MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD BOARD HEARING ROOM 2020 L STREET SACRAMENTO, CALIFORNIA THURSDAY, DECEMBER 14, 1995 9:25 A.M. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT John D. Dunlap, III, Chairman Eugene Boston, M.D. Joseph C. Calhoun Lynne T. Edgerton M. Patricia Hilligoss John S. Lagarias Jack C. Parnell Barbara Riordan Ron Roberts James W. Silva Doug Vagim Staff: Jim Boyd, Executive Officer Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Mike Kenny, Chief Counsel Lynn Terry, Assistant Executive Officer Peter Venturini, Chief, Stationary Source Division Dean Simeroth, Chief, Criteria Pollutants Branch, SDA John Courtis, Manager, Fuels Section, SDA Tom Jennings, Senior Staff Counsel, Office of Legal Affairs Bob Cross, Assistant Chief, Mobile Source Division Jim Shears, Manager, On-Road Controls Section, MSD Sue DeWitt, Project Leader, Technology Advancement Section, MSD Veronika Pesinova, Staff, On-Road Controls Section, MSD Michael Terris, Staff Counsel, Office of Legal Affairs Kathleen Walsh, Staff Counsel, Office of Legal Affairs Dean Saito, Manager, Liaison Section, OAQTP Jim Nyarady, Staff, Office of Air Quality and Transportation Planning Pat Hutchens, Board Secretary Wendy Grandchamp, Secretary Bill Valdez, Administrative Services PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii I N D E X PAGE Proceedings 1 Call to Order 1 Pledge of Allegiance 1 Roll Call 1, 2 Opening Remarks by Chairman Dunlap 2 AGENDA ITEMS: 95-13-1 Public Meeting to Update Board on Status of California Cleaner Burning Gasoline Implementation Efforts Introductory Remarks by Chairman Dunlap 5 Staff Presentation: Jim Boyd Executive Officer 7 Dean Simeroth Chief Criteria Pollutants Branch Peter Venturini Chief, Stationary Source Division 14 Closing Remarks by Jim Boyd 18 Questions/Comments 19 95-13-2 Public Hearing to Consider Amendments to California cleaner burning gasoline Regulations, including amendments re downstream blending of oxygenates Introductory Remarks by Chairman Dunlap 27 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX, continued. . . PAGE AGENDA ITEMS: 95-13-2 Staff Presentation: Jim Boyd Executive Officer 28 John Courtis Manager Fuels Section, SSD 30 Questions/Comments 37 PUBLIC COMMENTS Mike Kulakowski Texaco 40 Questions/Comments 42 Cindy Hasenjager California Renewable Fuels Council 44 Questions/Comments 46 Robert Warden Chevron Products USA 48 Written Comments Entered into Record by Mr. Jennings 49 Closing Remarks by Mr. Boyd 50 Record Officially Closed to Await Notice of 15-day Public Comment Period 50 Motion by Vagim to Approve Resolution 95-48 51 Roll Call Vote 52, 53 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX, continued. . . PAGE AGENDA ITEMS: 95-13-3 Public Hearing to Consider Adoption of National Security Exemption for Military Tactical Vehicles and Equipment Introductory Remarks by Chairman Dunlap 53 Staff Presentation: Jim Boyd Executive Officer 54 Veronika Pesinova Staff On-Road Controls Section, MSD 55 Questions/Comments 61 PUBLIC COMMENTS: Captain Kathy Dodge with Randall Friedman U.S. Department of Defense 63 Questions/Comments 66 Record Officially Closed on 95-13-3 69 Questions/Comments 70 Motion by Calhoun to Adopt Resolution 95-49 71 Roll Call Vote 72 95-13-5 Public Meeting to Consider Approval of Proposed report to Governor and Legislature on State and Federal Air Quality Planning Process required by AB 2751 Introductory Remarks by Chairman Dunlap 72 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX, continued. . . PAGE AGENDA ITEMS: 95-13-5 Staff Presentation: Jim Boyd Executive Officer 74 Jim Nyarady Staff Office of Air Quality and Transportation Planning 75 Written Comments Entered into Record 81 Motion by Boston to Adopt Resolution 95-50 81 Discussion 81 Roll Call Vote 82 Luncheon Recess 83 Afternoon Session 84 95-13-4 Public Meeting to Update Board on Zero-Emission Vehicle Program Introductory Remarks by Chairman Dunlap 84 Staff Presentation: Jim Boyd Executive Officer 86 Sue DeWitt Project Leader Technology Advancement Section, MSD 87 Questions/Comments 94 PUBLIC COMMENTS: Tom Austin Sierra Research 97 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX, continued. . . PAGE AGENDA ITEMS: Questions/Comments 103 95-13-4 Matt Saboraria for Assemblyman Curt Pringle 111 Questions/Comments 115 John Larrea for Assemblyman Mickey Conroy 118 Questions/Comments 118 Reuel Jones for Assemblyman Bruce Thompson 119 Laurie Conaty for Assemblyman Bernie Richter 120 Questions/Comments 122 Ana Arakelian for Assemblyman James Rogan 123 George A. Plescia for Assemblyman Bill Morrow 124 Jim Haagen-Smit Citizen 124 John Grimley for Senator Ray Haynes 125 Supervisor Jan Mikels South Coast AQMD 129 Questions/Comments 133 Ben Ovshinsky Ovonic Battery Co. 136 Questions/Comments 141 Paul Knepprath American Lung Assn. 145 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX, continued. . . PAGE AGENDA ITEMS: 95-13-4 Janet Hathaway Natural Resources Defense Council 148 Questions/Comments 158 Joe Caves Union of Concerned Scientists 164 Tim Carmichael Coalition for Clean Air 171 Gary A. Patton Planning & Conservation League 176 Statement and Request by Mr. Lagarias 183 Samuel A. Leonard General Motors 186 Questions/Comments 189 Ed Maschke CALPIRG 197 Bill Van Amburg CALSTART 201 Cecile Martin California Electric Transportation Coalition 205 John Weber SoCal Gas 212 Lloyd Dixon Rand 215 Questions/Comments 219 Kelly Brown Ford Motor Company 232 Questions/Comments 235 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ix INDEX, continued. . . PAGE AGENDA ITEMS: 95-13-4 V. John White Sierra Club 239 Dave Hermance Toyota Technical Center 249 Paul Edison Pulliam Citizen 251 John Schutz Nissan R & D 254 Jerry Cole Advanced Lead-Acid Battery Cons. 257 Stephen Heckeroth Homestead Enterprises 260 Reg Modlin Chrysler Corporation 263 Bruce Parmenter EAA 266 Clare Bell EEA 270 Chuck Olson Citizen 279 Peter W. Barnes Citizen 281 Questions/Comments 283 Leo Heagerty U.S. Electricar 284 Tom Gage AC Propulsion, Inc. 286 Questions/Comments 290 William Craven Electrosource, Inc. 290 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 x INDEX, . . . PAGE AGENDA ITEMS: 95-13-4 Closing Remarks by Chairman 293 Adjournment 294 Certificate of Reporter 295 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 --o0o-- 3 CHAIRMAN DUNLAP: Will the December Board meeting 4 of the California Air Resources Board please come to order. 5 I've asked Supervisor Vagim to please lead us in 6 the Pledge of Allegiance. 7 SUPERVISOR VAGIM: Good morning, Mr. Chairman. 8 Will you please stand and join me in the Pledge of 9 Allegiance. 10 (Thereupon, the Pledge of Allegiance 11 was recited by all present.) 12 CHAIRMAN DUNLAP: Thank you. I'd like to ask the 13 Board Secretary to please call the roll. 14 MS. HUTCHENS: Boston? 15 Calhoun? 16 MR. CALHOUN: Here. 17 MS. HUTCHENS: Edgerton? 18 MS. EDGERTON: Here. 19 MS. HUTCHENS: Hilligoss? 20 MAYOR HILLIGOSS: Here. 21 MS. HUTCHENS: Lagarias? 22 MR. LAGARIAS: Here. 23 MS. HUTCHENS: Parnell? 24 Riordan? 25 Roberts? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 Silva? 2 SUPERVISOR SILVA: Here. 3 MS. HUTCHENS: Vagim? 4 SUPERVISOR VAGIM: Here. 5 MS. HUTCHENS: Chairman Dunlap. 6 CHAIRMAN DUNLAP: Here. Is that seven? Is there 7 seven of us? Five, six, seven. Okay. 8 Well, due to the fogged-in condition of the 9 airport and some travel glitches, it looks like there'll 10 only be seven Board members here today. And this, as you 11 know, is a very important Board meeting. So, I would have 12 liked to have had a full contingent of members, but it 13 doesn't look like we're going to be able to do that. 14 Before we get into our agenda today, I'd like to 15 take care of a couple of items of recognition. And I have 16 two staff members, Air Resources Board staff members, I'd 17 like to tell you a bit about. 18 The first one I'd like to call forward is Allen 19 Hirsch. Allen, can I get you to come over here to the 20 right, to the podium? Allen Hirsch is a public information 21 officer here at the Board, and during the year of 1995, he 22 served as president of the State Information Officer's 23 Council. And it's called the SIOC, and it is an 24 organization dedicated to public service. 25 Members come from the ranks of State Civil Service PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 and are also in appointed positions that deal with public 2 and media relations in State Government. 3 Allen was elected by his peers about a year ago, 4 and should take great pride in his year of service there, 5 going voluntarily above and beyond his normal work duties. 6 I want you to know, Allen, I'm proud of the work 7 that you've done with SIOC, and wanted to take this 8 opportunity to recognize your dedication, not only for those 9 assembled but before my colleagues on the Board. 10 I might point out, also, that Allen has a long 11 record of public service. He was a former member of the 12 Peace Corps and has done a lot of volunteer work in his 13 personal and public life. 14 And I wanted to again thank you and recognize you 15 for your service. If I can get you to come forward, I'll 16 give you a little letter and shake your hand. 17 MR. HIRSCH: Thank you. 18 (Applause) 19 CHAIRMAN DUNLAP: I also am pleased to be able to 20 tell you that Allen served with me at the Department of 21 Toxic Substances Control, and I was able to convince him to 22 come over here to the Air Resources Board. And it's been 23 great to have him here. 24 The second staff member of the Board that I'd like 25 to recognize is Kurt Karperos. Kurt, are you here? Can I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 get you to come forward as well? 2 It is a pleasure to be able to recognize Kurt, who 3 serves as a member of our legislative unit. And I have a 4 statement that I'd like to read. 5 It is routinely acknowledged that California 6 is a leader in the quest to find effective, 7 innovative solutions to air quality problems. 8 That reputation is deserved and it is shared 9 jointly by each member of this organization, 10 which I have called a world class organization. 11 It is something we should all be proud of. So, 12 when the opportunity arises to recognize an 13 individual who displayed those talents to 14 others we have become accustomed to expecting, 15 it is a chance to remind ourselves just how 16 talented and professional the California 17 Air Resources Board is as an organization. 18 I'd like, therefore, to present Kurt Karperos, 19 a member of our legislative unit, again one of 20 the finest groups of policy analysts and 21 legislative representatives that I've ever 22 been associated with, with this framed copy of 23 a letter that was signed by Governor Pete Wilson, 24 recognizing his efforts on a piece of 25 legislation, AB 531, which was carried by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 Assemblyman Morrissey. 2 Kurt is one of the newest members of the 3 legislative staff. He as an associate air pollution 4 specialist in the ARB Executive Office before joining the 5 legislative unit. Before coming to ARB, he was a research 6 specialist at Lockheed Corporation and, before that, he was 7 a senior member of the technical staff at Aerojet 8 ElectroSystems. 9 I'd like to acknowledge your excellent work, and 10 give you aa copy of the letter, the original letter that the 11 Governor sent to me recognizing and commending your work on 12 that bill. 13 Thank you, Kurt. Can I get you to come forward? 14 (Applause) 15 CHAIRMAN DUNLAP: I told him it was a beautiful 16 letter; I wanted to keep it myself. 17 Okay. Let's get into the agenda today. 18 The first item, 95-13-1 -- I'd like to remind 19 those of you in the audience who would like to present 20 testimony to the Board on any of today's agenda items to 21 please sign up with the Board Secretary here to my left. 22 If you have a written statement, please give 20 23 copies to her. 24 The first item on the agenda again is 95-13-1. 25 It's a public meeting to update the Board on the status of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 the California Cleaner Burning Gasoline regulation 2 implementation efforts. 3 This item before the Board today is an 4 informational report. Staff will provide a progress report 5 on the implementation of the program, which we now refer to 6 as cleaner burning gasoline. 7 This is the fourth status report the Board has 8 received on this program. Because the staff provided us 9 with an extensive presentation in September, this one will 10 be more brief. It will highlight significant 11 accomplishments since our last update. 12 The staff will provide us with an update on the 13 current status and results from the performance testing 14 programs, the latest forecast for supply and demand, and an 15 update on the public outreach efforts that are underway. 16 Before I turn the presentation over to Mr. Boyd 17 and staff, I'd like to recognize and thank several of our 18 fellow Board members for their extensive contribution to 19 this effort. First, I want to thank Jack Lagarias, who has 20 served as the Advisory Committee Chairman for the past year. 21 And I'd also like to thank Joe Calhoun, who has served as 22 the Advisory Committee Vice Chairman since last February. 23 I also want to remind Joe that it was Jack that 24 drafted him for that assignment and came to me and said he 25 had to have you involved there, Joe. Both have done an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 excellent job in representing the Board. And I also want to 2 thank Gene Boston for his assistance with our cleaner 3 burning gasoline outreach effort the medical community in 4 California. 5 And Gene, unfortunately, is fogged in the Orange 6 County Airport. I guess they can't even take off. So, with 7 that, I'd like to ask Mr. Boyd to go ahead and introduce the 8 staff presentation. Jim? 9 MR. BOYD: Thank you, Mr. Chairman. Good morning, 10 Board members, and good morning to the members of the 11 audience. 12 As you mentioned, we are indeed presenting what is 13 now the fourth in a series of reports to your Board on the 14 efforts being taken to implement the cleaner burning 15 gasoline program. In few minutes, I will yield the 16 microphone to Mr. Simeroth, who you've come to know as the 17 Chief of the Criteria Pollutants Branch in the Stationary 18 Source Division. He's been managing this program, and he 19 will provide you the presentation, and begin with a brief 20 background on the cleaner burning gasoline, then discuss the 21 results from the performance testing programs for motor 22 vehicles, engines, and equipment. 23 As part of this presentation, Dean's going to 24 provide information on the ARB's own on-road and off-road 25 test programs and explain the results of the cleaner burning PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 gasoline fuel economy studies. 2 Dean's also going to discuss the findings from the 3 test programs and discuss the results from those test 4 programs that individual companies have been carrying out. 5 Finally, we'll conclude the presentation with a 6 presentation discussing the forecasts for the supply of 7 cleaner burning gasoline and the demand that is seen, and 8 the current status of refiner's efforts in complying with 9 the March 1 compliance date. 10 And, as you know, several of the Board members and 11 members of your staff have been visiting with refiners and 12 visiting some of the refineries, and basically have been 13 pleased with what we've seen. 14 Finally, Peter Venturini, Chief of the Stationary 15 Source Division, will provide an update on the status of the 16 public outreach effort which is so important, and he'll be 17 emphasizing the accomplishments since the Board's last 18 update -- and I will underscore "accomplishments" -- and 19 then close with just a short summary on the overall program. 20 With that, I'd like to turn the microphone over to 21 Mr. Simeroth. 22 MR. SIMEROTH: Thank you, Mr. Boyd. 23 Chairman Dunlap, members of the Board, today, 24 we'll give you a brief presentation on the status and 25 implementation efforts that we've been undergoing to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 implement the cleaner burning gasoline program. 2 We'll focus on what has occurred since we last 3 briefed the Board on this program. Primarily, as you heard 4 from Mr. Boyd, I'll focus on the results of the Air 5 Resources Board on-road and off-road test programs, the 6 individual company test programs, and include some comments 7 on our fuel economy studies as part of those programs. 8 I'll also touch on the supply and demand issue, 9 and then turn the presentation over to Mr. Venturini to 10 complete the -- to do the discussion on the public outreach. 11 For the performance test program since we last 12 met, the performance subcommittee has finalized its 13 findings. You have copies of those findings before you 14 today. I'd like to note what went into that. 15 The on- and off-road program was designed by the 16 Air Resources Board and the performance subcommittee 17 jointly. It was implemented by the Air Resources Board with 18 advice and financial/materials support from organizations 19 who serve on the performance subcommittee. 20 The findings are a result of a consensus of ARB 21 and the performance subcommittee. And I'd like to highlight 22 the performance subcommittee on reaching those findings. 23 Finally, I'll touch on the results of the 24 individual company test programs, which are also summarized 25 in the findings that you have before you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 The basic findings for the on-road part of the 2 test programs are that California reformulated gasoline, or 3 cleaner burning gasoline, performs as well as current fuels 4 in vehicles. 5 We saw no increase in problems with the test 6 vehicles during the program as compared to the control 7 vehicles and as compared to a historic baseline that we 8 developed as part of the program. 9 The gas mileage, on average, may be reduced by 10 approximately one percent from current oxygenated gasoline. 11 This is on average. I'd like to emphasize that. On 12 average, it would be reduced approximately three percent 13 from current summertime nonoxygenated gasoline. 14 The range of that average is quite large. The 15 testing results indicate that the range is plus or minus 9 16 percent. So, if you have enough data, enough vehicles to 17 accurately calculate an average, then the average will be 18 approximately 1 percent less than current oxygenated and the 19 3 percent less than the nonoxygenated. But any one person's 20 individual vehicle may or may not be close to that range as 21 our actual test results indicate. 22 The off-road findings are equally positive. At 23 this time, based on results available to us, the cleaner 24 burning gasoline has been shown to perform as well as 25 current fuels. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 There are remaining studies to be completed. 2 These studies are being conducted by the Portable Power 3 Equipment Manufacturers Association. Two of their member 4 organizations have completed their studies. The other 5 approximately five members are in progress, and we should 6 have them n the very near future. 7 At this point, we don't expect any of the findings 8 to be changed as these studies become available to us. 9 For individual company test programs -- and I'd 10 like to compliment all the companies who participated and 11 provided us with the results of their test programs. 12 Starting with General Motors, they did a 13 laboratory or bench test program, looking at primarily soft 14 components that could be exposed to fuels. They tried to 15 identify all soft components that would be reasonably 16 expected to be found in the existing fleet and test those. 17 Their program is about three-quarters completed and, at this 18 point, they're seeing no expected problems. 19 Ford Motor Company contracted with the Southwest 20 Research Institute to look into lubricity issues in terms of 21 metal to metal contact, fuel pumps, et cetera. Their result 22 indicated no expected problems as well when you compare it 23 to the range of fuels presently available. 24 Nissan did vehicle testing and laboratory testing. 25 They accumulated approximately 30,000 miles on a vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 fueled with conventional fuel and 30,000 miles on another 2 vehicle fueled with the cleaner burning gasoline. 3 Looking primarily for deposit formation in various 4 parts of the engine, except for the combustion chamber, 5 deposit formation was less with the cleaner burning 6 gasoline, and the combustion chamber is approximately equal. 7 Again, they saw no expected problems. 8 Chevron did an employee fleet test program using 9 another version of the cleaner burning gasoline. And the 10 results of their program were combined with the Air 11 Resources Board results. It does not change any of the 12 findings that you have before you. 13 The overall failure rate in the Chevron test 14 program for the test vehicles is lower than the baseline 15 failure rate calculated by Air Resources Board staff. 16 Texaco did two studies, one at their Bakersfield 17 refinery and one at their research facility in Beacon, New 18 York. The Bakersfield refinery used company-owned vehicles 19 that operate within the refinery. The Beacon, New York used 20 employee vehicles. 21 The Texaco program was to evaluate severely 22 reformulated fuels, fuels with very low aromatic hydrocarbon 23 content is what we mean by that. Staff, in evaluating with 24 that type of fuel be expected to be produced (sic) and, if 25 it is produced, could be expected to be in the distribution PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 system, we found that if such severely reformulated fuels 2 are produced -- and we don't expect them to be produced 3 routinely at all -- then, they would not -- they would be 4 diluted in the distribution system, and we wouldn't expect 5 vehicles to experience those very low aromatic hydrocarbon 6 fuels as they're diluted through the distribution and in the 7 vehicle tanks. 8 Chevron test results indicate very low aromatic 9 hydrocarbon fuels -- emphasis on the word "very" -- may 10 accelerate problems in older, high-mileage vehicles and 11 vehicles in extreme service. 12 The Department of Energy has been conducting a 13 test program using five vehicles. They're vehicles that had 14 been used in California. They're relatively new, 10 to 15 20,000 miles on the vehicles. They're accumulating another 16 30,000 miles using the cleaner burning gasoline. Their 17 program is still underway. 18 In terms of supply and demand, looking at the 19 progress reports being submitted to us by the refiners, 20 which are being submitted at this point monthly, refiners 21 are still on schedule. 22 Looking at the information provided on their 23 expected production, we expect supply will meet demand, 24 expect no problems. If something should occur unforeseen, 25 variances are available as a relief. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 There is a hearing scheduled for this coming 2 January to consider the variance guidelines that are 3 required by Senate Bill 709, which becomes in effect this 4 January. So, we're on schedule to adopt those guidelines. 5 That public report -- the report is now publicly 6 available. 7 At this point, I'd like to turn it over to Mr. 8 Venturini to address the public outreach efforts. 9 MR. VENTURINI: Thank you, Dean. 10 Mr. Chairman, members of the Board, what I'd like 11 to do is take a few minutes and just briefly update you on 12 what we've been doing with respect to the public outreach 13 efforts since we last updated you. 14 It has been a very busy time for us over the last 15 couple of months. 16 Can I have the next slide, please? 17 What I've shown here is basically a slide I think 18 I showed you when we updated you on the program, our basic 19 overall strategy, which is basically to convey the 20 importance this program for public health protection, clean 21 air; to honestly address concerns, communicate, to work 22 cooperatively with all entities, particularly the public 23 education subcommittee; more importantly and most 24 importantly to be prepared. 25 On the next slide, we show some of our activities. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 In terms of our overall outreach plan, let me say that I 2 think we are about where we want to be at this point in time 3 with this program. We've essentially prepared the vast 4 majority of our outreach materials. The messages have been 5 completed and approved by the subcommittee, the basic facts; 6 these are the basic facts about the program and typical 7 questions and answers that individuals may have. 8 We've prepared two brochures, a short brochure, a 9 long brochure. We've prepared and finalized a video that is 10 now available. And we've activated our toll free 11 information line. The number's shown on the slide. That's 12 1-800-9CARFG9, and that is available. If anyone has any 13 questions or request information, they can call that line. 14 to date, we've received very few calls. Most of them have 15 been requests for additional information. 16 With respect to this, you should have received in 17 the mail a copy of our package in our folder that includes 18 the materials I've gone through, and you should have 19 received a copy of our video. We also have available 20 additional copies of these packages. If you'd like another 21 one today and at any time if you'd like copies of any of the 22 material that's in there, we're more than happy to provide 23 that. 24 I also want to touch briefly on training. We've 25 instituted a fairly extensive training program. To date, we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 are nearing completion of training all ARB staff members on 2 this program, so that all of us are aware of the key points 3 of this program. 4 We've also sent offers to train and brief local 5 district staffs -- EPA Region IX staff, and other agencies 6 in California, such as the Fire Marshal, Bureau of 7 Automotive Repair, the Energy Commission. And we expect to 8 be conducting those briefing training sessions over the next 9 month to six weeks. 10 What I'm showing you on this slide is the 11 briefings that we've held to date on this program. This has 12 been the major focus of our effort now for the last about 13 six weeks. We've conducted about 20 briefings to date. 14 These include local district boards and various associations 15 and organizations. 16 This is continued on the next slide. I want to 17 point out that many of these briefings have been what we 18 call team briefings or, in addition to a representative from 19 our organization, there's also a representative of an oil 20 company present as well. 21 Over the next months, we have scheduled about 22 another 15 briefings, and that will be ongoing. In addition 23 to these outreach briefings, we have also initiated 24 briefings of individual legislators by our legislative 25 staff. To date, there are about 15 such briefings that have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 occurred. Those will continue until all of the legislators 2 are briefed. 3 We also have scheduled media briefings. These 4 will begin next week with some editorial boards of the major 5 newspapers throughout the State. 6 Let me just say, overall, the response at all of 7 these briefings has been extremely positive to our cleaner 8 burning gasoline program. In addition, another benefit from 9 these briefings has been the many offers to help get the 10 message out, either through newsletters, articles in 11 publications, and so forth. And we are following with these 12 organizations to assist them in that outreach. 13 So, I think we're seeing somewhat of a domino 14 effect that will help further get the message out. 15 As I said, the major emphasis over the next couple 16 of months will be to continue our outreach efforts that we 17 have planned. 18 Let me just summarize very briefly this update. 19 As Dean indicated, we've essentially completed the testing 20 program. We saw no increase in problems, and vehicles 21 performed just as well on cleaner burning gasoline as they 22 do on conventional gasoline. 23 The supply situation is solid, and should be 24 adequate, and our outreach efforts are well underway. And 25 to date, the response has been very positive. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 Thank you very much. 2 CHAIRMAN DUNLAP: Thank you, Peter, Dean, 3 appreciate it. Jim, do you have anything to add? 4 MR. BOYD: Just a couple of closing remarks, Mr. 5 Chairman. Thank you. 6 We'll be providing the Board our next progress 7 report on this implementation of cleaner burning gasoline 8 efforts at our February Board meeting, which, as you know, 9 as just immediately prior to the March 1st, 1996, formal 10 introduction of cleaner burning gasoline here in California. 11 In addition, at that Board meeting, the February 12 meeting, we will be bringing to you, the Board, for your 13 consideration variance regulations that are, as indicated in 14 this presentation, part of the implementation program for 15 this overall program and this regulation. 16 I'll close with just a couple of additional 17 comments on the program. As has already been mentioned, 18 cleaner burning gasoline will provide one-fourth of the 19 emission reductions needed in our most important SIP. And 20 simply put, as I've said before, the SIP doesn't work 21 without California cleaner burning gasoline. The gasoline 22 is a critical portion of the total clean fuels/low- 23 emission/zero-emission vehicle program that will allow we 24 here in California to make progress towards cleaner air as 25 provided under both federal and State law. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 I think, as you've heard today again, the 2 implementation efforts are proceeding quite well. We have 3 our fingers crossed; we're hopeful. The outreach efforts 4 are now underway, and I expect you'll be seeing more and 5 more. And to date, the program is receiving a positive 6 response. As has been indicated, we are trying not to be 7 too complacent, but we are very grateful for the work of the 8 advisory committee and its subcommittees, and believe they 9 deserve a lot of the credit for the progress we've thus far. 10 And when all these diverse groups come together, 11 it's satisfying to see the harmony and the singleness of 12 purpose that people can come to in trying to see a launch of 13 a project that they all have invested so much in. So, we're 14 very pleased and very grateful for the help of all the 15 involved people, and we trust their continuing efforts to 16 advise and assist us in the future will be both invaluable 17 and extremely helpful. 18 Thank you. 19 CHAIRMAN DUNLAP: Thank you, Mr. Boyd. Supervisor 20 Silva. 21 SUPERVISOR SILVA: Yes. Thank you, Mr. Chairman. 22 Mr. Boyd, I have a couple questions. I know that we all 23 have a goal of cleaner burning gasoline. But when you run 24 lab tests in an ideal situation, I think sometimes the 25 result is a little bit different than maybe in the actual PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 field. 2 When you have new cars versus high-mileage cars, I 3 think that that could be a difference. And when you have 4 professional drivers or you're using vehicles that are tuned 5 to perfection, I think that the results might be different 6 than what the consumers are using, or the public I should 7 say. 8 Will we be testing this with people that are not 9 associated with the industry such as the automobile or the 10 gasoline companies? And would we be testing new cars as 11 well as high-mileage vehicles? 12 MR. BOYD: Supervisor Silva, your observation is 13 very right on in terms of our concerns about what happens to 14 anything that we want to the -- in a real world situation of 15 the public. In the testing programs that have been 16 conducted, and I think you can see that from the video that 17 is being distributed, show that we've done everything we 18 think in our power to reach out to an extremely diverse base 19 in terms of the types of vehicles and the types of operation 20 of those vehicles. 21 So, we have test fleets. And admittedly, they're 22 fleets of responsible companies and corporations that are 23 being tested, and they perhaps are subjected to better 24 degrees of maintenance than the average public, although I 25 can't make that statement categorically. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 But the diversity of the test fleets, such as the 2 fleet, the very old fleet at the California State University 3 at Fresno, for instance, and the very diverse fleet, a very 4 high mileage fleet, and the fact that the employees and 5 student employees are drivers of the vehicles and don't have 6 the same daily possession of the vehicles that perhaps 7 professional fleets have give us some diversity. 8 The refiners have used fuel and others have used 9 fuels in fleet of their own employees and employee cars, and 10 thus they are getting to a more average set of individuals 11 in our community. 12 So, I recognize your point. It's a good point. 13 And I invite Mr. Scheible or Mr. Venturini to expand on my 14 comments, but recognizing that we all -- the advisory 15 committee -- in total tried to reach out to as diverse and 16 as typical California citizen vehicle fleet as we possibly 17 could to head off the very concern that you have. 18 SUPERVISOR SILVA: Well, if we're talking about 19 one percent, I think that we could live with that. If we're 20 talking about, in the real world, nine percent, I think that 21 that would be a situation that should be addressed. 22 But I feel you tried to cover every base. 23 MR. BOYD: We're trying. Thank you. 24 SUPERVISOR SILVA: Okay. 25 CHAIRMAN DUNLAP: Plus, Supervisor Vagim's had it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 in his car, Jim, and it ran pretty well. He can give you a 2 personal -- quick, personal testimony. 3 SUPERVISOR VAGIM: Having a guinea pig of this, 4 and not a professional driver; however, driven like a 5 professional driver probably should have been driving at a 6 very high rates of speed coming to Sacramento -- 7 (Laughter.) 8 SUPERVISOR VAGIM: -- I can contest to you that 9 the fuel has not been a detriment to my automobile, and is 10 not a new automobile. It's an '88 version with medium 11 miles. And I wanted to purposely, as a Board member, be a 12 guinea pig to this to make sure that we weren't going to 13 find out with hindsight that we had a problem with this 14 fuel. 15 I am one of the higher averages, and Mr. Simeroth 16 and Mr. Venturini and I have had some discussions about 17 this. But they assure me the fleet averages are well within 18 the ranges that they've cited. 19 It'll be interesting. There'll be case by case 20 for some folk. There's probably 10 people in California 21 that keep meticulous records on their mileage. The rest of 22 us, probably who don't, will not have a fuel to compare it 23 to after the new fuel's in the system. So, those with long 24 memories will probably remember there's a nine percent 25 difference if there are extremes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 Most of the Californians I think will just 2 disappear in the great big scheme of things, and they'll 3 probably know they're not getting as good a mileage, and 4 hopefully that percentage will be more to the three percent 5 than to the nine percent. 6 And if that's the case, I think the fuel's a 7 raging success, and we'll all be beneficial of it, 8 particularly with that 15 percent reduction in every 9 tailpipe. 10 CHAIRMAN DUNLAP: Okay. Thanks, Doug. 11 Mr. Lagarias. 12 MR. LAGARIAS: Well, I think I have been very 13 impressed with the work of the advisory committee. And in 14 response to Mr. Silva's, the very design of this program was 15 to compare the cleaner burning gasoline with the existing 16 gasoline. And what we're seeing is the differences between 17 these two gasolines and separating out the wide variation 18 that occurs between the way people drive, the age of the 19 cars, and the other wide variabilities that we find in gas 20 mileage in any given car or among people. And what we're 21 doing is concentrating on the differences between cleaner 22 burning gasoline and the conventional gasoline. 23 It separates out these wide variations that will 24 occur in any event. 25 CHAIRMAN DUNLAP: Very good. Any other questions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 of staff? 2 Okay. It seems that we have no one that signed up 3 to testify on this item. Do we have any written 4 communication we need to report on, Mike? 5 MR. BOYD: None that I'm aware of, Mr. Chairman. 6 CHAIRMAN DUNLAP: Okay. 7 MR. LAGARIAS: I have one more comment. 8 CHAIRMAN DUNLAP: Yes, Mr. Lagarias. 9 MR. LAGARIAS: I'd like to comment on the public 10 outreach program, which I think is remarkably effective. 11 But it's still concentrating on the knowledgeable people, 12 the people that are aware of what's going on. And it hasn't 13 reached the people that actually put the gasoline in their 14 car. 15 And you will recall at our earlier meetings, the 16 representative of the station operators pointed out that 17 when we introduce new fuel, even the pump jockeys didn't 18 know what was going on. So, perhaps the oil companies might 19 consider putting a pamphlet up beside each pump station; so, 20 when the self-service people -- all of us pump gasoline -- 21 there's a little pamphlet on the pump that they can find out 22 more about cleaner burning gasoline. 23 CHAIRMAN DUNLAP: Point of purchase advertising I 24 think they call it. 25 MR. VENTURINI: Mr. Lagarias, your point is right PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 on. And, in fact, that is going to be happening. A number 2 of companies will be putting information out, as the 3 Chairman mentioned, point of sale items to let the public 4 know that they are getting the cleaner burning gasoline. 5 Also, as part of our briefings, we are reaching out to the 6 service station associations and automotive service councils 7 and so forth to brief them, educate them about the program, 8 and also using them as a vehicle to also get information out 9 to their members. 10 SUPERVISOR VAGIM: Mr. Chairman? 11 CHAIRMAN DUNLAP: Supervisor Vagim. 12 SUPERVISOR VAGIM: First, March 1st is the 13 deadline for the refiners to put it out. Can a refiner put 14 out the fuel before that time? 15 MR. VENTURINI: Yes. As a matter of fact, in 16 reality, you're probably going to start seeing what we call 17 cleaner burning gasoline starting to hit probably even this 18 month as refineries complete their turnarounds, as you get 19 all the pipes hooked up and everything. They're going to 20 start trying to make and blend this gasoline. 21 So, we'll probably start seeing some of this fuel 22 being introduced. It may not be totally meeting all of our 23 specs, but they'll be working toward getting the specs by 24 March 1st. And we are planning to begin monitoring the fuel 25 specifications out there so we can kind of see what's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 happening in the marketplace. 2 SUPERVISOR VAGIM: And one other question, Mr. 3 Chairman. 4 CHAIRMAN DUNLAP: Sure. 5 SUPERVISOR VAGIM: On the one percent to nine 6 percent swing and the average of three percent, have you 7 identified any particular engine types or types of vehicles 8 for four cylinder, eight cylinder, six cylinder that have 9 any particular propensity to have worse mileage than others? 10 MR. SIMEROTH: Supervisor Vagim, at this point, we 11 haven't. One of the things -- and we're still going through 12 the data on this. Things we're finding are that our test 13 fuel was relatively uniform and was made to -- the 600,000 14 gallons looked like each other. We've been testing 15 conventional fuels as part of the program looking for the 16 energy content of conventional fuels. 17 We're finding the energy content of conventional 18 fuels, which reflects itself in the gas mileage, varies more 19 than the average that we're trying to determine. And that's 20 causing some of the confusion, and makes hard to identify 21 which vehicles are -- 22 SUPERVISOR VAGIM: I see. It's hard to find a 23 benchmark from where you're coming from. 24 MR. SIMEROTH: Yes. 25 SUPERVISOR VAGIM: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 MR. SCHEIBLE: To put it into perspective, we 2 found different fuels could vary as much as nine percent in 3 energy content. So, from one fill up to another, depending 4 on if you bought the fuel with the most energy and the next 5 time with the least energy of conventional gasoline, you 6 could see a nine percent change in fuel economy just because 7 of that. 8 And that's kind of masking the -- that may be a 9 large part of the individual vehicle effect as opposed to 10 different vehicles reacting differently to the fuel. 11 SUPERVISOR VAGIM: I see. Thank you. 12 CHAIRMAN DUNLAP: Okay. Very good. Any other 13 questions of staff? 14 Okay. Then I think we'll move on to the next 15 item. But before we do that, I must compliment Mr. 16 Venturini on his cufflinks. I've not quite seen any lapel 17 buttons used quite that way for "cleaner burning gasoline." 18 I hope that's not a new style trend among the staff. Okay. 19 Let's move on to the second agenda item, 95-13-2, 20 which is a public hearing to consider amendments to the 21 California cleaner burning gasoline regulations, including 22 amendments regarding downstream blending of oxygenates. 23 This agenda item is the consideration of several 24 proposed amendments to our cleaner burning gasoline 25 regulations. The most significant amendment would allow PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 unoxygenated gasoline to leave a refinery without meeting 2 the standards as long as oxygen would be added downstream of 3 the refinery so that the final product would meet all of the 4 standards. 5 The other proposed amendments are less complex and 6 represent fine-tuning of the rule. They relate to 7 flexibility of compliance and ease of enforcement. This 8 package of amendments will provide additional flexibility to 9 refiners without sacrificing any of the emission benefits of 10 this clean air program. 11 At this point, I'd like to ask Mr. Boyd to 12 introduce the item and begin the staff's presentations. 13 MR. BOYD: Thank you again, Mr. Chairman. 14 As indicated, today, we are proposing several 15 changes. The major proposed change would allow producers of 16 gasoline who will add oxygenates at downstream pipeline 17 terminals or at the bulk plants to take into account the 18 dilution that occurs when oxygenates are blended with the 19 gasoline. 20 As the regulation stands today, all gasoline 21 shipped from a refinery must meet our specifications, except 22 those pertaining to oxygen content, when the gasoline leaves 23 the refinery or let's say the site of importation of the 24 gasoline. 25 Thus, the producer who adds oxygenates at a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 downstream location cannot take advantage of the dilution of 2 the benzene content, the aromatic content, the olefin 3 content, or the sulfur content. That occurs when the 4 oxygenate is finally added to the fuel stock. 5 The U.S. EPA now allows credit for this kind of 6 improvement, and we propose to do the same. While sounding 7 simple in content, the execution of this proposal is indeed 8 somewhat complex in order to ensure enforceability of the 9 regulations. 10 I also need to note that making this change will 11 not result in the loss of any of the anticipated emission 12 reductions attributed to cleaner burning gasoline. 13 Our other proposed modifications, as I indicated, 14 are less complex and deal with clarifications and 15 improvements, and to provide flexibility in compliance and 16 ease of enforcement. And they are, first, an extension at 17 thae outset of the regulation of the time that a refiner 18 will have to offset high values of regulated properties in 19 its initial batches of gasoline made under the regulations. 20 Secondly, a provision to let a refiner who's using 21 alternative limits set with our predictive model to switch 22 between flat and averaging limits. 23 Thirdly, a change in the definition of the, quote, 24 "production facility," end quote, in recognition that some 25 refiners' operations are not all on one property; also, a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 change in the winter oxygen season for San Luis Obispo, also 2 a clarification of the RVP season in Southern California, a 3 prohibition of mixing finished gasoline and gasoline that 4 lacks oxygen; and, finally, clarification of the calculation 5 of the amount of gasoline that a small refiner may produce 6 until 1998, without meeting all of our standards. 7 And with that summary, I'd now like to introduce 8 Mr. John Courtis, Manager of the Fuels Section of the 9 Stationary Source Division, to give you the staff's detailed 10 presentation. 11 Mr. Courtis. 12 MR. COURTIS: Thank you, Mr. Boyd. 13 Mr. Chairman and members of the Board, what I'm 14 going to present to you today is amendments for the 15 California reformulated gasoline regulations, and those 16 amendments include changes regarding the downstream blending 17 of oxygenates. 18 Over the past year, the ARB staff held a number of 19 meetings with gasoline producers, marketers, and others to 20 discuss implementation issues of California reformulated 21 gasoline regulations. 22 The proposal, as presented to you today, was 23 formed as a result of these discussions. It represents 24 improvements in flexibility of compliance without 25 sacrificing either the enforceability of the regulations or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 the environmental benefits. 2 Next slide, please. 3 I would like to provide you with some background 4 information first. This table lists the eight 5 specifications for the California reformulated gasoline. It 6 shows both the flat and the average standards that would 7 apply when gasoline is shipped from the refinery. 8 This table also shows the cap limits that are 9 applied for all the distribution systems. 10 Next, please. 11 Companies are also allowed to comply with the 12 requirements of the California reformulated gasoline 13 regulations by the use of the predictive model. The 14 predictive model allows for alternative gasoline 15 formulations to be produced as long as those gasoline 16 formulations have less or equal emissions with the limits as 17 adopted by the Board. 18 We expect that the majority of gasoline producers 19 in California will make extensive use of the predictive 20 model in order to comply with the California RFG 21 regulations. 22 Next. 23 The proposed amendments presented to you today, 24 again, is a result of meetings that we had held during 1995 25 with oil company representatives and others. We also held PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 two public workshops to receive comments and discuss the 2 staff's proposals. 3 The latest workshop took place on November 30th of 4 1995, when we discussed the staff report. We believe that 5 you have in front of you copies of the suggested 6 modifications to the original proposal. Most of those 7 modifications have been suggested as the result of public 8 comments received at the November 30th workshop. 9 I would like to add, also, that copies of the 10 proposed modifications are available at the back of the 11 room. 12 Drafts of these modifications have been provided 13 to interested members of the public at the beginning of this 14 week. My presentation of the proposed amendments would 15 include both the original proposal and the proposed 16 modifications. 17 The most significant amendment is to add 18 provisions to the regulation for allowing downstream 19 oxygenate blending. 20 The other amendments, as Mr. Boyd talked about, 21 represent minor technical changes to the California RFG 22 regulations in order to assure a smooth implementation and 23 to improve flexibility. 24 And here in the next slides is a list of the 25 proposed changes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 Next, please. 2 The first amendment that I would like to talk 3 about is the amendment for downstream blending of 4 oxygenates. We call that with the acronym CARBOB, which is 5 an acronym for California reformulated gasoline blendstocks 6 for oxygenate blending. 7 These amendments are patented after the federal 8 U.S. EPA requirement, and the U.S. EPA called their program 9 RBOB. 10 These federal RBOB requirements are already in 11 place in the South Coast Air Basin. The CARBOB is needed to 12 provide some additional flexibility to refiners that use 13 ethanol as the oxygenate of choice. And, again, the 14 requirements of CARBOB are very similar to the federal 15 requirements for RBOB. 16 This schematic gives you an idea of how oxygenates 17 are blended into the various points of the production and 18 distribution system. There are two types of oxygenates 19 commonly used -- MTBE, which is an ether, and ethanol, which 20 is an alcohol. 21 Usually, MTBE is added at the refinery prior to 22 the product being shipped out of the refinery either through 23 the pipeline or with a tank truck. 24 Ethanol is mostly added downstream at the terminal 25 facility. The addition of oxygenates into the gasoline PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 would help producers of gasoline in meeting the California 2 RFG standards through a dilution effect. Because usually 3 oxygenate does not contain any components like aromatics and 4 others. In addition, oxygenates reduce the concentration of 5 these compounds in the gasoline. 6 Next, please. 7 Existing provisions of the regulations, as it 8 stands now, require compliance with the standards at the 9 production facility. Although it allows the downstream 10 blending of oxygenates, the product must comply with the 11 standards before it leaves the refinery. Refineries that 12 blend downstream of the refinery cannot take advantage of 13 the dilution effects of oxygenates therefore. That is 14 particularly important for refiners that plan to use ethanol 15 as the oxygenate of choice. 16 Next, please. 17 Our proposal would allow noncomplying gasoline to 18 be shipped if downstream blending with oxygenates would 19 result in a complying product. And, again, it is very 20 analogous to the U.S. EPA. 21 Next, please. 22 As I mentioned before, all the other amendments 23 are technical in nature, and I will cover them very briefly. 24 The first is a proposal to include changes that 25 would allow offsets up to 180 days at the start of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 program, which is March 1st of 1996, for companies that 2 choose the averaging provisions. 3 This is important for companies that plan to use 4 the averaging provisions of the regulation. 5 Next, please. 6 The next proposal is to incorporate some changes 7 that allow a smoother administration of the predictive 8 model. The proposed amendment makes it a lot easier for the 9 refiners to switch between the flat and the average limits 10 when they are changing the PM formulations. 11 Refiners could not do that before if there was an 12 outstanding debit for one of the gasoline properties. 13 The next amendment is on the definition of 14 production facility. Some refineries operate tanks that are 15 outside of the main facility. The proposed amendments would 16 allow producers to expand their production facility limits 17 that may allow producers to include offsite tanks in the 18 definition production facility, especially tanks that they 19 have leased and operated under the direction of the 20 producer. 21 The next amendments that are proposed are for the 22 small refiner provisions. If you recall, the California RFG 23 regulations provide small refiners with a two-year extension 24 of the compliance date for four out of the eight California 25 RFG properties. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 That extension is subject to a number of 2 conditions for the gasoline that is supplied by the small 3 refiner. We propose today some minor clarifications to the 4 requirements for the gasoline that is supplied by the small 5 refiners. 6 The next amendment is a change in the wintertime 7 oxygenate seasons for San Luis Obispo. In 1992, the Board 8 amended the wintertime oxygenate regulations for San Luis 9 Obispo to align the control period with the period for the 10 areas that supply product to San Luis Obispo. 11 The regulation, California reformulated gasoline 12 regulations did not have that alignment. Our proposal is to 13 do the same thing for the California RFG oxygenate season. 14 Next, please. 15 The next amendment would affect the applicability 16 of RVP limit in the South Coast Air Basin. This is 17 basically to correct a drafting error for phasing in the RVP 18 season in the March through April period of 1996. The 19 proposed amendments will assure that the RVP limits would 20 apply to the refineries during startup period. 21 The last amendment and my least is proposed for 22 enforcement reasons. We propose some limits on the blending 23 of California gasoline with nonoxygenated blendstocks. This 24 amendment will help in preventing the addition of 25 noncomplying product into the California gasoline. It is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 required that certain demonstrations are made by the 2 producers and the blenders. 3 The staff looked at the environmental impacts over 4 the proposed amendments and we believe that the proposed 5 amendments will not change the environmental benefits over 6 the California RFG regulations. 7 Looking at the economic impacts, the staff did not 8 identify any adverse economic impacts. We believe that the 9 proposed amendments will add significant flexibility to 10 refiners with potential cost savings, and recommend that the 11 Board approve the proposed changes. 12 That concludes my presentation. I would like to 13 add that Mr. Tom Jennings, Senior Staff Counsel, is at the 14 end of the table, and Mr. Jennings drafted most of the 15 regulatory language of the proposed changes. 16 We are ready to answer any questions. Thank you. 17 CHAIRMAN DUNLAP: Any of the Board members have 18 any questions? 19 Okay. Mr. Calhoun. 20 MR. CALHOUN: In one of the slides, there's a 21 statement, "For enforcement reasons, we propose limits on 22 the blending of California gasoline with nonoxygenated 23 blendstocks, unless certain demonstrations are made." 24 Would you care to elaborate on that a little? 25 MR. JENNINGS: Certainly, Mr. Calhoun. One of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 key principles of the regulation is that we have the more 2 stringent that apply at the refinery or import facility, and 3 then the less stringent cap limits that apply throughout the 4 distribution system. 5 What we want to do is make sure that every gallon 6 of gasoline that comes into the California distribution 7 system is made subject to the refinery limits at one point, 8 when it is converted from nongasoline to gasoline. 9 So, theoretically, the regulation has always said 10 that every person who produces gasoline has to meet those 11 refinery limits, but it was relatively difficult to 12 administer that in terms of a person who might be blending 13 blendstocks into reformulated gasoline some point downstream 14 of the refinery. 15 So, what we did is put in a provision that was 16 very closely patterned after a provision the EPA has that 17 prohibits adding nonoxygenate blendstocks into gasoline 18 unless the person can prove that those blendstocks 19 independently meet all of the California reformulated 20 gasoline requirements. 21 We're proposing two exceptions. One is a very 22 limited exception when transmix is used at a terminal, and 23 we'd allow that to be done in accordance with the protocol. 24 And also, we allow companies, with approval of the ARB, to 25 add blendstocks into off-spec gasoline to bring that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 gasoline into spec. Sometimes you have blendstocks that 2 would meet most of the requirements by far, but might not 3 have oxygen in them or something like that. 4 But we want people to be able to bring that 5 gasoline into spec. 6 MR. CALHOUN: How will the staff know the 7 composition of the blendstock? Will the companies tell you 8 this, or what? 9 MR. JENNINGS: Well, what we tried to do -- and, 10 again, the more complex and, quote, "flexible," unquote, 11 regulation you have the harder it is to enforce. And it 12 always creates tension with us. 13 With the proposed language, we no longer -- the 14 advantage of the proposed language is that we no longer have 15 to prove that those blendstocks didn't meet the standard. 16 Rather, we've put the responsibility on the blender to 17 demonstrate that those meet the standards. And unless the 18 blender can do that, blending the blendstocks into the 19 downstream gasoline is prohibited. 20 MR. CALHOUN: Thank you. 21 CHAIRMAN DUNLAP: Okay. Any other questions of 22 staff before we get into calling the witnesses forward? 23 All right. We have three people that have signed 24 up to testify on this item. I'd like to have them come 25 forward. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 Mike Kulakowski of Texaco, followed by Cindy 2 Hasenjager from the California Renewable Fuels Council, and 3 Robert Warden from Chevron, if you'd proceed in that order. 4 Good morning. 5 MR. KULAKOWSKI: Good morning, Mr. Chairman, 6 members of the Board. My name is Mike Kulakowski. I'm a 7 staff engineer with Texaco Refining & Marketing based on Los 8 Angeles. 9 I've been involved with these regulations since 10 before they were passed. I'm very familiar with it. I've 11 appeared before you before, and appreciate the opportunity 12 to be here today. 13 Texaco has participated cooperatively with the ARB 14 staff in the development of the changes before you today. 15 We believe that these changes will provide refiners with 16 greater flexibility in meeting the California RFG 17 requirements without any changes to the air quality benefits 18 of the regulation. 19 Texaco further believes that these changes 20 represent an important step in the successful implementation 21 of the program, and we support the staff proposal. 22 However, there is one more set of issues that we 23 have to overcome before March of 1996. These are 24 collectively known as the "overlap" issues. 25 As you know, after March 1st, 1996, both EPA and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 the ARB will regulate reformulated gasoline in California. 2 In the areas where these requirements do not precisely 3 overlap one another, simultaneous compliance can erode a 4 refiner's flexibility or result in needless and duplicative 5 reporting. 6 An example is in gasoline vapor pressure. ARB 7 sets a ceiling of 7.0 pounds per square inch, while EPA sets 8 a floor of 6.6 pounds per square inch. This is a very 9 narrow range which will significantly hamper refiners' 10 blending flexibility. 11 Over the last year and a half, we have met and 12 worked cooperatively with ARB and EPA staff to address these 13 overlap issues, but much work still remains. We have a 14 meeting scheduled January 12th, 1996, in Washington, D.C. to 15 address the remaining overlap issues with EPA. 16 Your staff has been very helpful and cooperative 17 in working on these issues, and we find that the presence of 18 your staff makes these meetings with EPA much more 19 productive. 20 So, Texaco requests that ARB staff versed in these 21 overlap issues attend this important meeting in Washington. 22 That concludes my written comments. I'll be happy 23 to answer any questions. 24 CHAIRMAN DUNLAP: Okay. Mr. Boyd, can you or your 25 RFG team say anything about this January 12th meeting in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 Washington, D.C.? Have we been invited? 2 MR. BOYD: We're aware of the meeting. We think 3 it is advisable to be at the meeting and are preparing to 4 request appropriate approvals to so attend. 5 And we, as mentioned, we've been on top of this 6 item working with the industry in the past. 7 CHAIRMAN DUNLAP: Right. We'll do everything we 8 can to make clarity happen, and we -- I won't say we're in 9 complete lock step with everything you propose relative to 10 those issues, but certainly we share many of those concerns. 11 And, Mr. Boyd, I would, of course, entertain 12 appropriate travel requests to send able representatives 13 from the Board. 14 Thank you for suggesting it. 15 MS. EDGERTON: Mr. Kulakowski, I want to thank you 16 for your support and working with the Board, and I'd also 17 like to thank you for wearing the pin. I think that looks 18 real good -- cleaner burning gasoline. 19 CHAIRMAN DUNLAP: But no cufflinks. 20 MS. EDGERTON: We're all together. Well, some 21 people have to wear them as cufflinks and some of them as 22 pins. Thank you. 23 CHAIRMAN DUNLAP: Thank you. 24 SUPERVISOR SILVA: Mr. Chairman. 25 CHAIRMAN DUNLAP: Yes, Mr. Silva. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 SUPERVISOR SILVA: Yes, Mr. Kulakowski. Real 2 quick. When a refinery -- from the time the gasoline leaves 3 the refinery production until it actually hits the service 4 station pumps, how long does that take? 5 MR. KULAKOWSKI: Typically, it takes approximately 6 six weeks. 7 In the past, it has taken about six weeks to get-- 8 when we make a change in vapor pressure to get from a 9 refinery all the way through to retail. There you're 10 dealing with a single parameter and you have quite a bit of 11 leverage. You can -- back to when we were blending to 7.8 12 or 9 pounds per square inch, you could go quite a bit lower, 13 and we have a lot of leverage to turn the tanks over. 14 With cleaner burning gasoline, many of the 15 parameters are set so low that you can't get a lot of 16 leverage. You can't go much below the specifications. So, 17 I think a slightly longer leadtime, as staff has proposed, 18 the March through June, in essence, is appropriate. 19 SUPERVISOR SILVA: Okay. Thank you very much. 20 CHAIRMAN DUNLAP: Okay. Thank you. 21 MR. KULAKOWSKI: Thank you. 22 CHAIRMAN DUNLAP: Ms. Hasenjager from the 23 California Renewable Fuels Council. 24 It seems we have your comments in writing. 25 MS. HASENJAGER: Yes, you do. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 CHAIRMAN DUNLAP: Okay. You're welcome to cover 2 them verbatim. I don't think you need to. You could 3 highlight them if you like, and I think we can follow along. 4 MS. HASENJAGER: Right. I'll try to just 5 highlight them. 6 Good morning, Chairman Dunlap and Board members. 7 My name is Cindy Hasenjager, and I'm the Executive Director 8 of the California Renewable Fuels Council. 9 The Council supports the efforts of the Air Board 10 in developing regulation to allow for downstream blending of 11 oxygenates. It's obvious that staff has put a great deal of 12 time and effort into these amendments which move toward 13 compliance flexibility and fuel neutrality. 14 Staff has been very diligent in getting industry 15 input on the development of these amendments to ensure that 16 they are workable, while maintaining the overall integrity. 17 However, like Mr. Kulakowski, I'd like to raise an 18 issue that has yet to be resolved, and that's the -- 19 currently, there is an RVP allowance for ethanol blended 20 gasoline during the month of October. The amendments that 21 you have before you do not carry that RVP allowance forward. 22 I recognize that it is a commitment of this agency 23 to provide policy that is oxygenate neutral. I would 24 suggest that the next step towards total fuel neutrality, 25 which will have the least impact on all affected parties, is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 to continue this October RVP allowance beyond 1995. 2 I also need to stress that this is a time- 3 sensitive issue and that it's important to get some 4 resolution to give clear direction to oxygenate blenders for 5 planning purposes for the 1996 carbon monoxide control 6 season. 7 Representatives of the ethanol industry have been 8 in discussion with ARB staff regarding this issue for some 9 time. Staff, however, is reluctant to propose extending the 10 existing RVP tolerance towards October because of their 11 concerns regarding ozone exceedances. 12 Now, up until very recently, tests of 10 percent 13 ethanol blends had not been conducted by this agency. 14 However, at this time, our industry, as well as other 15 agencies in this State, California Department of Food & Ag, 16 the California Energy Commission, the oil, automobile, rice, 17 and ethanol industry are working with ARB staff to develop a 18 test protocol to test 10 percent ethanol blends. 19 The objective of this test is to determine the 20 emissions impacts, including the ozone forming potential of 21 two fuels -- a 10 percent ethanol blend and an 11 percent 22 MTBE blended California cleaner burning gasoline. 23 Now, it's been our industry's long-standing 24 position that ethanol blended fuels should be evaluated and 25 judged on their ozone forming potential. The industry feels PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 that the proposed tests will demonstrate that 10 percent 2 ethanol blends provide the maximum carbon monoxide reduction 3 that's available without exacerbating ozone. 4 We would ask that this Board not set policy that 5 judges ethanol fuels before the results of this test are 6 complete. 7 CRC supports these amendments as part of the 8 larger objective to provide fuel neutrality. 9 Now, as I've suggested, the next step towards fuel 10 neutrality is to continue the existing October RVP 11 tolerance. The industry stands ready to continue our work 12 with staff to find the best way of doing this and resolving 13 this issue. 14 The Council would urge the Board to direct staff 15 to find an administrative remedy that will continue the 16 existing RVP allowance for gasoline blends of at least 4.9 17 percent ethanol during the month of October. 18 Thank you. Any questions? 19 CHAIRMAN DUNLAP: As you understand it, what 20 barrier is there to the October -- at this juncture -- to 21 the October issue? 22 Do you mean the study primarily, the assessment? 23 MS. HASENJAGER: Well, right now, the October RVP 24 tolerance is not continued with the oxygen cap during 25 October and there is an RVP waiver for 10 percent ethanol PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 blends October, also (sic). However, October falls within 2 the RVP control season and also the oxygen cap. 3 So, it is really the picture of the conflict 4 between the regulation and the legislation, which is SB 5 1166, that allows the RVP tolerance. 6 CHAIRMAN DUNLAP: Okay. Question, Mr. Calhoun? 7 MR. CALHOUN: Yes. I don't understand how you can 8 do this administratively. This is a regulation, is it not, 9 that requires the limitation on the RVP? So, how do you do 10 it administratively? 11 MR. KENNY: Mr. Calhoun, that's correct. Right 12 now, the reformulated gasoline regulation does have 13 limitations on October. And what Ms. Hasenjager is asking 14 for is a modification to that regulation and to the 15 standards of that regulation to allow for use of ethanol in 16 October. 17 MR. CALHOUN: I thought I heard Ms. Hasenjager say 18 find some administrative remedy for that. 19 MS. HASENJAGER: If I could interject, by 20 "administrative remedies," I mean whatever it would take to 21 change the regulation or whatever staff advises us is the 22 best way to proceed. 23 CHAIRMAN DUNLAP: Okay. Thank you. 24 MS. HASENJAGER: Thank you. 25 CHAIRMAN DUNLAP: Any other questions of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 witness? Okay. Thank you, Cindy. 2 Our final witness, Bob Warden from Chevron. 3 Good morning. 4 MR. WARDEN: Good morning, Mr. Chairman, members 5 of the Board. My name is Bob Warden from Chevron USA 6 Products Company. 7 Today, I'm speaking in behalf of the Don Bea, 8 who's the Chevron Products' Issue Manager for California 9 reformulated gasoline. 10 The changes being considered by the Board today 11 will provide compliance flexibility to the producers of this 12 cleaner burning gasoline. In addition, the proposed changes 13 will allow gasoline producers to blend oxygenates downstream 14 of their refineries. 15 We have worked closely with CARB staff in the 16 development of these proposed changes. Staff has seriously 17 evaluated our comments and incorporated many of them in 18 their suggested modifications to the original proposals. 19 We now completely support these amendments to 20 California RFG regulations as modified by the staff today -- 21 proposed today. 22 I will be pleased to answer any questions. 23 CHAIRMAN DUNLAP: Any questions of the witness? 24 Very good. Thank you for your time. 25 All right. That appears to conclude the public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 testimony. Is there anyone we've missed? All right. 2 With that, I'd ask staff to summarize any written 3 comments that we've received. If my package is correct, we 4 have about two letters; is that right? 5 MR. JENNINGS: I think we only have one written 6 comment from someone who -- oh, we have two written 7 comments. One is from Ultramar. Ultramar supports the 8 proposal with the staff modifications. 9 They, in particular, want to emphasize their 10 support of the change to the definition of production 11 facility. 12 We have a comment from a gentleman named Richard 13 Sealy. He had two points. One was that he believes that 14 the oxygen content requirement should apply year-round in 15 California. As you know, outside the wintertime oxygenate 16 control period, refiners are allowed to use the predictive 17 model to go below 1.8 weight percent oxygen. 18 We believe that during that period, the oxygen 19 content controls aren't necessary as long as the refiner can 20 demonstrate that they satisfy all of the criteria under the 21 predictive model. 22 I might note that the federal reformulated 23 gasoline regulations, which by June will be applying in most 24 of the State, have a 2 percent floor. So, in a sense, Mr. 25 Sealy's request is granted by that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 His second point was that he wanted to make sure 2 that we had mechanisms to make sure that oxygenate was added 3 downstream. And we have made every effort to have 4 mechanisms like that, including a provision that producers 5 of CARBOB conduct a quality assurance program to make sure 6 that the oxygenate is being added as they designate it. 7 CHAIRMAN DUNLAP: Very good. Thank you. Is that 8 it? 9 MR. JENNINGS: Yes. 10 CHAIRMAN DUNLAP: Mr. Boyd, do you have anything 11 else to add? 12 MR. BOYD: Just a concluding remark. Again, to 13 reiterate some of what I believe I and the staff said, the 14 proposals that we have made to you we think will provide 15 greater flexibility to refiners as they continue to prepare 16 to bring us cleaner burning gasoline next year. 17 We think, in providing this flexibility, as I said 18 again, we will not compromise the benefits of cleaner 19 burning gasoline with regard to its effectiveness and, thus, 20 the emissions reductions. Therefore, we recommend your 21 adoption of the staff proposal. 22 CHAIRMAN DUNLAP: Very good. Thank you. 23 Okay. I will now close the record on this agenda 24 item; however, the record will be reopened when the 15-day 25 notice of public availability is issued. Written or oral PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 comments received after this hearing date, but before the 2 15-day notice is issued will not be accepted as part of the 3 official record on this agenda item. 4 When the record is reopened for a 15-day comment 5 period, the public may submit written comments on the 6 proposed changes, which will be considered and responded to 7 in the final statement of reasons for the regulation. 8 Just a reminder to the Board members of our policy 9 concerning ex parte communication. Again, while we may 10 communicate off the record with outside persons regarding 11 Board rulemaking, we must disclose the names of our contacts 12 and the nature of the contents on the record. 13 And this requirement applies specifically to 14 communications which take place after notice of the Board 15 hearing has been published. 16 Are there any communications which need to be 17 disclosed? Okay. 18 With that, we have before a resolution that we've 19 had for a couple minutes. 20 Why don't we take a moment and review it, and then 21 we'll come back and see if we can take some action here. 22 The Chair would entertain a motion and a second to 23 move this item. 24 SUPERVISOR VAGIM: Mr. Chairman, I move for 25 adoption of Resolution 95-48. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 CHAIRMAN DUNLAP: Thank you, Supervisor Vagim. Is 2 there a second? 3 SUPERVISOR SILVA: Second. 4 CHAIRMAN DUNLAP: Supervisor Silva, thank you. 5 I have a motion and a second. Is there any 6 further discussion by members of the Board? 7 DR. BOSTON: Mr. Chairman? 8 CHAIRMAN DUNLAP: Yes, Dr. Boston. 9 DR. BOSTON: I wasn't here for part of the 10 presentation, but I have read the proposals. Is it 11 permissible for me to vote on this issue? 12 CHAIRMAN DUNLAP: Yes, it is. 13 DR. BOSTON: Thank you. 14 CHAIRMAN DUNLAP: And welcome, by the way. We've 15 missed you. 16 DR. BOSTON: Thank you. 17 CHAIRMAN DUNLAP: Okay. With that, we have a 18 motion and a second. Will the Board Secretary please call 19 the roll for a vote on Resolution 95-48. 20 MS. HUTCHENS: Boston? 21 DR. BOSTON: Yes. 22 MS. HUTCHENS: Calhoun? 23 MR. CALHOUN: Aye. 24 MS. HUTCHENS: Edgerton? 25 MS. EDGERTON: Aye. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 MS. HUTCHENS: Hilligoss? 2 MAYOR HILLIGOSS: Aye. 3 MS. HUTCHENS: Lagarias? 4 MR. LAGARIAS: Aye. 5 MS. HUTCHENS: Silva? 6 SUPERVISOR SILVA: Aye. 7 MS. HUTCHENS: Vagim? 8 SUPERVISOR VAGIM: Aye. 9 MS. HUTCHENS: Chairman Dunlap. 10 CHAIRMAN DUNLAP: Aye. 11 MS. HUTCHENS: Passes 8-0. 12 CHAIRMAN DUNLAP: Very well. Thank you. I'd like 13 to compliment the staff on a fine presentation. Mr. 14 Courtis, Mr. Jennings, Mr. Venturini, Mr. Simeroth, well 15 done. Thank you. 16 Okay. That brings us to the third agenda item. 17 And if staff will change places quietly, I'll continue right 18 along. 19 Again, I'd like to remind those who may have just 20 joined us in the audience that if you wish to present 21 testimony to the Board, please sign up with the Board 22 Secretary sitting to my left. 23 And if you have written statements, please provide 24 her with 20 copies so that they be distributed at the 25 meeting. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 The third agenda item is 95-13-3, which is a 2 public hearing to consider the adoption of the national 3 security exemption for military tactical vehicles and 4 equipment. 5 We have before us today a request by the military 6 to adopt amendments to the California regulations which 7 would provide exemptions for military tactical vehicles and 8 equipment. 9 These exemptions would be allowed in accordance 10 with the U.S. EPA's national security exemption and 11 exclusion provisions. 12 And, at this point, if staff has taken their 13 places, I'd ask Mr. Boyd to begin this item by introducing 14 it. Jim. 15 MR. BOYD: Thank you, Chairman Dunlap. 16 I think, as the Board members know, in general, 17 States in this nation have to align their programs with the 18 regulations adopted by the U.S. EPA as provided by the 19 Federal Clean Air Act. 20 But also, as this Board knows, in the area of 21 motor vehicle control emissions, California is, for the most 22 part, the only State authorized to adopt its own program and 23 to adopt more stringent programs and regulations than 24 federal requirements provide. 25 Currently, California has more stringent standards PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 for light- and medium-duty vehicles and for diesel heavy- 2 duty off-road engines over 175 horsepower beyond the year 3 2001. 4 It is this latter regulation that prompted the 5 U.S. Military to request that the Board adopt the U.S. EPA's 6 national security exemption and exclusion provisions for 7 military tactical vehicles and equipment. 8 Since California currently does not have any 9 provisions for the exemption of these types of vehicles and 10 equipment, but we are totally sympathetic to the reason 11 therefore, we have developed a proposal which would amend 12 Title 13 of the California Code of Regulations. This 13 proposed amendment will provide the military with the needed 14 flexibility without a significantly adverse impact to 15 California air quality. And, overall, California standards 16 continue to be, in the aggregate, much more stringent than 17 the federal program. 18 With that brief introduction, I'd like to call 19 upon Ms. Veronika Pesinova of the Mobile Source Division who 20 will provide you with the staff's presentation. 21 Ms. Pesinova. 22 MS. PESINOVA: Thank you, Mr. Boyd, Chairman 23 Dunlap, and members of the Board. Good morning. 24 Today, I will present the staff's proposal to 25 adopt provisions that would exempt military tactical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 vehicles and equipment from California emission standards 2 and regulations for on-road motor vehicles and for engines 3 used in off-road vehicles and equipment. 4 Such provisions would incorporate the existing 5 federal rules and guidelines providing for a national 6 security exemption. This exemption from California 7 standards is necessary for the military to maintain a 8 uniform combat ready fleet worldwide, which is necessary for 9 the national security interest. 10 I will begin by providing a background on the U.S. 11 EPA regulations for military tactical vehicles and 12 equipment. Recognizing the unique requirements of military 13 tactical vehicles and equipment, the U.S. EPA determined 14 that it may be difficult, burdensome, and contrary to 15 national security interests to require that these vehicles 16 and equipment meet federal new engine emission standards. 17 Several years ago, the EPA established two 18 categories whereby military vehicles and equipment may be 19 exempted from emission standards. These categories are 20 referred to as national security exclusions and exemptions. 21 In the exclusion category, the U.S. EPA excludes 22 such military combat or tactical vehicles as armored tanks 23 from the federal motor vehicle regulations. 24 These types of vehicles were never intended to be 25 subject to emission standards due to their being designed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 solely for combat use. 2 In addition, the military tactical vehicles that 3 do not qualify for exclusions may be granted national 4 security exemptions by the U.S. EPA. These vehicles may be 5 similar to commercial designed vehicles, but are modified 6 for military operations. 7 In the armored vehicle category, exemptions apply 8 mostly to trucks that transport weapon systems and combat 9 and support personnel during military operations. 10 In the off-road vehicle and equipment category, 11 there's portable equipment such as compressors and 12 generators, and construction equipment such as tractors, 13 scrapers, and forklifts. 14 All of these vehicles and equipment must be 15 capable of being deployed and maintained worldwide in 16 remote, harsh environments as well as in urban locations. 17 Also, military technicians must be able to use 18 common technical manuals and interchangeable parts to repair 19 the equipment at any location. 20 In 1988, the U.S. EPA developed guidelines for 21 national security exemption procedures for fiscal years 1988 22 to 1995, to cover on-road vehicles. They are presently 23 developing new guidelines for on-road vehicles procured in 24 fiscal years 1996 to 2000 and for off-road vehicles and 25 equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 The guidelines would essentially prescribe that 2 the military agency would request an exemption and that EPA 3 would grant the exemption under the condition that the 4 vehicles or equipment comply with the federal emission 5 standards in effect in the first year of procurement. 6 EPA would then issue a certificate of conformity 7 that would allow manufacturers who were awarded the contract 8 for procurement to manufacture those vehicles, engines, or 9 equipment in the same configuration for the duration of the 10 five-year contract. 11 Staff proposes that the ARB adopt the federal 12 provisions providing for national security exclusion and 13 exemptions, thus aligning with the U.S. EPA's regulations 14 and policies for military tactical vehicles and equipment. 15 The ARB would defer to the U.S. EPA the 16 administration of the program and the granting of national 17 security exemptions and exclusions. 18 In addition, staff is proposing that California 19 only exemptions be granted to certain vehicles and equipment 20 where the California standards differ from federal 21 standards. 22 For example, two categories that have unique 23 California standards are off-road diesel engines starting in 24 the year 2001 and utility engines starting in 1999. 25 Exemptions to those California standards would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 granted only to military tactical vehicles or equipment that 2 do not require a federal exemption and that meet all 3 applicable federal emission standards and regulations. 4 This special exemption provision from California 5 emission standards is necessary for the military to provide 6 for and maintain a uniform combat ready fleet that can be 7 deployed worldwide. 8 Lastly, it is proposed that the U.S. Department of 9 Defense will be required to submit to the ARB a list of 10 types of all vehicles and equipment located in the State of 11 California that are excluded and/or exempted under these 12 provisions by January the 1st, 1997. 13 This list would be updated by the Department of 14 Defense as new types of vehicles and equipment would be 15 added. 16 This information will allow ARB to track the types 17 of vehicles and equipment that would be excluded or 18 exempted. 19 Besides the tactical vehicles and equipment, the 20 military also uses in California an administrative fleet 21 consisting of light-, medium-, and heavy-duty vehicles. 22 Although vehicles owned by the military or by military 23 personnel are not required to be registered in California, 24 the military has been procuring only ARB certified 25 nontactical vehicles to be used in California. And it has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 committed to the ARB staff that they will continue to do so. 2 Therefore, these vehicles would not be subject to 3 the national security exemption and exclusion provisions. 4 The staff's proposal would have minimal 5 environmental impact. The number of military tactical 6 vehicles and equipment that could possibly be exempted 7 amount to less than 21,000 units. 8 Due to this relatively small number of vehicles 9 and especially due to the very low usage per year, the total 10 possible emissions increase would amount to less than 0.1 11 percent of the mobile source inventory. 12 In addition, it should be noted that the ARB and 13 the U.S. EPA are developing uniform emission standards for 14 both on- and off-road heavy-duty engines that will cut 15 emissions in half by the 2004 time frame. 16 This more than compensates this minimal air 17 quality impact of the military exemption. Concerning the 18 economic impact of the proposal, the exemption of military 19 vehicles and equipment would have no associated costs. 20 There will be no adverse economic impact on small 21 business or to industry, nor would it adversely affect the 22 economy of the State. In fact, these proposed amendments 23 would align California regulations with federal exclusion 24 and exemption regulations and policies, which would provide 25 a benefit for the military and the ARB. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 In conclusion, to allow for the uniform combat 2 ready fleet, which is required for the purpose of the 3 national security, staff recommends that the Board adopt the 4 federal provisions providing for the exclusion or exemption 5 of military tactical vehicles and equipment in a California 6 only exemption that would be automatically granted to 7 tactical vehicles and equipment that meet the federal 8 emission standards. 9 In addition, the U.S. Department of Defense would 10 be required to submit to the ARB a list of all types of 11 excluded and exempted vehicles and equipment located in the 12 State of California by January the 1st, 1997. This list 13 would be updated by the Department of Defense as new types 14 of vehicles and equipment would be added. 15 We will be happy to answer your questions. 16 MR. LAGARIAS: Thank you. Are there any questions 17 from the Board? 18 Dr. Boston. 19 DR. BOSTON: Could you explain to me what the 20 purpose of the list is? If these vehicles are only going to 21 be exempted anyhow, why do we need to bother the Department 22 of Defense with providing us a list every year? 23 MR. SHEARS: Well, we thought it would be 24 reasonable, since we are allowing a California only 25 exemption, that we -- at least to get somewhat an idea of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 the types of vehicles that would be subject to this 2 exemption. And it's not to be a work-intensive type of list 3 at all. That's why we're calling it for vehicle types. 4 We're not asking for a total list of every 5 vehicle. That would be very work intensive. And I know the 6 military was concerned about that. 7 We're essentially wanting to know about just the 8 types of vehicles that the military -- and particularly, as 9 time goes on, they may be requesting other types of vehicles 10 to be exempted, and we wanted to be able to track that. 11 That's all. Just see how the program's working. 12 MS. PESINOVA: And also for the emission inventory 13 purposes, so our emission inventory group knows, you know, 14 what to include in the emission inventory model. 15 DR. BOSTON: Do you know what the emissions from a 16 tank are? 17 MS. PESINOVA: No. 18 MR. SHEARS: Now, we're looking for the exempted 19 vehicles, which are basically not -- the tanks fall under 20 excluded which, of course, they are not subject to emission 21 standards. 22 These vehicles are subject to emission standards, 23 generally federal emission standards, and we just want to 24 see how many types of vehicles are going to be meeting these 25 types of standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 DR. BOSTON: So, you'll get types and numbers. Is 2 that what you want? 3 MR. SHEARS: Yeah. 4 MS. PESINOVA: Right. 5 DR. BOSTON: Okay. 6 CHAIRMAN DUNLAP: Any other questions of staff on 7 this item? 8 All right. Very good. We have one witness. 9 We'll ask Captain Kathy Dodge from the U.S. Department of 10 Defense to come forward. 11 Good morning. 12 CAPTAIN DODGE: Good morning, Chairman Dunlap, 13 Board members. 14 I'm Captain Kathy Dodge. I'm here representing 15 Rear Admiral William Senter (phonetic), who is the 16 Commander, Naval Base, San Francisco. He's also the 17 Department of Defense appointed regional environmental 18 coordinator for EPA Region IX. 19 The item before you concerns a proposal by your 20 staff to create a national security exemption for military 21 tactical vehicles and equipment to be included in your 22 regulations establishing off-road diesel engine emission 23 standards. 24 DOD strongly supports the staff proposed adoption 25 of these exemptions. We fully concur with the conclusions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 and recommendations contained in the staff report. Without 2 such an exemption, California's new engine emission 3 standards will have a major impact on military operations in 4 California and military readiness generally. 5 I want to emphasize our agreement with the 6 conclusion in the staff report that this exemption is 7 necessary for the military to maintain a uniform combat 8 ready fleet worldwide. 9 DOD's tactical vehicles and equipment are all 10 integral parts of a carefully balanced fighting force 11 procured and maintained on a fleetwide basis. 12 Tactical vehicles and equipment must be uniform 13 throughout the world in order to facilitate the training of 14 mechanics, the ready availability of parts and replacement 15 engines, and repair on the battlefield. 16 Moreover, the California National Guard and 17 Reserve components, as an integrated part of our nation's 18 combat force, must train and fight with the same equipment 19 used by active-duty forces worldwide. 20 Consequently, designing and procuring a separate 21 fleet of tactical vehicles and equipment for California 22 would significantly impair military operational readiness. 23 With regard to the proposed annual reporting 24 requirements, we support technical amendments proposed by 25 your staff to more accurately reflect the staff's intention PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 that DOD furnish the list of the types of tactical equipment 2 subject to the exemption as opposed to an individual listing 3 of all exempted vehicles and equipment. 4 The tracking and listing of thousands of tactical 5 vehicles and equipment items in California would be 6 extremely resource intensive and would not result in any 7 substantial air quality benefits. 8 On this note, I would like to add that the 9 Department of Defense is fully committed to programs with 10 substantive air quality benefits. 11 As an example, we are exceeding requirements for 12 alternative fuel vehicles, including electric, in our 13 fleets. 14 Our light- and medium-duty fleet vehicles meet 15 California emission standards and fully participate in the 16 California smog testing programs. We also wish to express 17 our appreciation to your staff, in particular Mr. Mike 18 Terris and Ms. Veronika Pesinova, for their timely and 19 cooperative responses to our DOD concerns on this issue. 20 Finally, I take this opportunity to ask your 21 assistance in quickly resolving another problem regarding 22 our inventory of tactical equipment in California. 23 Currently, our portable tactical equipment is 24 subject to regulation by each air district in California as 25 stationary sources. This patchwork of regulation is causing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 significant problems for the military services. 2 AB 531 signed by the Governor provides a sensible 3 framework for solving these problems through a statewide 4 registration program. We have started working with your 5 staff on the development of implementing regulations that 6 will accommodate our military requirements as intended by 7 the Legislature in AB 531. 8 We would like to work with you to complete these 9 regulations as quickly as possible. In the interim, we hope 10 that you will assist us in obtaining temporary relief from 11 the problems that we are currently experiencing. One 12 specific request is the possibility of reclassifying this 13 equipment as mobile sources instead of their current 14 stationary classification. 15 Again, on behalf of Rear Admiral Senter and the 16 Department of Defense, we appreciate your efforts in support 17 of our national defense mission, and ask adoption of the 18 staff report as amended. 19 I have a member of my staff, Mr. Randall Friedman 20 here, to answer any questions you may have on these issues. 21 Thank you. 22 CHAIRMAN DUNLAP: Thank you, Captain. 23 Any questions of our witness? Yes, Dr. Boston. 24 DR. BOSTON: Captain, when I was in the Service, 25 the only electric vehicles we had were golf carts. Do you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 mean you have -- 2 (Laughter.) 3 DR. BOSTON: -- some other ones now that -- 4 CAPTAIN DODGE: Yes. 5 DR. BOSTON: -- you could tell us about? 6 CAPTAIN DODGE: Randy? 7 CHAIRMAN DUNLAP: Now, don't be moving up, Gene, 8 the item here. 9 (Laughter) 10 MR. FRIEDMAN: Yes, the Department of Defense has 11 a number of programs. Our largest program is the CNG 12 vehicles. In fact, many of our facilities this year are 13 putting in the fueling facilities. And, incidentally, I 14 would add that those fueling facilities are generally going 15 to be open to the public as well, which is going to be 16 solving a problem for providing access to CNG where there's 17 no other feasible way to make that available. 18 We do have an electric vehicle program. There are 19 some electric vehicles. This is not as well developed as 20 the CNG program, but it is something that is being -- is an 21 active program. And, as the vehicles become more available, 22 it's the intent to purchase them and integrate them into our 23 fleets. 24 MS. EDGERTON: Can you comment? It's my 25 understanding that there's some technical advantages from an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 electric tank or some of the electric vehicles being used in 2 the fleet, something about they can't be detected as easily? 3 MR. FRIEDMAN: Well, the only place right now 4 where we are, you know, actively using the electric vehicles 5 is for the general fleet vehicles. And where they're 6 particularly working out is, you know, a lot of our sedans 7 are just used for errand trips on bases. They're 8 essentially perfect candidates for electric-type vehicles, 9 because their typical might have only five or ten miles of 10 use, but that's five or ten miles going from one building to 11 the next building, or going across the base. 12 And it's those types of areas where we're looking 13 at both the CNG and the electric vehicle. But the CNG is -- 14 our goal is to double the federal requirement for the 15 procurement of those vehicles. 16 MS. EDGERTON: Perhaps that's not some of the 17 tactical uses under the other vehicles is not what you're -- 18 MR. FRIEDMAN: Right. This is for nontactical -- 19 MS. EDGERTON: -- particularly doing. 20 MR. FRIEDMAN: Right. 21 MS. EDGERTON: Yeah. Because I know there is some 22 value tactically on that. Thank you. 23 CHAIRMAN DUNLAP: Thank you very much. Okay. For 24 the record, does staff have any communications to summarize 25 for us on this item? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 MR. SHEARS: We just received one letter from the 2 Office of the Undersecretary of Defense. And essentially 3 our previous commenter just summarized that letter. 4 CHAIRMAN DUNLAP: Okay. Mr. Boyd, do you have 5 anything to add? 6 MR. BOYD: No, Mr. Chairman. I would just urge 7 adoption of the staff recommendation. 8 CHAIRMAN DUNLAP: Very good. Thank you. 9 Since all testimony and written submissions and 10 staff comments on this item have been entered into the 11 record and the Board has not granted an extension of the 12 comment period, I'm officially closing the record on this 13 portion of Agenda Item 95-13-3. 14 Written or oral comments received after the 15 comment period's been closed will not be accepted as part of 16 the official record on this agenda item. 17 Again, we must cover ex parte communications. Do 18 any of my colleagues on the Board have anything to disclose? 19 All right. We have before us or will in about 30 20 seconds a copy of Revolution -- Revolution! 21 (Laughter.) 22 CHAIRMAN DUNLAP: -- Resolution 95 -- it was the 23 military context. 95-49, which would take care of this item 24 for us. 25 So, why don't we take a moment and review it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 MR. LAGARIAS: Mr. Chairman, since the military is 2 seeking an exemption for these vehicles in California, I 3 assume that would automatically apply to all vehicles going 4 into Bosnia as well? 5 CHAIRMAN DUNLAP: Maybe we'll have to check with 6 staff on that. 7 Jim, is that your understanding? 8 MR. BOYD: Indeed. A worldwide fleet, Mr. 9 Lagarias. 10 MR. CALHOUN: Can I ask the staff one other 11 question? 12 CHAIRMAN DUNLAP: Sure. 13 MR. CALHOUN: Mr. Terris, reading the letter we 14 received from the Assistant Secretary of the Navy, in the 15 last paragraph, they ask for our assistance in quickly 16 resolving the problem they're having with the inventory of 17 stationary source equipment on the various military bases 18 here within the State of California. 19 Would you care to comment on that at all? 20 MR. TERRIS: Mr. Calhoun, a workgroup has been 21 created to address the problems and to develop regulations 22 for 531. And, as part of that, we are working with the 23 districts in trying to provide relief in that regard. 24 MR. CALHOUN: What kind of relief? 25 MR. TERRIS: Asking that, in the interim period, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 that the districts not seek to enforce their stationary 2 source rules that apply to nonroad, off-road equipment that 3 are on military bases. 4 CHAIRMAN DUNLAP: The Chair would entertain a 5 motion. Yes. 6 MS. EDGERTON: I just want to make one comment. 7 It is my understanding -- and perhaps someone could correct 8 me afterwards if I'm not right. But since the military is 9 here, it's my understanding that electric vehicles -- the 10 advantage tactically, is that when they stop, the enemy 11 could not detect them, because they wouldn't be moving 12 anymore. They're not emitting any heat like a gasoline 13 engine, always it's idling and it's still continuing to emit 14 the heat. So, you can elude your opponent a little better 15 with the armored vehicle. 16 That's what I was speaking about when I thought 17 that was being developed. Thank you. 18 CHAIRMAN DUNLAP: Okay. Do I have a motion, then 19 a second? 20 MR. CALHOUN: I move the adoption of Resolution 21 95-49. 22 CHAIRMAN DUNLAP: Thank you, Mr. Calhoun. 23 MS. EDGERTON: Second. 24 CHAIRMAN DUNLAP: Ms. Edgerton was the second. 25 All right. The Board has before it Resolution No. 95-49, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 which contains the staff recommendations. 2 Would the Board Secretary please call the roll for 3 a vote? 4 MS. HUTCHENS: Boston? 5 DR. BOSTON: Yes. 6 MS. HUTCHENS: Calhoun? 7 MR. CALHOUN: Aye. 8 MS. HUTCHENS: Edgerton? 9 MS. EDGERTON: Yes. 10 MS. HUTCHENS: Hilligoss? 11 MAYOR HILLIGOSS: Aye. 12 MS. HUTCHENS: Lagarias? 13 MR. LAGARIAS: Aye. 14 MS. HUTCHENS: Silva? 15 SUPERVISOR SILVA: Aye. 16 MS. HUTCHENS: Vagim? 17 SUPERVISOR VAGIM: Aye. 18 MS. HUTCHENS: Chairman Dunlap. 19 CHAIRMAN DUNLAP: Aye. 20 MS. HUTCHENS: Passes 8-0. 21 CHAIRMAN DUNLAP: Very well, thank you. Staff, 22 well done. 23 Why don't we give the staff a moment to change 24 places. 25 All right. The fifth item on the agenda today is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 95-13-5, which is a public meeting to consider the approval 2 of the proposed report to the Governor and the Legislature 3 on State and Federal Air Quality planning processes as 4 required by AB 2751, which is found in the Statutes of 1994, 5 Chapter 189. 6 This item is a proposed report which discusses 7 specific aspects of the State and Federal air quality 8 planning processes as defined by that legislation. 9 The purpose of the report is to identify 10 differences in planning processes and deadlines and to make 11 recommendations to address any inconsistencies. The AB 2751 12 report is to be submitted again to the Governor and 13 Legislature. 14 The report itself is very brief. Its scope is 15 quite narrow. Nonetheless, preparation of the report 16 affords us the opportunity to consider ways to reduce paper 17 work and duplication in the air quality planning process. 18 That goal was explicitly stated in the bill, and 19 it's one which I heartily concur with. State and Federal 20 air quality planning requirements provide the framework by 21 which we design our efforts to achieve clean air in our 22 State. 23 Planning activities involve all levels of 24 government, so it makes sense to look at whether the process 25 is well-integrated and efficient. I expect that staff will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 discuss how well we are doing in that regard, and look 2 forward to hearing any recommendations for improvement. 3 And, at this point, I'd like to ask Mr. Boyd to 4 introduce the item and begin the staff's presentation. 5 MR. BOYD: Thank you. For the benefit of the 6 audience, I'd like to expand just a bit on the very 7 comprehensive introduction that you gave, Mr. Chairman. 8 As you know, shortly after this legislation, AB 9 2751 was enacted, California and this Board adopted the 10 federally required clean air plan for ozone, the infamous 11 1994 State Implementation Plan, or SIP. 12 Throughout the development of the SIP, air 13 districts and your staff worked closely to administratively 14 align the SIP planning process with State requirements. 15 And, as a result, the primary areas of so-called process 16 duplication were addressed at that time. 17 The main point that I would like to emphasize is 18 that there were no significant areas of inconsistency 19 between the State and Federal process for plan submittal 20 deadlines that affected development that, the 1994 SIP; 21 however, there indeed is the possibility of future 22 inconsistencies, which could be alleviated with minor 23 changes to the law. 24 I won't speak to the changes, but the staff will 25 elaborate on the changes we're recommending in their staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 presentation. 2 With that, I'll call upon Mr. Nyarady to give you 3 the staff presentation. 4 Jim? 5 MR. NYARADY: Thank you, Mr. Boyd. Good morning, 6 Chairman Dunlap and members of the Board. 7 I'll begin with a short introduction to this item. 8 Assembly 2751 requires the ARB to prepare a report that 9 identifies inconsistencies between the air quality planning 10 processes required by State and Federal law. 11 The report must also make recommendations for any 12 changes in State law necessary to align the two planning 13 processes. 14 The intent of B 2751 is to identify ways to reduce 15 duplication and paper work for the air districts, while 16 still ensuring the timely preparation of plans for meeting 17 State and Federal air quality standards. 18 The recommendations that you will see shortly have 19 been discussed with air district planning managers to ensure 20 that the goal of reducing duplication is being met. 21 The report requirements specified in AB 2751 are 22 as follows: First, the report is to describe State and 23 Federal requirements for the submittal of clean air plans. 24 Second, the report is to identify any 25 inconsistencies in the State and Federal deadlines, planning PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 processes, or related data collection and inventory 2 requirements. 3 Finally, the report is to recommend any changes to 4 State law needed to align the two planning processes. 5 First, I'll discuss the State and Federal planning 6 processes. In most ways, the planning processes are more 7 similar than they are different. State and Federal law both 8 require the preparation of attainment plans. 9 The 1990 Federal Clean Air Act set deadlines for 10 attainment federal standards. The California Clean Air Act 11 requires that State standards be attained by the earliest 12 practicable date. 13 Both State and Federal law require the development 14 of an emissions inventory for all nonattainment pollutants 15 and their precursors. However, there is only one emissions 16 inventory development process in California that is used for 17 both the State and Federal planning needs. 18 A key difference, though, is that the California 19 Clean Air Act uses 1987 as the base year and the Federal Act 20 uses 1990. 21 Both Acts also require the submittal of progress 22 reports. The California Act requires annual reports on the 23 status of rule adoption and implementation, as well as 24 triennial plan updates, which can include a more detailed 25 progress report. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 The Federal Act requires submittal of what are 2 called milestone compliance demonstrations to document that 3 the incremental emission reductions required on a three-year 4 cycle did actually occur. 5 I'll next discuss inconsistencies in the 6 deadlines. The California Clean Air Act required that 7 attainment plans be submitted in 1991, and originally 8 required updates three years after the ARB's approval of a 9 district plan. 10 Because the date of ARB approval varied, there was 11 no fixed due date for the plan updates. This was changed 12 with 1992 amendments to the California Act. These 13 amendments set a specific due date for the triennial updates 14 beginning in 1994. 15 This corresponds with the 1994 due date for the 16 federal ozone plans. As a result, State and Federal plan 17 deadlines were aligned beginning with last year's SIP 18 planning effort. 19 Since federal law does not require plan updates on 20 a fixed schedule, there are no future deadlines to align. 21 Rather, federal plans are updated as States deem necessary. 22 Thus, no changes to State law are needed regarding plan 23 deadlines. 24 Next, I will address inconsistencies in the 25 planning processes. In 1994, both federal ozone plans and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 State plan updates were due. As Mr. Boyd stated earlier, 2 ARB worked with the air districts to administratively 3 address the primary areas of potential duplication during 4 that process. 5 Specifically, ARB staff worked with individual 6 districts and the California Air Pollution Control Officers 7 Association, or CAPCOA, to administratively address the dual 8 plan requirements. 9 We recommended that districts prepare a single 10 document to meet both federal and State requirements. As a 11 result, most districts prepared a federal plan that included 12 a separate chapter or attachment to address the State 13 requirements for a plan update. 14 Consistent with State law, only the federally 15 required components of these plans were submitted to the 16 U.S. EPA as part of the SIP. 17 By integrating the planning processes, only one 18 document had to be prepared, and the accompanying public 19 workshops, CEQA documentation, public hearing notices, and 20 public hearings were not duplicated. 21 This saved time and resources not only for 22 districts and the ARB, but also for the public and affected 23 businesses and industries. 24 Because the Federal Act does not require updates 25 on a fixed schedule, any future SIP updates and State plan PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 updates can be addressed the same way. Since there is no 2 inconsistency, we see no need to change State law. 3 The last potential area for inconsistency is in 4 the emission inventory requirements. What's key here is 5 that a single emissions inventory process is used by the air 6 districts and ARB to produce the information needed for both 7 State and Federal plans. 8 The single statewide planning inventory consists 9 of the combination of air districts' stationary source 10 inventories, and ARB's mobile and area source inventories. 11 This inventory serves as a technical foundation 12 for both State and Federal planning purposes. What's 13 different is the baseline year. It's 1987 in the California 14 Act and 1990 in the Federal Act. In the 1994 SIP planning 15 process, ARB recommended that districts preparing a dual 16 purpose plan use a 1990 baseline inventory. 17 Most districts in this situation took that 18 approach. One of the proposed recommendations I'm about to 19 discuss is to change State law to provide a statutory basis 20 for this alignment. 21 To simplify inventory efforts for both districts 22 and ARB, we recommend that the State base year be aligned 23 with the federal base year. All that would be needed is a 24 change to the base year specified in State law from 1987 to 25 1990. This is the primary recommendation in the proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 report. 2 The proposed report also recommends clarifying 3 State reporting requirements to ensure that future State 4 progress reports can be used to meet federal progress report 5 requirements. However, after further discussion with staff 6 in several districts, we would like to modify that 7 recommendation. 8 Instead of a change to State law, we recommend 9 working with the districts to administratively ensure that 10 progress reports can serve dual purposes. Instead of 11 defining the contents of the reports in State law, districts 12 prefer to work with us to address this issue through the 13 CAPCOA planning managers group. 14 We agree with this approach. It's more flexible 15 and there is no real need to lock in specific statutory 16 reporting requirements. 17 To conclude, staff recommends that the Board 18 approve the proposed report with the one modification I have 19 just described. I'll now be happy to answer any questions. 20 CHAIRMAN DUNLAP: Do any of my colleagues on the 21 Board have any questions of staff on this item? 22 Mr. Boyd, do you have anything to add? 23 MR. BOYD: No, Mr. Chairman, I do not. Thank you. 24 CHAIRMAN DUNLAP: Okay. We seem to have no one 25 signed up to testify. No one signed up to testify as I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 understand it? 2 MS. HUTCHENS: No. 3 CHAIRMAN DUNLAP: Do we have any written 4 correspondence on this item? 5 MR. NYARADY: Yes. We have received two letters 6 from separate air districts, but both letters support the 7 change to the base year, and they bring up their concerns 8 with the reporting requirement clarification, which we've 9 addressed with the proposed modifications. 10 CHAIRMAN DUNLAP: Which two districts? 11 MR. NYARADY: Ventura and Sacramento. 12 CHAIRMAN DUNLAP: Okay. We've just been given a 13 resolution, so I will take a moment to examine it. 14 DR. BOSTON: Mr. Chairman? I'll move item -- I'll 15 recommend adoption of Resolution 95-50. 16 SUPERVISOR VAGIM: Second. 17 MAYOR HILLIGOSS: Second. 18 CHAIRMAN DUNLAP: Okay. Any discussion? It was 19 Dr. Boston who made the motion and Mayor Hilligoss seconded. 20 Any discussion? 21 MR. LAGARIAS: Mr. Chairman, I think the comments 22 made by Ventura and the Sacramento District are appropriate. 23 I know the short time frame prevented coordination with 24 CAPCOA, and the fact that some districts do not get federal 25 funding may give them problems, but the fact remains, in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 long run, this will certainly reduce paper work. 2 CHAIRMAN DUNLAP: Which is important, particularly 3 in this new era of finite resources and trying to do more 4 with less. We need to all be towing the wagon in the same 5 direction. 6 Okay. Any other points to discuss? Hearing or 7 seeing none, I'll ask the Board Secretary to please call the 8 roll, a vote on Resolution 95-50. 9 MS. HUTCHENS: Boston? 10 DR. BOSTON: Yes. 11 MS. HUTCHENS: Calhoun? 12 MR. CALHOUN: Aye. 13 MS. HUTCHENS: Edgerton? 14 MS. EDGERTON: Aye. 15 MS. HUTCHENS: Hilligoss? 16 MAYOR HILLIGOSS: Aye? 17 MS. HUTCHENS: Lagarias? 18 MR. LAGARIAS: Aye. 19 MS. HUTCHENS: Silva? 20 SUPERVISOR SILVA: Aye. 21 MS. HUTCHENS: Vagim? 22 SUPERVISOR VAGIM: Aye. 23 MS. HUTCHENS: Chairman Dunlap. 24 CHAIRMAN DUNLAP: Aye. 25 MS. HUTCHENS: Passes 8-0. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 CHAIRMAN DUNLAP: Very well, thank you. 2 At this point, what I would propose to do, seeing 3 that it's nearly the lunch hour, I would like to take a 4 lunch break at this time and reconvene back here a little 5 before one o'clock, and we will take up the final item, 6 which is the public meeting to update the Board on the zero- 7 emission vehicle program. I know there's a lot of interest 8 in that item, and I think we would be best served to take it 9 up in one shot without having a break in between. 10 So, we will convene slightly before one o'clock. 11 Thank you. 12 (Thereupon, the luncheon recess was 13 taken.) 14 --o0o-- 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 AFTERNOON SESSION 2 --o0o-- 3 CHAIRMAN DUNLAP: I would like to remind those of 4 you in the audience who would like to speak to the Board 5 today or present testimony to please see the Board Secretary 6 who sits over to my left. If you want to provide us with 7 written comments, make sure you provide her with 20 copies 8 so that they may be distributed to the Board and the 9 executive staff. 10 This is the final agenda item today, 95-13-4. And 11 I appreciate those of you that are here for this item that 12 have had patience with us. We just returned from a lunch 13 break. 14 At least month's Board meeting, staff brought us 15 up to date on the comments heard at the forums held to 16 discuss the ZEV program. The testimony received led staff 17 to suggest to us, to the Board, that the ZEV program could 18 be modified in a manner that addresses many of the comments 19 and concerns raised. As a result, and with the support of 20 my Board member colleagues, I asked staff to prepare a 21 package for this Board's consideration no later than March 22 of next year. 23 I enumerated three principles to the staff as they 24 develop this package. First, ensure that not one pound of 25 emissions are given up toward meeting the emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 reductions in the current rule and in our State 2 Implementation Plan. 3 Second, follow the steps identified by the 4 Independent Battery Panel; and, third, maximize use of 5 market forces and flexibility to achieve our environmental 6 standards and goals. 7 This direction is consistent with Governor 8 Wilson's letter of June of this past year to me. In that 9 letter, the Governor directed this Board to ensure that 10 equivalent or greater emissions reductions are obtained from 11 any substitutions or modifications to existing programs, and 12 that this Board take maximum and creative advantage of 13 competitive sources and market-based strategies to promote 14 advanced air pollution control strategies. 15 In November, Secretary Strock called on us to also 16 consider that any modifications be enforceable and certain, 17 respect the commitments made by many of the California-based 18 companies that have invested in bringing forward 19 technologies to meet our environmental challenges, and to 20 ensure that the Board explicitly considered the link between 21 environmental regulation and economic issues and 22 opportunities. 23 I've asked staff to report back to us at this 24 meeting on their progress for presenting a package of 25 revisions to us for next year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 At this point, I'd like to ask our Executive 2 Officer, Mr. Boyd, to initiate that update and to begin this 3 Board agenda item. 4 Jim? 5 MR. BOYD: Thank you, Chairman Dunlap. I'd first 6 like to take this opportunity to thank and to compliment Bob 7 Cross and the entire ZEV team, which cuts across a wide 8 swath of the organization, for all the hard work that they 9 have put in these past days, weeks, which frankly have grown 10 into months. 11 I appreciate -- I think we call do -- what's been 12 involved and what they've done. 13 The Board directed staff, as you indicated, to 14 provide the Board with a status report at this month's 15 meeting, and also directed us at the November 16th Board 16 meeting to conduct a workshop, which we did on December 6th. 17 At this workshop, interested parties were invited to comment 18 on three alternatives to the current ZEV program. 19 These three alternatives, identified as Concepts 20 A, B, and C in the staff document, were the staff's 21 synthesis of all the proposals received both at and 22 subsequent to the forum series that we conducted. And, in 23 addition, of course, participant in the workshop had been 24 invited to present their own alternative concepts. 25 We believe the workshop -- well, we know the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 workshop was extremely well attended, and we received many 2 constructive comments as well as additional proposals. And 3 we believe the workshop was therefore a significant 4 milestone. 5 Our presentation to you today will be to summarize 6 what we did present at the December 6 workshop for the 7 information and education of members of the Board and the 8 audience. 9 And I think, as everyone knows, we continue to 10 work to bring the Board a proposal that we believe brings 11 into account both what we learned at the forums and at the 12 workshop, and also takes into account the principles and 13 objectives that you, and Secretary Strock, and the Governor 14 articulated in his letter to you. 15 So with that, I'd like to introduce Ms. Sue DeWitt 16 of our ZEV team to make the staff presentation. Sue? 17 CHAIRMAN DUNLAP: Sue, I bet it's nice to have Bob 18 here today, isn't it? 19 MS. DE WITT: Actually, we sent him out to the 20 airport earlier. 21 CHAIRMAN DUNLAP: Did you? 22 MS. DE WITT: Thank you, Mr. Boyd, and Mr. 23 Chairman and members of the Board. 24 Thank you for the opportunity to bring you this 25 status report on the ZEV program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 This is an outline of what I'm about to present. 2 I'll give you a little background on California air quality, 3 a brief summary of the forums, and update you on the 4 testimony presented at the December 6th forum on alternative 5 concepts. 6 The California Air Quality and how did we get here 7 subject areas are identical to what we presented at the 8 December 6th forum. 9 What we told people at the forum was a little bit 10 of background about how we got here and, as you all are 11 probably aware, the State Implementation Plan was adopted in 12 1994, and that the SIP demonstrates the need for extremely 13 stringent emission standards for stationary and mobile 14 sources, and that even with all new SIP measures, additional 15 mobile source emission reductions are still needed. 16 The next slide shows this graphically. This slide 17 shows the impact that improved control technology measures 18 contained in the SIP will have on mobile source emissions. 19 Based on our current programs, emissions of ROG plus NOx 20 will be 1,094 tons per day in 2010. However, with the 21 improved control technology measures that were identified in 22 the State Implementation Plan, the ARB staff estimates that 23 mobile source emissions will be reduced to 708 tons per day 24 by 2010. 25 Although this is great progress, note that we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 still 139 tons per day short of attainment. 2 What's already counted in these projections are 3 listed here in this slide. In mobile sources, there is 4 enhanced inspection and maintenance programs, scrappage 5 programs, reformulated gasoline, the LEV clean fuels 6 program, which includes the zero-emission vehicle program; 7 within stationary sources, consumer products, power plants, 8 and large and small businesses are all subject to emissions 9 requirements. 10 And in going through alternatives that we've been 11 provided in this ongoing series of forums, one point we've 12 made consistently is that some of the suggestions have 13 duplicated what's already counted, and that we really need 14 to be looking at things that are different from what has 15 already been counted. 16 And what's already been counted, just so that 17 you're aware, are these on-road mobile source State 18 implementation measures. 19 These things are already in our emissions 20 reduction plans. 21 So, how did we get here? I think other people 22 have seen this. Now, I'm turning to today. As you know, 23 staff conducted a series of workshops this summer to collect 24 public comment on various aspects of implementing the ZEV 25 program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 This slide is fairly self-explanatory, but it 2 illustrates that staff received a great deal of information 3 and comment on these subjects, and that we have learned a 4 great deal from this testimony. It was a significant 5 benefit to the process. 6 In addition, the Board retained four experts in 7 battery technology to assess the state of battery 8 development. Their findings, which were presented at the 9 technology forum, were that the zero-emission vehicle 10 regulation was instrumental in stimulating investment and 11 progress in advanced batteries for zero-emission vehicles; 12 that a substantial volume of high-quality lead-acid 13 batteries will be available in the 1998 time frame, and that 14 advanced batteries are on the immediate horizon with 15 production quantities available in the 2000-2001 time frame, 16 if all goes well. 17 The panel also emphasized the need for pilot scale 18 production and fleet testing in order to continue the pace 19 of this progress. And a note that I would like to make for 20 the members of the Board and to the audience is that this 21 battery panel report is now available and we will be 22 reproducing it. 23 So, if anyone would like to give me a copy of 24 their business cards or a piece of paper with their name and 25 address on it, we'll make sure that by sometime next week, a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 copy of that report will be available to them. 2 Next slide. 3 In preparing the forum on alternatives to the 4 zero-emission vehicle program, staff developed criteria 5 based on the direction articulated by Chairman Dunlap. 6 The direction we received from the Chairman, 7 Secretary Strock's recent statement on this issue, and 8 Governor Wilson's letter to the Chairman this summer -- 9 foremost was the need to ensure that any alternative would 10 meet California's implementation plan commitments and 11 include a premium to ensure against risk. 12 The next three bullets are interrelated, in that 13 we need to identify a program that provides flexibility in 14 the marketplace and builds or nurtures a viable market for 15 zero-emission vehicles. 16 The last bullet emphasizes a working relationship 17 with the stakeholders to ensure success and enforce the 18 emissions goals as needed. 19 In addition, we note the importance of the 20 investments made by many businesses to meet the demand for 21 clean transportation technologies and the need to balance 22 the impact that environmental regulation will have on 23 economic issues, particularly fleet turnover. 24 Many local governments have also invested in this 25 program and have worked in good faith to assist in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 implementation of the program and, as noted by the battery 2 panel, it is also important to ensure that a healthy market 3 develops for the use of advanced technologies. 4 Turning to the forum, staff presented three 5 alternative concepts that took three different approaches. 6 You'll see them in more detail in the following slides. 7 Briefly, Concept A fully relies on performance 8 standards and market forces. 9 Concept B was a combination of market forces and 10 regulatory requirements, and Concept C was a regulatory 11 approach at a slower pace with incentives. 12 Concept A, which relies solely on market forces, 13 would achieve zero-emission vehicle equivalent reductions 14 plus a premium, and would allow any measure to be used to 15 achieve those reductions. 16 Zero-emission vehicles would be introduced through 17 a voluntary program if any manufacturer elected to do so. 18 Thus, manufacturers could be able to meet this requirement 19 without zero-emission vehicles. 20 Concept B combined market forces and regulatory 21 requirements with a voluntary sales program in the early 22 years. Incentives for early introduction and a voluntary 23 ramp-up to volume production of vehicles in anticipation of 24 a 10 percent requirement in 2004. 25 And Concept C was a regulatory approach which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 reduced the requirements and offers incentives for early 2 introduction of vehicles and implementation flexibility. 3 At the forum, staff heard presentations from 40 4 parties. Commenters included representatives from 5 automakers, electric utilities, environmental groups, oil 6 industry, local governments, and citizens. 7 Since the forum -- and actually I need to update 8 the slide from just this morning -- over 160 letters have 9 been sent to us. 10 In summary, each of the concepts had advances and 11 shortcomings, which I'm showing on this slide. 12 Concept A, for example, was very strongly market- 13 based, but it also had -- and this is according to the 14 testimony we received -- some risk of stranding business 15 investments and that the best development of zero-emission 16 vehicles would be unlikely under this scenario. 17 Under Concept B, it certainly offered increased 18 flexibility and provided an opportunity for partnerships 19 with automakers. Its shortcomings were, however, that it 20 deferred decisions on volume productions and that it 21 possibly jeopardized business investments in zero-emission 22 vehicle technology. 23 Concept C, zero-emission vehicle production was 24 certain, but it was also clear that the market for those 25 vehicles was also uncertain. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 Mr. Chairman and members of the Board, new options 2 have also been presented at the forum and new options have 3 been received since then. There are so many options now 4 that staff would like to ask the Board for a bit more time 5 to give these additional proposals fair consideration and 6 develop a recommendation once this review is complete. 7 Thank you. 8 CHAIRMAN DUNLAP: Thank you, Ms. DeWitt. 9 I want to thank the staff for the continuing work, 10 good work, fine work on this program. I believe I share 11 with the Board members a desire to bring this issue to a 12 point of decision by this Board. 13 However, I also understand the staff's need for 14 sufficient time to analyze the extensive volume of public 15 input that we received, and also to analyze more fully what 16 we have heard at the workshop. 17 This item, of course, is not an issue that should 18 be taken lightly by any of our stakeholders or by any 19 members of this Board. The Board needs to have all the 20 information at its disposal, and we have made -- certainly 21 up to this point -- a diligent effort to gather that 22 information. 23 However, what I hear the staff telling us is that 24 the full evaluation of this information is incomplete, much 25 of it only garnered at our last week's workshop. We have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 not had a chance it seems to fully analyze or assess what we 2 have received. 3 I am of the opinion that it is better to do it 4 right than to do it today. I believe we are close, but I do 5 not sense from staff that we've reached the knowledge 6 threshold that we need to make a decision. 7 With the concurrence of the Board, I would like to 8 continue this item to next Thursday, December 21st, for a 9 meeting here in Sacramento, at which time I hope the staff 10 will be able to provide us with a narrowing of the issues 11 and alternatives. 12 And it's my understanding, after making an initial 13 query of my colleagues, that most should be able to make it 14 that day, and I appreciate their effort. 15 I know that we have many visitors here today that 16 wish to share their concerns, their perspectives. Some have 17 traveled quite some distance to be here. Thus, I would like 18 to hear testimony today from any interested party. And we 19 do have a number that have signed up. 20 Also, a word, I guess -- I suppose I should make 21 this and may emphasize it again at the conclusion of 22 hearings and testimony. There has been an awful lot of 23 speculation about what this Board might do, about what this 24 Board might be considering, or direction that it may have 25 given to staff, or any other such item. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 I want to assure, certainly from my perspective, 2 that -- and I have said this many times -- any change or any 3 modification made to this program will be based upon an 4 assessment of the technology, the facts surrounding what it 5 would take to successfully launch this program, not based 6 upon any other factor. 7 So, I would discourage those from venturing 8 guesses or suspecting some conspiracy theory or whatever it 9 may be. We are moving in a very open fashion and will 10 continue to do that, because that's the only way to 11 successfully implement this program, in my view. 12 So, with that, I would ask my colleagues on t he 13 Board if they have any comments or questions of the staff's 14 presentation, and then I would encourage those who have 15 signed up to testify to please stand ready, because I'll 16 call you up in a few minutes. 17 Dr. Boston. 18 DR. BOSTON: Mr. Chairman, why was December 21st 19 selected? It seems like even one week isn't enough time to 20 fully analyze this issue. And I wondered why we didn't hold 21 it off till next year. 22 CHAIRMAN DUNLAP: Well, it's my feeling that we 23 have -- we have, what did Sue say, 160 letters? Many of 24 them are suggestions on modifications. I've had a chance to 25 sit with staff and go through some of them. So, we have -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 as a matter of fact, the three themes or concepts that you 2 saw outlined were kind of summaries of amalgamations of a 3 number of those. 4 We have the information. Staff has done much of 5 the evaluative work. There needs to be more. It was my 6 feeling that we get this done before the Christmas holidays, 7 and not prolong it anymore. 8 Again, we made a commitment last month to deal 9 with this in the March time frame. I've spoken to Mr. Kenny 10 about what it would take to have ample notice and the like, 11 and it seems that we need to get moving within the next week 12 or so. 13 Plus, there's a lot of people out there that are 14 very interested in what's done here for obvious reasons, and 15 it seems that lengthening the time will only encourage 16 speculation, which I guess doesn't do any of us any good. 17 DR. BOSTON: Thank you. 18 CHAIRMAN DUNLAP: Okay. With that, I'd like to 19 begin on the witness list. 20 I'll call you up in groups of three. If you would 21 move quickly, I'd be grateful. Tom Austin from Sierra 22 Research, Matt -- I apologize for this -- Saboraria from 23 Assemblyman Pringle's office, and Supervisor Jon Mikels, if 24 he's here, from the South Coast Air District. 25 MR. AUSTIN: Thank you, Mr. Chairman. I'm Tom PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 Austin, senior partner of Sierra Research. 2 I'm testifying today at the request of Western 3 States Petroleum Association. 4 At your November 16th meeting, you provided 5 guidance to the staff regarding the criteria you believe 6 that should be used in developing alternatives to the ZEV 7 mandate. One criterion, as you just repeated it, there 8 should be no loss in emissions reductions associated with 9 any alternative. 10 And following the November 6th (sic) meeting, the 11 Western States Petroleum Association asked Sierra Research 12 to investigate the feasibility of meeting the Board's 13 emission reduction objective. We've been able to identify 14 several control measures, none of which are included in the 15 current State Implementation Plan that are capable of 16 providing greater emission reductions in smog precursors 17 than the staff estimates are possible with the ZEV program. 18 And the table, which is displayed up on the screen 19 now, is included in my written testimony, and briefly 20 summarizes these alternatives to the current ZEV program. 21 The ZEV program is listed in the first row of the 22 table shown with the staff's estimate of a 14-ton per day 23 reduction in NMOG plus NOx emissions. Our estimate of a 24 $14,600 cost premium for each vehicle, which translates -- 25 depending on how you do the calculations -- into cost- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 effectiveness ratio of something in the vicinity of $200,000 2 per ton, which is far in excess of almost any other measure 3 in the SIP. 4 Tomorrow, we will be meeting with your staff to 5 discuss the details behind our cost estimates. We'll also 6 be presenting an analysis demonstrating the claimed life 7 cycle cost advantage of electric is completely eliminated by 8 assuming equal tax treatment and nonsubsidized electricity 9 rates. Our analysis will show that in order to get the 10 cost-effectiveness ratio down into the $20,000 per ton range 11 that ARB normally tries to stick to, the price premium for 12 an electric vehicle would have to be reduced to less than 13 $2,000. And based on what we understand are projections of 14 your own battery panel being, the cost of the battery alone 15 will be more than twice that much for a four-passenger 16 subcompact vehicle. 17 In the second row of the table, we show our 18 projections of the emission benefits of a 49-State low- 19 emission vehicle program. Under this alternative, federal 20 vehicles, which would otherwise be subject to a .25 gram per 21 mile hydrocarbon standard, become subject to a standard 22 which would allow them to achieve .075 grams per mile NMOG 23 when using California reformulated gasoline and operating in 24 California. 25 And as tourism and migration of federal vehicles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 brings them into California, the emission benefits we're 2 projecting by year 2010 are 18 tons per day, or four tons 3 per day more than the projections for the ZEV mandate. 4 The cost-effectiveness ratio that we've estimated 5 for the 49-State LEV program is well under $20,000 per ton. 6 And a big advantage of this approach is that prior to the 7 ZEV mandate reaching 10 percent, the benefits are 8 proportionately greater, and that occurs in the early years 9 when the public health benefits of reduced emissions are 10 also the greatest. 11 The next row of the slide shows the benefits of 12 more stringent standards for new motorcycles. It's been 20 13 years since the ARB tightened the emission standards for 14 motorcycles, and we believe it's clear that a 75 percent 15 reduction in emissions from motorcycles is possible. Even 16 though they don't travel very much and there aren't that 17 many of them compared to cars, with that kind of a change in 18 the emission standards, we're forecasting a reduction in 19 NMOG plus NOx emissions of 25 percent of the maximum 20 theoretical benefits of the ZEV mandate at a cost- 21 effectiveness ratio that we believe would be well under 22 $10,000 per ton based on some preliminary analysis that 23 we've done. 24 The fourth row in the table shows our estimates 25 for the repowering of off-road diesel equipment with some of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 the newer technology engines that will become available 2 because of the requirement that comes into play in 2005, for 3 a 2.5 gram per brake horsepower hour NOx standard. With the 4 repowering of only 10 to 15 percent of the off-road 5 equipment in Southern California, we're projecting that 70 6 percent of the maximum theoretical benefits of the ZEV 7 mandate could be achieved at a cost-effectiveness ratio of 8 less than $20,000 per ton. 9 The fourth alternative shown in the table is a 10 catalyst and oxygen sensor replacement program for high 11 mileage passenger cars and light trucks that marginally pass 12 the current standards in the smog check program. Those 13 standards are set such that older vehicles can pass the 14 test, even though the oxygen sensor may not have been 15 replaced for more than 50,000 miles, and the catalyst is 16 experiencing the deterioration due to more than a hundred 17 thousand miles of operation. 18 By requiring these key emission control components 19 to be replaced on marginally passing vehicles, we believe a 20 50 percent reduction in emissions is possible. That would 21 affect less than 3 percent of the fleet in 2010, and provide 22 almost 30 percent of the maximum theoretical benefits of the 23 ZEV mandate at a cost-effective ratio of less than $20,000 24 per ton. 25 And finally, the last item on the table, which we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 believe would have the biggest benefit, is the addition of 2 an under hood emissions test to the smog check program. 3 Recently collected data indicate that NMOG 4 emissions from under hood fuel leaks and defective positive 5 crankcase ventilation systems are a significant source of 6 emissions. The ARB's current emission projections assume 7 there are no emissions associated with defective PCV 8 systems. 9 Preliminary work by Sierra Research indicates that 10 it is feasible to measure these emissions during the smog 11 check program using a system that samples air flowing 12 through the engine compartment. 13 Our preliminary analysis indicates fleetwide NMOG 14 emission reductions achievable in the range of .1 grams per 15 mile which translates to 43 tons per day of NMOG in the 16 South Coast Air Basin. 17 And we believe, based on some preliminary work 18 we've done, that the cost-effectiveness of this alternative 19 would be well under $2,000 per ton. 20 When I described these alternative measures during 21 the December 6th public forum -- and I provided your staff 22 additional details on how we made these calculations -- the 23 staff indicated they believe these measures were worth 24 pursuing; however, the staff also suggested that ARB might 25 prefer to use such measures to further attainment of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 ozone standard. 2 Because the measures were developed in response to 3 the Board's interest in identifying alternatives to the ZEV 4 mandate, it would encourage similar efforts in the future if 5 ARB were to allow at least 14 tons per day provided by these 6 measures to serve as a replacement for the ZEV mandate. 7 The additional reductions would then provide a 8 substantial clean air premium that the Board said it was 9 seeking. 10 In summary, the measures we proposed are much more 11 cost-effective than EVs. They include the development of 12 innovative new technology, and they achieve more emission 13 reductions than is attributed by the staff to the ZEV 14 mandate. 15 Thank you for your consideration. I'll be pleased 16 to answer any questions you might have. 17 MS. EDGERTON: Mr. Austin, let's leave the chart 18 up there. Ms. DeWitt just made the point that, in order for 19 us to meet our SIP obligations, we need 139 additional tons 20 per day of pollutants removed. Now, could you -- have you 21 added up this list, 14 tons, 18 tons, 4, 10, 4, 14? What's 22 the total? 23 MR. AUSTIN: I think if you look at the total for 24 the alternatives to the ZEV mandate that we developed, it's 25 something like 79 tons compared to the 14 tons from the ZEV PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 mandate. 2 MS. EDGERTON: So, even if you add your 79 tons 3 and the 14 tons, what do you get? 113. That's what I got. 4 Is that right? No. 5 MR. BOYD: 93. 6 MR. CROSS: 93. 7 MS. EDGERTON: 93? I don't know why I got that. 8 Maybe I added ZEV twice. Maybe I was going to increase it. 9 MR. AUSTIN: We weren't attempting to develop a 10 new State Implementation Plan. We were attempting to come 11 up with -- to meet the Board's challenge to find alternative 12 control measures that are not in the current SIP just 13 recently developed by ARB. And I think we've done that. 14 MS. EDGERTON: I understand. So, what was the 15 total, Mr. Boyd? 16 MR. BOYD: 93. 17 MS. EDGERTON: 93. Okay. Now, 93 is the total 18 for that whole chart. Now, Mr. Austin, it's my 19 understanding you were formerly the Chairman of this Board. 20 MR. AUSTIN: No. 21 MS. EDGERTON: I mean the Executive Officer. 22 MR. AUSTIN: No, I was the Executive Officer. 23 MS. EDGERTON: Right. So, you understand the 24 California Clean Air Act very well. Our obligation is to 25 achieve the clean air standards in the Federal Clean Air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 Act, and that means that we have to have a program in place 2 that will have the emissions reductions required. 3 We are 139 short. Now, Mr. Strock offered a 4 speech in which he referred to what I call the Strock 5 principles. And on page 4 of his speech, he says, and I 6 quote, "Flexibility can only be offered in the context of 7 meeting California's commitments under the State 8 Implementation Plan for compliance with ozone air quality 9 standards by the year 2010. California submitted its SIP in 10 November, 1994, under the Federal Clean Air Act, including 11 the emissions reductions benefits from the ZEV regulation. 12 Any proposed alteration of the ZEV program must therefore 13 meet the same legal requirements of enforceability and 14 certainty." 15 To me, Mr. Austin, this means that we cannot 16 delete any measures deemed effective until we come up with 17 an additional -- until we have 139 tons put there. I don't 18 believe that his principles would allow the claimed 19 substitution of one measure that got a certain number of 20 emissions reductions for another when we believe that that 21 emission -- that the one that we have is potentially 22 effective. 23 MR. AUSTIN: Well, if I understand you then, you 24 weren't serious when you asked for any alternatives to the 25 current ZEV mandate, which is what I was focused on looking PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 at. What does your staff say the ZEV mandate does now and 2 what would additional measures not in the SIP do compared to 3 that. 4 And I attempted to come up with measures that 5 would go beyond the benefits which your staff estimates for 6 the ZEV mandate and are not in the SIP. It seems to me it 7 would further the attainment goals, reduce the size of the 8 black box, and make substantial progress. 9 MS. EDGERTON: Well, on that point of no loss in 10 emission reduction, I guess we may have a misunderstanding 11 with respect to what emission reductions mean, whether it's 12 limited to the particular measure or whether it's limited to 13 the overall tons that need to be reduced. 14 In any case -- 15 MR. AUSTIN: Well, that's what affects air 16 quality. And I assume that's what your focus would be. 17 MS. EDGERTON: The long-term healthy air, the 18 ozone attainment is what we're focused on. And the 19 California Clean Air Act makes it clear we're supposed to 20 use the maximum -- make the maximum progress practicable. 21 So, so long as the ZEV program is practicable 22 program, it, I think, has to be respected. 23 Now, I want to ask you about the 49-State car 24 program, 49-State low-emission vehicle program here. 25 Have you been working on that program in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 Northeast? 2 MR. AUSTIN: I haven't done any work related to 3 that program in the Northeast for quite some time. I did 4 some work about a year ago. I'm familiar with the issue 5 there. 6 MS. EDGERTON: Uh-huh. And has there been 7 anything signed in the Northeast? Has anyone agreed to the 8 49-State car program? 9 MR. AUSTIN: I don't follow it closely. My 10 understanding is that it's still up in the air, and there is 11 no commitment made by the seven manufacturers subject to the 12 ZEV mandate to go and sell 49-State LEV vehicles in the 13 States neighboring California. 14 MS. EDGERTON: So, neighboring California or 15 anywhere for that matter, isn't that -- 16 MR. AUSTIN: I think -- 17 MS. EDGERTON: -- a fact? 18 MR. AUSTIN: I think anywhere for that matter, 19 yes. 20 MS. EDGERTON: So, if I understand correctly, 21 there is no 49-State low-emission vehicle program in any 22 form right now which is enforceable. 23 MR. AUSTIN: There's an offer on the table. 24 MS. EDGERTON: Right. Okay. So, it's -- 25 MR. AUSTIN: Which could be made enforceable. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 MS. EDGERTON: I understand. I just wanted to 2 make sure that we understand what's real and what's 3 potential in this. 4 I'd like to make a comment also with respect to 5 what -- a couple of other Secretary Strock's principles. 6 On the clean air premium, he indicated that there 7 would need to be, if there were an interim alternative to 8 the numerical mandate, there would have to be a technology- 9 based clean air premium of pollution reductions 10 significantly greater than those provided by the current 11 regulation. This would be a risk premium for the State 12 whose SIP would be in that period less certain of federal 13 government approval. 14 I don't see how we're getting a clean air premium 15 here, since we're 139 tons short anyway. It seems to me 16 that a risk premium -- you know, we would still need -- we 17 would still be with this at risk of having our SIP less 18 certain of federal government approval, because it does not 19 hold the potential of a sustained achievement of sufficient 20 reductions to meet -- 21 MR. AUSTIN: (Interjecting) Well, I think it's 22 pretty clear where the clean air premium comes from. In the 23 absence of the ZEV mandate, replacing it with the measures 24 that we've identified reduces emissions in the South Coast 25 Air Basin to lower levels than would occur under the current PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 SIP. 2 So, obviously, the air's going to be cleaner. And 3 I think your staff recognizes that. These are real emission 4 reductions that are not currently in the SIP. Some of them 5 are not in the SIP because they really hadn't been thought 6 of before. The staff's had a lot to work on, and some of 7 these are fairly esoteric problems that we've identified in 8 very recent testing programs. 9 But they're real sources of emissions that can be 10 cost-effectively controlled and will provide more emissions 11 in the South Coast than under the current SIP with the ZEV 12 mandate. 13 MS. EDGERTON: Mr. Austin, I don't want there to 14 be any confusion here. I appreciate you having identified 15 them, and I think we ought to include them if the staff 16 feels that they're useful. I think we ought to include all 17 of the extra ones in our deliberations anyway, irrespective 18 of the ZEV issue. 19 And finally, there was another of the Strock 20 principles, which was number four. Any flexibility in 21 implementation must also respect the commitment of many 22 companies, including California-based companies, which have 23 invested in reliance not only on the initial 1990 regulation 24 but also on California's 1994 State Implementation Plan. 25 Whether one's concern is the ZEV regulation or environmental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 regulation in general, predictability in implementation is 2 critical for credibility, investment, and continued 3 technological and environmental improvement. 4 Mr. Austin, in your view, does this proposal meet 5 Strock principle four? 6 MR. AUSTIN: When I presented this in a more 7 detailed form at the December 6th workshop, I pointed out 8 right up front that these alternatives are not tied to any 9 one of the three concepts which your staff has explained. 10 They could be used under any of the concepts. And 11 it's my understanding that the Board has considerable 12 interest in seeing some type of program retained that would 13 provide that assurance to those working in the electric 14 vehicle area that there's still going to be progress on the 15 electric vehicle front. 16 We're not talking about -- I'm not saying this 17 only works with Concept A, where we forget about any kind of 18 a ZEV mandate at all. It would work under Concept A, it 19 would work under Concept B as well. 20 MS. EDGERTON: Thank you for your patience. 21 CHAIRMAN DUNLAP: Thank you. 22 MS. EDGERTON: And your talent. 23 CHAIRMAN DUNLAP: Any other questions of Mr. 24 Austin? Okay. I appreciate it. I'd ask staff to give us a 25 copy of that chart, a hard copy, and get that circulated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 MS. EDGERTON: For today. 2 CHAIRMAN DUNLAP: Yes, for today. 3 Matt Saboraria, Assemblyman Pringle; followed by 4 Supervisor Mikels. Is the Supervisor here yet? Followed by 5 John Larrea, Assemblyman Mickey Conroy. 6 Good afternoon. 7 MR. SABORARIA: Good afternoon. I'm Matthew 8 Saboraria with Assemblyman Curtis Pringle's office. 9 Assemblyman Pringle represents part of Orange County, and 10 he's the Senate Republican leader. He sends his regrets 11 that he could not be here to present these remarks himself. 12 So, I will do so on his behalf. 13 Chairman Dunlap and members of the Board, I wish 14 to take this opportunity to reiterate my strong opposition 15 to the existing zero-emission vehicle mandate as expressed 16 in my previous letters to the Board. 17 In recent weeks, it's come to my attention that 18 the CARB is giving serious consideration to revising the 19 terms of the mandate, such that the two and five percent 20 market penetration requirements by 1998 and 2001, 21 respectively, will be eliminated, but that the 10 percent 22 penetration requirement by 2003 will be retained. 23 I applaud the CARB's apparent recognition that 24 electric vehicle technology is insufficiently advanced to 25 bring a viable cost-efficient product to market by 1998. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 Simply changing the time frame for a forced introduction of 2 such vehicles does not address the broader policy concerns 3 surrounding this issue. 4 As stated in my letters to Chairman Dunlap, the 5 ZEV mandate will not accomplish its primary objective, 6 improving the State's air quality. Based on the CARB's own 7 estimates, as reported in the Sacramento Bee, use of 8 electric vehicles will reduce less than 1.5 percent the 9 principal ingredients in smog in Southern California 10 required under the Federal Clean Air Act by the year 2010. 11 In addition, electric vehicles powered by lead- 12 acid batteries will be far from pollution free. Indeed, the 13 source of pollution will be shifted to more concentrated 14 locations, such as lead mining, and processing centers, and 15 electric power generating stations. 16 Furthermore, the cost associated with this 17 negligible reduction in air pollution are unacceptably high. 18 Even the most conservative estimates of the cost per ton of 19 pollutants from existing internal combustion engines that'll 20 be reduced through the implementation of this mandate are at 21 least 10 times higher than other pollution reduction 22 methods. These costs, both in terms of the production costs 23 of electric vehicles and the necessary infrastructure 24 improvements will be heavily subsidized by electric utility 25 ratepayers and car buyers in California. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 Additionally, even under the proposed changes in 2 the timing of the introduction of electric cars, the ZEV 3 mandate forces a product to market prematurely. Electric 4 cars, while advanced in many respects, currently lack the 5 technology to compete favorably with existing internal 6 combustion automobiles, particularly in terms of range. 7 In addition to the negative implications in terms 8 of cost and consumer acceptance, limitations in lead-acid 9 and other battery technologies raise serious concerns about 10 the safety of electric vehicles. 11 The auto industry has made great strides in 12 improving the efficiency and cleanliness of internal 13 combustion engines over the past 25 years. Furthermore, 14 several alternative pollution reduction methods, such as 15 low, ultra low emission alternative fuel vehicles, have 16 emerged in recent years and show much greater promise in 17 moving the State towards the air quality goals mandated in 18 the Clean Air Act, while continuing to meet the cost, 19 performance, and safety demands of consumers. 20 I wish to stress that I'm fully aware that 21 California is, to a great extent, bound by federal law to 22 meet the air quality standards set forth in the Clean Air 23 Act. 24 However, the State should give private industry 25 maximum flexibility in meeting these standards. As PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 currently construed, the ZEV mandate does not provide for 2 such flexibility. Indeed, rather than focusing on meeting 3 higher air quality standards through the least restrictive, 4 most cost-efficient means, the ZEV mandate inappropriately 5 focuses on only one pollution reduction methodology, 6 electric cars. 7 When the federal government mandated higher fuel 8 efficiency standards in the 1970s and 1980s, it did not 9 require automakers to utilize specific technologies; rather, 10 automakers were given the flexibility to explore a wide 11 variety of methods to reduce fuel consumption and find the 12 most cost-efficient methods of meeting higher fuel 13 efficiency standards. 14 Through this market-driven process, automakers 15 developed the advanced fuel injection systems, computerized 16 on-board diagnostics, and a host of other engine design 17 modifications that have not only improved fuel efficiency, 18 but have maintained and, in many cases, improved engine 19 performance. 20 Several market-based alternatives to the existing 21 ZEV mandate, including proposals by the California Chamber 22 of Commerce and others, have received widespread support in 23 the private sector and merit serious consideration. 24 In closing, I again urge you to rescind the zero- 25 emission vehicle mandate and turn your attention to more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 feasible market-driven means of improving California's air 2 quality. 3 Thank you for your consideration. 4 CHAIRMAN DUNLAP: Dr. Boston, did you want to ask 5 a question? 6 DR. BOSTON: While you were speaking, it appears 7 to me that Senator Pringle must not have been aware of this 8 rule when it was passed way back in 1990, even after 9 millions of dollars were spent in development of this 10 technology. Why is he coming to us now with these 11 suggestions? Why didn't he come to us six years ago and 12 give these concerns? 13 Does he want us to abandon the whole program 14 immediately, right now? That's what you said. 15 MR. SABORARIA: Well, Mr. Pringle was not a member 16 of the Legislature in 1990. And I'm sure that had he been, 17 he would have expressed those concerns then as well. I 18 think the position is consistent with his position that 19 setting standards for improving the State's air quality is 20 one thing, and that would be an appropriate government 21 action in terms of intervening the market to control for 22 negative externalities such as pollution. 23 But in setting such standards, mandating the 24 manner in which private industry must come into compliance 25 would be inappropriate; rather, private industry should be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 given maximum flexibility to find the most cost-efficient-- 2 DR. BOSTON: How can you be selective on which 3 private industry you're going to favor? If there's a whole 4 industry out there developing over batteries and electric 5 car technology, he's willing to dump those immediately and 6 in favor of the auto companies. 7 MR. SABORARIA: Not necessarily. I hesitate to 8 speak for him, but I think that he probably would say that 9 creating a government program that is heavily subsidized by 10 taxpayers and consumers to spur the growth of a particular 11 industry would be an inappropriate intervention into the 12 market. And such companies engaged in such technologies 13 should be able to compete favorably on their own in the 14 market if their product is viable. 15 DR. BOSTON: All right. Thank you. 16 MS. EDGERTON: Mr. Saboraria, I -- just I want to 17 make a comment. Sir? Hello. I want to make one comment. 18 I agree that we should maximum market flexibility. 19 The difficulty, from my point of view, just so you 20 know, is that that flexibility -- we can't give more 21 flexibility than the Congress gave to us. And the Congress 22 has required us to have an effective State Implementation 23 Plan, one that's enforceable and one that will show that 24 there is attainment by 2010. 25 So, I just wanted to be sure you understood that I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 agree that the maximum -- we can't give something we don't 2 have the right to give. We can't fail to comply with the 3 law, because our obligation to Californians is to comply 4 with the law. 5 I just wanted you to understand what I was -- I'm 6 sure you mean maximum flexibility within the context of the 7 law. 8 MR. SABORARIA: Well, yes. He understands that's 9 the charge of the Board to do that. I just think that he 10 would make the case that if you have certain products that a 11 more viable, such as a law or ultra low emission vehicle 12 that might have broader consumer acceptance, the aggregate 13 reduction in pollution in tailpipe emissions would be the 14 same or perhaps greater if those products were favored in a 15 market environment over an electric vehicle, which may be 16 less acceptable to consumers, and that those products should 17 all be allowed to compete. 18 MS. EDGERTON: I understand. Thank you. 19 CHAIRMAN DUNLAP: Thank you. Mr. Larrea from 20 Assemblyman Mickey Conroy's office, followed by -- I take it 21 Supervisor Mikels has not arrived yet. Reuel Jones 22 following Mr. Larrea. 23 One thing I would just say -- there's some 40 24 people that have signed up to testify. And we're interested 25 in hearing from everyone. But if you submitted written PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 comments, I'd be grateful if you would just summarize those 2 if we promise to read those in their full glory prior to 3 next week's meeting. 4 MR. LARREA: I would be most happy to. In fact, 5 just to let you know, Mr. Chairman, Board members, Mr. 6 Conroy just instructed me that he'd just like to have me 7 come in and say that you're probably fully aware of his 8 position on the mandate, and that he would like to see it 9 just scrapped and allow it to proceed through the natural 10 market forces. 11 And his brief statement that he did fax me was 12 only a reiteration of his further position. 13 I will report to him that you're going to have a 14 further meeting after your staff does more considering on 15 this matter. And I think that it'd be best at that time 16 that he made a statement. 17 CHAIRMAN DUNLAP: Just a clarification point for 18 us. The Assemblyman would, of course, want us to be sure to 19 get emissions reductions so we'd be able to achieve the 20 health-based standards, right? He just thinks that this 21 approach, there's a problem with it? 22 MR. LARREA: I think -- it's difficult to speak 23 for him on this issue, because my issue is electrical 24 restructuring. But he is very much -- deregulation is the 25 approach that he's taking because of what is happening PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 throughout the State and the nation. 2 And I think his strongest opinion is that a 3 mandate is moving the opposite way of the way that the 4 economy is moving, which is to deregulate everything. And 5 he sees that -- why should ratepayers fund another mandate 6 that does not guarantee any results really in the future 7 other than minimal results when electricity, oil, gas, and 8 everything else is being deregulated, which promises to 9 bring prices down and increase not only technology but the 10 availability of energy. 11 CHAIRMAN DUNLAP: Okay. Very good. Thank you. 12 MR. LARREA: Thank you. 13 CHAIRMAN DUNLAP: Mr. Jones, Assemblyman Bruce 14 Thompson's office, following Laurie Conaty from Assemblyman 15 Bernie Richter's office. 16 Good afternoon. 17 MR. JONES: Good afternoon. How are you? 18 CHAIRMAN DUNLAP: I'm fine, thank you. 19 MR. JONES: I'd like to thank you for this 20 opportunity. I also will give you a copy of my remarks and 21 make it very brief. 22 Assemblyman Thompson is of the same opinion as the 23 other Assemblymen that have been spoken to you today. We 24 feel that the most cost-effective way is to not have the 25 electric vehicles. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 As we can see by the chart from our first speaker, 2 it was $200,000 per ton for 14 tons. And it was -- if you 3 add up all the other items on there, that only comes up to 4 $72,000 per ton. And I think that's a much more cost- 5 effective way, and Assemblyman Thompson feels so, too. 6 And then I'll give you my remarks. 7 CHAIRMAN DUNLAP: Thank you and thank him. 8 MR. JONES: Thank you. Any questions? 9 CHAIRMAN DUNLAP: Very well. Appreciate it. 10 Laurie Conaty, Assembly Richter. I apologize for probably 11 mispronouncing your name. Followed by Ana Arakelian from 12 Assemblyman James Rogan's office. 13 MS. CONATY: Mr. Chairman, members, I'm Laurie 14 Conaty. Almost got it. 15 CHAIRMAN DUNLAP: Okay. 16 MS. CONATY: I'm a member of Mr. Richter's staff, 17 and, as you know, Mr. Richter represents the 3rd District in 18 the Assembly. He's also the Chair of the Assembly Committee 19 on Environmental Safety and Toxic Materials. 20 And Mr. Richter has a keen interest in this issue 21 and is well-credentialed in the subject area. 22 Mr. Richter has submitted a letter to Chairman 23 Dunlap reflecting and reinforcing his previous testimony. 24 So, I'll be brief and to the point. 25 You know the Assemblyman's position on the issue. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 The mandate is simply wrong for a number of reasons, which 2 he and his Assembly colleagues, as well as industry experts, 3 have previously identified. From his perspective, it's time 4 to bury the concept and to seek new and more cost-effective 5 and environmentally beneficial solutions to the State 6 Implementation Plan compliance issue. 7 This is the time for constructive leadership on 8 this issue, and time to respond to the people of California 9 and recognize that the greater majority will be unduly 10 penalized by the mandate, as currently structured, for 11 little, if any, additional environmental benefit. 12 If the Board feels obligated to maintain the 13 course of the ZEV mandate in some form or another, then, as 14 he has stated in November 16th and again on December 6th, 15 Mr. Richter favors a market-based alterative without 16 production quotas and without public financing or subsidies. 17 He respectfully reminds you that consumer 18 acceptance is the most critical component of such a mandate. 19 Mr. Richter has listened to his constituents, his 20 conscience, and has read and reread the Governor's Executive 21 Order regarding cost-effective regulation, and he has come 22 to the conclusion that the promulgation of new rules and 23 regulations must be based on the following four criteria: 24 that there must be a cost/benefit analysis that is based on 25 current science and dollars; the regulation promulgated will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 significantly reduce human health and environmental risk; 2 that there's no regulatory alternative that is less costly; 3 and that a finding must be made that the benefits do justify 4 the costs of the regulations. 5 On behalf of Mr. Richter, I strongly urge you to 6 respect the wishes of the people of the State and revisit 7 the ZEV mandate, and concentrate upon the standards, and let 8 the market and people dictate the methodology. 9 MS. EDGERTON: Excuse me. I wanted to just make 10 one comment about the benefits and the costs. 11 MS. CONATY: Okay. 12 MS. EDGERTON: This is just a comment about the 13 things that are in my mind. I think, when you think about 14 measures that are in the SIP, we have to remember what are 15 the penalties for failing to comply with the federal 16 requirement of the SIP, such as the loss of highway funds, 17 which are very significant. We really need those for our 18 highway infrastructure. And if not equally bad or worse is 19 that we could be stuck with our businesses having to have 20 offset ratios significantly increased everytime they want to 21 expand. You have to have two for one. 22 So, the penalties for failing on that front aren't 23 just small. They are very costly themselves. 24 Thank you. 25 CHAIRMAN DUNLAP: Thank you. Ana Arakelian for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 Assemblyman James Rogan. George Plescia from Assemblyman 2 Bill Morrow's office next. Thank you. 3 MS. ARAKELIAN: Good afternoon, ladies and 4 gentlemen of the Board. My name is Ana Arakelian, and I'm 5 here from Assemblyman James E. Rogan's office, who 6 represents Glendale and Burbank and small portions of the 7 Los Angeles area. 8 In the interest of time, I'm here to go on record 9 to submit a letter for Assemblyman Rogan's comments and 10 statements opposing this mandate. So, if I may do that, I 11 can hand that to -- 12 CHAIRMAN DUNLAP: The Board Secretary. 13 MS. ARAKELIAN: Okay. And the Assemblyman 14 accommodates any questions or comments at a later time. 15 CHAIRMAN DUNLAP: Okay. Thank you. Appreciate 16 your efficient use of time. 17 (Laughter) 18 CHAIRMAN DUNLAP: George Plescia, Assemblyman Bill 19 Morrow's office, followed by John Grimley from Senator Ray 20 Haynes' office, followed by Kevin Smith of Senator Rob 21 Hurtt's office. 22 MR. PLESCIA: Good afternoon, Chairman of the 23 Board. I represent Assemblyman Bill Morrow of the 73rd 24 District, which is like North San Diego County and South 25 Orange County. And I'll respect your wishes for short PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 testimony, since I have a letter, and he is with the other 2 Assemblymen and women against the -- just the mandate. 3 CHAIRMAN DUNLAP: Okay. Thank you. 4 John Grimley. Kevin Smith, then I'm going to go a 5 bit out of order, and I'd ask that Jim Haagen-Smit -- is Jim 6 Haagen-Smit here? 7 VOICE FROM THE AUDIENCE: Yes. 8 CHAIRMAN DUNLAP: That is a particularly 9 meaningful name to me in particular, considering a fellow 10 with that name was the first Chairman of this Board. Are 11 you related? 12 MR. HAAGEN-SMIT: Yes, I am. I guess you could 13 call me the grandson of smog. 14 (Laughter.) 15 MR. HAAGEN-SMIT: Since he seemed to be referred 16 to as the father of smog. 17 I just wanted to come down here today as a 18 concerned citizen and owner of an electric vehicle, and 19 owner of many bicycles; that the zero-emission vehicle 20 program is important to all of us. 21 I've heard already today a lot of people against 22 it, but it certainly is important to many citizens out 23 there, and it can be very effective in the near term, and 24 much more effective in the long-term in reducing emissions 25 and dependence on oil. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 Electric vehicles have the opportunity to use 2 renewable energy, where regular conventional fueled vehicles 3 have a much harder time converting over to renewable fuels. 4 I don't know if there's much else to say. My 5 grandfather was concerned about when he was on the Board 6 and, as he left the Board, that it was becoming a political 7 board as opposed to a scientific board. And I'd just like 8 you to remember that he would be much happier to hear in his 9 grave that it is not a political board but a scientific 10 board. 11 So, if you have questions for me, I'll take them. 12 Thanks. 13 CHAIRMAN DUNLAP: Thank you for that perspective. 14 It's wise counsel. 15 Any questions? 16 MR. LAGARIAS: It's a very astute observation. 17 (Applause) 18 MR. HAAGEN-SMIT: Thank you. 19 CHAIRMAN DUNLAP: Okay. Did Mr. Grimley or Mr. 20 Smith -- please come forward. 21 MR. GRIMLEY: Chairman Dunlap and members, my name 22 is John Grimley. I'm an administrative assistant to Senator 23 Haynes. The Senator had hoped to make it today. However, 24 due to scheduling conflicts, he could not. 25 The Senator wrote a letter to Governor Wilson on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 December 12th, which we cc'd to you, Mr. Chairman. And the 2 Senator asked me if I could come to this meeting and, with 3 your permission, read his letter to the Governor into the 4 record. 5 Would that be all right, Chairman Dunlap? 6 CHAIRMAN DUNLAP: I'm sorry? 7 MR. GRIMLEY: The Senator asked me to come and 8 read the letter that he wrote to the Governor into the 9 record with your permission. 10 CHAIRMAN DUNLAP: Sure. That'd be fine. We can 11 get into the record without it being read, but if you prefer 12 to read it, I'll accommodate it. 13 MR. GRIMLEY: Thank you, Mr. Chairman, I 14 appreciate that. 15 "Dear Governor Wilson -- cc to Chairman Dunlap -- 16 I'm writing to express my concerns over the California Air 17 Resources Board's current deliberations about the electrical 18 vehicle mandate. 19 "Firstly, I would like to emphasize that I'm a 20 free enterprise, pro-industry, and business legislator. As 21 you know, there are many businesses in the private sector in 22 favor of regulations which apply to their competitors, which 23 then limits their competition. 24 "There are also businesses that favor regulations 25 because it forces people to deal with their particular PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 business. The unfortunate circumstances in California today 2 is that many regulations have strong vested interests in the 3 private sector. 4 "A good example of just such a regulation is the 5 electrical car mandate shamelessly enacted and enforced by 6 the California Air Resources Board. The mandate requires 7 that a certain number of cars manufactured for delivery in 8 California be electrical. 9 "The mandate does not require that people buy 10 these guys, only that, in order to manufacture these cars 11 and sell them, $2,000 to $5,000 will be added to the cost of 12 a gas-powered vehicle in order to subsidize electrical cars. 13 "Of course, electric companies support the mandate 14 and want to raise electric rates to finance research 15 programs to promote the policy. Oil companies and car 16 manufacturers oppose the policy. The issue is not who 17 supports or opposes the policy, but rather what advances a 18 free market economy. 19 "Production mandates enforced by government are 20 what destroyed the Soviet economy. Government bureaucrats, 21 who are not driven by cost considerations or consumer 22 preferences, are inherently poor at deciding what people 23 should buy. These bureaucrats want people to buy electric 24 cars so they in turn order someone to make them. 25 "According to these bureaucrats, if people don't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 buy electric cars, they are ill-informed, and ought to 2 recognize the wisdom of the bureaucrats' decision. 3 "Mandates are based on socialist economic policy 4 and in the end will fail. Interestingly enough, electric 5 companies who argue vehemently for mandates on the car 6 companies argue against the mandates which require them to 7 buy power from independent power companies at artificially 8 high prices. 9 "In fact, arguments against mandates on any 10 business is the correct position, as this policy promotes a 11 free marketplace. 12 "A number of marketplace participants produce 13 consumer goods of high quality at a price which the maximum 14 number of consumers can afford. If a company cannot produce 15 a desirable product, a quality, affordable product, it will 16 go out of business. 17 "If a government mandate is required to enforce 18 sales goals, the cost of the mandate will be passed on to 19 other products, driving people who otherwise could afford 20 the product out of the market. 21 "Again, Governor Wilson, I wish to respectfully 22 register my strong opposition to any electric vehicle 23 mandate and hope the Air Resources Board will reconsider 24 this unfortunate policy. 25 "Sincerely, Raymond M. Haynes." PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 CHAIRMAN DUNLAP: Thank you. 2 MR. GRIMLEY: Thank you, Chairman Dunlap and 3 members. 4 CHAIRMAN DUNLAP: It's my understanding Supervisor 5 Mikels is present. Please come forward. Good to see you. 6 MR. MIKELS: Good to see you. I didn't know, Mr. 7 Chairman, if this was going to be possible. Our plane -- 8 they said, at the moment, well, we're sorry, it's fogged in. 9 You're not going to get out of here. They switched planes, 10 and we made it. 11 CHAIRMAN DUNLAP: Well, good for you. 12 MR. MIKELS: Good to see you this morning, Mr. 13 Chairman and members of the Board. 14 I'd like to thank you for the opportunity to offer 15 the South Coast AQMD's perspective on your pending decision 16 here today. In short, the ZEV mandate or emission 17 equivalent, direct mobile source alternative is essential 18 for Southern California. 19 You know, it's ironic that Southern California's 20 home to the cleanest stationary sources in the nation, while 21 the air basin in which they are located is the most 22 noncomplying in the nation. 23 Cleaner fuels, smaller cars, and more efficient 24 internal combustion engines have helped, but VMT and fleet 25 growth have all but wiped out much of these gains. Motor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 vehicles remain the single largest source of air pollution 2 in the South Coast Basin. 3 Indirect source rules, as our experience with 4 mandatory ride sharing has amply demonstrated, are clumsy, 5 ineffective, and costly. As a result, these measures failed 6 utterly the test of public acceptance. A combination of 7 direct measures and pricing mechanisms offer the most 8 reliable method to achieve an equitable distribution of 9 responsibility. 10 Shifting the cost of economic externalities from 11 mobile sources to employers, shopping centers, entertaining 12 venues, and airports represents bad economics and poor 13 public policy. 14 But this is the only alternative currently 15 available in the South Coast District. The REACH task 16 force, and that's an acronym standing for reduce emissions 17 and congestion on highways, is a broad-based group 18 representing a wide spectrum of interests, and is working to 19 develop pricing mechanisms to replace the indirect source 20 rules that we have now. 21 Waiting in the wings is control measures in the 22 air quality management plan, but which have been put off for 23 rulemaking purposes. 24 The task force has considerable work to do before 25 a set of detailed recommendations can be finalized. We've PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 been in existence about six or seven months now, and we're 2 working feverishly to develop some mechanisms and work 3 through the issues that those pricing mechanisms present in 4 terms of coming up with some equitable alternatives. 5 As opposition builds against both indirect and, as 6 you find today, direct measures to control mobile source 7 emissions, the potential for backsliding threatens both 8 conformity determinations and federal sanctions. 9 Simply stated, your ZEV mandate is the cornerstone 10 of the South Coast Basin's attainment strategy. Thanks to 11 your vision, substantial progress has been made toward 12 developing zero-emission technologies, such as electric 13 vehicles, advanced batteries, and fuel cells. 14 Chairman Dunlap stated the matter most succinctly 15 in his letter to the L.A. Times on December 7th. "Electric 16 vehicles are one strategy for not only cleaning the air, but 17 for developing a high technology industry that will help 18 replace the thousands of jobs lost to military base closures 19 and aerospace industry downsizing. 20 The South Coast AQMD recognizes that technology 21 rules may, in fact, require some adjustment as deadlines 22 adopted years in advance come upon us. In fact, we in the 23 South Coast have committed to such reality checks with our 24 technology forcing rules as part of our business clean air 25 partnership. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 However, emission reductions lost as a result of 2 such adjustments must be made up somewhere, and should be 3 made up and must be made up in the same source category and 4 for foisted upon stationary sources, which have done their 5 fair share to reduce emissions. 6 Your Board has the primary authority over the 7 biggest source of air pollution in the South Coast District. 8 Minor adjustments that retain the fundamental thrust of the 9 present ZEV program and its emission reductions potential do 10 not threaten attainment. 11 Mobile sources simply need to meet and shoulder 12 their responsibility. Your ZEV requirement has stimulated 13 zero-emission technologies worldwide. Success is within 14 reach. Your action today is necessary to protect both the 15 environment and the rebounding economy in Southern 16 California. 17 And that concludes my prepared remarks, Mr. 18 Chairman. And we would also comment with regard to what I 19 understand has been a big issue in your hearings today, with 20 regard to the -- whether or not there should be a rule or a 21 memorandum of understanding. 22 I would say that, in the absence of a rule, the 23 technology forcing impact of that rule, industry has 24 developed the technological advances that have been achieved 25 and made thus far would be placed in jeopardy (sic). PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 Thank you for the opportunity to address you this, 2 I guess this is afternoon now. And if you have any 3 questions, I'd be happy to answer them. 4 CHAIRMAN DUNLAP: Well, first of all, maybe I can 5 start it off. I appreciate you taking the time to come up 6 here today. It means much just to have you come up. 7 A couple points I'd just like to emphasize. I 8 appreciate very much the perspective that, truly, the clean 9 air strategy for the South Coast Air District is a 10 partnership between the State and your local board. I mean 11 there's no question about that. And the mobile sources 12 account for the majority of the emissions in your area. 13 Tell me -- the South Coast has done an awful lot. 14 I've been very impressed over the years with the technology 15 advancement program where you emphasized mobile source pilot 16 projects and promoting cleaner mobile sources. 17 How do you see that? You can see that continued 18 emphasis remaining constant over the next few years? I 19 mean, are you going to be continuing to be active in that 20 area like you've been the last five or six years? 21 MR. MIKELS: Yes, Mr. Chairman. Not only through 22 our technology advancement office and the funds available to 23 that, but also through the district's allocation of 2766 24 funds. 25 Our MSRC task force has categorized into three PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 main categories of technology advancement -- generally 2 speaking, one of the main thrusts that they also want to 3 bring into this area, along with old vehicle scrapping, 4 which was energized this year through a significant 5 allocation. 6 CHAIRMAN DUNLAP: Okay. Well, we certainly 7 appreciate that partnership and need it to continue. 8 Ms. Edgerton, do you have a question for the 9 Chairman? 10 MS. EDGERTON: Well, actually, I have a comment I 11 wanted to -- as a resident of the South Coast, was proud of 12 your comments, because you spoke very well in our behalf. 13 So, thank you very much. And I'll try to do my part here as 14 well. 15 But could you speak to your -- and more 16 specifically, the ZEV market launch program that you all are 17 working on with respect to -- where does that stand in terms 18 of the rebates to purchasers of electric vehicles? 19 MR. MIKELS: If you're talking about -- I believe 20 we were discussing -- 21 MS. EDGERTON: MSRC? 22 MR. MIKELS: -- the MSRC allocation that was made 23 within the past as part of their multiple year program. I 24 can't tell you the up-to-date status, other than its 25 approval, and it was just a couple of months ago. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 So, they're working toward that, and they're going 2 to energize that. I have met with a number of the members 3 of the MSRC, and we just received their two-year program at 4 our last board meeting, and there was no testimony in 5 opposition to it, and support from those members from a 6 diverse membership on the board. 7 MS. EDGERTON: Thank you. 8 CHAIRMAN DUNLAP: Supervisor, I noticed you 9 provided us also with two resolutions, one from your Board 10 of Supervisors in San Bernardino, and the other -- 11 MR. MIKELS: Yes, Mr. Chairman. 12 CHAIRMAN DUNLAP: -- from County of Riverside, 13 where you're encouraging this Board to hold firm to its ZEV 14 program. 15 MR. MIKELS: That's correct. Both boards 16 unanimously supported that position. 17 CHAIRMAN DUNLAP: I noticed our Supervisor Riordan 18 also voted aye for that. 19 MR. MIKELS: Not only was she an aye vote, Mr. 20 Chairman, she was a mover. 21 CHAIRMAN DUNLAP: She was a mover. All right. 22 Jim, did you have a question? 23 SUPERVISOR SILVA: Yes. First of all, I'd like to 24 say it's nice to see you up here, Jon. 25 MR. MIKELS: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 SUPERVISOR SILVA: I didn't realize until 2 yesterday that you'd be here. 3 The letter that you brought up and you just read, 4 I would like to say, for the record, that I have not 5 indicated to you how I would vote on the ZEV. And I will be 6 listening to the testimony and in the future, and I'd just 7 like that for the record. 8 CHAIRMAN DUNLAP: Very fine. 9 MR. MIKELS: Thank you, Mr. Chairman. 10 CHAIRMAN DUNLAP: Appreciate it. 11 MR. MIKELS: Thank you, members of the Board. 12 CHAIRMAN DUNLAP: I hope you make it out of town, 13 Jon. Because, if not, I'll see you in the airport, I'm 14 sure, later tonight. 15 MR. MIKELS: Okay, John. 16 CHAIRMAN DUNLAP: Okay. Ben Ovshinsky from Ovonic 17 Battery Company, followed by Paul Knepprath, then Janet 18 Hathaway. And Paul Knepprath is with the American Lung 19 Association and Janet Hathaway from Natural Resources 20 Defense Council. 21 MR. OVSHINSKY: Mr. Chairman, Board, and staff, 22 I'm Ben Ovshinsky from Energy Conversion Devices. Our 23 company is the parent company of Ovonic Battery Company, 24 which has developed the basic technology of nickel metal 25 hydride and owns the basic worldwide patent to that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 And I'd like to make a few comments setting out 2 the facts about electric vehicles, advanced battery 3 technologies, and mandates. 4 Nickel metal hydride batteries are a major 5 rechargeable consumer battery currently being produced at 6 thae rate 400 to 500 million batteries per year for consumer 7 applications. 8 Our company's is a volume manufacturer of hydride 9 battery materials for these batteries, which are largely 10 manufactured and sold worldwide by our licensees, which 11 include 16 of the 18 most significant manufacturers in the 12 world. 13 Due to the 1998 California ZEV mandate, we have 14 obtained substantial funding from a variety of sources, 15 including U.S. ABC and several major automotive 16 manufacturers to develop nickel metal hydride batteries for 17 electric vehicles. 18 This technology is rapidly developed to provide 19 excellent energy, power, ruggedness, durability requirements 20 to make electric vehicles a reality. 21 We are working with American European, Japanese, 22 and Korean automobile manufacturers in a wide variety of 23 current vehicle platform tests. 24 Limited range has been emphasized as being a 25 disadvantage for electric vehicles. Our battery has the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 highest volumetric energy density available for any electric 2 vehicle. 3 This battery has led to a variety of EV -- the 4 setting of a variety of EV range records. In test at CARB, 5 a converted Geo Metro demonstrated a range of 170 miles. 6 The General Motors Impact EV has demonstrated a range of 7 excess of 240 miles. That's all on a single charge. 8 The Sunrise EV has attained a record range of 238 9 miles in a road race. 10 Our batteries also demonstrate the ability to be 11 recharged 50 percent in 15 minutes. With one such rapid 12 recharge, the range of vehicles, such as the Impact or the 13 Sunrise -- these are purpose built vehicles now -- can be 14 extended to nearly 400 miles right now. 15 Range is not an issue with electric vehicles 16 powered by Ovonic nickel metal hydride batteries. Our 17 battery also has excellent power performance, having powered 18 the Impact from 0 to 60 miles in under 8 seconds; Saturns 19 from 0 to 80 in under 10 seconds, with top speed well in 20 excess of 100 to 110 miles per hour. 21 This powered a Chrysler van to over 90 miles an 22 hour. For over two years, it has powered a converted 23 Suzuki, through one of our licensees, over the steep hills 24 of Hong Kong. Power is not an issue with electric vehicles 25 powered by Ovonic nickel metal hydride batteries. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 Further, development continues. I am informed 2 today that a 91 watt hour per kilogram EV battery under test 3 now should yield a range of over 300 miles. 4 We agree with the CARB Battery Technical Panel is 5 the remaining hurdle is cost. Projected high-volume 6 production costs are already feasible and can and will be 7 lowered by further development. 8 However, actual cost can only be driven down by 9 increased volume. That's standard manufacturing operations. 10 Regardless of what the volume production cost 11 projections are, we need volume production. To be 12 successful, it's critical to be able to get sufficient 13 volume to reach our early cost goals. 14 Millions of dollars in investments have been made 15 by ourselves and others -- entrepreneurial, free-market 16 investment; I don't think we have a penny of taxpayer money 17 that I'm aware of particularly. 18 Millions of dollars in investments have been made 19 by ourselves and others to help make electric vehicles 20 technically feasible in response to the California ZEV 21 mandate, in response to the ZEV mandate. 22 We have joined with General Motors to form GM 23 Ovonic, a joint venture and commercialization nickel metal 24 hydride electric vehicle batteries at volumes of the level 25 anticipated due to the 1998 ZEV mandate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 Substantial numbers of batteries on the order of 7 2 to 10,000 units per year are required by the GM Ovonic 3 business plan as it was revealed by GM Ovonic at the October 4 11th CARB workshop. 5 Even with the public uncertainty in the ZEV 6 mandate that have arisen over the last few months, potential 7 orders appear to be evaporating. 8 Elimination of the mandate or even a lowering of 9 the number of electric vehicles required can only be 10 expected to have a severe negative impact on our ability to 11 provide California with EV batteries through this newly 12 formed joint venture. 13 Ovonic nickel metal hydride is a here-and-now 14 advanced battery technology, an advanced battery technology 15 that is here now, and it's ready for ramp-up. 16 That's the end of my comments at this point. 17 Actually, I'd like to add one more comment. 18 CHAIRMAN DUNLAP: Sure. 19 MR. OVSHINSKY: I heard Bob Stemples (phonetic) 20 speak publicly at the American Physical Society convention 21 last year in San Jose, and he said -- he's the ex-CEO and 22 Chairman of General Motors. And he said that given 23 sufficient volume, EVs will not be an more -- I'm quoting -- 24 not be any more expensive than a conventional ICA -- ICE 25 vehicle. That's not me. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 CHAIRMAN DUNLAP: Mr. Lagarias. 2 MR. LAGARIAS: On the issue of cost, how much -- 3 how does the cost of ionic batteries compare with lead-acid 4 batteries? 5 MR. OVSHINSKY: Let me say that I'm in a difficult 6 position, in that I'm not a technical person. I represent 7 the parent company, which puts me two arms removed from the 8 joint venture. I'm not privy to the business plans. All I 9 can speak is in qualitative terms. 10 They will be cost competitive. It will be 11 economical. It will fulfill what Bob Stemple is talking 12 about. 13 Given volume production of the battery, the EV 14 platform will not be any more expensive than an ICE vehicle. 15 MR. LAGARIAS: We're trying to get a feel for 16 things. We know what the lead-acid battery will cost. Is 17 it twice as expensive, ten times expensive, twenty times, 18 200? 19 MR. OVSHINSKY: I apologize for having to 20 basically repeat, you know, the previous statement. That 21 kind of data, which is available, I don't have. And I'm not 22 going to make that available to you. We have been making 23 that available and will make that available to you, to the 24 staff, to the Board, to the Chairman. And it has been made 25 available. I'm not privy to it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 CHAIRMAN DUNLAP: Okay. Staff's indicating that 2 they have some of the information that you're so deftly 3 sidestepping at this point. And I understand that. Thank 4 you. 5 MR. CACKETTE: Mr. Chairman, we could either 6 provide the answer to Mr. Lagarias -- 7 CHAIRMAN DUNLAP: Sure. 8 MR. CACKETTE: The Battery Panel I think addressed 9 this, and we have the report. 10 CHAIRMAN DUNLAP: To the audience, too, the 11 Battery Panel also was able to acquire some proprietary 12 information, secret information -- 13 MR. OVSHINSKY: Right. 14 CHAIRMAN DUNLAP: -- and we try to be respectful 15 of that. Mr. Lagarias is most of the time, too. 16 (Laughter.) 17 MR. LAGARIAS: It's going to be competitive, and 18 it brought up the issue of cost, and I just want to know 19 what he's talking about. 20 MR. OVSHINSKY: Again, you know, I'm only speaking 21 in qualitative terms. It's no more expensive than the 22 conventional ICE. 23 CHAIRMAN DUNLAP: Okay. 24 MR. OVSHINSKY: Including the battery. 25 CHAIRMAN DUNLAP: Yes, Dr. Boston. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 DR. BOSTON: A quick question. You mentioned that 2 one of the cars, the Impact, you mentioned has been run on 3 your metal hydride battery. 4 MR. OVSHINSKY: Sure has. 5 DR. BOSTON: If you make a car to run on the lead- 6 acid batteries, is it difficult to convert it to the Ovonic 7 battery? 8 MR. OVSHINSKY: No. One of the attractive things 9 about the nickel metal hydride technology, the Ovonic 10 technology, is that it's pretty much compatible. We've 11 slipped lead-acid out of the Impact and slipped the nickel 12 metal hydride pack in. I've got photographs of it, not for 13 display, but I have photographs in our annual report of that 14 Impact battery pack. 15 DR. BOSTON: The same size compartment requirement 16 and everything usually? 17 MR. OVSHINSKY: Basically. Considering that we 18 put out at least twice as much energy capacity per weight. 19 You could make smaller compartment. But if you want the 20 range, it'll be the same size. 21 DR. BOSTON: Thank you. 22 MR. BOYD: Mr. Chairman, we've got nonconfidential 23 data that Mr. Cross can share. 24 CHAIRMAN DUNLAP: Sure. 25 MR. CROSS: Now that we have the public version of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 the battery report available. The general costs cited for 2 nickel metal hydride are -- right now, it's a thousand 3 dollars per kilowatt hour, greater than a thousand. '97- 4 2001, which would be during the ramp-up that he's talking 5 about, 225 to 500. And for the Ovonic batteries 6 specifically, in '98, it's projected to be 450 to $550 per 7 kilowatt hour; in 2001, it's 230 to 250. 8 Remember, lead-acid is 150. But these batteries 9 are much longer life than the lead-acid batteries typically, 10 and then they have superior range as well. 11 MR. OVSHINSKY: Well, I want to avoid this, Mr. 12 Chairman, because I'm not a technical specialist. But the 13 data that I have from interoffice information. The cost of 14 nickel metal hydride at present is $235 per kilowatt hour, 15 and next generation at 190. 16 But I don't want to stand by those or swear by 17 those, but I'm not the technical expert. But I would -- 18 we're in continued and perhaps constant communication with 19 the staff on this. 20 CHAIRMAN DUNLAP: Sure. 21 MR. LAGARIAS: You would have helped me if you 22 had-- now, these nickel metal hydride batteries are the same 23 kind that go in watches and -- 24 MR. OVSHINSKY: They go in almost any laptop 25 computer, computer electronics, CD player. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 MR. LAGARIAS: All right, take the cost of the 2 battery that you put in a laptop computer, and ramp it up to 3 a kilowatt hour, let's see what the cost of those batteries 4 is. Thank you. 5 MR. OVSHINSKY: Thank you. 6 CHAIRMAN DUNLAP: Thank you very much. 7 MR. OVSHINSKY: Thank you, Mr. Chairman. 8 CHAIRMAN DUNLAP: Paul Knepprath, Janet Hathaway, 9 followed by Joe Caves from the Union of Concerned 10 Scientists. 11 Good afternoon, Paul. 12 MR. KNEPPRATH: Good afternoon, Mr. Chairman and 13 Board members. Paul Knepprath, here representing the 14 American Lung Association of California. 15 Thank you for the opportunity today. We'll be 16 looking forward to the next week's meeting, and I guess I 17 would just put a pitch in now, that it would be, I think, 18 very beneficial if constituent groups could get some kind of 19 a proposal ahead of time of Thursday. It would make it 20 helpful for us, be able to look at something that you might 21 be proposing for Thursday, and be able to give you some 22 reactions and responses. 23 I feel, in some manner, that I'm repeating myself 24 from our last hearing, which I'm going to, you know, state 25 basically some of our policy positions. But we certainly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 would be willing to look at something that would go to you 2 for next week and give you our specific responses to that 3 proposal. 4 The American Lung Association supports and has 5 since its inception the ZEV mandate, because we believe it 6 represents a regulatory approach that we need to battle our 7 serious smog problems here in California, clean up the air, 8 and make it a healthier place for people to breathe. 9 We believe that the mandate provides a ramp-up to 10 getting the electric vehicle viable as a transportation 11 option, and we are very concerned that we may be backing 12 away from the actions that we need to take that will bring 13 us this cleaner transportation. 14 If we put off the introduction of this car, we are 15 delaying the significant contributions to cleaner and 16 healthier air that is the promise of this technology. 17 And while we appreciate the remarks that have been 18 made very publicly and sincerely that the ZEV mandate will 19 not sacrifice any emission reductions, we do see a 20 tremendous future for the electric car, and want to make 21 sure that within that discussion, the electric car itself, 22 as a viable transportation option, is promoted and remains 23 on the table in a viable fashion. 24 We don't see a lot of other emission reductions 25 out there to be gotten, and note this is an important part PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 of our long-term clean air solution. 2 And while our principal concern is obviously for 3 the breathers in California, our State's special 4 responsibility under the Clean Air Act also places in a 5 leadership position for other States throughout the nation. 6 And so, regarding that, whatever is done here in 7 California should be referable for those in other States. 8 The ALA is concerned that moving away from the 9 mandate will merely postpone our progress toward electric 10 cars that we may never ever regain the momentum that we 11 need, and we will have lost the opportunity to get the 12 significant emission reductions that this technology will 13 bring us after the initial stages of introduction. 14 For these reasons, we ask that you maintain strong 15 on this progressive regulation, and also to restate my 16 commitment that if we receive something ahead of time, we'd 17 like to get you some comments back to you before your next 18 meeting. 19 CHAIRMAN DUNLAP: Thank you. Ms. Hathaway. 20 (Thereupon, the reporter requested a 21 pause to change tapes.) 22 CHAIRMAN DUNLAP: For those who keep track of such 23 things, there have been 12 speakers thus far and 28 24 remaining. 25 MS. HATHAWAY: Well, that does put a kind of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 burden on me to move through this quickly. 2 CHAIRMAN DUNLAP: Just purely informational, 3 Janet. No pressure. 4 MS. HATHAWAY: Thank you, Mr. Chairman. 5 CHAIRMAN DUNLAP: No pressure. 6 MS. HATHAWAY: No pressure at all. 7 (Laughter.) 8 MS. HATHAWAY: Mr. Chairman and members of the 9 Board, my name is Janet Hathaway. 10 I'm pleased to be here to talk with you about the 11 electric vehicle program. Because we don't have a more 12 concrete a more elaborated proposal before us, I'm simply 13 going to respond to what we saw last week at the workshop to 14 try to give some detail. I hope some of this (speaking 15 slide) is legible -- it looks like it's going to be a hard 16 read -- to people as to why we strongly oppose both Option 17 A, which is really the oil industry proposal through the 18 Chamber of Commerce, and Option B, which is the car company 19 proposal, and why we propose an alternative for the Union of 20 Concerned Scientists, which is a version of Option C. 21 And you have testimony about that in more detail. 22 To begin with -- the next slide -- the ARB Concept A is a 23 little bit vague, as all of these proposals unfortunately 24 are, but what we have to do is try to piece together how 25 this could work, how could Concept A work? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 It is claimed to be a system that would rely 2 entirely on market forces, but we're not really sure what 3 harnesses the market to really give us emission reductions. 4 Now, if it's truly a market system, one way that 5 it could be conceived of is as a total laissez faire system, 6 everybody does whatever is in their economic interest to 7 reduce air quality. But that would violate the promises that 8 Chairman Dunlap and Secretary Strock have made to ensure the 9 equal emission reductions occur. 10 Because, in fact, trusting in the market is what 11 has brought us to this point of having the very most severe 12 air quality problem in the country. 13 So, that, we don't think, is what you really have 14 in mind. It would certainly violate both the Federal and 15 State Clean Air Acts, because it wouldn't give us measurable 16 progress to the air quality goals. 17 So, our other hypothesis, which is the next slide, 18 is that it is some form of allocation -- sorry. It's a form 19 of allocation of the emission reductions in the mobile 20 source among all the participants. 21 Trust me, this slide does say that. But it's 22 backwards. 23 It basically would require us to go into some 24 either negotiation or determination of who all the players 25 are that contribute mobile source pollution. You can see PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 this would include the car companies that sell vehicles, but 2 it might also include the oil industry, since it's fueling 3 these vehicles, and somehow we would have to come to some 4 resolution of how you would cap emissions from the mobile 5 sector, how you could move it down. 6 Now, let me just say, this is a monumental task. 7 It's a great and radical change from anything we've done 8 before, and to even get these allocations set, I suspect, 9 would be at least as politically and technically challenging 10 as these programs. 11 So, let it just not be thought that this is going 12 to be some easy, cheap alternative to going forward with our 13 current programs. 14 Okay. Next slide. 15 What are the measures that have been suggested for 16 Concept A? Some of these you've already seen detailed by 17 Tom Austin, representing WSPA here. 18 The emission reductions that we already have in 19 the SIP are all needed, and then we need more. And some of 20 the other emission reductions that have been talked about 21 are the 49-State car, which is the first bullet up there, 22 some tougher standards for motorcycles, actually I think 23 inspection and maintenance for motorcycles, an underhood 24 test for crankcase ventilation emissions during smog check, 25 and then also repowering of off-road diesel equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 Now, all of these measures have their own land 2 mines in getting them implemented. Some of them may be very 3 good ideas, but they certainly are not anything guaranteed 4 to be easy to achieve. 5 And certainly, one of the major problems with 6 these is that they may simply augment programs we already 7 have in our SIP, like inspection and maintenance, and may be 8 really needed to even meet our current expectations for the 9 inspection and maintenance program and, therefore, would not 10 give us surplus emissions that could be counted in any way 11 to reduce the black box of emissions. 12 Now, next slide. 13 Let's talk about in more detail about the idea of 14 a 49-State car. One thing that I think people here in this 15 room need to know is there is no such 49-State car planned 16 at this point. There is a proposal from EPA. All of the 17 Northeastern States would have to agree to it, together with 18 all the car companies before it could become an effective 19 reality, that 49-State cleaner certification could occur. 20 But even if this did occur, there is no guarantee 21 that California will find in-use emissions going down as a 22 result of the 49-State car. Why is this? 23 It's because -- and this is the second bullet up 24 there -- certification standards do not guarantee lower in- 25 use emissions. This is unfortunate, but true, that what we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 find -- we find that in-use emissions are not simply 2 controlled by cutting down on their initial certification 3 standards. In-use emissions are affected by a number of 4 different factors -- how quickly vehicles are allowed to 5 travel or how quickly they're driven, and that problem is 6 only going to be enhanced as our speed limit goes up. How 7 aggressively drivers accelerate, and the effectiveness of 8 the emission control systems, which again is our whole smog 9 check program. 10 Now, remember, 49-State cars -- the whole 11 assumption about getting some benefit from 49-State cars is 12 that somehow these vehicles migrating in are going to be 13 cleaner. 14 We have no way to control that. To begin with, 15 these vehicles are going to come from any State. Some of 16 these States have no smog check program whatsoever. Many of 17 them have much weaker smog check programs than do our State. 18 And even our State's smog check program, with all the 19 enhancements we've tried to put on it, does not ensure that 20 in-use emissions stay low. 21 So, finally, the last point on this slide is that 22 the California tougher in-use standards for vehicles do not 23 control these vehicles that are migrating from other States. 24 Therefore, this is not an enforceable California 25 alternative, and could not, in fact, be a SIP measure that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 California adopts. 2 Next slide. 3 So what more could California do? What more can 4 we do in addition to what's in our SIP? We may want to 5 undertake the underhood inspections. Maybe we want to go 6 forward with some replacement of oxygen sensors or catalysts 7 on certain vehicles. Maybe we want to have further 8 exploration of Premair catalysts or motorcycle standards. 9 But the bottom line question is, how is this going to be 10 done, who's going to bear the cost, and, of course, why is 11 this even being raised by the oil industry as an alternative 12 to ZEV? 13 I think the point was very clearly made. These 14 things may very well be needed just to meet our SIP 15 obligations under the Clean Air Act. 16 Okay. So, the next slide? 17 Some of these measures may help strengthen our 18 SIP, but they do not replace the need for ZEV. They may 19 very well augment our inspection and maintenance program, or 20 reduce the black box of currently unaccounted for emission 21 reductions needs. 22 But they can't all be an alternative to LEV/ZEV, 23 in part, because LEV/ZEV is in our SIP, and LEV/ZEV is the 24 only one of our programs that actually will reduce the 25 emissions reductions' costs over time, the only program that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 we can point to that could continue over time to get more 2 and more emissions reductions at a lower cost per ton. And 3 that is key. 4 Next slide. 5 What are the other effects of this Option? 6 Clearly battery research and development, which so many of 7 the automakers are looking forward to, will dry up if there 8 is no assured market and no requirement for sales of ZEVs. 9 We heard that I think very clearly from the 10 battery audit, and certainly -- I've certainly heard from 11 battery makers in Europe recently at a ZEV conference. And 12 I think that that can't be doubted. We're going to disrupt 13 investment that has been diligently pursuing a better 14 battery. 15 Next? 16 We also would find under Option A that the 17 voluntary ZEV demonstrations, which may very well be a 18 portion of and a necessary condition to creating a market in 19 ZEV, will not be a substitute for actual sales of these 20 vehicles to consumers. 21 And so, again, while it's a necessary condition 22 that's not sufficient, it's not an alternative to our 23 current ZEV program. 24 The next point, E, Concept A kills the 25 Northeastern States' ZEV programs. This is a crucial issue. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 The Northeastern States have worked very hard to hold on to 2 the possibility, the option, of having electric vehicle 3 programs themselves. They've had to fight very hard to 4 ensure that EPA did not come back to them, "You cannot adopt 5 California's ZEV program. 6 Then, each of those States have been severely -- 7 subjected to severe lobbying, both in their legislature and 8 in their executive offices, to kill their electric vehicle 9 programs. 10 Finally, court cases that have just been endless 11 have been brought by the very people who are opposing the 12 ZEV program here against those States for their programs. 13 They've resisted. They've held on to their programs. How 14 could we possibly justify killing their efforts to clean up[ 15 their air, especially when their programs to clean up their 16 air benefits Californians, because that's the only way we'll 17 have assurance of migrating vehicles being clean if some of 18 these vehicles are, in fact, being sold -- zero-emission 19 vehicles are being sold in other States. 20 And, of course, as the market increases because of 21 these States having ZEV programs, the cost to Californians 22 in purchasing ZEVs will go down. 23 And then, finally, when people say, are these 24 measures that are identified in an equivalent to the ZEV 25 program under time, remember, it's just not nonmethane PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 organic gases that get reduced by ZEVs. That's very 2 important. 3 But it's not the only benefit we get from ZEVs. 4 We also get nitrogen oxide reductions that are extremely 5 necessary if we're going to see clean air in the South 6 Coast. Where is that going to come from if we go with 7 something in Option A? 8 The air toxics benefits, again, a very important 9 question. How do we ensure that we do see air toxic 10 reductions? 11 Carbon dioxide and carbon monoxide both -- both, 12 as you know, are major problems with our current internal 13 combustion engines. And then small particulates which are 14 very much associated with asthma problems and real 15 respiratory distress in our urban areas, what can we do that 16 is going to assure all of those benefits ZEVs continue? 17 Next slide. 18 The premise of Option A is that emission 19 reductions are really fungible, that an emission reduction 20 anywhere is the same. 21 But that's not really true. It matters very much 22 where and when emissions occur for most pollutants, and 23 vehicle emissions occur from internal combustion engines now 24 just when ozone is optimized for formation, and also where 25 people will be exposed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 So, this is a very serious issue. So, to use an 2 analogy here, when we look at the electric vehicle and try 3 to find an alternative to it, let's remember that, if we 4 were stranded on a desert island, eating up all of our food 5 from a box that just happened to occur, you know, washed 6 from some passing freighter or something, is not the same. 7 It doesn't give us the same benefit as planting a crop. 8 The ZEV program is a crop that continues to reap 9 benefits for us. It gives us cheaper emission reductions 10 over time. 11 And then, finally -- so, again, another strained 12 analogy, but I just have to do it. 13 You can scrap together a number of different 14 measures to try to get yourself emission reductions, but 15 they don't add up to the ZEV program. You can look at all 16 these crushed marble stones, but you put them together, it's 17 not the Pieta. And that's really the problem we're faced 18 with now. 19 People are trying to give us a lot of different 20 things we can cobble together. They don't have the same 21 long-term effect as our current ZEV program. 22 So, let me stop at this point and thank you very 23 much for the serious efforts you're making to find what can 24 be done. 25 I hope you'll look carefully at our Option C, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 we'll hear more about that from other spokespeople later in 2 the day. 3 Any questions? 4 CHAIRMAN DUNLAP: Thank you. Mr. Calhoun? 5 MR. CALHOUN: I can't resist asking this question. 6 You know, in the past, I used to sit in the audience and 7 listen to various Board members make comments. And I can 8 recall specifically one comment that was made that, "Why 9 should you be worried about what happens back East? You 10 should be worried about California." 11 And today, I hear your comments suggesting that, 12 well, we ought to be worried about it. 13 I just want to just remind you of the fact that, 14 in the past, I've heard some of the Board members say, "We 15 aren't worried about what goes on in the East." Maybe we 16 should be worried, but I don't know that. 17 I guess the other comment -- another point that I 18 wanted to make was that you mentioned something about the 19 49-State tough in-use -- enforcement of tougher in-use 20 standards. And I don't know -- and the staff can correct me 21 if I'm wrong -- if they're referring to enforcing the 49- 22 State standards by the IM program. 23 I've got the impression that the enforcement of 24 the in-use standards is to going to be just as it is now, 25 based on the very effective in-use program that this Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 has, where they target specific engine families for 2 enforcement testing based on data that you get from a number 3 of sources, one of which is the in-use program. 4 So, I would think that -- I assume that that's 5 what they have reference to. I'm not sure. Is that 6 correct? That the enforcement of the 49-State vehicle in- 7 use standards is intended to be based primarily on your 8 in-use test program. I'm thinking in terms of the -- where 9 you preferentially select various engine families and test 10 those vehicles, and based on the results of testing, you 11 decide whether or not a campaign is appropriate or not. 12 MR. CACKETTE: Well, a 49-State engine family 13 would be one that was certified by EPA -- 14 MR. CALHOUN: I understand that. 15 MR. CACKETTE: -- under this program. And so, we 16 would not be targeting those engines, nor would we have the 17 authority to target them for in-use enforcement actions, 18 other than smog check. 19 They'd just be here, and if EPA recalled them, 20 they would get recalled. If they didn't, they wouldn't. 21 MR. CALHOUN: So, you use that data -- or EPA 22 would use that data to test them in-use if they wanted to; 23 is that correct? 24 MR. CACKETTE: Well, in the extreme, I guess, that 25 illustrates the point -- if EPA had no in-use enforcement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 program and these 49-State cars came here to operate in 2 California, they would not be subject to any recall program, 3 unless they happened -- well, they wouldn't be subject to 4 any recall program. 5 We would have no authority, and there would be no 6 recall program. Now, if EPA has an effective -- maintains 7 an effective in-use program, then they would be caught by 8 the EPA program. The only program that would affect them 9 here would be smog check, which affects the owner of the 10 car. 11 MR. CALHOUN: Does this Board, as a matter of 12 policy, provide -- or maybe, of course, EPA could get it 13 themselves directly from the smog check program -- to 14 preferentially select vehicles for in-use testing? 15 MR. CACKETTE: We use that, yes. We use any 16 information we can. If I could take just a moment to 17 comment on the 49-State vehicle program. One aspect of it 18 that has not come up that is germane to its use as an offset 19 to the -- to a ZEV program, for example, under federal law, 20 a 49-State LEV program is highly likely starting in the year 21 2004. 22 That's because the law says that EPA shall do 23 another reduction in emission standards in the year 2004, 24 and they're not allowed to do it before that year, provided 25 certain things are demonstrated. One is that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 technology's available and, you know, every car being sold 2 in California be a LEV. So, I think that criteria's been 3 met -- would be met automatically. And if there's a need 4 for air quality reductions in at least a few areas in the 5 country. 6 And while I can't speculate on whether that will 7 be the case, I would assume, since there are, you know, it's 8 about 50 now are nonattainment of ozone. By the time they 9 make that adoption sometime around 2000 for the standard, 10 that it would -- there would still be a need in other places 11 in the country. 12 So, if that's true, then the LEV standard will go 13 into effect nationally in at least the year 2004. After 14 that point on, under any reasonable reading of an offset or 15 an alternative program, it would not be available as an 16 alternative program. 17 So, it potentially could be an offsetting program 18 in the interim years but, at least my thinking on it is it 19 would not be available beyond 2004. And so, if there was a 20 complete offset, like in Option A where you just go out and 21 find another way of getting the tons and you chose the 49- 22 State program, that would not work after the year 2004. 23 MS. HATHAWAY: And, Mr. Calhoun, just to answer, 24 the point that I was trying to raise in my testimony is that 25 California couldn't enforce, by recalling vehicles, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 higher standard that they're hoping to get, the cleaner cars 2 that they're hoping to get from these other States. 3 And that's why it wouldn't be an enforceable SIP 4 measure for California, because they'd have to rely on the 5 hope that these would stay cleaner. That's it. 6 MR. CALHOUN: Thank you. 7 MS. EDGERTON: The principle, though, is the same, 8 irrespective of whether WSPA is saying it or NRDC is saying 9 it. 10 If you're looking at the emissions reductions 11 achieved or the emissions -- you know, or the pollutants 12 contributed by out-of-state cars, you are going to find that 13 the cleaner those cars are the better off we're going to be. 14 So, if -- what cars come into our State most? I 15 don't know. From Oregon? Let's just hypothetically, if 16 Oregon adopted our standards instead of the federal 17 standards, there would be an incremental increase in benefit 18 to us. The analogy is obviously that, although New York and 19 Massachusetts seem very far away -- and I'm not sure, 20 sometimes I wonder whether the East Coast really likes 21 having us, you know, around, but -- they think we're a 22 little wacky, I think, sometimes. 23 But notwithstanding that, the cleaner their cars 24 are when they come into our State, the more -- the better 25 for our air. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 So, there is -- if I understood what you were 2 saying, the implication was that, if the Northeast were to 3 adopt, under the OTC, a 49-State low-emission vehicle 4 program, we would get some benefits from those migrating 5 vehicles. 6 But if the Northeast were to adopt the entire 7 California program, we would get more benefits. Is that 8 correct? 9 MS. HATHAWAY: Well, Ms. Edgerton, one small 10 caveat. It is absolutely true that if you have ZEVs in the 11 programs of other States, and some of those other State 12 residents move to California or travel to California, you 13 get some sure in-use benefits that California can see. 14 But what you don't get with the 49-State car is 15 certainty of where the in-use emissions will be. Because it 16 doesn't actually turn out that when you certify at a 17 slightly lower level, you necessarily get in-use emissions 18 that are lower. 19 It depends on how people drive and all those other 20 factors. But with ZEV, you do have that certainty. 21 MS. EDGERTON: And one question I wanted to ask in 22 terms of deterioration of the emissions control systems, 23 could you make a comment on the differential between the LEV 24 and the ZEV in terms of the stability of the emissions 25 reductions -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 MS. HATHAWAY: Yeah, there's a recent -- 2 MS. EDGERTON: -- over time? 3 MS. HATHAWAY: That's a really difficult issue. 4 Recent studies that EPA has done and also a study from the 5 Department of Physics at the University of Michigan indicate 6 that in-use emissions of some of our cleanest certified cars 7 exceed even some of the cars that didn't ever have catalysts 8 on them. Because of the nature of their emissions systems' 9 failures, they actually have emissions that are basically 10 like the unregulated cars used to be. 11 So, if you have catalyst failures that are really 12 dramatic or if you have oxygen sensors that are not working, 13 you can see cars just as dirty as you used to have before we 14 even went to the very strong efforts that we've gone to 15 clean up emissions. 16 So, yes, LEV vehicles, or gasoline vehicles with 17 all these tailpipe efforts and catalysts and so on can 18 actually be as polluting in-use as some of our old 19 prestandard, precatalyst vehicles. Not so with ZEVs. 20 CHAIRMAN DUNLAP: Okay. Thank you, Ms. Hathaway. 21 Joe Caves, Union of Concerned Scientists, followed 22 by Tim Carmichael, Coalition for Clean Air, and Gary Patton, 23 Planning and Conservation League. 24 MR. CAVES: Mr. Chairman and members, Joe Caves, 25 representing the Union of Concerned Scientists. I will try PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 to be brief and not go over the issues that I think were 2 just presented. 3 And I want to, first of all, raise an issue of 4 process that I think is critical. And Mr. Knepprath raised 5 it earlier. And that is, the most important thing for us to 6 be able to give you meaningful comments is for us to see the 7 proposals that are really on the table, that you're really 8 considering. 9 The difficulty we had a month ago, when you held a 10 hearing here and we believed the Chairman was going to 11 provide direction to the staff, and we basically trying to 12 make comments based on our guesses of what he was going to 13 say. "We like this. We do not like this." 14 Last week, we walked into the workshop and, for 15 most of us, we saw for the first time this document which 16 laid out these concepts. And while I think that was useful 17 and I think representing a good effort by the staff, this is 18 all the detail we've seen of those concepts. 19 And so, the difficulty for us is how do we comment 20 on those? How do we give you meaningful testimony that can 21 guide your thinking to indicate where we are, perhaps point 22 up criticisms. We assume that there will be a staff 23 proposal that will be brought forward whenever the next 24 hearing is. 25 What I'd like to request on behalf of our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 organization -- I think probably most of them -- is for us 2 to be able to see that in advance of our testimony, ideally 3 a day or so, but certainly -- at least so that when we make 4 our testimony, it is not made in a vacuum. It is not based 5 on what we're having to do today, which is I will -- and 6 I'll try not to repeat the comments that have been made -- 7 but to try to comment on what amount to very narrow outlines 8 of proposals which may or may not be relevant to the actual 9 decision which you're going to have to make. 10 So, I would ask, Mr. Chairman -- 11 CHAIRMAN DUNLAP: Sure. 12 MR. CAVES: -- that we come up with some way to 13 deal with that, so that again we're not going into elaborate 14 efforts to try to testify to things that really aren't on 15 the table for consideration. 16 I'm going to bounce around quickly. We will 17 submit written testimony. But just in the interest of time, 18 let me hit a couple of quick points. 19 I want to particularly agree with the points that 20 were made by NRDC about the WSPA testimony. Those are all 21 good measures for us to consider. Those are not measures 22 that are necessarily either achievable or reliable for 23 California. 24 I think that we had a good discussion of some of 25 the problems that exist with the 49-State car. It's not at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 all clear that California can enforce such a measure or, 2 even if agreements are present that would achieve a 49-State 3 car in other States, that we're going to get that kind of 4 performance and we're really getting the emissions 5 reductions from them. 6 When added into Mr. Cackette's comments that, as 7 we believe, we probably are going to see that car in the 8 very near future as a required federal measure, it doesn't 9 give us the emissions reduction that we need as a 10 substitute. 11 Further, a number of the other measures that are 12 raised, again, while interesting, are not -- some of them 13 are going to require legislation, some of them are going to 14 require significant technical evaluation before we determine 15 whether they're even practical. 16 And I would add one final point to that. 17 Interestingly, none of those are -- with the exception of 18 the 49-State car -- impose any burden on the automobile 19 industry which, after all, that's -- they're the ones who 20 have the obligation for the zero-emission vehicle program. 21 Interestingly, none of them pose any obligation, 22 financial or otherwise, on the oil industry either, who are 23 the ones that are bringing forward these. 24 I want to talk just briefly about Concept A. And, 25 again, all we've seen is this document. So, our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 understanding about what it represents is very limited. The 2 NRDC representative speculated as to what was really meant. 3 And I'd rather step back for a moment and just 4 talk about what the concept means. It sounds good in 5 theory to say we're going to go to a market-based system. 6 it sounds good in theory to say what we're going to do is 7 we're going to let you go out and buy emissions wherever you 8 want. And wherever you can find it the cheapest, that's 9 where you can get it and you can substitute that for 10 measures. 11 But I would point out that the reason that this 12 Board has followed the direction it has of trying to adopt 13 measures that it could clearly identify the technology that 14 would be used to satisfy those emission reduction 15 requirements is to avoid the criticisms that are going to 16 come out if you adopt this sort of market-based program. 17 If you set pure emission standards without 18 identifying the technology -- and particularly if you were 19 to do this generally -- you're going to have industries 20 coming in here in a few years saying,"How could you impose 21 these requirements on us without consideration of the 22 technologies that are required or the economics of that?" 23 And that's the flip side to trying to be sensitive 24 to technology, to saying before we adopt a measure, we need 25 to understand what's the technology and the economics of it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 It's not easy. 2 The second point I want to make on the market- 3 based programs is, if we're going to put -- if we're going 4 to have a true -- and again, I'm operating off this outline 5 of Concept A -- if we're going to try to achieve equivalent 6 emission reductions to the current program -- and UCS has 7 stated clearly that we disagree with the current evaluation 8 of the staff as to what those emission reductions are. 9 And we think if you count such things as off-cycle 10 in-use emissions, marketing, other things, if you look at 11 the penetration of zero-emission vehicles that the South 12 Coast is counting on, we think the tonnage is much more like 13 40 tons per day rather than the 14 that the staff estimates. 14 You're going about a very significant amount of 15 emission reductions if you're truly going to get the 16 equivalent. 17 And, as we move to a market system, if you're 18 going to allow the auto industry to bid against the other 19 station -- the stationary sources, for example, in the South 20 Coast, including the small businesses down there, you're 21 going to drive the price of emission reductions up. You're 22 going to drive it up to a point that it has a very 23 significant economic impact on growth in that community. 24 That's another impact that's not been considered 25 with the development of this. And, again, these things PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 sound good in theory. When you start putting that into 2 play, when you have to deal down the road with the 3 implications of stifling economic growth because the auto 4 industry has come in and bought up the available and the 5 cheaper emissions reductions, that's going to have a severe 6 political impact, and one that's going to lead, we believe, 7 back into this direction; that until you have an alternative 8 transportation technology, you do not have a real pollution 9 reduction alternative. 10 And that we think is, to a lesser extent, but 11 still true with Concept B; that while it pays lip service to 12 a number of the elements that the battery panel has 13 identified that need to be done, that need to begin the 14 process of commercialization of advanced batteries, it lacks 15 a number of key elements. And those are -- maintaining the 16 pressure where there are both benefits and penalties for the 17 failure to make for a clear progress towards the goal, the 18 goal in our mind being achieving significant commercial 19 penetration of zero-emission vehicles in that 2003 to 2010 20 time frame. 21 The gaps that are in Concept B we think are fatal 22 flaws in that approach, because the Board is giving up 23 effective jurisdiction and the ability to oversee that 24 progress and ensure that the auto companies are making real 25 progress towards that commercialization. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 In conclusion, I just want to say, your Battery 2 Panel was chosen by you. They represent some of the 3 preeminent experts in what everybody has identified as the 4 critical technology needed to make the zero-emission 5 vehicles work. 6 That panel clearly identified that the mandate has 7 worked to bring us this far. And the most important thing 8 we can do is not to lose that momentum. We would urge you 9 not to lose that momentum and to stay with this program. 10 Thank you. 11 CHAIRMAN DUNLAP: Thank you, Mr. Caves. 12 (Applause.) 13 CHAIRMAN DUNLAP: Tim Carmichael, Coalition for 14 Clean Air, followed by Gary Patton, followed by Sam Leonard 15 from General Motors. 16 Good afternoon. 17 MR. CARMICHAEL: Good morning (sic), Chairman 18 Dunlap and Board members. I'm Tim Carmichael. I'm the 19 policy director for the Coalition for Clean Air. 20 I have some brief comments. But before I begin 21 those, I'd just like to echo the comments of Paul Knepprath 22 and Joe Caves on the specific point that we would also very 23 much like to have a proposal in writing prior to our next 24 meeting so we can come back with some educated responses and 25 some comments on the direct that staff is advising. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 I'd also like to echo the comments of Janet 2 Hathaway and NRDC, specifically to the Northeast, and I 3 would ask each of you to consider a role reversal and put 4 yourself in the position of Massachusetts and New York. If 5 California was the one following rather than leading, and 6 another State had the discretion or the choice to do away 7 with your program, effectively eliminate your program, it 8 would have a, you know -- I think it would have a dramatic 9 impact on your concerns for that State or, in this case, 10 their perspective about our actions. 11 My comments today will focus primarily on the 12 process that we have undergone over the last two months. As 13 we have stated many times, the Coalition for Clean Air 14 strongly supports California's zero-emission vehicle 15 requirements as an essential component of California's clean 16 air plan. 17 The Coalition and many other zero-emission vehicle 18 supporters were encouraged by the letter which Governor 19 Wilson had been sending out in response to questions about 20 the ZEV program. 21 In that letter, the Governor states that zero- 22 emission vehicles are an integral part of the goal to 23 improve air quality. Chairman Dunlap, you echoed that point 24 at the last Board hearing on November 16th, when you stated, 25 "There's no question that the ZEV is integral to our air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 quality program." 2 Unfortunately, in recent weeks, the Coalition for 3 Clean Air has become very concerned that Governor Wilson and 4 the California Air Resources Board are seriously considering 5 major modifications to the ZEV mandate, a suspension, or 6 possibly even a repeal. 7 This would not reflect the widespread support for 8 the mandate, which has been clearly demonstrated at each of 9 CARB's workshops over the past several months. 10 At the last workshop on December 6th, CARB staff 11 presented a broad outline of three concepts, which staff 12 presented earlier -- Concepts A, B, and C. In addition to 13 these three, there was a proposal submitted by the Natural 14 Resources Defense Council and the Union of Concerned 15 Scientists, which was similar but tougher to Concept C. 16 I assume the Board is familiar with these 17 concepts, as familiar as we are, based on the outlines. 18 I would like to draw your attention to those who 19 supported each of these concepts at that workshop. 20 Concept A was supported by two speakers, one 21 representing the California Chamber of Commerce and one 22 representing Chevron. 23 Concept B was supported only by the seven largest 24 auto manufacturers. 25 In contrast to the limited support for Concepts A PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 and B, more than 20 speakers representing the advanced 2 transportation industry, the business community, 3 environmental organizations, and utilities supported the 4 existing mandate or some modification similar to Concept C, 5 and the NRDC/UCS proposal. 6 It is important to note that the December 6th 7 workshop was an anomaly. That workshop reflected what we 8 have seen in most of the workshops since April, with the 9 noted exception of the oil and auto industries and their 10 anti-ZEV efforts, the vast majority of companies, 11 organizations, and individuals in California support the 12 existing ZEV mandate with some minor modifications. 13 Despite this, there continue to be strong 14 indications that CARB and the Governor's Office are focusing 15 on Concepts A and B, or some combination of the two. 16 If you do choose to pursue Concept A, Concept B, 17 or some combination, it will send a clear signal that the 18 California Air Resources Board is ignoring the results of 19 the public process and the majority opinion. 20 We have all been operating in good faith and 21 depending on Governor Wilson's commitment to the public 22 process as stated in his June 1st letter to you, Chairman 23 Dunlap, in which he instructed you to pursue California's 24 clean air plan, and I'll quote, ". . . in a manner that 25 provides affected parties with a fair opportunity to present PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 their case." 2 The letter goes on to say, "Your process must also 3 present all parties with a fair hearing of competing views 4 and an invitation to participate in negotiations on 5 alternative attainment strategies and tactics." 6 To date, the public process has clearly shown the 7 overwhelming support for the ZEV mandate. 8 In addition, I have copies, which I submitted to 9 the Board Secretary, of resolutions in support of this 10 program from Riverside County and San Bernardino County, 11 Santa Cruz County, the City of Santa Monica, the City of Los 12 Angeles -- and the City of Los Angeles. 13 I also have copies of declarations and letters in 14 support of the mandate signed by California's major 15 environmental and community-based organizations, including 16 the California League of Women Voters. 17 On the other side, opposing the ZEV mandate, are 18 the auto and oil industries, the same two industries which 19 are responsible for generating two-thirds of California's 20 air pollution. It is time for them to share the 21 responsibility of emissions reductions and stop trying to 22 undermine programs designed to improve air quality and 23 protect public health. 24 This program can and will work for California. It 25 is a technology forcing regulation which will improve air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 quality, protect public health, and help California's 2 economy. 3 We urge the Air Resources Board to listen to all 4 Californians, not just the auto and oil industries, and to 5 stand firmly behind this program. 6 Thank you very much. 7 CHAIRMAN DUNLAP: Thank you, Mr. Carmichael. 8 (Applause.) 9 CHAIRMAN DUNLAP: Mr. Patton from the Planning and 10 Conservation League, and then Sam Leonard from General 11 Motors. 12 MR. PATTON: Mr. Dunlap -- Mr. Chairman, members 13 of the Board, Gary Patton, General Counsel with the Planning 14 and Conservation League. 15 I have just three points for you. Two of them 16 have already been made by my colleagues in the environmental 17 movement. 18 The first is this mandate, this ZEV requirement, 19 has worked. The Battery Panel -- and I was very uncertain 20 when, through your workshop process, you decided to appoint 21 this Battery Panel, which I thought was probably in the 22 outcome going to decide what happened to this particular 23 mandate, which I think is a wonderful and which I think the 24 evidence through the workshops has demonstrated it's working 25 very, very well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 I was afraid, gee, here are going to be some 2 engineers who are going to be making decisions, and I was 3 uncertain. I'm not an engineer, I'm a politician, so I'm 4 worried about when engineers get to make the political 5 decisions. Because -- and I'm going to get into why you 6 shouldn't be afraid of making some political decisions on 7 this issue. 8 I was afraid of this. But I was terribly 9 impressed by that panel. They were independent, obviously 10 the most knowledgeable around. There was clearly no hidden 11 agenda on that panel, and they basically said, this thing 12 has worked because California, through the Air Resources 13 Board, was willing to say what we wanted to be done, 14 American industry was doing it. And that's the heroic story 15 of American know how coming through. 16 And so, it has worked and we think it will work. 17 We support -- the Planning and Conservation League supports 18 the continued ZEV requirement or mandate. We're willing to 19 have a Concept C to put in flexibility. 20 But what Janet Hathaway pointed out is, we're 21 really talking about a transition to a whole new style of 22 personal transportation. We built our civilization for good 23 and ill on the individual personal automobile. And it's too 24 late to go back in any short time frame. 25 Wouldn't it be wonderful if we could start having PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 cars that didn't pollute. We'd still get traffic jams, but 2 at least we'd solve the air quality problem. Well, in order 3 to do that, we have to make those effective in the market. 4 We have to have people buying them. We have to have a 5 number of them out there. 6 There has to be this so-called launch. And the 7 mandate has been what's got us this far, and we think it's 8 going to take us to the place where we're going to really 9 change the way we live. 10 Again, we need to say what we want and then let 11 people do it, let industry do it. We think that the 12 evidence shows that they can. 13 The second point, and this is really responding to 14 the various legislative members who have come before you 15 through their assistants, you know, you're not going to do 16 whatever you decide to do on the basis that there shouldn't 17 be a mandate, or requirement, or regulation; that somehow 18 that's wrong, because you're in the business of setting 19 requirements, and mandates, and standards and saying, this 20 is what we need to have you achieve whether you're an 21 individual driving around in a car, or a big business, 22 you've got to achieve this. This is our mandate, and we 23 know, as the public, that if you do this, we'll have cleaner 24 air and better health, and actually a better economy. 25 You've got to stick up for mandates on that basis, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 and you ought to really realize as well, I hope, that so- 2 called mandates or requirements are what make the market. 3 If you think of what a market started off to be, a market 4 was at place in the city, boundaried and set aside by 5 essentially the governing people in the city, the time and 6 place where those private transactions took place that drove 7 progress. 8 And that's what our regulations do. They set the 9 market. And that's why this mandate has worked and will 10 work. It says, this is what we expect American business to 11 be able to do, and you go out and figure out how to do it, 12 and you seven auto companies compete to see who gets the 13 business. 14 The fact of the matter is you want a mandate; you 15 just want the right mandate. It would be a terrible thing, 16 and my letter to you I think confesses, we don't want -- the 17 environmentalists, PCL, doesn't want you to impose a mandate 18 which fails in this area. And we are very, very clear that 19 that is why you're deliberating; that is why you're taking 20 the time the serious steps you've been taking this year and 21 you're now taking the steps you're taking to try to do it 22 right. Because, if you did it wrong, it would really be 23 terrible. 24 But you want a mandate. The question's just what 25 mandate do you want. Let's make it the right mandate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 We think Concept C, which is a mandate with 2 flexibility to make sure it works, seems to be the way to go 3 for us. 4 Now, the third thing is procedure. You've heard a 5 little bit how we'd like to have things in advance so we 6 could give you some specific feedback and, of course, we 7 would. 8 I want to just give me my own perspective of what 9 I think may be running through some of your heads at least. 10 Since I sat in an elected position for many years, and I 11 know when these big decisions come along, as they do 12 periodically, you've got to think about them in private, 13 you've got to have private discussions. You've got to talk 14 to your staff. You've got to canvass the people who are 15 going to be affected by whatever you're going to be on a 16 private basis. And then you've got a public hearing 17 process, because that's what the law requires and that's -- 18 as Governor Wilson said in his letter, which was just quoted 19 to you, that's the fair way to do it. 20 I would like to suggest to you that, from my 21 perspective, your big meeting isn't today; it isn't next 22 week. It's in March or February, whenever it is you set 23 that public hearing process where you're considering a legal 24 change to the existing rule. 25 Because that's when you'll have to publish PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 something and people will react to it, and you'll take these 2 testimonies, and I think you'll be pleasantly surprised by 3 the depth and complexity the testimony you get and maybe 4 surprised, if a mandate's on the table, what support you'll 5 see for that mandate. 6 I hope that if any one of these concepts, A or B, 7 that I don't think is the right direction, is of interest to 8 members of the Board -- and they may be, because you don't 9 want to make a mistake, I understand that -- that you will 10 not put yourself procedurally in a position next week, and 11 wouldn't have done it today, where you'll send forward for a 12 public hearing something that won't let you easily -- 13 because you can always go back and start all over -- but 14 easily make a decision along the lines of Concept B. 15 So, please, give yourself that procedural room in 16 your decision, because I do think you will be surprised when 17 you really have something firm to focus on of the kind -- 18 because I went to every one of those workshops or went to 19 almost every one, and I know some of you were at some of 20 them -- very rich and good testimony. And I think we are 21 going to launch a new era for California. 22 So, please, do that for us. And thank you for 23 your attention to this very important issue. Do remember 24 that you're going to ultimately say, "Here's what we think 25 we, as a society, business and individuals, need to do." PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 And in terms of the development of a vehicle that 2 doesn't pollute we think we can do it by this date; let's do 3 it. And I know it can be done. 4 Thank you very much. 5 CHAIRMAN DUNLAP: Thank you, Mr. Patton. 6 (Applause.) 7 CHAIRMAN DUNLAP: At this point, I'd like to take 8 a five to ten-minute break -- we'll take a ten-minute break, 9 comfort break for the staff and our court reporter. The 10 Board, of course, wouldn't need that. 11 (Laughter.) 12 CHAIRMAN DUNLAP: But we'll reconvene at 25 after. 13 (Thereupon, a recess was taken.) 14 MR. LAGARIAS: I'd like to call this meeting to 15 order. Mr. Dunlap apologizes, he'll be back shortly, but he 16 asked me to continue with the meeting. 17 Before I call Mr. Leonard, our next witness, I'd 18 like to take this opportunity to address you on some issues 19 that have been bothering me. Because we have such a 20 difference of opinion among the audience, I'd like to take 21 advantage of this to address you on some comments. 22 Now, I'm not subject to the pressure or desires of 23 any special interests or groups, although I am subject to 24 the laws of science and physics, and I can't bend them. In 25 fact, I resent some of the misconceptions we've been hearing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 over the past few months about what we're doing, proposed to 2 do, or what actions we may have. 3 I think one of the Assemblymen's representatives 4 said that some of our actions were shameful. But if there's 5 any shameful actions, I think the oil and gasoline people 6 who send letters to their retirees urging them to send 7 letters to the Board against the ZEV program is a shameful 8 action. And I'm not too sure of the action of the 9 environmental groups who propose similar actions, talking 10 about things -- some of them which they got right, but not 11 many -- misconceptions I'm talking about, rescinding or 12 weakening these issues. 13 But what are the issues that we're talking about 14 today? And one of them is the amount of cars that we're 15 talking about, two percent, five percent, ten percent. 16 Well, in 1990, when we had this issue brought up, the two 17 percent was a number taken out of the air to give us a 18 demonstration program of how well these ZEV vehicles would 19 work. 20 The five percent was a ramp-up, and the ten 21 percent was a requirement by the year 2010, to give us the 22 air emissions that we have to have. 23 And about the deadlines of '98, 2001, and 2003? 24 Well, those -- I'd prefer to use time as a resource rather 25 than a constraint. And all of these are flexible things. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 And what about the technology? In 1990, the technology was 2 not clearly identified, and we've had these periodic reviews 3 to see the status of the technology. 4 But certainly, for the year 2010, when many people 5 make an example, we don't expect the electric vehicle to 6 have a range of 85 miles per charge, but we don't know what 7 the range will be required. And I think for the next 8 meeting, I'd like to see the staff tell us for the years 9 2003, what kind of range we should need from an electric 10 vehicle, how will it be used, what will be its cost and 11 performance. 12 Because now we've got enough information to give 13 us the information we need. 14 Today, we have not seen, in my mind, or identified 15 the technology that will give us the performance needed for 16 the year 2003, and the ten percent production of new cars. 17 I think we have to know what type of vehicle can meet that. 18 The '98 mandate we have essentially is to give us 19 a demonstration program to see what kind of vehicles are on 20 the road, how they will perform, who will use them, and 21 where they will go. 22 Having found that information -- without that 23 information, we can't really tell what we're going to have 24 in the year 2010. 25 And I think that we have to recognize that after PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 we see how the vehicles perform on the road, we may have to 2 modify our projections in the future of what we will need, 3 whether we have to stand aside as the market takes over, or 4 whether we have to adjust our quotas, depending on how 5 people are using them, and where we want to go. 6 After '98, we want to continue to remain open to 7 new technologies to see whether there are other ways to go, 8 whether hybrids fit in the program, or where we should go 9 from there. 10 To those who are entering the market and are 11 saying that, "You'll pull the rug out from under us," 12 anybody that's developing a new technology is not guaranteed 13 a market. No one is guaranteeing a market for anyone. In 14 fact, if you look at the automobile industry in its early 15 years, there were many technologies that came out too early 16 or that were never used, and the same will apply to this 17 technology. 18 And if these emerging efforts do not serve the 19 market, they won't be bought. 20 And finally, the ZEV program has been sold on all 21 kinds of bases. We started out as a vehicle for reducing 22 air pollution primarily in the South Coast. It's an air 23 pollution reduction program. 24 Since, it's become an energy conservation program, 25 an energy alternative program. It's become an economic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 incentive program. It's creating new business. It's all 2 things to all people. But our primary concern is clean air 3 and that is our fundamental mandate. 4 And with that, I'll turn it back to the Chairman. 5 CHAIRMAN DUNLAP: Thanks, Jack. I appreciate it. 6 Mr. Leonard. We'll get back to our witnesses. 7 Sam Leonard from General Motors, followed by Ed Maschke from 8 CALPIRG, and Bill Van Amburg from CALSTART. 9 MR. LEONARD: Thank you. Mr. Chairman, members of 10 the Board, I'd like to make a short statement today. 11 GM commends the Board for recognizing that given 12 the current state of battery technology, the current mandate 13 is a blueprint for failure. 14 The time lines for batteries presented by the 15 Battery Panel and repeated by the CARB staff today are 16 absolutely best-case, no-problem scenarios. Anyone involved 17 in a new technology knows that this is the most unlikely 18 scenario to occur. 19 Nothing goes absolutely perfectly. And, 20 therefore, advanced batteries will likely not be available 21 in production quantities until the 2004 model year time 22 frame. 23 As GM has testified in earlier hearings and 24 workshop, we are committed to making a business out of 25 electric vehicles. No one individually and perhaps no one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 cumulatively can match the investment that GM has made in 2 the develop of electric vehicles. And no one is more 3 committed to making electric vehicles a success. 4 But for new technology to succeed, it must meet 5 two criteria -- first, it must be technically feasible; that 6 is, it must meet customer needs and desires. 7 Second, it must be commercially viable. It must 8 be able to be sold at a price that consumers are willing to 9 pay, while providing a shareholder return on his investment. 10 I heard earlier speakers say that the mandates make the 11 market. I was always taught that a willing buyer and 12 willing seller are what makes the market. 13 Batteries remain the key element for electric 14 vehicles. That is why the current mandate is a blueprint 15 for failure. And the illusion of flexibility provided by 16 Proposal C and similar proposals by the NRDC and the Union 17 of Concerned Scientists does nothing to avert the inevitably 18 of that failure. 19 Any program designed to make electric vehicles a 20 success in the marketplace must begin by proving to the 21 public and to the manufacturer the technical feasibility of 22 the batteries. This includes the essential time-consuming 23 elements of validation and life testing of the batteries, 24 field testing and experience, the growth of the buyers in 25 the market, and continued battery development to continue PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 making progress to bring that electric vehicle closer and 2 closer to being fully competitive with gasoline vehicles. 3 While there are aspects of Proposal B with which 4 we disagree, GM believes that Concept B holds the most 5 promise of meeting these elemental needs. It more closely 6 aligns the demands on the manufacturers with the realities 7 of battery and vehicle development. 8 Conceptually, Concept B also provides the most 9 hope of a rational compromise among the conflicting 10 interests you have heard this morning. 11 We believe Proposal B is the most likely scenario 12 to allow us to make a business out of it as we have 13 testified to many times before. 14 It recognizes that you can create a sustainable 15 EV market only through market forces, which are much more 16 effective than mandates and that we must begin to build a 17 customer base, and that there must be a new focus on 18 partnership, a paradigm shift from total command and control 19 to a partnership rather than the old adversarial approach. 20 We will continue to be fully involved in the 21 process in the coming weeks to develop Concept B into an 22 acceptable alternative to the current mandate. 23 Thank you. I'll take any questions. 24 CHAIRMAN DUNLAP: Okay. Thanks. Sure, Dr. 25 Boston. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 DR. BOSTON: Sam, along with your commitment to 2 make the electric vehicle work, when does GM pull off the 3 public relations campaign against it? 4 MR. LEONARD: Why did we pull off it? 5 DR. BOSTON: No, why don't you? 6 MR. LEONARD: That campaign has stopped at the 7 moment. The campaign was never against electric vehicles, 8 Dr. Boston. It has always been against the mandate. 9 DR. BOSTON: That's the way it came out. 10 MR. LEONARD: There's a difference between 11 electric vehicle success and a mandate. 12 DR. BOSTON: The letters I got didn't seem to 13 indicate that. 14 MR. LEONARD: They were meant to be against the 15 mandate, because the campaign was directed at the mandate. 16 CHAIRMAN DUNLAP: I'm not going to follow up, Sam, 17 with are you now or have you ever been. 18 (Laughter.) 19 MR. LEONARD: As a representative of a company 20 that I think is the founder of the EV mandate in the first 21 place with the Impact in 1990 -- 22 CHAIRMAN DUNLAP: Right. 23 MR. LEONARD: -- I'd just as soon not answer those 24 questions either. 25 CHAIRMAN DUNLAP: Okay. I respect that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 (Laughter) 2 CHAIRMAN DUNLAP: Any other questions of Mr. 3 Leonard? Go ahead, Lynne. 4 MS. EDGERTON: Mr. Leonard, Concept B -- 5 MR. LEONARD: Yes. 6 MS. EDGERTON: -- one thing perhaps you can 7 explain to me -- actually, I'd just like to ask you, it 8 struck me that going from no mandate to 2004 mandate -- 9 that's what you're asking for there, 10 percent in 2004? 10 MR. LEONARD: I'm asking for a six-year suspension 11 of the mandate, yes. 12 MS. EDGERTON: Do you think that -- it just 13 strikes me that it's not realistic to go from zero to have 14 10 percent in 2004. How do you envision that ramp working? 15 MR. LEONARD: I envision that ramp as being a 16 market development which neither I, nor you, nor anybody in 17 this room has any ability to predict what the absolute 18 numbers are. 19 And therefore, no manufacturer should be at a 20 penalty for failing to meet. There is a proposal in there 21 that certain manufacturers would voluntarily enter the 22 market with retail sales of those vehicles. There is an 23 advanced development project in there, where we would foster 24 the pilot production and field testing of advanced battery 25 vehicles in a significant quantity, more than enough for us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 to get the information we need on those advanced batteries. 2 So, the market would develop. We'd grow it, and 3 we'd know how to get there. 4 MS. EDGERTON: So, if I understand you, all along 5 the way, you'd be selling cars to get to the ten percent? 6 MR. LEONARD: Yes. Some of -- what? 7 MS. EDGERTON: To get up to the 10 percent? 8 MR. LEONARD: We'd be selling some cars, yes. 9 MS. EDGERTON: Well, 10 percent is bigger than two 10 percent. 11 MR. LEONARD: 10 percent is bigger than two 12 percent. 13 (Laughter.) 14 MS. EDGERTON: So, in effect, you'd be doing that 15 all along the way, or you'd all of a sudden have a gross 16 number of ten percent? I don't understand your proposal. 17 MR. LEONARD: I don't -- cannot predict at this 18 time, Ms. Edgerton, how that market's going to develop. It 19 may stay at a very, very low level. When the battery 20 development comes through and we have a competitive battery, 21 we may see a exponential curve. 22 I cannot plot today the growth between today and 23 ten percent in 2004. I do not know for sure, any more than 24 I did in 1990, that ten percent in 2004 is a reality. But 25 it's as good a placeholder as any for right now. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 MS. EDGERTON: And I appreciate your candor. So, 2 if I understand you right, it's not a commitment. It's a -- 3 MR. LEONARD: It's a commitment to work towards 4 it. There's a difference between a commitment to work 5 towards it and knowledge that you're going to reach that 6 goal. And I think you'd have to admit that. We all work 7 towards goals; we don't always reach them. 8 MS. EDGERTON: That's true. So, I'm sure you've 9 been here all morning and you know that -- we know each 10 other. You know my background is law. 11 What's your -- do you have any comment on whether 12 there would be -- do you have any proposal that would be 13 enforceable as a matter of law in a SIP? 14 MR. LEONARD: Enforceable with respect to the 15 emissions? 16 MS. EDGERTON: Uh-huh The reductions in -- 17 MR. LEONARD: Emission reductions? 18 MS. EDGERTON: If this is a volunteer program, 19 it's not a program. It's not a regulation. it's -- 20 MR. LEONARD: The proposal to cover the emission 21 reductions is twofold. Number one, it's to meet the NMOG 22 curve, which gives you a portion of those emission 23 reductions. 24 MS. EDGERTON: But that's not -- I mean, that's 25 already there. It's not the new -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 MR. LEONARD: It's still a proportion of them. 2 You don't lose all the benefits of the ZEV. You don't lose 3 the tailpipe benefits, because we would have to -- to met 4 the NMOG curve, we would have to increase our production of 5 ULEVs in 2003 from about 15 percent allocated formula, under 6 the current law, to over 30 -- close to 35 percent. So, 7 there's a definite increase in commitment just in the NMOG 8 curve. 9 MS. EDGERTON: The existing NMOG curve. 10 MR. LEONARD: The existing NMOG curve. We'd have 11 to build more ULEVs. 12 MS. EDGERTON: If you didn't do ZEVs. 13 MR. LEONARD: If we didn't do ZEVs. More ULEVs 14 than current planned ULEVs and ZEVs combined. Secondly, 15 there's the national 49-State program, which EPA apparently 16 thinks is enforceable, because they're more than willing to 17 give credit to the Northeast States for it as they've stated 18 in their proposal. 19 That is a method by which we can replace those 20 lost emissions. It is a method which the Air Resources 21 Board does not have as its ability to adopt. So, it is not 22 something that can be adopted in the SIP. It is pure 23 offset, unlike some of the other types of activities that 24 we've seen, because it's not available to the Air Resources 25 Board to put in its SIP. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 MS. EDGERTON: What do you mean when you say it's 2 an offset? I'm sorry. 3 MR. LEONARD: It's a pure offset of the lost 4 emissions of ZEV, because it's not a program that the Board 5 by itself can adopt. 6 There's no way for the Board to get the benefits 7 of the 49 States' program, except through the voluntary 8 action of the manufacturers. 9 MS. EDGERTON: Well, it seems to me that it's more 10 in the -- it's also in the same vein as the position we've 11 taken with respect to the activities that the national 12 government's supposed to regulate. I mean, we can take into 13 account benefits that are incidental. 14 So, if there is a 49-State car, we can legally 15 take that in there. 16 (Thereupon, both speakers spoke simultaneously, 17 and the reporter was unable to capture the 18 exchange clearly, nor was the recorded exchange 19 clear.) 20 MS. EDGERTON: So, I mean, we get it. 21 MR. LEONARD: But if there is no 49-State car, you 22 can't. And the federal government, until 2004, cannot 23 reduce the federal emissions. It has to be a voluntary 24 program on the part of the manufacturers. 25 MS. EDGERTON: Well, I thought you were saying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 that EPA's about ready to agree -- 2 MR. LEONARD: To a proposal outlining the program, 3 at -- 4 MS. EDGERTON: In lieu of the petition. 5 MR. LEONARD: -- which -- at which time each 6 manufacturer would have to voluntarily sign up for the 7 program. 8 MS. EDGERTON: Uh-huh. Good. Okay. I was just 9 trying to understand a little bit better your proposal. 10 What effect, in your opinion, would Proposal B 11 have on ZEV technology investments? 12 MR. LEONARD: Given the realistic outlook for ZEVs 13 to begin with, I don't think it'll change them 14 significantly. The manufacturers will continue to invest in 15 the ZEVs. The market's not going to sell any less or any 16 more because the mandate is or isn't there. The mandate in 17 its current form was a blueprint for failure. 18 The numbers were not gong to be met, because the 19 vehicles that met customer demand were not going to be 20 there. There are going to be some vehicles available with 21 the mandate or without it. They will meet limited customer 22 demands, and they will be sold with or without the mandate. 23 MS. EDGERTON: Mr. Leonard -- 24 MR. LEONARD: So, I don't see how that changes ZEV 25 development at all. U.S. ABC battery funding is still going PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 on. We'll still go on. 2 MS. EDGERTON: Some people have suggested to me 3 that without the mandate that the ABC battery funding will 4 stop. 5 MR. LEONARD: I'm sorry. That was one of the 6 other commitments, one of the other proposals. 7 MS. EDGERTON: Was that in B? 8 MR. LEONARD: Yes. 9 MS. EDGERTON: That the auto companies -- 10 MR. LEONARD: Would continue to do their share of 11 the funding of U.S. ABC through the year 2000. Second 12 phase. 13 MS. EDGERTON: Now, we were together in 1994. I 14 remember that was about five percent of the overall funding 15 was provided by the car companies, U.S. ABC battery? 16 MR. LEONARD: I think it's a little more than 17 that, but, Lynne, I can't tell you whether it's five or 50.. 18 I don't know standing here. 19 MS. EDGERTON: Okay. Thank you very much. 20 MR. LEONARD: Thank you. 21 CHAIRMAN DUNLAP: Anything else for Mr. Leonard? 22 Thank you, Sam. 23 MR. LEONARD: The one thing I would say it is in 24 the tens of millions of dollars. 25 MS. EDGERTON: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 CHAIRMAN DUNLAP: CALPIRG, Ed Maschke, followed by 2 Bill Van Amburg, CALSTART, followed by Cecile Martin from 3 California Electric Transportation Coalition. 4 I'd just mention to the audience we're about 5 halfway through. So, use time efficiently, please, or we'll 6 lose our quorum. 7 Good afternoon, sir. 8 MR. MASCHKE: Good afternoon, Mr. Chairman. 9 My name's Ed Maschke. I'm Executive Director of 10 CALPIRG, the California Public Interest Research Group. 11 We're a 60,000 member environmental consumer organization 12 who's vitally interested in the issue of electric vehicles. 13 I think it's interesting to note that we've tried 14 to figure out today what is before the Air Resources as it 15 seems you are trying to figure out what's before you. We 16 have what's called the oil proposal, which is essentially no 17 mandate, free market reigns, then we have what you just 18 heard from General Motors in their proposal, which is 19 essentially, "Trust me. We'll get the job done. We don't 20 need any mandates. We don't need any kind of pushing from 21 government. What we simply need is to let the market reign. 22 We can do the job. And if you want to keep a mandate out 23 there in 2004, that's fine, but then we reserve the right to 24 come back and blow that out again if we happen to lay on 25 another 10 or $20 million of advertising. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 CARB seems right now to be between a rock and a 2 hard place. While it appears that the Governor wants some 3 changes and that I think you are looking for some changes in 4 terms of the market acceptance and what the plan can be, the 5 difficulty is how to get there, given your staff 6 recommendations and what they have told you about what is 7 possible about the various options you have before you, and 8 implementing those so that you end up with a real and viable 9 program that promotes electric vehicles. 10 And, at least from what we've seen today, it 11 doesn't appear that you're going to be able to get to that 12 objective without some sort of mandate. That is not going 13 to make the Governor very happy. And I think that is going 14 to end up very much a political problem for this Board. 15 I think you end up, if you don't stick to the 16 mandate -- and this is the worst part for the Air Resources 17 Board -- breaking the regulatory compact that you have 18 constructed with 150 businesses throughout the State of 19 California, with literally hundreds of million dollars (sic) 20 of investment flowing in. 21 And that investment is in small business. It's in 22 businesses that are trying desperately to survive in the 23 face of huge competition. And so, your difficulty and your 24 conundrum at this part is to try and figure out how to keep 25 something in place that realistically provides them an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 option to stay in the marketplace while not allowing 2 predominance by the major car companies at this point. 3 And by leaning and bending to what has been an 4 onslaught of campaigning from the oil companies, from WSPA, 5 from AAMA -- you've had a report we released yesterday that 6 documented some $24 million in spending on lobbying, on 7 campaign contributions. As an aside, it's interesting to 8 note that the public officials who appeared here today 9 suggesting that EVs shouldn't get any kind of public handout 10 or any kind of subsidy are very eager to put their hand out 11 when the oil companies or the car companies wish to give 12 them political contributions, and do so on a regular basis. 13 So, you're in a hard place. And I understand that 14 place. I sat on a very controversial public board in a 15 place called Goleta, California. I was on the planning 16 commission for the County of Santa Barbara. I've sat 17 through the Exxon hearings. I've sat through the coastal 18 hearings in terms of offshore oil emissions, and the 19 problems that we've had in Santa Barbara County. So, I can 20 feel for you at this point as public officials who want to 21 try and do the right thing. 22 And I think you do. I think you've sat here for 23 six years. You've sat through these hearings. You 24 understand what your staff has gone through and the type of 25 yanking around that's gone on. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 But it's difficult to stand up to the kind of 2 pressure that you're feeling. And the pressure is not only 3 external in terms of the public relations campaigns that are 4 going on, but it's also internal from the person who 5 appointed you in many cases. 6 So, we're concerned at this point that the public 7 perception is that CARB is reacting in a negative fashion, 8 and that in that reaction, you're producing uncertainty. 9 That uncertainty is again going to affect EVs. It's going 10 to affect the market out there. 11 And it is not going to be the kind of regulatory 12 stability that you wish to inject into the marketplace if 13 you're going to have a growing industry. 14 I guess I would like to speak very quickly to one 15 issue that was raised by a number of speakers, and that is 16 that you're suggesting at this juncture that we have one 17 week to reprepare whatever it is that's going to be 18 suggested as the new option, A B, C, or a combination A, B, 19 C, or some other option of which we will have probably 20 noticed sometime, perhaps Tuesday or Wednesday, if we're 21 lucky. 22 And I submit to you, if this hearing's going to 23 have any meaning in terms of the public interest and 24 representing the public interest, that if you give us one 25 day notice, that'll help. If we have no notice, you can't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 possible expect meaningful public input. 2 And what says, if there's no notice, is your minds 3 are made up. And if that's the case, don't make us come 4 back. So, I would suggest to you and I would submit to you 5 that it would be useful to carry this item over until next 6 year. 7 I would urge you and our organization urges you -- 8 we've been on the phones, and perhaps you've heard about it. 9 We've generated somewhere in the neighborhood of 2,000 calls 10 in the last four days, and we will continue to do that, most 11 of those going to the Governor's office, whose phones were 12 shut off on Sunday night after 350 calls went in. 13 We will continue to do that. We will continue to 14 mobilize the public, and we will do so in support of this 15 ordinance. And we would continue to stay on the pioneering 16 path you've been on, because your job, and it's a hard one, 17 is to protect the air of the people of the State of 18 California. 19 So, we urge you to stay on that path. Thank you. 20 CHAIRMAN DUNLAP: Thank you. Any questions? All 21 right. 22 Mr. Van Amburg. Do we have a slide show today, 23 Bill? 24 MR. VAN AMBURG: No, I've spared you that, Mr. 25 Chairman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 CHAIRMAN DUNLAP: I look forward to them. 2 MR. VAN AMBURG: I know. 3 CHAIRMAN DUNLAP: I don't really want to see you 4 without a slide show. 5 MR. VAN AMBURG: I was betting on the come. I 6 just thought maybe next week there'd be another chance to do 7 this all again. 8 (Laughter.) 9 MR. VAN AMBURG: And I was right. And that's the 10 consistency. Seriously, thank you for the opportunity to 11 speak, and I think I will save most of my comments for next 12 week. 13 It's a pain to come back to the fog of Sacramento, 14 but I also actually applaud CARB taking a cautious approach 15 and, frankly, staying out of all the political mine fields 16 that are out there. I would recommend and counsel, from the 17 perspective of CALSTART and the 160 companies in the 18 advanced transportation industry that we deal with, that you 19 do take a cautious approach. And take your time to think 20 this out. 21 For five years, you've had a program that, while 22 controversial, has done what you intended to do. And I 23 think there's been great acknowledgment that that's the 24 case. The question is, where do you go from here? 25 Our concern has been that if you change PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 substantially the ground rules you've laid to this date, you 2 may not get the outcomes you want to continue over the next 3 several years. There's been tremendous technology 4 development. There's been tremendous growth of a support 5 industry. 6 Now, I understand the sensitivity that your job is 7 not to create or support industries; your job's to clean the 8 air. But if you're going to have high technology solutions, 9 especially for transportation, you will need a support 10 industry to help the ramp up. 11 Changes that take away some of the consistency and 12 continuity that was out there will guarantee that you will 13 not have the support industry in the numbers you will want; 14 therefore, you will never be able to make the ten percent, 15 whether there is market acceptance of this or not. 16 And the main point that I'd like to make here 17 today, what has been driving entrepreneurs in this industry, 18 what it is that CARB over the past five years is simply 19 said, at a fixed point in time, there'll be a certain number 20 of vehicles. Be fruitful and multiply. And they have. 21 They've gone forth and taken that -- we've got a 22 shot. It lowers the risk. Investors are willing to take 23 part in our technology, and they can move forward based on 24 that. 25 If you take away the fixed numbers of vehicles or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 a tough target, whatever it may be, two percent, one 2 percent, whatever the numbers may be, tough targets drive 3 results. No tough targets means you'll probably see 4 California companies, of which there are over 300 now, maybe 5 pulling out of this business, redirecting resources. 6 You will see investment slowing down. And, 7 frankly, I think the greatest concern to you folks is that 8 you'll see technology improvement dropping off. 9 You've had tremendous success in the history of 10 CARB for setting tough goals, sticking to the course, and 11 seeing results. It goes back to catalytic converters. I 12 think you're seeing it with reformulated gas. And I think 13 you're seeing it with your ZEV program, part of your LEV/ZEV 14 program. 15 And our caution to you would be, if you want to 16 continue to see the results you've engendered to date and 17 the ability to make the goals you want to make tomorrow, you 18 have to keep the consistency of approach that you've 19 maintained to this point. 20 I think you want to fix it; you don't want to nix 21 it. I think that's a key point to make. 22 So, with that, I will return next week with a full 23 slide show for your enjoyment. 24 CHAIRMAN DUNLAP: We'll look forward to it. Thank 25 you, Bill. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 Any questions? Okay. Cecile Martin, followed by 2 John Weber, SoCal Gas, and Lloyd Dixon from Rand. 3 MS. MARTIN: Good afternoon, Chairman Dunlap and 4 members of the Board. 5 My name is Cecile Martin. And today, I'm 6 representing the California Electric Transportation 7 Coalition. I think you're familiar enough with our 8 organization after these frequent workshops and hearings. 9 I do represent the fuel providers for EVs, one of 10 the zero-emission vehicles that we hope to see in the 11 future. 12 Along with everyone else, we attended the workshop 13 last week, and, you know, I think we echo some of the 14 sentiment that you've heard today that it's been very 15 difficult to prepare, I think, and to do our best work for 16 some of these workshops, because of not being fully aware of 17 what we were going to face. 18 I think we're used to the traditional Air 19 Resources Board process where we get a staff report, and 20 we're kind of commenting on specifics. So, bear with me 21 again if I'm repetitive. 22 But we did feel, I think all of us there who tried 23 to speak to these -- and I don't think that this varies, 24 depending on what position you take, is that the concepts 25 were sketchy at best. And yet, we were asked to weigh in on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 the general direction that we'd like to see staff and the 2 Board move. 3 But I do want to say that at the workshop, there 4 was overwhelming support for something like Concept C. And 5 I've provided the Board with a summary document of that 6 workshop that lists the supporters for the various concepts. 7 And I think that illustrates what I'm saying. 8 And because Concept C is a sketch again, it's not 9 to be taken verbatim that this is support for the staff 10 Concept C, but rather it's just the approach that seemed to 11 fit what most people were thinking. 12 Now, we supported the principles in Concept C, and 13 we also offered a detailed presentation of options for 14 flexibility, market, and marketing incentives, and kind of a 15 change in the slant of the ramp to ten percent in 2004. And 16 in the earlier package that we distributed, I've also 17 provided the Board with a full copy of our testimony. 18 But right now, I'd like to summarize our position 19 on the three concepts that we were presented with. We 20 believe that Concept C is on the right track. It assures 21 the mission benefits and it assures the SIP commitment. And 22 I'd like to reference again Mr. Strock's comments. And I 23 think this discussion of a premium which -- emissions 24 premium, which has never really been defined, and one way we 25 tried to define it in our presentation was to say that, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 since electric vehicles don't degrade over their lifetime, 2 that that's more -- you know, more of a benefit than a 3 gasoline powered vehicle that does have some degradation, 4 and that that should be taken into account. 5 And then we also believe that EVs have other 6 benefits that are not really part of your regulation, but 7 are a bonus that comes along. 8 There's lower CO2, less toxic exposure, and no 9 refueling emissions. So, we say, yes, to what Chairman 10 Dunlap offered as the three measures that he was considering 11 today. You will get the tons here. 12 We think that within Concept C, you can provide 13 flexibility, and we've suggested flexibility again in the 14 ramp, credits for early vehicles, sales, and advanced 15 technology. We're hoping that this approach or something 16 that would be developed from this principle would allow 17 manufacturers individualize their marketing strategy. 18 And we also feel that something like this approach 19 would allow a ramp that takes battery manufacturers from 20 pilot to full commercial production. So, I think that this 21 aspect or this principle does support battery manufacturer, 22 or excuse me, Battery Panel recommendations. 23 And that was the second, I believe, of Chairman 24 Dunlap's points. 25 We also think that Concept C supports PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 infrastructure development, which requires a lot of planning 2 and coordination, building codes, which we've just gotten 3 approved, safety training, which we're just beginning, and 4 training for vehicle support as well as recharging. 5 And that requires planning and understanding of 6 what cars are going to be in the market, where they're going 7 to be introduced, and where public charging is most likely 8 to be located. 9 We also believe that something like Concept C 10 supports California business, EV industry, and investment by 11 maintaining a clearer regulatory signal than the other 12 options. And this, we believe, is the yes to the third 13 point that Chairman Dunlap mentioned, which is the very 14 important link between regulation and economic opportunity. 15 And I believe it was in a previous Board meeting 16 that Ms. Edgerton mentioned that the winner of the Nobel 17 Prize for Economics this year won that prize based on his 18 theory and one that his wife contributed to, that regulation 19 does spur economic growth, and that there is a positive 20 relationship there. 21 Now, we feel that Concept A goes way too far. It 22 really only offers -- although it's hard to understand how, 23 because, again, the language is vague, and so I don't want 24 to do injustice to this, but it offers only partial 25 emissions reductions. It discusses nothing of the premium PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 and the other benefits that were lost. And, again, if it 2 looks at fleet averaging, it's only looking at NMOG, and we 3 lose that NOx benefit, which is so critical in the South 4 Coast and so critical in Sacramento. 5 It does not offer credits that advanced 6 technology, and I did have the benefit of seeing the chamber 7 proposal as it was sent to some of the businesses that we 8 work with closely. And there seems to be a 9 misunderstanding, in my mind at least, in the language of 10 the proposal, about how credits are generated. 11 Certainly, in order to generate a credit, my 12 understanding is that we have to exceed a standard. 13 Thereby, we have to do more. 14 So, I would agree with the earlier speaker that 15 we're not going to be able to generate credits unless we 16 have some technology that offers us lower emissions. 17 There's no provision in A for infrastructure. As 18 I mentioned earlier, it requires planning and coordination. 19 We cannot expect infrastructure to just appear. 20 And we believe that this measure results in a 21 dramatic loss of investor confidence. And, as we've said 22 before, we're already seeing the results of the mixed 23 messages. We are already seeing businesses turn from this 24 area of development. 25 So, I don't think it measures up on delivering the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 tons, Chairman Dunlap, as you had mentioned. I don't think 2 it's very -- makes a very clear link between environmental 3 regulation and economic opportunity. And it certainly does 4 not support the Battery Panel recommendation that we need to 5 keep going no matter what the ramp. 6 And then, finally, Concept B we don't think goes 7 quite far enough. The emissions offsets are uncertain after 8 2003, and there's already been some discussion about the 9 emissions offsets. Again, you get NMOG and not NOx, and 10 that continues that question for districts that are quite at 11 risk in that area. 12 As far as -- I also know there's no commitment at 13 this time to a 49-State car, and while I think we would 14 receive some benefits, I'm not certain about using all of 15 our future options against an existing regulation and losing 16 additional benefits that we so very much need. 17 Also, while we think demonstrations are very good 18 and, you know, our industry has played a very key role in 19 this State with demonstrations, most recently with General 20 Motors' Impact. They are very expensive, these 21 demonstrations, and we have a lot of data from that that we 22 are happy to share. We think demonstrations of advancing 23 technology do need to continue, but we don't think a 24 demonstration alone makes a program. 25 And we know that demonstrations keep costs high PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 and volume low. We would see limited infrastructure 2 progress here, I believe, because the numbers of vehicles 3 are very low. And there is some uncertainty here, unless we 4 could rely on some level of market launch. 5 And I think a voluntary program is not quite 6 enough; that we would like to see some form, some mechanism 7 that CARB has at its disposal to require some level of 8 retail launch to be in the form of a binding agreement. 9 And I know that there has been mention here today 10 that companies, you know, they aren't owed anything. And I 11 think that's true. But I think there's a misconception here 12 that the auto makers are the only companies that need to be 13 in existence to have a successful EV industry. 14 And, for example, there may be companies that own 15 their own suppliers, but a brand new supplier network is 16 being created. And that network is not necessarily going to 17 be available without some market signals. And I believe the 18 mandate was the market signal. I don't think any company 19 put all their eggs in that basket. But I think a delay of 20 eight years is going to very difficult and if any company is 21 looking at making a profit, for certain they'll divert some 22 of their resources away from this important work. 23 So, we think that tons are uncertain during the 24 SIP years and a little bit uncertain in the near term. We 25 don't think this proposal assures a ramp to meet the Battery PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 Panel recommendations, and we think it creates a potential 2 disconnect between economic opportunity and regulation that 3 we think would be very beneficial for California. 4 That's really the end of my comments today. I 5 guess I would like to echo what other people said, is that, 6 really to get the best work from us, we need a little 7 notice. And I know that the Board has been under a lot of 8 pressure, and there's been a lot of attention to public 9 process. And we've participated in all of it. 10 But, as we move closer to getting a staff 11 proposal, I think we'd like time to have really well thought 12 out responses. 13 And in addition to that, we have submitted a 14 proposal formally during the workshop, and we're hoping to 15 hear soon from CARB staff about what you think of it. 16 Thank you. 17 CHAIRMAN DUNLAP: Okay. John Weber, SoCal Gas, 18 followed by Lloyd Dixon. 19 MR. WEBER: Good afternoon. 20 CHAIRMAN DUNLAP: Hello. 21 MR. WEBER: I appreciate the opportunity to be 22 here and provide some comments on behalf of Southern 23 California Gas to Chairman Dunlap and the Board. 24 My name is John Weber. I am the General Manager 25 of Transportation at Southern California Gas Company. My PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 previous experience, by the way, was at General Motors as 2 director of the powertrain product planning activities. 3 Combined with my current responsibilities at SoCal 4 Gas to build and develop the market for natural gas powered 5 vehicles, I think provides me with a unique perspective. 6 But, again, I thank you for the opportunity comment on the 7 possible amendment to the California low-emission vehicle 8 program. 9 As you know, the primary supplier of stationary 10 source fuel in the South Coast Basin is the Gas Company. 11 And we are concerned that a fair share of necessary emission 12 inventory reductions from mobile sources are achieved as 13 well as we go forward. 14 The emission reductions to be achieved from the 15 current LEV program are important towards California's clean 16 air attainment goals. And, as such, the Gas Company 17 supports the alternative program concepts that were 18 presented by the staff that include the requirement that the 19 emissions reductions beyond the current LEV program must be 20 achieved. 21 And most importantly, these equivalent reductions 22 must be achieved using control methods that are not already 23 included in other California State Implementation Plan 24 control measures. 25 We recognize that there is a possibility that you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 may be pushing back or delaying the ZEV program in some 2 form. We just want to assure that you that Southern 3 California Gas requests the opportunity to work 4 cooperatively with the staff as they develop optional 5 approaches. We think, for example, that there are a number 6 of possible approaches that will allow you to continue to 7 gain the full emissions reductions benefit under the 8 California SIP program even if the ZEV program is moved out 9 in time. 10 Some of those may be an acceleration of the 11 existing low-emission alternative fuel technology vehicle 12 classes, for instance. It may be a combination of a new 13 standard that would recognize the cleanliness of other fuels 14 that happen to be significantly cleaner than the ULEV 15 standard that may allow you to document and book those 16 emissions reductions. 17 We believe there's a combination of many 18 approaches that will allow you to still obtain the emissions 19 reductions necessary. 20 It is interesting to note that there are 31 21 original equipment manufacturers that are offering factory 22 developed and warranted natural gas vehicles and/or heavy- 23 duty engines in the marketplace. 24 These are basically internal combustion products, 25 not necessarily alternative propulsion driven machines, but PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 let me assure you that there has been a quiet multiyear 2 development going on in the area of natural gas vehicle 3 technology. And it gets cleaner and cleaner year by year. 4 And that includes many worldwide automakers as 5 well. 6 Southern California Gas specifically commits to 7 work with the ARB staff to assure that a carefully developed 8 alternative results -- would result in an early introduction 9 of cleaner vehicles, like NVGs, so that the 1994 SIP 10 emission reductions are achieved. 11 So, thank you for your attention, and I'm happy to 12 address any questions that you might have. 13 CHAIRMAN DUNLAP: Thank you, Mr. Weber, appreciate 14 it. Mr. Dixon from Rand, followed Kelly Brown from Ford 15 Motor Company. 16 MR. DIXON: Hi. My name is Lloyd Dixon. I'm an 17 economist at Rand Corporation in Santa Monica. We're a 18 private nonprofit firm that does research on public policy 19 issues. 20 Today, I want to tell you some additional findings 21 from a study we're doing on the ZEV mandate. The study's 22 a part of a year-long study on California's ozone attainment 23 strategy. 24 What I first want to do is just tick down our main 25 findings so far, and then spend a few minutes -- a few PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 minutes describing each one of them, and you have the more 2 detailed description of my comments today in your packets. 3 Our findings -- the first of our findings is that, 4 based on the reviews of the literature that we've been able 5 to do, it looks like the ZEV mandate will be expensive 6 during the first five years. But, of course, in evaluating 7 the ZEV mandate, you want to look its cost-effectiveness 8 over the long run. And based on what we know now, the long- 9 term cost-effectiveness of the ZEV mandate could be just 10 about anything. 11 Now, this doesn't mean that California 12 policymakers should turn their backs on ZEVs, because there 13 are very unattractive outcomes possible without the ZEV 14 mandate. And finally, that this enormous uncertainty 15 suggests certain principles should be used in designing the 16 policies for ZEVs. 17 And those are the policies that enable learning 18 about ZEV technical and the alternatives, not be susceptible 19 to disaster, and that they avoid the worst of the worst 20 scenarios, and that are flexible and can be tailored as new 21 information becomes available. 22 Next slide. 23 On our first conclusion, we look -- we've been 24 able to suggest that the cost of ZEV mandate in the first 25 five years for California will likely lie somewhere between PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 2.3 and $8.6 billion. And if you add in the mandates in 2 Massachusetts and New York, this could rise to 3.5 to $13 3 billion. 4 Now, long term -- next slide, please. 5 The long-term effectiveness of ZEVs depends on how 6 those costs decline over time as well as the emissions 7 reductions that are generated. And we've simulated long- 8 term cost-effectiveness using parameters -- using ranges 9 into which the important parameters that determine cost- 10 effectiveness are likely to fall. 11 So, we've used different assumptions for the cost 12 during the first five years, high and low assumptions of 13 fast and slow decline for costs after that. And we have 14 different assumptions of what the ultimate fleet penetration 15 would be as well as what the emissions avoided, or emission 16 reductions produced by ZEVs are. 17 And those determined by how effective the ZEV 18 control strategy is. And with those, we calculate long-term 19 cost-effectiveness, both for vehicles produced between 1998 20 and 2010, which is the second to the last column there as 21 well as the long-term cost-effectiveness for vehicles 22 produced after -- electric vehicles produced after 1998. 23 And we find that cost-effectiveness grounds -- the 24 ZEV mandate could be a great success or could be a great 25 failure. If initial costs are low and they decline quickly, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 the long-term cost-effectiveness of ZEVs could be very low, 2 even if the emissions avoided fall in the midpoint of our -- 3 of the range. 4 On the other hand, if the emissions reductions are 5 high and they don't decline very quickly, we could see a 6 very high cost-effectiveness number for ZEVs in excess of a 7 hundred thousand dollars and indeed, in some scenarios, 8 excess of $500,000 per ton reduced. 9 Now, given this uncertainty, this uncertainty does 10 not imply that we should turn our backs on ZEVs, because 11 undesirable outcomes are possible without ZEVs. 12 Consider the following pessimistic, but not 13 implausible scenario, the ZEV mandate's not repealed, ZEV 14 technology doesn't develop as fast as it would otherwise, it 15 turns out that our ICE controls strategy is disappointing 16 and that we're short of compliance in 2010. 17 Then we may have to turn to very expensive 18 control, alternative control, mechanisms, such as 19 transportation control measures. 20 Now, this is a scenario you want to avoid, and it 21 presents us with a very challenging policy question. And we 22 don't think -- we don't see any easy answers to this, and we 23 think that the uncertainty should be acknowledged and 24 incorporated into the decision-making process rather than -- 25 rather than just ignoring it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 And so, based on that, we've developed four 2 different principles that we think should be used in 3 redesigning or changing the ZEV policy. 4 The first is, we aren't sure whether ZEVs are a 5 corner-- or should be a cornerstone of California's long- 6 term strategy at this point based on what we know. But we 7 think that these policies should enable us to learn more 8 about whether it should be or not; i.e. we need to learn 9 more about the technology, its cost, availability, and 10 performance. We need to know more about how the remaining 11 measures of our ICE control strategy are going to work, and 12 we need to know more about what other measures, outside 13 mobile sources are possible and their costs (sic). 14 While we are agnostic about whether EVs should be 15 long-term -- or cornerstone of California's long-term 16 strategy, we think it's important not to adopt near-term 17 policies that somehow hinder our ability to use EVs in the 18 future. 19 And those threats are both marketing and political 20 in nature. On the marketing side, I might imagine an early 21 roll-out of disappointing EVs may sour consumers on electric 22 vehicles and make it difficult to market EVs even if well- 23 performing EVs are available in the future. 24 On the innovation side, we want to make sure we 25 don't do things that discourage innovators from investing, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 and that requires balancing flexibility as well as some kind 2 of predictability in the mandate. 3 Third, we think it's important to accommodate a 4 broad range of vehicles and innovators in the policies, for 5 example, to see whether small nontraditional vehicles can 6 make an important contribution to California's ozone 7 reduction strategy rather than relying on electric vehicles 8 that look very similar to the ICEs on the road today. 9 And finally, I wouldn't be an economist if I 10 didn't point out that we should try to do these -- 11 accomplish these things at least cost. For example, can we 12 learn more about advanced batteries and their capabilities 13 without fielding large fleets in the early years? 14 Can we learn more about what consumers need from 15 EVs and what they want without fielding a large fleet in the 16 early years that may be expensive? 17 Thank you. 18 CHAIRMAN DUNLAP: Thank you, Mr. Dixon. Ms. 19 Edgerton has a question for you, sir. 20 MS. EDGERTON: Thank you. I'm trying to 21 understand from your report whether you did any independent 22 research on costs, did you? 23 MR. DIXON: We relied mainly on available 24 information and studies. We did talk to various 25 stakeholders and how to interpret that information, and what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 the numbers meant. But we rely mainly on available 2 information. 3 MS. EDGERTON: That's what I deduced from looking 4 at this. On page 11, it said the information available on 5 the fixed cost is very sketchy. Our upper and lower bounds 6 should therefore be interpreted as tentative. 7 MR. DIXON: Right. 8 MS. EDGERTON: I mean, if I understand you right, 9 that's tentative. And then when you reach your conclusions, 10 you say, the first five years of the ZEV mandate will be 11 costly. 12 MR. DIXON: Right, well -- 13 MS. EDGERTON: That's "will be." That's not 14 tentative, isn't it? 15 MR. DIXON: Yeah. Based on the information that's 16 not available; that's our best guess of the plausible range 17 in which they will fall in the first five years. We have to 18 acknowledge that. 19 MS. EDGERTON: So, if I understand you right, 20 it'll be costly because the studies that you reviewed, some 21 of them were really costly. 22 MR. DIXON: Right. 23 (Laughter.) 24 MS. EDGERTON: Some people say it will be really 25 costly. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 MR. DIXON: No. Our contribution is that we did 2 evaluate these studies, and we didn't accept information 3 that we thought had no basis that -- you know, that we 4 reviewed studies to see if, you know, if they were 5 consistent. They told us what they were doing; that we 6 could understand it, and it made some plausible sense to us. 7 But, you know, we can't audit, for example, the 8 numbers on which some of these studies are based. And so, 9 we have to report what we see based on our evaluation of 10 whether it seems to be consistent and make sense. 11 MS. EDGERTON: Well, to whom are they going to be 12 costly? This report is very obscure on that. 13 MR. DIXON: That's a very good question, and 14 that's an issue that's dealt with in our full report that's 15 not dealt with here. What you see here is the -- these are 16 costly in the sense that this is the incremental cost of 17 electric vehicles over the internal combustion vehicles. 18 So, we're assuming that the same number of 19 vehicles are sold and they're driven the same amount, and 20 that, you know, you just have to pay this extra amount to 21 produce them. 22 Now, in the full report which we hope will be out 23 in January, we do a lengthy analysis of who bears these 24 costs, how much is borne by Californians, how much is borne 25 by automakers, how much is borne by EV -- what are the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 benefits of the EV buyers and the cost to ICE buyers? 2 And so, we address that issue more. 3 MS. EDGERTON: Well, I don't understand why the 4 incremental costs of EVs over ICEs in your analysis would be 5 so much more. Did you assume that -- you do have 6 assumptions in here that indicate that you're assuming that 7 there'll be progress. 8 MR. DIXON: Right. Well, the reason that the 9 numbers are high in the first five years is that you're 10 talking about new technologies, and you're talking about not 11 large production scales. And that's what's driving the 12 cost. 13 Also, on the high end of their estimates and 14 what's driving that is that the automakers plan to produce, 15 from what w can tell, vehicles that are comparable in 16 performance, except for range, as ICEs. They've got air 17 conditioning. They handle well. They got power steering. 18 And that is really expense. 19 Now, one of our points is that maybe that's not 20 the only way to meet the mandate, but that's what they seem 21 to be planning to do. 22 And if they do that, that's expensive. So, that's 23 what drives the upper end of our -- of our bounds. And 24 then, we make estimates. There's incredibly little 25 information on how those costs will come down after the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 first five years. 2 And we basically used estimates of how costs 3 declined in other industries after the first five years to 4 do our sensitivity for the cost-effectiveness numbers. 5 MS. EDGERTON: So, if I understand you right, 6 what's happened to the money that's already been invested? 7 Is that in the costs? 8 MR. DIXON: Yeah. That's another good -- 9 MS. EDGERTON: Well, frankly, I don't understand 10 your report. The assumptions are not clear. 11 MR. DIXON: Well, there's a real difficulty in 12 presenting what is a 300-page report in -- 13 MS. EDGERTON: Yeah. I understand. 14 MR. DIXON: -- a 20-page briefing and have five 15 minutes to talk about it. So, I can't cover all the points. 16 Clearly, from a policy point of view, a lot of 17 these costs are already sunk. You know, they should not, 18 you know, that's gone. You know, that's not something that 19 should enter into your policy decisions. 20 Now, some of those costs have been spent. It was 21 very hard to figure out how much of them had been spent. 22 But, by no means have all of them been spent on the fixed 23 costs, you know, because we're still three or four years 24 away from, well, whatever it is -- three years away from 25 actual introduction. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 So, I can't really answer your good question of 2 what percent of those fixed costs have already been 3 incurred. But my sense is that it's certainly not over 50 4 percent. 5 MS. EDGERTON: And what price did you assume that 6 people would pay? I mean, is this the cost without anybody 7 buying anything? 8 MR. DIXON: This is assuming -- so, interpret this 9 as this is the resource cost. This is the cost to society 10 of producing these vehicles. 11 Now, how much consumers pay for these determines 12 the distribution of those resource costs to society. So, it 13 determines whether it's the ICE -- you know, how much the EV 14 buyers pick, how much ICE buyers pick up. And so, that's 15 really the distribution of how those costs to society fall. 16 And then we deal -- that's something we address. 17 I mean, I can tell you there's a fundamental issue 18 who bears these costs, and that issue focuses on how 19 automakers place their vehicles, and economic reasoning 20 would suggest that automakers should increase the prices of 21 their California ICEs to compensate for these extra costs of 22 the electric cars. 23 And so, there's good reason to think on economic 24 grounds that the cost of ICEs is going to go up as a result 25 of the electric vehicle mandate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 However, the real world doesn't necessarily seem 2 to work that way in the sense that automakers do seem to 3 spread the cost over the entire national fleet for many 4 things, such as the emissions controls. You know, it's a 5 hundred dollar markup in California, and that doesn't 6 correlate very closely to the actual cost of the emissions 7 devices. 8 And so, if that's the case, then the burden on 9 Californians would be much less, and it might be 10 insignificant on Californians. 11 MS. EDGERTON: Let me ask you, if it's the cost to 12 society, is it -- I don't see in here anything about the 13 benefit to society. Do you discount any emissions benefits 14 or the cost of air pollution in the South Coast, for 15 example? I mean, your total figures for four years, you 16 have a range of 2 to 8 billion. And you say it's going to e 17 costly. But we know that the health studies -- which you're 18 very familiar with, I know that -- are 9 billion a year 19 cost. 20 MR. DIXON: What we did, we did what's commonly 21 done, the cost-effectiveness ratio, the dollars per ton 22 removed. We discussed some about the dollar benefits and 23 how you translate tons reduced into dollar benefits, which 24 is a very difficult problem, and the estimates out there 25 probably incompletely measure what the dollar benefits of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 tons reduced are. 2 But, you know, we stuck with tons reduced, because 3 our thinking was that, at this point of the project, which 4 is -- which is, we're not looking at the overall stationary 5 sources and non -- and heavy-duty vehicles at this point. 6 But given you want to get this many tons out of 7 light-duty vehicles, what's the most cost-effective way to 8 do it? So, that's why we stuck with cost per ton removed. 9 So, our benefits are tons, which enter our long- 10 term cost-effectiveness. 11 MS. EDGERTON: Well, how much did you assume it 12 was going to be costly -- you said it's costly to society. 13 How costly to society? How did you calculate how costly to 14 society ICEs are? 15 MR. DIXON: Well, what we did was -- what we did, 16 we figured out the incremental cost, how much more the 17 production of ZEVs was going to be, rather than not having 18 the mandates. So, it's sort of with and without the 19 mandate. What are the costs? Okay. 20 And that's what that first one was on the cost 21 during the first five years. 22 And then the benefits are how many tons reduced 23 you get out of that, which we -- which was the basis for 24 those long-term cost-effectiveness numbers, which could be, 25 under some scenarios, you know, moderate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 And so, that's how we have used the benefits in 2 there. 3 MS. EDGERTON: When you were looking at the costs 4 to society, for example, for the EVs, did you look at the 5 emissions from the power plants? 6 MR. DIXON: We assumed that those were not 7 significant for the South Coast; that those wouldn't affect 8 our -- would affect very little. So, we did not add the 9 increased emissions from actual electricity generation. 10 MS. EDGERTON: Thank you. Did you include the 11 emissions from refineries and refueling and evap emissions? 12 MR. DIXON: Right. We did do that, yes. 13 MS. EDGERTON: All of those? 14 MR. DIXON: Uh-huh. 15 MS. EDGERTON: Well, I look forward to receiving 16 your report. 17 Who paid for your report? 18 MR. DIXON: This was jointly sponsored by an 19 upfront grant from the California Manufacturer's 20 Association, as well as internal funds from ORAD. And Rand 21 is very concerned about maintaining the independence and 22 objectivity of work and we made sure that this project 23 conforms to that. We have final say over publication and 24 what's in it and when it's released. 25 CHAIRMAN DUNLAP: Mr. Dixon, you're going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 provide us the full report, right? 2 MR. DIXON: Yeah, certainly. 3 CHAIRMAN DUNLAP: Okay. 4 MR. DIXON: We hope that's out in January. 5 CHAIRMAN DUNLAP: Okay. 6 MS. EDGERTON: I just want to caution that the 7 word "costly" is so subject to misinterpretation, and such a 8 value laden word -- 9 MR. DIXON: Your decision as policymakers should 10 be based on the long-term cost-effectiveness of EVs. Those 11 are the things that we say could be low, could be high. 12 However, you may also be concerned about, you know, what you 13 have to invest upfront. You know, what kind of money you're 14 talking about upfront. 15 For a number of reasons, it's going to be 16 expensive in the first five years, and you know, you've got 17 to have stamina to get through those first five years if you 18 want to see this thing -- if you want to see it pay off. 19 This is a long-term investment that's got upfront costs that 20 may pay off. I don't know if it will. But if it pays off, 21 will pay off in the long run. 22 MS. EDGERTON: Just one final question. On your 23 ICE, what ICE did you assume? 24 MR. DIXON: Well, we had a couple of different 25 assumptions on the four. Our assumption of low emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 reductions due to EVs, we used the CARB estimates for a ULEV 2 that are forecast in 23 -- 2003, I think it is. And for our 3 high emissions reduced, we used the emissions -- the current 4 estimates of the emissions of the California '93 vehicle. 5 And so, in effect, you might think that that California '93 6 vehicle saying that all these incremental policies, OBD, 7 smog check, the NMOG standard, will not reduce emissions 8 from what we're currently seeing from California vehicles. 9 So, in that sense, that's a pessimistic assumption 10 of how the ICEV control program works. 11 Now, on the other hand, there's a lot of concern 12 that our current estimates of the emissions from ICE 13 understates true emissions. And so, you know, that's why we 14 don't know if, you know, how pessimistic that -- using a 15 California '93 as a basis for emissions reductions. 16 MS. EDGERTON: I just want to make sure I 17 understood you correctly. You're comparing the ULEV and 18 1993 -- 19 MR. DIXON: What we did -- 20 MS. EDGERTON: -- to -- the ULEV standards, which 21 would go into effect in 2003 as if it were 1993? 22 I am sorry. I didn't follow the -- 23 MR. DIXON: Right. Well, first, we -- we looked 24 at the effectiveness for vehicles sold from 1998 and after. 25 Okay. So, it's not just -- I mean it's -- EVs 1998 to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 indefinite future. They're sold at 10 percent forever. 2 MS. EDGERTON: Yeah, but I'm talking about the 3 five years. 4 MR. DIXON: Right. And so, our low estimate -- 5 yeah, for one end of our extreme, we use a ULEV for that 6 whole period, right. 7 MS. EDGERTON: So, for the ICE standard that you 8 compared high and low the other studies. You picked CARB, 9 and you got all those -- all that stuff. 10 MR. DIXON: Right. 11 MS. EDGERTON: Your baseline is your ULEV that we 12 will require in 2003. 13 MR. DIXON: Right. Now, some -- 14 MS. EDGERTON: Even though during that period of 15 1998 to 2003, we don't require it? 16 MR. DIXON: Well, I mean -- that doesn't really 17 matter, because of the NMOG standard, because of the NMOG 18 standard, there's no exhaust emissions benefits from EVs 19 under one set of scenarios, because more EVs -- less EVs 20 mean the ICEs, remaining ICEs have to be cleaner under the 21 NMOG standard. 22 So then, you have to look -- well, how do the 23 evaporate emissions and the market emissions differ? And 24 so, the answer may not be as -- it may not be as bleak as 25 your -- it may not be as extreme as you're -- as you're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 hinting, because you don't have the evaporative -- I mean 2 you don't have the exhaust side of it. 3 MS. EDGERTON: Well, I apologize for taking so 4 much of your time. I have a lot of respect for you and our 5 work. And I'm just trying to understand some of the 6 principles. 7 Thank you. 8 MR. DIXON: Okay. 9 CHAIRMAN DUNLAP: Thank you, Mr. Dixon. Kelly 10 Brown, followed by V. John White of the Sierra Club, 11 followed by Dave Hermance, Toyota Technical Center. 12 MR. BROWN: Due to the lateness of the hour, I'll 13 keep my remarks brief, and it looks like we're going to have 14 a chance to do this weekly anyway, so anything I don't do 15 today, we'll do either here, or next week, or the Christmas 16 show. 17 (Laughter.) 18 MR. BROWN: Mr. Lagarias covered a lot of the 19 things that were on my mind listening to the talk today, so 20 I'll just focus on a couple of them I think maybe he didn't 21 elaborate on enough. 22 During the course of the workshops and the 23 hearings that we've had over the last few months, the debate 24 always seems to slip back to an issue of whether or not you 25 have a ZEV mandate, and the fate of the Western World seems PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 to turn on that. 2 I don't think it's necessarily an issue of just 3 that simple, of either ZEV mandate or no ZEV mandate, or 4 it's not like "save the whale" or "Remember the Maine." We 5 agree that the Battery Panel did point out that the mandate 6 did stimulate a lot of progress. And I wouldn't argue with 7 that. 8 But the Battery Panel and others have also pointed 9 out that it's time for a change, and that if we stay the 10 course, in '98, things aren't going to work out well, and 11 that will be the death knell, I'm afraid, of electric 12 vehicles. 13 The mandate, we don't need to go back and decide 14 whether you people or your predecessors were right or wrong 15 with the mandate. I think it's sufficient to say that it 16 appears to about lived its usefulness. 17 And we need a different course. During the course 18 of the discussions, we were asked during the public process 19 at the workshop to do several things. One was prepare an 20 alternative, and we did that. Within the alternative, we 21 were asked to make sure that there was continuing progress 22 on technology. And I think we did that. 23 We were asked, rightly or wrongly, to make sure 24 that there was an offset and premium offset. And we did 25 that. We were asked to make sure that there were no gaps in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 ZEV availability, and we did that. 2 I think, overall, to the amazement of some, seven 3 fiercely competitive companies agreed to all those different 4 things and found ways, with differences, company to company 5 that we could do that. 6 One of those pieces got a lot of attention today 7 and a lot of misinformation I think we shared. The value of 8 the 49-State program -- one, as Mr. Leonard said, it won't 9 be available unless the seven manufacturers agree to make it 10 available. So, as Mr. Cackette said, up to 2003, that's a 11 true offset. 12 All of the offsets to date that have been brought 13 forward seemed to get sucked up in the black box, so I don't 14 know how we would offset the ZEV benefits if there are no 15 programs that are available for offsetting. 16 There was also a question, in particular by the 17 NRDC, about the viability, because California can't enforce 18 in use. If we sign up to the 49-State program, EPA would 19 enforce it just like a legitimate program. We would have a 20 contract with them, and it would be enforceable. 21 The fact that California doesn't enforce it is no 22 different than the action taken by this Board just recently 23 on heavy-duty engines, where we volunteered to agree with 24 EPA and CARB to do heavy-duty engines requirements earlier. 25 They're also covered by the preemption in the Act. And the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 benefits primarily from 49-State trucks migrating into 2 California are booked in the California SIP. 3 Our 49-State concept is no different. If it 4 doesn't work there, it doesn't work on the heavy trucks. 5 I think -- just one last thing. It seems to be 6 taken for granted our offer to match the NMOG curve, as if 7 that's simple. And even in our discussions with the staff 8 who know our business pretty well, you fall into a trend of 9 saying that all these vehicles are on the shelf; that all 10 you do is slide it from the year 2000 back to 1998. There's 11 no work to that. It's just sliding something from one end 12 of the shelf to the other. 13 In Ford's case, that commitment would mean six 14 major new vehicle programs and at least $350 million worth 15 of investment. 16 With that, I'll take any questions. 17 MS. EDGERTON: Thank you. And I hope nothing I've 18 said indicates that I think it's easy, anything's easy. 19 What's the old saying? Everything's difficult before it's 20 easy. 21 MR. BROWN: No, I think it's nothing's impossible 22 if you don't have to do the work. 23 (Laughter.) 24 MS. EDGERTON: So, the question I want to ask 25 again about this 49-State car. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 Where are you in that process with EPA? 2 MR. BROWN: Nowhere. Their rulemaking is out, but 3 more importantly, the talks with the States in the Northeast 4 have stalled. And it stalled, I think, waiting to see what 5 happens with the ZEV mandate. 6 My personal perception is it's probably more a 7 political issue than a technical issue. Unfortunately, you 8 know, some have alleged that's happening in California, too. 9 I don't know what's going on here. 10 But the talks in the Northeast have stalled, and I 11 think the program -- we've lost most, if not all of '97 12 model year already. I'm not sure if it will go forward. 13 This program that we've offered here in California 14 I think is the last shot to make it work. That's my 15 personal opinion. And I've been involved in the discussions 16 in the Northeast for quite a while. 17 MS. EDGERTON: So, if I understand you right, 18 you're saying that the 49-State car is dead in the 19 Northeast, but if we agree to it, you'll get EPA to enforce 20 it and California will have saved the 49-State car? 21 MR. BROWN: Believe it or not, that makes sense to 22 me. Yeah, I think what actually happened is the stumbling 23 block in the Northeast is the ZEV mandate. Two of the 24 States have a ZEV mandate, and we've been unable to work 25 that out. They are willing to give up their program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 MS. EDGERTON: But if there's no ZEV mandate for 2 98-99, for example here, then they don't have one either, 3 right? Because they have to adopt our program. So, then 4 why would you offer the 49-State car to them to get out of 5 the mandate if there were no mandate that they could adopt 6 the California had? 7 MR. BROWN: You know, I think I understood that. 8 (Laughter.) 9 MS. EDGERTON: I'm counting on you. 10 MR. BROWN: It might be time to go to the Rubicon. 11 (Laughter.) 12 MR. BROWN: The 49-State car, we told the States 13 in the Northeast that we would make the 49-State program 14 available there, and we would devote the resources of those 15 programs provided we didn't also have to do a parallel 16 program on electric vehicles. We couldn't do both. 17 If the electric vehicle program goes away, either 18 because those States agree to or because California moves 19 the ZEV program, then it makes our offer feasible. 20 MS. EDGERTON: So, if I understand this, it's -- 21 we're -- if New York and Massachusetts agree that they don't 22 want to have the ZEV mandate, then you'll probably -- you 23 would have gone forward -- maybe that's -- is that still a 24 good offer on the 49-State car, and California will also get 25 the benefits of in-migration of the 49-State car. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 MR. BROWN: But one key thing we've got to that 2 point -- it's almost a year to the day that we got to that 3 point. And we haven't gotten past the ZEV mandate piece. 4 MS. EDGERTON: Uh-huh. 5 MR. BROWN: And I think everybody's waiting to see 6 what happens in California. 7 MS. EDGERTON: Okay. But conversely, if 8 California, I mean, keep this mandate, they don't get the 9 49-State -- well, they get -- I see. So, it's divide and 10 conquer. 11 Thank you. 12 MR. BROWN: No. I don't agree with that. I don't 13 agree with that. 14 MS. EDGERTON: Correct me then. 15 MR. BROWN: No, I think it's win-win for 16 everybody. If we can get through the ZEV mandate problem in 17 the Northeast or through California, it would facilitate the 18 49-State car. The auto companies are on the track where we 19 know we've got a product plan that we can actually build, 20 that satisfies our customer needs. It's a win for the State 21 of California, because you get your emission benefits. It's 22 a win for the Northeast because they get their emission 23 benefits. Everybody wins. 24 MS. EDGERTON: One final question, then. 25 Are you saying that if they -- if California and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 New York did not keep the ZEV mandate, that you would not 2 oppose our having it? 3 MR. BROWN: You're California I think. 4 MS. EDGERTON: I know. 5 MR. BROWN: You meant New York and Massachusetts? 6 MS. EDGERTON: If New York and Massachusetts 7 passed on it, would you stop opposing it here? 8 MR. BROWN: It's -- that wouldn't make the 9 batteries work. 10 MS. EDGERTON: All right. Thank you. 11 CHAIRMAN DUNLAP: Thanks, Mr. Brown. 12 V. John White, followed by Dave Hermance from 13 Toyota, followed by Paul Pulliam. 14 MR. WHITE: Mr. Chairman, members, John White, 15 representing the Sierra Club. 16 When the "grandson of smog" appeared this morning, 17 I thought back to my first ARB hearing. And I think it was 18 at Cal Tech in 1972, and I think the subject was vacuum 19 spark advanced disconnect. 20 Mr. Calhoun may remember that situation. This is 21 another case where we thought we knew what we were doing but 22 didn't. 23 And I think that it caused me to think about the 24 rich history and tradition of this Board and all of the 25 accomplishments that have come about, and I appreciate the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 Chairman and the staff taking some time for us all to 2 reflect and maybe take a deep breath. 3 This a very important process that we're engaged 4 in, a very important product. And I think -- I don't know 5 if I can be here next week, because I had some other plans. 6 There are other environmental issues that I work on, even 7 other air quality issues. 8 I would love to have all the help on smog check 9 that we've been having on the ZEV thing, because I think 10 that smog check is a program that illustrates why we have to 11 have the ZEV program. 12 And so, if you'll bear with me, Mr. Chairman, I'd 13 like to reflect both on the process and the substance. We 14 have generally been associated with the fine work that's 15 been done by the Natural Resource Defense Council and the 16 Union of Concerned Scientists on the technical issues and 17 the options. We've also contributed to the effort to 18 organize the public on this issue. And I think one of the 19 difficulties that nobody's known, maybe even this Board, 20 exactly where this issue is at a given moment, given the 21 rumors and the conversations that are going on, and I think 22 that -- I wanted to reflect a little bit on how we got to 23 this point and maybe offer some suggestions. 24 But I couldn't help but think about when Ms. 25 Edgerton was questioning the Rand speaker and then Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 Austin's early remarks. 2 When we start looking at costs and benefits of 3 this program, I think we've got to be careful of the 4 criticism -- I don't know who it's from or who it's directed 5 towards, but I always like the way it sounds. And people 6 that know the cost of everything and the value of nothing. 7 And I think in the case of this ZEV technology leap that 8 we're trying to undertake, there are some intangibles here 9 that are both qualitative and quantitative that aren't 10 specifically in this Board's specific jurisdiction. 11 So, I don't want to get off point and try to have 12 you pay attention just to the intangibles, but I think that 13 when we look at just these narrow cost/benefit analyses that 14 only look at NMOG and only look at these incremental 15 differences, we're missing the point of what I think this 16 mandate has come to mean and why it has so much weight 17 attached to it. 18 And that is that our in-use vehicle program 19 continues to be a failure. It has gotten better, but it is 20 a failure, I&M is an enormous administrative and financial 21 burden. It is unfair inherently to somebody. It is 22 inherently imprecise in terms of the benefits. The data 23 keeps coming in. Our friends in the remote sensing 24 department are finding criticisms now of their work that a 25 given vehicle on a given day can pass the remote sensing and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 fail the next day. 2 We haven't had the political will to do the EPA 3 or the Sierra Research design I&M program, and haven't been 4 there when none of these other people, except the staff, 5 were there. Mr. Austin was there, also. 6 I&M is not an easy issue to do right, because of 7 who it affects and the business and the economics. 8 The other thing is our friends in the car 9 companies have to acknowledge that they have yet to offer 10 cradle to the grave, lifetime emissions warranty on 11 condition, where it doesn't matter who owns the vehicle; 12 that they warrant that the vehicle will perform over its 13 life, not its useful life as we arbitrarily define it, but 14 over its life. 15 That's the standard that the ZEV met. And despite 16 the enthusiasm we now have elicited from the electric 17 utility industry, the electric utilities weren't even in the 18 room in 1990, when this deal got done. Okay? 19 This deal was done and I'm proud to have been 20 there. We were fighting about other things at the time. 21 Actually, nobody really focused on the ZEV requirements. We 22 were focusing on ULEV and the availability of alternative 23 fuels. 24 But the reason we were there and here today is 25 because of that need to get to zero and stay at zero, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 because that's what the population of this State's growth 2 requires. It's what the limits we have found on the 3 stationary source side of the program. We can only go so 4 far. We very much need this set of technologies. 5 That having been said, I also have come to be 6 concerned and to realize the importance of a successful 7 launch. And there was a number of very constructive 8 conversations beginning to happen, and I hope it can still 9 happen. I think you've seen from Ms. Hathaway, and Roland 10 Wang, and others some very constructive contributions 11 towards flexibility from the environmental side. 12 Some of us thought we were making a mistake 13 tactically by surfacing anything other than two percent down 14 the line. But we began to see the need to look at 15 flexibility. 16 And yet, I think that one of the disturbing things 17 that's happened in the last several weeks is that Option A 18 has come out of nowhere to have a dominant role in the 19 discussion. And to the extent that the Governor and the 20 Administration is unhappy with the criticism they receive -- 21 there's a lot of loose talk now about people not being 22 welcome. The Governor, you shouldn't oughta (sic) done this 23 and made these wild accusations. The reason that climate 24 has existed is because, having participated in this process 25 throughout, the oil companies have been existing primarily PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 outside this process. 2 I don't know that Doug Henderson's even ever 3 addressed this Board or a workshop on this subject. We've 4 gone from the Citizens Against Hidden Taxes in the workshops 5 to now the esteemed Mr. Austin presenting his alternatives. 6 But the oil companies have been very present in 7 other places. We've even heard them to report, "Don't 8 bother with ARB and the staff. The action's elsewhere." 9 And it's that sense that the action may be 10 elsewhere that has caused us to view with great concern the 11 sudden elevation of an option that is nowhere found to be 12 supported that is nowhere found to be supported anywhere in 13 the record of the workshops or the work that has been done. 14 But because it's coming from the Chamber and the 15 oilers (sic), it's got some legs. And now, it looks like we 16 have artificially winnowed the process down. Instead of the 17 existing law, existing 2 percent, which is what to me ought 18 to be the base case, Option C, which is an Enviro, utility, 19 flexible option, which some of us had to be dragged 20 screaming -- not kicking, but, you know, just -- it's a 21 reluctant concession to reality, or Option B, which is the 22 car companies', I think quite responsive, effort to get back 23 to us all with their first serious proposal. 24 It's a little late, but they did something. And I 25 don't think in the response to the criticism that we should PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 ignore the fact that there has been some movement from their 2 side that I think is encouraging. 3 But I think the process broke down for a couple of 4 reasons. One, I think the arbitrary decision that Mr. 5 Brown's earlier discussion reflects of, well, just throw the 6 Northeast over the side and do for them what they couldn't 7 do for themselves, which is to recognize what's in their 8 interest and take the 49-State car, and go home and leave 9 the real work to us. 10 The folks in the Northeast said -- I've worked 11 with them and proud to work with them on both the 12 environmental, Governor Weld, Governor Pitaki (phonetic), 13 have really worked hard. They want this technology, too. 14 And I think the shift from the two percent mandate 15 to a staff/car company (sic) version of Option A and C, some 16 combination, that explicitly cut the Northeast out created 17 two problems. One, it set of a reaction back East, 18 understandably of, you're screwing us, you know? Are you 19 screwing us or is it just the staff? You know, so, these 20 people have worked really hard. 21 Some of them are here today. They 're good folks. 22 They've actually done a terrific job of taking the best that 23 Mr. Brown and his folks have to offer and survived with a 24 bipartisan political support for this technology. 25 The second thing is that I think the apparent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 willingness to move off of a regulatory mandate with some 2 adjustments to a full voluntary, early year launch created, 3 I think unintentionally, uncertainty about the will of this 4 organization to go the distance to bring this technology to 5 fruition. 6 And I think that's an important variable. It's an 7 intangible. It's not something you can quantify. But I 8 think there is a lot riding at this moment on the signal 9 that is felt in the private sector about your willingness to 10 stay the course, not stay the course in a literal, 11 prescribed fashion that ignores Jack Lagarias' well-founded 12 and well-expressed concerns. 13 I think that whatever the process is we're now in, 14 that the process of discussion of evaluation of options 15 needs to keep going on. I know the channels are hard to 16 find that don't get disrupted by the Press or other means. 17 But I would urge to keep at it. And I appreciate 18 the response that seems to have been reflected in the sort 19 of not getting buffaloed. But I'd be very cautious about 20 this pressure that we're seeing from one particualr sector 21 here. Because I don't think it fits with the rest of what 22 else is going on. 23 And it's something we're going to react to, 24 because we have dealt with these people before. We have 25 dealt with phony Astroturf groups. Mr. Woodward was here PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 today, even Mr. Henderson. But Bob Woodward was here today, 2 because this is a big account for him, and this may turn 3 into an initiative, too. 4 But that is all free speech. That's First 5 Amendment, can't do anything about it. But it does elicit 6 from us in the environmental community a particular 7 reaction, because we have some intangibles, too. 8 We have the situation of the gentleman that was 9 executed in Nigeria directly for working on oil. We have 10 the situation in the Alaska National Wildlife Refuge. We 11 have the Intergovernmental Panel on Climate Change just 12 coming out with reports. 13 All of these things point to the need to move us 14 beyond petroleum. And the oil industry, I think, can make a 15 contribution to that process with the cleaning up of 16 gasoline and the offering of pointed and effective 17 criticisms of the work that we're doing. But they need to 18 be in the process more and less outside trying to juice the 19 situation through the political process if they want us to 20 step up to the table and take things at face value. 21 Lastly, with respect to the car companies, the 22 reason that we have reluctance in the environmental 23 community with respect to a trust me option is that we have 24 some unfortunate history in that department. 25 The experience recently with the Cadillac emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 system being deliberately bypassed for the air conditioning 2 system. You saw the story in the Bee this week. When the 3 air conditioning runs, the Nox is higher. Gee, that isn't 4 in the model. 5 And yet, who isn't using the air conditioning in 6 Southern California or the Valley in the summertime? I 7 means our in-use emissions don't track in-use emissions that 8 are actually occurring. 9 And we have had some mixed signals in the past 10 when they had asked for incentives on fuel economy, and 11 we've given them an incentive approach, we got the same 12 answer. 13 So, I think there's some work to be done in that 14 department. I think that also -- the last point I want to 15 make is that the staff and the Battery Panel's emphasis on 16 the promise of advanced batteries, I think, has missed a 17 little bit of the flavor that is out there in the experience 18 at SMUD and in other places -- that folks that are given the 19 lead-acid products, even with the range less than 100 miles 20 we think can still find a practical use and a willingness to 21 buy these cars. 22 As Mr. Brown said, something sounds easy when you 23 don't have to do it. And I appreciate that point. But I 24 think we have to be careful that the advanced batteries 25 don't be the enemy of the good. And I think we have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 terrific amount of companies' involvement in the lead acid 2 technology and in the near-term market. 3 I don't know what the numbers are. I can stand up 4 here and say that 2 percent needs to be unchanged and that's 5 the only definition of success. 6 But practically speaking, I think there are 7 elements of success that can be adapted from a number of the 8 discussions that have gone on. But the integrity of the 9 process, the integrity of this Board I think is an issue 10 that I want to see come out of this restored and renewed. I 11 think the actions that you're taking today, the way you're 12 going about it today is a good sign. But, you know, this is 13 high stakes. There's a lot of money riding on this. 14 There's a lot of public confidence, a lot of public support. 15 We're trying to be responsible and yet critical when we see 16 the need. 17 We'd like to see this move forward in a way that 18 can be successful for everybody. And we wish you well, and 19 we'll do our best to contribute constructively as we go 20 forward. 21 Thank you. 22 CHAIRMAN DUNLAP: Thanks, Mr. White. Dave 23 Hermance from the Toyota Technical Center, followed by Paul 24 Pulliam. 25 MR. HERMANCE: Let's see, is it either afternoon PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 or evening? I'm not sure which. 2 In any event, good afternoon, Mr. Chairman, 3 members of the Board. I am Dave Hermance, General Manager 4 of Powertrain with Toyota's Technical Center in Los Angeles. 5 Because of the hour, and because several others 6 have already spoken, I had thought maybe to not speak, but 7 then when I heard that we were counting votes for how many 8 people spoke for each proposal, I decided probably I ought 9 to anyway. 10 Toyota has participated in all the workshops and 11 hearings leading to this point. Further, we have met 12 individually with ARB staff and three chairpersons over the 13 last four years to review ZEV progress since the advent of 14 the mandate, and the challenges remaining, and also related 15 issues with regard to the LEV/clean fuel piece of the 16 situation. 17 We have also, as Kelly mentioned, worked with 18 other automakers in the recent time frame to develop what we 19 regard as a viable alternative to the current ZEV sales 20 mandate. 21 Proposal B, while not perfect and certainly not 22 yet fully defined, provides a framework which, with further 23 negotiation to develop sufficient detail, will provide the 24 highest probability of a successful market launch of ZEVs. 25 We look forward to working with staff to finalize a viable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 ZEV alternative. 2 Now, I feel compelled to make at leas one or two 3 observations about another proposal. 4 Proposal C requests or suggests the scaling back 5 in various and sundry ways, depending upon which version of 6 C you look at, for two or three years to at least starting 7 at one percent, and maybe creating some incentive. 8 Please remember the Battery Technology Assessment 9 Panel timing for the availability of production quantities 10 of advanced batteries is 2000-2001, and that is a best case 11 scenario. 12 Further, remember, that in the marketing, at least 13 those people who routinely market vehicles had estimates of 14 market volume demand, free market demand in '98, 15 substantially less than 1 percent, more on the order of a 16 quarter to a half a percent. 17 Any alternative which has substantial numbers of 18 vehicles for sale, mandated for sale in '98, with batteries 19 not yet ready is a likely scenario for a lack of successful 20 launch. Therefore, we regard C as nonviable. 21 In deference to time, I am done. 22 CHAIRMAN DUNLAP: Okay. Thank you for that 23 perspective. 24 Mr. Pulliam. Thank you for your patience. 25 MR. PULLIAM: Mr. Chairman, I'll keep this as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 short as possible. 2 I'm Paul Edison Pulliam. I'm the senior member of 3 IEEE. The initial cars in this nation were direct current 4 powered with DC motors. Henry Ford years ago got the patent 5 for automobiles. He and George Montgomery -- Westinghouse 6 is the right name -- were DC and AC powered deals, and they 7 were buddies that took their vacations together. 8 I'm the fourth president historically of the 9 Electric Auto Association. I didn't stay in one chapter 10 very long, because I was going for AC motor propulsion of 11 vehicles. Everybody around me was going DC. 12 And the two mixed ideas didn't gel too well. The 13 fellow that was seated to your left said that in the year 14 2010, there should be 10 percent zero-emission vehicles. 15 From my viewpoint, the other 90 percent will be hybrid 16 vehicles. They use a DC powered motor, and the call it a 17 starter. That makes the whole thing a hybrid. 18 Now, then, point I wanted to raise is that from 19 Folsom to Sacramento was the first long-distance electric 20 transmission line in this whole nation. The AC came here 21 and was changed to DC to run the streetcar system. And now 22 we're trying to get the best we can of propulsion of our 23 vehicles without having excess exhaust emissions. In the 24 papers I had passed out, says that there's two cars 25 functioning using an alternating current motor to drive an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 alternator to provide the power for AC electric motors. The 2 missing link in that statement is that there is something 3 called a wound rotor motor that can be used as a rotary 4 transformer. It can take the standardized voltage as it 5 comes off of the high line or from an alternator and turn it 6 to zero amplitude and increase it gradually to full rated 7 voltage of the AC motors. 8 In doing this, it causes propulsion that is using 9 one-fifth of the horsepower that is used by the Michigan 10 production of cars. The other four-fifths goes in the 11 mechanical transmission from the motor through the 12 transmission, through a power shaft, trough the 13 differential, to the rear wheels; four-fifths of the power 14 is wasted in moving those things to different speeds. 15 So, we do have now -- one at McClellan Air Force 16 Base, one at another location in the vicinity -- two cars 17 that use one-fifth of the possible power with an electric 18 drive. AC motor with electric drive. 19 The key factor there is that the voltage applied 20 to that motor can go in amplitude from very low, medium to 21 high, to higher amplitude per alternation and get the job 22 done. 23 I'm going to have a better writeup for you on the 24 21st of January (sic). 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 CHAIRMAN DUNLAP: Okay. Very good. Thank you for 2 your interest, sir. 3 John Schutz from Nissan, followed by Jerry Cole 4 from the Advanced Lead-Acid Battery Consortium, followed by 5 Stephen Heckeroth. John, thank you for your patience. I 6 know that you're going to use the few minutes you have 7 allocated wisely. 8 (Laughter.) 9 MR. SCHUTZ: Well, with that lead-in, good 10 afternoon. 11 I am John Schutz of Nissan Research and 12 Development from Los Angeles. In previous workshops and 13 events, Nissan has presented material on the status of 14 technology. We have talked about the detail of our work 15 with lithium ion batteries, our assessment of the market 16 potential for EVs. 17 I won't go into the details, just summarize 18 briefly. 19 We do believe the market acceptance of EVs will be 20 severely limited unless their range in typical urban driving 21 exceeds 120 miles, and their cost approaches that of 22 comparable conventional vehicles. 23 We remain convinced that in order for EVs to 24 succeed in the general market, they must also meet or exceed 25 customer expectations for convenience, performance, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 reliability, and durability. 2 For the market to develop, the first retail 3 customers must be absolutely delighted with their EVs. The 4 word of mouth will be the most important method of 5 attracting additional buyers. If the first buyers are 6 disappointed, well, the long-term success of the EV market 7 will be seriously undermined. 8 Now, with regard to the status of EV and battery 9 technology, we agree with the conclusions of the Battery 10 Technology Panel that advanced batteries are essential for a 11 broad market acceptance vehicles. 12 And we agree with their conclusion that the 13 lithium ion technology offers the greatest potential over 14 the next five to ten years. 15 Thus, Nissan plans to continue focusing our 16 efforts on the lithium ion project. There are many 17 remaining tasks, confirming performance, durability, safety, 18 reliability. However, the main issue to be resolved is 19 cost. Challenges include materials issues, improving the 20 separator in the electrolyte and finding an acceptable 21 substitute for cobalt, as well as reducing manufacturing 22 complexity. 23 The research and development time, which by the 24 way is just another way of saying trial and error, required 25 to complete the optimization process cannot be precisely PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 estimated. 2 These activities are primarily the battery 3 manufacturers' responsibility, although they are likely to 4 require additional vehicle adaptation and further 5 confirmatory testing. 6 So, we want to stress now that we cannot predict 7 the time of successful commercialization of the lithium ion 8 battery for use in EVs. We will begin small scale tests in 9 California, we expect, in 1998, with 10 to 20 vehicles in 10 the first year, continue our efforts toward a marketable EV. 11 Now, we do accept that the mandate thus far has 12 helped to accelerate process of EV development. We do 13 believe that it's now time to collectively acknowledge the 14 next step is to follow the development tasks identified by 15 the Audit Panel. This needs to be carried out in an orderly 16 manner. 17 And we believe that Concept B comes closest to 18 meeting the -- providing a framework for seeing that 19 through. 20 Nissan wants to compliment Chairman Dunlap, the 21 Board, CARB staff for your efforts and patience thus far in 22 seeking a workable alternative. 23 We will continue to take part in the discussions 24 on alternatives and be back next week. 25 CHAIRMAN DUNLAP: Thank you, John. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 Mr. Cole, followed by Mr. Heckeroth from Homestead 2 Enterprises, followed by Reg Modlin from Chrysler. 3 MR. COLE: Thank you, Mr. Chairman. 4 Chairman Dunlap and members of the Board, my name 5 is Jerry Cole. I serve as president of the Advanced Lead- 6 Acid Battery Consortium, which is known by the acronym of 7 ALABC, which is a research program supported by 47 lead-acid 8 battery producers and suppliers to that industry from around 9 the world, with several members here in California. 10 Over the past four years, ALABC has devoted nearly 11 $20 million toward research efforts aimed at improving the 12 life, the range, and the reliability of lead-acid batteries 13 for EV use. We took up this effort in large part because of 14 the California mandates. And these mandates ensured, we 15 thought, that there would be a market to justify that 16 investment. 17 Without question, the ZEV mandates have been a 18 major factor in stimulating the acceleration of battery 19 technology development, all battery technology development, 20 including our own program. 21 Without the mandates, it's doubtful that progress 22 anywhere near the degree of progress made during the last 23 four to five years would have occurred. And similarly, if 24 the mandates are dropped, we strongly think that further 25 investment will simply dry up. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 In industry, just as in government, there are 2 always competing demands for funds. The mandates give 3 reasonable assurance that a market would be there, 4 justifying the investment. 5 If we now go into a period of maybe we will, maybe 6 we won't, the driving force for investment in EVs will, I 7 think, be lost. Therefore, as you consider how to change 8 the mandates, we ask that you at least ensure the 9 continuation of the mandates in some form, particularly the 10 current midpoint and the end point goals. 11 We think that Option C, as presented to the CARB 12 staff last week, is the best option to ensure continued 13 investment and economic growth, while meeting clean air 14 goals. 15 Regarding the changes in the mandates, we 16 understand that CARB is considering granting multiple 17 credits to auto manufacturers, depending on the type of 18 battery technology that they employ. We're very concerned 19 about this issue, and we think that if differential credits 20 are employed, the level playing field, which is so important 21 to a market-based approach, will be lost. 22 We strongly urge you not to implement a system of 23 differential credits for different battery technologies. 24 All EVs are emission free, and that's really the bottom 25 line. If, however, credits must be part of the program, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 then they should take into account the concept of cost and 2 the principal performance parameters rather than to rely 3 simply on the choice of chemistries. 4 In making your -- what I consider to be a 5 profoundly important decision on the future direction of 6 these mandates, we know that you're concerned not only about 7 California's air quality, but also California's economy. 8 And please keep these factors in mind. 9 California's the world's EV leader. The 10 technology developed here can form the basis for a totally 11 new industry, and California's the natural home for that 12 industry. And batteries, particularly lead-acid batteries, 13 are currently being produced in California in great numbers. 14 With EVs requiring even more batteries, the industry will 15 surely grow, and for a variety of practical and economic 16 reasons, these batteries will certainly be made in 17 California. 18 Finally, California's regarded as a leader in 19 environmental regulations. Our industry has sometimes felt 20 the brunt of California's leadership in this area. But 21 whether we liked it or not, we always knew that California 22 would stand its ground. Therefore, we urge you to stand 23 your ground now. 24 Certainly make adjustments that are necessary and 25 practical, but don't throw away the mandates that have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 resulted in so much progress and so much promise for the 2 future. 3 On a separate note, I'd like to address the issue 4 of how misperceptions on the State of battery technology, 5 especially lead-acid, have driven the debate on EV mandates. 6 Doubts as to the technical and economic 7 practicality of the mandates are consistently linked to the 8 so-called shortcomings of battery technology. As we've said 9 to CARB and to the CARB staff in the past and will continue 10 to say in the future, advanced lead-acid batteries can 11 support an EV with adequate range, acceptable cost, and 12 reliability in a time frame consistent with the current 13 mandates. 14 Thank you. 15 CHAIRMAN DUNLAP: Thank you, Mr. Cole. That's 16 important for us to hear. I appreciate the way in which you 17 presented that. 18 MR. COLE: Thank you. 19 CHAIRMAN DUNLAP: So, lead-acid's here, and it can 20 used, and it can work, right? 21 MR. COLE: Correct. 22 CHAIRMAN DUNLAP: Okay. I don't have any 23 questions for this gentleman, do you? All right. Mr. 24 Heckeroth, Homestead Enterprises. 25 MR. HECKEROTH: Mr. Chairman, and hardy members of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 the Board. My name is Steve Heckeroth. I've a degree in 2 architecture, and environmental design. What I have to say 3 comes from my heart, not from my pocketbook. I have come 4 here at my own expense from Mendocino County to thank the 5 Board to creating a zero-emission mandate, which I believe 6 has fueled electric vehicle research and development 7 worldwide. 8 It is my hope that you will uphold the mandate. 9 As a designer and builder for the last 25 years I have 10 dedicated my wife to finding ways to live without using 11 nonrenewable energy resources. 12 The articles that I hope you have in front of you 13 describe some of my most recent projects toward this end. 14 I've built homes that convert direct to solar energy to the 15 heat and electricity needed for the occupants. 16 But over the last few years, I've realized that 17 transportation uses about four times the amount of energy 18 that we use in our homes, and it creates about ten times the 19 amount of pollution that is created by energy needs of our 20 homes, because this is total reliance on petroleum. 21 So, I've shifted my focus to building electric 22 vehicles. Our own home that we live in has a roof 23 integrated three kilowatt photovoltaic array that provides 24 all our electricity and charges the batteries of my electric 25 car. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 The inefficiency of batteries is often used as an 2 excuse for our continued reliance on fossil fuels. But 3 let's take a look at the efficiency at the battery we are 4 currently using, the Earth. It took 3 billion years of 5 plant growth and decay to create the pool of energy, which 6 we know as fossil fuel. For the last 600 million years, 7 this pool has remained mostly undisturbed. But then, in the 8 last hundred years, we've used up over 50 percent of the 9 petroleum resource, a nonrenewable resource. 10 To better understand the time line I'm talking 11 about, this equates to 100 years of charging being used up 12 in two minutes. I would like to challenge anyone who wishes 13 to water down the mandate to do a range test against my 14 electric car that I built in my garage. 15 The only requirement is that the exhaust from both 16 vehicles be terminated in a sealed cab. 17 (Laughter.) 18 MR. HECKEROTH: Under these circumstances, the 19 driver of a pre-70s car from Detroit would not make it out 20 of the driveway. An ultra-low emission car might have a 21 five-mile range. My electric Carmen Ghia has a 60-mile 22 range. 23 Just as surely as exhaust in a cab will kill, will 24 cause death, exhaust in the atmosphere will cause 25 extinction. It seems like a heavy price to pay for short- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 term economic gain. 2 Please stay the course. Thank you. 3 CHAIRMAN DUNLAP: Thank you for your time and 4 interest. 5 (Applause.) 6 MR. HECKEROTH: If here's any questions about the 7 articles I've given you, I'll be happy to answer them next 8 week. 9 CHAIRMAN DUNLAP: Okay. Thank you. Okay. Reg 10 Modlin from Chrysler Corp., followed by Bruce Parmenter from 11 EAA, and Clare Bell from Electric Auto Association. 12 MR. MODLIN: Good evening. Thank you very much 13 for letting me have a couple minutes of your time this 14 evening. 15 My name is Reg Modlin. I'm Chrysler's Manager of 16 Environmental and Energy Planning. As you're well aware, 17 Chrysler has not been shy in expressing our support of 18 developing electric vehicle technology and our opposition to 19 forced government mandates, like the California ZEV 20 requirement. 21 We've also been very openly stating our 22 willingness to work with you to resolve what has become a 23 very pointed policy debate, one that has diverted all of our 24 attention from the missions of our respective organizations. 25 In CARB's case, crafting a realistic public policy PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 that improves air quality -- for example, in our case, 2 building vehicles that truly meet customer expectation. 3 Through this process, we have told you that we are in 4 support of developing electric vehicles. In fact, just this 5 week, we announced our intent to produce our all new Epic 6 electric minivan, which is an acronym for Electric Powered 7 Interurban Commuter. 8 We made this announcement at the EVAA conference 9 in Atlanta. This vehicle got an overwhelming reaction, 10 positive reaction from the EV community. We are tooled up, 11 have signed up all of the necessary suppliers, and we are 12 ready to produce this vehicle on the very same assembly line 13 as our gasoline powered minivans at our Windsor, Ontario, 14 Canada assembly plant. This is not a glider. This is not a 15 conversion. 16 We also announced in Atlanta that we have resolved 17 some of the industry conflicts on plug designs and charging 18 protocols by joining with Ford to endorse a conductive 19 charging system. And we continue to support and invest 20 millions of dollars in industry and government research on 21 further developing advanced battery technology through the 22 United States Advance Battery Consortium. 23 We want to abe in the EV business when the battery 24 technology is in line with customer expectations, not when 25 arbitrarily mandated to do so by government. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 In other words, we continue to stand against 2 government mandates of any kind. Our Chairman and CEO, 3 Robert Eden, said as much last month in a speech given in 4 Sacramento when he asked CARB to reevaluate the mandate. 5 And his words, I'll quote, "We have a role to play in 6 cleaning the air, a reasonable proportional role, and we are 7 prepared to play it." 8 That's why I'm here to reiterate today. Chrysler 9 is convinced that the path to resolved this issue rests with 10 the outline of Concept, which was outlined last week and 11 also earlier today. 12 This eliminates the near-term sales mandates, 13 provides an exhaustive review in 2000 for long-term 14 strategy, brings a voluntary offer for sale of electric 15 vehicles, subject to consumer demand; and, most importantly, 16 meets all of California's clean air requirements by 17 emphasizing the importance of a national clean car program. 18 The staff's Concept B is not perfect in our 19 estimation and will prove to be extremely costly and 20 technically challenging for the industry. But it does 21 provide California with its needed clean air benefits, 22 provides an avenue for the continued development of electric 23 vehicles, and the associated elusive battery -- advanced 24 battery development. 25 More importantly, it puts aside the mandate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 argument for several years. For Chrysler, if you want to 2 fix a problem, the basic concepts or the staff's Concept B, 3 have all the elements to work out a solid plan of action. 4 Pursuit of technologically sound, commercially 5 viable products appears to be the focus of a concept. We 6 are prepared to work with you on this endeavor, because it 7 is common sense and will benefit all parties. Most 8 importantly, it will benefit the citizens you represent. 9 Thank you. And I will take questions. 10 MS. EDGERTON: Thank you. Are there any questions 11 by members of the Board? 12 Thank you. Will Bruce Parmenter from EEA please 13 come? 14 CHAIRMAN DUNLAP: Following Bruce, we'll hear from 15 Clare Bell, and then Sonia Hamel from the Commonwealth of 16 Massachusetts. 17 MR. PARMENTER: Hello, Chairman, Board. My name 18 is Bruce Parmenter. I'm a public citizen that also has a 19 lot of activities working with electric vehicles. I own an 20 electric Blazer conversion, had it for three years. I'm a 21 member of the San Jose Chapter of EEA. I'm one of the 22 officers with that chapter. 23 I also spend six to eight hours every single night 24 helping the world with electric vehicle information for 25 free. I have my day job. I have no other funding. Because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 there is such a demand for information. It is true that 2 there is the Horizon battery and the new batteries coming 3 out with the longer ranges. But right now, the wet cell 4 technology, there is a tremendous demand for people that 5 want that. 6 Today, in and out of this meeting that's happened, 7 I've talked to four people who want to know how to get one 8 of the vehicles that are parked out there in the street. I 9 think that your mandates are right in line with the amount 10 of people that want electric vehicles. Not everybody wants 11 to go 500 miles. Because if you had a 500-mile vehicle, 12 you'd need a 500-mile outlet that would be able to charge 13 it. 14 Most people have a regular routine, and they need 15 an electric vehicle that is less maintenance, costs less per 16 mile, doesn't drip on the ground, blah, blah, blah, you know 17 all about this. 18 What I'm here today is as a private citizen who's 19 very active with electric vehicles. I see a tremendous of 20 input, because I take my own personal money, which I've done 21 today, my own personal vacation to come here. I hauled my 22 vehicle here so that I can drive electric for other purposes 23 besides, not to tell you I'm here; I will be electric, but 24 also the fact that I will be able to leverage off of what 25 SMUD's done. I did the same thing last week when I was down PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 in L.A. for your meeting that was down there. 2 I drew a tremendous amount out of my own pocket, 3 because somebody's got to do it. As you can see, there's so 4 much millions of dollars being spent to kill it, because 5 they don't want to do it. The only reason we have safety 6 belts and everything else is because you forced it. I say 7 I'm here right now as a citizen saying, please, continue, 8 have teeth, don't shorten your sword. 9 The public wants electric vehicles. It might 10 start out with a certain range and increase. They need to 11 learn how to make electric vehicles, because they've never 12 done it. They've always made concept cars. 13 If the automakers do not want to make it, my 14 American automakers that I can't buy from today, then there 15 are outside companies that are selling them. They will make 16 that available. I don't want to do that. I want to have it 17 made here in California. I live in Sunnyvale, which is 18 about an hour south of San Francisco. I've come all the way 19 here for that. 20 At this point, I'd like to make sure that you 21 understand that I don't represent the EAA, except that I'm a 22 member. I have Clare Bell here that will speak on behalf of 23 the board. 24 But I know that there's a tremendous amount of 25 organizations, and I speak also for the free time that I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 spent on the electric vehicle list, which is on the 2 Internet. We have about a thousand people that are 3 networkers themselves feeding to other publications and 4 other types. 5 There is a tremendous amount of interest in this 6 that's happening. It's increased. I applaud. I look 7 forward to changing my wet cell batteries out and getting 8 nickel metal hydrides in the future. 9 But what will I do with that longer range? I will 10 continue to do what I'm doing, which is to make my time and 11 my money available to go out and show people, yes, you, too, 12 can plug into the wall while you sleep and get a full charge 13 and continue doing what you've already been doing. My 14 electric blazer has a 40-mile range. That is my set of 15 clothing. That's all I really need, because I'm in the 16 Santa Clara Valley, and I charge, and I do my regular 17 routine, even extend my range off of opportunity charging 18 with an infrastructure that we set up. 19 We have people and places. The public is very 20 accommodating. Everybody likes these vehicles. Is it for 21 everybody? That's a different issue. There is a 22 percentage; it will increment (sic) just along the lines of 23 your mandate. It's perfect. I can't see anything wrong 24 with it. I look forward to promoting everybody, which is 25 what I do. I promote the regular automakers, the battery -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 you may have seen some of those that I promote, all the 2 industries that are out there to try to get the information 3 out available for people so they can make wise choices. 4 If you give them all the information of who to go 5 to, and you give them a tool set of what it is they can go 6 to see what their needs are, then they can make a wise 7 decision as to whether or not an electric vehicle would work 8 for them. 9 And that's where I'm at right now. I have no 10 prepared notes. I have no funding coming from anywhere, and 11 I haven't submitted a hundred copies to you. But I am open 12 to questions. 13 CHAIRMAN DUNLAP: Thank you. We appreciate your 14 commitment and your enthusiasm for this program. Well said, 15 even without notes. 16 (Applause) 17 CHAIRMAN DUNLAP: Clare Bell. Clare Bell from the 18 Electric Auto Association, followed by Sonia Hamel from 19 Massachusetts, and then Chuck Olson. Hello, Ms. Bell. 20 MS. BELL: Hello. I remember you from the meeting 21 before last. 22 I'm here both as a private citizen and as a 23 representative of the Board of Directors of the Electric 24 Auto Association. 25 I will try to keep this as short I can. I do have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 some information for you. I'll try to present it later in 2 written form, so I don't have to go over it a lot here. 3 Just in short, the EAA Board voted to support you 4 in the two percent mandate, and saying that it will help us 5 to continue what we've been doing. We have been putting EVs 6 on the road. We are putting EVs on the road. We're talking 7 to people about them. We've probably put close to 3,000 8 cars on the road in California. That's more -- well, that's 9 a lot more cars than any other organization that I know of. 10 They're coming on the road one by one. Individual 11 citizens are doing it. And that brings me to the point that 12 people want these cars. Why aren't there more of them? 13 Because there are obstacles to putting EVs in the market. 14 And they're not obvious obstacles either. 15 I'll just touch on a few of them, and I'll give 16 you a list later. One of which is the small companies that 17 are presently developing EVs, do not have the financial 18 resources to deal with things such as -- well, financing, 19 liability laws, a number of other difficult things, that 20 when you're a small business trying to compete with a larger 21 corporation, you -- it's hard to get started. 22 We have people that build kits for these cars and 23 sell them to individuals who then build them into real cars. 24 Why don't we have more people that build the cars 25 themselves? Because there are obstacles. Financing is an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 obstacle. People who buy EVs buy them out of their own 2 pocket. They have a difficult time financing them. 3 My suggestion to the car companies is, if you just 4 helped us finance the cars, you wouldn't have to build any 5 of them. You'd put a lot more of them on the road. That's 6 one thing. 7 Another thing is -- hand on a minute. It's been a 8 long day, and I came from that storm in Santa Cruz. I 9 personally have built three EVs. The reason I did it was 10 because of the ZEV mandate that was put into place. I 11 believe it. I work as an editor for EAA newsletter, a 12 publication. I was also very dismayed to learn via the 13 Press -- and that source is not always reliable, but the 14 Governor's Office indeed has been putting pressure on the 15 Board, and we really hope that you don't knuckle under to 16 it. 17 I have some suggestions from the board and that 18 is, one, please concentrate on enforcement. We need a law 19 that can be enforced. We cannot depend on the promises of 20 the industry. We've had the track record. And as we all 21 know, that air bags, catalytic converters were brought in 22 because there were laws that required them. 23 Nothing says that corporations have to do things 24 for the public good, unless -- not that they don't, but 25 there's nothing that requires them to do so. And that's why PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 governments and laws exist. 2 Okay. I'd like to make another comment, and this 3 may be some interesting information for you. It goes back 4 to the comments about the emissions testing, and whether it 5 reflects the true emissions during driving. According to a 6 study by MIT, the federal test procedures do not reflect the 7 realities of driving. The reason being is that when cars -- 8 okay, cars rely on feedback from an oxygen sensor to sense-- 9 to let the catalytic converter get the optimum mix to be 10 able to handle it, not let exhaust out the door. 11 Sorry, I'm kind of tired. But to be able to do 12 that, they have to have that feedback loop. When you stomp 13 on the gas in any modern car off the showroom floor, that 14 oxygen sensor link is bypassed. Okay? It says, each second 15 of driving with the pedal down corresponds roughly to 30 16 minutes of carbon monoxide emissions and one minute of 17 hydrocarbon emissions. 18 That may be one reason why we can't meet our -- 19 the requirements that the federal government is asking for. 20 If the tests don't reflect what the cars are really putting 21 out, I think that's an important cause of the difference. 22 It also points up even more strongly the need for electric 23 vehicles. And I may point out that some of the ULEVs and 24 some of the LEVs may be subject to the same types and the 25 same kind of design problems that the modern cars have. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 So European automakers have already taken this 2 into account and designed around it. Their cars don't do 3 that. American cars do. 4 I can give you more information about this. I'm 5 sorry, I've gone on a bit too long. 6 Okay. And we are very much aware what kind of 7 pressure's been brought. We know how much people have 8 spent. We know how much political pressure's been exerted. 9 We know how much bad science has been done in the name of 10 overturning the ZEV mandate. But what we want to say is we 11 want your help. We're doing what you want us -- you want 12 Californians to do. We're putting cars on the road. 13 We want to be able to do it faster, better, more 14 effectively. We want to be able to put those cars out with 15 American stickers on them, not from overseas. And we ask 16 your help in supporting the ZEV mandate, the two percent 17 Concept C. We also ask that you look specifically at 18 enforcement. Don't rely on promises. And we will do 19 everything in our power that we can to help you in terms of 20 information or support. 21 And I thank you for letting me speak. 22 CHAIRMAN DUNLAP: Thank you for your comments. I 23 appreciate your insight, and keep on doing what you're 24 doing, putting cars on the road. 25 Okay. Sonia Hamel. Good evening. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 MS. HAMEL: Chairman Dunlap and Board members, 2 thank you very much for letting me present a few points that 3 I'd like to make today. 4 I am the Director of Air Policy and Planning for 5 the Commonwealth of Massachusetts, and am here representing 6 Secretary Trudy Cox, who is the Secretary. 7 It's very unusual actually for me to come to 8 another State and to testify in front of a Board that 9 represents another State's interest. But these are unusual 10 times. And, as you know, the Clean Air Act grants 11 California the right to have a program that's more stringent 12 than the federal program. 13 Other States don't have that right unless they 14 adopt California's program. And we have significant air 15 quality problems in our State. 16 And we have been very careful to adopt 17 California's program and to adopt it exactly. Ours needs to 18 mirror yours. We've been acting in good faith as has the 19 State of New York in adopting your program to date. And, 20 therefore, we're inextricably tied to whatever you do. 21 We don't want to interfere with California 22 decisions. We just want -- I want to make the Board very 23 aware of what our interest is and what the implications are 24 of the kinds of decisions that you're going to be making 25 here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 I also want you to know that in Massachusetts, 2 although our problems are not as bad as some of the areas of 3 California, we do have 750,000 people who've got respiratory 4 problems, chronic respiratory problems and related problems, 5 which are all worsened by ozone. We do have significant 6 ozone problems in our State. We also receive a lot of air 7 transport. And you combine New York and Massachusetts, 8 there are over 3 million people that are affected with 9 respiratory diseases. 10 We have the California LEV program in place right 11 now. It was implemented last year in our State. The cars 12 that we receive now, if you buy a car in California -- in 13 Massachusetts, you get a California car. 14 It's having visible impact. It's having 15 noticeable impact as our fleet begins to turn over. And 16 we're enthusiastic about that connection. And we definitely 17 want to keep that connection. 18 I have to say that, although some people have 19 suggested that there should be no reason for us to consider 20 each other in making decisions or maybe for you to consider 21 us, I think there actually are benefits for California 22 citizens in keeping our two programs connected. And I think 23 that there are economies of scale. You're a very big State, 24 but I think it helps to have a larger market, and I think, 25 in the long run, that that's going to reduce the cost that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 your citizens will incur in having a ZEV program and having 2 ZEV vehicles sold here. 3 I think that we have a serious long-term 4 commitment, so you can count on us to be with you and to be 5 at the table. and I think that our program, in fact, will 6 work as well -- a ZEV program would work as well in the 7 Northeast, because our densities are much more accommodating 8 in some ways to the ranges that are available, especially 9 the early ranges that are available. 10 An average commute in Boston is about 9.8 miles. 11 People don't do 40 miles a day. It's very different. I 12 know here you can take -- it could be ten miles to get a 13 carton of milk, at least in the L.A. Basin it certainly can. 14 I think that, in many ways, we are very well 15 suited, and our cities are very well suited -- Manhattan is, 16 Boston is -- to the short-term ZEV reality, and then 17 certainly to the long-term ZEV reality. 18 I guess I'm watching the devolution of regulations 19 from the federal government down to the States. And there's 20 a big movement to give the States back rights and to give 21 the States back responsibilities for regulating themselves. 22 And that creates some new realities in terms of States 23 seeing each other as partners, and not as rivals and being 24 able to prepare to bring forward environmental programs. 25 I don't think we can rely on the federal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 government and nor should we. So, I think that it's 2 important for us to maintain partnerships, to start them, to 3 keep them strong, and we're certainly ready to do that. And 4 I come here wanting to do that. 5 California's pivotal to whatever happens. I know 6 that it took an enormous amount of courage originally on 7 this Board when this program was enacted. And we remember. 8 We always remember that. The staff at California Air 9 Resources Board is very highly valued. We use your work all 10 the time. 11 We are always making reference to the work that 12 you do, and we appreciate you. And we remember that the 13 Board's early leadership, in spite of a lot of the 14 innovation that we've heard about today, a lot of-- the fact 15 that the car makers are saying that they are beginning to be 16 ready, and that certainly a lot of independent producers of 17 vehicles are ready to take on the challenge. 18 And I guess what I'm asking is that you continue 19 with the same kind of courage that you've had in the past. 20 It was a very hard decision. I know that people are acting 21 ont his Board in good faith to try and evaluate what the 22 likelihoods are. You're dealing with many, many 23 uncertainties. And I really do appreciate your process. 24 But I also encourage you to be courageous. 25 I'm here if there are questions. I'm available. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 CHAIRMAN DUNLAP: Thank you very much for your 2 interest and for making the trek out to California. I had a 3 chance to speak to Sonia last night for a few short while, 4 and I know firsthand of their commitment to work with us in 5 California and to ensure that we are focused on the same 6 goals. 7 And I appreciate again the spirit in which you've 8 come. Thank you very much for that. 9 Chuck Olson, followed by Peter Barnes, and Leo 10 Heagerty from U.S. Electricar. 11 Good evening, sir. 12 MR. OLSON: Good evening, Mr. Chairman and Board, 13 and the executive staff. My name is Chuck Olson. I'm here 14 as an individual, but I am a member of the Electric Auto 15 Association. I've driven an electric car for 13 years. 16 It's met my needs all the time. The only is that 17 I have to do the work on it myself. Well, I take that back. 18 We have some fellows in my club that do take it. 19 But anyway, I better get to my point here, the 20 things I wrong down. I was going to fax this letter to 21 Governor Wilson, but the hour got too late last night, so I 22 had to get up early to get up here. 23 All right. It says, no group can be expected 24 willingly to surrender a profitable monopoly position, even 25 in the global interest, unless forced to do so. Example: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 seat belts, air bags, et cetera. 2 If you judge electric vehicles with the source of 3 electricity, you should also judge gas vehicles with the 4 refinery, which they haven't cleaned up. 5 Okay. And then, there's a couple of items that I 6 personally found out through my own self now. This could be 7 considered hearsay, but when you have your friends tell you 8 these things, you think they're pretty true. 9 Well, you know, General Motors bought 51 percent 10 of Saab. But this was after Saab took a car that they were 11 going to build in the future, and all of a sudden Saab 12 didn't put that car out. And then, another company would 13 get one feature. Another car company would get another 14 feature. They would spread the wealth so to speak. 15 So, that's car companies. 16 Now, my personal experience -- I was a 17 construction electrician. We doubled the size of Standard 18 Oil Refinery. While we were waiting in gas lines, we got 19 friendly with people up there at the refinery. They told us 20 that the oil and the gas was so full in the tanks, they were 21 overflowing. 22 They said that there was tankers in the Bay, so 23 many of them, it was a navigational problem. They had to 24 put them in the ocean. 25 That oil crunch, when we were waiting in the gas PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 lines, was pure and simple orchestrated. Now, that's the 2 people you're dealing with. 3 Now, if you don't force this mandate, you're not 4 going to have it. Any questions? 5 MS. EDGERTON: Are there any questions from any of 6 the Board? Thank you very much. Mr. Barnes, Mr. Peter 7 Barnes, are you here? Thank you. Then, after Mr. Barnes, 8 Mr. Leo Heagerty. 9 MR. BARNES: Ladies and gentlemen, thank you for 10 the opportunity to speak before you and for your early 11 insightful decision on electric vehicles. 12 I would like to speak for somebody who can't be 13 here today, and that's my grandson, my grandson Jacob, and 14 emphasize that there are things beyond the market forces. 15 I'm very concerned about the quality air that he will 16 encounter during his lifetime. And I ask you to consider 17 his needs for cleaner air, even though he can't be here, and 18 the need for us to move in that direction as quickly as 19 possible. 20 Electric vehicles are, in my opinion, a part of 21 the solution. They are part of the solution that you have 22 moved further towards reality. I ask you not to bow to the 23 strong lobbying interests of people who are very concerned 24 about market forces, and don't have such a long-term view. 25 I believe it is your responsibility to have this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 long-term view for our State. 2 I'm a geologist and very familiar with the Earth, 3 climate change, petroleum resources. Further, I'm used to 4 viewing things in a very long time frame. And in the long 5 term, my grandson will be better served in his health and 6 home with your decision to move us towards electricity, 7 which is also moving us towards a very clean environment 8 with energy sources of hydro, wind, solar. 9 I consider you as representatives for Jake and 10 myself on this issue as we do not have the resources to fund 11 lobbyists, 800 numbers, newspaper ads. And so, Jake and I 12 are counting on you to ensure that EVs are available and not 13 sometime in the future, but within a couple years or so. 14 And that will not happen with a strong zero- 15 emission vehicle mandate in place. Because your early 16 foresightful decisions, I purchased an EV three years, 17 anticipating replacement with a mass-produced electric 18 vehicle in 1998. 19 I have learned since that time that even with a 20 hand-built state-of-the-art EV, they are practical and meets 21 all the needs. And I've moved it from being a second 22 vehicle to my primary vehicle. I don't consider a second. 23 I do have a second vehicle, but it's used for secondary 24 activities, not primary. 25 The most common question I get, of course, is where PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 do I buy one. And that's where I see you guys coming in and 2 helping us moving in that direction. I don't see the public 3 concern about public acceptance. 4 You have the opportunity to move us in a positive 5 direction. Please keep the ZEV mandate in place. Your 6 original foresight was correct. Thank you. 7 MS. EDGERTON: Before you leave, Mr. Barnes, could 8 you tell me where you live? 9 MR. BARNES: In San Carlos. 10 MS. EDGERTON: In San Carlos. 11 MS. BARNES: Just south of San Francisco. 12 MS. EDGERTON: Okay. I was just curious about 13 your commute. 14 MR. BARNES: It's about a 12-mile commute on a 15 freeway in the hills. 16 MS. EDGERTON: In the hills. 17 MR. BARNES: In the hills. 18 MS. EDGERTON: Thank you. Are there any 19 questions? 20 MR. CALHOUN: Where did you buy your electric 21 vehicle? 22 MR. BARNES: I bought -- it's a conversion. It's 23 a converted Rabbit pickup. 24 MR. CALHOUN: Thank you. 25 MS. EDGERTON: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 I'll now ask Leo Heagerty from U.S. Electricar to 2 give testimony. And after him, Mr. Tom Gage from AC 3 Propulsion. Thank you. 4 MR. HEAGERTY: Good evening. Thank you for this 5 opportunity to speak to you. My name is Leo Heagerty. I'm 6 with U.S. Electricar. We're a San Francisco based EV 7 manufacturer. Well, I must be one of the -- first, I want 8 to say that we're here. I represent U.S. Electricar to let 9 you know that we support very much the mandate, at least two 10 percent or some reasonable figure within that and some 11 regulatory participation. 12 I think beyond that, I must be one of the 13 impossibilists that you've heard about earlier this evening. 14 And maybe this is a report from the field versus my planned 15 comments. But just very briefly, what I'm hearing today and 16 what I've heard in the course of the conversations and the 17 debates over the last months is increasing amounts of debate 18 about the technology and the availability of it. And 19 there's no doubt there's a long way to go. 20 However, I can tell you, as an EV manufacturer and 21 a marketer of EVs in the United States and internationally, 22 that the market is there, and that the technology is there. 23 It certainly is not a blanket technology, but it's 24 significant niches, and I think particularly in a place like 25 California, you can find tremendous application. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 We're finding high levels of interest in short 2 commute areas, urban areas with heavy pollution, those type 3 of things where we're really going to see the greatest 4 benefit of EV technology anyway in comparison to the fossil 5 fuel or the internal combustion technology anyway. 6 I think that's an important thing to keep in mind. 7 There's a lot of ways to market this. This is primarily a 8 marketing challenge. It's not a technology challenge. The 9 technology will come. There's absolutely no doubt in my 10 mind about that. And I think you're seeing that in spades 11 by how your -- how the CARB mandate has stimulated 12 technology development. 13 I think the point also should be made that looking 14 forward, we enjoy a position of leadership right now. We 15 find it -- we've gone offshore increasingly to international 16 market our product. I think we enjoy a position of 17 leadership, both in technology and market position at this 18 point. 19 That's beneficial in a number of fronts, not only 20 in marketing sales, but also in funding. Frankly, we're a 21 case example, a case in point of a company that raised in 22 excess of $50 million towards development of our company, 23 and subsequently hit a bump in the road, as they say, or a 24 hole in the road, and ran out of money. And I think one of 25 the compelling reasons that occurred was the change in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 congressional mandate in November of '94. The 2 antienvironmental attitude put anxiety in financial markets. 3 My point here is that I think we'll increasingly see that in 4 California if we back off from this. 5 I know your mandate is clean air. There's no 6 doubt we can do that, but let's just say that the economic 7 aspects have been serendipitous. There's a benefit you're 8 getting, and let's not lose it. 9 So, I would strongly urge you to stay the course. 10 There's got to be some rational way to get us to more 11 efficient modes of transportation. And I think we recognize 12 the inevitably of this industry. Thank you. 13 CHAIRMAN DUNLAP: Thank you, sir. Tom Gage. I 14 think we have three speakers left. Tom Gage, AC Propulsion, 15 William Craven from Electrosource, Inc., and Matthew 16 McKinnon from the Machinists Union. 17 If I could get you gentlemen to queue up, I think 18 we can finish this up in the next few minutes. And thank 19 you for your patience. 20 MR. GAGE: Chairman and Board members, thank you 21 for the time. I have a 12-page package. I'm culled out 22 about four or five slides I'd like to share with you. And 23 if my remarks interest you, I hope you'll take the time to 24 look through the whole package. 25 My name is Tom Gage. I'm an independent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 consultant. I'm representing AC Propulsion, which is a 2 California Company that invents, develops, and manufacturers 3 advanced electric vehicle powertrains. 4 I'd like to talk to you about a CARB EV 5 demonstration program. Slide, please. 6 For some background, the mandate missed the 7 market. The goal was to improve air quality by reducing 8 tailpipe emissions. The approach was to replace IC miles 9 with EV miles, and the requirements are the production of 10 EVs, the purchase of EVs, and the use of EVs. 11 The mandate stopped at the production of EVs. And 12 I think I can say and maybe it's one of the statements made 13 today that can't be disputed, is that cleaning up the air 14 requires the purchase of EVs and the use of EVs, and they be 15 used frequently, and they must be used year after year. 16 But that's all hindsight. 17 Next slide, please. 18 Now, it sounds like we're talking about a more 19 balanced program that will mix EV demonstrations with 20 mandates or other kinds of programs to bring EVs to market. 21 What I suggest is that as part of this program, part of the 22 revised ZEV program, CARB must lead its own EV 23 demonstrations. The reasons are several. 24 EVs are in California's interest, not the OEMs. 25 Other States already sponsor EV demonstrations -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 Connecticut, Massachusetts, and New York, to make three. 2 Technology forcing, the tool that CARB has used very 3 successfully over the years won't work when the customer has 4 a choice. And as long as the mandate is less than 100 5 percent, the customer will have a choice. 6 An independent program, not a program run by the 7 OEMs or other parties, is necessary to provide objective 8 information. 9 Next slide, please. 10 I believe an open demonstration will open minds, 11 and that is the biggest barrier to EV success. Consumers 12 have an awful lot of questions about EVs and they need to 13 have them answered before they spend their money on them. 14 An open demo will answer consumer concerns. It will 15 spotlight innovative technology. It will discover market 16 niches. It will compare EV designs, and it will explain 17 successes and failures in the market. 18 CARB, EV manufacturers, and the public will all 19 benefit from an inclusive and objective demonstration 20 program. 21 Next slide, please. 22 The first aspect of the program would be a 23 demonstration program. The State would provide a small 24 fleet of EVs from OEMs and qualified converters. Qualified 25 applicants would get a two-week demo at no cost. The State PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 would maintain the vehicles, monitor the usage patterns, and 2 the reactions of participants. A 100-car fleet would yield 3 2500 in-depth exposures and responses per year. 4 The demonstration program would be augmented by a 5 lease program -- I won't discuss it in depth. It would 6 allow customers who are interested to lease EVs from the 7 State for a short term to really find out how they like 8 them, without having to commit to a full purchase of an EV. 9 Next slide, please. 10 To summarize, CARB leadership is required. CARB 11 must seek out and actively promote contributions of EV 12 innovators, not just rely on the products being offered by 13 the OEMs. 14 CARB should cooperate and help OEMs, but should 15 not rely completely on their demonstrations. CARB should 16 focus on the long-term air quality benefits of EVs. This 17 has been pointed out earlier today. No deterioration of 18 emission performance, no off-cycle emissions. 19 The short-term gains from the mandate are of less 20 importance. CARB must make EV demonstrations to serve 21 California's interest. 22 Thank you. Lights, please. 23 Earlier today, Mr. Lagarias said some words that I 24 agree with strongly. He felt that he personally -- and I 25 suspect the entire Board needs more information and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 understanding of the EV market. He then went on to shame 2 the oil companies for some of the misinformation that 3 they've spread about EVs. He shamed the environmentalists 4 for some of the misinformation they have shared. 5 I would like to suggest that, if the Board is 6 actually committed to EVs, and you're unwilling to lift a 7 finger or spend a dollar to make the EV market, that's shame 8 on you. 9 Thank you. 10 CHAIRMAN DUNLAP: Thank you for your comments. I 11 can assure you we're interested in the zero-emission vehicle 12 technology being successfully introduced. That's very 13 important to us. We need for a lot of the obvious reasons. 14 But I, again, appreciate the spirit in which you've offered 15 that little sound bite. 16 MR. GAGE: Thank you. 17 CHAIRMAN DUNLAP: William Craven, and Matt 18 McKinnon. Is Matt McKinnon still here? 19 VOICE FROM AUDIENCE: He left. 20 CHAIRMAN DUNLAP: Okay. You may be the last one. 21 MR. CRAVEN: Oh, thank you, for all of us. That's 22 an unfortunate position to be in. 23 Mr. Chairman, Board members, my name is Bill 24 Craven. I'm vice president of sales for Electrosource, 25 Inc., a manufacturer of advanced lead-acid technologies, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 battery technology. 2 I have three simple points. I submitted a written 3 statement to you, so you'll have it to read later on this 4 evening in detail. 5 The first point is a solution does exist today. 6 the CARB Technology Advisory Panel report confirmed that 7 advanced batteries, lead-acid batteries will be available by 8 1998. And I'm here to emphasize that advanced lead-acid 9 batteries can and will take a vehicle over a hundred miles 10 in range. It depends upon the vehicle. 11 The second point, and it is really near and dear 12 to me, is indecision about the mandate has already had an 13 effect upon the EV industry and, in particular, I bring to 14 our company. We are already reallocating resources that we 15 once focused on electric vehicles, on safety issues, on 16 educational issues, educational programs, technical issues. 17 we are reallocating those resources to other market areas 18 where our battery is going to be marketed or is in existence 19 and is being marketed today. 20 So, it's' already in effect. I would suspect that 21 if you asked the esteemed Battery Panel to go around and ask 22 the same questions to the battery industry, even though 23 those questions were asked just 60 days ago, because we 24 didn't realize the changes may be so severe, I assure you 25 the answers would be different, and certainly would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 different from our battery company. 2 The third and final point is -- what would be 3 extremely helpful -- and I know you're trying to get this 4 (speaking to reporter), but I'll just say it anyway -- we 5 need a definable program as soon as possible. We are 6 shifting and changing; we've suspended some things. But if 7 we had something we knew what your goal was, we could then 8 and do want to assist you in achieving that goal and 9 objective. 10 So, finally, please stay the course. 11 CHAIRMAN DUNLAP: Thank you, Mr. Craven. I 12 appreciate that message. 13 MR. CRAVEN: Thank you. 14 CHAIRMAN DUNLAP: Is Mr. McKinnon here? All 15 right. 16 That concludes we received for today. I'd like to 17 make a closing comment, and then wrap up the meeting. 18 I'd like to thank all of you that have stuck with 19 us today that have provided testimony. We appreciate the 20 time and effort you put in to be here and to help us reach 21 an informed decision. 22 I would like to reiterate that staff will spend 23 the next week refining our options and will make a 24 presentation to the public and to the Board on Thursday, 25 December 21st, here in this very room. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 I want to stress that it is not an action to be 2 taken lightly by anyone. These is a very serious public 3 policy issue and we take it seriously. 4 When the Board does make a final decision, I want 5 to assure you it will be a responsible decision, a decision 6 made for one purpose only, which is to improve California's 7 air quality and protect public health. 8 The Board has not and will not violate the public 9 trust. Our final Board decision will be made in public next 10 year, early next year before March concludes. And again, I 11 want to assure you there will be no loss of emission 12 reductions. 13 Such reductions are the primary reason that we're 14 here today to fulfill the obligation we've made, this Board 15 has made, and this Administration has made to the people of 16 California as put forth in the Board's State Implementation 17 Plan. 18 So, we'll look forward to seeing you next week. I 19 am planning to have that meeting next week begin around the 20 noon hour, in the neighborhood of 11:00, 11:30, and I will 21 make sure that people are aware of that. 22 Mr. Kenny. 23 MR. KENNY: We just need to specify a precise for 24 when the meeting's going to begin. 25 CHAIRMAN DUNLAP: Why don't we say 11:30. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 MR. KENNY: Thank you. 2 CHAIRMAN DUNLAP: So with that, unless my Board 3 member colleagues have anything to say, I think we'll 4 adjourn the meeting. 5 This, the December meeting -- well, actually, 6 we'll continue. Excuse me. I don't want to pound the gavel 7 too much. We will continue this meeting till next week, 8 next Thursday. We will conclude the testimony and the 9 discussion at this point. 10 Thank you. 11 (Thereupon, the meeting was continued to 12 December 21, 1995, at 6:25 p.m.) 13 --o0o-- 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 CERTIFICATE OF SHORTHAND REPORTER 2 3 4 I, Nadine J. Parks, a shorthand reporter of the 5 State of California, do hereby certify that I am a 6 disinterested person herein; that the foregoing meeting was 7 reported by me in shorthand writing, and thereafter 8 transcribed into typewriting. 9 I further certify that I am not of counsel or 10 attorney for any of the parties to said meeting, nor am I 11 interested in the outcome of said meeting. 12 In witness whereof, I have hereunto set my hand 13 this 26th day of December , 1995. 14 15 16 Nadine J. Parks 17 Shorthand Reporter 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345