BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY CENTRAL VALLEY AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA THURSDAY, APRIL 25, 2002 9:00 A.M. JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Allan Lloyd, Chairperson Dr. William Burke Mr. Joseph Calhoun Mrs. Barbara Riordan Supervisor Ron Roberts Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Mr. Matthew McKinnon STAFF Mr. Mike Kenny, Executive Officer Mr. Tom Cackette, Deputy Executive Officer Mr. Mike Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Walsh, General Counsel Ms. Steve Albu, Chief, Engineering Studies Branch Mr. Chuck Beddow, Acting Chief, Fuels/Consumer Products, Enforcement Branch Analisa Bevan, Manager, ZEV Implementation Section Mr. Richard D. Bode, Chief, Health and Exposure Assessment Branch Mr. Adriane Chiu, Air Resources Engineer Mr. Bart Croes, P.E., Chief, Research Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED Mr. Bob Cross, Chief, Mobile Source Division Ms. Vickie Davis, Staff Counsel, Office of Legal Affairs Ms. Erin Dooley, Air Pollution Specialist Mr. Scott Fruin, Indoor Exposure Assessment Section, Research Division Mr. Paul Jacobs, Acting Chief, Enforcement Division Ms. Peggy Jenkins, Manager, Indoor Exposure Assessment Section Mr. Jack Kitowski, Chief, On-Road Controls Branch Ms. Leslie Krinsk, Senior Staff Counsel, Office of Legal Affairs Mr. Tom Montes, Air Resources Engineer Mike McCarthy, Manager, Advanced Engineering Section Mr. Kirk Oliver, Senior Staff Counsel, Office of Legal Affairs Mr. Mike Regenfuss, Air Resources Specialist Ms. Janice Ross, Staff Air Pollution Specialist, Enforcement Division Ms. Cindy Sullivan, Manager, Alternative Strategies Section Ms. Gayle Sweigert, Air Pollution Specialist Ms. Rosalva Tapia, Air Pollution Specialist Mr. Mike Terris, Special Assistant to the Executive Officer, Office of Legal Affairs Mr. Jason Wong, Air Resources Engineer Ms. Judy Yee, Air Pollution Specialist PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX PAGE Roll Call 1 Opening remarks by Chairperson Lloyd 2 Item 02-3-1 3 Chairperson Lloyd 3 Executive Officer Kenny 4 Staff presentation 5 Q&A 11 Item 02-3-2 30 Chairperson Lloyd 30 Executive Officer Kenny 30 Staff presentation 32 Q&A 57 Ombudsman Tschogl 72 Greg Dana 73 David Ferris 77 Grant Nakayama 106 Richard Kozlowski 127 Frank Krich 141 Afternoon Session 149 Lisa Stegink 149 Eric Swenson 152 John Trajnowski 153 Motion 173 Vote 173 Item 02-3-3 174 Chairperson Lloyd 174 Executive Officer Kenny 175 Staff presentation 175 Motion 185 Vote 185 Item 02-3-4 185 Chairperson Lloyd 185 Executive Officer Kenny 187 Staff presentation 189 Q&A 207 Jerry Pohorsky 235 Sara Rudy 243 Fred Maloney 245 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX CONTINUED PAGE Sandra Spelliscy 258 Bonnie Holmes-Gen 265 Motion 284 Vote 284 Item 02-2-5 284 Chairperson Lloyd 284 Staff Presentation 285 Q&A 296 Public Comment 299 Adjournment 299 Certificate 300 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. It could be a 3 long day, so I'd like to commence the April 25th, 2002, 4 public meeting of the Air Resources Board and call it to 5 order. 6 I'd like to ask Ms. D'Adamo to lead us in the 7 Pledge of Allegiance. 8 (Thereupon the Pledge of Allegiance was 9 recited in Unison.) 10 CHAIRPERSON LLOYD: Thank you. 11 Will the Clerk of the Board please call the role. 12 BOARD CLERK DORAIS: Dr. Burke? 13 BOARD MEMBER BURKE: Present. 14 BOARD CLERK DORAIS: Mr. Calhoun? 15 BOARD MEMBER CALHOUN: Here. 16 BOARD CLERK DORAIS: Ms. D'Adamo? 17 BOARD MEMBER D'ADAMO: Here. 18 BOARD CLERK DORAIS: Supervisor Desaulnier? 19 Professor Friedman? 20 Dr. Friedman? 21 Mr. McKinnon? 22 BOARD MEMBER McKINNON: Present. 23 BOARD CLERK DORAIS: Supervisor Patrick? 24 Mrs. Riordan? 25 BOARD MEMBER RIORDAN: Here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD CLERK DORAIS: Supervisor Roberts? 2 Chairman Lloyd? 3 CHAIRPERSON LLOYD: Here. 4 I have a few introductory comments. 5 But, Mr. Kenny, did you want to mention a few 6 words? 7 EXECUTIVE OFFICER KENNY: Thank you, Dr. Lloyd. 8 One thing I did want to mention real quickly is 9 that we do have a new board clerk, and that's Stacy 10 Dorais. And so I wanted to at least introduce her to you 11 and then also express my welcome to her. 12 And then in addition to that, since we do have a 13 new board clerk, we are also losing a board clerk, and 14 that's Marie Kavan. And I just simply want to say thank 15 you to Marie for all the work she's done over the years -- 16 or actually over the last couple of years with the Board 17 and with the staff. So thank you. 18 CHAIRPERSON LLOYD: Thank you very much. 19 I'd like to add my welcome and -- thanks also to 20 Marie and welcome to Stacy. I look forward to working 21 with you. 22 Just a couple of comments. 23 First of all, I'd like to congratulate one of our 24 colleagues, Dr. Bill Burke. He's just been appointed by 25 the Speaker to the California Coastal Commission. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 So, Dr. Burke, we'd like to congratulate you very 2 sincerely. I know you'll do a great job. 3 Also, I'd like to say that today there is a 4 meeting, a technology fair at the California Fuel Cell 5 Partnership. We've just concluded a day and half of 6 meeting of the California Fuel Cell Partnership and 7 Steering Committee. That's being held out at the 8 partnership. Obviously, through a glitch, we're not too 9 happy that ARB cannot be there; but again, we had an 10 excellent meeting of the Partnership. And any of you who 11 are interested, I encourage you to go out to the 12 Partnership on Industrial Way in West Sacramento during 13 the meeting. 14 So with that, I'd like to go to the first item. 15 I'd like to remind people, anyone in the audience who 16 wishes to testify on today's items, please sign up with 17 the clerk of the Board. And also if you have a written 18 statement, if you could provide 30 copies to the clerk. 19 The first item on the agenda today is 02-3-1. 20 And it's our monthly health update. 21 As you know, the Board's primary role is to 22 protect public health from air pollution. And these 23 monthly updates are an important mechanism to keep the 24 Board informed of the latest findings on these particular 25 issues. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 And, again, two important studies were recently 2 conducted in southern California, investigating the 3 possible linkage between air pollution and premature 4 births and birth defects. 5 Some of you may have read about those in the 6 papers. 7 Today staff will tell us more about those studies 8 and what it all means. 9 It's important again for the Board that we stay 10 informed of latest developments, research findings, and 11 the relevance to our work here at the Board. 12 With that, I'd like to turn it over to Mr. Kenny. 13 EXECUTIVE OFFICER KENNY: Thank you, Dr. Lloyd 14 and Members of the Board. 15 This informational item will highlight recent 16 findings from two studies conducted by investigators at 17 UCLA who examined the association between air pollution 18 and prenatal birth defects. 19 The premature-birth study found an increased risk 20 of premature birth associated with high ambient carbon 21 monoxide or high PM10 concentrations. 22 A later study found an increased risk of cardiac 23 and facial birth defects associated with high ambient 24 concentrations of carbon monoxide or high concentrations 25 of ozone. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 And today Scott Fruin, one of our co-authors on 2 this study and a member of the Research Division will 3 update the Board on the latest findings of these studies. 4 Scott. 5 MR. FRUIN: Thank you, Mr. Kenny. 6 (Thereupon an overhead presentation was 7 presented as follows.) 8 MR. FRUIN: Good morning, Dr. Lloyd and Members 9 of the Board. I'm presenting results from three studies 10 conducted in the South Coast Air Basin. 11 --o0o-- 12 MR. FRUIN: In these studies birth data were 13 taken from birth certificates and records provided by the 14 California Birth Defects Monitoring Program to determine 15 the rates of low birth weight, premature birth, and birth 16 defects. 17 Subjects whose residential zip codes were within 18 a two-mile radius of an air-monitoring station were used 19 for the low-birth-weight and premature-birth studies, and 20 those within a ten-mile radius were used for the 21 birth-defect study. 22 The three studies used data from the years 1987 23 to 1993, depending on the study. And the pollutants, 24 carbon monoxide, ozone, nitrogen dioxide and PM10, were 25 investigated in all three studies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 All results reported here were statistically 2 significant. 3 --o0o-- 4 MR. FRUIN: In the first study low birth weight 5 was defined as less than about 5.5 pounds. This was about 6 two percent of the 126,000 births include in this work. 7 For comparison, the average birth weight observed was 8 about 7.6 pounds. 9 The primary finding was that the risk of low 10 birth weight increased 22 percent for women who 11 experienced during their last trimester of pregnancy 12 morning ambient carbon monoxide levels of 5.5 P.P.M. or 13 above, compared to those that experienced less than 2.2 14 P.P.M. 15 Other pollutants and other trimesters did not 16 show us a statistically significant association. 17 --o0o-- 18 MR. FRUIN: Concentrations over 5.5 P.P.M. 19 represent the highest 5 percent of the levels during the 20 study and those below 2.2 P.P.M., the bottom 50 percent. 21 These averages were taken from the 6:00 a.m. to 9:00 a.m. 22 morning period when atmospheric conditions tend to be 23 stagnant and rush-hour carbon monoxide accumulates. 24 For comparison, the state and federal 8-hour 25 standards for CO is 9 P.P.M. So most or all of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 concentrations found to increase the risk of low birth 2 weight were below the longer federal and state standard. 3 --o0o-- 4 MR. FRUIN: In the premature-birth study, 5 prematurity was defined as birth before 37 weeks of 6 gestation or about 8.5 months. This occurred about 9 7 percent of the time. So it was more common in low birth 8 weight. 9 Although premature birth is associated with low 10 birth weight, it does not necessarily result in low birth 11 weight. 12 For example, only about 25 percent of the 13 premature births were also defined as low birth weight. 14 So prematurity and low birth weight are not merely two 15 aspects of the same factor, but are two different effects. 16 About 97,000 births were included in this research. 17 The beginning and ending weeks of a pregnancy 18 were found to be the most sensitive to air pollution with 19 regard to prematurity. And the last six weeks of 20 pregnancy an increased prematurity risk of 20 percent was 21 found per 50-microgram-per-cubic-meter increase in PM10, 22 and a 12-percent increase in the risk for each ambient 23 increase of 3 P.P.M. carbon monoxide. 24 Fifty micrograms per cubic meter is a current 25 level of the federal annual PM10 standard and also the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 California 24-hour standard. 2 --o0o-- 3 MR. FRUIN: For the first month of pregnancy an 4 increased risk of 16 percent was found for 5 50-microgram-per-cubic-meter increase in PM10 and a 6 4-percent increase for each 3 P.P.M. increase in ambient 7 carbon monoxide. 8 No associations were found for ozone or NO2ï. 9 --o0o-- 10 MR. FRUIN: For the birth-defects study, eight 11 types of heart and facial birth defects were included, 12 which account for about a third of all birth defect 13 occurrences. About thirty-five hundred birth defects were 14 included. 15 Carbon monoxide was associated with heart-chamber 16 defects for second-month exposures. A 200-percent 17 increase in risk was found for second-month, 18 average-24-hour carbon monoxide greater than 2.4 P.P.M., 19 compared to concentrations of 1.1 P.P.M., the highest and 20 lowest 25 percent of the concentrations during the study. 21 A strong dose response was also found where 22 increased risk was seen with increasing CO concentration. 23 --o0o-- 24 MR. FRUIN: Elevated second-month ozone was 25 associated with aortic artery and valve defects. A 150 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 percent increase in risk was associated with second-month, 2 average-24-hour ozone above .03 parts per million compared 3 to those at or below .01 parts per million. These were 4 also the highest and lowest 25 percent. 5 For comparison, the federal 8-hour standard is 6 .08 P.P.M. However, a direct comparison cannot be made to 7 the standard because the ozone concentrations used in the 8 study were 24-hour averages and ozone is very low at 9 night. 10 --o0o-- 11 MR. FRUIN: Overall, the study results have 12 several strengths. Increasing risk was often seen 13 increasing estimated dose, and remarkable consistency was 14 observed in the timing of the vulnerable periods during 15 pregnancy, such as the associations between air pollution 16 and birth defects only occurring during the second month. 17 Adverse birth outcomes have been well studied in 18 other parts of the world such as China and the Czech 19 Republic, and similar results have been found. Several 20 caveats should be included however. 21 Although CO was implicated in each study in 22 concentrations below the state and federal 8-hour 23 standard, the CO findings must be viewed with special 24 caution because CO is highly correlated with other 25 gasoline-powered vehicle emissions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 Additionally, the limitations of these studies 2 are also cause for caution in interpreting the results. 3 Using ambient concentrations to represent exposure is 4 common in epidemiological population studies for practical 5 reasons, but is not necessarily accurate. 6 --o0o-- 7 MR. FRUIN: It ignores a fact such as population 8 gradients in your busy roads, time spent in vehicles, and 9 indoor sources of exposure. 10 Finally, these studies did not have information 11 about, and therefore could not adjust for, such important 12 risk factors as maternal active or passive smoking, work 13 status and weight gain during pregnancy. 14 These papers do raise concerns about possible 15 fetal effects occurring at low ambient concentrations 16 sometimes below state standards. They have been and will 17 continue to be reviewed carefully during SB 25 review of 18 the state standards for protecting children. 19 In conclusion, these studies produce interesting 20 results, but results which are difficult to interpret. 21 Unless we can improve exposure estimates and correct for 22 all important pregnancy risk factors, we cannot be sure 23 about the magnitude of the actual risks, only that there 24 appears to be risk. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 CHAIRPERSON LLOYD: Thank you very much. 2 Ms. D'Adamo, question? 3 BOARD MEMBER D'ADAMO: You've indicated that this 4 compares -- or that the results are comparable to other 5 studies. 6 Are you aware of other studies that did account 7 for other factors such as smoking or passive smoke 8 exposure, et cetera? 9 MR. FRUIN: The only study I'm aware of that had 10 good results in excluding smokers was the Chinese studies. 11 But that's -- it's generally a problem in these large 12 epidemiological studies to collect detailed personal 13 information about the subjects. So that's a common 14 weakness with these kinds of studies in general. 15 BOARD MEMBER D'ADAMO: Are there any studies that 16 you're aware of that are under way that would account for 17 those factors? 18 MR. FRUIN: Not that I know of. 19 BOARD MEMBER D'ADAMO: Okay. And then as far as 20 exposure, looking at the low birth weight example during 21 the last trimester, how often were those participants 22 exposed? Do you have data that indicates, or is it just 23 one episode or over an average during the entire last 24 trimester? 25 MR. FRUIN: That was a 3-month trimester. So PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 those numbers represent a 3-month ambient carbon monoxide 2 concentration, which would be the outdoor levels. Chances 3 are the actual exposures were higher because people tend 4 to spend more time closer to vehicles and more time in the 5 presence of cigarettes than the monitors ever are. So it 6 represents, I guess you could call it, a changing base 7 line due to the ambient air. 8 BOARD MEMBER D'ADAMO: All right. And then that 9 was south coast. Could you compare the exposure levels to 10 other regions of the state? 11 MR. FRUIN: I would say in general, although the 12 concentrations of carbon monoxide have come down very 13 rapidly in south coast over the decades, it's probably the 14 part of the state that has the highest CO still. I'd have 15 to check with other -- so I would say in general that's -- 16 those kind of concentrations can be found in urban areas 17 with high traffic density. So it's probably about the 18 highest CO concentrations in the state. 19 BOARD MEMBER D'ADAMO: Okay. Thank you. 20 CHAIRPERSON LLOYD: Yeah, on the CO issue. I 21 recognize I guess it's still around Lynwood that is still 22 a continuing problem there. Is that still true? 23 Obviously, it was true in this '87 to '93 time period. 24 Is that still a problem? 25 RESEARCH DIVISION CHIEF CROES: Lynwood and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 actually the City of Calexico have the highest carbon 2 monoxide levels in the country right now. 3 CHAIRPERSON LLOYD: Calexico is not in the South 4 Coast basin yet? 5 RESEARCH DIVISION CHIEF CROES: No, not yet. 6 (Laughter.) 7 CHAIRPERSON LLOYD: Mrs. Riordan. 8 BOARD MEMBER RIORDAN: Mr. Chairman, I just 9 wondered if you had any input from public health 10 professionals. It occurs to me that there are maybe some 11 other factors involved here, access to good medical care, 12 whether or not these are -- the birth mothers are very 13 young or older, et cetera, et cetera. 14 What's the interaction with a study like this, 15 and then the public health research that's being done? 16 MR. FRUIN: Well, that's a good point. 17 First of all, the work was conducted at UCLA, and 18 the principal investigator was Dr. Beate Ritz, who's both 19 an M.D. and epidemiologist. So this did have a lot of 20 public health pier review. 21 And, you're right, that the maternal risk factors 22 are very significant. In fact, they're usually higher 23 than the effects we see here due to air pollution. Things 24 like maternal age and health and those factors, where 25 possible and where that information was available on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 birth certificates, that was included and the results were 2 adjusted for that. But, as I said, there were some 3 important gaps in that information, such as: Did the 4 mother smoke? Did the mother go to work? Did she spend a 5 lot of time commuting? Or what -- did she stay at home? 6 Was she quite young or quite old? Also, things like 7 educational level, ethnicity, those factors were taken 8 into account where they could be. 9 BOARD MEMBER RIORDAN: So there was interaction, 10 which makes this more significant, I think, to look at 11 with that kind of interaction rather than just taking it 12 and isolating it by itself. 13 MR. FRUIN: Yes, the interactions were very 14 significant. And that is a major part of the difficulty 15 in these kinds of studies, is trying to account for those. 16 BOARD MEMBER RIORDAN: Thank you. 17 CHAIRPERSON LLOYD: Mr. McKinnon. 18 BOARD MEMBER McKINNON: Yeah, I just want to 19 follow up on Member Riordan's question a little bit. 20 The Board on a number of occasions has talked 21 about -- primarily in discussions about environmental 22 justice, about looking at studies and kind of wondering if 23 communities that may be considered environmental justice 24 communities that have worse air than other communities, 25 also have a number of other problems. And I think Member PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 Riordan pointed out health care. 2 And one of the things that concerns me -- I don't 3 devalue this research. It's important research. But one 4 of the things that concerns me is how we make the linkage 5 as to whether or not when we're looking at this kind of 6 thing, whether or not the community and the folks that 7 we're looking at have health care available and whether or 8 not they have quality health care. And understanding that 9 you can't study every last detail, I think that's an 10 important piece in trying to figure out whether or not 11 there's a linkage between health -- the particular health 12 effects in a community and the air quality. It seems to 13 me it would certainly help us think about those things. 14 CHAIRPERSON LLOYD: Good comment there. 15 I guess the other one obviously is the PM coming 16 out of this, which again raises the issue that when we are 17 obviously looking at mitigation measures, for example, the 18 Diesel Risk Mitigation Program and how we address those, 19 clearly, whatever we can do to reduce particulates there 20 with those programs is going to be very, very helpful. 21 Questions from -- yes, Ms. D'Adamo. 22 BOARD MEMBER D'ADAMO: Just a follow-up question. 23 As we go through -- periodically we review 24 research proposals. 25 Is this something that the research staff could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 be mindful of as to the gaps in this study, and maybe look 2 for a way to partner with another institution on a study 3 that would account for the factors that haven't been 4 considered just because you don't have access to the data? 5 POPULATION STUDIES SECTION MANAGER WELLER: This 6 is Barbara Weller at the Research Division. 7 And, yes. You know, we have the Vulnerable 8 Populations Program, which is designed to look at 9 particularly sensitive populations. And in looking at 10 these studies, understanding of course that there are some 11 gaps in the information here, we're certainly concerned. 12 The fetus is definitely a sensitive population. So we are 13 looking at that and considering how, you know, we can 14 gather more information on this particular sensitive 15 population. 16 Obviously, these studies do raise some concern. 17 Although, at this point, you know, there isn't a lot that 18 we can say besides the fact that we are concerned. 19 And obviously one of the things that we would 20 like to incorporate is to try to have more information on 21 such effects as access to health care, nutrition, the ages 22 of the mothers. That would make this study stronger. 23 BOARD MEMBER D'ADAMO: So that we could rely on 24 the data, right? 25 POPULATION STUDIES SECTION MANAGER WELLER: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 Exactly. 2 MR. FRUIN: If I can also add, the current 3 research going on is by Dr. Ritz at UCLA is trying to take 4 into account different traffic densities in the different 5 neighborhoods, which does have an economic justice 6 component to it. 7 The lack of prenatal care was taken into account 8 in the work so far. And that definitely is one of the 9 most important risk factors. Probably the most important 10 risk factor that hasn't been able to be taken into account 11 for so far is the maternal smoking or exposed to passive 12 smoke. 13 CHAIRPERSON LLOYD: Mr. McKinnon. 14 BOARD MEMBER McKINNON: Mr. Chairman, if I could 15 shift gears to another subject. I don't know if 16 everybody's asked -- 17 CHAIRPERSON LLOYD: Is it relevant to this? 18 BOARD MEMBER McKINNON: Well, it's relevant to 19 Research, before they leave. 20 CHAIRPERSON LLOYD: Okay. 21 Over the last couple of years we considered 22 several rules that got us into the dual path between 23 diesel and CNG. And my understanding is that there is at 24 least some preliminary results of a study that are 25 available. I looked at -- just glanced at something the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 other day. There was a press release I think last week. 2 And I've heard all sorts of stories about it, but I kind 3 of want to clear something up here. 4 I remember very well after we had the school bus 5 debate asking -- you were here reporting on a study, and 6 asking you all if we could get more information on CNG 7 versus diesel, and specifically around some of the 8 decisions that we were having to make at the time, which 9 was CNG with no after treatment versus diesel with after 10 treatment. 11 And it's my understanding you have some results. 12 And I'm wondering if you could give us at least a briefing 13 on that or a short summary of it. 14 EXECUTIVE OFFICER KENNY: Actually, we did 15 anticipate that this might possibly come up, since we did 16 release the information just in the last week. And so we 17 are prepared if the Board would like to take a few moments 18 just to kind of walk through some slides and provide that 19 information to you. And so I guess with that I'll turn it 20 over to Bart. 21 (Thereupon an overhead presentation was 22 presented as follows.) 23 RESEARCH DIVISION CHIEF CROES: Thank you, Mike. 24 We've been doing a number of briefings for 25 various stakeholders on these results. So I'll just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 present a few of the slides that we've been presenting. 2 --o0o-- 3 RESEARCH DIVISION CHIEF CROES: This is a picture 4 of the bus-test facility that we used in downtown Los 5 Angeles for a study we began about a year ago. We're 6 still getting results and still analyzing the data. 7 This is primarily an in-house effort at ARB. You 8 can see at the bottom of the page that there were many 9 contributors to the study. And the South Coast AQMD was a 10 funding partner. 11 --o0o-- 12 RESEARCH DIVISION CHIEF CROES: One of the main 13 motivations for the study was to collect data on the 14 comparative toxicity between modern CNG and diesel buses, 15 which was proposed as a yardstick in the South Coast 16 AQMD's transit bus fleet rule. 17 We also investigated ultrafine particles because 18 of a report that CNG buses reduced total particle 19 emissions but produced higher numbers of ultrafine 20 particles that penetrate deeper into the lung. 21 We were also asked to look at the effects of duty 22 cycles on emissions for various urban and highway 23 conditions. 24 The lead investigator, Dr. Alberto Ayala has a 25 forte in quality assurance procedures and conducts PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 independent audits of other test programs. So we devoted 2 about half of the study effort to investigating the 3 reproducibility of the results and the effects of sampling 4 artifacts. 5 The group spent about six months of testing and 6 another half year analyzing data. But in the interests of 7 time, I'm only going to report the more significant 8 findings. 9 --o0o-- 10 RESEARCH DIVISION CHIEF CROES: We tested buses 11 currently in use at the L.A. County MTA, focusing on 12 modern technologies. Both buses were of the same engine 13 family. The CNG bus was fairly new. 14 A year ago when we started the study, the South 15 Coast AQMD looked for but was unable to find a CNG bus 16 with after-treatment for us to test. So the one we tested 17 was just a plain bus. 18 We tested a diesel bus on BP/ARCO's ECD-1 19 low-sulfur fuel. It comes standards with a catalyzed 20 muffler to reduce hydrocarbon and carbon monoxide 21 emissions. 22 The muffler was taken off and replaced with a 23 continuously regenerating particle trap that was being 24 evaluated as part of the Board's diesel PM risk-reduction 25 plan. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 --o0o-- 2 RESEARCH DIVISION CHIEF CROES: The criteria 3 pollutant results were as expected. The red bars on the 4 chart represent the average for on-road buses throughout 5 California. And then we present our test results for CNG, 6 diesel with the catalyzed muffler, and the same diesel 7 vehicle with the CRT particle trap in order. 8 CNG has the lowest NOx emissions. And the 9 particle trap had no effect on diesel NOx emissions. The 10 CNG and diesel with the catalyst had much lower PM than 11 the average diesel bus. And the CRT particle trap was 12 very effective at reducing PM emissions even further. 13 Buses are not significant sources of non-methane 14 hydrocarbons or carbon monoxide. And there was really no 15 significant difference between CNG and diesel. However, 16 the diesel after-treatments were effective at reducing 17 both these pollutants. 18 I don't have a slide on the ultrafine particle 19 results, but we found that both CNG and the CRT are 20 effective at controlling all sizes of particles. 21 --o0o-- 22 RESEARCH DIVISION CHIEF CROES: Nitrogen dioxide 23 emissions were -- are generally very low, and have not 24 been part of any previous ARB emission measurement 25 programs. However, at Chairman Lloyd's request, they were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 measured as part of our study. 2 For CNG and the diesel with the catalyzed 3 muffler, the amount of nitrogen dioxide was fairly low, 4 about 5 percent, as is the case for almost every other NOx 5 source. 6 The CRT converts NOx to N02ï to burn soot captured 7 on the particle trap. The trap manufacturers have 8 overdesigned the system, and the excess NO2ï escapes into 9 the atmosphere where it can speed up the process that 10 forms ozone and PM 2.5. 11 An air quality modeling study conducted by ARB 12 staff in collaboration with Professor Dabdub at UC Irvine 13 found that if the NO2ï fraction is reduced to 20 or 25 14 percent, the PM and non-methane hydrocarbon reductions by 15 the CRT trap would more than offset the NO2ï increase. 16 The trap manufacturers are currently working 17 toward this goal. 18 --o0o-- 19 RESEARCH DIVISION CHIEF CROES: We examined the 20 emissions of formaldehyde and other toxics and found much 21 higher levels for the CNG bus; over 50 times higher. 22 The cancer risk for the formaldehyde emissions 23 alone from the CNG bus is greater than that diesel PM from 24 the CRT-equipped bus, even though formaldehyde has a 25 low -- much lower unit toxicity than diesel PM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 We also conducted AIM's tests, exposing various 2 strains of salmonella bacteria to the bus emissions and 3 then counting the number of bacteria that mutate. A 4 positive result does not necessarily have human health 5 implications, but certainly warrants further study. 6 Dimutogenic activity for the CNG exhaust was almost a 7 factor of 10 higher than the CRT, which was twice as high 8 as the diesel bus with the catalyst. 9 These results are shown on a per-gram basis. If 10 you take into account the lower particle emissions from 11 the CNG bus, the dimutogenic activity per mile driven is 12 still well above the two configurations for the diesel 13 bus. 14 --o0o-- 15 RESEARCH DIVISION CHIEF CROES: Several caveats 16 need to be kept in mind. 17 First, the research team is committed to 18 submitting their work to scientific pier review. And they 19 have two articles already published, one in review and 20 three others in progress. 21 The South Coast AQMD funded a different research 22 team to test the same CNG bus and a second one in order to 23 see if our results are reproducible. Results are still 24 pending from that study. 25 Our major caution is that we only tested two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 buses. And while they appear to be normal in terms of 2 criteria pollutant emissions, they do not necessarily 3 represent the fleet average. 4 The mutogenetic activity results have generated 5 the greatest interest. But the thing that needs to be 6 kept in mind is that the AIM's test is a screening 7 procedure that we employed primarily because it was the 8 only type of bioassay that was practical in the timeframe 9 and resources we had available. 10 The group is currently in L.A. testing the same 11 CNG bus with an installed catalyst paid for by the South 12 Coast AQMD. And this is similar to the catalyzed muffler 13 technology on the diesel bus that we've already tested. 14 Preliminary results for the criteria pollutants 15 from last week are very encouraging, and we are expecting 16 the formaldehyde emissions from the CNG bus to be greatly 17 reduced. 18 We are also testing an advanced technology CNG 19 bus that comes standard with a catalyst. And we're 20 working with the University of Rochester for more 21 human-health-relevant bioassays. We expect results from 22 this study to be available by the end of the year. 23 The South Coast also plans to fund the first ever 24 insulation and testing of a particle trap on the CNG bus 25 and is organizing an effort to identify additional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 bioassays that we're participating in. 2 So this completes my presentation. I'd be glad 3 to answer any questions. 4 CHAIRPERSON LLOYD: Mr. McKinnon. 5 BOARD MEMBER McKINNON: Yeah, I just -- I said I 6 wanted to clear the air of a few things. I have heard 7 that this study didn't address CNG with traps and I've 8 heard that it was timing. And as the Board member that 9 asked for this study, we didn't ask you to study CNG with 10 traps. We asked you to look at exactly what we having to 11 consider as Board members, and you did that, and thank you 12 for doing that. 13 So this result certainly came as unexpected to 14 lots of people. And that's the way it is. If we find out 15 with science what we need to do or what we need to know, 16 it's encouraging that we can operate in the future with 17 the facts. And I thank you all for doing exactly what was 18 asked. And certainly there's more to do, but it gave us 19 more information. Thanks. 20 CHAIRPERSON LLOYD: Yes, Dr. Burke. 21 BOARD MEMBER BURKE: I'd like to comment on both 22 the study on the environmental impact on the birth rate of 23 children. 24 For 40 years now I've been listening to reports 25 of various kinds on studies on minority areas, everything PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 from population base to our health rate. And for a large 2 period of that time I lived in those areas. And I 3 remember how the Census Bureau used to operate when they 4 come to a black community. They'd stand at the furthest 5 edge of the black community look in there and say, "Well, 6 how many do you think are in there?" "It looks like about 7 400 to me." And then they'd go back and put it in their 8 report. 9 What we have done here is ask you to study 10 something that is almost unsuitable, because -- I can only 11 speak for the South Coast District. In the South Coast 12 District our environmentally challenged area and our 13 underprivileged area not only is devoid many times of 14 medical care, but also has an inherent cultural fear of 15 reporting or giving information which are used in studies 16 of this type. 17 So, you know, we've always got to try and study 18 it and we always have to have information of this type 19 available, but I don't read this like a Bible, because I 20 know what people -- how they react to that. 21 As it relates to the CNG versus diesel study, I 22 agree with Matt. We asked you to study it and you went 23 out and you studied it. 24 My only concern would be that two buses are 25 not-a-study-makes to me. If somebody in the South Coast PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 came back to me and said, "We went down and we took two 2 buses and we tested two buses, and this is our findings 3 and this is what we want you to make a judgment on," I'd 4 be concerned about that. 5 And so, you know, we at South Coast want to help 6 out, financially, academically, whatever way we can to 7 help expand the study, so that we have what both Matt and 8 I both want, is a clearer scientific picture of what the 9 reality is. 10 When you go into a bus yard and just pick two 11 buses, I'm not sure that you want to base state 12 regulations on a sample that small. 13 CHAIRPERSON LLOYD: Yeah, I could only obviously 14 echo that. I think you indicated in the program that we 15 put all the caveats in there. I think there is enough 16 information there to go further. So I think I'm 17 comfortable with that. Clearly this was -- adds to our 18 knowledge of where we were compared to a year ago. And 19 again I'm delighted with the effort that the staff has put 20 in and the resources Mr. Kenny has committed. And I would 21 hope, in fact, that that will continue. We've got tough 22 times. And delighted again we're working closely with Dr. 23 Burke and his staff at South Coast, because clearly they 24 bring technical expertise as well as some dollars to help 25 us resolve these issues. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 So I'm looking forward and encourage staff to 2 continue to work with all the stakeholders here. I'm glad 3 the issue came up before the Board, because I think it's 4 very important that as we move ahead we understand where 5 we are. And obviously the results, while limited, I think 6 they are significant. And we recognize we have people -- 7 plus the fact I think I appreciate staff bringing this and 8 Mr. McKinnon bringing this before the Board. Because 9 clearly there are a lot of spin doctors out there, and 10 obviously our job is to get to the truth so we understand 11 what's going on. 12 So I hope you'll continue to work with all the 13 stakeholders so we can actually come back as we broaden 14 the data base. And please keep us informed as to the new 15 results occur. 16 I had one question there. And I recognize some 17 of the discussions in the past year about trying to get a 18 trap manufacturer interested in putting traps on natural 19 gas. And I know that Dr. Burke's staff has looked at that 20 and initially had some difficulty getting them interested 21 because of a limited market. 22 Is there any trap manufacturers stepping forward? 23 You implied that they are? But do we have anybody signed 24 up to work on that? 25 RESEARCH DIVISION CHIEF CROES: My understanding PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 is that South Coast AQMD issued an RFP about a year ago, 2 didn't get any responses, reissued it and got two 3 responses. And I believe we are making a decision very 4 soon on which one to fund. So I don't know who made the 5 bids, but apparently someone has stepped up to the plate. 6 CHAIRPERSON LLOYD: But the sooner, I guess, the 7 South Coast makes the decision then to get that underway, 8 the sooner we can get these buses tested with traps on 9 them. 10 RESEARCH DIVISION CHIEF CROES: Yeah, the way the 11 RFP was written is they'll do the same type of tests that 12 we did in our study. 13 CHAIRPERSON LLOYD: Great. 14 Well, thanks very much. And I say please keep us 15 informed and continue to work with all the stakeholders, 16 so we get this important issue resolved. 17 Any other questions for the research staff while 18 they're here? 19 With that, thank you very much indeed. Thanks. 20 I guess since this is not a regulatory item, it's 21 not necessary to officially close the record. 22 So we'll give a few minutes to move on to our 23 next item -- Agenda Item 02-3-2, which is Proposed 24 Revisions to On-board Diagnostic Systems Regulation 25 OBD II. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 Again, as a reminder to my colleagues, in 1998 2 this Board adopted the Low Emission Vehicle LEV II 3 Regulation which require new vehicles sold in California 4 to meet very stringent emission standards. On-board 5 diagnostics are an important tool because they ensure that 6 these vehicles will remain clean for their entire life. 7 When emission problems are detected, OBD systems 8 alert drivers with a warning light. Trouble codes stored 9 in the vehicle computers identify the nature of the 10 problem so it can be properly addressed. Because OBD II 11 systems are so effective in detecting emission problems, 12 it is also used as part of California's smog check program 13 for vehicles 1996 and newer. 14 The Board receives regular updates on the 15 progress of OBD requirements, including the one we will 16 here today. 17 Mr. Kenny, would you begin staff presentation on 18 this item, please. 19 EXECUTIVE OFFICER KENNY: Yes. Thank you, Mr. 20 Chairman and Members of the Board. 21 ARB's stringent Low Emission Vehicle II standards 22 and the increasing use of OBD II in the smog-check program 23 require modifications to be made to the OBD II regulation. 24 Due to the number of changes being proposed, the staff has 25 created a new regulatory document containing the OBD II PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 requirements. 2 In addition, problems with past OBD II-related 3 enforcement cases have revealed the need for the ARB to 4 strengthen and define more appropriate enforcement 5 procedures for vehicles with problematic OBD II systems. 6 Therefore, staff has also developed a set of enforcement 7 requirements specifically OBD II compliance cases. 8 The proposal will also require the vehicle 9 on-board computer to keep track of the performance of OBD 10 II monitors so that staff will be able to determine how 11 well these monitors work in the field. 12 These two regulations will apply to 2004 and 13 newer model year vehicles. 14 The proposed requirements will encourage 15 manufacturers to improve the durability of their emission 16 control components. They will also insure that 17 malfunctions are detected and repaired before other 18 components are damaged and vehicle emissions are high. 19 Thus, the proposal will help ensure that the 20 emission benefits from the Low Emission Vehicle II Program 21 are realized. 22 And with that, I'd like to turn the presentation 23 over to Mike Regenfuss, who will make the presentation and 24 summarize the proposal. 25 (Thereupon an overhead presentation was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 presented as follows.) 2 AIR POLLUTION SPECIALIST REGENFUSS: Thank you, 3 Mr. Kenny. 4 Good morning, Chairman Lloyd and Members of the 5 Board. 6 On-board diagnostics, or OBD II, was adopted in 7 1989 and is required on all 1996 and newer passenger cars, 8 light-duty trucks, and medium-duty vehicles. 9 The regulation is comprehensive in that it 10 requires monitoring of virtually all components and 11 systems on the vehicle that can effect emissions. 12 The OBD II system is an added software function 13 in the vehicle computer that takes information readily 14 available from the various sensors and components to 15 indirectly evaluate the performance of the emission 16 control system. 17 The OBD II-related software is running during 18 normal operation of the vehicle. And when the operating 19 conditions are right, it conducts tests in the emission 20 control system. 21 And when the OBD II system detects a fault or a 22 malfunction, a warning light or check-engine light is 23 illuminated and fault information is stored in the 24 computer memory. In this way OBD II systems detect 25 real-world malfunctions during real-world driving PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 conditions. 2 --o0o-- 3 AIR POLLUTION SPECIALIST REGENFUSS: Currently, 4 100 million vehicles in the United States are equipped 5 with California-certified OBD II systems, which includes 6 all California vehicles and most federal vehicles since 7 the 1996 model year. 8 In total, these vehicles have accumulated over 9 three trillion miles. Staff continually receives feedback 10 on the effectiveness of the program and how OBD II systems 11 perform in use. 12 The feedback comes from many sources including 13 manufacturers, a federal advisory group, and repair 14 technicians. Their feedback is generally positive and 15 indicates that the program is working as intended. 16 --o0o-- 17 AIR POLLUTION SPECIALIST REGENFUSS: The OBD II 18 requirements were adopted to ensure that emission-related 19 malfunctions are detected over a vehicle's entire life, 20 really as long as it is on the road. 21 There is a trend in the fleet to increasing 22 percentages of high-mileage vehicles. In 1995, only 17 23 percent of the fleet had more than 150,000 miles on the 24 odometer. By 2001 that number climbed to 41 percent. 25 Being a significant portion of the fleet, these PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 vehicles are the real focus of the OBD II program. 2 The objective of the OBD II program is detecting 3 and repairing emission-related malfunctions over the life 4 of the vehicle, making it a crucial component in 5 California's efforts to achieve emission reductions. 6 --o0o-- 7 AIR POLLUTION SPECIALIST REGENFUSS: So how does 8 OBD II fit in relative to other ARB programs? 9 The LEV II program is moving California towards a 10 fleet of near-zero emission vehicles. The LEV II program 11 requires manufacturers to build vehicles that meet the 12 emission standards over the useful life of the vehicle, 13 which is generally defined as 120,000 miles. 14 ARB's certification and in-use compliance 15 programs verify that in-use production vehicles do indeed 16 meet the standards for their useful life. 17 However, for California to achieve its clean-air 18 goals, these vehicles need to be maintained at LEV II 19 emissions over their entire life, well beyond 120,000 20 miles. 21 And that is where the OBD II Program is critical. 22 While the OBD II system is actually working from the day a 23 vehicle is built until the day it is retired, its main 24 purpose is to detect emission control system malfunctions 25 as vehicles age, and alert drivers, repair technicians and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 smog-check inspectors that emission-related repairs are 2 necessary. 3 The projected emission benefits of the OBD II 4 program are achieved when malfunctions are detected and 5 effective repairs are made. 6 --o0o-- 7 AIR POLLUTION SPECIALIST REGENFUSS: As 8 emission-control technology continues to advance, the OBD 9 II requirement needs to keep pace. The proposed technical 10 changes ensure that OBD II monitoring systems are tailored 11 to lower emission standards and new technologies. 12 Additionally, feedback and experience from the 13 field have identified some areas where improvement to the 14 requirements can be made. 15 Lastly, because California is relying critically 16 on OBD II to ensure that LEV II vehicles maintain proper 17 emission performance, and in view of refusal by several 18 manufacturers to remedy faulty OBD II designs, stronger 19 enforcement provisions are necessary. 20 --o0o-- 21 AIR POLLUTION SPECIALIST REGENFUSS: The proposed 22 changes are categorized into four areas: Technical 23 requirements and revisions; revisions affecting inspection 24 and maintenance, or I & M programs, and repair 25 technicians; malfunction thresholds, and strengthening of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 the enforcement provisions. 2 We'll start by addressing the technical proposal. 3 --o0o-- 4 AIR POLLUTION SPECIALIST REGENFUSS: The current 5 regulation requires monitoring of the hydrocarbon, or HC, 6 efficiency of the catalyst system. The current catalyst 7 monitoring requirements have proven sufficient for LEV I 8 Program vehicles. However, the more recently adopted LEV 9 II Program focuses on NOx emission reductions and requires 10 a 75-percent reduction in NOx levels relative to the LEV I 11 Program. 12 In reviewing emissions data from vehicles that 13 failed the HC catalyst thresholds, staff has concluded 14 that current LEV I HC monitoring thresholds are not 15 adequate to ensure that LEV II Program vehicles will 16 maintain acceptable NOx emission levels. Accordingly, to 17 protect against high-end-use NOx emissions, staff is 18 proposing a NOx catalyst monitoring requirement for LEV II 19 Program vehicles. 20 --o0o-- 21 AIR POLLUTION SPECIALIST REGENFUSS: Staff is 22 proposing a phase-in to this requirement over the 2005 23 through 2007 model years on LEV II Program vehicles. 24 The OBD II system would be required to indicate a 25 catalyst malfunction before either the HC or NOx PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 conversion efficiency results in emissions exceeding 1.75 2 times the HC or NOx standards. The staff is also 3 proposing a malfunction threshold of 2.5 times the 4 standard for SULEV vehicles. 5 For 2005 and 2006 model years a higher interim 6 phase-in threshold of 3.5 times the NOx standard is being 7 proposed. Manufacturers will meet this requirement by 8 refining current monitoring methodologies. 9 --o0o-- 10 AIR POLLUTION SPECIALIST REGENFUSS: Staff is 11 also proposing changes for cold-start strategies and 12 secondary-air-system monitoring. On LEV II vehicles about 13 80 percent of emissions occur in the first minute of 14 driving before the catalyst is warmed up. 15 After the fuel system is operating in its 16 closed-loop mode and the catalyst is hot, LEV II emission 17 control systems are highly effective and tailpipe 18 emissions are virtually immeasurable. 19 Therefore, to achieve LEV II Program standards, 20 manufacturers use special cold-start strategies and 21 components such as secondary air to accelerate catalyst 22 warm up. 23 The proper function of these components and 24 strategies during cold start is key to maintaining low 25 emissions in use. Therefore, staff is proposing that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 these strategies and components be monitored while they're 2 active during the cold-start period and not later in the 3 driving cycle. 4 This proposal would be phased in on 2006 through 5 2007 model year vehicles. 6 --o0o-- 7 AIR POLLUTION SPECIALIST REGENFUSS: There are a 8 number of other technical revisions that staff is 9 proposing as well. 10 Recent advances in diesel fuel injection 11 technology and diesel after-treatment may enable 12 manufacturers to meet the low-emission standards. 13 Staff is proposing monitoring requirements for 14 diesel-emission-control systems, most importantly 15 catalysts and particulate matter or PM traps. 16 The proposed changes ensure that diesel vehicles, 17 like gasoline and alternative fuel vehicles, will have 18 acceptable tailpipe emissions throughout their life. 19 Manufacturers will use -- will likely use the 20 same control sensors that are added to meet the 21 low-emission standards for also meeting the OBD II 22 monitoring requirements. 23 The proposed changes would apply to 2004 and 24 newer light-duty diesels and 2007 and newer medium-duty 25 diesels. These dates are consistent with the phase-in of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 low-emission standards for these categories. 2 Lastly, staff will further evaluate diesel 3 technologies and monitoring requirements when it develops 4 the on-board diagnostic requirements for heavy-duty 5 engines next year. 6 Regarding misfire monitoring, the current 7 regulation allows the disablement of the misfire monitor 8 on a case-by-case basis, with Executive Officer approval, 9 under conditions where monitoring may not be reliable. 10 Staff's proposal further clarifies, and limits 11 for misfire monitoring disablements will be approved, 12 thereby ensuring that all manufacturers will have a 13 minimum acceptable level of misfire monitoring capability. 14 --o0o-- 15 AIR POLLUTION SPECIALIST REGENFUSS: The current 16 regulation only requires verification that the variable 17 valve timing, or VVT, system is functional. 18 Current VVT systems are largely used just to 19 improve performance. However, VVT systems will be used on 20 LEV II Program vehicles to reduce emissions as well. 21 Generally, staff is proposing that the 22 malfunction thresholds be based on emissions exceeding 1.5 23 times the standards instead of some level of 24 functionality. 25 Manufacturers will satisfy this requirement using PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 existing monitoring strategies, calibrated to 1.5 times 2 the standard. 3 Staff is proposing that most changes would be 4 required on 2005 and newer vehicles. 5 --o0o-- 6 AIR POLLUTION SPECIALIST REGENFUSS: I'll now 7 focus on the proposed revisions that address the I&M 8 Program and repair technicians. 9 --o0o-- 10 AIR POLLUTION SPECIALIST REGENFUSS: 11 Standardization has been an essential element of the OBD 12 II Regulation since its adoption in 1989. Standardization 13 assists all repair technicians by providing equal access 14 to essential repair information. It results in 15 information that has a consistent format for manufacturer 16 to manufacturer. 17 The standardized features include 18 communication -- the communication protocol for scan tools 19 that retrieve information from the on-board computer, the 20 electrical connector for the scan tool and its location, 21 and fault codes. 22 Updates to current standardization requirements 23 are warranted based on global standards, technology 24 improvements, and feedback from the field and the I&M 25 Program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 Staff is proposing further standardization of the 2 OBD II System to help technicians make effective and 3 timely repairs on increasingly complex emission-control 4 systems. 5 --o0o-- 6 AIR POLLUTION SPECIALIST REGENFUSS: A number of 7 the proposed changes are intended to help I&M Programs. 8 EPA recently modified its requirements for state I&M 9 Programs to require the OBD II System to be inspected 10 during an I&M test. In fact, EPA now allows the OBD II 11 test to be done in lieu of any tailpipe emission testing 12 for 1996 and newer vehicles. 13 Given the EPA requirement, there is an increasing 14 focus on both the proper performance of the OBD II Systems 15 and the ease of incorporating OBD II tests into I&M 16 Programs. 17 The following changes are intended to facilitate 18 I&M testing of OBD II-equipped vehicles. When vehicles 19 are manufactured they are assigned a unique 17-digit 20 identification number known as the Vehicle Identification 21 Number or VIN. The VIN is commonly used as the ID number 22 for vehicle registration purposes and, as such, is 23 collected during an I&M test. 24 The staff is proposing that VIN be electronically 25 accessible through the OBD II System on 2005 and newer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 vehicles. 2 Electronic access would help protect against 3 fraudulent practices in OBD II-based I&M Programs and 4 would simplify and automate data collection. 5 The OBD II System provides information to the 6 inspector about its diagnostic status or readiness status. 7 Readiness status is a key feature of the OBD II System and 8 was developed to prevent fraudulent I&M practices that 9 exist on OBD I vehicles. 10 Staff is proposing changes that would provide 11 more consistent reporting of readiness status information 12 and additional information about how long the vehicle has 13 been driven since the OBD II information was cleared. 14 These changes would help a technician prepare a vehicle 15 for inspection following servicing. 16 Inspectors could also use the additional 17 information to differentiate whether the OBD II 18 information had just been cleared in an attempt to skirt 19 the I&M requirements or the vehicle is perhaps not ready 20 due to other reasons beyond the driver's control. 21 --o0o-- 22 AIR POLLUTION SPECIALIST REGENFUSS: The current 23 standard for the diagnostic connector location gives 24 manufacturers too much flexibility. This is proven to be 25 too disruptive and time consuming in the I&M process when PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 inspectors try to locate the connector. Therefore, the 2 staff is proposing to further confine the connector 3 location to the driver's foot well. 4 While all these changes target OBD II for I&M, 5 the proposed changes would be helpful to repair 6 technicians as well. 7 --o0o-- 8 AIR POLLUTION SPECIALIST REGENFUSS: Inspectors 9 and technicians use scan tools to read information from 10 the OBD II system. The scan tools talk to vehicles via 11 standardized protocols or languages. To keep pace with 12 vehicle technology, staff is proposing to add another 13 protocol, the Controller Area Network or CAN protocol. 14 The CAN protocol provides improved 15 emission-related information to technicians. The staff 16 proposal would allow the CAN protocol on 2003 and newer 17 vehicles and would make CAN the only allowable protocol 18 for 2008 and newer vehicles. 19 The CAN Protocol further standardizes existing 20 OBD II information and addresses some of the shortcomings 21 of the existing protocols. It practically doubles the 22 amount of data provided to repair technicians and 23 communicates it at rates up to 10 to 50 times faster. 24 Staff is proposing a phase-out of the other 25 protocols to eliminate problems that exist because of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 multiple protocols and because CAN provides better 2 information to technicians. 3 The addition of the CAN protocol will require 4 technicians and I&M stations to update existing scan tool 5 equipment to support it. The staff has concluded that the 6 cost to upgrade will have a negligible economic impact on 7 the State's service and I&M facilities, while improving 8 the usefulness and effectiveness of OBD II in repairing 9 vehicles and in I&M programs. 10 --o0o-- 11 AIR POLLUTION SPECIALIST REGENFUSS: With 12 Executive Officer approval, the current regulation allows 13 the use of a unique protocol, the J1939 protocol, on 14 medium-duty vehicles. 15 This protocol was developed for heavy-duty 16 vehicles and was originally added to the OBD II Regulation 17 because engine manufacturers wanted it as an option to 18 allow them to use the same protocol on their heavy-duty 19 and medium-duty applications. However, to date no 20 manufacturers have requested approval to use it. Staff is 21 proposing to remove the provision for J1939 from the 22 Regulation. 23 As an alternative, staff is proposing to allow 24 manufacturers to use the protocol that is adopted for 25 heavy-duty vehicles when staff develops its heavy-duty OBD PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 requirement next year. 2 However, because there is an uncertainty for 3 manufacturers for vehicles produced in the immediate 4 future, a provision has been added to allow the use of 5 J1939 for the 2004 and 2005 model years as long as the 6 vehicles can still be tested in an I&M station. 7 --o0o-- 8 AIR POLLUTION SPECIALIST REGENFUSS: In the 9 presentation so far, a number of features of the OBD II 10 and their utility and I&M Programs and vehicle repair have 11 been discussed. 12 Given the reliance of I&M Programs and proper OBD 13 II operation, the staff is proposing expanded 14 manufacturers' testing of actual production vehicles. 15 This testing would verify that OBD II systems properly 16 support the standardized features necessary to conduct a 17 valid I&M test. 18 These features include readiness status, 19 check-engine light illumination, fault codes, and 20 reporting of VIN. 21 The testing would be required for 2005 and newer 22 model year vehicles. Manufacturers would have to test one 23 vehicle per unique software calibration. 24 --o0o-- 25 AIR POLLUTION SPECIALIST REGENFUSS: The next PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 portion of the presentation focuses on malfunction 2 thresholds. 3 --o0o-- 4 AIR POLLUTION SPECIALIST REGENFUSS: A number of 5 major OBD II system monitors are calibrated to an emission 6 threshold of 1.5 times the emission standard. This means 7 the OBD II system will detect a malfunction and illuminate 8 the check-engine light before emissions exceed 1.5 times 9 the emission standards. 10 As the industry transitions to the lower emission 11 levels of the LEV II Program, some have questioned the 12 need to revise a threshold of 1.5 times the standards. 13 They contend that with the lower emission levels, the 1.5 14 thresholds are no longer feasible or cost effective. 15 --o0o-- 16 AIR POLLUTION SPECIALIST REGENFUSS: Based on 17 systems certified to date, staff does not believe LEV II 18 and ULEV II tailpipe standards necessitate less stringent 19 OBD II malfunction thresholds. The thresholds for LEV II 20 Program vehicles are feasible and necessary to maintain 21 the NOx benefits of the LEV II Program. 22 Numerous vehicles are already in production that 23 meet these thresholds. Nonetheless, in the event that 24 issues arise with the proposed thresholds, the proposed 25 regulation would permit the Executive Officer to revise PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 the thresholds as necessary. 2 --o0o-- 3 AIR POLLUTION SPECIALIST REGENFUSS: Staff is 4 proposing a threshold of 2.5 times the emission standards 5 for SULEV vehicles. While thresholds of 1.5 times the 6 standards are feasible, staff believes the 2.5 threshold 7 is appropriate. The higher threshold accounts for the 8 increased variability or uncertainty of today's emission 9 measurement technologies relative to the SULEV standards. 10 Based on currently certified SULEV vehicles, the 11 higher thresholds will allow manufacturers to use 12 essentially identical levels of individual component 13 deterioration as occur on ULEV I vehicles. This will 14 ensure that on SULEV vehicles the check-engine light is 15 only illuminated after significant deterioration of the 16 emission-control system has occurred. 17 It is important to note that three different 18 manufacturers already sell SULEV vehicles meeting staff's 19 proposed thresholds. Furthermore, a number of other 20 manufacturers have presented their plans to ARB staff to 21 introduce new SULEV models for the 2003 model year. 22 While they indicated it takes a serious effort to 23 develop the emission control and OBD II systems on these 24 vehicles, they have not indicated that it is infeasible. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 AIR POLLUTION SPECIALIST REGENFUSS: This slide 2 and the following slide are graphical comparisons of 3 staff's proposed thresholds and industry's proposed 4 thresholds. 5 The axis on the left is the threshold as a 6 multiple of the vehicle's actual NMOG certification 7 standard. The staff's proposed NMOG thresholds are the 8 same as the industry's thresholds for ULEV I and ULEV II 9 vehicles. 10 Staff is proposing a threshold of 2.5 times the 11 standard for SULEV vehicles. The industry's proposed 12 threshold of 1.5 times ULEV I is equivalent to 8.3 times 13 the SULEV standard. 14 This means a vehicle's emissions could be 8 times 15 the standard to which it was certified before the warning 16 light or check-engine light comes on. 17 --o0o-- 18 AIR POLLUTION SPECIALIST REGENFUSS: This graph 19 is a comparison based on NOx standards. Staff's and 20 industry's proposed thresholds are the same for the ULEV I 21 standards. 22 For ULEV II vehicles, staff's proposed threshold 23 is 1.57 times the standard, industry's threshold is 6.4 24 times the certification standard. 25 For SULEVs staff is proposing 2.5 times the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 standard, while industry's proposal is nearly 23 times the 2 standard. 3 --o0o-- 4 AIR POLLUTION SPECIALIST REGENFUSS: As mentioned 5 earlier, industry largely contends that the staff's 6 proposed thresholds are not cost effective for consumers. 7 As shown on the previous slides, the industry believes a 8 fixed threshold of 1.5 times the ULEV I standard should be 9 used for the ULEV II and SULEV emission categories. 10 The staff performed two cost-effective analyses, 11 one using the staff's thresholds and the other using the 12 industry's. The staff's thresholds of 1.5 times the 13 standard yielded a cost effectiveness of about $5 per 14 pound. These values include -- well, this value rather 15 includes cost to consumers in the form of I&M repairs and 16 emission benefits from keeping all vehicles at or below 17 1.5 times the emission standard. 18 The industry's proposed threshold of 1.5 times 19 the ULEV I standard yielded a cost effectiveness of about 20 $4.75 to $6.50 per pound, depending on the assumptions 21 that were made. 22 While the cost effectiveness is about the same as 23 staff's, industry's proposed thresholds represent nearly 9 24 tons per day fewer emission reductions than staff's. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 AIR POLLUTION SPECIALIST REGENFUSS: The last 2 portion of the presentation focuses on revisions related 3 to OBD II enforcement. 4 --o0o-- 5 AIR POLLUTION SPECIALIST REGENFUSS: Staff has 6 been testing OBD II cars for compliance since the 1994 7 model year. 8 ARB staff has attempted to enforce the OBD II 9 regulations under enforcement procedures that were adopted 10 for tailpipe emissions standards before OBD II was 11 developed. 12 Staff has ascertained through recent OBD II 13 enforcement actions that existing enforcement procedures 14 are not adequate to monitor compliance to OBD II 15 standards. This has resulted in some areas of ambiguity 16 in trying to determine which existing enforcement 17 provisions apply to OBD II enforcement. 18 --o0o-- 19 AIR POLLUTION SPECIALIST REGENFUSS: To address 20 this issue, staff is proposing a number of changes to 21 strengthen enforcement of the regulation and to ensure 22 that production vehicles have properly functioning OBD II 23 systems. 24 The proposal includes early evaluation and 25 verification testing of OBD II systems by manufacturers on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 production vehicles. 2 It also specifies requirements for in-use 3 monitoring frequency and collection of in-use data 4 supporting the required frequency. 5 The proposal also includes OBD II specific in-use 6 test procedures for enforcement testing. And for systems 7 determined to be non-compliant, the enforcement procedures 8 would address remedial actions. 9 --o0o-- 10 AIR POLLUTION SPECIALIST REGENFUSS: Both ARB 11 staff and manufacturers regularly discover defects or 12 problems with OBD II systems on in-use vehicles. Many of 13 these defects are easy to find and correct if they are not 14 found by the manufacturers during the normal development 15 and validation processes. 16 These defects compromise the integrity of the 17 program and can undermine technicians' confidence in the 18 information they get from the OBD II system. Therefore, 19 staff is proposing a requirement for manufacturers to test 20 every diagnostic on two to six vehicles per year, to catch 21 defects early enough to remedy them quickly and easily. 22 The testing would be conducted on actual production 23 vehicles in the first 16 months of production. 24 --o0o-- 25 AIR POLLUTION SPECIALIST REGENFUSS: As mentioned PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 earlier under the I&M related revisions, staff is 2 proposing a requirement for the manufacturers to verify 3 that the standardized features used in I&M testing are 4 properly implemented. This requirement would ensure that 5 production vehicles are designed and built properly to 6 communicate with technicians and inspectors. 7 Manufacturers would be required to test one 8 production vehicle per software version released. 9 Standardized test equipment meeting a goal standard will 10 be developed for manufacturers to use when conducting 11 these tests. 12 --o0o-- 13 AIR POLLUTION SPECIALIST REGENFUSS: An issue 14 that often arises in staff's routine certification work 15 and in a number of the OBD II enforcement cases is: How 16 often does a monitor have to run on in-use vehicles? Or, 17 in other words, how quickly does a malfunction have to be 18 detected during real-world operation? 19 The staff's proposal addresses this question by 20 defining a standardized method to measure on-road 21 monitoring frequency of each monitor. The proposal would 22 require manufacturers to implement software in the 23 vehicles that tracks how often monitoring occurs. 24 The proposal also specifies minimum acceptable 25 in-use monitoring frequency that equates to a detection of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 a malfunction within about two weeks of vehicle operation 2 for most monitors. 3 This requirement would be phased in over the 2005 4 through 2007 model years, with interim acceptable 5 frequencies for the first two years of implementation. 6 --o0o-- 7 AIR POLLUTION SPECIALIST REGENFUSS: The staff is 8 proposing a new regulatory section, Title 13 Section 1968. 9 5. This section would contain specific enforcement 10 procedures to be used by ARB when enforcing OBD II 11 regulations. 12 The proposed enforcement regulation addresses 13 industry's concerns about detailed procedures to be 14 followed by staff when conducting enforcement. It also 15 addresses the shortcomings of trying to enforce OBD II 16 compliance using enforcement procedures designed for 17 tailpipe emission standards. Staff is proposing that the 18 enforcement regulation be effective beginning with the 19 2004 model year. 20 Industry has expressed some concern about the 21 2004 start date, and has requested that it be delayed till 22 the 2006 model year. 23 A later start date is inappropriate and 24 unnecessary for several reasons. Since the proposed OBD 25 II requirements for the 2004 model year remain essentially PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 the same as the current regulation, the proposed 2 enforcement regulation would effectively be used to 3 enforce existing monitoring requirements. 4 The proposed enforcement procedures are necessary 5 to address the unique issues that arise in OBD II 6 enforcement. In order to make OBD II an effective tool 7 for California's smog -- California's smog-check program, 8 all future OBD II systems starting in the 2004 model year 9 need to function properly. 10 Accordingly, staff needs effective enforcement 11 procedures to remedy noncompliant OBD II systems. 12 The industry in many enforcement cases has 13 refused to correct in-use defects that significantly 14 compromise the effectiveness of the OBD II program. The 15 current tailpipe enforcement procedures have proven 16 ineffective at accomplishing acceptable or appropriate 17 remedial action on these issues. 18 Staff finds no reason to further delay 19 enforcement of the OBD II requirements. 20 --o0o-- 21 AIR POLLUTION SPECIALIST REGENFUSS: The proposed 22 regulation would establish specific procedures for ARB 23 staff to follow when conducting in-use testing of 24 different OBD requirements. 25 As with the existing tailpipe enforcement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 regulations, the proposal specifies an appropriate sample 2 of vehicles to be tested and clearly defines the testing 3 that can be conducted. 4 The proposal also specifies the criteria for 5 staff to consider in determining compliance. 6 The proposal eliminates provisions to offset OBD 7 II noncompliance with over-compliance on tailpipe 8 emissions. As such, the proposed enforcement procedures 9 provide manufacturers with a clear understanding of the 10 enforcement process and their rights and responsibilities. 11 Nonetheless, the industry contends that the 12 existing procedures are sufficient for enforcement of the 13 OBD II Regulation, and they further contend that fleet 14 emissions should always be a factor in determining OBD II 15 compliance and remedial action. 16 As explained at the beginning of the 17 presentation, the OBD II requirements are distinct and 18 separate requirements from the emission certification 19 requirements. Compliance with one does not ensure 20 compliance with the other. 21 While closely related, LEV II Emission Program 22 and the OBD II Program serve different purposes and must 23 be separately enforced. 24 --o0o-- 25 AIR POLLUTION SPECIALIST REGENFUSS: The proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 procedures also set forth the criteria for determining 2 appropriate remedial action to correct a noncompliance. 3 Nearly every time a noncompliance is identified, the ARB 4 would have discretion to determine an appropriate remedy. 5 If a noncompliance does not have a significant 6 effect on the performance of the OBD II system, the remedy 7 may simply be to correct it for future model years. In 8 cases where the noncompliance does have a significant 9 effect, the Executive Officer may order recall and assign 10 monetary penalties. 11 However, under limited conditions where at least 12 one major monitor in the OBD II system is essentially 13 nonfunctional, the proposed regulations would impose a 14 mandatory recall. The industry has strongly opposed 15 staff's proposal for mandatory recall and believes 16 discretionary recall is more appropriate. 17 However, staff's proposal would result in 18 mandatory recall only in very serious cases where a 19 manufacturer has grossly failed to meet its design and 20 verification responsibilities. 21 --o0o-- 22 AIR POLLUTION SPECIALIST REGENFUSS: In summary, 23 California's LEV II vehicle fleet has near-zero emissions 24 and needs to be maintained at near-zero emissions over its 25 entire life to meet California air quality goals. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 An effective OBD II Program is crucial to 2 maintaining the fleet at near-zero emissions and is as 3 important as the emission standards themselves. 4 The proposed technical changes are feasible and 5 necessary to maintain emissions at acceptable levels as 6 vehicle's age and to ensure that OBD II vehicles can be 7 successfully incorporated into the smog-check program. 8 And, lastly, given the reliance on the OBD II 9 Program, the proposed enforcement regulation is necessary 10 for staff to effectively enforce the OBD II requirements. 11 This concludes the staff's presentation. 12 CHAIRPERSON LLOYD: Thank you very much. 13 Questions or comments from my colleagues at this 14 time? 15 Mr. Kenny, do you have any additional comments? 16 EXECUTIVE OFFICER KENNY: No. 17 CHAIRPERSON LLOYD: Okay. With that, I think 18 we'll go straight into the public testimony. And I'd like 19 to call up the first witness who has signed up to speak on 20 this item. 21 BOARD MEMBER CALHOUN: Before we do that, I'd 22 like to ask the staff two or three questions. 23 CHAIRPERSON LLOYD: Sorry. Did I miss you down 24 this way. 25 BOARD MEMBER CALHOUN: I'm not going to let you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 miss me. 2 (Laughter.) 3 BOARD MEMBER CALHOUN: During the early part of 4 the presentation staff explained some of the reasons for 5 the proposed changes. And I think you indicated and 6 repeated this several times during the course of the 7 presentation that some of the changes are being proposed 8 because of your inability or because manufacturers refused 9 to recall the vehicles. Is that correct -- did I 10 understand that correctly? 11 EXECUTIVE OFFICER KENNY: That's correct. 12 BOARD MEMBER CALHOUN: And what was the reason 13 for the refusal? 14 EXECUTIVE OFFICER KENNY: Well, we can only 15 speculate as to the reasons that they have. But our 16 suspicions are that as a result of the Toyota on-board 17 diagnostic recall case, in which we were unable to 18 actually implement a recall, that there are substantial 19 defects in our regulations right now that would prevent us 20 from actually going forward with recalls. 21 And so, as a result, we are relatively powerless 22 to use the existing regulations to enforce recalls. And 23 so the manufacturers recognize that and would choose to 24 essentially not honor recalls or to essentially cooperate 25 on recalls. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 BOARD MEMBER CALHOUN: Did the staff, at any 2 time, attempt to relate the emission performance of those 3 vehicles to -- relate the defect to the emission 4 performance of the vehicles? 5 EXECUTIVE OFFICER KENNY: We have made it a 6 fairly standard response that, in fact, the emission 7 performance of the vehicles an the OBD requirements are 8 separate. One of our concerns there has been that if, in 9 fact, the manufacturers would be allowed to show that the 10 emissions of a vehicle are relatively good, despite the 11 fact the OBD system does not work, that what would happen 12 is that there is then no requirement for an OBD system. 13 And we would then -- 14 BOARD MEMBER CALHOUN: Repeat that again. 15 EXECUTIVE OFFICER KENNY: If the manufacturer can 16 establish that the emissions performance of a system is 17 sufficient and, therefore, an OBD requirement is 18 unnecessary, what that effectively does is it takes out 19 the requirement for an OBD system on that particular 20 vehicle. If you can offset your emissions with compliance 21 on OBD, then there's no point of an OBD system. 22 BOARD MEMBER CALHOUN: Well, I'm not so sure -- 23 EXECUTIVE OFFICER KENNY: Let me try one more 24 time. 25 Let's say, for example, a manufacturer said that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 his particular system was extremely durable and that it 2 worked just fine and that despite -- it worked just fine 3 in terms of emissions performance, despite the fact that 4 the OBD system did not work. And so, therefore, because 5 the emissions performance of that vehicle was good, there 6 should not be a requirement for a recall based on the fact 7 that the OBD system failed. 8 What ends up happening in that situation is that 9 every time there is a problem, we have to go back through 10 the process of determining whether or not the OBD system 11 requirements are applicable or whether or not the OBD 12 system requirements should be waived. 13 And what we have said repeatedly is that the OBD 14 system requirements are independent of the emissions 15 performance of that vehicle, because they serve many 16 purposes. They serve the purpose of achieving emission 17 reductions. They also serve the purpose of supporting the 18 smog-check system. And so we don't want to be in a 19 situation in which a manufacturer could say, "My emission 20 performance is fine; consequently, I don't need to worry 21 about the OBD system. And you shouldn't worry about OBD 22 because my system works in terms of the emissions 23 profile." 24 BOARD MEMBER CALHOUN: But isn't the overall 25 purpose of having the OBD system on the vehicle is to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 determine whether or not various components are operating 2 properly? And even if there is a slight deterioration in 3 the emission performance, isn't that the -- isn't this 4 whole thing related back to emissions? 5 EXECUTIVE OFFICER KENNY: Well, I think -- I 6 don't disagree with you on that. They are related. OBD 7 essentially is a mechanism for determining how the 8 emissions of the -- what the emissions performance of a 9 vehicle is. 10 At the same time, if you have an OBD system that 11 doesn't work and you have the ability of a manufacturer to 12 argue that "My emissions are okay. So, therefore, I 13 didn't need an OBD system," we're put in the position in 14 which we can never enforce an OBD requirement. We're 15 always put in the position of arguing the issue of whether 16 or not the emissions performance is sufficiently good 17 enough that, in fact, you can waive the OBD requirement. 18 And we've been trying to not be put in that 19 position, because what ends up happening then is that 20 we're in a case-by-case situation on every particular 21 recall that we look at as to whether or not the emissions 22 for that vehicle are good or bad, and we have to argue 23 whether or not we are essentially within the standards or 24 outside the standards, and we have to basically look at 25 the fact that they will take advantage of the margin of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 compliance. 2 And so we effectively eliminate the OBD 3 requirements. I mean, there's no reason for them to 4 comply with them, because they can instead point to the 5 durability of a system in a particular situation, and they 6 can point out that, in fact, "My emissions profile is okay 7 here." 8 And so that's why we have tried to make these two 9 separate independent requirements. If you relate the two 10 requirements between OBD and emissions, you effectively 11 eliminate OBD. 12 BOARD MEMBER CALHOUN: Well, I don't see how you 13 can justify having the system unless you try and relate 14 them to the emissions performance of the vehicle. As a 15 matter of fact, I know the genesis of this check-engine 16 light on the vehicles. And the primary reason for the 17 light being on there was to give the manufacturers some 18 assurance that the vehicles that are being produced and 19 shipped are -- do, in fact, have components that are not 20 defective, because if the light -- I won't go into a whole 21 lot of details on this. 22 But I think most of you know this, that most of 23 the vehicles are -- various emission components are 24 checked at the end of the production line. And they have 25 a system that indicates whether or not the various PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 components are working properly. And if that is, in fact, 2 the case, then why would they even want to do this if they 3 weren't trying to relate them to the emissions point? 4 EXECUTIVE OFFICER KENNY: Well, it is related -- 5 I don't want to say it's not related to emissions 6 performance. It is. It is essentially a check and an 7 insurance policy with regard to emissions. 8 But the difficulty is -- let's say you have an 9 OBD component that's not working properly. And what it 10 does is it allows for slightly higher emissions. And yet 11 those emissions are still underneath the fleet average 12 that would be associated with that particular vehicle 13 class. 14 What ends up occurring there is if you can come 15 in and you can argue that you are in compliance with the 16 vehicle class emissions standard, despite the fact that 17 you have higher emissions than are required under the OBD 18 system, we suffer an air quality hit. 19 And what also ends up happening is that you can 20 take that to the next extreme and you could argue that. 21 What ends up occurring is that there is no OBD enforcement 22 ability at that particular point in time. 23 That's exactly the center we found ourselves in 24 in the Toyota case, in which what ended up happening is we 25 had additional emissions, but the additional emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 were small; and so the manufacturer argued to the 2 administrative law judge that, in fact, on an overall 3 basis the emissions increase was sufficiently small that 4 it should not be held against the manufacturer and a 5 recall for failure of the OBD system should not have 6 occurred. And the administrative law judge agreed with 7 that situation and determined that, in fact, a recall 8 should not occur despite the fact that the OBD system did 9 fail and we had higher emissions. 10 BOARD MEMBER CALHOUN: Did the vehicle meet the 11 emissions standards? 12 EXECUTIVE OFFICER KENNY: Well, the vehicle met 13 the fleet emission standards. It did not meet the 14 standards -- the certification standards. But what ended 15 up happening in the Toyota case is the ALJ looked at the 16 fleet emission standards and said, "Well, there's room in 17 here. And so, therefore, I'm going to give Toyota the 18 benefit of the fact that they are within that room." But 19 on the certification side, the emissions were higher than 20 the standard. 21 DEPUTY EXECUTIVE OFFICER CACKETTE: In that case, 22 we induced failures into the evaporative system, and it 23 resulted in emissions that were about 15 times the 24 standard, and the system would not detect the failure. 25 The argument was made that, well, not that many cars PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 during their life -- those Toyotas are going to have 2 failures. But individual cars will have failures. 3 Those individual cars will be emitting at 15 4 times or more than the standard. And if we did an I&M 5 program, we did a check -- a pressure check on the 6 evaporative system, it would fail. It would go to the 7 mechanic, and the mechanic would say, "Well, gee, the 8 on-board diagnostic says this car is working fine. What 9 do I do?". 10 So the whole concept of getting individual cars 11 repaired, fixing individual emissions and ultimately 12 providing the incentive to the manufacturer to make the 13 systems bullet proof as possible for their life sort of 14 evaporates -- excuse the pun -- goes away in this case if 15 we don't have the ability to recall defective systems. 16 BOARD MEMBER CALHOUN: You know, the staff also 17 mentioned earlier that the staff does not believe certain 18 things. And that's probably true. And maybe the reason 19 for that is because of lack of experience with the system. 20 And they haven't been out there long, I guess maybe 10 or 21 12 years. But things keep changing every year. You 22 have -- not every year, but we have -- the ARB has new 23 requirements. 24 And I can envision a case where staff may think 25 that maybe one and a half times is the appropriate level, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 but because -- and they may find that, well, this isn't 2 really the level that it should be at. 3 And I guess where I'm headed with this is, the 4 part of the Regulation that really causes me heartburn is 5 the mandatory recall. Let's assume that the staff 6 believes that threshold should be one and a half or two 7 and a half or three and a half times the -- whatever the 8 number is, and it turns out that in reality maybe a higher 9 threshold was more appropriate. But yet if the 10 manufacturers are required to implement a recall, on 11 the -- under this proposal, it would be mandatory, then 12 that doesn't seem to be the appropriate thing to do. 13 EXECUTIVE OFFICER KENNY: What we were trying to 14 do with the mandatory recall provisions is to essentially 15 reflect the fact that in certain very egregious situations 16 we would want to eliminate the opportunity for discretion 17 by the staff. 18 And so in that particular situation what happens 19 is we have identified those particular egregious 20 situations in which a mandatory recall would be 21 appropriate. 22 Now, this is going to sound a little bit funny, 23 but essentially a mandatory recall is not necessarily 24 always mandatory. And what I mean by that is that one 25 thing that actually always does exist in California law, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 and this exists at the criminal and the civil levels, is 2 that there is always enforcement discretion. And so if 3 you have a particular factual situation that does not seem 4 amenable to a mandatory recall, there is always the 5 ability to essentially exercise enforcement discretion and 6 to not enforce against that particular manufacturer. 7 I mean, that is common in California. District 8 Attorneys do it. City Attorneys do it. County Counsels 9 do it. And all regulatory agencies do that. And we have 10 done that historically at the Air Resources Board. And we 11 would anticipate doing that in the future in a particular 12 relevant and reasonable and appropriate factual situation. 13 But what we were trying to do with the mandatory 14 recall is also make sure that, in fact, we don't get into 15 a situation in court in which the issue of the use of 16 discretion with regard to ordering or not ordering a 17 recall becomes the debate. 18 CHAIRPERSON LLOYD: I think Ms. D'Adamo had a 19 comment and then Mr. McKinnon. 20 Oh, she passed to Mr. McKinnon. 21 BOARD MEMBER McKINNON: I kind of want to repeat 22 back the first kind of discussion to make sure I get this. 23 If we don't have enforcement power on OBD II, 24 essentially what we're doing -- we would be doing is 25 determining whether a car or a group of the same model of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 cars met the emissions class -- the emissions levels for 2 their class. That's essentially what we'd be doing. 3 So, therefore, if we did not have OBD II and 4 computers that worked, that consumers expect to work, that 5 auto technicians expect to work, that smog stations expect 6 to work, they wouldn't work for all those purposes. So 7 that's why you're saying it's two separate considerations? 8 EXECUTIVE OFFICER KENNY: That's correct. We 9 think it's extraordinarily important that you have an OBD 10 system that has independent integrity and that is not 11 related to emissions. Because if you relate it to 12 emissions, then there is always the ability to say in any 13 particular situation, "My emissions are okay. So the fact 14 that the OBD system didn't work in this particular 15 situation doesn't matter." You know, our view is that the 16 fact that the OBD system must work is always important. 17 You've always got to have an OBD system that is functional 18 and that is accurate and that is reliable. 19 BOARD MEMBER McKINNON: Thanks. 20 CHAIRPERSON LLOYD: Would you identify yourself. 21 GENERAL COUNSEL WALSH: Kathleen Walsh. 22 One factor that might make this a little easier 23 to understand is that, when we say not related to 24 emissions, in fact, the decision that the Board is making 25 when adopting the on-board diagnostic regulations is a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 determination that those requirements are directly related 2 to emissions performance and that it is critical, an 3 important part of the vehicle's meeting emissions 4 standards. 5 So the question becomes whether we reconsider 6 that issue at every individual situation where you have 7 have a potential noncompliance. And staff's belief is 8 that reconsidering, redetermining that important 9 connection is really not necessary at that point in time, 10 that the real focus of the discussion is "Does the 11 on-board diagnostic system work?" We already know it has 12 an important emissions consequence. 13 CHAIRPERSON LLOYD: Ms. D'Adamo. 14 BOARD MEMBER D'ADAMO: And I would just compare 15 it to driving-under-the-influence laws and blood-alcohol. 16 There's no reason to have to -- if someone has a 17 blood-alcohol at a certain point, that's the violation in 18 and of itself because society has determined that that's a 19 dangerous situation. Likening it to what you had just 20 indicated, there's no need to have to go into court and 21 establish whether or not the person -- it affected their 22 driving ability. 23 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 24 TERRIS: If I might add in response to Mr. Calhoun's first 25 question. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 The intent of the OBD system is to work for the 2 full life of the vehicle. And we forecasted vehicles are 3 going to be on the road for 10, 15, 20, 25 years. And 4 that it would be very speculative, at this point in time, 5 to make a determination as to whether the components that 6 are being -- very complicated and new types of components 7 that are applicable to the LEV II program will work that 8 far out. And so you need and OBD system to be functional 9 to make that determination at that later date. 10 CHAIRPERSON LLOYD: And also I think -- 11 addressing Mr. Calhoun's talking about the threshold and 12 sensitivity, I was just looking at slide 19, which did 13 indicate that there is a flexibility to revise the 14 threshold, if necessary. So I presume that was put in 15 there just for the comment that Mr. Calhoun made. If, in 16 fact, we feel operationally that that's necessary, that 17 flexibility exists; is that correct? 18 EXECUTIVE OFFICER KENNY: Yes. 19 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: Bob 20 Cross from the ARB staff. 21 One other thing that I think that -- in response 22 to the discussion that Mr. Calhoun brought up is the idea 23 that the emission control system is just that; it's a set 24 of components which works together to control emissions 25 and make the vehicle work properly in terms of fuel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 economy, drivability, life, all of that stuff. 2 And the OBD system is the monitoring part, which 3 looks at this whole integrated system. It says are all of 4 the little pieces of it working properly? And if they're 5 not, they tell the consumer and the consumer gets them 6 fixed. Well, if you start arguing, well, geez, you know, 7 that little component over there is -- you know, it's not 8 quite as important as these other ones and, therefore, one 9 shouldn't enforce noncompliance if the monitoring part of 10 the system for that component doesn't work, you get into a 11 real judgment mess where you don't -- you know, where you 12 go to a smog check, for example, and you have a situation 13 where Fords don't monitor to component X and GMs do or -- 14 and it becomes a sort of system that can't work in the 15 field. And I think that the idea that the system has to 16 work as a complete system and has to be fixed if it 17 doesn't is, I think, just sort of common sense. 18 And that's why the staff is so adamant about 19 this. 20 CHAIRPERSON LLOYD: Another question on the SULEV 21 threshold and the request there to relax those quite a 22 bit. You had indicated in the slide that three 23 manufacturers already sell SULEVs meeting those 24 requirements. Can you say who those companies are? 25 EXECUTIVE OFFICER KENNY: I'm sorry, I missed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 that. 2 CHAIRPERSON LLOYD: Could you identify the 3 companies already meeting the 2.5 thresholds for SULEV 4 monitoring. 5 ENGINEERING-STUDIES BRANCH CHIEF ALBU: Yeah. 6 Steve Albu. 7 Nissan Sentra CA is one of them. We have a 8 Toyota Prius; and also a Honda model, I think the Accord. 9 CHAIRPERSON LLOYD: Thank you. 10 Any other questions from my colleagues here? 11 I admitted before the very important piece from 12 the Ombudsman. 13 Again, Madam Ombudsman, would you please identify 14 the public process pursued as this Regulation was being 15 developed before the Board and provide us with any 16 comments on the procession or any other observations you 17 may have? 18 OMBUDSMAN TSCHOGL: Okay. Glad to. 19 Mr. Chairman and Members of the Board, this 20 update has been developed with input from vehicle 21 manufacturers, trade associations, repair technicians, 22 California and other state I&M program personnel, the 23 United States Environmental Protection Agency, and other 24 interested parties. 25 The advanced engineering section of ARB began PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 working on this update in June 1999 when it held a public 2 workshop. Since that time, staff has held numerous 3 meetings including teleconferences with individual vehicle 4 manufacturers regarding this Regulation. Staff also held 5 meetings with their trade associations and legal counsel. 6 Because of continuing issues, staff held about 7 five face-to-face meetings with the trade association that 8 represents most of the vehicle manufacturers. 9 Additionally, in July 2001, another public 10 workshop was held. Approximately 120 people attended each 11 workshop. Individual stakeholder meetings varied from as 12 few as three people to as many as 10, with 30 to 40 people 13 attending the meetings with associations. 14 And finally, the notice for the public hearing -- 15 for this public hearing was posted on the official OBD II 16 Regulation web site and was also mailed out on March 8th 17 of this year. 18 Thank you. 19 CHAIRPERSON LLOYD: Thank you very much. 20 So with that, I would like to call up the first 21 witness and begin the public testimony. 22 Our first witness is Greg Dana, followed by David 23 Ferris, followed by Grant Nakayama. 24 MR. DANA: Good morning, Members of the Board and 25 Chairman Lloyd. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 My name is Greg Dana. I'm Vice President of 2 Environmental Affairs for the Alliance of Automobile 3 Manufacturers. And for the purpose of today's hearing, 4 I'm also speaking on behalf of the Association of 5 International Automobile Manufacturers or AIAM. 6 With me today is David Ferris of General Motors, 7 who will cover the technical aspect of our comments today, 8 and Grant Nakayama, who will cover the legal aspects of 9 our comments today. 10 And we very much appreciate the opportunity to 11 provide the industry's views on these proposed changes to 12 on-board diagnostic regulations. 13 Let me start by saying we very much appreciate 14 the time that the CARB staff has taken to work with the 15 industry representatives to make changes to improve the 16 original proposal. Just in the past few weeks we have 17 worked with CARB staff to identify over 30 technical 18 changes, which we expect to be resolved during the 15-day 19 review process. 20 We have included our comments on these issues in 21 our written comments submitted for the record by letter on 22 April 24th, 2002, and will not cover them today. 23 While much agreement has been reached, the auto 24 industry continues to have serious policy, technical, and 25 legal concerns with the enforcement provisions of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 proposed regulations. 2 We are committed to providing to our customers 3 robust, reliable, and accurate OBD systems. But the 4 proposed regulations before you today contain hundreds of 5 provisions, which together comprise a very complicated 6 technology-forcing regulation which could jeopardize our 7 ability to do so. 8 The proposed regulation calls upon manufacturers 9 to achieve and implement a number of technological 10 accomplishments in the near future. This necessarily 11 involves some degree of forecasting about what will be 12 possible in the future and when. 13 Throughout the development of these rules both 14 ARB and staff and the manufacturers have had to make 15 good-faith projections about the availability of future 16 technologies. 17 The Alliance and AIAM have particular concerns 18 about technological feasibility of certain aspects of 19 these rules. And our specific concerns are described in 20 our written comments. 21 It is possible that some requirements in these 22 rules may end up presenting a technological obstacle not 23 foreseen by either ARB or the manufacturers. Accordingly, 24 Alliance and AIAM members reserve the right to seek relief 25 in the future from any requirement of these rules that may PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 turn out to be technologically infeasible, whether or not 2 we have highlighted those particular comments -- those 3 particular issues in these comments. 4 The new requirements include in-use monitoring 5 performance ratios, NOx catalyst monitoring, diesel 6 catalyst monitoring, secondary air system monitoring, 7 variable valve timing system monitoring, and particulate 8 matter trap monitoring. 9 These proposed new requirements have not yet been 10 demonstrated to be feasible on a full range of vehicle 11 applications. Monitoring strategies for these new 12 requirements are now being developed and still need to be 13 fully evaluated and proven. 14 There is no guaranty that the monitoring 15 strategies that manufacturers are now developing will meet 16 these new requirements. And these efforts are further 17 complicated by the stringency of the malfunction threshold 18 that ARB's proposal requires when concerning levels of the 19 LEV II Program emission standards. 20 Because of these continuing technical concerns, 21 we understand that ARB staff has agreed to adjust these 22 items in a biennial review of the OBD II requirements. 23 The Alliance and AIAM recommend that a requirement for an 24 OBD II biennial review be documented in the Board's 25 resolution on the proposed OBD II regulatory changes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 At this point, I'd like to ask David Ferris to 2 come up and continue the testimony of the Alliance. 3 CHAIRPERSON LLOYD: Thank you. 4 MR. FERRIS: Good morning. 5 My name is David Ferris. I'm a senior staff 6 development engineer working for General Motors. I've 7 been working on OBD II since 1989, when the regulation was 8 first adopted. And I've developed a working relationship 9 with OBD engineers from essentially every automotive 10 company in the world. And I'm here today representing the 11 Alliance and AIAM. 12 I'd like to start out by pointing out that, as 13 Greg just said, we are really not challenging these new 14 technical requirements that are in this Regulation. We 15 are working with the staff and we are mounting a major 16 effort to develop new monitoring diagnostics. And we 17 will, if we have problems, revisit those technical 18 challenges in the future. 19 And I had to make one comment. I was not 20 planning on discussing this point this morning. However, 21 there was a slide regarding our proposal to freeze the 22 thresholds at one and a half times the ULEV I standards, 23 and the staff put up a slide that showed -- illustrated 24 the sort of comparison from a multiplicative perspective, 25 which showed that at SULEV II that would be 8 times the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 NMOG standard or 22 times the NOx standard, or something 2 like that. 3 You can paint a very different picture if you 4 plot that chart with emissions as the access, and it then 5 becomes a much more reasonable picture. I just wanted to 6 make that comment. I do not want to spend a lot of time 7 on that point today. 8 We really want to focus on our major concerns, 9 which have already been discussed a little bit; and, that 10 is, the mandatory recall without consideration of impact 11 on in-use emissions and of the related aspect of a 12 possible recall without consideration of impact on in-use 13 emissions. 14 The enforcement section of the proposed 15 regulation states that the Executive Officer shall order 16 the recall and repair of all vehicles if enforcement 17 testing indicates that certain trigger points are reached, 18 with no consideration of impact on in-use emissions or 19 flexibility for any other remedial action. 20 This mandatory recall requirement is based on the 21 false assumptions that such recalls would always be 22 necessary and would provide significant emissions benefit. 23 This requirement would preclude other remedies that may be 24 better for the environment, the consumer, the Air 25 Resources Board and manufacturers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 In the ARB staff report, the staff states that 2 they are not required to consider the cost effectiveness 3 of a remedial order for a manufacturer which has elected 4 to ignore the regulation and produced an essentially 5 nonfunctional OBD system. I want to address this "elected 6 to ignore the regulation and produce an essentially 7 nonfunctional OBD system." 8 This assumes that a serious OBD flaw will be the 9 result of something less than a good-faith effort. It 10 also assumes that the systems would be nonfunctional, 11 which is not the case. The industry, in general, does not 12 ignore the regulation. OBD systems represent an extreme 13 technical challenge. Issues that could result in 14 mandatory recall are much more likely to be the result of 15 an honest error rather than ignoring the regulation. I'd 16 like to provide some examples that would illustrate this. 17 For General Motors, we have engine variance, that 18 is, a group of engines that are all extremely similar. In 19 one case we had an engine that was a basic engine, a 20 higher performance version that had identical displacement 21 and it was otherwise identical, and then a smaller 22 displacement version. But from an engineer's perspective, 23 these engines are extremely similar, have identical 24 emission control systems and generally identical 25 calibrations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 When we did the OBD calibrations, we focused on 2 the high-sales volume, larger displacement, normal engine, 3 and we made the assumption that the OBD calibration on the 4 engine would be applicable to the other two variants of 5 the engine. 6 When we finally got around to getting the proper 7 prototype vehicles -- actually were production vehicles to 8 test those other variants, much to our surprise we learned 9 that whereas the base engine, the normal power larger 10 displacement engine, was within the one and a half times 11 the standards thresholds, as it was supposed to be; the 12 larger power version, which was seemingly identical from 13 an emission controls perspective, and the smaller 14 displacement version, which was also identical, same 15 catalyst, et cetera, one had two and a half times the 16 standards, another was four times the standards. 17 So this was a situation that was difficult to 18 foresee; and at some level it is not possible for us to 19 test every single configuration that we build, both in the 20 development process and then in validation verification 21 immediately prior to production. 22 The CARB staff has proposed some new production 23 vehicle testing requirements. We are embracing those. 24 We're not fighting those. And I think that those kinds of 25 things will go a long way toward helping us detect these PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 kinds of things before they get into production. But, 2 nonetheless, it is such a technical challenge that it's 3 likely that these kinds of things will continue to happen 4 in the future. 5 In addition, OBD software also presents a major 6 technical challenge. In some sense, the software has to 7 be practically perfect. Because if it's a little too 8 sensitive, we can have false mills, which no one wants; if 9 it's not sensitive enough, we may not be compliant with 10 something like the one and a half times the standards 11 threshold. 12 And I'll tell you, it is just not possible to 13 develop perfect software. For a typical OBD software set, 14 we've got about 60,000 lines of code and a pop-up 10 15 possible errors per line of code, and about 15,000 16 calibration parameters. So that's, if you look at it, 17 about 615,000 opportunities for error, if you will, in a 18 typical software set. And this is not just GM. I've 19 talked with other engineers in the industry, and this kind 20 of scenario is pretty typical. 21 If sort of for convenience purposes you assume 22 some of those potentials for error are not significant, 23 you could round down to about a half a million possible 24 errors for each software set. And for a large 25 manufacturer like GM, we have about two hundred software PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 sets each year. So that represents an opportunity to make 2 about 100 million possible errors in a year. These errors 3 are sort of like typo errors, if you will. 4 So even if our software is 99.9999 percent 5 accurate, we still have the possibility of many errors in 6 that software. 7 And I want to point out, this is really very 8 similar to consumer software. If you think about errors 9 and problems that you may have experienced on your PCs 10 either at the office or at work, especially when you have 11 different software interactions, you install some new 12 software and realize that it has created some problem with 13 other software. 14 We have, in fact, at least one example within GM 15 in the past where an error -- well, an error -- a change 16 in software that was independent of OBD had a completely 17 unforeseeable impact on the OBD software. The OBD 18 engineer involved said, you know, "I didn't know about 19 this. But even if they had told me in advance exactly how 20 they were changing that other software, I could not have 21 predicted the impact that it would have on this OBD 22 software." And that particular example is one that would 23 have put us into a mandatory recall trigger under the new 24 regulations. 25 Any single error, any single bit error could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 result in a mandatory recall. And I want to point out 2 here that the diagnostic software is much more sensitive 3 to these kinds of errors than the emission control 4 software. Yes, you could have an error in emission 5 control software that would immediately cause high 6 emissions. 7 But that's one of the reasons why we do build 8 vehicles with a margin. We build them at 50 or 60 percent 9 of the standards; and, thus, they're much more tolerant 10 both to the different vehicle configurations that I talked 11 about before, and the emission control software because of 12 this margin or cushion is much more tolerant of 13 calibration errors or calibration imperfections, if you 14 will. If you have a software error or a calibration 15 imperfection, emissions may go up by 5 percent, but you're 16 still well below the standard. There's not a problem. 17 The OBD software is at least an order of 18 magnitude more sensitive to these kinds of what you could 19 consider typographical kinds of errors, small errors where 20 a single error could put you into a noncompliance 21 situation, could put you into the mandatory recall 22 trigger. So I'd like to again try and put this in a 23 perspective perhaps that you could understand. 24 I ask the question: Can the Air Resources Board 25 produce 200 documents each year, with each document having PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 500,000 words each document, with no typos? I don't think 2 so. And I hope that helps you appreciate the technical 3 challenge that we have. We cannot make perfect software. 4 Another comment that was made earlier in the 5 hearing by Mike Regenfuss was that the mandatory recall 6 triggers were linked to a gross failure on the part of 7 manufacturers to meet the development and verification 8 responsibility. And I argue, this is not accurate. It is 9 not a gross failure to meet this responsibility. This is 10 a huge technological challenge. 11 As you have all experienced with your home PCs, 12 especially if you've tried the new version of whatever, 13 you can see that, you know, it's hard to get software 14 perfect. There are frequently many bugs that crop up that 15 are just unforeseen. And it's practically impossible to 16 do enough verification and validation testing to 17 completely eliminate them. 18 So given this situation, it is just plain unfair 19 to have a mandatory recall for such technically 20 challenging requirements. 21 Now, beyond that, while the trigger points that 22 the staff has established for mandatory recalls do 23 represent, what I would call, significant OBD system 24 flaws -- we won't argue that, these are significant OBD 25 system flaws -- that does not necessarily represent either PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 what they call a nonfunctional OBD system or a significant 2 impact on in-use emissions. 3 Many monitors would still be functional even 4 though they meet these triggers. And I'll give you a few 5 examples. 6 We have recall -- mandatory recall triggers for 7 in-use monitoring frequency ratios, how frequently these 8 diagnostics are running in the real world. If you don't 9 meet those ratios, that means that it may take a few extra 10 weeks to turn on the mill. I would argue that's not 11 nonfunctional; that just delays when the light comes on. 12 At LEV levels a difference between one point LEV 13 II levels and SULEV levels, is a difference between 14 something like one and a half times the standard 15 requirement; and three and a half times the standard, 16 which was the mandatory recall trigger, is a very small 17 amount of emissions. 18 And, for example, twenty thousandths of that 19 monitor would have a mandatory recall for failure to 20 detect a thirty thousandths leak. Now, if that monitor 21 did detect, say, a thirty-five thousandths leak and 22 greater size leaks, I would argue it's not nonfunctional, 23 it just isn't good at detecting a twenty thousandths leak. 24 So I want to point out that there are about 150 25 fault codes on a typical vehicle. If one monitor doesn't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 work properly, the other 149 do. So the OBD system is 2 still 99 percent functional or more. 3 And furthermore, the sort of undeniable fact of 4 the matter is that the impact of an OBD system flaw on 5 in-use emissions is directly related to the durability of 6 the component that is being monitored. There's just no 7 way to deny that fact. The more durable the component 8 that's being monitored, the smaller the impact of an OBD 9 flaw. And failure to consider that in a remedial action 10 is unconscionable. 11 In some cases, recalls would not be cost 12 effective, because the repair would be expensive and/or 13 the emission benefit would be negligible. If the emission 14 component that is being monitored, as I said before, is 15 very durable, there may be little harm if the monitor is 16 not fully compliant. And attached to our written comments 17 we have a study that was done by Sierra Research which 18 explains the way that you can do an emission projection in 19 more detail. But I won't go into that right now. 20 In other cases, recalls should not be necessary 21 since there is an overt indication of the malfunction, and 22 it would be essentially self-campaigning. So many OBD 23 problems are not good candidates for a recall. And let me 24 give you some examples of these that would be 25 self-campaigning malfunctions or a costly recall with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 little emission benefit. 2 The first example would be an idle air control 3 valve which disables a monitor like the catalyst monitor, 4 which is a major monitor, and we would fail to detect that 5 malfunction of the idle care control valve. So that would 6 trigger a mandatory recall under the proposal. 7 But if this idle air control valve malfunction, 8 which was not detected and would not eliminate the mill as 9 it was supposed to, if that was associated with a severe 10 drivability problem every time and we could demonstrate 11 that, like stalling -- severe stalling, that would mean 12 that it would have to get repaired and there would be no 13 need for a recall. 14 Another similar example would be an electronic 15 throttle control malfunction that similarly disabled, say, 16 an O2ï sensor or catalyst monitor, a major monitor again; 17 and a very similar example where, if there was a severe 18 drivability problem that was associated with the 19 malfunction of the minor component, the idle air control 20 or electronic throttle control, then there really would be 21 no need to recall because it would be self-campaigning 22 even though it wasn't detected and didn't eliminate the 23 mill as was supposed to. 24 Another example, now this time of a costly recall 25 that would potentially have little emission benefit, we'll PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 focus on the catalyst monitor. And in many cases as we go 2 to lower and lower standards, we're not able to monitor 3 the entire catalyst system. In order to get the 4 monitoring sensitivity that we need, we have to monitor a 5 part of the catalyst system, a partial volume. So we have 6 to size that monitored volume just right in order to meet 7 the requirements. Now, we can make a good faith effort. 8 But anyone who's tried to deteriorate and determine 9 threshold catalysts realize this is a bit of an art, it's 10 extremely difficult, and we may not always get it right. 11 If it turns out then that the only way to -- so 12 we could end up with a situation where the catalyst 13 monitor did not eliminate the mill until something like 14 four times the standards, and thus we would be into a 15 mandatory recall. 16 If it turns out that the only way to rectify that 17 problem in terms of a recall would be to resize the 18 monitored catalyst volume, we'd literally have to pull 19 catalyst systems off and put different size catalysts on, 20 even though the basic emission performance of the catalyst 21 system was very good. 22 In order to rectify the monitoring problem, we'd 23 have to pull off the catalyst system, which had perfectly 24 good emissions, put back a catalyst system with a 25 different monitored volume in order to get the right PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 sensitivity of the diagnostic system. This would easily 2 be a thousand bucks a car for the recall, extremely 3 expensive. 4 And looking at the minuscule air quality benefit 5 represented between the one and a half or 1.75 times the 6 standards and three and a half times the standards, and 7 especially then depending on the durability of the 8 underlying catalyst system; if that underlying catalyst 9 system was proving to be very durable in the field, the 10 emission benefit would be just insignificant and the cost 11 would be extremely expensive. And so the cost 12 effectiveness of this recall would be absurd. 13 Now, we're not suggesting that there shouldn't be 14 any remedial action, but mandatory recall is just not 15 appropriate in that kind of situation. 16 Going on further then, if we have these kinds of 17 situations, and not only is the mandatory recall 18 inappropriate from a manufacturer's perspective, but keep 19 in mind for a recall you're inconveniencing consumers. 20 You're sending them back to the dealer or wherever. I 21 mean, they're generating emissions in that process at some 22 level, you know. It just may not be appropriate to have 23 recall in every case. 24 If deterrents or punishment is the major issue 25 here, you can have those deterrents or punishment with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 other remedial actions besides recall; and then not have 2 the inconvenience and the extra emissions for the 3 consumer. 4 And it was mentioned earlier here enforcement 5 discretion is a potential mitigating factor here. We do 6 not believe that enforcement discretion is adequate 7 protection from unreasonable recalls, because third-party 8 lawsuits or citizen suits could challenge the ARB's 9 ability to use the discretion when the regulation clearly 10 eliminates discretion in an unprecedented way. 11 And, furthermore, an administrative law judge 12 would not be allowed to judge the appropriate use of 13 discretion under the proposal. And our legal counsel will 14 elaborate on these points later. I'm not an attorney and 15 not an expert on that sort of thing. 16 Okay. The other really related major issue here 17 is other ordered remedial action where average emissions 18 shall not be considered. So we've talked about the 19 mandatory recall category, where the Executive Officer 20 shall order a recall. There's another category for those 21 OBD issues that are not serious enough to trigger a 22 mandatory recall. The proposed regulation states that the 23 Executive Officer may require remedial action up to and 24 including recall. However, the staff has recently 25 proposed to add language to this section which states: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 "In making the determination, the average tailpipe and 2 evaporative emissions of vehicles within the affected 3 motor vehicle class shall not be considered." 4 This specific ban on consideration of emissions 5 benefit is extreme. The emissions impact is the bottom 6 line. This is the Air Resources Board. I mean think 7 about what this says. Does the Board really want this 8 sentence in the regulation, "in making the determination 9 the average tailpipe and evaporative emissions of vehicles 10 within the affected motor vehicle class shall not be 11 considered."? I mean to me this is unbelievable. 12 This precludes the opportunity that should be 13 available to us to demonstrate that there's a minimal 14 emissions impact over any period of time and that that 15 should be considered when thinking about a remedial 16 action. 17 The staff has stated that they do not trust the 18 projections for in-use emissions for OBD remedial actions. 19 Admittedly, it is difficult. On the other hand, in-use 20 emissions projections are routinely used by the ARB staff 21 for a variety of purposes. And they should not be 22 prohibited from consideration for determining appropriate 23 remedial action. We do not understand why the staff is 24 reluctant to consider projections of impact on in-use 25 emissions for determining appropriate remedial action for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 OBD systems. 2 So, conclusions: Manufacturers do not ignore the 3 regulation. Most OBD problems are the result of imperfect 4 software or other technical challenges. And it is unfair 5 to require mandatory recall in this situation. 6 Significant OBD system flaws do not necessarily 7 represent either a nonfunctional OBD system or a 8 significant impact on in-use emissions. In many cases, 9 the system will still be 99 or greater percent functional 10 and provide 99 percent of the benefit. 11 Recall would be unnecessary for many issues that 12 are self-campaigning and not cost effective for many 13 issues that are costly to repair and/or have negligible 14 emissions impact. It is not appropriate to inconvenience 15 the consumer if the emission benefit is negligible. 16 I want to point out, we agree that OBD is needed. 17 In fact, General Motors started installing OBD systems on 18 vehicles before they were required by any government 19 agency. And we support implementing OBD and I&M. We 20 understand the need to enforce the regulation. And we 21 agree that in certain cases a mandatory recall may be 22 necessary; for example, if there's a software error that 23 literally would prevent a vehicle from getting through an 24 I&M inspection, every vehicle is going to have to get 25 fixed. So perhaps there should be a recall in that case. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 And I can think of others. 2 However, this proposal goes way too far. Rather 3 than "shall order recall," the Board should consider 4 language such as "shall order remedial action up to and 5 including recall, with consideration of impact on average 6 in-use emissions when determining remedial action." 7 This language would allow the ARB to enforce the 8 regulation while protecting the industry from mandatory 9 recalls that are neither necessary nor cost effective. 10 This concludes my statement. I'll be happy to 11 answer any technical questions that you may have. 12 And then Grant Nakayama will discuss the legal 13 aspects of these issues. 14 CHAIRPERSON LLOYD: Thank you very much. 15 Yes, Mr. McKinnon. 16 BOARD MEMBER McKINNON: Yeah, you made a lot of 17 legal and kind of public arguments, but I'll wait for the 18 attorney for those. 19 I do have a technical one. 20 How many times has the -- in your knowledge, has 21 this Board passed up prosecuting a recall and worked with 22 manufacturers to figure out a solution? Does that happen 23 at all? Does the Board -- 24 MR. FERRIS: Sure. 25 BOARD MEMBER McKINNON: Sure. And does it happen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 frequently? 2 MR. FERRIS: I mean, there are many, many OBD 3 flaws, OBD system flaws, which are sort of -- everyone 4 agrees are trivial, and a recall would be absurd. And 5 other flaws that are a little more serious. I mean we 6 have worked out a variety of different remedies, I guess 7 you would say, for many problems. 8 BOARD MEMBER McKINNON: And in those cases 9 enforcement action wasn't taken at all; is that correct? 10 MR. FERRIS: Correct. 11 BOARD MEMBER McKINNON: Okay. Does staff have 12 any difference with that, that frequently it happens that 13 no enforcement action was taken, people try to work out, 14 making sure that the problem is corrected? 15 GENERAL COUNSEL WALSH: That is -- 16 CHAIRPERSON LLOYD: We have technical or legal 17 answer here? 18 GENERAL COUNSEL WALSH: Okay. I'll do the legal 19 part and I'll let him do the technical part. 20 It is true that we often times do not recall or 21 require recall on vehicles where there is some indication 22 of noncompliance for a number of reasons. And that is 23 achieved through the exercise of enforcement discretion. 24 Mr. Kenny earlier described that. 25 We exercise enforcement discretion in a wide PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 variety of circumstances in our enforcement programs and 2 motor vehicle programs, both for certification standards 3 and recall in-use standards. It's been a long standing 4 practice. As Mr. Kenny indicated, it is a part of the 5 basic California common law. It is well recognized by the 6 courts. 7 And although there is certainly not any way I 8 could guarantee that a third party would never come in and 9 file a lawsuit to try to force that issue, I think it is 10 very unlikely, and mostly very unlikely because the 11 chances of success would be practically nil. 12 CHAIRPERSON LLOYD: Okay. Mr. Albu -- 13 BOARD MEMBER McKINNON: I had one more question. 14 CHAIRPERSON LLOYD: But I think Mr. Albu wanted 15 to -- 16 ENGINEERING STUDIES BRANCH CHIEF ALBU: Let me 17 just say that over the last couple of years we've probably 18 had about 77 different issues with GM alone. And I'd say 19 the vast majority of those have been settled with maybe a 20 service bulletin or maybe nothing at all. 21 Currently, we have maybe two issues where we 22 think there's an issue whether it should be recalled, but 23 they disagree and they refuse to do so. 24 So that's kind of the numbers, if you want those. 25 BOARD MEMBER McKINNON: I received the paperwork PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 to read about 4:00 o'clock yesterday afternoon from the 2 Alliance and the Association, both parties that are 3 testifying. And I'm sure the NBA playoffs suffered last 4 night, in my view, because I read the whole damn thing. 5 But one of the things that occurred to me -- and 6 I think your example about how many lines of code and 7 software is something that is encountered in all sorts 8 of -- it's in the aircraft industry, it's in all types of 9 industries. And I'm sure that the largest software 10 operating system manufacturer loved that you didn't say 11 their name a minute ago. But certainly all of us have 12 experienced that, so that's something we can relate to. 13 How many of the problems that you've talked about 14 are simply worked out with a software fix? And is that 15 something -- is it really -- with automobiles and 16 automobile services, is it really like our computers with 17 upgrades, our PCs with upgrades? I know aircraft have 18 upgrades all the time. So -- 19 MR. FERRIS: Not all automotive computers are 20 reprogramable, but General Motors' computers are. And, 21 yes, we can then reprogram them with a software upgrade, 22 in essence. 23 BOARD MEMBER McKINNON: And how often are 24 problems like we're discussing in this Regulation resolved 25 with upgrades? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 MR. FERRIS: Frequently. 2 BOARD MEMBER McKINNON: Okay. And is an upgrade 3 considered a recall, or is it considered a service issue 4 if you're on a service schedule? How's that dealt with? 5 MR. FERRIS: It's generally some kind of service 6 thing. I mean, there are a variety of different problems, 7 and some of them have overt indications to the customer. 8 So when the problem happens, emit brings it in and it gets 9 reprogrammed and gets it resolved. For example, a false 10 mill -- if we have an unreasonably high false mill 11 illumination rate, that's one where there's no need for 12 recall. When the light comes on, he brings it back and 13 gets it reprogrammed to desensitize the system a little 14 bit, for example, 15 BOARD MEMBER McKINNON: Okay. And I just kind of 16 want to quantify this. So I want, if you can, to take a 17 stab at what percentage of issues we're talking about here 18 today can be resolved with software-related upgrades. And 19 then I want to ask staff the same question. Because 20 I just -- I want to kind of get a grasp of how big that 21 is. 22 MR. FERRIS: I mean some of the problems would 23 sort of simply potentially confuse a service technician. 24 And a simple service bulletin sort of explaining the 25 situation is agreed by all to be the best solution, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 because reprogramming some of the cars, and not all of the 2 cars, could create more confusion than originally existed. 3 That's a pretty trivial kind of issue. So in some cases 4 we can just issue a service bulletin explaining things. 5 I would say the vast majority of things are 6 certainly related to software that can be reprogrammed, 7 and then we routinely do that. 8 There are many things, however, that do require 9 sometimes some hardware changes or something like that. 10 BOARD MEMBER McKINNON: Thanks. 11 ENGINEERING STUDIES BRANCH CHIEF ALBU: I'd say 12 the vast majority of solutions are reprogram type 13 solutions. In fact, the two that GM is refusing to recall 14 would be fixed by reprogramming. But they don't want to 15 recall vehicles and reprogram them because it costs 16 them -- I guess their contractor says something like $25 a 17 car. And they don't want to spend that money to fix the 18 car. Because when you take 3.6 million cars at $25, it's 19 a lot of money to them. 20 So that's what we're talking about here. 21 BOARD MEMBER McKINNON: Thank you. 22 CHAIRPERSON LLOYD: Okay. 23 MR. FERRIS: Can I correct that? 24 Actually, for us the reprogramming costs are more 25 like $50 a vehicle. And, you know, depending on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 emission benefit, that may or may not be cost effective. 2 CHAIRPERSON LLOYD: Any questions from my 3 colleagues? 4 Dr. Burke. 5 BOARD MEMBER BURKE: Yeah, I just have one quick 6 question. 7 I'm not quite sure I understand what our problem 8 would be if we phrased it like they said and said, "up to 9 a recall." Is that -- does that weaken our legal 10 position? 11 EXECUTIVE OFFICER KENNY: Yes. 12 CHAIRPERSON LLOYD: Thank you very much, because 13 I was going to ask the same question on that. 14 And the other question, I think you pointed out, 15 the linkage there with emissions, or the lack thereof, I 16 guess. 17 Is staff reconsidering that, given, I think, the 18 point that Mr. Ferris made there? 19 EXECUTIVE OFFICER KENNY: Actually, we have had 20 discussions with the industry on this very issue fairly 21 extensively. We had meetings yesterday, and there have 22 been a number of meetings with staff previous to that. 23 We continue to believe that essentially putting 24 that language in there puts us into a situation in which 25 we are trading off the OBD systems for the emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 performance of a car. And that's what we are trying to 2 avoid. We think that -- what that does is it compromises 3 the ability to have an effective and solid OBD system. 4 CHAIRPERSON LLOYD: The other point it gets back 5 to, I think Mr. Dana's comment, about a biennial review of 6 the status of the OBD. That's not currently in the 7 resolution, but that would be included? 8 EXECUTIVE OFFICER KENNY: We can include that. 9 We actually have historically tried to provide biennial 10 reviews of OBD for the Board. We actually missed our last 11 biennial review simply because of the fact that we were 12 involved in OBD issues and all staff were working on those 13 for about two years. But we'd be happy to put it in the 14 resolution if the Board so chooses. 15 CHAIRPERSON LLOYD: Thank you. 16 Mr. Ferris. 17 MR. FERRIS: Could I respond? 18 We believe that if we have invested extra money 19 and extra effort up front to design vehicles that are at 20 half the standards to start out, and designed vehicles 21 that have very durable components so that emissions stay 22 low for a very long time in use, that we should get some 23 consideration of that when determining a remedial action 24 for an OBD-related problem. It' not unreasonable. 25 CHAIRPERSON LLOYD: Yes, Mr. Kenny. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 EXECUTIVE OFFICER KENNY: The response to that is 2 what we are talking about with the mandatory recall. Are 3 they very serious, very egregious violations? We are not 4 talking about every single violation being subject to 5 mandatory recall. The vast majority of the situations 6 would be subject to the discretionary recall. But there 7 are some that are serious enough that we think a mandatory 8 recall is appropriate. 9 What we are trying to do there in that particular 10 situation is make sure that we have a very clear and very 11 understandable playing field for all to participate in, 12 and not have a lot of uncertainty in that particular 13 regimen. 14 The goal here is to ensure that, in fact, 15 everybody knows exactly what we're looking at, and not 16 just essentially to provide a level of uncertainty that 17 provides for opportunities for discussion, for litigation, 18 for challenge. And so to the extent that we have tried to 19 provide that certainty, we would disagree that, in fact, 20 we should sort of reduce that certainty and provide for 21 far greater levels of ambiguity. 22 BOARD MEMBER ROBERTS: Mr. Chair, could I ask a 23 question? 24 CHAIRPERSON LLOYD: Yes, Supervisor Roberts. 25 BOARD MEMBER ROBERTS: I'm having a little PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 difficulty with this. And it sounds like you're saying, 2 "we need this because we're only going to apply it in the 3 worst cases, and otherwise trust us." But the language 4 that you're proposing doesn't give me a warm feeling. And 5 if I were in their shoes, it would leave me with some 6 discomfort also, a great deal of discomfort. 7 Is there another way to phrase this that allows 8 you to achieve those goals? And it's not clear to me 9 whether your concern comes for those instances where they 10 exceed the fleet averages or they come at some lower level 11 below the fleet averages but higher than the goals of the 12 original -- the performance goals of the original 13 products. 14 EXECUTIVE OFFICER KENNY: Supervisor Roberts, our 15 primary concerns here are legal. I mean, what we are 16 trying to do is make sure that -- 17 BOARD MEMBER ROBERTS: I understand that. Our 18 primary concerns are cleaning up the air. But I -- and 19 when we're setting standards and you tell me the fleets 20 are making that standard, I'm not sure why I have to be 21 concerned about recalling for a system that, whether it is 22 malfunctioning or not, the goal of cleaning up the air is 23 there. 24 EXECUTIVE OFFICER KENNY: Well, they are related 25 to -- this is related to cleaning up the air. If we have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 an effective and reliable on-board diagnostic system, they 2 will provide us with air quality benefits. If, in fact, 3 we give the manufacturers the option of coming in and 4 saying, "In this particular situation the on-board 5 diagnostic system was unnecessary because we have 6 emissions profiles that show that these vehicles are 7 working effectively on emissions," what ends up happening 8 is that we do not have a level playing field with regard 9 to on-board diagnostics anymore. 10 And there's been a substantial question as to how 11 compliance is going to occur. And in every situation in 12 which we then raise the question, it's going to be a 13 question of "did the on-board diagnostic system in this 14 particular case" -- or "was the on-board diagnostic system 15 in this particular case necessary?" Or "did the 16 manufacturer otherwise achieve emissions benefits?". 17 And what we're trying to do is make sure that, in 18 fact, we can rely upon the on-board diagnostic systems and 19 that all manufacturers know what is expected of them, as 20 opposed to providing the out along the lines of "if you 21 basically can show that you're within the fleet averages," 22 as an example, "even though your certification levels are 23 higher on a particular vehicle, we're not going to be able 24 to recall you." 25 That effectively takes away the integrity of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 on-board diagnostic systems, and it effectively gives the 2 manufacturer the ability to say, "I produced a car. It 3 was okay on emissions. It didn't need to have an on-board 4 diagnostic system. And so, therefore, here it is. 5 There's a light here and that's it." 6 BOARD MEMBER ROBERTS: Well, I understand your 7 desire for something stronger than that, but it seems like 8 you've gone all the way to the opposite end of the 9 spectrum with respect to what's being proposed here. And 10 that's where you've created a whole lot of uncertainty 11 from their perspective. 12 EXECUTIVE OFFICER KENNY: What we tried to do 13 there is provide as much certainty as we can by having the 14 detail in the regulation. But in the particular 15 situation, and there are eight situations in which we are 16 looking at very egregious violations, we have tried to 17 identify them as mandatory recalls to ensure that, in 18 fact, we have the greatest ability possible to ensure that 19 those recalls occur. 20 And I understand their concern about that. But 21 we've tried to alleviate that concern by letting them know 22 that, in fact, we do have the ability to utilize 23 enforcement discretion. And historically we have utilized 24 enforcement discretion on a pretty routine basis, and in 25 particular in this particular programming. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 And so that is the place where we would try to 2 essentially make sure that we can adjust in the event that 3 we have something that is sort of the aberration in terms 4 of the eight parameters that we are looking at mandatory 5 recalls for that maybe doesn't fit a mandatory recall. 6 BOARD MEMBER ROBERTS: Mr. Chairman, I appreciate 7 your opportunity for other questions. I'll listen to the 8 rest of the testimony. But I just -- I want to alert 9 staff that at least as one of the Board members here, I'm 10 having trouble with this argument. 11 CHAIRPERSON LLOYD: By all means. I think -- any 12 other questions? 13 Thank you very much. 14 What we're going to do, given the length of the 15 testimony from the Alliance, I'm going to need to take a 16 five-minute or ten-minute break -- ten-minute break for 17 the court reporter. And then we will break for lunch -- 18 try to break for lunch at 12:30. 19 So let's break until 11:30, and then go from 20 11:30 to 12:30, and we'll take lunch. 21 Thank you. 22 (Thereupon a brief recess was taken.) 23 CHAIRPERSON LLOYD: I would like to continue with 24 the third speaker from the Alliance, Grant Nakayama. 25 Followed by Richard Kozlowski and Frank Krich. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 MR. NAKAYAMA: Good morning. My name is Grant 2 Nakayama. I'm an attorney with Kirk & Ellis. And I'm 3 speaking on behalf of the Alliance of Automobile 4 Manufacturers and the Association of International 5 Automobile Manufacturers, AIAM. 6 My comments today will address the enforcement 7 issues related to the current OBD II proposal. And I'll 8 attempt to keep my comments brief. I think Mr. Ferris 9 covered a good number of the points I would make. And I 10 don't want to repeat those points here. But there were a 11 number of other interesting points that did come up. 12 And before I go over those, there was one area 13 where we made significant progress with the staff over the 14 last week. And I just wanted to discuss that for the 15 record. 16 And this is the problem of statistical 17 representativeness of the test sample. And in one area, 18 and that is ensuring the statistical representatives so 19 the test happens is very important with this OBD 20 Regulation, because some of the test requirements the 21 manufacturers and others don't actually observe the 22 testing. The vehicle is just driven by an owner and you 23 download the data. So it's very important the sample be 24 representative. 25 We think based on our discussions that staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 shares that belief that the statistical representatives of 2 the sample is important. 3 They desire to also have a robust set of 4 requirements. And it's our understanding -- and the staff 5 can respond -- that they've agreed to work with us to 6 develop specific regulatory language in a 15-day-notice 7 process that would provide regulatory requirements on how 8 that sampling came about. I think that would avoid some 9 of the issues that have occurred in other cases. It would 10 provide more certainty for the staff and for manufacturers 11 about how the testing would be conducted. 12 Let me now move on to -- the main item of 13 interest obviously is the mandatory recall provision. 14 And, as Mr. Ferris discussed, the industry has major, 15 major problems with this really dramatic departure from 16 the ARB's practice. 17 For the last 30 years of enforcing emission 18 regulations, the ARB -- the Board has always given the 19 Executive Officer discretion to fashion an appropriate 20 remedy. Here there's going to be a specific provision 21 that requires in the event of certain nonconformities a 22 recall. It says, "We will require recall." And those are 23 the emission threshold and monitor frequency requirements. 24 We've heard some discussion that, in fact, we 25 have enforcement discretion, as the staff has pointed out, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 so we don't really need to enforce the recall -- the 2 mandatory recall provision. And I think, just as an 3 initial matter, a legal matter, is that really the right 4 way to craft the regulation to say," The mandatory recall 5 provision is here, but we understand that perhaps it may 6 not be appropriate in all situations. So don't worry, I 7 won't really enforce the regulation some times." 8 I think really consistent with the principles of 9 sound, open government, we would want that process where 10 the appropriate remedial action is weighed to be an open 11 process, in which certain factors -- in fact, all factors 12 that are relevant are considered. 13 So to say that, "Frankly, yes, we're going to 14 require recall so we can manage more," -- we put that in 15 the regulation, and then we say, "Well, we really won't do 16 that in practice," is, frankly -- it's not consistent with 17 good government and it's hard, we think, to argue that 18 that's legally -- it meets the necessity and cost 19 effective requirements of the Government and the Health 20 and Safety Code. Because under the Government Code, you 21 know, a regulation must be reasonably necessary, and it 22 must be under the Health and Safety Code both necessary 23 and cost effective. 24 To mandatorily require recalls when, in fact, 25 another remedial action may be more appropriate, seems PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 neither cost effective nor necessary. 2 Let me move on to the emissions impact part of 3 this, because that's also important. 4 Not only now do we have remedial action where 5 mandatory recall is required and there is no discretion; 6 we have a second category where discretion is still 7 retained by the Executive Officer. And in that category, 8 as Mr. Ferris pointed out, emissions -- the fleet average 9 emissions will not be considered under specific 10 prohibition there that prohibits the consideration of the 11 fleet average emissions. 12 So that means basically that the many factors 13 that would go into deciding whether recall or whether some 14 other emissions remedial action would be appropriate as it 15 would relate to the fleet average emissions aren't going 16 to be required. And that's really, as I think Board 17 Member Calhoun pointed out, why we're all here. That's 18 the bottom line is the emission performance, if the 19 vehicles, in fact, are very durable, if, in fact, it can 20 be proven to a neutral third party that the emissions 21 impacts are negligible, and that there's really no benefit 22 in performing the recall. 23 In fact, in some cases the recall may be even not 24 beneficial but detrimental. If it confuses the service 25 technician or something like that, why would we want to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 require or why would we want to have emissions impacts not 2 considered. 3 I mean it's almost -- it's a very bizarre 4 situation for an environmental agency, I believe, to put 5 in the regulation, "We're not going to consider the 6 environmental impact of a nonconformity with that 7 environmental regulation." I mean that's -- it's a 8 strange, strange provision. And as Mr. Ferris pointed 9 out, I don't think we really want to put that in there. 10 Let me also point out -- I think there was some 11 discussion here about what the current status is of one 12 manufacturer's various enforcement or nonconformities in 13 the -- with its OBD system. And I think that a number of 14 77 was pointed out. 15 And I think that's a reflection of the 16 difficulty, frankly, of meeting all the OBD requirements, 17 not a reflection on any particular manufacturer, a 18 shirking of its responsibilities. And, in fact, in that 19 case I believe we heard two cases that would be 20 appropriate for recall, and that the other cases would be 21 amenable or resolved in other manners. 22 Given that, that you were talking 2 out of 77 23 cases, why would we again want to put a provision that 24 says recall is mandatory? 25 There was another point brought up, and I -- this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 is sort of a technical point. But because I'm following, 2 Dave may want to respond to this. Somebody expressed 3 concern about, I believe it was, the compatibility of the 4 I&M system with the various OBD systems if there was a 5 nonconformity. And I believe that issue is an issue that 6 would be addressed in deciding on the proper remedial 7 action, whether the OBD system would work with the I&M 8 system. 9 And, Number Two, under the present system to date 10 manufacturers are given leeway with deficiencies. In 11 other words, Manufacturer A's system is not the same as 12 Manufacturer B's system. Deficiencies are granted. And 13 the I&M system works fine under -- with that. So I don't 14 understand how that really could affect the necessity for 15 having this mandatory recall and again having this 16 provision that emissions of all things would be the thing 17 we would not consider. 18 I'm departing somewhat from my prepared remarks 19 because I think we covered a lot of this before. 20 I'd be prepared to take any questions from 21 anybody, legal or otherwise. 22 CHAIRPERSON LLOYD: Your comment vis-a-vis the 77 23 cases again, the 2 appropriate for recall, what do you 24 mean by appropriate? 25 MR. NAKAYAMA: Well, since the staff has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 concluded that two, apparently they believe, are 2 appropriate -- now, the manufacturer may not agree that 3 they're appropriate, and I don't speak for General Motors 4 there -- but I think that's an indication certainly of -- 5 I think we should approach with great hesitation a 6 provision that mandates recalls for OBD violations or OBD 7 nonconformities. 8 CHAIRPERSON LLOYD: What about Ms. D'Adamo's 9 analogy this morning? 10 MR. NAKAYAMA: Okay. That's a very interesting 11 analogy, the drunk-driving analogy. Here I think we're 12 talking about the appropriate remedy. I think we're 13 talking about a situation where manufacturers try in good 14 faith to meet a very technically challenging regulation. 15 Again, perfect software -- basically, a strict liability 16 situation, we understand that. It's a strict liability 17 situation. 18 You violate the requirements, there's going to be 19 a remedial action. But is a mandatory recall really the 20 right remedial action in this situation where it's 21 technically challenging and where we know there's going to 22 be many nonconformities -- we know there are many today, 23 dozens -- a mandatory recall what we really want to do? 24 In that case, I don't think it is. 25 And then to not consider emissions, in fact, it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 almost something out of a Kafka novel. This Environmental 2 Board is going to say, "No, we're not going to consider 3 the emissions impact, the fleet-average emissions impact 4 in that violation." That has to come into play, I think, 5 in making a reasonable and reasoned decision about what 6 the right remedy is. 7 CHAIRPERSON LLOYD: Ms. D'Adamo. 8 Oh, Mr. McKinnon. Sorry. 9 BOARD MEMBER McKINNON: Well, I think an analogy 10 was made awhile ago, and the analogy was to drug and 11 alcohol testing where there's -- there's certainly not 12 evidence of impairment. What there is is the presumption 13 based upon the results of the test. 14 And it seems to me if we're put into a 15 position -- where out of 79 instances we are put into a 16 position where we have to go to court, say, in 77 of those 17 cases to get correction to the OBD system, we could spend 18 a lot of time and money on both sides getting good OBD 19 systems. 20 I think what I understand here and personally how 21 I view this is that we want OBD systems that reliably tell 22 us that the emissions are good on a car. We want that. 23 And if because of reasons of legal sparring it seems the 24 two were not linked, that's an interesting sort of 25 political argument. I'm not sure if it's a legal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 argument. 2 But what we want is systems that -- OBD systems, 3 computers that tell us when there's a problem and when 4 there might be an emissions problem. We want that. And 5 if there are, problems with that, we want it fixed. Okay. 6 And it may well be that when somebody shows up for their 7 25,000 mile service, there's a little software upgrade 8 that happens while they're there that's done in a 9 cost-effective way and that it's done in, whatever, 40, 10 the 77 or 79 examples. 11 So it occurs to me that getting aside from sort 12 of political sparring arguments, where we're at here is: 13 How do we make OBD systems reliable; how do we consider 14 changing technology, more and more difficult problems, and 15 whatever flex is needed in the system to get through those 16 changes and get to the point where we have gone through 17 changes and we've ended up with good OBD II systems that 18 give us a good presumption of the air quality impacts of 19 that car? 20 And so, you know, I labored through your document 21 last night, and -- but I'm not impressed by kind of 22 political sort of arguments that we're separating 23 emissions from the OBD system reliability or whatever. 24 The two should -- we should be able to look at OBD II data 25 down the road and know that we're getting good air because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 of it. 2 Thanks. 3 CHAIRPERSON LLOYD: Okay. Mr. Calhoun. 4 BOARD MEMBER CALHOUN: Let me make one comment 5 relative to what you just said. 6 I think by and large the staff is doing a good 7 job of working with industry and industry is doing a good 8 job of working with staff in dealing with those problems 9 that they have at the present time. Manufacturers run 10 into problems all the time. And they go to the staff, the 11 staff listens, have discussions with the representatives, 12 and in many cases they buy into what's being proposed. 13 And every now and then you run into a rare 14 exceptional case where there's a disagreement and then 15 some legal action is taken. And that was the case where 16 they referred to Toyota earlier. And you can always have 17 those. 18 And I don't know if the analogy of drunk 19 driving -- and at least the judge has some discretion when 20 you go before him. So that's what it would be like, I 21 think, in the case of the proposed regulation -- no 22 discretion. See, you shall order recall. 23 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 24 TERRIS: Mr. Chairman, this is Mike Terris. 25 I would like to just try to expound on their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 point about that the agency seems to be ignoring its 2 mission when it doesn't consider emissions. 3 I think the point is is that we say that what is 4 irrelevant is forecasted -- speculative emission forecasts 5 by the -- that we're just not certain if they're true or 6 not; and for the purpose of assuring that we can have OBD 7 systems that will catch actual emissions from older 8 vehicles and for the purpose of assuring that we have 9 valid I&M testing. 10 CHAIRPERSON LLOYD: Mr. Kenny. 11 EXECUTIVE OFFICER KENNY: I just wanted to 12 respond to Mr. Calhoun's comments. 13 Actually, I think your comments were pretty 14 accurate. I think that really has been kind of the 15 history, is that we have had a very good working 16 relationship with the industry; we tend to look at the 17 problems and try to work them out, generally, 18 cooperatively and collaboratively. And that has been very 19 productive and very valuable. 20 I think you're also right about the fact that you 21 get those exceptions in which, you know, both parties 22 essentially can't reach a conclusion. And in this 23 particular situation that is probably what we're arguing 24 about more than anything else here, is that, you know, 25 we're looking at that extreme, that exceptional situation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 But from a staff perspective, what we're 2 primarily concerned about is in that particular situation 3 we need to have the tools available to us to protect the 4 LEV II program and to make sure that, in fact, the LEV II 5 program is going to deliver emission benefits that are 6 associated with it. 7 We have not really seen a single recall since we 8 lost the case before the attorney -- before the 9 administrative law judge. We have had one recall, but it 10 was one that was already in process. But since then, we 11 haven't seen one. 12 And the primary reason for that is we no longer 13 have the tools to enforce the on-board diagnostic 14 regulations. And so what we have come back to you with 15 today is essentially kind of a rewrite of those tools to 16 ensure that, in fact, those on-board diagnostic 17 regulations will be enforceable in those exceptional cases 18 where, you know, we aren't able to kind of 19 collaboratively, cooperatively reach a conclusion, which 20 is generally the pattern, but sometimes we don't. 21 BOARD MEMBER CALHOUN: Were the other recalls 22 that you referred to related to OBD systems? 23 EXECUTIVE OFFICER KENNY: Yes. We have actually 24 dismissed cases that were OBD related because we 25 are unable to prosecute them successfully. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 BOARD MEMBER CALHOUN: Well, how do you know if 2 you haven't tried? 3 EXECUTIVE OFFICER KENNY: Well, because we have a 4 case in point in which we lost; and we know, therefore, 5 then that, in fact, there is a precedent that can be very 6 easily relied upon. 7 We also know, more importantly, that we spent two 8 years on that case. That is a significant dedication of 9 staff resources. What ends up happening is that we spend 10 all our time with our, you know, expert staff on these 11 issues in court; we're not accomplishing anything for the 12 air. 13 And so we are trying to ensure that, in fact, 14 we're not spending our time basically being expert 15 witnesses in court, but instead we have our staff working 16 and improving systems around the state of California so 17 that, in fact, we get, you know, cars that are just as 18 clean as we can possibly get them. 19 We spent -- you know, Mr. Calhoun, we spent over 20 two years on that case. 21 CHAIRPERSON LLOYD: Supervisor DeSaulnier. 22 BOARD MEMBER DeSAULNIER: Mike, getting back to 23 one of Mr. Calhoun's questions. The staff did say 24 something about perspectively there are two instances 25 where you might ask for mandatory recall with GM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 Are there other instances of other auto 2 manufacturers where you're prepared to use this tool? 3 EXECUTIVE OFFICER KENNY: We actually went 4 through that, and there is also one other instance with 5 one other manufacturer in which it could be appropriate. 6 BOARD MEMBER DeSAULNIER: Could you quantify to a 7 certain degree what we've lost in emissions in a broad way 8 in the time that we haven't been able -- had this tool? 9 EXECUTIVE OFFICER KENNY: Well, what I can give 10 you kind of is the types of numbers of vehicles we're 11 talking about. 12 With regard to at least one manufacturer we're 13 talking about in excess of three million vehicles that we 14 would have recalled that we're unable to recall at this 15 point in time. I don't think we have a quantification, 16 but let me turn to staff. 17 BOARD MEMBER DeSAULNIER: I'm struggling, and I 18 hear some of my colleagues struggling, with sort of the 19 order of magnitude what the public health issue is, 20 knowing that -- I empathize with the need for you to have 21 the leverage or the hammer, so to speak -- 22 EXECUTIVE OFFICER KENNY: Supervisor, the 23 difficulty here is that as we get, you know, lower and 24 lower on our certification levels associated with LEV 25 II -- even if you have a doubling of the standard or a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 tripling of the standard, you know, we're at levels now 2 that are extraordinarily low. And so in terms of absolute 3 tonnage numbers, they're probably not going to be that 4 high on an annual basis. What we're looking at is the 5 fact that those vehicles will be out there for the 6 lifetime of that vehicle. 7 BOARD MEMBER DeSAULNIER: I understand that, 8 Mike. Anybody that's been in this business even for a 9 short period of time understands we're not looking at big 10 tons in any action we take. But I'm still trying to -- 11 understanding that these are small amounts in the big 12 picture, what are we getting from it? 13 ENGINEERING STUDIES BRANCH CHIEF ALBU: Maybe I 14 could comment a little bit. 15 One of the issues that's still at large is the 16 recall of a catalyst system. Basically, when a catalyst 17 can is completely empty, it's been wiped out, the monitor 18 will not pick it up. That's a gross emitter. And the 19 vehicles in question have a basic defect with a catalyst 20 that will likely cause that situation. We're going to 21 have trouble in enforcing that. 22 The GM case involves a situation where an evap 23 monitor does not work. So when another situation occurs, 24 which may be likely on an older car, the vehicle after 25 that, if there's any kind of a leak, a small leak in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 evap system, will again have a gross emitter. 2 Now, I don't know how to project on an older car, 3 you know, 15 years, 150,000 miles. When mechanics pull 4 out engines, they pull off lines, they try to put them 5 back, the lines are cracked, hoses don't get put on 6 correctly, basically fuel pumps and fuel tanks have to be 7 removed, you have to remove the fuel tanks, remove the 8 fuel pump. And in so doing, do you disturb lines as well? 9 How many of those vehicles are actually going to have 10 leaks that will not be picked up because those GM cars 11 can't pick them up once they get past a certain point? 12 BOARD MEMBER DeSAULNIER: Okay. 13 ENGINEERING STUDIES BRANCH CHIEF ALBU: So it's 14 situations like that where we have gross emitters out 15 there, you know, case by case. And we can't quantify how 16 many are out there, but we can be sure an issue will find 17 a consultant to make a quantification that will give them 18 the result they want. And then we have to go to court to 19 argue about "is it right or wrong?" And it puts us -- I 20 mean, I have four staff to do all of what we did. And we 21 spent two years in this last case, and I got nothing else 22 done. 23 And it's really just -- you know, that's the 24 situation. 25 BOARD MEMBER CALHOUN: I have a question for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 Steve. He mentioned a catalyst case. 2 Now, what about the emission performance of those 3 vehicles that you cited earlier with the catalyst? 4 ENGINEERING STUDIES BRANCH CHIEF ALBU: Well, I 5 can say that in the program in Colorado, several of those 6 vehicles were found. The OBD system did not work. They 7 were gross emitters. And the question came back to us, 8 "Well, what's wrong with OBD that they can't find these 9 gross emitters?" So the I&M programs themselves are 10 concerned about the fact these cars are out there, but 11 they're not being found. 12 Well, engine-out emissions, basically about 3 13 grams per mile and hydrocarbons perhaps maybe 3 grams of 14 NOx, 10 to 30 times the standard. I mean, if that helps. 15 CHAIRPERSON LLOYD: Yes, and then Mr. McKinnon. 16 MR. NAKAYAMA: First of all, with respect to the 17 emissions impacts of these various defects. I mean, that 18 is something that if you allow consideration of people 19 bringing the best data available, they look at it, and 20 they make a decision. I mean, why should we bar ourselves 21 from considering that, because -- you know, I know the 22 staff thinks it's very difficult to project emissions from 23 the vehicles for the life of the vehicle. But, you know, 24 there are analytical techniques -- and, in fact, I know 25 another gentleman will probably follow me and provide more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 information, because there's been such a bit of a 2 discussion about what actually happened in the Toyota 3 case. And there are a lot of lessons to be drawn from 4 that, and I think people have different views of that 5 case. 6 But certainly there was very credible evidence. 7 And it was based on ARB test programs about what the 8 defect rate would be. It was ARB data that was used to 9 project the emissions impact. It was an ARB emissions 10 inventory model. So it's not that we can't project the 11 emissions impact that I think is really the problem here. 12 Number Two, with respect to needing to protect 13 the LEV II program. If, in fact, there's these gross 14 emitters, if, in fact, they occur and, you know, you 15 account for them in the modeling, and the vehicle class as 16 a whole doesn't meet the LEV II standards, fine, then 17 recall them. But if, in fact, they're so infrequent, that 18 they really have no impact on the average fleet emissions, 19 why would you -- you know, if it's one or two, why would 20 you recall them. 21 CHAIRPERSON LLOYD: Before Mr. McKinnon, I just 22 say, again, I hope that when we've got succeeding 23 witnesses -- I don't want to replay the Toyota case. So 24 let's -- now, what we're trying to do is move on from 25 there and to use the lessons learned from that so we, in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 fact, can work more cooperatively together. And in this 2 case, in a time when the state is increasingly short of 3 resources, to make sure that our resources are targeted at 4 those areas where, as Mr. Kenny said, you can get maximum 5 benefit and not going around chasing legal issues here. 6 So please -- again, I don't want to -- no, you 7 didn't imply that, but I just want to make sure that we 8 don't do that here, but rather move on from that. 9 Mr. McKinnon. 10 BOARD MEMBER McKINNON: I'm clearly leaning in 11 favor of giving staff the stick that they need. But I 12 certainly understand why one might be concerned that that 13 was the only solution, a recall. 14 Have -- and I ask this of both staff and the 15 industry. There was a discussion earlier about biennial 16 review. Have the two discussed any other frameworks for 17 dealing with, you know, a real onerous instance where -- 18 and let me say this: In asking this question, I believe 19 in having good OBD II systems. I'm not interested in the 20 fight over whether we've proved emissions or not 21 emissions. Part of this is to make sure we have good 22 systems that work. 23 But has there been any discussion of alternatives 24 in terms of resolving a difference? Coming to the Board, 25 coming every couple of years to say, you know, we had 79 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 cases, you know, two of them amounted in recalls, probably 2 four others should have, or one of the recalls was unfair 3 and here's why. 4 It seems to me that staff needs the club. But 5 are there alternatives that help us get to a resolution 6 that everybody can live with? 7 MR. NAKAYAMA: Can I respond to that? 8 CHAIRPERSON LLOYD: Yes. 9 MR. NAKAYAMA: I think certainly the industry has 10 bent over backwards in the last week to try to come up 11 with alternate language. And I think Mr. Ferris offered 12 some in his testimony about remedial actions up to and 13 including recalls. 14 But that language obviously wasn't satisfactory. 15 And we're frankly puzzled because -- I mean, I think all 16 manufacturers agree with you, that we do want good OBD 17 systems. And I know that the particular manufacturer that 18 was involved -- and I don't want to rehash that case -- 19 but is very interested and committed to reducing emissions 20 and having good OBD systems. And I speak from -- you 21 know, I was one of the attorneys who worked on that case. 22 And I don't think you've seen any slacking. And, in fact, 23 I think you think -- I think you've seen us work very hard 24 to produce good OBD systems. 25 CHAIRPERSON LLOYD: I hear you mention that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 language. But I also heard Mr. Kenny say this morning and 2 gave examples where you have mandatory recalls, but 3 obviously there's discretion there. So in some of those 4 cases I just don't understand. Either the sides are not 5 hearing each other or that, in fact, you don't believe 6 that, in fact, the Executive Officer will exercise 7 discretion. 8 MR. NAKAYAMA: If I could respond there. 9 With respect to the regulation itself, it does 10 say, "shall order recall." Now, the Executive Officer 11 says, "I will exercise my discretion to enforce or not 12 enforce that particular provision." But that's what the 13 regulation would say. And is that the way we really want 14 to go? I'm just saying that -- this particular Executive 15 Officer might be fine. He or she who succeeds this 16 particular Executive Officer may also be fine. Who knows 17 what will happen in the future. 18 Do we want to really make the regulation say that 19 or do we want to have a situation here where -- it seems 20 strange as a -- again, I think it's a legal argument. I 21 don't think it's a policy argument. It's a legal 22 argument, that it's -- it's really not correct to have a 23 regulation that says we're going to do one thing all the 24 time, but then I really -- it's okay, I'll take care of it 25 legally because I may not enforce that regulation. That's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 really, I think -- with respect to the necessity under the 2 Health and Safety Code and the Government Code, that is 3 not a necessary provision in the requirements. 4 EXECUTIVE OFFICER KENNY: I guess the simple 5 response to that is that we have basic speed laws that say 6 you shall not exceed 55 miles an hour, you shall not 7 exceed 70 miles an hour. And yet those are routinely 8 enforced with discretion, and that's what we are talking 9 about here. 10 CHAIRPERSON LLOYD: With that, I think -- thank 11 you very much, Mr. Nakayama. 12 MR. NAKAYAMA: Thank you. 13 CHAIRPERSON LLOYD: Again, I appreciate all the 14 comments from the Alliance, recognizing this is a tough 15 issue. 16 I was hoping that we could conclude this by 17 12:30. But clearly I don't see that's likely, unless I 18 get tremendous cooperation from the succeeding witnesses 19 here. 20 But, anyway, we'll call now Mr. Kozlowski, Frank 21 Krich and Lisa Stegink. 22 MR. KOZLOWSKI: Thank you, Mr. Chairman, and good 23 morning. 24 I hope I cooperate with you and do this very 25 quickly. But I have to tell you that I'm going to talk PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 about the Toyota case. Are you going to kill me? 2 CHAIRPERSON LLOYD: Not immediately. 3 MR. KOZLOWSKI: Very briefly. Actually, I come 4 here -- Toyota really doesn't want to testify today. 5 CHAIRPERSON LLOYD: Thank you. 6 (Laughter.) 7 MR. KOZLOWSKI: But we thought we had put this 8 case behind us, and we'd like to do that. But the case 9 has a life of its own. So I guess we're not able to put 10 it behind us. 11 And what I want to do this morning is correct 12 some misimpressions that came out of the Toyota case. 13 We had one statement earlier in the day that the 14 defect in the Toyota system raised emissions 19 percent or 15 16 percent. Well, in fact, the judge found that the 16 testing that was based on was not credible, was not good 17 statistically inferred data, and picks up on the point Dr. 18 Burke made this morning about the two trucks being tested. 19 The information is good, it's useful, but not dispositive. 20 And, in fact, when this issue was heard at the trial 21 court, the judge concluded that there wasn't enough -- 22 that the testing was not credible. 23 And, again, I don't want to open old wounds, so 24 I'm not going to read from his decision. But it's clear 25 in his decision that that wasn't the case, that emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 did not -- you could not tell how emissions increased 2 based on the testing that was done by CARB. 3 And there's other specific issues I want to put 4 aside, and that will shorten the testimony and make us 5 both happy right now. 6 The point I'd want to make is Toyota is a good 7 manufacturer, makes good cars, makes good emission-control 8 systems, makes good on-board diagnostic systems. It went 9 to the hearing because it did not agree with CARB's 10 finding that there was a defect, and that the defect if it 11 did exist, should result in a recall. That's why it went 12 to hearing. 13 And let me quote from Judge Roman's decision, 14 which says, "Accordingly, based on competent and credible 15 evidence presented, this tribunal must conclude that, 1) 16 the recall class is not equipped with faulty evaporative 17 leak emission monitors," i.e., the monitors were okay. 18 "The recall class evaporative leak check monitors, mills, 19 illuminate when the vehicles leak gasoline vapors." The 20 system's okay. 21 "Recall class drivers will be informed when leaks 22 occur, and thereby able to effect repairs resulting in 23 decreased atmospheric emissions." 24 In other words, if the reason we're changing 25 these enforcement regulations is to make sure we could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 mandate a recall in the Toyota case, you have the wrong 2 decision. You are implementing a program that's going to 3 assure using this as an example, that you have a wrong 4 decision, and we'll have classes of vehicles recalled when 5 there's no appropriate need to do it. 6 And with respect to the average emissions, which 7 was defined in the case, that average emissions did not 8 exceed standards, a specific finding of Judge Roman. 9 That's not what we're talking about here. That's one 10 issue that's specifically prohibited. But there's no 11 emissions considerations for recall. It's excluded. You 12 consider cost, I think; convenience to consumers. You 13 consider lots of things. But you do not consider 14 emissions. That seems to me to be the wrong direction. 15 Certainly, it would have been the wrong direction in the 16 Toyota case. 17 That's the only point I would make. If the basis 18 of their program is Toyota, we think Toyota was a right 19 decision, a good decision. 20 Thank you very much. 21 CHAIRPERSON LLOYD: Thank you. 22 Staff to comment on that? 23 GENERAL COUNSEL WALSH: I think the important 24 point to know here -- and I'm not going to spend a lot of 25 time rehashing the case. But the question is whether this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 Board wants to be the Board -- the entity that makes the 2 decision about how important the OBD system is, how well 3 it has to function, or whether that's a decision that will 4 be left to an administrative law judge or a judge in the 5 superior court. 6 The mandatory recall provision allows you to say 7 that there are certain egregious situations where you 8 believe that a recall is appropriate; that a no-harm, 9 no-foul call by an administrative law judge may miss many 10 of the important points about what is critical and 11 important to air quality in California if we have good, 12 solid, reliable on-board diagnostic systems. 13 CHAIRPERSON LLOYD: Thank you. 14 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 15 TERRIS: Mr. Chairman, if I may. 16 CHAIRPERSON LLOYD: Yes. 17 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 18 TERRIS: Mr. Kozlowski's statement regarding the OBD 19 testing performed by the ARB staff in the Toyota cases is 20 actually irrelevant here. What we've done in the proposed 21 regulations that would apply to 2004 vehicles and later is 22 set forth specific in-use test procedures, which are 23 different than what were followed in the Toyota case. 24 CHAIRPERSON LLOYD: Thank you. 25 MR. KOZLOWSKI: I was -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 CHAIRPERSON LLOYD: Ms. D'Adamo. 2 BOARD MEMBER D'ADAMO: Question of Ms. Walsh. 3 Another way of saying or describing what you just 4 did would be to say that, per se, the OBD affects 5 emissions and that we would be making that determination 6 with the mandatory provision? 7 GENERAL COUNSEL WALSH: Right, under those 8 limited circumstances that are caught up in the mandatory 9 requirement, yes. 10 CHAIRPERSON LLOYD: Thank you. 11 Dr. Burke. 12 BOARD MEMBER BURKE: This question is for Ms. 13 Walsh also. 14 In keeping with that, would -- I would assume 15 that if we issue a recall, they would have an adjudicated 16 right to go to Court to fight that, right? 17 GENERAL COUNSEL WALSH: Yes. 18 BOARD MEMBER BURKE: Then I'm not quite clear on 19 what the language does for us as well. 20 GENERAL COUNSEL WALSH: Well, what it does is it 21 says this Board's determination is under specific limited 22 circumstances. We're not talking about a minor error in 23 thousands of lines of code. We're talking about an error 24 which, however it occurred, resulted in a significant 25 impact on the ability of the on-board diagnostic system, a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 monitor on a type of vehicle to operate; that that system 2 should be recalled and that on-board diagnostic system 3 repaired so that it functions appropriately. 4 BOARD MEMBER BURKE: So it's still in the hands 5 of some judge to make the decision. So aren't we right 6 where we started in the first place? 7 GENERAL COUNSEL WALSH: No, because the 8 regulation as proposed would say to the judge that is the 9 harm that needs to be addressed. And in the Toyota case 10 we ended up arguing, having to resolve the issue because 11 of the evidence that the judge allowed in, the question of 12 whether the vehicles on average met the standard, whether 13 there was a problem with the evaporative emission control 14 system. 15 That made the hearing a much more 16 resource-intensive activity. You've heard about the need 17 to take up the time of a significant portion of our 18 technical staff down in El Monte, the folks that are 19 responsible for implementing the program, to put together 20 the testimony and evidence to counter that claim. 21 In fact, the judge made a determination 22 ultimately that we had not made the showing that there was 23 an emissions consequence. 24 I have also a quote from the decision that I'd 25 like to read for you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 "The Executive Officer counters that he's not 2 required to show an emissions impact to justify a recall." 3 And that was our argument. We did not believe that the 4 regulations as they now existed required that, and we are 5 proposing changes that we think would address the judge's 6 decision to the contrary. "But only that he" -- the 7 Executive Officer -- "needs to show a violation of the 8 applicable standards or test procedures." 9 He goes on to say, "By failing to fully disclose 10 for three successive years all the secondary parameters 11 and monitoring criteria relevant to the evaporative 12 system, Toyota obtained certifications for its 13 recall-class engine families and placed in commerce over 14 337,000 vehicles that are driven on the roadways of 15 California in violation of the Health and Safety Code and 16 its implementing regulations." 17 CHAIRPERSON LLOYD: Supervisor Roberts. 18 BOARD MEMBER ROBERTS: Well, I was just wondering 19 if Mr. Kozlowski would comment. I mean, we just heard 20 staff say most of his testimony is irrelevant. And I 21 thought it might be interesting to -- 22 MR. KOZLOWSKI: Well, I don't think it's 23 irrelevant. Again, I'd like the Toyota case not to be 24 used as the example, because I think the end result was 25 right; and if the new regulations give you a different end PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 result, that's wrong. Despite the fact that there -- 2 there was -- the judge did find, for example, that there 3 was some problems with the certification applications, 4 some technical problems with submission of data, he found 5 that the systems were okay. 6 And under this regimen, there would be a 7 mandatory recall. And the difference between the 8 mandatory recall and a discretionary recall is that in a 9 hearing, whether recall's appropriate is off the table. 10 You can only argue the front half, is there a violation? 11 And in many cases we would concede that there is 12 violations, but question whether the remedy was 13 appropriate. 14 And in the example you gave, Mr. McKinnon, I'm 15 not sure that we could have vehicles checked at the 25,000 16 service interval. I think we'd have to -- we'd go through 17 a full recall. And that's laid out in the regulations, 18 which means notices to everybody, blah, blah, blah, blah, 19 blah. A service campaign like you talked about may be an 20 adequate remedy and get everybody fixed. But under the 21 regulations, probably couldn't consider that. 22 ENGINEERING STUDIES BRANCH CHIEF ALBU: Maybe I 23 could make one comment, if I could, Mr. Chairman. 24 CHAIRPERSON LLOYD: Yes. 25 ENGINEERING STUDIES BRANCH CHIEF ALBU: Just to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 give you a flavor -- I'd really like to put the Toyota 2 case behind as well, because nobody suffered more than we 3 did. But I just want to give you an example of the kinds 4 of issues that came up. 5 One of the issues that came up was: Are these 6 cars -- do they have problems detecting leaks or not? We 7 gave about ten cars out -- or we had ten cars, and we had 8 numerous drivers at ARB drive them. We've been over 9 20,000 miles on these cars. We couldn't get the light to 10 come on but twice. It should have come on hundreds of 11 times. Well, when their contractor drove the cars, they 12 got the lights on routinely. I have no idea how that 13 happened. But that's the way it happened. We didn't have 14 the resources to go back and try to figure out what their 15 contractor did, get all the data on that, because it 16 wasn't even admissible if we tried to. 17 So it's just these kinds of things that come up, 18 and it makes it sound so easy when you're sitting here and 19 listening to all this about what happens. But the reality 20 is, this kind of stuff comes up and we go over and over 21 and over it and took two years. 22 Well, we're pretty certain about what we did and 23 we're pretty confident what we did was accurate. But it 24 didn't come out the way we liked. And that's one thing. 25 The other thing I wanted to mention, just to get PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 back to what is the real scope of this problem -- Mike 2 went back and looked at the number of cases we've had over 3 the last two to three years of OBD issues with all 4 manufacturers. We're estimating there's probably been 5 about a few hundred issues where there has been problems 6 with the systems. And based on the regulations that we're 7 asking you to accept today based on mandatory recall, 8 meeting those provisions, there's probably only three that 9 would fall in this category "mandatory recall." And so we 10 think that, you know, this is really an aberration, 11 something that would occur very rarely. And for our 12 purposes, we don't see how we can continue to have an OBD 13 program unless we have this kind of support in the 14 regulation. 15 CHAIRPERSON LLOYD: And as I think you indicated 16 earlier -- staff indicated earlier clearly, OBD is going 17 to play an increasing role in smog check and get us on 18 another popular program that we would also like to get 19 some solutions to there. 20 MR. KOZLOWSKI: Dr. Lloyd, could I -- I hate to 21 do this, because again -- 22 CHAIRPERSON LLOYD: Last time. 23 MR. KOZLOWSKI: Yeah, I'll promise it's the last 24 time if no one else over here mentions Toyota again. 25 CHAIRPERSON LLOYD: Well, staff does have certain PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 prerogatives. 2 MR. KOZLOWSKI: I know. 3 Steve suggested that the testing that was done by 4 Toyota was hokey -- you know, I don't know of any other 5 way to put it -- and that his testing -- 6 CHAIRPERSON LLOYD: No, he didn't say that. 7 MR. KOZLOWSKI: What did he say? 8 CHAIRPERSON LLOYD: No, he didn't say that. He 9 said that your contractor got different results from ARB. 10 MR. KOZLOWSKI: And he didn't know why. 11 CHAIRPERSON LLOYD: Exactly. That was a very 12 different statement than the one you -- 13 MR. KOZLOWSKI: I'm sorry. I stand corrected. 14 Again, let me quote Judge Roman. 15 "It is clear that the Board staff Phase Two 16 selection of vehicles and drive patterns did not meet the 17 requirements of any known or generally accepted 18 statistical method of sample selection for the purpose of 19 drawing inferences about the performance of the vehicles 20 in recall class." 21 Again, the only point I want to make is we, 22 Toyota, believe those vehicles met the standards, they met 23 the OBD requirements, and think the judge said so. I know 24 the staff disagrees. But I just think that that leaves a 25 misimpression of the Board. So anyhow, again, I will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 excuse myself if I can't say anything else. 2 CHAIRPERSON LLOYD: And I would also agree with 3 your opening comment. Clearly, we respect Toyota, we 4 respect their products. And we recognize we all are 5 aiming towards that result where we can kind of work 6 together and basically only detect those areas where 7 you've got gross malfunctions, too. But we also -- as 8 we've seen this morning, this is a really complex issue; 9 but it has a fundamental building block for our whole 10 program here, so you can see we're trying to work very 11 carefully through this program. And, unfortunately from 12 my viewpoint, on the technical side, a lot of these are 13 legal issues and it's one where we have to obviously rely 14 on our staff here and based on, if you like, battled 15 experience here in the legal courts. 16 MR. KOZLOWSKI: Thank you very much. 17 CHAIRPERSON LLOYD: Thank you very much. 18 Sorry. Do you want to -- 19 GENERAL COUNSEL WALSH: Well, I was going to ask 20 if I could, in fact, exercise the staff prerogative that 21 you referred to, and just to make a quick response. 22 In fact, we did learn the importance and 23 necessity of making sure that we had well-defined test 24 procedures. I think staff believes that the testing that 25 they did was adequate. But we have modified the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 regulations that we've brought to you today to include 2 specific test procedures. And we believe that will 3 alleviate those kinds of issues. 4 I would like to exercise staff's prerogative to 5 read one last piece from Judge Roman's decision. And 6 hopefully -- 7 CHAIRPERSON LLOYD: Let's put this the last for 8 this one. 9 GENERAL COUNSEL WALSH: Hopefully, this will be 10 the last one. 11 "In charting its course, Toyota, through its 12 human agents, selectively ignored applicable and clear 13 provisions of law, destroyed relevant test data, and 14 failed to appropriately reveal additional parameters until 15 Board staff inquiry. 16 "Despite the Executive Officer's compelling and 17 persuasive arguments, this tribunal is, nevertheless, 18 constrained by the clear provisions of the applicable 19 statutes and regulations from compelling a recall." 20 CHAIRPERSON LLOYD: So this is what you're trying 21 to -- 22 GENERAL COUNSEL WALSH: That's what we're trying 23 to correct. 24 CHAIRPERSON LLOYD: Yeah, summarize it. 25 Next witness, Frank Krich, is it? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 MR. KRICH: Yes. 2 CHAIRPERSON LLOYD: Lisa Stegink and Brad 3 Schelske. 4 Now, we've got -- I guess maybe I'm optimistic. 5 We're going to break in about five minutes. This is 6 probably the last witness we'll take before lunch. 7 MR. KRICH: Okay. Thank you. 8 Good afternoon. My name is Frank Krich and I am 9 a Senior Planning Specialist for DaimlerChrysler 10 Corporation. 11 DaimlerChrysler Corporation appreciates this 12 opportunity to comment on ARB's proposed revisions to the 13 OBD II regulation. We fully support the Alliance's 14 comments on this issue. 15 In the staff report, ARB states that the current 16 OBD II regulation was originally adopted in 1989. ARB 17 also states that it subsequently adopted modifications to 18 this regulation and regular updates to the Board in 1991, 19 1993, '94 and finally in 1996. And these were to address 20 manufacturers' implementation concerns, strengthen 21 specific monitoring requirements, add new monitoring 22 requirements, and clarify regulatory language. 23 The history of cooperation and reassessment of 24 the OBD Regulations has been a longstanding example of the 25 success of mutually beneficial agency/industry efforts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 We appreciate ARB's willingness to address our 2 concerns, both formally in regulatory reviews and case by 3 case during the certification process. Unfortunately, the 4 formal reviews to address manufacturers' concerns are 5 usually accompanied by more stringent and additional 6 monitoring requirements. This process usually drives the 7 technology that is need to meet the requirements and makes 8 it difficult to develop and implement compliant OBD II 9 monitoring systems when the target keeps moving. 10 While it appears that we have had stability for 11 over five years since the last update in 1996, this 12 regulation phased in many new monitoring requirements with 13 some still not completely phased in. For example, the 14 low-emission vehicle catalyst monitor, full-range misfire 15 detection, thermostat monitoring were just completely 16 phased in in this 2002 model year. The twenty thousandths 17 inch evaporative leak detection monitor will not be 18 completely phased in until the 2003 model year. 19 We agree that the regulation before you today 20 addresses many of our concerns and that the ARB staff has 21 taken the time to meet with us to resolve most of these 22 concerns as documented in the Alliance comments. But the 23 proposed regulations also increase the stringency and add 24 new monitoring requirements that, once again, move the 25 target. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 This comes at a time when manufacturers begin 2 introducing significant quantities of vehicles into 3 California that meet the more stringent LEV II emission 4 standards. OBD II will be challenged to monitor the 5 emission control systems of these vehicles to ensure that 6 they do not exceed 1.5 times very small emission standards 7 whose difference is difficult to detect even in a 8 laboratory environment. 9 Further more, it is accompanied by a separate and 10 distinctive enforcement regulation that substantially 11 changes the process and flexibility under the current 12 emissions enforcement regulations whose process is well 13 understood by ARB and manufacturers. 14 Manufacturers have had difficulties and continue 15 to have difficulties implementing the OBD II monitoring 16 requirements. Some of these have gone unnoticed by the 17 media, while others have not. The media is also reporting 18 on those OBD II systems that are operating properly. 19 These reports indicate that a movement is developing where 20 states and vehicle owners are questioning the cost 21 effectiveness of OBD II related repairs. I believe it is 22 unlikely that Californians will react differently. 23 While we support the principle of OBD II as an 24 effective inspection and maintenance tool, our concern is 25 that if OBD II becomes too stringent, and we may already PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 be there, no one will be able to stop the political 2 upheaval that could severely dampen its effectiveness. 3 Also, your decision today not only affects 4 vehicles in California, but vehicles nationwide, because 5 EPA's National Low Emission Vehicle regulation requires 6 California OBD II systems and manufacturers usually focus 7 on developing one OBD II system rather than one for 8 California and another for the other 49 states. 9 I ask that you carefully consider the proposed 10 OBD II regulation before you today, with the hope that you 11 will request the staff to focus on those issues that 12 provide clarification and address our concerns without 13 increasing the stringency of the existing regulation. 14 Ideally we'd rather see a regulation that 15 addresses our concerns rather than one that adds new 16 requirements. But we understand this may not be possible 17 at this time. 18 The Alliance has written comments identify 19 several unresolved issues including the mandatory recall 20 provisions of the proposed OBD II enforcement regulation 21 and the increased stringency effect when the OBD II 22 threshold of 1.5 times the emission standards is applied 23 to the LEV II emission standards. 24 The mandatory recall provisions should be revised 25 to provide the Executive Officer flexibility to evaluate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 the need for a recall on a case-by-case basis. Lack of 2 flexibility could seriously deteriorate the cooperative 3 spirit that we have developed over the years with the 4 staff to mutually resolve issues satisfactorily. 5 ARB should also establish OBD II emission 6 thresholds that are tied to the ULEV I emission standards. 7 This would help address our concerns regarding feasibility 8 and cost effectiveness for OBD II related I&M repairs. 9 Once we have a true period of stability and have 10 acquired the knowledge to develop and implement monitoring 11 systems that are less likely to have problems, we will be 12 in a better position to take on the next OBD challenge. 13 That concludes my formal presentation. I do want 14 to add one extra item on the standardization section of 15 the regulation. 16 The proposed regulation, as was stated this 17 morning by the staff, requires that manufacturers 18 implement the CAN Protocol on all 2008 model year 19 vehicles. 20 As such, it bans the use of a standard -- of an 21 SAE protocol that's been out there for quite awhile, SAE 22 Standard J1850. The reg prohibits its use in the 2008 23 model year. 24 We would like to have that standard extended one 25 more year. It would have little effect, if any, on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 equipment and tool manufacturers, I&M facilities, and the 2 service facilities because these vehicles on the road 3 today use this protocol, and the tools and the facilities 4 will all have to accommodate it in many more years to 5 come. 6 We believe it's much better to deal with a stable 7 older protocol that force manufacturers to hastily move to 8 a new CAN Protocol. Now, don't get me wrong. We're not 9 against the CAN Protocol, and we're doing it as rapidly as 10 possible. Unfortunately, in this particular case, talk -- 11 doesn't talk at us -- but it applies more to us because 12 our current plans do not accommodate changing over in the 13 2008 model year. 14 We're talking about 24,000 vehicles that we would 15 have to hastily do to it to get it to the CAN Protocol. 16 So I ask that the staff consider extending it for one 17 additional year for those vehicles. 18 That concludes my testimony, and I'll take any 19 comments. 20 CHAIRPERSON LLOYD: Any questions of staff on 21 that? 22 Clearly, you're saying this just applies to 23 DaimlerChrysler? 24 MR. KRICH: Yeah, that particular one time. 25 That's my envision. I know it's a point for us. There PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 may be others, but I know it's a point for us. 2 CHAIRPERSON LLOYD: Mr. Cackette. 3 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, we've 4 had this discussion with Chrysler and Frank. And we think 5 rather than revising the regulation, let other people 6 delay one more year, that we can handle this with a 7 deficiency. There are two things that can be not quite up 8 to par on every OBD system that are allowed by regulation. 9 And this is one that we think -- 10 CHAIRPERSON LLOYD: So you've got the 11 flexibility -- 12 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. And 13 albeit they -- you know, it takes a little bit of 14 something away from them, they only have one deficiency 15 left. But it's an easy way of doing it, and hopefully for 16 one year it wouldn't cause them much problem. 17 CHAIRPERSON LLOYD: Okay. 18 MR. KRICH: I guess my comment would be -- we 19 appreciate that flexibility. I hope that we're in a 20 position when that model year comes around that we have 21 the deficiency to give up and that there's something not 22 more important that we'd have to use it for. But -- 23 CHAIRPERSON LLOYD: I think the -- hopefully the 24 other issue that staff committed to was to have a formal 25 biennial review, and the I&M Program would hopefully PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 address that. 2 MR. KRICH: That's correct. That could be 3 helpful too, with that being in two years. 4 CHAIRPERSON LLOYD: Okay. Thank you. 5 Other questions? 6 Well, thank you very much. 7 What I'd like to do is take now a break till 8 about 1:00 o'clock for lunch and then resume with the EMA 9 comments. And we have five witnesses right after lunch. 10 So I'd hope that we can keep the comments here limited and 11 focused on the issue, so we can. 12 move this ahead. 13 Thank you. 14 (Thereupon a lunch recess was taken.) 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 AFTERNOON SESSION 2 CHAIRPERSON LLOYD: We'd like to continue public 3 testimony. Thanks. 4 Continue with Lisa Stegink. 5 MS. STEGINK: Good afternoon. 6 My name is Lisa Stegink and I'm here today on 7 behalf of the Engine Manufacturers Association. 8 Among EMA's members are manufacturers of engines 9 used in medium-duty vehicles, those 8,500 to 14,000 pounds 10 that are covered by the ARB proposal. 11 EMA's members also include the major 12 manufacturers of heavy-duty truck and bus engines used in 13 vehicles over 14,000 pounds that may be affected by this 14 proposal and, as we understand, will be the subject of an 15 upcoming heavy-duty OBD rule making. 16 EMA appreciates staff's willingness to meet with 17 us to discuss engine manufacturers' concerns with the 18 proposal as it relates to medium and heavy-duty engines 19 and vehicles. 20 EMA's comments today focus primarily on two 21 issues: The SAE J1939 communication protocol and the new 22 OBD specific in-use enforcement procedures. 23 EMA urges the ARB to continue to specify J1939 as 24 a diagnostics protocol for medium duty vehicles. Engine 25 and truck manufacturers as well as service providers have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 made significant financial and time investments in the 2 J1939 technology, starting as early as 1995 when J1939 was 3 first incorporated into the OBD II regulation. 4 EMA appreciates the steps staff has taken to 5 include the language that may allow for J1939 in the 6 future. But the language as it stands in the proposal 7 today is not enough, as it depends on the adoption of a 8 heavy-duty OBD rule that has not been proposed. Thus, we 9 support the concept that staff noted this morning that 10 would specifically include J1939 for 2004-2005. 11 The importance of specifically including J1939 12 goes beyond the current regulation for engines and 13 vehicles under 14,000 pounds. Indeed, what happens with 14 this regulation will set the stage for future OBD 15 requirements for heavy-duty engines and vehicles in 16 California. 17 You've received a copy of the statement that I'm 18 presenting here today, so I will not go through all the 19 specific support issues in the interests of time. 20 But I do want to say that the medium- and 21 heavy-duty industry continues to work to make J1939 a 22 world-recognized vehicle communications protocol for both 23 on-highway and off-highway use. In fact, some engine 24 manufacturers are in Tokyo today working on worldwide 25 harmonization of heavy-duty OBD. Those discussions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 include J1939. 2 The European proposal on heavy-duty OBD also 3 recognizes J1939 as the appropriate standard. 4 EMA again urges ARB to specifically include J1939 5 in today's rule, and we're willing to work with the staff 6 to implement appropriate language, if necessary. 7 Like the Alliance, EMA also has substantial 8 concerns with the proposed new OBD-only in-use enforcement 9 provisions. Rather than leading automatically to 10 mandatory recall, a finding that an OBD system is not 11 working properly should be addressed on a case-by-case 12 basis, considering a wide range of factors and the 13 availability of voluntary measures to address the apparent 14 nonconformance. 15 EMA urges ARB to revise the OBD II enforcement 16 provisions accordingly. And we support the position of 17 the Alliance with respect to OBD enforcement. 18 Thank you. 19 CHAIRPERSON LLOYD: Thank you very much. 20 Does staff have a comment on the request? 21 ADVANCED ENGINEERING MANAGER McCARTHY: Mike 22 McCarthy. 23 Yes, we have. We believe we've worked out some 24 language that will work and a 15-day change that will 25 allow a two-year gap for 1939 to be allowed, and then PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 allow us to move forward with the heavy-duty OBD 2 regulation and come back and make adjustments in either 3 regulation, as needed. 4 CHAIRPERSON LLOYD: Does that make you happy? 5 MS. STEGINK: Well, we'll be happy when we see 6 the language. But, yes, I think we -- we understand the 7 concept and what the staff is proposing to do. And, yes, 8 it sounds like the right step, so -- 9 CHAIRPERSON LLOYD: Yeah, you have to have faith, 10 be trustful. If they commit on the record here, that's 11 going to happen. 12 MS. STEGINK: Okay. 13 CHAIRPERSON LLOYD: Anymore questions? 14 Thank you very much. 15 MS. STEGINK: Thank you. 16 Then we have Eric Swenson, John Trajnowski, and 17 Bonnie Holmes. 18 MR. SWENSON: Good afternoon. I'm Eric Swenson 19 from International Truck and Engine Corporation. 20 Our company manufacturers medium and heavy-duty 21 trucks, principally above 14,000 pounds, but we sell 22 engines that could be used in 8,500 to 14,000 pounds. 23 I appreciate the Board's discussion regarding 24 15-day change notice for J1939. And I believe that I 25 don't have any further comments on that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 However, I would like to remark that I am a 2 member of the Society of Automotive Engineers Committee 3 that authors J1939 and am available to the staff tomorrow 4 for questions and comments if they'd like to take 5 advantage of it. 6 CHAIRPERSON LLOYD: Thank you very much. I'm 7 sure staff has taken note of that. Thank you, and thank 8 you for being brief. 9 John Trajnowski from Ford, and Bonnie Holmes-Gen. 10 MR. TRAJNOWSKI: Thank you. My name is John 11 Trajnowski. I'm with Ford Motor Company. I'm a technical 12 staff engineer. 13 I'm really going to be brief. I'm sure you'll 14 appreciate that. 15 I just wanted to follow up on the discussion on 16 mandatory recall, and point out that the requirements that 17 have been proposed today, the monitoring requirements, are 18 technology forcing. And, you know, that requires -- 19 they're not available off the shelf. We have to invent 20 them. We have to develop them and prove them out. And, 21 you know, it just simply presents a lot of risk for us. 22 And we have to infer how they're going to operate, you 23 know, in the field. 24 You know, and it's just not appropriate to have 25 mandatory recall for requirements that are technology PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 forcing. 2 And also I just want to point out, on the analogy 3 that these requirements were like a speeding limit and 4 that it's like getting a speeding ticket; the mandatory 5 recall to me is really more like getting the death 6 penalty. And it just -- combined with technology-forcing 7 requirements, mandatory recall is just not appropriate. 8 That's all I have to say, if you have any 9 questions. 10 CHAIRPERSON LLOYD: Well, that's interesting. 11 Between death penalty and drunk drivers, I'm not sure what 12 we're on here. 13 (Laughter.) 14 CHAIRPERSON LLOYD: Any questions from the Board 15 members? 16 Thank you. But you are neutral on the 17 regulation -- proposed regulation? 18 MR. TRAJNOWSKI: Yes. 19 CHAIRPERSON LLOYD: Okay. Thank you. 20 Yes, Ms. D'Adamo. 21 BOARD MEMBER D'ADAMO: Yes. I think that this 22 might be the appropriate time, because I think calling it 23 the death penalty is going perhaps a bit too far here. 24 During the break I took a look at the proposed 25 changes. And there actually are two different sections. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 One is the mandatory recall section, and then one is a 2 discretionary recall. And I think that we've heard so 3 much today about the mandatory recall, that it would 4 perhaps be useful, at this time, if we could have staff 5 outline the differences between those two. Because not 6 all instances will get us to the mandatory recall. In 7 fact, it's my reading of this section that there are a 8 number of factors that would actually put the manufacturer 9 into what is called the discretionary recall provision. 10 So if staff could briefly outline the differences 11 between those two sections, I think it would be helpful. 12 BOARD MEMBER RIORDAN: Ms. D'Adamo, while they're 13 thinking about that, what page are you on? 14 BOARD MEMBER D'ADAMO: Okay. I'm looking at the 15 staff-suggested modifications on page -- page 14 is the 16 discretionary -- oh, wait a second. There's so many pages 17 here. 18 ADVANCED ENGINEERING MANAGER McCARTHY: It's page 19 12 and page 14. 20 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 21 TERRIS: There's a back -- there's two numbering systems, 22 and so the enforcement regs are at the back end of the 23 package. 24 BOARD MEMBER D'ADAMO: Yes, it's at the -- so go 25 to the end. And on page 14, that's the discretionary. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 And the mandatory section is on page 12, under Subdivision 2 C, Remedial Action. 3 BOARD MEMBER RIORDAN: Thank you. 4 ADVANCED ENGINEERING MANAGER McCARTHY: So 5 Section C3 on Page 12 there is the mandatory recall 6 section that we've talked about so much. And in that 7 section we identify six specific factors that are defined 8 performance levels well above what's required under the 9 OBD II regulation. 10 And these are thresholds that we've used 11 engineering judgment and looked at to see what's 12 appropriate design and what the impacts of a design of a 13 monitor that is well above these standards will have on 14 the OBD program as a whole. 15 We've defined these factors specifically, as what 16 we've described before, as essentially nonfunctional 17 monitors that are well beyond what we require under the 18 OBD regulation. However, we still do provide two 19 different outs in a case where a manufacturer has ended up 20 in a case where they have a mandatory -- a monitor that 21 meets the mandatory recall factor, but the problem was 22 unforeseen by the manufacturer. Could have been a 23 deterioration or failure mode that was unanticipated by 24 the manufacturer. And we have a provision to get him out 25 of a mandatory recall in that situation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 Second, we've added a provision if there is a 2 redundant diagnostic, that even though the primary 3 diagnostic intended to catch the problem and does not 4 catch it, a secondary diagnostic is redundant and does 5 indeed catch it. That's also an out to get out of the 6 mandatory recall. 7 And under Section C4 that begins on Page 14, 8 there we identify the factors that the Executive Officer 9 will consider in determining appropriate remedial action 10 for everything -- all the other nonconformances that are 11 found with OBD II systems. And as Steve had mentioned 12 earlier today, there's probably been in the past two to 13 three years probably two to three hundred cases of 14 nonconformances that either we've discovered during our 15 testing or manufacturers have found and brought forward to 16 us. 17 And about -- we think at least three of them -- 18 three, maybe four of them would fit into these factors 19 that would fall under mandatory recall. The other two to 20 three hundred of them would fall under these -- category 21 here in C4, the discretionary remedial action where the 22 Executive Officer has the discretion to order anything -- 23 from no remedial action at all up to a recall. 24 BOARD MEMBER D'ADAMO: Okay. 25 EXECUTIVE OFFICER KENNY: Can I add a little bit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 to that, that might be of some benefit? I was actually -- 2 just to give the Board maybe a little bit more specificity 3 with regard to the mandatory recall and what we're talking 4 about with regard to mandatory recalls? 5 There really are, as you just heard, six 6 particular recalls that would be mandatory. And the first 7 one essentially is a system failure. And it's a system 8 failure in which basically, either through the 9 manufacturer's own information or through -- and of 10 testing pursuant to the regulations, it's determined that 11 the system essentially fails by the factor of two or three 12 over what it should be operating to. 13 The second one is when the system is tested kind 14 of on-road, and it's determined essentially on-road that 15 the system is also failing. And again, the factor there 16 that's provided is essentially a threshold of two to three 17 what otherwise would be required by the regulations. 18 The third mandatory recall is specific to a 19 misfire monitor. And what that one does is it basically 20 determines whether or not there are misfires and there 21 are -- is information provided by the manufacturer. And 22 what the mandatory recall would provide is that if there 23 are 20 percentage points higher in terms of the number of 24 misfires over what the manufacturer provided, then a 25 recall would be mandatory. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 So, for example, if the misfire information 2 provided by the manufacturer was at 12 and we came in with 3 a 28, that would not be a mandatory recall. But if it 4 came in at 32, it then would be. 5 The fourth one is evap. And we're looking again 6 at the evaporative monitor. And the situation here is 7 that the evaporative emissions monitor is not detecting 8 evaporative emission failures at a rate again of 50 9 percent over the evaporative's hole diameter size, which 10 means two and a half times the area, then you have again a 11 mandatory recall. 12 The fifth one is essentially kind of a general 13 on-road testing that we have that shows that the emissions 14 coming from the system are 150 percent higher than were 15 allowed under certification. And if we have 150 percent 16 higher emissions, then again it's a mandatory recall. 17 And then the last one is if you have a conflict 18 in terms of how it operates with the I&M system. And if 19 we have that, where it basically is intruding upon the 20 ability of the I&M system to function effectively, again 21 that's a mandatory recall. 22 Those are the six limited situations that we've 23 identified in which mandatory recalls are applicable. And 24 in each of those six situations, you know, we're looking 25 at significant OBD failures. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 If you're not in one of those six areas -- and 2 that also does not talk about the two exceptions that Mike 3 just talked about. But if you're not in one of those 4 situations, then you're in a discretionary recall 5 situation. 6 So those are the six that really have been sort 7 of discussed at great length, but I think without kind of 8 the specificity that might be of some value to the Board. 9 BOARD MEMBER D'ADAMO: Well, thank you very much 10 for taking the time to go through that. And I would just 11 like to say that I'm very comfortable with the way this is 12 structured. I think it's similar to other provisions of 13 the code where perhaps in certain circumstances the 14 Executive Officer Enforcement Division may have 15 discretion; but in other instances because the violation 16 may be more egregious, the code actually requires a 17 certain enforcement action; of course keeping in mind that 18 ultimately it would be up to the discretion as to whether 19 or not the ARB would even pursue the action, which is 20 where the -- I believe, Mr. Kenny, your comments came from 21 earlier, that ultimately, of course, we retained the 22 discretion. 23 CHAIRPERSON LLOYD: Thank you very much. 24 We have one last witness, Bonnie Holmes-Gen. 25 I don't see her here either. She was going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 speak on behalf of the American Lung Association in favor 2 of the regulation. 3 So I guess with that, Mr. Kenny, do you have any 4 further comments from staff. 5 EXECUTIVE OFFICER KENNY: No, I don't. 6 BOARD MEMBER ROBERTS: Mr. Chairman. 7 CHAIRPERSON LLOYD: Yes. 8 BOARD MEMBER ROBERTS: Just -- we were at this 9 end of the room trying to follow, and we can't find in any 10 of these documents which Page 12 you're on. We've come 11 across three different Page 12s and we -- 12 CHAIRPERSON LLOYD: Well, we can give you some 13 help down this side of table. I think Didi says -- it's 14 the back part of this -- the back part of that. 15 BOARD MEMBER ROBERTS: Oh, okay. It's not -- 16 it's this document, the back part. 17 CHAIRPERSON LLOYD: The back part, yeah. 18 Thank you. 19 While Supervisor Roberts is looking there, I will 20 now close the record on this agenda item. However, the 21 record will be reopened when the 15-day notice of public 22 availability is issued. 23 Written or oral comments received after this 24 hearing date but before the 15-day notice is issued will 25 not be accepted as part of the official record on this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 agenda item. 2 When the record is reopened for a 15-day comment 3 period, the public may submit written comments on the 4 proposed changes, which will be considered and responded 5 to in the final statement of reasons for this regulation. 6 So, at this time, I would like to ask my 7 colleagues if they have any ex parte communications to 8 disclose? 9 Well, I'm the only one. I have two. One on 10 April the 11th in Los Angeles. I discussed this 11 regulation with Kelly Brown from Ford. It was just a 12 cursory discussion in terms of the fact there were 13 significant issues that had to be resolved between staff 14 and the industry. And we discussed whether additional 15 time will be required, and Kelly said he would look into 16 that with staff. And so that's one. 17 And then just yesterday at the California Fuel 18 Cell Partnership, Al Weaverstad and I slipped into this 19 conversation somewhat by accident and discussed that -- he 20 discussed that he'd had, he thought, a very good, honest 21 discussion with the Executive Officer and staff yesterday 22 and that they looked forward to a discussion today at this 23 meeting and trying to get resolved as many of the 24 outstanding issues as possible, recognizing then probably 25 some would not get resolved. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 BOARD MEMBER BURKE: Mr. Chair. 2 CHAIRPERSON LLOYD: Yes, Dr. Burke. 3 BOARD MEMBER BURKE: I have a question to ask. 4 If I have a discussion with the South Coast staff 5 about an issue on this, is that considered an ex parte 6 communication? 7 GENERAL COUNSEL WALSH: No. 8 BOARD MEMBER BURKE: Okay. Then can I ask one 9 question? Because I wasn't here when the Toyota thing 10 happened. 11 And, by the way, the South Coast staff has spent 12 hours going over this. And they're 100 percent behind 13 CARB on this regulation. 14 Did the Toyota lawsuit come to the Board for a 15 vote? 16 GENERAL COUNSEL WALSH: No, it did not. 17 After we got a recommended decision from the 18 ALJ -- and the regulations provide for that -- the 19 parties, Toyota and staff, were able to sit down and 20 resolve the matter. And we have, in fact, settled that 21 case. So the decision did not come back to this Board. 22 Although, had the case continued to be contested, it would 23 have been. 24 BOARD MEMBER BURKE: Thank you. 25 BOARD MEMBER CALHOUN: None of these decisions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 ever come before the Board. This is action taken by the 2 Executive Officer. So we never know about it until 3 somewhere after the fact. 4 GENERAL COUNSEL WALSH: Well, the decision -- the 5 initial decision is made by the Executive Officer. But 6 there is an appeal process to the Board. There's a 7 mechanism for doing that. In the Toyota case the Board 8 made the decision, as is provided under the regulation, to 9 refer the matter to the Office of Administrative Hearings 10 for the evidentiary hearing and the creation of the 11 recommended decision. That would have then in normal 12 course come to the Board for final action. 13 CHAIRPERSON LLOYD: I think Mr. Calhoun does 14 bring up an interesting point. I think -- and we give the 15 authority to the Executive Officer, and it's his 16 discretion to negotiate or decide whether to pursue that. 17 And that's rightly so. On the other hand, it would be 18 maybe helpful for the Board to be kept informed if, in 19 fact, you're going to recall the action. Not to -- we 20 can't delegate and then -- but I don't know if there's a 21 way, Mr. Kenny, of how we can accomplish that. 22 EXECUTIVE OFFICER KENNY: We can provide 23 essentially in writing information to the Board members of 24 any potential recall actions that we are intending to 25 pursue. In addition, as Kathleen just indicated, there is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 an appellate right essentially to the manufacturers if, in 2 fact, a recall order is issued. 3 CHAIRPERSON LLOYD: So maybe my colleagues would 4 think that would be helpful and maybe it would address 5 some of the concerns from the industry there. 6 Mr. McKinnon. 7 BOARD MEMBER McKINNON: Now, do we have a problem 8 hearing lots of facts and details of a case prior to the 9 appellate right being exercised or not being exercised? 10 GENERAL COUNSEL WALSH: Well, when a recall is 11 ordered and the Board would then be the decision maker of 12 last recourse, we certainly would not be providing 13 information to the Board ex parte as staff. So that 14 information -- any information we provided to the Board 15 would be provided to the affected party as well. 16 BOARD MEMBER CALHOUN: It seems to me the 17 Executive Officer has the authority now to order a recall. 18 CHAIRPERSON LLOYD: Yeah. 19 BOARD MEMBER CALHOUN: And so why do we need to 20 adopt another regulation saying, "These are the conditions 21 under which the recall will occur."? Because you don't 22 know all the facts. 23 CHAIRPERSON LLOYD: I didn't think that's what we 24 were trying to do. I think what I was trying to do was to 25 keep the Board fully informed of this. That was the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 intent. 2 BOARD MEMBER CALHOUN: But what I'm hearing from 3 you is that you're suggesting this after the fact, after 4 the recall decision has been made. 5 CHAIRPERSON LLOYD: No, that's why I'm throwing 6 it open here for some discussion. That's why I was also 7 talking to Mr. Kenny as to is there a way in which we can 8 keep the Board more informed so that, in fact, -- maybe 9 before it's actually being issued that the Board's 10 informed, so that we have an opportunity if, in fact, we 11 would happen to disagree. But I don't know. It gets into 12 a tricky area. That's why I'm looking for some guidance 13 here. 14 EXECUTIVE OFFICER KENNY: I think it does get 15 tricky. I mean I'm happy to essentially inform the Board 16 in advance of any recall notice -- notification being 17 provided. But I'm not sure that the Board would want to 18 essentially have kind of a hearing on whether or not the 19 recall should occur, because you're going to get into a 20 very lengthy, very convoluted, very complicated 21 adjudicative discussion. 22 CHAIRPERSON LLOYD: And that was my comment 23 earlier, we can't delegate the responsibility and then 24 take it back. So maybe -- did you have a suggestion? 25 BOARD MEMBER D'ADAMO: Well, no. I just think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 that the regulation is pretty clear as to the factors. 2 And the only thing that notification would do is just to 3 make certain that the Executive Officer realizes the 4 importance of his or her decision. But you're going to go 5 through that factoring system as required by the 6 regulation anyway. 7 EXECUTIVE OFFICER KENNY: Correct. 8 CHAIRPERSON LLOYD: Yeah, I was specifically 9 talking about the one where he has discretion whether to 10 exercise that. So. 11 GENERAL COUNSEL WALSH: As a practical matter, 12 when a recall is ordered, we put out a document which is 13 the recall order that lays out the basis for the decision 14 that a recall is necessary. That document together with 15 a -- you know, some sort of notification to the Board. 16 Even in the past we have made that available to the Board 17 when the recall order is issued. 18 So there -- 19 CHAIRPERSON LLOYD: So we do that simultaneously. 20 GENERAL COUNSEL WALSH: Yes. 21 CHAIRPERSON LLOYD: Okay. Well, then any other 22 discussion as -- Mr. McKinnon. 23 BOARD MEMBER McKINNON: Yeah, I reaffirm that I 24 think we should have a right to protect the on-board 25 diagnostic system rule on its own. And so I can live with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 the rule. I absolutely understand some of the concerns 2 about discretion, but I think I'm willing to live with it. 3 And I think hearing that there's an appeal that 4 can come to us also helps me with that. Because if there 5 is an egregious example, it certainly can come to us. And 6 if it's outrageous, I'm sure we'll deal with it 7 accordingly. 8 I also think that there might be some merit to 9 this notion of having a look at this down the road and see 10 how it's working. And I don't know if we want to 11 formalize it as a biannual review or we want to just make 12 sure that in a couple of years we -- we're expecting a lot 13 of changes to the auto manufacturers, and it should be for 14 the most part a very cooperative process. And if that 15 isn't how it's working, we should be able to hear that. 16 BOARD MEMBER RIORDAN: Mr. Chairman, if I might 17 just to follow along. 18 It seems to me a biennial review is a good thing. 19 Perhaps it gives us a level of comfort that this is moving 20 forward as we anticipated it. I certainly support the 21 staff recommendations. 22 But I do think people, for whatever reason, 23 change over a period of time, not only staff but sometimes 24 Board members, so it's good to have an update just to 25 allow people to know that this is a process that's moving PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 forward. And I would hope that we might include that in 2 the resolution just as a line item -- I think that would 3 be helpful -- to remind us in the future that we do need 4 to have some sort of a review. 5 CHAIRPERSON LLOYD: Dr. Burke. 6 BOARD MEMBER BURKE: There seems to be some 7 confusion on the thing down here. Is there really an 8 appeal to the Board? 9 GENERAL COUNSEL WALSH: Yes. 10 BOARD MEMBER CALHOUN: I'm not aware of any 11 appeal ever coming to the Board, when the executive 12 officer -- 13 CHAIRPERSON LLOYD: So you've been on the Board 14 for quite a few years and nothing has happened? 15 BOARD MEMBER CALHOUN: Well, I'm not aware of any 16 appeal ever coming to this Board. 17 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 18 TERRIS: Member Calhoun, in 1998 we adopted administrative 19 hearing procedures for petitioning and challenging 20 Executive Officer decisions. And that process hasn't 21 appealed to the Board after an administrative law judge 22 makes his decision. 23 EXECUTIVE OFFICER KENNY: And if I could add to 24 that. 25 In the case of the -- in the matter of the Toyota PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 case, it was essentially a referral to the administrative 2 law judge to do the fact finding. And then the Board 3 retained the discretion to accept or reject the 4 administrative law judge's decision. And so the entire 5 process essentially began with that case being referred to 6 the administrative law judge because there was an appeal 7 of the Executive Officer recall decision by Toyota. And 8 that matter then went to the ALJ. 9 It was after that decision was tentatively 10 provided that continued discussions occurred between the 11 staff and Toyota, and ultimately a resolution was achieved 12 between the two parties. Had that not occurred, then the 13 Board would have had to have heard the administrative 14 law -- would have had to have considered the 15 administrative law judge's decision, and then they would 16 have to also have decided whether to accept it or to 17 modify that particular decision. 18 So that process was used in that case, and that 19 was probably the only time it has been done to date. 20 BOARD MEMBER CALHOUN: But it never came -- it 21 never got to the point where it would come to the Board. 22 Well, what's wrong with the present system then, 23 if you -- 24 EXECUTIVE OFFICER KENNY: Well, the present 25 system, in terms of the process, is fine. We're not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 changing that process. We're changing essentially the 2 recall regulations themselves that are applicable to the 3 manufacturers. The manufacturers will still have the 4 right to appeal to the Board if they disagree with the 5 recall order. That is being retained. 6 BOARD MEMBER RIORDAN: And, Mr. Kenny, don't I 7 remember that you can also have a division of the Board 8 actually hear some of that and then make a recommendation 9 to the Board, as I recall? I think I recall that being -- 10 EXECUTIVE OFFICER KENNY: Actually, Mrs. Riordan, 11 I think you're absolutely right. As I recall back on when 12 this case was brought forward, I think the Board had 13 elected to create a subcommittee of the Board, which, as I 14 recall, consisted of four members. 15 BOARD MEMBER RIORDAN: I don't even think it was 16 that big. 17 EXECUTIVE OFFICER KENNY: Three members. 18 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 19 TERRIS: If I may just jump in. 20 The procedures that we adopted in 1998 superceded 21 those previous procedures, which provided for a panel of 22 the Board or going to an administrative law judge. So the 23 present regs require it to go to an office -- to an 24 administrative law judge. 25 BOARD MEMBER RIORDAN: To administrative -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 2 TERRIS: -- for initial hearing of the matter. 3 BOARD MEMBER RIORDAN: Right. Then prior to that 4 there was then the opportunity -- 5 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 6 TERRIS: At the time of the Toyota hearing procedures 7 provided -- 8 BOARD MEMBER RIORDAN: Right, because I do think 9 I recall that. 10 EXECUTIVE OFFICER KENNY: You are right and Mr. 11 Terris is also right. But we had basically kind of a 12 change there where we tried to make it as simple as 13 possible for the Board. Because one of the concerns we 14 had, at one point, was that the Board could get caught up 15 in essentially a two-year adjudicative hearing. And we 16 were concerned that what would happen is that a challenge 17 to a recall order would take up all of the Board's agenda 18 time for the entire year or longer. And so that's why the 19 regulations were modified, to provide for an ALJ to make 20 the tentative determinations. 21 CHAIRPERSON LLOYD: And I think, as you indicated 22 earlier, be careful what you wish for, because I don't 23 think we want to spend all our time in those areas. But 24 at least the process is there, which is important. 25 Any other comments, discussion from the Board? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 Mr. McKinnon. 2 BOARD MEMBER McKINNON: Just so I'm clear on it. 3 So once it leaves the ALJ and there's appeal to 4 the Board, it's an appeal to the full Board? 5 SPECIAL ASSISTANT TO THE EXECUTIVE OFFICER 6 TERRIS: Yes. 7 CHAIRPERSON LLOYD: Well, with that, we have a 8 motion before us. 9 Do we have any -- 10 BOARD MEMBER D'ADAMO: So moved with Mrs. 11 Riordan's addition. 12 CHAIRPERSON LLOYD: Any other modifications 13 there? 14 BOARD MEMBER RIORDAN: I'll second the motion. 15 CHAIRPERSON LLOYD: Okay. Well, I'd like to put 16 it to a vote. 17 All those in favor say aye? 18 (Ayes.) 19 CHAIRPERSON LLOYD: Against? 20 (Nos.) 21 CHAIRPERSON LLOYD: So that's Supervisor Roberts 22 and Mr. Calhoun. 23 So all in favor except for Supervisor Roberts and 24 Mr. Calhoun. 25 Dr. Burke, did you vote? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 BOARD MEMBER BURKE: Yeah, I voted. I voted for 2 it. 3 CHAIRPERSON LLOYD: Thank you. 4 Thank you very much. And thank you, staff, and 5 thank you, all the people that testified. It's a tough 6 issue. We hope that obviously staff will continue to work 7 with the industry and work it out. 8 Thank you very much. 9 We'll take just a couple minute break while we 10 change staff and get on to the next agenda item, which is 11 the 02-3-3, report to the Governor and state legislature 12 on penalties or violations of state motor vehicle fuel 13 specifications. 14 (Thereupon a brief recess was taken.) 15 CHAIRPERSON LLOYD: One of the most effective 16 emission control strategies is standards this Board has 17 set for fuels used in motor vehicles. California has the 18 most stringent standards in the world today. These fuel 19 standards reduce emissions directly. They also allow us 20 to use the most advanced motor vehicle emission controls 21 on the market today. 22 Like all regulations, fuel specifications are 23 only effective when they are fully complied with. So we 24 need a strong and effective enforcement program to make 25 sure that California fuel manufacturers and distributors PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 understand the importance of compliance. 2 Today, we are focusing on one element of that 3 enforcement program -- the penalties that may be imposed 4 when violations of clean fuel regulations occur. 5 At this point, I would like to turn it over to 6 Mr. Kenny to begin staff presentation. 7 EXECUTIVE OFFICER KENNY: Thank you, Mr. Chairman 8 and Members of the Board. 9 In 1995 the Legislature provided a new penalty 10 structure to assist us in the enforcement of clean fuel 11 regulations. At that time, the Legislature also asked us 12 to report back to them on the effectiveness of the new 13 penalties. 14 The first report was submitted in 1998, and this 15 is the second report. 16 And with that, Ill turn it over to Janice Ross, 17 who will make the presentation. 18 Janice. 19 (Thereupon an overhead presentation was 20 presented as follows.) 21 AIR POLLUTION SPECIALIST ROSS: Thank you. Good 22 afternoon. 23 As most of you undoubtedly know, the Air 24 Resources Board is responsible for coordinating efforts to 25 improve air quality in California and to maintain progress PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 made in that regard. And one of the ways this is 2 accomplished is by developing regulations to control 3 harmful emissions from various sources. 4 The ARB is charged with the primary 5 responsibility for controlling air pollution caused by 6 motor vehicles. And this includes authority to set 7 specifications for fuels used in motor vehicles to reduce 8 harmful emissions of air pollutants. 9 Regulations are only useful to the extent that 10 they are complied with and, therefore, their enforcement 11 is of primary concern. 12 The Enforcement Division of the ARB has the 13 primary mission of enforcing statewide regulations. And 14 the Fuels Enforcement Section of the Enforcement Division 15 is responsible for the statewide enforcement of vehicular 16 sources as described in Part 5 of the Health and Safety 17 Code, which includes the manufacture and distribution of 18 motor vehicle fuels, gasoline and diesel, in California. 19 The regulations adopted pursuant to this 20 authority are codified in Title 13 of the California Code 21 of Regulations; while the penalties for violation of these 22 regulations can be found in Part 5 of the Health and 23 Safety Code. 24 --o0o-- 25 AIR POLLUTION SPECIALIST ROSS: This report PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 concerns a 1996 revision of the penalty structure that was 2 first established in 1976. 3 In 1996 Senate Bill 163 introduced a new motor 4 vehicle fuels penalty structure intended to be more 5 workable for actual enforcement. It was to remain in 6 effect until January 1st, 1999, and then repealed unless 7 the Legislature directed otherwise. 8 It also required that the Board report to the 9 Legislature on the implementation of the new structure. 10 And this first report was submitted in 1998. 11 As a result of that report, the Legislature 12 extended the sunset date to January 1st, 2003, and asked 13 for a further report in 2002. And that second report is 14 what we are asking you to approve today. 15 --o0o-- 16 AIR POLLUTION SPECIALIST ROSS: In 1976 the only 17 penalty available for violations of the fuel specification 18 regulations was $500 per vehicle, as specified in Health 19 and Safety Code Section 43016. 20 At that time, Part 5 referenced several different 21 types of vehicular controls, such as catalytic converters, 22 so the per-vehicle wording was not inappropriate in 23 general. However, it did not lend itself to enforcement 24 of the fuel specification regulations as they were adopted 25 because actual enforcement strategy involved sampling PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 fuels throughout the distribution chain, from refineries 2 and bulk terminals to small service stations. 3 In order to apply the penalty to volumes of motor 4 vehicle fuel found to be in violation of the regulations, 5 the per-vehicle wording had to be construed to mean 6 per-vehicle fueling. This proved difficult because the 7 number of field inspectors available was not sufficient to 8 perform direct observation accounting of vehicle sales. 9 And since our commitment has always been to take 10 noncomplying fuel off of the market as soon as possible, 11 there had usually not been any sales to observe once a 12 violation was detected. 13 However, investigation could tell us how much 14 noncomplying fuel was sold before we found the violation. 15 So these volumes expressed in gallons traditionally were 16 divided by 20 to obtain a very conservative estimate of 17 the number of vehicle fuelings, which were then multiplied 18 by $500 to yield the maximum potential penalty for a given 19 violation. 20 As you will see, while this mechanism resulted in 21 penalties that were fair and reasonable, this was not a 22 straightforward calculation and not always easy for the 23 regulated industry to understand. 24 Also, in some cases such as violations at 25 refineries that involve thousands of barrels of fuel, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 potential maximum penalties derived this way were 2 inordinately large. 3 --o0o-- 4 AIR POLLUTION SPECIALIST ROSS: In the meantime, 5 the penalty structure found in Part 4 of the Health and 6 Safety Code, which applies to nonvehicular violations, was 7 much more flexible and straightforward. It had a tiered 8 structure, with increased penalties for violations caused 9 by negligence and even greater penalties for deliberate 10 and knowing violations of the law. 11 These penalties were applied per violation per 12 day, and also included a list of factors required to be 13 considered in determining appropriate penalty amounts. So 14 in 1996 the Legislature gave us a parallel structure for 15 fuels violations. 16 --o0o-- 17 AIR POLLUTION SPECIALIST ROSS: Senate Bill 163 18 also had a tiered structure that categorizes violations by 19 their degree of egregiousness. In each case, the penalty 20 cited is a maximum penalty for each day of each violation. 21 For falsification of records required to be kept 22 by statute or regulation, the potential penalty is $25,000 23 per day. For strict liability violations the maximum 24 penalty is $35,000 per day. For violations in which we 25 can demonstrate negligence as a cause, the potential PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 penalty is $50,000 per day. 2 And for violations that we can prove to have been 3 intentional, the maximum penalty is $250,000 per day. 4 To include the impacts of varying volumes of 5 noncomplying fuel, additional penalties are available for 6 excess emissions attributed to noncompliance: $9,100 per 7 ton for gasoline and $5,200 per ton for diesel. These 8 figures are based on the cost effectiveness of Phase 2 9 clean gasoline and low-sulfur and low-aromatic diesel 10 fuel, and can be revised periodically to reflect changing 11 economic conditions. 12 And to take into account the differing durations 13 of violations, each day during which any violation occurs 14 is considered to be a separate violation. 15 --o0o-- 16 AIR POLLUTION SPECIALIST ROSS: In addition, 17 Senate Bill 163 specified certain factors to be considered 18 in determining an appropriate penalty, such as the extent 19 of harm to public health and safety; the compliance 20 history of the violator; the cooperation of the violator 21 during investigation; and mitigation and remediation 22 efforts that the violator took. 23 --o0o-- 24 AIR POLLUTION SPECIALIST ROSS: Senate Bill 163 25 also includes authority to adopt administrative penalty PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 procedures as an alternative to litigation or negotiated 2 settlement, with a limit of $25,000 per day and a maximum 3 per violation cap of $300,000. 4 --o0o-- 5 AIR POLLUTION SPECIALIST ROSS: And staff is 6 currently developing a proposal to bring to the Board 7 later this year to implement this authority. 8 --o0o-- 9 AIR POLLUTION SPECIALIST ROSS: The Legislature 10 clearly stated Senate Bill 163 that its intent in 11 providing this alternate structure was to update the 12 penalty provisions for fuel specification regulations and 13 to provide a tool for effective fair and consistent 14 enforcement. Likewise, the Legislature made clear that it 15 did not intend to modify penalty settlements beyond 16 historic levels. 17 --o0o-- 18 AIR POLLUTION SPECIALIST ROSS: This table shows 19 a representative sampling of cases settled under the 1976 20 penalties provided by Health and Safety Code Section 21 43016. 22 The next table shows a similar sampling of cases 23 settled under the revised penalty structure Senate Bill 24 163. As you can see, the range of penalties is very 25 similar. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 We looked for a way to demonstrate mathematically 2 that the Legislature's intent has been met. But, 3 unfortunately, there were too many variables involved to 4 do so. 5 --o0o-- 6 AIR POLLUTION SPECIALIST ROSS: Largely because 7 at the same time that the revised penalty structure became 8 effective, so did the Phase 2 Clean Fuels Regulations. In 9 order to provide needed flexibility to industry, we moved 10 with rules -- from rules with straight cap limits 11 throughout the distribution chain to alternative 12 compliance models, allowing formulations that meet 13 predictive models, have designated alternative limits, 14 that average limits over successive batches, and so on. 15 Therefore, enforcement strategies had to change 16 to accommodate these new rules. 17 We have come to rely much more on batch reporting 18 and self reporting a violation, since identifying 19 violations by analyzing the components of fuel samples is 20 no longer as easy and straightforward as it once was. 21 Therefore, cases developed after implementation 22 of the new fuels regulations and the new penalty structure 23 don't look very much like the cases developed before 1996. 24 And they aren't easily compared except by looking at 25 settlement ranges. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 --o0o-- 2 AIR POLLUTION SPECIALIST ROSS: During five years 3 of working with the new penalty structure in a variety of 4 situations, it has proven to be easy to explain to the 5 regulated community and in the courtroom. And it has 6 become the useful tool that the Legislature intended, 7 providing flexibility for the various violation scenarios 8 to which it has been applied, and also providing the 9 necessary deterring effect. It is much easier to achieve 10 and demonstrate fair and consistent enforcement with this 11 structure. 12 --o0o-- 13 AIR POLLUTION SPECIALIST ROSS: The Legislature 14 also asked that we report on the compliance rates since 15 implementation of the new structure. 16 Since the 1998 report, 9,620 samples of motor 17 vehicle fuel have been collected and analyzed. Of those 18 samples, 79 cases have been opened, for a compliance rate 19 of 99.2 percent. It is the consensus of enforcement staff 20 and legal staff that the penalty settlement has stayed 21 consistent historically and that the Legislature's intent 22 has been realized. 23 --o0o-- 24 AIR POLLUTION SPECIALIST ROSS: In preparing this 25 report, the public and the regulated community were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 invited to comment. Public workshops were held in 2 Sacramento and El Monte between four and six in the late 3 afternoon to make community participation as easy as 4 possible. 5 The workshops were very lightly attended, and no 6 one has expressed any opposition to the report, either 7 through the workshops or through E-mail from the web site 8 or any other mode. 9 Industry has already sponsored Senate Bill 433, 10 Machado, repealing the sunset provisions of Senate Bill 11 163 in order to make it permanent. 12 Thank you. 13 CHAIRPERSON LLOYD: Thank you very much. 14 Comments, questions from my colleagues? 15 BOARD MEMBER RIORDAN: Mr. Chairman, I was 16 briefed by staff. And it seems to me to be very 17 straightforward. They did an excellent job of putting 18 together all of the data that needed to be. And I think 19 this reads easily for the Legislature. Obviously, there's 20 support from the industry, the affected industry. And I 21 think it's probably wise for us just to move this on with 22 the approval of the resolution. 23 CHAIRPERSON LLOYD: I agree, and I think it's -- 24 again, compliment staff and very nice reporting 25 summarizing that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 We've got a proposer, I guess seconder, for the 2 motion? 3 BOARD MEMBER RIORDAN: Yeah, I'll move the 4 resolution. 5 BOARD MEMBER McKINNON: I'll second. 6 CHAIRPERSON LLOYD: All in favor say aye? 7 (Ayes.) 8 CHAIRPERSON LLOYD: Anybody against? 9 Okay. Thank you. Unanimous support there. 10 And thank you very much, staff. 11 Let's take a couple of minutes while we move 12 ahead to the next item. 13 The next item is 02-3-4, proposed guidelines for 14 implementing an expanded statewide zero emission vehicle 15 incentive program, ZIP I and ZIP II. 16 During 2000 and 2001 this Board took regulatory 17 and nonregulatory action on several occasions to address 18 some of the implementation challenges facing the Zero 19 Emission Vehicle Program, the ZEV Program. With each 20 action, the Board affirmed the ZEV Program and the 21 importance of ZEV technologies to attaining our public 22 health, global climate change and energy diversity goals. 23 As an aside, I couldn't help think as we debated 24 at some length this morning about ways of detecting 25 emissions, how nice it is to look at the alternative here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 With ZEV, we don't have to worry about that. 2 Anyway, in doing so, this Board also acknowledged 3 concerns about product availability, market demand, and 4 cost, noting in particular the government incentives to 5 lower the high cost of ZEVs in the early years will ease 6 the transition to a self-sustaining ZEV market. 7 I am pleased that today we are considering 8 staff's proposed guidelines for implementing three 9 separate ZEV incentive programs, one existing program and 10 two new programs. 11 In December 2000, this Board approved guidelines 12 for implementing the ZEV incentives created by Assembly 13 Bill 2061 by Assemblyman Alan Lowenthal of Long Beach. 14 That $18 million program, which expires at the end of this 15 year, provides grants up to $9,000 for the purchase or 16 lease of zero emission passenger cars and trucks. It is 17 properly referred to as the AB 2061 or Lowenthal program, 18 or simply the ZIP. 19 Today, staff is proposing to modify the ZIP 20 consistent with Assembly Bill 3090, authored by 21 Assemblyman Marco Firebaugh, which went into effect 22 January 1, 2002. 23 The new legislation adds environmental justice 24 considerations to the allocation formula for ZEV 25 incentives, which is an important refinement as we go PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 forward, particularly in light of the environmental 2 justice policies adopted by this Board last September 3 which will apply across the Board to all ARB programs. 4 In the 2001-2002 budget, Governor Davis 5 proposed -- this is the third one -- and the State 6 Legislature approved an additional $20 million for ZEV 7 incentives. This appropriation will fill the gap when the 8 2061 Program expires and will make ZEV incentives 9 available through June 2004. 10 The new $20 million is equally -- divided equally 11 between two new incentive programs, one for individual 12 vehicle purchases and one for fleets. Like the AB 2061 13 Program changes I discussed a moment ago, the proposed 14 guidelines for the new fleet incentive program incorporate 15 environmental justice principles and criteria. 16 At this point, I'd like to turn it over to Mr. 17 Kenny to begin the presentation and present this to the 18 Board. 19 EXECUTIVE OFFICER KENNY: Thank you, Mr. Chairman 20 and Members of the Board. 21 The proposed guidelines before you today are 22 aimed primarily at the consumers of zero emission 23 vehicles. Staff is attempting to provide single points of 24 contact for both individual vehicles and fleets with a 25 single application form so the consumers know who to call PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 and how to avail themselves of the maximum available 2 incentive for the particular vehicle they are purchasing 3 or leasing. 4 The proposed guidelines include an implementation 5 schedule; procedures for administering the programs; 6 criteria for recipients; eligible vehicles and fleet 7 projects; evaluation and ranking criteria; environmental 8 justice allocation criteria; and proposed grant amounts 9 for various vehicle types. 10 Due to the current fiscal crisis, however, the 11 Governor's budget for Fiscal Year 2001-2002, the current 12 budget year, cut $3.2 million from the original $18 13 million authorized for the ZIP I program. 14 There is a possibility that the budget for the 15 next fiscal year will also include some degree of cutback 16 for ZEV funding. Staff has taken the possibility of 17 further budget cuts into account while establishing 18 vehicle eligibility criteria and grant amounts for the ZIP 19 II Program. 20 Judy Yee of the Mobile Source Control Division 21 will now make the staff presentation on the expanded 22 statewide ZEV incentive program, covering ZIP I and ZIP 23 II, and Gayle Sweigert will follow with the staff's 24 presentation on the proposed fleet incentive program. 25 Judy. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 (Thereupon an overhead presentation 2 was presented as follows.) 3 AIR POLLUTION SPECIALIST YEE: Thank you, Mr. 4 Kenny. 5 To begin this presentation, I will briefly 6 highlight the purpose of the proposed guidelines and the 7 status of the statewide incentive program for zero 8 emission vehicles currently being implemented by the ARB. 9 In stakeholder jargon, the current program is 10 simply referred to as ZIP or ZIP I. 11 Staff will then provide an overview of the 12 proposed guidelines, in particular the organization of the 13 guidelines and the key elements. I will conclude with a 14 brief summary and recommendations. 15 --o0o-- 16 AIR POLLUTION SPECIALIST YEE: The purpose of the 17 proposed guidelines is to provide for the coordinated 18 implementation of three distinct but similar incentive 19 programs for ZEVs. 20 One is the existing ZIP I, which was originally 21 authorized by Assemblymember Lowenthal with Assembly Bill 22 2061 in the statutes of 2000. The proposed guidelines 23 will also address changes to ZIP I required by Assembly 24 Bill 1390 in the statutes of 2001, which was sponsored by 25 Assemblymember Firebaugh. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 The two new ZEV incentive programs are programs 2 authorized and funded by the Fiscal Year 2001-2002 3 approved State budget. 4 Since Board approval of the original guidelines 5 in December of 2000, ZIP I has been implemented statewide 6 by an ARB program manager. However, the South Coast Air 7 Quality Management District on a voluntary basis, as 8 provided for by AB 2061, recently began implementing the 9 program in its jurisdiction. 10 New zero-emission light-duty cars and trucks 11 capable of operation on freeways are eligible for ZIP I 12 incentives. 13 Grants up to $9,000 may be awarded to qualified 14 applicants for eligible ZEVs purchased or leased between 15 October 1, 2000, and December 31st, 2002. To date, over 16 340 grants have been awarded. 17 Eighteen million dollars was originally 18 authorized for this program. However, the budget for 19 2001-2002 has reduced the budget funds by $3.2 million. 20 And the Legislature is considering a combination of 21 additional funding cuts and funding redistribution. Staff 22 expects remaining funding to be sufficient for the award 23 of ZIP I grants to eligible applicants in 2002. 24 --o0o-- 25 AIR POLLUTION SPECIALIST YEE: To begin the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 overview of proposed guidelines I will describe the 2 organization. 3 --o0o-- 4 AIR POLLUTION SPECIALIST YEE: The proposed 5 guidelines are organized in two parts. 6 Part 1 contains guidelines for the coordinated 7 implementation of the two very similar incentive programs 8 that will be administered seamlessly as an expanded 9 statewide zero-emission vehicle incentive program. These 10 are for the current program, ZIP I, as well as the new 11 state budget funded program, ZIP II. 12 Part 2 contains proposed guidelines for 13 implementing the other new program funded by the state 14 budget and incentive program for fleet vehicles. 15 --o0o-- 16 AIR POLLUTION SPECIALIST YEE: Staff considered 17 legislative guidance in developing the proposed 18 guidelines. Staff will highlight key guidance provided by 19 Assembly Bill 1390 and budget act language for the 20 2001-2002 State budget. Staff-initiated changes will also 21 be identified. 22 --o0o-- 23 AIR POLLUTION SPECIALIST YEE: AB 1390 provided 24 general and specific guidance that affected the 25 development of the guidelines. It encourages the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 consideration of environmental justice principles in the 2 implementation of all incentive programs. 3 The Bill also modified the ZIP I Program to 4 expand eligibility for grants to federal agencies and to 5 give the Board more flexibility regarding the 6 implementation of ZIP I, specifying that the Board may 7 reserve and allocate ZIP funds and reduce grant amounts to 8 ensure equitable availability of grants. 9 The original bill authorizing the ZIP I Program 10 was more restrictive regarding the grant amount. 11 --o0o-- 12 AIR POLLUTION SPECIALIST YEE: The 2001-2002 13 State budget appropriated $20 million for additional ZEV 14 incentives. In the Budget Act language, the Legislature 15 authorized that such funds shall be available for 16 expenditure through June 2004, and awarded through one of 17 two new programs. The availability of these funds will 18 allow ARB staff to continue implementation of a statewide 19 ZEV incentive program after the expiration of the 20 Lowenthal funds on December 31st, 2002. 21 The $10 million of the appropriation is for 22 grants up to $5,000 per vehicle. The Board is directed to 23 establish the vehicle eligibility and grant eligibility 24 criteria for these additional funds, allowing the expanded 25 ZIP Program to provide incentives for ZEVs not eligible PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 for ZIP I grants. 2 The other $10 million is for grants up to $11,000 3 per vehicle to subsidize the purchase or lease of ZEVs to 4 be used in fleets operating in nonattainment areas. 5 More details regarding legislative direction will 6 be provided when Part 2 of the guideline is covered. 7 The Legislature expressed its intent that the 8 Board consider the eligibility of low-speed vehicles or 9 neighborhood electric vehicles when developing and 10 implementing programs. 11 --o0o-- 12 AIR POLLUTION SPECIALIST YEE: Staff is proposing 13 changes to the ZIP I based on experience with implementing 14 the program, including a stricter definition for "new 15 vehicle" and provision for the inclusion of specialty 16 fleet vehicles. Additionally, to add a consumer 17 protection element, staff proposes requiring eligible 18 vehicles to be covered by a 36-month vehicle and battery 19 warranty. 20 Finally, staff proposes to limit the amount of 21 state grants per vehicle to 50 percent of the recipients 22 cost. 23 --o0o-- 24 AIR POLLUTION SPECIALIST YEE: Part 1 contains 25 guidelines for the expanded statewide ZEV incentive PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 program. Staff will provide an overview of the expanded 2 program that consists of ZIP I and ZIP II, a comparison of 3 the two programs, and descriptions of the new types of 4 vehicles that will be included in the expanded program. 5 --o0o-- 6 AIR POLLUTION SPECIALIST YEE: Part 1 contains 7 ZIP I guidelines originally approved by the Board in 8 December 2000, with staff's proposed revisions to account 9 for modifications required by AB 1390. Part 1 also 10 contains proposed guidelines for the new ZIP II incentive 11 program. 12 As ZIP I and ZIP II will be administered as a 13 single expanded program, a single application form and 14 approval process will be used. The program manager will 15 ensure that the applicant receives a larger grant award if 16 eligible for both the ZIP I or ZIP II grant. 17 Staff proposes implementing ZIP II upon Board 18 approval of these guidelines. Staff is not proposing 19 retroactive eligibility for ZIP II grants because the 20 program manager will need to work with the manufacturers 21 to ensure that their vehicles meet the new eligibility 22 criteria. 23 The ARB program managers for the statewide 24 incentive program and the fleet incentive program will 25 work cooperatively to ensure that the grants are awarded PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 to eligible recipients. 2 As mentioned previously, ZIP I and ZIP II are 3 similar but distinct programs. 4 The similarities: Both ZIP I and ZIP II grants 5 are awarded on a first come, first serve basis. Vehicles 6 must meet the same eligibility criteria, including meeting 7 applicable safety standards, ARB certification 8 requirements, and vehicle warranty requirements. Eligible 9 vehicle models will be placed on a list of eligible 10 vehicles, which will include the ZIP I and ZIP II grant 11 amounts. 12 The differences include: Vehicle grant 13 availability. ZIP I grants are available through 2002. 14 Zip II grants may be awarded through June 2004. Only 15 freeway capable ZEVs, also known as full-function ZEVs, 16 are eligible for ZIP I grants up to $9,000. Additional 17 types of ZEVs are eligible for ZIP II grants, which will 18 vary according to vehicle category up to $5,000. 19 In establishing the grant amounts, staff took 20 into consideration typical manufacturer suggested retail 21 price, vehicle range, and suitability to meet a variety of 22 transportation needs. 23 The next four slides provide examples of the 24 vehicle categories and a comparison of grant amounts. 25 These vehicle categories will also be utilized for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 fleet incentive program. 2 --o0o-- 3 AIR POLLUTION SPECIALIST YEE: The full-function 4 vehicle category is for passenger cars and trucks capable 5 of operation on freeways. In 2002, when the three 6 incentive programs overlap, a full-function ZEV may be 7 eligible for either a $9,000 ZIP I grant, a $5,000 ZIP II 8 grant, or an $11,000 fleet program grant. Their program 9 managers will work to ensure that the applicant receives 10 the largest grant award they are eligible for. 11 The city ZEV category is for smaller passenger 12 cars with manufacturer imposed restrictions on operation 13 on freeways. Vehicles in this category must meet the same 14 federal motor vehicle safety standards, FMVSS, as 15 full-function ZEVs and be suitable for many of the same 16 transportation applications. 17 --o0o-- 18 AIR POLLUTION SPECIALIST YEE: However, a vehicle 19 placed in the city ZEV category will not be eligible for a 20 ZIP I grant because of the restriction on its operation on 21 freeways. These vehicles may be eligible for either a 22 $3,500 ZIP II grant or a $5,000 fleet program grant. 23 --o0o-- 24 AIR POLLUTION SPECIALIST YEE: The zero-emission 25 motorcycle, ZEM, category will be limited to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 three-wheeled, fully enclosed zero-emission vehicles with 2 one or two seats. Such ZEMs are proposed for inclusion in 3 the expanded ZIP because they provide an innovative 4 zero-emission transportation option and support advanced 5 ZEV technology. 6 It's noteworthy that the ZEMs are not included in 7 ARB's zero-emission vehicle mandate and manufacturers will 8 not earn regulatory credit. Therefore, ZEM prices are set 9 without the benefit of ZEV credit value. 10 Staff is proposing that an eligible ZEM be 11 awarded a ZIP II grant up to $2,000 or a fleet grant up to 12 $3,000 if capable of operation on freeways. 13 ZEMs are not eligible for ZIP I grants because 14 they are not passenger cars or trucks and are not required 15 to meet the applicable FMVSS. A ZEM not capable of 16 operation on freeways may be eligible for lower grant 17 amounts, a $1,000 ZIP II grant or a $1,500 fleet grant. 18 --o0o-- 19 AIR POLLUTION SPECIALIST YEE: The neighborhood 20 ZEV category is limited to low-speed zero-emission 21 passenger or utility vehicles that will not be used to 22 comply with the ZEV mandate. 23 NEVs are manufacturers' lowest cost compliance 24 option for the ZEV mandate. And a manufacturer may price 25 a ZEV -- excuse me -- a NEV with consideration for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 potential ZEV-credit value. 2 If the manufacturer has agreed to forego using or 3 selling any regulatory credit earned by a NEV, then the 4 NEV may be eligible for a $1,000 ZIP II grant or a $1,500 5 fleet grant. 6 --o0o-- 7 AIR POLLUTION SPECIALIST YEE: At this juncture, 8 Gayle Sweigert will continue staff's presentation on the 9 proposed guidelines and describe the new fleet incentive 10 program. 11 AIR POLLUTION SPECIALIST SWEIGERT: Thank you. 12 I will now discuss staff's recommendations for 13 the ZEV incentive program for fleets that operate in areas 14 of California with the poorest air quality. 15 I'll begin by providing background information 16 and then describe the proposed guidelines. 17 --o0o-- 18 AIR POLLUTION SPECIALIST SWEIGERT: First, I will 19 highlight the legislative direction for this program and 20 how it fits in with ARB's environmental justice programs 21 and policies. 22 ARB is directed to implement an incentive program 23 for fleets that operate in nonattainment areas of 24 California. We're also directed to award grants through a 25 competitive process that gives preference to communities PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 that are impacted by the poorest air quality, including 2 low income and communities of color. 3 --o0o-- 4 AIR POLLUTION SPECIALIST SWEIGERT: The Board 5 approved broad-ranging environmental justice policies in 6 December of 2001. The new policies are some of the most 7 comprehensive ever adopted by a state agency. The 8 policies connect to integrate environmental justice into 9 all ARB programs. Implementation will be coordinated with 10 California's 35 air pollution control districts. This ZEV 11 incentive program is an important part of ARB's 12 environmental justice program implementation. 13 --o0o-- 14 AIR POLLUTION SPECIALIST SWEIGERT: The proposed 15 goals incorporate the legislative and Budget Act intent 16 for this fleet program. In addition, they reflect the 17 priorities identified by ARB in our environmental justice 18 policies as well as for implementation of the ZEV Program. 19 Program goals include encouraging projects that 20 showcase ZEV technologies to communities or include 21 education on air quality benefits of ZEV technology and 22 the promotion of full function ZEVs to support the 23 commercialization of ZEV technology and the expansion of 24 the consumer market. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 AIR POLLUTION SPECIALIST SWEIGERT: I will now 2 describe the key program elements. 3 As mentioned earlier, grants are to be awarded 4 through a competitive process. A competitive process 5 includes the solicitation and review of project proposals. 6 Each solicitation or funding cycle is broken down into 7 three different periods. 8 During the pre-solicitation period, the ARB 9 program manager responsible for administering the program 10 and stakeholders will conduct comprehensive outreach to 11 communities. 12 During the grant solicitation period, 13 applications will be accepted and assistance provided to 14 interested parties on how to complete the application. 15 Staff envisions at least two different solicitation 16 periods. 17 After the grant solicitation period closes, the 18 grant allocation and project implementation period begins. 19 Staff believes that the first set of grants will be 20 awarded in the fall of 2002. Applicants not selected will 21 be provided assistance in obtaining grants to the ZIP I or 22 ZIP II programs. 23 --o0o-- 24 AIR POLLUTION SPECIALIST SWEIGERT: As a first 25 step, staff proposes developing a comprehensive outreach PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 strategy with program partners and sponsors. Program 2 partners may be air districts or other public agencies 3 that agree to assist with implementation of the program in 4 their area. 5 Program sponsors are public or private agencies 6 that would like to assist with program outreach, 7 identification of potential applicants, or assist with 8 fleet assessments. The participation of program partners 9 and sponsors will allow us to tailor outreach activities 10 to meet the needs of different areas of the state. 11 Outreach will focus on providing information on 12 the program and educating communities on ZEV technology. 13 Outreach activities will include a number of 14 pre-solicitation workshops, which would be cosponsored by 15 program partners and program sponsors throughout the 16 state. 17 --o0o-- 18 AIR POLLUTION SPECIALIST SWEIGERT: The program 19 uses a competitive process for awarding grants. 20 Applications will be evaluated and prioritized using 21 objective criteria. 22 The first process in the process is the 23 announcement that the solicitation process is open. 24 Applications will be made available through ARB, the 25 Internet via ZEVINFO.com and through the offices and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 activities of program partners and sponsors. 2 The second step is made after the application 3 period closes. During this period, the ARB program 4 manager will review applications to determine if the 5 applicant meets the minimum eligibility requirements. The 6 program manager will consult with program partners. 7 --o0o-- 8 AIR POLLUTION SPECIALIST SWEIGERT: Finally, all 9 applications meeting the minimum eligibility requirements 10 will be evaluated and scored using the project evaluation 11 criteria. I will describe the evaluation process in 12 detail in a moment. 13 --o0o-- 14 AIR POLLUTION SPECIALIST SWEIGERT: There are 15 minimum eligibility requirements that all projects must 16 meet. First, consistent with the legislative direction, 17 vehicles must be placed with fleets. Therefore, to be 18 eligible, an application must be a business, corporation, 19 sole proprietor, or public agency. Individuals are not 20 eligible. Staff proposed definition for a fleet is very 21 broad, an existing fleet with two or more vehicles. 22 Second, the Legislature specified that the fleet 23 must be located in a nonattainment area. Staff is 24 proposing that eligible areas be limited to those 25 designated nonattainment for the federal ozone standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 This will focus the program to those areas with the most 2 severe regional air quality problems. 3 Environmental justice criteria are important to 4 ensure that the program targets those communities with 5 exposure to the worst air quality, considering 6 socioeconomic and air quality data. 7 Staff proposes to rely on criteria developed by 8 air districts. Staff also proposes that applicants have 9 the opportunity to use alternate criteria as long as 10 documentation is provided. ARB will work with air 11 districts as needed to develop environmental justice 12 criteria for the program. 13 --o0o-- 14 AIR POLLUTION SPECIALIST SWEIGERT: Eligible ZEVs 15 are the same as ZIP II, but the overall grant amounts are 16 different, as discussed earlier. 17 Finally, staff will ask larger projects to 18 provide additional information on project administration. 19 This is to ensure the funds encumbered for those projects 20 that have the best prospects for being implemented. 21 --o0o-- 22 AIR POLLUTION SPECIALIST SWEIGERT: As mentioned 23 earlier, all eligible projects will be evaluated. Staff 24 proposes that an ARB technical committee be formed to 25 evaluate projects. This committee would be a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 cross-divisional committee of ARB staff. In addition, 2 projects would be evaluated by local program partners. 3 Final project scores would reflect the input of 4 program partners and the ARB technical committee. The 5 Executive Officer would have oversight of project awards. 6 The highest scoring projects or those projects that attain 7 a qualifying score would be awarded grants. 8 We will evaluate projects in a manner that would 9 not disadvantage smaller community projects. 10 --o0o-- 11 AIR POLLUTION SPECIALIST SWEIGERT: All 12 applicants that meet the minimum eligibility requirements 13 are eligible for funding. All eligible applications will 14 be further evaluated using the project evaluation criteria 15 to prioritize projects for funding. 16 As you may recall, environmental justice criteria 17 is also an eligibility requirement. The severity of the 18 air quality impacts and socioeconomic factors will also be 19 considered when ranking projects. 20 Vehicle miles traveled. The more a ZEV is 21 driven, the greater the air quality benefit to the 22 community. 23 Public education to communities on air quality 24 issues as well as ZEV technology is important. Education 25 is stressed in ARB's environmental justice policies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 Applicants that incorporate education into their projects 2 will be given a higher priority. 3 Program partnerships can include sponsorship by 4 other organizations and provide diverse benefits to 5 communities. Program partnerships can include financial 6 or in-kind contributions or noninitial sponsorship or a 7 public or workplace charging infrastructure. 8 Finally, vehicle use and application will be 9 considered. Applicants will be asked to describe how the 10 vehicles will be used. Fleet applications will be 11 evaluated for the benefit to the community, among other 12 factors. 13 Staff will be available to assist air agencies 14 with environmental justice criteria if none have been 15 developed. Staff proposes to make baseline allocations to 16 all eligible nonattainment areas for the first 17 solicitation. Funds remaining after all eligible projects 18 have been awarded will be made available to other areas 19 for awards. ARB staff will work with program partners to 20 begin the first round of workshops this summer. 21 Now, Judy Yee will summarize and offer staff's 22 recommendations. 23 AIR POLLUTION SPECIALIST YEE: First, staff is 24 suggesting a number of modifications to the guidelines to 25 address comments received. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 In place of proposed -- of the proposed vehicle 2 eligibility requirement for a minimum 36-month full 3 vehicle and battery warranty, staff is suggesting that the 4 requirement be modified to a minimum 12-month full 5 warranty plus an additional 24-month prorated warranty. 6 This modification will allow manufacturers some 7 flexibility in pricing and marketing their vehicles and 8 still provide a high degree of consumer protection. 9 Staff is also proposing minor corrections and 10 additions to the guidelines. Specifically language has 11 been prepared and made available. However, there was a 12 change, and so I suggest the audience stop by at the table 13 outside and pick the latest version of the suggested 14 modifications. 15 The proposed guidelines with staff-suggested 16 modifications provide for the coordinated implementation 17 of three significant zero-emission vehicle incentive 18 programs that will provide critical grants to reduce the 19 high cost of ZEVs during the ramp up to a sustainable ZEV 20 market. 21 The next slide provides a summary of the 22 incentives provided by these three programs. 23 --o0o-- 24 AIR POLLUTION SPECIALIST YEE: The ZIP I program, 25 which expires at the end of this year, provides a higher PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 grant amount, up to $9,000, but only for full-function 2 vehicles. 3 The top ZIP II grant amount is $5,000. However, 4 the ZIP II program may make awards to a wider range of 5 vehicles through June 2004. The ZIP II grant amount will 6 vary by vehicle category. 7 The fleet program provides the highest grant 8 amounts, up to $11,000 to promote the placement of ZEVs in 9 areas with the poorest air quality. 10 Together, these three programs will promote 11 consumer and fleet consideration of full-function ZEVs, 12 city ZEVs, and to a more limited extent, zero-emission 13 motorcycles and low-speed neighborhood vehicles, as viable 14 options for meeting their transportation needs. 15 --o0o-- 16 AIR POLLUTION SPECIALIST YEE: To conclude, staff 17 recommends that the Board approve the proposed guidelines 18 with the suggested modifications. 19 CHAIRPERSON LLOYD: Thank you very much. 20 Before we get into Board questions or comments, 21 I'd like to ask Supervisor Roberts to give us a recent 22 example of apparently a wonderful incentive program for 23 electric vehicles -- not vehicles -- electric -- 24 BOARD MEMBER ROBERTS: Vehicles may be stretching 25 it a little bit, Mr. Chairman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 But this past weekend we had our third lawn mower 2 trade-in program and -- in which you trade in a gas-fired 3 lawn mower for an electric rechargeable cordless Black & 4 Decker lawn mower. And this has become -- in San Diego, 5 at least, has become one of the big events of the year. 6 It's without a doubt one of the most successful things the 7 Air -- the APCD, the Air Pollution Control District, 8 sponsors. And in addition to the -- sort of the benefits 9 of the trade-in program, which was substantial, getting 10 the older two-cycle lawn mowers off the lawns on an 11 hour-for-hour basis, I am told, is the equivalent of 12 removing about 40 cars for each electric one that replaces 13 it. 14 So the program -- we've got it very well 15 organized now -- we started at 10:00 o'clock -- excuse 16 me -- we started officially at 8:00 o'clock in the 17 morning, and by 10:15 the last of 600 mowers was put into 18 the person's car who was purchasing it. 19 We made some changes this year. We didn't 20 require that everybody start their lawn mowers, but we did 21 tell them that they were subject to a spot start if we had 22 any concerns. And anyone that didn't have -- if it didn't 23 appear that it was in operating condition, didn't have 24 wheels or it was otherwise broken down, we just told them 25 there's no point in getting in line because we weren't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 going to accept those as trade-ins. 2 It is a very, very popular program. And my 3 thanks to Jerry and others who have helped to get this 4 going in San Diego. I suspect we will do it again next 5 year. The pre-event publicity was incredible. This year 6 for the first time, even during the day and afterwards, 7 there was still quite a bit of very positive publicity. 8 We have done a lot, including big banners on the county 9 building to tell people it's coming. 10 So by -- you either have to be -- I think that, 11 if I recall, the person who had number 600 got there at 12 about 10 minutes to 8:00 this year. The first person in 13 line arrived at 10:00 o'clock the evening before. And by 14 about 4:00 or 5:00 o'clock in the morning of Saturday, the 15 day of the event, we had probably about 100 people in 16 line. 17 So it's just -- it's, I think, a small step. 18 It's a very visible step. We're doing a lot better with 19 that than I think we are with our electric vehicles. 20 But -- 21 CHAIRPERSON LLOYD: Maybe we should turn the 22 program over to you for marketing here. 23 BOARD MEMBER ROBERTS: Well, I was talking to 24 Bill a little while ago. I told him we can send 25 consultants up to L.A. to help them. Because part of it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 is also making it convenient for people and making sure 2 you get them through. And it's -- we have it so it's very 3 well organized from the point at which they roll up to the 4 point that they roll out with their lawn mower. It takes 5 a lot of people on-site. We've got it broken down in the 6 respective areas, so it's very easy for them to pay and, 7 you know, it really works quite well. 8 CHAIRPERSON LLOYD: What is the geographical 9 consideration? Do you have a -- they have to come -- 10 BOARD MEMBER ROBERTS: We have one site. You 11 have to live in San Diego County. 12 CHAIRPERSON LLOYD: Do you have to have proof 13 of -- 14 BOARD MEMBER ROBERTS: Yeah, we ask just for 15 identification that you live in San Diego County. And you 16 can pay by cash, check, money order, credit card. That's 17 all set up. 18 We are actually the distribution. The first year 19 we did it, we did it in the Kearny Mesa area, which is 20 just north of -- about 10 miles north of downtown. For 21 the last two years we have been doing it right at the 22 county administration building. We have some big parking 23 lots, and we can control the crowds both with parking and 24 line up. But it's worked well. 25 The people were actually stopping as they were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 coming from the airport to downtown San Diego, as there's 2 this enormous line of lawn mowers. And I had several 3 people that drove up that wanted to know what was -- you 4 know, what would be going on, you know, what was causing 5 all these lawn mowers to line up. 6 So it became a -- it's a very successful event 7 and I hope we can do it again next year. 8 CHAIRPERSON LLOYD: Well, that's really -- what's 9 the warranty on the batteries for those lawn mowers, do 10 you know? 11 Does anybody know? 12 BOARD MEMBER ROBERTS: I don't know the answer to 13 that. 14 CHAIRPERSON LLOYD: Does anybody know? 15 Three years, okay. 16 Ms. D'Adamo. 17 BOARD MEMBER D'ADAMO: You know, it just occurred 18 to me, as I hear you tell us about San Diego and the 19 intense level of interest there, I've read numerous 20 articles in the paper through the years about similar 21 programs. And I'm just wondering if there's anything that 22 ARB can do to help encourage other communities to do this. 23 And maybe there's some sort of a formula that could be 24 used so as to advise communities at what point does that 25 incentive stop, depending on how much of an incentive you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 give them, so that we can get more of these lawn mowers 2 out there in communities? 3 And I don't know if anyone has ever thought 4 about, like, how much were you charging consumers? If you 5 charged more, how long would that line have been? Would 6 you have still run out of the lawn mowers? And maybe if 7 you charged more, could you have purchased more? 8 BOARD MEMBER ROBERTS: Yeah, I don't -- you know, 9 again, it's a number of units involved, such that we're -- 10 we're not into doing a marketing study. It's just kind of 11 these and try to eyeball it. 12 The deal that we have, the lawn mower -- the 13 Black & Decker lawn mower that we use retails at our local 14 Home Depot for $379 plus tax, which brings it up over $400 15 per unit. We sell those for a $150 flat fee, tax 16 included. So it's a considerable discount, but there's 17 still a fair amount to pay. If you'd made that $200 18 versus $150, you could put a few more. 19 But I don't know -- yeah, we just don't know. I 20 mean, I sort of like it kind of where we are right now. 21 It seems like it's working really well. And, you know, 22 while there's demand, you know, I suspect if you got up -- 23 you increased it quite significantly, I think the demand 24 would probably fall off. 25 But the other interesting thing -- and I did PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 talk -- Home Depot and Black & Decker have been partners 2 in this. And one of the interesting things that's 3 happened, and they were willing to share with us, that 4 every Home Depot in San Diego following that Saturday 5 event has shown a sales increase of somewhere between half 6 dozen and a dozen of these units in the following week, at 7 full price. 8 So it's not just what we're doing on the site 9 that day, but it's also -- there's some -- you know, 10 there's an immeasurable impact that's also occurring, 11 because they said it's -- you know, we promote this well 12 enough and, for whatever reason, people are there to buy 13 them at full price in far greater quantities than they 14 would normally see. 15 CHAIRPERSON LLOYD: What happens with the old 16 ones? 17 BOARD MEMBER ROBERTS: The old ones? We actually 18 have a recycle right there on-site. The oil is drained, 19 the gas is drained, and we start dismantling them right 20 there. 21 CHAIRPERSON LLOYD: Okay. 22 BOARD MEMBER ROBERTS: Yeah, and it's -- every 23 part of this -- we've learned. It took a couple years. 24 But this year was just as smooth as could be. And, as I 25 say, within just a little bit over two hours, from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 beginning to end, of official operation, we were able to 2 get everybody out of there and we were breaking down all 3 of our own displays and things. 4 We've also had requests already next year from a 5 number of major local environmental groups, including the 6 Sierra Club, that they would like to be on-site, they 7 would like to be cosponsors, they would like to have desks 8 where they can pass out information. We have -- the Air 9 Pollution Control District, we put together a packet so 10 that we give the people a packet of information on other 11 things that they can do to help us to clean up the air. 12 So there's an educational component that we've wrapped 13 into it also. 14 CHAIRPERSON LLOYD: Excellent. 15 BOARD MEMBER BURKE: Is there any ethnic -- did 16 you notice being any ethnic breakdown in there? Was it 17 just the same as the general population or -- 18 BOARD MEMBER ROBERTS: Yeah, I don't know if I 19 could be a good judge of that. I would tell you that 20 there is every -- every group is represented. Probably -- 21 maybe from an age breakdown there may have tended to be a 22 little older group than the average age. And I think 23 there's reasons for that, you know. It's a good deal. 24 You tend to see maybe some older people who are maybe more 25 interested in their lawns than some of the younger people. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 But it seemed like a -- you know, a pretty 2 typical group. And it was -- it cut right across all 3 economic groups, too. I can tell you, there was a number 4 of people that got there late and didn't get them, who I 5 know personally. And they could afford to go full price 6 if they have to, but they wanted to get it for the deal. 7 So I suspect next year -- what we found is that 8 each year the people that don't make the cutoff learn and 9 next year -- there was a lot of people this year that were 10 successful that weren't last year, so it kind of builds in 11 a market. 12 We also maintain lists so that we can notify 13 anybody on that list. We have a web page. We have -- I 14 mean, we really promote it to the fullest extent possible. 15 We probably -- we're looking at perhaps doing 700 units 16 next year. 17 CHAIRPERSON LLOYD: Excellent. 18 Well, maybe we could take advantage of Supervisor 19 Roberts' experience and I guess -- I was going to say 20 Jerry. I don't know where he's gone to now. Oh, there he 21 is down there. It would be good to, you know, maybe look 22 at that, see how we can be more effective statewide. 23 Anyway, I thought it was worth a detour because 24 it's clearly a wonderful example of incentive programs, 25 while not electric vehicles, perhaps these vehicles -- did PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 you want to say something, Jerry? 2 COMMUNICATIONS DIRECTOR MARTIN: The 3 Communications Office has run this program since 1997, and 4 we've actually done it throughout the state -- 5 CHAIRPERSON LLOYD: With money from the Executive 6 office? 7 COMMUNICATIONS DIRECTOR MARTIN: Yes. Actually 8 the Executive Office finances it. But we've had very 9 successful programs. And in the Bay Area and San Diego we 10 have -- and in Sacramento, of course, where there's a big 11 sell-out every year. We've not been as successful in the 12 South Coast and in Ventura, where I guess people don't -- 13 they have more garners maybe. But in both of those cases 14 we've -- average sales were around a third of whatever the 15 volume was. But in San Diego -- well, Supervisor Roberts 16 said it -- people get there very early. 17 The first year I was there, I think we did a TV 18 interview at 7:00 in the morning. By the time the 19 interview was over, all the lawn mowers were sold. And 20 that's been the case practically every place else. And 21 the Bay Area has about five different sites around the 22 area; all of them sell out 4 or 5, 600 mowers apiece. So 23 far we've probably been involved in something around 24 20,000 sales over the last five years. 25 CHAIRPERSON LLOYD: Ms. D'Adamo. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 BOARD MEMBER D'ADAMO: Have you had any garden 2 service companies take advantage of the offer? It may not 3 work because of the -- 4 COMMUNICATIONS DIRECTOR MARTIN: No. In some of 5 the places we've been involved, the South Coast and the 6 Bay Area particularly, they have committees that they've 7 put together; there are always representatives of local 8 landscapers and gardening groups and they have some 9 realistic concerns. One is the life span of the 10 batteries; they go through the machinery fairly quickly; 11 they don't want to buy extra batteries, so they're afraid 12 that they'll run out during the day, things like that. 13 But for normal homeowners, they're a very good 14 buy. And the real trick is the more money you offer, the 15 faster they'll go. I think that was one of the problems 16 we've had in some of the less successful ones, was we just 17 didn't offer quite enough rebate and people didn't show 18 up. 19 CHAIRPERSON LLOYD: I don't want to hijack any 20 more of the staff's proposal here, but thank you very 21 much. 22 Getting back to the thing today. I had just a 23 couple questions before I turn it over to my colleagues. 24 When we talk about the eligibility 25 requirements -- and I've seen some of the discussions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 vis-a-vis the federal ozone standard or the 8 hour or the 2 1 hour or what should be holding. What's the rationale 3 for using federal rather than state ozone attainment 4 areas? Or could we just substitute a state just as well? 5 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: We 6 could substitute state. And it was just a -- the bill was 7 not prescriptive, and so we chose the federal ozone 8 nonattainment. We also could have looked at PM or some 9 combination of PM nonattainment. We just chose to keep it 10 fairly generic for that category. 11 CHAIRPERSON LLOYD: But we could look at that 12 particularly since we're going to -- we're looking at PM 13 obviously with SB 25 and then ozone after that. It might 14 be useful then, look at the state -- 15 BOARD MEMBER ROBERTS: Mr. Chairman, could I 16 follow up on that? Because I was going to ask a question. 17 Because of all these great efforts on lawn mowers 18 and other things, last year I think we became the first 19 large urban area in the state to hit the federal ozone 20 standard. I'm not sure which standard we're talking 21 about, but it seems like to be penalized for that now and 22 the eligibility requirements of this is not -- I think 23 it's very shortsighted, if that's indeed what happens. 24 CHAIRPERSON LLOYD: Well, what about State? 25 Maybe you haven't attained the State standard yet. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 BOARD MEMBER ROBERTS: Nobody is. 2 EXECUTIVE OFFICER KENNY: If we were to move it 3 to the State ozone standards as basically the basis, I 4 don't think any of the major areas in the state would have 5 trouble. 6 BOARD MEMBER ROBERTS: But the federal one we've 7 got. We want to keep going. 8 CHAIRPERSON LLOYD: So we move it to state, we're 9 okay? 10 BOARD MEMBER ROBERTS: I think we're okay with 11 that. 12 EXECUTIVE OFFICER KENNY: You're okay in a bad 13 way there. 14 BOARD MEMBER ROBERTS: Well, I want to qualify 15 for this program and make things better, so -- 16 CHAIRPERSON LLOYD: Dr. Burke. 17 Yeah, a good point though. 18 BOARD MEMBER BURKE: I'm going to have to leave, 19 so I really would like to just make those comments to 20 staff. 21 CHAIRPERSON LLOYD: You have a pressing 22 engagement, I understand. 23 BOARD MEMBER BURKE: Yes. 24 I'm going to check the air quality in the Staple 25 Center. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 BOARD MEMBER RIORDAN: Can I go with you? 2 BOARD MEMBER BURKE: I did check it out at 3 Sacramento stadium the other night, and it wasn't too 4 good. 5 Nothing personal, folks, nothing personal. 6 On Page 5 of our -- Page 5 or 211, I think it is, 7 depending on which number you use, there's -- talking 8 about the $12 million and the fact that that Monday we'll 9 go back to the local air districts. So I've been assured 10 by staff that that will happen. We have a request -- 11 AQMD, we'd like to put before the Board to be considered a 12 pilot project in some of this money that goes back. And I 13 offer this to the Board and Mr. Kenny to consider. 14 What we would -- of that there's the Firebaugh 15 mandate. Okay. And what we at South Coast would like to 16 do is combine the 50-percent EJ funds for the fleets -- 17 that's the $110,000 per vehicle stuff -- with the ZIP 18 funds of $9,000 per vehicle, which runs through December 19 2nd. This would be only on special cases at the 20 discretion of the staff. And I know that there's some 21 concern on the CARB staff, "well, if you do that, "it will 22 reduce the number of vehicles that you put on the road." 23 But our concern is putting those vehicles into 24 places where they need them the most. And we feel that if 25 we have this opportunity to do that, we can really go into PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 environmentally challenged areas and provide vehicles on 2 specific cases to specific groups or individuals, so that 3 it will make an impact in those areas that we've been 4 talking about for the last year and a half. 5 We obviously love this program. We want to 6 support the program. This is an aberration that I would 7 love to see it happen. But if it doesn't happen, you 8 know, we're not going to be upset. But we just think that 9 this would probably be a more efficient way for us to do 10 it and meet the goals that the Board has been espousing 11 the last year. So I'm just throwing that out to the 12 Board, to Mr. Kenny. 13 EXECUTIVE OFFICER KENNY: We were just talking 14 with staff about that right now. And apparently the 15 current guidelines do provide for that to occur, if it's 16 so chosen. You know, the one thing to keep in mind is 17 that that does mean the potential for up to $21,000 in 18 terms of a subsidy to any particular vehicle. 19 Now, the guidelines also provide that you don't 20 have to go to that maximum level, but that you could go up 21 to that level. So it does provide for the potential if 22 you go down that path for a subsidy of a fairly large 23 amount for one vehicle. 24 BOARD MEMBER BURKE: And we understand that, and 25 we're not looking to give people cars and things like PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 that. But, you know, if there is, you know, special 2 charity or something, you know, or some community group 3 that, you know, is going to get a vehicle, we'd like the 4 opportunity to do that. But you said we already have that 5 ability. 6 CHAIRPERSON LLOYD: I presumed you also had the 7 flexibility, if you want to use your funds to match the 8 state funds. 9 BOARD MEMBER BURKE: I'm sure that we'll be doing 10 some of that. 11 BOARD MEMBER RIORDAN: Mr. Chairman, could I ask 12 the staff, can you use -- let's say you want to supplement 13 these monies with other monies that the district might 14 have. Could you use the 2766 monies? 15 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: Yes, 16 you could do that. And as a matter of fact, what I 17 understand is the South Coast District was actually hoping 18 to combine the funds as well as use some of their own 19 funds for infrastructure to really have a complete 20 package. 21 BOARD MEMBER RIORDAN: But you can use those 2766 22 monies, that's going to have a lot of big -- 23 BOARD MEMBER BURKE: How much do I have? 24 BOARD MEMBER RIORDAN: Oh, you have so many cars 25 down there that -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 BOARD MEMBER BURKE: Do I have Riordan kind of 2 money? 3 (Laughter.) 4 CHAIRPERSON LLOYD: The other question I had, 5 getting to some of the incentives here -- if we looked at 6 the summary table, I can see the trend here. The one 7 thing I don't quite understand is, when you look at 8 neighborhood, you've got the ZIP II, a thousand, and the 9 fleet, 1,500. And those could handle up to four people 10 could. Then you've got the equivalent of the 11 zero-emission motorcycle, which -- was that a one or two 12 seater? 13 EXECUTIVE OFFICER KENNY: It can be either a one 14 or a two seater. 15 CHAIRPERSON LLOYD: Two seater. 16 And then you've got double the amount that -- the 17 grant amount. 18 EXECUTIVE OFFICER KENNY: What we were trying to 19 do there is essentially recognize the cost associated with 20 each of the vehicles. The zero-emission motorcycles 21 generally tend to retail for the 15 to 16 -- in the 15 to 22 $16,000 range, whereas the NEVs tend to retail at 23 potentially as low as one-third of that. 24 CHAIRPERSON LLOYD: Okay. 25 BOARD MEMBER McKINNON: I swear I'm not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 antagonized by the L.A. Lakers versus Sacramento Kings 2 part of the discussion earlier, but my -- I guess we could 3 do a lot of twisting and contorting what I think is a very 4 good proposal to -- when, in fact, what could be done is 5 fundraising to help in those few specific cases and kind 6 of keep on the big picture here. And the big picture is, 7 we want to make sure that the cars get out there, that 8 they get in the right places. Assemblyman Firebaugh did a 9 lot to move us in that direction. And I think staff has 10 been very thoughtful in this proposal. 11 So my tendency is, you know, probably to have to 12 back it up in action, to help raise some money. We're 13 doing EJ work and it's very, very important to do. And I 14 think we dealt with the Firebaugh Bill in this proposal, 15 which gave very, very good guidance. But to say that 16 we're going to work it patching together a 100 percent of 17 the cost of a car is a little more than -- somebody 18 doesn't get a car if we do that. 19 And so -- 20 CHAIRPERSON LLOYD: But I guess what we're 21 saying, that the proposal has that flexibility, it's up to 22 the local districts to implement them, that they can 23 choose that if they want to; is that correct? 24 EXECUTIVE OFFICER KENNY: Yes. 25 CHAIRPERSON LLOYD: And I agree with you, Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 McKinnon. I guess we -- I presume the local district will 2 look at that very carefully. Otherwise, you're depriving 3 some of that. 4 Supervisor Roberts. 5 BOARD MEMBER ROBERTS: Yeah, Mr. Chairman, if I 6 could. While I was listening to the presentation there 7 were two things that struck me: One, last month I was 8 over in Arizona. And I think it was last year that they 9 had a program that turned into a statewide crisis. And I 10 learned about it because I noticed there was a lot of new 11 golf carts over there that I hadn't seen before. 12 And as I understand it at least, they were doing 13 not just ZEVs but they were doing alternative fuel. And 14 they just offered a tax credit -- full tax credit on your 15 state income tax for however many years it took to write 16 down whatever it was you were going to purchase. And they 17 had a lot of companies that opened up right away 18 converting big SUVs to propane tanks, which qualified for 19 50 or $60,000 vehicles, and they were -- and as I 20 understood it at least -- you may know something about 21 it -- they ended up having an emergency session of the 22 Legislature to correct this thing, after they were in the 23 hole for some many millions of dollars. 24 But when I was looking at the slides in this 25 neighborhood ZEV, I don't know if that -- if there's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 something that protects you on golf carts, because it 2 seems like -- I would think we don't want to go there. 3 EXECUTIVE OFFICER KENNY: If I could maybe try to 4 respond. You are right. I mean in Arizona last year they 5 had a fairly major debacle. I mean they did essentially 6 have an unlimited tax credit, and I think it ended up 7 costing the state somewhere in the range of $300 million, 8 which was unanticipated. I think the original projections 9 were, you know, one-fifth, one-sixth of that. 10 In California, with this particular program, we 11 don't have an unlimited cap here. We do have a cap on the 12 amount of money that's available. And once that money's 13 gone, we're out of money. 14 BOARD MEMBER ROBERTS: We're already out of 15 money. So on that part, I'm not worried about it in 16 California. What I was concerned about was whatever money 17 we do have, if -- as I looked at this neighborhood ZEV, I 18 didn't know if a golf cart could qualify. That was more 19 of my concern, not that there's unlimited exposure for the 20 state. We did that with the electricity already. 21 EXECUTIVE OFFICER KENNY: Yeah, and the NEVs 22 we're really not looking at golf carts. We are looking at 23 essentially low-speed vehicles. And we do think that, in 24 fact, there is probably not going to be a lot of 25 attraction to this program for the low-speed vehicles. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 And the main reason for that is under the current ZEV 2 regulations, manufacturers can produce those vehicles and 3 obtain ZEV credit. 4 And what we've tried to do here is essentially 5 establish that if they want to obtain a subsidy, that's 6 fine, they can receive this subsidy of roughly $1,000 to 7 $1,500; but they get no ZEV credit. And we think that in 8 fact the ZEV credit is probably worth more than $1,000 to 9 $1,500, and so they'll probably go down that path. 10 If, in fact, they choose to go down this path, we 11 think they'll do so in very limited numbers, and we get 12 essentially kind of a very cheap air quality benefit 13 because the NEV credit under the ZEV program is probably 14 worth more than $1,000 to $1,500. 15 BOARD MEMBER ROBERTS: So we're offering 16 something we don't think people are going to take? I 17 don't -- that doesn't make -- anyway, forget that for a 18 moment. 19 You're telling me it doesn't include golf carts? 20 EXECUTIVE OFFICER KENNY: It does not include 21 golf carts. 22 BOARD MEMBER ROBERTS: Okay. The second question 23 is -- I'm trying to imagine how this environmental justice 24 thing works. I mean I don't how -- with a car, do you 25 know where the car is going to be? I mean is it where the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 car starts its day off or is it where the car is driving 2 or -- I don't understand how you -- I don't understand the 3 criteria. How do you implement with a car in 4 environmental justice? 5 ZEV IMPLEMENTATION MANAGER BEVAN: The 6 eligibility for the location of environmental justice is 7 where the vehicle is garaged. And the application should 8 also indicate to us how -- where the vehicle will be used 9 and whether or not it operates in that community. 10 BOARD MEMBER ROBERTS: Okay. I'll believe it 11 when I see it, but -- 12 EXECUTIVE OFFICER KENNY: One of the difficulties 13 for us, Supervisor, is that essentially the legislation 14 did provide that we needed to incorporate some kind of an 15 environmental justice component. And we have had some 16 difficulty trying to figure this out. But we think we've 17 got something that does provide at least an environmental 18 justice aspect to the distribution of the funds for 19 electric vehicles. And so that's what we're going to try 20 to implement and try to comply with the requirements that 21 have been placed upon us. 22 BOARD MEMBER ROBERTS: Well, I can appreciate 23 that. I just think in terms of these vehicles it's going 24 to be very difficult to have something that is real 25 meaningful. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 CHAIRPERSON LLOYD: Would this come back to 2 Supervisor Roberts, for example, in the San Diego case, it 3 would come back to their board? How would it work. 4 EXECUTIVE OFFICER KENNY: It sounds like it 5 probably would not. It sounds like, with the exception 6 of -- it sounds like only Los Angeles in the South Coast 7 Basin is essentially implementing it in that fashion. The 8 rest of them are being implemented basically more through 9 the statewide approach. 10 CHAIRPERSON LLOYD: So we would be implementing 11 San Diego? 12 EXECUTIVE OFFICER KENNY: Actually, what I was 13 just informed is that we are doing all of it for the 14 environmental justice part of it. So all of that will be 15 coming through us. 16 CHAIRPERSON LLOYD: But working with the local 17 districts. Okay. 18 But that's a very good -- 19 BOARD MEMBER ROBERTS: I'm going to be interested 20 in how that applies in San Diego, because I can't begin to 21 develop a real solid plan that I feel comfortable with. 22 EXECUTIVE OFFICER KENNY: I think we'll probably 23 have a pretty good sense of that in the sense that I think 24 the Legislature is also going to be interested in how this 25 plays out, and they're probably going to look for some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 kind of a report from us on this. And so we'll try to 2 provide information to both the Board and to others who 3 are interested in terms of how that is -- how the 4 distribution implementations occur. 5 CHAIRPERSON LLOYD: Mr. McKinnon. 6 BOARD MEMBER McKINNON: Yeah. I have kind of a 7 guess. I mean like if the U.S. Postal Service is running 8 500 electric delivery vehicles in Sacramento, and if they 9 talked about doing something like that in San Diego 10 county, and -- I think it would be real clear that Barrio 11 Logan and East San Diego and maybe some other areas would 12 get those vehicles in lieu of, say, Rancho Santa Fe or, 13 you know -- I imagine there would be some -- 14 BOARD MEMBER ROBERTS: These guys could tell you 15 about the air quality. There's not a lot of difference in 16 the air quality, but you can feel if you want. 17 BOARD MEMBER McKINNON: Well, certainly in Los 18 Angeles there are places like -- the Alameda Corridor and 19 some places where it's very, very clear what the 20 differences are. So I guess now I understand why you're 21 saying it. So you're not sure, but -- 22 BOARD MEMBER ROBERTS: Well, I just -- I don't 23 know how you -- you tell somebody who's going to drive a 24 car how you keep it -- and we're not even sure where these 25 areas are. You know, I mean if we're going to have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 social program, we might as well admit it. But if we're 2 going to still be an air quality board, I think we've got 3 to do more than give lip service to that. And that's 4 where I'm having the problems here. And I think we're 5 getting into a whole range of real soft stuff. 6 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: If I 7 can make a comment on that issue. We're also going to 8 hear the same issue come up in the next item, the Carl 9 Moyer Program. And perhaps they're a little bit ahead of 10 this because the current year funds for the Carl Moyer 11 Program already have the requirement that half the funds 12 be spent in environmental justice areas, if I may use 13 those words. And those funds have already gone to the 14 districts. So they're dealing with that issue already. 15 And San Diego district is dealing with how to -- 16 as all the others are, how to define exactly what EJ is in 17 their specific criteria. And I know San Diego is looking 18 at poverty levels as well as ozone and PM concentrations. 19 And they have not finalized their area -- their criteria. 20 But it is a difficult issue. We deal with it 21 when you have something like a transit bus, which has a 22 various route; when we have tugboats, which go in a fairly 23 wide region. But we are struggling with it, but we are 24 working with all the districts to work our way through 25 this in the first year of the Moyer and then the first PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 year of this program. And we've been pretty open in 2 trying to work with the districts to meet their individual 3 needs. 4 BOARD MEMBER ROBERTS: Well, I'll report back to 5 you after I see how it works. And I'm somewhat skeptical 6 at this point. 7 CHAIRPERSON LLOYD: Ms. D'Adamo. 8 BOARD MEMBER D'ADAMO: Well, I had thought that 9 the EJ criteria was going to be decided by the individual 10 air districts. 11 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: The Air 12 Resources Board is open to letting the individual 13 districts decide what meets environmental justice criteria 14 for their area. What we've found is some of them are 15 looking to us for assistance. And, for instance, in the 16 school bus program we sort of defined default criteria for 17 the districts. They could come up with their own, which 18 the South Coast District did; they could rely -- or they 19 could rely on our default criteria; or they could come up 20 with something different. We would do the reality check 21 on it and help them work through the issues, but it is 22 their criteria to define. 23 BOARD MEMBER D'ADAMO: Supervisor Roberts, I had 24 some questions within the last couple of days similar to 25 those that you just posed. And I think that we can't help PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 but kind of look at where we live and how EJ would apply, 2 you know, in our own communities. 3 But staff had walked me through a number of 4 likely factors that the air districts -- the individual 5 air districts would more than likely consider and 6 implement. And once they did that, it made more sense. I 7 think that it is possible to achieve both goals, to 8 achieve our environmental justice goals and the ZEV goal, 9 which is getting lots of cars out there, getting them in 10 communities where they're going to be seen, where they're 11 going to be visible, and where they're going to have an 12 impact. So I don't know if staff could just quickly go 13 through those factors, maybe it would help to make a 14 little more sense -- the likely factors that would be 15 considered. 16 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: Well, 17 the district which is furthest along I think in defining 18 criteria is the South Coast Air Quality Management 19 District. And one of the places they start is with income 20 level. And they define regions that are 10 percent below 21 the poverty level based on 2000 census data. So that's 22 sort of one starting point. 23 And then they overlay over that PM exposure and 24 communities with the highest 15 percent of PM 25 concentration. They chose 15 percent. You could look at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 maps and do different severity, you know, drawings for the 2 regions. They do have that data readily available, others 3 may not. 4 Toxic exposure can be drawn from that and then 5 combined with local stationary sources to come up with 6 toxic exposure, and they use a cancer risk of greater than 7 a thousand in a million. So those kinds of criteria are 8 what's being used in many cases. Other areas are looking 9 at populations of elderly or high concentrations of 10 stationary sources, minority populations. South Coast 11 didn't use minority populations, but that's often 12 mentioned in the Firebaugh Bill. 13 So there's a variety of different criteria that 14 can be used to come up with different mappings. 15 BOARD MEMBER ROBERTS: Maybe we're unique, but 16 our worst air isn't in the poorer areas, if you will. And 17 so that starts off -- you know, I mean what is it that 18 we're trying to do? And, you know, if it's environmental 19 justice, we're trying to clean up the air; and the worst 20 air, fortunately or unfortunately, it isn't following the 21 socioeconomic patterns that I think we're addressing. 22 So for whatever it's worth -- maybe we're just, 23 you know, an aberration in the state, but we have our own 24 unique problems and that's why I'm anxious to work, see 25 what recommendations come out. But if it's a social PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 program, that's one thing; if we're talking about cleaning 2 up the air, that's something else. 3 I keep thinking I'm on an air board. 4 CHAIRPERSON LLOYD: If there are no more comments 5 from my colleagues, then I'll call up the first witness. 6 We have Jerry Pohorsky, Sara Rudy, Fred Maloney, 7 Sandra Spelliscy, and Bonnie Holmes-Gen. That's the ones 8 signed up. 9 MR. POHORSKY: Good afternoon. I'm Jerry 10 Pohorsky. I am a member of the Production Electric 11 Vehicle Drivers Coalition. And I am your customer, I am 12 the consumer. I drove here in my EV1 today. And I do 13 have a couple comments to make. 14 On Page 322, which is also 1-2, it says, "all of 15 the funds will be used for grants and none will be used 16 for program administration. The purpose of the program is 17 to make the price of a full-service electric vehicle 18 comparable to that of a conventionally fueled vehicle, 19 spurring the electric vehicle market in California." 20 Later on there's a table that describes the 21 incremental cost of the electric vehicle over its gasoline 22 equivalent. And for the specific case of the Toyota RAV4, 23 there's an incremental cost of $21,395. Now, taking the 24 wording from AB 2061, early on it mentions paying 90 25 percent of the difference over $1,000. So if you knock PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 $1,000 off of the number I just gave you, 90 percent of 2 $20,000 would be about $18,000. But the highest ZIP I 3 grant is $9,000. 4 So addressing the comment that Board Member 5 McKinnon made about somebody getting a free vehicle here, 6 even if you aggregated all of these grants, you're only 7 getting something for the price of the gasoline vehicle. 8 You're not getting anything for nothing here. 9 Now, let me just shift gears and talk a little 10 bit about the law of unintended consequences. Because I 11 just mentioned that all of the funds will be used for 12 grants, one of the unintended consequences of receiving a 13 1099 form is that part of the money that is from the $18 14 million is actually going to the federal treasury by 15 virtue of my income taxes. 16 So state money is going to the federal government 17 because the grant is being taxed. Now, there's nothing 18 prescriptive in AB 2061 about the taxability of the grant, 19 but yet the Board did send 1099's out last year. So that 20 was sort of a preemptive strike and forced me to pay 21 income tax on that. 22 And, in addition, I'm getting my grant in the 23 form of a lower monthly lease payment. And my lease is 24 less than a year old, and yet I was taxed on the entire 25 two-year amount in fiscal year 2000. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 So I do really appreciate the grant. Don't get 2 me wrong. It's a sweet deal. I really like it. It's 3 making the affordability of the car great for me. A year 4 from now my lease ends, I'm going to be in the market for 5 a RAV4. I'm not sure how sweet the deal will be at that 6 time, but I really do appreciate it. But it is being 7 diluted a little bit by the taxability of it, and just 8 wanted to give the consumer point of view here. 9 Finally, I just wanted to close up saying that I 10 would like to be part of your public education program. 11 I'm down in Santa Clara in the heart of the Silicon 12 Valley. So any kind of education or outreach that you 13 have in mind, I'd be really happy to help with that. 14 Thank you. 15 CHAIRPERSON LLOYD: Thank you. 16 Question of Staff. I know this question about 17 federal tax came up before. And, quite honestly, I'd 18 forgotten about it, but I guess there's no way around 19 this? 20 STAFF COUNSEL DAVIS: That's correct. 21 I'm Victoria Davis from the Legal Office. And I 22 had the absolutely unmitigated joy of dealing with the 23 Internal Revenue Service and -- 24 BOARD MEMBER DeSAULNIER: Give her a grant. 25 (Laughter.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 BOARD MEMBER RIORDAN: There were no options. 2 MR. POHORSKY: Well, I guess you can't really, 3 you know, fight it. But it's just a shame that some of 4 your state $18 million is finding its way into the federal 5 treasury. 6 STAFF COUNSEL DAVIS: Well, what we did was, 7 first we asked about the program as it existed at the 8 time, which was the ZIP I Program. We also asked 9 essentially was there any way we could restructure this so 10 that it would not be what in taxes is a taxable event. 11 It's a foreign language, folks. And the short answer was, 12 no. There is a possibility of reducing the taxable event 13 impact if the grants are made to be need-based. But I 14 believe, one, that's not really the intent of the program; 15 two, it puts us heading down a primrose path to a slippery 16 slope we don't want to go on. 17 CHAIRPERSON LLOYD: So taking us one step 18 further. So we give this to a low-income community, all 19 of a sudden they're saddled with this big tax liability, 20 is that right? 21 STAFF COUNSEL DAVIS: Well, -- 22 MR. POHORSKY: If it's an agency, I don't think 23 they pay tax. It's only for individuals. 24 CHAIRPERSON LLOYD: If we're trying to help out 25 some of these low-income communities, so we give them -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 STAFF COUNSEL DAVIS: Well, part of the 2 difficulty with our trying to restructure this is the 3 individual characteristics of each participating entity's 4 tax picture. And that's why we decided we didn't want to 5 go into the tax advice business in the first place. 6 With respect to grants being made available to 7 the extent that they're attractive to someone of much 8 lower economic means than would usually be buying a new 9 vehicle like this, yes, I imagine the grants would be 10 taxable. On the other hand, that person isn't in a real 11 high tax bracket. And so it all sorts itself out to a 12 certain degree. 13 But essentially -- 14 CHAIRPERSON LLOYD: I think what Mr. Pohorsky has 15 also drawn to our attention, at least to my attention, 16 there are unintended consequences here. It'll be 17 interesting as this is deployed -- I presume staff is 18 aware of this. But I wouldn't like to see this come back 19 and reverberate and Mr. Firebaugh come back to us and say 20 no good deed goes unpunished, so to speak. 21 BOARD MEMBER ROBERTS: Mr. Chairman. 22 CHAIRPERSON LLOYD: Yes. 23 BOARD MEMBER ROBERTS: One other thing though, if 24 you're dealing with 501C3, nonprofit corporation, it's a 25 whole different game. And I think in some of these areas PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 out of your targets, I think that -- and I think that's 2 what Mr. Burke was maybe referring to, is those kinds of 3 organizations, that would receive a real benefit. 4 STAFF COUNSEL DAVIS: Right. And that's again 5 why we cannot be giving tax advice one way or another, 6 because we don't know all the factors even if everyone 7 tells us everything. 8 MR. POHORSKY: Once you give a 1099 though, 9 there's really no alternative. 10 STAFF COUNSEL DAVIS: Unfortunately, the IRS made 11 it pretty clear that we need to do that, too. 12 BOARD MEMBER RIORDAN: Let me ask a question 13 though on his tax -- that he had to pay all of the tax in 14 one year. 15 MR. POHORSKY: Right. 16 BOARD MEMBER RIORDAN: I'm wondering if there 17 would be a way to grant so that it wouldn't -- at least if 18 you're paying a lease -- this was to help you pay a lease, 19 correct? 20 MR. POHORSKY: Yes. 21 BOARD MEMBER RIORDAN: You could divide that 22 grant -- you could award the grant on paper only and then 23 divide it in each year perhaps to lessen the impact 24 perhaps. I don't know. 25 MR. POHORSKY: I'm not complaining. For me it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 wasn't a big deal. I'm just trying to represent consumers 2 in general. 3 And I had another question. Does anybody know if 4 the rebate that the Energy Commission gives on 5 photovoltaic installations, whether there's any tax 6 consequence there? 7 ZEV IMPLEMENTATION MANAGER BEVAN: That's not 8 taxable. 9 MR. POHORSKY: Oh. Well, maybe that could be a 10 precedent we could use somehow. 11 All right. Thanks. That's all I have. 12 ZEV IMPLEMENTATION MANAGER BEVAN: That's in the 13 State law that -- for renewables that's something that's 14 been added in, that by upgrading your house with 15 renewables, you're not taxed on that rebate. 16 CHAIRPERSON LLOYD. Well, maybe Mr. Firebaugh 17 could also look at some of that. 18 ZEV IMPLEMENTATION MANAGER BEVAN: That may be a 19 federal -- 20 Mr. McKinnon. 21 BOARD MEMBER McKINNON: Yeah, it occurs to me we 22 could ask our federal representatives to deal with this 23 problem, our two senators and our 53 -- 52, soon to be a 24 53 house members, to try to deal with this. And I would 25 bet the amount of money by the time you subtract out the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 501(c)(3)s and everybody else involved, and to get it down 2 just to the individuals, and then the taxable -- the tax 3 that's actually brought is probably minuscule. And that's 4 probably a little insertion in a bill somewhere and it's 5 done. 6 So maybe we should ask for it from the federal 7 legislative body. 8 ZEV IMPLEMENTATION MANAGER BEVAN: I have a 9 comment to clarify the lease situations Two things: 10 The reason that the entire grant was taxed in the 11 lease situation that he described is because the grant was 12 assigned to the car company at the time the lease was 13 finalized to bring down the entire lease amount right up 14 front. That's a choice that's made by assigning the 15 lease -- or assigning the grant to the auto maker. The 16 consumer also has a choice to take the payments in three 17 lump sums of $3,000 each over the three-year lease period. 18 Additionally, auto manufacturers who have taken 19 the lease up front -- the grant up front, some cases -- in 20 one case in particular have chosen to take on the tax 21 liability . Ford, for example, has taken the tax 22 liability for lease customers. That's a possibility 23 that's open. 24 BOARD MEMBER RIORDAN: Thank you, because that 25 solves my problem, that there's a choice that can be made. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 CHAIRPERSON LLOYD: Thank you. 2 EXECUTIVE OFFICER KENNY: If I could add one 3 thing. 4 CHAIRPERSON LLOYD: Yes. 5 EXECUTIVE OFFICER KENNY: Actually, the reason I 6 stepped away is Kings & McCumbard just wanted to sort of 7 point out that there's a federal tax credit for the 8 purchase of these vehicles, for the lease of these 9 vehicles. And so any tax credit probably more than 10 offsets any tax liability associated with the grant. So 11 although, you know -- the witness is correct that there 12 will be some state money that will be going to the federal 13 treasury, there is also federal money that will be coming 14 back to the individual as a tax credit. And I think all 15 in all we probably come out ahead. 16 CHAIRPERSON LLOYD: Kingsly is with whom? 17 EXECUTIVE OFFICER KENNY: CR Research. 18 CHAIRPERSON LLOYD: Oh. Thank you. 19 Sara Rudy, Fred Maloney, and Sandra Spelliscy. 20 MS. RUDY: Hi. My name is Sara Rudy. I'm the 21 California Regulatory Liaison for Ford Motor Company. And 22 I had a presentation, but I'm going to try and shorten it 23 and just speak from my slides here. 24 So really Ford supports the use of incentives to 25 help develop and grow the full function ZEV market. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 really believe this money should be spent on full-function 2 ZEVs. 3 And then the second point I wanted to make is 4 that if there is a bad rewarranty requirement, we 5 recommend that that prorated requirement be required. And 6 that is because to recognize the current state of the 7 battery technology, we all know today you have to replace 8 the batteries in your flashlights and your radios and your 9 cameras. Batteries are consumable products. They wear 10 out, and we have to recognize that. I think otherwise we 11 give a false sense of security. 12 CHAIRPERSON LLOYD: So are you happy with the 13 staff modifications? 14 MS. RUDY: Yes, I am. 15 It ensures the quality of the battery and 16 electrical system, which I believe is why the staff wanted 17 to include the battery warranty in the first place. And I 18 think you can you do that with the prorated warranty. It 19 shares the cost between the manufacturer and the user. 20 And, importantly, it discourages the intentional 21 owner-induced failures at 35 months. If you have a full 22 36-month warranty, it doesn't take long to figure out how 23 to kill your battery and get a new battery pack at 35 24 months. 25 And then you share it with all your friends that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 drive EVs and pretty soon manufacturers are paying for 100 2 percent warranties. 3 So that's about all I have to say. 4 CHAIRPERSON LLOYD: Great. Thank you very much. 5 Fred Maloney, Sandra Spelliscy, and Bonnie 6 Holmes-Gen. 7 Fred. 8 MR. MALONEY: Good afternoon. I am Fred Maloney. 9 I'm a senior manager for the Alternative Fuel Vehicle 10 Programs for DaimlerChrysler Corporation. I appreciate 11 the opportunity to speak to you today on the ZIP programs. 12 DaimlerChrysler, as Chrysler Corporation, was the 13 first OEM to certify and sell electric vehicles in the 14 state of California. 15 In 1993 we produced the TEVan, which was an 16 electric-powered version of our minivan. In 1997 we went 17 to our second-generation electric minivan, which we call 18 the EPIC. But in 2000 we ventured into a whole new 19 business, and that was the neighborhood electric vehicle 20 business, with the purchase of Global Electric MotorCar. 21 Incentives have been critical for the sale of 22 electric vehicles. Not that they come close to covering 23 our costs. Our lease rate and the incentives do not cover 24 our research and development, do not cover the incremental 25 costs of the vehicles, nor does it even cover our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 marketing costs. 2 However, incentives do provide more than just 3 financial support. Incentives demonstrate the 4 government's belief in the product. It is for this 5 reason, belief in the product, that we believe that all 6 ZEVs should be eligible for incentives. 7 Specifically, DaimlerChrysler, while we support 8 incentives for all electric vehicles, opposes the one 9 requirement that NEVs would receive an incentive only if a 10 manufacturer foregoes the ZEV credits for the vehicles. 11 We note several issues with the provision of this 12 rule. The Air Resources Board role should be that of 13 support of the market development of all electric 14 vehicles. This provision signals ARB's lack of support 15 for NEVs, resulting in a negative image for neighborhood 16 electric vehicles. The proposal is not consistent with 17 the intent of the budget appropriation, which directed the 18 funds be used for incentives for vehicles that satisfy the 19 ZEV mandate, including consideration of neighborhood 20 electric vehicles. 21 We considered several ZEV options when developing 22 a ZEV compliant program for DaimlerChrysler. For the long 23 term we believe that fuel cells have the greatest 24 potential to meet our customer's needs. We needed a ZEV 25 product to get us there. One of the products that caught PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 our attention was neighborhood electric vehicles. The 2 more we investigated neighborhood electric vehicles, the 3 more we realized that in addition to ZEV credits, there 4 was a potential market for neighborhood electric vehicles. 5 This was something that we never saw with our EPIC. 6 After considering several NEV options, including 7 developing our own NEV, DaimlerChrysler Corporation 8 purchased GEM. GEM had been a success in other states, 9 and we believe that they could be successful here in 10 California. 11 The market for NEVs, however, is undeveloped. 12 DaimlerChrysler and GEM are putting forth a great effort 13 to develop this market. The dealer network has grown from 14 1 to 66. We spent millions of dollars promoting the GEM 15 vehicle, including television and print media. ARB's 16 recognition and validation of the NEV with financial 17 incentives would demonstrate to the public that ARB 18 supports NEVs as a viable means of transportation and 19 means of compliance with the ZEV mandate. 20 I believe that ARB should not be picking winners 21 and losers until the effectiveness of a vehicle is 22 demonstrated. Rather, ARB should give full consideration 23 of providing NEVs incentives even if the manufacturers 24 choose to use the vehicle for credit. 25 I would be pleased to answer any questions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 CHAIRPERSON LLOYD: Thanks very much. 2 Staff response on that? 3 EXECUTIVE OFFICER KENNY: I think the primary 4 response there is that the NEV vehicles are going to be 5 sold retail for potentially less than $6,000. And so they 6 become a very low-cost alternative to compliance with the 7 ZEV program. 8 To the extent that we also provide a subsidy in 9 in addition to a credit, what we do is we essentially 10 negate the ZEV program as a whole and we provide a 11 counter-incentive to compliance with vehicles that will 12 provide kind of full service to the consumers and to their 13 owners. 14 CHAIRPERSON LLOYD: Supervisor Roberts. 15 BOARD MEMBER ROBERTS: I don't know. Maybe all 16 day I'm trying to reach a middle ground here. 17 While I was concerned about golf carts, I think 18 they're talking about something that's not a golf cart. 19 It's street worthy, if you will. 20 MS. RUDY: We do not make golf carts. 21 BOARD MEMBER ROBERTS: No. And that's what I'm 22 trying to qualify. 23 It seems to me what they've got is something that 24 is great for especially an urban area. We're looking at 25 how we might use something like this in a downtown and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 some significant numbers with lease agreements, where 2 people can kind of have an access to these at the train 3 depot and other places. I mean this is the kind of 4 discussions we're having. And I'm not familiar with their 5 product per se, but we're talking about things like this. 6 And rather than say you either get the $1,000 or you get a 7 credit, you know, I'm not so worried about them flooding 8 the market. 9 I'd like to see them flood part of the market 10 with these. And maybe there's some partial credit or 11 something that you can do to help this thing to happen. 12 Because I think as a -- I'm not as optimistic as I am on 13 some of the other stuff we're doing with -- you know, in 14 terms of, you know, battery operated stuff. But I think 15 that there is a market for those and I think it will be, 16 especially in the urban areas that we're not seeing, where 17 they -- they don't take up a lot of room and can easily be 18 handling the short trips that would happen in a downtown 19 area. 20 CHAIRPERSON LLOYD: I am sympathetic to your 21 point also. And I've known the work that 22 DaimlerChrysler's put out trying to look for niches and 23 market the vehicles. So, yeah, if we could find a middle 24 ground, I'd be happy to be with you. 25 EXECUTIVE OFFICER KENNY: If I could add one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 thing? 2 CHAIRPERSON LLOYD: Ms. D'Adamo. 3 BOARD MEMBER D'ADAMO: Well, respectfully I 4 disagree. I remember when the ZEV item came before us, a 5 lot of us were really struggling. I don't want to speak 6 for anybody but myself here. So I was really struggling 7 with these NEVs. But it's my understanding that your 8 company and others had already invested quite a bit. And 9 so I think that that in large part had to do with why they 10 maintained -- or they maintain their position as obtaining 11 credit. 12 I do also recall that a lot of us on the Board 13 encouraged staff to come up with some sort of credit 14 scheme so that we could get as many full-size vehicles on 15 the market as possible. So I'm a little uncomfortable 16 with doing anything much more than what the proposal 17 provides for. 18 Now, if it's a city car -- a city-type car, I 19 feel differently about that as long as it's freeway 20 capable. I don't believe that the cars that you're 21 talking about can be used on the freeway. 22 MS. RUDY: No, these cars can't be used on the 23 freeway, but they can be used in the downtown area where 24 there is an air quality problem. 25 And I guess the issue is, not the size of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 incentive -- we're not looking for a $2,000 incentive for 2 these vehicles, but some minimal -- at least some minimal 3 incentive that would say, yes, this is a viable product, 4 in which -- and I agree with Supervisor Roberts. You've 5 offered an incentive that I don't believe anybody is going 6 to take advantage of. But this -- and relating to his 7 story about the electric lawn mowers. Incentives bring 8 people out. We found that out in 1980 when Iacoca said, 9 "Buy a car, get a check." 10 So incentives are powerful, not for the money 11 that is given out, but just for the concept that these 12 vehicles are acceptable vehicles. 13 BOARD MEMBER D'ADAMO: Yeah, I know. I 14 understand. 15 MS. RUDY: And these vehicles will clean up the 16 air. 17 BOARD MEMBER D'ADAMO: I think what we're -- what 18 I'm looking for is actually a program that's going to 19 succeed, not the incentive program, but the electric 20 vehicle program. And I think the more cars that we get on 21 the road, on the freeway increase people's acceptance of 22 these. I think that's where I'd be coming from. 23 Did you have something, Mr. Kenny? 24 MS. RUDY: Unfortunately, we're several months 25 shy of some major programs that I think would change your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 mind on some of these issues. 2 CHAIRPERSON LLOYD: Yeah. 3 BOARD MEMBER ROBERTS: Mr. Chairman, again, I'm 4 thinking that there might be some partial credit, not a 5 full credit. 6 But let me just add some perspective. And 7 there's at least a few of us that have been on this Board 8 for an awful long time, that sat through an awful lot of 9 meetings on looking at projections on where we were going 10 to be today on battery technologies. It hasn't happened. 11 It hasn't happened. It hasn't remotely happened. We're 12 not seeing anything near what we had hoped for. 13 And I'm going back seven or eight years ago. And 14 in looking where we are today, the tremendous promise that 15 I think that we hoped for, it isn't there. And I think -- 16 I'm just trying to adjust to realities and say, you know, 17 what part of this program may there be a real market for? 18 We thought we were going to have batteries taking 19 us 150 or 200 miles by now. And unless somebody is 20 keeping a secret, I still haven't come across anything 21 like that. We thought costs were going to be a fraction 22 of -- you know, we didn't think we were going to be 23 dealing with $21,000-a-unit increments. 24 The world has not developed in the way that we 25 had hoped. I'm not saying as we projected, because it was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 hoped. And the Advanced Battery Consortium and all these 2 people that came in and with all of these ideas on zinc 3 and lithium and every other imaginable thing, I -- you 4 know, I think the real answer to air pollution control is 5 going to perhaps lie in a whole different technology, and 6 I'm not as bullish as I perhaps used to be on that and 7 batteries. 8 But I think there is a niche, especially in 9 congested urban areas, for something like they're talking 10 about. And I don't -- you know, I'd like to see at least 11 enough of an incentive that we're -- you know, that we get 12 to a point where we test it. And so it's not -- I'd like 13 to see the other happen, but I'm not -- I'm not as 14 optimistic because we don't have the range, we don't have 15 the costs, and we don't have the battery technology that 16 we had hoped for. 17 And I followed this pretty close, I can tell you 18 that. And I can tell you the name of the guy who bought 19 the first EV1 in California, in fact in the United States. 20 And I can tell you what his history on that's been, and 21 it's not very nice. And I can tell you about the second 22 one he bought, and it's still not very nice. So -- 23 CHAIRPERSON LLOYD: But that was General Motors. 24 This is DaimlerChrysler. 25 BOARD MEMBER ROBERTS: Oh, no. I'm just saying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 the battery and that whole idea, Mr. Chairman, it -- the 2 reality is somewhat different than the dream that was 3 painted for us back in 1995 or 1996. 4 CHAIRPERSON LLOYD: Correct. 5 Mr. Kenny. 6 EXECUTIVE OFFICER KENNY: What I wanted to add in 7 was essentially if you'd look at the existing ZEV Program, 8 we provide four credits for NEVs, the vehicles we're 9 talking about, in 2002 and 2003. That's a substantial 10 number of credits. And what it is is essentially a 11 sufficient number of credits to provide a great incentive. 12 The concern we would have here is that if, in 13 fact, we provide both credits and $1,000 to $1,500 14 incentive on top of that for a vehicle that costs roughly 15 $6,000, we are potentially diluting the ZEV Program and 16 providing really kind of a single alternative for 17 compliance. And what would likely happen is that the 18 manufacturers will see that the best way of going here 19 from a cost standpoint and from a compliance standpoint is 20 to provide a large, large number of NEVs and to 21 essentially move away from city cars and to move away from 22 full-service vehicles. And so we will not see those 23 almost with certainty if we provide both the credit and 24 the incentive. 25 What we tried to do here was essentially make a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 recognition of the fact that we are providing huge numbers 2 of credits in the early years for NEVs in order to allow 3 them to be introduced into the marketplace and to have a 4 niche and to basically establish whether or not that niche 5 is one that the consumers would be comfortable with. 6 If the consumers are comfortable with it, what we 7 thought we would then do is make sure we can bring this 8 back to the Board, and as the credit rachets down over the 9 next several years, that the credit could then be 10 reestablished at a higher level through the Board's 11 direction. But if, in fact, the market doesn't take off, 12 then the Board has already made the right choice in terms 13 of providing the opportunity early-on and then allowing 14 the market to decide whether it's going to be successful 15 or not. 16 The other fear here is that if we do provide a 17 subsidy when we're providing the lowest cost alternative 18 through the credit mechanism, is that none of the subsidy 19 monies will go to anything but NEVs. And we think that 20 probably is also a mistake. 21 CHAIRPERSON LLOYD: Mr. McKinnon and Mrs. 22 Riordan. 23 BOARD MEMBER McKINNON: I'm one of those crazy 24 fools out there that only buys American cars. And so my 25 choices in large American cars have diminished if I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 going to buy an electric car. And I have to tell you, the 2 last car I bought was a Chrysler product. And if you 3 still had the EPIC, the next car I'd buy would be a 4 Chrysler product. 5 But you don't have the EPIC moving. And the EPIC 6 was a hell of a good idea. I mean there's some folks 7 running a -- that were running an airport transportation 8 service down at LAX using the EPIC. And I mean when you 9 talk about, you know, a full service car that, you know, 10 you could put a family in and I could take a kid to hockey 11 practice and all that stuff, you did the best of -- for my 12 world, you did the best that there was when you did the 13 EPIC. You're not making it. 14 I think that it is good for us to have a broad 15 variety, and NEV becomes one of the pieces of it. So it's 16 interesting, you know, and good to have it included. I 17 don't know that we should subsidize it. Having 18 full-service freeway capable vehicles subsidized is 19 important to me. 20 And I think limiting subsidies on NEVs and -- 21 there's a little one in here for the three-wheel 22 motorcycle. I think it's a good thing to have a little 23 one in there. I don't think it should be big. It's a one 24 or two passenger vehicle. 25 But, I don't -- you know, you make your choices. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 But I'll tell you, I think you were on to something with 2 the EPIC. And maybe it's a cost thing and a whole bunch 3 of questions, but I'm sorry you -- 4 MR. MALONEY: It was a great vehicle. It still 5 is. It's a good vehicle, but it is very expensive. 6 Also, the infrastructure standardization 7 basically eliminated that from being a viable product, 8 because the ZEV infrastructure would not provide enough 9 energy to charge the battery in a reasonable amount of 10 time. So that was one of the contributing factors also. 11 BOARD MEMBER McKINNON: Well -- 12 MR. MALONEY: We had a charger, that it was -- 13 BOARD MEMBER McKINNON: The Lockheed charger, 14 right? 15 MR. MALONEY: The Lockheed charger. That was 16 much more powerful than the charger that -- it was off 17 board because it had to be large enough to charge the 18 battery pack because the battery pack had become so large. 19 And now with the on-board requirement for electric 20 vehicles, we couldn't get a battery charger large enough 21 on-board. 22 BOARD MEMBER McKINNON: I thought you abandoned 23 the EPIC before the -- 24 MR. MALONEY: No, no, no. I mean that wasn't the 25 sole contributing factor. I'm just saying if we did PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 continue though -- I mean we couldn't continue. 2 CHAIRPERSON LLOYD: Mrs. Riordan. 3 BOARD MEMBER RIORDAN: Well, Mr. Chairman, I 4 think I heard Mr. Maloney say something about the product 5 that would be introduced in a few months. Was that what I 6 heard. 7 MR. MALONEY: Some programs -- neighborhood 8 electric vehicle programs that we are working on now that 9 will be announced soon, that show how you -- 10 BOARD MEMBER RIORDAN: A program or a product. 11 MR. MALONEY: It's a program, programs that show 12 how useful neighborhood electric vehicles can be. 13 BOARD MEMBER RIORDAN: Oh, sorry. I thought if 14 it was some interesting new product, I'd certainly be 15 willing to revisit this issue. But if you're not 16 introducing some product that's going to be beyond our 17 expectations, then I'm pretty comfortable with where I am. 18 MR. MALONEY: That's different. We may be doing 19 that too. But this is specifically neighborhood electric 20 vehicles. 21 BOARD MEMBER RIORDAN: Okay. 22 CHAIRPERSON LLOYD: Thank you very much, Fred. 23 I think we probably have some additional comments 24 on NEVs from Sandra Spelliscy and Bonnie Holmes-Gen. 25 MS. SPELLISCY: Thank you, Mr. Chairman and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 Members. Sandra Spelliscy with the Planning and 2 Conservation League. And I'd just like to start out by 3 saying we have worked with the staff on this issue through 4 the ZEV Alliance, and we'd like to thank the staff for 5 listening to some of our concerns. And some of the things 6 have been addressed and they've moved -- some ways we're 7 not quite where we would like to be today. But they have 8 listened to our concerns and we appreciate that. 9 And I have some very brief comments. And a lot 10 of them are about the budget situation that the State is 11 facing. We are in a very dire situation in terms of the 12 State budget, as you all know. And the ZEV incentives 13 program is in jeopardy right now because of that. 14 We have seen the Legislature cut approximately 15 $10 million of a $20 million appropriation in this year's 16 budget already, basically the money that would go for the 17 ZIP II guideline. So we're down to about 50 percent of 18 what we thought we had a year ago. And, in fact, when 19 they get into their next rounds of cuts in May, I don't 20 know that we'll see any of the money left at all, because 21 the situation is so severe. 22 And so one of our concerns I think from the 23 outset is that we always felt very strongly that the 24 limited amount of incentive money we would spend should go 25 to full-function vehicles and those that were -- where the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 incremental costs of the vehicle was really high and that 2 were the kind of vehicle that was most likely to really 3 replace the trip made by a full-function internal 4 combustion engine. 5 And, at this point, I'd say I think we continue 6 to have some concerns about perhaps the message that is 7 sent in broadening the guidelines, so that you are giving 8 money to vehicles that aren't receiving credit within the 9 program and other vehicles that are basically pretty 10 inherently low-cost vehicles that, although they're not 11 technically golf carts, many people in the public would 12 perceive them as sort of golf-cart-like vehicles. 13 And so we continue to have concerns that those 14 are the kinds of vehicles that people will see on the 15 street, those are the kinds of vehicles they'll equate 16 with the zero-emission program. And as policymakers look 17 at what their ZEV incentive dollars are buying in these 18 very difficult budget times, we're really going to have an 19 uphill fight a) hanging onto any money this year at all 20 and b) in better budget times coming back to the 21 Legislature and saying, "Okay, now we're doing a little 22 bit better and we want to make up some of that incentive 23 money that we lost." 24 So I think you're in a very difficult position at 25 this point, and I -- one of the recommendations I would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 make to you is that you might want to consider delaying 2 even taking action on this item right now until it's clear 3 what the budget situation will be. 4 But, again, I think it's critical, given the 5 budget play at the Legislature right now, that the signal 6 is sent about how our state is going to spend these very, 7 very limited number of dollars and what we're getting for 8 those dollars is how that will be perceived by 9 policymakers as really important. So I just want to leave 10 you with those thoughts. 11 I'll answer any questions if you have any. 12 CHAIRPERSON LLOYD: Ms. D'Adamo. 13 BOARD MEMBER D'ADAMO: Well, but don't you think 14 if we don't act, that it would send a different message to 15 the Legislature that we haven't even gotten our act 16 together to determine how the funds would be distributed? 17 MS. SPELLISCY: No. At this point, I don't. I 18 think there's sort of less of a risk, particularly for 19 people -- I think for people who don't like the ZEV 20 Program to begin with and would like to find ways to make 21 mischief with it, it may be -- you know, the fact that you 22 haven't completed your work is sort of less -- they would 23 be less able to use that then, "Okay, look it. This is 24 the kind of stuff we're spending the money on," and those 25 sorts of things. I mean, it's a difficult call. But I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 think that -- I mean what it says to me is there's a 2 broadening of the program at a time when the money is 3 actually diminishing. And there may be questions about 4 the types of vehicles that are being incentivized and, you 5 know, whether or not it makes sense to do that. 6 BOARD MEMBER D'ADAMO: And when you say 7 broadening, you're referring to the NEV, the $1,000 in 8 lieu of the credit, and what other item? 9 MS. SPELLISCY: And the incentive for the 10 vehicles that aren't -- don't actually receive ZEV credit 11 as well. So zero-emission motorcycles. 12 CHAIRPERSON LLOYD: Mr. McKinnon, do you want -- 13 BOARD MEMBER McKINNON: Yeah, I guess when we 14 dealt with this issue in terms of credit to manufacturers 15 in prior occasions, I have consistently raised the 16 question about the three-wheel motorcycle, which -- you 17 know, let's not kid each other. There's an Oregon 18 version, but there's a California manufacturer that is 19 providing vehicles that get people to work and back and 20 maybe one or two people in them. I don't think we ought 21 to give them full credit -- or full subsidy in this case, 22 not credit. 23 But I'm fully willing and able to defend the 24 decision where part of the solution is being done by -- on 25 a company's own -- these guys risk their own capital to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 build that business. They hired Californians to go to 2 work there. I can't imagine a reason that we would 3 exclude them from -- what we're trying to get accomplished 4 here is zero-emission vehicles, and they provided one. 5 And they provided one without being forced to or pushed to 6 or negotiated with. They just did it. 7 And I would be really unhappy if we -- I was 8 unhappy when we set that issue aside in previous hearings. 9 MS. SPELLISCY: Well, I guess one of the other 10 things that has concerned us is information that those 11 vehicles are being manufactured and being sold and 12 actually -- you know, people want them and they're not 13 having any trouble selling the ones that they produce. 14 And you should know that a similar issue like this came 15 before the Energy Commission when they were talking about 16 using -- spending some money to do incentives for hybrids. 17 And we weren't in favor of spending tax payers' dollars to 18 incentivize the purchase of vehicles that were already 19 selling. I mean there have been waiting lists to buy a 20 Toyota Prius and a Honda Insight. And there we didn't see 21 any reason why we needed to incentivize a vehicle that was 22 moving off the shelf as soon it was produced. 23 And so -- you know, that's one of the 24 distinctions I think that in times when you're looking at 25 very, very limited dollars, if any dollars, that you have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 to just draw these lines and that we -- you know, we may 2 look at things very differently in a different budget 3 year, but this year -- I really do think we're at risk of 4 losing the rest of the ZEV incentive money completely. 5 BOARD MEMBER McKINNON: It is not only a 6 difficult budget year; it is a difficult employment year. 7 And Corbin provided a new set of jobs to this state. And 8 to thumb our nose at that would just be outrageous. I 9 mean -- but beyond the budget -- I understand the budget 10 and I work here in the beltway and we talk about it a lot 11 and all that. But the real world out there is that 12 there's a whole bunch of people that aren't working. 13 That's the real problem going on out there. That's why 14 there's less coming in. 15 And not -- a lot of it is 911 related and a lot 16 of it is trade related. Nine eleven did a lot of it. 17 And I have to deal with it every day. And here's 18 somebody that did something positive. They're going to be 19 operating in an environment that, you know, some would 20 argue we regulated this market into happening, and we 21 exclude them? I can't do it. 22 And it's beyond budget. It's jobs and it's 23 what's right and what's wrong. 24 MS. SPELLISCY: Well, it's a year of very tough 25 choices, I agree. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 CHAIRPERSON LLOYD: Thank you, Sandy. 2 Bonnie. 3 MS. HOLMES-GEN: Afternoon, Mr. Chairman, Board 4 Members. My name is Bonnie Holmes-Gen and I'm here on 5 behalf of the American Lung Association of Sacramento -- 6 of California. 7 And we are here supporting you moving ahead with 8 the ZEV incentive program. We've appreciated your support 9 for the ZEV Program over many years. But we do have 10 concerns -- and you've had some discussion about them. 11 Maybe I'd just add a couple of points. We do have 12 concerns about the allocation of the funding between the 13 various categories of zero-emission vehicles. 14 Our great concern is that the funding be focused 15 on the full-function zero-emission vehicles and that we 16 have as much funding available as possible, especially in 17 the 2003 year, for the full function ZEVs. 18 And so we are encouraging you to make some 19 adjustments in the allocations to ratchet down on the 20 funding that's going to the city vehicles, the NEVs, and 21 the zero-emission motorcycles. Or to make some 22 adjustments to cap those amounts in this program so that 23 we are going to assure that most of the money is going to 24 go to support the full-function zero-emission vehicles. 25 As you know -- or many of you may know that our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 lung association -- actually seven of our local 2 associations have been involved with the assistance of a 3 grant from the Energy Foundation in gathering support for 4 the ZEV program around the state and encouraging local 5 governments to adopt ordinance resolutions and policies to 6 make the zero-emission vehicles their first choice in a 7 vehicle -- new vehicle procurement process. 8 And, you know, we are encouraged that there may 9 be, you know, several more policies adopted even before 10 the end of this year. And we hope that this work in 11 concert with the work that many other groups are doing is 12 going to help drive up the orders of full-function 13 vehicles. And again, you know, we believe that the 14 presence of an adequate pot of funding in the ZEV 15 incentives program is essential and important to us in 16 generating local support and helps to get locals to go 17 ahead and sign up for these kinds of policies to purchase 18 ZEVs. 19 Just a couple of specific comments. In the city 20 electric vehicle category, we appreciate the staff has 21 reduced the proposed incentive. It's now about $3,500 for 22 general use and $5,000 for fleet use. But our concern is 23 that this still may be a little bit too high. And the way 24 we're looking at it, if a city EV is priced around 25 $20,000, then a $3,500 incentive represents about 18 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 percent of the price. 2 Now, when we look at a full-function ZEV at 3 $42,000, let's say, a $5,000 incentive is 11.7 percent of 4 the price. So our concern is that we're offering, you 5 know, less of an incentive when you look at the total cost 6 of the vehicle for the full function than we are for the 7 city vehicles. 8 So we were -- we would encourage you to drop that 9 down -- that incentive down to, say, $2,500 per city 10 vehicle. And we think that would be a little more fair to 11 the large number of full-function electric vehicles that 12 we expect in 2003 and would save more of the money for 13 that program. 14 In terms of neighborhood electric vehicles, we do 15 have -- we appreciate that the staff has recommended no 16 incentive on NEVs in the 2002 period, and we support that. 17 But we would also like to see you extend that into 18 2003-2004 for the individual purchase. And then drop the 19 fleet purchase incentive, also in 2003-2004 -- we would 20 recommend dropping that down to $1,000 per NEV. 21 And, you know, you've heard the concerns and I 22 think you understand the concerns, you know, they are 23 fairly low priced for an electric vehicle. You've talked 24 about that. There are already ZEV credits, as you've 25 commented. And we understand that there has been or might PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 still be a manufacturers' credit. And you might want to 2 ask the Chrysler representative. We understood there was 3 going to be a GEM manufacturer incentive of around $2,000 4 for those vehicles, which is obviously very significant. 5 So we want to make sure that we're not, as you said 6 earlier, dropping that price down so low that we're 7 driving the market toward those vehicles. 8 In terms of the zero-emission motorcycles -- 9 you've had a lot of discussion about that -- it certainly 10 is a viable option to meet transportation needs, as you've 11 commented. But we are again concerned about the 12 possibility for too much of the incentive money going 13 toward those vehicles. We would prefer, frankly, that 14 there not be incentive funding going to that vehicle 15 category. Maybe you could consider looking at some kind 16 of a cap on the money. If you're thinking that there 17 might be, you know, 50 or 100 motorcycles that might be 18 incentivized with the funding, maybe you could specify 19 that you're intending to look at a specific number and not 20 have too much of the money go toward that category. 21 So I would just put that forward for your 22 consideration. And, again, the purpose is not to, you 23 know, punish any manufacturer such as the motorcycle 24 manufacturers. Our only concern is that there's not a big 25 pot of money -- the money is proposed to be reduced PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 because -- or potentially reduced in the Legislature 2 because of the serious budget deficit. And, you know, our 3 concern is that we save as much as possible of the money 4 for the full-function ZEVs. And we're only talking about, 5 you know, a couple thousand ZEVs here that could be 6 incentivized with this funding. 7 So we would again encourage you to make some 8 adjustments to bolster the funding going to full-function 9 and reduce to some degree the money going to city and 10 neighborhood and maybe put a cap on the amount of money 11 going to the motorcycles. 12 Thank you very much for consideration of 13 comments. And we look forward to working with you 14 together to make this program successful. 15 CHAIRPERSON LLOYD: Thank you very much, Bonnie. 16 We missed you this morning. 17 MS. HOLMES-GEN: I'm sorry. And thank you for 18 doing the right thing. I appreciate it greatly. 19 CHAIRPERSON LLOYD: Thank you. 20 Any comments from the staff? I'm sure you've 21 heard these before. And I know you're trying to craft a 22 tough issue here. 23 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, I think 24 some of the testimony went towards the numbers and where 25 the incentives are likely to go, what category of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 vehicles. And while we can't, you know, predict or 2 guarantee which way it's going to go, there -- in the city 3 class, the one we've defined here is ones that are not 4 freeway capable. And right now we don't know of any 5 vehicles that are going to be offered in the next one or 6 two years that even fit in that class. 7 In the Corbin-style class, we know their 8 production capability is relatively small. And so we're 9 probably talking, you know, a hundred-type number of 10 incentives. 11 And in the NEV category, as Mr. Kenny said, we 12 expect most of the NEVs will take the credit rather than 13 the incentive. And so the kinds of companies that will -- 14 that would be able to take advantage of that small 15 credit -- or a small incentive, I think, are the really 16 small companies that haven't got around to selling their 17 credit to GM, Ford, Chrysler, somebody else like that. 18 So in three of the four categories we expect that 19 the use of the incentives will be pretty small. The 20 corollary to that is that most of them go to 21 freeway-capable vehicles, which is, I think, what the 22 Board's, you know, desire had been from the ZEV mandate, 23 which is the result that most the testifiers would like 24 too. 25 So I don't think there's any risk that it's going PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 to all go pouring to one area versus the other. That 2 would happen if there was a change such that you could get 3 credit for NEVs and incentives for NEV, but not the way at 4 least the proposal is structured. 5 CHAIRPERSON LLOYD: Other discussion from my 6 colleagues here? 7 Supervisor Roberts. 8 BOARD MEMBER ROBERTS: Just a question. And 9 maybe there's no answer. 10 So for the city ZEVs, this doesn't really exist? 11 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 12 unfortunately, we kind of changed the definition, which -- 13 the city -- we had talked I think about city cars as being 14 these two seaters, that -- like the Ford Think vehicle. 15 That vehicle, which is one we know that's coming to 16 production, is a freeway-capable vehicle. And so it's in 17 the same category as the full-function vehicles. 18 The ones -- the category we have here are those 19 two-seater-type vehicles that can't go on the freeway. 20 And right now we don't know of any of those. So -- 21 BOARD MEMBER ROBERTS: The first one you were 22 referring to, is that a lower cost version of the -- 23 DEPUTY EXECUTIVE OFFICER CACKETTE: The first 24 one, the Think vehicle, is something that, you know, is -- 25 without the incentive it's probably a $20,000 vehicle. So PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 it's not a low-cost vehicle. 2 BOARD MEMBER ROBERTS: Well, it's low cost in 3 comparison to a unsubsidized cost -- I mean, that's an 4 unsubsidized cost? 5 DEPUTY EXECUTIVE OFFICER CACKETTE: Right. It's 6 low compared to a larger vehicle, but it has a smaller 7 battery. But it still has things like air conditioning 8 and all of the normal functions that a conventional car 9 would have. 10 BOARD MEMBER ROBERTS: But that won't fit into 11 this category? 12 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, that 13 fits into the Number 1 category, the same thing as a 14 Toyota RAV4. It gets a full credit, full incentive. 15 BOARD MEMBER ROBERTS: It gets a full credit -- 16 DEPUTY EXECUTIVE OFFICER CACKETTE: Full 17 incentive. 18 BOARD MEMBER ROBERTS: Full incentive? 19 DEPUTY EXECUTIVE OFFICER CACKETTE: Right, both. 20 I mean it's a -- 21 BOARD MEMBER ROBERTS: I thought the incentive 22 was based on the differential and -- 23 DEPUTY EXECUTIVE OFFICER CACKETTE: Maybe it's 24 easier -- a picture is worth a thousand words. They'll 25 show you which ones we're talking about. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 BOARD MEMBER ROBERTS: Yeah, help me here because 2 I'm -- 3 CHAIRMAN LLOYD: After this item we will take a 4 10-minute break for the court reporter and then -- before 5 we take the last item. 6 BOARD MEMBER DeSAULNIER: Now that you're all 7 asleep, I'd like to talk. 8 DEPUTY EXECUTIVE OFFICER CACKETTE: Okay. Here 9 we go. 10 If you go back to the one before that. 11 The car on the lower by the red one is what we 12 were calling a city car. That's the Ford Think vehicle. 13 But that's freeway capable. So that fits in this category 14 that would get the same amount of incentive as a RAV or 15 the Ranger pickup, for example. 16 The next slide shows a car that we don't believe 17 is going to be in production. 18 BOARD MEMBER ROBERTS: Before you leave the first 19 one, so I understand this -- maybe a selling price, 20 unsubsidized, around $20,000. 21 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, it's 22 actually -- Judy said -- the initial one in the first year 23 I think is -- for that red one is more like twenty-six. 24 BOARD MEMBER ROBERTS: Twenty-six? 25 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 And it could be eligible for a grant up to about 2 $9,000? 3 DEPUTY EXECUTIVE OFFICER CACKETTE: Right. 4 BOARD MEMBER ROBERTS: Okay. 5 DEPUTY EXECUTIVE OFFICER CACKETTE: With other 6 credits that vehicle will end up being a fairly low-priced 7 vehicle, but still, you know, in the teens. 8 BOARD MEMBER ROBERTS: Yeah. Maybe that's going 9 to take care of what I need -- the thing that I'm 10 concerned about and have -- what kind of range does that 11 have? 12 DEPUTY EXECUTIVE OFFICER CACKETTE: Sixty miles, 13 maybe. 14 BOARD MEMBER ROBERTS: How much? 15 DEPUTY EXECUTIVE OFFICER CACKETTE: Sixty. 16 BOARD MEMBER ROBERTS: Sixty miles? Okay. 17 DEPUTY EXECUTIVE OFFICER CACKETTE: And then this 18 vehicle that's on the next slide was a Toyota 19 demonstration vehicle. And this one was not freeway 20 capable. But we have no indication this is going into 21 production. So it fell into this sort of new definition 22 of city EVs which are not freeway capable. And my point 23 was that in the years that these grants are available, we 24 don't have any information that this kind of car is going 25 to even be out there. So -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 BOARD MEMBER ROBERTS: So we've got a program but 2 we may not have a grant, so that may be -- 3 DEPUTY EXECUTIVE OFFICER CACKETTE: For this 4 category. But there will be for the other categories. So 5 all I'm saying is that if -- if the concern was that 6 all -- that the money might float on one of these other 7 categories, all of it there, we don't think that's going 8 to happen. We think the money will flow mainly to the 9 first category, which has got these smaller vehicles and 10 full-function vehicles, all of which are freeway capable. 11 BOARD MEMBER ROBERTS: Okay. But this -- I mean, 12 I thought we were having some heartburn over this and one 13 of the others that we're going to flood the market, but 14 there's not even a vehicle. 15 So I was going to ask you what you thought the 16 price on that was without the subsidy, but there isn't 17 any, so I won't ask that. 18 What's the price of the motorcycle without 19 subsidy? 20 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, that 21 one was running around -- without subsidy, I think around 22 $17,000. But, in fact, we crafted most of these -- you 23 can argue about what the pricing is. We're not sure of 24 the pricing on some of these vehicles. But we did try to 25 craft these so that they are roughly the same -- you know, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 rounded to the plus or minus 500 level. They are roughly 2 the same percentage of a typical asking price for the 3 kinds of products that we think were out there. 4 BOARD MEMBER ROBERTS: Well, that's what I was 5 trying to get at. Based on some of the comments the last 6 speaker made, it sounded like maybe that wasn't the case. 7 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, it 8 depends on what you believe the price is. She picked 9 $42,000 for the RAV. I guess if you pick $35,000 for the, 10 maybe, Ranger pickup truck and the EV1, which you've had 11 experience, then that comes out to be about 15 percent. 12 And it works out about that. And there's rounding to keep 13 the numbers, so maybe it's 12 percent, maybe it's 17 or 18 14 percent. But it's all roughly the same proportion to a 15 typical asking price. 16 BOARD MEMBER ROBERTS: And what do you think the 17 neighborhood ZEV is? 18 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, the GEN 19 two seater has been advertised at 6999. 20 BOARD MEMBER ROBERTS: Without subsidy? 21 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. But 22 then they have a four-seater version, which would be 23 higher priced. We've seen some that were 9, 10 thousand, 24 I believe. 25 Anymore higher than that? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 AIR POLLUTION SPECIALIST YEE: The Ford Think was 2 offered for $8,000. 3 DEPUTY EXECUTIVE OFFICER CACKETTE: Okay. Yeah, 4 the Think for $8,000. The Lido, again not sure of the 5 exact price, but it might have been over ten, because it 6 has a full-car kind of -- more of a car kind of body. But 7 they're all neighborhood low-speed vehicles. And so, you 8 know, it's hard to pick what the right number is there. 9 But we tried to provide, you know, some incentive 10 for that product, should it not get ZEV credits. If it 11 gets ZEV credits, we're pretty comfortable that that end 12 of the market will go pretty fast. A lot of manufacturers 13 are focusing on it because you get four ZEV credits 14 initially and it ends up being the low-cost option to 15 compliance. So we don't think giving more money there 16 necessarily makes sense. 17 BOARD MEMBER ROBERTS: Can you take the 18 motorcycle on the freeway? 19 DEPUTY EXECUTIVE OFFICER CACKETTE: Yes. 20 CHAIRPERSON LLOYD: One of the things I think 21 staff has done -- I guess if there's a choice to be made 22 with this regulation, whether keep it simpler or keep it 23 complex, it seems to be the path has always been to go 24 more complex. And I think you've made it more difficult 25 now because the issue, I think -- Ms. D'Adamo and I were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 talking -- because, you know, city cars now, not city cars 2 it used to be, city car no longer exists, now a 3 full-service car and city car doesn't exist at all. But 4 there is a category for it. 5 So maybe we could clear this up here. It's 6 not -- maybe in the future we could -- can we rename 7 the -- 8 EXECUTIVE OFFICER KENNY: I think the difficulty 9 has been that essentially things have evolved. I mean, 10 when we first saw the -- for example, the Think city car, 11 it was a vehicle that was designed to stay under 55 miles 12 an hour. And as time has gone on, Ford has kind of 13 rethought that, and now Ford is basically labeling that as 14 freeway capable. And so -- whereas there are other cars 15 that were basically city cars which have not been 16 redesigned or relabeled as freeway capable. And so that's 17 why you've gotten this one category that now has been 18 almost split in two, with part of it going up into the 19 full-service area. 20 DEPUTY EXECUTIVE OFFICER CACKETTE: We got there 21 because the legislation, you know, provided this 22 freeway-capable or not-freeway-capable distinction. And 23 that's kind of why -- 24 CHAIRPERSON LLOYD: So there's no confusion -- 25 DEPUTY EXECUTIVE OFFICER CACKETTE: It's just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 like entropy, you know. 2 CHAIRPERSON LLOYD: -- they are not going to be 3 built? 4 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, 5 I don't -- we don't know for sure, but I don't think so 6 right now. It's more in demonstration programs. And it's 7 not freeway capable. So if it was built, I guess it might 8 fall in this category. 9 CHAIRMAN LLOYD: So the only car that used to be 10 a city car and is not a city car is the Ford one. 11 DEPUTY EXECUTIVE OFFICER CACKETTE: Right. 12 CHAIRPERSON LLOYD: Okay. Thank you. 13 Ms. D'Adamo. 14 BOARD MEMBER D'ADAMO: And this used-to-be-city 15 car that's no longer a city car, how many -- or is there a 16 requirement as far as passengers on the full functions? 17 DEPUTY EXECUTIVE OFFICER CACKETTE: There's not. 18 It happens to be a two-passenger vehicle. But there's not 19 a requirement that distinguishes it under this program 20 between two and four seats. 21 BOARD MEMBER DeSAULNIER: Mr. Chairman. 22 CHAIRPERSON LLOYD: Yes. 23 BOARD MEMBER DeSAULNIER: Am I still a member? 24 (Laughter.) 25 BOARD MEMBER DeSAULNIER: Actually, I want to go PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 back and talk about the Toyota lawsuit for a minute. 2 (Laughter.) 3 BOARD MEMBER DeSAULNIER: Is this the ECOM that's 4 on the screen right now. 5 So we put that in because we thought that Toyota 6 might have ECOMs in the market or there might be something 7 like that, but there's not going to be now? 8 DEPUTY EXECUTIVE OFFICER CACKETTE: Yes. Well, 9 we don't think there's going to be. It's not clear. 10 BOARD MEMBER DeSAULNIER: Some kind of 11 metaphysical thing where we create categories that don't 12 exist or -- 13 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: We had 14 pretty extensive outreach with, you know, everybody -- car 15 manufacturers and environmental groups and users and fleet 16 owners -- in development of these proposals. And we did 17 come up with a proposal. As you see it -- recognizing 18 that, as you saw here, there are people on opposite sides 19 of many of the issues. But our stakeholders did ask us to 20 include this category as a placeholder, more or less, for 21 this program or future incentive programs if this vehicle 22 or similar vehicles get produced. 23 So we recognize there aren't any. We were hoping 24 it wasn't going to confuse the situation, but we were 25 trying to be responsive to the stakeholders and provide a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 placeholder. 2 BOARD MEMBER DeSAULNIER: Well, I do think it's 3 important that we develop clear distinctions and maybe 4 work with the Legislature. Personally, I think what I've 5 seen with the junior -- or the senior city cars, the Think 6 and the Smart car, and what they're doing in Atlanta, and 7 Europe, how successful they are -- although they're not 8 ZEVs -- they're internal combustion engines -- I really 9 see a future for them. 10 And when I used to think -- when we first talked 11 about this, and I agreed with Bonnie and others that we 12 should be really focusing on the full side, and I think we 13 still should. But in terms of what I've been able to 14 follow both in Japan and Europe and now Atlanta vis-a-vis 15 parking incentives and things like that, that there's a 16 real opportunity there and we have to -- we want to get 17 people in there. 18 Now, having said that, I do think -- I agree with 19 Bonnie that -- or Sandy that there is a market there that 20 should fill up pretty quickly, that people will want that 21 product in urban settings. But I think we have to 22 differentiate if for no other reason as the nomenclature 23 sort of evolves. We all have to know what we're talking 24 about. 25 And in terms of the ECOM, you know, if we're not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 going to have grants there, maybe there's a way to make 2 sure that that money that might have gone there gets 3 incentivized into the full-feature cars, rather than do a 4 percentage. And I don't know if there's a simple way to 5 do that. 6 DEPUTY EXECUTIVE OFFICER CACKETTE: No, it would. 7 I mean, the money is going to go wherever there's 8 customers. It's not allocated per -- just the amount was 9 trying to -- calculated by a percentage. 10 BOARD MEMBER DeSAULNIER: But most likely, since 11 there's nothing in this market, that's going to go the 12 full-sized -- 13 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. If 14 there's no allocation of money within the total amount 15 available to each one of these categories, it's going to 16 go wherever there's customers. 17 BOARD MEMBER DeSAULNIER: Well, since I've talked 18 so much today, I don't want to belabor the point, at this 19 point. I think you've done a good job and I'm supportive. 20 But I -- just for those comments. I know that things are 21 changing quickly, and we have to certainly work with 22 people to make sure we're speaking in the same language. 23 CHAIRPERSON LLOYD: One question I would like 24 to -- since it was brought up, I would like to take 25 advantage of our Ledge Director being here, Rob Oglesby. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 And ask you, Rob -- the advice we're getting from 2 Sandy was that maybe we should delay things. Could we get 3 the benefit of your wisdom here on that particular aspect. 4 MR. OGLESBY: Well, I think the Legislature and 5 the administration as a whole approved the original 6 legislation with a full expectation that we are going to 7 go forward with the implementation of this program; and 8 indeed it's been a priority for the Governor and the 9 Governor's budget in setting aside the money. So I think 10 the direction that we have as a state agency from the 11 executive branch is to proceed with the program. 12 However, Sandy Spelliscy and others certainly 13 observe that the budgetary -- the fiscal topography has 14 changed over the time and there is -- there is certainly 15 the risk that funds that remain with positive balances may 16 be revisited. And I guess my response to that would be 17 that there's a May revise due out in mid-May and that 18 there's a legislative and budgetary process that will take 19 place. And that'll be the forum for deciding where funds 20 come out of. Having this program defined on the books by 21 regulation I don't think interferes with that process. It 22 may change the balances in the accounts. 23 CHAIRPERSON LLOYD: Okay. So your advice would 24 be -- 25 MR. OGLESBY: Stay the course. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 CHAIRPERSON LLOYD: Okay. Thank you. We 2 appreciate that. It's helpful from that perspective. 3 Any more discussion? 4 BOARD MEMBER ROBERTS: I'd like to make a motion 5 that we adopt the staff recommendation. 6 BOARD MEMBER D'ADAMO: Second. 7 CHAIRPERSON LLOYD: All in favor say aye? 8 (Ayes.) 9 CHAIRPERSON LLOYD: Anybody against? 10 Thank you. 11 And thank you, staff. I guess we will take a 12 10-minute break. Twenty-five after get together for the 13 last item. 14 (Thereupon a brief recess was taken.) 15 CHAIRPERSON LLOYD: I'd like to start on Agenda 16 Item 02-2-5. And it's the final agenda item. 17 Status report on the Carl Moyer Memorial Air 18 Quality Standards Attainment Program. 19 In 1999, Governor Davis approved the first major 20 appropriation for the Carl Moyer program. The ARB and the 21 California Energy Commission were given the responsibility 22 for implementing and managing this program, consistent 23 with statutory criteria. 24 Since then the Carl Moyer program has received a 25 total of $114 million over four years. Local air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 districts have provided an additional $41 million in 2 matching funds and project proponents have provided 3 additional and in-kind contributions to get these projects 4 off the ground. 5 Today, we can see that the Carl Moyer program is 6 a resounding success. Together ARB, CEC, and the local 7 air districts have contributed and obligated funding for 8 the first three years, reducing NOx emissions by 14 tons 9 per day at an average cost effectiveness of approximately 10 $5,000 per ton. The program is also providing significant 11 particulate matter reductions. 12 As a result of the Carl Moyer program, we have 13 cleaner transit buses, refuse haulers, and line-haul 14 trucks on the road; less polluting marine vessels in our 15 coastal waters; and cleaner agricultural pumps and farm 16 equipment in our fields; as well as nonpolluting forklifts 17 at warehouses and ports. 18 At this point, I would like to ask Mr. Kenny to 19 introduce the item and begin staff's presentation. 20 EXECUTIVE OFFICER KENNY: Instead of going 21 through the introduction, I think what I'm going to do is 22 simply turn it over immediately to Rosalva Tapia and 23 she'll provide the staff presentation. 24 CHAIRPERSON LLOYD: Thank you. 25 AIR POLLUTION SPECIALIST TAPIA: Thank you, Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 Kenny. Good afternoon, Chairman Lloyd and Members of the 2 Board. 3 (Thereupon the overhead presentation was 4 presented as follows.) 5 AIR POLLUTION SPECIALIST TAPIA: Today I will 6 present the third status report on the Carl Moyer Memorial 7 Air Quality Standards Attainment Program, the Carl Moyer 8 Program. 9 The program was initiated in 1998 and is about to 10 enter its fourth administrative year. 11 In the first three years the program has operated 12 rapidly and effectively. It has been a success in 13 producing near-term reductions of NOx and toxic 14 particulate matter in order to meet our air quality 15 commitments. 16 --o0o-- 17 AIR POLLUTION SPECIALIST TAPIA: I will begin 18 with a summary of the program's background and history. 19 The program is named after the late Dr. Carl 20 Moyer. Dr. Moyer led the early development of the 21 program, which provides grants for the incremental cost of 22 cleaner than required heavy-duty vehicles and equipment. 23 The types of projects funded are typically new 24 alternative fuel vehicles or the replacement of an older 25 uncontrolled diesel engine with a new diesel engine. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 The program includes on-road heavy-duty vehicles, 2 off-road equipment, agriculture irrigation pumps, electric 3 forklifts, locomotives, and marine vessels. The program 4 began solely as an ozone-attainment strategy aimed to meet 5 near-term NOx commitments. 6 In 1994 the 1994 State Implementation Plan, 7 specifically SIP Measure M4, calls for incentives to 8 archive early reductions of NOx emissions from heavy-duty 9 diesel engines. 10 --o0o-- 11 AIR POLLUTION SPECIALIST TAPIA: As previously 12 stated, the concept of the program began with the 1994 SIP 13 and SIP Measure M4. 14 In 1998 through the budget process the Governor 15 and the Legislature authorized the first allocation of 16 funding to implement the Carl Moyer Program. 17 In 1999 the program was codified into the Health 18 and Safety Code Section 44275. 19 Both ARB and the California Energy Commission 20 approved guidelines to implement the engines, the engine 21 infrastructure, and advanced technology portions of the 22 statewide program. 23 --o0o-- 24 AIR POLLUTION SPECIALIST TAPIA: In 2000 the Carl 25 Moyer Program Advisory Board, a 13-member advisor board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 created under the Health and Safety Code, reported the 2 Carl Moyer Program as a success to the Governor and the 3 Legislature. The advisory board recommended the program 4 to continue and incorporate revisions that would require 5 reductions of toxic emissions of particulate matter. 6 In November 2000 the Air Resources Board approved 7 revisions to the guidelines and incorporated the advisory 8 board's recommendations. The program's third and fourth 9 year funding is administered under these revised 10 guidelines. 11 In 2001 the Governor and the Legislature 12 authorized funding for the fourth year of the program. In 13 addition, the Governor signed Assembly Bill 1390, authored 14 by Assemblyman Firebaugh. This bill requires districts 15 with over one million residents to expel at least half 16 their State Carl Moyer funds to benefit low-income 17 communities or communities of color. 18 To summarize the funding history over the course 19 of four fiscal cycles, the Carl Moyer Program has received 20 $114 million in one-time appropriations from the budget. 21 In years two and three the California Energy 22 Commission received portions of the funds to implement the 23 Infrastructure Demonstration Program and the Advanced 24 Technology Development Program. 25 In this fourth year ARB received the entire PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 sixteen million allotted to the program. 2 --o0o-- 3 AIR POLLUTION SPECIALIST TAPIA: I will continue 4 with an overview of the program and the districts' status. 5 --o0o-- 6 AIR POLLUTION SPECIALIST TAPIA: The Carl Moyer 7 Program funds are administered as follows: ARB and CEC 8 overlook different portions of the funding. 9 The vast majority of the funds are allocated by 10 ARB for engine replacement. These funds along with funds 11 allotted to the Infrastructure Demonstration Program are 12 allocated to the districts. 13 Participating districts have provided $41 million 14 in matching funds to pay for additional engine and 15 infrastructure projects that meet the state guidelines. 16 Finally, CEC's Advanced Technology Development 17 Program supports the development of advanced emission 18 reducing technologies for heavy-duty engines. CEC issued 19 formal solicitations and awarded grants to specific 20 programs -- excuse me -- projects aimed to help industry 21 develop low-emission advanced technology. 22 --o0o-- 23 AIR POLLUTION SPECIALIST TAPIA: In the fourth 24 year, Colusa County APCD joined the program, bringing the 25 total to 23 districts that have participated in the Carl PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 Moyer Program within the last 4 years. 2 --o0o-- 3 AIR POLLUTION SPECIALIST TAPIA: I will now move 4 to a brief discussion of the projects and benefits of the 5 Carl Moyer Program to date. 6 --o0o-- 7 AIR POLLUTION SPECIALIST TAPIA: In the first 8 three years of the program, 48 percent of the allocated 9 funds helped repower or purchase new on-road engines, 10 which include heavy-duty refuse vehicles, transit and 11 school buses. Three percent of the funds went to electric 12 forklifts; 28 went to ag pump repower projects; 18 to 13 repower marine vessels, including fishing vessels, 14 tugboats, and harbor vessels; 2 percent of the funds went 15 to off-road projects which include agriculture and 16 construction equipment. 17 In total, the Carl Moyer program has funded 4,356 18 engines statewide. 19 --o0o-- 20 AIR POLLUTION SPECIALIST TAPIA: The vast 21 majority of the on-road projects consist of transit buses 22 and refuse vehicles. Logging trucks, delivery trucks, and 23 other special service vehicles have participated as well. 24 On-road projects are popular in areas such as the 25 Bay Area and South Coast. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 --o0o-- 2 AIR POLLUTION SPECIALIST TAPIA: Marine projects 3 are popular in participating coastal districts such as San 4 Diego and the Bay Area. Marine vessel engines have a long 5 duration, providing emission benefits for up to 20 years. 6 --o0o-- 7 AIR POLLUTION SPECIALIST TAPIA: Offered 8 equipment such as grape harvesters, tractors and 9 construction equipment make up the large portion of 10 off-road projects. 11 --o0o-- 12 AIR POLLUTION SPECIALIST TAPIA: San Joaquin and 13 Sacramento Metropolitan Air Districts concentrate the Carl 14 Moyer Program funds to repower and replace agriculture 15 irrigation pumps. 16 --o0o-- 17 AIR POLLUTION SPECIALIST TAPIA: South Coast uses 18 Carl Moyer Program funds to electrify over 200 forklifts. 19 --o0o-- 20 AIR POLLUTION SPECIALIST TAPIA: The first three 21 years of the program is estimated to produce approximately 22 14 tons of NOx reductions and approximately half a ton of 23 PM reductions per day. Because of the life of the project 24 some of these benefits will continue into the next decade. 25 Although the overall cost effectiveness of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 program has increased slightly, it still remains well 2 below the threshold of $13,000 per NOx ton. The average 3 cost effectiveness continues to be about $5,000 per ton -- 4 NOx ton reduced. 5 --o0o-- 6 AIR POLLUTION SPECIALIST TAPIA: I will now 7 discuss activities related to the current year of the Carl 8 Moyer Program. 9 --o0o-- 10 AIR POLLUTION SPECIALIST TAPIA: In the current 11 year ARB received $16 million allotted to the Carl Moyer 12 Program. ARB has distributed the funds to participating 13 districts who have begun to administer the fourth year 14 funds. Fund levels are shown here. 15 --o0o-- 16 AIR POLLUTION SPECIALIST TAPIA: As stated 17 earlier, legislation charted in October 2001 requires 18 districts with a population of over one million residents 19 to expel at least half their Carl Moyer state funds to 20 projects that will benefit low-income communities or 21 communities of color. 22 The five largest participating districts -- south 23 Coast, San Joaquin, Sacramento, Bay Area, and San Diego -- 24 are required to meet this new criterion. The is also a 25 beneficial goal for the rest of the participating PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 districts. 2 --o0o-- 3 AIR POLLUTION SPECIALIST TAPIA: ARB would like 4 to provide information to guide the districts in 5 developing their own EJ criteria, but prefers the 6 districts to evaluate their own environmental justice 7 needs. 8 Since environmental justice characteristics vary 9 from district to district, ARB acknowledges that districts 10 need to focus their environmental policies on their 11 specific needs. Since South Coast has completed the 12 development of their environmental justice criteria, I 13 will highlight their policy as an example. 14 South Coast will evaluate its fourth year 15 projects according to poverty level, PM exposure, and 16 toxic air exposure. 17 South Coast has defined its areas of poverty as 18 areas where at least 10 percent of the population falls 19 below the poverty -- the federal poverty level. The 20 district will also give consideration to projects 21 operating areas with the highest 15 percent of PM 22 concentration and to projects operating in areas where the 23 cancer risk occurs at a rate of at least one thousand per 24 one million inhabitants. 25 The South Coast estimates that 60 to 75 percent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 of all projects it has funded with the Carl Moyer state 2 funds fall in areas of environmental justice. 3 --o0o-- 4 AIR POLLUTION SPECIALIST TAPIA: Also, new for 5 the fourth year is an interdistrict program. In December 6 2001 ARB released an interdistrict solicitation, calling 7 for projects which operate in more than one California 8 district. Every district is distinct in its methods of 9 administrating and operating their California program 10 funds -- the Carl Moyer program funds within the criteria 11 of the guidelines. 12 In the past, districts have found it difficult to 13 coordinate funding for multi-district projects. Hence, 14 ARB set aside about half a million dollars in funding to 15 focus on projects that operate in multiple districts. 16 ARB received over $1 million in applications. 17 ARB staff is currently reviewing these applications and 18 plans to finish its review process in early May. 19 --o0o-- 20 AIR POLLUTION SPECIALIST TAPIA: I will now 21 discuss the future of the Carl Moyer Program. 22 On March 5th, 2002, California voters passed 23 Proposition 40, which allocates $2.4 billion to improve 24 the environment of parks and areas of recreation. Of 25 these funds, the proposition allocates $50 million to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 Carl Moyer Program. Furthermore, proposition language 2 specifies that each air district will be eligible for a 3 grant of at least $200,000. 4 The $50 million, which will begin to be available 5 in Fiscal Year 2002-2003 will fund projects that reduce 6 the air pollution impact in California parks and 7 recreational areas. 8 --o0o-- 9 AIR POLLUTION SPECIALIST TAPIA: To address 10 changing emission standards and ensure the program 11 operates in the most effective and economic manner, ARB 12 staff have proposed revised guidelines to the Board in 13 Fall 2000. Those revisions will include language to 14 address the implementation of Prop 40. 15 --o0o-- 16 AIR POLLUTION SPECIALIST TAPIA: I will end my 17 presentation with program conclusions and staff 18 recommendations to the Board. 19 --o0o-- 20 AIR POLLUTION SPECIALIST TAPIA: The program has 21 been a success, producing 14 tons of NOx and half a ton of 22 PM emissions reductions per day. These reductions help us 23 meet our SIP objectives. The program has helped cleanup 24 the air in harbors, neighborhoods, fields, farms, urban, 25 and rural areas. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 Staff recommends the Board continue its efforts 2 to keep the program funded. 3 That concludes my presentation. Thank you. 4 CHAIRPERSON LLOYD: Thank you very much. 5 Board members have any questions? 6 BOARD MEMBER CALHOUN: Refresh my memory as to 7 the source of funding for the Carl Moyer Program. 8 AIR POLLUTION SPECIALIST TAPIA: In the past four 9 years we've received one-time allocations from the budget. 10 And Proposition 40 was voted by the California voters. 11 It's a $50 million allotment -- one-time allotment. 12 BOARD MEMBER CALHOUN: Thank you. 13 CHAIRPERSON LLOYD: Given the criteria for this 14 new -- the Prop 40 funds, the South Coast is still likely 15 to get the lion's shares of the funds, for the 40 million? 16 AIR POLLUTION SPECIALIST TAPIA: From the fourth 17 year? 18 CHAIRPERSON LLOYD: No, for the 40 million. 19 AIR POLLUTION SPECIALIST TAPIA: Oh, Prop 40 20 funds? 21 CHAIRPERSON LLOYD: How is that likely to be 22 geographically distributed? I realize you have to have a 23 guess there. 24 BOARD MEMBER DeSAULNIER: Yeah, since Bill isn't 25 here, can we take as much of that today out of South PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 Coast? 2 (Laughter.) 3 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: 4 Remaining Board members get to distribute the funds. 5 CHAIRPERSON LLOYD: Good answer. 6 (Laughter.) 7 BOARD MEMBER RIORDAN: It's a reward for staying 8 late. 9 CHAIRPERSON LLOYD: But it seems though that's -- 10 you know, how would it likely be distributed? 11 EXECUTIVE OFFICER KENNY: Well, what's 12 historically happened, when we've done the Moyer funds, is 13 we've tried to do it on the basis of population and on the 14 basis of program. And so it's likely that the South Coast 15 will probably end up with roughly 40 percent of the funds. 16 CHAIRPERSON LLOYD: Given -- although you've got 17 national -- you've got parks and recreation. And it 18 depends how you define those. 19 EXECUTIVE OFFICER KENNY: Well, it will depend 20 upon how we define those. But it's like that, in fact, 21 there will be sufficient parks and recreational areas in 22 the South Coast just like everywhere else in the state. 23 And so it'll probably be to a great extent population 24 based. But, again, I mean I'm speculating here. We 25 haven't really spent any time on this at all at this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 point. 2 BOARD MEMBER RIORDAN: Mr. Chairman, what was the 3 amount though that came to the districts from Prop 40? 4 There was something that I thought reflected $200,000. 5 EXECUTIVE OFFICER KENNY: Prop 40 said $200,000 6 minimum per district. It should be -- but it should be -- 7 I mean, there are roughly 35 districts in the state. And, 8 you know, that would roughly translate to $7 million if we 9 just did kind of a $200,000 minimum. But obviously 10 there's quite a bit of money left. So the larger areas 11 will probably end up with, you know, a good portion of 12 that. 13 CHAIRPERSON LLOYD: But each area is 14 guaranteed -- each of the 35 districts is guaranteed a 15 piece, which they weren't guaranteed under Moyer. 16 BOARD MEMBER RIORDAN: Is there a matching 17 component, or is that for us to decide or -- who 18 decides -- 19 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: That is 20 for us to decide. 21 CHAIRPERSON LLOYD: And those guidelines will be 22 coming back to us later? 23 EXECUTIVE OFFICER KENNY: Yes. 24 CHAIRPERSON LLOYD: Ms. D'Adamo. 25 BOARD MEMBER D'ADAMO: The environmental justice PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 component under the bond, is that the only requirement, or 2 do we also have other requirements like air -- poor air 3 quality, et cetera? 4 EXECUTIVE OFFICER KENNY: Well, there was a 5 requirement that essentially the money be spent for air 6 quality improvements of park and recreational areas. And, 7 you know, one could define that fairly narrowly and say 8 that it has to be right there in the specific park and 9 recreational area or one might want to define that a 10 little bit more broadly, in which case the region that 11 contains parks and recreational areas would get the money. 12 I think our general kind of direction or thought 13 there is to essentially probably go broad there with the 14 definition. 15 CHAIRPERSON LLOYD: Okay. I guess we don't have 16 any witnesses signed up for this item. 17 And since this is not a regulatory item, it's not 18 necessary to officially close the record. So with that, 19 we'll finish this item. And thank you, staff, very much. 20 I guess the public comment period, we don't 21 have anybody signed up, so with that I'll bring the April 22 25th Air Resources Board Meeting to a close. 23 Thank you all. 24 (Thereupon the California Air Resources 25 Board meeting adjourned at 4:45 p.m.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 CERTIFICATE OF REPORTER 2 I, JAMES F. PETERS, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing California Air Resources Board meeting was 7 reported in shorthand by me, James F. Peters, a Certified 8 Shorthand Reporter of the State of California, and 9 thereafter transcribed into typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said meeting nor in any 12 way interested in the outcome of said meeting. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 8th day of May, 2001. 15 16 17 18 19 20 21 22 23 JAMES F. PETERS, CSR, RPR 24 Certified Shorthand Reporter 25 License No. 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345