BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD LOS ANGELES AIRPORT SHERATON GATEWAY HOTEL 6101 WEST CENTURY BOULEVARD LOS ANGELES, CALIFORNIA FRIDAY, SEPTEMBER 24, 2004 8:30 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. Alan Lloyd, Chairperson Ms. Sandra Berg Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Dr. Henry Gong Ms. Barbara Patrick Ms. Patricia Salas Pineda Mrs. Barbara Riordan STAFF Ms. Catherine Witherspoon, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Diane Johnston, General Counsel Ms. Kathleen Tschogl, Ombudsman Mr. Steve Albu, Mobile Source Control Division Mr. Richard Corey, Chief, Research and Economic Studies Branch, Research Division Mr. Fereidun Feizollahi, Air Resources Supervisor I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF Mr. Paul Hughes, Manager, Low Emission Vehicle Implementation Section, Mobile Source Control Division Mr. Aron Livingston, Staff Counsel Mr. Nic Lutsey, Graduate Student Assistant, Mobile Source Control Division Mr. Chuck Shulock, Vehicle Program Specialist ALSO PRESENT Ms. Louise Bedsworth, Union of Concerned Scientists Mr. Brian Bunger, Bay Area Air Quality Management District Mr. Bahram Fazeli, Communities for a Better Environment Mr. Larry Green, Sacramento Air Quality Management District Mr. Eric Haxthausen, Environmental Defense Ms. Bonnie Holmes-Gen, American Lung Association Mr. Roland Hwang, Natural Resources Defense Council Ms. Wendy James, Clean Cars Campaign Mr. Brian Johnson, Managing Director, City of Santa Monica Mr. Kenneth Johnson, KJ Innovation Mr. Joseph Kubsh, MECA Mr. Lewis Lem, AAA Mr. James Lyons, Sierra Research Ms. Laura MacCleery, Counsel for Auto Safety Mr. John McNamara, California Refuse Removal Council Mr. John Perez, United Food & Commercial Workers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Ms. Nancy Pfeifer, City of El Segundo Mr. Carlos Porras, Independent Mr. Terry Tamminen, CalEPA Secretary Mr. John White, Sierra Club Mr. Brian Williams, Deputy Mayor, City of Los Angeles Mr. Dennis Zane, ALA PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX PAGE Opening remarks by Chairperson Lloyd 1 Roll Call 2 Item 04-8-2(continued) 2 Mr. Eric Haxthausen 2 Mr. Bahram Fazeli 8 Mr. Kenneth Johnson 10 Mr. Joseph Kubsh 17 Mr. John Perez 21 Mr. Dennis Zane 23 Ms. Laura MacCleary 26 Mr. Brian Bunger 28 Mr. Larry Green 31 Mr. Roland Hwang 33 Ms. Bonnie Holmes-Gen 40 Councilmember Nancy Pfeifer 45 Ms. Louise Bedsworth 47 Mr. Brian Johnson 52 Ms. Wendy James 54 Mr. John McNamara 56 Mr. James Lyons 58 Mr. Carlos Porras 60 L.A. Deputy Mayor Brian Williams 63 Mr. John White 68 Mr. Lewis Lem 74 CalEPA Secretary Terry Tamminen 79 Staff Responses to Question from Public 84 Ex Parte Communications 112 Discussion & Q&A 118 Motion 142 Vote 142 Adjournment 143 Reporter's Certificate 144 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Meeting of the California Air 3 Resources Board is now in session. Today is a 4 continuation of yesterday's Board meeting. And in fact 5 will be a continuation of the witnesses on Item 4-8-2. 6 So I'm very pleased to welcome the first witness, 7 Deputy Mayor Brian Williams from the City of L.A., 8 followed by Council Member Todd Campbell from the City of 9 Burbank and Council Member Eric Busch, City of El Segundo. 10 Sorry. Not arrived yet. 11 We'll have then Dennis Zane, John Perez -- 12 another John Perez. 13 Denny, are you here? 14 Tim, what's happening to L.A. here? 15 Okay. Try again. 16 Bahram Fazeli, Dr. Marlyn Woo, Eric Haxthausen. 17 Eric, are you -- you want to -- 18 MR. HAXTHAUSEN: I'm here. Yes, I can speak. 19 CHAIRPERSON LLOYD: Yes, please. 20 EXECUTIVE OFFICER WITHERSPOON: Dr. Lloyd, the 21 clerk needs to take roll. 22 CHAIRPERSON LLOYD: Oh, sorry. 23 Clerk of the Board, would you please call the 24 roll. 25 BOARD CLERK ANDREONI: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 Ms. Berg. 2 BOARD MEMBER BERG: Yes. 3 BOARD CLERK ANDREONI: Ms. D'Adamo? 4 BOARD MEMBER D'ADAMO: Here. 5 BOARD CLERK ANDREONI: Supervisor DeSaulnier? 6 BOARD MEMBER DeSAULNIER: Here. 7 BOARD CLERK ANDREONI: Dr. Gong? 8 BOARD MEMBER GONG: Here. 9 BOARD CLERK ANDREONI: Ms. Kennard? 10 Supervisor Patrick? 11 BOARD MEMBER PATRICK: Here. 12 BOARD CLERK ANDREONI: Mrs. Riordan? 13 BOARD MEMBER RIORDAN: Here. 14 BOARD CLERK ANDREONI: Supervisor Roberts? 15 Ms. Pineda? 16 BOARD MEMBER PINEDA: Here. 17 BOARD CLERK ANDREONI: Mr. Loveridge? 18 Chairman Lloyd? 19 CHAIRPERSON LLOYD: Here. 20 Thank you very much. Well then we'll have Eric 21 Haxthausen, followed by Kenneth Johnson and Joe Kubsh from 22 MECA. 23 I would appreciate if people can keep to about 24 five minutes today. We still have a growing witness list. 25 MR. HAXTHAUSEN: Thank you, Dr. Lloyd and members PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 of the Board. I'll try to be crisp this morning. 2 My name is Eric Haxthausen. I'm an economist and 3 clean car policy advocate with Environment Defense. And 4 yesterday -- yesterday you heard from my colleague John 5 DeCicco. I'd like to amplify a few of his remarks with 6 respect to some of the economic issues involved in the 7 proposal before you. 8 Could I have the next slide please. 9 (Thereupon an overhead presentation was 10 Presented as follows.) 11 --o0o-- 12 MR. HAXTHAUSEN: I'd like to make three basic 13 points today in my comments. 14 The first is that the proposed regulations 15 developed by the staff, the proposal that's before you, 16 are cost effective and they clearly meet the economic test 17 that's laid out, set forth in AB 1493. 18 Secondly, if adopted, the proposal would bring 19 net benefits to California. 20 And, finally, the analysis that the staff has 21 prepared is sound, thorough and comprehensive. 22 Next slide please. 23 --o0o-- 24 MR. HAXTHAUSEN: The key test in the statute is 25 is the proposal economical to the owner or operator of a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 vehicle, taking into account the full life cycle costs of 2 a vehicle? The staff proposal clearly meets that test. 3 It shows net cost savings to consumers over the full 4 vehicle life cycle and every year of the program. 5 Moreover, the operating cost savings exceed the increased 6 vehicle cost by $30 million in 2009 and $5.3 billion 7 dollars in 2020, and they increase throughout the 8 program -- the lifetime of the program. 9 Next slide please. 10 --o0o-- 11 MR. HAXTHAUSEN: And I want to emphasize one 12 thing. This is a very robust conclusion. Even if the 13 staff were to go back and make some revisions to some of 14 the costs that you have heard and we're comfortable with 15 their basic cost estimates, many of the assumptions -- 16 because many of the assumptions that underlie those 17 estimates are quite conservative. Even with an arbitrary 18 doubling or even tripling of the costs, this proposal 19 would still pass the test in the statute. I think that's 20 an important point that we'd like to have on the record. 21 And, indeed, we believe as my colleague, John 22 DeCicco, said yesterday that the proposal could be more 23 stringent and still be cost effective under those terms. 24 Next slide please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 MR. HAXTHAUSEN: The second point I'd like to 2 make is that the proposal will yield net benefits for 3 California. These cost savings through reduced operating 4 costs means more money in California -- the California 5 economy and in consumers' pockets. 6 The proposal will result in more jobs. The 7 proposal calculates -- the analysis shows 55,000 more jobs 8 and higher levels of individual income for Californians. 9 Moreover, the focus of the regulations is to 10 reduce greenhouse gases. And the proposal will reduce 11 them significantly, by 32 million tons of CO2 equivalent 12 annually in 2020, by 57 million tons in 2030 and 13 continuing out into the future. 14 It's worth noting, by the way, that the analysis 15 shows that the regulations would have overall net benefits 16 even before accounting for the value to California's 17 economy associated with taking these important steps 18 toward stabilizing California's climate. 19 Next slide please. 20 --o0o-- 21 MR. HAXTHAUSEN: The reductions in greenhouse 22 gases that this program will deliver are an important and 23 needed step towards stabilizing California's climate. 24 Because of the size of California's economy, the 25 significant fraction of greenhouse gases that come from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 California motor vehicles and California's role as a 2 technology leader in the world, it is clear that any 3 reasonable climate stabilization policy will include 4 greenhouse gas emission reductions from California 5 vehicles. 6 The proposal before you today offers critical 7 leadership and paves the way for other jurisdictions, both 8 in the U.S. and elsewhere, to address this important 9 issue. 10 Although some will and have suggested that the 11 analysis underlying the proposal does too little to 12 clarify the precise effects of the regulation on the 13 climate, the key point is that this proposal takes a 14 needed step in the right direction. It is not necessary 15 to know precisely down to the tenth of a degree or to the 16 asthma-related death or to the hospitalization how this 17 proposal will affect Californians in the future. It's 18 enough to know that it's -- there's a problem, and a very 19 large problem, as we heard yesterday, and it's necessary 20 to begin to act. 21 And on this point it may be helpful to reflect on 22 the early days of smog control. It was not necessary to 23 wait for advances in air quality modeling to know that 24 action was needed to reduce smog-causing emissions. And 25 there was little danger at that time of overreacting at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 the time in order to make the air, quote-unquote, too 2 clean. 3 Next slide please. 4 --o0o-- 5 MR. HAXTHAUSEN: Finally, the staff proposal is 6 sound and thorough. The analysis that underlies it is 7 sound and thorough, and the proposal relies on analysis 8 using standard economic methodologies. In particular, the 9 analysis that accounts for many mitigating factors that if 10 ignored could tend to reduce the benefits or increase the 11 costs of the regulation, those factors have been carefully 12 addressed by the staff. And you've heard from the staff 13 about the fleet turnover effect and the scrappage effect. 14 There's no major missing pieces in this analysis. It's 15 all there. 16 As you've heard, the analysis is also tailored to 17 California and California communities. Some of the 18 estimates that have been cited by others are nationalists. 19 And it's the estimates developed by the staff are tailored 20 to California and, therefore, more appropriate. 21 Next slide please. 22 --o0o-- 23 MR. HAXTHAUSEN: To summarize, the proposal is 24 economically well justified. It easily meets the 25 statutory cost effectiveness criterion. It passes a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 standard benefit cost test if one were to apply that. And 2 the conclusions are robust and they rely on reasonable 3 economic assumptions and thorough analysis. 4 Thank you. 5 CHAIRPERSON LLOYD: Thank you very much. 6 Any questions from my colleagues? 7 Seeing nothing. 8 Thank you very much. 9 Bahram Fazeli is now here. So I -- 10 MR. JOHNSON: Did you mention whether Kenneth 11 Johnson is here? Could I -- 12 CHAIRPERSON LLOYD: No, you can -- if we can -- I 13 didn't realize that Bahram was here. So after Bahram, 14 yes, please. 15 MR. FAZELI: Thank you. Good morning. 16 My name is Bahram Fazeli. I'm Southern 17 California Director with Communities for a Better 18 Environment. 19 CBE is a statewide environmental health and 20 justice organization. And we rely on community education 21 and organizing legal advocacy and technical research to 22 empower low income communities of color to engage in the 23 decision-making process. 24 Today I'm presenting CBE and also the 25 Environmental Justice and Climate Change Initiative. EJCC PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 is a diverse consensus-based group of U.S. environmental 2 justice, climate justice, religious, policy and advocacy 3 networks, working together to promote sane and equitable 4 climate policy. Our mission is to education and engage 5 the people of North America towards the creation and 6 implementation of just climate policies in both a domestic 7 and international context. 8 Climate change is a serious issue for everyone 9 who inhabits this planet. And Californians will face 10 serious challenges as the impacts of global warming are 11 realized. 12 Indigenous people, people of color, and 13 low-income communities especially need to make sure that 14 effective and just actions are taken to combat climate 15 change because they will be the hardest hit and least able 16 to adapt to its effects, as the Redefining Progress study 17 has found. 18 The Pavley Bill is important for people 19 everywhere, not just in California. The EJCC is concerned 20 about the bill because we recognize it as a significant 21 legislation that will serve as a model for states all over 22 the nation. As Beverly Wright, Co-chair of EJCC and 23 Director of Deep South Center for Environmental Justice, 24 points out, we want to make sure that this bill is 25 implemented in its strongest form so that if and when it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 adopted by other states, it will be effective enough to 2 make a real difference. 3 We want to recognize that this is only a first 4 step in our commitment for just climate policies, and 5 there is a long way to go. We applaud the efforts of ARB 6 staff and the leadership of the Board and we strongly 7 support the recommendations. 8 Thank you. 9 CHAIRPERSON LLOYD: Thank you very much indeed. 10 Thanks for coming. 11 Yes. Now, Mr. Kenneth Johnson. 12 An announcement from the hotel. There's a 13 Mercedes which has to be moved, apparently owned by -- it 14 says here, Chu Johnson. But that could be Stew Johnson. 15 Of course Stew Johnson from VW driving a Mercedes, I'm not 16 sure. So there may be some -- but if there really is a 17 Chu Johnson or a Johnson, needs to move their Mercedes. 18 So maybe we can pass that on. 19 Okay. So we have Kenneth Johnson, Joe Kubsh, and 20 Lewis Lem. 21 MR. JOHNSON: Let's see, my comments relate to 22 Section 7 in the staff report on regulatory alternatives. 23 This section is -- it's actually the shortest section in 24 the report. It's slightly over one page. It discusses 25 the alternatives of doing less or doing more. But it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 doesn't say anything about doing anything fundamentally 2 different than the proposed LEV type 2 level standard. 3 One alternative that could have been considered 4 would be to set the emission standard for each test weight 5 according to an estimate of the maximum feasible 6 cost-effective emissions reduction for that weight. This 7 alternative would, by definition, satisfy the 1493 8 mandate. 9 Another option that I think some people have 10 brought up in previous workshops would be to set a single 11 uniform standard that applies to all weights. I think 12 there are good reasons that the staff rejected a 13 weight-neutral standard. Although the staff report does 14 not state those reasons. 15 The emission level that's attainable within the 16 limitations of feasibility and cost effectiveness 17 generally depend on vehicle weight. So it's not possible 18 to define a single standard that makes sense for all 19 vehicles. And a weight-neutral standard would only 20 satisfy 1493 on a sales average basis and then only for a 21 particular assumed vehicle weight distribution. 22 This is also true of the proposed two-level 23 LEV-type standard. 24 Fourteen ninety-three requires maximum feasible 25 cost-effective reduction of GHG emissions for motor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 vehicles. The proposed standard does not comply with this 2 mandate. For example, according to staff analysis, the 3 smallest truck in an NESCCAF study, which has a 4250 pound 4 test weight, could in 2016 achieve emissions of 284 grams 5 per mile within the limits of feasibility and cost 6 effectiveness. Whereas a standard only requires an 7 emissions of 332 grams per mile. 8 So the only sense in which the proposed standard 9 can be construed as achieving the objective of 1493 is on 10 a sales average basis and only for a fleet weight 11 distribution matching General Motors 2002 California 12 sales. These conditions are too limiting to meet the 13 requirements of 1493 in part because the standard is not 14 self-consistent. The calculations underlying the standard 15 are premised on a specific fleet weight distribution and 16 yet the two-level formula standard would itself induce the 17 industry to change vehicle weights either by upweighting 18 or downweighting so that the assumed weight distribution 19 no longer applies. 20 For example, the 2002 market had 20 models, 21 including 8 GM models with test weights of 3750 pounds, 22 which is at the upper limit of the T1 weight range. The 23 calculations underlying the proposed standards assume that 24 these vehicles are in the T1 category. But the standard 25 creates a compelling incentive to upweight these vehicles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 so that they are -- so they would be subject to the less 2 stringent T2 standard, 332 versus 205 gram per mile. 3 So by adding about 100 pounds to each of these 4 vehicles a manufacturer effectively gets 120 gram per mile 5 emission credits, which would have a value of probably 6 about $1500 in terms of compliance costs reduction. 7 If all manufacturers were to upweight their 3750 8 pound vehicles to move them up into the T2 category, the 9 effect on California emissions in 2030 would amount to 10 about 15,000 tons CO2 per day, which is about 10 percent 11 of the projected reduction under the proposed regulation. 12 And that's a reduction that is not accounted for and 13 neglected in the staff analysis. 14 If the manufacturers were to also equate their 15 3625 pound vehicles, that would add another 20,000 tons 16 CO2 per day. And if you extrapolate that to the national 17 level, that could probably be another factor of 10 18 increase. 19 CHAIRPERSON LLOYD: Mr. Johnson, have you passed 20 this on to staff? 21 MR. JOHNSON: I've submitted a written commentary 22 on this which goes into the technical details and 23 describes this in a lot more detail on August 11th. 24 VEHICLE PROGRAM SPECIALIST SHULOCK: Yes, we 25 received that information. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 CHAIRPERSON LLOYD: Okay. Thank you. 2 Maybe you could summarize. 3 MR. JOHNSON: Okay. The standard would also 4 induce downweighting due to the weight stratified 5 disparities in compliance costs. For example, in the 6 NESCCAF study -- well, let me just skip over this quickly, 7 because I don't want to take too much of your time. 8 But the downside of the incentive would provide 9 no environmental benefit because emission standards are 10 flat within each class. And while downsizing reduces 11 emissions, it also reduces a need for overcompliance 12 credits so small trucks could be designed to a less 13 stringent emissions of that. So the downsizing incentive 14 only functions to incentivize industry to substitute 15 downsizing for technology contrary to the technology 16 forcing nature of the regulation. 17 Upweighting and downweighting will shift the 18 vehicle weight distribution away from the assumed 19 California 2002 market conditions so that the standard no 20 longer satisfies the 1493 mandate even on a sales-average 21 basis. 22 And even if there were no upweighting or 23 downweighting, and if the vehicle weight mix in 2016 24 matched 2002 California conditions, the proposed standard 25 would still not comply with the mandate because, with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 exception of GM, none of the six manufacturers is actually 2 required under this standard to achieve maximum feasible 3 and cost-effective emission reductions. GM is the only 4 company that's actually required to achieve that standard. 5 CHAIRPERSON LLOYD: Thank you. I'll have to cut 6 you off here, because you've had 10 minutes now. 7 MR. JOHNSON: Okay. Thank you. 8 But I would just encourage you to look at my 9 written comments. I propose specific numerical emission 10 limits that would be more environmentally effective, more 11 cost-concerted than the proposal. 12 Thank you. 13 CHAIRPERSON LLOYD: Thank you very much. 14 Questions? 15 Ms. Berg. 16 BOARD MEMBER BERG: Yes. Could we have staff 17 comment on some of these points? 18 EXECUTIVE OFFICER WITHERSPOON: Mr. Johnson did 19 submit several thoughtful substantive comments to us over 20 the course of the rule development process, raising 21 exactly the issues that staff wrestled with from the very 22 beginning in coming up with a form of the standard and the 23 stringency of the of standard. He mentioned the 24 consideration of weight-based designations and uniform 25 standards in addition to what staff selected, which was a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 LEV-based two-tier division. And that we had not fully 2 explained our reasoning for rejecting the others in the 3 existing staff report, that's correct. We spent so much 4 time and such exhaustive analysis that at the end it was 5 old history to us. But in the final statement of reasons 6 we will clearly articulate why we selected the LEV II over 7 the other methods. 8 He also spoke about upweighting and 9 downweighting, which would be an issue no matter what form 10 of the standard was selected there is a risk of gaming in 11 any direction. And we won't be able to manage and police 12 that until we have some experience with the standard 13 itself. 14 In the two-tier structure the car and light-duty 15 truck weights overlap. So the first issue is what's a car 16 and what's a truck. And staff will be exercising 17 discretion, ask manufacturers come forward to them with 18 different vehicles in the crossover categories in coming 19 up with the right designation. 20 And then Mr. Johnson spoke about what happens 21 based on weight alone. You move into truck, but there is 22 a part of the weight boundaries that overlaps. So both 23 things will be going on. 24 And I think that's pretty much -- and then he 25 reaches the conclusion that because we chose LEV II and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 because not all manufacturers have to strive as hard to 2 meet that framework of the standards, that by default our 3 standards don't represent maximum feasible. Staff 4 believes that they still do. There are also mandates in 5 the bill that we must provide flexibility to 6 manufacturers, we must manage costs. And so the 7 underlying theory of the standard is it has to be 8 achievable by everyone and the farthest behind 9 manufacturer sets the ceiling on maximum feasible, not the 10 farthest ahead. 11 And so that's the nature of staff's proposal. 12 MR. JOHNSON: Okay. Can I just make one belief 13 additional -- 14 CHAIRPERSON LLOYD: No, I'm sorry. Because we 15 had too much of that yesterday. 16 BOARD MEMBER BERG: Thank you very much. But 17 thank you, Mr. Johnson. I do have your comments here. 18 And you did a lot of hard work. And thank you for that. 19 MR. JOHNSON: I appreciate that. 20 CHAIRPERSON LLOYD: Then we have Joseph Kubsh and 21 then Lewis Lem, then John Perez, who's now here. 22 MR. KUBSH: Good morning, Mr. Chairman and 23 members of the Board. My name is Joe Kubsh. I'm the 24 Deputy Director of the Manufacturers of Emission Controls 25 Association, MECA. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 MECA is a nonprofit association of the world's 2 leading manufacturers of emission control technology for 3 mobile sources, with a proven track record over the last 4 30 years of developing emission controls for all kinds of 5 on-road and off-road vehicles. 6 My comments today are not directed at the core 7 proposals regarding reducing carbon dioxide emissions from 8 light-duty vehicles, since these technology options are 9 largely outside of the experience base of our industry. 10 But I would like to offer one comment with 11 respect to the relationship between reducing greenhouse 12 gases like carbon dioxide and reducing criteria 13 pollutants, that is also an important part of California's 14 emission goals. 15 Our industry firmly believes that all of the 16 light-duty power train options, including light-duty 17 diesels, can be combined with appropriately designed and 18 optimized emission control technologies to meet all 19 applicable California conventional emission requirements 20 during the proposed implementation years that we're 21 considering here for reducing climate change emissions. 22 The Chairman and staff are well aware of the 23 impressive track record of gasoline stoichiometric 24 technology that's in the marketplace already today 25 achieving in some cases near-zero tailpipe emission levels PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 of criteria pollutants. 2 I did want to also indicate that there's a 3 growing body of evidence of the impressive technology 4 development associated with clean diesel technology. And, 5 again, Chairman and staff are well aware of some of these. 6 We believe that in the 2009-2016 timeframe technologies 7 like particulate filters, NOx-absorbent technology, and/or 8 selective catalytic reduction technologies will allow 9 manufacturers to use clean diesel as an option even here 10 in California and, thus, all of the technology options 11 that staff includes in their report for reducing climate 12 change emissions do not preempt those vehicles from still 13 meeting criteria pollutant requirements here in 14 California. 15 And that concludes my comments for today. 16 CHAIRPERSON LLOYD: Thank you very much, Joe. 17 A comment was made yesterday questioning -- I 18 think it was from South Coast -- questioning the potential 19 durability of control systems which would come into play 20 for the new generation of diesel which could meet our 21 standards. Do you have any comment to that? 22 MR. KUBSH: Yes. I can state that, firstly, with 23 respect to diesel particulate filters, by the end of this 24 year there'll be almost a million vehicles in -- 25 light-duty vehicles in Europe equipped with particulate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 filters that have operated for tens of thousands, in some 2 cases in excess of 80,000 -- 50,000 miles without any 3 problems, indicating that that technology is very robust 4 and certainly can provide very large reductions in 5 particulate matter emissions from light-duty vehicles. 6 There's still some remaining challenges on the 7 NOx side with respect to NOx absorbers and selective 8 catalytic reduction as they may be applied to light-duty 9 vehicles. But for reference, at the recent Department of 10 Energy DEER Conference that was held in Coronado here in 11 California a couple weeks ago, a couple manufactures 12 reported their latest results on light-duty diesel 13 vehicles equipped with filters and NOx absorber technology 14 and/or selective catalytic reduction technology, that 15 showed the ability to meet LEV II type NOx requirements 16 after a full useful life durability. 17 So, again, there's still some work to be done 18 there. But there's a growing body of evidence that these 19 technologies will be durable enough for light duty and we 20 believe even for heavy duty applications moving forward. 21 CHAIRPERSON LLOYD: Thank you. 22 Questions? 23 Thank you very much. 24 Lewis Lem. Then John Perez. 25 John Perez. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 MR. PEREZ: Good morning, Chairman Lloyd and 2 Board members. My name is John Perez. I'm the Director 3 of Political Affairs for the United Food and Commercial 4 Workers Union and the Vice President of the United Food 5 and Commercial Workers Western States Council. We 6 represent some 187,000 working families in the state of 7 California. 8 And I'm here before you today to ask you to adopt 9 the staff proposal to reduce greenhouse gas emissions from 10 motor vehicles that's before you today. 11 There's no longer any real doubt that greenhouse 12 gases are a key factor in the warming of the earth's 13 climate. And the impact of the global fever is already 14 being felt in the State of California. Our snow packs are 15 shrinking, our rivers are drying up, and our coast lines 16 are eroding. These changes threaten the lives and the 17 livelihoods of every working family in California. 18 Food, water, and energy costs are likely to 19 increase as the weather emergencies, insurance liabilities 20 and environmental losses and demands upon our public 21 health infrastructure. Indeed, California working 22 families, especially those in low income and environmental 23 justice communities, are at risk economically and socially 24 and they're most likely to fill the impact the quickest. 25 Passenger vehicles and light trucks are the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 largest source of global warming pollution in California, 2 accounting for approximately 40 percent of the state's 3 emissions. We can't continue to permit such excessive 4 greenhouse gas emissions from motor vehicles, especially 5 when technologies to reduce greenhouse gas emissions 6 already exist and more will be available in the years 7 ahead, as the CARB staff has identified. 8 We've already pumped out enough greenhouse gases 9 to affect California's climate, geology and economy for 10 decades to come. We owe it to the working families of the 11 State of California to rise to the challenge and stem the 12 global warming tide. 13 Organized labor in California is up to that 14 challenge. Over 23 unions in the state, including my 15 union, the United Food and Commercial Workers; electrical 16 workers; service employees; steel workers and machinists, 17 have indicated their support for the strongest possible 18 regulations to reduce greenhouse gas emissions from 19 automobiles. 20 There's no doubt that the labor movement takes 21 the threat of global warming and climate changes 22 seriously. The draft plan before you is a sound platform 23 for significant reductions and we urge your support. 24 CHAIRPERSON LLOYD: Thank you very much. 25 Questions? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 Oh, I've also got a John A. Perez here? 2 MR. PEREZ: Correct. 3 CHAIRPERSON LLOYD: Same person or not? 4 MR. PEREZ: I'm sorry? 5 CHAIRPERSON LLOYD: I've also got a John Perez 6 here. 7 MR. PEREZ: John A., John Perez, same person. 8 CHAIRPERSON LLOYD: The same one? 9 MR. PEREZ: Yeah. 10 CHAIRPERSON LLOYD: Okay. Thank you. Thank you 11 very much. 12 Well, I see that Denny Zane has arrived. And 13 then I don't know whether Dr. Marlyn Woo and Lewis Lem. 14 Laura MacCleery. 15 Is Lewis Lem here? Laura MacCleery? 16 So, Denny, are you going so come first and then 17 Laura MacCleery? 18 MR. ZANE: Good morning, Chairman Lloyd. My name 19 is Denny Zane. I'm a resident of the City of Santa 20 Monica, former mayor there. And for the last year or so I 21 have been working with the American Lung Association, 22 reaching out to cities and to labor organizations to find 23 support for this proposal. 24 And I must confess that I was quite surprised at 25 the readiness I found among elected officials and labor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 leaders and the sense of urgency that they shared about 2 the importance of this regulation. 3 John Perez, who just testified, indicated to you 4 that there were some 23 labor organizations that offered 5 support for this proposal. I have a chart here that will 6 show you a list of those folk. 7 Well, I'll just hold it. 8 EXECUTIVE OFFICER WITHERSPOON: You can put it on 9 the easel. 10 MR. ZANE: Okay. Later when officials from a 11 number of the cities who have indicated support will be 12 here as well, we will show you a list of the cities and 13 counties that have indicated support. 14 I think that the sense of urgency is growing in 15 California. Recently when the proceeding of the National 16 Academy of Sciences released its report about the effects 17 of global warming on California, there was one image that 18 stuck with me and that I shared frequently when I spoke 19 with elected officials. The image was that over the next 20 century coastal communities will begin to feel like inland 21 communities and the inland communities will begin to feel 22 like Death Valley. 23 I recently made a trip to Death Valley. I 24 arrived at midnight. It was 101 degrees. I grew up in 25 Colton, an inland community near San Bernardino. I now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 live in Santa Monica on the coast. 2 The imagery suggested by this spokesperson for 3 the National Academy of Sciences struck me quite close to 4 home. I do not look forward, nor should any of us, to the 5 day when the coastal communities will have days over 110 6 degrees like I frequently experienced when I was young man 7 in Colton; or when Colton, San Bernardino and other inland 8 cities will have a 101 degree temperatures at midnight. 9 This is not a future we should bequeath to our children. 10 This is a future to avoid. 11 You are perhaps the most important, perhaps even 12 the most influential, agency, collection of individuals 13 who can make a difference as to where we go over this 14 century. I envy you your role. I think were any of us to 15 choose careers or positions in public service, the 16 opportunity to make a difference is really what we are 17 seeking. You have an opportunity to make a difference 18 like few others have had before you or will have after 19 you. I urge you to stand tall to it and support this 20 measure. 21 Thank you. 22 CHAIRPERSON LLOYD: Thank you very much. 23 Impressive list of supporters. 24 Questions? 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 Laura MacCleery, Brian Bunger, and Larry 2 Sherwood. 3 MS. MacCLEERY: Good morning, Mr. Chairman and 4 members of the Board. My name is Laura MacCleery and I'm 5 counsel for Auto Safety at Public Citizen. 6 At Public Citizen I work for Joan Claybrook, who 7 is Administrator of the National Highway Traffic Safety 8 Administration and for 30 years has worked on auto safety 9 issues. 10 Unfortunately, in our experience all too often 11 the auto industry wages what the springboards called an 12 irregulatory case on air bags, the regulatory equivalent 13 of war against safety standards such as rollover or roof 14 crush resistance or even air bags. 15 I just wanted to go on record today and say that 16 we're very supportive of the Board's proposal. We 17 disagree with some of the allegations raised by outside 18 groups, which we believe to be front groups for the auto 19 industry, that there are safety implications from the 20 proposal. The weight reductions that are at issue in that 21 argument are not going to flow from the Board's proposal, 22 which is a carefully thought-out and comprehensive 23 technology package, completely free of any implications 24 for the weight or vehicle attributes as the Board has 25 said. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 And even in the context of the arguments that 2 they're being made, the issue that weight and safety are 3 interrelated is a myth. In fact, weight is a function of 4 vehicle size, which is sometimes confounded with weight in 5 the data. And it's also function of vehicle design. So 6 smaller vehicles are as safe, if you look at driver death 7 rates, as larger or heavier vehicles. 8 I have made extensive comments in this regard and 9 slides to the record. But because the safety issue's not 10 been a huge issue in these proceedings, I'm just going to 11 refer to that. 12 I'd also like to submit for the record a report 13 that we commissioned several years ago on a retrospective 14 look on different cost estimates by industry for 15 regulations that the federal government has promulgated 16 over the years. It covers DOT, OSHA, FDA. It's quite 17 comprehensive. And in every case it found that the 18 prospective view of the costs of the regulatory compliance 19 were overstated, sometimes by a factor of 10. And it 20 explains some of the economic factors in the missed 21 analysis for that. So that's for the record for the 22 Board. 23 Thank you very much. 24 CHAIRPERSON LLOYD: Thank you very much. And 25 thank you for being mindful of our time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 Any questions here? 2 Thank you. 3 Brian Bunger, Larry Sherwood, Roland Hwang. 4 MR. BUNGER: Good morning, Chairman Lloyd, 5 Supervisor DeSaulnier and members of the Board. Thank you 6 for the opportunity to address you today on this wonderful 7 piece of regulatory work. 8 My name is Brian Bunger and I'm the District 9 Counsel for the Bay Area Air Quality Management District. 10 Jack Broadbent, our Executive Officer, sends his regrets 11 that he could not be here today personally to address you. 12 Mr. Broadbent also sends his congratulations to 13 the new members of the Board and the continuing members. 14 And we both look forward to working with you as we 15 continue our mission to achieve clean air in the Bay Area. 16 I'm here today on behalf of Mr. Broadbent and the 17 staff to offer our support of this regulatory proposal. 18 We sent a letter by facsimile on -- I believe on 19 Wednesday, but I'll reiterate the comments we made there. 20 The Bay Area Air Quality Management District 21 staff supports the ARB staff proposal to control 22 greenhouse gas emissions from motor vehicles being 23 considered by you today. 24 In 2002 the Air District supported and lobbied 25 for passage of California's landmark legislation, AB 1493 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 (Pavley). 2 We believe that the proposal before you today is 3 a rational, reasonable beginning towards the more 4 responsible future for motor vehicles that the original 5 legislation envisioned. 6 There is clearly strong worldwide consensus in 7 the scientific community that human actions are affecting 8 climate through atmospheric build up of greenhouse gases. 9 In California the transportation sector is the largest 10 single contributor to greenhouse gas emissions. To 11 address this AB 1493 stipulates that the ARB enact 12 regulations to achieve the maximum feasible and cost 13 effective reduction of greenhouse gas emissions from motor 14 vehicles. We believe that the staff proposal before you 15 today achieves this goal. 16 While we note that costs have increased in the 17 addendum for compliance in the near term for cars and 18 light trucks, we do not believe that that in any way 19 diminishes the importance of passing this regulatory 20 proposal. 21 Higher compliance costs may mean higher initial 22 consumer purchase costs. But the staff proposal clearly 23 demonstrates that these are more than offset by reduced 24 lifetime operating costs. Thus we do not believe that the 25 information in the addendum should delay the Board's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 regulatory adoption schedule. 2 For regions like the Bay Area that are very close 3 to attaining federal ozone standards, future global 4 warming and the resulting increase in ozone concentrations 5 jeopardizes our efforts. And global warming makes our 6 task of attaining state ozone standards even more 7 difficult. 8 While California's light-duty fleet is 9 responsible for a relatively small percentage of total 10 global emissions of greenhouse gases, we concur with the 11 staff report that this does not mean California should be 12 passive and ignore the problem. 13 California has long been a leader in air quality 14 efforts. California regulatory efforts and their 15 worldwide replication have historically impacted far more 16 than just California vehicles. The staff proposal would 17 have economic benefits for our state, both the personal 18 incomes here because of reduced automobile operating costs 19 and for other reasons, many of which you have heard from 20 other speakers. 21 In conclusion, we urge you and your colleagues to 22 adopt the staff proposal. It is critically needed and a 23 reasonable step forward on our journey towards minimizing 24 climate change. Please know that the Air District is both 25 supportive of your efforts and will be doing what we can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 as well to address this issue. 2 Thank you. 3 CHAIRPERSON LLOYD: Thank you very much. 4 Supervisor DeSaulnier. 5 BOARD MEMBER DeSAULNIER: I'll just let my 6 colleagues know. Unfortunately our Board was not able to 7 take action to adopt it because we canceled a couple of 8 meetings in the summertime. But I'm quite confident that 9 my colleagues would not only be supportive, but would -- 10 if they were to draw, the rule would be more stringent. 11 MR. BUNGER: Thank you. 12 BOARD MEMBER DeSAULNIER: On behalf of the Bay 13 Area. 14 CHAIRPERSON LLOYD: Thank you. 15 I guess it looks like Larry Green's going to come 16 in. 17 Hi, Larry. 18 MR. GREEN: You have a Larry from Sacramento, but 19 a different one. 20 CHAIRPERSON LLOYD: Yeah, good. 21 And then Roland Hwang and then Bonnie Holmes-Gen. 22 MR. GREEN: Good morning, Chairman Lloyd and 23 Board members. 24 The Sacramento Air District strongly supports 25 this proposed regulation and commends the staff and Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 for the measured approach they've taken in this proposal. 2 Increased CO2 levels will have a very detrimental 3 effect on air quality in the Sacramento region. Being 4 part of the Central Valley, that includes both ourselves 5 and the San Joaquin, the weather impacts that were 6 outlined yesterday, our summer temperatures and longer 7 summers, will increase the frequency of ozone episodes and 8 both federal and state exceedances. Visionary measures 9 like this regulation are needed to reduce the impact of 10 these detrimental weather effects. 11 I've noted two key points about this regulation 12 that's -- it doesn't require the use of hybrids, 13 alternative fuels and other technology. But these are 14 really likely to be available and cost effective. 15 And we believe that this regulation is very much 16 supported by the residents in our region and that this 17 idea of life cycle costs being actually a positive aspect 18 for the consumers is an excellent aspect of the 19 regulation. 20 We urge you to adopt the regulation as 21 expeditiously as possible. And support you -- we'll be 22 there doing whatever we can to help along the way. 23 Thank you. 24 CHAIRPERSON LLOYD: Thank you very much, Larry. 25 I appreciate that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 Roland Hwang, Bonnie Holmes-Gen, and Louise 2 Bedsworth. 3 Good morning. 4 MR. HWANG: Good morning, Dr. Lloyd and members 5 of the Board. 6 It's a pleasure for me to provide additional 7 comments from the Natural Resources Defense Council on 8 this very important issue. My colleague, David Doniger, 9 spoke to you about the green light on your legal authority 10 at the federal level to go forward with this proposal. 11 (Thereupon an overhead presentation was 12 Presented as follows.) 13 MR. HWANG: I wanted to quickly go over some of 14 the issues that were raised yesterday, particularly about 15 cost estimates and about the impact that California 16 actions will have nationally, even globally. 17 Next slide please. 18 --o0o-- 19 MR. HWANG: Also in your packet of comments I 20 want to point out that there is a global warming and ozone 21 report that the NRDC recently completed, and it was 22 released last Monday. We also did one for the East Coast. 23 I'm not going to actually review that. Today I'm going to 24 spend my time on the second and third bullets. 25 Next slide please. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 --o0o-- 2 MR. HWANG: And I'm going to skip over here. But 3 in your packet again we have a report called Smog in the 4 Forecast, Attachment A in your packet. It clearly shows 5 that global warming means more smog and more adverse 6 health impacts for citizens of California. 7 Next slide. 8 --o0o-- 9 MR. HWANG: And I'm going to skip this slide to 10 move on to a point here. 11 --o0o-- 12 MR. HWANG: I think it's very instructive as 13 we're listening here today in 2004 about cost estimates 14 from industry, about how they have estimated past air 15 pollution control measures and the costs. And typically 16 we see -- actually very consistently we've seen from 17 regulators -- we see the auto industry and regulators 18 overestimating the true cost of actual compliance. There 19 are several reasons for this: 20 One reason being regulators and industry are 21 conservative. 22 Second reason is that industry's often strategic 23 about the cost estimates. 24 And, finally, the third reason would be 25 unanticipated innovation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 But the key point here is that we've seen over 2 and over again throughout history, really through the last 3 four decades of motor vehicle pollution control, a 4 consistent story here of cost overestimation for actual 5 regulatory compliance. 6 In the 1970's we saw auto makers, in this case 7 Chrysler in advertising claimed $1300 for a catalytic 8 converter, which turned -- which in today's dollars -- is 9 $2800 in today's dollars. And the actual cost turned out 10 to be closer to $1600 in today's dollars. 11 I'm sorry. The regulators estimated about $1600. 12 And the actual cost turned out to be between 875 and 13 1,350. The auto estimate in this case for catalytic 14 converters was about 1.6 to 3.2 times too high. 15 Next slide please. 16 --o0o-- 17 MR. HWANG: Another case study, 1990's, not 10 18 years ago, the auto industry was claiming $788, ARB staff 19 was estimating $120. The actual cost according to ARB 20 estimate was $83. Auto estimate was about 10 times too 21 high. ARB's estimate, while not right on the money, was 22 much closer, was 1.4 times. 23 Next slide please. 24 --o0o-- 25 MR. HWANG: This slide is I think also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 instructive. This is during the 1990's when California 2 was debating the low-emission vehicle program about a 3 decade ago. This is actually -- the reason I brought this 4 up is that this is actually -- you saw a presentation by 5 Tom Austin yesterday from Sierra Research. Ten years ago, 6 him and his colleague produced some estimates for the auto 7 industry on the cost of compliance for the LEV program. 8 In this case T LEV's, LEV and U LEV standards. And these 9 are his estimates in red, as you can see. And you can see 10 the actual estimates where there's a bullet here which -- 11 if you could press the next button on the slide. 12 --o0o-- 13 MR. HWANG: Sierra Research estimates 10 years 14 ago were 4 to 6 times too high from actual compliance. As 15 you can see, they estimate for a LEV I standard a thousand 16 dollars, for a U LEV standard about -- almost $1500. So 17 that's the track record which this particular company and 18 this particular analyst has had in predicting air 19 pollution actual costs. 20 Next slide please. 21 --o0o-- 22 MR. HWANG: And, again, I've reviewed in my 23 comments. You can -- you're free to look at that at your 24 leisure. But I've reviewed the past history of motor 25 vehicle pollution control. And consistently what we see PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 is 2 to 10 times overestimation by the industry. So the 2 $3,000 you actually heard yesterday from Mr. Tom Austin is 3 actually very consistent and to be expected of what the 4 industry has predicted in the past in terms of their cost 5 overestimations. 6 Next slide please. 7 --o0o-- 8 MR. HWANG: The other point I'd like to make is 9 the -- the impact of California action cannot be 10 understated. My colleague, David Doniger, mentioned three 11 ways for which this is going to impact pollution outside 12 the state. And what I would like to reinforce is a 13 consistent track record again of California action on air 14 pollution being emulated nationally and by other states. 15 Starting in the early '60's California was the 16 first ever state or government agency to regulate 17 pollution for motor vehicles, positive crankcase 18 ventilation, emulated later federally and in other areas. 19 1966 California adopted the first ever pollution 20 tailpipe standard for carbon dioxide and hydrocarbons, 21 adopted federally in 1968. 22 And in 1970's a huge success story. First ever 23 requirement for catalytic converter here in California. 24 California stood up the auto makers when they claimed 25 economic calamity and high cost. And of course the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 catalytic converter is a huge clean air success story. 2 Next slide please. 3 --o0o-- 4 MR. HWANG: This story continues. 1990, first 5 unleaded gasoline or for made gasoline, coming across the 6 U.S. and now internationally. 7 1994 LEV program. Four northeast states adopted 8 that. Eventually became the model for the national LEV 9 program. 10 California's LEV II program, which is a current 11 criteria pollutant -- smog-forming pollutant control 12 program. That has been adopted by seven northeast states 13 and has served as a model for the current federal 14 program -- Tier 2 program. 15 2009 when these California CO2 standards take 16 effect, we believe -- if you look at the past history and 17 you look at the intentions from New York State, Canada and 18 elsewhere, have indicated interest in adopting these 19 standards. 20 CHAIRPERSON LLOYD: Are you going to -- getting 21 to a close? 22 MR. HWANG: Yes, I'm almost done, Dr. Lloyd. I 23 appreciate your attention. 24 --o0o-- 25 MR. HWANG: Let me close by saying the following: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 I think that this is the most important air pollution 2 standard since the adoption of the catalytic converter in 3 the 1970's. In the 70's smog was a big problem for 4 California. Still is a big problem. These big problems 5 require big solutions. And I think that California's 6 standards today is a meaningful solution to a big problem. 7 So the question is: Is this -- I think the 8 question before the Board is: Is this problem big enough 9 for California to take meaningful action? I think the 10 answer has to be a resounding yes. 11 I think, is it -- if the question before the 12 Board is, is it appropriate for California to take action 13 ahead of the federal government, I think the answer has to 14 be a resounding yes because it is shown consistently in 15 the past that California's actions can lead to benefits 16 beyond the borders of this state. 17 Next slide please. 18 --o0o-- 19 MR. HWANG: And in summary, we think the proposal 20 is technically and economically well justified. It's 21 consistent with the intent and requirements of the law. 22 And though the stringency in phase-in could be stronger, 23 on balance we believe this is a good proposal, we believe 24 the Board should adopt what is before you today. And I 25 think this -- California has an opportunity here to repeat PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 the success it has had over the last four decades fighting 2 smog forming pollution from tailpipes and repeat their 3 success of the catalytic converter during the 1970's. 4 Thank you for your attention. 5 And, Dr. Lloyd, I apologize for running a little 6 bit longer. 7 CHAIRPERSON LLOYD: Thank you. I know you had a 8 lot of information there. 9 Questions, comments from the Board? 10 Thank you. 11 Going to take Bonnie Holmes-Gen. But then we 12 have Assemblywoman Nancy Pfeiffer from the City of El 13 Segundo. So we'll take her after Bonnie Holmes-Gen. 14 MS. HOLMES-GEN: Good morning. 15 My name is Bonnie Holmes-Gen. I'm representing 16 the American Lung Association of California, which is the 17 oldest voluntary nonprofit health organization in the 18 country. And I'm hear to communicate the strong support 19 of the American Lung Association of California for the 20 greenhouse gas regulation that's before you today, and to 21 present to you with petitions, letters and resolutions 22 from around the state in support of your efforts. 23 The American Lung Association Board of Directors 24 approved a greenhouse gas and global warming position 25 statement in June of 2004. And I'm not going to read you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 the whole statement. But I am going to point out that 2 there's three main points in our statement: 3 That rising temperatures will likely contribute 4 to increased ozone formation and increased emissions of 5 pollutants that dirty the air and damage lung cells. 6 Worsening air quality will lead to worsening of 7 respiratory illnesses, including increased asthma attacks, 8 increased hospitalizations for respiratory and 9 cardiovascular diseases, reduced lung capacity, and 10 premature deaths. 11 And California, are resolution says, should adopt 12 the strongest possible regulations to reduce greenhouse 13 gas emissions from motor vehicles, and should increase the 14 stringency of those regulations over time as more 15 alternative fuels and new technologies become available. 16 My main message today is this: The Auto 17 Alliance -- the Alliance of Automobile Manufacturers is 18 wrong about this regulation in many respects, but 19 especially when they try to say that there are no 20 demonstrable public health benefits from this regulation. 21 Make no mistake, this regulation is clearly a public 22 health measure. That's why the American Lung Association 23 of California and public health organizations across the 24 state, including the California Medical Association, 25 American Academy of Pediatrics -- you heard from yesterday PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 Dr. Roth -- American Academy of Family Physicians, 2 California School Nurses Organization, and many others 3 have expressed their support for this regulation. 4 That's why over 160 doctors, nurses, respiratory 5 therapists and other health professionals have signed a 6 petition urging you to adopt this regulation. And I 7 believe you have this in your packets. 8 As your own publications state, over 90 percent 9 of California population already live in areas where the 10 air is unhealthy according to state and federal standards. 11 We already know that the air is responsible for thousands 12 of premature deaths and hospitalizations every year. We 13 are finding out that people are experiencing lung health 14 problems even at levels that meet our current standards, 15 which is a tremendous concern. 16 Clearly we cannot afford to let rising 17 temperatures make our air pollution problems worse. We 18 need every tool in our tool kit to deal with our severe 19 air quality problems here in California. And that 20 includes reducing greenhouse gas emissions, which is -- 21 you should consider a key element of our state strategy to 22 control smog. And, as you know, not only will the 23 greenhouse gas regulation benefit California from slowing 24 the warming of the planet that contributes to ozone 25 pollution, but it will also have direct smog benefits from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 the regulatory controls on the order of five tons per day, 2 which is extremely significant. 3 I'd like to present to you in addition to the 4 over 160 physicians and respiratory therapists and nurses 5 over 3,000 letters of support from the public that's 6 collected by the American Lung Association. Here is just 7 a small sampling. We have a box outside. And these 8 letters urge you again to move forward today and adopt 9 this resolution. Many Of these are from health 10 professionals or individuals suffering from lung illness. 11 And most of these have some personal messages for you. 12 And I'm just going to read one very briefly. 13 "Asthma affects all of us. I don't have asthma, 14 but I have a serious genetic lung condition which is 15 highly exacerbated by pollution. I can't live in areas 16 with high pollution, and often have to live in places 17 where the cost of living is much higher just to have 18 cleaner and healthier air. I am particularly concerned 19 about our air pollution problems because avoiding a lung 20 transplant is a high priority for me. In the broader 21 picture there are millions of young children who are born 22 in polluted areas, who are growing up with underdeveloped 23 lungs and much higher rates of asthma." 24 This is just one of many, many letters. 25 Okay. I'd also like to present to you over 60 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 resolutions, letters of support from local governments 2 around the state. We have a board here listing all of 3 these cities and counties that have taken positions. You 4 also have a folder with all of these resolutions and 5 letters. We actually keep collecting them. Everyday we 6 get a few more. So you actually have over 60 I think in 7 your packet. We've had 56, but now we have over 60. 8 There's fairly equal representation from northern 9 and southern California. And all of these local 10 governments have urged you to adopt the strongest possible 11 regulations to reduce greenhouse gas emissions from motor 12 vehicles and are urging you to take strong leadership on 13 this issue. 14 You will hear from representatives from several 15 cities today later in the program. 16 Local American Lung Association offices worked 17 very hard together with other organizations over the past 18 year to encourage local governments to take these actions 19 in support of the greenhouse gas regulation. We're very 20 proud to have such broad support. 21 In closing, public health demands that you take 22 action to control greenhouse gases. We are urging you 23 today to demonstrate strong leadership for public health 24 for California and the world by adopting the proposed 25 regulations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 Thank you for your time. 2 CHAIRPERSON LLOYD: Thank you very much, Bonnie. 3 Comments? 4 Again, congratulations on all the hard work, and 5 thanks for all the cities weighing in. 6 So we now have Councilwoman Nancy Pfeiffer from 7 the City of El Segundo. And then we'll go with Louise 8 Bedsworth from UCS. 9 COUNCILWOMAN PFEIFFER: Good morning, Chairman 10 Lloyd, members of the Board. I'm Nancy Pfeiffer here to 11 represent the City of El Segundo. Mayor Kelly McDowell 12 asked me to read the following statement into the record 13 of today's proceeding: 14 The City of El Segundo urges you to adopt new 15 strong regulations to reduce greenhouse gas emissions from 16 motor vehicles. The city supports the proposal that is 17 before you for consideration today. 18 In the study of the effects of global warming on 19 the State of California, 19 scientists warn that 20 California faces devastating impacts due to greenhouse 21 gases. 22 Local governments are likely to suffer severe 23 consequences from the effects of global warming, as we are 24 often the agencies of first recourse for constituents 25 facing the burdens of poor environmental decisions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 Unfortunately, under California law, local governments 2 have the least flexibility to generate the resources 3 needed to respond effectively, a problem likely to be 4 compounded by the expected adverse economic consequences 5 of global warming on industries essential to the fiscal 6 health of local governments such as real estate, tourism 7 and agriculture. 8 In short, global warming threatens California's 9 health, environment, economy, and quality of life; and 10 greenhouse gas emissions from passenger vehicles and light 11 trucks contribute vastly to the buildup of greenhouse 12 gases in the atmosphere that results in global warming. 13 The city believes it is imperative that 14 California lead the way in addressing the problem of 15 global warming. We must act now to avert even more severe 16 impacts from global warming in the future. We must act 17 now to cut greenhouse gas emissions from vehicles. 18 The city of El Segundo, along with 60 other 19 cities throughout the State of California, supports strong 20 measures to reduce vehicle greenhouse gas emissions and 21 the proposed regulations that staff has prepared are a 22 good start. They are a step in the right direction to 23 ensure to the maximum extent feasible the cost-effective 24 reduction of greenhouse gases emitted by passenger 25 vehicles as mandated by AB 1493. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 The City of El Segundo encourages the Air 2 Resources Board to adopt staff's proposed regulations. 3 Thank you. 4 CHAIRPERSON LLOYD: Thank you very much. 5 Louise Bedsworth, Wendy James, and Jane Williams. 6 MS. BEDSWORTH: Good morning, Chairman Lloyd and 7 Members of the Board. Thank you for providing the 8 opportunity to comment on the proposed regulations. My 9 name is Louise Bedsworth. I'm a senior analyst in the 10 Clean Vehicles Program at the Union of Concerned 11 scientists. 12 (Thereupon an overhead presentation was 13 Presented as follows.) 14 MS. BEDSWORTH: Before I present our comments I 15 would just like to commend staff for preparing a very 16 thorough and detailed regulatory proposal. It clearly 17 reflects attention to the intricacies and requirements of 18 AB 1493. And I'd also like to thank staff for the very 19 open and participatory process that has led to this 20 regulation. We very much appreciate the workshops that 21 have been held over the last year, and also just the time 22 that staff has taken to meet with us and explain some of 23 the intricacies of this regulation. I know this has 24 helped a lot with our understanding. And so I just want 25 to thank staff and acknowledge the time that they've put PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 into that. 2 So overall we feel the proposed regulation is 3 very strong, has a very sound technical base, and puts 4 technologies that we're seeing emerging in the vehicle 5 market, as evidenced by the vehicles that were here 6 yesterday, into wider use throughout the vehicle fleet. 7 The standards are exceptionally cost effective to 8 California consumers. 9 I'd like to focus the bulk of our comments on the 10 modeling results that staff has produced and how they can 11 compare to some prepared by the Union of Concerned 12 Scientists in a report released this spring. 13 The two studies represent the only analyses that 14 were available through the drafting of the regulation to 15 assess the technological potential and cost of reducing 16 vehicle -- greenhouse gas emissions in California in 17 accordance with the regulation. 18 --o0o-- 19 MS. BEDSWORTH: The UCS study was conducted 20 independently. We used the modal energy and emissions 21 model, which was developed using federal highway funds 22 through the Universities of Michigan and California. 23 Like CARB's analysis, our analysis is bases on 24 vehicle simulation modeling. We modeled five classes of 25 vehicles and we looked at two different levels of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 technology. 2 In addition, we estimated the cost of 3 technological improvements using a recent analysis of 4 vehicle technologies completed by researchers at some 5 national laboratories. 6 So this graph here shows the results of our two 7 studies. The Air Resources Board are the bars, with the 8 blue bar showing the lowest emission reduction potential 9 in each vehicle class; and the yellow bar, the highest 10 technology package that was modeled in that vehicle class. 11 The red triangles are the results that our study found. 12 And this is for near-term technologies. 13 One difference in the study that I should point 14 out is where ARB relied on a small truck, we modeled an 15 SUV. But I think what's important is particularly in the 16 near-term technologies you see that the two results are 17 quite similar, with overlapping reduction potential across 18 all vehicle classes. 19 In addition, you see a consistency across the 20 vehicle classes and the reduction potential that is 21 available. 22 --o0o-- 23 MS. BEDSWORTH: The next slide shows the same 24 information for the midterm technology. And probably not 25 surprising to many people is you'll see that our study is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 a bit more optimistic in the midterm. We've made some 2 more aggressive technology assumptions, applied a bit more 3 technology to our vehicles, and we have slightly higher 4 reductions. In this case we estimate about a 40 percent 5 reduction potential in the midterm, as opposed to the 30 6 percent. 7 But I think what remains important here is 8 consistency across the vehicle classes. We see a similar 9 reduction pattern across. 10 So in the next slide I want to show the cost 11 estimates from the two studies. We've heard a lot about 12 costs. 13 --o0o-- 14 MS. BEDSWORTH: This shows for the large car, 15 just one of the vehicle classes, the cost associated with 16 a given percent reduction in greenhouse gases emissions. 17 The dots are -- each of the technology packages modeled in 18 the Air Resources Board study are the stars, the blue 19 being near-term; red, long-term. And the black line is 20 the average trend through those points. The green 21 triangles and the green line are the results from the UCS 22 study. 23 And what this shows is that for a given percent 24 reduction in greenhouse gas emissions the two studies 25 produced very similar estimates of the costs of complying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 with this regulation. And when you look at this across 2 all the vehicle classes you find similar results. 3 So I think together these two studies illustrate 4 the feasibility and cost effectiveness of the proposed 5 regulations. 6 I do want to touch on one area where we feel 7 there is a potential for strengthening the regulation. 8 And the next slide -- 9 --o0o-- 10 MS. BEDSWORTH: In the current proposed standard, 11 hybrid electric vehicles have not been factored in. And 12 we feel that in the 2016 standard this is a missed 13 opportunity. According to announcements by auto makers at 14 least 13 models of hybrids will be available by 2010. 15 This is across all vehicle classes. Currently about 25 16 percent of hybrid vehicle sales occur in California. And 17 given current waiting lists and interest in the available 18 vehicles, this does not seem likely to abate in the 19 future. 20 In addition, hybrids are likely to be a primary 21 compliance pathway employed by auto makers in the ZEV 22 Program. Under the ZEV Program approximately 12 percent 23 of new vehicle sales in California could be hybrids by 24 2016. Depending on the emission reductions achieved with 25 these vehicles, this could be an additional -- up to an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 additional 2 percent reduction. And it seems at this time 2 that it would be wasteful to leave those potential 3 reductions on the table given the cumulative nature of 4 greenhouse gas emissions. 5 So in conclusion, I just would like to thank you 6 all for the opportunity to commend today. And we 7 definitely support the adoption of this regulation and 8 look forward to California taking a leadership role once 9 again in addressing air pollution. 10 CHAIRPERSON LLOYD: Thank you very much. 11 Any questions or comments? 12 Thank you. 13 And in terms of your last slide there, I should 14 draw people's attention that haven't seen it already the 15 excellent write-up on the new Honda Accord hybrid vehicles 16 in today's U.S.A. Today. So very favorable write-ups. 17 Thank you. 18 We have Brian Johnson, Director, Environmental, 19 City of Santa Monica, and then Wendy James, and John 20 McNamara. 21 MR. JOHNSON: Good morning, Board and Chair. My 22 name is Brian Johnson. I am the Managing Director of the 23 City of Santa Monica's Environmental Division. 24 The City of Santa Monica is here today to applaud 25 and support your efforts to reduce greenhouse gas PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 emissions, and your leadership is welcome. The city has 2 taken extraordinary steps to mitigate its own greenhouse 3 gas emissions, and we will suffer extraordinary harmful 4 consequences from the impacts of these emissions should 5 they not be abated. 6 For instance, we have replaced approximately 80 7 percent of our sizable vehicle fleet that belongs to the 8 city with low polluting emission vehicles. We have 9 purchased 100-percent renewable energy for all city 10 facilities at a very cost competitive rate. 11 These are two of the many programs undertaken by 12 our small city to take responsibility for our share of 13 global emissions. We applaud your efforts in allowing the 14 State of California to take similar responsibility. We 15 made this commitment in recognition of the risk to the 16 health of our community, the risk of damage to our coastal 17 tourism infrastructure, our storm water management system, 18 and indeed our water supply. 19 We recognize that there are costs involved, and 20 these costs may be inevitable. Yet these costs pale in 21 comparison to the cost of attempting to manage and pay for 22 the global damage, some of which may be irreversible, 23 resulting from greenhouse gas emissions at its present 24 rate. 25 The city urges you to confirm your leadership and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 your forward-looking vision in this matter, and looks 2 forward to your establishment of the most aggressive 3 greenhouse gas emission requirements as possible. 4 Thank you. 5 CHAIRPERSON LLOYD: Thank you very much. 6 Wendy James, John McNamara. 7 MS. JAMES: Good morning. My name's Wendy James. 8 I am campaign coordinator for the California Clean Cars 9 Campaign, which is a coalition of 15 health, environmental 10 and public interest groups that support the adoption of 11 the regulation you're considering today. 12 In addition to the 15 organizations that are 13 actively involved in the coalition, we have provided the 14 Board members with a compilation of letters and 15 resolutions of support. You should have each received one 16 of these notebooks that includes letters from hundreds of 17 supporters, in addition to the approximately I think it's 18 113,000 now pieces of mail out in the hall in the mailbags 19 from private citizens. But this particular notebook is a 20 compilation of about 65 cities, counties and local 21 officials from Agoura Hills to Yucca Valley, a very broad 22 range in terms of size and geographic location; 225 23 businesses, business organizations and business leaders, 24 ranging from the California Restaurant Association to, our 25 particular favorite, Spin & Margie's Desert Hideaway; 16 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 health and medical organizations, including the California 2 Medical Association and the Health Officers Association of 3 California; 23 labor organizations, including the 4 California Nurses Association and the Pipe Trades Council; 5 and nearly 40 environmental -- environmental justice, 6 community and public interest groups. 7 The staff recommendation, while conservative, 8 responds effectively to the directions set forth in the 9 original legislation. ARB's adoption of the proposed 10 vehicle emissions standards represents an important step 11 forward in the state's efforts to protect public health 12 and reduce harmful global warming pollution from cars. 13 Our coalition believes the ARB's analysis over 14 the past two years has resulted in a proposed rule that 15 fairly complies with the law and that will deliver 16 affordable clean car choices for California consumers. 17 Many off-the-shelf technologies identified in the 18 staff analysis, and several of which were displayed in the 19 vehicles outside the hearing room yesterday, can reduce 20 global warming pollution at a price that is cost effective 21 to the consumer, without affecting vehicle safety, size, 22 weight or performance. The proposed regulation gives auto 23 makers complete flexibility to apply these technologies in 24 varying combinations to achieve significant emissions 25 reductions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 The rule being considered by the Board today is 2 technically justified with the thorough analysis conducted 3 by staff. However, the coalition of organizations 4 involved with the California Clean Cars Campaign believes 5 that the conservative analysis has resulted in a proposed 6 regulation that should be strengthened. We believe that 7 the regulation could be more effective in a number of 8 ways; for example, by increasing the stringency of the 9 standard and/or shortening the implementation timeframe. 10 Individual organizations involved with the campaign have 11 offered specific proposals for strengthening the 12 recommendation in their direct testimony, but we do 13 support the regulation before you. 14 Thanks very much. 15 CHAIRPERSON LLOYD: Thank you very much. 16 And I notice from the binder you provided here 17 that among the elected officials urging strong support of 18 the regulation is Mayor Loveridge. 19 MS. JAMES: Yes, that came in about march. 20 Thank you very much. 21 CHAIRPERSON LLOYD: Thank you very much. 22 John McNamara, James Lyons, Carlos Porras. 23 MR. McNAMARA: Good morning, Chairman Lloyd, 24 Board members and staff. My name is John McNamara and I'm 25 a staff member for the California Refuse Removal Council. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 We recently worked with you on the refuse fleet rule, the 2 solid waste collection rule. And thank you for the 3 opportunity to come here and address you today on this 4 issue and provide our comments. 5 The CRRC member companies have extensive 6 experience with natural gas and alternative fuel engines 7 in refuse vehicles, especially over the last four years 8 here in southern California. And some of our members have 9 implemented and spearheaded and introduced programs for 10 over ten years trying to be leaders in the area of clean 11 engine technologies for refuse vehicles. 12 CRRC submitted a report to you in response to 13 this rule making that documents the failures of the 14 natural gas engines, alternative fuel engines that we've 15 had in the refuse industry over the last four years. Some 16 of them have been extensive with engine failures and fuel 17 tank failures and what not. 18 The purpose of that was just to highlight a 19 couple of issues that we saw in your staff report. And we 20 wanted to make a couple comments and contribute to the 21 discussion today. 22 Number one is that our experience shows that 23 natural gas engines at least for the vocation that we have 24 are not ready for commercial use. They're more expensive 25 and they have more problems than we'd normally expect for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 a commercially available vehicle. We're trying to do the 2 best we can with what we've got right now. But they're 3 not working in the ways that they were proposed to work in 4 the regulations and by the manufacturers that were 5 proposing before you during those rule making processes. 6 And then also we support rule making that 7 includes a dual path or a few neutral policy. We've seen 8 that that's much better than rules that dictate the 9 individual technologies or constrained your ability to use 10 technologies that could achieve the emission goals. 11 That concludes my comments. And thank you very 12 much again for letting me make the presentation. 13 CHAIRPERSON LLOYD: Thank you very much. 14 Questions, comments? 15 Okay. James Lyons, Carlos Porras, Lewis Lem. 16 Now, if we get our two elected officials come, 17 the Deputy Mayor Brian Williams of L.A. or Council Member 18 Todd Campbell, please let me know. 19 MR. LYONS: Good morning. My name's Jim Lyons. 20 I'm a senior partner at Sierra Research. You heard 21 testimony yesterday from my partner, Tom Austin. 22 I'm up here for the moment because I understand 23 that because Tom testified yesterday, he's unable to do so 24 again today. 25 But I'd like to just take two minutes to address PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 a couple of things that have come up about my firm's cost 2 estimations in the past and to provide a little bit more 3 information about what Tom said yesterday. 4 First, with respect to the cost of the LEV 5 vehicles that's been brought up here today, it's been 6 pointed out that our previous analysis was a factor of 10 7 off from what the, quote-unquote, actual results are. I'd 8 like to point out that those actual results the staff is 9 presenting are based only on information from vehicles 10 where the emission control system in California is 11 different from that sold federally. There's a label that 12 has to be dealt with when those vehicles are sold in 13 California. 14 And in most cases, as CARB staff has pointed out, 15 emission control systems are the same on vehicles on a 16 nationwide basis. These emission control systems cost 17 hundreds of dollars, not $83. It's only the difference 18 when it exists between a California vehicle and a federal 19 vehicle that's been reported here. 20 Secondly, there was a big discussion yesterday 21 about Martec, what costs are in, what costs are out. I'd 22 just like to point out that we went back, because we were 23 confused, talked with Martec. They sent a letter to Tom 24 Austin, which has been entered into the record, which 25 supports Tom's position and indicates that the appropriate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 multiplier is not 1.4 that staff has used, but rather 2 2.44, which if you take staff's number, multiply that 3 thousand by this multiplier after dividing by the old 4 multiplier. For that error alone puts the cost about 5 $1750, which is higher than the fuel savings reduction 6 that Tom pointed out yesterday, that I haven't heard 7 anybody comment on so far. 8 CHAIRPERSON LLOYD: Thank you, Jim. Yeah, this 9 was helpful. I'm sure that we're going to hear from staff 10 responding to that. 11 MR. LYONS: Thank you. 12 CHAIRPERSON LLOYD: Thank you. 13 Carlos Porras? 14 Lewis Lem. 15 MR. PORRAS: Good morning. Welcome to Los 16 Angeles, for those of you Board members who are not from 17 Los Angeles. 18 My name's Carlos Porras. I am here just as a 19 private citizen, but having done several years of work in 20 the L.A. area, primarily the Alameda Corridor communities 21 of southeast L.A. County. And it is primarily a work that 22 has been motivated by environmental justice. Communities 23 that I worked in are approximately 98 percent people of 24 color and low to moderate income. And so while this may 25 be redundant from some of your two days of testimony, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 think it's important enough for me to come to speak a 2 little bit about not only some of the potential impacts of 3 the future, but also to point out very current and 4 existing impacts of global warming that are having 5 tremendous impacts in communities of color throughout the 6 world. And I think that it is very important for this 7 Board to understand its potential to show a leadership 8 role and global responsibility. 9 As you have probably heard, low income 10 communities of color in this country are very vulnerable 11 to disease, environmental disease, have high incidences of 12 respiratory disease including asthma. And any potential 13 exacerbation of environmental degradation and impacts to 14 the health would be significant and a further devastating 15 burden on these communities, primarily because less than 16 one in three have medical insurance and adequate access to 17 health care. 18 Similarly the infrastructure of these communities 19 is less than adequate, and so the heat rises would also 20 have significant impacts to these communities who don't 21 have adequate housing stock and are able to afford any 22 kind of mitigation of those impacts. 23 And so it is important I think for the Board to 24 continue in its leadership role by looking at this in a 25 very serious manner, adopting this role, working within PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 the communities that would be impacted to find mutual 2 solutions and working with all stakeholders to make sure 3 that we can move forward and gain progress on this. It's 4 very important. 5 Thank you. 6 CHAIRPERSON LLOYD: Thank you very much, Carlos. 7 I appreciate you coming. 8 Lewis Lem. 9 Lewis Lem, not here. 10 Deputy Mayor Williams -- Brian Williams? 11 Not here. 12 Counsel member Todd Campbell? 13 Not here. 14 Do we want to look to you, Ms. Witherspoon, as to 15 whether you want to -- seeing that there's time, whether 16 we should take a short break for the court reporter. 17 EXECUTIVE OFFICER WITHERSPOON: I think, since we 18 were expecting elected officials to arrive and don't want 19 to miss their opportunity to speak, that if we did a brief 20 recess now. We'll also need one at the very end of the 21 witness list for staff to regroup on all the last-minute 22 comments and prepare their presentation to you. 23 So if we could take perhaps 10 to 15 minutes now 24 and then complete the witness list when we reconvene. 25 CHAIRPERSON LLOYD: Okay. Let's try to get back PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 at 10:15, take a 10-minute break. 2 (Thereupon a recess was taken.) 3 CHAIRPERSON LLOYD: I'd like to restart and 4 extend our welcome to the Deputy Mayor of Los Angeles, 5 Brian Williams. 6 Thank you very much, sir, for coming. 7 LOS ANGELES DEPUTY MAYOR WILLIAMS: Good morning. 8 Thank you. Thank you for the opportunity to address you 9 on behalf of the Mayor and the City Council of Los Angeles 10 and all of those who are interested in this -- greatly 11 interest in this subject this morning. 12 I do have a very short statement that I'd like to 13 read to you. I have copies of it available to present to 14 your executive secretary and executive staff. But this is 15 a message from the Mayor, who at this point is speaking on 16 behalf of the Mayor and the entire City Council. 17 Good morning, Chairman Lloyd, Board members and 18 staff. I'm Brian Williams, Deputy Mayor for the City of 19 Los Angeles. 20 Mayor James Hahn and the City 21 Council of the City of Los Angeles have 22 adopted a resolution which was forwarded 23 by Council Members Perry and Carter, is 24 to "urge the California Air Resources 25 Board to adopt the strongest possible PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 regulations to reduce greenhouse gases 2 emitted by passenger vehicles pursuant 3 to AB 1493. 4 "We endorse the staff proposal that 5 is before you for consideration today." 6 And I take it yesterday as well. 7 "Assembly Bill 1493 requires the 8 California Air Resources Board to adopt 9 regulations to achieve the maximum 10 feasible and cost-effective reduction of 11 greenhouse gases emitted by passenger 12 vehicles. Since passenger vehicles and 13 light trucks are the state's biggest 14 source of global warming pollution and 15 climate change threatens California's 16 health, environment and economy, the 17 City of Los Angeles strongly supports 18 this effort. 19 "In addition, to city recommends 20 that the State Legislature support such 21 regulations to protect the health and 22 the welfare of the state's residents and 23 economy. 24 "The new regulations by AB 1493 will 25 continue the drive toward advanced PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 technology and alternative fuel vehicles 2 that can achieve extremely low levels of 3 both traditional air pollutants and 4 greenhouse gases." And I'd like to 5 submit to you that I did in fact drive a 6 hydrogen vehicle here today. 7 "The regulations would give 8 consumers additional choices of clean 9 vehicles without taking away existing 10 vehicle options. 11 "Studies of global warming warn that 12 California faces the potential for 13 dwindling water supplies, a rise in 14 heat-related deaths, reduced crop yields 15 and other devastating impacts if we fail 16 to sharply cut greenhouse gas emissions. 17 "The City of Los Angeles is 18 especially concerned with the effects of 19 global warming on our water supplies and 20 the quality of our air, two issues long 21 associated with southern California. 22 "Evidence that global warming may be 23 reducing the Sierra snow pack has 24 already been widely reported. Every 25 southern California city is dependent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 upon water imports from the Sierra 2 runoff and they all need to watch 3 carefully the impact of these 4 developments in our water supply. 5 "In addition, there is evidence that 6 global warming will worsen our air 7 quality both by creating meteorological 8 conditions favorable to ozone formation, 9 which may lead to increased asthma 10 attacks and other respiratory impacts, 11 and by stimulated greater demand for 12 electric power to operate air 13 conditioning units. 14 "We believe that it's imperative 15 that California leads the way in 16 addressing the problem of global 17 warming. 18 "The city too is committed to 19 reducing greenhouse gas emissions from 20 city operations through the adoption in 21 2001 of the Energy Climatic Action Plan. 22 This plan includes a number of 23 strategies to reduce energy use and 24 emissions from the city's fleet 25 vehicles. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 "Again, we strongly urge you to 2 adopt the strongest possible regulations 3 to reduce greenhouse gases from 4 passenger vehicles." 5 And on behalf of the City of Los Angeles, Mayor 6 Hahn thanks you for your efforts to reduce air pollution 7 in southern California. 8 CHAIRPERSON LLOYD: Thank you very much indeed. 9 LOS ANGELES DEPUTY MAYOR WILLIAMS: Thank you, 10 sir. 11 How do you find the hydrogen vehicle and where do 12 you refuel? 13 LOS ANGELES DEPUTY MAYOR WILLIAMS: We refueled 14 it downtown. We have one standing refueling station. And 15 we hope to have another one some time soon. It's a great 16 vehicle to drive. I just wish it came in a slightly 17 larger version. 18 (Laughter.) 19 LOS ANGELES DEPUTY MAYOR WILLIAMS: Thank you. I 20 have copies of the statement. 21 CHAIRPERSON LLOYD: Thank you very much for 22 coming. 23 I don't know whether we have Council Member 24 Campbell here -- Todd Campbell. 25 No? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 Then Lewis Lem and John White. 2 Lewis Lem, John White. 3 MR. WHITE: Mr. Chairman, Board members, thank 4 you for having me. It's a good day to be in Los Angeles 5 and an historic occasion. 6 I want to thank, first of all, the staff of the 7 Board for the terrific job that they've done in building 8 the analytical case for the rule making and the patience 9 that they've shown. With all of the input that they've 10 received, their traditional good grace has stayed with 11 them. And I think the cases they've put forward, while 12 more modest than what we would support -- I'm here today, 13 by the way, representing the Sierra Club of California. 14 We believe the regulation could be stronger, but we 15 believe it's a good first step. We also think that the 16 analytical support for the regulation is robust. 17 And we're really sort of surprised that we 18 haven't gotten a better effort from the car companies in 19 response. We had hoped in working on this legislation 20 that we could stimulate a really constructive effort on 21 the part of the auto industry in working to craft a global 22 warming pollution reduction strategy that would be 23 something that would represent a partnership, as we have 24 done in times past. 25 But it appears that, despite all the evidence, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 most recently the National Geographic cover story on the 2 rising threat of global warming and the growing scientific 3 consensus, it appears that the auto industry is simply 4 continuing to delay and ignore the imperative need for 5 action. And so it's up to you and the Governor to get 6 them to act as needed. 7 I think there are a lot of positive signs in the 8 current environment with regard to technology and with 9 regard to the opportunities for accelerating the progress 10 of the technology. 11 My friend Carl Pope from the Sierra Club noted 12 the other day that the waiting list for the Prius is 13 longer than for a kidney. So I think that that's a sign 14 of how much the public wants cleaner cars. 15 I'm also very disappointed that the auto 16 industry's continuing to fund the most outrageous 17 propaganda through independent third parties that attempts 18 to attack and raise fears of the public. This is 19 unfortunately a part of the strategy that they pursued 20 with Ms. Pavley and the Legislature, is to basically hire 21 third parties, set up front groups to cast the most 22 spurious allegations about the effect of this rule, 23 instead of debating the facts. 24 And I recall during the legislative process 25 there's one moment in the debate when the Senator Debra PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 Bowen, who happens to represent this area, I believe -- at 2 least Marina Del Rey and Venice, you know, said to the 3 auto industry, "Get rid of your lawyers. Get your 4 engineers to work." 5 And I would add to that, not just the lawyers and 6 the whole legal strategy of attacking the state's 7 sovereignty and saying that we don't have the authority to 8 protect our citizens from global warming and the threats 9 that it causes, but also these political hacks that they 10 have hired to go and do their dirty work. 11 Some of the very best companies, that have the 12 very best products have been silent in this regard. And I 13 think it's time for them to step up. I know there's a 14 strategy in the auto industry of "all for one and one for 15 all" and "we're going to let the lawyers take care of this 16 problem." But we really would suggest that the public 17 needs a better response than that. 18 We need a committed and concerted effort to 19 accelerate the deployment of these technologies, building 20 on the success of the electric vehicle mandate, which 21 despite yesterday's comments in fact is a successful 22 experiment because we had the courage, this Board 23 especially, strong supporters of the electric 24 vehicle mandate, like Mr. DeSaulnier and Ms. D'Adamo, 25 listened to the merits, and we crafted adjustments that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 got us many more benefits than we would have gotten had we 2 not done the mandate in the first place. 3 And I would point out -- I thought it was sort of 4 ironic yesterday when Mr. Austin proclaimed his 5 astonishment that we would rely on the federal test 6 procedure for fuel economy. I don't see the auto industry 7 going to the federal -- National Highway Traffic Safety 8 Commission and asking to revise the test procedure in 9 light of the real-world procedure because it overstates 10 fuel economy. 11 And it's like when we had the flexibility that we 12 introduced for the auto industry with regard to compliance 13 with the ZEV mandate, and we ended up with a lawsuit 14 because we dared to give them flexibility to build hybrids 15 instead. And they wonder why their customers don't trust 16 them. Because of their behavior and because we know they 17 can do better and they must do better. 18 This regulation is a first step. It is a modest 19 step. You can see in the experience in the marketplace, 20 with the technologies that are emerging, with the waiting 21 lists, with the enthusiasm of the customers and with the 22 competitive pressures, that you're on firm ground and 23 moving forward. 24 But it's very important that we act today and 25 it's very important that somehow, some way we get a more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 constructive response from the auto industry and we get to 2 work on solving this problem, which can no longer be 3 denied. And it can no longer be denied what the stakes 4 are for California. And while there are those who believe 5 it would be better if this were done at the federal level, 6 the fact is we can't wait. There is an imperative to move 7 now to protect the public, to introduce new technologies, 8 to come up with a plan that makes sense. As always, good 9 lead time is provided, flexibility is provided, choices 10 are provided. Most recently I believe there's been an 11 adjustment that allows a better opportunity for plug-in 12 hybrids, which Ms. D'Adamo has been helping us with. 13 So, again, we're continuing to be innovative in 14 California, the Board is listening. But it needs to 15 respond to facts and to simply ignore the diatribes and 16 the disruption. 17 And at some point we hope that the management of 18 these companies will give us the kind of leadership that 19 their customers need and that the citizens of not just 20 California but of the whole world need to move on solving 21 this problem. 22 Thank you, Mr. Chairman. 23 CHAIRPERSON LLOYD: Thank you very much. 24 Any questions? 25 I would say, John, in response to that, we did PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 get a letter today -- the Board got a letter today from 2 Honda. And, as I mentioned earlier, the very excellent 3 write-up of their new Accord hybrid. 4 MR. WHITE: Well, in U.S.A Today there's a very 5 nice write-up from an independent source. 6 CHAIRPERSON LLOYD: That's what I was referring 7 to. 8 But Honda also states in the letter that they do 9 stand willing to work with us. They don't agree with the 10 regulation, but they will -- would like to work with us to 11 address what they also consider to be an issue. 12 MR. WHITE: Well, I don't believe that Honda is 13 participating in these public exaggeration campaigns to my 14 knowledge, so I don't want to include them. But I believe 15 that some of these front groups that run through the PR 16 firms in Washington and the laundered money and so forth, 17 the rest of the auto industry does hold some 18 responsibility for those activities. 19 CHAIRPERSON LLOYD: But on the other hand, Honda 20 does agree with Mr. Cabaniss's comments yesterday. So I 21 don't want to say that they're -- you know, they're 22 absolving themselves of all guilt. But I did get this 23 letter. 24 MR. WHITE: It takes great courage to break from 25 the status quo. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 CHAIRPERSON LLOYD: Thank you very much. 2 Oh, and then can I take Lewis Lem. And then it 3 gives me great pleasure to also welcome my boss, Secretary 4 Terry Tamminen, Secretary of Cal EPA. 5 MR. LEM: Good morning, Board members. Thank you 6 for the opportunity to speak with you. I have some very 7 brief comments. 8 I'm from the Triple A of northern California. We 9 have about four million members in northern California and 10 Nevada and Utah. We also -- there's also the Auto Club of 11 Southern California, which is a separate organization. 12 And both of our organizations have taken an interest in 13 the proposed regulations. 14 At this time this point we do not have a position 15 on the regulations. Obviously these regulations would 16 have a significant effect on consumers. And so we are 17 certainly very interested in what you decide today. 18 The particular issue that I would just say a few 19 things about relates to the cause of the legislation that 20 has to do with whether the regulation is economical to the 21 consumers. Part of our work is to speak on behalf of the 22 consumers with regard to the costs to the consumers. Of 23 course these numbers are subject to debate, and we're 24 certainly interested in what happens in the future with 25 regard to the cost to the consumers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 There is some work that we've been looking at 2 relating to this question of payback period. And I would 3 say at this point that it's really not clear from the 4 consumer's perspective what the rate payback period is in 5 terms of what a consumer will choose to purchase a 6 vehicle. There's some discussion about payback period 7 over the life of the vehicle. But the best information 8 seems to suggest that consumers don't make their choices 9 about purchasing vehicles over the life of the vehicle but 10 rather thinking in a much shorter time period. So this 11 does affect the question of whether there's a net benefit 12 in terms of the cost for operation of vehicle or not. At 13 this point though, it's really not clear what the 14 consumers' payback period really is. This is certainly a 15 question I think that we'd like to have more information 16 on as we go forward. 17 Thank you very much. 18 CHAIRPERSON LLOYD: Does the association 19 typically reflect the feelings of the members? 20 MR. LEM: On selected issues we will try to get 21 some information on the feelings of our members. In this 22 particular case we haven't conducted a survey or a poll of 23 our members. But we generally get feedback from our 24 members, and generally -- there is a concern about any 25 additional costs for purchase and for operation of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 vehicles. But on this particular issue we don't have a 2 survey of our members. 3 CHAIRPERSON LLOYD: I was just referring to the 4 surveys and the discussion we had yesterday and the fact 5 that 80 percent of Californians support this -- doing 6 something about greenhouse gases. And I wonder whether 7 your members would fall into there. And while you've got 8 a neutral position, maybe some of the members would like 9 to support doing something like -- 10 MR. LEM: This is a very good question. I mean 11 we're aware of the polls and certainly the PPIC polls and 12 other poles which indicate broad levels of support for 13 environmental progress on air pollution issues. Those 14 polls are generally reflective of the population as a 15 whole. 16 CHAIRPERSON LLOYD: Including the greenhouse 17 gases, specific to that? 18 MR. LEM: The general public opinion polls seem 19 to indicate that, yes. 20 CHAIRPERSON LLOYD: Thank you. 21 MR. LEM: Thank you. 22 CHAIRPERSON LLOYD: Questions? 23 Question, Supervisor DeSaulnier. 24 BOARD MEMBER DeSAULNIER: I just wanted to point 25 out I'm a member. So you'll find out where I stand. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 (Laughter.) 2 CHAIRPERSON LLOYD: So am I. 3 BOARD MEMBER DeSAULNIER: Everyone raise their 4 hands. 5 CHAIRPERSON LLOYD: Yeah, it looks as though 6 we've got more than 80 percent. 7 BOARD MEMBER DeSAULNIER: I think that 8 constitutes a professional survey. 9 (Laughter.) 10 MR. LEM: We can take a survey right here, I 11 guess. 12 BOARD MEMBER GONG: Just curious. I'm sure many 13 of the surveyed populations that were studied were drivers 14 or are drivers. So I assume that they're part of Triple A 15 and everything else. So I would urge Triple A to 16 actually, you know, poll their people. But now it's kind 17 of late. 18 I was also wondering: What about the southern 19 California chapter? Do they -- does that organization 20 have a stand on this proposal? 21 MR. LEM: I can't speak for them, unless there's 22 somebody here from the Auto Club of Southern California. 23 But my understanding is that neither of the clubs have 24 taken position on the regulation. We did track the 25 legislation, AB 1493, the Pavley legislation. So we did PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 have an opportunity to comment during the legislative 2 process. 3 I would say also though, just in terms of 4 predicting the future, there's this question research-wise 5 about what people say they're willing to do and what they 6 actually do. And until they actually as consumers do 7 something, we don't really know whether their stated 8 preference is the same as their revealed preference. And 9 that's part of I think what we're trying to figure out as 10 we go forward. 11 CHAIRPERSON LLOYD: So the public is different 12 than politicians? 13 (Laughter.) 14 BOARD MEMBER DeSAULNIER: Present company 15 excepted. 16 CHAIRPERSON LLOYD: Thank you very much. 17 MR. LEM: Thank you very much. 18 BOARD MEMBER RIORDAN: Mr. Chairman, in 19 seriousness though, I think it would be very helpful for 20 both auto clubs, northern and southern California, to be 21 involved in our process, because it is, by your analysis, 22 that then you would begin to understand best and be able 23 to provide that information to your members. And so I'm 24 hopeful that if we hold any further workshops on this 25 subject as it evolves forward that you all are present at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 those workshops. Now, maybe you are and I'm not aware of 2 it. But I think it would be very helpful, because you are 3 an important arm of information to thousands and thousands 4 of Californians who drive everyday of their lives. 5 So let's include the automobile club in those 6 efforts. 7 CHAIRPERSON LLOYD: Thank you. 8 MR. LEM: Thank you. We would be delighted to 9 take part in anything involved here. 10 Thank you very much. 11 CHAIRPERSON LLOYD: And thank you for coming 12 down. We appreciate it. 13 Now, as I said before, we have the pleasure to 14 introduce Cal EPA's Secretary, Terry Tamminen. 15 CALIFORNIA EPA SECRETARY TAMMINEN: Thank you, 16 Chairman Lloyd. And thank you to everyone for allowing me 17 to speak out of order. Unfortunately I, as you can 18 imagine, have a number of other things to get on to, as I 19 know many of you do, so I'll remain brief. 20 I just wanted to, first of all, come here today 21 to say thank you to everyone who has put so much hard work 22 in on this measure and on this question, on all sides of 23 the issue. There's no question how much hard work and 24 thought has gone into this issue of global warming. 25 Just, by the way, I grabbed this tie running out PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 this morning and put it on. And I didn't realize until I 2 walked in here that it has polar bears on it, which might 3 be one of the species most at risk if we fail in our task 4 of curbing global warming. 5 But I do want to sincerely thank all of our Board 6 members, especially our new appointees. Welcome. And 7 it's good that you've started off your first meeting with 8 an easy task. 9 (Laughter.) 10 CALIFORNIA EPA SECRETARY TAMMINEN: But thank you 11 for your deliberations, as I know you'll be wrestling with 12 your decisions here in the coming hours, obviously future 13 decisions in the coming months. 14 I want to thank the staff, who I think has done 15 an exemplary job of looking at the technology here and 16 presenting options and alternatives and the science of 17 global warming, and just say thank you for your, as 18 always, stellar scientific work. 19 I certainly want to thank the author of this 20 measure, Assemblywoman Fran Pavley, who I'm honored to say 21 is my Assemblywoman; and actually someone who used to work 22 for her, who now works for me, who was very engaged in 23 this, Ann Baker, who is here today as well, who is my 24 Deputy Chief of External Affairs, Deputy Secretary of 25 External Affairs at Cal EPA. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 But of course success has many parents, while 2 failure is an orphan. And many members of the public, of 3 the stakeholder community have also worked on this. 4 And so today is really a very momentous occasion. 5 This is one of those days that we will remember for all of 6 our lives. And the question is: For what will we 7 remember this day? We all have these kinds of days in our 8 lives, when we were married or when we found out there was 9 no Santa Claus, the birth of our first child or the death 10 of JFK. If we're of a certain age we remember December 11 7th, 1941. No matter what our age we remember the other 12 date that will live in infamy, 9/11. 13 But the question is for what will we remember 14 this day? Will this be the day that California, as a 15 nation -- or as a state, as a society, as a group of 16 stakeholders and public officials and members of the 17 public, as citizens, as people of a community came 18 together and decided to do something about a growing 19 threat? 20 And you've heard all of the science. I'm not 21 going to go back over all of the reasons why this is an 22 important issue. You already know that. I won't waste 23 your time. 24 But I think I do want to just touch on one thing, 25 that perhaps others in their testimony so far have not, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 that has troubled me about this debate. I've seen in the 2 papers recently quotes and discussion of -- actually it's 3 gone on over the last many months -- about the fact that 4 California's contribution of greenhouse gases overall to 5 the world problem is not that much; it's a very small 6 percentage; and that obviously cars contribute, some say 7 as much as a third, obviously other mobile sources 8 contribute more, so it could be as much as half of our 9 greenhouse gas contribution. But in any event, still the 10 cars that you're dealing with here today are a small 11 percentage of a small percentage. And so, you know, come 12 on, why are we getting all worked up over something that's 13 such a small contribution to this big global problem? 14 And that mentality troubles me. And that is 15 something that I think in your deliberations today and in 16 the statements that we make coming out of this and in the 17 statement that your decision today will make is something 18 that we can change that dialogue, that we can make it 19 clear that, yes, we do understand that our contribution, 20 no matter how large or small, makes a difference. 21 Obviously in all of society we have things where 22 perhaps our contribution is greater or smaller. But we 23 don't minimize the fact that every single one of us makes 24 a difference. And when it comes to air pollution, when it 25 comes to something like global warming, when it comes to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 our responsibility for the most disproportionately 2 impacted among us in our communities, every single action 3 that we take, or inaction, does make a difference and 4 cumulatively will end up making a difference. 5 And so I hope that we can, at a minimum, erase 6 that concept from this debate, that somehow our 7 contribution doesn't matter, that whatever we do as 8 individuals or as a state here is not going to matter in 9 the big picture, because it will. In part, because of 10 leadership. We have an unusual opportunity, not only 11 because of the stellar reputation of the Air Resources 12 Board but because of our unique new Governor, who 13 obviously, as you know, supports this measure. 14 He's made it very clear that he supports our 15 landmark greenhouse gas law, as he called it. Obviously 16 the decision about how to implement that is up to you. 17 But he supports this process. And he understands at its 18 core, and the reason he supports it is because he realizes 19 that we are all members of this world community. 20 And so I ask you and I ask all of the 21 stakeholders to consider that in their continuing 22 deliberations and their thought about this, that we all 23 make a difference. It was Dr. Martin Luther King, Jr., 24 who said anyone can be great because anyone can serve. 25 You don't need a college degree. Your verb and your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 subject need not agree. You only need a heart full of 2 grace. And if this is the day that we believe that and we 3 believe that our actions make a difference, then this will 4 be a day to remember. 5 Thank you all. 6 CHAIRPERSON LLOYD: Thank you very much, Terry. 7 Now we'll go into staff responses to some of the 8 issues that have come up during the testimony from 9 witnesses? 10 EXECUTIVE OFFICER WITHERSPOON: Yes, Chairman 11 Lloyd. 12 In response to the testimony received yesterday, 13 particularly from Sierra Research and Tom Austin, though 14 we catalogued other issues as the day went on, staff spent 15 the evening going through the eight cartons of material 16 provided to us by the Auto Alliance in an attempt to 17 discover the facts underlying Mr. Austin's testimony and 18 to reconcile them with the specific facts underlying the 19 staff's analysis. 20 We did find discrepancies, that we are correcting 21 some of our own calculations. And we also found some 22 discontinuities, where the point was valid but the scope 23 of its impact on staff's analysis was smaller than implied 24 in the testimony. And we'll delineate those differences 25 for you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 So Chuck Shulock is going to take us through the 2 issues one by one. And then at the end of his remarks 3 about the specific comments on the regulation Mike 4 Scheible will speak to the issue about low carbon fuels. 5 And then Diane Johnston will speak about a separate issue 6 that's been raised on process and whether or not to keep 7 the public record open between now and when it would 8 ordinarily reopen with our 15-day changes. 9 CHAIRPERSON LLOYD: Thank you very much. 10 So without any further ado, I'll call on Chuck. 11 (Thereupon an overhead presentation was 12 Presented as follows.) 13 VEHICLE PROGRAM SPECIALIST SHULOCK: Thank you. 14 I will, as Catherine indicated, run through our 15 response, our understanding of the various issues that 16 were raised. 17 We also have some things that you asked us to 18 take a look at. And I will provide what we were able to 19 pull together on that as well. 20 Next slide please -- so I'll run through costs, 21 questions raised with regard to costs, questions raised 22 with regard to our benefits, the issue of plug-in hybrids, 23 a question regarding alternative fuel adjustment factor 24 particularly for hydrogen. The effect of higher fuel 25 prices, that was one of the things you specifically asked PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 about. And then low carbon fuel. This will be where Mike 2 Scheible will take over. 3 Next slide please. 4 --o0o-- 5 VEHICLE PROGRAM SPECIALIST SHULOCK: Are the 6 costs understated? Summarizing briefly the comments 7 yesterday, the commenters indicated that their cost is 8 $3,000 as opposed to our staff reported $1,000. One 9 particular issue was what's called the markup factor 10 that's applied to the basic cost estimates. They 11 stated -- we used a factor of 1.4. They said that was too 12 low. It should be about 2. This morning there was a 13 letter distributed which referenced a study, and then Mr. 14 Jim Lyons based upon that said there's a factor 2.44. So 15 another factor that was introduced this morning relative 16 to this. 17 Another comment on cost had to do with automated 18 manual transmissions, which is one of the technologies 19 that was widely used in our packages that we employed to 20 set the standards. They said that those costs were too 21 low, should be higher. And that the implication of wide 22 spread adoption of automated manual transmissions would be 23 a need to prematurely retire transmission plant capacity 24 in their industry. 25 And then, finally -- and this I believe relates PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 mostly to turbocharged engines -- they stated that our 2 modeling assumed the use of premium fuel but the 3 technology from an engineering standpoint would require 4 the use of premium fuel, but that the use of the premium 5 fuel was not accounted for in our cost estimates. 6 In our response, we continue to feel that the 1.4 7 markup is valid for purchased parts. And a little bit 8 more background on this. In our study all of these 9 technologies are purchased from suppliers. And in the 10 Martec work, these parts that were coming to us from the 11 suppliers would have built into it engineering costs, 12 warranty costs, the cost of providing a finished product 13 to the manufacturer and then fully support in designing, 14 building, and fully supporting that. 15 We then said the manufacturer will have 16 additional costs to integrate those parts into their 17 vehicle. And you may recall yesterday, we put up a slide 18 at the end where Steve Albu walked through and talked 19 about the kinds of -- the kinds of costs that we see at 20 the manufacture level: Integration, as I mentioned, into 21 the vehicle; dealership costs and profits. 22 So what we've done is, say, for these parts 23 provided by suppliers, yes, there are costs for 24 manufacturers. We took those into account. And we 25 believe that the 1.4 markup is valid. As it shows up PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 there, that's supported by other studies. ANL did a study 2 that used a 1.5 factor. It's comparable to others. It's 3 what we've used in the past. 4 So staff's position on this is that the 5 derivation of this work is well supported, it's consistent 6 with our practices, and we would continue to stand by it. 7 Next slide please. 8 --o0o-- 9 VEHICLE PROGRAM SPECIALIST SHULOCK: On the 10 automated manual transmission. First of all, the costs in 11 the costs that we used are supported by the Martec data. 12 But another way to think about this or look at it is that 13 new data shows that a six-speed automatic -- so a 14 different technology from an automated manual 15 transmission -- this is a six-speed auto -- gives about 16 the same CO2 reduction as staff assumed for the automated 17 manual transmission at a slightly higher cost, about $100. 18 So, you know, in the larger scheme of things there are a 19 variety of ways that manufacturers could proceed here. 20 And another feature of the six-speed automatic is 21 that that is a logical outgrowth of all the plant, the 22 tooling, the manufacturing capacity, all those things that 23 are out there. So the ability to use six-speed automatics 24 would mean that there's no need for retooling, no need to 25 retire any of this plant capacity sooner than would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 otherwise be the case. 2 With respect to premium fuel, there we just 3 flat-out disagree. The AVL modeling did assume the use of 4 regular gasoline. It's representative of the performance 5 of these technologies with regular gasoline. So on that 6 one we think that the original point was not supported. 7 Next slide please. 8 --o0o-- 9 VEHICLE PROGRAM SPECIALIST SHULOCK: On the 10 benefit side. A couple of issues. Test cycles. You may 11 recall the discussion about real-world driving versus some 12 of the various test cycles that were used. Minivans and 13 how they factor into how we set the standard. Vehicle 14 miles traveled. This is the discussion about how do you 15 average in vehicles that have high mileage early on and 16 then retire from the fleet. 17 And then, finally, criteria pollutant impact. 18 This was not talked about at length in the Alliance -- or 19 in the Sierra presentation. But they do in their comments 20 make a point that -- they suggest that this regulation 21 actually has a negative criteria pollutant impact. And we 22 wanted to hit that head-on in our discussion here today as 23 well. 24 Next slide please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 VEHICLE PROGRAM SPECIALIST SHULOCK: What we used 2 was the federal test procedure, FTP. This is an accepted 3 test cycle. It's been in use since the 1970's for 4 emission control purposes and for emission compliance. We 5 used it for a couple of reasons. First of all, it reduces 6 the testing burden. There's already processes in place, 7 testing that is done using this cycle. And to make use of 8 that information in this regulation minimizes the burden 9 upon manufacturers. If there was some other cycle used, 10 there would need to be a considerable amount of testing. 11 This testing is very expensive. And so consistent with 12 what we do in the rest of our program, we used the FTP 13 here. 14 In addition, if you go in to, say, "Well, let's 15 use another cycle," there's a lot of issues involving 16 adequate data across the fleet for all the different 17 models that we evaluated. And our sense was that adequate 18 data to set a standard based upon a different cycle was 19 not available. And that's what led us to use the FTP 20 here. 21 Next slide please. 22 --o0o-- 23 VEHICLE PROGRAM SPECIALIST SHULOCK: The comment 24 with respect to minivans was that the LDT 2, the larger 25 trucks, that the benefits in our work were calculated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 without minivans and that the result of this was that the 2 CO2 savings, the CO2 benefit were overstated. 3 Again, here, this is one where respectfully we 4 would flat-out disagree. Minivans are included in our 5 baseline. And maybe some discussion will be necessary to 6 make everybody recognize that. But the minivans are in 7 the baseline. And so this issue from our standpoint is 8 not germane. 9 Next please. 10 --o0o-- 11 VEHICLE PROGRAM SPECIALIST SHULOCK: Vehicle 12 miles traveled. The comment here was that the way that we 13 derived the lifetime mileage of a vehicle had a problem 14 with the result that the lifetime mileage was too high and 15 that this overstated the fuel savings. And then the 16 commenter went on to say that this had a significant 17 impact on the rest of the analysis. 18 We've taken a look at this. We're still 19 evaluating in some senses. But at the point -- at this 20 point the comment does appear to be valid. So we said 21 well what are the implications? And as we looked at where 22 this particular piece of information was used in the 23 analysis, it's only used in a couple of places. And I'll 24 run through for you where it contributes and where it 25 doesn't. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 First of all, the statewide economic impact where 2 we talk about the aggregate savings to the state, the 3 billions of dollars of savings and how those compare and 4 then by implication the number of jobs, the personal 5 income, all that sort of stuff, those calculations are not 6 affected, because the mileage accumulation used in those 7 calculations came from our fundamental EMFAC model, and 8 this issue does not apply to the mileage estimates that 9 were used in that model. And so all of the statewide 10 economic impact is not affected. 11 Similarly, the consumer monthly payment is not 12 affected. When we've talked about a five-year loan at 5 13 percent and what would that monthly savings be, for the 14 purposes of that exercise we assumed a new car with a 15 certain mileage accumulation, only five years, as all -- 16 the next slide will show sort of when the difference 17 between what the commenters suggested and what we did. 18 And it only begins to show up in the very later years. 19 So for our calculation of this payback and the 20 monthly savings, again that's not affected by this 21 particular issue. 22 The thing that is affected is what are the 23 overall savings over the life of the vehicle, is one 24 calculation. And as you might expect, you know, we're 25 assuming 202,000 miles, and the other number is more like PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 I believe 155,000. Over the life of the vehicle there 2 will be less savings. On the other hand, the difference 3 is in years 9, 10, 11, 12, those savings are discounted. 4 And so the actual, you know, dollar value contribution or 5 those out-years is not as big as you might think. And 6 I'll give a specific example in a second. 7 But that life cycle savings estimate does come 8 down, but the savings still will exceed the costs. This 9 is not an issue where, as is argued, we tip over and now 10 have something that is not cost effective to the consumer. 11 That slightly extends the payback period. But the payback 12 period is still well short of six years, so certainly 13 short of 16 years, so well short of the life of the 14 vehicle. 15 One other issue that we'll bring up that wasn't 16 raised. But when we did a thorough look at, okay, where 17 are these numbers used and what might they affect, another 18 issue that was affected is we built into the way the 19 standard works a credit if a manufacturer uses an improved 20 air-conditioning system. The way that that was calculated 21 we said, "Well, what are the savings?" And we spread 22 those savings over the entire mileage life of the vehicle. 23 So if you shrink the mileage life a little bit, then the 24 gram per mile savings actually goes up. So it turns out 25 that the credit for a lowly air conditioner that's in our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 proposal should be increased. And I think it's about 20 2 to 30 percent, as I recall from staff. 3 So that there is an issue there where something 4 needs to be taken into account. 5 Next slide please. 6 --o0o-- 7 VEHICLE PROGRAM SPECIALIST SHULOCK: This 8 illustrates for you the math, I guess, of what we're 9 talking about. What that graph shows: The pink line is 10 the August 6th values that we used. That's what adds up, 11 if you read the line below, to the 202,000 for a PC/LDT1 12 1, 219,000 for the LDT 2. So that's the numbers that we 13 were using. The blue or black, whatever it is, line is 14 the modified line from Sierra Research, taking into 15 account the issues that they had raised. 16 So what you can see is that for the early years 17 there's really no difference. And it's in those latter 18 years that it starts to show up. And this is supported by 19 a quote from Sierra that's shown at the bottom there: 20 "CARB's approach to estimating mileage accumulation 21 generally match us for the first 8 to 10 years." We agree 22 with that. And that's the reason why our analyses that 23 focused on a five-year payback are not affected and the 24 overall life cycle, which gets into those out-years which 25 are heavily discounted, is not affected very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 Next slide please. 2 --o0o-- 3 VEHICLE PROGRAM SPECIALIST SHULOCK: This gives a 4 specific example of the difference that comes in. The 5 first column, values in August, are what we used in the 6 staff report. The second column is what those values 7 would be using these updated numbers. So as you can see, 8 well, the initial cost of the control vehicle won't 9 change. And this is on a sort of vehicle-by-vehicle 10 basis. This is one specific model vehicle. 11 Initial cost doesn't change. If you look at the 12 lifetime savings in 2004 dollars, there is a decrease. It 13 goes down from a little under $2700 to a little over 14 $2100. So there is a decrease in that lifetime savings. 15 And that has to do with the miles that aren't there any 16 more in the far years. 17 So because of that, the net present value comes 18 down. Rather than being $1472, it's $923. But certainly 19 it's well on the positive side of the equation, which is 20 what really matters for the fundamental question of "Is 21 this regulation cost effective to the consumer?" As you 22 can, see there is an effect on the payback period, but 23 it's small. It goes from 5.6 years to 5.9 years. 24 Next slide please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 VEHICLE PROGRAM SPECIALIST SHULOCK: This next 2 issue I mentioned is the smog impact of the regulation. 3 The comment was that this regulation would increase 4 criteria pollutant emissions, those emissions that 5 contribute to smog, by two fundamental mechanisms. First 6 of all -- which we addressed in our staff report. First 7 of all, that the higher vehicle costs that they are 8 assuming would lead to reduced turnover of the fleet, 9 lower sales of new vehicles. This leads to higher 10 emissions because the fleet is older and not as clean. 11 And the second part of their argument is that we 12 underestimated the rebound effect, the rebound effect 13 being: If the cost of driving goes down because these 14 vehicles are more efficient, will people drive more? We 15 had estimated an effect of about 3 percent or so. They 16 are arguing that that's off by a factor of 6 and that the 17 correct rebound should be closer to 20 percent. 18 On the first part of this, the higher vehicle 19 cost, well, as we've said, we don't think the costs are 20 higher. So this issue sort of goes away. We would stand 21 by our estimates of the potential impact of fleet turnover 22 on these criteria pollutant emissions. 23 On the second issue having to do with rebound, 24 there were three issues raised by the commenters in their 25 written documentation. This was not provided in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 testimony, but we went back and looked through the stack 2 of comments. 3 First issue had to do -- we had contracted with 4 University of California at Irvine, UCI, to do this work. 5 First issue was that UCI found that higher per capita 6 income and increased urbanization, both of which are 7 features of California, as you well know, that this higher 8 income and increased urbanization would reduce the rebound 9 effect and that this finding is contrary to other studies. 10 We went back and spoke to the investigator. 11 And what's going on is that these factors of per 12 capita income and increased urbanization were not 13 considered in most of the national studies that had been 14 used. So it's not surprising that we found something a 15 little bit different, because their were some additional 16 factors that were used in our study. 17 Second issue was that the study overestimates the 18 affluence of Californians by failing to account for the 19 higher cost of living in California. And the reason this 20 is relevant is a part of this whole exercise is, well, how 21 big a difference does it make if your operating cost goes 22 down a couple of cents per mile or something like that. 23 And the extent to which that would matter depends upon how 24 much income people have. 25 So California, with relatively high incomes, one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 of the findings of our study is that because of those 2 higher incomes the impact of this rebound is smaller than 3 it might be at a national study. 4 So the commenters said that we had failed to take 5 into account the higher cost of living. We checked this 6 out. And the study uses what's called real per capita 7 income. Real income is, by definition, income that's 8 already adjusted for the cost of living. So this cost of 9 living issue is not germane to the study that was 10 performed for us. 11 The third one -- and I'll confess, you know, in 12 reading notes from our economists on this one -- but it 13 says -- the comment was: "A misspecification of the model 14 due to correlation among some of the explanatory values 15 would lead to errors." I mean basically that some of the 16 variables that were used were highly correlated with each 17 other. And, therefore, when you try and untangle them, 18 you get misleading results. 19 On this one we checked. And it turns out that 20 this issue had actually been raised in staff review and 21 previous reviews of this report and has been addressed by 22 Dr. Small, who was the investigator. So, again, we would 23 say that this has been taken into account. 24 Next slide please. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 VEHICLE PROGRAM SPECIALIST SHULOCK: Well, so 2 just summarizing on that last one, I guess. We would 3 continue to stand by our analysis, which indicated that 4 there would be a positive criteria pollutant benefit here. 5 Next, on plug-in hybrids, there was some 6 discussion. Just to summarize briefly, the comment was 7 that there needed to be a mechanism to capture the first 8 year's worth of benefits from those vehicles. Our 9 response is that the comment has merit; and based upon 10 your direction provided yesterday, we will address that as 11 a 15-day change. 12 Next slide please. 13 --o0o-- 14 VEHICLE PROGRAM SPECIALIST SHULOCK: The 15 alternative fuel adjustment factor. Some testimony 16 yesterday suggested that hydrogen vehicles would not meet 17 our proposed standards due to our calculated factor for 18 upstream emissions for hydrogen fuel production. 19 As we noted in our presentation yesterday, we 20 expect the upstream emissions to decline over time, as 21 cleaner sources of hydrogen become more prevalent. Staff 22 recommends a 15-day change to the regulations to specify 23 that the upstream adjustment factors for alternative fuels 24 may be modified by the Executive Officer if information 25 exists that a different value is appropriate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 You know, basically here we're saying this is 2 somewhat fluid, there may be other developments. So we 3 would recommend a 15-day change to allow those factors to 4 be adjusted as new information comes in. 5 Next slide please. 6 CHAIRPERSON LLOYD: Well, we're also building 7 some safety in there so that in fact we're putting 8 pressure to get as much renewed hydrogen as possible. 9 VEHICLE PROGRAM SPECIALIST SHULOCK: Yes, sir. 10 And I'll speak to that a little bit here. 11 --o0o-- 12 VEHICLE PROGRAM SPECIALIST SHULOCK: This sort of 13 illustrates the situation and illustrates the factor used 14 in the staff proposal for fuel cell vehicles. There are 15 also factors for hydrogen, internal combustion, and 16 electricity. This example relates to fuel cells. 17 The column labeled "proposed standard" indicates 18 the fully phased-in standards for both the near and the 19 midterm. So 233 grams per mile in the near term, 205 20 grams per mile in the midterm. These are for passenger 21 cars. 22 As can you see -- well, in the column labeled 23 "proposed adjustment factor" is the adjustment factor for 24 fuel cell vehicles that is currently reflected in the 25 proposed reg, the 210. So as you can see, this factor -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 it's below the 2012 near-term standard but slightly higher 2 than the 2016 midterm standard. 3 The final column reflects the staff's best 4 estimate as to what the adjustment factor would be with 5 the hydrogen mix that includes 20 percent use of 6 renewables. And as you can see, we're saying that it 7 would be 180, well below both the near-term and the 8 midterm standards. 9 As staff indicated yesterday, the executive order 10 initiating the hydrogen highway effort specifically calls 11 for a significant and increasing use of renewables in the 12 production of hydrogen. 13 This third column also reflects the state's 14 renewable portfolio standard, which is almost certain to 15 be met in 2010. 16 So given the ability to modify these adjustment 17 factors to keep up with changes in development, staff 18 expects that alternative fuel cell -- excuse me -- 19 alternative fuel vehicles, fuel cell vehicles, 20 specifically, will continue to provide emission benefits 21 beyond what's provided -- what's required by the proposed 22 regulation. 23 Next slide please. 24 --o0o-- 25 VEHICLE PROGRAM SPECIALIST SHULOCK: You asked PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 for some additional work on what are the implications of 2 higher fuel prices. So what we did -- next slide. 3 --o0o-- 4 VEHICLE PROGRAM SPECIALIST SHULOCK: -- we ran a 5 couple of cases, one for near term and one for midterm, as 6 to what would happen if the fuel price was $5 a gallon. 7 Picked that as something representative of a substantial 8 increase. So as you can see here, your monthly payment is 9 not changed; the operating costs savings goes up pretty 10 dramatically; and the monthly net savings, rather than 11 being $11 for these near-term standards, would be $45 12 dollars. 13 --o0o-- 14 VEHICLE PROGRAM SPECIALIST SHULOCK: Next slide 15 shows same information for the midterm. Under -- at a 16 dollar seventy-four a gallon there is a monthly net 17 savings over a five-year loan of $3. At $5 per gallon 18 this is amplified dramatically. That monthly savings 19 bumps up to 66 -- excuse me -- the operating costs savings 20 bumps up to $66 and a net monthly saving of $46. 21 Next slide please. 22 --o0o-- 23 VEHICLE PROGRAM SPECIALIST SHULOCK: The final 24 issue has to do with low carbon fuels. Mr. Mike Scheible 25 will present some information on our assessment of low PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 carbon fuels. And then following that we have one final 2 slide where I will summarize our conclusions. 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 4 Chuck. 5 During the development of the AB 1493 regulation 6 a number of stakeholders came and requested that the Air 7 Resources Board expand its efforts, not only to look at 8 the impact of what could be achieved for reducing global 9 warming gases from new vehicles, but also to look at what 10 might be done with our fuels regulations. 11 So pursuant to this, Chuck and his staff 12 immediately recognized that this was something not in line 13 with what they were doing, and so he turned it over to 14 those of us on the fuel side of things at ARB. 15 We looked at this issue and we went about trying 16 to assess what might be done. And basically it's what 17 could be done inside of ARB's existing regulatory 18 authority to somehow require a reformulation or a 19 different mixture of fuels so that the net fuels supplied 20 in the marketplace to California's vehicle fleet resulted 21 in lower global warming gas emissions. 22 We examined this in several ways. We tried to 23 determine what would our legal authority be and how would 24 the new authority under AB 1493 play into this, how might 25 it be accomplished, which mechanism would be used, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 what would actually be done in terms of those people who 2 currently produce fuels? What would it entail in terms of 3 regulatory development or additional development in the 4 fuels industry? What would it cost, how might it be 5 accomplished? And I'm going to today summarize what our 6 conclusions to date are and a little bit of what we did 7 with this. 8 First, with respect to the legal issues. Our 9 analysis of the AB 1493 authority was that it neither 10 authorized nor mandated that we deal with fuels. That 11 bill was very clearly targeted towards new vehicles and 12 the emissions from new vehicles. Fuels is a component, 13 because we've in the proposal before you today included 14 credits for vehicles that are designed and actually use 15 fuels that have lower emissions than the base fuel, which 16 is the gasoline in California. 17 Second, we believe that our existing authority, 18 and to control air pollution in general and to control 19 fuels specifically, likely would be sufficient if all the 20 criteria were met to support a proposal, if we were to 21 make it, from a legal standpoint. We'd likely have the 22 legal authority. It hasn't been tested, we hadn't done it 23 before, so we can't say that with 100 percent certainty. 24 In terms of practicality, I think we've pretty 25 early on concluded that this was not an easy regulation to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 do. I personally believe it would be something akin to 2 the magnitude -- you know, on the same type of magnitude 3 as what it took to develop the 1493 regulation. It is -- 4 when you get into the possible mechanisms, it's quite 5 complex to do it properly and to proceed. So it would be 6 a large effort. And that in part led us to the conclusion 7 that it wasn't something we could do on the same timeframe 8 that the 1493 regulation was being developed. 9 Also, I think we concluded it would be quite 10 controversial, especially among the providers of current 11 fuels, which are the makers -- basically the makers of 12 diesel fuel and the makers of gasoline -- to have an 13 additional mandate to somehow again reformulate their 14 fuels or do something -- or introduce different fuels or 15 work with those that provide alternative fuels into the 16 marketplace. 17 We also looked at the economics of what might 18 occur. And our assessment is that this is not a 19 proposition that would pass the type of test that 1493 20 provided to us, which is that it is cost effective for the 21 consumers. We do not believe we have a situation whereby 22 establishing a set of requirements we'll get these dual 23 benefits: The environmental benefit because we have less 24 global warming gas emissions; and the consumer will 25 benefit because over the life of the regulation we will do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 something that will actually decrease vehicle operating 2 costs. Our assessment is the opposite of the available 3 options, that fuel costs would rise. And that the Board 4 would have to basically chart out some new territory in 5 terms of determining what should Californians be paying 6 for reductions in global warming gases. 7 And relative to what is being talked about 8 internationally in terms of CO2 trading markets, for 9 example, once you're in the order of $10 or $20 per ton, 10 we think that the costs are going to be in the orders of 11 hundreds of dollars per ton for a fuel type of program. 12 So that was not for encouraging for us for a 13 regulation. 14 And, lastly, our assessment indicates that the 15 leverage is fairly small, but there are benefits that can 16 be made. Basically most of the near-term leverage would 17 come from increasing the proportion of the amount of 18 ethanol that's used in gasoline or the amount of biodiesel 19 that's used in the diesel fuel pool. But that we're 20 talking, even with large penetration of those fuels in the 21 current mix, a small percentage, just a few percent change 22 in the global warming gas emissions from the vehicle 23 fleet. It's not a -- it's a significant number, but 24 relative to the 1493 types of goals and progress we should 25 be making, it's small. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 Lastly, the 1493 regulation kind of carves out 2 the most promising areas that we saw, which is when 3 vehicles are introduced that use alternative fuels from 4 once the regulation is passed into the future and generate 5 lower global warming gas emissions, they will be 6 considered under the program and count under the program. 7 So we're really in a fuels -- a separate fuels regulation 8 dealing with the existing fleet or those vehicles that 9 weren't affected by the 1493 regulation. 10 So our conclusion right now is we're not ready to 11 say it's time to launch a regulatory effort along these 12 lines. It's time to continue to explore this, to work I 13 think in some other ways in terms of what should be a 14 broader fuel policy. Do we need an incentive-type of 15 program that would help develop a biofuels market where we 16 are using, not corn ethanol produced in the midwest as the 17 basic fuel to get global warming gas reductions, but are 18 looking at a more homegrown biomass-produced ethanol that 19 would both increase the benefits economically to the state 20 and also increase the global warming benefits. 21 I can't say it would be done at a lower cost than 22 current efforts, but at least we would be keeping the 23 economics inside the state. And we need to look at 24 biodiesel and what we can do there to ensure that we have 25 a lower emission fuel from a criteria pollutant standpoint PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 as well as a fuel that produces global warming gas 2 reduction. 3 We've discussed this with representatives of some 4 of the groups that supported this and we've discussed it 5 with the Energy Commission in terms of our analysis just 6 to have them check and say, "Would you reach a different 7 conclusion from the facts?" And the Energy Commission 8 staff is basically agreeing with us on our analysis. 9 So that's the status as of now. And I'm happy to 10 answer any questions. 11 CHAIRPERSON LLOYD: Thank you for that full 12 report, Mike. 13 What I would like to do, maybe in, say, November 14 time period, just to get together with some of the 15 stakeholders so we can actually -- could summarize these 16 and decide, well, how much further, if at all, we'd want 17 to take this. 18 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. I'd be 19 very happy to do that. 20 CHAIRPERSON LLOYD: Ms. D'Adamo. 21 Okay. 22 VEHICLE PROGRAM SPECIALIST SHULOCK: Then next 23 slide please. 24 --o0o-- 25 VEHICLE PROGRAM SPECIALIST SHULOCK: And I think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 on behalf of the staff that have worked on this thing, 2 it's with a great deal of enthusiasm that I bring to you 3 the last slide here. 4 (Laughter.) 5 VEHICLE PROGRAM SPECIALIST SHULOCK: And those 6 are our conclusions. 7 From the cost standpoint, we stand by the work 8 that's in the staff proposal. We stand by those estimates 9 and believe that the staff report is still valid. 10 On the benefit side, as I mentioned, there is an 11 issue with the odometer readings that seems to have some 12 merit. But it does have limited effect. And even in that 13 calculation where it does make a difference, the savings 14 still exceed the cost. The positive benefit to California 15 from this regulation is unaffected. 16 On the environmental side, we still from the 17 staff's standpoint project a positive benefit from this 18 regulation, and we continue to stand by that as well. 19 Thank you very much. 20 CHAIRPERSON LLOYD: Thank you again, Chuck, for 21 again a very comprehensive overview and response there. 22 And, again, I like the idea also that -- we didn't find 23 all Sierra's comments wrong. We found -- we agreed in 24 that case with one of them. And to me it provides some 25 credibility that you did a thorough job of looking at the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 issue. 2 I think Ms. Johnston had a statement. 3 GENERAL COUNSEL JOHNSTON: We've received a 4 request from Steven Douglas, representing the Alliance of 5 Automobile Manufacturers, to hold the record open to 6 comment on additional information that was presented by 7 Martec and others to the Board members. 8 And looking at the request, we think that if the 9 staff -- if the Board approves the inclusion of the 10 staff's recommended 15-day changes, that the 15-day 11 comment period will provide an opportunity for all of the 12 interested stakeholders to comment on staff's additional 13 work and on those comments that were provided by other 14 testifiers and other submissions. 15 So we recommend to the Board that the 15-day 16 comment period would satisfy this request. 17 BOARD MEMBER RIORDAN: Mr. Chairman? 18 CHAIRPERSON LLOYD: Yes. 19 BOARD MEMBER RIORDAN: Maybe for the audience who 20 may not know what the 15-day comment period is, and 21 perhaps for the new Board members, you might go over that 22 procedure so that everybody understands what that means. 23 GENERAL COUNSEL JOHNSTON: Thank you. I'd be 24 happy to address that. 25 The 15-day comment period is, the Board has a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 proposal before it which was announced in the staff report 2 for 45 days. And during the -- throughout that period 3 we've received comments. And in response to those 4 comments, both received before the Board meeting and at 5 the Board meeting, staff is recommending certain 6 modifications to the proposal. And in order for all -- if 7 the Board approves those modifications, what we do is the 8 staff goes out with a report and notice so that all 9 commenters can review the proposed modifications and 10 comment on those. And in addition to the recommended 11 changes, the report -- the supplemental report is also 12 available for commenters, and that addresses many of the 13 questions that were raised by commenters during the 14 hearing. 15 So I hope that -- have I explained it well 16 enough? 17 EXECUTIVE OFFICER WITHERSPOON: Well, just to add 18 one more clarifying comment. What typically occurs is 19 that the Board closes the record at the time before your 20 deliberations and vote. And then it is reopened by staff 21 at your direction with the 15-day -- a new 15-day comment 22 period and then closes again. So it would be our 23 recommendation not to leave the record open today, but to 24 do what we traditionally do, which is to close it. And 25 then we will be reopening around the end of October PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 because we have to complete this action before the end of 2 the year. And so staff needs to get that notice out 3 quickly so we can review the comments on the 15-day 4 changes and finish the complete package before December of 5 the year. 6 CHAIRPERSON LLOYD: So absent further comments 7 from you, I was about to do that. 8 (Laughter.) 9 CHAIRPERSON LLOYD: I will now close the record 10 on this agenda item. However, the record will be reopened 11 when the 15-day notice of public availability is issued. 12 Written or oral comments received after this hearing date 13 but before the 15-day notice is issued will not be 14 accepted as part of the official record on this agenda 15 item. When the record is reopened for a 15-day comment 16 period, the public may submit written comments on the 17 proposed changes, which will be considered and responded 18 to in the final statement of reasons for the regulation. 19 So before I begin deliberations with my 20 colleagues on the Board, I'd like to ask my colleagues if 21 they have any ex parte communications. 22 While we may communicate off the record with 23 outside persons regarding Board rule making, we must 24 disclose the names of our contacts and the nature of the 25 contents on the record. This requirement applies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 specifically to communications which take place after the 2 notice of Board hearing has been published. 3 Are there any communications that you need to 4 disclose? 5 And I'd like to start with Supervisor DeSaulnier 6 and we'll work down this way. 7 BOARD MEMBER DeSAULNIER: Thank you, Mr. 8 Chairman. 9 On September 13th I met with Elisa Lynch from 10 Bluewater Network and was joined by conference call with 11 Dave Modisette at my Concord office. The conversation was 12 consistent with Dave's testimony yesterday. 13 On September 20th I had a telephone conference 14 call with the Union of Concerned Scientists with Jason 15 Mark and Kim Cahill. 16 On September 20th as well I met in person Roland 17 Hwang NRDC and from representatives from California Clean 18 Cars. 19 On September 29th, I also talked with Bob 20 Epstein. 21 And, yesterday, on September 23rd, I will submit 22 for purposes of this report that I had conversations after 23 the close with Kelly Brown from Ford Motor Company and Al 24 Weaverstadt, and also later in the evening with Dean Kato, 25 consistent with my comments at the end of the hearing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 yesterday. 2 Thank you, Mr. Chairman. 3 CHAIRPERSON LLOYD: Thank you. 4 Ms. Berg. 5 BOARD MEMBER BERG: On September 13th, I had a 6 telephone conference with the Union of Concerned 7 Scientists with Peter Frumhoff and Stephen Schneider. We 8 reviewed the Climate Change in California report. And it 9 was consistent with their testimony here the last two 10 days. 11 On September 15th, I had a meeting at my company 12 in Los Angeles with the American Lung Association with 13 Bonnie Holmes-Gen. And we discussed the public health 14 impacts on the proposal, the greenhouse gas regulation. 15 It was consistent with her testimony today. 16 On September 15th, via telephone conference, I 17 had a meeting with the NRDF and the Environmental 18 Entrepreneurs and CALSTART that was with Bob Epstein, John 19 Boesel, and Matt Peak. We discussed the jobs and economic 20 development opportunities associated with the regulation. 21 It was consistent with the testimony that we heard. 22 On September 16th I met with the Alliance of 23 Automotive Manufacturers, Fred Webber, Eloy Garcia, Steven 24 Douglas. And we discussed issues of concern for customers 25 and the economy if the regulation passed. We had a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 discussion of the federal versus state authority and the 2 impact of the regulations on the auto manufacturers. 3 On September 16th I met with the California Clean 4 Cars via telephone. Roland Hwang, Louise Bedsworth, and 5 Tim Carmichael. And it was in support of the regulation 6 and the feasibility of current and future technology. 7 On September 20th, I had a telephone conversation 8 with Bluewater Network, a Elisa Lynch and David Modisette. 9 And we discussed the alternative fuel vehicles, and then 10 the language which created barriers in the regulation. 11 And both those discussions were consistent with the 12 testimony that we've heard over the last two days. 13 Thank you, Mr. Chairman. 14 CHAIRPERSON LLOYD: Thank you. 15 Ms. D'Adamo. 16 BOARD MEMBER D'ADAMO: On September 15th, I had a 17 telephone conference call with Jason Mark and Dr. Amy 18 Lohrs -- Dr. Amy Lohrs, Climate Impact Scientist at USC, 19 Jason Mark with Union of Concerned Scientists, regarding 20 climate change impacts. 21 On September 9th, I had a meeting with Dr. Russel 22 Long, Bluewater Network, and Dave Modisette with Cal ETC, 23 regarding the plug-in hybrid issue. 24 And I followed up -- I'm jumping around here 25 because -- I followed up -- On September 23rd had a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 conference call with Dave Modisette and Russel Long 2 regarding the same issue. And then yesterday spoke with 3 them as well. 4 September 20th -- oh, let me go back. 5 On September 23rd I had -- which was yesterday -- 6 I had a follow-up discussion. But I also had a follow-up 7 phone call on September 20th with Elisa Lynch and Dave 8 Modisette regarding the plug-in hybrid issue. 9 On September 17th, at the Air Resources Board 10 office in Sacramento, I met with Bonnie Holmes-Gen with 11 the American Lung Association, Tim Carmichael, Coalition 12 for Clean Air, and Dr. Marta Arguello, Physicians for 13 Social Responsibility, regarding health impacts of climate 14 change. 15 On the 22nd of September I had a conference call 16 with Roland Hwang with NRDC, Louise Bedsworth, Union of 17 Concerned Scientists, and Tim Carmichael with the 18 Coalition for Clean Air. And the discussion mirrored 19 their testimony. 20 Thank you. 21 CHAIRPERSON LLOYD: Thank you. 22 Dr. Gong. 23 BOARD MEMBER GONG: On September 14th, I met face 24 to face with Roland Hwang of NRDC and Sujatha Jahagirdar 25 of California Environment in my office, consistent with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 their testimony over the past two days. 2 On September 15th I met with Bonnie Holmes-Gen of 3 the American Lung Association of California in El Monte 4 ARB Laboratory. She discussed with me the health effects 5 of global warming. 6 On September 16th, I met with Eloy Garcia and 7 Steven Douglas of the Alliance of Automobile Manufacturers 8 in my Downey office, consistent with presentations given 9 yesterday. 10 And on September 16th I had a teleconference with 11 Elisa Lynch, Bluewater Network, and Dave Modisette with 12 the California Electric Transportation Coalition, 13 discussing plug-in electric hybrid vehicles. 14 That concludes mine. 15 CHAIRPERSON LLOYD: Thank you. 16 I don't have any ex parte communications. 17 Mrs. Riordan? 18 BOARD MEMBER RIORDAN: I do not have any ex parte 19 communications. 20 CHAIRPERSON LLOYD: Supervisor Patrick. 21 BOARD MEMBER PATRICK: Thank you, Mr. Chairman. 22 On September 2nd at the ARB offices I met with 23 Bonnie Holmes-Gen from the American Lung Association. We 24 were joined by conference call by Marta Arguello from the 25 Physicians for Social Responsibility. And both of those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 individuals have given testimony. And our discussions 2 regarding public health issues mirrored their testimony 3 here in the last two days. 4 On September 15th, I had a conference call with 5 John Boesel and Matt Peak from CALSTART. And we discussed 6 economic opportunities for California's businesses in 7 this -- regarding the Pavley bill and our proposed 8 greenhouse gas regulations. And that mirrors Matt's 9 testimony yesterday. 10 And on September 20th, I met with Jason Mark of 11 the Union of Concerned Scientists and Kim Cahill from 12 Stanford University. And they walked me through some of 13 the information about the climate change study that Dan 14 Cayan spoke about yesterday. 15 That's all. 16 CHAIRPERSON LLOYD: Thank you very much. 17 I'd like to start the discussion led off by 18 making some comments. 19 Is this thing on? Oh, okay. 20 I'd like to make some comments and ask my 21 colleagues also to comment. Clearly this is an extremely 22 important day for us. I would like to thank everybody 23 who's come, everybody who's participated in this process 24 over the years, all of the people who have contributed to 25 that, both in support and against the Regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 Most of all, I'd like to compliment staff for 2 just a wonderful job. And I know with something of this 3 magnitude it's not easy to pull all the pieces together. 4 You never came to me and asked for more time. You just 5 worked harder. So I appreciate that very much. You did a 6 great job. 7 Of course thank Assemblywoman Fran Pavley. She 8 also set the target for us so we didn't have much leeway. 9 We were required by that legislation to act. 10 I think we had some impressive presentations on 11 why we need to act on global climate change and public 12 health. Again, you look through the slides. 13 I also see now that many more people are 14 recognizing the importance of the impact of climate change 15 on public health, and particularly children's health. As 16 we've seen the recent studies coming out of USC, more and 17 more we recognize the impact of air pollution and public 18 health. 19 And I think the impact we talk about as well 20 covered the impact of what California does and the rest of 21 the world. I think that's very important. Yesterday we 22 talked about China. My understanding is, while China's 23 not set any specific regulations on greenhouse gases, they 24 are certainly heading that way. And they've looked at 25 ways of looking at renewable energy and looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 efficiency to get rid of and reduce greenhouse gases. 2 And yesterday or I guess today -- or yesterday -- 3 there was an article in the Toronto Star: "Tundra Tests 4 Stun Scientists." This was a 20-year study carried out in 5 the Canadian tundra which showed that in fact CO2 is being 6 emitted. I say this is a real concern. So these things 7 are happening now in terms of the feedback mechanism. And 8 we've already seen the issues how this affects California. 9 And I've said many times, we can't afford to wait until 10 all the evidence is in. 11 One of my disappointments, as I've said 12 yesterday, in this whole process, that we didn't get more 13 input and cooperation from the auto industry. Secretary 14 Tamminen and myself, we sent letters to all the major auto 15 companies throughout the world, recognizing that we have a 16 huge problem with greenhouse gases. We have public, 17 legislative and administrative and government support to 18 do something. So we ask the auto company representatives: 19 How can we work together? If you don't like this, how can 20 we work together? The response and the silence was 21 deafening. 22 I really don't understand how this fits with a 23 recent statement by President Cho of Toyota, which is one 24 of the most enlightened environmental companies in the 25 world. This is a quote taken from a statement he made in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 Michigan in August. 2 "We like to think of it as enlightened 3 self-interest. If automakers don't reduce smog-forming 4 emissions, greenhouse gases, and the need for petroleum, I 5 believe we won't be in business." 6 That's a very powerful statement. 7 So it gets me back to the opportunity that 8 Secretary Tamminen and I provided the automakers. 9 Everybody is anxious to see Governor 10 Schwarzenegger blow up the boxes of government. Why 11 should they be restricted to government? Why can't we 12 work together and break down the barriers that separate us 13 on this very, very important issue? 14 We're not talking about something unique in 15 California when we're talking about going after small 16 contributions on the global scene. We go after everything 17 we can in California from smog-forming pollutants. Staff 18 brought me a little while ago a very small contribution of 19 VOC from nail polish hardeners. So this is not unique. 20 We go after these because of our need to protect public 21 health. 22 The regulation is cost effective required. I was 23 very impressed by the testimony yesterday from some of 24 you, the groups who were saying that it's good for the 25 economy creating jobs. And that's been the history of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 California. More importantly, it's good for public 2 health. 3 I was tempted, as I went into this, to try to 4 strengthen regulations, to try and strengthen the staff 5 proposal. And I was disappointed that the 3 and 3 went to 6 4 and 4. 7 But I guess the thought of trying to get us 8 started down this path and the continuing hopes that we 9 can work together with the auto industry led me to believe 10 that maybe this is the best start that we can make. 11 I would end by saying we should be able to work 12 together. I hope that we still can work together on this 13 tremendously important issue. The stakes could not be 14 higher. I'm proud of this Board. I'm proud of the staff. 15 And we will not shirk the duty, while still at the same 16 time hoping that under this Governor's leadership we can 17 impact, break down the barriers, and work together. If we 18 can't work together on this issue, with so many 19 ramifications for California, for public health, for our 20 children, for the rest of the world, when are we going to 21 work together? 22 With that I would like to start at the extreme 23 right, just on the seating here -- 24 (Laughter.) 25 CHAIRPERSON LLOYD: -- with Supervisor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 DeSaulnier. 2 BOARD MEMBER DeSAULNIER: It depends on one's 3 perspective, Chairman Lloyd. 4 All right. I also want to thank -- actually I 5 want to thank everyone who's participated in the hearing, 6 all the speakers. I've appreciated the civility, although 7 I have not agreed with the content of all the speakers. 8 I am particularly proud of our staff, those 9 bureaucrats, not in the pejorative but public servants, 10 all of you. You really are -- and this is no hyperbole -- 11 you lead this state, this country, and indeed the world in 12 this kind of effort. 13 I want to thank Fran Pavley, a freshman 14 legislator, who had the courage to introduce this 15 legislation. I will admit to some political envy. I wish 16 it was me, but congratulations. 17 (Laughter.) 18 BOARD MEMBER DeSAULNIER: I also want to thank 19 the Secretary and Governor Schwarzenegger for sticking 20 with this proposal. 21 This is a public health issue, clearly. It's a 22 public health issue for those of us in this room. But 23 it's also a public health issue for everyone on this 24 planet. And most importantly, as the Chairman has 25 mentioned, it's a public health issue for future PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 generations. 2 I actually believe that some of the concerns that 3 we've heard today are understated. And I am very 4 concerned that there is a real risk in the near term, 5 certainly in my children's life term. 6 But this is a first step. And we are -- if we 7 are to be good stewards of the State of California's 8 public health and for myself, for the Bay Area and the 9 Delta that I represent, which will be one of the first 10 places impacted in California if we don't act, I think 11 this is a completely necessary and prudent first step. 12 There clearly is agreement on the danger of CO2. 13 According to James Baker, the head of the National 14 Atmospheric and Oceanic Administration, he says -- and I 15 quote -- "There is no better scientific consensus on any 16 other issue today in science except perhaps Newton's 17 second law of dynamics." 18 I won't go through, because I think it's been 19 refuted very strongly by our staff and by other speakers 20 about the documents and the comments by Sierra Research. 21 Although I was tempted yesterday to point out the 22 historical accuracy of regulators, not only in air quality 23 versus the auto industry, but also on safety. But I think 24 that has been refuted. 25 I did want to say that when Fred spoke, he spoke PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 about the global issue and he alluded to China and a way 2 for China. In a New York Times article in June of 2001, 3 it was reported that China has actually reduced its 4 percentage of CO2 by 19 percent in the same time that its 5 economy has grown by 36 percent. 6 It was also said by Fred and others that this 7 issue should be solved in Washington. It was a global 8 issue, but it should be solved in Washington. Actually if 9 I had my druthers, it would be solved in Detroit. But as 10 Madison said, "If men were angels, there would be no need 11 for government." 12 Consistent with what the Chairman said, I will 13 admit to a difficult night's sleep last night, bordering 14 on a good deal of frustration, sometimes anger, and 15 disappointment with my friends in the auto industry. 16 And first with the foreign automakers, I too 17 don't understand your position. You have provided the 18 leadership. You have invested in this technology. You 19 are going to financially, I believe, benefit from it, and 20 you should. I don't understand why you don't take credit 21 for it. And I will be severely disappointed if you are 22 party to a lawsuit subsequent to this hearing. 23 To the American automakers, nothing brings me 24 greater pain than to take a legislative action that may 25 hurt American workers. There is a great scene -- and for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 my new colleague, he'll have to bear with me, I'm a 2 history buff. There's a great scene, for those of you who 3 may have seen the HBO series, "A Band of Brothers," where 4 towards the end of World War II, there's a convoy of 5 American soldiers going from Munich to Berchtesgaden. And 6 in the opposite direction are marching over a hundred 7 thousand Vermark soldiers. And a young private stands up 8 and says, "What were you thinking," in his frustration. 9 He said, "Take a look at General Motors. Welcome to 10 Ford." And you can't watch that but feel as American a 11 great sense of pride and the accomplishment of those 12 companies and what they did in that period. 13 And this is no less an important issue. They 14 should be at the table with us. And they should be 15 amongst the leaders globally of solving this challenge. 16 And I'd just like to end with one last quote. 17 The first Governor of my native state, Massachusetts, made 18 a speech many years ago that's been often quoted, 19 particularly by a former Governor of California. And he 20 said that America -- John Winthrop said that America 21 should always be a city on a hill to the rest of the 22 world. It should be a beacon. 23 And here today I'm really proud of my colleagues 24 and our staff and the Legislature that we will continue to 25 be a beacon for public health and air quality, that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 California and the Air Resources Board will be that city 2 on the hill when it comes to public health. And I want to 3 thank all of you, particularly the environmental movement, 4 for your contributions. 5 Thank you, Mr. Chairman. 6 CHAIRPERSON LLOYD: Thank you, Mr. Supervisor. 7 Ms. Berg. 8 BOARD MEMBER BERG: Thank you, Mr. Chairman. 9 I too would like to thank staff. As a new Board 10 member -- I think I'm going on 45 days now -- staff had a 11 great job in bringing me up to speed. And they really 12 worked overtime in doing that, and I thank you for that. 13 I thank my colleagues also for welcoming me and 14 making me feel that there was -- that my participation was 15 important for this legislation. 16 California has been a leader in the environmental 17 responsibility and this Board's action has shown the way. 18 The need for this regulation has absolutely been 19 demonstrated, not only over the last few years since 20 Assemblywoman Pavley passed this bill and -- the Assembly 21 passed this bill -- she introduced it -- but that we've 22 heard a cry from the citizens absolutely, by 80 percent 23 think that we should do something about this issue. 24 I am mindful of the business concerns, however, 25 of people like our automobile dealerships and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 statistics that the California motor associations show. 2 They do have legitimate concerns. They sell 2,084,000 new 3 cars, 1.9 million used cars and trucks, and they generate 4 $93 million in sales. They represent about 20 percent of 5 our retail. And I think that we have an obligation to 6 make sure that our assessments are accurate as this 7 regulation goes forward. 8 Also, as far as the preemption, I think we agree 9 to disagree. And I hope that it isn't fought out in 10 court. But if that's the way it has to be, then that's 11 the way it's going to be. 12 I am hopeful that our job creation statistics 13 will bear out. However, I feel that the legislation does 14 not require us to make sure that there's job creation. 15 And I do think the cost -- we have met the obligation of 16 the regulation, albeit that we do have some leeway. And I 17 appreciate staff's going back. And I understand they 18 worked late into the night last night looking at their 19 cost estimates, reviewing some of the testimony that was 20 given, and I do appreciate that. 21 I do think this is a health issue. I do think 22 that California does lead the way. And I appreciate 23 everybody's assistance in helping me come up to speed on 24 this issue. 25 Thank you, Mr. Chairman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 CHAIRPERSON LLOYD: Thank very much. 2 Ms. D'Adamo. 3 BOARD MEMBER D'ADAMO: Thank you, Mr. Chairman. 4 It's been said by many that this is a momentous 5 occasion and that we are really paving the way here, as we 6 have in the past. But I have to say that so many others 7 have made our jobs so easy for us today. If it weren't 8 for Assemblywoman Pavley, the Governor's strong 9 leadership, the Secretary's strong leadership, staff. 10 This table has gotten so large. We've got public 11 health officials, local governments, many from other 12 states, of course the environmental community, the 13 business community -- segments of the business community, 14 and of course the public at large. And it's just -- I 15 echo what my other colleagues have said. It's just sad 16 that we don't have the auto makers at the table. 17 But I am very confident that -- in so many 18 respects they have a "can do" altitude. And I think that 19 they're just in this case hiding behind their lawyers and 20 that they're secretly saying somewhere that they can do 21 this. It's not that difficult. When we look at the cost 22 estimates and the costs associated, are more than offset 23 by the savings to the consumer. 24 This regulation is -- it's not even a close call 25 for me personally. You look at the evidence presented, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 the testimony, the staff report, the countless reports and 2 studies, it just repeatedly cries out for us to act. The 3 science is solid, it's conclusive. 4 And the costs associated with it -- I really do 5 appreciate staff staying up last night to go over some of 6 the concerns that were raised. I suspected because of 7 previous experience with the auto makers crying wolf, and 8 as was pointed out by NRDC's presentation today, and 9 public citizen, that they were going to be off. And I do 10 appreciate staff once again going through the numbers and 11 again reassuring us that your figures are accurate and in 12 fact there would be a -- the costs associated would be 13 offset by the savings to the consumer even with the 14 modifications made. 15 The Legislature has given us a mandate to act. 16 And the staff proposal meets that mandate to reduce 17 greenhouse gas emissions. And I'm very pleased that the 18 staff report meets that mandate, with a flexible standard 19 that's met without sacrificing vehicle choice, 20 performance, safety or other factors that are so very 21 important to consumers. We can do both. We know we can 22 do both. It's been done in the past. And without a 23 doubt, it'll be done this next round as well. 24 The bottom line, this regulation is good for the 25 environment, it's good for the public health, it's good PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 for the economy, and it's good for the consumer. 2 Thank you all so much for all of the hard work 3 that you have done, at the staff and others that have 4 really made our job I think quite a lot easier today. 5 Thank you, Mr. Chairman. 6 CHAIRPERSON LLOYD: Thank you very much. 7 Dr. Gong. 8 BOARD MEMBER GONG: This is my first Board 9 meeting. And because I guess of my physician educator 10 background, I actually prepared slides and a talk, 11 (Laughter.) 12 BOARD MEMBER GONG: I felt apologetic and, you 13 know, humble about this thing. So I decided just to do 14 the talk. 15 CHAIRPERSON LLOYD: Wise choice. 16 BOARD MEMBER GONG: Chairman Lloyd said, "Do your 17 thing. Do a good job." Actually my wife and daughter, 18 who lives in Paris, France, is watching this on the 19 webcast. Amazing. And they told me by E-mail, "Do a good 20 job." 21 So like it or not, here it comes. 22 I just want to get over some key points. And it 23 may be longer than most of you wish. But I do feel that 24 this is a very important moment in the environmental 25 history of California. And I'd just like to begin and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 thank our Chairman, Dr. Alan Lloyd, for his excellent 2 leadership on this important issue, over the past several 3 years and also during the past two days. 4 I also appreciate the statements provided by a 5 well qualified, dedicated and sleepy ARB staff and those 6 sage comments voiced by my fellow Board members. 7 I am mindful of the various issues raised during 8 my ex parte meetings. 9 Finally, I thank yesterday's informative 10 technical speaker, Dr. Santer, and the many public 11 speakers throughout the past two days for their thoughtful 12 and sincere discussion. 13 I've reviewed the proposed regulation, the 14 context of the mission of the Air Resources Board, the 15 environmental goals of Governor Schwarzenegger, the 16 legislative mandate of Assembly Bill 1493, the input from 17 various technical and non-technical sources, and also 18 obviously from my own professional experience and 19 background. 20 I would also like to call your attention to 21 today's L.A. Times' California section in which -- there's 22 a column to the left here: "Governor signs bills for air 23 coast." And you can read it for yourself. But I think 24 that really confirms the current Governor's dedication to 25 ensuring that we have a good quality environment here in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 California. 2 I tend to review issues, whether they're medical 3 and sometimes even non-medical, with an analytical and 4 balanced approach as much as I reasonably can, knowing 5 that we humans do not always make absolutely correct or 6 perfect decisions. In fact, health professionals and 7 patients always deal with some degree of uncertainty and 8 risk taking, expecting that net or overall benefits will 9 come from reasonable and good faith decisions and 10 interventions. 11 But and informed decision should be made in 12 timely fashion. By loose analogy, the patient here is the 13 earth and its inhabitants. The disease are simple. It's 14 our global warming and its complications. And a treatment 15 option is the proposal before us today, knowing that this 16 stuff is only the beginning of a course of treatment. 17 As in medicine and in clinical research, a basic 18 therapeutic question we ultimately need to answer as best 19 as we can is: Are the benefits greater than the risks? 20 There many other corollary questions. But to me, as a 21 physician, as a clinical researcher, are the benefits 22 greater than the risks of doing what you're going to be 23 doing? 24 With this in mind, I can clearly say that the 25 involved parties have presented interesting and relevant PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 arguments about the proposed regulations. I am impressed 2 by the following points about human health and welfare. 3 And I'd just like to quickly go through them. 4 Global warming, its causes and its downstream 5 effects on the earth, vegetation and human health and 6 welfare are scientifically plausible, well supported, 7 internally consistent and of great concern to everyone. 8 The large amounts of carbon dioxide and other greenhouse 9 gases emitted from motor vehicles are in my mind a 10 preventable technological issue that, if reduced, has 11 significant downstream benefits and importance for human 12 health and welfare. 13 These gases can affect human health, not just 14 because there's so much of it there, but also because they 15 last a long time in the atmosphere. 16 The chronic global warming process promotes air 17 pollution such as ozone, a potent criterion pollutant. 18 Air pollution affects all exposed populations ranging from 19 children, unborn children, adults and seniors, and 20 increases premature deaths from lung and heart causes, and 21 also morbidity such as asthma attacks. This is in 22 combination with, and in excess of that, with heat waves. 23 And I think I've made this point yesterday, that 24 I'm also concerned about disproportionate health effects 25 or impacts on low income and minority communities. They PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 are only exacerbated by air pollution and heat waves. We 2 already have documentation that these communities 3 experience intense exposure levels and increased health 4 risks today. 5 The numerous downstream adverse health effects 6 from climate change and air pollution have been well 7 described. Although I appreciate best the respiratory 8 illnesses from air pollution, I also observe that 9 persistent climate warming causes more intense and varied 10 health effects such cardiovascular and neurologic failure 11 during heat waves, more mosquitoes and viral infections, 12 other transmitted diseases, allergies, and probably 13 unforeseen physical and mental health problems downstream. 14 This translates to me into more illnesses, deaths, health 15 care and societal costs. I think it follows logically. 16 And just a comment about industry. It's already 17 been made before. But my perspective is that different 18 sectors in industry have been responsible and constructive 19 corporate citizens in the past and also in the present. 20 Obviously not every sector in industry thinks the same way 21 or has the same behavior. But industry has a valuable 22 stake and role in this greenhouse gas process and in 23 today's decision. For example, the automobile makers have 24 a history of helping us achieve technical progress with 25 improving air quality, but now appear to oppose the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 proposed regulations. During this process, the opposers 2 have not adequately proposed practical and effective 3 solutions to the ongoing greenhouse gas emission issue, in 4 my opinion. 5 Indeed, the opposers have not acknowledged the 6 real and potential adverse health effects from global 7 warming, and claims that there are no measurable health 8 gains or benefits from the regulations in the future. 9 I disagree. And I wonder, not if, but how much 10 health benefits will accrue within California and other 11 states and nations should the proposals be passed. 12 I note also that not one health professional or 13 authority has testified on their behalf against the 14 proposed regulations or on the medical relevance of the 15 described health threats. 16 And I can facetiously ask the question: Does 17 global warming produce any health benefits? 18 The good news is that human health and welfare 19 will benefit from the proposed greenhouse gas emission 20 regulation in California. Although scientists may differ 21 about the precise number of related deaths or emergency 22 room visits, the numbers are similar or generally in the 23 ballpark. What is more critical is that the positive 24 impact of the regulations I believe will be a decrease in 25 these health numbers. This speaks for itself, that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 life-saving measures are worthwhile endpoints for our 2 children and adult populations, some of whom have 3 sensitive medical conditions. 4 Our nation and State of California sets important 5 environmental precedence, including leadership, 6 regulations, and technological intervention. California's 7 not alone in its effort to reduce greenhouse gas 8 emissions, and our actions today will certainly wake up 9 the rest of the world. Thus, our decision is a 10 transcending signal to other states and countries to 11 follow California's lead in long-term environmental 12 vision. 13 It appears to me that it's automatic, 14 quote-unquote, that many other parties will join us in 15 this important endeavor, because we can only succeed by 16 working in a collaborative spirit. I hope that the 17 opposers to this regulation will eventually constructively 18 engage and support this effort. 19 In summary, taking all the above into my 20 decision-making process, I enthusiastically support the 21 proposed regulation. The intense, scheduled process and 22 goals of the proposed regulation represent not only an 23 initial positive step in direction, but also signal real 24 concerted efforts to practice preventive medicine at a 25 public level within the state and also outside the state, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 eventually. 2 This landmark legislation to combat climate 3 change will have far reaching downstream effects that will 4 improve air quality and the climate in California and also 5 for the country and world. There will be a return in our 6 investment. We need to start now. The eventual effect of 7 this new an pivotal legislation is cleaner air to breathe 8 for everyone, our children, their children, drivers, 9 automobile makers, and for our own earth. 10 Thank you for my time. 11 CHAIRPERSON LLOYD: Thank you, Dr. Gong. And I 12 must say I didn't think I'd have to put a five-minute 13 limit on my colleagues. 14 (Laughter.) 15 CHAIRPERSON LLOYD: Just for next time would 16 you -- 17 BOARD MEMBER GONG: It's my first meeting. 18 BOARD MEMBER DeSAULNIER: You feel bad. 19 CHAIRPERSON LLOYD: No, thank you very much. 20 You're allowed a honeymoon period. 21 Mrs. Riordan. 22 BOARD MEMBER RIORDAN: Thank you, Mr. Chairman. 23 I'll yield a little bit of my time to Dr. Gong. 24 Our primary concern has always been the 25 protection of the public health. But in the case of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 issue before us, I also find that we're concerned with the 2 protection of our natural resources. 3 I believe that there has been compelling 4 information and evidence on the part of our staff and of 5 the majority of those who have testified before us in the 6 last two days that would cause me to certainly affirm the 7 resolution that is before us. I cannot say how wonderful 8 I thought the presentations were on behalf of so many of 9 you. And you've certainly helped collectively to bring us 10 to this point of hopefully affirming the staff report. 11 Thank you. 12 CHAIRPERSON LLOYD: Thank you very much. 13 Supervisor Patrick. 14 BOARD MEMBER PATRICK: Mr. Chairman, you'll be 15 grateful to know that my laptop is locked away in my car 16 because I'm getting ready go home shortly. But I 17 appreciated hearing what Dr. Gong and all of my colleagues 18 have had to say. 19 I don't think I've taken the opportunity yet to 20 thank staff for a job well done. I've been on this Board 21 for many years, and I would say that the report that you 22 have given over the last two days has been among the very 23 best. And I particularly appreciate the fact that you 24 have acknowledged some of the issues as we've gone along 25 and actually some of the issues that will be ongoing as we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 move in the direction that I believe that we will be 2 moving. 3 It's an honor to have Assemblywoman Pavley here. 4 I know she's behind this screen here somewhere. 5 Thank you for being here. 6 And of course for having Secretary Tamminen here 7 as well. It was a particular treat. 8 There's been a lot of discussions about, gee, you 9 know, what is this going to do, this is such a relatively 10 small step? Actually I think it's a very major step, and 11 I think it's equivalent to the shot heard 'round the 12 world, because this Board once again is stepping up to the 13 plate. We already have one of our sister states that's 14 come up and said, "Great. We're right behind you." And I 15 believe that others will fall in line as well. 16 It think it's very important that the Air 17 Resources Board, that the entire world does look to, is 18 making this strong statement. 19 And I'm so appreciative of all of the people that 20 have given testimony. It's been very thought provoking. 21 And I believe that staff has done an excellent job at 22 developing a cost-effective and flexible measure that we 23 can all live with. 24 I'm very disappointed, as my colleagues are, that 25 the auto makers have been AWOL on this, because they are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 absolutely major stakeholders in this. I believe -- I 2 have such confidence in them. I know that this can 3 happen, and I believe that it will happen. And it would 4 have been such a pleasure to have all of us working 5 towards this end together. I believe that we will get 6 there though. 7 And so I again want to thank everyone that has 8 been involved in a rather long hearing. It has been a 9 pleasure to be involved in it. And, once again, I know 10 all of us feel very, very proud to be on the California 11 Air Resources Board, because hopefully we're showing the 12 rest of the world today the direction that we all need to 13 be going in. 14 Thank you Mr. Chairman. 15 CHAIRPERSON LLOYD: Thank you, Supervisor 16 Patrick. 17 Before I ask for a motion, I'd also like to, as I 18 did yesterday, thank Assemblywoman Fran Pavley for her 19 wonderful leadership, and also to express how much it 20 means to staff for you to be here. You just didn't come 21 in and make a token appearance. You came yesterday, 22 you've come back today. So we're wonderfully obviously 23 delighted that you'll be in Sacramento for a number of 24 years to come to continue your wonderful leadership. So 25 thank you so much indeed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 Also I'd like to -- I acknowledged 2 specifically -- well, I looked specifically last time at 3 the engine room. I would also like to look forward to the 4 captain and the co-captains of this thing. And I think -- 5 because it's probably the biggest regulation that, 6 Catherine, you've brought to us. And of course with Tom 7 Reliable. So I'd like to congratulate you, Diane as well 8 and Mike. But particularly -- I know it's been a tough 9 road, you've been tough -- but the effort you put in. And 10 also the time you all took to polish the presentation, the 11 dry runs. It really showed. So thank you again. 12 So with that, I'd like to ask my colleagues if 13 they've got a motion? 14 BOARD MEMBER D'ADAMO: I'd like to move 15 Resolution 04-28 with the changes that we discussed 16 regarding plug-in hybrids and the hydrogen issue. 17 CHAIRPERSON LLOYD: As covered in the 18 presentation, yes. 19 Seconder? 20 BOARD MEMBER DeSAULNIER: Second. 21 CHAIRPERSON LLOYD: Second. So proposed by Ms. 22 D'Adamo, seconded by Supervisor DeSaulnier. 23 All in favor say aye. 24 (Ayes.) 25 CHAIRPERSON LLOYD: Anybody against? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 Thank you all very much. 2 So we've got a unanimous vote. 3 (Applause.) 4 CHAIRPERSON LLOYD: With that I guess I would 5 officially close the September 24th meeting of the Air 6 Resources Board. 7 Thank you all. 8 And that will be reopened for the 15-day comment 9 period. 10 Thank you. 11 (Thereupon the California Air Resources Board 12 meeting adjourned at 12:15 p.m.) 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 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 7th day of October, 2004. 15 16 17 18 19 20 21 22 JAMES F. PETERS, CSR, RPR 23 Certified Shorthand Reporter 24 License No. 10063 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345