you today 19 capitalizes on this fundamental shift in thinking of the 20 automobile manufacturers by providing the flexibility and 21 the time to bring the new and exciting products that Mr. 22 Eaton and others have in mind to market. 23 Finally, it's been suggested by some that from now 24 through 2002, the vehicle manufacturers may do little to 25 encourage a developing market for ZEVs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 As I mentioned previously, we think the key to the 2 growing market is the availability of good and exciting 3 vehicles that consumers will want to buy. 4 To provide the Board and the public with 5 information on whether manufacturers are developing these 6 types and a variety of vehicles needed to reach the 2003 ten 7 percent requirement and to reach a sustainable market for 8 ZEVs, the MOA that we are proposing requires the 9 manufacturers to share their product plans and their 10 business with us every two years. 11 We won't be able to tell you publicly what 12 specific models they are working on due to confidentiality. 13 But we will be able to tell you whether they are taking the 14 right steps to produce a growing number of ZEVs. 15 We will verify our findings with site visits as 16 provided for in the MOA. We are confident we'll be 17 providing you with a positive report. But if we are wrong, 18 you will know that, too, and you can consider what further 19 steps should be taken. 20 The second issue is: Will the proposed -- this 21 came up many times during the development of the MOAs. Will 22 the proposal assure no loss of emission reduction? 23 The Board and others in the Administration made it 24 clear to us that proposed changes to the current ZEV program 25 must not decrease emissions or put approval of the SIP in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 jeopardy. 2 We believe the staff has met these objectives with 3 the proposal that you are considering. As explained in the 4 presentation, we have calculated the loss of emission 5 reductions resulting from suspension of the 1998 through 6 2002 ZEV production requirements. 7 Working with the vehicle manufacturers, we 8 identified a program which will fully offset the lost 9 emission reductions. That program is the National LEV, or 10 low-emission vehicle program, and it's called NLEV for 11 short, which the vehicle manufacturers have agreed to 12 implement three years in advance of potential Federal 13 requirements. The staff report provides a detailed 14 explanation of how we determined that no loss in emission 15 reductions will result from implementation of the proposal 16 being considered today. 17 As you may hear in the testimony today, not 18 everyone agrees with your staff's analysis. Most troubling 19 are suggestions that we fabricated an analysis to fit the 20 desired result. I'd like to address that first. 21 The analysis we performed is fully explained in 22 the staff report. We used the same modeling tools -- 23 namely, MFAC 7F, which were used to develop the State 24 Implementation Plan, which you have approved, and we have 25 addressed all the subsequent questions posed regarding this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 analysis. 2 The only fabrication seems to be the allegations 3 that our analysis is other than what we have put forth in 4 the public record. 5 We have also received comments that the 6 assumptions we made are too optimistic and less optimistic 7 assumptions would show there is a loss of emission reduction 8 from this proposal. There is always room for legitimate 9 debate and disagreement when assumptions are involved -- 10 which, in this case, has been occurring. However, rather 11 than enter into a defense of the assumptions we made, I 12 would like to share with you how we looked at the 13 sensitivity of our assumptions to determine whether they are 14 critical to the end result, which is to assure there is no 15 loss of emission reduction. 16 An example helps illustrate this point. Eighteen 17 percent of all new registrations in California each year 18 involve cars originally sold in another State, which do not 19 meet the California emission requirements. 20 The migration of these cars to California will 21 provide an emission benefit if the vehicles are NLEVs rather 22 than the dirtier Federal cars, with NLEVs being 60 percent 23 cleaner than the current U.S. EPA requirements. 24 The rate at which these out-of-state cars have 25 been migrating to California has been decreasing over the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 past ten years. And some have argued that we should have 2 used the lowest rate of migration to represent the future. 3 We used the average rate of migration instead. 4 Had we used the lower rate, which is about 14 percent 5 instead of 18 percent, our analysis would change as follows: 6 The NLEV program would continue to fully offset 7 with a premium lost ZEV reductions in the year 2010, the 8 attainment deadline. 9 Thus, there is no implication on SIP 10 approveability. With respect to the analysis of cumulative 11 reduction from between the years 1998 and 2010, the NLEV 12 program would offset about 80 percent -- 85 percent of the 13 lost ZEV benefit instead of the 104 percent based on the 14 staff's assumptions. 15 To put this in perspective, the lost emission 16 reduction from the five-year suspension of the ZEV 17 production requirement averages about one and a half tons 18 per day of smog-forming precursors on an annual basis. If 19 the actual migration rate of out-of-state vehicles is less, 20 about 20 percent less than we have assumed, the actual 21 reductions achieved by NLEV would be about 0.3 tons per day 22 less. 23 Generally, the staff does not devote significant 24 resources to sources with emissions of less than one ton per 25 day, and most control measures considered by the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 provide emission reductions of 10 to 50 tons per day in 2 contrast to the uncertainty we're discussing here, which is 3 0.3 tons per day. 4 Thus, we concluded that reasonable differences in 5 assumptions were not critical to the policy issues at hand, 6 nor did they merit a feedback provision to ascertain if the 7 NLEV program is producing exactly the emission reductions 8 expected. 9 Kathleen? 10 MS. WALSH: Mr. Chairman and members of the Board, 11 as legal counsel to the staff, I want to address the 12 question of MOA enforceability. This is an issue that was 13 first raised back at the Board hearings in November and 14 December, and has been echoed in many of the written 15 comments that we've already received on today's proposal. 16 The MOAs are enforceable under State law as 17 contracts. In much the same way that we would approach 18 enforcing new motor vehicle standards or other regulatory 19 requirements, staff will monitor the manufacturers' 20 activities under the MOAs to determine whether they are 21 meeting those commitments and will be doing that on an 22 ongoing basis throughout the term of the agreement. 23 The reporting and onsite access provisions of the 24 agreement that were earlier described by Mr. Evashenk are an 25 important part of this activity, but we also have existing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 provisions in our regulatory programs that will provide us 2 with information that's relevant to this determination. 3 If staff determines, based on information that it 4 receives or is in possession of, that a company is not 5 complying with one of the commitments in an MOA, we would 6 notify the manufacturer of our determination and give them 7 an opportunity to make a response. 8 After considering the company's response, the 9 Executive Officer would make a final determination as to 10 whether there was an noncomplying situation, and we would 11 again notify the manufacturer of that determination. 12 At that point, the manufacturer has the option of 13 proceeding to this Board to get a review of the Executive 14 Officer's determination. And once you've made a decision as 15 to whether the manufacturer is taking good-faith efforts to 16 comply with each and every commitment in the MOA, the 17 manufacturer at that point has an obligation to comply with 18 your final determination or to challenge that determination 19 in court. 20 This is, in all relevant respects, similar to the 21 way we would handle regulatory compliance issues. 22 Finally, as mentioned by Mr. Evashenk and as 23 recognized within the terms of the MOA itself, this Board 24 always retains the regulatory authority to reinstate the ZEV 25 production requirements should you determine that that's an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 appropriate response to an noncompliance situation. 2 MR. EVASHENK: In addition to the proposed 3 regulatory changes just described, the staff also proposes 4 15-day changes for several nonsubstantive modifications to 5 the ZEV program. These include modifying the standards and 6 test procedures to be consistent with the Title 13 7 amendments, moving the test procedures cited in Section 8 1960.1 to the standards and test procedures, and adding the 9 definition of zero-emission vehicle to Section 1976. 10 In conclusion, the staff recommends that the Board 11 modify California Code of Regulations Title 13 to eliminate 12 the percentage ZEV requirement for the 1998 to 2002 model 13 years, and provide additional ZEV credits for the early 14 introduction of vehicles with greater range or battery 15 specific energy. 16 The staff also recommends that the Board direct 17 the staff to enter into a partnership with the automakers 18 through the commitments contained in the memoranda of 19 agreement. 20 In summary, the staff believes that the proposal 21 meets the directives provided by the Board and confirms the 22 Board's commitment to a sustainable long-term ZEV market. 23 Before we conclude staff's presentation, we would 24 like to enter into the record correspondence from 25 individuals not able to testify today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 MR. KITOWSKI: Thank you. As of this morning, we 2 have -- over 1,000 people have provided comments on this 3 regulation. The majority of those -- 91 percent, in fact -- 4 were against the proposed changes and wanted to retain the 5 original ZEV requirement. Three percent supported the 6 proposed changes, and six percent fell into an alternate 7 category. 8 Of those that were against the changes, 702 were 9 concerned about the changes protecting the clean air, 10 health, and the environment. 303 related concerns that the 11 MOA was not enforceable, had loopholes, or had inadequate 12 ramp-up. 65 cited the importance of the zero-emission 13 vehicle regulations towards job benefits or economic 14 developments in California. 15 Others expressed concerns related to energy 16 diversity and security and the desire to buy an electric 17 vehicle themselves. 18 Of those that fell into the other category, about 19 half, or three percent, were against tax subsidies and any 20 EV mandate. And a smaller number were requesting that the 21 ARB push for EV incentives and economic development of 22 electric vehicles. 23 This concludes the staff's presentation. We'd be 24 happy to answer any questions. 25 CHAIRMAN DUNLAP: Thank you. Mr. Boyd, before I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 ask my colleagues on the Board if they have any questions, 2 do you have any final comments? 3 MR. BOYD: No. Thank you, Mr. Chairman. I stand 4 by the staff's recommendation -- 5 CHAIRMAN DUNLAP: Okay. 6 MR. BOYD: -- and look forward to an interesting 7 discussion. 8 CHAIRMAN DUNLAP: All right. With that, Ms. 9 Edgerton. 10 MS. EDGERTON: Mr. Chairman, respected members of 11 the Air Resources Board, members of the professional staff, 12 and ladies and gentlemen of the audience, I appreciate this 13 opportunity to share with you a few of my thoughts. 14 First, I urge environmentalists here today and 15 around the world to recognize and accept the fact that every 16 single member of this Board -- from the Chairman to each 17 Board member, to each and every staff member -- wants to see 18 the successful introduction of zero-emission vehicles in the 19 State of California. 20 Chairman Dunlap, this Board and our staff have 21 very courageously faced the tremendously difficult challenge 22 of creating a new path for California to follow into the 23 21st Century. 24 And while I am disappointed with some aspects of 25 the program, I am not disappointed that we are making a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 change. I want it understood that I fully supported the 2 Chairman and staff in their decision to hold last year's 3 series of workshops. Indeed, I recall pushing hard, very 4 hard for agency -- for the agency to take up the myriad 5 issues needing resolution in order for the ZEV program to 6 work. 7 I agreed with the Chairman last fall and I still 8 do that the combined private institutional opposition of the 9 auto manufacturers to the two percent ZEV mandate was so 10 strong, uniform, concerted, well-funded, and unyielding that 11 it would have been foolhardy to proceed without some course 12 correction. 13 Indeed, frankly, it seemed likely to me that some 14 stakeholders might have spent more money and time in 1995 15 blocking the mandate than on succeeding in their underlying 16 ZEV programs. 17 And most certainly, the new electric vehicle 18 technologies inspired a massive campaign from a petroleum 19 industry determined to protect its domination of the 20 transportation sector well into the 21st Century. 21 And while I made it clear to the Chairman that my 22 first preference was for a program which resembled Option C, 23 reducing the mandate requirements to approximately one 24 percent in 1998 to 2000, I also give him my opinion that the 25 likelihood of the ZEV program success would be improved even PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 with Option B over what it would have been had we left the 2 program untouched. 3 And furthermore, I want it understood that while I 4 am concerned about the wisdom of certain minor provisions in 5 the MMOA (sic), and I may raise those concerns over the next 6 two days where appropriate, I firmly believe that the 7 likelihood of success of the ZEV program has been increased, 8 even if this proposed Board action goes forward today 9 utterly unchanged, over what it would have been had we left 10 the program unchanged. 11 CHAIRMAN DUNLAP: Thank you, Lynne. I appreciate 12 your comments. 13 Any other questions of staff or comments? Mr. 14 Lagarias. 15 MR. LAGARIAS: Thank you, Mr. Chairman. 16 I don't have a prepared speech, but I certainly 17 concur with Ms. Edgerton on her remarks. I think they're 18 quite appropriate. I do have a couple of questions. 19 But before I ask them, I'd like to note that one 20 of the pioneers in this program who has worked very hard in 21 Southern California for ARB is retiring next month, and I 22 think we should acknowledge Don Drachand's sterling efforts 23 in this entire program. 24 Thank you, Don. 25 (Applause.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 MR. LAGARIAS: Specific question's to the MOA -- 2 CHAIRMAN DUNLAP: Jack, if I may interject, right 3 before lunch, we're planning to recognize Don and give him a 4 token of our appreciation. And hopefully he won't forget 5 the Board as he moves on down that retirement path. 6 But we'll be hearing from Don a little bit later. 7 MR. LAGARIAS: Oh, great. 8 Now, my specific question's on the MOA regarding 9 the credits that would be applied. Would those be over and 10 above the requirements that the MOA calls for during the 11 1998, '99, 2000 year period? 12 Bob? 13 MR. CROSS: We were deciding here who was going to 14 answer. The answer is yes. 15 MR. LAGARIAS: How's that? 16 CHAIRMAN DUNLAP: It's yes. 17 MR. CROSS: The MOA vehicles are not part of the 18 credit program that is applicable to the 2003 model year, if 19 you will. 20 In other words, they have their own internal 21 credit program, which is satisfied by using advanced 22 batteries. 23 When you exceed the number of vehicles in the MOA, 24 then those vehicles generate credits, and they can either be 25 used for hydrocarbon or for compliance with the NMOG curve PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 when they're generated, or between that time and 2003, or 2 they could be used as ZEV credits, if you will, in 2003 to 3 reduce the amount of ZEVs that need to be sold. 4 MR. LAGARIAS: Well, isn't the '98 and the 2001 5 period the time that we would expect to find how vehicles 6 would be used, where they would be applied, what kind of 7 difficulties they face, and what kind of infrastructure 8 issues we would be facing? 9 Isn't this one of the main purposes of this time 10 period? 11 MR. CROSS: Yes, it is. And we believe that the 12 manufacturers will be putting substantial numbers of 13 vehicles into commerce. 14 MR. LAGARIAS: Over and above the MOA 15 requirements? 16 MR. CROSS: Over and above the MOA requirements, 17 absolutely. 18 MR. LAGARIAS: All right. Thank you. 19 CHAIRMAN DUNLAP: Mr. Roberts, did you have any 20 questions yet or do you want to hold them? 21 SUPERVISOR ROBERTS: I'd like to hold them. I do 22 have a number of questions. 23 CHAIRMAN DUNLAP: Okay. 24 SUPERVISOR ROBERTS: I'm not prepared to make a 25 speech yet. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 CHAIRMAN DUNLAP: Okay. All right. 2 SUPERVISOR ROBERTS: I'd also, Mr. Chairman, we 3 have certain rules for divulging meetings. 4 CHAIRMAN DUNLAP: Yes. 5 SUPERVISOR ROBERTS: And I didn't know at what 6 point you were going to be -- 7 CHAIRMAN DUNLAP: We'll get to that in a little 8 bit, the ex parte. The "Mr. Kenny component" as we call it. 9 (Laughter) 10 CHAIRMAN DUNLAP: Okay. With that, if there are 11 no other questions, Mayor, Supervisor, do you have any 12 comments down there of staff? If not, we'll go right into 13 the witness list then. 14 What I'd like to do is to call those that have 15 signed up, the witnesses. 16 How many do we have thus far? What's the total? 17 Do we know? 18 MR. VALDEZ: 30. 19 CHAIRMAN DUNLAP: 30 thus far. Okay. I'd 20 encourage those in the audience that wish to testify to get 21 on the list, because we want to manage our time wisely here. 22 I'd also like to ask those in the audience, staff 23 that's in the audience that aren't involved with this item, 24 if they would move to one of the conference rooms so that 25 the seats can be given to those from external groups or organizations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 I would be appreciative if that would occur. 2 Why don't we go to the witness list, then. We'll 3 start off with Valory Brown from Assemblyman Steve Baldwin's 4 office. 5 I'll read five names. I would ask you to come to 6 the front row and take a seat, and then we'll have you queue 7 up and we'll just begin following the order I outline. 8 Valory Brown, John Grimley from Senator Ray 9 Haynes' office, George Plescia from Assemblyman Bill 10 Morrow's office, Bob Ham from Assemblyman Conroy's office, 11 and Beau Biller from Assemblyman Jan Goldsmith's office; if 12 you'd come forward, please. 13 I don't see any movement. Okay. All right. 14 John Schutz, Nissan, followed by Jerome Cole, 15 ALABC; Janet Hathaway, NRDC; Andrew Frank, U.C. Davis; and 16 Cecile Martin, CalETC. 17 Good morning, John. You seem to be the lead-off 18 hitter this morning. 19 MR. SCHUTZ: Well, that's a privilege. I wasn't 20 expecting it, but I will take the opportunity. 21 By the way, I will say that for future 22 presentations, Tom, we'll get you a picture of one of our 23 cars. 24 (Laughter.) 25 MR. SCHUTZ: Good morning. I'm John Schutz of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 Nissan Research and Development, Los Angeles office. I'm 2 here representing Nissan Motor Limited of Japan to give 3 brief comments on the proposed changes to the LEV (sic) regs 4 that have been described by staff and the proposed 5 memorandum of agreement between CARB and the seven auto 6 manufacturers, of which, of course, Nissan is one. 7 I've been part of this negotiating process, and I 8 must say it has been lengthy. It's been exhaustive. It's 9 been very thorough in the details. And we've done, I think, 10 quite a -- quite a good job. 11 Nissan wishes to commend the CARB staff, both 12 technical and legal, for their effort and patience in 13 working out the details of this MOA and the regulation 14 changes. 15 We urge the Board to approve the MOA and the 16 regulations changes as have been presented. Not everyone 17 involved has reached this point fully satisfied with every 18 detail of the agreement. But on the whole, we have come to 19 realize and recognize this as the best achievable 20 compromise. 21 The agreement recognizes the limits of the 22 technology that were brought into focus by the battery 23 technology audit panel, as mentioned earlier. 24 The MOA and the revised regulations will maintain 25 the product-for-sale requirement in the year 2003, which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 thus continues as the motivating force behind the costly 2 test-and-development phase for the advanced technology EVs. 3 We hope, along with others, that some evidence of 4 a sustainable market with EVs will emerge as we proceed 5 through the advanced battery technology development program, 6 so that the produce-for-sale requirement becomes irrelevant. 7 In the meantime, Nissan will commit to the terms 8 of this agreement and will continue our concerted effort 9 towards commercially viable EVs. 10 Today, as has been mentioned, you've had an 11 opportunity to see a number of vehicles outside, including a 12 Nissan Avenir EV on display beside the building. 13 Our vehicle is currently undergoing testing on 14 public roads in several areas of California by my staff. In 15 fact, it just came back from San Francisco. 16 It is identical to about 25 other Avenir EVs that 17 are in operation with several utility companies in Japan and 18 in the U.S., including Southern California Edison. 19 Although the Avenir EV is equipped with current 20 technology lead-acid batteries, which limit its range, it 21 does have state-of-the-art electronics and powertrain 22 components, which give it excellent performance, smoothness, 23 and ease of driving. 24 Nissan, in cooperation with Sony Corporation, is 25 developing lithium-ion advanced technology batteries for use PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 in EVs that offer up to three times the range and cycle life 2 of current technology batteries. 3 At this year's Los Angeles Auto Show, this past 4 January, Nissan displayed two fully functional lithium-ion 5 equipped EVs, the FEV-II concept car, and a Nissan Prairie 6 Joy EV minivan. In fact, that minivan was driven after the 7 show by Jim Boyd and Steve Albu of staff. 8 Because of scheduling conflicts, we were not able 9 to bring either of these vehicles to Sacramento for this 10 event. Later this year, however, Nissan plans to bring a 11 similar lithium-ion equipped Prairie Joy to Los Angeles for 12 more extensive testing. 13 It'll go to our Arizona proving ground first for 14 some hot weather testing, and then will be around Los 15 Angeles for some time. 16 Further, as a part of Nissan's commitment under 17 the proposed MOA, we plan to bring additional lithium-ion 18 equipped minivans to California in '98, the first year of 19 the advanced battery technology development project. 20 So, in conclusion, I would like to emphasize again 21 that Nissan strongly supports the proposal before the Board 22 here today. We believe these changes are what are best for 23 our customers, best for the citizens of California, and will 24 give the emerging EV technology the best opportunity for 25 success on the market. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 Thank you very much. 2 CHAIRMAN DUNLAP: Thank you, Mr. Schutz. 3 Any questions? Mr. Lagarias. 4 MR. LAGARIAS: Will you be able to supply more 5 than the MOA requirements if there's a demand for your 6 electric vehicle in the ensuing period between now and the 7 year 2003? Or will you limit your efforts to just what the 8 MOA requirements would put on your company? 9 MR. SCHUTZ: To be perfectly honest with you, Mr. 10 Lagarias, the number of vehicles we build is strongly 11 dependent on the progress of the cost reduction efforts on 12 the battery. 13 We, I think -- in general, I could say we would 14 not limit our production if things looked very, very 15 promising and if the battery development comes along as we 16 expect it will. 17 In the first couple of years, we will adhere to 18 the MOA requirements. But, as we get close to 2003, 19 obviously, if we are ready to expand the pilot production of 20 the batteries significantly at that point, why, the number 21 of vehicles could increase. 22 So, I really can't commit at this point. 23 MR. LAGARIAS: Thank you. 24 CHAIRMAN DUNLAP: Okay. Thank you, Mr. -- 25 MS. EDGERTON: Can I ask -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 CHAIRMAN DUNLAP: Yes, Ms. Edgerton. 2 MS. EDGERTON: Yes. I just wanted to ask you, 3 could you tell me -- I think this was part of what Mr. 4 Lagarias was asking, but what is your best guess? This is 5 outside of the terms of the MMOA (sic). What can you tell 6 the California public about how many cars you expect -- 7 electric vehicles you expect as a minimum or a maximum for 8 your company to bring to California between now and 2003? 9 MR. SCHUTZ: Well, the MOA provides for about a 10 hundred and twenty dollars as Nissan's share, provided that 11 our battery meets the specific energy requirements that are 12 in the MOA. 13 We'll certainly do that. Now, beyond that, as I 14 said, it's difficult to predict. We aren't in a position to 15 commit, because the -- because the battery needs to go 16 through a couple of iterations of development. We're going 17 through some materials changes in the battery materials to 18 reduce the cost. And the success of those changes needs to 19 be measured in a lab first, and then phased into production. 20 And it's hard right now to predict how quickly 21 that will happen. 22 MS. EDGERTON: Well, when do you think that might 23 happen? 24 Since I've been on the Board, there's been a lot 25 of emphasis put on the advanced -- the need for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 automobile companies to have leadtime. 2 MR. SCHUTZ: Uh-huh. 3 MS. EDGERTON: Because you make your production 4 decisions several years in advance. 5 MR. SCHUTZ: Yes, yes. Well, in this case, of 6 course, it's not really an automobile manufacturer's 7 leadtime issue. It's a battery manufacturer's issue on 8 developing new materials, substitute materials, and 9 developing the -- making sure that the performance and 10 reliability are not unduly affected by substituting -- 11 frankly, the material that is specifically in the battery 12 that we're working on is cobalt. That is quite expensive. 13 And nickel is a viable substitute and so is 14 manganese. Sony is working very hard on these -- on the 15 chemistry involved in making those substitutions. And they 16 are optimistic about nickel. They are not so optimistic 17 about manganese at this point. 18 MS. EDGERTON: That's very helpful. Well, perhaps 19 you could help me understand the car that you brought up 20 here today. 21 Does it have lead-acid batteries in it? 22 MR. SCHUTZ: Yes, it does. They are-- 23 MS. EDGERTON: It's a very cute car 24 MR. SCHUTZ: Yeah, they are sealed lead-acid. 25 MS. EDGERTON: Right. Now, if I understand what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 you're saying to me, your company has no intentions of 2 marketing -- no present intentions of marketing that car? 3 MR. SCHUTZ: No. The vehicle that we have out 4 here is purely a test car. It has the batteries above the 5 floor, and it was intended to develop the powertrain and 6 the control systems. And it's done very well at that. 7 The vehicle that we bring here in 1998 will be a 8 Prairie Joy, or a similar vehicle to the Prairie Joy I 9 should say. 10 You like the name, "Prairie Joy"? 11 MS. EDGERTON: I do. I like it a lot. 12 MR. SCHUTZ: We begged the marketers to take the 13 word "Joy" off it. 14 MS. EDGERTON: I like it. 15 (Laughter.) 16 MS. EDGERTON: It would make me joyful if you 17 brought it in. 18 MR. SCHUTZ: No. The vehicle we bring in '98, it 19 will be a -- will be a fully developed vehicle for the U.S. 20 market with lithium-ion batteries in it. 21 MS. EDGERTON: In 1998. 22 MR. SCHUTZ: In 1998. 23 MS. EDGERTON: But that's your demonstration 24 vehicle. 25 MR. SCHUTZ: But that will -- but that still will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 be a very limited production, because of the -- because of 2 the prototype developmental nature of the battery. 3 The vehicle will be a functional vehicle, but the 4 batteries will be a functional vehicle, but the batteries 5 will still be very expensive. And that's really the 6 limiting factor when we come right down to it. It's the 7 cost of the developmental batteries. 8 And until the substitution and the process changes 9 have been worked out by Sony, why, it's going to be 10 difficult to bring more than the required number of 11 vehicles. 12 MS. EDGERTON: So, if I understand you correctly, 13 your company has no intentions of marketing any electric 14 vehicles with lead-acid batteries? 15 MR. SCHUTZ: Yes, that's correct. We do not. We 16 feel that our efforts are best focused on bringing the 17 lithium-ion to the market. We think that is, long term, the 18 way to success in the market. 19 MS. EDGERTON: So, if I understand you correctly, 20 we'll see nothing from you until the lithium-ion battery or 21 some equivalent is in production quantity? 22 MR. SCHUTZ: Yeah. That's right. That's right. 23 And, as I said, we will have lithium-ion equipped 24 vehicles here on test within a few months, actually there'll 25 be a vehicle here in August. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 MS. EDGERTON: Well, good. Now, let me ask you 2 one more question. And I apologize for one more question. 3 With respect to the ramp-up provisions and the 4 product plan provisions, which are in the MMOA, would it be 5 correct for me to assume that what you're going to be 6 telling us is your plans for ramping up and producing 7 demonstration vehicles as opposed to vehicles for the 8 commercial market initially? 9 MR. SCHUTZ: Yes. Initially, that's right. 10 MS. EDGERTON: Within the next five years? 11 MR. SCHUTZ: Well, let's see. 2003 production, we 12 would have to have firm plans in place by, say, '99 or so. 13 So, I think, by the 2000 review, we should have a pretty 14 thorough plan laid out. 15 Now, in the meantime, of course, we are going to 16 be giving you a lot of information about how development on 17 the batteries are coming and where that goes. 18 And, obviously, that's going to be the controlling 19 factor for the next several years. 20 MS. EDGERTON: Thank you. 21 MR. SCHUTZ: Okay. 22 MS. EDGERTON: Supervisor Roberts, then Mr. 23 Parnell, then Dr. Boston. 24 SUPERVISOR ROBERTS: Thank you. Lynne started to 25 get at it a little bit, but let me ask -- it sounds like the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 commitment I'm hearing is 120 vehicles through 2003? 2 MR. SCHUTZ: Yes. That's what's provided for in 3 the MOA. 4 SUPERVISOR ROBERTS: Okay. 5 MR. SCHUTZ: That's correct. And actually, 6 though, that 120 vehicles would be during the period 7 provided in the MOA. 8 So, it would be '98, '99, 2000, with the 9 possibility of 2001, if we have some good reason for a 10 delay. 11 SUPERVISOR ROBERTS: It sounds like you're in a 12 position slightly different from maybe some of the other 13 manufacturers with respect to focusing on a particular 14 battery with a particular -- maybe a development agreement 15 with Sony? 16 MR. SCHUTZ: Well, I'm not sure what you're 17 asking. But, yeah, specifically, we are the only ones right 18 now. We have a development agreement with Sony. That's 19 right. 20 SUPERVISOR ROBERTS: Okay. Now, what happens if 21 the lithium-ion battery doesn't come along in its 22 development phases as quickly as you're hoping that it 23 might? 24 MR. SCHUTZ: Well, Nissan, of course, is well 25 aware of other battery development that is going on. And we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 have -- certainly, the nickel metal hydride batteries look 2 very good. There's -- in fact, there's a vehicle sitting 3 outside here that performs very well with nickel metal 4 hydride batteries. 5 We have -- we have an interest in that. If the 6 development of the lithium-ion -- the performance of the 7 lithium-ion so far is excellent. So, performance is not an 8 issue. 9 But cost is the issue. 10 SUPERVISOR ROBERTS: Okay. 11 MR. SCHUTZ: And, certainly, we would be faced 12 with a difficult decision if we saw others able to come to 13 the market with viable vehicles and we're stuck in a very 14 high-cost position. Unless we had significant performance 15 advantages, why, we'd have to make some choice. 16 SUPERVISOR ROBERTS: So, in 1999, you're going to 17 have to make a decision with respect to the year 2003? 18 MR. SCHUTZ: Yeah, that's about the time frame. 19 SUPERVISOR ROBERTS: And it's at that point, then, 20 if the lithium-ion battery didn't perhaps have the promise 21 it appears to have today with respect to cost and other 22 issues, then you'd be prepared to switch over to some other 23 battery to be able to meet the requirements in 2003? 24 MR. SCHUTZ: Well, I'm not going to speculate 25 about what we're prepared to do at that point. But, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 certainly, the assessment of the battery audit panel and our 2 assessment is that lithium-ion is going to be the best 3 overall compromise. 4 And I think the likelihood of getting it down to a 5 point where the life cost -- that is, the lifetime cost over 6 the life of a vehicle -- if that cost is down at the USABC 7 midterm level and comparable with other batteries, why, I 8 think it'll go. 9 SUPERVISOR ROBERTS: I guess I'm not sure I'm 10 hearing -- I'm wondering if the commitment is to producing 11 the required cars in 2003 with whatever battery, but it 12 sounds like your commitment is to pursuing the lithium-ion 13 battery until it works. 14 MR. SCHUTZ: Well, sure. I guess, obviously, we 15 have to make decisions as we approach 2003. And right now, 16 we are very optimistic about lithium-ion, even though the 17 cost is high, because the performance is excellent. 18 So, we would prefer to concentrate on bringing 19 that into a cost-effective state. So, at this point, that's 20 what we're focusing on. 21 Now, if we reach 1998-1999, and it's obvious that 22 that's not going to work, we're certainly going to be in 23 here talking in great detail with your staff and make a 24 decision as to how best to proceed. 25 I think that, long term, based on what the battery PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 audit panel has reported, why, lithium is seen as, long 2 term, the best candidate for the next, say, 10 or 15 years. 3 And if we and everyone else are wrong about that, why, we're 4 going to have to rethink it a bit. 5 At this point, we don't think we're wrong. We 6 think it's going pretty well. 7 SUPERVISOR ROBERTS: I don't have any further 8 questions. 9 CHAIRMAN DUNLAP: Mr. Parnell. 10 MR. PARNELL: For my own discussion, it seems to 11 me that a lot of the questions are focused on what Nissan is 12 going to be doing outside the mandate in the agreement. 13 And it would seem to me -- and I wonder if you 14 concur -- that the real issue here is electric vehicles are 15 going to become a reality, and we all realize that, with 16 some kind of battery in it. 17 And given that costs and reliability issues are 18 satisfied, that it behooves Nissan and other automobile 19 manufacturers to be first in, to be able to grasp that 20 market share. 21 And you're going to be looking at that as well as 22 the technology as you proceed down this path. Competition 23 still is the driving force out there among and between 24 automobile manufacturers. 25 And so, while you're talking currently and have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 had this discussion on technicalities, realistically, your 2 company, as well as all others, would like to be into this 3 market in a favorable way, as early as possible, to be able 4 to get -- to obtain your market share. 5 MR. SCHUTZ: You'd said it very well. This a very 6 competitive business. We want these vehicles to be part of 7 our profit-making lineup. And we are doing our best to 8 differentiate ourselves from the other companies to reach 9 that end. 10 And so, you're right. 11 MR. PARNELL: Thank you. 12 CHAIRMAN DUNLAP: Dr. Boston. 13 DR. BOSTON: Mr. Schutz, I think you partially 14 answered the question I had when Supervisor Roberts was 15 talking to you. 16 But my question was about the commitment between 17 your company and Sony. Is that a wedded agreement? We get 18 information here that there are many companies working on a 19 lithium-ion battery that indicate they're very close to a 20 viable battery for a car. 21 If another company came up with such a battery, 22 would your company be able to use that? Or are you strictly 23 wedded to Sony's development? 24 MR. SCHUTZ: I guess I can characterize that a 25 little bit. I mean, we are the only company with a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 development agreement with Sony. We are certainly not the 2 only company that has talked to Sony. And Sony is willing 3 to sell batteries to anybody. 4 They don't have the development resources to go 5 through an in-depth development program with more than one 6 manufacturer at a time. And that's why we're the only ones 7 with a development agreement right now. 8 We have talked to other battery manufacturers 9 around the world who have other batteries available. And at 10 this point, we believe Sony is further along. And so, at 11 this point, we're going to stay with them. 12 CHAIRMAN DUNLAP: Okay. Thank you, John. 13 John Grimley from Senator Ray Haynes' office? 14 Good morning. 15 MR. GRIMLEY: Good morning, Chairman Dunlap and 16 members. 17 The Senate's presently in session, and Senator 18 Haynes asked me to come here and, with your permission, read 19 a statement of his to the Board. 20 (Reading) When I was told last December that the 21 Air Resources Board had decided to revise its zero-emission 22 vehicle regulations, I thought the Board had, in fact, taken 23 the volumes of evidence against this classic unfunded 24 mandate to heart. 25 Unfortunately, I was sadly and profoundly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 mistaken. The much touted delay of electric vehicle 2 production and sale quotas from 1998 through 2002 amounts to 3 no less than a smoke screen concealing that the most 4 stringent quotas, 10 percent per year beginning in 2003, 5 remain intact. 6 This minor rollback represents a mere 15 percent 7 reduction from approximately 1.3 million electric cars under 8 the original mandate to 1.1 million under the proposed 9 version being discussed today. 10 It is the fine print of the provisions calling for 11 the so-called voluntary introduction of electric vehicles in 12 the years subsequent to 2003 that I find most onerous. 13 Therefore, I submit to you, if there is to be 14 voluntary EV production, why is any mandate needed? In 15 exchange for the voluntary production of an unspecified 16 number of EVs by major automakers -- for which even the Air 17 Resources Board itself admits that there is virtually no 18 market -- CARB is seeking to create a market for these 19 vehicles where none exists. 20 CARB's obligations under the proposed memoranda of 21 agreement are far flung and ambitious indeed, and will 22 require massive taxpayer subsidies to fulfill. 23 Firstly, CARB promises to support the development 24 and implementation of incentive programs to enhance the 25 near-term marketability of ZEVs. This proposal is nothing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 more than a euphemism for taxpayer giveaway schemes to 2 induce consumers to buy overpriced, substandard performing 3 electric cars that would not otherwise -- that they would 4 not otherwise choose to purchase. 5 An example of one such incentive program is the 6 $10,000 in taxpayer funded breaks currently touted by 7 General Motors in marketing its $35,000 electric EV1. 8 CARB also commits, by implication, to coerce the 9 Department of Insurance into establishing reasonable rates 10 for insuring new electric vehicles, and to work with the 11 Department of State Banking to assist in securing financing 12 for the purpose of ZEVs. 13 This proposal would lead one to believe that 14 regardless of the level of risk involved in purchasing or 15 driving EVs, they will be insured and financed at attractive 16 rates, subsidized by the vast majority of consumers who 17 choose to purchase safer and less expensive conventional 18 vehicles. 19 Further, CARB promises the automakers that it will 20 facilitate the purchase of ZEVs by selected State agencies. 21 This clearly means the taxpayers will be forced to purchase 22 for government use expensive electric vehicles which they 23 themselves would not choose to buy for their own families. 24 CARB conveniently neglects to disclose how much 25 all this will cost or who will pay for it. However, CARB's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 willingness, even eagerness, to commit the State to 2 subsidize -- to subsidies and other preferential treatment 3 for the breadth enumerated in the contracts clearly 4 demonstrates there is no desire on the part of the private 5 sector to seriously invest in EV technology. And there's no 6 market demand to induce them to do so. 7 Whenever government presumes to anoint any 8 technology or product over another, the public surely loses. 9 I'm reminded of the Department of Energy's synthetic fuels, 10 or syn fuels program, which cost taxpayers tens of billions 11 of dollars and succeeded in achieving nothing but a larger 12 Federal deficit. 13 The proper function of the Air Resources Board is 14 not, as this Board seems to believe, to serve as an 15 industrial politburo. Rather, the Air Resources Board 16 should focus on setting reasonable emission standards based 17 on sound scientific assumptions which can be met by the 18 private sector in the most cost-efficient and practical way 19 as possible. 20 Many members of the California Legislature have 21 taken a keen interest in the unfunded mandate and have taken 22 time on several occasions to make their opposition known to 23 the members of this Board. 24 Regrettably, it appears our concerns have fallen 25 upon deaf ears. Once again, I urge you to repeal the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 unfunded ZEV mandate in favor of market-based clean air 2 solutions, which require neither technology mandates nor 3 public financing. 4 Thank you for your consideration. 5 CHAIRMAN DUNLAP: Thank you for your comments, Mr. 6 Grimley. 7 If I might, just as a point of perhaps education 8 on your part, in September -- I think it was September of 9 '94, we had an executive order from Governor Wilson. 10 Tom, can you speak to that? Familiarize Mr. 11 Grimley as to the parameters of that, so we might have a 12 more complete rounding out of the story. 13 MR. CACKETTE: I think the Governor issued 14 Executive Order 100-94. And the purpose of it was to lay 15 out his desire of how to effect the energy policy -- I don't 16 remember the exact name of it. But it's called the EPACT 17 Act, which is a bill dealing in part with alternative fuel 18 transportation and requiring fleets to buy alternative 19 fueled vehicles. 20 And in that, he identified what the requirements 21 of the EPACT law were, and indicated that, with the 22 appropriation of the necessary funds, that the State would 23 purchase ULEVs and ZEVs for the State fleet at a rate of 24 about 10 percent of State purchases from 1996 and beyond. 25 And this was seen as both fulfilling the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 requirements of Federal law and also consistent with the 2 Board's action to encourage these very low-emission vehicles 3 as well as alternative fuel vehicles. 4 MR. GRIMLEY: Chairman Dunlap, I'd be happy to 5 pass that along to Senator Haynes. 6 CHAIRMAN DUNLAP: Yes. And if you'd like a copy, 7 we'd be happy to get it for you. 8 I just wanted to make sure you had a more -- you 9 were able to round out the story and understand our role 10 relative to the EPACT requirements. 11 MR. GRIMLEY: Thank you, Chairman. 12 CHAIRMAN DUNLAP: Okay. 13 MR. GRIMLEY: And I'll -- on behalf of our staff, 14 I'll contact your staff and pass along anything you'd like 15 to have Senator Haynes' view. 16 CHAIRMAN DUNLAP: Sure. That's be fine. 17 MR. GRIMLEY: Thank you, Chairman Dunlap. 18 CHAIRMAN DUNLAP: Thank you. 19 MR. GRIMLEY: Thank you, members. 20 CHAIRMAN DUNLAP: Mr. Lagarias -- Mr. Grimley, 21 before you stray too far, Mr. Lagarias had a question or a 22 comment. 23 MR. LAGARIAS: I'd like to comment to you on the 24 question you raised. Why is this mandate needed? 25 The Clean Air Act requires us to adopt regulations PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 through a State Implementation Plan. To do that, we adopt a 2 number of regulations reducing emissions. EPA will not 3 accept a promise that I'll do this or do that in a State 4 Implementation Plan. 5 So, to achieve the air quality standards by the 6 year 2010, we adopted this program. And in the process, we 7 recognized there were technological and scientific issues 8 still to be resolved, which we are addressing at the current 9 time. 10 But the point is, we're in a Catch 22. We have to 11 meet the air quality standards. This is one approach, and 12 it's one of a very small part of a total clean fuels/clean 13 air/clean car program. And that's why we have taken the 14 route that we have taken. 15 MR. GRIMLEY: Thank you, Chairman Dunlap. 16 CHAIRMAN DUNLAP: All right. Thank you. Thanks, 17 Jack. 18 I apologize to the witnesses I have queuing up. 19 There are some that have arrived that I originally called. 20 So, indulge me for a moment if you would. 21 Valory Brown from Assemblyman Baldwin's office I'm 22 told is here. I'd invite her to come forward, and then 23 we'll follow up with Mr. Cole, Mr. Ridenour, Ms. Hathaway, 24 Mr. Frank, and Ms. Martin. 25 Good morning. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 MS. BROWN: Good morning. I have a statement from 2 Mr. Baldwin. 3 (Thereupon, the microphone was adjusted for 4 the witness.) 5 MS. BROWN: This is from Assemblyman Baldwin. 6 (Reading) I have expressed my opposition to the 7 electric vehicle mandate on several occasions. The proposed 8 revisions to this unfunded mandate have given me no reason 9 to soften that opposition. 10 As a matter of fact, the revised EV regulations 11 have confirmed my previous opinion that this mandate will do 12 nothing but prop up a struggling technology at taxpayer 13 expense, all the while providing little public benefit. 14 Under the cloak of environmental concern, the EV 15 mandate would force automakers to produce and sell electric 16 vehicles at a cost two to three times more than their 17 conventionally fueled counterparts, while performing at a 18 significantly inferior level. It is my contention that the 19 taxpayers would be forced to subsidize those EVs with 20 billions of dollars worth of State fleet purchases, rebates, 21 incentives, and other so-called tax breaks. 22 CARB's mission to efficiently and cost-effectively 23 clean California's air needs to be the focus of CARB. 24 Obligations assumed by CARB in the MOAs, such as those 25 described above, are patently inappropriate. They must be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 taken off the table as CARB has neither the authority to 2 undertake nor the means to fulfill them. 3 Frankly, it is time for CARB to get back to basics 4 and focus on achieving cleaner air by cost-effective means. 5 That means repealing the zero-emission vehicle mandate all 6 together, and replacing it with reasonable air quality 7 standards that can be met by the private sector in the 8 quickest, most economic, and efficient way as possible 9 without production quotas and without subsidies. 10 Sincerely, Steve Baldwin. 11 CHAIRMAN DUNLAP: Thank you. 12 MS. BROWN: Thank you. 13 CHAIRMAN DUNLAP: Okay. Mr. Cole from ALABC. 14 Good morning. 15 MR. COLE: Good morning. Chairman Dunlap and 16 members of the Board, my name is Jerry Cole. I serve as 17 president of the Advanced Lead-Acid Battery Consortium, 18 ALABC, which is a research organization which, over the past 19 four years, has devoted about $20 million toward research 20 efforts aimed at improving the life, range, and reliability 21 of lead-acid batteries for electric vehicle use. 22 It's been a privilege for us to work with you and 23 the talented CARB staff over the last six months or so to 24 help modify the mandates to better reflect the realities of 25 the marketplace. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 Our ultimate objective throughout this process has 2 been to ensure that the modifications to the mandates would 3 in no way diminish enthusiasm for EVs. While we believe 4 that this goal has been more or less accomplished, we're 5 concerned that too much emphasis has been placed by the CARB 6 staff on specific energy, your energy density, as the sole 7 criterion of battery performance. 8 As you know, specific energy is the only basis for 9 awarding ZEV credits under CARB's advanced battery 10 technology demonstration program. 11 Now, comparing batteries purely on the basis of 12 range seems appealing on the surface, because it allows 13 comparison by means of a single figure. Seemingly, 14 batteries offering higher specific energy are better than 15 those offering less specific energy. 16 Importantly, however, cost of the battery and life 17 of the battery are of equal, if not greater, importance to 18 the consumer's purchasing decision. A battery with a high 19 specific energy and a very short life will not succeed in 20 the marketplace, nor will a battery with a high specific 21 energy and a high cost. 22 ALABC, with the goal of maximizing the appeal of 23 EVs to eventual consumers, suggests that you consider a 24 different approach to evaluating battery performance. We 25 suggest that CARB incorporate specific energy into a, quote, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 "battery value," or BV, which allows a single figure 2 evaluation of different batteries while taking into account 3 vital parameters, such as cost and life. 4 Battery value could be calculated by measuring the 5 specific -- or by multiplying the specific energy in watt 6 hours per kilogram times the life and cycles, and dividing 7 that by the cost in dollars per kilowatt hour. 8 Our suggested approach combines three critical 9 parameters that exercise a vital influence on the 10 acceptability of a battery into a single expression, the 11 value of which could be used to compare different batteries. 12 Battery value would be increased by increasing the 13 specific energy and the life and by decreasing cost. 14 Clearly, the higher the BV, the better the battery. 15 Now, it's our view that the battery value approach 16 is a significant enhancement to the specific energy only 17 criteria incorporated into the memoranda of agreements with 18 the automakers. 19 Now, we realize the difficulties that would be 20 associated with renegotiating the credits issue with the 21 automakers. However, the use and reporting of our suggested 22 approach to assess battery performance during the 23 demonstration program would provide valuable information to 24 CARB and ultimately to the consumers on the performance of 25 EVs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 In earlier discussions with the CARB staff, 2 they've agreed that our suggestion has merit and that they 3 would measure and report battery performance as we've 4 suggested throughout the demonstration period. 5 On a separate note, I'd like to update briefly the 6 Board on the outcome of a recently held meeting of the 7 ALABC's members and contractors that we held here in 8 Sacramento last month. 9 The purpose of the meeting was to review our 10 accomplishments and to discuss where we go from here. As 11 we've testified previously, our research endeavors over the 12 last four years have yielded significant improvements to 13 energy density, rapid charging and also the cycle life of 14 lead-acid batteries. 15 Although the range of lead-acid powered EVs is 16 less than gasoline powered vehicles, the range of an 17 advanced lead-acid battery powered EV in 1998 will be more 18 than adequate for drivers whose daily commutes are a hundred 19 miles or less. 20 Further, with advanced rapid charging techniques, 21 which we've developed, the refueling necessary to drive a 22 lead-acid powered vehicle beyond the single charge range can 23 now be accomplished in a very short time with virtually no 24 inconvenience to the driver. 25 We look forward to being an active participant in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 CARB's advanced battery demonstration program. We're 2 planning, during the next phase of our research program, to 3 sponsor the research and demonstration activities needed to 4 qualify as an advanced technology battery in CARB's 5 demonstration program. 6 And we're specifically planning to continue our 7 program to achieve further improvements in specific energy 8 and cycle life that will enable advanced lead-acid powered 9 EVs to be cost competitive with gasoline powered vehicles. 10 That concludes my remarks, and I'd be happy to 11 answer any questions that you might have. 12 Thank you. 13 CHAIRMAN DUNLAP: And I'm sure we may have a few. 14 I just wanted to comment and thank you for the 15 conference, or the meeting as you called it, that you put on 16 here last month. I know I was able to spend some time with 17 you all and I appreciated the way in which you presented not 18 only the capability of your product in today's marketplace, 19 but also what your short and long-term plans were. 20 It did a lot to educate us. I know that staff has 21 spent some time with you to try to accommodate your request 22 relative to participation in some of the demonstration work 23 of this proposed change to the ZEV program. 24 And I appreciate it. I think you came a long way. 25 Did you come from North Carolina, is it? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 MR. COLE: Yes, that's right. 2 CHAIRMAN DUNLAP: Well, appreciate the time you 3 spent here in California. 4 Mr. Calhoun, did you have any comments? And 5 Supervisor Roberts will follow. 6 MR. CALHOUN: I think you indicated that the staff 7 has stated that it would consider incorporating a battery 8 value in their report. Would that satisfy your concern? 9 MR. COLE: Well, yes. It would satisfy us. We 10 would have preferred that the battery value, the concept of 11 including life and cost, would have been included in the 12 credits issue. 13 We understand that that has some practical 14 difficulties associated with it. But we think if the -- if 15 the battery value concept can be included in the reporting 16 as the demonstration program moves along, then there will be 17 ample ability of the ARB and also the public to understand 18 the differing values of different kinds of battery 19 technologies that'll be included in the program. 20 MR. CALHOUN: I think the idea of incorporating 21 that in the report would be a good idea. And, as you 22 indicated, so the public can see what is actually happening 23 from that. And that could ultimately precipitate some 24 changes to -- at least in the mind of the person who's going 25 to buy a particular vehicle. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 MR. COLE: Right. Correct. 2 MR. CALHOUN: Thank you. 3 CHAIRMAN DUNLAP: Any staff response to that good 4 idea, Bob? 5 MR. CROSS: Just very quickly. We met with these 6 folks yesterday, and we think that -- we wish we thought of 7 the battery value idea. Technically, it's a very good idea, 8 and we look forward to using it as part of our reporting 9 from here on. 10 CHAIRMAN DUNLAP: Okay. Supervisor Roberts. 11 SUPERVISOR ROBERTS: I was going to comment that I 12 like that idea, and I was hoping that staff was prepared to 13 incorporate that. 14 The other thing I was curious about was the 15 improvements in the charging that you referred to. And I 16 wonder if you could just share with us what you see coming 17 by 1998. 18 You kind of touched on it, but. . . 19 MR. COLE: Well, with regard to rapid charging, 20 about four years ago, it was assumed that you needed to take 21 several hours -- up to eight hours to recharge a lead-acid 22 battery. 23 Over the intervening years, our research has shown 24 and demonstrated quite clearly that a battery can be 25 recharged from say 80 percent depth of discharge -- almost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 flat -- back up to full charge in a matter of 10 minutes if 2 you do it right. 3 And by that I mean you have to use pulse charging, 4 pump in the power in a way, using specific charging 5 algorithms. But it can be done. And interestingly enough, 6 it also seems to be beneficial to the life of the battery if 7 you do it that way. At least that's what our research as 8 shown so far. 9 We are hopeful of working with the ARB and at 10 least one of the California utilities to bring that rapid 11 charging technology here over the next couple of years. 12 SUPERVISOR ROBERTS: And you also mentioned that 13 you expect that the range is going to be in excess of a 14 hundred miles by 1998? 15 MR. COLE: Yes. We believe. Our batteries that 16 we will have available beginning in June -- now, these 17 admittedly are prototype batteries that are being optimized 18 at the present time -- will have a specific energy in the 19 range of 45 to 50 watt hours per kilogram. And we believe 20 that, with appropriate vehicle designs, you should be able 21 to achieve a hundred mile range with those kinds of 22 batteries. Yes. 23 SUPERVISOR ROBERTS: Thank you. 24 CHAIRMAN DUNLAP: Before you leave, Mr. Cole. 25 Supervisor Silva? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 SUPERVISOR SILVA: What would be the cost of 2 converting a home charging station, so it would be able to 3 take a quick charge? 4 MR. COLE: We don't envision the rapid recharging 5 or rapid charging station to be home type chargers. 6 When people are home, they would likely use their 7 regular house current to charge the batteries. Where we 8 think these rapid recharging stations would be useful would 9 be out in the field, perhaps at service stations, places 10 like that, because that can be properly equipped to handle 11 it. 12 You do require a rather special service line for 13 these kinds of chargers. But it would give the consumer, I 14 think, a lot of confidence, a lot more confidence than they 15 have now if they knew that they could pull into a rapid 16 charging station, maybe pay a little bit more than they 17 would for their charge overnight at home, but still have the 18 ability to get a charge in ten minutes and be on their way. 19 SUPERVISOR SILVA: Thank you. 20 CHAIRMAN DUNLAP: Thank you, Mr. Cole. 21 MR. COLE: Thank you very much. 22 CHAIRMAN DUNLAP: Ms. Hathaway, followed by Mr. 23 Ridenour. 24 Janet, we haven't seen you move that slow in a 25 long time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 MS. HATHAWAY: (Walking with aid of cane) I'm 2 trying for the sympathy vote here. 3 (Laughter.) 4 MS. HATHAWAY: My name is Janet Hathaway. I'm an 5 attorney with a national nonprofit environmental 6 organization, the Natural Resources Defense Council. 7 As the Chairman and members of the Board know, 8 NRDC has a number of offices, including ones on the East 9 Coast, all of which are working on this electric vehicle 10 issue, because of energy and air quality benefits that we 11 see as coming from these technologies. 12 Because of the long history of discussion between 13 NRDC and the Board about this change of regulation, I'm not 14 going to go into great detail about our concerns. I think 15 you know that we're gravely disappointed with the suspension 16 of the sales requirements until the year 2003. 17 While we supported the idea of flexibility in the 18 early years, we didn't feel the necessity of such a large 19 extension of the period of just negotiation and cooperative 20 procedures with the car companies. We felt it was very 21 important to have clear benchmark ramp-ups to the 10 22 percent. 23 But that's behind us. And what we think is 24 important now is that the Board implement this agreement in 25 a manner that does get us to the 10 percent in the year PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 2003. And I was pleased to hear in the staff remarks that 2 that is an essential part of what the ARB intends to be 3 doing. 4 The signal that we're now in a mode of working 5 toward marketing these vehicles I think is a really 6 remarkable change and shift. It's very beneficial to us in 7 California to be operating with the goal -- shared with car 8 companies -- that now the task is to find ways to overcome 9 hurdles to marketing. 10 This is very different from last year's debate. 11 It's very different from the discussion that we heard when 12 the car companies were telling us that electric technology 13 was something way off in the future and not something viable 14 for California consumers. 15 All of this is extremely heartening, but I think 16 that we have to look very seriously at how we make this a 17 reality. And one of the ways that I would strongly urge the 18 Board to proceed at this point is to take seriously the need 19 for a great amount of public involvement in making this 20 project work. What the Board has done on the cleaner 21 burning gasoline -- which I happen to be a task force member 22 on -- is I think a paradigm of cooperative building of 23 relationships that span the spectrum of interests. And this 24 is exactly what we need with the new electric vehicle 25 program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 We need to make sure that we identify problems 2 collaboratively; we figure out what can be done at different 3 levels, at local levels, at State levels, to overcome 4 problems. We need to find ways to get information that 5 people have confidence in about the progress of the car 6 companies, and also about the ways in which perhaps 7 technology is not being fully utilized. 8 So, that, as a paradigm, I think is something that 9 gives me a lot of optimism that we can work through these 10 problems without a lot of distrust, without the distance 11 that seems to occur when we have a particularly adversarial 12 relationship. And I really urge that we take this 13 opportunity very soon to form such a task force on electric 14 technology. 15 Let me say that that process issue is something 16 that I think would have benefited the MOA. I mean, had 17 there been somewhat more openness in the discussions that 18 could influence the MOA, I think that a number of the flaws 19 that environmental groups see as undermining our confidence 20 in the MOA could have been resolved. 21 One very particular one that I would just urge 22 that people consider, and that is national low-emission 23 vehicle is something good. We'd like to see it. But it 24 seems unfortunate that California has taken the position 25 that, in order to get it, we had to give away our sales PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 program for electric vehicles all the way until the year 2 2003. 3 I just want to read to you from the Massachusetts 4 Attorney General's statement to the Board about the electric 5 vehicle regulatory changes. 6 He states, (reading) the first problem with 7 California's relying on the NLEV, or the 49-State vehicle 8 program, is that the program will happen or not regardless 9 of California's actions. Thus, California could enjoy the 10 benefits from the NLEV while keeping the sales mandate. In 11 other words, California is not trading the ZEV sales mandate 12 for a 49-State vehicle program; rather, California is 13 trading something for nothing. 14 And I think that's the crux of the problem that we 15 see, is that -- perhaps it's overstating to say we're 16 trading something for nothing. What we're trading for is a 17 more cooperative relationship, as I see it, with the car 18 companies. 19 But the 49-State vehicle, unfortunately, is not 20 something car companies are promising to do in the 21 Northeast. They are still combatting the States that have 22 electric vehicle programs, and saying that they will not 23 build the 49-State vehicle unless and until those States 24 withdraw their ZEV program. 25 So, I think it would be very good if the car PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 companies here would make a firm promise that they are going 2 forward with a 49-State cleaner vehicle. And, in addition 3 to that, I'd like to say that California could have had 4 both. We could have had flexibility in the early years, 5 more cooperative relationships with the car companies, and 6 we could have had a 49-State vehicle had we chosen to go 7 that route. 8 I would hope at least that we do get the NLEV. 9 And I think there is ambiguity that many people read into 10 the memorandums of understanding. Let's make sure we get 11 49-State vehicles. If the car companies balk and do not 12 produce those vehicles, I do hope the Board will reconsider 13 going back, even to a sales mandate of the type we had from 14 1990 on just to show that we are really serious about these 15 air quality needs. 16 They are not optional. They are not just 17 something we'll get if the car companies feel comfortable 18 about delivering them. 19 And then, a final point, and that is, this has 20 been a very, very contentious process. And I know that 21 people may feel somewhat bruised by the criticisms that have 22 come from environmental groups. But people must understand 23 that we are only bringing these criticisms up because we 24 feel that the importance of this is monumental. 25 /// PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 The public health concerns about air quality are 2 not going to get less. They're going to get greater. As we 3 look more and more at the health data, we certainly have 4 greater reason to be concerned about the pollution that 5 comes from automobiles. 6 So, we are taking this not as an issue of trust, 7 not as an issue of wanting to work with car companies, and 8 wanting to be cooperative. That really is not the point. 9 The point is, what do Californians do if the car 10 companies fall short of their promises? We breathe dirtier 11 air. That's what will happen. And so, our serious efforts 12 here are not to be difficult with you, not to be name 13 calling about the intentions of people and car companies. 14 They are making good products; they will continue to make 15 products when that is profitable. 16 And I'm very pleased to hear Nissan and others 17 talking in a way that indicates they believe that the 18 electric vehicle will be profitable. But what we need is 19 agreements that will shore up the air quality benefit. 20 And, Chairman Dunlap, if you could simply speak to 21 that issue of what do we do if 49-State vehicles are not 22 produced by the car companies, and what do we do if, in 23 fact, even with the 49-State vehicles we don't get all the 24 emissions benefits? 25 Will the Board step in and will we collect that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 residual of emissions benefits? 2 And with that, I just want to thank you all for 3 the hard work that went into this and pledge to you that I 4 want to work very cooperatively with car companies, 5 utilities, fleet managers, whoever, because I think this 6 technology is a winner, and I think that we can show them 7 ways in which they can benefit both economically and 8 environmentally from this technology. 9 Thank you. 10 CHAIRMAN DUNLAP: Thank you for your comments. As 11 usual, you hit the hot button issues in your remarks. 12 We, of course, will not sacrifice air quality with 13 any revision of this program. And so, as we hear from the 14 remaining folks, the witnesses, we will come back and have a 15 discussion about what happens if the national LEV doesn't 16 come on line as we need it to, and what recourse we have. 17 We tried to have the staff presentation reflect 18 much of that, but we can cover some ground again if you'd 19 like. 20 One comment from, I guess, my vantage point about 21 the national LEV. I certainly know there's been a lot of 22 negotiation and discussion in various venues around the 23 country on behalf of the automakers with the various States 24 about that program. 25 But, Janet, I have to disagree with that Attorney PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 General's comments about the fact that the NLEV was coming. 2 This program, as I understand it, brings the NLEV forward 3 nationally three years earlier. And we're proud of that 4 fact. 5 And we, of course, will benefit from that here, as 6 will other States. And it's particular important for that 7 fact to be known, because we have taken -- and it may be, of 8 course, some sensitivity on my part -- some criticism from 9 other States that think that a change here might 10 disadvantage them. And we have to disagree with that. 11 We think there's enough benefit in this provision 12 that California not only retains its leadership here in the 13 State but nationally as well. 14 MS. HATHAWAY: Mr. Chairman, on that point, I 15 think it's important for me to respond that, though it's 16 correct that EPA could not have mandated a national lower 17 emission vehicle program until three years later than 18 California's getting it, in fact, the car companies have 19 offered and offered years ago a willingness to do a 20 voluntary program with the Northeastern States at a faster 21 time schedule than California is talking about if the 22 Northeastern States would all agree not to implement a ZEV 23 program. 24 So, a cooperative, voluntary program on the same-- 25 with the same goals, getting a cleaner vehicle, was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 something that was being offered by car companies because 2 they wanted to get out from under faster, tougher regulation 3 in the East. 4 And that was going to happen, and it will happen 5 if the East cooperates with the car companies. It was 6 irrelevant that California got involved. 7 So, the fact was we could have had an NLEV 8 program, and we could have had sales mandates both in 9 California. Because the motivating force for the car 10 companies to implement a 49-State vehicle is that the 11 Northeastern States have gotten together in a collaboration 12 called the "Ozone Transport Commission," and they agreed to 13 a tougher, faster schedule implementing California's low- 14 emission vehicle program, including allowing States to 15 implement a ZEV program. 16 So, that was the motivating force that got the car 17 companies to talk about the 49-State vehicle, not this 18 discussion that has occurred subsequent to our decision here 19 in California to move away from regulation. 20 CHAIRMAN DUNLAP: I appreciate that perspective, 21 and we'll hear more about that later. I'll ask staff to 22 respond as we conclude the witness list, Janet. 23 There were a few that wanted to speak. Supervisor 24 Roberts, and then Ms. Edgerton, then Jim. 25 SUPERVISOR ROBERTS: While I'm interested in that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 part of it, I didn't want to lose the other suggestion for 2 the cooperative task force that apparently contributed in a 3 significant way, or at least the model of which contributed 4 a significant way, to the success of the clean fuels 5 program. 6 And I didn't know what it would take to have part 7 of that -- while there appears to be a spirit of cooperation 8 on both sides, I'd like to see that somehow 9 institutionalized, if we could, in a task force so that we 10 don't feel compelled that the truth squads that were out on 11 the road last year have to be the way that we approach the 12 year 2003. 13 I'd like to think that we could engage people in 14 not only the manufacturing side and the environmental side, 15 but the governmental agencies are going to have to make 16 changes to prepare the way for these vehicles. 17 So, I'd like to come back to that later. But I 18 think that's a real positive suggestion, and I hope we can 19 move forward on that, too, and incorporate it into this 20 agreement. 21 CHAIRMAN DUNLAP: Good point. I think Ms. 22 Edgerton had similar hopes as well. Lynne? 23 MS. EDGERTON: Ms. Hathaway, you correctly state 24 that there was an offer on the table of a 49-State car to 25 the Northeast. I would be remiss if I didn't ask whether it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 had been accepted. 2 MS. HATHAWAY: It has not been accepted at this 3 point, because one of the contingencies is still in debate, 4 and that is the 49-State car, according to the car 5 companies, will not be implemented if there are States that 6 persist in their current electric vehicle sales programs. 7 Now, the States -- there are several States that 8 have adopted legislation to mimic California's, or actually 9 to draw over California's electric vehicle program into 10 their States. 11 Those States are undercut by this regulatory 12 change, but some of them are insisting on going forward, 13 which we really strongly applaud. They do need to do so for 14 their air quality reasons, and the State of Massachusetts 15 and the State of New York have both indicated a desire to 16 continue with their electric vehicle program. 17 So, currently, there is a question mark over 18 whether a 49-State vehicle will be a reality. 19 MS. EDGERTON: Well, I appreciate that. And I 20 want to go back, though, again to this point. Isn't it 21 true that California is the first State to accept the offer 22 of the 49-State car? 23 Isn't this the first real deal, and don't we 24 therefore get credit for it? 25 MS. HATHAWAY: Well, Ms. Edgerton, I would like to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 give credit, but I think there's a major loophole in the 2 memorandum of agreement that California has reached with the 3 car companies. And this I've discussed with the Chairman 4 and the General Counsel here. 5 As we read it, the memorandum of agreement states 6 that California is expecting, or the Board is expecting from 7 the car companies the national low-emission vehicle program 8 or whatever other program is deemed by the Board to be 9 equivalent in emissions reductions. 10 I don't have the language in front of me, and I 11 see Mike Kenny does. But that is what worries us, is that 12 the possibility remains out there, without violating the 13 agreement at all, that car companies will come forward with 14 a package of emission reduction measures that they say, 15 "Certify this, please. We think it's equivalent to what 16 NLEV would given us." 17 That's a lot more uncertain, particularly if it's 18 not new car emission technology. 19 So, that's something that we think is a flaw in 20 the way the draft memorandum agreement was presented, and 21 one that could be a serious one if car companies aren't 22 sincere in their effort to really follow through with their 23 promise about NLEV. 24 CHAIRMAN DUNLAP: On that point, Mike, I'll ask 25 you and your team to deal with that later as one of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 items we address. 2 Lynne, anything else? 3 MS. EDGERTON: Uh-huh. I want to say that I agree 4 that the contractual approach of the MMOAs was used instead 5 of a regulatory approach because the automakers do want to 6 circumvent Section 177 of the Clean Air Act, which was 7 Congress's explicit intention for other States to be able to 8 follow California's lead with respect to new motor vehicle 9 standards. 10 And I will say that it has been less clear to me 11 exactly how California citizens or businesses benefit in any 12 significant way from this particular automaker maneuver, 13 because we area dependent on national standards in making 14 our SIP. 15 I question whether it's not in our interest to do 16 everything we can to help other States has stronger 17 programs, which the whole net result is to lift up the 18 standard to generally. 19 MS. HATHAWAY: Ms. Edgerton, I couldn't agree with 20 you more on that point. I mean, California only loses if 21 the market for electric vehicles is initially very small. 22 Because one of the things that the battery audit 23 panel pointed out is that economies of scale that really 24 reduce costs occur after you're talking 40,000 units and 25 more. That's where you really start to see cost savings. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 So, it's very beneficial for California to see 2 States like Massachusetts and New York persist with their 3 electric vehicle program to bring those costs down for our 4 citizens. Because while things stay at a pilot level 5 production, as they will under the MOA for the first few 6 years, costs will be higher than they otherwise would be. 7 So, that's one of our concerns. 8 MS. EDGERTON: Well, I want to ask you to submit-- 9 I appreciate that, and I'm finished. If I just could get 10 you to -- I want to follow up on what Mr. Roberts has asked. 11 I would appreciate sometime in the next day, if 12 you have specific thoughts on what sort of authorities would 13 be -- the kind of authorities you think would be helpful in 14 going ahead. 15 As you quite well put it, now that's behind us. 16 Now, let's see what's before us. And if you have specific 17 comments about authorities and criteria, or organizational 18 structure and procedures that you think would be 19 constructive, it sounded like Mr. Roberts would like to hear 20 them, and certainly I would. 21 MS. HATHAWAY: Well, I'll get those to you -- 22 MS. EDGERTON: Thank you. 23 MS. HATHAWAY: -- right away. I'd love to see 24 those implemented. 25 CHAIRMAN DUNLAP: Please, Lynne, don't invite her PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 to do that. She does it all the time anyway. 2 (Laughter.) 3 MS. EDGERTON: She just gives you her thoughts. 4 She doesn't always give me -- 5 CHAIRMAN DUNLAP: She does. Mr. Lagarias, then 6 Dr. Boston. 7 MR. LAGARIAS: Ms. Hathaway, it's very refreshing 8 to see you being not opposing to our issues and being very 9 constructive. And we're very pleased to see this direction. 10 And, as we found on the advisory committee for the 11 cleaner burning gas, that when people having opposing views 12 get together, you find they don't all have horns, and that 13 we can work to a common objective. 14 MS. HATHAWAY: So, I take it -- what you are 15 saying is you've discovered I don't have horns. 16 (Laughter.) 17 MR. LAGARIAS: If you say so. 18 MS. HATHAWAY: No. I appreciate very much what 19 you're saying. I think it's time for us to work for 20 solutions. And I could, you know, detail criticism after 21 criticism, but what is the point of that, when what we need 22 is the electric vehicle in the hands of consumers. 23 MR. LAGARIAS: Yes. All right. Well, in your 24 specific comments on the MOA, you expressed a concern that 25 the automobile people might come up with an alternative to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 the 49-State NLEV. 2 Well, don't you think if they could come up with 3 anything like that, we'd take it out of the black box and 4 add it to our additional regulations? 5 MS. HATHAWAY: That would delight me. My worry, 6 though, is that the way the MOA is termed, that would 7 satisfy their obligation under that agreement. 8 And though -- 9 MR. LAGARIAS: It's unrealistic to conceive of 10 anything other than the NLEV program. 11 MS. HATHAWAY: Well, I think that there are people 12 who speculate that maybe people -- people in the automobile 13 industry, if they are really serious about avoiding the 14 NLEV, would come up with some very ingenious schemes, 15 including things that we don't think could really work in 16 the end. 17 MR. LAGARIAS: Perhaps. But in the past, the 18 country has adopted the California approach to most of these 19 regulations. 20 And if the LEV is successfully introduced in 21 California, I don't think there'll be any problem in 22 creating a demand for an NLEV program. 23 MS. HATHAWAY: I have to agree with you that, you 24 know, my concern as a lawyer is to look for where things 25 could go wrong. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 My concern as a citizen is to look for what could 2 go right and try to be there to make it right. I mean, my 3 view is the 49-State vehicle is important. It will benefit 4 the other States, but not if it has to undermine the ZEV 5 programs of other States. 6 MR. LAGARIAS: You've explained something to me. 7 You lawyers are always looking for something that can go 8 wrong. We're looking for things that can go right. 9 MS. HATHAWAY: Yeah, we look for trouble. 10 (Laughter.) 11 CHAIRMAN DUNLAP: Dr. Boston. 12 Thanks, Jack. 13 DR. BOSTON: I was just wondering, Ms. Hathaway, 14 if we could arrange it, I think it would be very interesting 15 if you'd have lunch with Senator Haynes and Assemblyman 16 Baldwin. 17 (Laughter.) 18 MS. HATHAWAY: Interesting for whom? 19 (Laughter.) 20 MS. HATHAWAY: Thank you. 21 CHAIRMAN DUNLAP: Thank you, Janet. 22 Mr. Ridenour, followed by I guess Mr. Ham from 23 Assemblyman Mickey Conroy's office is here. Okay. 24 Eric, it will take just a moment for our court 25 reporter. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 (Thereupon, there was a pause in the 2 proceedings to allow the reporter to 3 replenish her stenograph paper.) 4 MR. RIDENOUR: Good morning. No? No, I missed 5 it. Sorry. Good afternoon. 6 I would like to thank the Board for the 7 opportunity to present our views this afternoon. My name is 8 Eric Ridenour, and I'm the Director of Environmental and 9 Energy Planning at Chrysler Corporation. 10 The Board's being asked today to approve the staff 11 recommended changes to the ZEV mandate. And then, as a 12 companion to the revision, each of the seven affected auto 13 manufacturers will sign a memorandum of agreement that 14 commits us contractually to the partnership on electric 15 vehicles. 16 We believe this is an historic partnership. We 17 think it will help usher in a new era, hopefully, of 18 cooperation and trust between the Board and the auto 19 industry. Chrysler strongly endorses the recommendation to 20 approve these changes as written. And we want to make the 21 following comments for the public record. 22 First off, we'd like to thank the Chairman and the 23 Board for this last year. It's been an intense effort and a 24 whole lot of time and energy of the staff and others to try 25 and bring this together and to hear about the feasibility of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 this regulation prior to its coming into force so we make 2 sure we do the right thing. 3 We think the changes today present three important 4 objectives. It gives electric vehicles their best chance of 5 success. It gives Californians a certainty of clean air, 6 and it precludes forcing a product on Californians that does 7 not meet their needs or their pocketbooks prematurely. 8 We think it gives the electric vehicles their best 9 change for real success because manufacturers are committed 10 to getting cars on the road. Chrysler has committed to 11 having its Epic minivan that's outside today available by 12 1998. We're looking to see how soon we can get it. We're 13 working very aggressively. But we are committed that it 14 will be on the road by '98 model year, which is just a 15 little more than a year away. 16 We have brochures and pictures outside for 17 everyone who wants to see it. We've started sending out 18 already marketing things to all the fleets that we currently 19 sell our CNG vehicles to, considering those are the prime 20 candidates for these type of vehicles. 21 So, we've already started the marketing efforts on 22 those. We, as a group, have committed to the capacity in 23 place by '98 of 15,000 vehicles a year if the demand 24 warrants it. 25 If that happens, and we get anywhere near that, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 there'll be a lot more capacity that goes in place in order 2 to meet the continuing ramp-up. 3 Third, we think the industry has committed to 4 pursuing the battery technology needed for success, and that 5 is a low cost, high performance battery. 6 We've committed to continuing to purchase and test 7 those advance battery prototypes and to continuing our share 8 of the USABC Phase II program on battery research and 9 commercialization. 10 Fourth, the industry's committed to the 3750 11 vehicle advance battery demonstration program, and to get 12 those vehicles on the road by the year 2000. We've been 13 collecting data on many of these vehicles and will be able 14 to use this extensive database to determine usage patterns, 15 performance characteristics, durability, and reliability of 16 components and, most importantly, consumer acceptance. 17 We'll be able to get to see the advantages and 18 disadvantages and get to those crucial customer tradeoffs of 19 performance versus size, versus range, versus cost. All 20 those have to be put into a box together in order to get 21 customer utility in order to get customer utility. 22 These vehicles will not be cheap, because the high 23 level batteries are going to be very expensive. The 24 battery panel has told you that, and we know that for a 25 fact. And the volume commitments we made are many times PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 more than what we would have done if we were just going to 2 test and develop the technology for ourselves. But we 3 agreed to the additional units in order to demonstrate a 4 commitment to the EV development and show that commitment in 5 a clear way. 6 This proposal also ensures that manufacturers will 7 have the production capacity and the product programs in 8 place to meet the 10 percent mandate in 2003, and this is 9 significant. 10 We will need to begin to design and testing these 11 products prior to the 2000 biennial review. As you heard 12 from John Schutz earlier, the leadtimes of the industry 13 means that we'll have things that you'll see before we go to 14 that biennial review, which we think will be a key one 15 because we'll have data in hand of vehicles on the road. 16 We're going to be spending significant capital to 17 put the productive capacity in place by 2003; so, during 18 that whole period, there will be an aggressive ramp-up of 19 research and development and dollars going into EVs. 20 We have pledged to provide you our EV business 21 plans and to give you access to our facilities, our advanced 22 facilities. First time we've done that. We have let you on 23 the thing, but this is the first time contractually we've 24 committed to do that. 25 There is some who want more sooner. Everyone PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 would like more sooner; doesn't matter what the quantity is. 2 As the battery panel pointed out, the high level 3 batteries are very expensive. Higher volumes of these 4 advanced batteries will simply not be commercially feasible 5 until these batteries are ready for full production to get 6 down to those lower costs. 7 The battery panel testified that the earliest the 8 advanced batteries may be available is 2001 or 2002 model 9 year. Remember, the battery panel works in calendar years. 10 You lose a model year. You lose a year when you go to model 11 year. 12 And that's an all home run scenario. And those of 13 us who are in this business, we know that very few new 14 technology ballgames are won with all home runs. There's 15 going to be a few singles along the way, and that will cause 16 some delays. 17 But more importantly, they also told you that 18 there were technologies that may even have more promise that 19 sit just behind these lead technologies, about 18 months 20 behind for some of them that we think are very promising. 21 We believe that 2003 is the earliest anyone should 22 plan for production of these advanced batteries for volume 23 production, and that a solid case could be made for a later 24 date as we told you in December when we came before you. 25 That's a speculative thing, but we've committed to doing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 that. 2 What we don't want and we don't think is in 3 anyone's interest is to preclude promising technology 4 strictly to meet some sort of arbitrary time line. 5 We're going to have lots of access and lots of 6 discussion. People are going to know what's coming and 7 where they are. 8 That's not to say that there won't be significant 9 volumes of EVs prior to 2003 model year. Manufacturers will 10 have a variety of lead-acid vehicles for sale with 11 sufficient capacity to fully meet market demand. And some 12 manufacturers may choose to go with those earlier technology 13 batteries, and therefore may be on the road prior to 2003 if 14 the home runs work out. 15 If the market is ready, competitive aspects will 16 ensure that there's significant volume. And that's the 17 first "if." 18 On the subject of clean air benefits, I would like 19 to give you credit. We did not ever get an agreement on the 20 49-State program, as we call it, the national LEV program. 21 We do and have committed to the 2001 and beyond. 22 The only thing up for discussion in the Northeast remains 23 those earlier ramp-up vehicles, which you already get. 24 So, the 2001 and beyond, we've committed to you. 25 That's the LEV program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 We believe that, as a matter of principle, though, 2 we would like to diverge just a little bit and talk about 3 the strategy of technology forcing does place California on 4 the cusp between success and failure whenever you push 5 technology. 6 Fortunately, we've had more cases of successes 7 than failure, and that's good for everyone. But sometimes 8 technology forcing will fail. We think that this whole 9 experiment was that; that it was not ready, and it wasn't 10 time. That's what the -- this isn't a trade for an early 11 mandate for a later mandate. This, in fact, is the original 12 program wouldn't have worked as planned, and this is a 13 modification to make it a workable program. And I think 14 that's important. 15 Because we don't believe, both as a matter of 16 principle and as precedence, that on this or other ones, 17 there should be an automatic manufacturer pays if the 18 technology fails. 19 We think that that risk is more properly assumed 20 by the agency that decides it's a strategy to work on 21 technology forcing. But in this one instance, because of 22 the serendipitous events, as I mentioned before, with the 23 49-State, which was on the table that nobody had accepted 24 yet, it allowed us to offer that vehicle to California and 25 California took us up. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 As the staff explained, through the mechanism of 2 migration, this will more than exceed the theoretical clean 3 air benefits of the EV program during the '98 to 2002 time 4 frame. 5 And in CARB's own analysis, it shows that this 6 program -- so much for technology. (Remarking on a 7 microphone's failure) 8 CHAIRMAN DUNLAP: We have another one waiting for 9 you, though, Eric. We're running through mikes today. 10 UNIDENTIFIED SPEAKER: Battery. 11 (Laughter.) 12 MR. RIDENOUR: Okay. They got a new battery in 13 it. 14 The main important point is that this keeps the 15 SIP whole and that's good for California. 16 And the other thing that wasn't really brought up 17 is that these benefits continue well past 2010. The model 18 stops at 2010, so you really can't see that. But this thing 19 keeps giving; whereas, the '98 to 2002 ZEV benefits peak in 20 2004, and then start decaying as some of those vehicles 21 start going off the road. 22 So, in fact, it's actually better than anything 23 you've seen as far as if you want to talk about a cumulative 24 time scale. 25 And as Tom mentioned earlier, some will -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 (Thereupon, the third microphone failed.) 2 CHAIRMAN DUNLAP: We're going to have to take a 3 lunch break if this keeps happening. Try it again, Eric. 4 See what you got. 5 MR. RIDENOUR: Okay. 6 CHAIRMAN DUNLAP: Speak loud, and what I will tell 7 the audience is, we'll take a lunch break after Mr. 8 Ridenour's comments, and we'll get the staff to check into 9 this short. 10 MR. RIDENOUR: We've looked at it, and we believe 11 the benefits are on the conservative side of the LEV, 12 because it only includes -- for those 49-State vehicles that 13 permanently come into the State does not include tourism, 14 business travel. Those are harder to nail down exactly how 15 many. And it also claims only three years of credit for the 16 49-State, as we talked about, 2001, '2, and '3. Because in 17 2004, the expectation is that EPA would bring on Tier 2 18 standards, which are nearly -- we would expect to be 19 somewhere to this NLEV vehicle. 20 But the reality is EPA will probably phase in Tier 21 2, much like they phased in Tier 1, and they can wait till 22 2006 before they actually do it. 23 For every year and every phase, it starts adding 24 even additional benefits beyond those already shown. So, 25 from that side, we're being conservative. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 On the flip side, we think the case for the EVs 2 are probably overstated. And the main issue we have is that 3 it's assumed that it replaces gasoline vehicles on a one- 4 for-one basis for all of their mileage. And with these 5 lower range vehicles being third vehicles or whatever, in 6 general, will not do that, especially in the early years. 7 So, that might be true later, but we think for the 8 early years, that's an overstatement. And also it has, we 9 think, additional vehicles. And it assumes all 10 manufacturers will be in this program, not just those 11 required. 12 The last item is simply our belief that to develop 13 a sustainable, significant market share, which is what you 14 need and what your SIP is looking for -- for new technology, 15 it requires both the market acceptance as a minimum, but a 16 significant market pull to build that share. No sustainable 17 market has ever been mandated or created by forcing 18 manufacturers to sell something the consumer doesn't want to 19 buy. 20 That's why we're opposed to mandates. We've never 21 been against electric vehicles. We'll show you our stuff 22 out at the parking lot. 23 The automotive marketplace is extremely 24 competitive. Manufacturers battle over tenths of a point 25 market share and spend what it takes to compete in new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 market segments. 2 One only has to look at our incentives sometimes; 3 when the thing gets a little soft, they'll look at that. 4 When the EV market develops, Chrysler will be 5 there in a big way. To restate, we believe the proposal 6 before you today provides the best chance for electric 7 vehicles to compete in the marketplace. It ensures the 8 continuation of development efforts and gets vehicles on the 9 road and into customer's hands. And, as an added bonus, the 10 proposal delivers superlative clean air benefits. 11 Thank you for your time and attention. I'll be 12 happy to answer any questions. 13 CHAIRMAN DUNLAP: Okay. Thank you. Mr. Calhoun? 14 I'm certain that you have a question. 15 MR. CALHOUN: No, I don't have any question right 16 now. I guess I would just like to emphasize something that 17 he has said and others have said, that competition is going 18 to force this thing to be successful. We can sit here and 19 we can talk about it all day and all night, but the real 20 determinant as to whether or not a program is successful is 21 competition. 22 And I know enough about the auto industry to know 23 that Chrysler isn't going to allow Ford or General Motors to 24 get ahead of them, at least not for very long. And he 25 mentioned this one-tenth of a market share and the amount of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 money that they will spend in order to try and accomplish 2 that. 3 That's real. And that is going to be the driving 4 force behind having a successful program. 5 CHAIRMAN DUNLAP: Thanks, Mr. Calhoun. Ms. 6 Edgerton. 7 MS. EDGERTON: Mr. Ridenour, did you -- did I 8 understand you to say that Chrysler is going to offer for 9 commercial sale vehicles starting in 1998? 10 MR. RIDENOUR: Yes, that's correct. 11 We expect to sell into the fleet market 12 predominantly because of the shorter range and high cost. 13 That makes the most sense. 14 We have a lot of experience. We have a lot of 15 CNG vehicles out there today that, while aren't as limited 16 on range, are still limited range vehicles. And so, we feel 17 we have a lot of expertise in selling those successfully 18 into fleets. 19 MS. EDGERTON: So, I wanted to just clarify that, 20 unlike Nissan, who really has said that all they're planning 21 to do so far is participate in the demonstration project 22 with 120 vehicles, Chrysler is planning on entering the 23 commercial market. 24 That means that you will be submitting a product 25 plan? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 MR. RIDENOUR: Uh-huh. We would envision a 2 product plan that would show the '98 actions, which are 3 pretty much as I've laid out. We've made those public. 4 Everything beyond that, I can't speak of in the broader 5 audience, but we'd expect business plans that would show 6 additional products and/or changes to those products, as 7 they make sense, to meet the 2003. 8 Ten percent is a significant share of the market. 9 No one vehicle does that, with the exception of maybe our 10 minivan as a single entry. So, we think that's a 11 significant point. So there'll be actions that will lead to 12 that. 13 MS. EDGERTON: I really like your minivan, by the 14 way. I was out there today. 15 So, this November, you'll have plans that will be 16 telling us what you're doing in 1998? 17 MR. RIDENOUR: It's a technicality. I think the 18 plans that we submit are just ahead of the biennial review. 19 I don't think the first one is this November. Yeah, it's 20 '98, so. . . 21 MS. EDGERTON: Wait a minute. When do the plans 22 start? 23 MR. RIDENOUR: The plans get submitted three to 24 six months ahead of the biennial review so you'll have time 25 to review them and ask questions before the biennial review PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 process starts. 2 The annual plans are how many are sold, of what 3 type, at what price. 4 MS. EDGERTON: Bear with me just a minute. 5 CHAIRMAN DUNLAP: Tom? Mr. Cackette or Mr. Boyd, 6 can you speak to the time when we'll first get -- 7 MS. EDGERTON: (Interjecting) When's the November 8 1st? 9 MR. CACKETTE: The MOA provides for continuing 10 biennial reviews. This is the '96. There'll be a '98 and a 11 2000. And these business plans will be submitted prior to 12 those biennial reviews by the Board so that we have a chance 13 to put the information together and package it in a way that 14 we can make it available to you and the public without 15 violating confidentiality. 16 In addition, we'll have the annual plans, which 17 are reports, which tell what happened up to that point -- 18 actual sales, actual costs, things like that. 19 CHAIRMAN DUNLAP: Okay. So, around the summer of 20 '97 is when we'll get the information. 21 MR. CACKETTE: I think there's a specific date in 22 here. 23 MR. RIDENOUR: Yeah, and I know we -- 24 MS. EDGERTON: Yeah, and I see it's here in 1C. I 25 guess that changed from a version that I saw. I thought PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 there was an annual product plan that was -- 2 MR. RIDENOUR: Through negotiations, it's always 3 been that way. 4 MR. CACKETTE: Yes. 5 MS. EDGERTON: So, according to this agreement, 6 the first time we get any product plan is November 1st 7 before 1998, then, not '97. 8 MR. RIDENOUR: I think to help make it a little 9 clearer, is we have divulged the near term plans already in 10 our confidential submissions to you for the interim period. 11 There's not going to be a substantial amount. As 12 John Schutz pointed out, those substantive product decisions 13 aren't going to be made. We don't make decisions before 14 they're ready, because we tend to miss the market if you 15 make them too soon. 16 So, a '96 plan submitted in November wouldn't look 17 much different than what you already know today, because the 18 future is fuzzy with specifics. 19 MS. EDGERTON: So, how much time do you need -- 20 how much leadtime to make your plans for the -- 21 MR. RIDENOUR: (Interjecting) Well, the plans are 22 really done five years in advance. So, for '98, will be the 23 first time that we, as a corporation, will really get into 24 the, you know, substantive detail on any product, regardless 25 of whether it's electric vehicles, or the replacement for a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 minivan, or a new Neon, or anything like that. That's just 2 the cycle. 3 Because if you make decisions earlier than that, 4 they tend to be the wrong decisions and you'll have to trim 5 them. 6 MS. EDGERTON: Okay. I did want to let you know 7 that I am one of the skeptics about whether there may be all 8 those emission reductions achieved -- equivalency. And it's 9 not because I think anybody fabricated anything. 10 It's because I have some concerns about the use of 11 the 18 percent migration figure, since the last time we saw 12 18 percent was 1987. And what we've seen for the last few 13 years has been more nearly 14 percent. 14 But I thought your point was well taken that you 15 might have a one percent tourism addition. So, even if 1995 16 is 14 percent, and you add -- 17 MR. RIDENOUR: (Interjecting) I think we saw 1.8 18 percent in the stuff we've seen on tourism. So, roughly two 19 percent. 20 MS. EDGERTON: So, even if you add two percent, 21 you might get up to 16 percent. And, as has been described 22 by Chief Deputy Cackette, the total numbers of tons are not 23 overwhelming. 24 On the other hand, I must say that I would feel 25 much more comfortable if you and our staff would go back and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 take another look at whether there may be some shortfall 2 that could be made up some other way if we have to. 3 MR. RIDENOUR: One of the things that I think's 4 important to note is the actual number of 2010 is about 4 5 tons versus about a little under 2 tons, like 1.6 versus 6 4.1. So, it's more than double the benefit in the year 2010 7 of the SIP, which was the agreement to get the clean air 8 benefit. 9 So, I think it's very important to realize that 10 even if you were more -- you know, theoretically, and I 11 don't know if it's linear or not, because it's a model and 12 models are sometimes funny. But if you cut it in half to 9 13 percent, you'd still be even. 14 MS. EDGERTON: That's not my understanding from 15 talking with the staff. But I just want to take -- I don't 16 know -- well, the other staff that I spoke with said that we 17 didn't cross the -- we had no chance at equivalency until 18 2010 using an 18 percent. 19 MR. RIDENOUR: That's a cumulative number. And 20 I'd just caution that, in general, when the staff discounts 21 cumulative numbers; when we're submitting NMOG, they start 22 after two years cutting it in half, and then cutting it in 23 quarters, because of the lingering effects. 24 We could argue that, as a matter of precedence, 25 when we submit NMOGs we get "binned" at a decay factor. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 We'd argue that that same decay factor would happen. 2 But in 2010, the year of the SIP and from 2006 and 3 beyond, this overwhelms. This continues to go through 2015. 4 So, on a cumulative basis, if you add the next five years, 5 it's overwhelming. 6 CHAIRMAN DUNLAP: If I might interject. 7 MR. RIDENOUR: I've got a chart that shows that. 8 MS. EDGERTON: Please. 9 CHAIRMAN DUNLAP: If I might interject here, I 10 would just -- Ms. Edgerton offered up a suggestion. I think 11 it's a good one. 12 Eric, maybe the industry team would sit down with 13 staff again one more time and take a hard look at it, see if 14 there's any new information that's available. And if it is, 15 apply it to the model and make the necessary revisions. 16 It would cause several of the members of this 17 Board to have a lot more comfort that it's being checked and 18 tracked. 19 MR. RIDENOUR: I mean, I think it's very sold. I 20 know we've -- 21 MS. EDGERTON: Thank you very much. 22 MR. RIDENOUR: -- spent a lot of time and energy. 23 I feel very comfortable. We'd be more than happy to do it 24 again. 25 CHAIRMAN DUNLAP: Yeah. There's a willingness to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 be believers, but who was it that said, "Trust, but verify"? 2 I'm kind of adding a past President I think. 3 MR. LAGARIAS: Ronny. 4 MS. EDGERTON: Thank you very much. 5 CHAIRMAN DUNLAP: President Reagan said that, and 6 that might apply here, Eric. 7 MR. RIDENOUR: Is there an overhead that I could 8 use here? 9 CHAIRMAN DUNLAP: Certainly. All it does is take 10 the staff numbers out of the report, Attachment B, and then 11 our team evaluated the next five years of what they would 12 look like hopefully. Okay. Good. 13 CHAIRMAN DUNLAP: And certainly, Eric, you can 14 understand how important it is -- 15 MR. RIDENOUR: Oh, I definitely understand. 16 CHAIRMAN DUNLAP: -- for us to have that pinned 17 down. 18 MR. RIDENOUR: And that's why I'm saying, 19 sometimes a visual is worth more than me trying to belabor, 20 trying to explain it in bad word choices. 21 But the big point is the dark line that you see 22 growing early, as the staff pointed out, the early years, 23 there is no NLEV. So, therefore, the only thing that's 24 happening is the ZEV mandate. But as time moves on, you 25 see the smaller gray bars that become overwhelming through PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 time. And that's what we're talking about here, is that 2 2010 is the last, you know -- just before the box is 2010 3 for those who can't read all the years. 4 So, you see, the last five years, you can see the 5 decay factor on those early ZEVs as they start being taken 6 out of service due to accidents, normal life time frames, 7 other things. 8 This thing just keeps on giving. So, that's what 9 we've walked through. We'd be more than happy to do that 10 again. But I just think that visual of the overpowering 11 number should make people feel a lot better and a lot more 12 confident that, even if there's a 14 versus a 16 as a 13 percentage, that's not going to drive that. 14 And then, if you add the two percent of migration, 15 it -- 16 MS. EDGERTON: (Interjecting) But your chart does 17 have -- it does assume an 18 percent; is that correct? 18 MR. RIDENOUR: We took the CARB numbers -- 19 MS. EDGERTON: Right. 20 MR. RIDENOUR: -- and just plotted them. 21 MS. EDGERTON: Yes. I've got a chart. I want you 22 to understand why I'm concerned. 23 MR. RIDENOUR: Sure. 24 MS. EDGERTON: It's hard to see, but as you can 25 see, the historical data that's been provided to me from '80 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 to '94, it seems to indicate that -- for example, if we had 2 picked from 1990 to 1994, we would not be able to have used 3 18 percent. 4 And the other -- but even, you know, I can see how 5 you might take all that. You've got to make decisions to 6 make assumptions and make averages. 7 So, that certainly is rational. What is of a 8 concern to me and what I hope maybe we can discuss some 9 more, or you can discuss with the staff, is the future; 10 where do you go from there? 11 It seems to me, to assume that we're going to have 12 18 percent in '95, '96, '97, '98, when we're looking at not 13 having crossed over to 18 percent for 10 years, it just bugs 14 me. 15 So, thank you very much. 16 MR. RIDENOUR: Understand. 17 CHAIRMAN DUNLAP: Staff will be sure to follow up 18 on that and get back to Ms. Edgerton. 19 Okay. Mr. Lagarias, before you leave, Eric. 20 MR. LAGARIAS: Just a comment on this. Does this 21 account for the fact that over the past five years, there 22 are more people leaving the State than are coming into the 23 State, and that we're losing a lot of cars that are 24 registered in California and are no longer here because 25 people have gone back to their home States?? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 MR. RIDENOUR: I think that actually helps the 2 analysis, because those are the cleaner cars yet that are 3 leaving. As far as the underlying base, I don't that -- 4 because what you're really worried about is the dirtier cars 5 are coming in rather than the cleaner cars that leave. 6 But I'm not a modeling expert. I'm relying on my 7 staff. 8 CHAIRMAN DUNLAP: On that point, just to clarify 9 it. I think that certainly the population trend in 10 California has been growing, but that doesn't get to the 11 point, I think, Jack's getting at about people coming and 12 going and what not. 13 And I think, later on, I saw on the list here, we 14 have a witness from SCAG who's going to speak, and maybe 15 they can incorporate in their remarks some of the trends 16 we're seeing in population growth, and vehicle travel, and 17 the like. 18 MR. LAGARIAS: I really only have one question. 19 Did I understand you to say that Chrysler is 20 committed to meet a 49-State national LEV program in the 21 year 2001? 22 MR. RIDENOUR: That's our absolute current intent. 23 I mean, there's -- 24 MR. LAGARIAS: Ms. Hathaway, did you hear that? 25 Because that was a concern she had. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 Thank you. 2 CHAIRMAN DUNLAP: One thing, Ms. Edgerton, a point 3 that I should bring up at least relative to the numbers. 4 There is a small percentage of vehicles that are not 5 registered in our State and that escape registration with 6 DMV and any kind of enforcement activity. 7 And so, those I believe have not been entered into 8 the mix as I understand it. And I don't even want to 9 speculate what that number may be. But it is some number, 10 and it certainly would have an impact on air quality, a 11 detrimental impact. 12 So, with that, Eric, thank you. 13 MR. RIDENOUR: Thank you. 14 CHAIRMAN DUNLAP: I would like to break at this 15 point for about 35 minutes or so. We'll reconvene around 16 1:00. And the audience may have a few extra minutes. We're 17 going to recognize the retirement of one of our employees to 18 start the meeting; reconvene, I should say. 19 (Thereupon, the luncheon recess was taken.) 20 --o0o-- 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 AFTERNOON SESSION 2 --o0o-- 3 CHAIRMAN DUNLAP: Okay. I'll call the witness 4 list now, and we'll get it going. There's a few of the 5 staff members and a few of the Board members lingering, but 6 most of them are in the back, so the witnesses will be 7 heard. 8 I'm going to run through three or four names and 9 if you're here, please come forward, and we'll begin the 10 testimony. 11 Andrew Frank from U.C. Davis, followed by Cecile 12 Martin from CalETC. Is Bob Ham here? Okay. Followed by 13 Bob Ham, and then Judy Mikels from SCAG, and Lloyd Dixon 14 from Rand. 15 So, Mr. Frank? Good afternoon. Good to see you 16 again. 17 DR. FRANK: Yes. 18 CHAIRMAN DUNLAP: Did you bring your car today? 19 DR. FRANK: Well, no, I didn't bring my car, but 20 we're working on a new car. 21 CHAIRMAN DUNLAP: All right. When you get it 22 running, bring it over here and show me, will you? 23 DR. FRANK: Right. The new car's going to be a 24 Ford Taurus and hold four passengers. And it's being built 25 for P and GD. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 One of our goals is to inform the staff -- I don't 2 know if the staff really knows -- that P and GD, you know, 3 the president's partnership with the 80-mile per gallon car, 4 could be combined with the ZEV, California ZEV program if we 5 allow hybrids. 6 So, that brings up the subject of what I really 7 want to talk about today. I personally think this electric 8 vehicle mandate that we have started is definitely in the 9 right direction. I'm here to say the mandate has spurred 10 the research and development of EVs and, in fact, the last 11 five years we've actually gotten more accomplished in 12 research and development of true electric technology than we 13 have in the last 50 to 100 years. 14 So, the most important thing about the mandate is 15 that we maintain this pressure on the research and 16 development community, both the Federal Government as well 17 as the car companies, to continue this rate of research and 18 development. 19 And it behooves the entire country, because when 20 we're all said and done, we will have a much better, and 21 more friendly, and environmentally clean transportation 22 system as a result of this work. 23 So, I'm going to ask that the Board consider 24 keeping the mandate as it is; however, to allow for the -- 25 allow the car companies flexibility, and to be able to meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 the mandate, to push forward on your proposed EZEV mandate, 2 the equivalent zero-emission mandate for hybrid vehicles. 3 Because I believe that gives the car companies an out. 4 And if they do it correctly, it does not mean a 5 more expensive car. In fact, what we have shown in research 6 at the University indicates that it is possible to build a 7 hybrid electric car at approximately the same cost as a 8 conventional car, because you don't have to have as many 9 batteries, and the engine and the powertrain is greatly 10 reduced in size. 11 So, I'd like to express my opinion that the 12 mandate be softened by allowing the car companies to build 13 hybrids. Now, I understand and, of course, I do research in 14 the area, so I understand that there's a lot of questions at 15 this moment about how to test the hybrid. 16 Well, okay. That's one of the things that has to 17 be settled. How will we assess the concept of a hybrid from 18 an emissions point of view? 19 Well, it's kind of the chicken and an egg problem. 20 If you don't have the chicken, you can't figure out what the 21 eggs look like. So, we need to build these hybrids. We 22 need the car companies to build these kinds of vehicles, 23 and then we can begin to evaluate and develop the testing 24 procedures. 25 Now, the testing procedure is one of the questions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 of hybrids that has to be answered. But I think the hybrid 2 satisfies a lot of the goals and problems of EVs in the 3 short term especially. 4 Our research indicates that the present electric 5 battery technology, what is available out there today, is 6 good enough for hybrid, and the hybrid will perform equally 7 to a conventional car in every way. Give you the same 8 range; give you the same performance. In fact, our Taurus 9 that we're building as a hybrid will get 80 miles per 10 gallon; at the same time, it will go 0 to 60 in eight 11 seconds. So, when we're all done, we'll have a car that is 12 better than a conventional Ford Taurus with a conventional 13 engine and transmission. 14 Now, of course, one can sit here and claim all 15 this. And it's one thing to say it, and it's another thing 16 to do it. We actually had built a car in the past. It was 17 a special purpose built car, like the GM Impact, in which we 18 had already achieved 77 miles per gallon by driving it from 19 the Air Resources Board down in El Monte up to Davis, up 20 here to Sacramento, up over the mountains on one battery 21 charge and five and a half gallons of gasoline. 22 So, that comes out 77 miles per gallon on 23 gasoline. So, it is doable, and you no longer have the 24 problem of range. And I hate to have Ms. Hathaway get 25 caught in an electric vehicle in the middle of Watts without PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 a charge. 2 She might have to wonder about that charge. 3 Anyway, so a hybrid will satisfy a lot of the 4 problems we're trying to address, and I think it gives the 5 car companies a way out. Technologically, it's not a 6 difficult thing if they will do it according to what staff 7 the staff has suggested in terms of their equivalent ZEV 8 program. 9 I think it's a good suggestion, and I think that's 10 where we ought to be headed, sticking with the mandate, 11 while pushing the EZEV hybrid concept as the alternative to 12 changing the mandate entirely. 13 Incidentally, one last comment, and that is, we've 14 got a good thing going. We've got momentum. When you 15 change horses in midstream, what I'm afraid of is we will 16 begin to lose momentum. And this rate of growth, as I 17 mentioned at the beginning, we had in the last 50 years -- 18 in the last two or three years, we've had the equivalent of 19 research in the last 50 years in electric cars. We can 20 continue that rate of growth if we maintain this mandate 21 where it is. 22 That's my comment. Thank you. 23 SUPERVISOR RIORDAN: Thank you, Mr. Frank. Let me 24 ask the Board if there are any questions. 25 Mr. Lagarias. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 MR. LAGARIAS: Dr. Frank, thank you for your 2 comments. And I agree with you that we need flexibility to 3 allow all types of technology to enter this arena. 4 The regulation really called for zero-emission 5 vehicles. It didn't call for battery operated cars. And 6 we're now redefining equivalency of zero. So, I would 7 certainly encourage that they push on this technology. 8 And if, indeed, it shows merit, I think we'll find 9 ways of letting it enter the picture. 10 DR. FRANK: Good. That's just my hope. Thank 11 you. 12 SUPERVISOR RIORDAN: Are there any other questions 13 by any of the other Board members? 14 Mr. Calhoun. 15 MR. CALHOUN: We've heard a lot of discussion 16 about the hybrid, and the merits of which is kicked around 17 back and forth. 18 What's the status of that? 19 MR. CACKETTE: Let me see if I can answer the 20 right question here. 21 One of them I can answer is the status of how our 22 regulations might treat hybrids, and the other one is the 23 status of hybrids as an evolving technology in 24 transportation. Should I do both or the first? 25 MR. CALHOUN: Both. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 MR. CACKETTE: Okay. The first one is, in terms 2 of an equivalent zero-emission vehicle program, we're 3 developing a regulatory proposal we'll bring to the Board in 4 December, and that will define zeros as power plant level 5 emissions, or something equivalent to that. And then 6 vehicles that do not use power plants to charge themselves 7 could have just the same amount of emissions as the power 8 plant and still be called a zero-emission vehicle. 9 That would expand it to very clean hybrids, fuel 10 cells with reformers, things like that, as another potential 11 zero-emitting technology to complement battery powered 12 vehicles. 13 As far as where hybrids are in general, Dr. Frank 14 probably knows better than I do. But there's a tremendous 15 amount of research going on around the world on hybrid and 16 other hybrid-like vehicles, including fuel cells. 17 So, there's a lot evolving work on fuel cells that 18 suggests they're coming much closer to commercialization 19 than we may have thought. And hybrid electrics, there's 20 multi-hundred million dollar programs at all the domestic 21 auto companies underway funded by DOE to produce hybrid 22 electric vehicles as well as the P and GD program, which is 23 a billion dollar program. And most people believe that the 24 vehicle that will come out of there, the 80 mile per gallon 25 car, will be a hybrid of some type. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 MR. CALHOUN: Thank you. 2 MR. CACKETTE: So, it's evolving pretty quickly. 3 SUPERVISOR RIORDAN: All right. Thank you. 4 DR. FRANK: One last quick comment. If we build a 5 hybrid, bear in mind that you could -- if the hybrid has a 6 60 to 80 mile range, that you could build 11 hybrids, and 7 according to the proposed rules, would be equivalent to 10 8 electric vehicles. 9 In other words, 11 hybrids would be equivalent to 10 10 ZEVs. And to me, that makes -- that opens the door for 11 the car companies without changing too much technology, and 12 adapting the existing battery technology to put these things 13 out on the market very quickly in a very short length of 14 time. 15 Thank you. 16 CHAIRMAN DUNLAP: Thank you, Mr. Frank. 17 What I'd like to do is shift from the agenda just 18 for a moment and take care of more of the Board's personal 19 business, if I may, in public. 20 I'd like to ask Don Drachand to please stand up 21 and join Board Member Calhoun over there at the podium. 22 It is with mixed feelings that I make the next 23 announcement. By the time this Board holds its next 24 hearing, the ARB will have lost one of its cornerstones. 25 Don Drachand, Chief of the Mobile Source Division, who is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 retiring. 2 As I've said many times, the ARB's real strength 3 through the years is its staff, world class employees 4 dedicated to the mission of this Board, certainly talented 5 and committed. And Don has been a leader for many years. 6 He's been with the Board some 26 years. 7 As a matter of fact, Joe Calhoun left the Board as 8 an employee in 1974, and had worked -- I won't say side by 9 side with Don, but certainly done was a colleague of Joe's 10 and Joe knows him well. And that's why he's at the podium 11 there. 12 But Don has epitomized those high standards and 13 ideals, which are the true foundations for this Board's 14 remarkable success over the years. And it's appropriate 15 that at his last hearing as a manager and a leader of this 16 Board, that we should be considering a move that will assure 17 the success of perhaps Don's most outstanding contribution 18 to the Board's work, which is the zero-emission vehicle 19 standards. 20 So, Don, it's with great pleasure and a touch of 21 sadness that offer you on behalf of my Board member 22 colleagues -- actually Joe will do it -- this token of our 23 appreciation for your 26 years of service. 24 I'd like to ask Joe, if you wouldn't mind, to read 25 the Board resolution -- it's signed by all of the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 members, Don -- and tell you what we think of you, I guess, 2 in the closing hours of your career here. 3 (Thereupon, the Resolution was read to 4 Mr. Drachand, after which a standing 5 ovation was accorded him.) 6 MR. DRACHAND: Thank you very much, Joe. I know 7 you're busy, Mr. Chairman. I'd like to take about two 8 minutes to say my thanks. 9 I've had the privilege to work for the Air 10 Resources Board for about 30 years. I worked for the first 11 Chairman, Dr. Haagen-Smit, his Board, all the way down to 12 your Board. 13 And I've been extremely pleased that the support 14 and confidence that you Board members have shown the staff. 15 I can't emphasize enough what a difference this makes for 16 the staff. 17 I want to thank all of you and previous Boards for 18 that. 19 I also want to take a few minutes to thank my 20 management staff, Mr. Boyd, Mr. Cackette, Mr. Scheible. 21 These people are exemplary civil servants in my mind, in the 22 true sense of the word. They've given us good direction. 23 They make us work hard sometimes, but they've also supported 24 us in terms of resources and funding to do the research that 25 we need to do to come up with the rules that we bring up to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 you. 2 I also want to take a few minutes to thank the 3 staff, not just the smart young people that you see in front 4 of you at Board meetings, but also the hundreds of engineers 5 and scientists that work in El Monte gathering data that 6 goes to make the reports and regulations that we bring up to 7 you. 8 Also, I want to thank the legal staff, the 9 Administrative Services, staff, and the other divisions that 10 help us do what we do. What we did was really a full team 11 effort. It wasn't just one person or one division that did 12 it. 13 And, finally, I'd like to take a few minutes to 14 express my deep gratitude and respect for the people that we 15 regulate. These people are tough. It's tough to deal with 16 these people. 17 (Laughter.) 18 MR. DRACHAND: We have yelled at each other. 19 We've bumped heads on occasion. But eventually things come 20 together, and they make the cars that contribute to clean 21 air in California. 22 I want to thank you all very, very much. 23 (Applause.) 24 CHAIRMAN DUNLAP: Thank you, Joe, very much. Don, 25 well said. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 Now, take your place and get back to work 2 defending your program. 3 (Laughter.) 4 Cecile Martin, from CalETC, followed by Judy 5 Mikels from SCAG, and Lloyd Dixon from Rand. And then Tim 6 Carmichael from the Coalition for Clean Air. 7 MS. MARTIN: Good afternoon, Chairman Dunlap, 8 members of the Board, staff. 9 (Thereupon, the microphone was adjusted.) 10 MS. MARTIN: I think you all heard my greetings. 11 And I want to say congratulations to Don as well. It's a 12 hard act to follow up here. 13 Now, back to the subject at hand. I'm 14 representing the California Electric Transportation 15 Coalition. We're a nonprofit business association, whose 16 mission is to promote clear air through the development and 17 use of zero-emission vehicles, hybrid electric vehicles, 18 electric buses, and rail. 19 CalETC's board members are the fuel providers for 20 the growing electric vehicle market. And in that role, we 21 have had and continue to have a stakeholder's interest in 22 the direction of California's zero-emission vehicle program. 23 As CalETC has said many times in these hearings 24 and workshops over the last year, the market for electric 25 vehicles can only begin when there are viable and affordable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 cars and trucks available to fleets and consumers. 2 It will take this market to spur competition and 3 grow in volume so that costs and prices will drop, and 4 vehicles with electric propulsion systems can begin to 5 contribute their full potential to California's drive for 6 cleaner air. 7 During the past workshops, hearings, and actually 8 since early in 1991, CalETC has stood at the podiums and 9 asked the automakers for electric vehicles, and that's what 10 we've been given, not with the certainty or in the numbers 11 that we expected. But regardless of what happens here 12 today, the market for electric vehicles has begun to take 13 shape, and all of our roles are changing. 14 This is truly the moment when the rubber meets the 15 road. Now, I wanted to speak just a little bit about the 16 uncertainty in numbers. Because for us, as fuel providers, 17 we do need access to information. We're hoping to have 18 access to the noncompetitive aspects of automakers' plans, 19 because we need to be able to prepare and make our business 20 cases for investment in infrastructure. 21 We know that in the last few months, automakers 22 have announced at least three separate products that will be 23 available this year. So, we have accelerated our schedule 24 of preparation. CalETC and its members are committed to 25 infrastructure readiness. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 Infrastructure projects that we have been working 2 on since last year are nearing implementation. In 3 California, electric and building codes now contain a new 4 section that describes safe EV charging facilities. The 5 statewide training for building officials begins next month. 6 In addition, all utilities are establishing their 7 procedures for quick response to requests for recharging 8 infrastructure on the utility side of the meter, and some 9 utilities are establishing customer-side infrastructure. 10 New businesses are being formed to provide 11 infrastructure equipment and services to EV consumers. 12 And there are Northern and Southern California 13 efforts to establish master permitting procedures to 14 simplify and accelerate the installation of EV 15 infrastructures. 16 Inductive charging systems are fully standardized 17 and will be UL Listed to the new codes in time for vehicle 18 introduction. The Society of Automotive Engineers is 19 working to finalize the conductive plus standard, completing 20 standardization for conductive systems. 21 At least three manufacturers are poised to 22 manufacture these systems and list them to the new code in 23 time for the introduction of vehicles recharging with the 24 conductive system. 25 Further, high voltage quick charge demonstrations PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 are being planned in at least three areas of the State. 2 In another important area, the emergency response 3 training project with the State Fire Marshal that we began 4 last year is proceeding on schedule with additional support 5 from the automotive industry. 6 And thanks to the Air Resources Board initiative, 7 there are now regular meetings with representatives of the 8 California Highway Patrol, firefighters, and other emergency 9 response personnel. 10 In the expectation of the introduction of 11 vehicles, at least five regions of the State are already 12 proposing purchase incentives for electric vehicles. These 13 incentives are a critical component of early vehicle 14 introduction and a wise avoided cost investment strategy for 15 communities trying to reduce mobile emissions by putting 16 zero-emission vehicles on their streets. 17 Some of those programs are in areas where Board 18 members reside or in areas that Board members represent, and 19 we're hoping for your support there. 20 These programs and many others are good examples 21 of public/private partnerships, and it is necessary for the 22 public and private sectors to work together to lay the 23 foundation for the successful introduction of EVs. 24 Public agencies, when they understand zero- 25 emission vehicle benefits, continue to step forward to do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 what they can to encourage this technology. To support 2 their efforts, as well as those of the private sector, it is 3 important that they have access to a balanced and 4 independent analysis of ZEV benefits. 5 And we appreciate staff's efforts today in 6 pointing out that the analysis in the documents presented 7 today was incomplete, and that included upstream emissions 8 for electric vehicles, but not all upstream emissions for 9 gasoline vehicles. 10 We urge the Air Resources Board to complete this 11 fuel cycle analysis and to produce a document for the 12 purpose of educating the public about the fuel range of ZEV 13 benefits, and to address any concerns that the public may 14 have about the relative impacts of battery recycling and 15 power plant emissions. 16 This is a first and necessary step in the public 17 education campaign that is needed to provide the public with 18 an independent source for continuing information on ZEVs. 19 And, of course, I'd like to second what a couple of earlier 20 speakers mentioned and say that we would very much like to 21 see a public education campaign like we've just experienced 22 for cleaner burning gasoline. 23 And we really would hope to work with the Air 24 Resources Board on a campaign like that. 25 We also need public agencies like yourselves, who PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 do know the benefits of EVs, to take the lead in fleet 2 purchases to set a positive example for other agencies and 3 the public by modeling the kind of ideal fleet you envision 4 for California's future. 5 As CARB moves forward to fulfill its 6 responsibility in the area it deems appropriate to remove 7 any existing barriers and to support the early market for 8 ZEVs, both the vehicles and the fuel, CalETC members will be 9 working with you and with the industry to do all we can to 10 provide Californians with the opportunity to make a p 11 purchase choice for clean air. 12 And on behalf of our members, I want to reiterate 13 our continuing commitment to EV readiness. 14 CHAIRMAN DUNLAP: Thank you, Ms. Martin. Any 15 questions of our witness? 16 Ms. Edgerton. 17 MS. EDGERTON: Ms. Martin, what figures are you 18 currently using? I mean, it struck me as making great sense 19 that obviously you need to know how many electric vehicles 20 to plan for. 21 And where does the MMOA leave you in terms of 22 planning? And do you -- that's one thing. Do you have 23 alternative ways and communications with the automakers to 24 work that out? 25 We have the infrastructure working group. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 MS. MARTIN: If an automaker lets fuel providers 2 know that they're going to introduce vehicles, where and 3 about how many, it's easy to make a business case to go 4 forward with that investment. 5 We see in the MOA that there will be demonstration 6 vehicles, but we don't know where they'll be located. At 7 least we have some leadtime, because that doesn't begin 8 until 1998. 9 But we have heard that some manufacturers are 10 introducing vehicles this year. We're working with those 11 manufacturers to make sure we're ready. And they have been 12 forthcoming with information. 13 But it will be difficult, I think, when all seven 14 manufacturers are making plans to keep up with manufacturers 15 on an individual basis. 16 It would be great if there was a place where we 17 could get a sense of what was coming ahead of time. 18 CHAIRMAN DUNLAP: Thank you. 19 Judy Mikels? If I might give some counsel to some 20 of the witnesses, we received and read an awful lot of 21 material. And if we've had your written testimony for some 22 time, you can be assured that most of us, if not all of us, 23 have read it. 24 So, please, don't feel that you need to read or 25 cover everything that you may have written to the Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 Because, while your points are important and we need to hear 2 them, we may have already had a chance to follow them. 3 So, if that applies to you, use it. If not, feel free to 4 cover what you feel you need. 5 MS. MIKELS: Well, good afternoon, and thank you 6 all for allowing me to speak. 7 You do have the written testimony in front of you. 8 My name is Judy Mikels, and I'm from the Southern California 9 Association of Governments. I serve as a regional council 10 member. I'm also chair of the energy and environment 11 committee. I'm a county supervisor for the County of 12 Ventura. You probably are well aware of the County of 13 Ventura. 14 Since you have the written testimony, I see no 15 reason to read to you and to read it into the record. We 16 would just like to reiterate, you know, that there are 17 millions of dollars of transportation funds at risk. 18 Thank you very much for what you've done so far in 19 maintaining some sort of incentive for continuing. We have 20 our conformity plans at risk. We're very pleased with 21 what's before us. 22 And as it goes forward, if it goes forward as it 23 is, we feel that it will not impact our conformity plans. 24 We just hope that there is no more relaxation due to our 25 Federal transportation funding. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 I would be happy to leave it at that. You've 2 heard more than you probably need to over the last few 3 years. If I can answer a question, I certainly would be 4 happy to. 5 CHAIRMAN DUNLAP: I had a question. I don't 6 remember exactly the detail. It had to do -- Jim, help me 7 out. 8 MR. BOYD: Population. 9 CHAIRMAN DUNLAP: Oh, population trends. Could 10 you say a word or two about that? We had an earlier witness 11 that mentioned -- brought this up. And I think Mr. Lagarias 12 raised it as well. 13 MS. MIKELS: Okay. I wasn't here when the 14 earlier. Were you here for the earlier testimony? 15 CHAIRMAN DUNLAP: Erica, can you -- 16 MS. MIKELS: Could she come up? I apologize. I 17 was at the California Association of Counties meeting. So, 18 I don't want to give you what you've already heard. 19 You heard the question earlier. Can you give us 20 some statistics about what's happening with population 21 increases in Southern Cal? 22 MS. VANDENBRAND: Indeed, the population is going 23 up and vehicle ownership is going up along with it. We have 24 increased vehicle miles traveled, all those things 25 essentially about to increase vehicle emissions. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 because of that, we need to reduce those emissions. And 2 what we found and what the SIP has found is that one of the 3 most effective ways is to do that through zero-emission 4 vehicles and through alternative fuels. 5 My name is Erica Vandenbrand (phonetic), and I'm 6 principal planner with the Southern California Association 7 of Governments. 8 MR. LAGARIAS: Mr. Chairman, the question I raised 9 was not new registration or out-of-town registration, but 10 the existing population. What about reregistration? How is 11 that going? 12 MS. VANDENBRAND: Well, I don't have the 13 statistics off the top of my head about reregistration. But 14 what I do know is that the population increase in Southern 15 California is primarily people who are here already. And 16 reregistration, there has been some cars that have left. 17 But there's still quite a lot of cars remaining. And what 18 we're seeing is that there are just simple more and more 19 cars being owned. 20 MR. LAGARIAS: Well, of course, that would be with 21 the new registrations as well. We want to know who's 22 driving out of the State and not coming back. 23 MS. VANDENBRAND: Honestly, I can't tell you right 24 off the top of my head. We know that some people are, but 25 who they are hasn't been kept track of. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 MR. LAGARIAS: Thank you. 2 MS. MIKELS: If we have those figures -- and 3 certainly Erica is headed back, as well as I, and we will 4 try to get that information to the Board as clearly as we 5 possibly can. 6 CHAIRMAN DUNLAP: That would be appreciated. And, 7 Jim, if you'd ask Mr. Scheible to call up. He has direct 8 contact with SCAG. 9 We just wanted to get a flavor for what's happened 10 population-wise. 11 MS. MIKELS: Well, it appears that, since our 12 population is growing, those registrations that are leaving 13 are being outnumbered by the internal growth. That's about 14 the only statement I can make. But we can certainly get you 15 that information as best as we have it and get it back to 16 you quickly. 17 CHAIRMAN DUNLAP: Okay. Thank you. 18 MS. MIKELS: Thank you very much. 19 CHAIRMAN DUNLAP: Lloyd Dixon from Rand, followed 20 by Tim Carmichael, Dave Hermance from Toyota, and Joe Caves 21 from Union of Concerned Scientists. 22 Good afternoon, Mr. Dixon. 23 MR. DIXON: Hi. My name is Lloyd Dixon. I'm a 24 chemist at Rand. 25 We have just completed an extensive study of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 California's ozone reduction strategy for light duty 2 vehicles. We presented some of our findings on the zero- 3 emission vehicle mandate to you last December. And you 4 should have recently received the summary of our technical 5 report. 6 Today, we will explain why we believe it wise for 7 the Board to revise the ZEV mandate. We will assess the 8 proposed revision and provide suggestions for increasing its 9 payoff. 10 In particular, we believe that the intense debate 11 over the ZEV mandate should not district attention from the 12 critical importance of programs that control emissions from 13 internal combustion engine vehicles. 14 So, I have some slides here to help with the 15 presentation. First, our research suggests that there's 16 great economic and environmental risk of proceeding with the 17 mandate as it currently is. This is because electric 18 vehicles could cost much more to produce and operate than 19 internal combustion engine vehicles in the early years. 20 They could also be displacing fairly clean ICEVs 21 if the ICEV control program works well. 22 The mandate may cause the prices of internal 23 combustion engine vehicles to rise by $550, because the 24 mandate, in effect, creates increases -- creates a cost to 25 selling an additional gasoline powered vehicle in the State. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 This increase in prices can slow the sales of new 2 vehicles, cause the fleet to age, and increase the overall 3 emissions from LEVs. And finally, the current mandate poses 4 risk, because it could result in consumer disappointment 5 with EV performance and harm the long-run prospects for 6 ZEVs. 7 Now, on the other hand, there's great economic and 8 environmental risk from repealing the mandate all together. 9 Without the mandate, ZEV technology may stagnate. It could 10 turn out that our emissions control efforts from internal 11 combustion engines are disappointing. It may be very 12 difficult to come up with other ways to reduce emissions, 13 and California could be left with some very unappealing 14 alternatives to meeting its Federal standards in the year 15 2010. 16 Well, given these uncertainties and these risks, 17 we developed some principles for desirable ZEV policies, and 18 what we concluded is that we don't need to commit to a long- 19 term ZEV policy right now; that what we should instead is 20 look for short-term policies that allow us, first, to avoid 21 really bad outcomes, extremely bad outcomes. 22 We should also adopt policies that allow us to 23 learn about, first, the promise of electric vehicle 24 technology and the effectiveness of the other elements of 25 the strategy. And those other elements are so important, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 because they, in part, determine the overall desirability of 2 electric vehicles. 3 And, finally, we should take -- we should adopt 4 policies that allow us to take advantage of this 5 information. Next slide. 6 Now, we think that the proposed revision to the 7 mandate is consistent with these principles. It appears to 8 avoid the worst-case outcomes by delaying production -- by 9 delaying the production quotas that avoid the possibility of 10 very high cost with little emission payback in the early 11 years. 12 It also avoids the -- by promoting the 13 demonstration program and funding for R & D, promotes the 14 continued development of electric vehicles. 15 It provides, through the demonstration vehicles 16 and the R & D, it allows us to continue to learn about the 17 promised electric vehicles, and what role they should play 18 in our overall strategy. 19 The battery research provisions allow us to see if 20 we want to realize the promise of any advanced technology 21 battery research efforts, and also we'll learn more about 22 our other strategies to control emissions. We'll learn more 23 about the strategies to control emissions from gasoline 24 vehicles. 25 And finally, the biennial reviews allow this CARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 Board to use the information that becomes available to 2 revise the mandate as appropriate. 3 Next slide, please. 4 So, we think that the proposed revision is clearly 5 superior to either the mandate as it currently is or its 6 outright appeal, but we think its success depends on how 7 it's implemented. 8 And we urge the CARB Board to first make 9 information on EV performance and cost publicly available to 10 the extent confidentiality allows. This will allow policy 11 makers, the public, as well as investors to better 12 understand the real costs and payoffs of electric vehicles. 13 We also encourage the Board to announce soon how 14 different factors will be weighed in their biennial reviews 15 of the mandate. And this will help strike a balance between 16 the flexibility that you need in setting -- in modifying 17 policy appropriately as well as the predictability that's so 18 important to investors and the development of advanced 19 technology batteries. 20 And finally, and perhaps most importantly, we 21 think that it is very important for the Board to pay close 22 attention to the non-ZEV elements of our strategy. And this 23 is important for two reasons. First, these other elements 24 are potentially large sources of emissions. And, second, 25 how effective they are will indeed determine what the proper PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 role of ZEVs should be in California strategy. 2 Next slide. 3 Now, our research suggests that a tremendous 4 amount of uncertainty does remain about the non-ZEV elements 5 of our strategy. And let me just give three examples or 6 examples from three key programs 7 First, the benefits of the scrappage program will 8 depend importantly on details that have yet to be 9 determined. This program could result in the in-migration 10 of many vehicles. It also could provide incentives for 11 drivers to tamper with or delay repairs on his car. And, if 12 this is the case, then we may fall far short of the 13 projected benefits of the scrappage program. 14 OBD II could pay enormous dividends, but it's 15 important that its effectiveness may well depend on this 16 very little understood -- very poorly understood behavior of 17 drivers and smog check technicians to check engine lights. 18 And finally, the success of the smog check II 19 program is hardly assured. The higher repair limits may 20 increase evasion of the program. And we know from 21 experience how hard to is to deter fraud. 22 The last slide. Oh, that is the last slide. 23 Sorry. 24 Anyway, in the end, we encourage CARB and the 25 public to pay careful attention to the design and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 implementation of these programs and to monitor closely 2 their emissions reductions. This will be important to 3 determine how hard we should continue to push those in the 4 future. 5 CHAIRMAN DUNLAP: Thank you. Mr. Lagarias has a 6 question. 7 MR. LAGARIAS: I take from your discussion that 8 you're supportive to our proposed modifications to the ZEV 9 program. 10 MR. DIXON: That's right. 11 MR. LAGARIAS: Well, that's interesting. 12 Who's funding your study? 13 MR. DIXON: It's partly funded by the California 14 Manufacturers Association, and then it's partly funded by 15 Rand's internal funds through the Institute of Civil 16 Justice. 17 MR. LAGARIAS: So, we had no part in putting you 18 up to this report? 19 MR. DIXON: No, you had no part. 20 (Laughter.) 21 MR. LAGARIAS: Are you aware that when you 22 discussed the non-ZEV elements program, that 90 to 98 23 percent of the program is dedicated to TLEVs, LEVs, and 24 ULEVs programs, substantially reducing emissions from new 25 cars? That the clean fuel program also gets immediate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 benefits, and that the ZEV program is an addition. And 2 while it's getting the major part of the attention, it is 3 not the major contributor to pollution reduction. It's just 4 looking into the future. 5 And overlook the benefits of the LEV, the ULEV, 6 and the clean gas/clean fuels program is really not putting 7 things in perspective. 8 MR. DIXON: Yeah. And the point we're trying to 9 make is continue -- is to encourage -- or to continue to put 10 its focus on that part of the program. And, in particular, 11 look at the design, implementation, and evaluation of the 12 key elements of the program. Because there's a lot of 13 uncertainty about how certain parts of the program would 14 work, and how they work has a lot of impact of what we will 15 have to do in the future. 16 Any other questions for Mr. Dixon? All right. 17 Very well. Thank you. 18 Tim Carmichael, Coalition for Clean Air, followed 19 by Dave Hermance, Joe Caves, Mike Miller. 20 Mr. Carmichael, I understand you've given us 21 written testimony here. 22 MR. CARMICHAEL: Yes, I have. I'll just try and 23 touch on a couple of points that I don't believe have been 24 addressed this morning. We concur with much of the 25 testimony of NRDC. And some of the comments you may have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 heard from us before, but I'll be as brief as possible. 2 Good morning -- or good afternoon, members of the 3 Board. Chairman Dunlap, good to see you. 4 My name is Tim Carmichael. I'm the Policy 5 Director for the Coalition for Clean Air. 6 As we have stated many times in the past, the 7 Coalition strongly supports California's zero-emission 8 vehicle requirements as an essential component of 9 California's clean air plan. 10 The Coalition participated in all of CARB's 11 workshops -- 1995 workshops on zero-emission vehicles, and 12 based on that information, supporting existing ZEV 13 technology which was presented at those workshops, the 14 Coalition does not agree with this agency's proposal to 15 repeal the ZEV requirements until 2003. In fact, we believe 16 that CARb should move ahead with the 1998 requirements. 17 Unfortunately, this agency is going to move ahead 18 with another program. 19 Relative to the program that's before you, the 20 memorandum of agreement and the regulatory adjustments that 21 would go along with that, the Coalition continues to have 22 several of the same concerns we highlighted in our testimony 23 last December. 24 Specifically, the MOA does not provide a viable 25 ramp-up to the 10 percent level in 2003. It seems clear PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 that this Board understands the importance of that 10 2 percent level in 2003 based on your commitment to date to 3 that percentage in that year. 4 Our concerns relate to how do we get from here to 5 there? And if we accept that the manufacturers will not 6 only have a capacity to produce 14 or 15,000 vehicles in the 7 year 2000, but actually produce that number of vehicles, 8 zero-emission vehicles, we're still very concerned about the 9 years 2000 to 2003. 10 And if we went from 15,000 ZEVs in the year 2000 11 to the projected approximately 100,000 vehicles in the year 12 2003, that would require an annual growth of 100 percent per 13 manufacturer per year. That is enormous for any 14 manufacturer to grow by 100 percent per year, even a small 15 component of their business. 16 CHAIRMAN DUNLAP: Mr. Carmichael, if I could just 17 make a point on clarification. I think they said a capacity 18 of 15,000 in '98. 19 MR. CARMICHAEL: Okay. 20 CHAIRMAN DUNLAP: I understand your point. 21 MR. CARMICHAEL: Even if it's 1998, you still have 22 tremendous growth -- that probably means in excess of 50 23 percent a year till 2003. 24 Requiring the automakers to submit production 25 plans is simply not enough. We believe that there should be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 an interim production requirement in the 2000 to 2003 time 2 frame so that, you know, we do, in fact -- California does, 3 in fact, see 10 percent of the vehicles in 2003 as zero- 4 emission vehicles. 5 That is critical to our air quality and is 6 certainly critical to meeting the ZIP as we see that target 7 in the future. 8 Our second major concern relates to equivalent 9 emission reductions. This morning, the testimony has 10 focused on the viability of the 49-State car, and the 11 questions surrounding the percentage that will migrate into 12 this State. 13 Even if you accept the staff's projections and you 14 accept the automakers will produce a 49-State car in 2001, t 15 his program before you that you're considering does not 16 achieve equivalent emission reductions. It doesn't achieve 17 it in 1998 to 2002 time frame. In fact, it doesn't achieve 18 equivalent emission reductions until 2006. 19 The Coalition that equivalent emission reductions 20 in 2006 means little to someone who's breathing in 1998. 21 In a December 21st letter to Chairman Dunlap, 22 Governor Wilson wrote, and I quote, ". . .I would endorse 23 modifying the ZEV mandate so long as a modification meets or 24 exceeds the emission reduction benefits of the existing 25 regulation." PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 As the proposal before you does not deliver 2 emission reductions equivalent to the ZEV mandate, we are 3 left to conclude that this proposal would not have the 4 endorsement of the Governor. 5 Finally, a modification of the ZEV requirements, 6 which will not result in equivalent emission reductions, is 7 not acceptable to the Coalition for Clean Air. And we do 8 not believe it should be acceptable to this Board. 9 As I stated earlier, none of these concerns are 10 new. The Coalition for Clean Air, along with the National 11 Resources Defense Council, Union of Concerned Scientists, 12 and the Planning and Conservation League have addressed 13 these issues at the Board meeting in December and in letters 14 submitted in January and February of this year. 15 Unfortunately, to date, no revisions addressing 16 these concerns have been incorporated into the proposal that 17 you are considering. 18 The Coalition urges you to reject the MOA until 19 these equivalent emission reductions -- until the issues of 20 equivalent emission reductions and a viable production 21 ramp-up are addressed. 22 Thank you very much. 23 CHAIRMAN DUNLAP: Mr. Calhoun and then Ms. 24 Edgerton. 25 MR. CALHOUN: Mr. Carmichael, how would a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 specified ramp-up -- a specified number of vehicles, how 2 would that differ from the original regulation? 3 MR. CARMICHAEL: It would differ in that you would 4 not have the 1998 requirement; you would have a requirement 5 in 2001. 6 As has been laid out clearly over the last year, 7 the majority of emission reductions will come post-2003. 8 But they rely on 10 percent beginning in 2003. And if we 9 don't reach the 10 percent level in 2003, we're not going, 10 you know, make the emission reductions that are projected 11 and required to meet our SIP goals in the year 2010. 12 So, my concern is that we're postponing this 13 program for five years, and we're not asking enough in the 14 interim. And we're going to get 2002, 2003, and the 15 automakers will throw their arms up and say, "We can't do 16 it." 17 MR. CALHOUN: Well, the Board has a provision to 18 know what's taking place during the intervening years. They 19 will know what kind of progress is being made. So, I don't 20 know how you can accurately predict at this point what's 21 going to happen between now and then. 22 MR. CARMICHAEL: You're right. We can't predict. 23 And we want to hedge on the side of clean air. And we want 24 to ensure that there are protections there. And we feel one 25 protection would be a milestone or a target requirement in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 the year, you know, 2000, 2001. 2 MR. CALHOUN: The Board will periodically receive 3 reports from the staff about what is actually taking place. 4 The Board will know that. 5 And if the Board feels as though some change will 6 be needed down the road in order to make the program more 7 effective, it will have an opportunity to do that. 8 MR. CARMICHAEL: Okay. If I could respond to 9 that. 10 As was highlighted earlier by the gentleman from 11 Chrysler, the first production plan that you will receive 12 will be in 1998. That, we hope, will cover the next five 13 years. 14 CHAIRMAN DUNLAP: '97. In '97. 15 MR. CARMICHAEL: Okay. In 1997. We hope that 16 will cover the next five years. But your next opportunity 17 to review production is two years after that in 1999 or late 18 1999. 19 It was pointed out that the automakers need four 20 years advance to develop a production plan. So, it's not 21 until 1999 that you will know one way or the other whether 22 these automakers are -- on paper only -- are going to meet 23 2003 targets. 24 And even if they lay it out on paper, you -- I'm 25 not sure what the value is or how much better off this Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 will be in evaluating or stating that the automakers will 2 achieve the 2003 goal. 3 Simply because they said, in 1999, our four-year 4 production plan shows that we'll product X-number of 5 vehicles in 2003, we don't believe that the paper submittal 6 to this Board is enough. 7 MR. CALHOUN: What would you have the Board do? 8 MR. CARMICHAEL: Well, in a perfect world, we -- 9 MR. CALHOUN: We want to do this in the imperfect 10 world. 11 MR. CARMICHAEL: Okay. We would like a percentage 12 requirement in the 2000 and 2003 time frame. 13 MR. CALHOUN: Well, to me, that's no different 14 from what we started out with. That concludes my comment. 15 CHAIRMAN DUNLAP: Thanks, Mr. Calhoun. 16 Ms. Edgerton. 17 MS. EDGERTON: Well, in the interest of getting a 18 colloquy going, it does strike me that there is -- that 19 there are quite a number of differences. But one difference 20 which is enormous and which the automakers negotiated very 21 hard for is that having a contractual obligation as opposed 22 to a regulatory obligation greatly reduces the likelihood 23 that the California program can be adopted by the Northeast 24 States. 25 I beg your pardon? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 MR. CALHOUN: I haven't said a word. 2 MS. EDGERTON: Oh, I thought I saw you shake your 3 head back and forth. 4 So, it seems to me that it's pretty clear the 5 reason why we're -- the reason why this rather unusual or 6 odd approach has been taken is because of a concern there on 7 behalf of the automakers. 8 Secondly, I think a contract, though, -- I mean to 9 be fair -- is very, very different from a regulation, in 10 that a contract is an agreement between the parties and must 11 be interpreted based on the actual four corners of the 12 agreement. 13 You have to look at what is actually in the 14 agreement in order to determine the intention of the 15 parties. That's a well-settled principle of law. 16 So, it seems to me that if this went to a court, 17 if the contract went to a court, and there were terms that 18 were missing, you know, it's going to be very difficult. 19 And, secondly, if it went to a court and there 20 were terms that were agreed to, they wouldn't be mandates. 21 They would be agreed to by both parties. 22 I have found it very confusing to hear people talk 23 about anything that's in the MMOA, in the proposed MMOA, 24 which would be a ramp-up as a mandate. 25 It is not correctly -- it would not correctly be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 categorized as a mandate at all. It would be correctly 2 categorized, I believe, as a voluntary agreement, as an 3 agreement, good-faith agreement by the auto manufacturers to 4 California to tell us at a minimum what they plan to provide 5 to us to help us with our air. 6 So, it strikes me that it's very different asking 7 for a ramp-up, a voluntary ramp-up number that's publicly 8 released to Californians who breathe this air. You know, 9 air pollution is probably the fourth-highest ranking public 10 concern. 11 This is quite different, it seems to me. I think 12 it's a clear, a fair request. That's one of the things that 13 I wished that was more carefully and specifically set out, 14 Mr. Carmichael. 15 CHAIRMAN DUNLAP: Well, one of the things, too -- 16 I think we've heard this. I think we even had this 17 discussion last time you were here. This Board is concerned 18 about letting the market have a role to play here. And no 19 matter how we were to implement this program, the market 20 will play a role. 21 And it's the intent and it was the direction from 22 this Board to staff to find the best way to harness that 23 market while getting at the clean air goals. 24 And that's what the intent is here. I want you to 25 at least hear that from me. It's not a sinister move to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 deprive the breathers of this State of their rights. We 2 want that program, the ZEV program that is, to work and we 3 need it to work to attain the clean air goals. 4 So, I appreciate your consistency and your 5 personal believe that there's some areas that we need to 6 focus on. I appreciate that. That's wise counsel. 7 And I'm glad that you continue to let us hear that 8 throughout this process. 9 Any other questions of Mr. Carmichael? 10 MS. EDGERTON: I have one, because we've talked 11 about -- the man from Chrysler mentioned 15,000 by 1998. 12 But -- 13 CHAIRMAN DUNLAP: Cumulatively. 14 MS. EDGERTON: Cumulatively. Uh-huh. That's 15 right, in the aggregate for all manufacturers. 16 However, in the MMOA, 1-B, market-based ZEV 17 launch, where it is provided that -- where it's called for 18 manufacturers to maintain a, quote/unquote, "capacity to 19 produce specified ZEVs that could be sold in California if 20 warranted by consumer demand," I can see how it could be -- 21 I can share the concern that a manufacturer can simply offer 22 unattractively priced ZEVs without maximized performance, 23 and declare that these ZEVs weren't warranted by customer 24 demand. 25 I mean, it seems to me that's -- that's a concern, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 that's a legitimate concern. And also, I would say, with 2 respect to that 1-B, it is mentioned that Exhibit A will 3 have the capacity numbers. 4 And I can only deduce from the testimony that I 5 suppose what's already been submitted by the manufacturers 6 confidentially has been made public by Chrysler saying it's 7 15,000 today. 8 MR. CARMICHAEL: Chairman Dunlap actually 9 estimated to be in that ball park in December, and that's 10 why I was using that number. 11 CHAIRMAN DUNLAP: Which was confirmed today. 12 MS. EDGERTON: So, that part's not public (sic) 13 anymore, so why don't we just go ahead and put it in the 14 agreement? 15 CHAIRMAN DUNLAP: I think we can -- 16 MR. CACKETTE: The reason for that was that there 17 are seven different agreements, and the 15,000 number is the 18 aggregate, which we made available publicly prior to it. 19 But the individual numbers per manufacturer are deemed 20 confidential by those manufacturers. 21 MS. EDGERTON: Well, that always -- 22 MR. CACKETTE: That's the only reason for that. 23 CHAIRMAN DUNLAP: One thing --- 24 MS. EDGERTON: Well, we could say -- 25 CHAIRMAN DUNLAP: What I'd like to do is stick to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 the witness' testimony. And I think, Ms. Edgerton, we can 2 cover these items when we hear from the witnesses. 3 MS. EDGERTON: Okay. 4 CHAIRMAN DUNLAP: And our own discussions. 5 MS. EDGERTON: Thank you. 6 CHAIRMAN DUNLAP: Thank you, Mr. Carmichael. 7 MR. CARMICHAEL: Thank you. 8 CHAIRMAN DUNLAP: Dave Hermance from Toyota, Joe 9 Caves from the Union of Concerned Scientists, Mike Miller 10 from the California Motor Car Dealers Association, and then 11 Marc Chytilo from the Environmental Defense Center, CalPIRG. 12 Good afternoon. 13 MR. HERMANCE: Good afternoon, Mr. Chairman, 14 members of the Board, staff, and interested others. Why 15 else would you be here if you weren't interested. 16 I am Dave Hermance, General Manager of Powertrain 17 in Toyota's Los Angeles Technical Center. 18 As a member of the negotiating team, a tired 19 member of the negotiating team, I'm here to express Toyota's 20 strong support for the pending staff recommended regulatory 21 changes and the MOA. 22 While not perfect in our eyes, they represent a 23 viable compromise which we believe will result in the 24 highest probability of a successful market launch of EVs. 25 The regulatory changes are necessary to avoid a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 catastrophe or, as member Calhoun called it, "a pending 2 train wreck," in 1998. We appreciate staff's recognition of 3 this problem and commend the new process undertaken to 4 resolve it. 5 The MOA represents a new approach to development 6 of advanced technology. Further, in recognition of 7 California's unique air quality situation, the industry has 8 agreed in the MOA to implement cleaner cars nationwide which 9 will result in a greater air quality benefit toward 10 California's SIP compliance. 11 This contract is fully enforceable, and we 12 certainly regard it as that, and intend to comply fully. 13 And in combination with the regulatory changes, it will give 14 EVs their best shot at success. 15 Since other members of industry have spoken 16 previously and more will speak later, I will end my comments 17 there and attempt to answer your questions. 18 CHAIRMAN DUNLAP: Okay. Very well. Ms. Edgerton. 19 MS. EDGERTON: I want to get back -- are you 20 authorized to talk about the commitment of your company to 21 the 49-State car? 22 MR. HERMANCE: Absolutely. We are totally 23 committed to implementing the program. 24 MS. EDGERTON: Okay. And that's the NLEV, same 25 thing as an NLEV. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 MR. HERMANCE: That's correct. 2 MS. EDGERTON: Would you be prepared to write a 3 letter to Administrator Browner from the U.S. EPA, 4 indicating that, as soon as we take our action tomorrow, 5 that you are committed? 6 MR. HERMANCE: I believe you've got a 15-day 7 notice pending that precludes an agreement as of tomorrow. 8 But, we are committed to implementation of the 49-State. 9 Whether it's specifically the one outlined in the 10 NPRM is not quite -- there is some risk associated with 11 that. It will be a 49-State program. It may not be the one 12 as defined in the NPRM. It will still accomplish .075 fleet 13 average NMOG. 14 MS. EDGERTON: NPRM, could you, for the public -- 15 MR. HERMANCE: That's EPA's language for notice of 16 proposed rulemaking. 17 That's the document that's out now for comment. 18 It's an in-process document. It's not a final one. 19 MS. EDGERTON: Can you clarify for me why 20 representatives of the auto companies in the last couple of 21 weeks have objected to representatives of the U.S. EPA about 22 having the NPRM regulation approved? 23 I mean, if -- I just want to get clear. 24 CHAIRMAN DUNLAP: Lynne, if I may -- 25 MS. EDGERTON: Yeah, sure. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 CHAIRMAN DUNLAP: -- ask maybe a clarifying 2 question. There is some difference between the Federal 3 definition of an NLEV and our definition for purposes of our 4 proposal here today, Mr. Cackette? 5 MR. CACKETTE: The NLEV regulation that EPA's 6 proposing is designed to allow a vehicle manufacturer to 7 voluntarily sell cars. But once they do that, they have 8 enforceable requirements to meet emission standards to which 9 they voluntarily sold the car. 10 So, in other words, they can say, "Yeah, II want 11 to," or, "No, I do not want to sell LEVs in the other 12 States." 13 And once they do that, those vehicles are subject 14 to recall and other provisions, which are basically governed 15 by that rulemaking. That's what's at stake. 16 What governs their decision to do that -- I think 17 the definitive statement Mr. Hermance said -- is the MOA, 18 which says that they will do it. They are committed to 19 selling nationally cars which meet the equivalent of 20 California LEV standard. 21 CHAIRMAN DUNLAP: Okay. 22 MS. EDGERTON: But my question is this: I just 23 want to be sure -- and I'm going to ask the other car makers 24 who come up, too -- I want to be sure that I am not mixed up 25 about what California has really achieved here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 My understanding is that once these MMOAs are 2 approved, Massachusetts and New York have a right, and 3 you've promised, and it's enforceable there, for them to get 4 in 2001 the NLEV, the 49-State car. 5 I mean, we've claimed that we've won this for 6 everybody. And I just want to be sure at the end of the day 7 that that's true. 8 MR. HERMANCE: In Massachusetts and New York -- 9 let me clarify one thing first. 10 I've not been party to the direct negotiations in 11 the Northeast. That's handled out of a different office in 12 our company. 13 However, my understanding is Massachusetts and New 14 York currently have regulation on the book which 15 specifically adopts California's low-emission vehicle 16 program. 17 It's my understanding that unless they change what 18 they've done on the books, they'll actually wind up getting 19 the fleet-average NMOG as opposed to .075. They'll get the 20 California program exactly instead of NLEV. 21 MR. LAGARIAS: Very good. 22 CHAIRMAN DUNLAP: Ms. Edgerton, just -- 23 MS. EDGERTON: So, we haven't won what we thought 24 we'd won for them. You're still negotiating. 25 MR. HERMANCE: Well, no. Massachusetts and New PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 York have adopted your rule. They will get your vehicles, 2 which is actually cleaner than NLEV, marginally cleaner than 3 NLEV. 4 SUPERVISOR RIORDAN: It's a little bit cleaner. 5 MR. HERMANCE: Yeah, it's marginally cleaner than 6 NLEV. 7 MS. EDGERTON: What I would like to have at the 8 end of the day -- my understanding, when I came to this 9 hearing, was that what California got, they'd get. And 10 that, as a result, we would be counting what they sold there 11 and came into our State according to that particular 12 standard. 13 MR. HERMANCE: That's correct. 14 (Thereupon, both speakers spoke 15 simultaneously.) 16 MR. HERMANCE: -- well, Massachusetts and New 17 York, instead of being a .075 car, it could be a ULEV; it 18 could be a LEV, or it could be a TLEV, as long as the fleet 19 average NMOG meets your curve, unless they change their 20 rule, which is a possibility. 21 CHAIRMAN DUNLAP: But from the all other States, 22 the migration -- 23 MR. HERMANCE: From all the other States -- 24 (Thereupon, the reporter requested one 25 person speak at a time.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 MS. EDGERTON: What's wrong with this picture, 2 Tom? 3 CHAIRMAN DUNLAP: I think we're maybe splitting 4 hairs here. 5 MS. EDGERTON: I don't. Well, it may be -- 6 MR. CACKETTE: I think the differences you're 7 hearing here is that -- I mean, you referred to a 49-State 8 or a NLEV program, and two of the States might have slightly 9 different cars than that, that will be more identical to 10 California vehicles than the NLEV car, depending on their 11 actions, because they've already adopted under 177 our 12 program. 13 The other 47 States would get -- have not taken 14 that action, and would -- I think it's 47. I'm not sure if 15 Maine is in there or Vermont. There are a couple of other 16 ones that are considering it in the Northeast, but the other 17 States will get the California LEV car -- Nevada and 18 Arizona, places where we get more of our migrating cars 19 from, will get the California LEV equivalent vehicle in 20 2001. 21 MS. EDGERTON: Thank you. Well, I'd like to get 22 back, and I'll move on in the interest of -- 23 CHAIRMAN DUNLAP: That's fine. We can have a 24 discussion. One thing, I'd like to caution my colleagues, 25 as witnesses come forward, we don't want to imply that they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 must send communications to other regulatory agencies or 2 anything like that. 3 They're here to try to educate us and answer 4 questions about our program. So, I just want us to be a 5 little careful about suggesting we send letters -- require 6 them to send letters to Administrators of EPA or any other 7 such organizations. 8 MS. EDGERTON: Okay. 9 CHAIRMAN DUNLAP: While Mr. Hermance may be 10 totally capable and confident to cover these areas which 11 we're considering today, I don't know that you can make as 12 broad a policy for your company. 13 MR. HERMANCE: That's correct. I can not. 14 CHAIRMAN DUNLAP: Okay. Any other questions of 15 Mr. Hermance? 16 All right. Thank you. Joe Caves, Union of 17 Concerned Scientists; Mike Miller, California Motor Car 18 Dealers Association; Marc Chytilo, Environmental Defense 19 Center, CalPIRG; and then Kelly Brown, Ford Motor Company. 20 MR. CAVES: Mr. Chairman, members, Joe Caves, 21 representing the Union of Concerned Scientists. 22 Let me just, first of all, say we share, I think, 23 the goal of this Board in having a successful market launch 24 of zero-emission vehicles, and we participated at every 25 stage, and you've heard our technical comments. And I hope PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 that where we've had disagreements, that they are respected 2 as our legitimate concern to try to make this a workable 3 program. We'll continue to voice those. 4 And we previously testified that we do not agree 5 with CARB about the wisdom of substituting a contractual 6 agreement for regulatory standards to ensure development of 7 zero-emission vehicles. 8 After reviewing the staff report and the MOA, that 9 view has not changed. But rather than restate those 10 arguments, you've heard them before, I want to confine my 11 remarks to some specific concerns about the MOA that I think 12 that you can address now; and I think, in the interest of a 13 successful market launch that you should at least consider. 14 One of the concerns that I want to raise with you 15 is what I would term potential loopholes -- I'm certain not 16 intentional; but, nonetheless, loopholes -- that could allow 17 one or more car makers to avoid key requirements of the 18 agreement. 19 To cite what I think is probably the most obvious, 20 the MOA includes language that excuses a failure to comply 21 with the technology partnership if the price of pilot 22 batteries are, quote, "unreasonable." 23 Reasonable costs are not defined in the MOA. The 24 whole point of the partnership is, of course, to test 25 advanced battery technologies, and allowing an out on cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 in that way I think defeats the whole purpose of that 2 provision, and what I think is critical to the MOA, which is 3 the technology partnership. 4 A second concern that I want to raise is on the 5 issue of ramping up to the 10 percent production. I think 6 we've all recognized that it's getting to that, it's having 7 an acceptable and sustainable zero-emission vehicle program 8 in California that's really the key to the air quality 9 benefits we're after. 10 The debate we've had over the early years is 11 really how to get there, how best to test that market, how 12 to find the way that works. 13 Nonetheless, those years working up to 2003, are 14 really critical. The existing regulation has an explicit 15 ramp against which we can at least judge automaker 16 performance. We understand your reasons for wanting to 17 eliminate that. And while we have some concerns about it, I 18 think the MOA goes -- is way too flexible, and it lacks some 19 key provisions. 20 The MOA requires only that car makers submit such 21 ramp-up information to the extent it's available. There is 22 no requirement that it be available; that car makers 23 actually develop ramp-up plans. There is no requirement 24 that automakers demonstrate real progress consistent with 25 the state of the technology, as your staff is telling you, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 from the technology partnership. 2 There is no explicit penalty or even a real threat 3 of regulatory action the car maker that fails to make 4 reasonable efforts to build and market zero-emission 5 vehicles. 6 What you have before you is an agreement that 7 depends on trusting the automakers to make investments and 8 commitments that are in the interest of cleaning up our air, 9 but may not be in their immediate financial interests. 10 And we all understand how their financial 11 circumstances may change and, quite frankly, their corporate 12 priorities may change. And while we may be sympathetic, 13 that does not put us in a position where California 14 necessarily wants to have its clean air future in the hands 15 of those short-term shareholder-based decisions. 16 For this program to have any hope of success, I 17 think the Board has to send strong and explicit signals 18 about exactly what's expected of the car makers during the 19 supposed ramp-up period. And what are the consequences for 20 a willful failure to comply? 21 We believe that the MOA, as written, does not meet 22 that test. I want to, first of all, say that we appreciate 23 thae Chairman's remarks this morning as to that issue. But 24 I will say further, the reason that we have a contract or 25 the reason you have a regulation is because you have to deal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 with changed circumstances and changed attitudes of the 2 parties that come to that agreement, and you have to protect 3 against that. 4 We would urge you to include some kind of formal 5 commitment or statement from the Board as to how they view 6 the MOA in this regard. As part of the formal action this 7 Board takes, we would suggest an amendment to the MOA. But 8 at least this Board ought to be explicit about what they 9 expect of the car companies and what will happen if they 10 fail to comply. 11 An additional issue on the MOA that I want to 12 raise deals with emissions equivalents. And I heard Tom 13 Cackette's eloquent defense of the staff with respect to the 14 modeling. And indeed, UCS has been one of the groups that 15 has raised points of concern and disagreements on that. 16 And I, first of all, want to say -- I want to 17 reiterate our support for and belief in the integrity of 18 CARB's staff on this issue, and don't mean in any way to 19 disparage it. But at the risk of setting off another 20 statement like that, I do want to respectfully disagree with 21 some of the elements of the emissions analysis. 22 We've submitted extensive written testimony on 23 this issue that documents in detail our concerns. Let me 24 just note a few of those. 25 Even as your staff report -- or at least what I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 heard this morning -- indicates substitution of the 49-State 2 car for ZEVs will increase emissions, at least until the 3 year 2006, I believe is the staff analysis today. Our 4 analysis suggests 2007. 5 Second, we believe staff's analysis overestimates 6 the NLEV benefits. I appreciate again the Chair indicating 7 a desire to revisit some of those numbers with CARB staff 8 and the automakers, we would respectfully ask to be included 9 in that discussion and that analysis. 10 I think that one of the difficulties all of us 11 have with the MOA process is, it is occurring behind closed 12 doors. Concerns and criticisms we might have might be 13 unfounded, because we have no way of knowing because, quite 14 frankly, we're excluded from that discussion process. 15 I think all of us would benefit in trying to 16 understand these numbers better if we had a more open 17 discussion and process in that regard. 18 Finally, I just want to -- just want to indicate 19 some concern about the sort of larger issue with the NLEV as 20 to what's going in the two Coasts, and the extent to which 21 automakers may be saying one thing and one thing on the 22 other Coast. 23 I'm not in a position to judge that issue, but I 24 think it is one that deserves further exploration here. 25 Having said all this, I want to add one more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 point. UCS and I think the entire environmental community 2 wants this program to work. We believe that zero-emission 3 vehicles and the related transportation technology, such as 4 hybrids and fuel cells, offer our best and maybe only long- 5 range hope for clean air in California, given how dependent 6 this State is on automobiles. 7 And we stand willing to work with CARB and with 8 the automakers to put the kinds of disputes we've had aside 9 and begin to find ways to make a market launch of zero- 10 emission vehicles successful in California. 11 Thank you. 12 CHAIRMAN DUNLAP: Thank you, Mr. Caves. 13 Mr. Lagarias? 14 MR. LAGARIAS: I think I heard those same 15 discussions when you had an ex parte discussion with me 16 earlier. 17 MR. CAVES: And I appreciate the members of the 18 Board being willing to have those discussions. 19 MR. LAGARIAS: You raised the concern about the 20 fact that the MOA would say that the price of batteries 21 would have to be reasonable, and you were concerned about 22 the word "reasonable," who determines it. 23 What do you think is reasonable? 24 MR. CAVES: Well, I think the battery panel laid 25 out a range of what we would call reasonable cost. It's not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 defined in the MOA itself, and I think that's one of our 2 concerns. 3 The way the MOA is structured, and I would just 4 mention as a caveat, the way a court is gong to review a 5 contractual agreement like this is different than the way 6 they would view a challenge to an administrative regulation 7 or an action of an administrative regulation. And this 8 contract specifically provides for a de novo review. So, 9 you have the potential of having a judge taking a brand new 10 look at this issue. 11 And while CARB may believe that a reasonable price 12 is within the range the battery panel suggested, that 13 doesn't mean on an independent review by a judge, if there's 14 not some explicit definition of a reasonable price, that he 15 would agree. 16 MR. LAGARIAS: Well, it seems to me that until you 17 get cars on the road with batteries, you find out whether 18 people would consider batteries reasonable or not by buying 19 them or not buying them. 20 MR. CAVES: Well, if I could, Mr. Lagarias, the 21 issue is, from the technology partnership on the early 22 vehicles, where they're really only making very limited 23 number, and that that number of vehicles is in part, as I 24 understand it, limited because of the car makers' desire not 25 to make too many; at the same time, that limits the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 economies of scale that are involved in batteries. 2 So, you have a situation where CARB staff and the 3 car makers have explicitly negotiated down to a commitment 4 by car makers for a limited number of pilot vehicles. 5 The question is whether or not car makers have an 6 out and can avoid meeting that commitment by making a 7 statement that what battery manufacturers want to charge 8 them for those few hundred or few dozen batteries is an 9 unreasonable price. 10 And I would just indicate that I think that a 11 range of reasonable price needs to be defined to avoid what 12 could be, I think, extremely unfortunate later disputes over 13 that issue that might prevent the entire technology 14 partnership from being successful. 15 MR. LAGARIAS: It might. But it seems to me that, 16 if you start bringing the courts into trying to decide what 17 the people want or don't want by determining things like 18 reasonable, you're obfuscating the issue, which is how do 19 people use these vehicles and where do they go with them? 20 MR. CAVES: With respect, sir, it's not us who are 21 trying to bring the courts into the question of what is a 22 reasonable price, but the MOA itself. That's been the 23 action of CARB staff in saying that, if the prices are not 24 reasonable, that is a defense against not participating in 25 the technology partnership. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 We've not raised the issue; CARB has. 2 MR. LAGARIAS: Well, the competitiveness of the 3 suppliers of batteries will pretty much determine what the 4 price of batteries will be, because they're competing with 5 each other just as the auto manufacturers are. 6 MR. CAVES: Well, indeed, I think our view is that 7 the seven large -- seven of the largest corporations on this 8 planet have very little need of protection from us in 9 dealing with what amount to dozens of battery manufacturers 10 and trying to drive those prices to a -- particularly 11 because battery manufacturers are going to want to get their 12 batteries into those cars. 13 MR. LAGARIAS: Right. 14 MR. CAVES: I mean, this is their future market. 15 MR. LAGARIAS: That's a point that's debatable. 16 CHAIRMAN DUNLAP: I was just going to ask, 17 suggest, Mr. Cackette, maybe you can talk about the spirit 18 in which that provision was included. 19 Because I think Joe, as you hear it, I think it 20 may be a source of some reassurance. 21 MR. CACKETTE: Yes. The statement for allowing 22 an out if there's not a reasonable pilot level price for 23 batteries was driven by a single concern. And that was this 24 contract obligates the vehicle manufacturers to put out 25 these 3750 vehicles, each one with an advanced battery pack PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 in it. 2 And if they found themselves in a situation where 3 they absolutely have to buy a certain pack from a certain 4 manufacturer and that's the only one they've got, they could 5 arguably be held up for an outrageous price. 6 And the only spirit there was to give them an out 7 so that they would not be held hostage to million dollar 8 battery packs. 9 And we believe we know what a reasonable pilot 10 level price is based on the guidance that was provided by 11 the battery panel and the person that makes the decision on 12 this -- notwithstanding the legal review -- but within the 13 confines of whether it's a violation of the memorandum of 14 agreement or not, is the Executive Officer. 15 So, we are in control of deciding what is 16 reasonable or not reasonable. 17 MR. LAGARIAS: So, that word was put in there in 18 the pilot stage. 19 MR. CACKETTE: Yeah, it's only to the pilot stage 20 batteries. And, you know, there has been some -- there have 21 been some examples where some of these early batteries in 22 very small units of a few were priced, you know, scaling up 23 from laptops, and ended up with, you know, hugely inflated 24 costs. 25 And that's not something that we want to see PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 either. It becomes I think bad publicity that have 2 demonstration vehicles have outrageously priced batteries. 3 And it's not representative of the future. 4 And so, we just wanted to provide some kind of a 5 provision that gave us a leverage to let the marketplace 6 establish a fair and reasonable price. 7 MR. CAVES: Well, I think we don't object to that, 8 Mr. Lagarias. Our concern is that the standards which Mr. 9 Cackette may hold in his head as to what a reasonable price 10 is are not, in fact, in the record of this proceeding, and 11 is not, in fact, in the record before you in adopting this 12 MOA. And that's what we're trying to address. 13 MR. LAGARIAS: It's going in the record right now. 14 MR. CAVES: Well, I heard that he has news on the 15 subject, not that what those range -- or even that it 16 included the -- 17 CHAIRMAN DUNLAP: I don't mind. Tom? 18 MR. CACKETTE: There is something on the record. 19 It's the battery panel report. They talked about what they 20 thought typical prices would be. 21 But, obviously, when it comes down to situation, t 22 he Executive Officer would have to look at the actual 23 situation, what is the exact battery. Maybe it deserves a 24 higher price. Maybe the reasonable price we see today seems 25 unreasonable because everything else is cheaper. I don't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 know. 2 We're hoping the competition will not make this an 3 issue at all; that it was merely an escape valve for a 4 potentially egregious situation. 5 SUPERVISOR ROBERTS: Would there be a way of 6 defining that to give a little bit more comfort? I was 7 starting to feel good, but then when I heard what you just 8 said, it's got me nervous again. 9 CHAIRMAN DUNLAP: There's one battery pack in 10 particular -- I shouldn't say one battery manufacturer that 11 had a very small number of pilot battery pack units that 12 cost in the range of -- they were selling them for about 13 $300,000 a battery pack for the car. 14 It was felt that that range was much more 15 expensive than you would want to expect or require an 16 automaker to -- even giving Joe credit for perhaps his 17 assessment that they are very large corporations, it's still 18 an incredible amount of money. And for units that cost that 19 cost that much, to be forced into a pilot when they're 20 economically so out of line, Supervisor, it might just be 21 difficult to conclude that they could ever become 22 commercially viable during the lifetime of our what we're 23 discussing here, or that time period which we're discussing 24 here. 25 SUPERVISOR ROBERTS: But there's no requirement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 that anybody use a particular company, is there? 2 CHAIRMAN DUNLAP: Particularly now, in some cases, 3 there are only a few manufacturers. And so, as it was 4 explained to me, we ran the risk of holding people hostage 5 economically. 6 SUPERVISOR ROBERTS: There's only a few battery 7 manufacturers? 8 CHAIRMAN DUNLAP: Of a certain type of battery. 9 MR. CACKETTE: There are developers of a number of 10 batteries -- we think there's about 10 or so right now, but 11 we don't know how that's going to sort out in the future. 12 So, those people could drop out and new ones could 13 come into the marketplace. We're not sure. But that's 14 possible that you could end up with a vehicle manufacturer 15 that had gone the track using a specific technology battery, 16 find a couple of the potential manufacturers deciding not to 17 move forward in the pilot area, and they could be stuck -- 18 basically held hostage for whatever price and rapid 19 development and recovery costs that battery manufacturers 20 should choose to apply. 21 And there's no out for the vehicle manufacturer, 22 because they're locked into this contract, having to do it, 23 and so on. 24 It's a little hard to sit here and defend a 25 corporation like General Motors about whether they have to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 spend this kind of money, but we would -- in the spirit that 2 it was put in there, it was for that purpose alone. We 3 don't think that's going to happen. 4 MR. CAVES: And I don't want to question the 5 spirit with which it was put in. And I want to make clear 6 that we don't want to defend battery manufacturers that are 7 trying to hold General Motors, or Ford, or Chrysler hostage 8 to buying their batteries. 9 Because I was rather on the flip side of that 10 situation, where you had a recalcitrant automaker who 11 decides, for whatever reason, they don't want to participate 12 in the technology partnership, you have the potential here 13 for them to say that a $50,000 or a $40,000 battery pack at 14 pilot level production -- they could declare that 15 unreasonable. 16 The would take that to the Executive Officer, who 17 would say, "No, that's reasonable." 18 They would then get a de novo review under this 19 contract. And the difference between contract law and 20 standard administrative law is, if they were appealing a 21 decision under administrative regulation, the deference 22 would go to the administrative agency. In that case, almost 23 certainly the Executive Officer's decision as to what was 24 reasonable would stand. 25 That's not necessarily true with respect to a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 contract agreement where you've not spelled out the terms. 2 That is, I think, a more serious issue than I think CARB 3 staff is taking it. And it's one, again, that I think you 4 don't want the technology partnerships to flounder on this 5 kind of technicality. 6 CHAIRMAN DUNLAP: Mr. Kenny, do you agree that 7 that's open to interpretation? 8 MR. KENNY: I think Mr. Caves actually raises a 9 valid point. But I think Mr. Cackette is trying to answer 10 that point in a way that the actual language came about. 11 The desire here was, as Mr. Cackette enunciated, that we 12 were simply trying to address an extreme situation that 13 could arise under the way the agreements were written, in 14 which the manufacturers had to procure a certain number of 15 batteries for these demonstration vehicles. 16 The original thought was that this would prevent 17 the extreme situation. And what we would do in the event 18 that reasonable pilot level prices had to be addressed, we 19 would look at the battery panel's determinations. We would 20 also look at the historical evidence that's been available 21 to us with regard to what the car manufacturers have done in 22 the past with regard to pilot level programs. 23 Additionally, because of the fact that we're 24 looking at this particular issue at this point, if it turned 25 out at some point down the road that this really became a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 sticking point, it seems to me that, at that point in time, 2 there's probably going to be an issue with regard to good 3 faith that underlies this topic. 4 And at that point, if we're looking at good-faith 5 compliance with the regulations, then I think this Board 6 would need to consider whether or not it wants to stay with 7 this particular approach or return to some kind of 8 regulatory approach. 9 MS. EDGERTON: I'd like to -- 10 MR. LAGARIAS: I have two more points. Mr. Caves, 11 you made a point of stating that ARB should be explicit 12 about what we expect of the car companies. Well, I thought 13 that MOA said what we expected from the car companies and 14 what we were going to do. 15 Now, there are other things you might want to see 16 in it, but it is explicit. 17 MR. CAVES: I think what I'm addressing there 18 particularly is the failure of the -- and the particular 19 provision is referenced on C3 of your report, ZEV Product 20 Plans. 21 (Reading) The issue of a ZEV product plan shall 22 include, to the extent available, projections for model 23 types, vehicle features, specifications, production 24 capacity, et cetera, and the lack of a specific requirement 25 to ramp up to the 10 percent, or to provide plans which CARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 could reasonably say do, in fact, show a reasonable 2 potential of ramping up to the 10 percent. 3 I mean, I respect that this Board has decided not 4 to set those same kinds of numerical standards you had 5 before, but at least to give you a clear signal that you 6 need to be able to make a judgment based on the information 7 that's provided that they can get to that 10 percent; that 8 they're making reasonable efforts. 9 And there is both a lack of the explicit 10 requirement that they provide plans that show that they can 11 ramp up to 10 percent and a lack of requirement that they 12 actually even provide specified information here if it's not 13 available. 14 If a car company were to choose not to make those 15 kinds of plans or argue that it's not available because they 16 have not made a decision as to which option they're going to 17 make, you have -- they have no requirement to submit that 18 information to you. 19 MR. LAGARIAS: Well, the discussions Board members 20 have made with the staff have been very explicit about 21 requiring, when they review these plans for ramp-up, that 22 they clearly demonstrate the ability to -- and not only the 23 capability, but the direction of meeting the 2003 production 24 requirements. 25 MR. CAVES: And I appreciate those statements and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 the extent that we can get that on the record, I think it's 2 useful in establishing what the Board's intent is here. 3 MR. LAGARIAS: Well, that's clearly what the Chair 4 and the other Board members have directed the staff to do. 5 One final question. You brought up the point that 6 fuel cells may be the solution in the long range approach to 7 the clean car of the future. 8 Now, that's an example of considering time as a 9 resource. You didn't put a date on that. You didn't say by 10 2003 and 2010. You said that's down the road. 11 And yet, the emphasis we hear is trying to 12 shoehorn in this interim period between 1998 and 2003; all 13 of a sudden that's a constraint. There's no consideration 14 of using it as a resource. 15 MR. CAVES: I am mindful of your suggestion to me 16 that I begin to rethink my views on this and try to use time 17 as a resource. And that's one of the reasons that I 18 mentioned the fuel cells. 19 I would say further that I understand what the 20 Board is trying to do, and you're -- and we've had extensive 21 discussions on this issue. But I think that it's important 22 that the Board, in reviewing what occurs between now and 23 2003, that you have a clear view of what the car companies 24 are doing, and that you lay out clear expectations both to 25 them and I think to the public, so that everybody has a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 clear understanding of what you intend from them and where 2 we're going to get. 3 MR. LAGARIAS: Great. Thank you. 4 CHAIRMAN DUNLAP: Supervisor Roberts, then Ms. 5 Edgerton. 6 SUPERVISOR ROBERTS: Yeah. Let me -- I want to go 7 back for a minute to this -- the ramp-up issue, because 8 there's still part of it that concerns me. And, as I 9 listened to the testimony, at least one of the manufacturers 10 that spoke to producing 120 vehicles, and little more than 11 that, that I hear at least in the testimony, it seems like 12 we're creating a situation where we're kind of passive 13 observers of what is going on with these efforts. 14 And it's not clear to me what happens, for 15 instance, if that particular company were to stick to the 16 120 vehicles. It's very unlikely that they're going to get 17 to the 10 percent in 2003. 18 And yet, there doesn't seem to be anything more 19 than that called for in any way that's enforceable on our 20 part. 21 MR. CACKETTE: Your point is correct prior to 22 2003. What's driving the ramp-up is the 2003 ten percent 23 requirement. 24 You probably can't get there from 120 vehicles to 25 whatever 10 percent of Nissan's sales are. I don't know PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 what that is, but it's the many thousands. 2 And to try to avoid that or provide an early 3 warning, a red flag, if that was the case, we asked for 4 these business plans. Because one of the specific things 5 that is enumerated there is to have information on the 6 products that will be -- being designed to meet the ZEV 7 regulatory requirement in 2003. 8 So, there's two things that we get out of these. 9 One is, we would identify if Company A just seemingly was 10 not making any good-faith effort -- they didn't have the 11 products; they didn't seem to have the plans in place that 12 anyone could reasonably argue could support a 2003 ten 13 percent requirement. So, we know that. And we can let you 14 know that that's happening to one, two, all seven 15 manufacturers, so that you can take the other actions that 16 may be appropriate. 17 And we're depending on the fact that all seven 18 know that we're looking at all seven plans independently. 19 So, one manufacturer's going to be somewhat at ease of a 20 lack of good faith, if you would put it that way, if they 21 know that the other manufacturers -- one of the other 22 manufacturers is moving forward. 23 So, we used the competitive pressures months ago, 24 and the knowledge of the marketplace and what they're 25 developing to try to assure them that it's not a smart thing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 to be a -- 2 SUPERVISOR ROBERTS: (Interjecting) We heard 3 their plans were about four years in advance a while ago. 4 1999, a plan's going to be out. You'll review that in the 5 year 2000. 6 MR. CACKETTE: Right. And in '98 as well. The 7 plans they have generally fall into -- in talking with the 8 various manufacturers, fall into two categories. Within a 9 plan, there's a three to five-year horizon. Within the 10 three-year horizon, which is the typical number you hear 11 about there being model revisions every three years, like 12 happens with the Honda Accord, for example, it will have 13 detailed information. 14 SUPERVISOR ROBERTS: (Interjecting) Let me -- you 15 know, I don't know want to draw this out too much. But what 16 if you get to the year 2000, and you're looking at a plan, 17 and maybe they're really going to do better than 120. Maybe 18 they're going to get to 130. 19 Okay? I'll give them the benefit of the doubt. 20 MR. CACKETTE: Okay. 21 SUPERVISOR ROBERTS: They did what this MOA says 22 they have to do. They even went beyond that by 10 percent 23 or so. But it doesn't look like they're in the position to 24 get to your 10 percent. Then, what do you do? 25 MR. CACKETTE: What we'd do is we'd come back and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 we'd be making a presentation, and we'd say, Mr. Chairman 2 and members of the Board, we reviewed the business plans of 3 the seven manufacturers subject to the contracts and MOAs 4 that we have with them. And we can tell you today that six 5 of them are developing the kind of products that we think 6 support the 10 percent requirement, and one of them isn't. 7 And then we'd have to decide what to do about 8 that. And we'd try to explain -- 9 SUPERVISOR ROBERTS: Well, what might be the 10 options under this agreement? 11 MR. CACKETTE: Well, the premise of this agreement 12 is that, for those first five years, this is a market-driven 13 introduction of vehicles. So, there is not a mandate or a 14 remedy within that time frame to say that there's some 15 implicit ramp-up that is go/no go position. 16 It's going to be your staff's judgment and the 17 information we get as to whether they're on a path for 18 success or failure. And then -- 19 SUPERVISOR ROBERTS: What are the options? It's 20 still not clear to me. What are the options for us if you 21 have identified that -- 22 MR. CACKETTE: For lack of good faith, we could 23 propose to reinstate the mandatory requirements. That's one 24 if it seems to be a lack of good faith. 25 On the other extreme, it could be that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 experience of the ZEVs that are on the road and the 2 development projects simply are not supporting the viability 3 of having 10 percent vehicles in 2003. And that would be 4 the other extreme, where we say, "Gee, we're going to have 5 to reconsider whether this program can be successful or be 6 successful on this time frame." 7 It could be either extreme. In the latter, we 8 have to figure out what's the best course of action. And in 9 the former, the Board could action to basically force the 10 manufacturer to do a better job. 11 SUPERVISOR ROBERTS: If you found that they 12 weren't proceeding in good faith, then you say you could 13 make that determination? You could make them subject to the 14 existing rules, which would then -- 15 MR. CACKETTE: You would have to reimpose the 16 rules by regulatory action. But there's nothing in this MOA 17 or change in the regulations that take any of that authority 18 away from the Board. 19 We still have the authority to reimpose any 20 standards that we can justify as technically feasible. 21 SUPERVISOR ROBERTS: The Board would be able to 22 put back into place those regulations? 23 MR. CACKETTE: That's right. 24 SUPERVISOR ROBERTS: Mr. Kenny, do you want -- 25 MR. KENNY: Yes. The qualifier I want to throw in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 there is that it sounds a little bit like we're talking 2 about preconditions to Board action. There are no 3 preconditions to this Board acting in any fashion that's 4 subject to its authority. 5 And adopting a regulatory requirement is within 6 this Board's authority at any time. 7 MR. CACKETTE: You just have to follow the due 8 process of reimposing it. 9 SUPERVISOR ROBERTS: So, if somebody were not 10 dealing in good faith and didn't appear that they putting 11 together the program that looked like they can get to that 12 goal, you're saying you could take steps, huh? 13 MR. BOYD: Yes, Supervisor Roberts. We indicated 14 earlier that that was one of the provisions of the program 15 that we had outlined. We have several tools. We have 16 annual reports and data. We have the biennial business 17 plans. We have site access guaranteed under the agreements, 18 and we have the ability at any point in time to give the 19 Board an evaluation and, as indicated, give you an 20 indication of whether we think there's a good-faith effort 21 or not. 22 In the context of that public discussion, the 23 culprits, whoever they may be -- or et cetera -- would have 24 an opportunity to respond to that. 25 And the Board has the option of following a staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 recommendation or finding to the contrary, the staff 2 recommendation of lack of good faith and a projection on our 3 part that they are not adequately ramping up such that they 4 can meet the 2003 requirement, and the Board should take 5 action X, Y, or Z. 6 And the most dramatic of which is reinstatement of 7 the original program; but, as we indicated, "or some variant 8 thereof." 9 SUPERVISOR ROBERTS: Are you going to be able to 10 go after singular manufacturers then? If six comply and a 11 seventh doesn't, you're going to actually be able to take on 12 that one, and you're going to make them subject to these 13 rules and the others are not going to be? Is that what I'm 14 hearing you say? 15 MR. BOYD: That's theoretically possible, in that 16 we have seven individual agreements. The enforcement 17 action, the punitive power that we have to exercise that 18 judgment against each and every one of the contracts. And 19 if only one, for whatever reasons, is way out of line, 20 we have and you have the capability of dealing with and 21 disciplining, if you want to call it that, that particular 22 individual. 23 SUPERVISOR ROBERTS: So, any number from one to 24 seven, we can -- we're free to act on. 25 CHAIRMAN DUNLAP: Mr. Boyd, if I may ask counsel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 maybe to affirm that? 2 MR. KENNY: Yes. It would be a very interesting 3 regulatory approach, but we do believe that we could do it. 4 The way we would -- the we have at least thought about it so 5 far, is that we would have a regulatory structure that would 6 be applicable probably to all, but in which those who are in 7 compliance would essentially be able to more or less opt 8 out. 9 And so, the one who was in noncompliance would be 10 obligated to therefore comply with any regulatory approach. 11 SUPERVISOR ROBERTS: The ones that are in 12 compliance can opt out? 13 MR. KENNY: Yes. We were trying to figure earlier 14 about how we would -- this is what we've been thinking about 15 over the last several months -- but how we would essentially 16 construct a regulatory framework that was applicable only to 17 a noncomplying company out of the seven. 18 It would be very difficult we think to essentially 19 construct a regulatory framework that was applicable only to 20 one company. But the way we could construct it would be a 21 regulatory framework that was generally applicable, but 22 which would have specific provisions in it that would allow 23 for companies to not have to comply with the regulatory 24 provisions because of their compliance with alternative 25 provisions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 The alternative provisions that we were thinking 2 about would be compliance with the existing MOAs. 3 CHAIRMAN DUNLAP: Conceptually, it would be 4 similar to like an alternative compliance plan? 5 MR. KENNY: Yes. 6 MR. CAVES: And if I could comment on that, that 7 is one of the issues that we raised previously that, in 8 order to avoid this kind of awkward construct, would be -- 9 instead of repealing the mandate to 2003, suspend it for 10 those companies who are in compliance with the MOA, and then 11 it could be reinstated if someone is found out of 12 compliance. 13 CHAIRMAN DUNLAP: Supervisor, the alternative 14 compliance plan -- I guess a "blueprint" has been used here 15 at the Board with consumer products since -- how many years 16 have we had that in place, Mr. Kenny? 17 MR. KENNY: Approximately three. 18 CHAIRMAN DUNLAP: Three years? 19 MR. KENNY: About three years. 20 SUPERVISOR ROBERTS: I've actually seen that in 21 the short time I've been here. 22 But could you comment on the last approach where 23 you'd be suspending? 24 MR. KENNY: The negotiations that we had with the 25 automakers did not really get to the point where we were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 talking about a suspension. 2 They really went to this point where we are 3 actually talking about a repeal. I think the primary 4 motivation behind that was the consequences to Northeast 5 States. If you go with a suspension, there is what's called 6 a Section 177 consequence. And that has applicability to 7 the Northeast States. 8 If you go with a repeal, there is the exact 9 opposite consequence to the Northeast States. 10 MR. CAVES: Although you'd have the potential, if 11 you then try to reimpose the mandate at some earlier date, 12 and then suspend it for some, you're going to run right into 13 the same situation. 14 MR. KENNY: In terms of practical consequence in 15 the State of California, that is true. 16 SUPERVISOR ROBERTS: I don't have any further 17 questions right now. 18 CHAIRMAN DUNLAP: Okay. Ms. Edgerton. 19 MS. EDGERTON: Mr. Caves's positions, his comments 20 about the likely court interpretation of the MMOA are, in my 21 view, a hundred percent correct. 22 I think it'd be very difficult, if not impossible, 23 for us to succeed in proving the existence of an intention 24 that's not in the four corners of the document. 25 With respect to the reasonable pilot price issue, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 which was raised, when I asked staff about it, the response 2 that I got was that reasonable pilot price is one word, and 3 that reasonable pilot price means prevailing pilot price, 4 which, for example, for nickel metal hydride batteries would 5 be around $250,000. 6 And I would feel most comfortable if there was a 7 provision included in the body of the agreement, because 8 really, if it's not in there, it will not have the same 9 weight as what is in there; that clarified that the parties 10 understood that reasonable pilot price could mean batteries 11 up to $250,000 each, if that's correct. You know. 12 It seems to me we've got 15 more days. I think 13 that our colloquy right here has proven beyond a shadow of a 14 doubt that a court would have difficulty figuring what we 15 meant, because we don't even know what we meant as best I 16 can tell. 17 We've had our Chairman say he thought what was 18 behind it was $300,000 was too much. I was sitting here 19 thinking, what it means is $250,000 for the battery and the 20 technology demonstration project. 21 Mr. Caves is wondering whether it's 40,000. Mr. 22 Lagarias thought it was a competitively priced battery at 23 first. And I think we're all pretty up to speed, so I think 24 it stands for itself. 25 This conversation is that we would all benefit by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 having it clarified in the body of the language. I mean the 2 language of the agreement. 3 And I would support that. Would you have any 4 objection? Do you think that's something that could be 5 taken care of in a 15-day agreement, just clarifying what is 6 meant by -- what is meant by a 15 -- what is meant by a 7 reasonable pilot price? 8 MR. KENNY: There is actually not a need to do a 9 modification to the MOAs in the context of a 15-day 10 regulatory change. 11 The MOAs are actually outside the regulatory 12 structure. If, in fact, it was the desire of the Board to 13 go in that direction, what we would simply need to do is go 14 back and reopen the negotiations on that matter with the car 15 companies. 16 MS. EDGERTON: Well, maybe we can find out right 17 here when the next people come up, if they'll agree to it, 18 and what they think it means, and we can get it taken care 19 of. 20 The next thing is, "to the extent available" is 21 worrisome. I agree on that. 22 And I think that -- I think that any reasonable 23 interpretation of the sentence would mean to the extent 24 available anyway. 25 And I think it only confuses things. And I would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 appreciate it if the auto companies' principal spokespeople 2 who are still going to come would reflect on whether that's 3 the kind of thing that would be okay with them, too, because 4 I'll ask them about it. 5 Thank you. 6 CHAIRMAN DUNLAP: Thank you, Mr. Caves. 7 MR. LAGARIAS: One comment. I think if you start 8 putting in prices on what you think is reasonable, if you 9 said 300,000, for example, I guarantee you every developer 10 would find that his value is 300,000, and that's what you're 11 going to have to pay. 12 I think that agreements have to be flexible. I 13 think that you can't tie the hands of everything because of 14 how you want to interpret things now, because things are 15 going to change. 16 And we have to look at the staff and the people 17 affected in the auto industry to work these issues out. 18 Because, clearly, they understand the intent of the program. 19 MR. CAVES: And I think there are some ways to 20 work it out and, in fact, to achieve what was stated as the 21 intent. 22 And that would be, eliminate that provision that 23 allows them an out, and instead allow at the Executive 24 Officer's sole discretion his ability to excuse performance 25 in that regard in the case of an unreasonable battery price, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 or a battery manufacturer who's trying to use this in an 2 unreasonable fashion. 3 And that solves your problem. You don't risk 4 separate court interpretation. At the same time, it allows 5 what clearly CARB staff wants to do, which is prevent 6 automakers from being held hostage by a single battery 7 manufacturer. 8 CHAIRMAN DUNLAP: Thank you, Mr. Caves. 9 MR. CAVES: Thank you. 10 CHAIRMAN DUNLAP: Mr. Miller. 11 (Thereupon, there was a pause in the 12 proceedings to allow the reporter to 13 replenish her Stenograph paper.) 14 CHAIRMAN DUNLAP: Okay. Mr. Miller, the time is 15 now yours. Go right ahead. 16 MR. MILLER: Go right ahead, huh? Okay. 17 My name is Mike Miller, and I am the President of 18 the California Motor Car Dealers Association, an association 19 of 1400 dealers across the State of California, with 100,000 20 employees. 21 And I was -- I had made a couple of notes, and 22 I've said many things over the past year, but I'm really 23 here to say that I represent the one situation that you 24 haven't covered. And that's when all of you go home, it's 25 when that customer comes into my dealership and buys the car PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 at night, whether it be the 3200 cars that you're talking 2 about doing a year, whatever that number is, up to whatever 3 higher number; if that car is not right when we put that car 4 out, we have an unhappy customer. 5 Now, I'm here to tell you that when I took office 6 almost 11 months ago, it was my goal to take the mandate 7 and destroy it. We believed that the electric vehicle would 8 never work, and we thought it would be a failure. 9 Shortly thereafter, we had a chance to drive one. 10 The people in the association and myself flew back to 11 Detroit. We drove three back there. And I drove another 12 one in California a few months later. 13 And I would like to tell you that that car is a 14 winner; that car will be a major part of my inventory that 15 I sell to the public. I love the car. But I love the car 16 with the next generation battery or the one after that. 17 The problem is that I can not sell a car that is 18 going -- in the quantities in particular that you're talking 19 about, and a car that will get from 50 to 75 miles between 20 charges. 21 It doesn't work. There's no way that I can 22 rationalize that. There's no way that I can ever convince a 23 customer to do it. 24 It is important that this car start out with a 25 chance to succeed. We're talking about numbers that we have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 to hit in the year 2010. We're talking about moving the 2 mandate back to the year 2003, having the 10 percent number 3 on it. I concur with those a hundred percent. 4 And I would absolutely believe that you could do 5 10 percent in the year 2003 if the battery will get you 150 6 to 200 miles. 7 And then when you go to the lithium after that, 8 maybe you can get more than that. And if the prices come 9 down, I think everything that everybody said is accurate. 10 And that's where I come from. At some point, the 11 manufacturer, the State of California, and the United States 12 Government is going to stop putting money after this, and 13 the customer's going to have to put their own money on it. 14 And it's not going to be at 3700 cars or whatever 15 that number is. Because that's easy to take care of. You 16 know, you can buy your way through that. But you can't buy 17 your way at 10 percent. You've got to have a real car 18 there. You've got to have a real car that I can live with, 19 and that I can comfortably sell to my customer. 20 I can not sell a car that I can not have the 21 confidence that my customer can go from Point A to Point B 22 reasonable, without worry, "Am I gonna get stuck? Do I have 23 to think about that additional miles, and the quality of 24 it?" 25 I just heard a conversation about battery and, Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 Lagarias, I agree with you a hundred percent. If you put a 2 number in there, whatever number it's going to be, that's 3 going to be the number. 4 We have to make this a market-driven product, 5 whether it is in the initial part of it or it is in the year 6 2003. Please understand that I believe this car will be a 7 major success. I would drive the car. I have -- in fact, 8 we were on a radio show down in Los Angeles, the Michael 9 Jackson Show. And I said that I believed that 10 percent is 10 a lock in the year 2003 to 2005. I really believe that if 11 the battery is there. 12 But the battery has to be there. And you've got 13 to give it a chance. When you're talking about ramp-up and 14 you're talking about going from zero to whatever numbers in 15 the initial stages and when you're having the conversations 16 that I just heard, ladies and gentlemen, I don't know what 17 you do with those cars if they don't work. 18 Why not take smaller steps? Why not allow the 19 cars to work? And why not pass the liability or reduce -- 20 excuse me -- reduce the liability all the way down the line 21 to have these cars succeed before we start asking for major 22 numbers. 23 The only numbers that I heard were all followed or 24 proceeded by the word "produce." Nobody -- and I've been 25 sitting here for two hours -- nobody has said one word about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 a customer buying a car. 2 That's where the rubber meets the road. And all 3 of this is for naught if we don't address that. 4 My concern is that wherever you go in your first 5 year that you're going to have this in, not 2000, but in the 6 next few years, as we've had the request to ramp up, the 7 first year the numbers are going to look terrific. But then 8 you will have hit the saturation point with the current 9 battery. 10 Then it's going to fail. And what I'm really 11 saying to you is I don't want this car to fail. This car 12 can not fail. This is the evolution. Very frankly, I said 13 to my wife this morning when we left Los Angeles, and we 14 stopped at a place to get a cup of coffee. The car I'm 15 driving had a cup holder. And I said to her, "It's kind of 16 sad when I read recently in an article that the great 17 evolutions and the great excitement about cars today is that 18 they now come with cup holders, and that the cup holders pop 19 out." 20 (Laughter.) 21 MR. MILLER: This is the evolution. This is the 22 future of the automobile business; it's the electric 23 vehicle. It's one of the great evolutions in my lifetime. 24 I don't want to see it hurt. And I want to see it done so 25 it's done well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 The investment is just a few years between now and 2 the year 2003. And I'm convinced that, if we are delivered 3 a product that I can be comfortable selling, that I will 4 sell at least 10 percent. And I'm using the word "at 5 least." I really believe there are certain areas of 6 California that we will do greater numbers than that. And 7 there are certain areas that we won't. 8 I have gone across the State with 18 field 9 meetings as president of this association, and I have talked 10 about the electric vehicle in every meeting. Frankly, 11 that's where I was this morning. We went from Los Angeles 12 to a field meeting in Orange County and flew up here just 13 for this. 14 And in every one of those meetings, we look at the 15 areas -- and there are certain areas the electric vehicle 16 will have absolutely no involvement. I think of areas like 17 Bakersfield, or I think of areas where there's just too much 18 driving; that the people have to be -- they have to buy into 19 it, and they would have to change a little bit. 20 Los Angeles, Orange County, Ventura County, San 21 Francisco, all those areas I think would be very good for 22 it. I really believe it's a winner. 23 I ask you to -- we looked at the three plans. We 24 heartily endorse the plan that your staff has recommended. 25 We truly do believe it's the way to go. Allow it to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 succeed, allow it to succeed the right way. 2 And I ask that you don't enter into any areas 3 where you're going to inhibit or you force cars to come out 4 that we eventually have to either junk or somebody's going 5 to have to buy. 6 Allow it to be something that the market drives. 7 The market will drive this car. 8 Thank you. 9 CHAIRMAN DUNLAP: Thank you, Mr. Miller. I 10 thought it was impossible to improve upon Peter Welch's 11 representation of this association, but you have outdone 12 him. 13 MR. MILLER: Thank you. 14 CHAIRMAN DUNLAP: So, you're welcome to come back 15 here anytime. Peter, we're sorry. He's taken your job. 16 Mr. Lagarias. 17 MR. LAGARIAS: Thank you. I thought that was a 18 very constructive and positive message. 19 MR. MILLER: Thank you. 20 MR. LAGARIAS: You did strike a responsive cord. 21 And I wish you'd take this message back to the auto 22 manufacturers. When they do build cars, please build a 23 larger cup holder. 24 (Laughter.) 25 CHAIRMAN DUNLAP: Jim, did you -- Supervisor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 Silva. 2 SUPERVISOR SILVA: Mr. Miller? 3 MR. MILLER: Yes. 4 SUPERVISOR SILVA: I'm not an expert on cars, but 5 if a product gets out there before it's really been refined 6 and you have people that really like the innovation or 7 whatever it may be, but the technology is not there, 8 wouldn't that be the same as like, for example, poisoning 9 the well, and then we lose the people that would probably 10 sell that product? 11 MR. MILLER: Supervisor, I've said that for the 12 whole time, in that the only way that I know that this car 13 will fail is if we bring out and we force the issue too 14 soon, and with a product that is not a quality product. 15 That is the sure poison to this car. I believe 16 this car is so good, and the potential of the car is so good 17 that I don't want it poisoned. You're a hundred percent 18 right in what you're saying. 19 If they come out with something marginal, what 20 happens -- and the truth is, and everybody in this audience 21 knows a lot of people that do this. 22 The problem is, you have one bad experience, 23 you're going to tell 10 people. If you have a good 24 experience, you tell one. You have a bad car, and that'll 25 spread like wildfire. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 You get stuck someplace that you can't go because 2 you have an electric vehicle and your mileage -- you didn't 3 calculate your miles right, you have ruined the car. You've 4 got to take those obstacles away. 5 We're asking for people, at some point they want 6 to buy it, they have to make some concession to it, in that 7 they have to think about how many miles might they go today. 8 You don't have to do that with the car that's in 9 your driveway today. But I believe that the car has so many 10 positives that you can get away from that. 11 But if we start sticking too many negatives to it, 12 then we start balancing. And then people are going to say, 13 "You know what? I don't need the aggravation, or I don't 14 need to think twice about it." 15 I'll wait until the next generation, which might 16 be the year 2010, whenever it comes, where you might get 300 17 miles between charges. 18 Does that answer your question? 19 SUPERVISOR SILVA: Thank you. 20 CHAIRMAN DUNLAP: In this case, I need to look out 21 for a witness. He has a plane to catch. So, I'm going to 22 let you go before we inundate you with questions. 23 Thank you for your time. 24 MR. MILLER: Thank you. 25 CHAIRMAN DUNLAP: Marc Chytilo, Environmental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 Defense Center, CalPIRG, and then Kelly Brown, followed by 2 Steve Heckeroth, and Doug Henderson. 3 MR. CHYTILO: Mr. Chair, members of the Board, I 4 am Marc Chytilo. I'm the Chief Counsel of the Environmental 5 Defense Center, and we are a public interest environmental 6 law firm in Santa Barbara, one of the towns that has over a 7 dozen electric buses currently in operation. 8 And let me stand up and raise my hand for Mr. 9 Miller, because I'm ready to buy an electric car. I'd like 10 to be able to retire the old Honda Civic that we keep 11 trundling along in year after year as our second car for one 12 that we can use in Santa Barbara, where rarely would we ever 13 go beyond a 30 or 40 mile radius. 14 I'm here today not just in that capacity as a 15 consumer, potential consumer, but as a representative of 16 both the California Public Interest Research Group, and the 17 Massachusetts Public Interest Research Group. 18 The significance of having a Massachusetts group 19 here before CARB will become clear to you in just a moment. 20 But indeed, the significance of what you are contemplating 21 today, the significance of this action, is not only national 22 in scope; it's international. 23 And as part of the comments that I submitted to 24 your Board, was some correspondence from a Canadian group 25 that's watching very carefully on how California's going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 treat the electric vehicle industry, because they, too, are 2 looking to the electric vehicle as a solution to a problem 3 that they're finding particularly difficult. 4 The perspective that we have on this issue, coming 5 from a community where electric vehicles are already in 6 place and are something that there is a considerable amount 7 of consumer demand for, is that CARB has pioneered the air 8 quality improvement technologies. In fact, the history of 9 the Clean Air Act is for technology forcing measures. 10 However, at this juncture, it appears that CARB is 11 prepared to snatch defeat from the jaws of victory. And 12 we're really concerned about that. 13 As I came in, I saw down in the parking lot, as 14 I'm sure you did, a series of vehicles that are out there 15 that are ready to go. And while they may not satisfy the 16 consumer who wants to be able to drive 300 miles, they do 17 provide a very important opportunity for a significant part 18 of the market; that is, the second vehicle, the commuters 19 who can limit their driving to within the reasonable range 20 of that vehicle. 21 Now, as I understand it, the folks at U.C. Davis 22 have done some evaluation of the available market for these 23 vehicles, and it's anywhere from 7 to 14 or 15 percent of t 24 he perspective car buying market. 25 Unfortunately, the auto manufacturers have come up PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 with their own data, which shows that it's going to be 2 impossible to launch this vehicle as the market is currently 3 configured until you have the long-range vehicle 4 commercially available. 5 And I think that the product of your decision here 6 is going to be to impair the ability of California and the 7 nation and, in fact, the world to be able to accomplish the 8 air quality goals that we all consider to be very, very 9 significant. 10 Now, I'm here today as an attorney and I'm taking 11 Janet Hathaway's more pessimistic role. I have to look for 12 the problems, and I've been asked to review how the 13 California Environmental Quality Act may apply to the action 14 that the Board is considering taking. 15 Now, I see that many of you do serve in other 16 roles before -- as members of a city council or boards of 17 supervisors, and you may be familiar with CEQA in a 18 different context. 19 And you may also note that there has not been a 20 considerable amount of attention paid to CEQA in the context 21 of the staff report and the analysis that's been brought to 22 you. 23 And it's my contention that, in fact, CEQA's goals 24 of full disclosure of all potential impacts associated with 25 a potential action has not been honored through this process PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 and, as a result, the decision that you're being asked to 2 make is not the best decision. 3 The processes that are created by CEQA provide an 4 opportunity for agencies to make decisions that will have 5 the best possible environmental ramifications, while 6 accomplishing the goals of the project. 7 And the certified regulatory program under which 8 the Air Resources Board is authorized to operate under 9 requires that you adopt and embrace the spirit and the 10 purpose of CEQA in your decision making. 11 And I'm concerned that, in fact, that's not been 12 fulfilled. 13 The guidelines which interpret CEQA specify that 14 the role of the CEQA document -- in this case, the staff 15 report -- is to demonstrate to an apprehensive citizenry 16 that the full ecological ramifications of your action have 17 been considered. 18 And it is there where I think that the staff 19 report falls short. This is a process that involves 20 literally millions of people, millions of people will be 21 affected by the decision that you make here. 22 And it is going to be one that is going to have 23 very significance adverse ramifications potentially to 24 environmental quality. And the failure to use the staff 25 report and to use the CEQA process as a tool to guide your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 decision-making process has tainted that process. And I 2 would implore the Board to step back from the course that 3 you're on and look -- take a hard look at the environmental 4 issues that are associated with the proposed action, and 5 evaluate whether there may be additional mitigation 6 measures, whether there may be other alternatives that would 7 be able to accomplish the purposes that you seek to 8 accomplish here. 9 CEQA requires that, as you make this demonstration 10 to the apprehensive citizenry, that you provide a logical 11 link from the facts to the conclusions that are drawn. And, 12 as we've tried to do an analysis of the staff report and its 13 review of environmental issues, as we peel back the onion, 14 we found troubling issues rise virtually at every corner. 15 There was a discussion earlier about the model and 16 the assumptions that underlie it. And the model, of course, 17 is a critical bit of information here. Because the staff 18 report recognizes that there are going to be some short-term 19 increases in air pollution, and there's going to be exposure 20 of -- as a result of that, additional people to air 21 pollution that otherwise, with the ZEV program, would have 22 been able to have been reduced or eliminated. 23 However, when you look at the model, you realize 24 that virtually every assumption that was made was made in a 25 manner as favorable as possible to minimize the significance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 of the environmental impact associated with your decision. 2 You heard about the 18 percent migration rate; the 3 trends actually indicate that a 14 percent migration rate 4 would be -- is more reflective of what's really going on. 5 1987 was the last year we had an 18 percent rate. 6 Now, just adjusting that one number in the context 7 of the model employed by staff changes the net cumulative 8 benefit associated -- the air quality benefit associated 9 with the NLEV mitigation measure, if you will, from 104 10 percent at the year 2010 to 85 percent. So, we don't get 11 that net air quality benefit that is -- that was pledged 12 when this process was initiated, and which is the 13 underpinnings of staff's conclusion that the significance of 14 the environmental impacts is not going to be great. 15 But there are a lot of other issues. One of the 16 most significant issue that has been overlooked through this 17 process is that there are two States -- Massachusetts on 18 behalf of the residents I'm speaking with -- for today, and 19 New York -- have already opted into the California tailpipe 20 emission standards. 21 So, the model assumed that the NLEV, the in- 22 migration of cars for the purposes of calculating this 23 benefit were all going to be Tier I cars, dirtier cars. 24 But, in fact, to States, two very populated and large 25 States, have already adopted California standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 So, the cars that are going to come in from New 2 York and from Massachusetts aren't going to benefit -- we're 3 not going to see an air quality benefit from the NLEV 4 program, because we're already there in those two States. 5 So, the model in that way has overstated the 6 benefits associated with the NLEV as a mitigation measure. 7 Another assumption was that there would be 8 turnover -- that the average fleet age would be 7.31 years. 9 Well, in fact, the in-migration fleet, the migrant fleet 10 tends to be substantially older; in fact, twice that age. 11 Excluded from the model's assumption of the 12 benefits are refinery emissions associated with the 13 additional fuel that's going to be burned by the NLEVs which 14 would otherwise not be required to be produced if the ZEV 15 program were in place. 16 Similarly, the proposal that's been put forward 17 allows the compounding of the ZEV credits, which is going to 18 have an adverse effect on the ultimate long-term emissions 19 reduction from the ZEV program. So, we're compromising the 20 ZEV program as we're trying to build up the NLEV program. 21 And that's going to have some significant cumulative air 22 quality impacts. 23 And the worst problem associated with the whole 24 modeling proposal and the NLEV program as a mitigating 25 factor is that there's no real mitigation monitoring plan. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 There's no ability to evaluate how effective either the NLEV 2 program or, as is allowed by the MOAs, the substitute 3 program is in actually accomplishing those emissions 4 reductions. 5 And what CEQA requires, and what I've not seen out 6 of the documents that have been made available to me at this 7 point is a mitigation monitoring plan, which is an element 8 that the Legislature saw fit to pass and include as part of 9 CEQA in any agency action where there was a determination 10 that there was the potential for significant impacts and 11 mitigation measures were available to reduce the 12 significance of those impacts. 13 The mitigation monitoring plan is supposed to be a 14 device where you can go back and evaluate how effective the 15 mitigation measures have been. And, as the proposal is 16 currently been brought to you, there is no mitigation 17 measure plan -- mitigation measure plan. And, in fact, 18 there is a number of opportunities for mischief in 19 determining whether the mitigation is actually going to be 20 effective. 21 So, that's a concern that we have that we think is 22 particularly significant. 23 Other environmental impacts are associated with 24 the fact that the NLEV program is going to generate 25 additional PM10 pollution, which is not included as part of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 the calculation -- what sort of benefits the ZEV program 2 would offer to us as opposed to the NLEV program with 3 respect to PM10. The same analysis applies to toxics, which 4 has been brought up by a number of commenters in their 5 letters. 6 The second major problem that we have with respect 7 to this CEQA analysis is the memorandum of agreement and, 8 specifically, its enforceability. Without the opportunity 9 to ensure that we're going to accomplish the emissions 10 reductions that the NLEV program is designed to accomplish, 11 there's no guarantee that we're actually going to get the 12 air quality reductions that even the NLEV program offers. 13 And indeed, without having some sort of 14 third-party enforceability, some avenue for the public to 15 participate in the process of evaluating whether these 16 mitigation measures have actually been effective, you're 17 denying the enforceability of these mitigation measures in 18 the MOA generically. 19 You've gone from a situation where have regulatory 20 compliance which is enforceable by public interest groups, 21 by the citizenry that can observe and monitor this process, 22 and see that, indeed, we're going to accomplish these 23 emissions reductions, to one that's based on contract. And 24 it's just a contract between the Air Resources Board and the 25 auto manufacturers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 The public has no role in that process. They have 2 no ability to participate and to learn that, in fact, these 3 emissions reductions are being accomplished and, if they're 4 not, to be able to take action to ensure that they are. 5 SUPERVISOR RIORDAN: While you've paused for just 6 a moment -- 7 MR. CHYTILO: sure. 8 SUPERVISOR RIORDAN: -- and I'm respectful of the 9 time and we have a number of other speakers. Is there some 10 way you could perhaps draw this to some sort of a summary? 11 We do have -- and you're certainly, I think, on record in 12 writing, am I correct? 13 MR. CHYTILO: Yes. 14 SUPERVISOR RIORDAN: Okay. 15 MR. CHYTILO: Supervisor, I am. And I'll try and 16 bring this together. 17 SUPERVISOR RIORDAN: Thank you. I'd appreciate 18 that. 19 MR. CHYTILO: I hope that you understand just -- 20 that these are technical concerns. 21 SUPERVISOR RIORDAN: And I recognize that. 22 MR. CHYTILO: They concern the CEQA process. They 23 don't necessarily jeopardize the final decision, but the way 24 the decision is accomplished. 25 And it would be my hope that the Board would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 able to go back and address some of these issues in the days 2 that follow before taking final action, and that that will 3 provide a mechanism where this process can be honored. 4 I'll be brief. 5 A second issue, which is not clearly stated in the 6 staff report and jeopardizes the whole CEQA process is that 7 the basic need for these changes has not been established, 8 in our opinion, from unbiased sources. 9 As we've noticed, it is the auto manufacturers and 10 Sierra Research, two entities that have expressed a very 11 strong predisposition on this overall issue, that have led 12 the Board to conclude that this change is necessary. And if 13 you look at what I consider to be some unbiased sources, the 14 Department -- or the University of California at Davis 15 study, it shows indeed there is a market for these vehicles. 16 And so, the overall need for the project just 17 needs to be better articulated. It shouldn't be based on 18 biased data. And I'm afraid that that's the case right now. 19 Thirdly, the public process is very important for 20 CEQA. And there has been a major change in this program 21 going from ZEV to the NLEV. The public just has not had the 22 opportunity to be involved in the environmental impact 23 analysis components of that. And the fact that you received 24 a thousand comments, 70 percent of which were concerned 25 about environmental impact issues, indicates as black letter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 CEQA law, that there is a significant issue there that needs 2 to be fully developed. 3 The staff report spends one page on environmental 4 analysis. And that just does not provide a substantive CEQA 5 response. It does not satisfy the requirements of this 6 statute, and it leaves the public very much in the dark 7 through this process. 8 Finally, we have grave concerns with respect to 9 the State's attainment status, and whether this particular 10 project, this proposal, is going to jeopardize the State's 11 attainment status. 12 If I could ask to put on the overhead here, this 13 is from the staff report, the cumulative net emissions. And 14 it's a little difficult to show. But I've worked closely in 15 Ventura County and Santa Barbara County -- Ventura in 16 particular, and Sacramento is in a similar situation, where 17 the attainment date is 2005. And if you'll see that the 18 benefits associated with the ZEV program for the 2005 19 attainment areas are significant. 20 Now, if you're looking just at the South Coast in 21 the year 2010, the NLEV program appears to catch up, 22 assuming that the model is all correct. 23 But for those other areas that are relying on the 24 ZEV emissions reductions, they're being left in the lurch. 25 They're going to be asked -- and Supervisor Mikels was here PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 earlier -- she and I have looked at air quality issues 2 together, and it's a problem. 3 Local districts have put everything possible into 4 their air quality attainment plans, and here with the ZEV 5 program, you're asking them to do more. That's a 6 significant environmental issue, because you're 7 contradicting one of the plans that was adopted at the local 8 level. 9 So, there's -- you can turn the lights back on 10 now. 11 There's a need for additional process to be able 12 to address these issues. I surprisingly echo the statements 13 by the gentleman from the Rand Corporation. It's necessary 14 to pay careful attention to this process. And indeed, I 15 believe that the CEQA process provides a vehicle for paying 16 that careful attention to the decision-making process, the 17 factors, the facts, the evidence that your Board considers 18 that the staff presents to you. 19 Based on what I've seen, I don't see substantial 20 evidence in the record to support the action that you're 21 being asked to approve at this point. 22 And consequently, I have concerns that the action 23 that you're taking is subject to a judicial challenge. So, 24 I hope that you can go back, try and remedy these concerns, 25 provide the public more opportunity for input in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 process, and a full airing of the environmental impacts 2 associated with this action. 3 Thank you. 4 SUPERVISOR RIORDAN: Thank you very much. 5 I'm going to ask if staff wants to comment at all 6 on the CEQA issues. I don't want to get into a debate, and 7 I would tell the speaker that I just am asking now for their 8 opinion. You've offered yours. 9 And if they want to have any opportunity to 10 comment, this is the appropriate time, if so. 11 MR. KENNY: We actually have no comment to make at 12 this time. 13 SUPERVISOR RIORDAN: All right. And I appreciate 14 that. Are there any questions by the Board members? 15 MR. CALHOUN: May I have one? 16 SUPERVISOR RIORDAN: Yes, Mr. Calhoun. 17 MR. CALHOUN: I don't agree with your assessment, 18 in that there's no basis for changing the program. 19 Apparently, you did not attend any of the hearings in the 20 past when the battery panel that this Board appointed came 21 in and said that the technology wasn't there, and that it 22 would not be there until around the year 2000, 2001. And on 23 that basis alone, I think it would have been irresponsible 24 on the part of this Board not to suggest any changes. 25 So, I just want you to realize that I certainly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 disagree with your assessment that there's no basis for 2 making any change. 3 MR. CHYTILO: I appreciate that. 4 MR. CALHOUN: And you also said something to the 5 effect -- "by a biased group" -- and I don't consider the 6 battery panel as being biased. 7 MR. CHYTILO: No, and I didn't make that -- I 8 wasn't leveling those charges at the battery panel. My 9 contention here would be that the short-range vehicles are 10 something for which there is an acceptable market out there. 11 And existing technology could be used, the lead-acid 12 batteries, in order to provide the first round of ZEVs. 13 And as advanced technologies came into place, then 14 we could see a transition of the fleet into the long-term -- 15 the longer-range vehicles. 16 But, at this point, I think that there is -- that 17 the ZEV mandate could be accomplished, and it could reduce 18 air pollution, and it could be successful as a commercial 19 venture -- if not for the big automakers, perhaps for many 20 of the small businesses in our State that are more actively 21 working on developing the technologies to be able to respond 22 to this mandate. 23 SUPERVISOR RIORDAN: We thank the speaker very 24 much and, if I might on behalf of our reporter, I'd like to 25 take a five-minute break and resume in truly five minutes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 Thank you very much. 2 MR. CHYTILO: Thank you. 3 (Thereupon, there was a brief recess taken.) 4 CHAIRMAN DUNLAP: Who have we got next? 5 SUPERVISOR RIORDAN: Mr. Brown. Mr. Kelly Brown. 6 Maybe, Mr. Brown, you could wait just a minute, 7 because people are still finding their seats. 8 MR. BROWN: C'mon, you don't want to miss this. 9 This is the best part. 10 SUPERVISOR RIORDAN: That's right. 11 (Laughter.) 12 MR. BROWN: See, look it. They're all coming in. 13 CHAIRMAN DUNLAP: No advertising. 14 MR. BROWN: Is it okay to start now? 15 CHAIRMAN DUNLAP: Yes, go right ahead. 16 MR. BROWN: My name's Kelly Brown. I'm Director 17 of Vehicle Environmental Engineering for Ford Motor Company. 18 And I'm going to start off by taking the 19 Chairman's wise counsel, and limiting my statement, and not 20 repeating things that have been said by others. 21 I would point out that I support the comments of 22 my colleagues, especially the detailed comments supplied by 23 Eric Ridenour of Chrysler. 24 I also support Ms. Edgerton's opening remarks. 25 It's a shame she's not here to hear me say that. I agree PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 that, on balance, the agreement is good. And I also agree 2 that some of the details cause me trouble. And they aren't 3 the way that I would write it. I suspect that Ms. Edgerton 4 and I dislike different parts of the agreement. 5 But I guess that means it's probably a good 6 agreement if people who have different views of what the 7 outcome should be and both have things they like and dislike 8 in the agreement; but, overall, they can live with it. I 9 think that's a definition of compromise. 10 Now, I'd like to comment on a couple of things, 11 and then I'll open it up to a spirited question session. 12 A couple of things that have been mentioned before 13 that I think have been misinterpreted -- we've heard a lot 14 of people comment about questions as to whether or not the 15 49-State program offsets the calculated benefits of the ZEV 16 mandate. 17 And I think the confusion might stem from the 18 chart that the last witness put up -- the cumulative 19 benefits. 20 I'm not sure what -- I wish the staff hadn't put 21 that in. I'm not sure what the meaning of a cumulative 22 benefit is. If all the emissions that went into the 23 atmosphere just stayed there, we would have been gone 24 generations ago. And, really, the year over year analysis, 25 I think, is much more technically correct and more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 thoughtful. 2 And if you look on page 59 of the report, and you 3 look at what the actual emissions benefits of either the 4 calculated benefits of the ZEV program -- and for the sake 5 of simplicity, put aside the fact that, if you look at the 6 battery panel report and the testimony of the other experts, 7 the fact that electric vehicles won't sell in any quantity 8 would really take those benefits almost down to zero. 9 But put that aside and assume those cars actually 10 got sold and actually displaced a gasoline vehicle. If you 11 look at the analysis, our offer is triple the benefits in 12 2010, which is the SIP year. It's tripled. 13 So, even if it goes to 14 percent, the worst case 14 assumption presented, it still shows better than equivalent. 15 With that, I think I'll take questions. 16 MS. EDGERTON: I just want to say I heard your 17 kind comments. I was in the back. 18 MR. BROWN: Thank you. I knew I'd get you back. 19 MS. EDGERTON: Well, it was kind of fun to hear 20 what you said behind my back. I really liked it. 21 Thank you. 22 CHAIRMAN DUNLAP: Okay. Mr. Brown, short and 23 sweet, have a seat. 24 MR. BROWN: Thank you. 25 (Laughter.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 CHAIRMAN DUNLAP: Mr. Heckeroth, Doug Henderson, 2 Larry Berg. 3 Again, I'd just remind the audience, if we've 4 heard from you and you've provided us comments in writing, 5 we've had a chance to read them; don't feel you need to 6 cover them all verbatim. But make a few salient points, and 7 we'll move the agenda. 8 MR. HECKEROTH: Thank you, Mr. Chairman and 9 members of the Board. My name is Steve Heckeroth. I'm the 10 only representative of a very small business that's come 11 before you today. 12 I'm educated as an architect. And for the last 25 13 years, I have been refining the design and construction of 14 buildings that rely totally on the sun to satisfy the energy 15 needs of the people who live and work in them. 16 In 1992, inspired by the courage and vision of 17 this Board's zero-emission mandate, I mortgaged my land and 18 sunk my life savings into starting a small cottage industry 19 style electric vehicle company. 20 My goal was to change the public's perception of 21 EVs from ugly, slow utility vehicles to good looking, high 22 performance cars. 23 When I started producing electric vehicles four 24 years ago, the only components available came from the golf 25 cart and forklift industry. Since then, a multitude of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 small businesses have sprung up all over the world in 2 anticipation of the mandate's implementation. 3 I am now able to get high performance controllers 4 with regenerative braking, power factor corrected chargers, 5 and light weight wheel -- permanent magnet wheel motors. 6 I am here to support the 1990 mandate and tell you 7 that my company is one of many that will have to close its 8 doors if you eliminate the percentage requirements for 1998 9 and 2001. 10 The staff's recommendation of Option B is based on 11 information gathered from what they call the primary 12 stakeholders. These stakeholders, it turns out, are not 13 people who've risked all they own, or our children, 14 grandchildren, or future generations as one would assume. 15 They include the oil and auto industry. These 16 industries are firmly entrenched in the technologies of the 17 industrial age, which has brought us to the point where we 18 need an air quality control board. 19 I'm a stakeholder along with all the people in 20 small business who believed that the mandate would be 21 implemented in 1998. But my efforts and interests are not 22 reflected in Option B. 23 When smoking was determined to be a public health 24 hazard, law makers did not sit down with the tobacco 25 industry and draft a memorandum of agreement for cleaner PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 burning cigarettes. 2 California took on smokers and the tobacco 3 industry, and made laws to protect the health of people in 4 public places. 5 The Option B MOA includes some serious loopholes 6 that will likely result in further delay of the full 7 compliance with the mandate. For instance, the auto 8 industry can influence the acceptance of ZEVs by continuing 9 its negative media campaign or by making products that are 10 not satisfactory to the public as evidenced by the price tag 11 of many of the cars they are suggesting. 12 The fines suggested in the MOA can easily be 13 circumvented by token efforts or included in the cost of 14 doing business. These fines are not commensurate with the 15 public health hazard caused by vehicle emissions and do 16 little to guide the industry toward -- they only punish 17 after the damage has been done. 18 According t o the California Energy Commission, 19 Californians burn 500 gallons of gasoline per capita for 20 personal transportation annually. If everyone in the world 21 consumed as much as California, the oil resources would be 22 exhausted in under three years. 23 Overconsumption of a finite resource and the 24 pollution caused by internal combustion engines are problems 25 that have to be addressed immediately. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 On the last page of my presentation, I list some 2 suggested options that would include the original 1990 3 mandate, with additions that would go beyond the Federal 4 standards. 5 Could I have the slides now? 6 Much is said in the staff report about waiting for 7 a successful launch of ZEVs. This Italian ZEV went 120 8 miles in one hour. That's averaging 120 miles an hour for 9 one hour. This is the ultimate car for half-width, fast 10 lane, single-passenger commuting. 11 Next slide. 12 The rest of the vehicles you see were built in my 13 shop with off-the-shelf components, recyclable lead-acid 14 batteries, and on-board chargers that can be plugged into 15 any 20 amp 110 Volt outlet without any increase in 16 infrastructure. 17 I used kit car bodies and aftermarket running gear 18 to make these electric cars by hand, which have outperformed 19 auto industry entries at EV rallies across the country. 20 this silver Porsche took first place in the Palm 21 Springs rally by going 117 miles on one charge. It took 22 second place in the DOE Clean Air Rally in Los Angeles, 23 easily outdistancing the Ford and Chrysler entries. 24 Next slide, please. 25 The yellow Porsche came in first in the Sunday PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 Challenge at Daytona Beach last year, with a 0 to 60 mile 2 per hour time of10 seconds. 3 Next slide, please. 4 It took second at Phoenix a couple of weeks ago 5 against -- in its class against 55 other entries, with a 6 time of 17 seconds in the quarter mile. 7 Next, please. 8 The black Porsche took second in the Silicon 9 Valley EV Rally, with a range of 92 miles in city traffic. 10 And it looks pretty good, too. 11 Next, please. 12 The red electric Porsche and tractor in this photo 13 can be charged with 3 kilowatt photovoltaic array on my barn 14 roof. 15 Next, please. 16 Making them truly zero-emission vehicles. 17 Could I have the lights again? 18 Members of the Board, the fact that you went 19 beyond the Federal requirement in 1990 to improve air 20 quality for the citizens of this State and required ZEVs in 21 your SIP was the inspiration that created an industry. 22 Based on my experience as part of that industry, I 23 still believe that your initial path is the correct one. 24 Option B leaves a questionable future for this 25 budding industry and opens many loopholes for the auto PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 industry. 2 Please have the same courage you showed in 1990, 3 and stick to the original mandate, or at least Option C. 4 Thank you. 5 CHAIRMAN DUNLAP: Thank you. Mr. Lagarias. 6 MR. LAGARIAS: How does the -- how is your 7 business affected by the ZEV regulation? 8 MR. HECKEROTH: It puts off till 2003 -- what it 9 does really is it gives the impression to the public that 10 the Air Resources Board has abandoned their stated mission 11 until 2003, and makes them think that the cars that produce 12 aren't viable. 13 And so, I had a very good public acceptance going 14 into 1995, but with the millions of dollars spent in 15 negative advertising by the auto industry, that acceptance 16 has dwindled considerably. 17 And to find out that they're successful negative 18 ad campaign has pushed back the industry to 2003, makes the 19 public think that -- well, I don't have the resources to 20 compete against that kind of -- 21 MR. LAGARIAS: You have special purpose cars, as 22 far as I can see; how much do they sell for? 23 MR. HECKEROTH: They sell for around $30,000. 24 MR. LAGARIAS: And is there a market for them? 25 MR. HECKEROTH: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 MR. LAGARIAS: Well, then, the ZEV regulation 2 shouldn't have any impact on your business. 3 MR. HECKEROTH: The negative advertising has had a 4 big impact on my business. I sold four cars in 1994; I sold 5 none in 1995, because I was spending most of my time and 6 resources trying to fend off the negative advertising. 7 MR. LAGARIAS: Well, the 2003 regulation's been on 8 the books since 1990, and there's no intent to change it. 9 That has not changed in any way. 10 MR. HECKEROTH: I agree, but by making the 10 11 percent in 2003, you've eliminated the small business 12 opportunity to fill in the time between now and then. 13 MR. LAGARIAS: It only affects seven 14 manufacturers, the regulation. 15 MR. HECKEROTH: In the public's perception, it 16 affects everybody. 17 MR. LAGARIAS: Well, it seems to me, if you have a 18 car that can perform as you say within a price range, and 19 there are a thousand people that indicated they want the car 20 in our mailings alone, there should be a ready market for 21 the volume of cars that you're interested in. 22 MR. HECKEROTH: My goal was to prove the 23 technology worked, not to become a manufacturer. And I 24 would be more than happy to turn that -- all my customers 25 over to the industry, and if they would produce a car that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 performed as well with current technology. 2 So, what I'd like to say is that the people in 3 small business -- and small business I think is under 500 4 employees, which -- 5 MR. LAGARIAS: Under a hundred. 6 MR. HECKEROTH: Under a hundred? Well, I 7 definitely qualify for that. 8 But the people in that size business can not 9 afford to wait till 2003, when the public views, as you do, 10 that that's when electric vehicles will be feasible. 11 And I don't have the resources to go out and tell 12 them that they're already feasible. 13 MR. LAGARIAS: Thank you. 14 CHAIRMAN DUNLAP: Thank you for your comments. 15 Mr. Henderson. 16 MR. HENDERSON: Mr. Chairman, members of the 17 Board, I am Doug Henderson, Executive Director of the 18 Western States Petroleum Association. And I want the Board 19 to understand that the Western States Petroleum Association 20 certainly recognizes the difficult task you face in 21 continuing to make improvements in California's air quality. 22 Our industry has a huge stake in your LEV program. 23 As you mentioned earlier today in your discussion 24 about the roll-out of our cleaner burning gasoline, we have 25 certainly supported your goals by producing and marketing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 that gasoline, which is, as you also know, the largest 2 single emissions reductions program in this State in more 3 than a decade, and we're particularly proud of the 4 cooperation that you mentioned earlier today. And, thank 5 you, Ms. Edgerton, for your comments. Same with Mr. Boyd's 6 comments as well. 7 Regarding the issue before you today, WSPA does 8 not believe that the ZEV mandate can be reconciled with your 9 mission. In our view, it is not effective and efficient, 10 and it does not give adequate recognition to the effects on 11 the economy that it would bring along with it. 12 Rather than a limited appeal, we feel that the ZEV 13 mandate should be eliminated, since it requires the forced 14 sale of electric vehicles, and also includes costly 15 anticompetitive subsidies required to accomplish that 16 objective. 17 We strongly believe and, as we have said 18 consistently, that the best way for CARB to meet its 19 objectives iis to set performance standards for emissions 20 reductions, and to allow the marketplace to find the most 21 efficient and least disruptive means of achieving these 22 standards. 23 Absent an outright repeal of your ZEV mandate, we 24 would support the proposed amendments before you, because 25 they eliminate the requirement on automobile manufacturers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 to sell a set percentage of ZEVs from 1998 to year 2002. 2 WSPA strongly opposes the terms of the MOAs that 3 obligate you to promote and seek subsidies for ZEVs. We 4 also urge the elimination of the mandate for the year 2003 5 and beyond. 6 Based on your staff estimates of emissions 7 reductions that can be expected under these amendments, only 8 10.4 tons per day of ozone precursor emissions would be 9 removed under the original 1990 mandate, and only 8.8 tons 10 per day under the 2003 mandate. 11 Mr. Chairman, that's less than one percent of the 12 reductions that you need to meet your goal. And the costs 13 are staggering, about $227,000 per ton. These are costs 14 that will impact every sector of California's economy. 15 And there are alternatives. Each of the four 16 alternatives described in our written testimony and written 17 comments submitted a couple of days ago, it costs less than 18 $1 billion in total from now through the year 2010 to 19 achieve the same 8.8 tons per day of emissions reductions. 20 That works out to between 5,000 and $25,000 per ton. 21 When electric vehicle technologies are adequately 22 developed, Mr. Chairman, they will be competitive in the 23 market without the need for mandates and subsidies. In the 24 meantime, progress can continue on air quality improvements 25 in a more effective, more credible, and less costly way. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 That's the end of our testimony. I'd be happy to 2 take any questions. 3 CHAIRMAN DUNLAP: Any questions of Mr. Henderson? 4 Okay. 5 Dr. Larry Berg with Ballard Power Systems, 6 followed by Ben Knight, followed by Rock Zierman from 7 Assemblyman Bordonaro's office. 8 Good afternoon, Larry. 9 DR. BERG: Good afternoon, Mr. Chairman. And 10 thank you, ladies and gentlemen of the Board for giving me 11 an opportunity to at least make a few comments. 12 But before I do that, I'd like to, on behalf of 13 Ballard, express our appreciation to Jim Boyd and Tom 14 Cackette and to you, Mr. Chairman, and to Lynne Edgerton for 15 working with us and discussing some of the things that were 16 of concern to us, and also providing the opportunity to work 17 in a cooperative way to hopefully facilitate the 18 implementation of this mandate, which I certainly would 19 support. 20 Also, having sat here all day, there are a few 21 questions I heard asked that I think perhaps I can give an 22 answer to. 23 One, regarding the state of fuel cell technology, 24 I am somewhat astonished, having followed it for 25 approximately 10 years -- when Ballard started out as a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 small R & D firm that had come out of the United States 2 space industry, with perhaps 10 to 15 employees, and one 3 support staff, to the state where, today, still being a 4 small player in a very large field. 5 However, it is a firm today of about 275 employees 6 and $350 million evaluation. So, in a period of about, I 7 would say, seven years, six years, I think the -- I always 8 like to, in a market economy, refer to the increase in 9 value. It has some reflection, I believe, in the relative 10 rapidity with which the technology has been developed. 11 Secondly, with regard to automobiles, Ballard 12 announced last September in London that we no longer need to 13 focus on the power density aspects of developing a fuel cell 14 for light-duty vehicles. The partnership for a new 15 generation of vehicles and the auto manufacturers set as the 16 goal for a proton exchange membrane fuel cell of 1,000 watts 17 per liter, or 700 wats per kilogram. And to carry it one 18 step further, or 28 kilowatts per cubic foot. 19 Having spent many hours at a Board like this, 20 basically, what we're talking about is something about like 21 that and about like that (indicating size) that produces 22 somewhere between 25 and 30 kilowatts of electricity. 23 Ballard, in the development of its automobile and 24 light-duty fuel cells, has entered into programs, the 25 largest being with Daimler-Benz and Mercedes-Benz in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 Germany. We are completing Phase II of that. 2 Daimler-Benz unveiled a vehicle about -- almost a 3 year and a half ago. It is our understanding the second 4 vehicle will be unveiled this year in Germany, and it is our 5 understanding that next year, sometime in 1997, we can 6 expect to see a Mercedes-Benz vehicle on the road in a test 7 mode in Germany. 8 Our second largest partner is General Motors. We 9 are partners with General Motors in the PNGV DOE program. 10 We have delivered one and I think the second fuel cell is 11 going to them that will be at the 50 kilowatt level. 12 So, the rapidity of this is almost beyond, from my 13 perspective as a nonengineer, expectations. 14 But I could point out that when we produced the 15 first fuel cell vehicle in the world in 1992, it was a proof 16 of concept bus. And, at that point in time, we were working 17 in the neighborhood of 140 to 160 watts per liter. 18 Slightly more than three years later, we are at 19 beyond the 1,000. And it is substantially beyond that. 20 In 1993, we were at the level of about 300 watts 21 per liter; less than a year later, we were at 570; less than 22 a year later, we were at 1,000. 23 Now, this doesn't mean that the fuel cell vehicle 24 will be in Mr. Miller's garage -- not garage -- his facility 25 in the next year, but what it does mean is that we are in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 the range of being able to produce a fuel cell by the end of 2 this decade. And with a production decision having been 3 suggested by Daimler-Benz, that decision will be made before 4 the end of the year 2000. 5 Our plans in 1991, were to have a fuel cell for 6 automobiles available for extensive testing in the late 7 1990s, and they would be available for commercial production 8 by the time the 2003 mandate went in. That was working 9 under the other original mandate, which still remains. And 10 we see no reason not to be able to meet that goal. 11 The cost of the fuel cell has come down. It's 12 come down dramatically in the last two years. Part of that 13 is related to the density, which I just described. Part of 14 it's also related to the use of materials in that fuel cell 15 with one of our joint partners, which is Johnson-Mathe. For 16 those of you in the automobile business, you recognize them 17 as the world's largest catalyst maker. 18 They are a partner, an equity partner of Ballard, 19 and we have made substantial progress there. More needs to 20 be done. 21 However, in that regard, I would refer you to 22 General Motors, which slightly less than two years ago, had 23 completed a study funded by DOE, which suggested -- the 24 headline of the Press release that went out shows, 25 "Nonpolluting Fuel Cell Engine Can be Made at No Extra Cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 to an Internal Combustion Engine." 2 I would -- since we are placing a great deal of 3 faith in General Motors in a variety of other ways, I'm 4 placing a great deal of faith in their cost projections in 5 this particular case. 6 I would refer one to one other item, and then I 7 will bring it to a close, Mr. Chairman. 8 The chairman of the board -- the former chairman 9 of the board of Daimler-Benz at the announcement, at the 10 showing of their first vehicle, was reported in Automobile 11 International in September, 1995, in a headline and a small 12 vehicle, which is presently being developed -- the headline 13 is, "Mercedes Could Have a Fuel Cell Car by the Year 2000." 14 What I would suggest, within the next year, and by 15 the end of 1997, with what we know with the partners that we 16 have in the automobile industry, which are 10 out of the 17 17 largest that we have these arrangements with, that you could 18 see -- you will see at least two fuel cell vehicles on the 19 road by the end of '97. You could see as many as five. 20 We're not in the automobile business. We're in t 21 he business of producing zero-emission engines for those who 22 do produce automobiles. 23 Mr. Chairman, thank you very much. 24 CHAIRMAN DUNLAP: Thank you, Dr. Berg. 25 DR. BERG: Any questions? I'll be happy to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 answer. 2 CHAIRMAN DUNLAP: A comment, if I could. I 3 appreciate very much you making the time to educate Ms. 4 Edgerton and I as to the recent progress made in the fuel 5 cell area. I appreciated that very much, and have had an 6 opportunity, as I know you have, to talk to the executive 7 staff of the Board. 8 DR. BERG: Yes. 9 CHAIRMAN DUNLAP: They've indicated, assured me 10 they'd redouble their efforts to track and to stay involved 11 with what's going on in the fuel cell area. So, you can 12 count on us being up to date, and certainly a partner in 13 many respects relative to sharing information and making 14 sure people know about the role that fuel cells can play in 15 the future. 16 So, we're encouraged by your work. 17 DR. BERG: Thank you, Mr. Chairman. The other 18 point I would make is -- and the only comment with regard to 19 the staff report and recommendation is that one thing we 20 would like to see is on the credits for ZEV, we have 21 demonstrated a 200-mile vehicle already. We would just kind 22 of like to see those credits keep on going up at the same 23 ratio. With all due respect, we kind of like that, Tom. 24 So, if we could discuss that in the future, that 25 would be deeply appreciated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 CHAIRMAN DUNLAP: Okay. 2 DR. BERG: Also, the 40-foot bus will be South 3 Coast at the July Board meeting, which I think is around the 4 10th or 12th. And we'll certainly send invitations and hope 5 to see all of you, and hope that we can bring a fuel cell 6 vehicle to one of the CARB meetings in the not too distant 7 future. 8 One last item related to Supervisor Roberts, 9 Ballard Power Corporation, which is our U.S. subsidiary, has 10 selected San Diego County as the site and opening of our 11 first facility. We have located that site. 12 The San Diego connection goes one step further. 13 The first vice-president, executive vice-president of 14 Ballard Power Systems Vancouver, but is also the head of 15 Ballard Power Corporation in the United States just happens 16 to live in San Diego. There's probably a correlation there. 17 But we will be opening that facility, and we will 18 be employing Californians. And we intend to grow. 19 CHAIRMAN DUNLAP: Very good. 20 For my colleagues on the Board that don't know it, 21 Dr. Berg served for nearly a decade as one of the -- 22 DR. BERG: Over a decade. 23 CHAIRMAN DUNLAP: -- prime movers and shakers on 24 the South Coast District Board. I had a chance to work with 25 him there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 Mr. Lagarias. 2 MR. LAGARIAS: Dr. Berg, we certainly want to 3 encourage the technology. Even Joe Caves has indicated that 4 you are the hope for the future. 5 What is the future? When can you anticipate 6 demonstrating, and then how long do you think the followup 7 would be to let's say commercializing fuel cell type 8 technology? 9 DR. BERG: We would hope to have light-duty 10 automobiles demonstrated in this State prior to the end of 11 this decade. 12 We have -- there's a relationship between the fuel 13 cells for heavy-duty and the relationships for light-duty, 14 and they sort of piggyback each other in terms of cost 15 reductions and testing. 16 We have three demonstration projects for our 40- 17 foot, 275 horsepower fuel cell powered transit bus. The 18 first contract was signed in the City of Chicago. The 19 second contract was in Vancouver, which was just announced 20 this week. It's about $8 million Canadian. And the third 21 demonstration will be Chula Vista, which Supervisor Roberts 22 has been of great assistance in helping reach the funding. 23 We think that that will be completed -- the 24 funding will be completed within a month. 25 That will give us the demonstration on the heavy- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 duty side that we feel is sufficient to work out the 2 problems to commercialize the transit bus in the year 1998. 3 That has been our business plan since 1991. Out of the 4 experience with the transit buses we feel that -- both with 5 the demonstrations and with the 100 vehicles, which we hope 6 to put on the road around -- not just North America, but 7 also in Europe prior to the year 2000 -- that it's out of 8 that experience, we'd meet your 2003 deadline with the 9 manufacturer being able to make a decision in the late 10 1990s. 11 Obviously, things need to -- someone used an 12 analogy before about hitting home runs and singles. 13 I think we'll be okay with singles, but we can't 14 have any strike outs. Because if something comes up that we 15 haven't anticipated, there could be a lag. But that is the 16 time frame that we set in '91. We have met every one of 17 those milestones, in most cases as much as a year early, 18 such as on power density. 19 And we feel that the confidence in the technology 20 has been demonstrated by the investors on the stock market 21 offerings that we've had, both on NASDAQ and at the Toronto 22 Stock Exchange, where it has gone up about 400 percent since 23 listing. 24 We have had good success in raising capital. We 25 have also used, obviously, government contracts. But it's' PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 been roughly a third, a third, and a third without relying 2 upon just public money. This is not a publicly developed 3 project. 4 And we are in business to make money. 5 MR. LAGARIAS: One other question. What is your 6 operating temperature, and what are you using as the fuel? 7 DR. BERG: The fuels, we are what we call a 8 multiple-fuel fuel cell company, which is customer friendly. 9 We think the best fuel, for example, for the heavy-duty is 10 obviously hydrogen. It's the simplest and it's the easiest 11 to deal with. 12 However, on the -- our automobile manufacturer 13 partners, I believe without exception, perhaps one 14 exception, have preferred to use methanol as the liquid fuel 15 with a small reformer on board to convert that into 16 hydrogen. 17 That certainly is the case with regard to General 18 Motors and Daimler-Benz. 19 With regard to temperature, it hasn't really made 20 any difference. We've operated the fuel cells in -- I guess 21 we first showed the bus number two in Toronto and trucked it 22 across Montana in the middle of winter. And operating 23 temperatures really don't have a lot of bearing. There are 24 concerns, obviously, because of the cooling system. But 25 these are the kinds of things that we hope will come out -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 and, frankly, we're confident will come out -- of the three 2 demonstration sites. 3 And the three sites are not chosen just because 4 they're the first ones to come up with money. They're three 5 different types of areas. San Diego, obviously, is in the 6 Southern California climate. Vancouver is a temperate 7 climate. It's rarely freezing, rarely snow. But it's 8 colder, it's damper. And Chicago, I don't need to tell you 9 what Chicago's like, having grown up in Iowa. 10 I don't know whether I answered your question, Mr. 11 Lagarias. 12 MR. LAGARIAS: I was looking for a number. Are 13 you talking about ambient, or 300, or 600? 14 DR. BERG: The PEM fuel cell is the low 15 temperature fuel cell, which is one of the reasons why it 16 has applicability for transportation. And we are not the 17 only producers of PEM fuel cells. IFC on the East Coast, 18 Energy Partners, and -- 19 MR. LAGARIAS: Thank you. 20 DR. BERG: -- H Power, et cetera, are in it, also. 21 And there is very little disagreement that, with 22 regard to transportation, it's the PEM. And the reason 23 being low operating temperature, and it's light. 24 CHAIRMAN DUNLAP: Ms. Edgerton. 25 MS. EDGERTON: Dr. Berg, I'd like to make a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 comment that it is my opinion that Ballard is very lucky to 2 have you as one of their board members. 3 As Chairman Dunlap mentioned, we very much 4 appreciate your coming to help keep us informed of your 5 progress. I'd also like to say I think California's lucky 6 that you are a Ballard board member, because -- Supervisor 7 Roberts, I know that -- I can assure you that I have 8 personal knowledge of Dr. Berg's working very hard to ensure 9 that this company came to California. 10 And I've been a very good sport about not having 11 it being in L.A. and having it be in San Diego. I've been 12 fully satisfied by that. 13 I'd also like to say that one of the things that 14 was a lot of fun about being appointed to this Board was, 15 when I found out that Mr. Dunlap was appointed the new 16 Chair, I recalled immediately that I first met Chairman 17 Dunlap in connection with my working to persuade -- well, in 18 a fuel cell project, shall we say it that way? 19 CHAIRMAN DUNLAP: That's right. 20 MS. EDGERTON: I think he refers to it as I picked 21 his pockets. In any case, so that was something that I 22 recalled immediately. 23 I'd like to say that this issue is, I believe, a 24 very good indication of the staff's openness and willingness 25 to consider the concerns of the Board members and of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 technologists. And subsequent to the release of the draft 2 report on this regulatory change, we had -- had the 3 opportunity to get together and talk, and I have been 4 tremendously impressed with the inclusion of fuel cells. 5 And it was sort of the focus that you made sure that this 6 program will not mandate a particular technology. And by 7 that, I mean not mandate advanced batteries if fuel cells 8 can be competitive. 9 I think Chairman Dunlap has made it very clear 10 that we want to be technology neutral. And whatever is the 11 cleanest and the most competitive, and can be delivered to 12 our cars, that's what we want. 13 So, I just wanted to thank you very much for that, 14 and say that it matters a great deal. 15 And finally, I'd say that, with respect to the 16 fuel cell issue, I couldn't help but think about it as I 17 read of the strikes in GM over the last few weeks, and the 18 importance of the outsourcing issue. And I do realize that 19 currently -- and, for example, Ballard is -- would be 20 considered a supplier, and that the outsourcing issue is a 21 potential reality, and I duly note that. 22 Thank you. 23 DR. BERG: Mr. Chairman, could I just make -- 10 24 seconds, one comment that I really appreciate the fact 25 sheet. There's one word I'd really like to see added, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 that is the most work on fuel cells going on in Europe is in 2 Germany. And you could put Germany there, we would be 3 deeply appreciative, as our largest partner. 4 Thank you very much, Mr. Chairman. 5 SUPERVISOR ROBERTS: Mr. Chairman? 6 CHAIRMAN DUNLAP: Thank you. Supervisor Roberts. 7 SUPERVISOR ROBERTS: The good judgment that 8 they've shown on site selection -- 9 CHAIRMAN DUNLAP: I know. 10 SUPERVISOR ROBERTS: -- along with the progress 11 that they're making on development of this technology, I 12 think it bodes well for the company. And it's nice to have 13 them involved in San Diego County. 14 CHAIRMAN DUNLAP: I've noticed General Motors and 15 EV1, and now Ballard, economic development is happening down 16 in San Diego. 17 SUPERVISOR ROBERTS: It's a wonderful environment 18 for launching these technologies -- 19 CHAIRMAN DUNLAP: That's right. 20 SUPERVISOR ROBERTS: -- Mr. Chairman. 21 CHAIRMAN DUNLAP: That's right. Thank you. Duly 22 noted. 23 Mr. Knight from Honda, Rock Zierman from 24 Assemblyman Bordonaro's office, Jamie Phillips. 25 And, again. And again, I'd remind the witnesses, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 if you provided written comments, please don't feel it's 2 necessary to cover the testimony word for word. You can 3 summarize it. It would be appreciated. 4 MR. KNIGHT: Good afternoon, Chairman and Board 5 members. 6 I'm Ben Knight with Honda Research and 7 Development. I'd like to present comments in support of the 8 staff proposal and the MOA. 9 Honda has supported CARB's '95 workshop process 10 with testimony, and also in private minutes with staff, we 11 shared our most confidential information, and by providing 12 technical information and also facility visit to the battery 13 panel. 14 We have been seriously preparing to meet the ZEV 15 requirement since it was adopted in 1990. And among our 16 activities, we've been operating a fleet of test vehicles 17 since the summer of '94. 18 The vehicles -- we call them research prototypes, 19 and there's a sample of one outside. They do employ a 20 dedicated ground up platform, even if you get confused by 21 some of the passenger car related body panels. 22 Also, we've expended significant resources to meet 23 the '98 regulation, including the development of an all-new 24 purpose built vehicle. 25 Also, we have been and will continue to work with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 the majority of the battery, major battery developers 2 worldwide. 3 We agree with the battery panel's assessment: The 4 advanced battery, offering greater range, and therefore 5 having a better chance at being accepted by the public, will 6 not be fully evaluated nor ready for full scale 7 commercialization prior to the years 2000 and 2001, and that 8 a constructive approach to work toward a ZEV market is to 9 conduct real world trials utilizing advanced technology 10 batteries in the vehicles. 11 The technology development partnership framework 12 in the MOA is the key element which would allow these 13 technologies to be promoted and evaluated in the market in 14 such a manner that all stakeholders -- the auto companies, 15 utilities, the government, and so forth -- could work 16 together in close cooperation to find ways to nurture the 17 EV. 18 We would like to accomplish the following in our 19 program: Offer and evaluate advanced technology batteries 20 installed in vehicles in real world conditions; work on 21 infrastructure development; evaluate incentives, 22 particularly nonmonetary incentives; and evaluate the 23 factors for customer acceptability. 24 In parallel with the advanced technology battery 25 trials, Honda will continue its aggressive R & D towards the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 further advancement of electric vehicle components systems 2 and, in particular, batteries. 3 Again, we look forward to bringing a quality 4 electric vehicle to this partnership and to work sincerely 5 and cooperatively toward common objectives with our utility, 6 and government, and supplier partners. 7 I'll be glad to answer any questions. 8 CHAIRMAN DUNLAP: Any questions? 9 MS. EDGERTON: Could you tell me, please, sir, 10 whether you intend to offer for commercial sale Hondas, 11 electric Hondas? 12 MR. KNIGHT: We're not convinced that the current 13 technology is -- makes a viable product, so we would like to 14 focus on the advanced technology and demonstration portion, 15 and put our energies there. 16 MS. EDGERTON: So, if I understand you right, 17 you're substantially in the same position as the -- were you 18 here when the representative from Nissan -- 19 MR. KNIGHT: Yes, I was. Under the MOA, the seven 20 automakers will be putting out up to 3,750 vehicles. And 21 our portion of that would be about 506 vehicles; depending 22 on the battery applied and the performance of the specific 23 battery, somewhat less than that. 24 That's where we would concentrate. I've said in 25 the past that I think managing a high quality program is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 extremely important and I think the quality over quantity is 2 a very important contribution to this program and next step. 3 And over the next several years, we'll be introducing those 4 vehicles. 5 MS. EDGERTON: So, that beautiful car out there is 6 not going to be for sale? I can't buy that? 7 MR. KNIGHT: The vehicle we're planning in this 8 next step will not be the vehicle outside. That's been our 9 current research prototype. 10 So, we're working on a completely new ground-up 11 vehicle. And at some point in the future, we'd like to 12 announce that. 13 MS. EDGERTON: And do you anticipate that vehicle 14 being the test bed for the advanced batteries? 15 MR. KNIGHT: The vehicle we're developing and 16 would apply to the demonstration program would be equipped 17 with advanced batteries. One of the key battery 18 technologies we've been working with towards '98 is a nickel 19 metal hydride battery. 20 MS. EDGERTON: Let me go back again. 21 Thank you. I think I was asking whether the 22 ground-up vehicle that you have been working on will be the 23 vehicle in which you will place the advanced batteries for 24 the technology demonstration project. 25 MR. KNIGHT: That's correct. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 MS. EDGERTON: Okay. So, if I understand you 2 right, so far, you don't see an entry point for lead-acid 3 battery electric vehicles for your company? 4 MR. KNIGHT: At this time, we think the best 5 approach to this is to put the vehicle out there in the 6 hands of consumers as well as fleets with the advanced 7 batteries and gauge where the technology's at, and work on 8 customer acceptance issues, and take it a step from there. 9 MS. EDGERTON: So, if I understand you correctly, 10 then, the first product plan you would be submitting would 11 be 1999, November? 12 CHAIRMAN DUNLAP: Be '97. 13 MS. EDGERTON: For commercialization. Potential 14 date. 15 MR. KNIGHT: Well, we certainly will comply with 16 the MOA as well as, frankly, I think we'll tend to meet more 17 frequently with staff and share our progress, technology, 18 and our plans. 19 At various stages, the plan is, you know, is 20 finally approved; at other points, the plan is under 21 development, or there may be several ideas and alternatives. 22 Finally, when a plan's approved, it's a start-up 23 of development. 24 MS. EDGERTON: And 506 cars? Is that right? 25 /// PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 MR. KNIGHT: That's our share of -- 2 MS. EDGERTON: Thank you. 3 MR. KNIGHT: -- the 3750. 4 CHAIRMAN DUNLAP: Okay. Thank you very much, Mr. 5 Knight. Jamie Phillips, Planning and Conservation League; 6 Rock Zierman, Paul Haluza from MEMA. 7 Hello, Ms. Phillips, I understand we have some 8 written testimony. 9 MS. PHILLIPS: Gary Patton has written testimony, 10 or presented a letter, and he was unable to be here this 11 afternoon, Mr. Chairman, members of the Board. 12 So, I'm here speaking very briefly on his behalf 13 again. I believe I was here on his behalf last time as 14 well. I apologize for his not being able to stay. He had 15 another engagement and had to leave, so. . . 16 We're here to urge you not to adopt the staff plan 17 as proposed. And we urge you to save the mandate, to make 18 he right decision for California for our health and for our 19 economy. 20 Backing away now we believe would be a mistake. 21 The mandate is working, and we've all read the battery panel 22 report, so I won't go through that. 23 And has it has indicated through the marketing 24 studies and through the battery panel report, it said that 25 it pushed technology and we all that. We believe that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 eliminating the early years of the mandate, as proposed in 2 this staff MOA recommendation, strips away your enforcement 3 capabilities. 4 And that, together with trusting the automobile 5 industry, abandons the intent of the original ZEV program 6 that was adopted in 1990. 7 Since last fall, as you know, PCL has accepted and 8 supported your stated need to build in flexibility in the 9 early years of the program. And we think that you can do 10 that without repealing the mandate. We think that you can 11 build in flexibility by adding language which creates 12 alternative compliance factors based on specific conditions. 13 And that, if those conditions are met, then the mandate does 14 not have to be applied. If the conditions are not met, of 15 course, the mandate is applied. 16 I would ask you to refer to the second page of Mr. 17 Patton's letter, because he outlines some suggested language 18 that you would be able to apply in this case. 19 He's essentially suggesting that the enforcement 20 mechanisms be part of the regulation, not part of the MOA 21 contract. 22 Members of the Board, PCL recognizes that you're 23 trying to develop an electric car program that works for 24 California. We applaud you for that. We support your 25 intent. We cannot support the proposed changes, however, in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 the implementation strategy. 2 We think you're making a mistake by giving up the 3 regulation and replacing it with the contractual agreement, 4 and we think it's a mistake to transfer that initiative and 5 control of California's clean air program in the future to 6 the automakers. 7 If you must take on the weaker path, we implore 8 that you address our concerns and the concerns as were 9 outlined very eloquently earlier today by both Janet 10 Hathaway and Joe Caves. So, I will not repeat those. 11 But we will be watching closely -- I'm sure you 12 know that -- to assure that you do carry out the public 13 trust. 14 Thank you. 15 CHAIRMAN DUNLAP: Thank you, Ms. Phillips. Okay. 16 Very good. Mr. Zierman. 17 MR. ZIERMAN: Mr. Chair, members, thank you very 18 much for this opportunity to speak. 19 My name is Rock Zierman with State Assemblyman Tom 20 Bordonaro's office. Tom fully accepted to come today, but 21 was unable to, and wanted me to come to express his views on 22 this issue, as well as invite each of you members to contact 23 him directly if you have any questions or comments for him. 24 Let me read his brief prepared comments for you. 25 (Reading) I want to express my strong opposition to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 zero-emission vehicle regulations, the ones that you and 2 your fellow Board members are discussing today. 3 As a matter of public policy, mandates such as 4 this are an anathema to the principles of free market 5 enterprise. The fact that a government mandate is required 6 to bring electric cars to the marketplace speaks volumes 7 about their viability. Clearly, if there were indeed a 8 market for these vehicles, no mandate would be necessary. 9 Further, if there were a market for these 10 vehicles, the extensive subsidies agreed to in CARB's 11 proposed memoranda of agreement with automakers would also 12 be unnecessary. 13 Once again, if there were a significant consumer 14 demand, this demand would be met in the marketplace by 15 competing private companies underwritten by shareholder 16 investment. 17 It is inappropriate public policy to commit 18 taxpayer dollars to produce a product which can not attract 19 investors and consumers on its own merits in the private 20 sector. 21 As a member of the Assembly Appropriations 22 Committee, I'm particularly concerned with respect to 23 provisions in the MOAs implying a commitment on the part of 24 the State to purchase EVs for government fleet use, and to 25 develop and support so-called incentive programs to enhance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 the marketability of EVs. 2 Where does the Board anticipate obtaining the 3 funding for such subsidies? And since EVs are priced at 4 roughly two to three times the cost of better-performing 5 conventionally fueled vehicles, how do you intend to justify 6 the expenditure of scarce public funds on EV fleet 7 purchases? 8 I would like to make it clear that I'm an advocate 9 of clean air, and do not believe that an improved 10 environment and fiscal responsibility are mutually 11 exclusive. However, the Air Resources Board's own staff 12 have indicated that even under the most optimistic 13 assumptions, the electric cars mandated under this 14 regulation would achieve less than one percent of the smog 15 reduction required under the State's clean air program. 16 This hardly seems a result worthy of the massive market 17 manipulation and public subsidizations anticipated (sic) by 18 the ZEV mandate. 19 Thank you. 20 CHAIRMAN DUNLAP: Thank you. And thank the 21 Assemblyman for his interest in this issue. Appreciate it. 22 Mr. Haluza from MEMA, followed by Charles Hooper, 23 and Pam Leeper from Project California. 24 Good afternoon, sir. 25 MR. HALUZA: Mr. Chairman, good afternoon. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 Members of the Board, for the record, my name is 2 Paul Haluza, and I'm Director of Government Relations and 3 Public Affairs for the Motor and Equipment Manufacturers 4 Association. 5 Unlike everybody else that has been before you 6 today, I'm here to address some very isolated issues and 7 raise some technical points within the proposal that you are 8 considering. 9 And basically, my remarks are intended to address 10 pending EPA rulemaking with respect t o the national low- 11 emission vehicle program, also NLEV, the proposal to include 12 California's OBD II as a component part of the NLEV and 13 linkage of the compliance of NLEV with today's proposal 14 before the ARB and your mandate for zero-emission vehicles. 15 For the record, MEMA is a national trade 16 association representing more than 750 manufacturers of 17 motor vehicle original equipment components, replacement 18 parts, accessories, automotive chemicals, and related 19 equipment. Our members supply both the vehicle 20 manufacturers with original components and systems, and the 21 independent aftermarket with replacement parts used in the 22 repair and service of in-use vehicles. 23 MEMA believes that it would be both premature and 24 inappropriate for California to adopt any proposal that 25 would link compliance with NLEV revisions to the low- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 emission vehicle regulations adopted in 1990, for two 2 reasons. 3 First, there are very serious unanswered questions 4 in the U.S. EPA's authority to certify or enforce before 5 2004 more stringent emission standards for new motor 6 vehicles beyond those set in the Clean Air Act amendments of 7 1990, and EPA lacks the authority to certify NLEV vehicles 8 utilizing California's OBD II system with antitampering 9 protection compliance installed as a part of that system. 10 Also, in listening to Tom Cackette describe the 11 NLEV program in the MOA, there may be -- I will congratulate 12 staff, whoever was very creative in developing that MOA, but 13 if I heard him correctly, I believe that under the 14 California MOA, it would be a California LEV vehicle, not 15 necessarily the NLEV vehicle as proposed by the Federal 16 Government at that point. 17 Am I correct with what I heard you say earlier, 18 Tom? I'm sorry. 19 MR. CACKETTE: It's a vehicle that meets standards 20 that are equivalent to the California LEV vehicle. 21 MR. HALUZA: Okay. I guess that would raise a 22 third point, and that is the ability of EPA to certify a 23 California LEV vehicle outside of California. 24 While we have heard many indications from senior 25 EPA officials that the agency plans to adopt the NLEV, to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 date, there's been no regulation. Absent actual notice of a 2 final NLEV rule, it would be premature and presumptuous of 3 ARB to include NLEV compliance in the proposal being 4 considered today. 5 With respect to the pending NLEV rule itself, MEMA 6 and other associations have made every effort to ensure that 7 the evidence in NLEV docket reflects the serious competitive 8 issues raised by other pending EPA dockets regarding 9 enforcement of California's OBD II in its present form, and 10 also as a national standard. 11 To date, we have found no indication that EPA's 12 given serious consideration to these concerns; instead, EPA 13 has blindly adhered to the notion that the NLEV proceeding 14 is a cooperative partnership effort between EPA and the 15 automobile manufacturers, and that they, along with the 16 States, are the only interested parties. 17 MEMA believes that this is an absurdly narrow view 18 in its attempt to promulgate an enforceable regulation -- 19 whether deemed voluntary or not -- when that regulation 20 would change the provisions of the U.S. Clean Air Act, 21 completely revamp national emissions policy and automotive 22 emission design, and create tidal wave effects in the $200 23 billion automotive parts and service industry. 24 Further, should EPA issue an NLEV rule 25 incorporating California OBD II provisions, particularly in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 advance of a determination on the State's request for a 2 Federal -- a waiver of Federal preemption, its action would 3 demonstrate the utter indifference to the rule's impact on 4 the independent parts manufacturers, rebuilders, automotive 5 service providers, and most importantly, the public, in 6 terms of decreased competition and higher prices. 7 It would also totally disregard the dictates of 8 the Clean Air Act, the U.S. Administrative Procedures Act, 9 and the Government in the Sunshine Act. 10 Secondly, with respect to the national adoption of 11 California's OBD II regulations, which are prominently 12 identified in the proposal before you today as a component 13 part, MEMA and other aftermarket associations have raised 14 numerous and substantial issues regarding the inconsistency 15 of OBD II and particularly its antitampering provisions, 16 with Sections 202(m)(4), and (5), and 207 of the U.S. Clean 17 Air Act; the U.S. Semiconductor Chip Protection Act, and the 18 clear congressional intent to ensure competitiveness in the 19 independent automotive aftermarket once the OBD systems are 20 mandated equipment. 21 MEMA has repeatedly noted in the public record 22 that the EPA can not certify or allow certification of 23 vehicles which comply with California' unlawful provisions. 24 Still pending before the EPA is a request by the 25 State of California for a waiver of Federal preemption to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 allow enforcement of its OBD II within the State of 2 California. And I guess it raises a legal question as to 3 whether you have the authority to enforce it as of the 4 moment. 5 EPA's acknowledged that the rulemaking procedure 6 has raised significant issues being debated within the 7 agency, and a final rule is not expected until late April. 8 The ARB has so far ignored any serious response to the 9 issues raised by the aftermarket and pursues its waiver 10 request on the basis that EPA has a record of deferring to 11 the wishes of the State on waiver issues. 12 However, if EPA determines that the NLEV 13 proceedings to adopt California's OBD II as a voluntary and 14 binding standard with which the automakers must comply 15 before the agency has fully evaluated the significant issues 16 raised by the aftermarket, then the pending waiver 17 proceedings is effectively mooted, and the aftermarket's 18 arguments will be rendered academic. 19 Thus, with respect to the proposal before the 20 Board today, MEMA would argue that adopting any portion of 21 the proposal that conditions compliance with NLEV and OBD II 22 would be premature at best absent the final decisions from 23 EPA on pending actions involving NLEV and OBD II. 24 Further, it runs the risk of abrogation should any 25 of these significant issues raised by the aftermarket be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 upheld in the future. 2 We would request that all reference to compliance 3 with NLEV and OBD II, including the language in the MOA, be 4 deferred until the Federal status for both is determined. 5 That concludes my formal remarks. I'd be happy to 6 take any questions. 7 SUPERVISOR RIORDAN: Thank you, Mr. Haluza. Are 8 there any questions for the speaker? If not, then we thank 9 you very much for your testimony. 10 MR. HALUZA: Thank you. 11 SUPERVISOR RIORDAN: The next person is Charles 12 Hooper. Is he here? I don't see Mr. Hooper. Pam Leeper? 13 Is she here? Apparently not. 14 Richard Wilmshurst? 15 MR. WILMSHURST: Thank you, Board members. I'll 16 make this short. You've been here for quite some time. 17 I'm an automobile dealer in Calaveras County -- 18 SUPERVISOR RIORDAN: Can you put the microphone a 19 little closer to your mouth? 20 MR. WILMSHURST: Thank you. -- about 80 miles 21 from here. And I'm interested in clean air. Thirty-nine 22 years ago, I drafted a regulation to stop motor boats up in 23 our area from putting pollution into the air at our 24 community, and it was passed, and it's been on the books 25 since that time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 I'm very interested in the Sacramento Basin. I'm 2 interested in what the Air Resources Board is going to do to 3 meet the Federal standards that the EPA has set for clean 4 air in this area. 5 And I believe it's up to the government to lead 6 the way. I'm familiar with this area, and I think that 7 there's a lot that can be done for pollution right here in 8 Sacramento in this basin area by applying standards to the 9 city, the county, the State, and the cooperation of the 10 Federal Government must lead the way in the use of ZEV 11 vehicles and CNG vehicles. 12 I've checked and found that you have about 25 13 vehicles operating. 15 are owned; 11 are leased; 5 are CNG. 14 I don't believe you have any ZEV vehicles operating at this 15 time. 16 I believe that this Board should select government 17 as the area that the low-emission vehicles are going to be 18 applied to. I think they should be applied to this area, 19 probably in other areas, and that the program get away from 20 the general public (sic), because you can't control the 21 general public, but you can control other governmental 22 agencies. 23 There's 1100 vehicles operating in this basin. 24 And I understand that if the modification of all those 25 vehicles was made so that they were low-emission, it would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 make quite an impact on this area and reduce the air 2 pollution. 3 I have made a suggestion that might be a 4 compromise to the regulations which you've wanted to change 5 in Title 13. And I think that's what we're probably here 6 talking about. 7 And I think that probably the regulation should be 8 left almost intact, with the exception that each 9 manufacturer shall certify, produce, and deliver for sale in 10 California directly to governmental agencies, if orders are 11 placed by governmental agencies to the selected 12 manufacturers one year in advance of the required delivery, 13 using the same up to two percent selection that you had 14 previously. 15 I think that government should get into this mode 16 in full fashion. It should take on converting its fleets, 17 because I think probably the largest fleet owner in the 18 State of California is government. And I think that's where 19 it starts. 20 Let's get these vehicles, CNG, let's get them to 21 ZEV, and let's make this operation work. I understand that 22 the Governor sent out an Executive Order. I imagine you're 23 all familiar with that. 24 Governor Wilson's Executive Order W100-94. And it 25 set up the -- I believe it's the Department of General PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 Services -- to set up areas for refueling CNG vehicles and 2 for also charging electric vehicles. 3 So, I would ask that you consider modifying the 4 regulations so that the government will actively take -- 5 want to hand this -- actively take an interest in this 6 program. 7 And that concludes my statement. 8 SUPERVISOR RIORDAN: And we thank you for your 9 presentation and staff has your work there. Thank you very 10 much, and thank you for waiting. 11 The next speaker that I'm going to call on is Daki 12 Venetolis. Excuse me. You're going to have to forgive my 13 pronunciation of your name. And if you would provide it 14 correctly for the record. 15 MR. VENETOLIS: Daki Venetolis. 16 SUPERVISOR RIORDAN: Venetolis (pronouncing). 17 Okay. 18 MR. VENETOLIS: I'm used to it. 19 SUPERVISOR RIORDAN: I bet you are by now. Thank 20 you. 21 MR. VENETOLIS: I'm from Berkeley, and I'm just an 22 environmental activist and advocate of zero-emission 23 vehicles. I thank the Board for hearing me today. 24 Even though it's kind of restating the issue that 25 this Board's been assembled to protect the air quality of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 California, and I feel strongly that if you all go against 2 the mandate that you have already instated (sic), it will be 3 going a step backwards. 4 The two percent is already a great step in favor 5 of zero-emission vehicles, and we really, really need it. 6 Your 1994 report has many statistics. Transportation 7 accounts for 60 percent of ozone emissions, 90 percent of 8 carbon monoxide, and 30 percent of carbon dioxide -- the 9 greenhouse effect. 10 All those things are detrimental to our air 11 quality as you know. And we can't wait for the future to 12 take this into effect. This two percent needs to be in now. 13 The electric vehicles could reduce carbon dioxide 14 by 70 percent if they were put in effect, and that's kind of 15 the environmental look at it, that we really need to get on 16 this now. 17 And I realize there's other economic issues to 18 take into account, but I feel that how they have been 19 represented today is not very realistic, because I think 20 that from the two percent, by 1998, that would be 25,000 21 cars if it was two percent produced in California. And 22 there's been some testimony to say that there is a market 23 for those short-range vehicles. 24 And the automakers are saying there's no market 25 for it. But I feel that if we were -- if the automakers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 were to give the consumers the option to have a zero- 2 emission vehicle, that would make them feel good. But it 3 really comes down to money. And these low -- these electric 4 cars are 50 percent more efficient, and so that's 50 percent 5 on a fuel cost. 6 And if you present that to a consumer that, yes, 7 you'll have to pay more upfront, but you're going to get it 8 back, because these things save energy -- and I was just 9 thinking of this kind of thing where we're teaching our 10 children -- turn off the lights, you know, when you leave 11 the house. Save energy. It saves money. It's better for 12 the environment. It's better for our natural resources. 13 And that's what we have to start doing. 14 If you all keep the two percent mandate, it will 15 push the zero-emission vehicles into effect and the market 16 economy will pick up, because people will realize that they 17 are viable. 18 Now, no one really wants them, because they've 19 only heard negative things about them. They don't believe 20 in them. But for commute vehicles, for people going to and 21 from work, they are perfect. 22 Obviously, the auto manufacturers, they're not 23 concerned with the environment; they're concerned with 24 money. And they want to keep selling their cars. They have 25 a system. They want to keep selling them until the latest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 date possible. And I think that that's -- for you all to 2 come together, you from an environmental standpoint, they're 3 coming from an economic standpoint. 4 And so, they're not necessarily -- even though 5 they say, yes, we'd love to see these zero-emission 6 vehicles, they have something going on already. They're 7 making cars. 8 The technology is there, and I think that, if 9 there was a two percent mandate upheld, then the consumer 10 population would come to realize these things. And I just 11 really hope you all consider these things before you go back 12 a step. 13 You've already made this step. You've gone 14 forward for the environment in California, and I hope that 15 you hold that line and not go backwards with this other MOA. 16 Thank you. 17 SUPERVISOR RIORDAN: And I want to thank you very 18 much, as a student, to take the time to be here for today's 19 testimony. 20 Are there any questions, Board members? Seeing 21 none, thank you very much. 22 MR. VENETOLIS: Thank you. 23 SUPERVISOR RIORDAN: Our next speaker, Mr. Stout, 24 Mr. Mark Stout. Are you here? 25 CHAIRMAN DUNLAP: Okay. Barbara George? Barbara PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 George? Peoples Energy Matters. 2 MS. GEORGE: Hi. I'm Barbara George with Peoples 3 Energy Matters. 4 And I greet you on the anniversary of Three Mile 5 Island 17 years ago today. Around five year ago, the Gulf 6 War ended, although the fires burned all year, and I heard 7 500,000 Iraqi children have died since the end of that war. 8 But the Middle East oil is still flowing through 9 our corporations, through our single-walled tankers, through 10 our cars, and trucks, and buses, and diesel trains, and 11 airplanes, and space ships. And it flows right out into our 12 water and our chemical-coated food, and our smoggy sky, and 13 all the way up through the Earth's atmosphere. 14 It's' comforting, isn't it? This is called 15 winning the war. We can do what we want; nothing has to 16 change. 17 I took the train here this morning, and I'm hoping 18 I can make it back this afternoon. There's just a few 19 trains a day, unfortunately. 20 I represent a group called Peoples Energy Matters. 21 We're a new organization focusing on mobilizing women in 22 particular to bring about a rapid change to sustainable 23 energy in our communities and our own homes. 24 We have a particular interest in getting clean 25 cars, so we can replace our internal combustion engines, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 quit polluting the air, and quit contributing to global 2 warming. I think those are issues that are very important 3 to women today. 4 We are appalled that the CARB staff has caved into 5 the auto and oil industries. We feel that our car companies 6 have always stalled on providing the advances that consumers 7 want. This happened with seat belts, airbags, and fuel 8 efficiency. 9 The Japanese took advantage of our stupidity and 10 captured the compact car market, causing years of hardship 11 in the U.S. auto industry. We believe the same thing will 12 happen with clean vehicles. Other countries will take the 13 lead and we'll be left behind. 14 The car companies claim there is no market for 15 ZEVs. However, we know many women who will not buy a new 16 car until they can get an electric one. 17 We are especially concerned about the lack of 18 advertising requirements for ZEVs in the MOA and in the 19 initial ZEV agreement. The car companies claim that they 20 are worried whether people will like ZEVs. Usually, when 21 big companies launch new product s on the mass market, they 22 push those products ad nauseam on television. 23 Where are the ads for the EV1? If GM was serious 24 about marketing this car, they would be running ads for it 25 all the time. Instead, they set the price so that only rich PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 people could afford it. 2 I believe they are actually trying to prove that 3 they can not sell electric cars. I can imagine an ad 4 campaign for electric cars. Think of the beautiful lawyer 5 on "Law and Order," or somebody like that. "Electric cars 6 have three moving parts instead of 2,000. You never have to 7 buy a muffler, never have to change the oil, never have to 8 go to a gas station, hardly ever need a mechanic. You save 9 a lot of money and a lot of time. My time is expensive." 10 Or how about somebody like Sally Field. "With an 11 electric car, you'll be doing the best thing you can do for 12 your children's health and the health of the planet, and 13 you'll have more peace and quiet. If you live near a busy 14 street or a highway, electric vehicles will make that road 15 much quieter. And when you take a deep breath, you'll small 16 the flowers instead of the gas." 17 Or how about this one. You've got a busy mom and 18 a voice over, an authoritative voice over: "With internal 19 combustion engines, the greatest pollution comes from short 20 trips, but with electric cars, you can run to the store, go 21 pick up your kids, stop by the cleaners, all with a clean 22 conscience. Electricity production at the utility only 23 produces about one percent of the pollution that each 24 internal combustion car produces." 25 Okay. One last one: "If you have an electric PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 car, you can't commit suicide by inhaling the exhaust." 2 (Laughter.) 3 MS. GEORGE: When lots of people have electric 4 cars, there will be no need for oil drilling off the 5 California Coast. No need for the birds and otters to drown 6 in the oil spills. 7 And we won't need huge armies and navies in the 8 Middle East. 9 I think if the word ever leaks out about the 10 advantages of electric cars, there will be a stampede to buy 11 them at an affordable price. And that means 15,000 or less. 12 Although there was one out in the parking lot -- it was 13 amazing, a small company; not one of these mass auto 14 companies. Has a car out there for $19,900. This is 15 getting into the realm of the possible. 16 And they seem to have a longer range than the big 17 car companies. And then, there's the one who produces the 18 Porches. Now, isn't it interesting that little companies 19 with no economy of scale are able to do that. Something is 20 strange. 21 This has been said kind of before, but I think 22 it's worth repeating, that this is not a rehearsal for life 23 that we are having here. This is the real thing. And guess 24 what, nicotine is addictive, and car exhaust does cause smog 25 and global warming. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 We need to make changes to clean up the air, and 2 we need to make them as fast as we can,not in seven years. 3 This is why I'm here today. As an antinuclear 4 activist, I'm not pleased about plugging cars into the grid. 5 I want to see electric cars powered with fuel cells, running 6 on totally clean fuel produced by solar processes. I'm 7 willing to go with hybrids, too. 8 We are in a delicate position on this planet. 9 Human ingenuity has produced many wonderful things and some 10 truly horrible things. We need to distinguish between them. 11 And it's hard when they're all mixed together. 12 I love cars. I love listening to a good tape and 13 seeing the countryside. But, frankly, I prefer to take a 14 bicycle, or a train, or a bus to work everyday. But an 15 electric car, that would really be fun. 16 Each of us have moments in our lives when we have 17 to choose between what is comfortable but clearly wrong, and 18 what is less certain, but that we know is right and 19 necessary. And I beg each of you on this Board to look into 20 your hearts tonight before you go to sleep and every night 21 until you take this vote. I believe your heart will tell 22 you that this MOA is dangerous and deadly. 23 I hope you will keep the original mandate. But 24 whether or not you do, please do put in some requirements 25 for advertising, because I think in this State, we know how PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 important that is to developing a market. 2 Thank you very much. 3 CHAIRMAN DUNLAP: Thank you. Any questions? 4 Okay. 5 SUPERVISOR ROBERTS: I was hoping Dr. Kervorkian 6 doesn't have to rebut this. 7 (Laughter and Moans.) 8 CHAIRMAN DUNLAP: I don't think you have to worry 9 about that, Ron. 10 Richard Wilmshurst from 49er Sierra Resources, 11 Inc. 12 SUPERVISOR RIORDAN: He's spoken. 13 CHAIRMAN DUNLAP: He's spoken. Okay. 14 Paul Knepprath, and Jerry Mader. Paul, are you 15 here? Mr. Mader? Come forward, please. 16 Followed by Bill Wason, then John Burton. 17 Mr. Knepprath's going to yield to you. That's 18 okay. Jerry, go right ahead. 19 MR. MADER: Okay. Sorry. Nice to be here this 20 afternoon. I'm going to be as brief as I can be. 21 I'm Jerry Mader. I'm the Chairman of the Advanced 22 Battery Task Force representing today AEG Corporation, Varda 23 RWE, and Electric Fuels Limited. 24 Before I make some of my remarks, I just wanted -- 25 I was listening carefully to your debate about trying to set PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 reasonable cost figures for pilot scale batteries. And I 2 would really encourage you to stay out of that quagmire. I 3 did this when I was in technology development for the 4 Electric Power Research Institute. I used to put out RFPs 5 for pilot scale batteries. 6 And what you have to understand is, in that 7 technology development stream, there's no real basis on 8 which you can set the cost of those batteries. The 9 manufacturers are going to take a loss on the sale of those 10 batters, so they set them -- they kind of pick a reasonable 11 cost so they can get some return on their investment. So, I 12 think that would be a folly to try to define what reasonable 13 cost would be for this type of MOA. 14 So, I would stay away from that. 15 I want to take a little slightly different tact 16 than what I've been hearing from a lot of people today. And 17 I want to say that this is a historic day, and I want to 18 congratulate this government organization, the staff and the 19 Board, for coming up with an agreement with the auto 20 industry to introduce electric vehicles. This has never 21 happened that I know of anywhere, because there hasn't been 22 big industry involved in electric vehicles really anywhere 23 in the world. 24 I've been in this field for over 17 years, and 25 this is a big day. You actually have hammered out an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 agreement to move forward to introduce electric vehicles 2 with the auto industry, not only the U.S., but also 3 Japanese companies. 4 And I think that you're to be commended for that. 5 The Task Force members in the Advanced Battery Task Force 6 are behind the proposal, because they know that the auto 7 companies are going to be their customers. And they know 8 that the auto companies have to be involved and be behind 9 what you're going to do here in California. 10 I would like to say that the key issue, as we've 11 talked about -- and many people have brought up -- in the 12 next few years is the development of the market. And that's 13 been this issue, I think, all through a lot of the debate 14 this summer. 15 And I just want to make the point that I think you 16 ought to be considering and thinking about how this market 17 segments itself, niche markets in the early phases, niche 18 markets in fleets. I really like this idea of placing 19 vehicles in rental fleets. It's a great way to get exposure 20 to the technology, and when you even have limited range, to 21 be able to get people to use vehicles, and also in buses. 22 This many, many -- I think anybody who's looked at 23 this technology over the years would agree that, in order to 24 introduce it, you need cooperation between, you know, 25 government, auto industry, you know, including the battery PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 industry, utilities, and the environmentalists. 2 And I think that, you know, the one encouragement, 3 and other people have brought this up today, but it's 4 something that I've been really trying to think through over 5 the last several months, is how do these entities come 6 together? 7 Over the last eight or nine months, there's been a 8 lot of dialogue. It's been somewhat divisive. People have 9 taken their stances. And I think this has created somewhat 10 of a rift between all these organizations. And I think 11 that, after today, we want to clear the table and start a 12 new process. 13 We want to start a process of kind of coming 14 together. I have had maybe the good fortune of going to 15 school in Michigan for seven years, and working and living 16 there for another ten, and now living out here for nineteen. 17 So, I've been like 17 years back in Michigan and 19 years 18 here. 19 I know a lot of people in the auto industry as 20 colleagues and friends. I think there's some effort that we 21 should put into building better relationships with these 22 people. I think that, you know, for good or for -- for 23 better or for worse, you have an agreement with them. And I 24 think that the way this technology will get introduced and 25 the way this trust issue will get handled is through PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 developing better relationships. 2 So, I would like to see us move beyond, you know, 3 a lot of this dialogue of -- and I don't mean to be putting 4 any profession down, but rather than looking at regulation 5 and legalities, you know, when we move into the technology 6 development and market development, it's more of a 7 cooperative approach. And I think we ought to give that a 8 try for two or three years and see how it works, and then we 9 can bring in the legalities and look at if it's working or 10 not working. 11 So, I would like to offer, you know, I stand ready 12 to be involved in any way I can to help bring the various 13 parties together and work so that we can have a true 14 partnership and establish a market over the next three or 15 four years. 16 Thanks. 17 CHAIRMAN DUNLAP: Thank you, Jerry, very much. 18 Any questions of the witness? Thank you. 19 Mr. Knepprath from the American Lung Association. 20 MR. KNEPPRATH: Good afternoon, Chairman Dunlap 21 and Board members. It's been a long day. I'm glad I have 22 the opportunity to stand here before you now. 23 My name is Paul Knepprath, and I'm speaking here 24 on behalf of the American Lung Association of California, 25 the 15 local affiliates and associations that we have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 throughout California, and our medical section, the 2 California Thoracic Society. 3 And we're here today to express our opposition to 4 the zero-emission vehicle regulation as it is before you. 5 Many people have mentioned these points, and I will just 6 make them for the record. 7 We believe that the proposal before you today 8 relies too heavily on the voluntary action by the automakers 9 to ensure the success of this program and to clean the air 10 between now and year 2003. 11 I'd also say that we have submitted a letter to 12 you for the record, and it may be before you as I'm 13 speaking. 14 And that while we understand the interest and the 15 desire in pursuing a market-based approach to the ZEV 16 regulation, and that it's desirable in this current 17 political environment, we believe that repealing the ZEV 18 until 2003 reduces your leverage and your ability to really 19 force progress and compliance set forth in the proposed MOA. 20 We believe and we have recommended that the Board 21 consider maintaining the regulatory approach and perhaps 22 marrying some flexibility, but while retaining the force of 23 the regulation in the former ZEV mandate. 24 Many of these proposals you have heard already at 25 previous hearings and workshops. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 I guess the reason why we believe that the 2 regulatory approach is a better way to go is, in this case, 3 when we're talking about an air quality regulation, which is 4 intended to reduce emissions and to provide for better 5 public health environment, that relying on the market is not 6 the way to do it. 7 If all we were talking about was introducing a new 8 vehicle for people to purchase because it was a new 9 transportation system, that may be a desirable way to do. 10 But we believe that, if you're looking at public health, and 11 you are a public health organization, that you ought to be 12 looking at a strong -- the strongest approach. And that, in 13 our mind, is the regulatory approach. 14 Having said that, and recognizing that there has 15 been a lot of work and a lot of effort gone into the MOA, 16 and that there appears to be a lot of momentum moving in 17 that direction, we would stress three things that you 18 consider in adoption and looking at this MOA and this 19 agreement you have in front of you. 20 Because we think that implementation is going to 21 be critical; that moving the ZEV technology out the door and 22 getting wide acceptance by the public in California is going 23 to be crucial to making this program work, we're 24 recommending three things. One is a comprehensive public 25 education campaign; two, some kind of a watchdog function or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 role specifically within the Air Resources Board; and, 2 three, pursuing incentives and supporting incentives to 3 create the market, to push the market. And this would be 4 both legislatively, administratively, however you can 5 support those. 6 It has been mentioned before that the public 7 education effort being undertaken by the RFG campaign is a 8 good model. And we would agree; that looks fine. There are 9 many other models I think that you could utilize. But 10 somehow we've got to get back out to the public to indicate 11 that these ZEVs are a clean-air vehicle; they are good for 12 public health. 13 There are lung health benefits to the ZEV; and, 14 secondly, that these are real cars for real people. We've 15 got to dispel some of the myths that have been put out there 16 by the oil and auto industry in the last several months 17 campaigning against the mandate, in which I think the public 18 has gotten the message that ZEVs are some kind of a wild 19 technology and that they may not be ready for Californians. 20 We think that it's our responsibility as the 21 public, your responsibility as the Board, to help bring the 22 message back to the public that these are real cars for real 23 people, and that they have good public health benefits. 24 The watchdog role I think is something -- 25 obviously, with the MOA, there needs to be some way to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 ensure that some of the loopholes or some of the -- what we 2 believe are some weaknesses in that are watched along the 3 way, and that we ensure as much -- create as much framework 4 as possible to ensure compliance with the MOAs and to move 5 this thing beyond just an agreement and into reality, 6 particularly with the issue of ramping up to 2003, which 7 remains, I think, an unanswered question. 8 And then on the incentives issue, whatever you can 9 do within your own power within the California Legislature, 10 and within this Administration, to push incentives, tax 11 incentives, whatever it may take to help the public purchase 12 zero-emission vehicles, we think that's the way for you to 13 go. And we would urge you to do so. 14 And those are our comments for today. And we 15 appreciate the opportunity to be here. 16 CHAIRMAN DUNLAP: Thank you. Just a comment. I 17 wanted to commend the ALA for re-energizing their efforts in 18 the clean air agenda here at the Board. It's good to see 19 you guys involved and participating. And you add a lot of 20 value to the debate. I don't necessarily say I agree with 21 every position you take. 22 MR. KNEPPRATH: Certainly. I'm sure there are 23 many that we will agree on, and there are going to be some 24 that we don't. But thank you for those comments. 25 CHAIRMAN DUNLAP: Thank you. Any questions of our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 witness? 2 Very good. Bill Wason, followed by John Burton, 3 followed by Ed Maschke. 4 Mr. Wason here? Okay. Mr. Burton from Integral 5 Design. Is Mr. Maschke here? 6 MR. BURTON: Thank you for letting me speak today. 7 This is a momentous day, and I'm somewhat unfortunately 8 convinced that you're going ahead with this decision. And I 9 think there are good elements in this decision and working 10 with the big auto companies. 11 However, I would be much more pleased if we had 12 stuck with our two percent and our ramp-up of percentage 13 requirements, because I believe the issue of air pollution 14 and public health is a big one. 15 And it connects to a lot of other issues, such as 16 population growth, greater, and so on. 17 Let me get specific and get through with my 18 testimony here. 19 This memorandum of agreement, I think it would be 20 in your interest to listen to our environmental lawyers who 21 have been speaking to you about weaknesses in the agreement. 22 Let's be honest. We know that we can't trust the auto 23 manufacturers to really implement electric vehicles if we'd 24 just look at history. 25 We'd like to trust them. Perhaps that's the good PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 thing about this agreement. But we know from history that 2 we can't. And so, we are going to have to be strong in 3 enforcing this agreement, even the minimal agreement that it 4 is. 5 The manufacturers have focused on battery 6 technology as an excuse to delay any implementation of 7 electric vehicles. 8 It shows a lack of vision and perhaps because of 9 their lack of interest in this area. Perhaps their interest 10 is increasing. And I'm sitting here wondering, can we trust 11 them to come up with the next generation of batteries 12 implemented in their vehicles? Perhaps we can. I hope we 13 can. 14 On the other hand, I'm very thankful that there 15 are people like MendoMotive, companies that have shown that 16 lead-acid batteries work just fine in nice light weight 17 fiberglass sports cars. 18 And beyond that, we know that a 50-mile range is 19 good a lot of our transportation needs. There are other 20 solutions other than advanced batteries. I'm sure someone 21 must have mentioned the idea of having battery stations 22 where you simply every 50 miles, pull into a battery 23 station, drop your old batteries out (sic) and get new 24 batteries in. 25 A lot of advantages to that if we were willing to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 set up that kind of infrastructure, you wouldn't have to own 2 the batteries and maintain them. And we could take care of 3 the environmental problems that way. 4 So, there's a lot of other possible solutions. 5 We've become focused into this one avenue, which is going to 6 be these auto industries coming up with these high-tech 7 batteries and delaying implementation of electric vehicles. 8 Clearly, MendoMotive and other creative 9 environmentally oriented individuals are going to continue 10 to come up with better and better electric vehicles in the 11 meantime. But it's unfortunate that you don't seem to have 12 any way to support those efforts. 13 The larger problem that I see that's not being 14 addressed by the Air Resources Board has to do with our 15 growing population. The trend to more automobiles and more 16 miles being traveled per person per automobile, and the fact 17 that we've built a very convenient system that supports the 18 single occupant automobile. And we all know that it's very 19 convenient, but we all know deep down that it's really one 20 of the biggest problems we have in this country. 21 You've already mention of the Gulf War and the oil 22 companies. So, beyond providing zero-emission vehicles, or 23 low-emission vehicles for a single occupant or two occupants 24 perhaps, clearly, the solution must include looking at 25 public transportation systems and a coordination of those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 systems. 2 And if you don't like the word public, then let's 3 call it group, or multiple occupant vehicle systems. 4 Shouldn't the Air Resources Board be taking initiative in 5 this area as well? You should be proud of what you've done 6 so far with the electric vehicles to promote them. We also 7 need to be coordinating and promoting public transportation. 8 9 For example, BART could be extended to places like 10 Santa Rosa, which could be connected to the North Coast 11 Railroad, which would be a public transit corridor if we 12 were willing to upgrade the infrastructure there. We have 13 agencies like the Solano Transportation Agency that's 14 starting to look at in a county area. 15 But I believe that your agency should look at 16 statewide coordination of these efforts, because the public 17 transportation system will be even more effective in 18 reducing air pollution if it is coordinated so it is a 19 convenient system that people like to use. 20 And, of course, most of us have traveled to Europe 21 or Japan, and we know that those systems can work. 22 Admittedly, it's going to take a lot of effort. But that's 23 why I'm bringing this up now, is that I think you need to 24 look into public transportation systems as part of the 25 solution that we need to push for. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 Thank you very much. 2 CHAIRMAN DUNLAP: Okay. Any questions for the 3 witness? Okay. Mr. Maschke from CalPIRG, followed by V. 4 John White, and Mr. Grumet. 5 MR. MASCHKE: Thank you, Mr. Chairman. We have a 6 small gift for the Board members from CalPIRG. I hope 7 there's enough to go around. 8 These are masks which are basically either for 9 sort of the smell of our testimony, if you will, or for the 10 decision that you're about to make which, in our opinion, 11 stinks. 12 So, I would ask you to pass these out. 13 We also are presenting you today with the 14 signatures of some 4,000 individuals who object to the MOAs 15 you have structured, to the deal that you have cut, and who 16 would ask that you not complete this mission that you're on. 17 And representing CalPIRG in our 60,000 members and 18 MassPIRG's 55,000 members, we ask you to reconsider your 19 actions and don't count the deal as done yet. 20 As you're aware, Mr. Chair, you were out of the 21 room, as was Ms. Edgerton, but we were represented by 22 counsel here today. We have posited some arguments in terms 23 of the CEQA perspective that is lacking, at least in our 24 opinion. And we would hope you take those comments 25 seriously. We would hope you answer the thousand comments PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 that are in the record. 2 And because we have just added another 4,000 3 individuals who have commented and signed petitions against 4 your change and your MOA, we would ask that you respond to 5 each and every one of them. Their addresses are there as 6 are their phone numbers. 7 We would ask that you work, as this Board has done 8 for many years, in the public interest. Since the inception 9 of this Board back to the time of Tom Quinn -- and, 10 unfortunately, I'm old enough to remember that, and I was 11 here at that time, this Board has been working as keepers of 12 the public health, if you will. 13 And the bottom line has always been the public 14 interest. And I think your actions in that area are 15 recognized, and it was stated earlier that you're in a world 16 leader position. 17 And it's appreciated. It is supported. And 18 rightly so, because you've taken many actions that have been 19 very, very forthright and very far reaching to clean the 20 air. But despite your good work, our air is not clean. 21 The evidence is mounting now that more and more 22 deaths and decreased life expectancy are linked to 23 diminished air quality. The report that we have just given 24 each one of you is something we released earlier this week. 25 It summarizes a tremendous amount of the data, the six city PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 studies, the various health impacts that you have laid out 2 from your own staff reports that provide the information to 3 show that what we're talking about here is not just a 4 decision about dollars and cents. It's a decision that 5 basically is killing people 6 Your actions will, in fact, have great harm upon t 7 he public or great benefit to the public. So this just 8 isn't about electric vehicles. This is about people dying 9 from air pollution when they don't have to, having their 10 lives shortened. 11 And I know you take your responsibilities as 12 public officials very seriously, and that's appreciated. I 13 think you're deliberate about these things. But, as we bear 14 responsibilities as consumers for the automobiles we buy and 15 for the fuel that we purchase and burn, you bear a different 16 responsibility and a greater responsibility at this time, 17 because you can change the direction. It's a rare 18 opportunity to have a launch window for technology. 19 I was blessed some time in the seventies to work 20 on something called the 55 percent tax credit, which we 21 wrote with Jerry Brown. Joe Caves, who stands before you on 22 this issue, also worked very hard on that. 23 John Burton, the man who just stood here was also 24 working on that issue at this time (sic). 25 /// PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 So, we have sometimes a launch window to make 2 significant change that's very important and that provides 3 the leadership potential for California. And I understand 4 that you're well aware of this. 5 Unfortunately, you've chosen -- you seem to have 6 chosen a path. And I won't prejudge your actions, although 7 they've certainly been stated at least by the majority of 8 the Board today, when I've heard you speaking, that the 9 public testimony doesn't seem to persuasive today; that's 10 you've already made up your minds; that the MOAs and the 11 deal that you've done and signed, as I understand, is a fait 12 accompli. 13 If those MOAs are not signed, then I have gotten 14 that wrong. Mr. Chairman, you shook your head, so I hope 15 that is correct. 16 CHAIRMAN DUNLAP: They haven't been signed, no. 17 There's an intent, if the Board takes action to approve the 18 staff recommendation, that they would be. 19 But they have not been signed. 20 MR. MASCHKE: Well, at least from our perspective, 21 the MOAs and your actions to develop a market-based 22 strategy, as ordered by the Governor, break the compact that 23 you and the Governor made with the businesses and the people 24 of this State. 25 And this is exactly what those who would decry PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 regulations rail against the most -- uncertainty and 2 changing the rules after six years of development of this 3 program. 4 It remains in doubt now whether or not CARB can 5 keep its word when the right amount of political pressure is 6 exerted and money is spent. 7 The retreat is disingenuous at best, and at worst, 8 it smacks of the things that the public believes worst in 9 its government, that politicians are bought with 10 contributions, and that their appointees are controlled by 11 the industries that they are to regulate. 12 The distortions that the automakers and the oil 13 companies put forth in the last two years to destroy public 14 confidence in electric vehicles would seem to have been 15 convincing to all that they are not serious about a viable 16 marketing strategy. But now, you've decided they should be 17 in the driver's seat; that they should decide on marketing, 18 and that we're going to have a partnership with them on 19 marketing instead of regulating. 20 Putting Detroit in this position is like leaving 21 Dracula in charge of the blood bank. You seek balance 22 between regulations and what they would cost. And what 23 price would you put on the lungs of your own child? 24 Two of my children have lung impairments. What 25 price would you put on the lungs of your elderly parents or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 of groups that are disabled? How does that figure in your 2 cost/benefit calculus? 3 And, as you're required to do an economic impact 4 statement as part of your own regulations, where are those 5 analyses done? And I would ask you to include within some 6 of that economic analysis what's called the externalities. 7 And those externalities have now been quantified to some 8 degree when you look at the studies that have been done on 9 not only the health impacts, but also the agricultural 10 impacts and the impacts to the economy of the State of 11 California. 12 So, this deal, if you will, that's been cut for 13 the Governor, because he wanted it done, smells. It's a bad 14 deal. You don't have to do it. A majority of this Board 15 doesn't have to vote for it. If those MOAs have not been 16 signed, I hope you will remember that you work for the 17 public. You take an oath when you took this office. And 18 you swore to uphold the Constitution, which includes some 19 pretty, pretty strong language about health and safety. 20 And you have the ability to basically do something 21 through a launch window and provide a technological 22 opportunity for this State. You don't have to knuckle 23 under. You don't have to, in essence, carry the water that 24 the oil companies and the car companies are now asking you 25 to carry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 This, I think, is really what you're charged with, 2 protecting the public health, safety, and welfare; 3 protecting the public's air quality, not to be the front man 4 for the Governor, not to be carrying the water for the oil 5 and the auto companies. 6 You are to regulate them, and what you have done 7 in this contractual agreement is give up your regulatory 8 authority. And if you continue on this way, why is it 9 anybody would not believe that they can come to this Board, 10 push hard enough on either the Governor or with funding 11 through two years of advertising, and expect that any rule 12 can be bent. 13 And why should the public end up with any 14 confidence? Mr. Chairman, I thank you for the time. I 15 think the public deserves better than the MOAs that have 16 been structured here. And I would encourage you to take 17 into account the comments that have been made by NRDC, by 18 UCS, by counsel representing us today. 19 And I would believe that it will take you at least 20 five or six months to answer those comments before this rule 21 could take effect. 22 Thank you. 23 CHAIRMAN DUNLAP: Thank you. 24 Any questions of the witness? Dr. Boston. 25 DR. BOSTON: Mr. Maschke, I take great objection PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 to a lot of the statements you have made. I don't think 2 it's your position to get up there and scold us when you 3 don't know half of what we've been doing over the last 15 4 years. 5 Who do you think is spending millions of dollars 6 to perform a children's health study in the L.A. Basin right 7 now? That has been our Board that's been doing that. You 8 don't know what the results of those studies are yet. And 9 we don't know what the results of those studies are yet. 10 When they come out, we'll be taking appropriate 11 action. If you would get those 4,000 people that you have 12 on signature there to line up and start buying electric 13 cars, then General Motors would be very happy to sell them 14 to you, and the other companies would jump in immediately 15 and have cars on the market to sell, also. 16 So, get your people to start putting up their 17 money where their mouth is and start buying these cars. 18 I think we've done a great job over the last few 19 years, and I think we've done a great deal to clear the air. 20 And I don't like to be scolded by you and have masks passed 21 out. I think that that's a very childish thing that you've 22 done. And I resent it. 23 MR. MASCHKE: Well, Dr. Boston, with all due 24 respect, I wouldn't like to be standing here and scolding 25 you if these MOAs were being questioned in the way that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 somebody who would look at them logically and say there is 2 not enforcement in this provision. 3 There is no provisions (sic) to get us to 2003 4 where we're going to be at 10 percent without the entire 5 world collapsing. And this MOA can't work. And I think 6 you, sir, as representative of the public, should be asking 7 the questions that the public was standing here asking 8 today. 9 DR. BOSTON: You don't know how I'm going to vote. 10 You have no right to assume that. You have already 11 prejudged what I'm going to do. And that is not accurate 12 for you to do that. 13 MR. MASCHKE: I did not say how you were going to 14 vote or anything else, sir. I simply said I think it would 15 be important for you to ask those questions. 16 DR. BOSTON: Prior to that, you stated you knew 17 how this Board was already going to vote; that our votes 18 were already bought by the auto industry. And that's 19 another statement that I resent. 20 You don't know that our votes have been bought. 21 That's a terrible thing to say. 22 MR. MASCHKE: Well, again, if you'd look in the 23 record, that is not even my characterization of you. 24 I said there has been $31 million spent in the 25 last two years, and it's been spent on lobbying; it's been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 spent on advertising; it's been spent basically a PR 2 campaign that apparently has worked. 3 DR. BOSTON: You don't know that. 4 MR. MASCHKE: Well, I hope you would prove me 5 wrong, sir. 6 CHAIRMAN DUNLAP: Mr. Lagarias. 7 MR. LAGARIAS: I think you ought to know that Dr. 8 Boston and I served on the 1990 Board that passed this 9 original ZEV regulation. 10 MR. MASCHKE: I do know that, sir. 11 MR. LAGARIAS: And I, too, resent the manner in 12 which you've presented the considerations we have. And you 13 bring in the Governor in all this. I've never been 14 approached by the Governor. 15 I look on this on its technical and economic 16 merits. And my judgment is based on what I see, and what I 17 know, and what I understand. 18 And to assume otherwise, I resent. 19 CHAIRMAN DUNLAP: Any other questions or comments? 20 Thank you, Mr. Maschke. Appreciate your time. 21 MR. MASCHKE: Thank you, Mr. Chairman. 22 CHAIRMAN DUNLAP: Mr. Grumet and then Mr. White. 23 MR. GRUMET: Thank you, Chairman Dunlap and 24 members of the staff, of whom I'm familiar and have enjoyed 25 working with for the last several years. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 I'm Jason Grumet, and I'm the Executive Director 2 of NESCAUM, which is the Northeast States for Coordinated 3 Air Use Management. And we represent the air control 4 programs of the States between Maine and New Jersey. 5 I personally have been enjoying working on this 6 issue myself since the late 1980s and, in fact, come before 7 you with a little bit of reluctance. I had decided 8 affirmatively to be a passive observer to your process with 9 plenty of difficulties back home to keep my mind occupied. 10 But as I watched the tortured expressions, as we 11 all tried to grapple with the exact status of what's 12 happening in the Northeast -- I guess in the word's of 13 President Clinton, "I felt your pain," and decided I would 14 come forward and try to at least put myself out of the 15 misery I was experiencing. 16 For myself, a lot of the pain results from the 17 great disparity between the presentations about the 18 commitment and the status of the national LEV program that 19 were represented today versus what we continue to grapple 20 with back home. 21 And I thought that what might be helpful would be 22 simply to just give you a little bit of context about the 23 national LEV program, its origin and its status, so that it 24 can form your ultimate decision. 25 As I think many of you know, several of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 Northeast States have been working very closely with the 2 staff here in California for a number of years using the 3 authority under the Act to mimic the substantial benefits of 4 the California program relative to the Federal standards. 5 Since the last 1980s, New York and Massachusetts 6 have adopted standards that are consistent with the 7 standards here in California. 8 As the State's moved forward and started running 9 into roadblocks in the Northeast based on the fear that some 10 States might adopt and other States might not, we turned to 11 a mechanism in the Clean Air Act -- the Ozone Transport 12 Commission. 13 And in February of 1993, voted -- this 13 State 14 region -- voted by 9 to 4 to have all States between Maine 15 and the District of Columbia adopt the California LEV 16 program, including the NMOG fleet average. 17 EPA approved that request in December of 1994, and 18 started a 12-month time clock that States needed to 19 essentially complete adoption of the OTC LEV program in 20 order to satisfy. Failure to do so would result in the 21 imposition of Federal sanctions. 22 During this time, the auto manufacturers became 23 understandably concerned that they were going not only to be 24 dealing with an autonomous program here in California, but a 25 lot of copycat programs back in the Northeast. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 And concerns about the tremendous quality they 2 perceived of complying with a whole host of fleet averages, 3 prompted them to offer the national LEV program. This is a 4 very positive step, and it's a step that we in the Northeast 5 have embraced. 6 But it has to be understood for what it is. It 7 is, in part, out of I think the sincere desire for a better 8 world that many in the car manufacturing industry support; 9 and it's, in large part, a quid pro quo. 10 The deal in the Northeast was if the Northeast 11 States all capitulated in their desire to have independent 12 programs, the car manufacturers would supply the entire 13 nation with the benefits of a national LEV program. 14 It's worth noting that we've been through the same 15 migration debate in the Northeast, and EPA reached the same 16 conclusion essentially -- it should be noted -- that you 17 did; that the benefits of having the regional program made 18 up for the decrement of lost benefits from complying with 19 the more stringent California standards. 20 However, what I think is important to understand 21 for your decision today is, what's the role of this Board in 22 securing that agreement? Because I don't think anyone 23 here's talking about taking credit for something in a 24 metaphysical sense but, in fact, obviously to the extent 25 that this action today secures that 49-State or Federal LEV PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 program, you will have done something that you should very 2 much take credit for. 3 And here's the rub. Back at home in the 4 Northeast, there is no unequivocal commitment on the part of 5 the auto industry to produce a national LEV vehicle. The 6 situation has been quite static for the last year or so. 7 The industry has basically said, unless and until 8 all of the States in the Northeast affirmatively repeal 9 their regulations, the industry will essentially keep their 10 clean cars to themselves. 11 That's the status of the situation right now in 12 the Northeast. So, to the extent that this action today 13 changes that; to the extent that, as a result of this 14 agreement, the auto manufacturers remove those hurdles and, 15 in fact, make an unequivocal commitment to sell vehicles in 16 any State that wants them that are at the LEV standards or 17 better, you will have deserved the full credit for securing 18 the national LEV deal. 19 I was quite pleased as I heard things that sounded 20 like that was what the auto industry, in fact, was coming 21 here to say to you. 22 But in some hallway discussions during the lunch 23 break, I found that, in fact, that is certainly not the 24 case. They are still equivocating. I was told that they 25 are committing to a LEV-type concept, but it's still very PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 much contingent in their minds upon certain things happening 2 outside of the State of California. 3 So, that, I hope, is where we can focus a little 4 bit of attention. To the extent that the industry's 5 willingness to provide California and the nation with NLEV 6 is contingent upon things happening outside of this process, 7 then it seems to me to be certainly a little bit more 8 difficult to base equivalency on this assumption. 9 And I understand that there are many aspects of 10 the MOU which provide alternatives. I think we would all 11 benefit tremendously if national LEV, in fact, was the 12 outcome. 13 And I think there are some activities you could 14 take by, in fact, when the auto representatives who follow 15 come forward, essentially to try to nail this issue down. 16 Are they or are they not making an unequivocating 17 commitment to national LEV? And if not, I would benefit 18 greatly from this trip to understand what it is that still 19 needs to happen in the Northeast in order for them to supply 20 us and you with the benefits of the national LEV vehicle. 21 And I think, mostly, I really just wanted to stand 22 here and see if there were any questions at all about the 23 hyperkinetics in the Northeast that still remain unclear 24 that I might be able to clarify before turning around and 25 flying home. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 CHAIRMAN DUNLAP: Maybe I'll start it off. 2 I want to tell you how much I appreciate you 3 monitoring those hallway conversations. 4 (Laughter.) 5 MR. GRUMET: They actually were with me directly. 6 CHAIRMAN DUNLAP: Oh, okay. 7 MR. GRUMET: But thanks for your concern. 8 CHAIRMAN DUNLAP: Because there's a couple people 9 that are going to come up here in a few minutes, and we'll 10 ask them to share some things. 11 MR. GRUMET: That's exactly what I would 12 appreciate. 13 CHAIRMAN DUNLAP: Any questions of the witness? 14 Lynne. 15 MS. EDGERTON: Mr. Chairman, I'm going to further 16 monitor those hallway conversations. 17 What else did you hear that they said was 18 required? 19 (Laughter.) 20 MR. GRUMET: Anybody want to buy a watch? 21 (Laughter.) 22 MR. GRUMET: Let me be absolutely explicit. What 23 has been thwarting the development of the national LEV 24 program has been a couple of things. 25 The States of Massachusetts and New York, in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 particular, have been unwilling to repeal their LEV 2 standards. In addition, they have been unwilling to accede 3 to the demand by the manufacturers that they also obviate 4 their authority to do anything different between now and 5 2006. 6 You may have trouble believing this, but the 7 manufacturers are coming before your peers in our States and 8 not only asking that you repeal your existing program, but 9 also asking that you make a prospective commitment between 10 now and 2006 to do nothing to change your regulation of 11 their product. 12 And while I think, you know, there are certainly 13 tremendous benefits to be gained from the national LEV 14 program, several of the Northeast States have to date have 15 been unwilling to trade in what are affirmatively, legally 16 adopted, and enforceable programs for something that remains 17 what they believe is a good idea, and something that they're 18 not yet convinced is ultimately in their interest. 19 I think they believe that having national LEV in 20 every State that wants it would be a profound achievement. 21 But those States who want to continue to cooperate with 22 California and impose fleet averages should have that 23 volition, and just as you're receiving additional benefits, 24 so would those States in the Northeast. 25 MS. EDGERTON: So, let me see if I understand PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 this. Massachusetts and New York have to repeal their 2 adoption of the California LEV program, including the NMOG 3 standards, in order for Massachusetts and New York to get 4 the 49-State car that California is agreeing to get? 5 MR. GRUMET: Here's the rub. 6 MS. EDGERTON: Is that right? 7 MR. GRUMET: It's a 49-State program. 8 MS. EDGERTON: Wait a minute. Is that kind of 9 right? 10 MR. GRUMET: It's close, but it's not exactly 11 there. And the problem is that it's a 49-State program. 12 That means that it affects everybody but you. You're the 13 50th State. 14 So, in other words, California saying it's okay 15 with us for you to sell these cars everywhere else is an 16 important step. 17 Massachusetts and New York saying it's okay with 18 us for you to sell these cars everywhere else is an 19 important step. 20 Both of those steps have been achieved. 21 What has not happened is the auto companies 22 agreeing to sell those cars everywhere else, unless and 23 until -- and this was as of three o'clock, so maybe it's 24 changed -- New York and Massachusetts repeal their programs. 25 In other words, the auto manufacturers' offer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 remained, as of two and a half hours ago, contingent upon 2 New York and Massachusetts repealing their NMOG curves, and 3 turning about and walking away from zero-emission vehicles. 4 So far, the States have not indicated a 5 willingness to do that. And, as a result, I don't think, in 6 fact, we have a confident 47 or Federal LEV program. 7 CHAIRMAN DUNLAP: Let me ask legal counsel. 8 (Thereupon, there was a pause in the 9 proceedings to allow the reporter to 10 replenish her Stenograph paper.) 11 CHAIRMAN DUNLAP: Okay. Mr. Kenny and Mr. 12 Cackette, as I read the MOA, we are to get the emissions 13 reductions from a 49-State NLEV. If there is a problem with 14 that, and those emissions reductions don't pan out, then 15 there are other measures that can be required; is that 16 correct? 17 MR. KENNY: That is our understanding. However, 18 we do expect NLEV. 19 CHAIRMAN DUNLAP: Understood. That covers the 20 emissions reductions requirements. 21 Are there any provisions in any nook and cranny in 22 this MOA that allows the automakers to somehow not provide a 23 49-State NLEV to the States of New York or Massachusetts, or 24 any other State, for that matter? 25 MR. KENNY: Well, the way the MOA is written is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 that, basically, they have an obligation to provide the 49- 2 State vehicles throughout the country. 3 There is an alternative provision there in which 4 they can provide something other than that. But the basic 5 obligation here is to provide those vehicles throughout the 6 country. 7 CHAIRMAN DUNLAP: Okay. 8 MR. GRUMET: Let me be clear. I don't for a 9 moment come before you to question your equivalency 10 determination. And I am absolutely confident that you will 11 do whatever it takes to secure equivalent reductions for 12 California. 13 My only point is that there is far more 14 uncertainty surrounding the national LEV program that has 15 been presented to you. And you would do the nation a great 16 service to the extent that you could reduce that 17 uncertainty. 18 CHAIRMAN DUNLAP: What I'd like to do at this 19 point is say thank you very much. I have four witnesses 20 left. Mr. White, would you yield to your colleagues from 21 the auto industry for a moment? 22 MR. WHITE: Sure. 23 CHAIRMAN DUNLAP: I'd like to call Mr. Leonard 24 forward from General Motors. 25 (Laughter.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 CHAIRMAN DUNLAP: Sam, you know I was saving you. 2 And I'd also like to call your colleague up from Mazda, Mr. 3 Aihara. Mr. Aihara still here? 4 Please come forward. Join Mr. Leonard. Just join 5 Mr. Leonard if you don't mind. I know that you're not 6 linked at the hip here, but at least we can get the 7 perspective maybe covered by both of you. 8 Sam, I know both of you have things you want to 9 say here, and I think you could cover that quickly, then 10 there's a few questions that are left outstanding, and I 11 think between the two of you, you can answer those 12 questions, which would be a great service to us and also 13 moving the agenda along. 14 MR. LEONARD: Be happy to. 15 CHAIRMAN DUNLAP: So, please cover the territory 16 you need to cover on behalf of GM. 17 MR. LEONARD: Okay. 18 CHAIRMAN DUNLAP: And then let's get into some of 19 the details here that are fast becoming troublesome. 20 MR. LEONARD: Okay. 21 CHAIRMAN DUNLAP: Okay. 22 MR. LEONARD: First, I fully support the comments 23 of Chrysler and the other auto manufacturers -- Ford and the 24 other ones that have testified so far. So, I'll try not to 25 repeat those. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 But I'd like to provide a little perspective on 2 this, because I think it's lost in the detailed review of 3 what's going on here. But, as most of you are aware, the 4 ZEV requirements -- the CARB ZEV requirements were 5 precipitated by the display of the GM Impact electric 6 vehicle at the January, 1990 auto show in Los Angeles. 7 GM announced at that time that we intended to 8 produce the Impact in the mid-1990s. It's been a difficult 9 road to production. There were hard times for the company, 10 deep losses in the billions and tens of billions of dollars 11 that caused delays in many of our new vehicle programs, not 12 just in the electric vehicle program. 13 The CARB ZEV requirements that would force six 14 major competitors into the EV market made a shambles of our 15 business case for the Impact vehicle. But the company's 16 commitments to the electric vehicle remained intact: an 17 intent to make a business out of it. 18 Our great concerns were the ZEV requirements that 19 would force too many vehicles into the market faster than 20 the consumers would be willing to accept them. But, as 21 evidence of our continuing commitment to make a business out 22 of the electric vehicle, General Motors displayed a 23 consumerized version of the Impact, the EV-1, fittingly at 24 the January, 1996 auto show. 25 Our Chairman, John Smith, in announcing the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 availability not only of the EV-1 for the fall of this year, 2 but also an electric version of our S10 pickup truck in the 3 spring quarter of 1997, confirmed these vehicles are, quote, 4 "the first products in a portfolio of high-technology 5 products that GM will bring to the market in the years 6 ahead. 7 It's a total business plan that we are working for 8 in electric vehicle technology. CARB's leadership with 9 today's proposal provides the opportunity for us to make a 10 business out of electric vehicles by allowing manufacturers 11 to focus their resources on the successful commercialization 12 of such vehicles. This will, in turn, encourage and 13 facilitate a parallel development of the necessary 14 infrastructure to enable electric vehicles to fulfill the 15 transportation needs of the State's consumers. 16 Through your leadership in adopting these proposed 17 changes, the electric vehicle now has a real chance for 18 long-term success. 19 Thank you. 20 CHAIRMAN DUNLAP: Okay. 21 MR. AIHARA: Thank you very much. 22 CHAIRMAN DUNLAP: Don't leave, Sam. 23 MR. LEONARD: I won't. 24 (Laughter.) 25 MR. AIHARA: Well, I won't let him go. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 (Laughter.) 2 MR. AIHARA: Chairman Dunlap and distinguished 3 members of the Air Resources Board, and our friends on the 4 Air Resources Board staff, we've worked together for many 5 months. And I represent Mazda Motor Corporation in 6 Hiroshima, Japan. 7 And Mazda has been working diligently to advance 8 automotive technology to help achieve vehicle emission 9 reductions, thus providing air quality benefits sought by 10 the State of California. 11 EVs, in order for them to meet the Board's ZEV 12 goal, must meet a variety of expectations that California 13 end users have, such as adequate vehicle performance with 14 sufficient driving range, and acceptable vehicle total 15 ownership cost or cost for purchase, lease, and operation. 16 However, when the Board's BTAP has concluded in 17 its report to the Board the successful launching of the EVs 18 is heavily dependent on the EV battery performance, and EVs 19 with current technology batteries will fall short for the 20 customer satisfaction. 21 Owing to such advanced batteries being still under 22 developing at the present, not to mention the series of 23 obstacles their development has to overcome to have them 24 meet required performance criteria, Mazda feels that, first, 25 the development of these batteries should mature; second, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 EVs equipped with these batteries should be tested under 2 real world conditions. 3 Through such validation testing, end user 4 preference would become more clearly identified, and most 5 potential problems would surface and be resolved. Through 6 repeated process, it will be fine-tuned for final production 7 and commercialization. 8 With these considerations, we remain fully 9 committed to terms of the MOA, and work very hard at it. 10 And the EV demonstration program for which the Board has 11 called, while continuing working toward the final goal for 12 introducing vehicles in the spirit of the ZEV program. 13 Thank you very much for your kind attention. And 14 this concludes Mazda's presentation. Thank you very much. 15 CHAIRMAN DUNLAP: Thank you. Okay. You'll 16 provide the court reporter with your testimony. All right. 17 Terrific. 18 Sam, there's been some monitoring of hallway 19 conversations, and people have the impression that somehow 20 you're telling us one thing in California and you're telling 21 the Northeast States something else. And we think the 22 staff's representing that they have an MOA saying that 23 you're willing to sign it, making some commitments, and that 24 somehow people are reporting that that's somehow 25 inconsistent with some negotiations or conversations being PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 held in the Northeast. 2 Shed some light on that, please. 3 MR. LEONARD: Number one, I don't think they're 4 inconsistent at all, but I'll try to shed some light. Part 5 of the problem is caused by some of the shorthand that's 6 being used here. 7 CHAIRMAN DUNLAP: Okay. 8 MR. LEONARD: The NLEV, as defined in the MOA, is 9 a little bit different than the NLEV NPRM. What we have 10 agreed to -- 11 CHAIRMAN DUNLAP: The NPR -- 12 MR. LEONARD: M, the notice of proposed 13 rulemaking. 14 CHAIRMAN DUNLAP: Which is the Federal proposal? 15 MR. LEONARD: Right. 16 CHAIRMAN DUNLAP: Okay. 17 MR. LEONARD: What we have agreed to do or is our 18 intent to do under the MOA is to provide a LEV average 19 vehicle nationwide beginning in the 2001 model year. That 20 is our intent. 21 CHAIRMAN DUNLAP: Three years earlier than the -- 22 MR. LEONARD: (Interjecting) Three years earlier. 23 CHAIRMAN DUNLAP: -- Federal Government could 24 require. 25 MR. LEONARD: If we are able to do that under the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 NLEV rulemaking of EPA, that is great and that's one option 2 we have to do that. 3 The second option of doing it is to find some way 4 to supply a straight California vehicle nationwide in 2001. 5 And hopefully, if we can't do the Federal NLEV program, we 6 would do that. 7 The third backstop in case neither one of those 8 works, because we're working with a notice of proposed 9 rulemaking on the Federal level that's not finalized yet, in 10 trying to sell California cars nationwide, believe it or 11 not, EPA doesn't believe they're as clean as their cars and 12 they would impose additional requirements on us. 13 CHAIRMAN DUNLAP: Okay. On that point, may I -- 14 MR. LEONARD: (Interjecting) We reserve the third 15 method as the final fallback method. It is a fallback 16 method. It is not the intent to utilize the equivalent 17 emissions. 18 All right. The Federal NLEV program under the 19 notice of proposed rulemaking by EPA, goes above and beyond 20 what we've agreed to in California. It includes not only 21 national vehicles at the LEV level in 2001, it also includes 22 early roll-out in the Northeast States of TLEVs and LEVs in 23 1997, 1998, 1999, and 2000. 24 We feel those are still currently negotiable items 25 with the Northeast. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 And to answer one additional question, as long as 2 New York and Massachusetts keep California requirements on 3 their books and do not provide an alternative that allows us 4 to put NLEV in those States, we cannot supply NLEV vehicles 5 to their States. The California requirements rule under 6 Section 177; so, it's not our choice at that point. 7 CHAIRMAN DUNLAP: Ms. Edgerton. 8 MS. EDGERTON: Is that an accurate interpretation 9 of what -- 10 CHAIRMAN DUNLAP: Tom just did. He said it's 11 accurate. 12 MR. CACKETTE: That's our understanding of the 13 situation. That's the way it went in our negotiations. 14 That was exactly the way it was portrayed and the way both 15 sides understood it in signing the agreement. What it was 16 is that if they can't deliver NLEVs to New York and Mass., 17 they'd deliver California certified cars to those States, 18 because that's what those States' rules require. 19 MR. LEONARD: It's like me trying to deliver NLEVs 20 to California. You wouldn't let me. I've got to deliver 21 California vehicles to California. 22 CHAIRMAN DUNLAP: Dr. Boston. 23 DR. BOSTON: Mr. Leonard, did I understand that 24 when you said that the Impact was in a 1990 auto show, that 25 was prior to this Board taking the action that we did? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 MR. LEONARD: It certainly was. 2 DR. BOSTON: Is that right? 3 MR. LEONARD: I am convinced in my mind that, but 4 for that, the ZEV mandate would not have happened from this 5 Board. 6 DR. BOSTON: And then the further implication was 7 that, if we hadn't have come up with that regulation, you 8 may have had that car on the market even -- 9 MR. LEONARD: (Interjecting) Sooner. Yes. 10 DR. BOSTON: -- sooner, because it didn't 11 introduce all the other competition to General Motors. 12 MR. LEONARD: We delayed the ZEV, the Impact 13 program, to reexamine the business plan because of the ZEV 14 mandate. Because, when you put -- it's one thing to market 15 a product when you are "the niche" vehicle for that market. 16 It's another one to market -- to tool up and market a 17 product when you're looking at six competitors being forced 18 into the market with you with a set number of vehicles to 19 sell. 20 DR. BOSTON: You should have told us that in 1990. 21 MR. LEONARD: We did. We did. 22 MS. EDGERTON: So, if I understand correctly, 23 Massachusetts and -- what you're saying is Massachusetts and 24 New York, by virtue of having adopted our standards anyway, 25 are going to get cars as clean as the 49-State car anyway? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 MR. LEONARD: Yes. 2 MS. EDGERTON: So, the emissions reductions 3 calculations that we use for 49 States times 18 percent, 4 times et cetera, et cetera, et cetera, are still what they 5 were? I mean they're still valid? Huh? Yes? 6 MR. CACKETTE: Yes. 7 MS. EDGERTON: Thank you. I had another question. 8 MR. LEONARD: Yes. 9 MS. EDGERTON: You know, Mr. Leonard, I've asked a 10 lot of people and, you know, I felt kind of badly because, 11 you know, I asked someone else if I could buy their car. 12 And I was wondering, if you were sitting out there, because 13 I'd already asked you to buy your car, I wasn't really 14 serious about buying their car. 15 (Laughter.) 16 MR. LEONARD: Give me my pen back. 17 (Laughter.) 18 MS. EDGERTON: I want your car. No. How many 19 cars do you expect -- I think this is public record, but 20 could you just repeat it for folks that -- 21 MR. LEONARD: (Interjecting) It is not public 22 record. It 's in the confidential submission, and I would 23 refer you to the confidential submission. The Chairman has 24 adequately summarized the industry numbers, and we have not 25 announced publicly how many we are going to sell. And I do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 not want to give the competitors that information as to 2 what I'm tooled up for. 3 MS. EDGERTON: Okay. Well, could you give me 4 whatever information is available in the public record? I 5 read recently that you were going to lease them; you weren't 6 going to sell them? 7 Can you just give us the -- 8 MR. LEONARD: (Interjecting) That decision has 9 not been made. 10 MS. EDGERTON: So, that's not really made. 11 MR. LEONARD: It's still to be made by the 12 marketing division. We have not announced capacity numbers 13 at all in the public record. It is in the confidential -- 14 CHAIRMAN DUNLAP: You've announced a season in 15 which they'd be available. 16 MR. LEONARD: We've announced that they will -- 17 that the Impacts will be available in the fall of '96, and 18 the S10s in the spring of '97. 19 MS. EDGERTON: And the Impacts -- well, the EV-1s 20 will be sold in California and Arizona? 21 MR. LEONARD: The EV-1s will be sold in the Los 22 Angeles, San Diego, Tucson, and Phoenix area, because those 23 are the climates and geography that are conducive to good 24 operation of that vehicle. 25 That vehicle is not designed, nor would we expect PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 it to operate well in -- right now -- either in the northern 2 climes of California, let alone Boston or Maine. It does 3 not have a fuel-fired heater in it. It has a heat pump. We 4 do not want to spread that vehicle, again, to consumers 5 before it is ready for them and get it a bad reputation, 6 when we can limit its marketing, build a good reputation, 7 make advancements in the technology, add the features that 8 it needs to go to the other areas -- to hilly terrain, the 9 cold terrain -- and make a success out of that. 10 We do not want to do that too fast, because that 11 will endanger the success of that product. We are making 12 the S10 available on a nationwide basis to fleets, because 13 we believe that fleets understand the limitations of 14 electric vehicles, and they will not have the potential to 15 damage the reputation of the vehicles that are going to the 16 general public with the EV-1 before it's ready. 17 MS. EDGERTON: Thank you. 18 CHAIRMAN DUNLAP: Any other questions of -- Jack? 19 MR. LAGARIAS: I just had a couple of side 20 questions, Mr. Leonard. One of the things I'm concerned 21 about, and I mentioned earlier today, did your emission 22 technology group go on strike, too, with the rest of the 23 company? 24 MR. LEONARD: No. That was just the production 25 people. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 MR. LAGARIAS: But you kept on working? 2 MR. LEONARD: Yes. We have. 3 MR. LAGARIAS: A concern I voiced, which was a 4 consumer complaint, earlier today, has any thought been 5 given to putting in larger cup holders? 6 MR. LEONARD: I believe some of our vehicles today 7 are designed for the 7-Eleven super mug, which is about a 8 two-liter cup. Are you drinking anything more than two 9 liters? 10 (Laughter.) 11 MR. LAGARIAS: Over and above. 12 (Laughter.) 13 CHAIRMAN DUNLAP: Sam, you're out of order. 14 (Laughter.) 15 SUPERVISOR RIORDAN: No, in fairness, I drive a 16 Chevy Tahoe. I will take Mr. Lagarias out and show him that 17 mine are adequately sized. 18 (Laughter.) 19 MR. LAGARIAS: That's a date. 20 (Laughter.) 21 CHAIRMAN DUNLAP: Okay. Any other questions for 22 the witnesses? 23 Supervisor Roberts. 24 SUPERVISOR ROBERTS: Thank you, Mr. Chairman. Mr. 25 Leonard, I have covered some -- a topic, that I thought if PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 anybody were following this closely, may be wondering about. 2 And I was hopeful maybe he might be able to explain it on 3 the record. And I know you'll recall that a couple meetings 4 ago, when he was at the microphone, I think I asked maybe 5 about once, but I think -- 6 MR. LEONARD: This is the embarrassing question? 7 CHAIRMAN DUNLAP: Yes. 8 SUPERVISOR ROBERTS: Twice I asked Mr. Leonard how 9 much that the manufacturers were going to put into the 10 battery technology. 11 CHAIRMAN DUNLAP: U.S. ABC, Sam. 12 SUPERVISOR ROBERTS: Yes, on ABC. And I remember 13 quite clearly, Mr. Leonard's answer was $35 million? 14 MR. LEONARD: Yeah, Phase 2. 15 SUPERVISOR ROBERTS: As I add up the totals in the 16 MOA, that they only add up to $19 million. 17 CHAIRMAN DUNLAP: It was Michigan dollars he was 18 talking about. 19 (Laughter.) 20 MR. LEONARD: No. If I can reconstruct the 21 scenario at the last meeting, you asked Mr. Brown for those 22 numbers. Mr. Brown could not give them to you; he did not 23 have them handy. For your information, I did not have them 24 handy either. We made a phone call back to Detroit, got a 25 set of numbers, which I thought were correct, and those were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 the numbers that I testified to at this hearing. 2 As it turns out, those numbers were not correct. 3 They were not correct at that time. The numbers that are in 4 the MOA, the $19 million, are the numbers that come out of 5 the November, 1995 budget of U.S. CAR. They are the numbers 6 that should have been given to you by me at the last 7 meeting, and they are the correct numbers. And they have 8 not been changed as a result of this MOA. 9 SUPERVISOR ROBERTS: Can staff verify that for me? 10 Mr. Leonard I think is making reference to a 11 document that I've never seen, and I -- 12 CHAIRMAN DUNLAP: Tom, let me ask the question 13 perhaps a little bit differently. 14 Since you've been talking to staff, Tom, Bob, has 15 it been the same number the whole time, or has that number 16 fluctuated? 17 MR. CACKETTE: We did not know the answer to the 18 question when Supervisor Roberts asked it either, and all I 19 remembered was from -- I think when you and I were in 20 Detroit -- 21 CHAIRMAN DUNLAP: Right. 22 MR. CACKETTE: -- there was a number that was in 23 the tens of millions thrown out, but I couldn't remember the 24 exact one either. I don't know if we actually went back and 25 looked at the U.S. CAR budget or not. But we did follow up PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 and, you know, confirm with the manufacturers that that's 2 what it is. So, unless they're not telling the truth, 3 that's -- I don't have any reason to question the number. 4 MR. BOYD: Well, Mr. Albu of our staff is, you 5 know, a regular observer of U.S. ABC. And although I've not 6 personally verified it with him, I think we've -- Steve 7 would have let us know if he had difficulty with that 8 number, and we've had no staff difficulty with it. 9 CHAIRMAN DUNLAP: Okay. 10 SUPERVISOR ROBERTS: Is there a way to check with 11 your -- not that I doubt what Mr. Leonard's saying -- 12 MR. CACKETTE: Sure, we can -- 13 SUPERVISOR ROBERTS: And I note that General 14 Motors is paying a lot more than anybody else, and I thought 15 maybe his colleagues were unloading on him for that reason, 16 but. . . 17 MR. LEONARD: No, that's my agreed share of U.S. 18 ABC, which is almost half. 19 SUPERVISOR ROBERTS: That's right. 20 MR. CACKETTE: We can certainly look for a hard 21 piece of paper that has the numbers on it. 22 CHAIRMAN DUNLAP: Okay. Anything else, Ron? 23 Ms. Edgerton. 24 MS. EDGERTON: Is the number of vehicles that 25 you're going to have in the technology demonstration project PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 something you're prepared to discuss? 2 MR. LEONARD: Yes. As far as I know, that was 3 disclosed in the staff report. It's 913 before you get into 4 the multiple credits for the batteries. And it's -- 5 MS. EDGERTON: I thought it was. The others have 6 discussed it. I just wanted to make sure we -- 7 MR. LEONARD: It's 182 in the first year, 365 in 8 the second year. And staff was kind enough to throw us one 9 extra one, because we were the oddball rounding. They 10 rounded it one low, and somehow I got the extra one, so I 11 got 366 in the third year. 12 MS. EDGERTON: Thank you. 13 MR. CACKETTE: The real reason is they wanted to 14 have a bigger market share than the next closest competitor. 15 That's how the numbers were generated. 16 (Laughter.) 17 MR. LAGARIAS: You're committed to 366 cars? 18 MR. LEONARD: That's the third year, 365 the 19 second year, and 182 the first year; so, it's 913. 20 MR. LAGARIAS: If there's a demand for more than 21 the 182 that's specified, are you in a position to supply 22 more than the 182? 23 MR. LEONARD: Of the advanced technology vehicles? 24 MR. LAGARIAS: Yes. 25 MR. LEONARD: I'm not in the position to commit to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 more advanced technology vehicles than that. You will find 2 that my numbers for my capacity to produce lead-acid 3 batteries clearly exceeds that. 4 MR. LAGARIAS: Well, don't forget, you get more 5 ZEV credits the earlier you produce them. 6 MR. LEONARD: That's why I'm the only one that's 7 producing in the fall of '96. 8 MR. LAGARIAS: Now, those credits will only be 9 useful in the year 2003. Is that correct? 10 MR. LEONARD: I don't think they -- no, they're 11 treated as if earned in the year 2003, which means they have 12 some life after that, but it's a declining life. If you 13 don't use them soon, you lose them. 14 MR. LAGARIAS: Oh, good. 15 CHAIRMAN DUNLAP: Okay. If there aren't any other 16 questions for the witnesses, I'll thank both Mazda and GM. 17 I want you to know, Sam, Mazda carried you today. 18 MR. LEONARD: Thank you. 19 (Laughter.) 20 MR. AIHARA: Thank you very much. 21 CHAIRMAN DUNLAP: Mr. White, V. John White, 22 followed by Paul Pulliam, Anita Mangels, and Bill Wason. 23 Those are our four remaining witnesses. Good 24 afternoon, John. 25 MR. WHITE: Mr. Chairman, members, thank you for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 having me. I didn't realize I was yielding for the entire 2 presentation, but that's quite all right. I always like to 3 follow my friends from the auto industry. 4 I'm here today on behalf of the Sierra Club. 5 There's also been a filing, a written filing, by the Sierra 6 Club Legal Defense Fund that I would commend to your 7 attention for the record. 8 But I wanted to, as is my wont, to provide a 9 little different flavor and maybe a little perspective based 10 on some of the historical events that have transpired, and 11 maybe put this in a little context. 12 First of all, I want to congratulate the Board and 13 the staff for enduring what has been a contentious and 14 difficult process, and one that has yielded some significant 15 disappointments for us. But I think the Board remains 16 intact in its mission. 17 I want to reflect a little bit on what might have 18 been and where we might still go on some of these issues, 19 because I think it might be instructive -- for no other 20 reason, just to talk about them. 21 First of all, I have taken notes of the concerns 22 of the staff as reflected in the caution with which some of 23 the data presented at the workshops have appeared. And I 24 think you're faced with some difficult choices in not only 25 meeting a regulation, but launching a new product and a new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 technology. 2 And I think that counts for some of why this 3 decision is both so momentous and so difficult, is that this 4 is -- this is not just about numbers. This is about 5 changing fundamentally the transportation system. And I 6 think that the concern with the product that you were going 7 to get and the potential for there to be a failure of launch 8 is a legitimate concern and one that led to perhaps a 9 predisposition on the part of the staff to modify or adjust 10 the schedule. 11 I guess my own personal view is that you could 12 achieve I think the entire result, with respect to 13 flexibility, for individual manufacturers to introduce 14 vehicles within the context of the ZEV regulation. And this 15 would be my principal objection to the proposal that's 16 before you, is that I believe ultimately that where we are - 17 - there is a need for more flexibility than the original 18 regulation. 19 There is a need for individually tailored 20 compliance plans. Because you essentially have people in 21 different places vis-a-vis their technologies and their 22 product, and their belief and faith in this market. 23 I was a little troubled by the remarks from 24 General Motors just a moment ago that is basically saying, 25 the whole strategy is we've got to be in -- the only one. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 We don't want to compete with a bunch of other vendors in 2 this new market. 3 We only want to do it if we can be the only ones. 4 And I think actually that's -- that's an understandable 5 concern, but it's not one that I think necessarily meets the 6 public's interest. Because if the only car you can buy is a 7 $35,000 GM product, and there's nothing else on the market, 8 because there doesn't have be, I think that's a concern. 9 On the other hand, I think that the fact that you 10 didn't want to push everybody out there with products 11 regardless of where they were is an understandable concern. 12 And the numbers have been less important to me than the 13 direction that we're going. 14 I fear, however, that in going all the way from 15 what could be individually tailored alternative compliance 16 plans to the voluntary MOAs, you all have left too much on 17 the table. 18 And part of the reason for that is, on the one 19 hand, I think it's great to have the car companies 20 constructively engaged as opposed to totally hostile on the 21 product launch. And I know that that's something that's 22 been important to you and your staff, is that going into 23 this with their product that they really are unenthused 24 about and, you know, not really engaged constructively in 25 making the program work but sort of -- "Okay, here's your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 cars. You wanted 'em. You sell 'em." It's a difficult 2 spot to be in. 3 And I'm sympathetic to that goal, but I think that 4 we haven't left ourselves much room here to maneuver if, in 5 fact, things don't turn out as expected. So, that's number 6 one. I think you need to have the backstop of the 7 enforceability provided by the rule. 8 Secondly, the principal reason to not have that 9 certainty is to solve the problem for the Northeast that the 10 car companies have. And I think that's also a mistake; 11 understandable, but I think a mistake. 12 I have been greatly impressed by my colleagues' 13 leadership in the Northeast. This is not a market that I 14 would have thought you had as much enthusiasm for these 15 technologies as we in California. 16 But what the Northeast folks have shown, from 17 Governor Weld on down through all the environmental groups, 18 is great grassroots political public support of a bipartisan 19 nature that I think is a good deal. 20 Now, on the other hand, I know negotiations have 21 broke down and that there's sort of an impasse. And 22 essentially what you have is basically they're coming to you 23 and saying, "Get us out of that, and then we'll give you the 24 cars." 25 And I think I'm uncomfortable with that, and I've PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 expressed this to you all of you at different times. I 2 understand, but I'm uncomfortable with it. 3 The other problem about the MOA is we have just 4 emerged -- I think the Chairman called a meeting downstairs, 5 basically gave the instructions to the car companies to sort 6 of put away the campaign documents and the propaganda 7 machine, and get down to business and come up with an offer. 8 And I think that had an effect, and that's part of why we're 9 here today. 10 But I think part of the reason that you find some 11 harshness and disappointment on our part, as reflected by my 12 friend Mr. Maschke's earlier comments, is because it's a 13 little hard for us -- having watched what they all were 14 doing right before they turned in their offers to you -- to 15 now turn around and trust them. 16 The history of trust between the auto companies 17 and the environmental community has not been a good one. 18 It's a little bit like the history that the auto industry 19 has with the Japanese on the trade issue. 20 There's a lot of willingness to talk, but a 21 difficulty in actually achieving lasting agreements. And we 22 have experience on fuel economy. They didn't want CAFE to 23 be raised. They said, "Give us incentives." 24 We put a bill on the Governor's desk to provide 25 incentives for efficiency improvements, and they got the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 bill vetoed. 2 I'm reminded of Ronald Reagan's admonition to 3 Mikhail Gorbachev about arms, and it's a little bit where I 4 think we are with MOAs. It's, "Trust, but verify." 5 And I think what's lacking with respect to the 6 MOAs for us is any opportunity to participate or oversee -- 7 I realize this is confidential, trade-secret-type 8 information. On the other hand, the ramp-up issue and how 9 we're going to get from here to there is a significant 10 problem, and I think that the fact that we are essentially 11 relying on the good-faith efforts of the car companies -- 12 after we have had two years and many, many millions of 13 dollars spent on a campaign to trash the product that 14 they're now getting ready to introduce -- is part of why 15 we're in a little disconnected state. 16 And I think you all have some ability to help that 17 process along. I'd recommend that you do something about 18 the Northeast other than the 49-State car, because I think 19 the folks up there deserve more than that. 20 They've worked very hard, and I think you can 21 help, and I think the car companies perhaps have a reason to 22 want that to turn out a little differently. 23 The other issue that I want to reflect on a little 24 bit is that, as I look back, this decision and this process 25 we've been through is analogous to the earlier decision to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 start with catalytic converters, unleaded gasoline, and also 2 the three-way catalyst decision that this Board made in 3 1976. 4 In both instances, we had terrific resistance. 5 And then we had a breakthrough. We had Fred Harley from 6 Unocal saying the most incredible things, if you go back and 7 look at the quotes, about unleaded gasoline -- it was 8 impossible to make, and it would be wrong and, you know, so 9 forth. 10 Similarly, we had Mr. Estes in 1976 saying 11 virtually the same thing. Impossible to do three-way 12 catalysts; until Volvo came along and did that. 13 And I think, in this case, we had a similar kind 14 of bit of poker going on with you and the car companies 15 trying to see who was going to blink and what was going to 16 be the result; would there be somebody that broke? 17 I think the battery audit panel process that you 18 all went through was a salutary one. I sort of wonder why 19 you haven't had them back to see how this is playing in the 20 broader public community. 21 I urge you to keep those -- that counsel and that 22 process. I think that was a good channel. There was some 23 good conversations going on between the car companies, the 24 battery panel, and the rest of us that allowed for, I think, 25 a better understanding to emerge. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 But I think what's different about this decision 2 and the part that I think we all are feeling regretful about 3 is this atmosphere of intimidation that you've been 4 operating in. And I don't think until we're through it and 5 we actually look at the materials that were generated -- and 6 perhaps we'll someday get to see the RFPs that were issued, 7 and the workplans that were proposed by the PR consultants. 8 You all have really had a number done on you 9 throughout this process, some of it by us. We've been 10 trying to do a little campaign, too, in response to the 11 campaign. Okay? 12 But I don't think until the history of this is 13 really written that the atmosphere in which this decision 14 got made will truly be understood. And I really think that 15 our friends in the oil industry owe the citizens of the 16 State of California both an apology and an explanation for 17 the conduct that has gone on around this issue. 18 We don't even see Doug Henderson show up at these 19 meetings anymore. It's all consultants, and paid staff, and 20 front groups. But essentially, it's not been constructive. 21 And it's not been accurate. And it's affected the quality 22 of the process. 23 I think you all have endured and survived, and 24 you've come through it with your best effort. And I commend 25 you for that. But I think that it's a sad day when we have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 had the level of propaganda and political interference -- 2 attempted political interference -- in the processes of this 3 Board by an industry that isn't even affected by the 4 regulation, except with respect to lost market share. 5 And I just think, at some point, we need to know 6 more about why that was the strategy. There's a lot of 7 opportunity to come in and debate the merits of these 8 issues. But this business of sort of a campaign of just 9 fill the rooms, and flood the radio -- and, you know, all 10 with paid staff. They had stuff with the general public, 11 people have concerns and stuff, but this orchestration has 12 just not contributed to a successful outcome except perhaps 13 from their standpoint. 14 And I think it's a suppression -- an attempt to 15 suppress competition. I think it is unfortunate that it 16 spilled over in the Legislature. 17 One of the other thing that's changed is that we 18 don't now have as much of a bipartisan support for the big 19 picture that we're pursuing. There has been some erosion of 20 that, particularly in the Assembly. 21 I don't think, overall, in the Legislature you 22 will be interfered with or you will be intimidated in the 23 end, but I think certainly an effort has been made. And the 24 fact that some of the members just were repeating things 25 that they were told when, in fact -- let's take the subsidy PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 issue. 2 The oil industry is in receipt of more than $400 3 million income tax credits to retrofit the refineries in 4 California to meet your reformulated gasoline spec. 5 Okay. Now, we can debate whether that's 6 appropriate. We can debate whether we have the money in the 7 general fund to support that tax expenditure. 8 But I just am astonished that they have the nerve 9 to get up here and talk about subsidies of taxpayers' funds 10 or AQMD supported funds for incentives for electric cars or 11 incentives for the utilities, given the record of subsidies 12 in that industry. 13 And I would close with a couple suggestions for 14 the future. I very much want to see whatever you do be 15 successful. I think you could do this sin the context of a 16 regulation, and I would urge you to do so; maintaining the 17 flexibility, but keeping the regulation intact as the 18 vehicle for enforceability. 19 But I think we all have to now come together and 20 try to make this work. I think that the citizens are out 21 there. To get them connected to the car is something that's 22 very important. I have to tell you, despite the 23 reservations and disappointment we have, around the world, 24 people I talk to that are out there in the marketplace 25 /// PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 trying to sell technology, the GM announcement of going into 2 production has had far more positive impact than any 3 negative impact from perceptions of your decision. 4 I also think you need to work to reassure folks 5 that this is a midcourse correction and not abandonment, and 6 that 2003 is, in fact, a meaningful date. 7 I worry that the ramp-up is going to be steep. 8 But I think, on the other hand, there is an opportunity for 9 these vehicles to get sold in the terms that the car 10 companies want. We're putting a great burden on the 11 customer. I mean that's the one thing that I worry about, 12 is that we're sort of making customer choice the sole 13 mechanism -- the customer's willingness to buy the product 14 the sole mechanism by which the product gets to the market. 15 And I understand why the car companies want to do 16 it that way, but that means all of us are going to have to 17 work real hard to, you know, to get the word out and so 18 forth. 19 I also think you, as a Board, need to take some 20 greater interest in minimizing and understanding the impact 21 of the petroleum fuel cycle on the entire California 22 environment, not just the tailpipe emissions or the 23 evaporative emissions, but the cradle to grave, life cycle 24 costs of the petroleum. 25 And you need to also be sure that in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 electricity market, that the deregulation of electricity 2 doesn't interfere with the development of zero-emission 3 generating technologies that can make the electric car a 4 true zero-emission vehicle. 5 I want you to know that today I took the example 6 of Dr. Haagen-Smit's grandson from last time and rode my own 7 renewable zero-emission vehicle over here, because I think 8 we need to begin setting examples. And including bicycles 9 within your vision of ZEVs I think would also be 10 appropriate. I know they aren't quite as exciting, but I 11 think we need to recognize that the burden that the 12 California's driving system places on our environment is 13 something we all have to work on. 14 This process that you're engaged in, hopefully, 15 will be a step forward. I just hope that, as we go forward 16 in the future, we can perhaps raise the level of the 17 discussion and move the technologies forward in a way that 18 will give California the kind of leadership and the kind of 19 results that it needs. 20 Thank you. 21 CHAIRMAN DUNLAP: Thank you. Any questions for 22 Mr. White? 23 Very good. 24 Anita Mangels, Mr. Pulliam, and Mr. Wason. 25 MS. MANGELS: Good afternoon, Chairman Dunlap, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 members of the Board. 2 Thank you very much for waiting for me. I 3 appreciate it. 4 I also have for you a letter from Lew Uher, the 5 President of the National Tax Limitation Committee. I've 6 submitted that for the record. Mr. Uher was unable to be 7 here. So, he asked that I do that for him. 8 As you know, my name is Anita Mangels. I'm 9 Executive Director of Californians Against Hidden Taxes. We 10 are a coalition representing the Howard Jarvis Taxpayers 11 Association, the National Federation of Independent 12 Business, the National Tax Limitation Committee, the Western 13 States Petroleum Association, the California Business 14 Alliance, California Farm Bureau Federation, and many 15 others. 16 Our long-standing opposition to the ZEV 17 regulations is a matter of public policy is well known, and 18 the proposed revisions do nothing to alter that opposition. 19 Under the Health and Safety Code, regulations 20 enacted by CARB must achieve the desired environmental 21 benefit in the most cost-effective manner. The ZEV mandate 22 is not cost-effective; indeed, it is vastly more expensive 23 than other measures which provide equal or greater emissions 24 reductions. 25 As to environmental benefit, we would remind the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 Board, that according to your own staff, the ZEV mandate, 2 even in its original form, would have achieved less than one 3 percent of the emissions reduction required under the SIP. 4 This alone should trigger a complete repeal of the 5 mandate in favor of cost-effective solutions that would have 6 a real impact on our air quality, which the ZEV mandate 7 clearly will not. 8 However, since the Board has already acknowledged 9 the complete lack of air quality benefits to be derived from 10 the ZEV mandate, we will instead focus on the mandate's 11 costs and economic impact. 12 Is this on? (Speaking of microphone.) 13 CHAIRMAN DUNLAP: I can assure it's on. 14 (Laughter.) 15 MS. MANGELS: Thank you. Earlier this year, a 16 team of researchers from the Massachusetts Institute of 17 Technology has found that the costs -- and I quote -- "The 18 costs of implementing the California electric vehicle policy 19 are enormous, requiring subsidies as high ass $10,000 to 20 $20,000 per vehicle." 21 According to Sierra Research, the revised ZEV 22 mandate will cost California taxpayers about $17 billion, or 23 about $226,000 per ton of emissions reduced. This figure, I 24 believe, is compatible with the findings of M-Cubed in a 25 1994 economic analysis commissioned by CARB. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 Yet, amazingly, the staff report claims that not 2 only will the ZEV mandate not have an adverse economic 3 impact, it might even save consumers money. The fact of the 4 matter is that the revised ZEV mandate includes memoranda of 5 agreement -- which have been widely discussed this afternoon 6 -- between CARB and the world's seven largest automakers, 7 which specifically call for subsidies, tax breaks, and other 8 preferential treatment for ZEVs, all of which will cost the 9 public billions of dollars. 10 First and foremost, the MOAs call for the 11 development and implementation of incentive programs to 12 promote ZEV sales. An example of one such program already 13 exists. General Motors is widely advertising the $10,000 in 14 tax breaks available to purchasers of its $35,000 EV1. CARB 15 staff in its report today specifically mentions the South 16 Coast Air Quality Management District's "Quick Charge" 17 program. That provides $5,000 worth of rebates to buyers of 18 EVs, also funded by taxpayers. 19 CARB also promises to promote the sale of ZEVs to 20 other State agencies for government use. Who pays for 21 government fleets? Once again, the taxpayers. And in this 22 case, they'd be paying two or three times as much for 23 vehicles that perform at a fraction of the level offered by 24 conventionally fueled vehicles. 25 I'd like to interject here that I believe Senator PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 Haynes' staff member mentioned this earlier -- and, Chairman 2 Dunlap, I think it was you that brought up the Executive 3 Order of Governor Wilson. 4 The Executive Order that Governor Wilson signed in 5 1994, as I remember reading it -- I don't have it with me -- 6 but I think it was specifically intended to be a fuel 7 neutral -- a fuel neutral order, not giving any preference 8 to any particular fuel -- ZEVs, propane, natural gas, 9 whatever. 10 It was directed at widespread introduction of 11 alternative fuels. But by no means should that justify a 12 massive public expenditure committed strictly to ZEVs. And 13 I think that's probably one of the things that has been 14 concerning many of us; that ZEVs are not the most cost- 15 effective alternative fuel. 16 An example of this that comes immediately to mind 17 is the Ford Ranger pickup, the electric version of which has 18 a sticker price of about $30,000, and a range of about a 19 hundred miles; whereas, the electric Ranger's gasoline- 20 fueled counterpart goes about 350 miles on a tank of gas and 21 costs about $11,000. 22 Further, we have documents from State officials 23 indicating that they believe that this agency may have 24 exceeded its statutory by obligating the State to financial 25 commitments it may not be able to honor, and committing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 other State agencies to securing preferential treatment for 2 ZEVs. 3 One issue of concern is CARB's promise to work 4 with the California Department of Insurance and the State 5 Department of Banking to establish what appear to be 6 preferential rates for ZEVs. 7 We checked with the Department of Insurance and 8 were informed, and I quote: 9 "The Department was not consulted by the Air 10 Resources Board prior to the formation of the MOA. 11 Moreover, we did not become aware of t he Department's 12 inclusion in the MOA until we received your inquiry and a 13 copy of the MOA from you," close quote. 14 The Chief Deputy Insurance Commissioner went on to 15 say -- and I quote again -- "That the statement that the ARB 16 shall work with the California Department of Insurance to 17 establish reasonable rates for insuring ZEVs is based on the 18 factually incorrect premise that the Department sets 19 insurance rates for private passenger automobiles. The 20 Department does not function as a rate setter," close quote. 21 Similarly, Assembly Banking and Finance Committee 22 Chairman Jan Goldsmith advised us that he was not consulted 23 prior to the formation of the MOAs, although some provisions 24 of those agreements properly come under the purview of the 25 Banking and Finance Committee. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 These and similar comments from other public 2 officials raise serious concerns as to the propriety of the 3 MOAs, which appear -- and I'd like to stress "appear" -- to 4 have been created in a back room without disclosure to the 5 public, the Legislature, or other agencies which would be 6 responsible for implementing portions of the agreements. 7 I know that this Board took great exception to 8 that implication when Mr. Maschke was up here earlier. But, 9 again, I believe that the public agency -- even the 10 appearance of less-than-public disclosure of these types of 11 agreements which have such wide-ranging impacts to so many 12 constituencies is not helpful to finding consensus and 13 getting the job done. 14 CHAIRMAN DUNLAP: Are you referring to the 15 proposal? 16 MS. MANGELS: I'm preferring (sic) to the MOAs 17 personally. 18 CHAIRMAN DUNLAP: Proposed MOA. 19 MS. MANGELS: Exactly. The ones which have been 20 initialed, but not yet signed. 21 CHAIRMAN DUNLAP: Okay. 22 MS. MANGELS: And, again, I think the very -- the 23 very fact that you have succeeded in bringing Californians 24 Against Hidden Taxes, CalPIRG, the Sierra Club, and some of 25 these other organizations into consensus, that we're all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 suspicious of the MOAs, because we're not sure what it means 2 might bear out the fact that perhaps they were not exactly 3 fully disclosed and perhaps may be very ambiguous. 4 For example, one of the gentlemen who spoke 5 earlier brought up a question about, well, golly, what is a 6 reasonable cost? I think it was Joe Caves. A reasonable 7 cost for batteries, well, gosh, you know, the automakers 8 might think, if it's more than $10,000, it's too much. You 9 guys might think, if it's $350,000, well, that's fine, too. 10 We're looking at it, also asking what's a 11 reasonable incentive or subsidy? You know, there's already 12 $10,000 on the table for each EV1 that gets sold. 13 Down in the South Coast Air Quality Management 14 District, there's $5,000 for everybody that wants to buy an 15 EV. 16 Here in Sacramento, $800 -- up to $800, if you buy 17 something, SMUD will give you a rebate on an EV. 18 So, there's a wide latitude here that hasn't been 19 defined, and I think that's one of the areas of confusion 20 that really needs to be resolved. 21 Moving back to the economic analysis, in 22 addressing the economic impact of ZEV -- the ZEV mandate on 23 small businesses, the staff confines itself to discushing 24 (sic) -- I'm sorry. It's been a very long day -- to 25 discussing the effects of only those companies which are in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 electric vehicle related industries, which have relied on 2 the mandate as a source of business. 3 Since millions of tax dollars have already been 4 spent subsidizing so-called investments in the EV-related 5 businesses, the State should properly concern itself more 6 with the wisdom of wasting more tax dollars on a technology 7 which provides no air quality improvement than with propping 8 up businesses which seek to perpetuate and promote that 9 technology. 10 Large numbers of small and large businesses not 11 involve din the EV industry are opposed to the ZEV mandate. 12 Business organizations, such as the natural -- National 13 Federation of Independent Business, for example, which 14 represents over 40,000 small businesses throughout the 15 State; the California Business Alliance, and the Santa Clara 16 Valley Manufacturing Group, representing hundreds of high- 17 tech companies in the Silicon Valley are among t hose 18 represented by our coalition alone. 19 the reality of the ZEV mandate is this: At a cost 20 of at least $17 billion, the Air Resources Board is 21 inappropriately engaging in a market manipulation and 22 dubious contracts which will achieve less than one percent 23 of the emissions reduction required under its own clean air 24 plan. 25 For years, the world's seven largest automakers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 have been quietly competing to be the first to offer an 2 economically viable, performance competitive electric 3 vehicle. None has succeeded in making the battery 4 breakthrough necessary to make this goal a reality. 5 The automakers themselves have testified before 6 this Board, as Sam just did, that this competition would 7 have progressed without a mandate, and would have been more 8 sensitive to market conditions and the needs of consumers. 9 More importantly, it would have been financed with 10 investor capital, not taxpayer subsidies. 11 Now, thanks to the decision of this Board, the 12 California taxpayers will be footing the bill for the 13 research, development, and production of electric vehicles, 14 and creating a market for them through State fleet purchases 15 and multibillion dollar subsidies. 16 If the technology eventually takes off, the 17 shareholders of those investor-owned companies will get the 18 dividends. If it doesn't, they will not have lost a dime. 19 Either way, the California taxpayers will get 20 higher taxes or diminished levels of essential services to 21 absorb the cost of the mandate. They certainly will not get 22 cleaner air. 23 The unfunded ZEV mandate will cost at $17 billion. 24 That is almost $2200 for the average family of four in 25 California. It's legal standing is questionable, and it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 will not clean our air. 2 Once again, we urge you to repeal this unfunded 3 mandate and turn your attention to meaningful, market-based 4 measures to achieve our State's air quality goals. 5 Thank you. 6 CHAIRMAN DUNLAP: Thank you. Any questions of our 7 witness? 8 Ms. Edgerton. 9 MS. EDGERTON: How do you calculate the 17 10 billion? 11 MS. MANGELS: It's based on the incremental cost 12 of EVs as opposed to conventional cars. And I believe 13 you're very familiar with the Sierra Research report that 14 has come up with those numbers. 15 MS. EDGERTON: So, it's the same one as before. 16 MS. MANGELS: It's the same report as before, with 17 it recalculated due to the lower number of ZEVs that you're 18 planning on introducing. 19 MS. EDGERTON: I see. Why do you think the South 20 Coast money is available for everyone who wants an EV? 21 MS. MANGELS: Because they've allocated funds to 22 provide $5,000 rebates to people who buy electric cars. 23 MS. EDGERTON: Is that for everyone? 24 MS. MANGELS: It's for everyone up to $6 million. 25 And based on what we're seeing as the availability and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 numbers that people are interested in buying, I think that's 2 going to cover a lot of people. 3 MS. EDGERTON: How many cars is that? 4 MS. MANGELS: I'll get my calculator, and I'll 5 tell you, Lynne. 6 MS. EDGERTON: 1200? 7 MS. MANGELS: It's $6 million. 8 MS. EDGERTON: It's not every car. 9 MS. MANGELS: I stand corrected. It's six million 10 dollars worth, and there will be more. 11 MS. EDGERTON: It's not every car. 12 I just want to make a final comment. From my own 13 point of view, I believe -- you've made a lot of assumptions 14 and a lot of statements throughout this. And I just want to 15 clarify that we believe that our ZEV program is cost- 16 effective. 17 We have not found your arguments persuasive. 18 MS. MANGELS: And I may ask you, do you drive an 19 electric car yourself? Or what is it that you do drive? 20 MS. EDGERTON: I have no further comment. 21 MS. MANGELS: All right. 22 CHAIRMAN DUNLAP: Any other questions of the 23 witness? 24 Thank you. Mr. Pulliam, and Mr. Wason. I'm told 25 Mr. Wason's back. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 Please come forward and take your place in the 2 queue. 3 MR. PULLIAM: Thank you. Are you hearing me? 4 MR. LAGARIAS: Yes. 5 MR. PULLIAM: I'm one of the first four presidents 6 of the Electric Auto Association, which was formed south of 7 the Bay several decades ago. 8 The other three were going DC. I was attempting 9 to go AC motors. 10 They didn't like me too much. So, I'm still on 11 AC. But now, I've got something to talk about. Some 45 12 horsepower, air-cooled engines are being used in four-wheel 13 vehicles in Bosnia. They were built to my specifications by 14 Air Force people at the local air base that's about to go 15 out of business. 16 The engine runs at a constant speed of 1800 RPM, 17 but variable power, depending upon how much is needed by the 18 load. The load always determines the power on an electric 19 motor. 20 The 30 -- the 1800 rpm, you're talking about wheel 21 speeds, is equal to 30 revolutions per second. And the 22 motors can drive from zero at standstill to 28.5 revolutions 23 per second. 24 The 28.5 revolutions per second is 60 miles an 25 hour at the tire size on the wheels that they've got. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 1 The alternator is revved at 1800 rpm and puts out 2 a hundred and twenty-two-oh-eight (sic) Volts, three-phase, 3 60 hertz. 4 That power at constant voltage is fed to a rotary 5 transformer. You can move that transformer 15 degrees and 6 get no voltage out or back into congruent alignment at the 7 center of the coils and get full rated voltage of the 8 motors. 9 This is the only speed control you really need on 10 five horizontal deal. There's something else up my sleeve 11 for going up a steep slope, which has already been talked 12 before, but I don't want to put that out now, because I'm 13 dealing with the Ford Motor Company on that. 14 CHAIRMAN DUNLAP: Okay. 15 MR. PULLIAM: I can't go to everybody on that 16 extra deal. 17 But the rotary transformer goes from zero percent 18 of the voltage to a hundred percent of the voltage needed by 19 the motor -- I should say plural "motors" because the one 20 voltage is fed to all four motors, and the two in the rear 21 turn, the two in the front turn. They can turn at different 22 speeds as the car's turned. There is a rack and pinion gear 23 for steering in the front wheels. 24 Electric motors are said to have slip. When the 25 car is standing still, the slip is one. When the car is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 362 1 moving at 60 miles an hour, the slip is .05. There's always 2 some slip in an induction electric motor. 3 And I'm saying this one is .05. 4 CHAIRMAN DUNLAP: Mr. Pulliam, would you be 5 willing to meet with our technical staff on this? 6 MR. PULLIAM: Can you speak a little louder? 7 CHAIRMAN DUNLAP: Would you be willing to meet 8 with our technical staff on this? 9 MR. PULLIAM: I will get these copies made. The 10 lad in the white shirt told me told me to get ten copies 11 later. 12 CHAIRMAN DUNLAP: Well, Mr. Cross, who's wearing 13 kind of a pinkish shirt will wave to you now. I would like 14 it very much if you'd meet with him and share with him your 15 ideas, because you might be talking about some proprietary 16 information here, and I would hate for you -- 17 MR. PULLIAM: It could be proprietary, but -- 18 CHAIRMAN DUNLAP: I wouldn't want you to lose your 19 ability to make money on your ideas. 20 MR. PULLIAM: Well, I'll go one step further. 21 I'll wait for that deal, then. 22 CHAIRMAN DUNLAP: All right. 23 MR. PULLIAM: The initial designation of these 24 vehicles was by me, the Pulliam 4 x 4 toboggans. And they 25 were built on the air base, three of them with six sheepfoot PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 363 1 rollers, airlifted to Bosnia. 2 One sheepfoot roller is out in front of the 3 vehicle, and another one's trailing behind. And how that's 4 done is happy circumstance for the troops over there in 5 Bosnia. 6 From my viewpoint, they should be entitled to the 7 best we have available. And it took about ten minutes of my 8 time in the 4th Air Force Headquarters Building to get this 9 all done. 10 And it was done by people employed on McClellan 11 Air Force Base. When I was here several months ago, 12 everybody was talking about the 1910 and 2010. 13 CHAIRMAN DUNLAP: Right. 14 MR. PULLIAM: Well, in 2012, I'll be age 100, if I 15 should live so long. 16 CHAIRMAN DUNLAP: Okay. Thank you, Mr. Pulliam. 17 Mr. Cross will follow up with you. 18 Mr. Wason. 19 Sir, it's good to see you. I want you to know 20 you're all that stands between us and ending the public 21 testimony. 22 MR. WASON: Well, I have a couple of tough acts to 23 follow there. 24 So, I'll try and be brief. But I do have some 25 very specific input that I'd like to share with the Board, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 364 1 and just talk about a couple of general background things as 2 a start. 3 I think we've been very involved in this -- by the 4 way, I'm Bill Wason with BAT International. We're an 5 electric vehicle manufacturer in Burbank. 6 And we've been very involved in this process of 7 hearings, so I'm sure everybody -- a lot of people know who 8 I am. 9 But I think, given this is the end of the end, 10 there are a couple of comments that are worth noting. I 11 think you've done a commendable job of trying to bring all 12 the parties together and come up with an agreement. 13 And I want to commend you for that, and I think 14 it's well worth noting that you have advanced the industry a 15 lot. 16 But I think it's also worth noting that there is 17 still a lot of risk that this industry won't happen. There 18 are car companies that have done vehicle introductions that 19 could just as easily decide they don't like this industry 20 and back out. And with some minor changes in your 21 agreement, which have been discussed -- and I won't go into 22 detail; they've been submitted as testimony -- the 23 agreements could get a lot better. 24 I think that to give it some perspective working 25 this day to day, this has a huge impact on decisions that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 365 1 are made that could have a lot of impact on the technologies 2 that you have available. And we're working very closely 3 right now with one battery manufacturer, Acme Electric 4 Company, and it may not seem like a lot to invest $25 5 million in a battery plant, but it's tough to pull that 6 money out, given the environment of uncertainty. 7 And when you think about $25 million, it's a day 8 of health care costs in L.A. And it's that -- it's looking 9 at that perspective and that investment, and the effect on 10 the technology, and the timing of the entry that some of 11 these ideas are put in perspective. 12 I think, given that, there are two specific 13 comments that I would like to make. First, we have always 14 been in favor of a market-based approach, and we think it's 15 good that you're working on a market-based approach in these 16 early years. 17 But, if that's the case, you really need to show 18 the world that you are very strongly behind market-based 19 approaches, and be the standard bearer for those specific 20 market incentive mechanisms within the California 21 Government. 22 And there specific policy steps that you could -- 23 I understand how bills work and policies are made, and when 24 ou can take positions. But at the same time, a lot of what 25 goes on in the Legislature occurs behind the scenes. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 366 1 the ability of you to work at a staff level to deal with 2 technical issues and incentive mechanisms, and bring parties 3 together has clearly been demonstrated in what you've done 4 here in getting MOAs together, and could be continued in 5 efforts to get incentive mechanisms together. 6 Specifically, what we would like to suggest is 7 that, one, we would like to request that you specifically 8 support incentives like access to carpool lanes as an 9 example, and request that you make public statements to that 10 effect, when appropriate. 11 But more significant than that, is that you work 12 very closely with -- and suggest that staff work with the 13 auto companies on resolving technical issues associated with 14 carpool lane access for ZEVs, and invite the auto companies 15 to have a dialogue on those technical issues with the intent 16 of resolving any technical issues outstanding. 17 In addition to that, there are similar technical 18 issues with EPA, with Caltrans, with some of the other 19 agencies that interstaff communications could do a lot to 20 come up with a clear position for the Governor's Office to 21 look at. 22 So, I will leave it at that on that issue. 23 One other thing I wanted to bring up. I think 24 that this -- the MOAs present some tricky future legal 25 problems for CARB that may have some alternatives to -- as a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 367 1 fallback measure for enforceability, going back to requiring 2 mandates again. Because I think it's going to be extremely 3 difficult for you to ever go back to early mandates before 4 2003. 5 And it's clear that you may not get 49-State LEV, 6 because you end up -- because New York and Massachusetts end 7 up in court and, you know, a national LEV program never 8 happens, and you have a shortfall. 9 And you also have other totally separate from ZEV 10 problems with your '97 SIP submittal that may lead to 11 problems with EPA and a lawsuit from an environmental group 12 on enforceability of ZEVs may create some problems. 13 And what we would like to suggest is that you look 14 at a specific option relative to enforceability of your SIP 15 within the ZEV portion of it, and look at the idea of having 16 an agreement added to the MOAs that, if the car companies -- 17 if, for any reason, you fall back from a 2003 mandate, that 18 any credits that are part of the current MOA are bought up 19 by the Big Seven car companies. 20 That would create a tremendous amount of certainty 21 in the market that would et investments occurring at a very 22 rapid rate to get technologies on line. And I think if you 23 combine that with incentives like carpool lane access, there 24 would be enough market driver and investment certainty that 25 I think the technologies will be there and the market PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 368 1 competition will be there to make sure prices drop to 2 realistic levels, and that ZEVs are truly cost-competitive. 3 CHAIRMAN DUNLAP: Thank you. That wise counsel. 4 I appreciate your time and effort in providing that to us. 5 Any questions of the witness? 6 Okay. Very good. That is all I have on my 7 witness list. I trust, Madam Secretary, that that's all 8 that you have? 9 MS. HUTCHENS: Yes. 10 CHAIRMAN DUNLAP: I'd like to ask -- I guess that 11 concludes the public testimony. I'd like to ask staff if 12 there's any more summary work they need to do on letters or 13 communications that have been received? 14 I think you did that at the outset. 15 Mr. Boyd, does staff have any other further 16 comments before I close the record? 17 MR. BOYD: If I might, just a couple of comments. 18 CHAIRMAN DUNLAP: Have I mentioned that brevity is 19 a virtue? 20 (Laughter.) 21 CHAIRMAN DUNLAP: Lately? 22 MR. BOYD: If you afford me the opportunity 23 tomorrow, why, I'll -- 24 CHAIRMAN DUNLAP: I will afford you the 25 opportunity tomorrow, Mr. Boyd. You'll be the lead-off PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 369 1 hitter. 2 MR. BOYD: There are no further staff comments. 3 CHAIRMAN DUNLAP: All right. I will now close the 4 record on this agenda item. However, the record will be 5 reopened when the 15-day notice of public availability is 6 issued. 7 Written or oral comments received after this 8 hearing date but before the 15-day notice is issued will not 9 be accepted as part of the official record on this agenda 10 item. 11 When the record is reopened for a 15-day comment 12 period, the public may submit written comments on the 13 proposed changes, which will be considered and responded in 14 the final statement of reasons for the regulation. 15 At this point, I'd like to remind the Board of our 16 policy concerning ex parte communications. While we may 17 communicate off the record with outside persons regarding 18 Board rulemaking, we must disclose the names of our contacts 19 and the nature of the contents on the record. 20 This requirement applies specifically to 21 communications which take place after notice of the Board 22 hearing has been published. 23 Are there any communications which need to be 24 disclosed? 25 SUPERVISOR RIORDAN: Mr. Chairman, maybe I can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 370 1 begin. I would disclose the following: 2 I had a conversation with the representative from 3 Toyota, and one from Ford, Mr. Kelly Brown from Ford; David 4 Hermance from Toyota. The subject of the conversation went 5 no further than the testimony here, and really was to the 6 point of the testimony given by those two car manufacturing 7 companies. 8 CHAIRMAN DUNLAP: Okay. Very good. Why don't we 9 continue this way, if we may. That side today has had a 10 little bit of attention; we'll give this side a little bit 11 of attention now. 12 Mr. Lagarias? 13 MR. LAGARIAS: Mr. Chairman, I had three ex parte 14 meetings, all in Sacramento at the ARB office. On February 15 28th, I met with Joe Caves of the Union of Concerned 16 Scientists and Janet Hathaway of NRDC. 17 The subject of the discussion was their concern 18 with the MOA, which they presented today. 19 On March 12th, I met with Kelly Brown of Ford, 20 Dave Hermance of Toyota, and Eric Ridenour of Chrysler, and 21 their interest was in clarifying any concerns I might have 22 of the MOA and as they presented them here today. 23 And on March 25th, I met with John Torrens 24 (phonetic) of PG & E, and Dave Modisette of the California 25 Electric Transportation Coalition. And they were interested PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 371 1 in how firm the Board was in addressing the ZEV regulation. 2 And that's all. 3 CHAIRMAN DUNLAP: Thank you. Mr. Parnell. 4 MR. PARNELL: I, too, had ex parte communications 5 with Kelly Brown of Ford, Dave Hermance of Toyota, Eric 6 Ridenour of Chrysler, and the scope of the conversation was 7 merely to see whether or not I had any questions as to the 8 MOA. 9 CHAIRMAN DUNLAP: Okay. Very good. Mayor 10 Hilligoss. 11 MAYOR HILLIGOSS: Yes. On February 27th, I met 12 with the Concerned Scientists, and it's pretty much what 13 they said today. And on March 15th, I met with Mr. Leonard 14 from GM and Mr. Padilla from Nissan, and pretty much what 15 they had to say today. 16 CHAIRMAN DUNLAP: Okay. 17 Thank you, Mayor Hilligoss. Supervisor Silva. 18 SUPERVISOR SILVA: Yes, Mr. Chairman. Under the 19 rules of ex parte, I had meetings with representatives from 20 Nissan, Chrysler, and Toyota in my office in Orange County. 21 I also met with Ford in Sacramento. The 22 conversation went no further than the testimony that was 23 presented today. 24 CHAIRMAN DUNLAP: Okay. Are individual names 25 required to be mentioned, Counsel? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 372 1 MS. WALSH: I think it would preferable, yes, to 2 mention individual names. Although, in this case, he did 3 indicate the companies those individuals were from, he might 4 just confirm that those were the same individuals that the 5 other Board members had talked to. 6 SUPERVISOR SILVA: We did call the names in, I 7 believe, to the office here. I don't have their cards, and 8 I don't recall the names exactly. 9 CHAIRMAN DUNLAP: All right. Well, we'll work on 10 getting that squared away. 11 Ms. Edgerton. 12 MS. EDGERTON: I had some ex parte communications. 13 On February 13th, '96, I spoke with Janet Hathaway of the 14 Natural Resources Defense Council on the telephone. The 15 subject was letters that are -- a letter that was submitted 16 in the record about reservations that she had about the 17 legality of the MMOA. 18 On February 26th, '96, I spoke with Larry Berg and 19 Raoul Feros (phonetic) from Ballard. We were here in 20 Sacramento. It was a meeting. Mr. Dunlap, Mr. Boyd, and 21 Mr. Cackette, and Mr. Schoening, as I recall, were present. 22 And we had a confidential update on how fuel cells for 23 vehicles were working, not just light-duty vehicles, but 24 also the prospects for use in heavy-duty vehicles. 25 On February 28th, 1996, I had lunch in Los Angeles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 373 1 with Pete Pastillo and Ms. Weidner from Ford. And 2 primarily, we discussed Ford's plans for the introduction of 3 the Ranger. And we also discussed fuel cells, and my 4 concern that the Air Resources Board maintain its long- 5 standing tradition of being technology neutral, and not 6 favoring a particular technology, and that I was very 7 interested in ensuring that fuel cells would be appropriate 8 technologies for the technology demonstration project. 9 I did get a letter form Pete Pastillo that I 10 turned in on the record. I called Roger Carrick (phonetic) 11 last week. He's an attorney in Los Angeles, to ask him 12 whether the Justice Department had -- United States Justice 13 Department had opened an antitrust investigation with 14 respect to the suppression of ZEV technology by industrial 15 or institutional -- industry. 16 And he replied that they had. 17 I also spoke on several other occasions on the 18 telephone with Larry Berg regarding fuel cells, and I had 19 breakfast with him this morning and talked about it some 20 more. 21 I think that about sums it up. I had a drink with 22 some GM representatives, but I think I only bought a car. 23 (Laughter.) 24 CHAIRMAN DUNLAP: Thank you, Ms. Edgerton. Dr. 25 Boston. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 374 1 DR. BOSTON: What did you do for lunch? 2 (Laughter.) 3 MS. EDGERTON: What did I do for lunch? 4 DR. BOSTON: On March 14th, I met with Sam Leonard 5 of GM, Kelly Brown of Ford, and John Schutz of Nissan. They 6 wanted to discuss the commitment their companies were making 7 to go forward with the ZEV program, and the significance of 8 the 49-State LEV to our program. 9 We also discussed the MOAs and the agreement to 10 have the capacity to build a specific number of electric 11 vehicles. They weren't able to divulge to me the exact 12 numbers that each company would make, stating that that was 13 trade secrets. 14 But they did give their commitment to work on the 15 advanced batteries. That was the essence of our discussion. 16 CHAIRMAN DUNLAP: Thank you, Dr. Boston. 17 Mr. Calhoun. 18 MR. CALHOUN: I, too, had some ex parte 19 communication. On the 14th of February, I had a very brief 20 discussion with Janet Hathaway. And during that discussion, 21 we primarily focused on her concern about the ramp-up during 22 the early years. 23 And on the 13th of February, I had a meeting with 24 Mr. Aihara from Mazda, Kelly Brown of Ford, and Sam Leonard. 25 And the thrust of that particular discussion was whether or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 375 1 not I had any concern about the MOA. 2 CHAIRMAN DUNLAP: Thank you, Mr. Calhoun. 3 Supervisor Roberts? 4 SUPERVISOR ROBERTS: Thank you. There are a 5 couple of meetings that I should divulge that would be 6 appropriate. 7 The first was on March 14th, and that was a 8 meeting, a single meeting, that included Sam Leonard, Eric 9 Ridenour, and John Schutz. And that was to discuss ZEV 10 regulations generally and the MOA and some its pieces in 11 particular. 12 On March 27th, I met with Senator Ray Haynes and 13 had a short discussion on -- primarily on mandates, and 14 indirectly on the MOA. 15 CHAIRMAN DUNLAP: Thank you for inviting him to 16 send a representative today, Supervisor. 17 SUPERVISOR SILVA: I think he was planning on 18 being here -- 19 CHAIRMAN DUNLAP: I see. 20 SUPERVISOR SILVA: -- even without me. 21 And finally, on today, the 28th, earlier today, I 22 had a meeting with Janet Hathaway, Roland Wong, Joe Caves, 23 and Jane Kelly, all again to discuss the MOA. 24 CHAIRMAN DUNLAP: Okay. 25 MS. EDGERTON: I need to add one. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 376 1 CHAIRMAN DUNLAP: Ms. Edgerton. 2 MS. EDGERTON: Thank you, Dr. Boston. I actually 3 did have lunch. I did talk with Jason Grumet as I walking 4 during lunch, and Ronald Wong. I also remember that I did 5 speak with Paul Hallaker (phonetic) of CalSTART. And that 6 was in connection with whether they were going to be coming 7 today, and their disappointment that the program had not 8 adequately or did not appear to consider California 9 businesses' interest in advanced transportation technology. 10 Thank you. 11 CHAIRMAN DUNLAP: Okay. I, too, have a few to 12 report, ex parte communication. 13 First with Firoz Rasoul (phonetic) and Larry Berg 14 of Ballard Power Systems on February 26th, speaking about 15 fuel cells. 16 I also met with Joe Caves and Janet Hathaway on 17 March 20th -- Union of Concerned Scientists and NRDC -- to 18 talk about the MOAs, and met with Wayne Nastri, as a 19 representative of ALABC, the lead-acid battery consortium, 20 on March 27th. 21 And that's all I have to report. 22 With that, I would like to recess this meeting 23 till tomorrow morning at 8:30 a.m. 24 And we will reconvene at that point, and we'll 25 take up -- since the public testimony is concluded, we will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 377 1 take up the Board discussion. 2 It's my understanding staff will have a resolution 3 to present to the Board at that time. 4 Thank you very much. 5 (Thereupon, the hearing was recessed 6 at 7:00 p.m., to be reconvened at 7 8:30 a.m. on Friday, March 29, 1996.) 8 --o0o-- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 378 1 CERTIFICATE OF SHORTHAND REPORTER 2 3 4 I, Nadine J. Parks, a shorthand reporter of the 5 State of California, do hereby certify that I am a 6 disinterested person herein; that the foregoing meeting was 7 reported by me in shorthand writing, and thereafter 8 transcribed into typewriting. 9 I further certify that I am not of counsel or 10 attorney for any of the parties to said meeting, nor am I 11 interested in the outcome of said meeting. 12 In witness whereof, I have hereunto set my hand 13 this 7th day of April , 1996. 14 15 16 Nadine J. Parks 17 Shorthand Reporter 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345