MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD BOARD HEARING ROOM 2020 L STREET SACRAMENTO, CALIFORNIA FRIDAY, DECEMBER 11, 1998 8:30 A.M. Vicki L. Ogelvie, C.S.R. License No. 7871 Janet Nicol, C.S.R. License No. 9764 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT Barbara Riordan, Chairperson Joseph C. Calhoun Mark DeSaulnier John D. Dunlap, III Dr. William Friedman Lynne T. Edgerton Jack C. Parnell Barbara Patrick Sally Rakow Ron Roberts Staff: Michael Kenny, Executive Director Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Kathleen Walsh, General Counsel Jim Schoning, Ombudsman PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii I N D E X --o0o-- Page Proceedings 1 Call to Order 1 Opening remarks by Chairperson Riordan 1 AGENDA ITEMS: 98-14-5 Public Meeting to Consider Research Proposals Introductory remarks by Chairperson Riordan 1 Staff Presentation: John Holmes, Ph.D. 1 98-14-7 Public Meeting to Consider an Augmentation of an ICAT contract titled, "Dynamically Optimized Recirculation Coupled with Fluidized Bed Adsorption to Cost Effectively Control Emissions from Industrial and Solvent Operations Introductory remarks by Chairperson Riordan 3 Staff Presentation: John Holmes, Ph.D. 3 98-15-1 Public Hearing to Consider the Adoption of Proposed Revisions to the Regulation for Statewide Portable Equipment Registration Program Introductory remarks by Chairperson Riordan 5 Staff Presentation: Mike Kenny 5 Mike Tollstrup 7 Bruce Oulrey 12 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv I N D E X (Continued) --o0o-- Page Public Comment: Larry Bowen 16 Jeb Stuart 21 Paul Buchanan 22 Terry Ellis 27 95-15-2 Public Meeting to Consider Request for Public Hearing to Review the Decision of the Executive Officer to Order the Recall of Motor Vehicles Introductory remarks by Chairperson Riordan 33 Staff Presentation: Robert Jenne 34 Kirk Oliver 37 Toyota: Ned Isokawa 38 Charles Lockwood 40 98-15-3 Public Meeting to Consider a Proposed Determination Pursuant to Health and Safety Code Section 43830(g) of the Comparative Ozone Forming Potential of Elevated RVP Gasoline Containing 10 Volume Percent Ethanol Introductory remarks by Chairperson Riordan 49 Staff Presentation: Mike Kenny 50 Jose Gomez 53 Kathleen Mead 74 Public Presentation: Don Lucas 78 Bob Dinneen 83 Gary Whitten 89 Bob Heckert 94 Al Jessel 96 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v I N D E X (Continued) --o0o-- Page Public Comment: Paul Donahue 98 Megan Smith 100 Dawn Forsythe 106 V. John White 108 Necy Sumait 113 Thomas Toy 118 Paul Knepprath 122 Neil Koehler 125 Lloyd Forest 131 98-9-2 Continuation of Public Hearing to Consider an Amendment to the California Cleaner Burning Gasoline Regulations Increasing the CAP Limit for Oxygen from 2.7 to 3.5 percent by Weight Introductory remarks by Chairperson Riordan 149 Staff Presentation: Mike Kenny 149 Dean Simeroth 150 Richard Vincent 150 Public Comment: Neil Cuelior 153 98-15-4 Public Hearing to Consider an Amendment to the Specifications for Liquefied Petroleum Gas Intended for Use in Motor Vehicles Introductory remarks by Chairperson Riordan 154 Staff Presentation: Mike Kenny 157 Tony Brasil 159 Kathleen Mead 165 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi I N D E X (Continued) --o0o-- Page Public Comment: Kate Drakos 167 Bruce Irion 171 Baron Glassgow 174 Alina Kulikowski-Tan 177 William Platz 180 98-6-1 Continuation of a Public Hearing to Consider the Appeals of the City of Los Angeles from Order Nos. 070297-04 and 040198-02 of the Great Basin Unified Air Pollution Control District Introductory remarks by Chairperson Riordan 199 Public Comment: Brian Lamb 200 David Hotchkiss 201 Andrea Lawrence 201 Open Session to Provide an Opportunity for Members of the Public to Address the Board on Subject Matters within the Jurisdiction of the Board 205 Adjournment 206 Certificate of Reporter 207 Certificate of Reporter 208 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 --o0o-- 3 CHAIRPERSON RIORDAN: Ladies and Gentlemen, I would 4 like to reconvene the meeting on the second day of the State 5 Air Resources Board. 6 It is now in session, and it is a continuation for 7 two items that we are going to carry over from yesterday. 8 These are items that we could not get to last 9 night, but we are going to get to today in short order. 10 The first one is categorized as our Research 11 Proposals, 98-14-6. There are eight proposals, and I think 12 what I might do is just shortcut Dr. Holmes just slightly, if 13 I might, if that is agreeable, Dr. Holmes, and ask if all the 14 Members have had the opportunity to read those proposals and 15 then open it up for questions of staff as opposed to 16 introduction of the Item. 17 Are there some questions? 18 Supervisor Patrick, do you have a question? 19 BOARD MEMBER PATRICK: You can tell I am shifting 20 around in my seat, so I do have a question. 21 It is about your Spare the Air Study that you are 22 going to do, and I notice you did not choose the San Joaquin 23 Valley as part of your research proposal, and I am wondering 24 if the information that you get about the other Spare the Air 25 Programs in the Sacramento and the Bay Area will be able to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 be used for our Spare the Air Program in the San Joaquin 2 Valley? 3 DR. HOLMES: The idea here is to develop a generic 4 methodology for calculating the benefits of such programs 5 that can be used in not only Sacramento and Bay Area but also 6 the Valley and in Los Angeles, all. 7 Many of these districts have these programs. EPA 8 now will allow us to take credit for the air quality benefits 9 in these programs in our State Implementation Plan. 10 So, this would be of value to all districts to have 11 such programs. 12 BOARD MEMBER PATRICK: I think this is a marvelous 13 idea, and I am really looking forward to finding out what the 14 results of it are. 15 These things are a little bit hard to quantify, and 16 so the purpose of this is to give you ability and the 17 districts the ability to quantify the emissions reductions 18 from the Spare the Air; is that correct? 19 DR. HOLMES: Exactly. 20 BOARD MEMBER PATRICK: Thank you. 21 CHAIRPERSON RIORDAN: Okay. Any other questions 22 that Board Members have? 23 Then the Chair would entertain a motion. 24 DR. HOLMES: Madam Chairman, we do have eight 25 research proposals, but we also have one contract PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 augmentation for one of the ICAT projects. 2 CHAIRPERSON RIORDAN: What I was going to do, Dr. 3 Holmes, is deal with the Research Proposals first, and then I 4 am going to come to ICAT. 5 DR. HOLMES: Oh, I beg your pardon. 6 CHAIRPERSON RIORDAN: No problem. 7 You are faster than I am. Actually, it is all 8 right, Dr. Holmes. 9 I do have a motion from Ms. Edgerton for approval 10 of the Item on Research Proposals. 11 Mr. Parnell seconds the motion. Is there any 12 further discussion? 13 All those in favor of the Item, signify by saying 14 aye. 15 Opposed, no. 16 The motion carries. 17 Now, let me do the ICAT augmentation. This next 18 Item on the Agenda is 98-14-7. This is to increase funding, 19 Dr. Holmes, just a brief mention of what this is, and I would 20 appreciate that. 21 DR. HOLMES: This is a project that we have 22 co-sponsored with the South Coast and others to develop 23 solvent recovery systems for large painting operations and 24 other kinds of facilities. 25 The South Coast has become so interested in this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 that they want to expand it beyond the original intent of 2 what we were going to do, so they are giving the Air 3 Resources Board $50,000, and for administrative simplicity is 4 simply just to augment our contract rather than for them to 5 establish a separate contract with the folks who are doing 6 this at Steel Case. 7 CHAIRPERSON RIORDAN: Okay. Are there any 8 questions for the staff or Board Members? 9 BOARD MEMBER PATRICK: Motion to approve. 10 BOARD MEMBER DUNLAP: Second. 11 CHAIRPERSON RIORDAN: Motion by Supervisor Patrick 12 and second by Mr. Dunlap. 13 Any discussion on the motion? 14 All those in favor of the motion, signify by 15 saying aye. 16 Opposed, no. 17 The motion carries. 18 DR. HOLMES: Thank you very much. 19 CHAIRPERSON RIORDAN: Thank you and thank the 20 Research staff very much. 21 Wait for just a moment while we change staff. 22 You know, I actually think in reality these chairs 23 are still warm from our presence yesterday for so many hours. 24 While people are taking their seats, let me just 25 deal with a procedural question here, and that is before we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 begin this item, and it will apply to all further Agenda 2 Items, I would like to let you know that we are changing a 3 little bit the request for testimony. 4 Instead of our Clerk to the Board handling it here 5 in the room, outside, just outside the room, assembly hall 6 here, are tables and sign-up forms for you to indicate your 7 interest in testifying before this Board and on what 8 particular item you would like to testify. 9 Those tables are and the people there will take 10 your requests and manage to organize them, and then I will 11 call on you at the appropriate time. If you have written 12 testimony, I would just like to remind you that or a written 13 statement, please give the staff 20 copies for that. 14 I would be greatly appreciative of that and so 15 would they. 16 The first Item on the regular Agenda beginning 17 today is 98-15-1. This is a public hearing to consider the 18 adoption of proposed revisions to the regulation for 19 Statewide Portable Equipment and Registration Programs. 20 At this point I would like to ask Mr. Kenny to 21 introduce this item and begin the staff's presentation. 22 MR. KENNY: Thank you, Madam Chairman and Members 23 of the Board. 24 In 1995, legislation was enacted requiring the Air 25 Resources Board to develop and implement a uniform system for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 Statewide registration and regulation for portable equipment. 2 In response, the Board adopted regulations for the 3 Statewide Registration Program on March 27, 1997. 4 In adopting the regulation, the Board directed 5 staff in consultation with local air districts, affected 6 industry and the United States Environmental Protection 7 Agency to evaluate the applicability of the Statewide 8 Registration Program to portable equipment operating in 9 California coastal waters and to address any implementation 10 issues and other potential issues. 11 The Board instructed staff to report back within 12 one year of implementation of the regulations with any 13 recommended amendments. 14 Over the last year, staff has worked with the 15 various parties. Based on our discussions and the experience 16 gained over the last year, we are proposing several 17 amendments to the regulations. 18 These amendments eliminate the need for duplicative 19 permits, allow increased flexibility and reduce the cost of 20 operation. 21 The amendments also provide for registration of 22 portable equipment when operating in California territorial 23 waters. The proposed amendments to the regulations will have 24 an overall positive environmental impact and will not 25 interfere with the attainment or maintenance of State or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 Federal air quality standards. 2 Since February of 1998, staff has worked closely 3 with industry and the local air districts to develop the 4 regulatory amendments. These amendments are needed to 5 address issues discovered during the first year of 6 implementation. 7 During that time, staff faced the task of 8 developing amendments that satisfy the concerns of affected 9 parties but also remain consistent with the intent of the law 10 without compromising air quality. 11 The amended regulations before you for 12 consideration today represent the product of that effort. As 13 proposed, the amendments to the regulations are expected to 14 continue to provide a smooth transition from district permits 15 to Statewide Registration and provide expedited replacement 16 of older equipment with lower emitting technologies. 17 Now, Mr. Mike Tollstrup, of the Stationary Source 18 Division, will explain our proposal to you. 19 MR. TOLLSTRUP: Good morning, Madam Chairman and 20 Members of the Board. 21 For this Agenda Item, staff will present proposed 22 amendments to the regulations for the Statewide program to 23 register and regulate portable engines and their associated 24 equipment. 25 The proposed amendments to the regulation are in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 response to the Board's directions to evaluate the 2 applicability of the Statewide Registration Program to 3 portable engines operating in California coastal waters and 4 to address the other aspects of the program learned from 5 implementation during the past year. 6 In the interest of time, staff will present a 7 shortened version of the presentation package. Copies of the 8 slide presentation are available at the back of the room. 9 From September 1998 to the present, over 750 10 applications have been received. This represents over 10,000 11 portable engines and associated equipment. 12 Staff has completed processing of over 500 of these 13 applications. This represents over 9,000 engines and 14 associated equipment. 15 Staff is currently evaluating the remaining 250 16 applications. The average processing time for issuing 17 registrations has been about 60 days, which includes the 18 determination of completeness review. 19 Once an application is complete, it takes about 30 20 days for staff to process an application. 21 The following slides will summarize staff's 22 proposed amendments. The current regulation prohibits 23 Statewide registration of equipment operated offshore and 24 equipment subject to Federal regulations such as a new source 25 performance standard. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 Staff is proposing to amend the regulations to 2 allow Statewide registration of portable equipment operating 3 within State territorial waters and rock crushing operations 4 subject to new source performance standards, sub part 000. 5 Portable equipment subject to other Federal 6 regulations will remain ineligible for registration. 7 In addition, staff recommends removing the existing 8 selected catalytic reduction requirement for continuance 9 operating dredges because of technological feasibility 10 problems we have encountered. 11 To assure there is no air quality impact from this 12 amendment, staff recommends requiring all State registered 13 dredges be retrofitted with certified engines by the year 14 2005 and be subject to onshore district offset requirements. 15 It has become clear through implementation of the 16 regulation that the operation of the associated equipment at 17 some locations may be better suited for district permit 18 programs where site specific analysis to determine potential 19 impacts can be performed. 20 An example of the type of operation staff is 21 concerned about would be a rock crushing operation operating 22 in serpentine quarry. 23 Staff proposes to amend the regulation to make 24 Statewide registration of the associated equipment invalid at 25 locations where the nature of the activity performed may PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 result in hazardous pollutant emissions. 2 This determination will be made on a case by case 3 basis. 4 Other proposed amendments include, we have added 5 additional incentive to promote the use of cleaner technology 6 and encourage expedited conversion of large engine fleets to 7 cleaner engines. 8 For example, incentives can include a significant 9 reduction in record keeping and reporting requirement for 10 cleaner engines. 11 Staff proposes revising requirements for 12 spark-ignition engines and associated equipment. In 13 addition, because the proposed amendments would allow a 14 number of new categories to apply for Statewide registration, 15 staff is proposing to provide additional time for the 16 registration of resident engines and equipment to July 1, 17 2000. 18 Finally, staff is proposing additional amendments 19 that are non-substantive, being either clarification or minor 20 technical revisions. 21 Staff believes that the proposed amendments will 22 not result in any adverse environmental impact. Staff's 23 conclusions are based on the following. 24 The proposed revisions for State territorial waters 25 are consistent with existing district offset requirements. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 In addition, the regulation provides a number of incentives 2 which will encourage the rapid replacement of retrofit of 3 many of the higher emitting engines with cleaner 4 technologies. 5 The proposed amendments are not expected to have 6 any major cost impacts to assure that districts have adequate 7 resources to enforce the requirements of the new source 8 performance standards, sub part 000 sources. 9 Staff is proposing to amend the regulation to allow 10 districts the ability to charge for the actual cost of 11 enforcement. 12 With regard to business impacts, many businesses 13 would potentially benefit from the proposed amendments. 14 Benefits include eliminating the need for duplicative 15 permits, increase flexibility and reduce cost of permitting. 16 Also, since this is a voluntary program, businesses 17 will elect to seek State registration if it is financially 18 advantageous and administratively convenient. 19 In addition to staff's proposed amendments 20 highlighted in earlier slides, staff is proposing an 21 additional amendment which would be subject to a 15-day 22 comment period, and the Board's approval, the Board Members 23 have a copy of the 15-day amendments as attachment B of the 24 proposed Resolution. 25 Staff is proposing to add a provision that requires PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 the Air Resources Board in consultation with the Secretary 2 for Environmental Protection to determine if the regulation 3 should be retained, revised or repealed within five years of 4 the effective date of implementing the proposed amendments. 5 In addition, for a major project that operates 6 within State territorial waters, staff is proposing to adding 7 provisions allowing districts the ability to review projects 8 potential air quality impact prior to commencement of the 9 project. 10 Finally, staff is proposing to add emission limits 11 for spark-ignition engines of 15 pounds per day for NOx and 12 25 pounds per day for VOC. This applies for spark-ignition 13 engines. 14 The proposed amendments are available to the public 15 in the back of the room. 16 In conclusion, ARB staff recommends that the Board 17 adopt the proposed amendments with staff's proposed 18 modifications. 19 I thank the Board for the time to hear this 20 presentation. I would be glad to respond to any questions 21 that you might have. 22 CHAIRPERSON RIORDAN: Staff or Ombudsman Office, 23 would you comment on the process, please? 24 MR. OULREY: Madam Chairman, Members of the Board, 25 this Board adopted the original portable equipment regulation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 in March of 1997 for the mandate established by Assembly Bill 2 531, signed in to law by Governor Wilson in October 1995. 3 The regulation amendments that are before you today 4 were developed between February 4, 1998 and the present. The 5 amendments were developed with assistance of the portable 6 equipment program work group. 7 The work group consists of about 25 individuals 8 from local, state and federal air quality agencies, as well 9 as from effected industries such as oil services, well 10 drilling sand and gravel operation, construction, sanitation, 11 rental and manufacturing. 12 Many members of the work group were part of the 13 original group that helped develop the 1997 portable 14 equipment regulation. During the current round of revisions 15 to the regulations in 1998 ARB staff met with the work group 16 four times, once each on February 4, February 24, March 4 and 17 May 13 to identify issues and develop the regulatory 18 amendments. 19 Staff also held at least six individual meetings 20 between April 16 and September 30, 1998 with effected 21 industries and associations. The individual meetings 22 included representatives primarily from the dredging 23 industry. 24 Staff held the meetings to work out agreeable 25 requirements for portable equipment operating and State PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 territorial waters. 2 Staff met with 18 air districts from around the 3 state, some on numerous occasions between February 27 and 4 November 19, 1998. 5 Additionally, ARB staff made a presentation to the 6 California Air Pollution Control Officers Association on its 7 proposed regulation on October 8, 1998. 8 The Item was workshopped three times in 1998, once 9 in Sacramento, on August 18, once in Bakersfield, on August 10 20, and once in Diamond Bar, on August 21. 11 Over 700 individuals including parties from 12 industry, trade associations and government agencies who are 13 typically interested in regulatory activities affecting 14 portable equipment were invited to participate in each of the 15 public workshops. 16 Additionally, all of individuals that are currently 17 operating under the State Portable Equipment Registration 18 Program were invited to participate in the workshops. 19 ARB staff provided opportunity for public input 20 into the regulation during each of these times. In total, 21 ARB staff held about 500 telephone conversations, 22 teleconferences and meetings with effected parties, 23 industries, trade associations and government agencies during 24 the development of the proposed regulation. 25 On October 23, 1998, staff mailed out copies of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 staff report to over 700 individuals, representing the 2 public, government agencies and industry. 3 The staff report was made available on the Web on 4 October 23, 1998. 5 Finally, notices of this hearing were sent to 6 approximately 1500 individuals, including environmental 7 groups, industry and government agencies on October 23, 1998. 8 Subsequent to the release of the staff report in 9 October, staff revised the report in response to comments 10 from the San Diego Air District. 11 Other than representatives of the Portable 12 Equipment Work Group, stakeholders outside the San Diego Air 13 District have not had an opportunity to review and comment on 14 these changes. 15 If the Board approves the report, because of the 16 recent changes referred to, there will be a legally required 17 15-day extension for public notification and comment. We 18 recommend that the 1500 person mailing list referred to above 19 be used for purposes of this notification. 20 As you can see, to this point in time the staff has 21 done a good job reaching out to all the appropriate 22 stakeholders and effected parties and involving them in an 23 exclusive, deliberative and meaningful public process. 24 CHAIRPERSON RIORDAN: Bruce, would you, please 25 identify yourself? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 MR. OULREY: Sure. My name is Bruce Oulrey. 2 I am Deputy Ombudsman for the Air Resources Board. 3 CHAIRPERSON RIORDAN: Thank you very much. 4 Mr. Kenny, are there any other comments that you 5 have? 6 Board Members, do you have any questions for staff 7 on this Item at this time? 8 All right. We will move right into our witnesses. 9 Mr. Larry Bowen, from South Coast Air Quality 10 Management District, followed by Jeb Stuart from the 11 Construction Industry Air Quality Coalition. 12 MR. BOWEN: Madam Chairman, and Members of the 13 Board, I am Larry Bowen, I am a Senior Manager with the South 14 Coast Air Quality Management District. 15 This morning to your Clerk I presented, submitted a 16 letter from Dr. Barry Waterstein, Senior Executive Officer, 17 and he has asked me today to present verbally a summary of 18 those comments. 19 I want to say the South Coast Air Quality 20 Management District generally supports the proposal by your 21 staff today and would recommend this adoption. 22 I do, however, want to touch on a couple of issues, 23 one of which we will request consideration of amendment to 24 portion of that proposal. 25 The other two items I just nearly want to clarify PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 for the record what the intention of this very complex issue 2 is, two, the information has been distributed to your clerk 3 and I also believe that the copies have been provided. 4 We do have language, I do not know whether you want 5 to project it for the public, also, I will touch the issue 6 more. 7 The more important issue of that area in which we 8 wish to consider, you consider, amendment to the proposal 9 deals with the issue spark-ignition resident engines in the 10 staff proposal for alternative mass cap emission limits for 11 those, in lieu of the concentration emissions elements for 12 the technology requirements, and if you look at table 2 is an 13 area that is of discussion, is that in your current proposal, 14 this is subject, does not include the amendment that was 15 proposed earlier this morning. 16 We looked at this, as you can see in table 2, in 17 each of the columns there was a very large emission cap rate 18 that was authorized for those engines. 19 In the South Coast District, we have required the 20 technology requirement for the concentration emission limits 21 since 1983 as our VOC requirement. We do have a rule on our 22 books regulating control of internal combustion engines that 23 require the emission limitation requirements that are 24 proposed there, and therefore, we believe in the South Coast 25 District that the alternative for mass emission cap is not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 allowable. 2 Therefore, we recommend for consideration that this 3 mass emission cap can be excluded for applicability in the 4 South Coast Air Quality Management District. 5 Now, I did receive this morning and have not had an 6 opportunity to look at the staff's amendment proposal which 7 reduces those amounts, and that is by far a better approach. 8 We would, however, recommend that you also consider 9 our proposal to exclude the South Coast District for this 10 section of the rule. 11 We believe that the technology requirement or the 12 concentration limits are far better means to enforce the 13 requirements of the rule. 14 The two other items that I will just briefly 15 mention included in the text of Dr. Watersteins's letter, it 16 said first of all we want to make it very clear that we 17 understand the requirements that are proposed for the 18 dredging operations and for the operation in the State 19 territorial waters, regardless of the technology requirements 20 that the emission limitations emission caps and the 21 Department of Air Resources review do protect the air quality 22 in our district, and then we can support those amendments 23 provided those caps for retaining are in there. 24 The second item has to do with the alternative 25 record keeping requirements. We do support those. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 However, we want to make it very clear for the 2 record that we believe that it is the responsibility for the 3 source operator to assure that adequate records are kept and 4 accurately kept and remain readily available to the districts 5 to make sure they are operating in compliance. 6 That concludes my comments. I would be glad to 7 answer any questions. 8 CHAIRPERSON RIORDAN: Mr. Bowen, before we have 9 questions, let me just ask staff to respond to particularly 10 the first issue that you raised. 11 MR. VENTURINI: Glad to, Madam Chairman. 12 I will ask Mr. Tollstrup to provide our response on 13 that. 14 MR. TOLLSTRUP: As Mr. Bowen mentioned, we did 15 speak to before the meeting this morning. 16 Staff's proposed amendment is on a 15-day change to 17 lower the limits from 100 pounds per day to 15 pounds and 25 18 pounds respectively to NOx and VOC. 19 We believe the limits represent a good compromise 20 on the existing PPM we have in the regulation. The 21 regulation as currently drafted does require back for the non 22 resident engines that the requirements that Mr. Bowen is 23 talking about apply to resident engines only, which there is 24 a limited number. 25 The South Coast backup requirements, we might PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 mention, do not apply to grandfathered and non-road engines. 2 Our requirements would actually apply to non-road engines 3 once we receive approval from U.S. EPA. 4 So, the staff is proposing to lower the limits. 5 Like I mentioned, we believe that it is a compromise that it 6 allows a number of engines that we run across that have a 7 history of operating within the State, they do not have the 8 ability to purchase after-market controls, it is not 9 available for the engines, and it provides them the 10 opportunity to get into the program. 11 MR. VENTURINI: I am sorry. Peter Venturini, 12 Chief, Stationary Source Division. 13 When we made the adjustment to the cap to reduce 14 the NOx and VOC cap from 115 and 25 respectively, what 15 basically we did was took those concentration limits that are 16 in the regulation and converted to an equivalent daily limit. 17 So, what you come down to in the discussion with 18 Larry is with our daily cap, base would be limited to about 19 12 hours of operation. 20 With a concentration limit as Mr. Bowen is 21 referring, an engine would operate sufficiently longer, but I 22 think talking to Mr. Bowen they have a compliance preference 23 for the concentration limit. 24 It is kind of like six of one, half dozen of 25 another. So, I think from my perspective I would not have an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 objection to adding his language except in the South Coast 2 they prefer the concentration of it, but it is really six of 3 one, half dozen of another. 4 CHAIRPERSON RIORDAN: Okay. We will note that. 5 Thank you, Mr. Venturini. 6 Mr. Stuart, come forward. It is very nice to see 7 you. 8 I have to tell my colleagues that this is the first 9 air quality official that I ever met as an elected official, 10 and Jeb, it is very nice to see you. 11 He was formerly the head of the South Coast Air 12 Quality District. It is nice to see you, and welcome, and 13 please introduce yourself and your new role in representing 14 the industry. 15 MR. STUART: Madam Chairman and Members of the 16 Board, my name is Jeb Stuart, and I am representing the 17 Construction Industry Air Quality Coalition, which are 18 practically all of the contractors in the South Coast Air 19 Basin. 20 My organization first of all would like to express 21 its appreciation to the CARB staff and particularly Peter 22 Venturini, Ray Menabroker, Mike Tollstrup and his staff for 23 developing certainly the most, very flexible regulation, one 24 that is very cost-effective and one that costs about 25 one-tenth of the fees that most of the county districts PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 charge. 2 Also, they have been able to turn around 3 applications in weeks instead of months, which is certainly a 4 wonderful thing for people that have to have registration. 5 Also, I do not know how to say this, but there are 6 probably three or four thousand engines in the State or maybe 7 more that never got permitted by any district. 8 I am convinced that with this program with its 9 general structure that we can get a lot of those four or five 10 thousand owners to get their engines registered. 11 It will be a real improvement for air quality that 12 I think your program will give you, and I might also mention 13 that the regulation is just as stringent as any district 14 regulation or rules. 15 So, not too many disbenefits of air quality, and I 16 thank you. 17 CHAIRPERSON RIORDAN: Thank you. 18 Nice to see you. 19 Let me call Mr. Paul Buchanan up and Mr. Terry 20 Ellis, you are next on our witness list. 21 MR. BUCHANAN: Good morning, Madam Chair and 22 Members of the Board and staff. 23 My name is Paul Buchanan. I am Regional Manager, 24 and I represent Prime Equipment. 25 We are in the business of renting and selling a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 number of product lines that involve engines. I would like 2 to, I am commenting on a couple of items that were included 3 in a written testimony that was submitted. 4 The first would be extension of the registration 5 deadline. We strongly support the extension, and we feel 6 that the initial nine-month period was not sufficient to get 7 all the engines registered. 8 We want to be sure that the amendments will allow 9 registration and grandfathering of the non-resident 10 equipment. If not, we feel that the Board should allow this 11 equipment to be registered and grandfathered on the condition 12 it is included in the compliance plan to either upgrade or 13 replace. 14 The second item would be the expansion of 15 compliance plan provisions. This is listed in Section 3 of 16 our written testimony. It supports the expansion of the 17 compliance plan opportunities. 18 We would like to suggest that the Board direct the 19 staff to find ways to expand it even further, such as 20 allowing equipment that does not meet the emissions standards 21 to be registered if included again in that compliance plan. 22 We feel that it would also benefit air quality by 23 encouraging the rapid turnover of some of the older equipment 24 that is out in the field running. 25 Probably the most important, we have an item of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 concern in the fast track registrations for the rental 2 equipment industry. While we feel that the staff has done a 3 marvelous job in reducing that time frame down to a 60-day 4 period, in our business it is very difficult when we have a 5 demand or a need that has to happen tomorrow, and we as a 6 representative of some new product lines, we stock a lot of 7 these engines in inventory that would retail to end users. 8 If we have a need come up for rental, we would like 9 to have the ability to utilize for larger orders some of that 10 equipment and the processing time of 60 days is not 11 sufficient for us to be able to take advantage of that 12 business. 13 We believe it is a forgone conclusion that if these 14 are certified engines in the first place that they would be 15 registered, and so it is probably a time issue and not an air 16 quality issue. 17 That pretty well concludes. I would just like to 18 urge the Board to direct the staff to work with the rental 19 industry to develop a fast track program to turn around the 20 registration process even more quickly than it has been done, 21 and I would like to thank you for your time and consideration 22 where Prime Equipment is concerned. 23 CHAIRPERSON RIORDAN: Thank you, Mr. Buchanan. 24 Let's see, staff do you have any comments or 25 concerns? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 MR. TOLLSTRUP: Yes, in response. 2 I understand there are three issues here. The 3 first dealt with resident versus non-resident. The way that 4 the reg is currently structured, to qualify for residency it 5 requires they either have a district permit now or they have 6 some history of operating in the State. 7 I am not sure whether the proposed amendments we 8 are opening up that period of time once again to register the 9 engines would cover Mr. Buchanan's concerns, but that goes 10 beyond that, where the district does not require a permit, 11 all you need to do is show us that you have some history of 12 operating in the State and that qualifies you for residency 13 in the program. 14 So, that should cover a number of the engines that 15 you had some concerns over. 16 As far as relief from the compliance plan, we have 17 provisions in the regulation right now that basically allow 18 an owner operator of a fleet of engines to enter into an 19 agreement with us to convert those engines over to cleaner 20 engines within a specified time period, and right now 21 depending on the number of engines, it is either 18, 24 or 36 22 months, in the interim they do have some minimum control 23 requirements that they do have to meet. 24 What we relieve them from in the time period that 25 we granted during the compliance plan are the record keeping PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 and reporting requirements on some of the emission limits. 2 Staff would not recommend giving up, as I understand Mr. 3 Buchanan's comment, he is asking that we give up the minimum 4 control requirement to let some of these engines in under a 5 compliance plan, and we think a lot of the control 6 requirements that we have are minimum. 7 They are fairly easy for the engines to meet, and 8 we recommend keeping those emission limits in place in the 9 regulation and keeps the dirtier engines out. 10 As to the fast track permitting system, staff is 11 always looking for ways to expedite the registration process. 12 We do not believe that there is anything in the regulation 13 that precludes Mr. Buchanan from pre-registering groups of 14 engines to meet customer demands, and we think there are a 15 number of options in the program, and we would be more than 16 happy to work with Mr. Buchanan to see if there was something 17 we could do with compliance and regulations to fast track his 18 concerns. 19 CHAIRPERSON RIORDAN: Okay. Let's see, Mr. 20 Buchanan, if I have a business card, I do. 21 We will try to work with you, and staff can get in 22 touch with you and work with you on the permitting in terms 23 of how fast we can do this. We want to help you, obviously. 24 Thank you very much. 25 Mr. Terry Ellis. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 MR. ELLIS: Good morning, Madam Chairman and Board 2 Members and staff. 3 Short and sweet. That is what I was told this 4 morning, and that is what I am going to do. 5 CHAIRPERSON RIORDAN: Identify yourself for the 6 record and who you represent. 7 MR. ELLIS: I just want to let you know I am going 8 to be short and sweet first. 9 CHAIRPERSON RIORDAN: Well, that is important, too. 10 MR. ELLIS: Those that know me, know that is not 11 possible. 12 Terry Ellis, Regulatory Affairs Manager, for Gary 13 Drilling and Portable Equipment, owner. I am also the 14 Executive Director of the Coalition of Petroleum Services, 15 better known as COPS, which is the major category of 16 registered units within the portable equipment program 17 representing the petroleum industry and services of portable 18 equipment to it. 19 My comments, again, like I say, will be brief. 20 We have been a part, I have been a part of the 21 portable equipment program since the inception. We birthed 22 it in the local districts and brought it before -- and we 23 are basically directed or forced to take it to a legislative 24 route and ended up here in 1995 and began a working 25 relationship. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 Therefore, I have never in my regulatory life, 2 which spans 20 years, had such a cooperative effort from such 3 a carefully listening staff taking a very difficult issue 4 that EPA and CARB years ago said could not be done and bring 5 it to this point. 6 So, my comments are for the complicated issue and 7 so many interests at stake that this regulation and its 8 proposed amendments are fully supported by myself and the 9 industry as the most flexible way to deal with portable 10 equipment and its needs, and also address the air quality 11 issues. 12 Because, as of this morning I am also here to pick 13 up four more certifications for diesel engines to move 40 or 14 50 year old diesel engines into new engine standards, not 15 only for today but beyond 2001 and into the future, and this 16 program was the birthplace for that, so this program does 17 work, and it does give us the flexibility and does provide 18 incentives. 19 Turn now, as of Monday night, a meeting with 20 Detroit Diesel, an international product to be distributed 21 worldwide and certified here by CARB, so I thank the staff, 22 and I thank the Board for their time. 23 CHAIRPERSON RIORDAN: Well, thank you. 24 Very good words and good message and brief and to 25 the point. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 Thank you very much. 2 That completes the list of persons that have signed 3 up to testify. 4 Let me ask if there are any written submissions to 5 put into the record before we move on to a discussion of the 6 Item by the Board Members. 7 MR. VENTURINI: Yes, there are, Madam Chairman. 8 Mr. Tollstrup will summarize those briefly. 9 MR. TOLLSTRUP: The staff has received a total of 10 five comment letters, which I will briefly go over. 11 The North Coast Air Quality Management District and 12 Lake County QMAD shared similar concerns in common letters. 13 Both districts are opposed to staff's inclusion of the rock 14 crushing operation, subject to the new source performance sub 15 part 000, the staff response basically because of the 16 stringent daily and annual emission limits and the inclusion 17 of the sub part 000 sources into the Statewide program will 18 only be limited to the smaller operations, we have stringent 19 limits that will keep only the smaller one's in. 20 Under the Statewide program, there will be no 21 change in enforcement authority. Districts delegated 22 authority through the U.S. EPA authority will continue to 23 enforce the sub part 000 requirements. 24 The U.S. EPA will continue to enforce where 25 deligation has not yet been granted to a district. A PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 Statewide registration only replaces district permits. There 2 is nothing in our program that would preclude local 3 jurisdictions from land use decisions, CEQA requirements or 4 other programs outside of the air district programs that are 5 protective of specific sites from undesirable impacts. 6 With regards to operations at locations where 7 process of materials may result in the emission of hazardous 8 air pollutants, the State registration program is not valid 9 at those locations. Instead the districts would be able to 10 require permits for operation at those sites. 11 In addition Lake County requested that Statewide 12 registrations be posted with specific operating conditions at 13 each site, and State's staff response is that is an existing 14 requirement that the registration and specific conditions 15 must be posted at all times. 16 The other comment letter we received was from SMUD. 17 SMUD is requesting that the residency requirements be 18 extended to cover engines purchased by SMUD between 1996 and 19 1998. 20 As it stands now, they would not apply for our 21 program. Staff is opposed to SMUD's request. 22 One of the primary goals of the Statewide 23 regulation was to preclude dirty engines from coming in to 24 the program. The regulation was designed to place tightened 25 constraints on the criteria for establishing residency, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 opening up that residency criteria could result in a large 2 number of the higher emitting engines coming into our 3 program. 4 In addition to the comment letters, we received two 5 letters of support. One was from the Santa Barbara Air 6 Pollution Control District. The other was from the Rain for 7 Rent Company. 8 Thank You. 9 CHAIRPERSON RIORDAN: Thank you. 10 Before I officially close the record, let me ask if 11 any of the Board Members have questions of the staff. 12 Seeing none, then I will officially close the 13 record now on this Agenda Item. However, the record will be 14 reopened within the 15-day notice of public availability when 15 the 15-day public notice is issued. 16 Written or oral comments received after this 17 hearing date but before the 15-day notice is issued will not 18 be accepted as part of the official record on this Agenda 19 Item. When the record is reopened for the 15-day comment 20 period, the public may submit written comments and proposed 21 changes which will be considered and responded to in the 22 Final Statement of Reasons for the regulation. 23 This item does have an ex parte requirement. Are 24 there any communications that need to be disclosed on the 25 record now? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 Okay. You have a Resolution before you. It is 2 98-77. 3 The Board has had a chance to go over it. 4 Mr. Dunlap. 5 BOARD MEMBER DUNLAP: Yes, Madam Chairman, I would 6 like to talk about for a moment the South Coast amendment 7 that has been proposed and ask Mr. Kenny a question, if that 8 is okay, or Mr. Venturini. 9 South coast amendment, Mr. Kenny, is that 10 acceptable? 11 MR. KENNY: Yes, it is, Mr. Chair -- Mr. Dunlap. 12 CHAIRPERSON RIORDAN: See, they have not forgotten 13 you. 14 BOARD MEMBER DUNLAP: I have been trying to change 15 my ways. 16 MR. KENNY: I was going to say, your Honor. 17 BOARD MEMBER DUNLAP: Okay. I think if the South 18 Coast amendment seems okay, those witnesses that testified, 19 anybody of the four that would have had a problem with us, 20 making that move, that would have a problem with us, okay, 21 then I propose that we adopt the Resolution that staff has 22 proposed, but include the South Coast amendment, which deals 23 with spark-ignition engines, and it is found in table 2, help 24 me out, Kathleen. 25 MR. KENNY: Actually, I think the easiest way to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 probably do it is on various letters there is an attachment 2 to it, and that table on the bottom there is the provision 3 across the table, it shows except in the South Coast, has a 4 parenthetical for all three boxes. 5 BOARD MEMBER DUNLAP: So, that is what we will do. 6 So, that would be my motion. 7 CHAIRPERSON RIORDAN: Is there a second? 8 BOARD MEMBER ROBERTS: Second. 9 CHAIRPERSON RIORDAN: Supervisor Roberts. 10 Any further discussion? 11 Let me take a voice vote. 12 All those in favor of the motion, signify by saying 13 aye. 14 Opposed, no. 15 The motion is carried. 16 Thank you very much. Thank you to those that 17 testified, again, a very positive note for the staff, and I 18 do appreciate all the outreach that you obviously did for a 19 number of months with an incredible number of people. Thank 20 you. 21 All right. We will take just a brief moment while 22 staff changes, and we will go on to the next item on our 23 Agenda. This is Item 98-15-2. 24 Let me invite my colleagues back to the dias and 25 move on to this Agenda Item, which is Agenda Item 98-15-2. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 For those of you in the room who are interested in 2 the Item, if you would come to the front, and we will move 3 on. 4 If there is anyone wishing to provide testimony 5 today, again, I remind you of the tables outside the assembly 6 room to sign up. If you have a written statement be sure to 7 give 20 copies to the staff at that table. 8 This is a public meeting, number 98-15-2, to 9 consider a request for a public hearing to review the 10 decision of the Executive Officer to Order the Recall of 11 Motor Vehicles. 12 At this point I would like the Senior Staff 13 Counsel, Robert Jenne, to introduce the item, after which we 14 will first hear from staff and then Toyota. 15 MR. JENNE: Thank you. 16 As Chairman Riordan just indicated, I am a lawyer 17 in the ARB, Office of Legal Affairs, and I am introducing 18 this item today because General Counsel, Kathleen Walsh, has 19 asked to me to act as a legal advisor to the Board for this 20 Item since this is a contested matter in which the General 21 Counsel is representing the ARB staff. 22 The matter involves a motor vehicle recall order 23 issued by Executive Officer Michael Kenny on September 2, 24 1998. The recall order directs Toyota Motor Corporation to 25 develop a recall plan for a number of engine families PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 certified by Toyota for California sale. 2 Under ARB regulations, a manufacturer subject to a 3 recall order may request a hearing to contest the Executive 4 Officer's decision to issue the order. Toyota has filed a 5 petition requesting such a hearing. 6 Now, under the Board's judicatory regulation, 7 Toyota is entitled to receive a hearing, and the Board has 8 three options for how the hearing will be conducted. 9 What the Board will consider today is which of 10 these three options will be used to conduct the hearing. 11 It is my understanding, before I go any farther, 12 just to let you know, is that during the last several days 13 Toyota and ARB staff had a number of discussions about the 14 hearing procedures and have reached an agreement on the basic 15 outline on the procedures that they are recommending for the 16 Board's approval today, and that agreement is embodied in the 17 Resolution Number 98-81, which should be included in the 18 packet that you have in front of you. 19 So, to go over the three options that the Board 20 has, the hearing to be conducted as the first option is that 21 the full Board may decide to hear the matter itself. 22 The second option is for the Board to appoint a 23 committee no fewer than two Board Members to hear the matter, 24 and the third option is for the hearing to be conducted by an 25 Administrative Law Judge, or ALJ, from the Office of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 Administrative Hearings, in the Department of General 2 Services. 3 If a Committee of the Board or an ALJ conducts the 4 hearing, the Committee or ALJ would prepare a recommended 5 decision for consideration by the full Board. The full Board 6 would not be bound to accept the recommended decision and 7 would retain the final authority to make whatever decision 8 the Board believes is appropriate. 9 I would also like to mention that under ARB 10 regulations, the hearing must be initiated on or before 11 December 16, 1998, but the Board is empowered to delay the 12 hearing date if necessary to obtain the services of an ALJ. 13 My understanding is that both Toyota and ARB staff 14 believe that an extension is appropriate in this case. 15 So, with that short introduction, ARB staff and 16 Toyota would now like to address the Board and explain their 17 recommendations. 18 ARB staff's position will be presented by Mr. Kirk 19 Oliver, Senior Staff Counsel, from the ARB legal office. 20 CHAIRPERSON RIORDAN: Okay. Let me give some 21 guidelines to both staff and to Toyota, if I might. 22 In thinking about what was a reasonable time to 23 make your case, and I think I am going to ask staff to stay 24 within about a 10 minute presentation, please. I hope you 25 can do that, and Toyota a 20-minute presentation and stay PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 within those guidelines, because we could probably discuss it 2 for the rest of the day, and unfortunately, we just cannot, 3 because we have a big Agenda to follow. 4 So, let us try to stay in those guidelines, and I 5 will kind of watch the time for you. 6 Thank you. 7 MR. OLIVER: Thank you, Chairman Riordan, and I can 8 be even briefer than that. 9 CHAIRPERSON RIORDAN: Well, that will be all in 10 your favor. 11 MR. OLIVER: The way this case got here was through 12 an ordered recall that was issued in September to Toyota. 13 Toyota filed a petition that would stay the recall, 14 and we responded to that petition. Now the time has come to 15 decide who will hear the case. 16 We, in discussions with Toyota, have reached an 17 agreement that is embodied in the Resolution that is there 18 before you that the most efficient way to hear the case would 19 be to refer it to an Administrative Law Judge in the Office 20 of Administrative Hearings. 21 That Resolution that you have before you would 22 accomplish that referral. It would also make the finding 23 that is necessary under the regulations to delay the hearing 24 date, and we encourage you to adopt that Resolution. 25 We are available to answer any other questions that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 you might have, but again, that Resolution is something that 2 we have reached in discussions and through compromise and 3 agreement with counsel from Toyota. 4 We and Toyota believe that it represents the best 5 way to go to handle this matter. 6 Thank you. 7 CHAIRPERSON RIORDAN: Thank you. 8 I will now call on representatives from Toyota. 9 Would you come forward, please, and give us your name for the 10 record and your representation, whether you are the attorney 11 or Toyota or whomever you are. 12 BOARD MEMBER EDGERTON: Madam Chairman, just a 13 point of information, because I was not aware of what you all 14 agreed on yesterday, is it correct then that Toyota is 15 withdrawing its request to us to order the Executive Officer, 16 or direct the Executive Officer to withdraw the Recall Order? 17 MR. ISOKAWA: Yes. 18 CHAIRPERSON RIORDAN: Thank you. 19 If you would like to begin. 20 MR. ISOKAWA: Good morning, Madam Chair and Members 21 of the Board. My name is Ned Isokawa, one of the lawyers 22 representing Toyota. 23 It is my pleasure to appear before you today. I 24 will get right to it. 25 I urge the Board to adopt the Resolution that is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 before you. We have worked it out in a series of meetings 2 with Ms. Walsh and Mr. Oliver, and it represents the views of 3 Toyota and staff in how best to accomplish the hearing that 4 needs to be held in this matter. 5 I want to make a few comments that will last a 6 couple of minutes, and then I will get out of the way and be 7 responsive to any questions. 8 This is my first time before the Air Board, and one 9 of the things that I always do if I have the time is to 10 appear in front of the tribunal to get a feel for what is 11 going on. 12 So, I was here yesterday, and I suspect yesterday 13 was a rather unusual day, but it struck me when I listened to 14 those standing where I am standing stating views about 15 perspective on the process that was just ending, and some 16 dissatisfaction that he or his clients may or may not have 17 had with it. 18 Toyota and I do not want to be in that position. I 19 do not want to be in front of you ever with that kind of 20 message to you. I am pledging to you on behalf of my client 21 and my own personal behalf that I will work with staff in a 22 way to achieve a compromise here on any kind of procedural 23 matters, on process questions so that we get what we all want 24 here, which is a fair and impartial hearing and a just one 25 with a just result. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 With that, I wanted you to hear that from me 2 because I do not want to have to make the speech like was 3 made here yesterday. I have no expectation I am going to 4 have to do that, but I want you to have my assurance, and 5 that is our view point that we are approaching this process 6 which, after all, is just starting, and we have the ability 7 to control it and do it right. 8 That is what we want to do. 9 Now, before I step aside here, I would like to 10 introduce Mr. Charles Lockwood, who is from the association 11 of International Automobile Manufacturers, and after he has a 12 few words, I have one following brief comment that takes 13 about 10 seconds, and I am also available to answer and 14 respond to any inquiries from the Board. 15 CHAIRPERSON RIORDAN: Thank you very much. 16 We will hold then any inquiry until after Mr. 17 Lockwood speaks. 18 Mr. Lockwood, would you identify yourself for the 19 record, please. 20 MR. LOCKWOOD: Good morning. My name is Charles 21 Lockwood. 22 I am the Vice President, General Counsel, of the 23 Association of International Automobile Manufacturers, and as 24 an aside, I might tell you that the first time I appeared 25 before this Board, Dr. Hockenschmidt was the Chair. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 CHAIRPERSON RIORDAN: That was sometime back, 2 right, how many years ago? 3 MR. LOCKWOOD: That was more than 25. That is all 4 I will say. 5 AIAM, of course, supports the Resolution before 6 you. We have filed this morning with staff the notice of the 7 intent of the Association to participate in the hearing. 8 We find that there are a couple of issues that may 9 have potential implications for all of the automobile 10 industry that were raised in the recall notice, particularly 11 issues about the notice of the test procedures involved and 12 secondly regarding the meaning of the term defeat device. 13 We plan to cooperate fully with the staff in the 14 development and process of the hearing and, of course, will 15 answer any questions that you may have. 16 Thank you. 17 CHAIRPERSON RIORDAN: Thank you. 18 Are there any questions for Mr. Lockwood? 19 Seeing none, then please come back and make your 20 final statement. 21 MR. ISOKAWA: Thank you, Madam Chair. 22 I just wanted to inform the Board that I learned 23 yesterday that today the Board will receive a notice of 24 intent to participate in the public hearing from General 25 Motors Corporation and Daimler Chrysler Corporation, and I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 believe that their grounds for being interested in 2 participating are parallel to those just expressed to you by 3 Mr. Lockwood, and that is end of what I wanted to say, Madam 4 Chair. 5 CHAIRPERSON RIORDAN: Fine. I appreciate the 6 brevity. 7 Let me ask if there are any questions of the Board 8 for the speaker? 9 Yes, Ms. Edgerton. 10 BOARD MEMBER EDGERTON: Are you saying then that 11 you agree to the participation of General Motors and Daimler 12 Chrysler? 13 MR. KENNY: Yes, we do. 14 I think that is an issue that we basically want to 15 raise in the context of the Administrative Law tribunal, and 16 essentially look at all the issues that are surrounding them. 17 We are not prepared, I think, today to respond to 18 them. 19 CHAIRPERSON RIORDAN: Thank you. 20 Mr. Dunlap. 21 BOARD MEMBER DUNLAP: I know this is a different 22 kind of discussion here, but from where I sit, it seems to me 23 I would want to limit the discussion so we could do an 24 effective job on the facts rather than bringing in a lot of 25 other parties. It seems to me just, that is my gut instinct, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 so I appreciate you kind of asking that, but I did not come 2 away with any kind of a feeling or answer, not having gone 3 through this process, I do not think I would be willing to 4 bring other people into this. 5 If it is appropriate, I will ask you, sir, why 6 would we want to have other automobile companies sitting in 7 on this process as it involves you pretty much exclusively? 8 MR. ISOKAWA: It is our view, and I think the view 9 of the other manufacturers who want to intervene, under the 10 regulations that prevent such intervention or participation 11 in the hearing that the issues as we see them framed right 12 now. 13 BOARD MEMBER DUNLAP: Are broader industry 14 implications? 15 MR. ISOKAWA: Yes. 16 BOARD MEMBER DUNLAP: Okay. 17 But wouldn't it have the ability to lengthen the 18 discussion and make it perhaps a little bit more involved 19 than it might need to be? 20 Plus, you guys, I know are very competitive people, 21 generally right? You do not like people looking into your 22 business. 23 I am a simple man here. Maybe I am missing 24 something. But if you would illuminate that, I would be 25 grateful. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 MR. ISOKAWA: We are competitive and we do have 2 some similar interests, though in the issues that are framed 3 by this recall order, and you are obviously right, it does 4 have the potential to lengthen the process out and make it 5 more cumbersome and cumulative, but that is one of the 6 reasons why we want to make sure to work with staff and with 7 the ALJ, or should you decide to adopt the Resolution to make 8 sure that we are not reinventing the wheel time and time 9 again. 10 You have our assurance that we will be working 11 towards that, so there is not any kind of cumulative kind of 12 effort made that lengthens up the process unnecessarily. 13 BOARD MEMBER DUNLAP: Well, one of the ways to do 14 that would be to hire very expensive outside counsel so that 15 the meter is running, and the longer it goes it is really 16 painful for you, that is the way to keep everybody on point, 17 I guess. 18 Okay. I at least have a better understanding. 19 Thank you. 20 CHAIRPERSON RIORDAN: Ms. Edgerton. 21 BOARD MEMBER EDGERTON: I think this is my last 22 comment. 23 I am comfortable with the Resolution, and I 24 appreciate very much your working hard on it and coming to a 25 agreement on that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 I think it was wise. It was unlikely that we have 2 altered in any way the action of the Executive Officer. I 3 have reviewed it carefully, the direction is very clear and I 4 am convinced that the authority is there for the recall, and 5 my comment would be merely that is probably, Mr. Dunlap, what 6 everyone will be discussing, whether the authority exists in 7 the ARB to recall. 8 I would say that what I have seen as a matter of 9 fact is that there has perhaps been assumption that civil 10 penalties were all that was at risk for some of the car 11 companies, and most certainly the diesel settlement that we 12 saw at the national level did not include a recall. 13 So, I can see why there is consternation in the 14 industry. However, in the standpoint of air agencies charged 15 with the responsibility of implementing the Clean Air Act at 16 some point, the point has to strengthen, and it does have to 17 be clear that there is going to be recall in important cases. 18 Now, if the recall is for some reason the court 19 does not agree that we have the authority to recall, I would 20 caution you all that it is quite likely in California that 21 would be corrected in legislation subsequent thereto. 22 So, I make these comments because I am impressed 23 with your collaborative effort and spirit and long range 24 trying to make sure everything works, and you may want to 25 take that into account. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 Thank you. 2 CHAIRPERSON RIORDAN: Thank you, Ms. Edgerton. 3 Any other questions? 4 Ms. Rakow. 5 BOARD MEMBER RAKOW: Just a quick question for our 6 legal advisor. 7 Could you just explain to me the role of 8 interveners? Is it allowed under the law that anyone can 9 intervene in the case of the agency? 10 MR. JENNE: I am glad that you asked that. I was 11 just going to comment on that. 12 We have specific regulations that say how the 13 process is supposed to go, and there is a particular 14 provision that allows interested parties if they choose to 15 participate in the hearing and what they think is 16 appropriate, it is also to make sure that the process does 17 not get out of hand. 18 It allows the ALJ or whoever would be hearing the 19 case to impose reasonable limitations on what the intervening 20 parties may say. 21 BOARD MEMBER RAKOW: That has been my past 22 experience, and I just wondered if it was true in this case. 23 MR. JENNE: Yes, it is. 24 CHAIRPERSON RIORDAN: Thank you very much. 25 I am glad that you worked out the procedure that I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 think is a very good beginning. 2 MR. ISOKAWA: I think it is the first step of many, 3 Madam Chair. 4 CHAIRPERSON RIORDAN: Good. 5 I will entertain a motion. 6 Yes, Supervisor Roberts. 7 MS. HUTCHENS: Madam Chairman, you have a witness. 8 You have one witness. 9 CHAIRPERSON RIORDAN: No. Mr. Lockwood testified. 10 Thank you very much. 11 Supervisor Roberts. 12 BOARD MEMBER ROBERTS: Before I do so, and just so 13 I am sure that I am not causing any problems, but before I 14 leave, being a very satisfied owner and driver of a Toyota, 15 of which I am still making payments on that, that does not 16 disqualify me in any way, does it, Kathleen? 17 MS. WALSH: We certainly have no objections. 18 BOARD MEMBER ROBERTS: Then I move Resolution 19 98-15-2 (sic). 20 CHAIRPERSON RIORDAN: And there is a second by 21 Supervisor Patrick. 22 MR. JENNE: There is a clarification. 23 I believe it is Resolution 98-78, just for 24 clarification. 25 BOARD MEMBER ROBERTS: Sorry. Let us try this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 again. 2 Resolution 98-81 is the correct number. 3 Excuse me. It is Agenda Item 98-15-2, on 4 Resolution 98-81. 5 Excuse me. 6 CHAIRPERSON RIORDAN: That is not a problem because 7 I did not even catch it. 8 Thank you very much. 9 Any further discussion on this motion? 10 I will take a voice vote. 11 All those in favor of the motion, signify by saying 12 aye. 13 Opposed, no. 14 The motion is carried. 15 I want to thank everybody for working together on 16 this. Thank you. 17 We will take just a brief break, I think, while we 18 allow staff to change, and why don't we take about a 19 five-minute break. 20 (Thereupon a brief recess was taken.) 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 CHAIRMAN RIORDAN: Let me invite my colleagues 2 back to the dais. 3 MS. EDGERTON: Chairwoman Riordan, while people 4 are taking their seats, I wanted to make just one comment. 5 CHAIRMAN RIORDAN: Wait until they sit down. 6 Ladies and gentlemen, if I could have your 7 attention, please, I would like to go back to the agenda. I 8 have a desire to make this be an efficient day. 9 Ms. Edgerton, you had a comment. 10 MS. EDGERTON: Yes. Chairwoman Riordan, I'd like 11 to -- I meant to do this at the first of the day, but you 12 got the meeting started so quickly that I didn't have a 13 chance to. 14 I wanted to take this opportunity to thank you for 15 your excellent management of the meeting yesterday and of 16 last month, and tell you how pleased I've been with your 17 handling of it, acting chairwoman, and it's been a real 18 privilege. And good luck with the rest of the day. 19 CHAIRMAN RIORDAN: Thank you. 20 SUPERVISOR DeSAULNIER: Big improvement over the 21 previous. 22 CHAIRMAN RIORDAN: For the audience who may not 23 realize, this is the chairman. I'm but his assistant. 24 MR. DUNLAP: That is not true. 25 By the way, I want to correct Lynn. She is the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 chairman. The Governor appointed her. She is the one. So 2 there's no acting about it. 3 MS. EDGERTON: What did I say? 4 MR. DUNLAP: She's been keeping me hopping, asking 5 me to work on this or that. I assure you, she's got the 6 reins. 7 Yes, it is an improvement. 8 CHAIRMAN RIORDAN: Thank you. 9 And I have a good group of people working with me. 10 Yesterday was just a marathon is what it was and 11 if you can survive that, I guess we can survive it all. 12 This is agenda Item 98-15-3. 13 I'd like to remind you in the audience that the 14 sign-up table is outside the assembly room, for those who 15 wish to testify. 16 And this is a public meeting to consider a 17 proposed determination pursuant to Health and Safety Code 18 section 4383(g) of the comparative ozone-forming potential 19 of elevated RVP gasoline containing ten volume percent 20 ethanol. 21 At this point I'd like to ask Mr. Kenny to 22 introduce the item and begin the staff's presentation. 23 Mr. Kenny. 24 MR. KENNY: Thank you, Madam Chairman and members 25 of the Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 Last August, staff presented to the Board a 2 proposal to raise the oxygen cap to three and a half percent 3 by weight to increase the flexibility of refiners in meeting 4 the gasoline requirements in California. 5 Raising the oxygen cap would allow the use of ten 6 volume percent ethanol in gasoline. 7 The Board expressed concerns regarding the 8 potential impacts of raising the oxygen cap, given that a 9 finding on the ozone-forming potential had not yet been 10 made. 11 Thus, the Board delayed action on the oxygen cap 12 until a finding on ozone-forming potential could be 13 considered. 14 Today we are presenting to you a staff 15 recommendation on a finding pursuant to Health and Safety 16 Code section 43830, subparagraph G, on the ozone-forming 17 potential of elevated RVP gasoline containing ten percent 18 ethanol. 19 Health and Safety Code Section 43830, subparagraph 20 G, enacted in 1991 exempts gasoline blends containing ten 21 volume percent ethanol from the RVP standard. 22 This exemption is eliminated if the ARB determines 23 on the basis of independently verifiable automobile exhaust 24 and evaporative emission tests performed on a representative 25 fleet of automobiles that the ethanol blend would result in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 a net increase in the ozone-forming potential of the total 2 emissions, excluding the emissions of oxides and of 3 nitrogen, when compared to the total emissions, excluding 4 emissions of oxides and nitrogen from the same automobile 5 fleet using gasoline that meets all applicable 6 specifications for Phase 2 reformulated gasoline established 7 by this Board. 8 That's the longest sentence I think I've ever 9 read. 10 Accordingly, staff has evaluated the ozone-forming 11 potential of ethanol gasoline and will be presenting their 12 recommendation regarding the Health and Safety Code 13 provision for your consideration. 14 Staff's recommendation is based on the results of 15 an extensive 12-vehicle test program conducted by the ARB in 16 consultation with an ethanol work group composed of 17 representatives of the ethanol industry, the automobile 18 industry, the oil refining industry, the US EPA, ARB staff 19 and other interested parties. 20 This program cost over a million dollars in 21 equipment and resources. 22 In addition, the staff also reviewed other test 23 programs. The findings from these test programs support the 24 findings from our own test program. 25 At this time, I'd like to introduce Mr. Jose PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 Gomez, who will give the staff's presentation. 2 MR. GOMEZ: Thank you, Mr. Kenny. 3 Good morning, Madam Chairman and members of the 4 Board. 5 Today I will present to you the staff's 6 recommendation on the finding of the ozone-forming potential 7 of gasoline containing ten percent ethanol and having a one 8 psi increase in Reid Vapor Pressure, or RVP, compared to a 9 fully-complying gasoline. 10 I will provide a brief summary of the events 11 leading up to this regulation. 12 I will describe the current regulatory 13 requirements for Reid Vapor Pressure and oxygen in gasoline. 14 I will discuss our evaluation of the ARB test 15 program data and summarize other supporting evidence on the 16 effects of RVP and oxygen on exhaust and evaporative 17 emissions. 18 I will briefly outline the key issues considered 19 during the evaluation process. 20 And I will present staff's recommendation on the 21 proposed finding of the ozone-forming potential of gasoline 22 with ten percent ethanol having a one psi RVP increase. 23 Last spring the staff, at the request of the 24 gasoline refining industry, began assessing ways to provide 25 additional compliance flexibility in the reformulated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 gasoline program. 2 As part of that assessment, we considered several 3 options, including adding an evaporative model, adjusting 4 some of the cap limits, including raising the oxygen cap, 5 updating the exhaust predictive model, and eliminating the 6 wintertime oxygen requirements in the areas that have 7 attained the federal CO standard. 8 Last August the staff presented for your 9 consideration two proposals. One, to remove the minimum 10 oxygen content requirement in areas that have attained the 11 federal CO standard. The second proposal was to raise the 12 oxygen content cap to 3.5 weight percent. 13 The other flexibility options considered were 14 delayed until technical issues can be resolved. 15 At the August Board hearing, the Board approved 16 the proposal to remove the minimum wintertime oxygen content 17 requirement in areas that are in attainment for the federal 18 CO standard. 19 However, the Board delayed raising the oxygen cap 20 until they consider the ozone-forming potential of gasoline 21 containing 3.5 weight percent oxygen, or more specifically 22 ten volume percent ethanol with a one psi RVP increase. 23 On the Board's direction, we evaluated the 24 ozone-forming potential of gasoline with ten volume percent 25 ethanol and having the one psi RVP increase and will be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 presenting our recommendation to you today. 2 Now I will provide a brief summary of the 3 regulatory requirements for RVP oxygen in gasoline. 4 The Board has a long history of regulating 5 gasoline properties that are released through vehicle 6 emissions. Regulation of gasoline properties began in 1971 7 when the volatility, or RVP, of the gasoline was limited to 8 nine pounds per square inch during the summer months. 9 Controlling gasoline volatility is critical to reducing 10 evaporative emissions from gasoline used in vehicles, as 11 well as the gasoline distribution system. 12 Over the years the Board has continued to lower 13 the volatility of gasoline. 14 In 1971 the Board limited the RVP to nine psi, 15 which resulted in a 730 ton per day reduction in evaporative 16 hydrocarbon emissions from motor vehicles and the 17 distribution and marketing of gasoline. 18 In 1992 the Board lowered the RVP limit to 7.8 19 psi, which reduced the VOC emissions by another 220 tons per 20 day. 21 The Board lowered the RVP limit further to 7.0 psi 22 in 1996 as part of the cleaner-burning gasoline regulations, 23 which achieved an additional 110 tons per day of VOC 24 emissions. The 110 tons per day reduction in evaporative 25 VOC emissions accounts for about 60 percent of the VOC PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 benefits gained from the cleaner-burning gasoline program. 2 As you can see, controlling gasoline volatility 3 has been a major component of our emission control program. 4 It has resulted in a total reduction of over a thousand tons 5 per day of VOCs from motor vehicles and the storage and 6 distribution of gasoline. 7 While evaporative emissions have been greatly 8 reduced, they continue to significantly contribute to the 9 total emissions from gasoline motor vehicles. This graph 10 shows the projected contribution of evaporative emissions to 11 the total gasoline motor vehicle inventory. The relative 12 contribution of the evaporative emissions to the total 13 increases from the current 30 percent to about 35 percent by 14 2005. 15 The California reformulated gasoline regulations 16 set limits on other properties besides RVP. Depending on 17 the compliance option used, most properties can vary up to 18 the cap limits. However, the RVP level was fixed because of 19 its importance to evaporative emissions. Development of an 20 evaporative model will be necessary before RVP is allowed to 21 vary. 22 One of the other properties regulated under the 23 California reformulated gasoline program is oxygen. The 24 plan for oxygen content is 1.8 to 2.2. However, refiners 25 can certify alternative gasoline formulations with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 oxygen content from zero to 2.7 weight percent through the 2 use of the predictive model. 3 Ethanol, as well as other oxygenates, can be used 4 to meet the oxygen content requirement, but because the 5 current oxygen content cap precludes the use of ten percent 6 ethanol, ethanol blends do not qualify for an RVP exemption. 7 Adding ethanol to gasoline will increase the 8 volatility of the resulting gasoline blends. As can be seen 9 here, blending ten percent ethanol will increase the Reid 10 vapor pressure of the resulting gasoline blend by 11 approximately one pound per square inch. This impact on 12 volatility has emissions implications. It also presents 13 practical challenges to the use of ethanol gasoline. 14 Prior to the introduction of the federal 15 reformulated gasoline program in 1995 and our reformulated 16 gasoline requirements in 1996, ethanol had been used 17 primarily to improve the octane of gasoline and to reduce CO 18 emissions. 19 However, since the reformulated gasoline programs 20 were implemented, most refiners have chosen not to use 21 ethanol to meet the oxygen content requirements. 22 Historically about five to ten percent of the California 23 gasoline had been blended with ethanol. 24 Recently, some refiners have started to use some 25 ethanol in producing cleaner-burning gasoline. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 Historically, the Legislature provided an RVP 2 exemption to gasoline blends that contained ten percent 3 ethanol. The initial exemption was enacted into law in 1981 4 and renewed in 1986 and again in 1988. 5 The current exemption was codified into law in 6 1991. This exemption is conditioned on the ethanol blends 7 having equal or lower ozone-forming potential than the 8 fully-complying gasoline. 9 State law requires that gasoline that contains ten 10 percent ethanol be exempt from the Board's RVP limit unless 11 the Board determines that ozone-forming potential of the 12 total emissions excluding oxides of nitrogen will increase 13 compared to complying gasoline. 14 Last August the Board delayed raising the oxygen 15 cap to 3.5 weight percent, which would have allowed the use 16 of ten volume percent ethanol. The Board was concerned that 17 without the Board's finding on the ozone-forming potential, 18 the RVP of ten volume percent ethanol blends would increase, 19 which would result in increased emissions. 20 The state law requires that the finding on the 21 ozone-forming potential be made based on independently 22 verifiable data from a representative fleet of vehicles. 23 It further requires that the comparison be based 24 on the total emissions of each fuel, excluding NOx, tested 25 on the same representative fleet. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 Now I will describe our evaluation of the 2 ozone-forming potential of gasoline containing ten percent 3 ethanol with one psi RVP increase compared to complying 4 gasoline. 5 We relied on the recently-completed ARB test 6 program designed to meet the criteria of state law to 7 conduct our assessment of the ozone-forming potential of 8 gasoline containing ten percent ethanol with a one psi 9 average increase. 10 We also reviewed other studies such as those 11 conducted by Auto/Oil and other evaluations of the data, 12 such as the US EPA complex model. 13 I will now describe the ARB test program, discuss 14 our analysis of the data and present the results of our 15 evaluation. 16 In late 1995 we established a work group to help 17 us define the scope of the test program. Participants in 18 the work group include the ethanol industry, the oil 19 refining industry, the automotive industry, the US EPA and 20 other interested parties. 21 We held numerous meetings during the test program 22 development and consulted with the work group or its 23 technical subcommittee during the duration of the program. 24 The ARB expended more than $1 million in funds and 25 resources on this program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 The test program provided for testing to occur in 2 two phases. Phase 1 involved testing 12 vehicles for 3 exhaust emissions and six for evaporative emissions. The 4 testing was deemed necessary and the Phase 1 data would 5 allow refinement, if appropriate, of the test protocol for 6 Phase 2. 7 The test gasoline blends were made from the same 8 base gasoline. The complying fuel was oxygenated with 11 9 volume percent MTBE, and had a target RVP of seven psi. The 10 ethanol blend was oxygenated with ten percent ethanol, 11 resulting in an RVP eight psi. 12 We tested 12 1990 through 1995 model year vehicles 13 for exhaust emissions. Six of these vehicles were also 14 tested for evaporative emissions. 15 All test samples collected were speciated to allow 16 determination of the ozone-forming potential of the 17 emissions. 18 This test program is one of the largest single 19 data sets on speciated hydrocarbon emissions of gasoline 20 containing ten percent ethanol and having a one psi RVP 21 increase collected to date. 22 The test vehicles represent the types of vehicles 23 most operated in California. These vehicles represent 70 24 percent of the vehicle miles traveled. All the vehicles 25 tested have three-way catalyst and fuel injection. These PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 control technologies were introduced in 1981 and used in 2 virtually all 1996 and newer model year vehicles. 3 The test vehicles represent normal and moderate 4 emitting vehicles from 1986 and newer model year. These 5 vehicles account for about 32 percent of the reactive 6 organic gas emissions, 42 percent of the CO emissions and 48 7 percent of the NOx emissions in the light-duty motor vehicle 8 emissions inventory. 9 We measured exhaust emissions using two test 10 procedures, the federal test procedure representing normal 11 driving conditions, and a test procedure representing more 12 severe driving conditions for off-cycle emissions, referred 13 to here as the REP05 test procedure. 14 We also measured evaporative emissions for two of 15 the three evaporative modes, hot soak and diurnal. Running 16 loss tests were not performed because the test facility was 17 unavailable at the time. 18 Running loss emissions were calculated using an 19 ARB draft evaporative model, which is based on the US EPA 20 complex model. 21 The test procedures are standardized efforts to 22 represent different elements of the real world conditions 23 motor vehicles encounter. 24 To evaluate the ozone emissions impact of these 25 fuels, the individual test modes must be combined. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 As mentioned, the FTP represents normal driving 2 and the REP05 severe driving. We combined them in 3 proportion to their driving activity. 4 We also combined the exhaust and evaporative 5 emission differences between the two fuels using the 6 inventory. 7 Throughout the test program we kept the work group 8 informed of our progress and provided the preliminary data 9 as it became available. 10 The final data set was released last May. We 11 analyzed the data and shared the results of our analysis 12 with the work group in July and again in October. 13 We also held a workshop on the ozone-forming 14 potential determination in October. 15 We received suggestions from some of the work 16 group stakeholders. 17 We also received comments from other 18 representatives of the ethanol industry. 19 We considered all comments and input provided and 20 published the final report in November. 21 I will now summarize the results of our analysis 22 of the test data. 23 This table summarizes key results from the test 24 program for the exhaust and evaporative mass emissions. As 25 expected, the ten percent ethanol gasoline with the one psi PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 RVP increase had lower CO emissions compared to the combined 2 gasoline. 3 It also had slightly lower exhaust potency weight 4 of toxics. However, it had increased exhaust NMOG and NOx 5 emissions compared to the complying gasoline. 6 With respect to evaporative emissions, as expected 7 the one psi higher RVP of the ten percent ethanol blend 8 resulted in large increases in evaporative mass emissions of 9 NMOG and potency weighted toxics. 10 The percent changes for evaporative emissions 11 shown here include the calculated emissions for running 12 losses. 13 This table shows the results for combined exhaust 14 and evaporative emissions, including the calculated running 15 loss emissions difference. 16 The combined emissions increased for all 17 pollutants except for CO. 18 The ozone-forming potential of the total 19 emissions, excluding oxides of nitrogen, increased by 17 20 percent. 21 This increase incorporates the benefits to the 22 ozone-forming potential from the lower CO emissions of the 23 ten percent ethanol blend. 24 As shown in the column labeled likelihood, our 25 statistical evaluation provides a high level of confidence PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 that the ozone-forming potential of the ten percent ethanol 2 blend with one psi higher RVP is greater than that of the 3 complying gasoline. 4 As a sensitivity check we also calculated the 5 ozone-forming potential assuming there is no difference in 6 running loss emissions between the two test fuels. 7 We note that this is an unrealistic assumption 8 because loss emissions will increase with increased RVP. 9 In this case the ozone-forming potential of the 10 total emissions, excluding NOx, but including CO, increased 11 by six percent for the ten percent ethanol gasoline with a 12 one psi RVP increase, compared to the complying gasoline. 13 Again, our statistical evaluation shows that there 14 is a 96 percent likelihood that the observed results are 15 directionally correct. 16 Based on the results of this test program, we 17 conclude that ten percent ethanol gasoline for the one psi 18 RVP increase results in higher ozone-forming potential than 19 complying gasoline. 20 To further evaluate the impacts of our RVP in 21 oxygen on emissions we reviewed the existing database, 22 including the studies shown here. I will now briefly 23 describe these studies and summarize the general findings of 24 our review of the existing data. 25 Of the studies reviewed, the Auto/Oil program is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 the most extensive research effort looking at the effects of 2 fuel properties on motor vehicle emissions. 3 This was a multiyear $40 million effort that 4 evaluated multiple fuel properties in two vehicle fleets, an 5 older fleet and a current fleet. 6 The older vehicles were pre-1995 model year. The 7 current technology vehicles, similar to those in our test 8 program, represent 1998 technology. 9 Each vehicle test fleet consisted of roughly 20 10 vehicles. 11 Auto/Oil also conducted an evaluation of the fuel 12 effects on high-emitter vehicles. 13 Automotive Testing Laboratories conducted two test 14 programs for the ARB looking at the effect of oxygen on RVP 15 and emissions. These studies used the fleet of vehicles 16 ranging from 1973 to 1991 model year. 17 The American Petroleum Institute study consisted 18 of 11 vehicles tested on several fuels, including four that 19 vary RVP and oxygen. The vehicles tested in this study were 20 1981 to 1989 model years. 21 Our evaluation of the substantial database on the 22 effects of RVP on emissions shows that increasing RVP only 23 by one psi will result in large increases in evaporative gas 24 emission. 25 Also the data show that increasing RVP has a small PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 effect on exhaust hydrocarbon, CO and NOx emissions. 2 These data also show that adding oxygen only 3 improves combustion and primarily reduce CO emissions. 4 The data also show that adding oxygen increases 5 NOx emissions and has a small effect in reducing exhaust 6 hydrocarbon emissions. 7 The effect of oxygen appears to be less pronounced 8 in new technology vehicles such as low-emission vehicles and 9 ultra low-emission vehicles. 10 The data review also provide information on the 11 relative reactivity of the exhaust and evaporative 12 emissions. The data show that evaporative emissions are 30 13 to 40 percent less reactive than exhaust emissions and that 14 the reactivity is not significantly affected by the type of 15 oxygenate used. 16 In summary, the existing data show that the 17 increase in evaporative gas emissions from gasoline with a 18 one psi RVP increase cannot be offset by the lower 19 reactivity of the evaporative emissions and the exhaust 20 benefits from the higher oxygen content of ten percent 21 ethanol blends. This finding is consistent with the results 22 of our test program. 23 We further evaluated the effects of RVP and oxygen 24 by reviewing the available emissions models. Both the US 25 EPA and ARB have approved models that predict emissions as a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 function of fuel properties. 2 The EPA complex model has both exhaust and 3 evaporative components. EPA exhaust model contains a high 4 emitter component and the normal emitter component. The EPA 5 model is based on data for a 1990 technology vehicle fleet. 6 The ARB predictive model currently only addresses 7 exhaust emissions. As in the regulations, the RVP is fixed 8 as seven psi in the ARB model. 9 We used the EPA complex models to predict the 10 emissions difference for a gasoline with 3.5 weight percent 11 oxygen or ten percent ethanol, and a one psi increase in RVP 12 compared to a complying gasoline. 13 The results show that evaporative emissions 14 increased by 40 percent and exhaust hydrocarbon emissions 15 increased by three percent. 16 The combined exhaust and evaporative emissions 17 increased by 14 percent. 18 This is consistent with the results of the ARB 19 test program where we found an 18 percent increase in 20 hydrocarbons. 21 Finally, we sought peer review of our evaluation. 22 We followed the formal Cal EPA process for obtaining peer 23 review of our analyses. This peer review process was 24 established pursuant to last year's Senate Bill 1320. 25 The peer review was conducted by Dr. Don Lucas PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 with the University of California Berkeley, and Lawrence 2 Berkeley National Laboratory, who specializes in 3 combustion-generated pollutants and the development of 4 measurement diagnostic procedures. 5 Dr. Lucas was elected by the chancellor's office 6 of the University of California to perform the peer review. 7 The peer review found that the staff's conclusions 8 on the ozone-forming potential of ten percent ethanol 9 gasoline on the one psi RVP increase appears correct and is 10 justified by the information presented. 11 The peer review also found that the assumptions 12 made in the staff's evaluation are reasonable and that the 13 emissions are calculated in a consistent manner. 14 Now I will briefly highlight the key issues raised 15 and considered in our evaluation. 16 In the process of our evaluation of the 17 ozone-forming potential, we considered several issues raised 18 primarily by the representatives of the ethanol industry. 19 Concern was expressed that the test fleet is not 20 representative of the in-use fleet. 21 As I noted, the vehicles tested represent 22 emissions technology going back to 1991 and used in 23 virtually all vehicles after 1985. These types of vehicles 24 represent a very high percentage of the vehicle miles 25 traveled today. They also represent a significant portion PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 of the emissions from motor vehicles. Also, results of the 2 Auto/Oil test program show that older vehicles have 3 directionally similar response to changes in oxygen and RVP 4 as the vehicles tested in the ARB test program. 5 Concern was expressed that no high-emitting 6 vehicles were tested. The definition used by US EPA and ARB 7 for high-emitter vehicles that emit is that at least two 8 times the standard. Generally these vehicles have faulty 9 emission control systems or other mechanical problems that 10 cause such high emissions. The Auto/Oil test program tested 11 high emitters and found them to be highly unstable. The 12 Auto/Oil study accounted for the test to test the 13 variability of these vehicles and concluded that the 14 response to oxygen and RVP is consistent with that of 15 normal-emitting vehicles. 16 The high emitters used by the US EPA in developing 17 their model also shows that high emitters have large 18 variability in their emissions. 19 This graph illustrates the variation in the data 20 for normally high emitters. The graph on the left is 21 hydrocarbons and on the right is NOx. 22 From the EPA database we plotted the average 23 difference in the emission between two fuels that differ in 24 oxygen content and RVP. The error bar is the 95 percent 25 confidence interval about the average. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 You can see that the data for high-emitter 2 vehicles have large variation. With such high variation it 3 is difficult to isolate fuel effects from vehicle effects. 4 In conclusion, the results from these test 5 programs for older vehicles and for high emitters are 6 directionally consistent with the results of the ARB test 7 program. 8 We believe that the emissions response in the 9 fleet of vehicles tested in the ARB test program is 10 reasonably representative of the response in the overall 11 fleet. 12 Concern was expressed that the number of vehicles 13 tested was inadequate to provide statistically sound 14 results. 15 Our analysis showed that the data provides 16 statistically significant results. The statistical analysis 17 shows that the likelihood that the directional change in the 18 emissions is real and is greater than 90 percent. 19 Therefore, we conclude that further testing is unlikely to 20 change the results of the evaluation. 21 It was suggested that the way we included the CO 22 emissions in our analysis undercounted this contribution to 23 ozone-forming potential. 24 We accounted for CO consistent with the ARB's CO 25 inventory in determining the appropriate weight for CO's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 contribution to ozone-forming potential. 2 Ambient air quality measurements of CO and 3 hydrocarbon and tunnel studies support the CO-to-hydrocarbon 4 ratios in the inventory, which are used in our analysis. 5 It was suggested that the use of total 6 hydrocarbons in the determination of ozone-forming potential 7 is inappropriate. 8 The ARB analyses used the measure NMOG data to 9 calculate ozone-forming potential. 10 The total hydrocarbon inventory was used to 11 generate an NMOG emissions inventory. The NMOG inventory is 12 then used to combine the exhaust and evaporative emissions. 13 It was suggested that including running loss 14 emissions in the analysis was inappropriate because they 15 were not measured in the test program. 16 At the start of the test program the work group 17 agreed that running loss emissions would be calculated 18 rather than measured because the facilities that were 19 required were unavailable. 20 We used the calculated values for running loss 21 from an ARB drop model, which is based on the US EPA 22 evaporative model. 23 As I showed you earlier, we also conducted a 24 sensitivity analysis by assuming the difference in running 25 loss emissions between the two fuels to be zero. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 Even under this case, the ten percent ethanol 2 gasoline with one psi RVP increase had greater ozone-forming 3 potential than the complying gasoline. 4 It was suggested that the urban airshed models are 5 the best way to determine ozone formation. 6 It is unnecessary to conduct urban airshed 7 modeling to make the required finding of the ozone-forming 8 potential. When the net reactivity adjusted NMOG emissions 9 increase, the models will show a directional increase in 10 ozone concentration. 11 We included the comments on our analyses of the 12 test data as part of the information provided for peer 13 review. We also provided our response to those comments for 14 review. 15 With respect to the issues raised, the peer review 16 report concurs with staff's analysis and assumptions. 17 As I mentioned, the peer review found that the 18 staff's conclusion on the ozone-performing potential of ten 19 percent ethanol gasoline with one psi RVP appears correct 20 and is justified by the information presented. 21 Now I would like to briefly describe our plan for 22 future activity on providing additional compliance 23 flexibility. 24 We plan to continue the assessment started last 25 spring to evaluate ways to provide additional flexibility in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 the cleaner-burning gasoline program, while maintaining the 2 substantial emission benefit from the program. 3 We will continue to evaluate the feasibility of 4 updating the current exhaust predictive model and the 5 development of an evaporative model. 6 An evaporative model is needed before flexibility 7 on the RVP limit can be provided. 8 We will also consider the benefits offered by the 9 use of ten percent ethanol gasoline plans and will evaluate 10 how to properly credit such benefits. 11 To conclude, the staff's evaluation of the 12 ozone-forming potential of ten percent ethanol gasoline with 13 a one psi RVP increase meets the requirements of state law. 14 The results show the high degree of certainty that 15 ten percent ethanol gasoline with one psi RVP increase has 16 greater ozone-forming potential compared to complying 17 gasoline, and thus should not be exempt from the RVP 18 standard. 19 The ARB test program results are consistent with 20 existing data, and the independent peer review of the 21 staff's evaluation of the ozone-forming potential concurs 22 with staff's finding and recommendation. 23 Staff recommends that the Board make the finding 24 that gasoline containing ten percent ethanol with one psi 25 RVP increase increases ozone-forming potential compared to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 complying gasoline. 2 The proposed finding would preserve the emissions 3 benefits gained by the cleaner-burning gasoline program. 4 The finding does not prohibit the use of ethanol 5 in gasoline and it allows the Board to consider raising the 6 oxygen cap to allow ten percent ethanol in gasoline without 7 increasing emissions. 8 We recognize that ten percent ethanol blends offer 9 additional benefits and are committed to work with 10 interested parties to explore ways to properly credit such 11 benefits to the use of the ethanol, while preserving the 12 emission benefits of the reformulated gasoline program. 13 This concludes my presentation. I thank you for 14 your time. 15 CHAIRMAN RIORDAN: Thank you very much. 16 Let me ask, there's an important component to 17 this. Well, actually there are two important components. 18 First is our ombudsman's program, and I'd like you 19 to comment about the process that this item has gone through 20 before coming to the Board. 21 MS. MEAD: Thank you. For the record my name is 22 Kathleen Mead. Madam Chairman, members of the Board. 23 Although this item is not a regulatory item, the 24 outcome of your decision on the item could change current 25 regulations affecting stakeholders concerned with oxygenates PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 and gasoline fuel production, therefore the process by which 2 it comes to you for approval is important. 3 The item was initiated, as you heard, in October 4 1995 when a technical working group was established to 5 develop and oversee a test program to determine the 6 ozone-forming potential of the gasoline containing ten 7 percent ethanol. 8 Invitations to participate were sent to the 9 American Automobile Manufacturers Association, California 10 Renewable Fuels Council, Western States Petroleum 11 Association, General Motors Corporation and Ford Motor 12 Company. 13 Each of these organizations became active members 14 of the working group along with California Rice Industry 15 Association, the Renewable Fuels Association, Arco, Chevron, 16 Parallel Products, Sierra Club, Communities for Better 17 Environment, California Energy Commission, California 18 Department of Food and Agriculture and US EPA. 19 To develop the test protocol, staff conducted 20 three working group meetings on November 1st, 17th and 21 December 6th of 1995, and distributed a draft test plan for 22 comment in May of 1996. 23 The plan was finalized in September '96 and 24 testing began. 25 To keep the work group informed of the testing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 status, staff provided the work group with six status 2 reports. They were issued in November of 1996, March, June 3 and November of 1997, and March and May of this year. 4 Each report was accompanied by preliminary data in 5 electronic format. 6 After each update, staff fielded phone calls from 7 the Renewable Fuels Association, Sierra Club, American Lung 8 Association, WSPA, and other interested parties. 9 Last May the final data set was distributed to the 10 working group and made available on ARB's Web site. 11 Staff provided a preliminary assessment of the 12 data on June 10th of this year and held a work group meeting 13 on July 15th and October 22nd to discuss the data analysis. 14 A public workshop was held on October 27th of this 15 year. 1700 stakeholders were notified by mail. They 16 included representatives of gasoline and diesel interests, 17 refiners, petroleum product trade groups, petroleum product 18 vendors, government agencies, consultants, oxygenate trade 19 groups, organization of vehicle users, environmental 20 advocates and private citizens. 21 In addition, the workshop notice was posted on 22 ARB's Web site. 23 30 persons participated in the workshop 24 representing the National Corn Growers Association, 25 Renewable Fuels Association, WSPA, Exxon, Tosco, Mobile, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 Toyota, Methanex, Sierra Club, South Tahoe Public Utility 2 District, California Department of Food and Agriculture, 3 California Energy Commission and other interested 4 stakeholders. 5 As you heard from staff, an independent peer 6 review of the technical analysis was conducted by Dr. Don 7 Lucas of the University of California Berkeley and Lawrence 8 Livermore National Laboratory. 9 On November 17th staff mailed the final report and 10 analysis of the test data, today's Board hearing notice and 11 the proposed finding to over 400 aforementioned 12 stakeholders. 13 This information was also available on ARB's Web 14 site. 15 In conclusion, staff conducted an effective 16 outreach to stakeholders to identify all potential issues 17 and promote participation by all parties interested in the 18 recommendation before you today. 19 CHAIRMAN RIORDAN: Thank you very much. 20 Mr. Kenny, any other comments that you might have? 21 All right. There is, I think, another important 22 component of this and that is the peer review. I'd like to 23 invite Dr. Don Lucas from the University of California at 24 Berkeley to come forward, please, to the podium. We welcome 25 you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 Give us your name and maybe even a better title of 2 who you represent. 3 DR. LUCAS: Good morning. My name is Donald 4 Lucas. I'm a staff scientist at the Lawrence Berkeley 5 National Laboratory and a researcher in the School of Public 6 Health at UC Berkeley. I have a PhD in physical chemistry 7 from UC Berkeley. My research interest includes 8 combustion-generated air pollutants and developing new 9 diagnostic methods to measure those pollutants. 10 I've served as a reviewer for the US EPA, 11 Department of Energy, State of California, University of 12 California, and the Health Effects Institute. 13 I'm also an investigator and one of the authors on 14 the recent MTBE report requested by Senate Bill 521, an 15 assessment of the human health and environmental risks and 16 benefits of MTBE gasoline. 17 We reviewed previous data on the combustion 18 byproducts of MTBE in laboratory and vehicle studies and 19 performed laboratory experiments in a flow reactor. 20 I was asked to review the ARB report presented 21 today. 22 My work was performed under the interagency 23 agreement No. 98-004 where the University agrees to provide 24 peer scientific review of scientific work conducted by state 25 agencies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 I also read previous studies relating to the 2 subject and the comments and reviews made by other 3 interested parties and the subsequent responses of the ARB 4 staff. 5 These comments were often very valuable and they 6 helped clarify how the work was done and how the analysis 7 was performed. 8 As described in the staff presentation, the 9 results indicate that the fuel containing ethanol produces 10 more hydrocarbons, NOx and toxics with lower emissions and 11 CO. The ozone-forming potential is higher for the ethanol 12 blend, compared to the MTBE fuel. 13 This is an important study with valuable data 14 collected in a well-controlled and documented manner. 15 Proper calibration, validation and quality control 16 methods are reported. 17 This is a significant point, because while there 18 are many comments and critiques of the conclusions, there is 19 little criticism of the data itself. 20 While it is a good study, it's not perfect. As a 21 laboratory experimental scientist, I don't think that any 22 experimental program can be perfect. 23 For example, the inclusion of running losses is 24 crucial, and I don't think there was much value in analyzing 25 the results without including running loss data. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 Unfortunately, there were no direct measurements 2 of running losses. The emissions were estimated from the 3 hot soak emissions, which is the best measurement to use, 4 since the conditions producing the emissions are most 5 similar. 6 It is my opinion that the methods used to combine 7 the test data with inventory amounts to determine the 8 expected changes in emissions are consistent and reasonable 9 for all pollutants. 10 The calculation of the ozone-forming potential 11 including effects from CO in the exhaust, while complicated, 12 appear correct. 13 There have been many comments directed to the 14 number of vehicles tested as they are representative of the 15 vehicle fleet. 16 The number of vehicles to test is fairly easy to 17 answer, since robust statistical methods can be used to 18 determine if the results are significant. 19 In this study the 12 vehicles tested resulted in 20 near certain probability that the ethanol fuel blend has a 21 higher ozone-forming potential, that no additional testing 22 of vehicles of this type is needed. 23 The question about what is a representative 24 vehicle fleet is much harder to answer. The composition of 25 the fleet can be measured by many different parameters, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 changes with time, and is complicated by a complex testing 2 procedure that itself requires a long time. 3 The vehicles tested here are representative of the 4 significant fraction of the current fleet. However, the 5 entire fleet is not covered, and I don't know what it would 6 take to cover, say, 90 or 99 percent of the emissions or 7 vehicle types in this fleet. 8 Other reviewers suggest that high emitters should 9 be tested, and the ARB report addressed this issue. 10 For example, in the Auto/Oil study quoted 11 previously on high emitters, mass emissions of hydrocarbons, 12 CO and NOx were not significantly different in comparisons 13 of normal and higher emitters, and possible fuel effects 14 were masked by uncontrolled variations in the engine. 15 It might be impossible to obtain repeatable and 16 reliable data from high-emitting vehicles, and the number of 17 vehicles that would be needed for statistically significant 18 results cannot be estimated accurately. 19 The ARB report also reviewed previous testing 20 programs that examined the effect of different fuels on 21 emissions and the modeling results using EPA's and ARB 22 models. 23 While direct comparisons cannot be made, these 24 studies yield results similar in direction and magnitude and 25 tend to support the conclusions reached by the ARB staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 In summary, I believe that the work performed in 2 this study is of high quality. The conclusions reached by 3 the ARB staff appear correct and are justified by the data 4 analysis performed. The emissions are calculated in a 5 consistent and defendable manner and the assumptions made in 6 reaching the conclusions are reasonable. 7 Thank you. 8 CHAIRMAN RIORDAN: Dr. Lucas, thank you very much. 9 This was an added component that I think is a very 10 important one in terms of peer review. I think it is a good 11 thing and I hope in the future we can continue to use our 12 university systems as we did today, because it lends 13 credence to the staff report. 14 I'm going to ask if you would be available 15 throughout the balance of the testimony, if you can remain 16 through this item. 17 DR. LUCAS: Certainly. 18 CHAIRMAN RIORDAN: Thank you. 19 Let me ask the Board members if there are any 20 questions of Dr. Lucas at this time? 21 I don't believe there are. And so I appreciate 22 your being here and thank you very much. 23 We have a number of witnesses, and I am going to 24 ask some consideration for you to keep to about a 25 five-minute presentation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 If you have written testimony, obviously that's 2 made a part of the record. I would appreciate it if you 3 didn't read your testimony, but rather sort of directly told 4 us what your issues are. 5 I'm going to ask that we use the timing system 6 that is at the podium. Green light obviously means 7 everything is fine, keep going. When you see the yellow 8 light, you know you're about one minute from the end. And 9 of course the red light means I would like a conclusion. 10 So let us begin. Mr. Bob Dinneen from Renewable 11 Fuels Association, followed by Dr. Gary Witten, from Systems 12 Application International. Come forward, please. 13 Give us your name for the record and who you 14 represent. 15 MR. DINNEEN: Good morning, Madam Chairman, Board 16 members and staff. My name is Bob Dinneen. I am the 17 legislative director for the Renewable Fuels Association. 18 We are the national trade association for the domestic 19 methanol industry. 20 I have represented approximately 55 21 ethanol-producing facilities across the country, including 22 two right here in California that are producing ethanol from 23 waste products. 24 Now, as my title suggests, I'm not a technical 25 person. The technical comments on behalf of the association PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 are going to be made by Dr. Whitten, but I do have some 2 quick points to make, and I hope to be as sensitive as I can 3 to your time restraints. 4 The first question I have, point I would have, is 5 really with regard to process. And I think that the process 6 that has been involved here with regard to your 7 determination on the ozone-forming potential of ethanol 8 fuels is incomplete. 9 I give you great credit, the staff great credit, 10 for acting to lift the oxygen cap. It's a good first step, 11 frankly, given the unanimous support by the Legislature for 12 legislation to lift the cap that was evidenced during the 13 last assembly. That step is probably long overdo. But it 14 is a good step. 15 The cap has stifled competition here in California 16 among oxygenates. The cap has resulted in essentially an 17 MTBE program only. Other areas of the country that have 18 implemented clean fuels programs in the absence of a cap 19 have had a competitive oxygenate market and have not had 20 many of the problems that are being visited upon your 21 clean-burning gasoline program. 22 But the determination that's being made today in 23 relation to that cap is woefully inadequate. 24 The staff seems intent now, after seven years of 25 largely ignoring this issue, of focusing just on the narrow PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 question of what is the ozone impact attributable to a 2 one-pound waiver. 3 It seems to me that the more valuable question for 4 the ARB to analyze is where is the ozone equivalency between 5 ethanol and MTBE? There's a great deal of scientific 6 consensus right now that there are indeed benefits to the 7 use of ethanol. The ARB finally today in its presentation 8 recognized that that is the case, that there are benefits to 9 increased oxygen content, reduced carbon monoxide emissions, 10 increased exhaust VOC reductions and reduced reactivity. 11 These benefits have been ignored in the current predictive 12 model. 13 Now, it may be, frankly, that ultimately a one 14 pound waiver is not appropriate, that it will lead to 15 increased ozone formation. I don't believe, based upon what 16 you have before you, that that determination can be made, 17 but let's say just that that is certainly possible. 18 I would suggest to you, though, that it is equally 19 true that the one-pound penalty that is now imposed on 20 refiners that want to utilize ethanol in this clean-burning 21 program is also inappropriate. And making a finding today 22 on just that one-half of the equation, just the one-pound 23 waiver is inappropriate, prejudices whatever the Board or 24 the staff might do later on to determine what indeed is that 25 ozone equivalency. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 I would say also, I think this is an important 2 point, that the process lacks some context. Merely adding 3 up VOC emissions, even trying to do ozone-forming VOC 4 emissions, just adding them up, doing a counting process, 5 ignores what happens to those emissions in the atmosphere. 6 We do believe, and we think that there's a great 7 consensus, that urban airshed modeling studies are indeed 8 the best way to evaluate the relative ozone-forming 9 potential of competing fuels. 10 The RFA provided staff with a number of urban 11 airshed modeling studies showing the relative equivalency of 12 ethanol and MTBE, and those were largely dismissed. 13 The most comprehensive urban airshed modeling 14 studies that have ever been done on this issue suggest there 15 is essentially no difference between ethanol with volatility 16 increase and MTBE. Lot of technical reasons for that, but 17 that's what the urban airshed modeling studies show. 18 Now, there are a couple that show that there's a 19 slight increase. But when you're talking about one or two 20 part per billion benefit from ethanol, as most of the urban 21 airshed studies show, or part per billion detriment from 22 ethanol, as one urban airshed study shows, you're talking 23 about less than one percent difference in 120 part per 24 billion standard. 25 Now, we're in the Christmas season, so maybe it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 appropriate that the ARB engage in an exercise that is 2 essentially counting angels on the head of a pin, but I'd 3 suggest to you that in the process you're losing the saving 4 grace of ethanol and the program is suffering as a result. 5 The second point I want to make is that I do 6 believe that the test program itself is flawed. 7 CHAIRMAN RIORDAN: Mr. Dinneen. 8 MR. DINNEEN: Yes. 9 CHAIRMAN RIORDAN: See the red light there? 10 MR. DINNEEN: I do. 11 CHAIRMAN RIORDAN: We've got to make a conclusion 12 very soon. 13 MR. DINNEEN: I will. I have more extensive 14 comments, and I'll try to submit those to the record. I 15 appreciate your indulgence. 16 Like I said, We do have the some concerns about 17 the way the test program has been conducted, the number of 18 vehicles, things of that nature. 19 Maybe just one concluding comment, and I'll let 20 Dr. Whitten address some of those technical things. 21 A concluding comment would be this. You've got 22 the clean-burning gasoline program right now that's broken. 23 It's broken not because it's not reducing emissions. It is. 24 It's broken not because of the oxygen standard, because 25 oxygenates in fact help refiners meet the standards that are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 required in effect, and oxygenates, particularly ethanol, 2 can provide other environmental and public policy benefits 3 as well. 4 It's broken because the program has been built 5 around MTBE. And unless you find a way to make sure that 6 there's competition in the market, that ethanol can compete 7 effectively in this market, it's going to continue to cause 8 problems, lawsuits, consumer complaints, refiner angst about 9 liability with regard to MTBE, water contamination. These 10 are serious problems that are facing this program and 11 threatens the integrity of this important program. 12 There are areas of the country which ethanol is 13 used in this the program quite effectively. American 14 Lung -- 15 CHAIRMAN RIORDAN: Mr. Dinneen. 16 MR. DINNEEN: I know. 17 CHAIRMAN RIORDAN: I am going to be -- I'm going 18 to start taking time from your witness and I don't want to 19 do that. 20 MR. DINNEEN: I apologize. 21 My final point, look, if you figure out a way to 22 make ethanol work in this program, if you engage in a 23 process such that we can identify where between a one-pound 24 penalty and one-pound waiver the actual science is, I think 25 your program will be the better for it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 That's all. 2 CHAIRMAN RIORDAN: Thank you very much. 3 Dr. Gary Whitten, followed by Bob Heckert, 4 followed by Dr. Al Jessel and Rick Best. 5 DR. WHITTEN: Good morning, Madam Chairman, Board 6 members. My name is Gary Whitten. I'm chief scientist at 7 Systems Applications Internation. 8 I've been studying smog-forming chemistry for 9 about 25 years. I have a PhD in atmospheric and gas phase 10 chemistry. 11 This morning I would like to go over the issue of 12 using methanol in place of MTBE. 13 First of all, what was expected, the main thing is 14 reduction in CO and the fact that it can play a role in the 15 ozone forming. 16 Second part of it is that they used the urban 17 airshed model that -- and the existing regulatory and other 18 mass submissions models, that the one-pound waiver can be 19 justified. 20 The third item I want to talk about is the 21 representativeness of the 12-vehicle fleet that was tested 22 and how it could come to a evaluate -- come up with a number 23 that says it's really only less than ten percent of the 24 total mobile exhaust hydrocarbons. 25 I've given you a little handout sort of like PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 slides to go along with this. 2 First issue is carbon monoxide. We've known that 3 carbon monoxide emissions changes due to oxygen in gasoline 4 can mitigate the ozone problem since at least 1988. And I 5 testified before US Congress on that issue at that time. 6 And that was part of the history of where the 7 one-pound waiver has come from on a national scale. 8 Using the urban airshed model, we found an 9 interesting surprise most recently, that carbon dioxide in 10 the atmosphere accounts for as much as 11 percent of the 11 ozones that are formed every day in urban atmosphere. So 12 this is a very important ingredient in that 10 percent, 11 13 percent is making that much of a difference. 14 The new test data, the very comprehensive data on 15 these 12 cars, shows us that carbon monoxide can be reduced 16 as much as ten percent by the little extra oxygen that's 17 seen in ethanol compared to MTBE. 18 The urban airshed model run that we did actually 19 consisted of about a ten different sensitivity runs, testing 20 the sensitivity of the various parts of the mobile emissions 21 inventory like running loss emissions and exhaust emissions 22 and diurnal emissions and all of those kinds of things, so 23 that we can then combine those sensitivities to come up with 24 an overall evaluation. 25 The modeling run that we used was recently put PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 together by the South Coast Air Quality Management District 2 and the ARB working together on the so-called 1997 AQMP. 3 Part of that modeling looked into predictions of 4 ozone in the Los Angeles basin for the year 2000. It's 5 based -- one of the important simulations in that AQMP was 6 based on 1987 meteorology. On the second day of that 7 simulation you saw about a 148 parts per billion for the 8 year 2000. So this looks like it's giving a result that's 9 what we might expect for that to happen on a smoggy day. 10 By using the models that predict the various 11 emissions changes, this urban airshed model suggests that a 12 one-pound waiver can be justified. 13 But it's important also to know that notice, note 14 that when you do an urban airshed model for over a couple of 15 days, you see areas of the basin where maybe some of the 16 ozone goes up a little bit and some ozone goes down a little 17 bit and there's two criteria that we used to say that there 18 was no difference in ozone, and one was the highest one-hour 19 peak, which is where the standards have been set up until 20 this year, and where the urban airshed model is used in the 21 State Implementation Plan to show attainment. So that 22 one-hour maximum is an important criteria. 23 The second one is the pending standard of eight 24 hours, and the urban airshed model can be used for that. 25 And you got a little different result between one and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 other. 2 But the emissions inventory was adjusted using, 3 first of all, the Air Resources Board predictive model, 4 which is for exhaust emissions. It's based on some 7,000 5 federal test procedure tests, costing millions and millions 6 of dollars to prepare that data, and it's a statistically 7 optimized rendition of those 7,000 data points. 8 The new 12-car vehicle tests represents an 9 increase of less than one percent to that database. 10 And so if some 56 new data points, even though 11 they are very expensive, and they do provide information on 12 speciated hydrocarbons, that we did not really have very 13 well before. 14 Also it has information on aggressive driving that 15 we didn't have before. 16 It's a very valuable test, but again it does 17 contribute less than one percent to the total database for 18 the predictive model. 19 And the second model that we used was the one that 20 the ARB proposed for evaporation increases due to RVP. This 21 suggests that the increases are also less than what was 22 observed on the 12-vehicle fleet, but it's actually only six 23 cars that were tested for evaporative emissions. 24 I'm quite troubled by the idea that these six cars 25 and evaporative emissions and only 12 cars in exhaust PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 emissions are expected to represent the 30 million cars that 2 are going to be burning this gasoline in California. 3 CHAIRMAN RIORDAN: Dr. Whitten, as you can see, 4 we've got a red light there, so you want to draw it to 5 close. 6 DR. WHITTEN: I'll make one last very brief point 7 on the representativeness. 8 We've claimed that it's less than ten percent. 9 The ARB claims it's over 32 percent or 32 percent of the 10 total emissions. 11 You can arrive at the 32 percent by taking cars 12 that emits say up to 800 milligrams per mile. And if you 13 take cars that only emit only 400 milligrams per mile, the 14 number is more like ten percent. 15 And during the flexibility hearings SAI did a 16 reestablishment of the predictive model, splitting it at the 17 400 milligram point, and we found that the most important 18 change of this dual model where you had a high emitter model 19 about 400, and one below, most important change was that it 20 gave more credit, more reduction to oxygen in a fuel and it 21 was coming from the vehicles that were above 400 milligrams 22 per mile emissions test. 23 And this fleet that was tested, the highest single 24 vehicle was only 300 milligrams. 25 So none of the vehicles of the 12 are represented PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 by not necessarily high emitters, but certainly above the 2 400 milligram mark, which has been a common standard in 3 California since 1977. 4 CHAIRMAN RIORDAN: Okay. Thank you very much. 5 Are there any questions for this witness? 6 Thank you, Dr. Whitten. 7 Mr. Bob Heckert. 8 MR. HECKERT: Thank you, Madam Chair, and seasons 9 greetings. My name is Bob Heckert. And I am the 10 communications manager for the California Rice Promotion 11 Board. 12 And I'd like to come here today to relay some 13 thoughts that the rice industry association had had over 14 this matter, as well as individual growers. 15 What I'm hearing on the countryside is they'd like 16 to see a delay in today's decision, so that a couple of 17 things might happen first. 18 Before I suggest what those might be, you should 19 know that the California rice industry has invested heavily 20 in at least one ethanol plant and probably two in the not 21 too distant future. We see these as the best opportunity to 22 utilize or divert rice straw from burning practices, which 23 has come before this Board enumerable times, as my friend, 24 Mr. Kenny, knows. 25 And therefore we have a keen interest in trying to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 develop this burning alternative. 2 All these studies are very fine and I know the 3 staff has done a tremendous job, a lot of time and lot of 4 dedication to this effort, but the mere reason we want to 5 see this slowed down a bit is to take another look at what 6 happens in the process of producing ethanol, that is by 7 diverting rice straw from field burning, what benefits are 8 accrued when you count that into having an RVP waiver in 9 place? 10 In other words, we would produce less NOx. Can we 11 subtract that from the extra NOx that would be produced by 12 having the evaporative losses out there? We think that's 13 something which needs to be considered. And I'm sure you 14 all will at some point in the future, if I heard correctly 15 in the staff report. 16 Also if there is not enough offset there in order 17 to make up for those additional evaporations, let's look at 18 a different mitigation. Perhaps we need a better gas cap. 19 I don't know. That might be something to look at. 20 We'd like to see the scope of this study expanded 21 just a bit and delayed until we can have a few better 22 answers as to those points. 23 I think that would conclude our discussion at this 24 point. 25 CHAIRMAN RIORDAN: And I thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 Are there any questions for this witness? 2 Thank you. 3 Dr. Al Jessel, followed by Rick Best, Ms. Megan 4 Smith, and Dawn Forsythe. 5 DR. JESSEL: Thank you, Madam Chairman and the 6 rest of the members of the Board. I won't take up much of 7 your time. I'm going to focus my comments on a very 8 specific issue concerning the peer review. 9 CHAIRMAN RIORDAN: Yes. 10 DR. JESSEL: The copy I have is dated December 11 2nd, 1998. I congratulate the Board for actually getting 12 the peer review conducted, and Dr. Lucas, I think, has done 13 a fine job. 14 I just want to make one point, which I think is 15 going to be important as we move into another process to 16 reconsider fuels regulations and perhaps the RVP spec that 17 are I think that most people in this room are committed to. 18 The peer reviewer concludes, and I'm going to read 19 it directly off my copy of here, it says the conclusion of 20 the ARB staff is that California reformulated gasoline 21 containing ten percent ethanol results in an increased 22 ozone-forming potential if the RVP limit is not limited to 23 seven pounds per square inch. 24 Our position is that that is much too narrow a 25 finding, and really is in conflict with the finding as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 stated by the staff report, what's sitting before you as a 2 proposal. 3 What this says is that in no way could you find 4 that RVP could be raised above seven, potentially even 5 offset. And I think that may be prejudicial to the process 6 that I think we're all going to come into very shortly. 7 Historically, that statement was found in the 8 original draft proposal that CARB staff had put out for 9 public comment. It's not currently the way it's stated in 10 the draft before you now. 11 But I want to put on the record the fact that I 12 believe that this is a misstatement of the finding, with all 13 due respect to the peer reviewer, and I think it's wise to 14 have that on the record, because otherwise it may very much 15 prejudice the process that we're all going to move into at 16 some point. 17 So that's the extent of my comment. 18 CHAIRMAN RIORDAN: Thank you, Dr. Jessel. 19 I don't know if the staff would like to comment 20 now, or the reviewer, at this point or later. It's up to 21 you. 22 MR. SIMEROTH: My name is Dean Simeroth, 23 California Air Resources Board staff. 24 Our view is that we're trying to make the finding 25 on the complete waiver as it's written in the Health and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 Safety Code, not that something is slightly above seven and 2 may be prohibited. Try to preserve some flexibility. 3 CHAIRMAN RIORDAN: Thank you. 4 And thank you, Dr. Jessel. 5 The next witness is Rick Best. If you would come 6 forward and identify yourself for the record and who you 7 represent. 8 MR. DONAHUE: Thank you, Madam Chair. My name is 9 Paul Donahue, appearing for Mr. Best, who is unable to 10 remain for the entire procedure. 11 I'm here today on his behalf, and actually on 12 behalf of six environmental organizations who are as 13 follows: The California Public Interest Research Group, 14 Communities for a Better Environment, Californians Against 15 Waste, the Silicon Valley Toxics Coalition, the National 16 Audubon Society, and Clean Water Action. 17 All of the above organizations urge the Board 18 today to withhold making a final decision on the matter 19 pending in front of you right now concerning RVP gasoline, 20 until all appropriate variables are considered and there are 21 enough testing has been conducted to produce some adequate 22 data. 23 The letter I'm summarizing is in the record, but 24 it is our belief that a yes-no determination that you're 25 being asked to make today is -- does not and should take PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 into account the growing contamination of drinking water 2 supplies by MTBE, the nonpersistence, the nonmobility and 3 nontoxicity of ethanol in soil and water, and the 4 availability in California, as was previously mentioned, of 5 vast agricultural and other waste resources that can be 6 converted to ethanol. This step should be a first step, not 7 a final decision, in the effort to take advantage of the 8 benefits of using ethanol in California. 9 The draft report appears to fall short of that 10 standard in a number of ways, because only 12 vehicles have 11 been tested, and those types tested represent only about ten 12 percent of the emissions inventory. 13 Furthermore, high-emitter vehicles were not 14 tested, and ARB's reason, the staff report indicated these 15 vehicles were known to have highly variable emissions, but 16 that seems to buttress the argument that a larger number of 17 vehicles should be tested to smooth out and make a more 18 complete result from the variables. 19 Many of the tests cited in the study yields that 20 when averaged they show emission changes that are smaller 21 than the standard deviation. These throw the findings into 22 question and argue for a larger pool of tested vehicles. 23 Until these shortcomings are rectified, we do not 24 see how the ARB can answer this question about ozone-forming 25 potential of an ethanol blend compared to the currently used PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 fuel blends. 2 And we urge the Board to step back and reassess 3 the study until it has a chance to revise to answer these 4 questions. 5 Thank you, Madam Chair and members, for your time. 6 CHAIRMAN RIORDAN: Thank you, Mr. Donahue. And 7 thank you for representing Mr. Best. 8 Ms. Megan Smith. 9 MS. SMITH: Good morning, Madam Chairman and 10 members of the Board. By the way, I like the title Madam 11 Chairman. It has a ring to it. 12 I'm Megan Smith, co-director of the American 13 Bioenergy Association located in Washington, D.C. 14 Thank you for allowing me the opportunity to 15 testify before you on behalf of my association regarding 16 gasoline blended with ten percent ethanol. 17 California has a great opportunity to support an 18 emergence in California-based industry, that is biomass 19 conversion to ethanol. 20 I came out to California some five years ago while 21 employed at the National Renewable Energy Laboratory to 22 explore the potential for biomass ethanol in the state. 23 Since that time, we've discovered that California 24 has enough biomass waste resource to produce four billion 25 gallons of ethanol per year. This equates to approximately PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 three times the amount needed to displace the MTBE now being 2 used in California's gasoline. 3 The definition of biomass is any matter composed 4 of cellulose and lignin. Examples in California include 5 agriculture residues such as rice and wheat straw, orchard 6 prunings and pecan shells; forest residues, such as forest 7 thinnings and mill operator's waste; and the paper component 8 of solid waste, of which California has plenty of each. 9 The benefits of biomass ethanol are many and far 10 outweigh the supposed VOC problem for which ethanol is 11 always condemned. 12 But I'm not going to address this issue on a 13 technological level today, as there are others in the 14 ethanol industry that will do this eloquently. 15 Instead, I ask that you consider increasing the 16 oxygen cap while at the same time leaving in place the 17 one-pound waiver for ethanol that California had the 18 foresight to put in effect several years ago. 19 If not convinced to do so by my ethanol 20 colleagues, based on their scientific evidence regarding 21 emissions, I ask that you do this based on the potential 22 benefits biomass ethanol may bring to the State of 23 California in the near future, including reduction of air 24 emissions through residue burning abatement. 25 But in order for biomass methanol to become a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 reality, corn-based ethanol must be used in the meantime to 2 guarantee that a market for ethanol exists for biomass 3 ethanol once it's produced in California. 4 The current ethanol industry converts to ethanol 5 only currently available biomass, that is starch inside the 6 corn kernel itself. The rest of the plant is biomass. This 7 is where corn- or starch-based ethanol and biomass- or 8 cellulose-based ethanol differ. 9 Aside from absurdly low oil prices, corn-based 10 ethanol cannot compete with gasoline without its tax 11 incentives due to the high feedstock price of corn. 12 Biomass, on the other hand, is a less expensive 13 feedstock, much of it regarded as waste. 14 Also, biomass ethanol plants supply their own 15 power through conversion of biomass' lignin component. 16 These two things, cheaper feedstock costs and 17 self-supporting energy supply, make biomass ethanol more 18 cost effective than corn-based ethanol. 19 Because of this difference, biomass ethanol will 20 be able to directly compete with gasoline in the very near 21 future. 22 Biomass ethanol can help eliminate municipal solid 23 waste ag and forest residues. Many landfills in California 24 are turning away waste, only to find there are few other 25 disposal options. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 California's committee on alternatives to rice 2 straw burning has determined the conversion of rice straw to 3 ethanol as one of the few viable options. 4 In addition, yard and orchard trimmings, and even 5 pecan shells, may in the future actually acquire value, 6 increasing farm income. 7 Biomass ethanol can also help make forests safer 8 and healthier. Forest fires stemming from immense fuel 9 loading have severely threatened human life and property. 10 Biomass ethanol can therefore help California 11 alleviate air pollution by converting rice straw and forest 12 residues to ethanol that would otherwise burn, emitting 13 great amounts of air pollutants. 14 Also, state money would be saved by preventing 15 imperative fire-fighting practices, which are extremely 16 costly to California and the federal government on the 17 upwards of $1 billion per year. 18 As another benefit, biomass ethanol can improve 19 biomass power economics. 20 As you know, California has recently lost about 21 one-third of its capacity supplied by biomass power plants. 22 Biomass ethanol plant generates enough energy from 23 biomass' lignin component to actually operate the plant, 24 while still having excess electricity left over to sell to 25 the grid. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 Analytical data has revealed that coupling of 2 biomass power plants -- sorry -- of biomass ethanol plant to 3 these power plants may actually keep some of them 4 operational through improved economics. 5 Three biomass ethanol plants totalling 50 to 60 6 million gallons per year production are now in the planning 7 stages in California, ready for production in about three to 8 five years. One plant will convert rice straw, one will 9 convert rice straw and wood waste, and one will convert wood 10 waste only. 11 On October 20th of this year, a groundbreaking 12 ceremony took place in Louisiana to retrofit a starch-based 13 ethanol plant to use sugarcane waste as its biomass 14 resource. 15 California therefore will have the benefit of 16 expanding on the learning curve of this first-of-a-kind 17 plant, which will make construction and operation of 18 California plants that much easier. 19 In summary, the California State Legislature asked 20 for an evaluation of environmental benefits for MTBE 21 alternatives. 22 I believe I've covered these for biomass ethanol. 23 The recent UC Davis report and the CEC reports 24 support banning MTBE, and demonstrate that there are no 25 unsurmountable cost barriers to using ethanol in California. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 But to expand this industry quickly to displace 2 MTBE with ethanol is going to require a commitment from 3 California. 4 I believe that if California doesn't use 5 corn-based ethanol as a bridge to biomass-based ethanol, in 6 the future California may lose its opportunity for this fuel 7 and all of its many benefits, as it will be hard to 8 resurrect the oxygenated fuels program. 9 The corn ethanol industry claims it can rise to 10 the occasion of supplying most of the MTBE replacement 11 within a few years by expanding their existing capacity. 12 If California gave the Midwest this opportunity, 13 biomass ethanol could eventually be phased in to displace 14 Midwest ethanol. 15 The only barrier to using ethanol in California is 16 the current oxygen cap, along with the threat of eliminating 17 the one-pound RVP waiver. 18 Biodegradable California-based ethanol can provide 19 California with its many benefits, including a reduction of 20 open field burning and its air pollutants if this barrier 21 was taken down. 22 As a closing thought -- 23 CHAIRMAN RIORDAN: Closing thought. 24 MS. SMITH: As a closing thought, please don't let 25 California throw the biomass ethanol baby out with the MTBE PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 contaminated bathwater. 2 Thank you. 3 CHAIRMAN RIORDAN: Thank you very much. 4 Appreciate your testimony. 5 Dawn Forsythe, John White, and Necy Sumait, Thomas 6 Toy, if you will queue up, the list of witness. 7 Please introduce yourself and who you represent. 8 MS. FORSYTHE: Madam Chair, members of the Board, 9 my name is Dawn Forsythe. I'm the district information 10 officer from the South Tahoe Public Utility District. 11 I started out early this morning from South Tahoe 12 and my brain wasn't functioning right. If it was I would 13 have brought with me the copy of the Tahoe Daily Tribune. 14 You were the headlines this morning, "State Acts to Protect 15 Water Quality." I hope you're the headlines on Monday, our 16 next edition, that you can act to protect groundwater. 17 As you know, South Tahoe has lost 35 percent of 18 our drinking water wells to MTBE contamination. Because of 19 variable pumping rates, that's 17 percent of our drinking 20 water. 21 We're in dire straits in South Tahoe. As you 22 know, we are a small community, 30,000. We serve 30,000 23 people. But this holiday and next summer our population can 24 triple and at times quadruple. And, frankly, we're on the 25 edge with our water supply. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 We were hoping to replace it. We got a site that 2 we thought was an upgradient of a gas station, of any gas 3 stations. We were pretty sure that it was MTBE free. 4 Unfortunately it's on Forest Service land and that project 5 has been stopped because US Fish and Wildlife Service wants 6 to investigate eagle habitat. 7 We had another site where hydrogeologists gave us 8 90 percent confidence level that there would be no MTBE in 9 the lower aquifers, in the deeper aquifers. And maybe it's 10 our luck, but MTBE is there. Now, it's at very trace levels 11 .12, .17, .29, .30. It's going up. 12 And people say why are you worried about such 13 small minute traces of MTBE? Ladies and gentlemen, if 14 Godzilla is in your neighborhood, you don't go out and have 15 a barbecue on the front lawn. What you do is you go in the 16 house, you turn off the lights, turn down the stereo and 17 hope that Godzilla goes the other way. 18 We're hoping that Godzilla will go the other way 19 or that someone will come in and kill the creature. 20 Now, we're not air people. We're not gas people. 21 We're water people. 22 And the simple fact is that MTBE is contaminating 23 our groundwater, and ethanol and gasoline would not. 24 When the President wanted to kill Godzilla, he 25 called in the Air Force. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 You are the Air Force for the State of California. 2 Please help us stop Godzilla's rampage through South Tahoe. 3 Please consider the water considerations when you're looking 4 at the air. 5 This is so important, as if we're all to protect 6 the environment of South Tahoe and other communities 7 throughout California. 8 Thank you. 9 CHAIRMAN RIORDAN: Thank you very much. 10 Remind me, what did that headline say again? 11 MS. SMITH: "State Acts to Protect Water Quality." 12 CHAIRMAN RIORDAN: Good. Good for us. 13 Let me invite Mr. White to come forward. Necy 14 Sumait next, Thomas Toy, Paul Knepprath and finally Loyd 15 Forest. 16 MR. WHITE: Madam Chairman, members, good morning. 17 My name is V. John White. And I'm here today representing 18 Sierra Club California. 19 I apologize on behalf of my colleague, Bonnie 20 Holmes-Gen, who has been working on this issue for the club, 21 and who was unable to be here, so I'm trying to fill in. 22 You have a letter in the record from the Sierra 23 Club on these issues and in respect to the time, I'll be 24 brief. 25 I think that the staff report and the peer review PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 speaks for itself in terms of the facts that you have before 2 you. 3 We're grateful that the staff successfully 4 completed the 12-car study, which I think for those of us 5 that reflect on Auto/Oil and other kinds of studies that we 6 have, shouldn't be seen as a small number. It may be that 7 we want more cars, but this is a significant number of cars, 8 and the data is statistically significant. 9 We're particularly pleased, having supported 10 Senator Sher's legislation, to see that ARB be the first 11 agency we believe to utilize the peer review process. We 12 think that that's something that's very healthy for the 13 future. 14 The findings, again, with regard to the 17 percent 15 increase in ozone-forming potential, again, I think you 16 recall that it doesn't include NOx. For some reason the 17 Legislature in its wisdom suggested you not take that into 18 consideration, but, regardless, we know that that's a 19 factor. 20 Simply put, the open-ended volatility waiver 21 simply can't be allowed. There isn't the basis for doing it 22 on air quality grounds. 23 Also, I think the conservativism of the staff's 24 work on this has to be underscored by the Argon National 25 Laboratory study that found significant increases in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 aldehydes, and peroxyacyl nitrates in the atmosphere. 2 These are toxic and highly reactive, therefore 3 since they weren't considered, I would suggest that the 4 staff's conclusions are in fact conservative. 5 Sierra Club is not opposed to the use of ethanol 6 gasoline. We recognize its potential as a sustainable 7 waste-producing environmentally beneficial project. We have 8 supported subsidies for rice straw and other forms of 9 biomass ethanol and will do so in the future. 10 However, we have a strong belief that all the 11 gasoline additives need to comply fully with California's 12 air quality regulations. 13 Tosco has met this challenge in the Bay Area and 14 it's currently selling compliant ethanol blends. 15 I think your staff suggested, Dr. Jessel as well, 16 that additional regulatory mechanisms to facilitate the use 17 of methanol may be available and the only thing you're 18 taking off the table today is the RVP exemption. 19 I think as time has shown that the predictive 20 model and inputs that can be put in with everybody's 21 participation can in fact yield some substantial flexibility 22 and opportunities. 23 A lot of folks never thought you all would do the 24 oxygen cap, but when you found a way to do it right, you did 25 it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 So I think that I have confidence that the Board 2 as it strives to move forward into the next period will be 3 successful. 4 In that regard, we don't think it's too soon for 5 you to consider the next step toward attainment and look 6 forward to helping CARB define appropriate standards for 7 Phase 3 reformulated gasoline in the very near future. 8 Also, I would mention in response to the issues 9 raised on the water issue, that the Sierra Club has joined 10 with other groups in putting before the State Auditor 11 General some information about the nature of the water 12 contamination failure that we have in the state. 13 I look forward in the future to this Board perhaps 14 taking a more direct interest in involvement, just as 15 Mr. Del Piero was here yesterday, looking at your process 16 with regard to protecting the water quality with respect to 17 his concerns. 18 And I think the Board can no longer sit passive 19 with respect to the regulation of the state's gasoline 20 infrastructure, because there has been a systemic breakdown 21 that jeopardizes far more than the water supply with respect 22 to MTBE contamination. 23 And in fact if the true record of this story is 24 ever told, this Board will have been found to have been 25 aware and conversant with those issues, but did not have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 responsibility or authority. 2 One of the things I look forward to in the coming 3 years as we do multi-media analysis between any cost 4 regulatory agencies -- Ms. Rakow remembers, I think when the 5 Energy Commission played a very significant role with this 6 Board with respect to the launch of this program. 7 I think it's clear now that the fuel 8 infrastructure of the state, the impact of fuels on that 9 fueling infrastructure and the impact on that fueling 10 infrastructure on the groundwater supplies is something that 11 this body has to take -- 12 CHAIRMAN RIORDAN: Can you speak up? We're 13 getting to -- there was a request for you to speak up. What 14 they didn't know was the red light was on and I knew that 15 you were going to conclude soon. 16 MR. WHITE: I'd also like to extend not only best 17 wishes for the holidays, but congratulations to this Board 18 for its service over the last several years and particularly 19 for a stunning bit of achievement in the last quarter of the 20 Board's year. Very substantial body of work has been 21 accomplished and we congratulate you and commend you for you 22 public service. 23 CHAIRMAN RIORDAN: Thank you very much. 24 And I know that extends to the staff too, because 25 they're -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 MR. WHITE: Absolutely. 2 CHAIRMAN RIORDAN: -- very much a part of that 3 incredible record that we have undertaken. 4 Thank you very much, Mr. White. 5 Necy, you're going to have to pronounce your last 6 name correctly. 7 MS. SUMAIT: Good morning. I am Necy Sumait, with 8 Arkenol Inc., a California-based company. 9 I'm also here on behalf of the Clean Fuels 10 Development Coalition, CFDC. 11 We're pleased to provide -- to have the 12 opportunity to present comments on California Air Resources 13 Board's consideration of the ozone-forming potential of 14 ethanol blended fuels. 15 We would like to commend CARB on its efforts to 16 lift the current oxygen cap on gasoline in order to provide 17 more options for the use of clean-burning oxygenates, while 18 also providing additional refiner flexibility to meet the 19 environmental goals of California's clean-burning gasoline 20 program. 21 However, we do not feel it is prudent at this time 22 to include in the determination a position under 23 ozone-forming potential of such blends. 24 CFDC is a nonprofit organization with a diverse 25 membership of more than two dozen member companies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 representing a variety of industry interests, but include 2 fuel oxygenate producers, American automobile manufacturers 3 and independent US refiners and others involved in the 4 agriculture and clean fuel business. 5 CFDC supports the continued implementation of the 6 existing federal and California cleaner-burning fuel 7 programs, which demonstrated their ability to reduce air 8 pollution. 9 Arkenol, who I'm from, is a member of CFDC. 10 Arkenol is a technology development company with patented 11 technologies to convert a wide range of waste materials such 12 as rice straw and green waste into bio-based industrial 13 chemicals, such as fuel-grade ethanol. 14 Arkenol's developing project opportunities 15 worldwide, including a rice straw to ethanol plant here in 16 Sacramento County. 17 This project and others like it responds to ARB's 18 search for alternatives to rice straw disposal and 19 improvements in air quality from the avoidance of open field 20 burning. 21 The availability of technology like Arkenol's 22 allows for the conversion of California's abundant biomass 23 resources into home-grown fuels, while providing solutions 24 to our issues of waste management, air pollution and 25 economic development. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 CARB's determination of the ozone-forming 2 potential of methanol blends as a result of efforts to 3 increase the oxygen cap from its current level of 2.7 to 4 3.5, which would allow the use of ten percent volume ethanol 5 blends and give refiners more flexibility in developing 6 formulations of gasoline and improve air quality in the 7 State of California. 8 The constantly fluctuating science of fuel 9 formulations and the relationship with automobile emissions 10 has made this a complicated and difficult issue. 11 The proposed determination by the Board that 12 elevated RVP gasoline results in increased ozone-forming 13 potential is a serious determination with far-reaching 14 ramifications. In fact, this determination could have an 15 impact in the future use of oxygenates in gasoline, and 16 therefore deserves careful scrutiny. 17 The stated objective of giving refiners more 18 flexibility by allowing blends of ten percent ethanol is an 19 admirable goal, but itself will not result in any measurable 20 quantities of ethanol being utilized. 21 At the same time, however, we believe it's 22 premature to make a determination that such ethanol blends 23 increase the potential for ozone formation and urge that 24 this issue be examined further. 25 There are a number of benefits to increased oxygen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 content in gasoline and additional environmental gains are 2 available to California refiners using ten percent volume 3 blends, particularly with the availability of technology 4 such as Arkenol's biomass to ethanol will allow for an 5 expanded use of local biomass like rice straw and provide 6 the benefits that Ms. Smith described earlier. 7 Given the constraints that ethanol has faced 8 relative to meeting RVP requirements, this determination by 9 the Board could have the practical effect of eliminating 10 ethanol as an oxygenate and a clean-burning gasoline 11 program. 12 If problems associated with other oxygenates 13 result in a limitation on their use, the entire program's 14 use of oxygenates could be in jeopardy. 15 Therefore, the very relief to refiners the rule 16 seeks to provide would be lost, as well as the many air 17 quality benefits that have come from us from the use of 18 oxygenates in gasoline. 19 According to the supply and cost alternatives to 20 MTBE and gasoline study, the CEC, if the scope of replacing 21 MTBE were to be broadened to include the elimination of all 22 oxygenates from gasoline, the cost impact to consumers would 23 be the greatest, regardless of the length of time allowed 24 for the transition. That decision may need to increase 25 gasoline cost to California of over one billion to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 consumers. 2 We are in agreement with the California Department 3 of Food and Ag's analysis that there is, and others here, 4 that there is sufficient disagreement among experts 5 regarding the assumptions, the methodology and the modeling 6 protocols that warrant continued vehicle emissions testing 7 work beyond Phase 1. 8 This should also assure that the light-duty 9 vehicle fleet relative to the source of emissions is 10 appropriately represented in the test protocol. 11 We believe it's incorrect to focus on the massive 12 emissions without regard to the level of toxicity or 13 reactivity. 14 Not all VOCs are alike in terms of toxicity or 15 reactivity. The loss of oxygenates could result in an 16 increase of more carcinogenic compounds at the expense of 17 less toxic ones. 18 Reducing oxygenates would produce a fuel that is 19 more, rather than less, reactive, because of an increase in 20 the use of aromatics. 21 Furthermore, the CARB test program was not based 22 on a representative fleet of vehicles to make such an 23 important determination. The lack of high emitters among 24 the test vehicles and the overall small amount of vehicles 25 is not sufficient to provide a conclusion, given the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 importance of maintaining a viable role for all oxygenates 2 and gasoline. 3 CHAIRMAN RIORDAN: I think I'm going -- 4 MS. SUMAIT: Even the likelihood of this 5 determination will impact that role. 6 We respectfully urge the Board to refrain from 7 making this determination at this time. 8 Future tests to determine ozone-forming potential 9 need to be conducted with more in-depth examination and with 10 a much wider vehicle population. 11 In conclusion, California will need all available 12 options during the next three-year period to make cleaner 13 burning gasolines. A decision at this time such as is being 14 proposed would virtually eliminate the use of a renewable 15 cleaner-burning gasoline component with a multitude of 16 additional benefits for the state. 17 Thank you. 18 CHAIRMAN RIORDAN: Thank you very much. 19 Mr. Toy. 20 Give us your name and who you represent, for the 21 record, please. 22 And you can adjust that microphone up. 23 MR. TOY: Thank you. Good morning, Madam Chair 24 and committee. My name is Thomas Toy and I work for an 25 experiential education school out of Coloma, California, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 namely Current Adventures. 2 I work with children, primarily in water, namely 3 Lake Natoma and the lower American River in our adventure 4 camps. 5 After the findings were published about MTBE, I 6 felt that the children in our program were being put at 7 risk. I became interested in -- I can't read my own 8 writing -- in oxygenate alternative and see ethanol as a 9 viable substitute. Not only is it renewable, it also 10 doesn't harm the children I signed up in our programs. 11 Just briefly, I feel the findings in 98-15-3 are 12 inconclusive and that ethanol is a very green alternative. 13 And I think the kids would agree. 14 So thank you very much and enjoy your day. 15 CHAIRMAN RIORDAN: Thank you for being here to 16 testify. 17 Ms. Edgerton. 18 MS. EDGERTON: Mr. Toy, I think all of us share a 19 concern about a clean environment for the children. We have 20 probably the most important children's health study, an air 21 quality study, ongoing in the nation right now in our 22 research portfolio. 23 My understanding of the findings of the staff on 24 this is that if we go ahead and make the finding that you've 25 recommended, in fact we'll be recognizing that the tests PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 show more air pollution, not less, if you have the 2 unwaivered ethanol. 3 I mean, I wanted -- I'm a little confused by your 4 position, because what the staff report basically says is we 5 need to make this finding because ethanol is more -- has 6 higher Reid vapor pressure, and therefore is more reactive 7 and therefore will cause -- has more ozone-forming 8 potential. 9 Gentlemen, can you -- 10 MR. SIMEROTH: That's basically correct. Blending 11 ethanol into gasoline results in the result of having a 12 higher Reid vapor pressure of approximately one pound per 13 square inch. The test results would show that that results 14 in a significant increase in emissions of hydrocarbons, 15 which results in a higher ozone-forming potential in the 16 atmosphere. 17 MS. EDGERTON: So thank you. I'm not a scientist. 18 MR. TOY: I'm not either. 19 That was one of my problems when I read studies 20 such as this. 21 What I have found, I guess, just reading through 22 98-15-3 and in terms of just a person from the general 23 public that I feel if we did use ethanol now, currently, in 24 the formulated fuels that we have, that the benefits would 25 outweigh the cost of MTBE. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 And that what I would like to see, again coming 2 from the general public perspective, is that we can use 3 ethanol at the moment, and then down the road reformulate 4 gases so that the ozone increases or the clean air -- let me 5 see if I can say that again. So that we can reformulate 6 gases down the road so that it would accommodate the ethanol 7 usage in a much more greener way. 8 MS. EDGERTON: Just, just in -- without belaboring 9 this, from my study I think what we're doing here is going 10 to improve the -- it's a positive step in terms of 11 protecting the children's health. 12 So you might want to look a little more carefully 13 on that. You may keep your view when you walk out of here, 14 but I just -- we have a different view as to what the 15 consequence would be. 16 It's also my understanding that you can spend a 17 little more money and bring down that Reid vapor pressure in 18 the ethanol. It's not spend a little more money, it's spend 19 a lot more money, isn't it. I mean, in the blends. 20 MR. SIMEROTH: We have Tosco in the Bay Area is 21 using ethanol to make cleaner-burning gasoline. They also 22 used it last summer and fully complied with our Reid vapor 23 pressure requirements. 24 And I think what you're hearing this staff commit 25 to is to look at how do we correctly credit ethanol's use PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 for potential adjustments to our standards and still 2 preserve the benefits of the program and have flexibility. 3 MS. EDGERTON: Thank you. So the point is if you 4 bring down the Reid vapor pressure in the ethanol, then it 5 can be competitive in terms of its clean air benefit. 6 CHAIRMAN RIORDAN: Thank you, Mr. Toy, for coming. 7 We appreciate that. 8 Mr. Paul Knepprath and Neil Koehler will be the 9 last speaker on our agenda on this item. 10 MR. KNEPPRATH: Good morning, Madam Chair and 11 members. It's nice to be here today. I will try to keep my 12 comments brief. 13 CHAIRMAN RIORDAN: Good. 14 MR. KNEPPRATH: My name is Paul Knepprath, 15 representing the American Lung Association of California, 16 and our medical arm, the California Thoracic Society. 17 Simply put, the American Lung Association supports 18 the finding and your action on that finding as the staff has 19 recommended it to you. 20 Looking at the science and looking at the studies 21 that have been done, it appears that this has been fairly 22 exhaustive, that it is consistent with other studies that 23 have been done on this issue, and we support that. 24 The American Lung Association is not against 25 ethanol, per se. In fact our position on fuel is that we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 fuel neutral. We want fuels to be used that will give us 2 the most emission reductions and the most public health 3 benefits. So we want to make it clear that we're certainly 4 not up here today to oppose the use of ethanol or the 5 ethanol industry. And in fact as most of you know, we have 6 been supportive of all the efforts to reduce rice straw 7 burning and to use the fuel stock from rice straw for any 8 purpose that might benefit the environment or public health, 9 including the production of ethanol fuels. So I want to be 10 very clear on the record for that issue. 11 We are concerned about the ozone-forming impacts 12 that have been found in the ten percent ethanol, and just 13 say that we think that in a time when we're still not 14 meeting our attainment for ozone that it seems unwise for us 15 to move down the road of perhaps creating more barriers for 16 reaching containment based on the results from the studies 17 that have been shown in this area. 18 The other issue that we wanted to note, and we do 19 have this in the letter on record, is that the study showed 20 and found vehicle emissions of toxic air pollutants from ten 21 percent ethanol fuel to increase by about 13 percent. And 22 while this in the staff report the calculated potency 23 increase of only five percent, much of that was in acid 24 aldehydes, which US EPA has classified as a probable 25 carcinogen. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 These also promote the creation of PAM, the 2 perooxylacyl nitrates, in the atmosphere, which also 3 contribute to smog-forming potential. So we want to also 4 make note of that. 5 There's also the issue of commingling ten percent 6 ethanol fuel with non-ethanol California RFG and the results 7 of this kind of mixed commingling on ozone-forming 8 potential. We think that the multiplier effect should be 9 investigated on the cleaner-burning gasoline program before 10 making any decision on the waiver. 11 The ARB's clean-burning gasoline program has 12 brought real air quality and public health benefits beyond 13 the levels even predicted from the beginning of this 14 program. 15 We want to urge caution in the adoption of any 16 changes to the program that may risk reducing these 17 benefits. 18 We urge the Board to accommodate the use of 19 ethanol under the existing regulatory regime, so that the 20 benefits of substituting ethanol for MTBE or other 21 oxygenates can be obtained without eroding air quality 22 benefits. 23 Thank you. 24 CHAIRMAN RIORDAN: Thank you, Mr. Knepprath. 25 Mr. Koehler come forward, please. Give us your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 name and who you represent, and you can adjust that 2 microphone. 3 MR. KOEHLER: Good morning. I think it's still 4 morning. 5 My name is Neil Koehler. I'm president of 6 Parallel Products. We are a company in Southern California 7 that converts the waste products from the food and beverage 8 industry into ethanol. 9 And I would say that it was because of my very 10 deep-seated environmental convictions that I entered this 11 business in the first place, and that I truly believed in 12 the benefits that ethanol in all forms, in gasoline, in 13 straight use, in fuel cells, that it is truly a fuel for the 14 future, is the only renewable fuel, the only liquid fuel 15 commercially produced in the world that is derived from 16 renewable resources. 17 As we move into the next millennium and global 18 climate changes takes on significance as possibly the 19 largest air quality problem we face, ethanol is very much a 20 part of the solution. 21 I'm a bit confused by this whole process today and 22 very frustrated, frankly, because I feel that what we're 23 doing here is engaging in a negative exercise that somehow 24 is suggesting that ethanol is the problem and not part of a 25 solution. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 We know MTBE is a problem. We know we need to get 2 MTBE out of the gasoline in California. We know that it was 3 probably a lack of looking at the bigger picture that put us 4 in the position where we are today, where we have an MTBE 5 monopoly in this state and that ethanol has been 6 systematically excluded from the program. 7 It was ever since '95 when the CBG program went 8 into effect. We've been shipping our ethanol to every state 9 around California that welcomes its use in its clean-burning 10 programs, without the MTBE problems that we're having here 11 in the State of California. 12 So we clearly have a problem and we need to have 13 the political will and the technical abilities and the 14 creative thinking to solve this problem, and what we're 15 engaged in here today is so far from that. 16 Just a couple of specifics here. 17 Where I'm very very confused with what we are 18 doing today is that the Legislature has always wanted to 19 make sure that ethanol was given a fair role in gasoline. 20 That's why when the vapor pressure allowance was most 21 recently extended in 1992, I believe it was, that there were 22 the environmental safeguards to make sure that the ozone was 23 protected, because while, Ms. Silva, while it is true that 24 there are increases when you add small amounts of ethanol to 25 gasoline, I'll say one thing, ethanol as a pure compound has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 an RVP of two, very very low, so it's not ethanol in and of 2 itself, it's the blending. 3 But there are offsets. We've talked about them. 4 The CARB staff recognizes them. But the models, the 5 regulatory framework we have today does not incorporate the 6 benefits of ethanol. 7 I applaud staff for wanting to engage with all the 8 stakeholders to understand what those are, so that we can 9 establish environmental equivalents. 10 But what the Legislature said was that if you're 11 going to make this finding that's before you today it must 12 be on the basis of a representative sample of the vehicles. 13 We do not have a representative sample of the 14 vehicles in today's finding, and this is where I must appeal 15 to Mr. Dunlap, because he was the one that had the political 16 vision to say we need to do this test in the first place. 17 It was 125-vehicle test. Phase 1 was merely to fine tune 18 the test to go on to Phase 2. There is nothing in the 19 protocols that suggests after 12 vehicles we were going to 20 draw a technical conclusion. 21 And in fact because there was enough concern on 22 our industry's part, and I was on the ethanol working group, 23 that this would become an issue, I said, hey, what's to keep 24 this being a set-up that you do Phase 1, that is not 25 representative, and we don't go on to do the full test? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 Don't worry, that's not what is intended here. And that's 2 exactly what we have before us today. Very serious problem. 3 The vehicles that were tested are a very narrow 4 slice. I think even in the peer review it was clearly 5 stated that the test was representative of the vehicles 6 tested, but the vehicles tested were not representative of 7 the fleet in California. 8 We've presented technical information today that 9 would suggest it was representative of only ten percent of 10 the total emission inventories, the CARB staff is saying 11 it's closer to 35 percent, but that's when you assume that 12 the 12-vehicle class that was tested was representative even 13 of that class. And we know that it was not, because it was 14 the cleanest burning -- we know that cleanest burning 15 vehicles give you the less benefit for the use of oxygen. 16 It helps you in the older vehicles and the vehicles that are 17 not quite operating in tune. 18 So it's a very serious problem. 19 The California Air Resources Board themselves, I 20 have document I have here that defines what is a 21 representative fleet of vehicles for determining alternative 22 specifications in California gasoline. 23 And to just quote a couple of sentences, the test 24 fleet required by subsection shall consist of each vehicle 25 category contributing at least three percent of the sum of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 NMOG emissions. This was not done. 2 Within -- and then consequently, or a fourth point 3 on this particular section, says that over all categories 4 for the fleet or at least five percent -- over all 5 categories tested, the total number of vehicles shall be at 6 least 20. And we have 12. So we have a serious problem. 7 There was no consensus, contrary to some of the 8 statements that are made in the staff report. A majority of 9 the ethanol work group members, which included the broad 10 range of stakeholders, did not agree with the findings, and 11 the majority of those stakeholders, and you've heard from 12 them today, we have a majority of environmental groups 13 represented today, we have the agricultural industry, we 14 have the water agencies, we have the ethanol industry, we 15 have the people that want to build rice to ethanol plants in 16 this state, are saying is premature to make this finding. 17 This is a negative for one of the most positive alternatives 18 to the use of MTBE in California gasoline today. 19 We're not saying that there are not problems with 20 the vapor pressure issue, but they are mitigated, and that 21 by the benefits and that we have to get our arms around the 22 totality of the impacts and that we enter into a 23 collaborative process to determine that. 24 The only way -- 25 CHAIRMAN RIORDAN: I think that was an excellent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 conclusion. 2 MR. KOEHLER: I have one last statement, because I 3 mean this from the bottom of my heart, based upon the way 4 that I review all of the aspects of this, and I think it's 5 adequately and abundantly made clear by the testimony you 6 heard today, is that you would be shirking your technical 7 and your legal and your public policy responsibilities if 8 you make this finding today. 9 Thank you very much for your consideration. 10 CHAIRMAN RIORDAN: Thank you. 11 We have one person to add to the witness list. 12 Loyd Forest, come forward, please. 13 Ms. Edgerton. 14 MS. EDGERTON: Yes. Can either of you gentlemen, 15 Mr. Venturini or Mr. Simeroth, comment on this assertion 16 that there was no agreement or there was very little 17 agreement in the work group? My impression was that there 18 was, from what I heard, was there was a great deal of 19 agreement with the findings, certainly the peer review is in 20 agreement. I just wanted to give you a chance to reply to 21 that. 22 MR. SIMEROTH: The staff report does not say that 23 there was an agreement. 24 The ethanol industry and the representatives of 25 the industry did not agree with the conclusions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 We have other letters from other representatives 2 of the work group who did agree with the conclusions. 3 That's one of the reason why we subjected the 4 findings to the peer review process because we had -- 5 MR. SCHEIBLE: I think if you look at it as 6 various interest groups with technical expertise, the auto 7 manufacturers clearly looked at the data and found that they 8 supported the staff's analysis. The oil industry that makes 9 the fuel and must live with the rules and must make the 10 decisions on additives, reviewed it and agreed with the 11 staff analysis. 12 We had the peer review and we have other parties 13 that also have looked at it. 14 So in terms of they were quite a few ethanol 15 interest groups or parties that are interested in furthering 16 the use of ethanol, they would like to see additional work 17 done and would like to see the decision delayed. 18 I believe the other parties, generally it's fair 19 to characterize them as they reviewed the technical work, 20 they find it adequate, they find the finding to be 21 sufficiently done by staff. 22 CHAIRMAN RIORDAN: Mr. Koehler, no, no. Thank 23 you. 24 Mr. Forest. 25 MR. FOREST: Thank you, Madam Chairman. I'm Loyd PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 Forest, TSS Consultants. We're a consulting firm that 2 specializes in biomass technologies, such as biomass to 3 ethanol. 4 We're also involved in the Gridley ethanol 5 project, as many of you know, and a recently-announced 6 biomass ethanol project at Collins Pines in Chester, 7 California, that used wood waste. 8 And we previously worked on the Arkenol 9 biomass-to-ethanol project. 10 But we work on all technologies, biomass power, 11 and it's a narrow niche, but it's our niche in the 12 marketplace. 13 I'd like to make a couple points and I really like 14 to pick up on Mike Scheible's comment. 15 I think the interest from the biomass and ethanol 16 industry is certainly more work in addressing what 17 alternatives there are for, if not a full one-pound RVP 18 waiver based upon diverting the material that's open field 19 burning on the ag side or the forest side, where is that 20 equilibrium. 21 And I think it's been probably maybe a disservice 22 from a public benefit standpoint to pose the question only 23 as E10 or one pound per square inch exemption or no ethanol 24 in the marketplace. 25 So I would urge the Board, and I think to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 reinforce the letter that Bob Heckert sent to you on this 2 issue and his testimony earlier today, to further 3 investigate the alternatives for using ethanol in the 4 reformulated gasoline and how to mitigate them and where is 5 that optimization point. 6 So I would not want to lose that in the hearing 7 today. I think it's worthy in terms of California's need to 8 solve its open fuel burning problem, as well as its need to 9 reduce the air emissions from an air pollutant standpoint. 10 I'd also suggest the theme is probably among many 11 of the stakeholders here and the reference that was made to 12 not closing the door just with a seven pound per square inch 13 Reid vapor pressure to look at some alternatives in that. 14 In that sense I think if I were in the oil 15 industry and I allowed oil in the ground, that's an illiquid 16 asset, and the only way to make it liquid is to sell it, 17 presently the more I sell this year, the more valuable that 18 asset is from the chief financial officer and CPA would tell 19 me, I would certainly probably be resisting the use of 20 ethanol in gasoline in California. 21 I'm not condemning that. I'm saying from a 22 business standpoint it makes good sense. 23 But looking at it from a public benefit standpoint 24 and the ag industry standpoint, the worst industry in air 25 quality, there's a larger set of public benefits that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 certainly the Air Board has a responsibility to address. 2 And I would commend your staff on skillfully 3 juggling all these stakeholders and the addressing this 4 issue, but I would suggest that typically as Americans we 5 have three alternatives, two extremes and a moderate 6 position in between, and all I'm saying here is what the 7 French do is two extreme alternatives, either zero ethanol 8 or ten percent ethanol, and we probably need some compromise 9 in between that addresses something that mitigates the needs 10 and the number of the areas, including air quality and water 11 quality. 12 So I appreciate your time, and I also would 13 appreciate your patience. 14 CHAIRMAN RIORDAN: Mr. Forest, Mr. Dunlap has a 15 question for you. 16 MR. DUNLAP: Jack and I had some questions and 17 you're the perfect one to help us with these. 18 The first part -- by the way, I should acknowledge 19 for some of the newer Board members, Mr. Forest had spent a 20 lot of time helping us in the rice straw alternatives areas, 21 and served as chair of committees and what not, and has done 22 an awful lot in state government, and he's been a friend to 23 this organization, so when he shows up, usually I pay 24 particular attention, because it's an issue that merits our 25 attention. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 The first part of your commentary, Loyd, a moment 2 ago where you suggested some things that we might do, can I 3 get you to maybe specify those and the mechanics of what we 4 have before us today? How would we do this? 5 MR. FOREST: I think your staff has done some work 6 on looking at what the benefits the air pollution reductions 7 would be from diverting things like rice straw, orchard 8 prunings into a product such as ethanol. 9 And all I'm suggesting is that it doesn't look 10 like those benefits have been given any credit in 11 considering a reduction on the one pound per square inch. 12 MR. DUNLAP: Because of what would happen if you 13 burned them in the open field environment? 14 MR. FOREST: Yeah. And I'm not -- by the way, I 15 have a lot of respect for your staff. They've dealt with me 16 professionally every time I've asked them really dumb 17 questions. But I also respect some of their conclusions. 18 But I would suggest there is a middle ground here 19 that should be further addressed by the Board and the staff. 20 And then I think beyond that if I were a public 21 official looking at the ARB staff, I probably ask how would 22 you mitigate a full one pound per square inch Reid vapor 23 pressure exemption, in terms of meeting your objectives, not 24 increasing the emission in the air. 25 And that probably gets beyond just the question of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 open field burning, but I think it would be a service to the 2 Board and possibly the public to have some of the 3 alternatives addressed by the staff and brought back. 4 MR. DUNLAP: Now, let me come back to Mike, you 5 and I had some conversations in this regard. 6 One of the things Mr. Parnell and I were chatting 7 about was how to incentivize or give credit for some things 8 like energy considerations or for not having open field 9 burning and some efficiencies that we realize as a society 10 and some benefits that we realize, which are things that 11 this Board unfortunately has a lot of power as people would 12 assert, but it's limited primarily to one area. I mean, the 13 air quality impacts. And that's frustrating. 14 But, Mike, maybe the two Mikes, is there something 15 we're missing or is there something more we can do here? 16 How do we give credit or incentivize in some way this other 17 good, positive activities relative to burning, relative to 18 energy, et cetera? What can do? What do we need to change? 19 How do we get through this? 20 MR. SCHEIBLE: I think we're sensitive, and 21 acknowledge that the biomass industry can have air quality 22 benefits, that reducing burning can have air quality 23 benefits, in output of forest management and other things. 24 It's very -- technically, I'd say our assessment 25 is that those benefits aren't going to be great enough to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 even on a statewide basis offset the kind of benefit you see 2 from the cleaner burning gasoline. It's something like the 3 vapor pressure, which is extremely important. 4 Also, the cleaner burning gasoline program has 5 most of its benefits in Los Angeles and San Diego and the 6 Bay Area and the Valley, areas in the high ozone days where 7 burning is basically not an issue, and has toxics 8 reductions. It adds to PM. 9 So it's very hard to go in and create a here's a 10 credit that you now, when you make a fuel, get that credit. 11 It's much easier to say there are reasons why we want to do 12 things that make this industry have a higher chance of 13 success and I think we're open to that. 14 I just also want to address the issue, since I 15 have the microphone, of what's next. 16 We don't see this finding today as biasing the 17 staff or anything we would bring to the Board in terms of 18 our next step, which is to go into the cleaner burning 19 gasoline regulations, say how do we amend those regulations 20 so that it's far easier to produce non-oxygenated fuel, and 21 that that becomes more of a choice, because that's the 22 safest choice, that it's easier to use oxygen in a way that 23 is -- it recognizes the emission benefits and takes into 24 account any emissions benefits. 25 What we're saying I think is the science is clear, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 the studies have been done, we've put tremendous resources 2 into this. The answer is not going to change. 3 The RVP waiver when you use ten percent ethanol is 4 not the way to do it. 5 We'll have to come back with regulations that 6 should provide for greater emphasis for using ethanol as an 7 oxygenate. 8 I don't know whether we're going to march away 9 from MTBE, be forced to phase out MTBE or exactly what the 10 answer is going to be, but I know we're going to do things 11 to make its use far less needed in the state. 12 And I guess we pledged to you to do that in a way 13 that recognizes the benefits of adding oxygen, will probably 14 give vastly improved opportunity towards ethanol and the 15 biomass industry. 16 On the other hand, the one RVP waiver, we've done 17 more than an adequate job of defining technically and 18 scientifically what the law requires of us, and it's clear, 19 it's not the way to go to do it. 20 MR. DUNLAP: And that's the question relative to 21 legislation. You know what I mean? 22 And maybe, Jack, I probably muddled this for you. 23 CHAIRMAN RIORDAN: Mr. Parnell. 24 MR. PARNELL: No, you did not. 25 We had the discussion. And certainly while Loyd PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 is at the microphone I, for one, think and I think people 2 from the Lung Association and others who are here would 3 grant that there are other factors out there that we simply 4 don't understand well enough and we would be enormously in 5 error today if we in any way prejudice against ethanol and 6 its ultimate use in whatever formulation, or in whatever 7 market opportunity there is for it. 8 And it just seems to me that that isn't what we're 9 doing. I agree that isn't what we're doing. In fact we're 10 trying to gain some flexibility to do what we need to do to 11 go on to the next step. 12 I have great sensitivity to what both Bob Heckert 13 said, not only because of my roots in agriculture, but 14 because of my sincere desire to want to clean up this 15 environment. 16 And so every time you take a step it is subject to 17 all kinds of misunderstanding. 18 But in fact here what we're trying to do is take a 19 step that will allow us some flexibility to move on to the 20 next step. 21 And I would, for one, like to ask the staff to do 22 just exactly what Mr. Dunlap suggested, that we make a 23 sincere effort to work with those around us to quantify 24 those other factors to really fully understand what it is 25 we're dealing with in a larger sense. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 CHAIRMAN RIORDAN: I think we can very comfortably 2 give that kind of direction. 3 MR. PARNELL: Make sense? 4 CHAIRMAN RIORDAN: If you don't take an action 5 today, because it's not quite there, but let me as the 6 chairman just say we'd like the staff to respond to what 7 you've heard in terms of some concerns or -- 8 MR. KENNY: We will look at that and we will look 9 at ways of trying to quantify these other benefits, because 10 we do acknowledge that there are other benefits from the use 11 of ethanol. 12 To some extent, what's been happening today is 13 that there's a little bit of a polarization occurring, and 14 we do not want to see that happen. 15 What we'd really like to do is see the 16 environmental benefits from ethanol recognized and actually 17 incorporated into society, but at the same time what we want 18 to do is maintain the benefits that we've gotten from the 19 air quality program in the state. 20 CHAIRMAN RIORDAN: And Mrs. Rakow, and then I'll 21 come back to you, Mr. Dunlap. 22 MRS. RAKOW: Just very quickly. 23 On quantifying benefits, I know it's a very 24 difficult task to actually come up with a formula of the 25 criteria to get a number, equivalency number. Dick Bilas, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 who is now head of the PUC, president of PUC, worked on this 2 a great deal when he was commissioner at the Energy 3 Commission, and the Energy Commission has, over the years, 4 tried to get a handle on quantifying benefits. I don't know 5 at what stage they might be, but that might be a source that 6 you might converse with too and see what they have -- if 7 they've ever come up with anything definitively. 8 MR. KENNY: We'd be happy to coordinate with them. 9 Actually we have a very good relationship with the staff 10 over there and we will take advantage of it. 11 MRS. RAKOW: I don't know whether it's ever had a 12 result. 13 And the other thing I'm just curious about, 14 several years ago there was an interagency biomass 15 committee. Is that still going or do you know? 16 MR. FOREST: I don't think it's still going. In 17 fact, I think the state, and this is probably what's 18 happening to the symptom of it, lacks a biomass policy as a 19 state policy. It's coordinated in one of the agencies and 20 it probably needs to be resurrected. 21 And relative to your other comment, in recent 22 discussion with some of -- you came from the Energy 23 Commission, Sally, and I know you're very familiar with 24 it -- but recent discussion with some of the staff, they 25 want to go back and address the benefits formally in a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 project. So I think there's an opportunity for the -- 2 MRS. RAKOW: There is an opportunity for this 3 agency, I think, to be taking an aggressive role in 4 promoting an interagency action. 5 CHAIRMAN RIORDAN: Mr. Parnell has a question. 6 MR. PARNELL: It's, I guess, it is a question. 7 Does that give you any sense of warm fuzzy feeling that 8 there is a light at the end of this tunnel, Loyd? 9 MR. FOREST: I think it's appropriate on the 10 Board's part, and I heard the staff willing to do that, to 11 look at some alternatives and putting ethanol into the 12 reformulated gasoline market. 13 And I would also suggest that at least from our 14 standpoint, we're very concerned that that not increase the 15 air pollution in the state. We live here, our kids live 16 here, our grandkids live here. So we're supporting of 17 finding a win-win-win among these stakeholders. 18 And as far as warm fuzzy feeling, as you know, 19 Jack, you and I have both been in the livestock business, I 20 believe I have a sold a horse when I've seen money in hand. 21 MR. PARNELL: I understand that. 22 But let me say this, so it's on the record. So 23 many times in the area of fuel we have a lot of air quality 24 issues and I understand those we deal with them every day, 25 they're difficult to deal with, but there is another issue PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 that we don't often talk about, and we float over this. 2 This is a renewable source. We plant the seed, it 3 grows, we have some stuff to deal with, we call it biomass, 4 we process it, we put into a use and then we can do it over 5 again next year and the next year and the next year and the 6 next year without using up, we have all that we started 7 with. 8 And so long as we pay careful attention that we 9 don't degrade the environment in the process, this is a 10 win-win. This is a win-win. And we need to really spend a 11 lot of time focusing on how we can do this and do it 12 effectively. 13 CHAIRMAN RIORDAN: Okay. 14 MR. PARNELL: That's the end of my sermon. 15 CHAIRMAN RIORDAN: Thank you, Mr. Forest. You've 16 been a good witness to kind of take all of the discussion 17 and we appreciate that and we appreciate your being here. 18 Let's move on. 19 MR. DUNLAP: Whatever we do, for the audience, 20 blame Loyd. 21 CHAIRMAN RIORDAN: Let's move on. 22 This item is not a regulatory item, but I do need 23 to ask staff to read the letters of people who were unable 24 to be here. 25 MR. VENTURINI: Madam Chair, we do have a few PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 letters that we would like to read into the record. 2 Mr. Simeroth will do that. 3 CHAIRMAN RIORDAN: Thank you, Mr. Simeroth. 4 MR. SIMEROTH: We did receive a letter from the 5 Department of Food and Agriculture that asks -- they had 6 expressed concern also about the adequacy of the test fleet. 7 We believe we've addressed that already, reiterate that we 8 still feel the fleet is representative. It represents 12 9 model years of vehicles, it goes back 12 years, 70 percent 10 of the vehicle miles traveled representative. And I think 11 we've agreed to agree with the ethanol industry on whether 12 it's 10 or 30 percent of hydrocarbons. 13 In terms of, they also brought up the urban 14 airshed modeling issue. Staff has looked at that 15 extensively. We've reviewed the models that the Renewable 16 Fuels Association has asked us to review. We find that 17 there's not appropriate for one or more reasons for use in 18 California. 19 We have also ran our own urban airshed models 20 looking at the one psi increase when you do not include NOx 21 that shows ozone goes up. 22 I think that's the response to Food and Ag. 23 CHAIRMAN RIORDAN: Mr. Simeroth. 24 MR. SIMEROTH: They also asked for a delay. 25 CHAIRMAN RIORDAN: Let me just indicate something PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 that I would appreciate your doing. I think that we ought 2 to send over the peer review to that department. It might 3 be interesting to them. 4 MR. SIMEROTH: We have sent it to them. 5 CHAIRMAN RIORDAN: Have you sent it to them? 6 Well, they didn't read it, did they. 7 MR. SIMEROTH: Apparently not. 8 CHAIRMAN RIORDAN: Apparently not. 9 MR. SIMEROTH: We've also received a number of 10 other letters. Start with the American Association of 11 Automobile -- American Automobile Manufacturers' 12 Association. They support the staff's finding. They concur 13 that the recently developed data and test program would 14 suggest a one psi RVP waiver, call it waiver now, would 15 adversely impact California air quality. They concur that 16 test vehicles and test program represent a significant 17 portion of the current on-road fleet and number of units. 18 They see no additional benefit in testing additional 19 vehicles. Despite critical comments from some people, the 20 AAMA sees nothing in the data that would change the 21 significant conclusions of the test program. One psi 22 waiver, now the full waiver, would not only increase 23 emissions, but would -- let me skip that one. Increase 24 emissions. 25 Recommends the ARB to deny the waiver, encourages PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 the staff and industry to explore additional flexibility 2 within the existing program to accommodate ethanol without 3 degrading air quality. 4 Association of International Automobile 5 Manufacturers concurs that a one psi waiver for ethanol 6 would increase oxides of nitrogen and CO emissions. One psi 7 waiver would degrade fuel quality, which would impact 8 industry efforts, auto industry's efforts, to comply with 9 the recently-adopted LEV 2 standards. Urges the Board to 10 deny the waiver. 11 Daimler Chrysler basically reiterated the 12 Association of International Automobile Manufacturers' 13 findings, and urges the Board to reject the full waiver. 14 American Methanol Institute states the test 15 program was properly designed and productive. The test 16 program results confirm long-standing engineering judgment 17 held by the auto industry and oil refiners and regulators. 18 Results are consistent with prior studies. Recognizes that 19 additional flexibility should be developed, recommends the 20 waiver not be granted. 21 Oxygenated Fuel Association basically said the 22 same thing as the American Methanol Institute. Supports the 23 staff's findings and again recommends we pursue additional 24 flexibility. 25 Western States Petroleum Association letter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 concurs with the staff's finding, which is sound and 2 supported by compelling, verifiable scientific data. States 3 that other data on record supports staff's finding. 4 Encourages staff to further evaluate flexibility in the 5 gasoline program to accommodate ethanol, while preserving 6 the benefits of the program. Recommends that the Board 7 adopt staff's finding. 8 The other letters were addressed by commenters. 9 CHAIRMAN RIORDAN: Mr. Kenny, any final comments? 10 Board members, there is a resolution before you 11 and we're going to assume you have had a chance to look at 12 that resolution, and I'd entertain a motion. 13 SUPERVISOR ROBERTS: Madam Chairman, I'm not one 14 to draw this out any further. I'll make a motion in support 15 of, if I have the correct resolution, I think it's 98-78. 16 CHAIRMAN RIORDAN: That is correct, Supervisor 17 Roberts. 18 Is there a second to the motion? 19 SUPERVISOR ROBERTS: Do we need to also -- I think 20 we're all in the same position, we feel this appropriate to 21 approve this, at the same time to be encouraging staff to 22 continue to work with those in the industry to see if there 23 are ways to utilize this product that we'd very much like to 24 see put into use. So if that can be a separate direction. 25 CHAIRMAN RIORDAN: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 SUPERVISOR ROBERTS: As part of the motion, I 2 would like that to be the case. 3 CHAIRMAN RIORDAN: I'd like to do that and 4 I'd entertain a second to that. 5 MRS. RAKOW: Second. 6 CHAIRMAN RIORDAN: Second, Ms. Rakow. 7 Thank you very much further. 8 Further discussion on this? 9 Seeing or hearing none, let's vote on motion and 10 the addition to that beyond the resolution. 11 All those in favor of the motion signify by saying 12 aye. 13 (Ayes.) 14 CHAIRMAN RIORDAN: Opposed, no. 15 (No response.) 16 CHAIRMAN RIORDAN: The motion carries. 17 And thank you very much, staff. Appreciate that. 18 Between this item and the next item, is there much 19 of a staff change that we need go through? I'd like to kind 20 of move right along. 21 // 22 // 23 // 24 // 25 // PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 CHAIRPERSON RIORDAN: Do you need a couple minutes 2 there? 3 All right. Good. 4 Let me indicate to the audience while staff is 5 changing places that this next Item is 98-9-2. 6 It is a continuation of a public hearing to 7 consider an amendment to the California Cleaner Burning 8 Gasoline Regulations increasing the Cap Limit from Oxygen 9 from 2.7 to 3.5 percent by weight. 10 If I might, Mr. Kenny, may I ask you to introduce 11 this particular Item. 12 MR. KENNY: Yes. Thank you, Madam Chairman and 13 Members of the Board. 14 We will now continue a hearing that began last 15 August. At that meeting the staff made two regulatory 16 proposals concerning oxygen and gasoline. The proposals were 17 part of a continuing effort to provide requirements with more 18 flexibility in managing their use of the oxygen and 19 maintaining gasoline. 20 One proposal, which the Board adopted partially, 21 the minimum oxygen content required for gasoline in the 22 winter and the other proposal raises the cap limit on oxygen 23 to 3 1/2 weight percent, and we are taking that proposal up 24 again today. 25 Proposed new oxygen cap will make it legal to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 produce gasoline with 10 percent ethanol with no other action 2 by this Board, the RVP exception in Section 43830(g) would 3 then take that practical effect. 4 Therefore, the Board did not want to consider the 5 higher oxygen cap until we had decided to issue all the 6 ozones for potential of emissions from gasoline with 10 7 percent ethanol, and having just dealt with the later issue, 8 we can now return to the oxygen cap proposal. 9 In the past year, we have worked extensively on 10 ways to provide refiners with more practical latitude in how 11 they use oxygenated gasoline. We believe that the Board 12 should do what is possible in this regard as long as the 13 emissions benefits from cleaner burning gasoline are not 14 reduced. 15 The increase in the oxygen cap that we proposed in 16 August would raise the allowable ethanol content in gasoline 17 to about 10 percent. That would improve the utility of 18 ethanol to refiners as potential alternatives to MTBE. 19 By allowing 10 percent ethanol to qualify such 20 gasoline to be produced without an RVB control under the 21 Health and Safety Code Section, this has been considered by 22 the Board and it has not been our issue. 23 Consequently, at this time I would like to 24 introduce Mr. Simeroth, who will review the staff proposal. 25 MR. SIMEROTH: Mr. Kenny, I am going to ask Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 Richard Vincent of my staff to present the staff's proposal. 2 MR. VINCENT: Madam Chairman and Board Members, the 3 content slide for this shows the three topics to be covered 4 in this presentation. 5 Last August, the Board heard the staff's proposals 6 for changes in the California's RFG regulations to give 7 refiners more flexibility in their use of the oxygenates, and 8 the Board adopted the proposal to receive the winter oxygen 9 program in the carbon monoxide attainment areas, and also the 10 Board made technical changes, technical corrections in the 11 regulations. 12 However, the Board decided to postpone action on 13 the proposed increase in the oxygen cap until the Board could 14 determine whether or not gasoline with 10 percent ethanol and 15 not subject to the RVP limit would cause increased divisions 16 and increase the ozone potential. 17 Increasing the oxygen cap to 3 1/2 weight percent 18 would allow 10 percent ethanol in some gasolines, such 19 gasolines would be subject to the particulate model which 20 would ensure that the higher oxygen content would not lead to 21 increases in NOx or toxic exhaust emissions. 22 The matters of the evaporative emissions in the 23 ozone forming potential of the emissions from gasoline with 24 10 percent ethanol have just been considered by the Board. 25 Staff determined that the current predicted model PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 remains applicable for the higher oxygen cap. With the 2 higher cap, refiners can add more ethanol than they do now to 3 gasoline, thereby getting more octane and volume benefit than 4 is now possible with ethanol. 5 Since the U.S. EPA allows oxygen over 2.7 percent 6 to be provided only by ethanol, the higher cap limit would 7 not increase the amount of MTBE used in gasoline. Now since 8 the Board has dealt with the RVP exemption of the 10 percent 9 ethanol, we recommend that the Board now raise the oxygen cap 10 limit to 3 1/2 weight percent. 11 That concludes the staff's presentation. 12 CHAIRPERSON RIORDAN: Oh, my goodness. Here I am. 13 It is going to be a long day. Pardon me. 14 All right. Do the Board Members have any questions 15 for this abbreviated wonderful staff report? 16 Apparently not. So, we will go into our witness 17 list. 18 I have one person at this point who signed up to 19 speak, Megan Smith. 20 Ms. Megan Smith. Is she still here? 21 Megan Smith. I knew she had to catch an airplane, 22 so maybe that is where she is, and she might have signed up 23 early. 24 Is there anyone else wishing to speak on this 25 particular item? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 I did not have anybody on the witness list except 2 Megan Smith. 3 Seeing none, then I will return it back to Mr. 4 Kenny, and let me do this, the written submissions, I think 5 there probably are some. 6 MR. SIMEROTH: Madam Chairman, there are two 7 written submissions, the Western States Petroleum Association 8 wanted it to go on record that they are neutral on this item, 9 and they have no recommendation either way, and the other is 10 from the American Ethanol Institute, and they are raising the 11 CEQA issue, and there is the possibility that the increased 12 oxygen cap may bear on the CEQA analysis. 13 We do not think that that is correct. We think 14 that the differences between seven percent ethanol and ten 15 percent ethanol would not change our analysis. 16 It is an issue that we have evaluated, and we do 17 not see any issue there or any increased potential for 18 problems for the environment. 19 CHAIRPERSON RIORDAN: And that is the end of yours? 20 MR. SIMEROTH: That is it. 21 CHAIRPERSON RIORDAN: Mr. Cuelior, I am not going 22 to ask your name first, and I apologize you are going to have 23 to identify yourself. 24 MR. CUELIOR: Neil Cuelior, the pronunciation does 25 not look anything like its spelling. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 In concept we support and our industry supports a 2 coalition of people that we have been involved with in trying 3 to help ethanol find a role in this program to support 4 lifting the oxygen cap. 5 It is very important to note that it is totally 6 contingent upon RVP flexibility, and I would like to just 7 follow up with my remarks from before, I, too, and our 8 industry and coalition that we are part of are absolutely 9 committed to environmental equivalence. 10 So, we are not advocating anything in this program 11 that would in any way degrade the environment. In fact, we 12 think that ethanol not only has the ability to provide the 13 same, if not better, air quality benefits, but it also has 14 all these other environmental benefits that Mr. Parnell so 15 eloquently attested to. 16 But the issue that, as we talked to the refiners, 17 is that lifting the oxygen cap in itself does nothing to aid 18 in the introduction of ethanol into California gasoline. It 19 is economically impossible to produce enough sub grade RVP 20 gasoline to add ethanol to. 21 That is why there is a level of vapor pressure 22 tolerances that are absolutely warranted, and I think there 23 is going to be an effort on the part of the Air Resources 24 Board to try to quantify those. 25 Our point was that should have been done before a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 negative finding, but that is done, and we are now into the 2 cap, and so it is just important to go on the record and to 3 say if the Board claims it has done something today to help 4 the cause of ethanol that would be an inaccurate assessment, 5 because without a level of the vapor pressure flexibility 6 that I think we will get to that there really is nothing 7 being done to help the cause of finding a replacement for 8 MTBE in today's findings. 9 So, while we support this, I would point out that 10 we have got to move to a collaborate process and get away 11 from the failed policies and politics of the past, and 12 certainly our industry, and I would say the majority of the 13 stakeholders in this room today are willing to enter into a 14 new collaborate process. 15 We have not seen the willingness on the part of 16 technical staff to enter into a good faith way into that, but 17 maybe we will get that behind us, and then we will be able to 18 in the future. I do not know. 19 But I certainly hope so, and we will try with all 20 of the resources we have and the creativity to do that. 21 The Legislature last year unanimously with no votes 22 of opposition passed a bill that would have lifted the oxygen 23 cap and would have actually put in context the same sort of 24 offsets we had suggested that we are talking about, and when 25 I hear the Board Members wanting to do and I would like to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 note that there was only one entity in California that was 2 opposed to that bill, and that was the California Resources 3 Board, and it was unanimously supported by an incredibly 4 broad coalition, environmental, agricultural, resource groups 5 and was opposed by one, the California Air Resources Board, 6 authored by one of the most outstanding environmental 7 legislators in California, Assemblywoman Bowen and now 8 Senator Bowen, so I am sure the Legislature will have 9 something to say on all these issues, and hopefully, we can 10 get past a lot of the negativity that we have experienced and 11 move forward to a brand new day here, because I know ethanol 12 will be a part of that, and hopefully, we can all roll up our 13 sleeves and move in that direction. 14 So with the cap, it is great. It is a great start. 15 It does not do anything of itself to help the cause of 16 ethanol. 17 Thank you. 18 CHAIRPERSON RIORDAN: Thank you. That concludes 19 the witness list. 20 Since all of the testimonies, the written 21 submissions, and the staff's comments for this item have been 22 entered into the record and the Board has not granted an 23 extension of the comment period, I am officially closing the 24 record on this portion of Agenda Item number 98-9-2. 25 Written or oral comments received after the comment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 period has closed will not be accepted as part of the 2 official record on this Agenda Item. 3 There are ex parte requirements on this item. Are 4 there any to disclose from the Board Members? 5 Seeing none, there is a Resolution before us. This 6 is number 98-79, and it contains the staff's 7 recommendations. 8 Do I have a motion on that? 9 Supervisor Patrick. 10 BOARD MEMBER DUNLAP: Second. 11 CHAIRPERSON RIORDAN: Supervisor Patrick to support 12 and seconded by Dunlap. 13 Any discussion on the motion? 14 Seeing or hearing none, all those in favor of the 15 motion, signify by saying aye. 16 Opposed, no. 17 The motion carries. 18 Thank you very much. 19 Staff really caught me by surprise, because we went 20 so fast. Where were you yesterday? 21 All right. Next before us, and do we need any 22 change here in staff? 23 No. We are okay. 24 Agenda Item 98-15-4, let me ask Mr. Kenny to 25 introduce this item and the staff presentation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 MR. KENNY: Thank you, Madam Chairman and Members 2 of the Board. 3 This item is a proposal from staff to change the 4 fuel specification for LPG sold for use in motor vehicles. 5 LPG is commonly known as propane. 6 The changes are proposed to preserve the current 7 supply of complying fuel to owners of LPG vehicles while 8 assuring a quality vehicle fuel with adequate emissions 9 performance. 10 At the March 1997 Board hearing, the Board approved 11 the delay in implementing its previously adopted five percent 12 limit on the propene content on motor vehicle LPG. In 13 approving the delay, the Board directed staff to evaluate 14 alternative specifications for motor vehicle grade LPGs, and 15 the Board also made it clear that if staff were unable to 16 make an alternative recommendation, staff should propose an 17 ongoing solution that would eliminate the need for revisiting 18 this item in any future hearings. 19 First, I would like to briefly summarize the 20 history of the Board's action with respect to LPGs. The LPG 21 specifications were originally adopted in 1992 and include a 22 maximum limit on the propene content at five percent by 23 volume and a maximum limit on the butane and heavier content 24 at 2.5 percent by volume. 25 However, out of the concern that the supply of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 complying LPG might be unreliable, the Board delayed 2 implementing the five percent propene level until January 3 first 1995, and set an interm propene limit at 10 percent. 4 In 1994 and again in 1997, after concluding 5 complying fuel would not be available Statewide, the Board 6 extended the effective date for the five percent propene 7 limit. 8 The current effective date is January first, 1999. 9 Following the Board's direction, staff formed the LPG task 10 force which is comprised of members representing refiners, 11 LPG distributors, engine manufacturers and vehicle parts 12 manufacturers and others. 13 The staff's group developed and implemented a test 14 program to determine if there were alternate LPG 15 specifications that had equivalent performance durability and 16 emissions when used in engines that represent the latest 17 technology. 18 The staff has worked with the LPG task group to 19 identify an alternative specification for vehicle LPG that 20 could be acceptable in terms of emissions and major 21 performance. 22 On the basis of this work and other information, 23 staff is proposing an alternative to the specifications to 24 take effect in January. Staff is recommending that the 25 interim 10 percent propene limit that has been in place since PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 1992 to replace the five percent limit and that limit on 2 butane, butene and heavier hydrocarbons be amended to five 3 percent by volume. 4 The staff believes these changes are necessary to 5 ensure continuing supplies and complying LPG for vehicular 6 use. Failure to ensure adequate supply of LPG could result 7 in current and potential owners of LPG powered vehicles 8 selecting gasoline or diesel powered vehicles, resulting in 9 an increase in emissions. 10 Now, Tony Brasil will give the staff presentation. 11 Tony. 12 MR. BRASIL: Thank you, Mr. Kenny. 13 Good afternoon, Madam Chairman and the Board 14 Members. I will summarize the regulatory history and the 15 issues regarding LPG that bring us here today. 16 I will provide an overview of the LPG test program 17 and results and will present staff's proposal and its 18 effects. 19 In 1992, the Board adopted motor vehicle grade to 20 LPG specifications to ensure fuel quality for vehicles, and 21 the Board set specifications for certifying new engines and 22 for in-use LPG based on an ASTM standard for special duty 23 propane, which would put the limit on propene at five 24 percent. 25 To ease the transition to the new standards, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 Board included an interim limit, allowing 10 percent propene, 2 also referred to as HV 10. This is the limit in effect 3 today. 4 Under this average, the propene content is about 5 four percent. The rest of the United States can use the 6 broad specifications of commercial grade LPG in vehicles. 7 Recently the U.S. EPA adopted commercial grade LPG 8 as the motor vehicle certification fuel but has not set a 9 standard for in-use LPG. 10 Commercial grade LPG has up to 50 percent propene. 11 Because of concerns with limited supply and distribution of 12 LPG complying with the five percent propene limit, the 13 Western Propane Gas Association petitioned the Board in 1994 14 and again in 1997 to continue the 10 percent interim propene 15 limit. 16 Concerns arise because there is little incentive 17 for fuel suppliers to change the propene content in LPG, and 18 most marketers and users cannot segregate the two grades of 19 LPG. 20 Our 1996 survey of wholesalers show that out of 104 21 sites currently selling to vehicles, only 38 would still be 22 able to if the propene limit for motor vehicles LPG is 23 reduced to five percent. 24 The Board recognized that implementing the five 25 percent propene limit would restrict supply, and the few PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 users would be able to secure it for consistent supply. 2 Therefore, the Board granted its delay each time. 3 However, at the 1997 hearing, the Board directed staff to 4 investigate alternative in-use specifications and emphasized 5 that if staff were unable to make a recommendation by today's 6 Board hearing, the five percent propene limit would take 7 effect in January of 1999, and there would be no more delays. 8 In response to the Board's direction, staff formed 9 the LPG task group. The task group is comprised of members 10 representing more than 30 organizations, including the auto 11 industry, heavy-duty engine manufacturers, fuel suppliers, 12 distributors and others. 13 The LPG task group designed and implemented the 14 test program to evaluate various skilled composition and the 15 overall cost exceeded over a half a million dollars. 16 The LPG task group selected these five LPG blends 17 for consideration. The base fuel meets the certification 18 fuel specifications in our regulations as propene content 19 four percent, and as you see the test fuel have varied 20 propene up to 21 percent and butene up to 20 percent. 21 Today what we are proposing is represented by fuel 22 one with 10 percent propene. I show in the right columns the 23 octane rating for fuel one, and there is only one octane 24 number below that of the base fuel. 25 Fuel five was added later in the process and was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 not tested for octane. The results of the emissions tests 2 show that fuel one with ten percent propene and five percent 3 butene was the most similar to the base fuel with the four 4 percent propene. 5 The emissions of the other tests were higher. On 6 the Cummins engine, there was no increase in emissions, 7 except for NOx. NOx increased nine percent, and the 8 allowance for testing was six percent. 9 The results on the Ford vehicle showed no 10 significant increase in emissions for any pollutant. The 11 performance tests are in progress, but the durability tests 12 have not started. 13 The results should be available early next year. 14 The Cummins engine was selected by the task group for 15 performance and durability testing, because it was more 16 sensitive to fuel changes than the Ford engine. 17 Limited engine performance data collected on the 18 Cummins engine during emission testing do not provide any 19 evidence that fuel one with ten percent propene and five 20 percent butene is likely to present performance problems. 21 Also in the past, Detroit Diesel Company conducted 22 its own performance tests on the prototype series 50 engine 23 with a 10 percent propene fuel. 24 The test showed no concerns within the normal 25 operating range of that engine. Based on this information PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 and the fact that the 10 percent propene limit has been in 2 effect for the last four years without any report of 3 problems, we feel it is appropriate to make a recommendation. 4 We are recommending the following: That the Board 5 retain the present maximum propene limit of 10 volume percent 6 effectively limiting the content to the same cap as cleaner 7 burning gasoline; set a limit on butene at five percent; and 8 set a new standard limiting butene heavier, except butane, to 9 a one-half percent. 10 As a result of comments received, we get to the 11 release of the staff report, we are also proposing to lower 12 the limits on sulfur in efforts to make the cap the same as 13 it is for gasoline, and I am proposing to make minor 14 technical modifications to clarify the test methods and the 15 limits on butane and butene and heavier. 16 These last two changes are different than what we 17 have noticed and will be subject to the 15-day comment 18 period, if adopted. 19 If staff's proposal is adopted, there will be 20 little change from the current situation. The average 21 propene content is likely to remain at four percent but will 22 be allowed to continue to vary up to the ten percent limit. 23 We may forego a maximum potential emission decrease 24 of a tenth of per ton a day for NOx activity adjusted 25 hydrocarbons, if we assume all of the vehicle grade LPG that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 contains 10 percent propene since the in-use average is only 2 four percent propene, the impact would be less. 3 Staff's proposal also assures an adequate supply. 4 Their restricted supply by going to the five percent propene 5 limit would result in increased emissions that LPG vehicles 6 are replaced by diesel or gasoline vehicles. 7 The proposed changes will have no economic impacts 8 compared to what is being done today and do not affect the 9 SIP. We will continue the plan performance and durability 10 test, and we will evaluate the results when the tests are 11 complete, but we do not anticipate any performance or 12 durability problems. 13 However, if we find any significant new 14 information, we'll return before the Board with appropriate 15 recommendations. 16 Because vehicle technology is changing rapidly, we 17 are committed to continue considering new information as 18 technology evolves. 19 In closing, if adopted, our proposal will maintain 20 the status quo and assure that it will continue supply of 21 complying LPG. The average propene content is expected to 22 remain close to four percent, the same as the certification 23 fuel as preserved. 24 The original intent in having the in-use fuel is 25 similar to the certification fuel. We do not expect the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 average propene content to change, because there is no 2 incentive for suppliers to change their existing practices. 3 Staff's proposal provides users with a high quality 4 fuel for vehicles. No other state does. 5 The 10 percent propene maximum is merely a cap that 6 does not change the users ability to obtain a higher grade 7 fuel nor does it prevent vehicle manufacturers from requiring 8 premium grade fuels as some do today. 9 There is essentially no economic impact by this 10 proposal, and finally it does not affect the SIP because no 11 emission benefit from the LPG fuel standards were claimed in 12 the SIP. 13 This concludes my presentation. 14 BOARD MEMBER DUNLAP: Thank you. 15 We will move to the Ombudsman. 16 Ms. Meade would you like to give a report. 17 MS. MEADE: Madam Chair and Members of the Board 18 i,n preparation for today's proposal, the staff formed an LPG 19 task group in February 1997, which was comprised of 37 20 organizations representing vehicle heavy-duty engine 21 manufacturers, refiners, fuel suppliers and LPG distributors. 22 Staff worked closely with the group to develop the 23 test protocol. In addition, later the same year the testing 24 program project manager was selected, the Adapt Group, a Los 25 Angeles based consulting firm with expertise in private, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 public institutional partnerships and extensive experts in 2 LPG fuel issues. 3 Between February 1997 and September of 1998, staff 4 held 10 LPG task force meetings to develop a memorandum of 5 understanding, project goals to test protocol and to receive 6 testing updates. 7 Each meeting summary was mailed to each task force 8 member and posted on ARB's website. Numerous phone calls 9 were handled by staff, averaging about 20 per week during the 10 first six months of the project. 11 In addition, staff met with the project manager 12 once a week during the implementation of the testing program 13 beginning in April 1998. 14 On October 23, staff mailed the staff report 15 together with the notices of the November 10 workshop and 16 today's Board hearing. These items were also posted on ARB's 17 Website. 18 The mailing went to 1300 individuals, including 19 task force members, groups which have been participating in 20 the past with ARB's fuel regulations, environmental 21 organizations, the U.S. EPA and other governmental 22 institutions. 23 On November 10, the workshop was attended by 15 24 interested parties, including representatives of Ford Motor 25 Company, Engine Manufacturing Association, Cummins Engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 Companies, Arco Products, and the Western Propane Gas 2 Association. 3 In conclusion, staff worked closely with affected 4 parties and provided adequate access to participation in the 5 development of the item now before you. 6 BOARD MEMBER DUNLAP: Very good. Thank you. 7 Mr. Kenny, would you add anything? 8 MR. KENNY: No, no, thank you. 9 BOARD MEMBER DUNLAP: What I think we will do, we 10 will hop into the witnesses. 11 Kate Drakos. I will ask everyone that we call to 12 sit in the front row or two. 13 Bruce Irion, Baron Glassgow, Alina Tan and Bill 14 Platz. 15 One thing I should mention, at various times there 16 are Board Members that are not sitting up here. In the back 17 they are taking their lunch, and we have a speaker for 18 listening, and I know I have been up and down, and I want you 19 to know I have been listening to what the testimony is. 20 MS. DRAKOS: Thank you. Good afternoon, Members of 21 the Board and staff. 22 My name is Kate Drakos, and I am representing the 23 Engine Manufacturers Association. EMA members include the 24 manufacturers of engines utilizing liquid petroleum gas and 25 small utility engines for industrial application and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 alternative fuel, heavy-duty engines, all of which are all 2 included in today's discussion on liquifed petroleum gas. 3 Now, in the interest of time, I will shorten up my 4 oral statement, but I would like to say that EMA has 5 submitted a more expansive comment that is in the record. 6 I will proceed with a modified version here. First 7 of all, the staff's proposed fuel specifications changes will 8 lower the octane reading in the commercial fuel used in our 9 member company engines. California octane rating is known as 10 anti-NOx fuel. 11 LPG engines which are derived from diesel platforms 12 are designed for HD 5 fuel octane quality. These engines 13 operate at higher compression ratios and load factors than 14 traditional light-duty LPG engines. 15 These design considerations were adopted to 16 maintain diesel engine-like performance, good fuel economy, 17 lower emissions and long life. 18 By increasing the propene content of the fuel, the 19 octane reading of that fuel will be lowered, and this in turn 20 will reduce our design margin and thus jeopardize the 21 performance and durability of these engines. 22 Secondly, data from the program indicates that 23 increasing the propene level increases the amount of NOx and 24 other ozone forming hydrocarbon emissions, although this may 25 be used as an acceptable trade-off to ensure a reasonable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 supply of LPG for LPG vehicle community in California. 2 EMA believes the Board must keep this in mind when 3 considering a broader LPG specification. 4 Next, the CARB LPG task group has not completed its 5 work. The group was formed to address technical issues 6 associated with a new, less restricted standard for LPG 7 engines. 8 Only the emission testing portion of the program 9 has been completed. Combustion performance and limited 10 durability testing, which makes up almost two-thirds of the 11 program, has yet to be done. 12 As technology continues to advance, durability 13 becomes a critical issue, and any new or amended commercial 14 fuel specifications must be shown to be acceptable over the 15 use of the life of the engine. 16 It is critical that the remainder of the program be 17 completed. Finally, and perhaps most importantly, the Board 18 must assure that any broadening of the LPG commercial fuel 19 specification is accompanied by strict enforcement of that 20 specification at the point of retail sale. 21 If the LPG specification is to be relaxed from HV 5 22 to HV 10, it remains critical for CARB to monitor the in-use 23 fuel to ensure that limits on the fuel are met and that 24 contaminants do not enter the fuel supply. 25 Also, if the LPG specification is to be relaxed, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 EMA requests that language be inserted in the Resolution 2 which allows for an automatic reconsideration of the new 3 specifications at a later time if it turns out that it is 4 demonstrated either for completion of the present CARB LPG 5 test program or from future relevant data that the broadened 6 commercial LPG specifications is harmful to the engines or 7 the environment. 8 In summary, the EMA requests that the Board fully 9 consider all of the ramifications of a broader commercial LPG 10 specification, including octane reduction, air quality, the 11 effect on engine durability and the need for enforcement of 12 fuel quality at the retail level. 13 We also request that in the future data from the 14 CARB LPG test program which is still underway or field use 15 that indicates that HV 10 adversely affects the manufacturers 16 engine durability and or performance, CARB will consider 17 whether HV 10 is an appropriate commercial specification in 18 developing new proposals if it is deemed necessary. 19 EMA thanks you for this opportunity to comment and 20 looks forward to working with the staff in the future. 21 I will be happy to answer any questions. 22 CHAIRPERSON RIORDAN: Thank you. 23 Are there any questions of this witness? 24 Seeing none, thank you very much. 25 Mr. Bruce Irion, and followed by Baron Glassgow. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 If you would introduce yourself for the record, 2 please, and who you represent. 3 MR. IRION: Good afternoon. I am Bruce Irion. 4 I work for the Martinez Refining Company, in 5 addition to that, Equilon Enterprises. 6 We welcome staff's proposals. The way to promote 7 the use of LPGs and motor vehicle fuel, we urge the Board to 8 encourage continued investigation with additional fuel 9 flexibility to promote the same. 10 I am sure if you have read through the staff 11 report, I think there are some things in there that I think 12 are relevant, and I would like to quote quickly from page 5, 13 the amendments were proposed to preserve and enhance the 14 current supply to complying fuel owners of LPG vehicles while 15 assuring adequate emission performance. 16 On page 4 the staff's proposal, will not have any 17 impacts on the State Implementation Plan because these fuel 18 specifications are not a sub strategy. 19 On the same page, the emission from gasoline 20 vehicles have greater ozone warrant potential and much 21 greater toxic contents than do emissions from LPG vehicles, 22 and also, LPG fuel engines produce virtually no particulate 23 matter compared to diesel engines. 24 Finally, from page 24, if the continued 25 availability of complying LPG due to the proposal promises PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 the sale of even a few new LPG engines in vehicles in lieu of 2 the gasoline, diesel vehicles, that effect in the proposal 3 could be a decrease in future emissions. 4 I would also like to add a couple of things which I 5 got from the Energy Information Administration in December 6 1997, alternatives to traditional transportation fuels, 1996, 7 I believe it is, like everything else, available on the Web. 8 CHAIRPERSON RIORDAN: Thank you. Amazing. 9 MR. IRION: Isn't technology wonderful? 10 In 1996, this report indicates that LPG vehicles 11 accounted for 75 percent of all alternative fuel vehicles, 75 12 percent, and 80 percent of those LPG vehicles were privately 13 owned versus 45 percent from non-LPF alternate fuel vehicles. 14 From these statements, it is clear that LPG is the 15 fuel of choice for alternative fuel owners and overwhelmingly 16 so for private owners of alternative fuel vehicles. 17 Also, CARB's LPG fuel standard will not ignore the 18 emissions consideration but was primarily adopted to promote 19 the use of LPG as an alternative fuel. 20 We believe that the proliferation of LPG as an 21 alternative fuel needs to continue and is best served by 22 having as much flexibility as fuel standards that consumer 23 acceptance will allow. 24 As the staff report indicates, less than 10 percent 25 of propane marketed is used in motor vehicles, and in fact, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 while some LPG marketed by refiners may meet motor vehicles 2 fuel specifications, I am not aware of any refiner that 3 guarantees this product meets these specifications, meets 4 specifications anymore restrictive than commercial grade LPG. 5 We are concerned, of course, that any overly 6 restrictive motor vehicle fuel specification could stifle LPG 7 fuel vehicles by limiting supply availability. 8 I have heard concerns raised that a flexible fuel 9 standard might impair the performance for emission 10 characteristics of engines. I do not view these concerns as 11 problems. 12 The emission performance of engines will continue 13 to be judged against the certification fuel that has not 14 changed. Furthermore, in the same fashion that certain 15 gasoline vehicles are recommended for use of 92 octane 16 fuels, there is nothing in this regulation that precludes a 17 manufacturer's ability to specify the use of the stringent 18 fuel then required by the regulation. 19 Finally, we trust gasoline users to make judgments 20 in deciding adequate performance for their engines. Why 21 should we assume that all alternative fuel vehicle owners 22 would exercise any poorer judgment? 23 It does not seem reasonable. A more restrictive 24 requirement should be set for LPG, and for gasoline, I was 25 also struck by your comment, Tony, about the EPA adopting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 commercial grade propane as standard one, their fuel. 2 Again, we support the recommendation of staff to 3 increase LPG motor vehicle fuel flexibility and encourage the 4 Board and staff to continue to explore LPG fuel flexibility 5 as a way of encouraging it use as alternative fuel. 6 CHAIRPERSON RIORDAN: Thank you very much. 7 Mr. Baron Glassgow, followed by Ms. Kulikowski-Tan. 8 MR. GLASSGOW: Good afternoon. 9 My name is Baron Glassgow, and I appreciate the few 10 moments I am going to spend with you today, and I emphasize 11 the few moments. 12 I am the Director of Field Services for the 13 National Propane Gas Association, and I staff NPGA's Engine 14 Power Committee. 15 I am here effectively to ask you to either 16 temporarily adopt the standard before you or to delay 17 adoption until the LPG task force has completed its work. As 18 what will be demonstrated in my very brief comments today, 19 the future of propane as a motor fuel in California is really 20 at stake in this conversation today. 21 The fine reputation today of the ARB leads your 22 conclusions to be used nationwide, certainly by the Federal 23 Government and by other states in the development of 24 regulations to be used throughout the country and sometimes 25 with unforeseen consequences. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 First I want to just point out briefly the reason 2 that the National Propane Gas Association is interested in 3 this issue. As a member of the LPG task force, we have been 4 a contributor to the participation, financially and as well 5 as the task force in terms of effort. 6 Our membership includes 4,000 businesses in 26 7 countries, including hundreds of businesses and thousands of 8 employees here in California. We are a trade association 9 that represents every spectrum of the propane industry from 10 the large mom and pop industry to the large corporation to 11 tank manufacturers. 12 With the propane producers, we represent everybody 13 and in this particular case, it is interesting, as Bruce 14 pointed out, and I am not going to repeat the statistics that 15 he had put in his comments, but certainly propane as a motor 16 fuel is the predominant alternative fuel. 17 As he indicated, 75 percent of vehicles located in 18 the country running on alternative fuel are running on 19 propane. The fuel spec that you have before is really 20 interesting in that it really does things that the staff 21 report doesn't reflect, I think. 22 The staff report indicates, and if I can -- the 23 staff is not aware of any LPG producers or marketers who 24 alter their facilities or operations to allow for segregation 25 of vehicular LPG. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 I think the conclusion that is being drawn through 2 those comments is that because preparation has not been made 3 that therefore there is not a problem with that, and I guess 4 that would be similar to saying you have not purchased a 5 ticket for a trip, therefore, it is not going to cost you 6 anything. 7 I think in this particular case we have not 8 purchased the ticket for the trip because we are not sure if 9 we are going to take the trip or not. 10 The difficulty that has began is that propane is 11 really a singular, the infrastructure for propane really 12 allows for a singular fuel. The national propane spec that 13 you have for commercial grade propane really reflects the 14 realities of the propane industry. 15 We have propane distribution that goes nationwide. 16 Just because a propane is sold here in California does not 17 mean it is different propane which is used in Arizona, 18 Nevada, Utah. We bring propane into California, and we take 19 propane out of California. 20 The commercial grade propane that is called from a 21 national level reflects the realities of propane. There is 22 one distribution. There is one tank. There is one refilling 23 mechanism. 24 It is all transparent across the country. 25 Essentially this spec will likely call for a dual system, one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 for propane motor fuel and one for non propane motor fuel, 2 and frankly, ladies and gentlemen, the propane industry is 3 not established to accommodate a separate motor fuel 4 facility. 5 The quickest way that we can kill the California 6 use of propane as an alternative fuel is to require 7 segregated propane as a motor fuel. The economics will not 8 support it. The infrastructure and production will not 9 support that. 10 In essence, what I would like to encourage you to 11 do is delay this for a few months until the LPG task force 12 work is done, or adopt this, recognizing that it is probably 13 a temporary adoption, and it will come back to you asking 14 that you reconsider this once the information is fully 15 available from the LPG task force. 16 Thank you very much for your time. 17 CHAIRPERSON RIORDAN: Thank you. 18 Are there any questions for this witness by any of 19 the Board Members? 20 Thank you very much. 21 The next witness is Ms. Kulilowski, and the final 22 witness is Mr. Platz. 23 If you would identify yourself for the record and 24 who you represent. 25 MS. KULIKOWSKI-TAN: Thank you, Madam Chairman and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 the Board. 2 My name is Alina Kulikowski-Tan. I am with the 3 Adept Group, the project manager of the ARB LPG fuel blends 4 evaluation project. 5 First of all, I would like to acknowledge the ARB 6 staff and the consortium and task group who sponsored this 7 project. Without their guidance and time and sponsorship, 8 this would not have been possible. 9 This project has been a very exciting project. We 10 have gained new insight every step of the way, and we have 11 now garnered not only national attention but international 12 attention. 13 We are getting inquiries all over the world about 14 this project. The project is well under way. We are in the 15 middle of the second phase of testing. 16 We are also still fund raising for the project. 17 In light of these circumstances, what I would like 18 to emphasize today is that we as project managers support 19 staff's proposal and ask that the Board consider the 20 following modifications or additions. 21 We would ask that the Board review the data from 22 the performance and combustion testing and durability testing 23 when it is complete. We estimate that will be in about six 24 months. 25 We ask that there be mandatory review by the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 within no more than three years. A lot of things change in 2 this industry in three years. They change year to year. 3 The technology that we are using to test in this 4 program right now did not exist two years ago. So, to assure 5 that the agreed-upon testing program is completed, as I 6 mentioned, we are about halfway through, and we are still 7 fund raising, I appeal to the Board that they give the staff 8 the support they need to complete this program. 9 This is a very exciting program. I cannot stress 10 that it has given a lot of insight to many different players 11 in this industry and related to this industry about how LPG 12 functions as a motor fuel. 13 We learned a whole heck of a lot in the emissions 14 phase. 15 Allow for equivalent LPG blend formulations. This 16 is an off-shoot off of what the ARB has already done with 17 diesel. We think this is a model that should be considered. 18 We are asking that the Board support staff looking 19 into looking at equivalent formulations and also to support 20 staff in maybe developing emissions prediction models because 21 of all that we have learned so far. 22 The final is delete the butane, butene and heavier. 23 This is usually a very valued issue, and staff's attention to 24 this issue is correct. 25 We as the project manager have not addressed this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 issue so far in the project. The task group has not 2 addressed it in their dialogues. 3 In summary, I would like to say thank you very much 4 for the support you have given the project today. I would 5 also like to extent thanks to the staff and to all those who 6 have made it possible. 7 Thank you. 8 CHAIRPERSON RIORDAN: Thank you very much and thank 9 you for your testimony. 10 Staff, I do not know whether you want to make any 11 comments on any of the speakers, and then what I would like 12 you to do is do the written submission, if there are any -- 13 I'm sorry, Mr. Platz, I forgot you, and I apologize. 14 I am so excited to get to the end of this Agenda. 15 MR. PLATZ: It is all right, Madam Chairman. 16 You are saving the best for last. 17 CHAIRPERSON RIORDAN: Best for last. I apologize. 18 MR. PLATZ: Well, as many of you probably know, I 19 am also, if not the signatory, at least the reason why we 20 keep getting to discuss this issue every couple of years. 21 Officially, my name is William Platz. I am 22 currently the President of the Western Propane Gas 23 Association. 24 This is a voluntary organization made up of some 25 175 propane marketers, distributors, fuel producers and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 equipment suppliers in the State of California and 2 represented also in Nevada now. 3 I want to remind the Board that propane or LPG is 4 sold for many different uses, not only for engine fuel but 5 for heating purposes, water heating, cooking, et cetera, and 6 any given market area in California is served by a minimum of 7 at least three if not more marketers. 8 Industry is deeply fragmented, highly competitive. 9 We eat our young. 10 Most of our companies are small mom and pop 11 organizations as opposed to the large groups that you deal, 12 say PG&E or Southern California Gas Company. We are not set 13 up that way, and frankly, we have a hard time getting along 14 and agreeing on much of anything. 15 For the past two years, WPGA has been working 16 closely with staff and the Engine Manufacturers on the LPG 17 task group in order to achieve a workable fuel specification. 18 We recognize that the decision point here before 19 you today is will LPG engine fuel have a limit of 5 percent 20 or 10 percent of propene, not none of the above, and I will 21 address some of the other little side issues on that one in a 22 minute. 23 Therefore, at this point WPGA feels they have no 24 choice but to support staff's recommendation to limit the 25 propene content to 10 percent by volume and the butane PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 content to 5 percent by volume, and in our opinion this is a 2 workable interim solution, as most of the LPG produced in 3 California meets and frequently exceeds this specification, 4 that is the propene and butane contents are most of the time 5 lower from most of the production points in California. 6 In our opinion, the results of emission testing has 7 been conducted over the past two years. The task group 8 supports our contention that an even wider LPG specification 9 may be appropriate, so we do not want to close the door. 10 We believe that as engine fuel metering technology 11 improves and emissions equipment is enhanced, the need for a 12 stringent LPG fuel specification is lessened. 13 We applaud staff's willingness to continue the 14 dialogue developed between our industry and look forward to 15 continuing the performance and durability testing of LPG 16 powered engines in the future. 17 We are confident that this specification today and 18 future specifications of tomorrow will build the AFV fleet 19 population in California while at the same time sustain the 20 existing fleet of some 40,000 propane powered trucks, vans 21 and taxis that are in California's current vehicle 22 population. 23 These platitudes aside, WPGA and certainly a number 24 of companies such as myself have some real concerns as to 25 how CARB intends to enforce compliance of this fuel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 specification. You heard EMA ask for vigorous compliance on 2 the retail level. 3 I am assuming that the Department of Measurement 4 Standards is going to be the agency that promulgates 5 enforcement procedures, but DMS does not answer directly to 6 this Board, to my knowledge. 7 We believe that it is appropriate that you as the 8 Board publicly give the staff, DMS, industry, engine 9 manufacturers some direction and opinion as to where and how 10 compliance is to be administered, if you truly desire future 11 growth of LPG as an alternative engine fuel. 12 Engine manufacturers have a major investment in 13 engine development. They want to sell some engines. We 14 marketers have a major investment in the distribution system, 15 but, as Baron Glassgow indicated to you, we are prepared to 16 only sell one LPG. 17 The fuel producers on the other hand make gasoline, 18 diesel and jet fuel. That is their primary product. While 19 LPG is a profitable niche market, it really only amounts to 20 three percent of their overall sales. 21 Refiners, with the exception of Bruce here from 22 Shell, still have the perception right or wrong that LPG is 23 equivalent to sawdust. Economics drive what is and is not in 24 LPG in any given month, and ASTM specifications aside, it 25 gets pretty tempting in the winter time when propane demand PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 is up for heating purposes and sales margins are high to 2 spike that LPG with a little extra propene, if not a few 3 unknown hydrocarbons. 4 The Agenda Item today is limited to approval or 5 denial of only a small portion of the overall alternative 6 motor fuel vehicles regulation. The main body of this 7 regulation specifically defines liquefied petroleum gas as 8 one of seven of the alternative fuels. 9 If you want to call the P-series, fuel number 8, I 10 suppose you could. It continues that no person shall sell, 11 offer for sale or supply an alternative fuel intended for use 12 in motor vehicles unless it conforms with applicable 13 specifications of which we are trying to adopt. 14 Alternative fuel shall be deemed to be intended for 15 use in motor vehicles, and I will get back to that one in a 16 minute. Motor vehicles, if it is sold or offered for sale or 17 supplied to a person engaged in the distribution, all of us 18 on the marketing side are engaged in the distribution of 19 alternative fuels, because for the most part our fleet 20 operates on our own fuel, unless the person selling, and that 21 is talking about our suppliers, unless the person supplying 22 or selling the fuel demonstrates that he or she has taken 23 reasonably prudent precautions to assure that the fuel will 24 not be used as a motor vehicle fuel in California. 25 Now, the Vehicle Code in California defines a motor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 vehicle as a vehicle that is self-propelled. So while the 2 LPG specification applies to fleets and forklifts, it does 3 not apply to the myriad of irrigation engines, wind machines, 4 floor buffers and LPG powered generators in California, 5 unlike gasoline and diesel, which are precisely defined by 6 CARB in Title 13. 7 There are no other provisions aside from what we 8 have just reviewed in this or any other regulation that gives 9 DMS the authority to administer LPG specifications. In our 10 minds, Section 2291 of Title 13 clearly gives an out to the 11 companies that make or import LPG by simply stating in 12 writing that they sell only commercial grade propane, which 13 is exactly what we get today, and that their product is 14 unsuitable for engine fuel use. 15 Now the practical matter, most LPG produced or 16 imported in California can, in fact, meet this 17 specifications. 18 But nobody is holding the producers feet to the 19 fire. The producers have said up until now that hardly even 20 sometimes be held to the ASTM specifications let alone engine 21 fuel specifications. This is entirely a game of trust that 22 has no oversight. 23 As I said in the beginning of my remarks the 24 distribution side of the propane/LPG industry is composed 25 mainly of mom and pop operators. They do not have the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 financial wherewithal to distribute multiple LPG blends nor 2 the inclination as their single largest LPG engine fuel 3 demand is likely to be their own delivery and service fleet. 4 In today's oil economics, there is not a clamor to 5 purchase or convert private fleets to LPG use, and the Feds 6 have taken a decidedly soft approach on EPACT and Clean Air 7 Act fleet purchase requirements. 8 So, aside from an unknown quantity of LPG powered 9 lift-trucks, propane use as an engine fuel does not currently 10 have much use potential for growth, and in fact, unlike the 11 other statistics that were quoted, the API statistic show the 12 fuel sales in this particular area are going down. 13 Compliance and exposure to fines for this or any 14 other LPG engines fuel specification would appear to fall 15 squarely on the shoulders of those marketers you folks should 16 be relying upon to distribute this clean burning alternative 17 fuel. 18 But we have no control over the specification of 19 LPG we are purchasing nor the capital required to set up 20 testing facilities to prudently assure ourselves that the LPG 21 that we receive complies with California specification for 22 our own fleets let alone our customers. 23 If the producers will not certify or are not 24 required to certify to what they are selling, how are we as 25 marketers supposed to determine whether or not our LPG PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 complies? 2 Frankly, it is easier, cheaper and far safer to 3 purchase and operate diesel powered Bobtails and pickups for 4 propane delivery. I do not think this is where this Board 5 wants to go, but as a practical matter, it is already where 6 we are headed. 7 Now, the argument we hear on the producers side is 8 that enforcement of engine fuel specifications on all propane 9 when so little of it is used for engines will shorten supply, 10 primarily propane supply, by some 8,000 barrels per day. 11 This is a lot of propane, and it cannot be possibly 12 made up with increased imports of specification propane from 13 outside Northern California. 14 There is not enough rail cars, and there are not 15 enough transports. 16 But what are the refineries going to do with it? 17 They make gasoline and diesel, and they make propane, whether 18 they like to or not. 19 They cannot fuel it all. They cannot burn it in 20 the refineries. 21 The same infrastructure argument holds for 22 exporting the stuff to any place outside of the State, and 23 the last time I looked, 8,000 barrels a day of California's 24 specification propane still yielded $125,000 of daily revenue 25 stream. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 In our opinion, that is worth investing some money 2 to cleanup some propane for a couple of refiners out there. 3 Like I said before, 90 percent of the propane made in 4 California today supposedly meets this proposed engine fuel 5 specification, but the regulations do not guarantee that the 6 fuel will be made available. 7 As a practical matter, imposing a fuel standard 8 would be much less expensive and far more equitable to 9 marketers if it were enforced uniformly at the producer level 10 where it is made. 11 In addition, the uniform standard would address 12 engine fuel uses outside of the purview of current 13 regulations. 14 An enforcement of a uniform specification 15 production would address the residual matter problem that we 16 marketers periodically face, but as written in Title 13, 17 Section 2290, does not address the availability problem. 18 If DMS only looks to the marketer for compliance, 19 this regulation could result in less LPG being sold to AFVs. 20 It could lead to heavy price discounting of non complying LPG 21 into the propane market. 22 This fuel ultimately may end up in fueling engines. 23 It could lead to abandonment of a market segment by marketers 24 that refuse to be bothered by fuel specification regulations. 25 They already have too many regulations to deal with now. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 The cost to enforce Title 13 as currently written 2 will be far higher at the end-use level because of the 3 quantity and variety of locations where LPG is used as an 4 engine fuel. 5 Compliance officers will need to sample engine fuel 6 from containers as small as eight gallon forklift cylinders 7 to as large as 30,000 gallon storage tanks at some fleet 8 locations. 9 Not to mention, as I said before, the thousands of 10 LPG powered Bobtails in California that use the cargo tank 11 not a separate motor fuel tank as its motor fuel tank. 12 Sounds complicated to me. Yes, I have one page 13 left. 14 CHAIRPERSON RIORDAN: Mr. Platz, could you move 15 that along. 16 MR. PLATZ: I appreciate the Board's indulgence. 17 This issue boils down to accountability and who 18 would accept responsibility. The answer, WPGA suggests, is 19 that if we were to have a fuel specification for LPG engine 20 fuel, then California should require all LPG sold in the 21 State comply with this uniform specification. 22 If uniformity is good enough for gasoline and 23 diesel, it should be good enough for propane. It's the 24 producers that make the stuff who should be held to this 25 specification rather than the market who has no control over PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 the quality of the LPG he or she buys and resells. 2 So, we are respectfully requesting that you folks 3 direct staff to draw up regulations, because we know they do 4 not exist yet for future approval that addresses uniform 5 specifications for all LPG sold in California. 6 I want to also thank you for being patient with me. 7 You guys have seen me come up here a couple of times now, and 8 we really appreciate that you have been working with this 9 industry. 10 But having said that, let me repeat that we too do 11 not think we are done. Performance and durability testing 12 needs to be completed on this proposed engine fuel. 13 We must continue to explore additional engine fuel 14 specifications and the potential use of fuel additives for 15 LPG engines, and we look forward to continuing the working 16 relationship that we have with you folks today. 17 If I could have one more minute. 18 CHAIRPERSON RIORDAN: A short one. 19 MR. PLATZ: A couple of issues that were brought up 20 in the other comments, my company operates two propane 21 engines. 22 Today I have had those engines replaced for about 23 10 months, operating on what propane is available to me 24 today. We have had some residual matter problems with some 25 propane that is not addressed in this specification today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 We have had build-up of what we refer to as 2 refining oil. That has been solved somewhat with technology 3 in that there is a filtering mechanism that we have to drain 4 on a daily basis for those engines. We have not had any 5 performance in combustion problems with the fuel we are 6 burning. 7 So, it's just been a matter of whatever happens to 8 be left behind of some of that propane. 9 The other issue that I want to kind of echo what 10 Alina had to say, the task group has not had a chance to 11 discuss the .5 limitation on the butenes and heaviers. 12 The other one that comes to mind that I noticed 13 today was the sulfur content, the lowering of sulfur content 14 from 120 parts per million to 80 parts per million. 15 There is known that the propene industry can lower 16 the sulfur content of propane, because what we are doing when 17 we add an odorant to propane, we are adding a sulfur base 18 compound, and that 120 parts per million weight is the 19 minimum required for the odorant that we have to put into 20 propane. 21 So, to lower that to 80 parts per million actually 22 is a health and safety concern. 23 CHAIRPERSON RIORDAN: Okay. Thank you, Mr. Platz. 24 I appreciate your comments and the extensiveness of 25 them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 Staff, any responses, and then I want you to do the 2 written submission into the record. 3 MR. VENTURINI: Madam Chairman, let me make a 4 couple of comments, and I think both Mr. Simeroth and Mr. 5 Jennings want to make a few comments. 6 I want to first address the performance issue. We 7 are very well aware that there is some additional work being 8 done on the program to take a look at durability and 9 performance. 10 We were hoping that that work would have been done 11 in time. Here it has not. 12 We fully intend to review that work, and if that 13 work suggests that we need to make an adjustment, we will 14 certainly bring that back to the Board. 15 The other question that was raised regarding 16 availability, a little concern, because we believe what we 17 are proposing to you today assures that there will be 18 availability of LPG in California for those vehicles by 19 basically putting the 10 percent which is basically the 20 status quote in place. 21 I also have the perception that there is a desire 22 to actually increase the 10 percent to some much higher level 23 or even go to the national or commercial grade quality 24 standard, which would be upwards of 50 percent. We do not 25 believe that is appropriate to do. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 At this point, I would like to ask Mr. Jennings to 2 address the issue having to do with all LPG meeting one spec, 3 and Mr. Simeroth can address the item about the sulfur and 4 butene. 5 I think that covers the major items. 6 MR. JENNINGS: Thank you, Mr. Venturini. 7 The ARB's authority to regulate fuels is limited to 8 an authority to regulate motor vehicle fuels. For all of our 9 motor vehicle fuels regulations, the regulations are written 10 in such a way that they only apply to that fuel when it is 11 intended for use in motor vehicles. 12 For instance, the Federal RFG regulations apply to 13 gasoline used in boats, but our regulation does not apply to 14 gasoline use in boats, because we do not have the authority 15 to do that. 16 Therefore, we treat LPG in a similar way to the way 17 we treat gasoline and diesel fuel. 18 In terms of the points that Mr. Platz made about 19 what level enforcement will take place, when we were dealing 20 with alternative fuels, such as LPG, where only 10 percent of 21 it is used as a fuel for motor vehicles, we had to come up 22 with a way where we could fairly try to catch that, but at 23 the same time not subject, beyond our authority, all of that 24 sort of fuel to the same standard, and we came up with a 25 structure that is in the regulation and that prohibits PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 producers from selling LPG to LPG distributors who are 2 engaged in distributing LPG for motor vehicle fuel unless the 3 producer reasonably knows on the basis of reasonably prudent 4 actions that the LPG will not be used for motor vehicles. 5 So, if the distributor simply says to the producer, 6 I want LPG that I can sell for use in motor vehicles and as 7 well as for other purposes, it would be illegal for the 8 producer to sell noncompliant products. 9 CHAIRPERSON RIORDAN: Okay. Thank you for those 10 comments. 11 MR. SIMEROTH: Madam Chairman and Members of the 12 Board, we held two workshops. 13 One was a sunset review workshop, and the other one 14 was a workshop on the full staff proposal. This was 15 subsequent to the 45-day release, after the staff proposal. 16 At those two workshops the engine manufacturers, 17 Ford and Cummins requested that we consider a more stringent 18 sulfur content requirement. 19 We said that we would consider that. We also 20 investigated what is the sulfur content in the fuel being 21 produced and distributed today. 22 What we are talking about is the sulfur content not 23 the full content. It is only the weight of the sulfur part 24 of the captan molecule. We were provided information 25 indicating that that is being made and distributed at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 approximately 30 parts per million, and a standard of 80 2 parts per million weight of sulfur would not be a problem for 3 the production and distribution of complying motor vehicle 4 LPG or other LPGs as far as that goes. 5 This would be the same sulfur cap as in our present 6 gasoline regulation. The reason that we were asked to 7 consider this is if the new LPG vehicles are going to be made 8 and put on the market, they are going to have to consider the 9 same type of catalytic control equipment that is being put on 10 these clean equipment, that is the concern about the sulfur. 11 It looks like we can accommodate and give them 12 assurance that they are not going to see above the 80 cap 13 that is presently in the gasoline. 14 The butane and heavier is to address some of the 15 issues that were raised. The heavier part is that we do not 16 allow the oils and things that is barely showing up in at 17 least in some fuel and that should not be there. 18 It may be something we need to look into and see 19 why it is showing up. We limit that to half a percent. 20 That is to keep the total, all of the contents from 21 being higher than the cap that is in the specification. 22 Again, drawing the analogy between the gasoline and 23 the LPG is to allow them to meet the same standards as the 24 vehicle manufacturers. We do not think this is going to be a 25 burden. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 Again, these compounds are normally present in 2 extremely low levels, and we do not have any information 3 otherwise at this point. 4 In terms of us developing a model along the line of 5 what is in the reformulated gasoline program, I would like to 6 be able to do that, but the database does not exist to allow 7 us to do that. 8 I also concur in the comment about the octane, and 9 what we have proposed, we are less than one octane difference 10 than our reference calibration fuel. 11 I cannot see that less octane will impact the 12 performance of the engines. 13 I think that covers most of the issues. We 14 basically looked at all of the information and feel that the 15 staff recommendation represents what we think is defensible 16 at this point in time. 17 CHAIRPERSON RIORDAN: Thank you, Mr. Simeroth. 18 Let us put the written submissions into the record, 19 and then I will open it up for Board questions to the staff. 20 MR. SIMEROTH: Madam Chairman and Members of the 21 Board, we have a letter from the Advanced Technology 22 International Corporation. 23 They are a manufacturer of an additive for these 24 types of fuels, and they ask that we give consideration of 25 use of their additive. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 In talking to the Engine Manufacturers, we have not 2 found any support for including an additive specification at 3 this point in time, but we will continue to have discussions. 4 We have a letter from Ford Motor Company. 5 Generally Ford agrees with the changes recommended by the 6 staff, the circumstances in terms of the insuring the steady 7 supply, basically some of the same comments, but they think 8 that it is worth while going with the staff's recommendations 9 to ensure the steady supply of LPG and promote the sales of 10 LPG. 11 They also, Ford recommends the 80 PPM sulfur limit 12 for the reasons I discussed earlier, and they support the 13 proposed cap of .5 volume percent on the butanes, butenes and 14 heavier components. 15 ARCO Products, a company also provided a letter. 16 They feel that there may be a potential for in the future for 17 certifying other formulation of LPG and asked us to continue 18 working with them. They feel the five percent propene limit 19 would discourage the use of LPG and recommend we go with the 20 10 percent. 21 And going with the 10 percent, keep in mind that 22 they would like to work with us on developing future 23 modifications and which we are agreeing to. 24 The Industrial Truck Association, with forklifts in 25 this case, sent us a letter saying that poorer LPG fuel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 quality is a problem for many years, effecting both 2 durability and performance and brought it to our attention in 3 the past, basically our Mobile Source Division. 4 They are encouraging that we not relax the H 25 5 standard and retain the H 25, except they are not supplying 6 any evidence why we should do that except for the statement. 7 We contacted them and found that the problems they 8 are referring to in terms of performance and durability are 9 not associated with the staff proposed 10 percent propene 10 fuel but proposed with fuels with that much higher limits, 11 that was the subsequent conversation. 12 They are also expressing concerns with the 13 enforcement and basically saying that we should enforce it. 14 We have a comment from the California Trade and 15 Commerce Agency recommending that we implement the staff 16 proposed changes, which you heard today. 17 CHAIRPERSON RIORDAN: Okay. 18 MR. SIMEROTH: That concludes the letters you see. 19 CHAIRPERSON RIORDAN: Thank you very much. 20 Mr. Kenny, any other comments? 21 Board Members, any questions for staff? 22 Mrs. Rakow. 23 BOARD MEMBER RAKOW: Yes. I notice in the 15-day 24 proposed changes that the staff is recommending a period of 25 five years for the review to see whether it should be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 revised, retained, et cetera, and one of our witnesses had 2 suggested a three-year period, because of the speed with 3 which technology changes. 4 Is five years sort of a standard? 5 MS. WALSH: Five years is basically a standard that 6 we have included in all of our regulations that you see 7 coming through, yesterday and today. 8 So, if the Board's consensus is to move that up to 9 three years, that would be appropriate. 10 BOARD MEMBER RAKOW: That would not be any 11 difficulty. 12 Okay. 13 CHAIRPERSON RIORDAN: Okay. Any other questions 14 for staff? 15 All right. This is an item that I need to close 16 the record on, and I will now close that record, however, the 17 record will be reopened when the 15-day notice of public 18 availability is issued. 19 Written or oral comments received after the hearing 20 date but before the 15-day notice is issued will not be 21 accepted as a part of the official record on this Agenda 22 Item. 23 When the record is reopened for 15-day comment 24 period, the public may submit written comments on the 25 proposed changes which will be considered and responded to on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 the Final Statement of Reasons for the regulation. 2 This has ex parte requirement. Are there any to 3 disclose by any Board Members? 4 Seeing none, then we will move on to the Item, the 5 Resolution is 98-80. 6 Is there a motion? 7 BOARD MEMBER PARNELL: So moved. 8 BOARD MEMBER DUNLAP: Second. 9 CHAIRPERSON RIORDAN: Moved by Mr. Parnell. 10 Seconded by Mr. Dunlap. 11 BOARD MEMBER RAKOW: May I make a comment that is 12 not going to add to the Resolution, but it occurred to me 13 when the staff reports back in six months or whatever time it 14 is, if the study is concluded at that time, it would be maybe 15 advisable to decide whether it would be a three-year or 16 five-year period. 17 That is just for staff to keep in mind. I should 18 have said that earlier. 19 CHAIRPERSON RIORDAN: Okay. Are there any other 20 points that anyone wants to make? 21 The motion is before us. 22 All in favor of the motion, signify by saying aye. 23 Opposed, no. 24 The motion carries. 25 Now we are on to the next Item, which is Item PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 98-6-1. 2 The two principal people that are involved in that, 3 of course, are not people, entities, City of LA, and the 4 Great Basin Unified Air Pollution Control District, there are 5 two representatives, and I would like them to come forward. 6 Let me begin the record with the following. This 7 Item is a continuation of the public hearing to consider the 8 appeals of the City of Los Angeles from Orders Numbers 9 070297-04 and 040198-02 of the Great Basin Unified Air 10 Pollution Control District. 11 This Item has been continued from our July 30, 1998 12 Board hearing. The appeals are from two orders adopted by 13 the District under the Health and Safety Code 42316. 14 The first order requires that the City implement PM 15 10 control measures on the dry bed of Owens Lake, and the 16 second order requires the City to pay the fees to the 17 District. 18 The City appealed both of these orders to this 19 Board, as allowed by State law, and I do not think we will 20 all forget that. 21 At the July hearing, both the District and the city 22 reported that they had recently signed a Memorandum of 23 Agreement and requested the Board to continue the Appeal of 24 the control measure order until the December Board hearing. 25 In the meantime, I understand that the District has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 adopted a revision to the Owens Valley State Implementation 2 Plan in accordance with the Memorandum of Agreement, and that 3 the City and the District are here today to jointly ask this 4 Board to dismiss both of the City's Appeals. 5 A dismissal would formally end the administrative 6 proceedings before this Board on the Appeals. 7 Let me ask Mr. Hotchkiss and Mr. Lamb to comment. 8 MR. LAMB: Madam Chairman, I am Brian Lamb. 9 I am District Counsel for the Great Basin Unified 10 Air Pollution Control District. I could not have done a 11 better summary. 12 You have taken everything I might have said. 13 CHAIRPERSON RIORDAN: My staff is very good about 14 this. 15 MR. LAMB: I ask you to merely approve the 16 stipulation dismissal with prejudice of the two pending 17 appeals at this time. 18 CHAIRPERSON RIORDAN: Thank you, and let us, we 19 will have Mr. Hotchkiss on the record representing the City 20 of LA. 21 MR. HOTCHKISS: I am the District Attorney for the 22 City of Los Angeles, and I would really like to add to the 23 record that the Resolution of these two Appeals probably 24 could not be affected in the satisfactory manner that they 25 have without all the work that was done by your staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 I want to compliment you on that. 2 CHAIRPERSON RIORDAN: Thank you. Thank you, and I 3 appreciate that. 4 Now finally, Andrea Lawrence, who is Mono County 5 Supervisor, would like to speak, and she is on the Governing 6 Board, of course, of the Great Basin. 7 MS. LAWRENCE: Thank you, Madam Chair. I am Andrea 8 Lawrence, Mono County Supervisor, on the Governing Board of 9 the Great Basin Air Pollution Control District. 10 I thank you so much for a few moments of your time 11 in light of a heavy Agenda. Where I am is especially 12 delighted and pleased to be here in seeing and additionally 13 hearing the two attorneys, one from the District and the City 14 of Los Angeles asking for your dismissal of the 15 administrative appeals challenging our plan. 16 Now that is behind us, we have every reason to hope 17 that as a result of the settlement, the District, we have 18 begun a new period of working cooperatively on working on the 19 plan that will ultimately see the essential act completed, 20 which is the attainment of the clear air standards by 1996 -- 21 don't I wish -- 2006. 22 But there is something equally important that we 23 have to do today, because all of us who are in the decision 24 making process know full well that there are stages and there 25 are phases and there are plateaus and there are highs and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 peaks and valleys, while in the process of doing this, we 2 have clearly got to acknowledge the great efforts of 3 leadership and vision that make these things possible, and in 4 recognizing this, the Great Basin on our regular Board 5 meeting on November 16 met and unanimously adopted a 6 Resolution honoring John Dunlap, III, upon his occasion of 7 his retirement from the California Air Resources Board. 8 There is a note that says here, and I will not 9 recite, it is lengthy and laudatory passages, but instead it 10 is enough to say that when we were at impasse, Chairman 11 Dunlap and all of you on the Board, your actions clearly made 12 it possible for us to be empowered both at the State level 13 and the City of Los Angeles and the County Air Resources 14 Board to come together and put, as we say in local politics, 15 the pedal to the metal, or where the rubber hits the road, 16 and all those quaint phrases, that get us down, sitting down 17 and doing the job we need to do. 18 It was done and done very successfully, and we were 19 very pleased with it. It's certainly taken years of 20 fruitless litigation, which none of us need anymore of. We 21 just need to sit down and solve our problems, and that is 22 what happened with this one. 23 Now, I would like to, I have something, we have 24 something here. We have for you, Mr. Dunlap, our enormous 25 appreciation to you for your leadership and vision in this, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 and the People of the Eastern Sierra clearly want to thank 2 you for generations to come for being such a positive role, 3 and that goes to all of you for contributing to this happy 4 resolution, and I hope you notice up here, this is our 5 characteristically angry moment on the Owens Lake, as you 6 notice going on up through here, it clearly acknowledges our 7 enormous appreciation of all of us on the east side for a 8 very important role you have all played. 9 We thank you very much. 10 CHAIRPERSON RIORDAN: Thank you. And that is well 11 deserved. 12 This is a rather happy occasion that I would close 13 the record. I do not think that staff has any comment to go 14 with this. 15 I would like to close the record on this. It is 16 just a pleasure to be able to do that. 17 There is no Resolution before the Board, but what 18 we need to do is to, as jointly requested by the District and 19 by the City, to have a motion and second to dismiss with 20 prejudice the appeals by the City of LA, and I am not going 21 to repeat those order numbers. We will make them a part of 22 the record of the Great Basin Unified Air Pollution Control 23 District. 24 It was moved and seconded by Supervisor Patrick and 25 Mr. Dunlap. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 Is there any further discussion on this item? 2 BOARD MEMBER RAKOW: No, but what a wonderful 3 Christmas present to the people of Owens Valley. 4 CHAIRPERSON RIORDAN: Let me ask now, all those in 5 favor of the motion, signify by saying aye. 6 Opposed, no. 7 The motion is carried. 8 We congratulate you. 9 I just have a footnote. At a meeting some time 10 back, it was GIS information talking about our ability to map 11 and do things, and guess what the topic was that they use as 12 an example, Great Basin, and I think Ms. Edgerton and I 13 clearly say that we know a lot of that Basin, and we have 14 good memories of the views that we had there. 15 So, we look forward to coming back and seeing it 16 when it is crystal clear. 17 We have one item, and that is the public comment 18 period, as it is appropriate for any public agency, this is a 19 open comment period for people to bring before the Board 20 items that were not on the Agenda but in our jurisdiction. 21 Is there anybody to speak under the public comment 22 period? 23 Seeing none, that is wonderful. 24 We will adjourn this meeting, as we have no further 25 business before us. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 I just have to say two things, though, as the 2 Chairman I have a prerogative. Former Mr. Chairman, that is 3 to say thank you to all of you. This was an incredible 4 Agenda. 5 I think when we look back on it with some pride, we 6 have accomplished a lot. We particularly accomplished a lot 7 this year under the guidance of Mr. Dunlap, and I wish to 8 wish all of you, the staff who worked so hard for us, the 9 very best of holidays. 10 There are a number of holidays coming up for a 11 number of religions, and I wish you all the very best and a 12 safe trip home everybody. 13 MR. KENNY: And if I could just make a couple quick 14 comments. 15 I also want to thank the Board. When we counted 16 out the number of witnesses that you heard over the last two 17 days, we stopped at 100, and it continued to go beyond that, 18 so I also want to wish you on behalf of the staff a very 19 happy and restful holidays in light of the last two days. 20 Thank you very much. 21 CHAIRPERSON RIORDAN: Thank you, and we are 22 adjourned. 23 (Thereupon the Air Resources Board meeting 24 was adjourned at 1:30 p.m.) 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 CERTIFICATE OF SHORTHAND REPORTER 2 3 I, VICKI L. OGELVIE, a Certified Shorthand 4 Reporter of the State of California, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing hearing was reported in shorthand by me, Vicki L. 7 OGELVIE, a Certified Shorthand Reporter of the State of 8 California, and thereafter transcribed into typewriting. 9 I further certify that I am not of counsel or 10 attorney for any of the parties to said hearing nor in any 11 way interested in the outcome of said hearing. 12 IN WITNESS WHEREOF, I have hereunto set my hand 13 this twentieth day of December, 1998. 14 15 16 VICKI L. OGELVIE 17 Certified Shorthand Reporter License No. 7871 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 CERTIFICATE OF SHORTHAND REPORTER 2 3 I, JANET H. NICOL, a Certified Shorthand Reporter 4 of the State of California, do hereby certify that I am a 5 disinterested person herein; that I reported the foregoing 6 meeting in shorthand writing; that I thereafter caused my 7 shorthand writing to be transcribed into typewriting. 8 I further certify that I am not of counsel or 9 attorney for any of the parties to said meeting, or in any 10 way interested in the outcome of said meeting. 11 IN WITNESS WHEREOF, I have hereunto set my hand 12 this 20th day of December 1998. 13 14 15 16 Janet H. Nicol 17 Certified Shorthand Reporter License Number 9764 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345