BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA, JR. BUILDING CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY CENTRAL VALLEY AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA THURSDAY, OCTOBER 19, 2006 9:00 A.M. TIFFANY C. KRAFT, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Robert Sawyer, Chairperson Ms. Sandra Berg Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Ms. Lydia H. Kennard Mr. Ronald O. Loveridge Mrs. Barbara Riordan STAFF Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Tom Jennings, Chief Counsel Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Quetin, Ombudsman Ms. Catherine Witherspoon, Executive Officer Mr. Gerhard Achtelik, Manager, ZEV Infrastructure Section Ms. Lori Andreoni, Board Secretary Ms. Analisa Bevan, Chief, Sustainable Transportation Technology Branch, MSCD Mr. Bob Cross, Chief, Mobile Source Control Division Ms. Leslie Crowell, Mobile Source Control Division Ms. Cynthia Garcia, Populations Studies Section, Research Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF Mr. Dave Mehl, Air Resources Engineer, Program Assistance Section Mr. Rob Oglesby, Legislative Director, Office of Legislative Affairs Mr. Chuck Shulock, Executive Office Mr. Dean Simeroth, Chief, Criteria Pollutants Branch, SSD Mr. James Ryden, Chief, Enforcement Division Mr. Mike Waugh, Manager, Program Assistance Section ALSO PRESENT Secretary Linda Adams, Cal/EPA Ms. Tina Andolina, Coalition of Clean Air Mr. Ari Arieli, Arieli Associates Mr. Todd Campbell, Clean Energy Mr. Mike Eaves, California Natural Gas Vehicle Coalition Mr. Arthur Douwes, Valley Transportation Authority Mr. David Fienberg, City of Santa Monica's Big Blue Bus Mr. Russ George, Planktos, Inc. Ms. Bonnie Holmes-Gen, American Lung Association Mr. Richard Hunt, Los angeles MTA Mr. George Karbowski, Foothill Transit Mr. Lance King, Community Solutions USA Ms. Mary King, AC Transit Ms. Dana Lee, Long Beach Transit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Ms. Ruth MacDougall, SMUD Mr. Jason Mark, Union of Concerned Scientists Mr. Roger Marmaro, Hythane Company Ms. Therese McMillan, Metropolitan Transport Commission Mr. Steven Miller, Golden Gate Transit Mr. Michael Murphy, Bay Area AQMD Mr. Durand Rall, OmniTrans Mr. Josh Shaw, California Transit Association Ms. Muriel Strand, Citizen Mr. Michael Tosca, UTC Power Mr. Bill Van Amburg, WestStart-CALSTART Mr. Gene Walker, Golden Gate Transit Mr. Peter Ward, California Energy Commission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX PAGE Pledge of Allegiance 1 Item 06-9-1 Chairperson Sawyer 3 Executive Officer Witherspoon 4 Staff Presentation 4 Item 6-9-3 Chairperson Sawyer 11 Executive Officer Witherspoon 12 Staff Presentation 13 Q&A 27 Item 6-9-2 Chairperson Sawyer 34 Executive Officer Witherspoon 36 Staff Presentation 39 Q&A 56 Secretary Adams 66 Mr. George 85 Item 6-9-4 Chairperson Sawyer 89 Executive Officer Witherspoon 90 Staff Presentation 92 Ombudsman Quetin 110 Q&A 111 Mr. Murphy 120 Mr. Douwes 122 Mr. Rall 123 Mr. Karbowski 126 Mr. Walker 128 Mr. Fienberg 129 Ms. Lee 131 Mr. Miller 133 Ms. King 134 Ms. Holmes-Gen 137 Mr. Hunt 146 Ms. McMillan 153 Mr. Arieli 155 Mr. Campbell 157 Ms. Andolina 160 Mr. Mark 162 Mr. Marmaro 165 Mr. Eaves 168 Mr. Tosca 170 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX CONTINUED PAGE Mr. Shaw 172 Q&A 175 Motion 177 Ex Parte 178 Vote 189 Item 6-9-5 Chairperson Sawyer 189 Executive Officer Witherspoon 190 Staff Presentation 190 Ms. MacDougall 200 Ombudsman Quetin 201 Q&A 202 Motion 209 Vote 209 Item 6-9-6 Chairperson Sawyer 209 Executive Officer Witherspoon 209 Staff Presentation 210 Q&A 220 Mr. Campbell 223 Mr. Eaves 224 Mr. Van Amburg 224 Public Comment Ms. Strand 230 Mr. King 234 Adjournment 241 Reporter's Certificate 242 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON SAWYER: The October 19th, 2006, 3 public meeting of the Air Resources Board will now come to 4 order. Would all please rise and join me in the Pledge of 5 Allegiance? 6 (Thereupon the Pledge of Allegiance was 7 recited in unison.) 8 CHAIRPERSON SAWYER: Thank you. 9 Would the Clerk of the Board please call the 10 role? 11 BOARD CLERK ANDREONI: Ms. Berg? 12 BOARD MEMBER BERG: Here. 13 BOARD CLERK ANDREONI: Ms. D'Adamo? 14 BOARD MEMBER D'ADAMO: Here. 15 BOARD CLERK ANDREONI: Supervisor DeSaulnier? 16 Dr. Gong? 17 Ms. Kennard? 18 BOARD MEMBER KENNARD: Here. 19 Mayor Loveridge? 20 BOARD MEMBER LOVERIDGE: Here. 21 BOARD CLERK ANDREONI: Supervisor Patrick? 22 Mrs. Riordan? 23 BOARD MEMBER RIORDAN: Here. 24 BOARD CLERK ANDREONI: Supervisor Roberts? 25 Dr. Sawyer? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 CHAIRPERSON SAWYER: Here. 2 BOARD CLERK ANDREONI: Mr. Chairman, we have a 3 quorum. 4 CHAIRPERSON SAWYER: Thank you. 5 I have a few remarks before we've get started. 6 First, I would like you to note a change in the agenda 7 order. We will hear the legislative update, Agenda Item 8 6-9-3, immediately after the health update. The climate 9 change report will follow. And from then on, we will 10 follow the noticed agenda order. 11 Later this morning, Cal/EPA Secretary Linda Adams 12 will be joining us concerning AB 32 and our new 13 responsibilities. Secretary Adams will try to time her 14 visit to coincide with the staff's climate change 15 presentation. But in the event she is delayed, we will 16 interrupt our proceedings when she arrives to hear from 17 her. 18 Now for our customary announcements to the 19 audience. To all the witnesses signing up to speak today, 20 please be aware the Board will impose as usual a 21 three-minute limit so that everybody gets a chance to 22 speak. 23 I request that each of you put your testimony 24 into your own words. It is easier for the Board to follow 25 if you go straight to the main points you want to make. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 Also, you don't need to read your written testimony to us 2 since it will be entered into the record. 3 I would now like everyone in the room to note the 4 emergency exits to the right of the hearing room and to 5 the rear through the main entrance. If exiting through 6 the rear of the hearing room, please follow the exit signs 7 to the left just past the rest rooms. In the event of a 8 fire alarm, we are required to evacuate the room 9 immediately. Evacuees will exit down the stairways and 10 possibly to a location site across the street. You will 11 receive instructions. When the all-clear signal is given, 12 we will return to the hearing room and resume the hearing. 13 Agenda Item 6-9-1, if you desire to speak, please 14 sign up with the Clerk of the Board. If you have a 15 written statement, please provide 30 copies when you sign 16 up to testify. 17 The first item on the agenda is our informational 18 health update. The Air Resources Board staff provides the 19 Board with regular updates on recent research findings on 20 the health effects of air pollution. Today's presentation 21 will report the findings on two recent California studies 22 on the adverse health effects of particulate matter on 23 infant health. 24 Ms. Witherspoon, would you please introduce this 25 item? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 EXECUTIVE OFFICER WITHERSPOON: Yes. Thank you, 2 Dr. Sawyer. Good morning, members of the Board. 3 One of the most troubling health effects of air 4 pollution is the association between particulate exposure 5 and premature death. This especially effects the elderly 6 and those with heart or lung disease. Much less 7 information exists about the susceptibility of infants to 8 particulate pollution, but there are indications that 9 infants are even more vulnerable than adults. 10 Today's presentation provides important 11 information on the association between particulate matter 12 and infant mortality in California. Cynthia Garcia from 13 our Health and Exposure Assessment Branch will make the 14 staff presentation. Cynthia. 15 (Thereupon an overhead presentation was 16 presented as follows.) 17 MS. GARCIA: Thank you, Ms. Witherspoon. Good 18 morning, Dr. Sawyer and members of the Board. 19 In today's health update, I will discuss the 20 results of two studies evaluating the possible association 21 between particulate air pollution and infant mortality in 22 California. As we know, several studies have reported 23 increased risk of premature death in adults and especially 24 in the elderly due to particulate pollution. However, 25 much less information exists on the adverse effects of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 particulate pollution in infant death. Understanding the 2 relationship between particulate pollution and infant 3 health is very important, since infants may be especially 4 vulnerable to air pollution. Compared to adults, infants 5 have increased breathing frequencies. Their lungs are 6 developing, and their detoxification pathways may be 7 underdeveloped. 8 --o0o-- 9 MS. GARCIA: The study being presented to you 10 today investigates the effects of two different 11 particulate size fractions, PM10 and PM2.5. PM10 is 12 composed of particles in three size ranges: Coarse, fine, 13 and ultra fine, which exists mixed together in ambient 14 air. 15 PM2.5 includes only fine and ultra fine 16 particles. This picture is a cross section of the human 17 hair. Drawn inside is the PM10, PM2.5, and ultra fine to 18 help put in perspective the size distribution of these 19 particle measures. 20 --o0o-- 21 MS. GARCIA: Why are we've concerned with 22 particles? We've estimated that attaining the State PM2.5 23 annual average standard would prevent approximately 8,200 24 adult premature deaths annually in California. We know 25 from previous research findings that particulate matter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 exposure is associated with cardiovascular death in 2 adults. Whereas, in infants, particulate matter seems to 3 be more associated with respiratory related deaths. 4 In addition, California has a disproportionate 5 share of the national exposure to particulate pollution. 6 Californians receive more than 60 percent of the 7 population weighted exposure to PM2.5 values above the 8 national average standard of 50 mircograms per cubic 9 meter. 10 --o0o-- 11 MS. GARCIA: Less known are the effects of PM on 12 children, especially infants. A few studies around the 13 world and in the U.S. have related PM to infant death. 14 Evidence of PM's deadly effect was dramatically 15 illustrated by the infamous Great Fog that gripped London 16 in 1952, officially killing 4,000 people. And later 17 review of infant death during the Great Fog found that in 18 the week before, 50 newborns died. During the fog, the 19 number jumped to 28, an 87 percent increase. 20 Brazilian scientists link childhood death under 21 the age of five to PM10 and determined a 7 percent 22 increase risk of death. In South Korea, investigators 23 found PM10 associated with a 102 percent increase risk of 24 respiratory death in infants as compared to a 6.3 increase 25 risk in individuals over 65. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 In the United States, Woodruff and Colleagues 2 conducted a study to evaluate the relationship between 3 infant death and particulate pollution in several 4 metropolitan areas across the United States. They found a 5 20 percent increase risk in infant respiratory death among 6 normal birth weigh infants associated with PM10 exposure. 7 There still exists a gap in our knowledge due to 8 the difficulty in carrying out these types of studies. 9 The low numbers of infant deaths are good news. However, 10 it makes studying the effects from the environmental 11 factors challenging. 12 The next two studies I'll discuss not only help 13 close some of the gaps in our knowledge, but more 14 importantly provide us with the effect of particulate 15 matter on infant death within California. 16 --o0o-- 17 MS. GARCIA: The first study is entitled, "Air 18 Pollution and Infant Death in Southern California," 1989 19 to 2000 by Professor Ritz and Colleagues. The objective 20 of the study was to evaluate the influence of outdoor air 21 pollution on post-neonatal infant death in South Coast Air 22 Basin in California. These are infants between 28 days 23 old and one year old. The investigators in this study 24 linked birth and death certificates for infants who died 25 between 1989 and 2000. There was a total of 19,664 infant PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 deaths for these eleven years of data. 2 The selected maternal ZIP codes within a 16 3 kilometer radius of a PM10 monitoring station for all 4 subjects, they calculate average PM10 exposure for two 5 week one-month, two-month, and six-month period before the 6 infant's death. 7 Investigating the effects from these different 8 exposure averages allow the investigators to determine the 9 most critical window of exposure responsibility for death 10 due to all causes, respiratory related, and sudden infant 11 death syndrome. The investigators control mother's 12 demographics factor such as race, education, age, marital 13 status, and smoking. 14 --o0o-- 15 MS. GARCIA: The results of this study adds 16 further evidences of a PM10 air pollution effect on all 17 calls of respiratory related infant death and sudden 18 infant death syndrome, or SIDS. 19 For pre-term birth infants or low birth weight, 20 the investigators found a 6 percent increase risk in all 21 cause death and a 26 percent increase risk in SIDs 22 associated with 10 microgram per cubic meter increase of 23 PM10 exposure average over two months prior to death. 24 On a shorter window of exposure and for all 25 infants regardless of birth weight, the investigates found PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 a 5 percent increase risk in respiratory related death due 2 to PM10 exposure average. It was over the two weeks prior 3 to death. 4 --o0o-- 5 MS. GARCIA: The second study is titled, "Fine 6 Particulate Matter, Air Pollution, and Selected Causes of 7 Post-Neonatal Infant Mortality in California," by Dr. 8 Woodruff and colleagues. Researchers examined the 9 relationship between long-term exposure to PM2.5 air 10 pollution and post-neonatal infant death in all areas of 11 California. 12 They linked monitoring data for PM2.5 to infants 13 born in California in 1999 and 2000 using maternal 14 addresses for mothers who lived within five miles of a 15 PM2.5 monitor station. The total number of infant deaths 16 for these two years is 1,606 deaths. 17 Researchers investigated each infant's death by 18 birth weight, category, and date of birth. This method 19 allowed the investigators to control for potential effects 20 due to birth weight, a non-contributing factor to infant 21 death. They calculate exposure as the average PM2.5 22 concentration over the period of life for the infant who 23 died. 24 As in the previous study, they controlled from 25 maternal demographic factors, such as race, education, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 age, and marital status. However, in this study maternal 2 smoking was not controlled for. 3 --o0o-- 4 MS. GARCIA: The strongest association found in 5 the study is to the respiratory related post-neonatal 6 infant death. Researchers found a 213 percent increase 7 risk for respiratory related infant death associated to a 8 10 microgram per cubic meter increase in lifetime PM2.5 9 exposure. The investigators also found a 7 percent 10 increase risk for all cause death. However, the low end 11 of the range was not statistically significant. The 12 investigators found no significant findings for SIDs. 13 The large confidence intervals observed for 14 respiratory related infant death is due to the much 15 smaller number of data points investigators had to work 16 with. There were only 51 cases of respiratory related 17 infant deaths recorded over the two-year period which 18 coincides with the beginning of the PM2.5 monitoring in 19 California in 1999. 20 --o0o-- 21 MS. GARCIA: In summary, both studies corroborate 22 previous findings of PM air pollution effects on infant 23 death and further evidence of an effect and exposure in 24 California. These studies support the observations that 25 not only adults but especially children and infants PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 benefit from PM controls and air quality improvements. 2 One of the problems encountered most often during 3 the infant study is controlling from maternal tobacco 4 smoke and indoor PM exposures. Although birth 5 certificates include maternal tobacco smoke, this field 6 may not be reliable. More studies are needed to fill the 7 gap of knowledge for remaining unanswered questions about 8 the consequences of environmental exposure to PM and to 9 provide us with a better understanding of children and 10 infant vulnerability to air pollution. 11 This concludes my presentation. I will be happy 12 to answer any questions. Thank you. 13 CHAIRPERSON SAWYER: Thank you, Ms. Garcia. 14 Are there any questions from the Board? If not, 15 and since we have no witnesses, does staff have any 16 further comments, Ms. Witherspoon? 17 EXECUTIVE OFFICER WITHERSPOON: Not at this time. 18 CHAIRPERSON SAWYER: Since this is not a 19 regulatory item, it is not necessary to officially close 20 the record. 21 We will now move to the second agenda item, which 22 is 6-9-3, a review of 2006 air quality legislation. This 23 was an exceptionally productive year for environmental 24 laws, including landmark legislation to reduce greenhouse 25 gas emissions back to 1990 levels. To make sure the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 is aware of all new laws affecting this body, I have asked 2 Rob Oglesby, our Legislative Director, to give us an 3 overview of the past legislative year. 4 Ms. Witherspoon, would you please introduce this 5 item? 6 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 7 Sawyer. 8 Air quality issues are very popular in the 9 California Legislature, and 2006 was no exception. The 10 enormous slate of air quality bills, the budget bill, and 11 several special air quality related hearings kept our 12 legislative staff hopping all year long. Fortunately for 13 all of us, it was a banner year. For the most part, the 14 good bills passed and the bad bills didn't. And that was 15 based in no small part to the extensive technical 16 expertise provided by our legislative team to the 17 Governor's office, individual legislators, and key 18 committees. 19 Rob Oglesby is going to present an overview of 20 the entire legislative year. But also today we have two 21 items on the agenda that go into a couple things in more 22 detail. In the third item on your agenda, we will discuss 23 Assembly Bill 32, the Global Warming Solutions Act. And 24 later this afternoon, staff will present a spending plan 25 for the one-time $25 million incentive funds added to ARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 budget for alternative fuels and vehicles. 2 But first we'll start with an overview of the 3 entire year. Rob. 4 (Thereupon an overhead presentation was 5 presented as follows.) 6 LEGISLATIVE DIRECTOR OGLESBY: Mr. Chairman and 7 members of the Board and Ms. Witherspoon, thank you for 8 the opportunity to be here today. 9 The purpose of this briefing is two-fold: First 10 to give the Board a preview of recently enacted bills and 11 create new programs or add new tasks that will come before 12 you for policy and implementation; and second, to provide 13 the public with a brief review of the significant air 14 quality legislation of 2006. 15 --o0o-- 16 LEGISLATIVE DIRECTOR OGLESBY: I'll start with a 17 score card. Overall, more than 2,000 bills were 18 introduced. Of these, over 200 bills related to air 19 quality. That's about twice the amount of a typical year. 20 Fifty made it to the Governor's desk. Thirty-seven were 21 signed into law. And 13 were vetoed. 22 --o0o-- 23 LEGISLATIVE DIRECTOR OGLESBY: In addition to 24 action on specific bills, the Legislature held 20 special 25 hearings related to air pollution issues. As you can see, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 the topics were diverse, but particular attention was 2 devoted to transportation, infrastructure, and alternative 3 fuel. 4 --o0o-- 5 LEGISLATIVE DIRECTOR OGLESBY: And more 6 importantly, the Senate confirmed the Governor's 7 appointment of a key member of ARB's Governing Board. 8 --o0o-- 9 LEGISLATIVE DIRECTOR OGLESBY: All the bills 10 relating to air quality along with veto and signing 11 messages and a listing of the special hearings are 12 presented in our annual legislative report. You should 13 have this report befor you, and copies are available here 14 for members of the public. And the report can also be 15 accessed online at ARB's website. 16 Now I'll highlight specific bills, budget action, 17 and legislative issues. I'm saving ARB's biggest issue 18 the landmark greenhouse gas bill, AB 32, until last. 19 Chuck Shulock will be covering that bill in detail as the 20 next item on your agenda, and I don't want to steal his 21 thunder. 22 --o0o-- 23 LEGISLATIVE DIRECTOR OGLESBY: Let me start with 24 activities related to goods movement and infrastructure 25 beginning with a brief overview of the Administration's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 activities and then turning to legislative development. 2 The Governor has made goods movement a top 3 priority of his administration and several members of the 4 Legislature also introduced bills on this subject. The 5 priority is well justified. 6 --o0o-- 7 LEGISLATIVE DIRECTOR OGLESBY: In 2005, goods 8 movement associated with the ports resulted in about 395 9 tons per day of NOx and 19 tons per day of PM. In the 10 greater Los Angeles area, the emissions resulting from 11 trade through the ports account for about 10 percent of 12 the regional NOx emissions and about 25 percent of diesel 13 PM emissions. The increase in potential cancer risk in 14 areas near the ports exceeds 500 in a million. 15 --o0o-- 16 LEGISLATIVE DIRECTOR OGLESBY: In April, you 17 approved ARB's Emission Reduction Plan for ports and goods 18 movement in California. The plan identifies specific 19 near- and long-term measures to cut port-related emissions 20 back to 2001 levels no later than 2010, and then to 21 continuously reduce emissions thereafter until ambient air 22 quality standards are met. 23 The plan also includes strategies to reduce 24 public health risk from port related diesel emissions by 25 about 85 percent by 2020. The plan is a component of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 administration's comprehensive Goods Movement Action Plan 2 that will be completed later this year. 3 Also this year, the Governor and the Legislature 4 worked together to approve SB 1266 by Senate President Pro 5 Tem Perata that proposes a $20 billion infrastructure 6 bond. 7 --o0o-- 8 LEGISLATIVE DIRECTOR OGLESBY: The bill was also 9 known as the Highway Safety, Traffic Reduction, Air 10 Quality, and Port Security Bond Act of 2006, but is now 11 better known as Proposition 1B on the November 7 ballot. 12 One billion. Did I say million? That proposed bond 13 includes one billion specifically dedicated to air 14 pollution reduction projects administered by ARB. 15 --o0o-- 16 LEGISLATIVE DIRECTOR OGLESBY: Should the 17 Proposition pass, the specific details of the types of 18 projects and the project selection process will be spelled 19 out in legislation next year. 20 SB 1266 requires the funds be expended only for 21 emission reductions not otherwise required by law or 22 regulation. In other words, surplus. And that the funds 23 be applied only to emission reduction activities related 24 to the movement of freight along California's trade 25 corridors. Some of the most critical emission source PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 categories in the goods movement sector are drayage 2 trucks, old switcher locomotives, cargo handling 3 equipment, marine vessels, especially when at dock, and 4 harbor craft. 5 ARB estimates a total cost to clean up those 6 sources to be about three to six billion. The one billion 7 for mitigation projects provided in the 2006 Bond Act 8 would reduce about 30 tons per day of NOx and about two 9 tons per day of PM. 10 --o0o-- 11 LEGISLATIVE DIRECTOR OGLESBY: Now let me move on 12 to another issue that shares a link with the 13 infrastructure bonds: School buses. 14 --o0o-- 15 LEGISLATIVE DIRECTOR OGLESBY: One way or 16 another, at least 25 million and perhaps as much as 200 17 million will be made available this fiscal year for school 18 bus replacement or retrofits. This year, the State budget 19 appropriated 25 million to replace pre-1977 buses with new 20 buses that are cleaner and safer. This builds on over 100 21 million in State funds that have been appropriated since 22 2000 for school bus replacement and retrofits. 23 --o0o-- 24 LEGISLATIVE DIRECTOR OGLESBY: However, if 25 Proposition 1B passes, 200 million will be made available PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 for school bus replacement and retrofits from bond funds. 2 And if that happens, the 25 million budget appropriation 3 for school buses will be redirected to public agencies for 4 grants to purchase low polluting construction equipment. 5 --o0o-- 6 LEGISLATIVE DIRECTOR OGLESBY: This past session 7 there was a great deal of activity related to alternative 8 fuel and petroleum demand reduction by both the 9 Administration and the Legislature. Again, I'd like to 10 begin with a review of some of the actions taken by the 11 Administration and then move to legislative developments. 12 --o0o-- 13 LEGISLATIVE DIRECTOR OGLESBY: The Governor has 14 issued a series of Executive Orders and Action Plans aimed 15 at reducing the growth and demand for conventional 16 petroleum based fuels and to develop environmentally sound 17 alternatives. You are already well acquainted with his 18 order setting the foundation for the hydrogen fueling 19 station infrastructure and establishing the State's 20 climate change emission reduction goals. 21 New Executive Orders include S 0606 that 22 establishes targets to increase in-state production and 23 use of bioenergy including ethanol and biodiesel fuel. 24 The Order sets an in-state production target for 25 transportation biofuels at 20 percent by 2010, 40 percent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 by 2020, and 75 percent by 2050. 2 The Executive Order is part of a more 3 comprehensive bioenergy action plan released in June that 4 among other provisions asks ARB to enable the most 5 flexible possible uses of biofuels while preserving the 6 full environmental benefits of existing programs. You'll 7 have a number of Board action items that provide 8 opportunities to implement the plan's objectives. 9 And on that point, this year's budget provides 10 $25 million to the ARB for incentives for 11 alternative-fueled vehicles and alternative fuel 12 infrastructure. You will hear ARB staff's plan for use of 13 these funds later today. 14 --o0o-- 15 LEGISLATIVE DIRECTOR OGLESBY: Also this year's 16 budget included an appropriation that will continue 17 progress on the hydrogen highway. As you know, in 2004, 18 Governor Schwarzenegger signed an Executive Order that 19 launched the creation of fueling infrastructure needed to 20 support the new generation of hydrogen powered cars. Last 21 year's budget provided initial 6.5 million for 22 State-sponsored hydrogen fueling stations and hydrogen 23 vehicle demonstration projects. This year's budget added 24 a second 6.5 million installment. This will add three 25 more stations and five fuel cell buses. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 And to ensure that the hydrogen used at these 2 stations and ultimately at every California hydrogen 3 station is substantially more environmentally beneficial 4 than conventional fuels, the Governor approved Senator 5 Lowenthal's SB 1505. 6 --o0o-- 7 LEGISLATIVE DIRECTOR OGLESBY: That bill requires 8 ARB to adopt regulations by July 1, 2008, that ensure that 9 State-funded hydrogen projects contribute to the reduction 10 of greenhouse gas emissions, criteria pollutants, and 11 toxic air contaminants. There are a number of detailed 12 provisions, but the most significant parts require that 13 well to wheel greenhouse gas emissions for the average 14 hydrogen powered vehicle must be 30 percent lower than 15 emissions of the average new gasoline vehicle. 16 In addition, one-third of the hydrogen must be 17 produced for renewable sources. And well to tank 18 smog-forming emissions from hydrogen must be at least 19 50 percent lower than the emission of gasoline. Finally, 20 well to tank toxic emissions from hydrogen must be reduced 21 to the maximum extent feasible. 22 Once the statewide use of hydrogen for 23 transportation purposes exceeds 3,500 metric tons a year, 24 the standards would apply to all hydrogen produced in the 25 state as a transportation fuel. It is expected that this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 trigger will not become activated until about 2011. This 2 coincides with the ZEV introduction timetable under ARB's 3 current regulations. 4 LEGISLATIVE DIRECTOR OGLESBY: Looking forward, 5 last year I reported on AB 1007 by Assemblymember Fran 6 Pavley that calls for an ARB/Energy Commission analysis of 7 the relative environmental and public health impacts of 8 different alternative transportation fuels. That work 9 product will be completed by July 2007 and will influence 10 the State's policy and future legislation on the State's 11 transportation fuel portfolio. 12 --o0o-- 13 LEGISLATIVE DIRECTOR OGLESBY: Let me turn to 14 bills effecting the Carl Moyer Program. There were two 15 bills signed this year that directly effect the Carl Moyer 16 Program -- 17 --o0o-- 18 LEGISLATIVE DIRECTOR OGLESBY: -- AB 2843 by 19 Assemblymember Saldaa and SB 225 by Senator Soto. 20 AB 2843 continues the targeting of 50 percent of 21 Moyer funds to environmental justice areas. This 22 requirement has been successfully implemented since 2001. 23 Senator Soto's SB 225 will have a positive impact 24 on the administration of Moyer Program by providing 25 additional resources to help local air districts deal with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 the expanded and more complicated Moyer program. 2 Previously, districts were limited to two percent 3 of their allocated Moyer funds for program overhead. SB 4 225 increases the allowance to either five or ten percent 5 depending on district population. Small and medium 6 districts will be able to use ten percent, while the five 7 largest districts which have a much larger allocation of 8 funds are authorized to use five percent. 9 SB 225 also amends the allocation formula that is 10 used to distribute Moyer funds to the districts. The 11 revised formula was agreed to by CAPCOA and is intended to 12 correct a drafting error and reflect the original 13 allocation agreement in AB 923. That bill enacted in 2004 14 expanded the program and provided stable long-term funding 15 for the program. 16 The adjusted distribution of funds is now based 17 on tons of diesel pollution in an air district rather than 18 on ambient PM levels. 19 --o0o-- 20 LEGISLATIVE DIRECTOR OGLESBY: This year also 21 produced a bill relating to the State's Smog Check 22 Program. 23 --o0o-- 24 LEGISLATIVE DIRECTOR OGLESBY: AB 1870 by 25 Assemblymember Lieber adds a visible smoke test to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 Smog Check Program and fulfills a recommendation presented 2 in the 2004 joint ARB Bureau of Automotive Repair smog 3 check evaluation report. 4 The current smog check test equipment does not 5 fail smoking vehicles because the particulates from the 6 smoking vehicles are too large to be measured by the 7 equipment. Adding a smoke inspection component to the 8 smog check program will reduce particulate emissions by as 9 much as 1.6 tons per day. 10 The bill also allows the Bureau to offer up to 11 $1,500 to retire a vehicle that has failed a smog check. 12 And if it is cost effective, the bureau may offer more 13 than 1,500. Currently, $1,000 is offered per vehicle. 14 --o0o-- 15 LEGISLATIVE DIRECTOR OGLESBY: That bill dealt 16 with some of the state's highest polluting vehicles. 17 Another bill, AB 2600, gave a boost to some of the state's 18 cleanest vehicles. 19 --o0o-- 20 LEGISLATIVE DIRECTOR OGLESBY: AB 2600 by 21 Assemblymember Ted Lieu extends the car pool lane access 22 program for the cleanest most fuel efficient vehicles and 23 authorizes an additional 10,000 clean air decals to be 24 issued to the most fuel efficient hybrid electric 25 vehicles. Currently, motorists who choose to travel in a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 car pool lane must either meet the occupancy requirements 2 or obtain a clean air decal. Qualifying vehicles include 3 zero emission vehicles, clean alternative fuel vehicles, 4 and most recently, the cleanest most fuel efficient 5 hybrids. To date, over 8,000 qualifying and zero emission 6 and alternative fuel vehicles and about 75,000 hybrids 7 have obtained a decal. 8 Current State law sunsets on January 1, 2008. AB 9 2600 extends the sunset date to January 2011. However, 10 without a corresponding change to federal law, AB 2600 11 only extends the program by about nine months. 12 Moving on to another important subject, I am 13 happy to report the success of a bill that addresses 14 indoor air quality. 15 --o0o-- 16 LEGISLATIVE DIRECTOR OGLESBY: As you will 17 recall, in July of 2005, the ARB recommended restricting 18 the sale of indoor air purifiers that emit harmful levels 19 of ozone. Some of these devices are manufactured to 20 intentionally produce ozone to improve air quality. Even 21 short-term exposures to ozone could produce shortness of 22 breath, asthma attacks, pulmonary edema, and increased 23 death among persons already in poor health. 24 In May of this year, ARB staff reported to you 25 that some of these devices may produce enough ozone in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 just a short period of time to exceed the State's one-hour 2 ozone standard. 3 --o0o-- 4 LEGISLATIVE DIRECTOR OGLESBY: In response to 5 this important public health issue, this year the 6 Legislature passed and the Governor signed Assemblymember 7 Fran Pavley's AB 2276, which was sponsored by the American 8 Lung Association and requires ARB by December 31st of '08 9 to adopt emissions standards for indoor air cleaning 10 devices to guard against unsafe levels of ozone. The bill 11 requires ARB to develop test procedures to measure ozone 12 emissions and implement certification and labeling 13 requirements. 14 --o0o-- 15 LEGISLATIVE DIRECTOR OGLESBY: I'll now add a few 16 comments on greenhouse gas developments before turning it 17 over to Chuck Shulock for his presentation on AB 32. 18 --o0o-- 19 LEGISLATIVE DIRECTOR OGLESBY: First, I'd like to 20 add my observation to the process that led to the 21 Governor's approval of California's landmark legislation 22 to reduce global warming emissions: Assembly Speaker 23 Nuez and Assemblymember Pavley's AB 32. That bill was 24 the product of extraordinary effort and countless hours of 25 hard work. Without the commitment of the top leadership PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 of the Assembly and the Senate working together with the 2 top leadership of the Administration, we would not be 3 where we are today. 4 In the executive branch, credit should be given 5 to the Governor himself and to senior staff as well as 6 Cal/EPA Secretary Linda Adams and her senior staff. And 7 here at the ARB, noteworthy contributions were made by Tom 8 Cackette, Mike Scheible, Tom Jennings, Lisa Macumber, 9 Chuck Shulock, and many others. 10 Catherine Witherspoon deserves special 11 recognition for her dedication, long hours, and pitbull 12 tenacity during negotiations on the bill. 13 Since Chuck will cover AB 32 in detail, I'll just 14 mention a companion bill, SB 1368, that helps fill in the 15 scope of greenhouse gas emissions associated with 16 electricity generation. 17 --o0o-- 18 LEGISLATIVE DIRECTOR OGLESBY: SB 1368 is a bill 19 that is consistent with California's goal of reducing 20 emissions of greenhouse gases with efforts already begun 21 by the California Public Utilities Commissions and the 22 Energy Commission. SB 1368 applies the same greenhouse 23 gas emission standards to municipal utilities that already 24 apply to investor-owned utilities. The bill sets 25 greenhouse gas emissions performance standards for all new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 long-term base load electricity used in California. 2 Without this bill, only in-state power generated 3 by the muni's would be subject to any new regulations 4 implemented under AB 32. Part of your task in 5 implementing AB 32 and this bill will be to coordinate 6 with the California Public Utilities Commission and the 7 Energy Commission to achieve the global warming emission 8 reductions needed from the state's power grid. 9 --o0o-- 10 LEGISLATIVE DIRECTOR OGLESBY: This concludes my 11 presentation. Thank you for your attention. On behalf of 12 the entire Legislative Office, I want to thank the 13 Chairman, Ms. Witherspoon, the Executive Office and 14 Program staff for their steadfast support and guidance 15 throughout the year. 16 CHAIRPERSON SAWYER: Thank you very much, Mr. 17 Oglesby. 18 I'd like to add my own appreciation for your work 19 and the work of your staff, especially in introducing me 20 to the legislative process during my first year as Chair 21 of the Board. Exceedingly valuable. 22 Are there any questions from Board members? 23 BOARD MEMBER D'ADAMO: I want to add you forgot 24 to compliment yourself on AB 32. I heard you did a very 25 fine job. So congratulations to the whole team. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 LEGISLATIVE DIRECTOR OGLESBY: Thank you very 2 much. 3 CHAIRPERSON SAWYER: Ms. Riordan. 4 BOARD MEMBER RIORDAN: Thank you for the 5 overview. 6 I do have a question for you on Soto's bill on 7 the Carl Moyer. Could you just reiterate the key points, 8 the changes on that one for me, please? 9 LEGISLATIVE DIRECTOR OGLESBY: First off, as you 10 know, the program has become vastly larger and more 11 complicated because the number and types of projects has 12 been expanded by AB 923. So it has a two-tiered -- and 13 district staff that administers those programs are feeling 14 the pinch of the burden of qualifying the projects under 15 the new revamped program. 16 The bill provides a two-tiered increase of the 17 amount of overhead that can be taken from Carl Moyer funds 18 and applied to the administration of the project, which is 19 currently capped at two percent. The five largest air 20 districts and take five percent, and the small and medium 21 districts will be able to take ten percent of the 22 allocations that are allocated to the various districts. 23 In addition, because of the complicated formula 24 that is in the allocation of the Carl Moyer funds to the 25 various districts, experience indicated that the original PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 formula has some defects and didn't accomplish what was 2 intended. And so to more appropriately target the funds 3 to the sources of pollution that the Carl Moyer program is 4 designed to effect, in other words diesel PM, the 5 adjustment was made in the allocation to not just consider 6 ambient PM levels, but to look at the PM link to diesel 7 emissions. 8 BOARD MEMBER RIORDAN: I appreciate that. Thank 9 you. I do know particularly for the small and mid-size 10 district, the administration costs have been a real issue 11 because of their limited staff. So I thank you for 12 whatever efforts you made. And I'm sure CAPCOA was very 13 much a part of that process too. 14 LEGISLATIVE DIRECTOR OGLESBY: Let me give credit 15 to where credit is due. CAPCOA was the sponsor of that 16 bill, and they did a fine job of working with the 17 stakeholders. 18 BOARD MEMBER RIORDAN: Great. I'm glad that was 19 resolved, especially for the smaller districts. That was 20 really critical. Thank you. 21 CHAIRPERSON SAWYER: Mayor Loveridge. 22 BOARD MEMBER LOVERIDGE: There were a lot of 23 bills. When you start looking, the word dead goes behind 24 most of the bills that show up here. 25 Perhaps you could summarize what is the focus of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 the kind of discussion on you're down to 37 signed. But 2 how do you get at what is the kind of discussion that took 3 place in the Legislature over air quality? What kind of 4 themes were being raised in these different bills this 5 program session? 6 LEGISLATIVE DIRECTOR OGLESBY: Let me say a 7 couple of things on that point. There has been an 8 emergence of interest in air quality as a subject matter 9 within the Legislature. And I'm happy to say that most of 10 the bills that have been introduced in the past session or 11 two have all been aimed at improving air quality. 12 Now, there are differences on priorities, 13 resources, methods, and roles for those related to air 14 quality improvement. But as opposed to bills that seek to 15 shrink program authority or restrain regulation in terms 16 of air quality, by and large, the bulk of legislation that 17 deals with air quality matters is something that is well 18 intended and has a constructive approach. 19 The themes that have risen to the top over this 20 past year, greenhouse gas was an enormous issue. 21 Dominated much of the legislative discussion this year. 22 But there remains a lot of concern with traditional 23 conventional pollutants because they continue to be a 24 significant health threat and a concern to the 25 environment. There was a number of bills that were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 introduced that related to ports, goods movement, 2 particulate, and infrastructure because of the health risk 3 and the proportion of the air quality problems those 4 represent. 5 And then I guess the other mega-category I'd call 6 the bills related to alternative fuel or basically 7 petroleum reduction or ethanol and those types of bills 8 where you're dealing with a recognition that the fuels 9 related to global warming, conventional pollutant, and 10 have other supply issues that provoke a lot of the bills 11 to be introduced on the subject. 12 CHAIRPERSON SAWYER: Ms. Berg. 13 BOARD MEMBER BERG: On a follow-up question, what 14 do you see or do you have a feel for this coming 15 legislative year? It seems like we've have a banner year. 16 And certainly the work that is set out before us seems 17 to -- going to take a lot of resources, a lot of time. 18 Plus we have the SIP review. And so do you have a feeling 19 for what's going to happen in the new legislative year? 20 LEGISLATIVE DIRECTOR OGLESBY: I think two areas 21 stand out as areas that will continue, you know. The work 22 is not done, and there needs to be more deliberation, and 23 there's great interest in the Legislature. And two of 24 those issues continue to be the legislation relating to 25 emissions around the port. And because the Administration PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 is about to release its Goods Movement Action Plan and as 2 well as continued interest in the communities that are 3 affected by emissions around the port, I would expect that 4 the coming year will build upon the work that's being 5 done, the legislation that was introduced this past 6 session as well as the recommendations that are in the 7 Administration's Goods Movement Action Plans. So I would 8 expect that area to continue to be an area of a lot of 9 activity. 10 The other area that I would expect another crop 11 of legislation would continue to be alternative fuel 12 legislation. We've still have issues that are related to 13 conventional petroleum based fuels and both in terms of 14 pollution, greenhouse gas. But legislative interest is 15 very high in diversifying our petroleum, diversifying our 16 transportation fuel portfolio and also reducing the impact 17 on the environment and greenhouse gases and others. 18 BOARD MEMBER BERG: Well, there is a lot of 19 things on the burner. And I, for one, would like to say 20 congratulations and thanks for all the hard work. 21 LEGISLATIVE DIRECTOR OGLESBY: Thank you very 22 much. 23 CHAIRPERSON SAWYER: There is no public 24 testimony. 25 Ms. Witherspoon, do you have any additional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 comments? 2 EXECUTIVE OFFICER WITHERSPOON: Only wish us luck 3 in implementing all this. There are certainly times -- 4 and I would say one of the themes that this Governor 5 doesn't sign bills just to feel good about them and be 6 symbolic. If there's already statutes that address the 7 problem, he prefers to rely on existing law. 8 And we've had a Climate Action Team meeting 9 earlier this week. And one of the members around the 10 table said it sure would be nice if they would not pass 11 any more bills while we figured this one out. And someone 12 else joked, good luck with that. Because in a 13 term-limited Legislature, people are in a hurry to make 14 their mark and address the biggest issues of the day. 15 So although State law is replete with air quality 16 mandates and our dance card is full for the next three to 17 five years, there will be additional mandates proposed and 18 passed next year by the Legislature. And we'll just do 19 our level-headed best to keep up with all of them. And 20 Supervisor DeSaulnier soon to be an Assemblyman will be 21 the author of many of these. 22 SUPERVISOR DE SAULNIER: Just want to keep you 23 busy. 24 BOARD MEMBER RIORDAN: At least he will 25 understand both sides of the issue though, how much can be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 done and how fast. 2 SUPERVISOR DE SAULNIER: No. I'll forget that 3 very soon. 4 (Laughter.) 5 SUPERVISOR DE SAULNIER: And there will be no 6 funding associated with this either. 7 CHAIRPERSON SAWYER: Since this is not a 8 regulatory item, it is not necessary to officially close 9 the record. 10 Agenda Item 6-9-2. The next agenda item is a 11 report to the Board on the new climate change activities 12 that we will undertake pursuant to AB 32, the California 13 Global Warming Solutions Act of 2006. AB 32 charts a path 14 for California that others worldwide will watch closely. 15 The Board faces a significant task to develop an 16 implementation strategy that achieves cost-effective 17 greenhouse gas reductions, encourages technology 18 development, and maximizes benefits for California's 19 economy. 20 During this process, we must look outward and 21 join with similar initiatives underway in other states and 22 in other nations. We must accomplish this while 23 continuing to focus on our public health mission. We must 24 continue to push forward aggressively on this diesel risk 25 reduction, the Goods Movement Action Plan, the State PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 Implementation Plans for ozone and fine particulate, 2 public health research, and the full range of public 3 health initiatives. The next few years will be 4 challenging for the Board, the staff, and the stakeholders 5 who follow our work. 6 For the benefit of the audience, I would like to 7 repeat a few words from a letter that I sent to my fellow 8 Board members when it became clear an historic agreement 9 had been reached and AB 32 would become law. 10 "That the Air Resources Board has been given 11 the primary responsibility for carrying out the 12 Act reflects the confidence that both the 13 Governor and the Legislature have in our 14 organization. The record the Board has 15 established in dealing with California's air 16 quality problems has earned that confidence. I 17 am certain that you share my pride in being a 18 part of the Air Resources Board. This bill truly 19 places California at the forefront of dealing 20 with global warming. I look forward to working 21 with all of you as we've enter this new era." 22 Ms. Witherspoon, would you please begin the staff 23 presentation? 24 EXECUTIVE OFFICER WITHERSPOON: Yes. And thank 25 you, Dr. Sawyer. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 Tom Jennings and I had the opportunity to 2 participate directly in the negotiations on the language 3 of AB 32. And during that process, we worked very hard to 4 improve the clarity of the bill so that its implementation 5 would be as straight forward as possible. 6 That said, it is still a very complex piece of 7 legislation. And every stakeholder we've talked to so far 8 has lots and lots of questions about how the law will 9 actually work in the real world. Also while the overall 10 policies thrust of the bill is clear, many challenging 11 sub-policy issues will come before this Board that you'll 12 have to wrestle with and make decisions on as we move 13 ahead. 14 The guiding philosophy for staff is that 15 everything we do needs to make practical sense, needs to 16 improve rather than worsen the climate change problem 17 which is no small feat when you consider the phenomenon of 18 weakage to other states and nations, and needs to inspire 19 other states and nations to join our efforts. 20 While we are expert at controlling air pollution, 21 going our own way on this problem is not sufficient. 22 Reducing California's carbon emissions alone will not 23 solve the global warming problem. We have to design our 24 strategies to cross borders, and we need to act as part of 25 the global community. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 The technical work required by AB 32 builds upon 2 programs and capability ARB has developed over the past 3 several years. We know how to create and maintain an 4 inventory of emissions. We know how to prepare plans to 5 achieve emission reduction plan goals. We know how to 6 evaluate sources and sectors and determine cost-effective 7 strategies. And we know how to enforce our regulation. 8 AB 32 simply requires us to extend those 9 capabilities into the world of greenhouse gas reductions. 10 At the same time, AB 32 requires us to move into areas 11 that are totally new to staff and the Board. We need to 12 develop expertise on how greenhouse gas reductions are 13 calculated, verified, and traded, how those transactions 14 are ensured and enforced. We need to understand the 15 inter-workings of market-based compliance approaches that 16 have been applied elsewhere in the world. And we need to 17 learn how the electricity sector operates in great detail, 18 including its economic structure and all existing and 19 pending regulations. 20 The good news is there is a tremendous amount of 21 expertise around the world, and we're well positioned to 22 tap into that knowledge base. Other jurisdictions are 23 closely following California's work and are eager to help 24 us address these complex issues. Delegations from the 25 United Kingdom and Japan will be visiting us this fall, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 and others will follow. 2 The work of the Climate Action Team will also 3 continue and will give us crucial inter-agency sounding 4 boards to bounce our ideas and issues off of. So we're 5 definitely not alone in these efforts. 6 One of the most exciting aspects of AB 32 to 7 other countries in the world is that it envisions 8 greenhouse gas reductions after 2012. As many of you may 9 know, the Kyoto protocol expires in 2012, and the 10 international community is grappling with what happens 11 next. 12 AB 32 is a bellwether for them and suggests its 13 politically and technically and economically possible to 14 keep the momentum going. 15 So the baton is now yours, and the whole world is 16 watching to see how California runs this segment of the 17 race. The staff presentation will be made by Chuck 18 Shulock who is coordinating ARB's response and 19 implementation of the new law. Chuck. 20 (Thereupon an overhead presentation was 21 presented as follows.) 22 MR. SHULOCK: Good morning, Mr. Chairman and 23 members. 24 --o0o-- 25 MR. SHULOCK: In my presentation this morning, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 will provide some brief background on climate change and 2 California's response to this challenge and then outline 3 the Board's responsibilities for implementing the key 4 aspects of AB 32. I will also touch on the implications 5 for the Board of this major legislation. 6 A key theme throughout my presentation will be 7 our intent to reach out to local, state, national, and 8 international stakeholders. As Catherine mentioned, there 9 are many experts that we can learn from, and we are 10 already taking steps to do so. 11 --o0o-- 12 MR. SHULOCK: First, some background on AB 32 and 13 other recent activities related to climate change. 14 --o0o-- 15 MR. SHULOCK: In June of 2005, Governor 16 Schwarzenegger signed an Executive Order that put in 17 motion a number of activities that ultimately provided the 18 technical basis for the drafting and adoption of AB 32. 19 This slide identifies the ambitious greenhouse gas 20 reduction targets that the Governor presented in his 21 Executive Order. As you can see, the Executive Order 22 committed the state to reduce its emission to 2000 levels 23 by 2010, to 1990 levels by 2020, and to 80 percent below 24 1990 by 2050. These are very ambitious targets. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 MR. SHULOCK: On Tuesday of this week, the 2 Governor signed another Executive Order, S-17-06. This 3 Executive Order provides direction to Cal/EPA, the ARB, 4 and other State agencies regarding the implementation of 5 AB 32. The Executive Order affirms that the Secretary for 6 Environmental Protection shall be the statewide leader for 7 California greenhouse gas reduction activities continuing 8 the leadership role Cal/EPA played in the Climate Action 9 Team. 10 Another key provision is the establishment by the 11 Secretary of a Market Advisory Committee of national and 12 international experts to make recommendations to the ARB 13 on the design of a market-based compliance program. These 14 recommendations are to be provided by June 30th, 2007. In 15 addition, the Executive Order directs the ARB to 16 collaborate with the Cal/EPA Secretary and the Climate 17 Action Team to develop a market-based program with the 18 goal of allowing trading with the European Union, the 19 Regional Greenhouse Gas Initiative in the northeast 20 states, and other jurisdictions. 21 --o0o-- 22 MR. SHULOCK: Before delving into the specific 23 requirements of the bill, we thought it would be helpful 24 to outline for you some of the worrisome impacts of 25 climate change in California. This slide illustrates some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 highlights from the ever-growing body of evidence. As 2 discussed in previous staff presentations, California's 3 particularly vulnerable to the adverse impacts of climate 4 change. We plan to brief you at least twice a year on new 5 scientific developments relating to climate change as they 6 come along. 7 --o0o-- 8 MR. SHULOCK: This slide shows fossil fuel 9 consumption in the transportation sector is the single 10 largest source of climate change emissions in 2002 with 11 the industrial sector as the second largest source. 12 Electricity production from in-state and out-of-state 13 sources was the third largest source. All of these 14 sectors will be addressed in our program. 15 --o0o-- 16 MR. SHULOCK: As I mentioned earlier, the 17 Governor's initial Executive Order established the Climate 18 Action Team. This multi-agency team includes director 19 level representatives from a number of agencies including 20 the Public Utilities Commission, California Energy 21 Commission, Resources Agency, Business Transportation and 22 Housing Agency, Department of Food and Agriculture, 23 Integrated Waste Management Board, and the Air Resources 24 Board. The team is Chaired by the Secretary of Cal/EPA. 25 The Climate Action Team was charged with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 preparing a report that defines the actions necessary to 2 achieve the Governor's emission reduction targets. The 3 resulting report, which was the subject of several public 4 workshops, identified more than 40 strategies that 5 collectively demonstrate the feasibility of meeting these 6 targets. 7 The supporting economic analysis that was 8 performed indicated that collectively the strategies would 9 lead to an increase in California jobs and income, 10 primarily because several of the strategies reduced fuel 11 and energy consumption. This puts more dollars in the 12 pockets of consumers, which in turn are spent in ways that 13 stimulate the economy. 14 --o0o-- 15 MR. SHULOCK: As you may recall from previous 16 presentations, the ARB was designated as lead for a number 17 of the strategies recommended in the Climate Action Team 18 report as shown in the next two slides. You've already 19 adopted two of the strategies noted here with a check 20 mark. In addition to identifying the strategy, this table 21 also indicates the estimated greenhouse gas reduction 22 expressed in millions of metric tons of carbon dioxide 23 equivalent in 2020. We are currently refining our 24 emission reduction estimates for each of the strategies as 25 are the other agencies with strategies identified in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 Climate Action Team report. 2 --o0o-- 3 MR. SHULOCK: This table shows the remaining ARB 4 strategies identified in the report. As we go forward, 5 however, our evaluation of potential mitigation strategies 6 will not be limited to those identified on these tables. 7 Rather, as part of the program design, we envision 8 collaborating with local, national, and international 9 experts to identify additional options for technologically 10 feasible and cost effective reductions. As I will discuss 11 later in my presentation, we will evaluate whether a given 12 strategy is more effectively included under a market-based 13 mechanism as opposed to a more traditional command and 14 control approach. 15 --o0o-- 16 MR. SHULOCK: AB 32 established California as a 17 world leader in greenhouse gas reduction, but we are not 18 acting alone. This slide underscores the fact that there 19 are many efforts underway to address climate change at the 20 international as well as the national level. We are 21 already starting to meet with experts familiar with each 22 of these efforts, and we expect to continue to build on 23 these relationships throughout the design and 24 implementation of the program. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 MR. SHULOCK: The significance of California's 2 program has been recognized around the world. No doubt 3 you have seen the extensive media coverage, a few examples 4 of which are shown here. 5 --o0o-- 6 MR. SHULOCK: Now I will move on to discuss the 7 major provisions of AB 32. First, it places into statute 8 the 2020 target date for reducing emissions to the 1990 9 base line level. Thus, at the broadest level, AB 32 10 reaffirms the vision outlined in the Governor's 2005 11 Executive Order. 12 Second, AB 32 places significant responsibility 13 with the ARB for the design and implementation of the 14 program while underscoring the need for close 15 collaboration with national and international 16 stakeholders. 17 Third, AB 32 recognizes the importance and 18 continuing role of the Climate Action Team in developing 19 and implementing an effective program. 20 --o0o-- 21 MR. SHULOCK: There are numerous milestones 22 identified in the bill beginning in January 2007 and 23 continuing for the next several years. The key dates are 24 outlined here. 25 In January 2007, ARB assumes responsibility for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 the operation of the statewide greenhouse gas emission 2 inventory. 3 By June 30th of 2007, ARB must publish a list of 4 what are called discreet early action. I will discuss 5 this more in a moment. 6 By January 1 of 2008, ARB must adopt regulations 7 for mandatory reporting of emissions and formally adopt 8 the 1990 base line level that will be used as the 2020 9 target. 10 The heart of the bill is the January 1, 2009, 11 scoping plan of reduction strategies. We then must adopt 12 regulations to implement the reduction measures identified 13 in the list of early actions and in the scoping plan. For 14 all of these milestones, we will reach out to stakeholders 15 through a broad range of approaches, including public 16 workshops. 17 --o0o-- 18 MR. SHULOCK: The first product that we plan to 19 bring to you in June of 2007 is a list of discrete early 20 actions. The purpose of this list is to identify actions 21 that are feasible to implement in the near term, thereby 22 delivering reductions prior to implementation of the 23 broader program. We expect the measures on the early 24 action list would address sources not closely tied to 25 potential market-based mechanisms. The regulatory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 strategies on this list will be brought back to the Board 2 at a later date as rule making items for consideration to 3 be enforceable by January 1 of 2010. 4 --o0o-- 5 MR. SHULOCK: The next near-term item to be 6 brought before you prior to January 2008 will relate to 7 emission inventory and mandatory reporting. A rigorous 8 inventory is critical to measuring progress towards the 9 target and also is needed to support the design of any 10 market-based program. 11 AB 32 directs the ARB to formally establish the 12 1990 base line level. This limit will define the total 13 reductions needed to reach the target, as well as serve as 14 a guide to monitor our progress as the program is 15 implemented. Equally important to the inventory is the 16 establishment of a mechanism for facility emissions 17 reporting. Reporting protocols developed by the 18 California Climate Action Registry will be used to the 19 maximum extent feasible. As part of this effort, the 20 largest emission sources will be folded in first with 21 others following in subsequent periods. 22 --o0o-- 23 MR. SHULOCK: As mentioned earlier, a key 24 requirement of the bill is the need to develop a plan by 25 January 1, 2009, to serve as a blueprint for achieving the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 maximum technologically feasible and cost effective 2 reductions. The plan will describe the mix of measures 3 that ARB proposes to use to achieve the reductions, 4 including direct emission reduction measures, market-based 5 compliance mechanisms, and potential monetary and 6 non-monetary incentives. 7 One issue that will need to be carefully 8 considered is how best to combine direct reduction 9 measures and market-based measures into a comprehensive 10 overall program. A crucial element in developing this 11 plan will be close coordination with local, national, and 12 international experts. This will be critical to ensure 13 that the program that is developed can interact with other 14 programs in other jurisdictions creating a path for future 15 trading. 16 We also will consult closely with the PUC and the 17 Energy Commission, given their expertise in the energy 18 sectors, which will play a key role in any efforts to 19 reduce greenhouse gas emissions. The plan also must 20 include a thorough assessment of the impact of any 21 potential strategies on California's economy as well as on 22 the environment and public health. 23 --o0o-- 24 MR. SHULOCK: Other State agencies will also have 25 a major role in making progress towards the targets. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 Executive Order issued by the Governor on Tuesday provides 2 clear direction on the significant role of the Climate 3 Action Team as the program is designed and implemented. 4 --o0o-- 5 MR. SHULOCK: One key goal for AB 32 6 implementation is to achieve the necessary reductions at 7 the least cost. Market-based mechanisms properly designed 8 can provide an efficient means for achieving substantial 9 emission reductions. The key role of market-based 10 mechanisms with respect to the overall program was further 11 underscored by the Governor in the Executive Order he 12 signed on Tuesday. 13 The bill defines market-based mechanisms as a 14 system of market-based declining annual aggregate emission 15 limits or as greenhouse gas emission exchanges, banking, 16 credits, and other transactions that result in the same 17 reduction as direct compliance. ARB will consider a broad 18 range of market-based strategies for integration into the 19 program, including trading of emissions both within as 20 well as outside the state, provided that rigorous 21 verification standards can be met. 22 --o0o-- 23 MR. SHULOCK: The bill provides clear direction 24 on the parameters for any market-based mechanism that is 25 developed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 First, the reductions must meet rigorous 2 verification requirements as indicated in the first 3 bullet. In short, they must be real. 4 Second, as I've previously indicated, we must 5 closely collaborate with the PUC given the important role 6 of the electricity sector in the program. 7 Third, we must design the program to avoid or 8 minimize leakage, which is the transfer of emissions to 9 sources outside the state. A program that causes 10 businesses to move out of state would be a failure on two 11 counts. There would not be a net reduction in greenhouse 12 gas emissions, and California would lose the jobs and 13 income associated with the business operations. 14 --o0o-- 15 MR. SHULOCK: We must also ensure that a 16 market-based program does not create localized impacts or 17 hot spots of elevated exposure or risk at the community 18 level. This is consistent with the Board's longstanding 19 commitment to environmental justice. 20 The effort is to be done in tandem with our 21 historic smog reducing programs so that our greenhouse gas 22 reduction efforts do not lead to an increase in criteria 23 or toxic pollutants, but rather lead to continued progress 24 on those fronts. Finally, we are to design the program 25 such that it maximizes the environmental and economic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 benefit for the state. 2 --o0o-- 3 MR. SHULOCK: The bill outlines a number of 4 criteria to be considered in the various rulemakings. The 5 regulations developed under the program are to be 6 transparent and fair. They must minimize cost as well as 7 promote early actions, including voluntary measures. 8 The regulations must be designed so that they do 9 not lead to disproportionate impacts on low income 10 communities. We're also to structure the program to 11 appropriately credit organizations for early reductions 12 that are taken. And as I mentioned earlier, the program 13 is to compliment our historic efforts to address air 14 pollution. 15 --o0o-- 16 MR. SHULOCK: This slide identifies further 17 direction concerning the regulations developed under the 18 program, where to consider cost effectiveness and overall 19 society benefits, minimize administrative burden, and 20 consider the significance of specific sources and source 21 categories. 22 --o0o-- 23 MR. SHULOCK: Other provisions of the bill 24 discuss its impact on the existing authority of various 25 agencies. The bill has no effect on the authority of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 PUC or on the obligation of utilities to provide customers 2 with safe and reliable electric service. The ARB and the 3 PUC will collaborate closely as the program is developed. 4 The bill does not change the authority of local air 5 pollution control districts. However, it does give ARB 6 the authority to collect fees to administer the program. 7 --o0o-- 8 MR. SHULOCK: There is also a specific mention of 9 motor vehicles. The regulations that your Board adopted 10 in September 2004 pursuant to AB 1493 represent almost 20 11 percent of the reductions needed to meet the 2020 target. 12 AB 32 provides that if that regulation is found to be 13 invalid, the ARB shall achieve an equal reduction through 14 alternative regulation of mobile sources. 15 --o0o-- 16 MR. SHULOCK: Staff has identified a number of 17 goals for our efforts. First and foremost, we seek to 18 create a model that meshes with programs underway in other 19 jurisdictions and other states and nations can copy. This 20 will provide an environment that allows for efficient 21 trading, therefore maximizing reductions at the least 22 cost. 23 The program is also to be structured to 24 facilitate efficiency and business expansion, including 25 the development and export of a broad spectrum of highly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 efficient technologies. Another key goal is to promote a 2 win-win environment where the emission reduction 3 strategies not only reduce greenhouse gases but also 4 criteria and toxic pollutants. And of course, one goal is 5 to meet the 2020 target. The bill also specifically 6 directs the ARB to make recommendations to the Governor 7 and Legislature on how to continue reductions beyond 2020. 8 --o0o-- 9 MR. SHULOCK: Now I will make a few brief 10 comments about efforts to hit the ground running given the 11 major tasks before us. 12 --o0o-- 13 MR. SHULOCK: It's fair to say that we're sobered 14 by the magnitude of the challenge. But we are also 15 energized by this new role and are already putting our 16 team in place. We're also working on a budget proposal to 17 provide additional resources for this work in the next 18 budget cycle. 19 We're developing an overall implementation plan 20 that will ensure that our development efforts are 21 transparent and allow for ongoing participation by 22 stakeholders, including meetings and workshops. 23 One key element in our effort is the need to 24 closely collaborate with other Cal/EPA boards and 25 departments, as well as other agencies including the PUC PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 and the CEC. These efforts have already begun. We have 2 also begun discussions with the California Climate Action 3 Registry on areas relating to emission reporting. 4 We also recognize the need to learn from national 5 and international experts that have related experience. 6 For example, we are already coordinating with 7 representatives from the UK, other EU representatives, and 8 experts at the U.S. national level. There's been a 9 tremendous amount of work done on these issues around the 10 world, and we have a significant opportunity to learn from 11 the other programs. The early indications are these 12 experts recognize the importance of what's transpiring 13 here in California, and they're more than willing to 14 provide their insight and assistance. 15 --o0o-- 16 MR. SHULOCK: The Executive Order that the 17 Governor signed on Tuesday provides additional direction 18 concerning the development of a market-based mechanism. 19 Specifically, it calls for the establishment a Market 20 Advisory Committee consisting of national and 21 international experts to make recommendations to the ARB 22 on the design of the market-based compliance mechanism. 23 As I mentioned earlier, the Committee is to make its 24 recommendations by June 30th, 2007, allowing sufficient 25 time for their consideration prior to ARB's development of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 the 2009 program blueprint. 2 In addition, AB 32 requires that ARB establish 3 two advisory committees to provide input during the design 4 and implementation of the program: One to address 5 environmental justice issues, and one for environmental 6 and technology advancement. 7 A key theme I've mentioned repeatedly is to 8 develop a program with the capacity to handshake with 9 other states and nations, therefore promoting the greatest 10 efficiency and lowest cost means for achieving the 11 reductions. 12 A point that cannot be overstated is the 13 direction in the bill as well as our acknowledgement of 14 the importance of reaching out to local, national, and 15 international stakeholders. We believe that collaboration 16 with these stakeholders is key to the development of an 17 effected program. 18 --o0o-- 19 MR. SHULOCK: With respect to the Board, AB 32 20 places you in a new arena. The development of a broadly 21 based greenhouse gas reduction program will require 22 consideration of new issues and collaboration with new 23 sets of national and international stakeholders. 24 From a workload standpoint, we will be bringing 25 to you a number of rulemaking items over the next several PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 years. We also will from time to time schedule 2 informational items to provide additional background on 3 key issues and concepts and bring you up to speed on the 4 results of our outreach and consultation work. 5 Successful implementation will require us to 6 build on our historic model of inclusion. For this 7 program, stakeholders will have very strong and likely 8 divergent opinions. We will aim to hear from each of them 9 to understand their recommendation as well as their 10 concerns. 11 This program clearly places the Board in a 12 national and international leadership role on climate 13 change issues. It, thus, will expand the Board's already 14 significant role and recognition. 15 Finally, as we begin to move forward, 16 stakeholders will carefully track all of our actions in an 17 effort to anticipate the direction that the program is 18 likely to take. 19 --o0o-- 20 MR. SHULOCK: In summary, the bill is a major new 21 initiative with new responsibilities directed at achieving 22 an ambitious emission reduction target. A successful 23 program will be one that can handshake with other states 24 and nations to provide a means for the least cost approach 25 for achieving emission reductions. And market-based PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 mechanisms will be an important component. 2 --o0o-- 3 MR. SHULOCK: It is clear that we must reach out 4 to experts throughout the world and work closely with them 5 throughout the program design and implementation. There 6 are a number of milestones over the next few years that 7 require that we hit the ground running. As such, we're 8 already assembling our team. 9 But it is also essential that these efforts do 10 not interfere with or detract from our long-standing 11 charge to effectively address criteria and toxic air 12 pollutants. That concludes my presentation. Thank you. 13 CHAIRPERSON SAWYER: Thank you very much, Mr. 14 Shulock. 15 Are there questions from the Board? 16 BOARD MEMBER RIORDAN: Mr. Chairman, I want to -- 17 CHAIRPERSON SAWYER: Ms. Riordan. 18 BOARD MEMBER RIORDAN: I want to congratulate you 19 on a very succinct report. And it's very helpful for us 20 to know what we are to anticipate in terms of working 21 through the next few years. 22 One of the things that I think is very 23 important -- and I only want to share this -- and that is 24 as a member of the Climate Action Registry Board and just 25 for the information of some of you in the audience, this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 was an early action by the Legislature and Governor Davis 2 I believe to begin on a voluntary basis to ask for 3 companies, businesses, and a whole host of others, because 4 cities have volunteered, municipal districts have 5 volunteered to record their greenhouse gases and the 6 reduction. 7 And what I took away from the few times I met 8 with the volunteered companies is just that they are 9 looking for opportunities to be sure that the measurements 10 are the same in California as they might be in other 11 locations because many of these companies are 12 multi-jurisdictional. In fact, they are doing business in 13 some cases worldwide. 14 So I would encourage and appreciate your interest 15 and collaboration. But to talk to some of those companies 16 that have already volunteered and registered so that 17 you'll understand some of the idiosyncrasies that they 18 have faced and that we can kind of smooth through some of 19 those things that they've already learned. I think that 20 would be really helpful. 21 And I'm impressed by some of their efforts. They 22 have been, Mr. Chairman, very significant on a voluntary 23 basis. And I think we can learn from them. I mean, I 24 know we have a whole host of people to talk to. But these 25 who have actually done it are probably some of the best to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 interview early and work with early. 2 EXECUTIVE OFFICER WITHERSPOON: Ms. Riordan, I 3 wanted to let you know Lynn Terry and her staff are 4 heading up the emission inventory effort, and if she would 5 just take a moment and describe some of the early steps we 6 are taking to coordinate with all of the participants in 7 the registry, the registry itself, and national bodies. 8 DEPUTY EXECUTIVE OFFICER TERRY: Well, we are 9 trying to hit the ground running, as Catherine suggested. 10 And the first step really has been to establish those 11 working relationships at the staff level with registry 12 staff and others that have been working with the voluntary 13 participants. 14 So, in fact, Linda Murchison was in Washington, 15 D.C. last week meeting with the multi-state registry. 16 California Registry was a very active participant in the 17 process. 18 So we've had several meetings in the last two 19 weeks to really start to establish these relationships, 20 initiate the transfer of the inventory from the Energy 21 Commission. We, of course, want to work on an ongoing 22 basis with them as well, the PUC, all of the agencies 23 mentioned in Chuck's presentation. 24 So since the passage of the bill, we have 25 actually spent about a month initiating those contacts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 So a lot of work to do. But we're very encouraged by the 2 spirit of those other agencies staff to want to work with 3 us and really create a partnership which is really 4 important because we're early in the learning curve. 5 BOARD MEMBER RIORDAN: And I appreciate that. 6 But it's the companies that are the ones that I think are 7 going to be really most helpful to you initially. So, you 8 know, the Hewlett-Packards and, you know, the really big 9 companies. And they can give you a lot of information and 10 support. 11 DEPUTY EXECUTIVE OFFICER TERRY: That's great 12 advice. And we will work through the registry staff to 13 contact those folks. 14 CHAIRPERSON SAWYER: Mayor Loveridge. 15 BOARD MEMBER LOVERIDGE: I think the big table 16 point that Barbara makes is well taken. Let me make a 17 couple quick comments and then a couple of ideas. 18 Sort of in local politics we talk about KISS, 19 keep it simple, stupid. But this is the absolute flip 20 side of that. Political science, we often talk about 21 policy being incremental, piecemeal, and so forth. But 22 again, what's before us is again the flip side of that, 23 complex and comprehensive and systematic. 24 But a couple of kind of thoughts I would just 25 offer. One of the things which you do at the beginning of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 each of our meetings is try to tell us where research is. 2 I think we should have at least occasional updating of the 3 research on global warming and particularly as it effects 4 the state of California. I think it would be helpful so 5 this doesn't simply seem as some sort of complex policy 6 matter, but also to underscore the kind of scientific 7 research which is responsible for this really 8 extraordinary initiative. 9 The other is the question of tracking and 10 transparency. I think it would be helpful if there were 11 kind of a regular -- wouldn't necessarily be too lengthy. 12 But I think there ought to be some regular reporting of 13 this at every Board meeting, at least at some aspect about 14 it so we keep that not something that occasionally shows 15 up, but as a regular part of what we do. So I offer those 16 two ideas. 17 CHAIRPERSON SAWYER: Ms. Kennard. 18 BOARD MEMBER KENNARD: Thank you. 19 Congratulations to progress thus far and good luck with 20 the challenge ahead. 21 I have three questions, the first relative to 22 funding. I think you've fundamentally answered how this 23 is going to be funded through fees and ultimately 24 hopefully through additional budget. Do you have a sense 25 of what that budget might be and in contrast to what the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 current ARB budget is? I mean, is it 50 percent more? 2 What kind of resources are -- 3 EXECUTIVE OFFICER WITHERSPOON: We're estimating 4 on the order of 10 percent more. We're at a staffing 5 level of a thousand. And as the bill was taking final 6 shape and going to the Governor's desk and we were doing 7 press interviews, we estimated on the order of 100 new 8 staff with some degree more, plus contract funds to do the 9 technical work. 10 We are preparing a more detailed budget change 11 proposal, though we're not allowed to speak openly about 12 it until Finance and Governor's office have reviewed it. 13 And they will issue on January 10th what the Governor's 14 overall proposal will be. And again, many more agencies 15 are involved. So the ultimate ticket will be more than 16 just the Air Resources Board's needs. 17 With respect to the fee mechanism, that is 18 certainly in the bill, and it's discretionary. The 19 Governor wished it was not there. He asked the speaker to 20 remove it, and the speaker refused. Because the Governor 21 had in prior forums indicated his personal view that 22 industry's burden was to control their emissions and it 23 was the State's, the citizens' burden to support the 24 scientific side, the governmental side because this is an 25 international challenge and not to be borne entirely on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 the back of businesses. 2 So there will be a tussle in the Legislature of 3 how much of the resource needs to be drawn from special 4 funds and other parts of the budget and how much will have 5 to come from fees. But we are following sort of the 6 Governor's preferences in this opening proposal to use 7 special funds at least to get launched. Because even if 8 we wished to use fees immediately or if he wishes to, we 9 need to set up a mechanism of collection. We need to get 10 into mandatory reporting before we would be able to. So 11 no matter what, we need start-up funds out of the state 12 budget. 13 BOARD MEMBER KENNARD: The somewhat companion 14 question is the focus on the market-based mechanism. In 15 the bill, are there any -- I think, Chuck, as you 16 describe, and control mechanisms? Are there penalties? 17 Do we have the regulatory ability to impose penalties? 18 EXECUTIVE OFFICER WITHERSPOON: The entire slate 19 of air quality penalty applies to the provisions of AB 32. 20 And we urged the author and the sponsors not to create 21 separate penalties, because we are experienced with 22 administering the ones that we have and the burdens of 23 proof and the way of presumptions work and the rest of it 24 and that they would be sufficient. If we find out later 25 that not through -- one of the other things they were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 interested in is penalties integral to specific rules such 2 that they weren't just our conventional so many dollars 3 per days of violation, et cetera, but were you to violate 4 a credit provision that you lost emission allowances in 5 the following year. Those are design questions to be 6 added to the deliberation on how you build the 7 architecture of markets. But we didn't want those 8 prejudged in the bill itself before we had a time to 9 explore them. 10 BOARD MEMBER KENNARD: Thank you. 11 And my final question relates to how do the local 12 air districts, if at all, participate in the program 13 design and implementation, enforcement, et cetera? 14 EXECUTIVE OFFICER WITHERSPOON: I knew someone 15 would ask that question. Expected it to be an air 16 district member. 17 The bill does not have a clear role for air 18 districts, though they certainly were active in the 19 deliberations and propose to all parties that they had 20 skills to share with respect to emission inventories and 21 with respect to on-site inspections. And so we have been 22 talking to CAPCOA, and we have several more meetings 23 scheduled on how we might work together. 24 One of the features of international reporting 25 programs is that they rely on third-party verifiers to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 affirm what the emissions are before they're entered into 2 data records. And there is a certification process to 3 become a verifier. We would like to see all the air 4 districts become verifiers if they choose to do so. And 5 to collect those fees, it's on the order of 20,000 per 6 report. Although at the moment, it's at the option of 7 businesses who to select to be their verifier. 8 We also talked about under existing law the 9 Energy Commission was to have conducted occasional audits 10 of the reports submitted to the Registry. They were never 11 funded to do so. So we are exploring whether through our 12 funding we can contract with air districts to conduct 13 audits on our behalf of the stationary facilities in their 14 jurisdictions. 15 We've also talked to air districts about their 16 role in advancing the United Nations initiative, to sign 17 up Cities and Counties and other municipal governments on 18 sort of local from the bottom up that we're going to 19 change the world, you know, one town at a time. And 20 they're very interested in those activities. And many are 21 already hosting educational forums for local government. 22 But we talked about where they might derive 23 funding to expand on those efforts and also how we all 24 might do a better job of communicating what the most 25 important steps to take are, what gives you the most PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 return for your investment. Because there's quite a lot 2 of symbolism going on in addition to real strategies, and 3 we would like to, as good scientists, identify where you 4 get the biggest bang for your buck and lead people in 5 those directions. 6 That's our preliminary list, and we'll keep 7 talking -- one other thing. To the extent that any of our 8 regulations market structures effect operation on a plant, 9 there may need to be adjustments to permits. And so we've 10 discussed front-of-the-cue possibilities. We don't know 11 the magnitude of new permitting that might be needed, what 12 other requirements could be triggered. Industry has come 13 to us anxious that CO2 requirements will push them into 14 new source review, trigger other requirement. We don't 15 know the extent to which that will be true. But if it is, 16 we'll need to work out sort of stream lining provisions 17 with air districts. Get that done. 18 CHAIRPERSON SAWYER: Thank you. 19 I'm pleased to note that Secretary Adams has 20 joined us this morning to present her views on the Global 21 Warming Solutions Act and the challenges that lie ahead. 22 Secretary Adams has a long and distinguished career in 23 State service, most recently and currently as head of the 24 California Environmental Production protection. She 25 joined the Schwarzenegger administration in May of this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 year and immediately was involved in the negotiations on 2 AB 32. She spent her first several months on the job 3 working almost exclusively on this issue. The value of 4 her efforts are evident in the final bill. Secretary 5 Adams was instrumental in achieving consensus language 6 that the Legislature could be proud of and which the 7 Governor could sign. 8 Ms. Adams, welcome to the meeting of the Air 9 Resources Board. And thank you very much for being here 10 today. We look forward to working with you in the months 11 and years ahead. 12 CAL/EPA SECRETARY ADAMS: Thank you, Bob. Thank 13 you very much, Dr. Sawyer. And thank you for the 14 invitation to appear before the Board this morning. This 15 is my first opportunity to meet some of you. Some of you 16 I've known a long time and very well. But I appreciate 17 this opportunity. 18 I just want to take a few minutes of your time to 19 talk about AB 32 and the Executive Order that the Governor 20 issued earlier this week. And I want to assure you that 21 the Governor is very, very excited about this opportunity 22 that puts California in the forefront of reducing 23 greenhouse gas emissions. This is truly an historic 24 effort. And you know, we're hearing from counties and 25 states all over the nation. And we're truly being watched PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 by the whole world on this effort and they're cheering us 2 on. 3 And of course much of the responsibility falls on 4 the California Air Resources Board to implement AB 32. 5 The Legislature and the Governor puts the great deal of 6 faith in the Air Board. You are a world-class 7 organization. 8 And I want to also take this opportunity to thank 9 Dr. Sawyer and Catherine Witherspoon and Tom Jennings for 10 all the hours they put in, many, many hours actually 11 drafting some of the final versions of AB 32. So thank 12 you very much. 13 And of course, this is a tremendous opportunity 14 and a huge challenge for all of us. And we all know that 15 there are many efforts underway among the various State 16 agencies. Of course, the Public Utilities Commission, the 17 Energy Commission, State and Consumer Services Agency, 18 they'll have a role to play. And the Governor has asked 19 me through the Executive Order that he just signed to 20 continue my role to coordinate efforts among State 21 agencies in reaching our goals. 22 Also the market component is hugely important to 23 the Governor. I think that was made clear during the 24 negotiations on AB 32. And the Executive Order also asked 25 me to convene an Advisory Committee of national and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 international experts to advise the Board on a market 2 approach. Because ultimately it's the job of the Air 3 Resources Board to do the rulemaking and design a market. 4 I was very fortunate to be able to go to New York 5 earlier this week and actually meet with my counterpart, 6 Denise Sheehan, in New York. And we were able to brief 7 Governor Schwarzenegger and Governor Pataki about the 8 efforts of the registry initiative, the eight states 9 initiative on the east coast, and how we might design a 10 market that we could join in with trading with the eastern 11 states. And I'll pass that along to the Air Board, and I 12 very much would welcome your close participation in the 13 advisory Committee. 14 We also were able to tour the Credit Suisse 15 trading floor. That was fascinating. There's billions of 16 dollars of carbon trading going on right now. And I plan 17 to ask a Credit Suisse expert to join us on that Advisory 18 Committee. 19 So I appreciate the efforts of the Board. And 20 you have a huge job ahead of you. And I will be here to 21 support those efforts and work closely with the Board. 22 Thank you very much. 23 CHAIRPERSON SAWYER: Thank you very much, 24 Secretary Adams, for coming this morning. 25 Would you answer some questions if Board members PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 would like to? 2 Well, I want to thank you for the job that you 3 have ahead of coordinating the other State agencies so 4 that we can all work together. That's a big task, and we 5 appreciate your taking that on. 6 CAL/EPA SECRETARY ADAMS: Thank you. 7 CHAIRPERSON SAWYER: Ms. D'Adamo. 8 BOARD MEMBER D'ADAMO: I was just going to say 9 the same thing. It is a big task. But if anyone can do 10 it, I know you can from years of working with you at the 11 Legislature and the previous administration. You have 12 some ability to bring parties of diverse perspectives 13 together and somehow come out with a solution. So look 14 forward to working with you on this. And congratulations 15 for a job well done in the negotiations. 16 CAL/EPA SECRETARY ADAMS: Thank you very much. 17 CHAIRPERSON SAWYER: Thank you very much for 18 joining us this morning. We'll continue the Board 19 comments, Supervisor DeSaulnier. 20 SUPERVISOR DE SAULNIER: Thank you, Mr. Chairman. 21 Sorry I won't be here for all of this to add to 22 your workload. I want to make these questions and 23 comments sort of as I go towards my last meeting. And 24 we'll go back to slide 25, since, Catherine, you gave me a 25 glance when we looked at this. And my only -- while this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 is very exciting, I think my experience here on the Board 2 and as we've reached our other challenges particularly 3 around smog, I remember your predecessor telling me some 4 years ago that some of the concerns around air quality and 5 the ability to reach federal attainment was going to go 6 away based on technology and improvement of the fleet. 7 And I would argue with him occasionally that I thought 8 land use and transportation societal changes would 9 continue to be important. And low and behold, here we 10 are. So maybe, Catherine, you could just talk about a 11 little bit of the things that we talked about last night 12 some of the provisions visive what Caltrans or CTC might 13 look at. 14 And specifically when I talk about our 15 challenges, and picture is very appropriate, is the 16 continued of growth of vehicle miles traveled in the 17 United States and in this country, VMT, and the continued 18 pressure on local government, those of us who are in local 19 government, to insist on local control over land use. And 20 then having served a decade on a metropolitan planning 21 organization, the Metropolitan Transportation Commission 22 in the Bay Area and the continued pressure particularly in 23 California to expand capacity for mobile sources, that I'm 24 just concerned as we go down this road that we follow the 25 technological path. But we don't become so determined PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 that technology will find our way out of this. That 2 ultimately there is a very real belief by many of us there 3 will have to be societal changes as well. And that will 4 go to the other issues, particularly VMT and VMT 5 reduction. 6 So maybe you can talk about specifically some of 7 the challenges that you both are part of the legislation 8 and how we're going to coordinate both with Caltrans, 9 California Transportation Commission and area MPOs. 10 Before you start with that, I did want to mention 11 in terms of air districts, the Bay Area Air District is 12 very involved. We actually have a very large event on 13 November 10th that the principle speaker will be former 14 Vice President Gore in the Bay Area. And it's going to be 15 hosted by Mayor Newsom. There's a lot of activity, and I 16 think the coordination with the air districts and with the 17 MPOs as we go forward is going to be very important. 18 And lastly, of course, local government has been 19 very involved. ICLEI, based in Berkeley I believe, 20 they've got literally hundreds of local government as 21 you've referred to, members. And a lot of us have adopted 22 guidelines in local government already. But that is just 23 background, more to the question on slide 25. 24 EXECUTIVE OFFICER WITHERSPOON: Well, I'm not 25 going to speak to the words here, because they're about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 ARB's surrogate regulation if we lose the first, they've 2 adopted -- but the picture about the cars. And I think 3 what you're getting at is in the Climate Action Plan 4 adopted before AB 32 was proposed in the Legislature, we 5 showed you the table of ARB measures. There were also 6 tables for every other State agencies with jurisdictions 7 including forestry, Business, Transportation, and Housing, 8 CEC, et cetera, that contain their commitments, their 9 policies, their programs that would result in a million 10 metric tons of CO2 reductions. And BTNH committed in that 11 plan to accomplishing 27 million metric tons of reductions 12 out of the transportation sector by 2020. And that's on 13 the order of the emission reductions coming from the 14 Pavley reg for motor vehicles. 15 And at the time, that calculation was based on 16 their aspirations for reducing BVT through affordable 17 housing programs, Go California, Smart California. They 18 have multiple slogans. But it all came down to smart 19 growth. And they are now going back through their 20 analysis and also through the sort of mechanical 21 evaluation of that, how would it actually be achieved 22 assuming first they've got the VMT, vehicle miles 23 traveled, calculations right given they don't have direct 24 power over the MPOs to order these changes. How can they 25 bring them about? Do they need an enticement of funding, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 or are there other ways they can get at this metric? 2 I don't think the transportation strategies are 3 going to end up in the market, per se. I think they're 4 going to be a stand alone achieved. I don't know if 5 they'll deliver as many tons as was originally hoped. It 6 was a very, very ambitious. But certainly any help that 7 anyone can bring to those transportation agencies would be 8 well appreciated. 9 The other thing Caltrans will be pressed to do 10 early is address cement and the inherent CO2 emissions 11 that come from cement production, particularly if the 12 bonds pass and California moves into dramatic increases in 13 transportation projects. It's already on the table. The 14 amount of tons it delivers depends on how much maintenance 15 and building is going on. Cementing roadways is really 16 only 5 percent we've learned of total use of cement. Most 17 of it's in tilt-up buildings. Though apparently some of 18 the greatest resistance to changing cement specifications 19 is in the transportation sector for all kinds of reasons. 20 So that's another thing that transportation agencies will 21 be wrestling with on a technical side. 22 Does that answer your question? 23 SUPERVISOR DE SAULNIER: You know what my point 24 is. I just think for the Board and to Chuck the 25 technological aspects will drive a bunch of this both PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 economically and I think both in terms of policy. But 2 using our situation on other criteria pollutants, our 3 struggle for technology to keep up with growth in 4 particulate vehicle miles traveled. So even in the best 5 of worlds, I think historically we have been shy in 6 California both in the Legislature and on boards and 7 commissions to delve in that third rail of local 8 government local policy land use decisions. And I 9 personally think it's been a mistake much to the chagrin 10 of many of my colleagues in local government. 11 But I think as the Board goes through this, I 12 know it's a delicate balancing act, and I know technology 13 will drive it at first. But given that it's appropriately 14 placed here and there's been discussion, I think we 15 shouldn't avoid it either, that we should engage in those 16 discussions. And as California has been a leader around 17 the world in many things, having been to China and seeing 18 how much they want to grow and how popular buying cars 19 there is now and their demand to develop capacity in terms 20 of freeways, their entrance into vehicle miles traveled is 21 the same issues, even though their cars may be more 22 efficient in terms of fuel efficiency, I think we should 23 set an example we are going to change that. So perhaps 24 there will be some direction from down the street in that 25 regard. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 MR. SHULOCK: I have a follow-up point on the Bay 2 Area District. Two weeks ago, I attended a meeting of the 3 CAPCOA planning managers up in Lake Tahoe, and some 4 representatives from the Bay Area made a presentation on 5 their program in this upcoming event that you mentioned in 6 November. And I thought there was a great deal there that 7 would be of interest to us. So I actually asked if they'd 8 be willing to come up following their event when all this 9 material could be public, if they could come up and brief 10 our management team. And they were very interested in 11 doing that. So we're going to be scheduling a meeting for 12 that later on in November. 13 CHAIRPERSON SAWYER: Ms. Berg. 14 BOARD MEMBER BERG: I feel a little bit quiet 15 today. Because as I listen to all of this, I'm feeling a 16 little bit overwhelmed. And as I take a look at slide 17 number 7 -- and once again, coming from industry and 18 realizing how again industry needs to step up to the plate 19 and then looking at electrical power and the 20 transportation, it occurs to me that so much of this is 21 also driven by marketing and consumers. 22 And yet I know just as Supervisor DeSaulnier 23 mention, the society changes that are needed -- and one 24 anecdotal story. As I was sitting at my doctor's office 25 at the reception desk ready to pay my bill, and there was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 a buzzing sound that was right next to their little 2 feng-shui water. And I'm thinking I'm watching this. I 3 see this water, and I'm going, what's the buzzing sound? 4 Well, it was electrical plugged in. And I said that's 5 ironic that we have this feng-shui water going, and it's 6 taking electricity. 7 So as consumers, somehow I think that we need to 8 get more information out about consumer choices. And our 9 choices all small that somebody might say so what, it's 10 just a little fountain, it makes a difference. And we've 11 got to keep getting the word out to people that these 12 choices to plug into electricity, everything we plug in 13 has an effect. And so however we can help, I would 14 encourage putting that piece in as well. 15 EXECUTIVE OFFICER WITHERSPOON: You are 16 absolutely right. And one of the things we went looking 17 for before AB 32 were carbon calculators for use by just 18 individuals to understand the magnitude of the choices 19 they made everyday. And they're not that easy to find. 20 We have to actually create some that tell you the 21 difference between turning off the light in the conference 22 room before you leave, not keeping your computer in the 23 sleep mode, but turning it all the way off, not having the 24 feng-shui thing, and all the rest of it, so people 25 understand and can set little contests with themselves. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 On a bigger scale, somewhere while we're working 2 furiously on these early deliverables, we need to start 3 the dialogue about what a low carbon society looks like. 4 Because we're going for an 80 percent reduction by 2050. 5 So technology can take us most if not all the way there in 6 2020, but we really have to transform sort of behavior and 7 styles of living as we go to the ultimate objective. 8 BOARD MEMBER BERG: Well, I couldn't agree more. 9 And I think that's why we need to pursue the market-based 10 approach. Education is only going to take us so far. I 11 look back during the energy crisis that we had a few years 12 ago and how the climate in this room was different than 13 what it is today. We came together during a short period 14 of time, but then we went back quickly to our old ways. 15 And I think that conservation programs when they're 16 incentivized properly through the utilities, et cetera, 17 and piggybacking onto what Supervisor DeSaulnier was 18 talking about in terms of smart growth, I think it seems 19 one thing missing in -- and I don't recall Business, 20 Transportation, and Housing's commitment. But the list 21 that you just provided, Ms. Witherspoon, seems to miss 22 mass transit and what can be done through the market-based 23 approach to further incentivize mass transit. Hopefully, 24 it's in the list and it just didn't get mentioned. 25 EXECUTIVE OFFICER WITHERSPOON: We think it was. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 We just don't know how much of the 27 tons attributed to 2 mass transit. 3 BOARD MEMBER D'ADAMO: So just in conclusion then 4 on that, I really think that we need to look at the menu 5 of options under the current configuration. For example, 6 just how far the State and federal government can push 7 smart growth, what can be done through the market-based 8 incentive program to pursue some of those goals that so 9 many of us wholeheartedly endorse but have recognized the 10 jurisdictional challenges. 11 I'd like to just briefly go to the time line, 12 slide 14. I want to make sure I understand this. So it 13 seems that the list of discrete early actions that would 14 be published in June of '07 are tied to the regulations 15 that would be implemented in January of 2010. 16 EXECUTIVE OFFICER WITHERSPOON: No later than 17 January of 2010. So they have to be adopted by the end of 18 '09 essentially. 19 BOARD MEMBER D'ADAMO: By the end of '09. And 20 the scoping plan of reduction strategies, January '09, 21 that would be tied to January 2011. 22 EXECUTIVE OFFICER WITHERSPOON: No later than 23 again. 24 BOARD MEMBER D'ADAMO: Where does the 25 market-based trading mechanism get implemented in all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 this? The reason I'm asking that is I think the sooner we 2 get that out there, the better. Hopefully, we don't have 3 to wait until these regulations get adopted. 4 EXECUTIVE OFFICER WITHERSPOON: Well, the market 5 measure itself is a regulation. And the crucial question 6 for the January '09 report is who's in the market and 7 who's under a stand-alone regulation to reduce their 8 emissions. That's the most important circle the Board 9 will be drawing, and then we will write the regulations to 10 accomplish that. But prior to the big program, we do want 11 the early action measures to include any credit 12 methodologies we're able to finish so people can start 13 stocking reductions away for later sale into the market. 14 Because we do want to incentivize early activity. 15 The Climate Action Registry already has a 16 protocol for forestry reductions that can be banked. They 17 also have nearly finished a protocol for methane digesters 18 on dairies. We are exploring with them what other 19 protocols might they be able to finish in time to release 20 with our early actions or in the window of time that was 21 given to us for those. 22 So markets are happening right now, and people 23 are anticipating what the rules are going to be and what 24 reductions they can credit. And we're encouraging that 25 and telling them anything you can quantify after 1990 and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 that we can verify we will get credit for, whether it's 2 against your own obligation or we're able to monetize it 3 and bring it into the credit system. 4 BOARD MEMBER D'ADAMO: And then just one other 5 thing I forgot to mention in my earlier comments about the 6 market-based trading on slide -- the pie chart, slide 7. 7 We see here that agriculture and forestry in this instance 8 plays a much smaller role. But I did just want to share 9 with my Board members, fellow Board members, some of the 10 conversations I've had with staff in interest to bring 11 agriculture into this, especially by way of the 12 market-based incentive program. And think it might also 13 be a way to address some of those smart growth issues in 14 terms of conversion of farmland into the sprawling housing 15 developments that many of us see. So just wanted to let 16 my fellow Board members know that's something I'm 17 interested in and maybe we can talk at a later time 18 privately if any of you are interested in working with me 19 on this. 20 CHAIRPERSON SAWYER: Mayor Loveridge. 21 BOARD MEMBER LOVERIDGE: On additional idea is 22 really part of reacting to Mark's comments. But this is 23 the regulatory framework that we now have in place and 24 particularly what districts have to do in terms of air 25 quality plan, what MPOs have to do with the regional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 transportation plan, do you see what we're talking about 2 today, how do you see this connected with air quality 3 management plans prepared by districts and the regional 4 transportation plans prepared by MPOs? 5 EXECUTIVE OFFICER WITHERSPOON: I wasn't thinking 6 about it a lot until some environmental groups came by and 7 said, you know, MPOs should be required to calculate the 8 CO2 impacts of alternate transportation plans as they are 9 required today to calculate the criteria pollutants 10 emissions and have them conform to federally required air 11 quality plans. 12 And I was thrown back a little bit by that 13 proposal. You know, I hadn't thought about AB 32 going 14 quite that far. And this might be an arena that needs 15 follow-up legislation. And they also, the environmental 16 group, brought it to our attention wanted us to do this as 17 an early action measure, which probably alarmed me more 18 than the concept itself, the idea we'd figure it out that 19 fast. 20 I do think that CO2 has to be in our minds now 21 with every decision that's being made, that we have now a 22 full integration of energy and environmental policy ahead 23 of us in every sector of the economy and every business 24 and governmental decision. And so it will be interesting 25 to see what the MPOs themselves come up with and what they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 start thinking about as the way of justifying funding 2 requests, the way of prioritizing between projects when 3 there are CO2 benefits to be had or losses to be suffered, 4 that that might change the dialogue in some cases. 5 But you know, it's been flagged for us. And 6 we'll start thinking about it. And Lynn, as soon as she's 7 done with the inventory, her staff can work on those 8 concepts. 9 CHAIRPERSON SAWYER: Ms. Berg. 10 BOARD MEMBER BERG: That just -- I do have one 11 other quick question. When we're looking at regulations 12 that does involve multiple pollutants, is there a priority 13 now? 14 EXECUTIVE OFFICER WITHERSPOON: Dr. Sawyer, do 15 you want to answer that question? 16 CHAIRPERSON SAWYER: Our priority is to protect 17 the public health of the people of California. Greenhouse 18 gases are related to that. And there will be trade-offs 19 and we're going to have to consider those very carefully. 20 But I think we should come down on the side of protecting 21 the health of the people of California. 22 EXECUTIVE OFFICER WITHERSPOON: Staff has been 23 saying the same thing. And one of the things I've been 24 trying to get across to all of our employees that this is 25 just one of the mandates that the Air Resources Board has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 to implement. The five years ahead of us are enormously 2 challenging on every front. We're bringing you the 3 biggest diesel risk reduction measures you've seen yet. 4 We're going try to deliver -- we will deliver on the Goods 5 Movement Action Plan. We have new State Implementation 6 Plans for South Coast and the San Joaquin Valley that take 7 us through 2024 with enormous efforts required by 2015 to 8 meet an unmovable federal deadline for particulate 9 attainment. And so we will be challenged on every front. 10 But the message I've given to any stakeholder who 11 asks me is health first, and we will minimize CO2 impacts 12 whether there's a trade-off. But Dr. Sawyer said this to 13 us himself. We know far more about the effects of air 14 pollutants on the human body than any aspect of the 15 climate change system. So just for that level of 16 knowledge alone, we have to go with the health conclusion 17 when it comes down to a choice. 18 BOARD MEMBER BERG: I really appreciate the 19 explanation. Because sometimes when the sound bite gets 20 really loud on something that's new in town, you can kind 21 of get a little bit distracted. So I appreciate that. 22 CHAIRPERSON SAWYER: If we are prevented from 23 enforcing our greenhouse gas regulations on light-duty 24 motor vehicles, am I correct to assume that the 25 alternative regulation called for in AB 32 will be an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 early action item? 2 EXECUTIVE OFFICER WITHERSPOON: Yes. 3 CHAIRPERSON SAWYER: I don't know -- 4 EXECUTIVE OFFICER WITHERSPOON: It will be 5 immediately on the heals of if we suffer a loss in court, 6 though we have to decide if we're going to wait until the 7 U.S. Supreme Court division or intermedia decisions, 8 because we do expect this litigation to go all the way to 9 the U.S. Supreme Court. 10 CHAIRPERSON SAWYER: Is there also a possibility 11 that U.S. EPA will not grant our waiver? 12 EXECUTIVE OFFICER WITHERSPOON: Yes. And it's 13 our intent if that occurs to sue them to secure our 14 waiver, which itself will create a different timetable. 15 CHAIRPERSON SAWYER: If the timetable extends 16 beyond July 1st, I think we ought to have the alternative 17 in mind anyway, meaning we ought to be working on it now 18 just in case. 19 EXECUTIVE OFFICER WITHERSPOON: We are. And 20 what's envisioned in AB 32 is a CO2 cap for auto makers 21 that requires them to come up with comparable reductions. 22 So it's not that hard of a regulation to write, though of 23 course we want to make it more bullet proof than the 24 first, were we to lose the first. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 We have a request of testimony from Mr. Russ 2 George. 3 MR. GEORGE: Well, thank you for letting me speak 4 today. My name is Russ George. I'm the President and CEO 5 of a California company based in Foster City called 6 Planktos, Inc. That's like the word plankton. And we're 7 focused on ecosystem restoration projects around the 8 world. And for the past several years, we've been funded 9 by Green Venture Capital and performing development 10 projects largely in the European union to do large scale 11 forestry ecosystem restoration projects there. Some of 12 those projects now are advanced in the Kyoto JI 13 implementation phase of the Kyoto Protocol to the point 14 where we will next spring begin planting about half a 15 billion trees across Europe to earn climate change 16 credits, carbon credits. 17 Simultaneously, we are developing and we have 18 presented our plan which is a California developed concept 19 which is called ocean restoration which is about bringing 20 back the health of our ocean ecosystems, much like we can 21 bring back the health of our forest ecosystems, by 22 restoring the plant life in the oceans, which has greatly 23 diminished today. 24 And we're just delighted that California has 25 finally stepped up to the plate and signed AB 32, because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 I've always had a bunch of questions coming from my Kyoto 2 world colleagues asking me what the hell I was doing in 3 California, which was part of the U.S. which wasn't part 4 of Kyoto. And I said, well, just wait. California always 5 leads the world on environmental laws and legislation. 6 And so now California has indeed taken that position. 7 So one of the things we're doing is I wanted to 8 point out how inexpensive it is to reach this 25 percent 9 reduction that the California has put into place through 10 ecosystem restoration by growing trees and ocean plants 11 that will take carbon dioxide out of the air, sequester it 12 for hundreds of years. And in the ocean case, for 13 millennia. We believe in a California case, a typical 14 household of four in California has a carbon footprint of 15 about 20 tons of CO2 emissions per year. That includes 16 one car being used. To knock 25 percent of that down, 17 which is five tons per year, by buying credits through 18 ecosystem restoration credits, that's about $25 per year, 19 $2 per month. So all of the households in California 20 could reduce their carbon footprint voluntarily at the 21 cost of $2 a month. That would more than meet the goal of 22 AB 32. 23 And the most important thing about that is that 24 goal could be met immediately. The ecosystem restoration 25 projects are online today around the world. They have the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 potential to sequester billions of tons of carbon dioxide. 2 It is the largest volume, lowest cost solution to the 3 climate change issue around the world. It's not source 4 reduction. In fact, it's better than source reduction of 5 CO2, because the same ton of CO2 ends up not being in the 6 atmosphere. But the major benefit of that CO2 not being 7 in the atmosphere is an enriched, revived and restored 8 ecosystem that we all enjoy. 9 So we wanted to make sure that the Air Resources 10 Board knew that there was technology available immediately 11 that can meet the goals of AB 32 beginning immediately, 12 not in 2020, next year at very low cost. So that's my 13 pitch. And we have presented some material. Go to our 14 planktos.com website. You can read lots more about it. 15 And I'd love to meet with any of the people on 16 the committees and things and sort of lend a hand for 17 California to learn what the rest of the world has been 18 doing for some years now. 19 BOARD MEMBER D'ADAMO: I have a question for you. 20 Do you have any of these ecosystem projects in California? 21 MR. GEORGE: Well, we're based in California. 22 So, for instance, we just bought a research-ship this past 23 week, and we're about to start a number of ocean projects 24 in the eastern pacific. This winter in January our first 25 project will get underway. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 Just like California has a large off-shore 2 fishing fleet that goes outside of our territorial waters 3 to bring home a fish product from our global commons, the 4 oceans, we can take our California-based research boat out 5 to sea to the global commons, bring back the health of 6 large forest size patches of the ocean, sequester very 7 definitively show the quantified sequestration of CO2, and 8 we can bring that carbon dioxide fish credit back home to 9 California. So in that case, we're certainly looking at 10 that. We haven't set up any forestry projects in 11 California, but we're certainly looking at some here. 12 CHAIRPERSON SAWYER: Thank you. 13 Any comments, Ms. Witherspoon, from the staff? 14 EXECUTIVE OFFICER WITHERSPOON: Research will 15 definitely follow up on this sequestration project, and we 16 have a lot to learn in that arena as well. 17 CHAIRPERSON SAWYER: Since this is not a 18 regulatory item, it is not necessary to officially close 19 the record. 20 I propose that we take a ten-minute break right 21 now, strictly ten-minute breaks, for our court reporter. 22 And we will resume at nine minutes after. 23 (Thereupon a recess was taken.) 24 CHAIRPERSON SAWYER: We will now resume the 25 meeting of the Air Resources Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 Our next agenda item is 6-9-4, Proposed 2 Amendments to the Zero-Emission Bus Regulation. This is 3 my first opportunity to preside over changes to Air 4 Resources Board's transit bus fleet rule. Although I was 5 certainly aware of the regulation while I was at the 6 University of California, the debate over advanced bus 7 technology was lively to say the least in the 8 San Francisco/Bay Area. 9 But today's hearing is not about natural gas 10 versus diesel technology or even about various hybrid bus 11 technologies. Where most of the debate has centered so 12 far, it's about the 15 percent zero-emission bus purchase 13 requirement that is due to take effect in the 2008 model 14 year for transit agencies on the diesel path. 15 The purpose of today's hearing is to determine 16 whether that purchasing deadline is reasonable given what 17 we now know about hydrogen fuel cell buses and the state 18 of their readiness. 19 Both staff and the transit districts agree that 20 the zero-emission bus technology is not ready for large 21 scale adoption and that there should be a second 22 demonstration phase. 23 The disagreements are over how long we should 24 wait until we require increased purchases, whether 25 alternative fuel districts should get even more time, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 whether we should ramp up beyond the 15 percent purchase 2 rate in the out years, and whether we should be more 3 explicit about how we are making these decisions by 4 spelling out the performance criteria we want to see. 5 For the diesel transit agencies that are facing 6 2008 purchase requirements, we need to act on this today. 7 If we agree on major issues, we can ask staff to work on 8 the smaller details in the actual rule language using the 9 15-day notice period if necessary. 10 I will now ask Ms. Witherspoon to introduce the 11 item and the staff's proposal. 12 EXECUTIVE OFFICER WITHERSPOON: Thank you, 13 Chairman Sawyer. Since the Board last amended the transit 14 rule in 2004, staff has closely monitored the development 15 of zero-emission bus technology. As Dr. Sawyer indicated, 16 the staff concluded the technology is neither durable 17 enough nor affordable enough at this juncture to support 18 the 2008 15 percent purchase requirement. Accordingly, 19 staff is recommending a change to the existing schedule. 20 This amendment is crucial to the diesel path districts 21 that are entering the procurement cycle for the 2008 model 22 year right now, though alternative fuel districts are also 23 concerned about the schedule as it applies to them in 24 2011. 25 To clarify what we are basing our regulatory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 decisions upon, staff is proposing explicit performance 2 criteria for your consideration. Specifically, staff is 3 suggesting that the Board approve a target price and 4 minimum durability requirement for fuel cell buses that 5 would have to be met before the 15 percent purchase 6 requirement went into full effect for any transit agency. 7 We think that that expression of performance criteria is 8 good public policy and highly desirable. It would 9 communicate our expectations more clearly to the 10 manufacturers of fuel cell stacks and buses and would 11 enable all stakeholders to anticipate how the zero 12 emissions portion of the transit bus rule will play out. 13 Even with the three-year delay we are proposing 14 today, staff cannot guarantee that fuel cell buses will 15 meet the necessary performance criteria in 2011. In the 16 event that future adjustments are needed, we would like 17 all parties to understand the reasons why ahead of time so 18 they aren't caught off-guard. 19 Since the staff report was published, various 20 stakeholders have expressed concern to us that the 21 performance criteria we are recommending could be gamed to 22 the detriment of zero-emission bus technology. Staff has 23 taken a close look at that issue and we think we have some 24 solutions that could be proposed as 15-day changes to the 25 regulatory language. We'll talk about that more at the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 appropriate time in the staff's presentation. 2 Concerns have also been expressed this entire 3 rulemaking is premature, given the technology review 4 that's pending for zero emission automobiles next year. 5 Staff understands the concern about symbolism and 6 precedent on ZEV issues. However, there is virtually no 7 technological connection between buses and cars. The fuel 8 cell stack manufacturers are different. The duty cycle is 9 different. The market structure is different due to hefty 10 federal transit subsidies, and the fueling infrastructure 11 challenges are quite different as well. So whatever you 12 decide today about zero-emission bus technology or 13 performance characteristics for buses simply won't apply 14 to cars. Staff indicated that prospective in the draft 15 resolution for this item and is more than happy to 16 emphasize that point repeatedly for the record. The staff 17 presentation today will be made by Leslie Crowell of the 18 Mobile Source Control Division. Leslie. 19 (Thereupon an overhead presentation was 20 presented as follows.) 21 MS. CROWELL: Thank you, Catherine. Good 22 morning, Chairman Sawyer, members of the Board, ladies and 23 gentlemen. 24 We are here today to discuss staff's proposal for 25 amendments to the zero-emission bus regulation. This PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 regulation is contained within the fleet rule for transit 2 agencies. The fleet rule for transit agencies along with 3 the zero-emission bus regulation was first adopted in 4 January of 2000. 5 --o0o-- 6 MS. CROWELL: I will begin with an overview of 7 the current zero-emission bus regulation and its relation 8 to the transit bus fleet rule and move into a discussion 9 on the status of the zero-emission bus technology. I will 10 then briefly discuss the process staff has gone through to 11 develop the proposal before you today, discuss the main 12 components of staff's proposal, and finally outline the 13 comments we have received thus far. 14 --o0o-- 15 MS. CROWELL: In January of 2000, the Air 16 Resources Board adopted stringent new engine emission 17 standards for urban buses, in-use fleet emission 18 standards, and a zero-emission bus requirement as part of 19 the fleet rule for transit agencies. The fleet rule 20 requires transit agencies to choose either the diesel or 21 alternative fuel path by January 2001. As a result, 22 transit agencies on the alternative fuel path have 23 deployed around 4400 clean alternative fuel buses. 24 In addition, diesel path transit agencies are 25 replacing the older higher-emitting diesel buses with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 clean diesel buses or have retrofitted buses with oxides 2 of nitrogen and particulate matter controls. Most of the 3 diesel fleet has been upgraded or replaced. Transit 4 agencies on both paths are in compliance with the oxides 5 of nitrogen and particulate matter reduction fleet 6 requirements. 7 As of January 1st, 2007, diesel path transit 8 agencies will have reduced the particulate matter 9 emissions by 85 percent from their 2002 fleet baseline. 10 The alternative fuel path transit agencies were required 11 to reduce particulate matter emissions by 60 percent 12 before January 1st, 2007, and 85 percent before January 13 1st, 2009. These transit agencies have surpassed their 14 2007 requirement and have achieved an 80 percent 15 reduction -- over an 80 percent reduction thus far. The 16 zero-emission bus purchase requirement is the final 17 component that remains to be implemented. 18 --o0o-- 19 MS. CROWELL: The zero-emission bus regulation 20 contains four main provisions and applies to those transit 21 agencies that have over 200 buses, urban buses. 22 The four main provisions include: A 23 demonstration requirement for the diesel path transit 24 agencies; zero emission purchase requirements for both 25 fuel paths; reporting requirements for enforcement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 purposes; and early implementation credits to encourage 2 early placement of zero-emission buses. 3 During the development of the zero-emission bus 4 regulation, staff recognized that transit agencies 5 implementing the alternative fuel path would incur 6 significant costs and achieve greater emission reductions 7 relative to the diesel path transit agencies. To balance 8 the larger early costs and emission reductions, the 9 alternative fuel path transit agencies were allowed two 10 additional years before the zero-emission bus purchase 11 requirement went into effect. And we're not required to 12 conduct a zero-emission bus demonstration program. 13 Thus, the current demonstration requirements 14 apply only to diesel path transit agencies with over 200 15 urban buses. The requirements allow transit agencies to 16 join together to conduct the demonstration. Currently, 17 two demonstrations are underway, both in the Bay Area 18 involving a total of six fuel cell buses. 19 The final report on the demonstration project is 20 due July 31st, 2007. Additionally, the Board directed 21 staff to assess the technology as the purchase requirement 22 dates approached. I will discuss staff's assessment and 23 the status of the technology later in the presentation. 24 --o0o-- 25 MS. CROWELL: Five diesel path transit agencies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 are required to conduct a zero-emission bus demonstration. 2 San Francisco Municipal Railway complies with the 3 regulation to their existing electric trolly system. 4 Electric trollies still remain a viable technology. 5 The remaining diesel path transit agencies that 6 are subject to the regulation determined that the fuel 7 cell bus is a better option. Technology demonstration 8 projects in California include two required by the current 9 regulation and a voluntary demonstration in Palm Springs. 10 Santa Clara Valley Transportation District partnered with 11 San Mateo County Transit District to demonstrate three 12 buses using Ballard fuel cells and a Gillig bus glider. 13 The buses were configured to rely only on a fuel cell for 14 mode of power. 15 Alameda/Contra Costa transit partnered with 16 Golden Gate Transit demonstrating three buses using United 17 Technology Corporation fuel cells in a Van Huevel glider 18 using a hybrid configuration. In addition, SunLine 19 Transit partnered with AC and Golden Gate Transits in 20 voluntarily operating and demonstrating a fourth UTC Van 21 Huevel bus. 22 --o0o-- 23 MS. CROWELL: The current regulation requires 24 that 15 percent of applicable transit agencies annual 25 purchases by model year be zero-emission buses. Diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 path transit agencies with over 200 buses are required to 2 purchase zero-emission buses beginning with model years 3 2008 and continuing through 2015. Alternative fuel path 4 transit agencies with over 200 buses are required to 5 purchase zero-emission buses beginning with model years 6 2010 and continuing through 2015. The current regulation 7 provides a two-year delay to transit agencies on the 8 alternative fuel path in recognition of their early 9 efforts to reduce emissions. 10 --o0o-- 11 MS. CROWELL: Ten transit agencies are subject to 12 the current purchase requirement and to the proposed 13 amendments to the regulation. A closer look at the slide 14 highlights that the diesel path transit agencies are all 15 located within the Bay Area and all but one alternative 16 fuel path transit agency is located in southern 17 California. 18 San Francisco Municipal Railway already meets 19 zero-emission bus purchase requirement through their 20 electric trolly fleet. Four additional transit agencies 21 may grow and become subject to the zero emission 22 regulation. 23 --o0o-- 24 MS. CROWELL: Staff tracks and evaluates 25 technologies that may be viable for meeting zero-emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 bus requirements. Those technologies include fuel cells, 2 fuel cell battery hybrids, and electric trollies. We are 3 aware of 16 zero-emission bus demonstrations worldwide. 4 --o0o-- 5 MS. CROWELL: The following parameters are used 6 to evaluate the performance of the fuel cell buses: 7 Initial cost of the bus; reliability; availability; fuel 8 economy; maintenance cost; durability; and infrastructure. 9 --o0o-- 10 MS. CROWELL: The evaluation of the technology is 11 based primarily on the initial results from the VTA and 12 SamTrans demonstration. Data from AC Transit and Golden 13 Gate demonstration are not yet available. 14 The fuel cell buses were able to meet on-road 15 performance requirements demonstrating an ability to 16 perform in stop-and-go traffic on hilly terrain and at 17 freeway speeds. Overall, the public response has been 18 positive. 19 However, challenges remain. Initial cost of 20 buses in the demonstration were between 3 and $3 1/2 21 million per bus. Just over a year later, these costs have 22 dropped to roughly 2.25 million for the same generation 23 hybrid bus. 24 According to United Technologies Corporation, 25 once about 100 buses are ordered, the price per bus would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 drop to roughly one million per bus. 2 Reliability is the measure of the number of miles 3 the bus is in passenger service between on-road repair 4 service events to the propulsion system. 5 VTA buses averages about 1,000 miles between 6 propulsion related road costs, while the diesel buses were 7 significantly more reliable and averaged around 11,000 8 miles between propulsion related road calls. It is 9 important to note that the clean urban transport for 10 Europe, or CUTE buses, in a large European demonstration 11 which also used the Ballard fuel cell averaged about 3,000 12 miles between propulsion related road calls. 13 The differences in reliability between the VTA 14 program and the CUTE program are still being evaluated. 15 Availability is measured by the number of days the bus is 16 scheduled for service and the number of days the bus was 17 not able for service due to any maintenance issues. 18 Diesel buses typically average around 80 percent 19 availability with VTA diesel buses achieving around 85 20 percent. The fuel cell buses were available about 60 21 percent of the time. 22 The number of miles per unit of fuel in energy 23 equivalent units either in miles per gallon of diesel fuel 24 or miles per kilogram of hydrogen represents the fuel 25 economy. During the evaluation period, the fuel economy PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 for the fuel cell buses when converted to diesel 2 equivalent gallons achieved about 3.45 miles per gallon 3 while the diesel buses demonstrated 3.95 miles per gallon. 4 Preliminary data from AC Transit shows significant 5 improvement in this area with their hybrid fuel cell buses 6 achieving about 7.6 miles per diesel equivalent gallon. 7 Maintenance costs were also evaluated during the 8 demonstration program. Only propulsion related items were 9 evaluated. Fuel cell bus maintenance costs were 4.26 a 10 mile, while diesel buses were around 59 cents per mile. 11 Warranties are typically a good measure of 12 durability for the propulsion system. Therefore, we are 13 looking at the terms of the warranties. Current diesel 14 warranties are around five years and 300,000 miles, or 15 roughly halfway through the useful life of the bus. Fuel 16 cell manufacturers express their warranty in hours of 17 operation for years of service. 18 Fuel cell warranties for the demonstration range 19 from 1,000 to 4,000 hours, roughly one to two years of 20 service. The warranties indicate that the fuel cell 21 durability is not comparable to diesel engines of its 22 time. However, fuel cell manufacturers have made 23 improvements in this area. Ballard recently announced the 24 warranty term for their 2008 fuel cells is 12,000 hours 25 and five years of service. This warranty would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 applicable during the proposed advanced demonstration. 2 Infrastructure costs for fuel cell buses include 3 costs for fueling stations, maintenance facilities, and 4 bus washing stations. The infrastructure cost for the 5 demonstration range from $4.4 million capable of fueling 6 15 to 20 buses for the VTA demonstrations to just over $5 7 million, fueling around six buses for the AC Transit 8 demonstration. 9 Data from the AC Transit buses is not currently 10 available. However, unlike the VTA buses, these buses are 11 operating in regular en route service. This is an 12 indication that the availability and reliability is likely 13 better than what was seen in the VTA demonstration. 14 In summary, the commercial viability of zero 15 emission technologies is still being developed. Initial 16 information from the demonstrations indicates that fuel 17 cell buses are feasible. The buses are meeting on-road 18 performance measures. They are quiet. They are well 19 received by the public. However, the demonstrations in 20 California have included time delays, higher than expected 21 costs, and reliability challenges. Unfortunately, 22 zero-emission bus technology is not yet ready for 23 commercial application. As a result, we are here before 24 you today to discuss proposed amendments to the 25 zero-emission bus regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 --o0o-- 2 MS. CROWELL: Staff is proposing three major 3 amendments to the zero-emission bus regulation. Staff is 4 proposing a second demonstration called an advanced 5 demonstration, delaying the purchase requirements by up to 6 three years, and proposing performance criteria to assess 7 the progress of the zero-emission bus technology towards 8 commercialization. 9 --o0o-- 10 MS. CROWELL: The advanced demonstration allows 11 transit agencies to prove commercial viability, establish 12 progress toward commercialization, and build customer 13 acceptance. Staff is proposing that buses in the advanced 14 demonstration be counted towards meeting the subsequent 15 purchase requirements. Staff is also recommending a 16 15-day modification to allow transit agencies to count 17 their buses from the first demonstration towards their 18 advanced demonstration requirements provided the buses are 19 upgraded with fuel cell technology used in the advanced 20 demonstration. 21 --o0o-- 22 MS. CROWELL: Like the current regulation, the 23 transit agencies fuel path dictates the options for the 24 advanced demonstration. The advanced demonstration is 25 required for all diesel path transit agencies that have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 over 200 buses. The buses must be in revenue service by 2 January 1st, 2009. Transit agencies can opt to 3 participate in a multi-transit agency demonstration or can 4 choose to operate the demonstration individually. The 5 transit demonstration is optional for the alternative fuel 6 path transit agencies. Alternative fuel transit agencies 7 must have their buses in revenue service by January 1st, 8 2010, one year later than the diesel agencies. 9 Like the diesel path transit agencies, these 10 transit agencies can opt to participate in single or multi 11 transit agency demonstrations. Alternative fuel path 12 transit agencies choosing to participate are given an 13 additional year delay on their purchase requirement. One 14 additional compliance option is available for the 15 alternative fuel path transit agencies. This compliance 16 option allows transit agencies to use near zero emission 17 buses that utilize zero emission enabling technology in 18 the demonstration. Examples include internal combustion 19 engine buses that operate on hydrogen or on hydrogen 20 natural gas blends. The intent of this option is to 21 foster development of electric drive technology, hydrogen 22 infrastructure, and cleaner lower-emitting internal 23 combustion engine technology. 24 --o0o-- 25 MS. CROWELL: Going into more detail, the single PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 transit agency demonstration requires six zero-emission 2 buses, while the multi-transit agency demonstration 3 requires a minimum of twelve zero-emission buses. In 4 addition, each transit agency in the multi-demonstration 5 must provide at least three zero-emission buses. For 6 example, a demonstration with five transit agencies would 7 require 15 buses. Although there are several options 8 available, staff anticipates the advanced demonstration 9 will yield a total of twelve buses or an increase of at 10 least six additional buses over the initial demonstration. 11 --o0o-- 12 MS. CROWELL: Staff is proposing to delay the 13 start of the 15 percent purchase requirement until 2011 14 for both the diesel path and alternative fuel path transit 15 agencies. With this delay, staff is also proposing to 16 extend the requirements through 2026. Alternative fuel 17 path transit agencies can gain an additional one-year 18 delay from the purchase requirement by participating in an 19 advanced demonstration as previously discussed. 20 --o0o-- 21 MS. CROWELL: Staff proposes the following 22 performance criteria be used to measure the progress 23 towards complying with the purchase requirement. Staff 24 will continue its regular assessment of the technology and 25 provide its next update to the Board by July 2009. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 The proposed criteria will help guide the 2 assessment of the commercial viability of the technology. 3 These targets were purchase cost, durability or warranty, 4 and reliability, shown in the table. 5 The additional purchase price target of $1 6 million is based on the cost of an electric trolly and 7 what the fuel cell providers believe is a realistic 8 target. 9 The second performance criteria is durability. 10 According to the transit agencies, most engines are 11 replaced approximately halfway through the life of the 12 bus. Based on this assumption, along with the warranty 13 for conventional urban bus engines, staff believes 20,000 14 hours is an appropriate criterion for determining the 15 durability. This translates to roughly 240,000 or to 16 360,000 miles. Reliability targets of 10,000 miles 17 between propulsion related road calls are consistent with 18 experience of transit agencies operating on diesel buses. 19 Staff received comments that the availability 20 parameter identified in the initial Statement of Reasons 21 does not effectively relate to the operation of the bus. 22 Staff proposes to remove the availability parameter from 23 this proposal as a 15-day change. 24 The staff will advise the Board in its July 2009 25 update how well the zero-emission buses are doing compared PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 to these criteria. Note that a proposed 15-day 2 modification shifts any division on the need for future 3 modifications to the purchase requirement from the 4 Executive Officer to the Board. As a result, the 5 performance will be removed from regulation and placed 6 into the resolution where they will guide staff's 7 evaluation. 8 --o0o-- 9 MS. CROWELL: Staff is also proposing these 10 additional minor amendments and modifications. The 11 original regulations provided bus credits for transit 12 agencies deploying zero-emission buses earlier. Staff is 13 proposing that the credit qualification dates be modified 14 to reflect the time line of the proposed demonstration and 15 purchase requirements. 16 Staff is proposing to amend fleet reporting 17 requirements from 2015 to 2027 for transit agencies 18 operating 150 or more buses. The reporting requirement is 19 extended to allow ARB to track compliance with the 20 zero-emission bus regulation. In addition, staff is 21 proposing to require quarterly updates on the status of 22 the fuel cell bus demonstrations. The updates would 23 include information pertaining to the performance criteria 24 described previously. 25 Some bus manufacturers are developing chassis PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 made of light-weight composite materials with reduced 2 nominal curb weight. Even when fully loaded, such buses 3 may weigh less than the 33,000 gross vehicle weight used 4 to classify an urban transit bus. Staff proposes that if 5 light-weight buses are equipped with zero-emission engines 6 designed to operate in urban bus service and carry a 7 similar manufacturer chassis warranty, then they could be 8 considered an urban bus for the purpose of the 9 zero-emission bus regulation. 10 --o0o-- 11 MS. CROWELL: The next two slides will present 12 the short- and long-term effects on emissions of adoption 13 of the staff proposal. This table depicts the emission 14 impacts compared to the existing regulation that result 15 from delaying the purchase requirement until 2011. The 16 emission loss is small and a necessary result of the fuel 17 cell buses not being ready for commercialization by 2008. 18 --o0o-- 19 MS. CROWELL: The next slide shows the statewide 20 emission reductions from the proposed regulation as 21 compared to not having a zero-emission bus regulation. 22 --o0o-- 23 MS. CROWELL: The following is a summary of the 24 significant changes made to staff's proposal from those 25 presented in the initial Statement of Reasons. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 changes were developed after considering comments received 2 during the 45-day public comment period. Staff is now 3 proposing that the Board consider the status of meeting 4 the zero-emission bus purchase requirement at its regular 5 meeting in July of 2009. Staff will use the performance 6 criteria previously discusses as the basis for assessing 7 progress towards the commercial zero-emission bus. 8 Based on the staff assessment and public comment, 9 the Board would decide if any corrections to the 2011 10 purchase requirement were needed. This process would 11 replace the original staff proposal to have the Executive 12 Officer make any mid-course correction suggested by the 13 technology and commercial readiness review. 14 The second 15-day change proposed by staff would 15 allow zero-emission buses from the first demonstration now 16 underway to count toward the proposed second demonstration 17 if the power train was replaced with the latest 18 generation. This will reduce the cost of the 19 demonstration for Bay Area transit agencies without 20 compromising the objective of the demonstration. 21 --o0o-- 22 MS. CROWELL: Based on the comment of the initial 23 staff proposal, there is still disagreement on when the 24 zero-emission bus purchase requirement should begin. Fuel 25 cell developers believe they can provide engines to meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 the current 2008 start date, although cost and performance 2 will not likely meet the performance criteria previously 3 discussed and considered by the staff as an important 4 commercialization. 5 Some environmental groups argue it is premature 6 to amend the regulation because a review of the fuel cell 7 technology as part of the zero-emission vehicle review is 8 underway but not complete. Staff's concern is that 9 purchases of buses for delivery in 2008 must be decided 10 soon, and the transit agencies need to know what the 11 requirements are now. 12 Some transit agencies have argued that the 13 purchase requirements should be pushed out even further 14 than 2011. However, their concerns seem to be nullified 15 by the plan 2009 Board review. 16 Alternative fuel path transit agencies have 17 commented they should be given a delay until 2012 without 18 participating in an advanced demonstration proposed by 19 staff. They believe the significant expenses they 20 incurred when electing to follow the alternative fuel path 21 justify the additional delay. They point out that the 22 regulation has historically provided a later start date or 23 other consideration for transit agencies purchasing 24 alternative fuel buses. And this should be reflected in 25 their revised purchase requirement start date. Staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 believes there is some merit to this viewpoint and is open 2 to delaying the purchase requirement until 2012 for 3 alternative path transit agencies without a requirement to 4 participate in the advanced demonstration. 5 In conclusion, staff recommends that you consider 6 adopting staff's proposal with the 15-day changes 7 presented today. In summary, the key recommendations are: 8 To adopt an additional advanced demonstration; delay the 9 purchase requirement; and recognize performance criteria 10 to be used in the staff's next evaluation and report to 11 the Board. This concludes staff's presentation. Thank 12 you. 13 CHAIRPERSON SAWYER: Thank you, Ms. Crowell. 14 Madam Ombudsman, would you provide your 15 statement, please? 16 OMBUDSMAN QUETIN: Thank you. 17 Dr. Sawyer and members of the Board, this 18 regulation has been developed with input from large 19 transit agencies, the California Transit Association, bus 20 manufacturers, fuel cell integration companies, fuel cell 21 manufacturers, the Natural Gas Vehicle Coalition, the 22 South Coast Air Quality Management District, and the Bay 23 Area Air Quality Management District. 24 Staff initiated their efforts to develop this 25 regulation on September 27th, 2005. They held the first PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 workshop on October 27th, 2005, in Sacramento; the second 2 January 27th, 2006, in El Monte; the third, April 14th, 3 2006, in Sacramento; and the fourth on June 21st, 2006, in 4 Diamond Bar. Approximately 10 to 30 stakeholders attended 5 each of the four workshops. In addition to the workshops, 6 there were 28 meetings with industry and over 30 telephone 7 conversations. 8 The staff report was released for public comment 9 on September 1st, 2006. And it was noticed on the web and 10 sent to more than 7,000 stakeholders via several list 11 serves. Thank you. 12 CHAIRPERSON SAWYER: Do members of the Board have 13 questions at this time? 14 Ms. Berg. 15 BOARD MEMBER BERG: Thank you. 16 I just would like to clarify my understanding on 17 the emission affects on slide 18 and 19. I think the 18 comment was made that albeit we would have additional 19 emissions, they aren't very -- I don't quite understand 20 how we get from 2015 of -2.2 NOx and so forth across the 21 line to where we're saving tons per year by 2023 of 22 22 NOx. 23 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 24 first slide is an apple and the second one is an orange, 25 so they're not directly comparable. The first slide shows PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 the losses that we would get from delaying the purchase 2 requirement and compares it to the current regulation. 3 The second slide looks at the overall benefits of the 4 remaining program compared to no regulation. 5 BOARD MEMBER BERG: So no regulation at all from 6 the very beginning? 7 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Right. 8 It shows you what the benefit of the amended, if you 9 adopted regulation, would be. It's very small short-term 10 loss due to a three-year delay in the purchase 11 requirement. And then the remaining benefit that is 12 realized by the revised regulation is 22 tons per year 13 NOx, for example, in the second slide. 14 BOARD MEMBER BERG: I just want to make sure that 15 I understand that we feel that the little over two tons 16 per year is a small amount. 17 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It's a 18 very small amount. 19 CHIEF COUNSEL JENNINGS: Just to clarify, it is a 20 small amount, but the resolution that we've prepared would 21 identify it as a significant adverse environmental impact, 22 and there would be the appropriate overriding 23 considerations findings. 24 BOARD MEMBER BERG: See, I have a problem with a 25 very small amount and a severe adverse. I mean, it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 confusing to me. And then when we're looking at if this 2 is such a small amount, the amount of money that each -- 3 I'm confused on the economic benefit and how we're 4 classifying this additional emissions. 5 EXECUTIVE OFFICER WITHERSPOON: Ms. Berg, I would 6 never call two tons that small, because we bring 7 regulations to you -- two tons per year. That's the 8 difference. It is very, very small. Ordinarily, we show 9 you tonnages in days. So if you divided that -- 10 BOARD MEMBER BERG: I understand. 11 EXECUTIVE OFFICER WITHERSPOON: If you divided 12 that by 365, it would be infinitesimal. 13 BOARD MEMBER BERG: That's where I was confused. 14 Thank you. 15 CHAIRPERSON SAWYER: Ms. D'Adamo. 16 BOARD MEMBER D'ADAMO: I was going to ask the 17 same question. I do recall in regulations that have come 18 before us in the past for review I think on the transit 19 bus rule including that if there are adjustments made in 20 the short-term that in the out years we make up for those 21 losses. And so as insignificant as this may be, I think 22 that we still need to make up for it in the out years. 23 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 24 that comment was raised -- similar comment was raised to 25 us by the environmental groups. And I think they were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 looking at it in two different ways. One was if you're 2 going to have a short-term loss, how about making the 3 transit agencies make up the short-term loss. 4 Our staff's view on that was good principle, but 5 for such a small amount of emissions, we'd have to draft 6 regulatory provisions. We'd have to have meetings with 7 the transit districts. We'd have to have a monitoring way 8 to see if the tons were achieved. And that from our 9 standpoint it would be a lot of work for very little gain. 10 The second comment I think they will make in 11 their testimony is they think the 15 percent number in the 12 longer term should rachet up. So maybe 15 percent and a 13 few years later 16 percent or something which would 14 provide additional benefit in the long term. And we 15 didn't propose that principally because there's still a 16 significant issue regarding the commercial viability or 17 when these vehicles will be commercially viable. And 18 there's another review going on and we thought maybe it's 19 better to deal with it as we get closer to a true 20 assessment of when these buses will become commercially 21 viable. 22 BOARD MEMBER D'ADAMO: But it does seem once they 23 do, we should rachet up the numbers. And just wondering 24 if there's a mechanism by bringing this back to us -- it 25 just seems that on this rule in particulate, it keeps PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 coming back to us with adjustments that go in the wrong 2 direction. So if we're going to continue to make 3 allowances, it just seems that even if it's an 4 insignificant amount, we need to be principled that we're 5 moving forward in this regulation. And if it can't be 6 done to make up for the losses in the long term, then a 7 trade-off would be racheting up at some targeted date. 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We 9 extend the scope of the rule from 2015 where initially we 10 were more optimistic on when commercialization would 11 occur. And we thought by that time they would be a purely 12 commercial product and we didn't need a regulation. And 13 so the regulation was designed to end in 2015. It's part 14 of this proposal we're going to send it out for another 15 eleven years. 16 One aspect is it will assure that once the 17 purchase requirement goes into effect, it stays in effect 18 for a much longer period of time, which arguably could 19 gain us some additional benefit. But your point about 20 racheting up the numbers beyond 15 percent, again I think 21 it was staff's viewpoint that that's best addressed in the 22 2009 review we bring to the Board, and not today when we 23 still have considerable uncertainty about when the 24 technology will be ready for commercialization. 25 BOARD MEMBER D'ADAMO: And then on the issue of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 the Board to determine commercial readiness, initially it 2 was in the reg, and now it's going to be in the 3 resolution. Just want to clarify that. How does it come 4 back before the Board? 5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We're 6 planning on doing another technology review and using the 7 performance criteria to help asses whether the 8 technology's ready essentially two-and-a-half years from 9 now. And at that point in time, we would then bring back 10 to the Board an assessment based on those performance 11 criteria and other inputs we have. And if everything 12 looks good, I guess we'd tell you that. If there looks 13 like there's a need for further changes, we would let you 14 know that, and we would hold a public hearing and decide 15 with everybody else's input as well as the staff's whether 16 you think it's a go or no go at that point in time. 17 BOARD MEMBER D'ADAMO: That would be the trigger 18 then, the 2009 review? 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Right. 20 And the significance of changing the performance criteria 21 is we had it originally proposed this would be done 22 administratively, that the Executive Officer would make 23 changes to the amount. And that's why the criteria were 24 important, because we wanted it to be a very well defined 25 process that she would operate under. Once we decide to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 come back to the Board and we make that decision in public 2 meeting, then I think the criteria become much more of an 3 advisory item that help us, the staff, and the affected 4 parties assess what the status of the technology is. 5 Ultimately, you know, it wouldn't bind you, and that's why 6 we put it in the regulation. That's to guide the staff. 7 BOARD MEMBER D'ADAMO: In the resolution. 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Excuse 9 me. In the resolution, to guide the staff rather than in 10 the regulation where the original proposal had it. 11 EXECUTIVE OFFICER WITHERSPOON: We also deleted 12 the stair step aspect of the performance criteria where if 13 it was a little more reliable you had to buy 2 percent 14 ZEVs. And if it was more reliable than that, you needed 8 15 percent ZEVs. And then finally you got to 15 percent. 16 And transit districts said to us if it's not reliable, why 17 should we buy it all? So we have a leap function now 18 where there's just one criteria. It needs to reach a 19 minimum reliability and a price point in our estimation 20 and in theirs before we move into full implementation. 21 But for the time being, the 15 percent purchase 22 mandate will stay on the books. And if everything is 23 going well, as Mr. Cackette indicated, we'll come tell you 24 that and the rule will simply carry forward. If it's not 25 going well, then you have an opportunity to adjust again PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 and consider ramp-ups, ramp-downs, demos, whatever you 2 think is appropriate. 3 BOARD MEMBER D'ADAMO: I'm just wondering based 4 on my earlier comments about racheting up, can we include 5 something in the Resolution so when it does come back to 6 us that issue is revisited so that we don't have the same 7 problem in two-and-a-half years from now, that it would 8 just take too long to go out and do a rulemaking. Just 9 kind of give the staff an advance warning that that's time 10 to make up for the losses or commercial viability is more 11 on track, rachet the numbers up. 12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: If 13 that's the Board's will, we can certainly do that. 14 CHAIRPERSON SAWYER: Could somebody brief me very 15 quickly on the status of the demonstration programs 16 outside of California? 17 ZEV INFRASTRUCTURE SECTION MANAGER ACHTELIK: 18 Currently, the biggest single demonstration program would 19 have been the Clean Urban Transit Program in Europe that 20 included nine cities and three buses at each city. And 21 that program went through two years operation, and some of 22 the cities stopped and have -- two of the cities stopped 23 and seven are continuing. And in addition, there's three 24 buses in demonstration in Australia and three in China. 25 CHAIRPERSON SAWYER: So these programs are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 similar to ours? 2 ZEV INFRASTRUCTURE SECTION MANAGER ACHTELIK: 3 They are similar, yes. They are not regulatory driven 4 like this one, but they are similar in the sense they are 5 operating fuel cell buses. 6 CHAIRPERSON SAWYER: And the experience is 7 similar? 8 ZEV INFRASTRUCTURE SECTION MANAGER ACHTELIK: The 9 experience has been varied. Some of the buses have 10 performed very well and are continuing to run. And in 11 some cases, part of the size-down from the nine to seven 12 cities, those two cities that were having more issues 13 transferred their buses to the other cities that were more 14 successful, and they're operating them now. 15 CHAIRPERSON SAWYER: Thank you. 16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think 17 one thing just in case that peaks your questions how could 18 that happen? How could the same vehicles in different 19 places operate differently? And we've seen that in our 20 two demonstrations as well. I think it depends on the 21 technology. It also depends on how they're taken care of, 22 how they're fueled, the quality of the fuel. There can be 23 dozens of aspects that can make one of the demonstrations 24 be more successful than another. And we've just learned 25 that from the past, and you have to sort those details out PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 when you really assess whether the technology is ready for 2 prime time or not. 3 CHAIRPERSON SAWYER: Okay. I would now like to 4 call the first three witnesses who have signed up to speak 5 on this item. And I would remind you we will be applying 6 the three-minute limit. The speakers will be Michael 7 Murphy, Arthur Douwes, and Durand Rall. 8 MR. MURPHY: Well, good morning, Mr. Chairman 9 Sawyer, and members of the Board. My name is Michael 10 Murphy. I'm on the staff at the Bay Area Air Quality 11 Management District. And we're here to support the 12 staff's recommendations as made to you today, including 13 their proposed 15-day changes that they've outlined in 14 their presentation. 15 The Bay Area Air District has been working with 16 the Metropolitan Transportation Commission and with our 17 transit districts on a very strong and cooperative effort 18 in the Bay Area to pursue the zero-emission bus mandate in 19 a way that results in a bus that is reliable. It is also 20 very cost effective and is easy to purchase for the 21 transit districts. We think moving the purchasing 22 deadline back to 2011 and also requiring the enhanced 23 demonstration will provide a very good opportunity to sort 24 of build on the early results of the first demonstration 25 and also point us towards getting a very reliable bus that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 we can deploy on our urban fleets. 2 One of the things that we're also most interested 3 in with the zero-emission bus mandate in pursuing just 4 getting additional emission reductions is how the use of 5 zero-emission buses can help enhance the regional effort 6 to have what was earlier referred to as smart growth or 7 efforts to increase density around transit lines in 8 transit nodes. Our hope is to over time see an increased 9 use in transit as well as an increased amount of transit 10 service provided. As we get more people living and 11 working and operating in these dense urban corridors, we 12 want to ensure that we are having buses that are 13 attractive and are not increasing any risk for exposure to 14 particulate matter. And so we feel that a very reliable 15 and very cost effected zero-emission bus technology is 16 going to help us with that, enhance that secondary effort 17 we have in the Bay Area. 18 One things we are supportive of is extending the 19 time frame in which they have to make the purchases which 20 the staff has proposed. Originally, it was a seven-year 21 period where they would have to make 15 percent of their 22 purchases zero emission. We're very supportive of getting 23 it out to a total 15 years, as proposed in 2026. Thanks 24 very much. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 Arthur Douwes. 2 MR. DOUWES: Good morning, Dr. Sawyer and members 3 of the Board. My name is Arthur Douwes with the Santa 4 Clara Valley Transportation Authority. And the Santa 5 Clara Valley Transportation Authority has been a quiet 6 leader in zero-emission bus fuel cell technology. VTA and 7 SamTrans started an $18.5 million ZEV demonstration 8 project by placing fuel cell buses in revenue service in 9 February of 2005. That is one year ahead of the 10 regulation. 11 And as you have seen, VTA has worked very closely 12 with ARB staff through the implementation of the program 13 reporting as well as keeping them informed. Furthermore, 14 VTA has made great strides in reducing emissions. VTA has 15 installed after-treatment devices on a number of our 16 buses. Additionally, in the last three years, VTA has 17 placed 100 new zero-emission light rail vehicles in 18 revenue service at a cost of approximately $300 million. 19 VTA has opened ten miles of additional light rail track, 20 and this has resulted in a September light rail ridership 21 increase of more than 40 percent over last year's 22 September figure, reducing conjunction, improving air 23 quality. 24 Considering this, VTA needs to balance available 25 funding, urge that regulations do not penalize VTA and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 SamTrans for taking these aggressive approaches for 2 emissions reduction actions and requests that ARB also 3 appropriate appropriate funding for these new programs. 4 VTA will continue to work with ARB staff 5 regarding the emissions reductions and also want to make a 6 couple of comments in our demonstration program relative 7 to the European program that was just questioned. 8 First of all, the buses in the European program 9 are different than our three buses that we have here. 10 They have different integration, plus they also have as we 11 just learned fuel cell design is slightly different than 12 what we have. The buses in Europe that have the same 13 design and fuel cell technology have the same problems 14 that we have incurred as well. Our results are relatively 15 close to what's been shown in the European program. 16 And at this time, I would like to thank you very 17 much and address any comments you may have. 18 CHAIRPERSON SAWYER: Thank you very much, Mr. 19 Douwes. Durand Rall. And then we'll have George 20 Karbowski, Gene Walker, David Fienberg. 21 MR. RALL: My name is Durand Rall. I'm the CEO, 22 General Manager of OmniTrans in San Bernardino, 23 California. And let me first thank you, Chairman Sawyer, 24 for the opportunity to be here this morning, the ARB Board 25 and staff. And also for the cooperation of staff in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 working the last few weeks on these regulations. 2 Let me first say that I do support the process 3 you're going through and the regulations we're making. I 4 just have a couple of concerns in those regulations I'd 5 like to address this morning. 6 We are one of those agencies that are under 200 7 buses. The original regulations exempted us if we were 8 under 200 buses in January of 2001, you were exempt from 9 the program. That has changed now to include us as soon 10 as we become a 200-vehicle operation. We are one of those 11 agencies approaching that number. 12 The zero-emission bus demonstration program would 13 require us to spend significant amount of money on an 14 infrastructure for only three vehicles. We think that is 15 problematic. The other greater concern I have is that at 16 the point we reach 200 vehicles, what is our obligation to 17 make conversion in a time point that's very unclear in the 18 regulation in the proposal. Our suggestion would be that 19 once we reach that 200 point, that we would have a three- 20 to five-year conversion period to allow us to financially 21 plan our facilities, plan our equipment purchases, do our 22 grants, and get those facilities and infrastructures in 23 place so we can operate that successfully. There's also 24 additional training required of our staff that needs to be 25 accomplished. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 The study compares the cost of electric trollies 2 at about $800,000 to the ZEV or zero-emission fuel cell 3 bus. We don't operate electric trollies at 800,000. We 4 operate buses at about 375,000. So it's about almost a 5 four-to-one capital ratio for acquisition when we get into 6 this type of program. That will also be a little bit 7 problematic for us. 8 Also I think we need to allow the ARB staff to 9 work a little bit more with our transit systems so we can 10 use this technology when it's proven and economical so 11 that we can be successful both for you as regulators and 12 also successful for ourselves as operators and would 13 request that you put into the regulation that we have some 14 guaranteed period of time after we reach that 200-vehicle 15 number to go forward, create our infrastructure, and we're 16 able to do that. And we're suggesting a three- to 17 five-year period to do that. 18 And with that, I thank you for your time and be 19 glad to answer any questions that you have. 20 CHAIRPERSON SAWYER: Thank you very much. 21 Does staff have a response to the timing? 22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think 23 we think that's a good idea. We have something similar to 24 that in the zero-emission light-duty vehicle regulation 25 when people move from an intermediate size to a large size PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 and become subject to the ZEV part of the mandate. So I 2 think that's something we can consider. We can pick the 3 period based on comments in the 15-day time frame. It 4 should be at least three years. 5 CHAIRPERSON SAWYER: Thank you. 6 George Karbowski. 7 MR. KARBOWSKI: Good morning, Dr. Sawyer and 8 members of the Board and ARB staff. My name is George 9 Karbowski. I represent Foothill Transit in the heart of 10 the South Coast Air Quality District. Foothill Transit 11 currently operates over 300 buses. And by the end of this 12 year, 75 percent of those buses will be fueled with 13 natural gas. We have two natural gas fueling facilities 14 at both of our operations and maintenance facilities. At 15 one facility, we don't even have the capability of 16 dispensing liquid fuel. The diesel tanks have been long 17 torn up and gone. We will only operate CNG. In addition, 18 we're about to open a public access natural gas fuel 19 station. And we're exploring a project to use hydrogen 20 enriched natural gas fuels to further drive down 21 emissions. 22 We're here today to support the moves and the 23 amendments made by ARB staff in pushing out the timeline, 24 and we're particularly interested in the 2009 25 decision-making point. But let me talk a little bit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 about, you know, who we are and what we are. Because, 2 frankly, we think that the whole ZEB project and the 3 demonstration projects may be a little bit fraud. I saw a 4 beautiful slide up here on the AB 32 presentation that 5 showed all those cars stuck in traffic. And I'm sure 6 every one of the transit folks in the audience today would 7 tell you that -- and I counted those cars by the way. We 8 could have put a 40-foot transit bus on each side of those 9 freeway and removed all those people from the cars. 10 You know, I recently bought 40 CNG buses, and I 11 applied for Carl Moyer funds. And they told me, you know, 12 we can't give you any funds for the engine, because the 13 engine manufacturer retired the funds. Well, okay. So I 14 missed out there. And many companies routinely use bus 15 passes to support their ride sharing and their emission 16 reduction goals there. Yet, we provide a service on a 17 daily basis that gets hundreds of thousands of people, 18 millions of people, as a matter of fact, out of their 19 cars. Yet, we can't apply those emission reductions 20 toward our emissions inventory. 21 I want to put to you today something very 22 important. Please remember when you make these rules and 23 these laws and these guidelines for us that if we send a 24 mixed message that, hey, we've got to reduce emissions, 25 but then we make it impossible for transit operators like PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 ourselves to financially be able to put that 2 transportation on the street, please remember that public 3 transit is part of the answer to the emission crisis in 4 the state of California and it's not part of the problem. 5 Thank you very much. 6 CHAIRPERSON SAWYER: Thank you. 7 Gene Walker. 8 MR. WALKER: Chairman Sawyer, members of the 9 Board, and ARB staff, good morning. My name is Gene 10 Walker. I'm the maintenance manager of Golden Gate 11 Transit. 12 I would like to acknowledge the efforts put forth 13 by the ARB staff and suggesting and comments from 14 interested non-governmental organizations such as Union of 15 Concerns Scientists and the Lung Association and their 16 proposed amendments of the zero-emission bus regulations. 17 AC Transit, the host of our property of our joint ZEB fuel 18 cell demonstration and the joint ZEB demonstration of 19 SamTrans and VTA, make the Bay Area the leader in fuel 20 cell technology. As a leader in fuel cell technology, 21 Golden Gate Transit in the Bay Area certainly recognizes 22 the importance and the need of the proposed amendments. 23 We have been actively working with the ARB staff and 24 non-governmental organization in a joint effort of 25 crafting a meaningful and achievable ZEV regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 Golden Gate Transit offers our support of the 2 staff's most recent proposed amendments: The push back of 3 purchase requirements; the use of updated fuel cell buses 4 currently in service; and the technical reassessment in 5 2009 are all very important to our efforts. The 6 amendments allow for the demonstrations to be completed, 7 the data to be disseminated, and allow for the advancement 8 of the technology, including required infrastructure 9 improvements. This will allow us to push for improvements 10 of reliability and durability and to assure they have a 11 reasonable expectation for transit use. We hope these 12 improvements will help drive down cost. 13 As in the past, Golden Gate Transit and all Bay 14 Area transits offer our continued assistance and unique 15 knowledge of ZEV technology to the CARB Board, ARB staff, 16 and interested and non-governmental organizations, and all 17 California transits in our joint efforts of reducing 18 emissions of our public transit fleets. Thank you. 19 CHAIRPERSON SAWYER: Thank you very much. 20 Gene Walker -- David Fienberg. And then we'll 21 have Dana Lee, Steven Miller, and Mary King. 22 MR. FIENBERG: Good morning. I'm David Fienberg. 23 I'm the Deputy Director of Santa Monica's Big Blue Bus. 24 I'm here today to support the staff recommendations as 25 proposed today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 The City of Santa Monica is very proud of our 2 leadership role in the field of environmental 3 sustainability. Since 1994, the city has lived by 4 sustainable city's plan which includes goals and 5 strategies for the city and all sectors of the community 6 to conserve, enhance our local resources, safeguard human 7 health and the environment, maintain a healthy and diverse 8 economy, and improve the liveability and quality of life 9 for all community members of Santa Monica. 10 The Big Blue Bus has been a key player in the 11 community's sustainability effort. In 1997, the Big Blue 12 Bus took a leadership role by placing in service a fleet 13 of five zero-emission electric buses. The Big Blue Bus 14 spent significant time and financial resources to keeping 15 these vehicles operational and promoting the electric 16 battery technology. 17 Since the 1990s, the Big Blue Bus has already 18 invested over $50 million in alternate fuel vehicles and 19 infrastructure. Our current fleet is more than 50 percent 20 alternatively fueled with only compressed natural gas or 21 liquified natural gas vehicle purchases planned for 22 future, all though there are many diesel buses currently 23 are being fitted with particulate traps and all of our 24 remaining diesel buses are going to be using biodiesel 25 fuel by the end of this fiscal year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 Big Blue Bus understands that the ZEB technology 2 will emerge in the near future, and we support moving 3 toward that goal to the extent that there are available 4 resources to help us with that. We also -- as OmniTransit 5 spoke a minute ago, we are concerned about the issue of 6 time for systems that are under 200 buses. We are 7 currently under 200 buses, but may go above that during 8 this period. And again, we're concerned that there's not 9 going to be a significant time for us to ramp up to 10 inspect the buses to get the money together and build a 11 whole new infrastructure if we have to do that in one 12 year. So we hope a minimum of three years, more 13 realistically for five years to catch up to the rest of 14 California on that issue with the larger operators. 15 Thanks for letting me speak today, and we 16 appreciate the opportunity to discuss these further if 17 you'd like. Thank you. 18 CHAIRPERSON SAWYER: Thank you very much. 19 Dana Lee. 20 MS. LEE: Good morning, members of the Board, 21 Chairman Sawyer. My name is Dana Lee, and I'm here from 22 Long Beach Transit. We are a medium-size alternative fuel 23 path agency serving 25 million customers a year. We are 24 proud of our record in working towards air quality 25 improvements. We've purchased recently 47 hybrid gasoline PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 buses with 15 more on the way. And these actually replace 2 diesel buses, thus really contributing to better air 3 quality in the region. 4 We are supporting staff's proposal today. We 5 understand that ZEB technology is coming and we support 6 that goal in that we can do so in our available resources. 7 We believe also that ZEBs are not ready for industry-wide 8 implementation. And more needs to be done to ensure that 9 the vehicles can perform to the standards that we need to 10 carry our customers to school, work, and other 11 destinations. 12 While we do support the proposal, we are 13 concerned, like my colleagues from other agencies with 14 under 200 buses, about the expansion of this regulation to 15 those agencies. We have fewer than 200 buses and are 16 worried that at what point we do reach 20 how much time 17 we're going to have to be able to ramp up and implement 18 that. 19 I would also echo the comments that perhaps we 20 can write a three- to five-year allowance into the 21 regulation and discuss that with staff. We think that's a 22 really great idea. I appreciate the opportunity to speak 23 before you today. And thank you very much. 24 CHAIRPERSON SAWYER: Thank you very much. 25 Steven Miller. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 MR. MILLER: Hello. I'm Steven Miller, 2 Superintendent of the Maintenance for Golden Gate Transit 3 in San Rafael, California. 4 I'm here to speak in support of the staff's 5 proposed amendments to the ZEB bus regulation. I urge the 6 Board to adopt the amendments as proposed. And that's 7 really for two reasons, for my perspective: Reliability 8 and cost. 9 As a superintendent of maintenance, I deal 10 directly with the business end of these vehicles. I feel 11 immense pride when I see one of our buses rolling down the 12 freeway carrying 60 or more passengers to and from their 13 jobs in San Francisco or elsewhere. I, as Mr. Karbowski, 14 like to think that that is potentially 60 gas-guzzling 15 SUVs left at home in the driveway that day. That makes me 16 very proud, especially when I consider the progress we've 17 made toward ensuring that our buses are the cleanest -- 18 some of the cleanest vehicles out there on the road. 19 The commuters on those buses, however, do not 20 have to be stranded along the road too many times before 21 they are going to make the decision to get back in those 22 SUVs and drive. You don't have to be late to work very 23 often before your focus shifts from clean air and 24 conservation to your livelihood and survival of your 25 family. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 While there's scarcely enough data to form 2 anything beyond conjecture, it appears at the conclusion 3 of the staff is that ZEBs have been one-tenth the 4 reliability of conventionally powered buses. I feel that 5 these reliability issues may be the undoing of much of the 6 good work we have done to this date. It is also not clear 7 to me that we'll even be able to keep these vehicles fit 8 and serviceable enough for transit applications. 9 As partners with AC transit and our ZEB 10 demonstration project, we are just now reaching the point 11 where we are training our mechanics to form routine 12 preventative maintenance on these vehicles. To my 13 knowledge, no mechanics in any ZEB demonstration projects 14 have actually repaired a fuel cell. Being a 15 superintendent of maintenance, that scarce me very much. 16 I think you should take that into consideration very 17 strongly. 18 And for those reasons, I strongly urge the Board 19 to adopt the amendments as proposed. Thank you very much. 20 CHAIRPERSON SAWYER: Thank you. 21 Mary King. And then we will have Richard Hunt, 22 Therese McMillan and Adi Arieli. 23 MS. KING: Good afternoon, Chairman Sawyer and 24 members of the Board. It's a pleasure to be before you 25 again. It's good to see you all. I'm Mary King, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 Assistant General Manager for External Affairs at AC 2 Transit. And I must apologize that Jamie Levin is not 3 here who could talk longer than you would want to hear 4 about all of the intricacies of our fuel cell 5 demonstration project. But I want to on behalf of him 6 thank you, Dr. Sawyer, and others of you who have spent so 7 much time and interest listening to Jaime and driving our 8 bus and spending time at our property. 9 Just to give you a little background, we have not 10 been low key on this bus either. I'll be on it tomorrow 11 morning at 8:00 at a press conference with Don Perata 12 looking for ways to get more money to put into this 13 demonstration, regardless of how much time you give us or 14 don't give us to implement the necessary improvements. 15 Little bit about AC Transit. We're the third 16 largest transit agency in California, the largest bus only 17 system in the United States. We operate a fleet of close 18 to 700 buses. We provide service to 17 cities in Alameda 19 and Contra Costa Counties. And our daily weekday 20 ridership is about 215,000 served by nearly 7,000 bus 21 stops and more than 100 bus lines. During the school 22 year, we provide approximately 60,000 home-to-school trips 23 for school children. 24 Forty-nine percent of our riders are considered 25 extremely low income. Twenty-three percent of very low PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 income. And the 28 percent remaining are moderate to high 2 income. But those are the folks we keep out of their 3 polluting single occupancy vehicles. 4 We are pleased to thank your staff. They've been 5 very supportive of our approach. They've worked with us 6 to understand the difficulties as well as the 7 opportunities in pursuit of our new technology, which at 8 this point is the hydrogen fuel cell. In addition to our 9 own concerns, we've been acutely aware though of other 10 issues raised by our partners, those in the environmental 11 community as well as those in the transit agencies outside 12 the Bay Area region. And to that end, your staff has 13 appropriately modified its original proposal, and we thank 14 them for that and strongly endorse the consensus position 15 that encompasses the key issues raised by the primary 16 stakeholders. And we would encourage your Board to adopt 17 the staff's most recent recommendations. 18 As we proceed over the next three years towards 19 the 2009 review, we will do our utmost to make sure that 20 we attain a further technological successes. We must 21 remain open to the fact that we're not yet sure what the 22 unknowns may be and what the outcomes may be from our 23 efforts. And we hope that you will remain open to those 24 possibilities also. 25 Your reasonableness in terms of looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 durability and looking at cost show us you're on the same 2 page with us in that regard, and our goals are certainly 3 the same. We would like, as you would like, to have a 4 healthy Californian environment, to have a healthy 5 environment in our community, and most particularly a 6 healthy environment for our riders, who are some of the 7 most vulnerable in the state of California. They are the 8 reason we operate. They are our mission. They are in 9 need not only of a healthy environment, but they are in 10 need of the ability to be mobile in society. We 11 appreciate your vote today on the positions that have been 12 brought before you by your Board, and we stand open to any 13 questions you might have. 14 CHAIRPERSON SAWYER: Thank you very much. 15 I would ask Mr. Hunt if I could put somebody 16 ahead of you who has to leave, and that would be Bonnie 17 Homes-Gen. Thank you. 18 MS. HOLMES-GEN: Thank you, Chairman Sawyer and 19 Board members for the opportunity to testify. I'm Bonnie 20 Homes-Gen with the American Lung Association of 21 California. And we appreciate the work that has been put 22 into this regulation by the staff, and especially we do 23 appreciate the recent modifications that were made to 24 address some of the issues and concerns that were raised. 25 But we do still have some serious concerns we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 want to express to you about this regulation. We believe 2 the zero-emission bus regulation is very important from an 3 air quality and health perspective because it helps to 4 push the zero-emission vehicle technology forward, help us 5 drive toward energy diversity and petroleum reduction, and 6 because it provides air quality health benefits to local 7 communities and establishes an important role for the 8 transit agencies on the diesel pathway, especially to make 9 some similar commitments and investments as the 10 commitments and investment made by the alternative fuel 11 transit agencies over the years. And we think it's 12 important to continue that progress for the diesel transit 13 agencies to be invested also in alternative fuels. 14 Our remaining -- our key remaining issue -- we 15 have a couple of them. But the most important remaining 16 issue from our perspective is the continued inclusion of 17 the performance-based criteria for the 15 percent 18 purchase. And we appreciate that the criteria has been 19 moved from the regulation to the resolution, but it still 20 appears to us that those performance-based criteria 21 essentially are operating similarly as the resolution is 22 proposed to be revised. And we're very concerned that the 23 performance-based criteria is establishing a precedent 24 that we don't agree with. And it's also premature, 25 because the Board doesn't need to make decisions today PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 about what criteria is going to be used in 2009 for 2 purchasing buses. 3 And we are very concerned that it could have an 4 inverse incentive on some of the stakeholders and 5 potentially have the effect of slowing the progress of 6 zero-emission bus technology. For example, on the issue 7 of reliability of the buses, I think you would agree 8 that's the reliability is partly under the control of 9 transit properties. And even the example that was just 10 given about the demonstration project in Europe seems to 11 me to show that buses could operate differently depending 12 on which transit properties are operating them and 13 operational conditions. So establishing the reliability 14 as a criteria for -- one of the criteria for requiring 15 purchases does place some of the responsibility on the 16 transit agencies in terms of how that criteria -- in terms 17 of how the buses are performing toward that point. 18 So we are concerned that it's premature, that 19 it's an inverse incentive, potentially could slow 20 zero-emission bus progress, and is certainly not needed at 21 this point. This element of the bus rule doesn't need to 22 be decided now and could be reanalyzed with more complete 23 information after the zero-emission vehicle review that's 24 coming up before the Board over this next year. As you 25 know, you have an extensive review going on right now. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 And the Board will be hearing the results of that review 2 early next year. And we think the Board would benefit 3 from hearing those results and evaluating the 4 zero-emission vehicle progress that's reported back to the 5 Board before making specific decisions about performance 6 criteria. 7 If the Board wants to revisit this item in 2009 8 and discuss the technology and update and have update on 9 the technology of the buses, that is fine. But we don't 10 think that the specific performance criteria should be 11 applied now in this regulation. 12 We also think that these specific criteria should 13 be reviewed and the Board should determine if those are 14 the right criteria. 15 CHAIRPERSON SAWYER: I must ask you to conclude. 16 MS. HOLMES-GEN: Okay. 17 Finally, we remain concerned about the cuts in 18 the number of buses. Very quickly, the staff proposed not 19 only delaying the 15 percent requirement, but also cutting 20 the numbers of buses required down significantly. And as 21 has been expressed earlier, we're concerned about this 22 continuing racheting down of the requirements in the 23 zero-emission vehicle realm. And this is just another 24 example of that. And especially combined with the 25 racheting down of this whole transit bus regulation over PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 time we think this is the wrong direction to be going. 2 We ask you to make up the numbers of buses and 3 the air quality emission benefits as you consider your 4 final motion on this regulation. Thank you for the time. 5 CHAIRPERSON SAWYER: Thank you. 6 BOARD MEMBER BERG: Excuse me. Could you make a 7 comment about the performance, who is going to certify? 8 How are we going to determine when the zero buses meet 9 that performance? Is it going to be the user? 10 EXECUTIVE OFFICER WITHERSPOON: No. It's going 11 to be you, the Board. And what we have proposed and the 12 reason we think talking about performance criteria now is 13 important as many people have observed, the transit bus 14 rule has been amended over and over and over again. And 15 people have raised issues about why is that the case. You 16 know, what is it that's going to cause the Air Resources 17 Board to leave the mandate in place what is it that will 18 cause us to fall back. And so we thought it was important 19 to be more transparent about the logic that staff is 20 applying and to recommend that you, the Board, also call 21 out some parameters that are important to you as we look 22 ahead to when the 15 percent purchase requirement would 23 take effect or would even ramp up. And that the most 24 pertinent factors to the transit companies are the price 25 of the bus and the durability of the bus in-service. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 And so we have recommended some minimum 2 performance characteristics to you as advice back to us so 3 when we come before you in '09 we would report back on how 4 well fuel cell buses are doing with respect to those 5 targets. You're not bound by them explicitly. You can 6 change your mind later and say fewer hours of reliability 7 are sufficient or slighter or higher price point is 8 acceptable. Things might change in the financing world 9 that would make more costly buses a reasonable thing to 10 mandate. And so they really are approximate parameters 11 for what we're getting at, that it ought to be within 12 reason before the police powers of this Board, the 13 regulatory powers of this Board are imposed on transit 14 agencies and you shall purchase these vehicles. 15 BOARD MEMBER BERG: I under understand the price 16 component. That's very measurable. You put out a PO and 17 they tell you what the price is. 18 I was curious as to the other, to measurement who 19 is going to -- how are you going to get that information? 20 Are we going to get it from the transit agencies? Are we 21 going to get it from the manufacturers? 22 EXECUTIVE OFFICER WITHERSPOON: From the transit 23 agencies the exact hours of reliability, the number of 24 maintenance calls, the kind of maintenance. And they are 25 complicated. And we've talked to environmental groups PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 about concerns that a transit agency that might not want 2 to pursue fuel cell buses may not tend to them as well, 3 causing there to be more maintenance required. AC Transit 4 obviously is not in that camp. They're gung-ho on fuel 5 cell buses. And we'll have the very best program and they 6 will be a gold standard if you will that we can compare 7 other transit agency's performance to. 8 But even cost is more complicated than it 9 appears, because the fuel stack manufacturers set one 10 price. The companies that build the chassis and integrate 11 it all into a working bus set another. And you know, 12 they're analyzed who actually calls out what a bus costs. 13 But the transit agency just cares at the end of the day 14 how much it costs them. 15 BOARD MEMBER BERG: What is the check we have to 16 write. 17 EXECUTIVE OFFICER WITHERSPOON: So we need to see 18 what's going on and what's driving the price point. And 19 if there's anything that can be done by volume purchasing, 20 by our mandates that would have that effect of driving the 21 price down. But if it's inherent in the stack, a mandate 22 is not going to overcome that. If it's a volume issue, a 23 mandate might. 24 BOARD MEMBER BERG: I'm very excited to see 25 companies like AC Transit who are very proactive. And I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 would hope that if we are getting conflicting information 2 that we would be very mindful that, you know, we got the 3 fox locked in the hen house, and we have to make sure that 4 the hens are accounted for. 5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think 6 we'll be able to look at conflicting data and provide you 7 with some advice as to which sets of data represent the 8 future and which sets of data don't represent the future. 9 That's really the key issue here. And hopefully we can do 10 that point. 11 BOARD MEMBER BERG: Thank you very much. 12 SUPERVISOR DE SAULNIER: Catherine, before you 13 run away. On the first point about the language, is it 14 possible in the 15 days -- and I know you've worked with 15 the stakeholders anyway. It seems like some of it may 16 just be semantics is it's clear it's guidelines. So they 17 have the performance language, our guidelines it will come 18 back to us. 19 EXECUTIVE OFFICER WITHERSPOON: Actually, I said 20 15 days. But now that it's in the resolution, the place 21 for that elaboration is in the resolution itself. So when 22 the Board deliberates a little later, you could recommend 23 that as an amendment. 24 SUPERVISOR DE SAULNIER: Or we can continue it. 25 CHIEF COUNSEL JENNINGS: One point on that, as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 you know, the proposed guidelines have three criteria. 2 And the staff's recommendation is you cut down to two 3 criteria. So there's only one that isn't price. 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Just 5 for accuracy, we had four and it cuts it back to three on 6 eliminating the one on availability. 7 SUPERVISOR DE SAULNIER: You'd suggest 8 eliminating the one on availability? 9 ZEV IMPLEMENTATION SECTION SECTION MANAGER 10 ACHTELIK: That's correct. 11 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: There 12 was some concern about what it really meant. And it's 13 available at 8:00 a.m. and breaks down at 9:00, that's not 14 great. It's 100 percent availability but not relevant to 15 the successful operation of buses. 16 So you know, we just didn't think it was 17 necessary given our reliability and durability parameters. 18 And you know, there is -- one of the information that is 19 beyond the transit agencies is what will the warranty be 20 offered on these bus engines by the builder of the engine. 21 I think that's an important criteria. That means we're 22 going to stand behind it. That's probably as unbiased a 23 number, because it comes with a huge cash responsibility 24 for producer. So we'll look at that as well. 25 CHAIRPERSON SAWYER: Okay. Richard Hunt. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 MR. HUNT: Thank you, Dr. Sawyer, members of the 2 Board. 3 We at L.A. Metro have significant concerns both 4 with the regulation as proposed in September. And though 5 we appreciate the modifications that may have been 6 presented or that were presented today, we still have 7 significant concerns. And they're global. Many of them 8 have been touched on already. And for brevity, I won't 9 harp on them. 10 I will tell you that MTA is the state's leader in 11 clear air vehicles. We operate the second largest fleet 12 in the world. We've spent over a billion dollars. Not a 13 million. Not 100 million. A billion dollars procuring 14 vehicles and installing an infrastructure to support those 15 vehicles. We're quite proud of what we've accomplished to 16 clean the air, especially in our southern California 17 region. 18 We've often said that we're not only on the 19 leading edge, we're on the bleeding edge. At a time when 20 ethanol was the rage and there were 455 buses nationwide, 21 Los Angeles tried to operate 333 of them. So we take 22 these commitments very seriously. We take our commitment 23 to clean air seriously. But the regulations raised 24 several issues for us. 25 And the one thing we would ask and we hope will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 happen is prior to the 2009 review that we set down as an 2 individual with your staff and go through what our issues 3 are. Every shoe is not same for every operator. What 4 effects OmniTrans and Foothill may or may not effect Los 5 Angeles. So we ask that people recognize that this is a 6 complex issue, and I think your staff has and recognizes 7 that. But we really need some hard ground work on these 8 regulations before they move forward. 9 We do have programs going on outside of the 10 regulations. We're working on a hydrogen/natural gas fuel 11 blend. The engines are being retrofitted as we speak in 12 Reno. And we're also evaluating taking our composition 13 bus. We operate the largest fleet of composite buses in 14 the country. We're retrofitting a couple of those to a 15 battery operation. We're always searching for ways to 16 help our clean air mandate that our MTA Board is so 17 strongly supportive of. But we think we need a great deal 18 of dialogue with the staff before we can support these 19 regulations. 20 L.A. Metro is concerned. It's an immature 21 technology. And it seems to us we're focusing on a 22 hydrogen fuel cell when there may be other alternatives in 23 the future. I mentioned batteries. Someone mentioned the 24 trolly buses. L.A. Metro in the next four years will put 25 into service about 150 light rail vehicles that are zero PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 emission. And to the extent we take money away from those 2 efforts, that only diminishes the overall effectiveness of 3 clean air in our region. 4 So I would ask that some consideration going 5 forward be given to using other approaches than hydrogen 6 fuel cells. 7 We think that the three years -- 8 CHAIRPERSON SAWYER: I must ask you to conclude, 9 please. 10 MR. HUNT: Thank you. Three-year push back 11 should apply to everyone uniformly, whether it was -- 12 regardless of your path. We think that makes good sense. 13 Because clearly the technology today is not commercially 14 available. 15 Last Monday in Paris someone asked the question 16 on the European fuel cell. European fuel cell program was 17 originally budgets at 125 million euros. The cost today 18 is exceeded 200 million euros. So clearly it's a 19 worldwide recognition that this is an expensive program 20 and there's a lot of work to do on it. 21 On behalf of the MTA, I thank you for allowing us 22 to come forward and speak on these issues. And we hope 23 you consider our input. 24 CHAIRPERSON SAWYER: Thank you. 25 Mayor Loveridge. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 BOARD MEMBER LOVERIDGE: Could staff -- two or 2 three issues have been identified. Could staff respond to 3 them? This is the only operating company that is listed 4 under the column opposed. I'm trying to understand the 5 extent of the opposition that they're raising. 6 EXECUTIVE OFFICER WITHERSPOON: I think that the 7 question that's being raised by MTA is a good public 8 policy to go to hydrogen fuel cell buses ever in Los 9 Angeles or in their property. Certainly as they pursue 10 light rail, just like electric trollies count in 11 San Francisco Muni, light rails zero-emitting buses would 12 count against any obligation at L.A. MTA. That's a quick 13 answer to that question. 14 But the letter submitted to you talks about a 15 natural gas bus costing 375,000 versus a fuel cell bus at 16 the price point staff is recommending of a million and a 17 quarter. And is that a good investment. And then you add 18 all the infrastructure behind that as well. And I think 19 the Board is going to have to wrestle with those issues 20 when we come back to you in '09. And we've seen in the 21 LEV/ZEV regulation for cars a proliferation of near ZEV 22 technologies as we quest evermore after zero. And the 23 same thing is going to happen on the bus side. We have 24 diesel electric hybrids. We have the hythane technology 25 that the witness referred to of hydrogen plus natural gas. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 We have gasoline electric hybrids, you know. And so you 2 will be pressed to decide does it really need to be zero 3 or should we look at some of these near zeros as well. 4 BOARD MEMBER RIORDAN: Mr. Chairman, there is one 5 thing I think we can assure Mr. Hunt. One of his issues 6 was will we be asking our staff to work with the different 7 transit agencies. And absolutely. I think the staff 8 really reaches out to try to understand unique 9 characteristics of the transit agencies. And there are 10 some significant ones. 11 If you look at the state of California and think 12 about the topography, the weather, there's so many things 13 that I am sure are going to affect the viability of 14 different transit agencies. So we'll do that. That's for 15 sure. 16 EXECUTIVE OFFICER WITERSPOON: One quick 17 correction. Tom just corrected me on light rail. The 18 definition of an urban bus is with wheels and capable of 19 self propulsion on a highway. So light rail does not 20 count in our urban bus regulations. But again, you decide 21 as we go through these issues. 22 CHAIRPERSON SAWYER: And San Francisco is the 23 only place that has electric buses? 24 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 25 only one that has a network of trolly buses. There are a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 few as battery powered ones in various demonstrations, but 2 not a large number. 3 CHAIRPERSON SAWYER: Okay. 4 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: Just 5 one of the other things that I think he quickly mentioned 6 that flipped by was that as the regulation currently is 7 drafted, they would have to earn being on the same time 8 schedule as the diesel path buses by doing a 9 demonstration. And I think staff sort of mentioned in its 10 comments there was a possibility of 15-day change that 11 would line up the natural gas alt fuel ones with the 12 diesel ones so that everybody had to do it at the same 13 time. And I think he was asking for that also and -- 14 MR. HUNT: That's correct. 15 CHAIRPERSON SAWYER: Thank you, Mr. Hunt. 16 BOARD MEMBER LOVERIDGE: Could I just ask, the 17 light rail issue seems to me in terms of a God's eye 18 perspective on metropolitan regions who we want to 19 encourage light rail systems, so whose rule is it that why 20 doesn't light rail count, I guess is the question? 21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It's 22 the way the rule is written it doesn't count. 23 BOARD MEMBER LOVERIDGE: Who's rule? 24 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: ARB's. 25 The why Catherine said ultimately at some point in time it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 would be up to you to decide if other forms of 2 transportation count. 3 BOARD MEMBER LOVERIDGE: Sometimes I say what is 4 the speak law in the land? And it's five votes. So on 5 this question of rule, it's our vote. 6 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: There 7 are other issues. We've limited this to I guess try to 8 keep the scope of it narrow, we limited it to full-size 9 buses. That's why we had the one discussion about what 10 happens if you have a light-weight bus, because that would 11 no longer become subject to the rule. And if they do a 12 ZEV version of it, it wouldn't count towards the rule. 13 We're saying let's fix that and allow that to count. But 14 there are a number of boundary conditions that various 15 people have suggested should change. We just have not 16 proposed the one MTA has talked about at this hearing. 17 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: It 18 also gets more tangled up because some of the light rail 19 are diesel electric, and therefore have diesel emissions 20 while some of other ones are electric. So if you can get 21 into that realm of light rail, you have to start looking 22 at both sides of it in terms of the "negative" ones that 23 have diesel emission in it versus the ones that don't. So 24 that gets pretty tangled up if you try to integrate that 25 with buses. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 CHAIRPERSON SAWYER: Okay. Therese McMillan. 2 MS. MC MILLAN: Good afternoon, Board members and 3 staff. I'll be brief. I know the hour is moving forward 4 on this topic. My name Therese McMillan. I am the Deputy 5 Executive Director of Policy for the Metropolitan 6 Transportation Commission which is the regional planning, 7 financing, and coordinating agency for Bay Area. 8 Thank you for the opportunity to comment on your 9 considerations for the rule. We have had in the past an 10 opportunity to outline for you the investment the region 11 has made to date, $300 million in various strategies to 12 reduce diesel emissions, a reduction of 410 tons per day 13 in NOx emissions and 16 tons of particulate emissions. 14 And your staff did an excellent job, of course, of 15 outlining the leadership role we've have in pursuing the 16 hydrogen fuel cell technology demonstrations. 17 We would agree with staff's assessment that 18 hydrogen fuel cell buses carry a lot of promise. They're 19 not ready yet for large scale implementation. You've 20 heard a lot about the fact that costs, reliability, and 21 durability are critical concerns. 22 I would like to underscore the fact that a couple 23 of folks have made that without new dedicated funding, the 24 high cost of purchasing the zero-emission buses and their 25 related infrastructure certainly could impact our region PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 and others in our ability to rehab and maintain the 2 region's transit capital plant. Giving existing 3 resources, I would suggest that a parallel effort we all 4 need to commit to is the pursuant of additional resources 5 to make sure that the implementation of this will be 6 successful without some undue impacts on other needs that 7 we need to pursue in our region. 8 However, all those observations aside, it in no 9 way diminishes our commitment in working with the Bay Area 10 transit operators and your staff in partnership to improve 11 air quality through the implementation of the 12 zero-emission bus rule. We are in support of the staff's 13 amended 15-day rule proposal as outlined today, 14 particularly the three main points of extending the 15 implementation for the diesel path properties to 20 -- 16 that is a very important element of concern to us -- the 17 evaluation of the ZEB technology this 2009 for commercial 18 readiness including cost and performance; and the support 19 of advanced demonstration projects to foster commercially 20 viable zero-emission buses; and particularly the ability 21 to upgrade our existing ZEB buses to meet the fleet level 22 requirement for the next generation of demonstrations. We 23 appreciate that point as Mary King underscored earlier. 24 In closing though, I would ask for clarification 25 that the earlier suggestion of a possible additional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 modification that the concept of a ramp-up of the fleet 2 percentage requirements would, in fact, be a consideration 3 as part of that 2009 evaluation and the findings that 4 would be contained therein and is not suggested as a 5 default outcome as of that date. So I just wanted 6 clarification on that point. 7 EXECUTIVE OFFICER WITHERSPOON: I understood it 8 as a request for staff when we come back with good news 9 that the technology is commercially ready that we also 10 suggest how quickly we might go to greater than 15 percent 11 purchase requirements. 12 MS. MC MILLAN: So it could be considered as part 13 of that long-term evaluation. Thank you very much for 14 your consideration. And we look forward to continuing to 15 work with your staff on next steps. 16 CHAIRPERSON SAWYER: Thank you. 17 Adi Arieli. 18 MR. ARIELI: Good afternoon Mr. Chairman, members 19 of the Board. My name is Ari Arieli. I have Ph.D. in 20 engineering from University of California Davis. 21 Unfortunately, I have more than 35 years of engineering 22 and transportation experience. I wish I could tell you I 23 had only five. 24 I want to touch on two aspects of the regulation. 25 As it stands even with the modification and they were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 unintended consequences, but they need to be addressed. 2 In Los Angeles County, the median income of the bus rider 3 is $12,000 a year. These people, half million people 4 number, are totally dependant on transit to access to 5 work, health care, and education. If we are going to 6 introduce much more expensive, three or four times more 7 expensive vehicles, undoubtedly will result -- because of 8 the capital limitation of the industry will result in 9 service cuts. It's a shame. So we are going to ask the 10 most unfortunate among us to pay for the implementation of 11 this regulation. It's a fact, and it has to be 12 considered. 13 The second part of what I want to address is as 14 follows. Ninty-five percent of all the NOx in the 15 atmosphere comes from natural sources: Bacteria in the 16 soil, lightening, volcanic activity. From the 5 percent 17 which are man-made, about 2.25 are from mobile sources and 18 2.25 from stationary sources, and remaining half of a 19 percentage from some various industrial processes. From 20 the 2.25 which are coming from the mobile sources, about 21 2.23 are coming from cars and trucks. So transit buses 22 represent less than 200th of 1 percent of the problem. 23 And somehow if you look at the timing, you are asking the 24 tiny transit industry which is capital limited in effect 25 to subsidize the automotive and trucking industry and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 technology development. I don't think it's fair. It's 2 fair to the taxpayer, to the public, to the public policy 3 to do it in this way. 4 Now, this is my speech. What I heard here about 5 a willingness to look at near-zero technologies such are 6 going to come. And at the moment that you got close to 7 this one, it's a totally different story. But if we're 8 going to impose an absolute zero emissions, which involve 9 significant infrastructure cost, high cost is of equal 10 procurement when and if they were to be robust and 11 commercially available. I don't think that the transit 12 industry can support it today, tomorrow, and 40 years from 13 now. Thank you. 14 CHAIRPERSON SAWYER: Thank you. Next will be 15 Todd Campbell, Tina Andolina, and Jason Mark. Todd. 16 MR. CAMPBELL: Chairman Sawyer, members of the 17 Board, staff. Todd Campbell with Clean Energy. 18 Wanted to first say that when I was part of the 19 environmental community, this was one of my banner rules, 20 and I really, really think that it should be emphasized 21 that we all knowledge that the transit agencies are part 22 of the solution even as an elected official. I count on 23 them to solve my mobility issues and problems. So clearly 24 this rule is not focused on transits to say anything other 25 than we really truly need to advance the emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 reductions in transit buses as our communities become more 2 dense. 3 That said, one of the key things I think in the 4 staff report -- or two key things that were said is that 5 the vast majority of Californians are living in areas that 6 fail to meet health standards at the state and federal 7 level. The second acknowledgement is that the 8 zero-emission vehicle program is an essential component 9 for the state's long-term ability to achieve those goals. 10 And I guess my major concern, despite how hard I 11 know the Air Resources Board staff works, is that we seem 12 to find all the reasons why not to move forward, whether 13 that be with cost or whether they be with availability, et 14 cetera, and so forth. And one of the things that I think 15 we were trying to be in 2000 very reasonable on was 16 San Francisco Muni when they asked for ZEV compliant 17 component with the electric trolly. In fact, we agreed to 18 that, because we thought that was a very good thing that 19 San Francisco Muni was doing and they were complying right 20 off the bat. 21 The second thing is that already that shows that 22 you can be compliant with ZEV requirements in 2000. 23 Certainly, San Francisco has a quite challenging 24 topography. I would say it's just not limited to trollies 25 either. They have electrical buses as well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 But also to say or make the economic argument 2 that this will either hurt service in the long run or 3 furthermore -- what was the other argument? Basically, 4 that the Air Resources Board staff's report was the total 5 number of buses purchased may not be maximized. Remember, 6 the way that the diesel path was trying to maintain its 7 pace with emissions reductions with the alternative fuel 8 path was because staff looked at it and said the engine 9 manufacturers are letting the transit agencies down, 10 essentially -- they didn't say that, but essentially 11 that's what was happening. And second, we have to combat 12 that with an aggressive turnover. So in a very wise way 13 of stating from my fellow council member, if not now, 14 when? 15 The reason being is, you know, when I look at the 16 economic forecast, it's $59 million to comply with the 17 rule in 2008 through 2011. In 2011 and beyond, it's 58 18 million or 32 million. I imagine these are both in 2004 19 dollars. What I'm trying to present here is in 2001 to 20 replace our high school stadiums for $4 million, we didn't 21 have the will to do it. Now we we're looking at $15 22 million to replace those stadiums. Prices do go up. So 23 we've got to bite the bullet at some point. My big ask of 24 you is this. One, we need to be able to build the 25 infrastructure. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 CHAIRPERSON SAWYER: I must ask you to conclude, 2 please. 3 MR. CAMPBELL: I'll give you my three points and 4 be out of your hair. Essentially, if you do amend the 5 rule, make sure that you have a backstop which would 6 integrate the hydrogen into the system. And certainly up 7 in Canada, we're doing that with transit. We're doing 8 hydrogen/natural gas bending. 9 Second, maintain the two-year delay for the 10 alternative fuel path because of the heavy investment they 11 put into their infrastructure to actually achieve very 12 clean emissions. 13 And if the zero-emission bus standard isn't 14 feasible in 2011, let's remove the diesel path entirely 15 and focus on just hydrogen-like strategies such as natural 16 gas and hydrogen plants. Thank you very much. 17 CHAIRPERSON SAWYER: Thank you. 18 Tina Andolina. 19 MS. ANDOLINA: Hello, Dr. Sawyer, members of the 20 Board. My name is Tina Andolina with the Coalition for 21 Clean Air. Thank you for this opportunity to speak on 22 this very important issue. 23 To begin, we want to commend the staff and Board 24 for removing the provision from the proposed amendments 25 that would have allowed significant Executive Officer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 discretion in the future. 2 We still do have two concerns with this proposal. 3 First and foremost, the proposed amendments do not address 4 the increase in pollution which will result from the 5 proposed three-year delay. ARB should hold the agencies 6 accountable for these emission reductions. While transit 7 agencies which choose the alternative path have continued 8 to step up to the plate with significant investment in 9 thousands of natural gas buses, the diesel path is not 10 being held accountable to carry its own weight. 11 While we recognize the benefits of the advanced 12 demonstration project, this project will not make up for 13 the lost emission reduction during the three-year time 14 frame. Similarly, while we support the extension of the 15 purchase requirement to 2026, this does not address the 16 need to see these reductions sooner. We would recommend 17 the Board require near-term reduction strategies to make 18 up for the loss in reductions caused by the proposed 19 delay. Also we support the concept of racheting up the 20 percentage required after 2011. I think that makes a 21 whole lot of sense, particularly if you find these 22 vehicles are commercially available. 23 Secondly, we do not support the proposed 24 performance-based criteria without sending a clear message 25 that transit agencies will be held accountable for meeting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 the purchase requirements. We will still be faced with 2 the same issues in 2009 and 2011 that we are dealing with 3 today. Using performance-based criteria simply creates a 4 reverse incentive for new technology to underperform. 5 Basically, we're giving transit agencies that don't want 6 to comply a map on how to get out of the regulation. 7 That's not necessary. It's not necessary today. 8 We cannot go into this requirement with one foot 9 out the door. We must be committed to ensuring this 10 technology is developed. The performance-based criteria 11 undermine that commitment and should be dropped 12 completely. Thank you for considering these comments. 13 CHAIRPERSON SAWYER: Thank you. 14 MR. MARK: Good afternoon, Chair Sawyer. Thank 15 you so much, and members of the Board. My name is Jason 16 Mark with Union of Concerned Scientists. And I want to 17 start off very clearly in stating our commendation and 18 support for the transit properties. You are really taking 19 a leadership role. I am fortunate that AC Transit is 20 really a national leader in the effort to develop fuel 21 cell technology and look forward to working with them and 22 other transit properties and you, the Board, and future 23 legislators to ensure that we're funding the buses as 24 needed and moving forward. 25 I had intended to come here today recognizing I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 think a consensus around information that has emerged over 2 the last week or so. I'm here to instead right now 3 suggest I'm not convinced we've quite reached that 4 consensus point. And I want to speak a little bit to the 5 15-day changes that staff have proposed. 6 Number one with respect to green power. That's a 7 proposal we do support. I think that makes a whole lot of 8 sense to support the Bay Area transit properties have who 9 requested that adjustment regarding the change on 10 commercial readiness. We certainly feel like the Board 11 deserves an opportunity to explore the commercial 12 readiness of the technology. But we continue to be 13 concerned about the current language of the resolution or 14 hint of the language in the resolution with respect to 15 performance criteria. And number one, we think the Board 16 should retain maximum latitude. Number two, they're not 17 performance criteria. Three, we don't think you need to 18 decide that now. 19 Let me take those three items in turn. Regarding 20 maximum latitude, the resolution as it currently reads or 21 a portion of it -- I'm reading now from the suggested 22 modification. The resolution would express the sense of 23 the Board that if these criteria -- those criteria are 24 approved, the purchase requirement would be implemented. 25 That's not in fact very different from the initial PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 Statement of Reasons which would have certainly made that 2 same choice but left in the hands of the Executive 3 Officer. We believe if you are going to review this 4 regulation in 2009 that you should retain maximum 5 flexibility as Board members to explore whatever criteria 6 is important to you. 7 Second of all, we're concerned that the 8 performance criteria that staff proposed are not the right 9 parameters. In particulate, as Board Member Berg 10 suggests, there are risks I think of the fox watching the 11 hen house as it were, particularly in the area of 12 reliability. This is not solely in the hands of the fuel 13 cell bus providers or the fuel cell engine manufacturers 14 that you're trying to incentivize and send a clear signal 15 to. This is very much in the hands of the transit 16 properties. We have wonderful examples of properties like 17 AC Transit who have been doing an excellent job in 18 delivering very impressive reliability numbers. We also 19 have tremendous variability across the industry both here 20 at home in California and as well as in Europe. 21 And then the issue of whether or not you need to 22 decide now. We're talking about you are essentially 23 looking at a straw proposal for what the criteria would be 24 in 2009. We're in 2006. You have many years to decide. 25 If the goal on staff's behalf is to send a clear signal to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 fuel cell manufacturers for the types of technology 2 criteria that are needed to succeed in California, I would 3 just suggest that the Air Board doesn't need to tell 4 companies like Ballard Power Systems or UTC what their 5 customers need in terms of reliability, in terms of cost, 6 in terms of warranty. Those companies wouldn't be in the 7 business if they didn't have a sense that they need to 8 reduce cost, increase durability and reliability for their 9 products. 10 So I would humbly suggest that you consider an 11 altered resolution that would direct staff to consider a 12 range of performance criteria in the update, but delete 13 specific reference to any performance criteria numbers. 14 Bottom line is that this is an opportunity for you to 15 preserve maximum latitude and make sure you're giving 16 clear but the right incentives to transit properties. 17 Thank you. 18 CHAIRPERSON SAWYER: Thank you. 19 Roger Marmaro, Mike Eaves, Michael Tosca, and 20 Josh Shaw. 21 MR. MARMARO: Good afternoon, members of the 22 Board, Chairman Sawyer, and ARB staff. My name is Roger 23 Marmaro. I am the President and CEO of Hythane Company. 24 Fortunately we have mentioned many times here today 25 through the blended fuels. And I've have a recently -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 they have some time to present to the staff of the ARB the 2 benefits of Hythane. Of those, I have to show what it is 3 and how it worked. We suggested how it can be used as a 4 bridge technology to get into the hydrogen for the fuel 5 cell era. We've pointed out many things that have to be 6 in the infrastructure of the hydrogen world, have to come 7 along with Hythane as well. It was a good way to get the 8 infrastructure built and the current technology. 9 We also show that the money spent on that 10 infrastructure would not be wasted. All of the hydrogen 11 upgrades that would be done in current stations now could 12 be utilized once the fuel cell technology does come to 13 commercial viability. 14 One of the things we suggested and showed is 15 hythane could be approved as a zero-emissions enabling 16 technology, we think that the commercial viability and the 17 availability of it being ready now could help speed up 18 what we are all trying to achieve. At the end of the day, 19 we've a couple things on the table. We have promoting 20 hydrogen technology, which one of those is fuel cell, 21 getting it to commercial viability stage. But the other 22 thing we're trying to promote is air quality. So waiting 23 to do anything until it's ready I don't think is the right 24 answer. Trying to implement and maximize our benefits now 25 while we are building up what we need to do is the right PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 answer. 2 We also went as far as proposing and putting the 3 proposal on the table, we wanted to go and certify three 4 of the main engines that are currently used in the 5 California area on a natural gas basis right now. The 6 proposal, from converting or retrofitting 1500 natural gas 7 engines, implementing 40 stations to get the 8 infrastructure going. And for a total amount on that was 9 about $37 million. And that would reduce -- get the 10 reduction of about 2,000 tons of NOx in the California 11 area over the seven remaining years life of those natural 12 gas vehicles. So that's a big enough number -- and we got 13 into size of numbers a little while ago -- that it does 14 make a difference. And it can be something that's done 15 today and it's working towards our immediate future. 16 And I've also had the opportunity to talk to many 17 of the transit agencies in the room today. And I always 18 get the very similar answers. They like the technology 19 and the ease of implementation. It piggybacks directly on 20 the natural gas infrastructure. They like the cost 21 benefits of it versus other technologies. 22 One of the things they're very concerned about is 23 if they go down that path, they wanted to be assured that 24 it would count for something. And I think the initiative 25 that the staff has put in with the zero-emissions enabling PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 technology gives us that benefit. 2 I want to thank the staff for having the vision 3 to include hythane and blended fuels as an enabling 4 technology. But I wanted to point out that I think we've 5 undercut the viability of the technology a little bit by 6 limiting the duration of the demonstration to one year and 7 then the reprieve to one year. I think the numbers that 8 we can show, the reduction of NOx and other emissions, are 9 such that the technology would be a viable technology 10 until the fuel cells or other hydrogen technologies come 11 to that commercial viability. So I think by artificially 12 cutting the duration of the period short and by limiting 13 the number of vehicles that we can take to this 14 technology, we're limiting ourselves. Thank you very 15 much. 16 CHAIRPERSON SAWYER: Thank you. 17 Mike Eaves. 18 MR. EAVES: Good afternoon, Dr. Sawyer, Board 19 members, and CARB staff. I'm Mike Eaves, the President of 20 the California Natural Gas Vehicle Coalition. And we 21 support the goal of moving ahead towards a zero-emission 22 bus technology for transit. And we're pleased with the 23 majority of the provisions of the proposed regulation. 24 But we're concerned about the requirement for the 25 alternate fuel path to conduct the demonstrations. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 agree with CARB's proposal to allow ZEB enabling 2 technologies such as the hythane or technology just 3 described. And we think that the performance of this 4 technology should be considered as maybe a final option as 5 you consider or look at the performance criteria for ZEBs 6 and determine if the technology meets the requirements or 7 not. I think the alternative enabling ZEB technologies is 8 a good fallback. 9 We support not requiring the demonstration for 10 the alternative fuel path. We would also hope that you 11 would preserve the two-year phasing between the diesel 12 path and the alternative fuel path. So while you're 13 requiring the ZEB program implementation by 2011, we think 14 that the alternative fuel path should be given until 2013 15 the same two-year phasing that is in the existing 16 regulation. 17 We support removing the criteria for purchase 18 from the regulation and putting that back to the Board and 19 staff to review in 2009. And we think that that review in 20 2009 should also include these other technologies that 21 become near zero technologies dependant upon the cost 22 criteria and performance criteria of the fuel cells. 23 We also support the regulations that would make 24 up the shortfall for the delay in the regulations. 25 Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 CHAIRPERSON SAWYER: Thank you. 2 Michael Tosca. 3 MR. TOSCA: Good afternoon. Thank you, Dr. 4 Sawyer and Board members for allowing me to testify today. 5 My name is Michael Tosca. I am with UTC Power. We're 6 world leader in fuel cell technology for space and 7 defense, stationary and transportation applications. 8 And I'd like to start off by commenting on a 9 question that Dr. Sawyer had earlier on regarding other 10 demonstration programs around the world. And the 11 uniqueness of the latest California demonstration program, 12 AC Transit and SunLine, is that these buses are advanced 13 buses. They're hybrid buses. They're different than any 14 other buses in the world. And they're truly making an 15 impact as far as making a change in the technology, not 16 only from a fuel cell manufacturer's perspective, but a 17 hybrid technology perspective. And as a result of that 18 program is two other programs that we're involved in in 19 Connecticut and Belgium. 20 And I'll close with what the rest of the world is 21 about to do. Basically, we support the demonstration 22 program that's outlined as a path to purchase requirement, 23 but not a delay in the purchase requirements. We oppose 24 the inclusion of zero-emission enabling technology option 25 by including non-zero emission buses that will shift the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 investment away from fuel cell buses and delay or erode 2 the commercialization of this technology. It would also 3 have a chilling effect globally on fuel cell suppliers 4 confidence in investment going forward. 5 The comment I would make on the purchase 6 requirement, which was disclosed today, is the 15-day 7 changes, the million dollar price for the bus. I would 8 make that contingent on an order of at least 100 buses in 9 volume. We've stated that in the past, that that would be 10 achievable. 11 There's increased interest globally as I 12 mentioned. And two weeks ago, an MOU, Memorandum of 13 Understanding, was signed in Belgium for five cities in 14 Europe: Amsterdam, Barcelona, Berlin, London, and Amberg 15 and also Canada AC Transit for an aggregated fuel cell bus 16 procurement. We recommend that California join in this 17 effort for an aggregated procurement worldwide to take 18 advantage of volume orders resulting in reduced cost. 19 This is a monumental event that occurred, and it would be 20 very beneficial for California to join this that effort. 21 Thank you very much. 22 CHAIRPERSON SAWYER: Thank you. 23 BOARD MEMBER LOVERIDGE: Can staff respond to 24 that potential joining? 25 CHAIRPERSON SAWYER: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 EXECUTIVE OFFICER WITHERSPOON: What happens when 2 you tie the price requirement to a volume purchase is you 3 also say that if purchases are less than that, in any 4 single transit district the price will be higher. So you 5 are raising the price, not the price at which the Board 6 would require purchases of 15 percent fuel cell vehicles. 7 And so that the expectation you would be setting is that 8 once we reached volumes of 100 more -- and maybe this 9 could happen sooner if transit companies did collective 10 buying. But they typically don't. That that is sort of 11 the learned out target you're reaching for rather than the 12 entry price you're looking for before you pull a trigger 13 on 15 percent. Because single transit company's purchases 14 will be less than 100 vehicles. So if we tie the two 15 together, they'll face a higher initial purchase price for 16 volumes below that. Does that -- 17 CHAIRPERSON SAWYER: Josh Shaw. 18 MR. SHAW: Mr. Chairman, members, Josh Shaw, 19 Executive Director of the California Transit Association. 20 We usually have come to the Board on iterations 21 of this regulation including when it was first promulgated 22 in 2000 with a formal support position after a process of 23 working with your staff on addressing the challenges and 24 opportunities. Because the ZEB aspect of this rule is so 25 complex and poses so many challenges that you heard about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 from my bosses, the member transit systems that were in 2 the room this morning, we don't have a formal position. 3 My Board has not been able to act yet. We've been working 4 with your staff up until this morning on understanding the 5 15-day change proposal. 6 So having said that though, I would commend to 7 you the process that led to those 15-day proposals the CEO 8 to the Deputy CEO on through the organization to all the 9 folks who have staffed the workshops where they invite our 10 comments and work with us and invite your environmental 11 partners in and the manufacturers, that process has led to 12 the changes today. And I would support and commend that 13 process. 14 And if I could summarize the comments I think I 15 heard from my members today, you clearly -- the 15-day 16 proposal addresses some of the biggest concerns of the 17 diesel path agencies, particularly in the Bay Area, by 18 acknowledging as Dr. Sawyer said at the outset, the 19 purchase requirements just aren't ready for the 20 requirements right in front of us. So delay that for a 21 year as proposed by the staff. 22 For all the agencies on either path, you have a 23 built-in opportunity in 2009 as has been mentioned, to 24 come back and consider whether even then the purchase 25 requirements can be met, whether by a basis of feasibility PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 or price or other factors. 2 By the way, I would suggest to you that's an 3 opportunity to think about some of the ultimate effects of 4 these rules and join Mayor Loveridge's question about 5 light rail to the comment that soon-to-be Assemblymember 6 DeSaulnier mentioned under your AB 32 discussion where he 7 said, isn't the ultimate savior for us really the 8 transportation land use connection. 9 For instance, I would say, do you want L.A. Metro 10 to spend a billion dollars on ZEB or near ZEB vehicles in 11 the out years when they might be able to show you they can 12 build a high-speed high-intensity high-use light rail line 13 from downtown L.A. to the west side of the county that 14 stops some in commercial and residential mixed-use places 15 that encourages more people to get out of the cars and off 16 the I-10 corridor, even off older buses. And you might 17 have better air quality benefits under that kind of an 18 analysis. Your regulation doesn't currently contemplate 19 that, but that's a conversation for a different day. 20 In the short term for this morning, we would echo 21 and support the request of the three members that said to 22 you, we're currently smaller than 200. We'll be over 200. 23 Can you phase in implementation for us? We'd ask you to 24 take up Bob Cross's point on that. 25 And also Bob mentioned the issue of should the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 demo for the alt fuel agencies if they don't pick it, 2 should the purchase requirements be 2011? And we were 3 frankly under the impression late last night that the 4 requirement for purchase would be 2012. I think two of 5 our speakers spoke to that, Mike Eaves from Natural Gas 6 and Richard Hunt from L.A. Metro. I would echo that 7 request and make it parallel. In other words, if you act 8 in 2009 to find that the purchase requirements are 9 feasible, put both the diesel and the alt fuel agencies on 10 the same three-year path that acknowledges the diesel 11 agencies' investment in the demo program and allows the 12 alt fuel agencies who otherwise hadn't been ready yet to 13 take advantage of that work and make those purchase 14 decisions in time. 15 Thank you very much. 16 CHAIRPERSON SAWYER: Thank you. 17 Ms. Witherspoon, does staff have any further 18 comments? 19 EXECUTIVE OFFICER WITHERSPOON: I think that we 20 didn't state it clearly, but we are open to pushing the 21 alt fuel transit districts start date for 15 percent to 22 2012 without an obligation to do a demo. 23 And what Mr. Shaw just indicated, why don't you 24 take diesel districts out there too, we haven't talked 25 about that until this moment. But I think since you're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 going to be reviewing this measure in '09, you'll be 2 deciding a lot of things in July '09. And so we're happy 3 for today to just say let's give the alt fuel districts 4 one more year, keep 2011 for diesel, and more to follow in 5 your July '09 proceeding. 6 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And the 7 other item I would add again was the comments about the 8 providing a phase-in for those who are under 200 when they 9 grow and fall into the purchase requirement we should give 10 them some period of time, at least three years. And they 11 suggested up to five. And I think that is something that 12 we would certainly recommend the Board consider that as 13 well as an amendment. 14 And I think there was some discussion early on 15 about resolution language to come back as also suggested 16 in our '09 review if things are good, maybe there should 17 be a ramp up. So that was still on the table from 18 previous discussion. 19 CHAIRPERSON SAWYER: Ms. Riordan. 20 BOARD MEMBER RIORDAN: Mr. Chairman. Mr. 21 Cackette, because I want to zero in on the agencies that 22 may transition from less than 200 to over 200, where would 23 that fit into this -- as the Board takes an action on the 24 resolution, is it just a comment please consider in the 25 15, or do you want it in the body of the resolution or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 where is that to be placed? 2 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That 3 would require a reg change from what we've proposed, 4 because we don't have that in the rule now. So you would 5 be directing us to develop that as part of the 15-day 6 change package if you so desire to do that. 7 CHIEF COUNSEL JENNINGS: The resolution says you 8 adopt the proposed amendments with the modifications set 9 forth in Attachment B. And then we would add to that and 10 with the following additional modifications. 11 BOARD MEMBER RIORDAN: Thank you. 12 CHAIRPERSON SAWYER: Mayor Loveridge. 13 BOARD MEMBER LOVERIDGE: I would move to have the 14 modifications as identified by staff. 15 BOARD MEMBER RIORDAN: I'll second it, but I 16 think you have ex parte. 17 CHAIRPERSON SAWYER: We have a little bit of 18 formality to go through first. Why don't I take care of 19 that. 20 Since all testimony, written submissions, and 21 staff comments for this item have been entered into the 22 record and the Board has not granted an extension of the 23 comment period, I'm officially closing the record on this 24 portion of the Agenda Item 6-9-4. Written or oral 25 comments received after the comment period is closed will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 not be accepted as part of the official record on this 2 agenda item. 3 And the ex parte statement. In fulfillment of 4 our policy concerning ex parte communications, are there 5 any communications that Board members need to disclose? 6 And we'll start with Mark. 7 SUPERVISOR DE SAULNIER: Well, I have one 8 unexpected one. I might say this for both myself and D.D. 9 had a very brief informal conversation that included Todd 10 Campbell, Bonnie Homes-Gen, and Jason Mark during the 11 break in between our last agenda item, and it was 12 consistent with their testimony today. 13 BOARD MEMBER BERG: I had a telephone 14 conversation yesterday Tuesday, the 17th, with Jason Mark, 15 Bonnie Homes-Gen, and Tina Andolina. And our phone 16 conversation was consistent with their testimony today. 17 CHAIRPERSON SAWYER: And I had a meeting with 18 Bonnie Homes-Gen in person and Jason Mark by conference 19 call. And their statements were consistent with what we 20 heard from them today. 21 BOARD MEMBER RIORDAN: I have no ex parte. 22 BOARD MEMBER KENNARD: I had one brief 23 conversation on October 12th with Deputy Mayor of Los 24 Angeles Jaime de la Vega regarding this issue. 25 CHAIRPERSON SAWYER: None. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 SUPERVISOR DE SAULNIER: Mr. Chairman, just a 2 clarification on the motion and hopefully a friendly 3 amendment for discussion. 4 So under the two suggestions were the one-year 5 delay in purchase requirement for alternative fuel 6 agencies, and there's no demonstration required. And the 7 smaller agencies, those under 200 buses become over 200 8 buses, they get three years before purchases agreement 9 kicks in. That's basically what -- 10 EXECUTIVE OFFICER WITHERSPOON: At least three 11 years. And we'll put that out for comment, three to five. 12 SUPERVISOR DE SAULNIER: So the last thing I'd 13 suggest is I've said this before. I wish Mike Kinny was 14 here when we reviewed this rule. It took a lot of work 15 and Mike did wonderful work here. And I think he intended 16 this in the best spirit. 17 The friendly amendment I would suggest is we 18 delete the specific performance criteria in the resolution 19 and just ask that the Board and staff would consider any 20 appropriate indications that the demonstration projects 21 are either not succeeding or coming short, something more 22 generic. Because I think that's another way of stating 23 the same thing you said, Catherine. It eliminates the 24 concern that I really don't share, but I understand there 25 may be agencies that use this as a poison pill. And I say PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 that because I really do believe for instance that AC has 2 invested so much that they wouldn't do that. But it 3 eliminates the concern. So that would be my friendly 4 amendment. 5 EXECUTIVE OFFICER WITHERSPOON: For the Board 6 members, the pertinent part of the resolution is on page 5 7 near that numerical chart where the words "immediately 8 proceeding and after declare." And the notion was that 9 because we're leaving the 15 percent mandate on the books 10 in staff's proposal that you would be indicating what 11 would have to be true for that to stay in effect. And if 12 you want to not say now, except in a very general way, 13 that's how you would change that section. And then, of 14 course, anything can be considered once you start talking 15 about amendments. But this was in order to provoke no 16 change, what would you be looking for to leave it stand. 17 SUPERVISOR DE SAULNIER: By changing it, it just 18 eliminates the concern. And the reality is the Board will 19 consider any and all efforts and also the conditions. 20 EXECUTIVE OFFICER WITHERSPOON: I think the 21 reality is we're going to be changing something or other 22 in July '09, so we'll be back here. 23 SUPERVISOR DE SAULNIER: I would be willing to 24 bet you may be back sooner than that. 25 EXECUTIVE OFFICER WITHERSPOON: I won't be coming PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 back sooner than that. 2 BOARD MEMBER RIORDAN: Let me ask about that 3 friendly amendment. I'm not sure if you can -- I'd like 4 something out there that says we're going to look at 5 certain things, but we may want to have some ability to 6 communicate that we could look at other things as well. 7 But it would seen to me we ought to be stating something 8 that we have a basis here to judge whether this program is 9 going to be okay or not, or we'll get to 2009 and we 10 didn't -- we'll just have a whole lot of things that 11 aren't very clear, and then we have to wrestle with it 12 then. 13 SUPERVISOR DE SAULNIER: I agree with that. My 14 concern is that it will be used just the opposite. 15 BOARD MEMBER RIORDAN: Could we say the criteria 16 would not be limited to? 17 SUPERVISOR DE SAULNIER: Easy, Bob. 18 (Laughter) 19 SUPERVISOR DE SAULNIER: Easy, easy. Bob, do you 20 have an answer to our conundrum? 21 BOARD MEMBER RIORDAN: You know, could we say 22 something about these are things that we may consider but 23 it's not limited to those? 24 SUPERVISOR DE SAULNIER: That would be fine. 25 BOARD MEMBER RIORDAN: I think there needs to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 some thought about what we might be looking at. 2 SUPERVISOR DE SAULNIER: Maybe -- Bob has come up 3 with an answer without hurting himself or anyone else. 4 BOARD MEMBER LOVERIDGE: Tom, you have your hand 5 up. 6 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: This 7 has been evolving in the last few days. And as I look at 8 the resolution language, I think it is drafted to be more 9 of a hard criteria used to decide go, no go. And I think 10 some of the wording that the staff presented in their 11 presentation was a lot more along the lines like we should 12 take these criteria into consideration with other 13 information and then have at least a staff developed 14 recommendation, which doesn't say delay or put it in 15 place, but just a staff recommended action to share with 16 the Board and you make the final decision. 17 And if that's the issue that I think triggered 18 the discussion, we could certainly change this language to 19 make it more in that tone, rather than right now it says 20 if the parameters are not met, the Board directs the staff 21 to propose revisions. Well, we might learn that as some 22 people testified there are other parameters, or a million 23 dollars might look more favorable or less favorable in 24 2009 than it does today and would be a different criteria. 25 So we would make those kind of -- try to take that all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 into consideration for you. And if you'd like, we could 2 certainly work on some language that would be different. 3 CHAIRPERSON SAWYER: I think that would be a good 4 idea. Can we do that in the 15-day framework, or do we 5 need to change the resolution? 6 CHIEF COUNSEL JENNINGS: Let me throw out 7 possible wording and see if you think that would satisfy 8 it. 9 Right before the table on page 5 would say, 10 "compare the performance with appropriate criteria that 11 include the following parameters below." And then right 12 below the table instead of, "if the parameters are not 13 met," "if the criteria are not met." 14 SUPERVISOR DE SAULNIER: With all due respect, I 15 don't think that's kind of encompassing enough. 16 BOARD MEMBER LOVERIDGE: I don't understand that. 17 SUPERVISOR DE SAULNIER: I think we're trying to 18 be prepared for raising the standards. A noble gesture 19 though, Tom. 20 BOARD MEMBER BERG: And considering other 21 standards. 22 SUPERVISOR DE SAULNIER: Right. 23 SUPERVISOR DE SAULNIER: Maybe the best way in 24 the old line of it's best not to watch resolutions be made 25 in public, is there an ability for you to work on language PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 given the direction from the Board? 2 EXECUTIVE OFFICER WITHERSPOON: I think so, but 3 that's a legal question. Can they adopt a resolution that 4 we're still refining? 5 Another simple change is right below the chart 6 delete that sentence, "if the parameters are not met, the 7 Boards directs staff to propose appropriate revisions to 8 the purchase requirement." 9 Because it simply says -- if that sentence were 10 gone, we're evaluating it. We're saying performance 11 targets are necessary. But we haven't said anything about 12 what the outcome will be based on staff's evaluation. 13 SUPERVISOR DE SAULNIER: Maybe, Mr. Chairman, 14 we're going to be going into lunch. Maybe we can give 15 direction the motion is what it is. But we'd like to take 16 the extra hour or two to work on language. 17 EXECUTIVE OFFICER WITHERSPOON: I'm just worried 18 we're going to lose a quorum. We're okay. 19 CHIEF COUNSEL JENNINGS: We could take the vote 20 right after lunch. 21 CHAIRPERSON SAWYER: Okay. Does this conflict 22 with our closed session during lunchtime? 23 CHIEF COUNSEL JENNINGS: No. I think we can 24 proceed with the closed session and then reopen the Z bus 25 matter right after you come back. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 CHAIRPERSON SAWYER: Okay. If that's agreeable 2 to the Board members, we'll do that. 3 At this time, I'd like to make the following 4 statement. We will now adjourn for a lunch break. During 5 the break, the Board will reconvene in a closed session. 6 The purpose of the closed session is for Board members to 7 confer with and receive advise from its legal counsel 8 regarding pending litigation. The litigation to be 9 discussed is Engine Manufacturers Association versus 10 California Air Resources Board and Caterpillar el at 11 versus California Air Resources Board which is pending in 12 the Sacramento County Superior Court. 13 Closed session is not listed on today's agenda 14 but is necessary to hold it today to discuss the available 15 litigation options in response to a court order that was 16 issued Monday of this week, three days ago. The order is 17 not yet final, but is scheduled to become final before our 18 next Board meeting. 19 After the conclusion of the closed session, we 20 will reconvene in open session. We expect to reconvene in 21 approximately 50 minutes. That is at 2:15. 22 Mr. Jennings, do you have any further statement? 23 CHIEF COUNSEL JENNINGS: Not at this time. 24 CHAIRPERSON SAWYER: Okay. 25 (Thereupon a lunch recess was taken.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 CHAIRPERSON SAWYER: The closed session of the 2 Air Resources Board has concluded. The Board met in 3 closed session to confer with legal counsel regarding the 4 pending litigation identified earlier today. I would like 5 our Chief Counsel, Tom Jennings, to summarize the matters 6 considered and the action taken by the Board. 7 CHIEF COUNSEL JENNINGS: Thank you, Dr. Sawyer. 8 In the closed session, we advised the Board 9 regarding pending litigation which is commonly referred to 10 as the chip reflash litigation, Engine Manufacturers 11 Association versus the ARB and Caterpillar et al versus 12 ARB. We discussed how to respond to a court order that 13 was issued last Monday. The Board authorized the 14 Executive Officer to pursue all available options with 15 plaintiff and follow through on any appropriate actions 16 that need to be taken before the next Board meeting. 17 CHAIRPERSON SAWYER: Thank you. 18 We'll now resume our consideration of the 19 resolution from Agenda Item 6-9-4 dealing with the zero 20 emission bus regulation. And I have a modification of the 21 part of the resolution which we were discussing which I'll 22 read to the Board members. 23 "Be it further resolved, that staff shall 24 update the Board with its assessment of 25 zero-emission technology and its readiness for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 commercialization on or before July 2009. The 2 staff will consider the implementation criteria 3 listed below as well as any other relevant 4 factors in completing its evaluation and 5 recommendation to the Board." 6 And then the criteria which are in the document 7 are listed there. 8 CHIEF COUNSEL JENNINGS: And that paragraph would 9 be substituted for the original paragraph right above the 10 table on page 5. 11 BOARD MEMBER RIORDAN: As the seconder of the 12 motion, I'll accept that amendment. 13 CHAIRPERSON SAWYER: Okay. 14 SUPERVISOR DE SAULNIER: I didn't mean the cause 15 so much trouble. Might as well be consistent right until 16 the end, Barbara. 17 BOARD MEMBER RIORDAN: I can't wait for you to 18 get in the Assembly. Some of your little amendments, I 19 can't wait to hear those. 20 SUPERVISOR DE SAULNIER: I'll only hope they'll 21 be as inpatient -- patient with me as you have been. 22 CHAIRPERSON SAWYER: Do I have a motion to adopt 23 the resolution as amended? 24 BOARD MEMBER RIORDAN: Yes. 25 BOARD MEMBER LOVERIDGE: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 CHAIRPERSON SAWYER: And a second? 2 BOARD MEMBER RIORDAN: You got that. 3 CHAIRPERSON SAWYER: And I assume we're ready to 4 vote. All those in favor please indicate by saying aye. 5 BOARD MEMBER KENNARD: Dr. Sawyer, if I could 6 just comment. 7 CHAIRPERSON SAWYER: I'm sorry. 8 BOARD MEMBER KENNARD: That's quite all right. 9 And I know it's been a weary session. But just this has 10 been a really troubling one for me, because I think it 11 demonstrates that public policy setting is not a perfect 12 science. Because I'm from L.A., I have a particularly 13 sensitive and sympathetic view of what L.A. MTA have to 14 say. And of course, they're three times bigger than any 15 of the other transit agencies, so they were most 16 challenged by this obviously. 17 And also, I happen to head a public entity that 18 has over 500 fleet vehicles. And we strive to do our best 19 in terms of providing clean air vehicles. And it's always 20 a challenge, and we try our best to do that. 21 But one of the keys to our success -- and I would 22 suggest we're very successful at it -- is we leverage our 23 dollars to the greatest extent possible. So in this 24 instance, I think it's challenging for the agencies to try 25 to undertake this commitment to zero emissions while still PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 using and maximizing their dollars. And I think that also 2 raises expectations beyond our ability to deliver when we 3 set standards when the technology and the performance is 4 not yet perfected. 5 So I hope that this is kind of a lesson for all 6 of us that we need to be very secure in the performance of 7 the technology before we endeavor in regulations. So I'm 8 going to support this, but reluctantly for those reasons. 9 CHAIRPERSON SAWYER: Thank you very much. 10 I'll proceed then with the vote. All those in 11 favor please indicate by saying aye. 12 (Aye) 13 CHAIRPERSON SAWYER: Opposed? 14 None opposes. Thank you very much. 15 The next item for our consideration is 6-9-5, 16 Proposed Amendments to the Air Resources Board Distributed 17 Demonstration Certification Regulation. Distributed 18 generation, or DG, refers to electrical generation 19 equipment that produces electricity near the place of use. 20 State law requires the Air Resources Board to certify DG 21 equipment that is below local air district permitting 22 thresholds and to set emission standards for that 23 equipment that are equivalent to central station power 24 plants. 25 I will turn this item over to our Executive PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 Officer, Ms. Witherspoon, to introduce and begin the staff 2 presentation. 3 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 4 Sawyer. 5 In 2001, the Board adopted the distributed 6 generation certification regulation pursuant to Senate 7 Bill 1298 enacted the previous year. DG was just starting 8 to be deployed at that time. Because of uncertainties 9 associated with DG technology, the regulation required 10 technical review and subsequent report to the Board. 11 Staff has worked with manufacturers and operators 12 of DG equipment, CAPCOA, and other interested stakeholders 13 during this technology review process. The proposed 14 amendments before you today are a result of that 15 collaborative effort. Dave Mehl of the Stationary Source 16 Division will present staff's proposal. 17 (Thereupon an overhead presentation was 18 presented as follows.) 19 AIR RESOURCES ENGINEER MEHL: Thank you, 20 Ms. Witherspoon. Good afternoon, Dr. Sawyer and members 21 of the Board. 22 --o0o-- 23 AIR RESOURCES ENGINEER MEHL: Today, I will 24 provide you with background on the Distributed Generation 25 Certification Program and a summary of the proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 amendments to the distributed generation certification 2 regulation. 3 --o0o-- 4 AIR RESOURCES ENGINEER MEHL: Distributed 5 generation is electrical generation technologies that 6 produce electricity near the place of use. DG includes 7 internal combustion engines, fuel cells, turbans, 8 mirco-turbans, wind turbans, and photovoltaics. 9 As these devices produce electricity near the 10 place of use, they are imbedded in our communities. They 11 are used at schools, libraries, hotels, offices buildings, 12 hospitals, businesses, and utilities. 13 --o0o-- 14 AIR RESOURCES ENGINEER MEHL: Here are a couple 15 of photos of DG devices. On the left are two identical 16 and natural gas fired 250 kilowatt mirco-turbans installed 17 in an office building. On the right is a photo of a 18 natural gas fueled 250 kilowatt fuel cell that is 19 identical to four that are used at a brewery. 20 Mirco-turbans and fuel cells are the only two types of DG 21 currently certified by our program. Since these 22 electricity generating devices are located in our 23 communities, the State Legislature want them to be clean 24 technology. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 AIR RESOURCES ENGINEER MEHL: Senate Bill 1298 2 chaptered in 2000 will require that beginning January 1, 3 2003, every DG unit sold in the state must either be 4 permitted by the local air district or certified for use 5 by ARB. SB 1298 required ARB to issue guidelines for 6 local air district to use when permitting DG equipment. 7 Furthermore, SB 1298 required the ARB to adopt a DG 8 certification program for DG exempt from local air 9 districts permits. 10 Finally, SB 1298 also required that DG units meet 11 the same emission levels that are achieved by the use of 12 the best available control technology, also known as BACT, 13 at new large power plants burning natural gas. This must 14 be done at the earliest practicable date. 15 --o0o-- 16 AIR RESOURCES ENGINEER MEHL: In response to SB 17 1298, the Board approved in November of 2001 permitting 18 guidelines developed by staff. These guidelines represent 19 BACT at the time for turban and internal combustion engine 20 DG devices. 21 --o0o-- 22 AIR RESOURCES ENGINEER MEHL: In November of 23 2001, the Board also adopted a DG certification 24 regulation. The regulation applies to DG that is not 25 subject to local air district rules, for example, fuel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 cells and mirco-turbans. These technologies are exempt 2 from local air district permits due to their low emissions 3 or fuel usage. ARB certifies DG at the manufacturer 4 level. Manufacturers submit information demonstrating 5 that their technology meets the applicable standards. 6 --o0o-- 7 AIR RESOURCES ENGINEER MEHL: The regulation 8 contains two sets of emission standards. 9 The first set came into effect shortly after the 10 date of adoption and reflected existing clean DG emission 11 limits. These are referred to as the 2003 standards. 12 The second set of emission standards reflect 13 large power plant BACT emission limits. These emissions 14 standards were to take effect at the earliest practical 15 date per SB 1298. These are referred to as the 2007 16 standards. 17 SD 1298 also prescribed that emission standards 18 be output based in units of pounds per megawatt hour. 19 This significant because output based standards take into 20 account both the electricity produced and useful heat 21 extracted from the exhaust, which is called combined heat 22 and power. 23 SB 1298 explicitly required ARB to give credit 24 for their combined heat and power in order to meet 25 emission standards. Combined heat and power, or CHP, is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 the total amount of useful energy obtained from the DQ 2 equipment. It is the sum of the electrical output of the 3 unit plus the amount of waste heat utilized in a 4 productive manner, such as heating water or providing heat 5 to industrial processes. By allowing certified DG units 6 to take credit for CHP, they can significantly increase 7 their overall efficiency. 8 A fuel cell, for example, can be 60 percent 9 efficient at producing electricity alone. But with CHP, 10 its efficiency can increase to about 85 percent. By 11 comparison, large power plants have an overall efficiency 12 of about 65 percent. Another benefit of higher 13 efficiencies with CHP is less fuel needs to be consumed, 14 thereby reducing emissions, carbon dioxide, a greenhouse 15 gas. 16 --o0o-- 17 AIR RESOURCES ENGINEER MEHL: For 2003, there 18 were two NOx standards: One with and one without CHP. 19 The standard that includes CHP is less stringent because 20 the useful heat recovered from a DG device reduces the 21 need to generate heat from a combustion device such as a 22 boiler. The 2007 emission standards, the standards that 23 reflect BACT at large power plants, are considerably more 24 stringent than the 2003 standards. There is no separate 25 CHP standard, although CHP can be used to meet the 2007 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 standards. 2 --o0o-- 3 AIR RESOURCES ENGINEER MEHL: Currently, four 4 mirco-turbans have been certified to the 2003 standard 5 using natural gas as the fuel. Five fuel cells and one 6 mirco-turban have already been certified to the more 7 stringent 2007 standards using natural gas as the fuel. 8 We expect more applications to be coming soon. 9 --o0o-- 10 AIR RESOURCES ENGINEER MEHL: Zero emission 11 technologies are not required to be certified by our 12 program, as these devices create no air pollutants from 13 their operation. Zero emission technologies include 14 photovoltaics, wind turbans, and hydrogen-fueled fuel 15 cells. ARB staff is working in conjunction with the 16 California Stationary Fuel Cell Collaborative to promote 17 the use of all types of fuel cells. 18 --o0o-- 19 AIR RESOURCES ENGINEER MEHL: The regulation as 20 adopted in 2001 required staff to complete a technical 21 review of four parts of the regulation and report their 22 findings to the Board. The areas of the regulation that 23 staff were to evaluate are: The feasibility of the 2007 24 standards; the amount of credit given for the use of CHP; 25 the testing procedures; and how emissions durability is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 determined. 2 --o0o-- 3 AIR RESOURCES ENGINEER MEHL: Based on findings 4 from the technical review, staff believes that the 2007 5 standards are both feasible and appropriate. Therefore, 6 staff is proposing no change to the implementation of the 7 2007 standards. 8 ARB staff spent an extensive amount of time 9 searching for data related to the amount of waste heat 10 utilized by facilities with certified equip. We were not 11 able to find sufficient data during our review. 12 Therefore, staff is proposing no change to the CHP credit. 13 --o0o-- 14 AIR RESOURCES ENGINEER MEHL: Staff is proposing 15 modifications to the testing requirements. We are 16 proposing to change the VOC test method to one that is 17 more accurate than the current test method. Furthermore, 18 testing would be conducted only at 100 percent load 19 instead of a weighted average at multiple loads. 20 During the technology review, staff found that 21 most of the time these technologies operate at 100 percent 22 load. We recommend deleting the requirement to test each 23 unit with a portable NOx analyzer at the time of 24 production. Hand-held analyzers cannot measure NOx 25 emissions at such low concentrations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 However, the regulation maintains ARB's authority 2 to test DG units as necessary to assure continued 3 compliance with the applicable emission standards. We are 4 also proposing other minor changes in the testing 5 requirements to improve clarity and enforcability of the 6 regulation. 7 --o0o-- 8 AIR RESOURCES ENGINEER MEHL: Regarding 9 durability, staff is proposing to require manufacturers to 10 note on their applications components most critical to 11 maintaining compliant emissions. We'll work with the 12 manufacturers to identify these critical components. 13 The manufacturers must then track the maintenance 14 of those components and submit this data to ARB staff upon 15 request. Staff will use this information to determine if 16 the certified units are continuing to meet the emission 17 standards. In addition to addressing the four issues 18 required in the technical review, staff is proposing other 19 revisions. We are proposing to add standards for 20 certifying technologies fueled by waste gases. We're also 21 proposing to increase fees to fully fund the program. I 22 will discuss these two revision further in the next few 23 slides. Finally, we are proposing other minor changes to 24 improve clarity and enforcability of the regulation. 25 These changes are mainly editorial in nature. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 --o0o-- 2 AIR RESOURCES ENGINEER MEHL: In 2001, the 3 general consensus was that waste gas DG applications would 4 require local air district permits and therefore would not 5 be subject to this regulation. Since then, we have 6 determined that a significant number of waste gas 7 applications are exempt from local air district permits. 8 Although the regulation allows alternative fuels, 9 waste gas is varied based on the type of waste gas, 10 locations, time of year, and weather. The DG 11 certification program does not have a method to 12 accommodate such variability of fuels. 13 As mentioned earlier, DG equipment must either be 14 permitted by the local districts or certified by the ARB. 15 Staff has asked districts to issue permits for otherwise 16 permit-exempt equipment while we sought a better solution 17 to certified DG equipment on waste gases. 18 --o0o-- 19 AIR RESOURCES ENGINEER MEHL: Staff is proposing 20 surrogate fuel compositions that manufacturers can use to 21 certify their technologies. We have developed surrogate 22 fuel compositions for landfill gas, digester gas, and oil 23 field waste gas. We are also proposing a two-tiered 24 emission system for waste gases as was adopted for natural 25 gas systems in 2001. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 The interim emission standards will become 2 effected January 1, 2008. These are similar to the 2003 3 standards for natural gas. Based on sources test results, 4 we believe these standards to be currently feasible for 5 both micro-turbans and fuel cells. By January 1, 2013, 6 waste gas DG units are required to meet large power plant 7 BACT emission levels. 8 --o0o-- 9 AIR RESOURCES ENGINEER MEHL: SB 1298 authorizes 10 the ARB to collect fees to pay for staff resources 11 necessary to implement the DG certification program. The 12 initial fees established in 2001 have proven inadequate to 13 offset staff resources. Staff is proposing to increase 14 the application fee to fully offset the cost of certifying 15 technologies from $2500 to $7500 per new application. To 16 date, DG manufacturers have not opposed this 17 recommendation. 18 In order to promote clean technologies, devices 19 that can certify to the 2013 waste gas standard prior to 20 2008 would not be required to submit an application fee. 21 However, they would be subject to recertification fees. 22 --o0o-- 23 AIR RESOURCES ENGINEER MEHL: We recommend that 24 the Board adopt the proposed amendments to the distributed 25 generation certification regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 This concludes my presentation. Thank you. 2 CHAIRPERSON SAWYER: Are there any questions from 3 the Board? 4 I have no witnesses. I have one witness. Will 5 you please come forward and identify yourself? 6 MS. MAC DOUGALL: My name is Ruth MacDougall, and 7 I'm a Senior Project Manager at SMUD's advanced renewables 8 and distributed generation technologies group. 9 I just wanted to comment to the Board, appreciate 10 the hard work they have done on the certification standard 11 and to tell you why I'm here is that SMUD has many goals, 12 renewable portfolio standard, greenhouse gas reductions, 13 energy efficiency, and a distributed generation policy. 14 And we need good technology and appropriate regulations, 15 you know, to meet those goals. And so there's been a lot 16 of work put into the certification standards. 17 However, I have to agree with the comments 18 provided by Leslie Witherspoon of Solar Turbans that those 19 have not been reflected in the guidance documents. And 20 that the guidance documents should be consistent with the 21 certification standards. And it's one of the comments 22 that's on your website as one of the public comments. 23 But specifically, the guidance document should 24 include 60 percent engine efficiency qualifying efficiency 25 standard which is stated in the certification standard or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 regulation. But it's stated as 75 percent in the guidance 2 documents. And likewise, the dates have changed in the 3 certification standard, but not in the guidance documents. 4 And our air quality district, who are actually first, 5 that's the organization that we work with to get permits 6 and everything, I think they would benefit from having the 7 direct standards reflected in the guidance documents. So 8 that's my only comment. 9 CHAIRPERSON SAWYER: Thank you very much. 10 I realize I neglected to Ombudsman statement on 11 this. 12 OMBUDSMAN QUETIN: I was just starting to relax 13 there. 14 Dr. Sawyer and members of the Board, this 15 regulation has been developed with input from the fuel 16 cell manufacturers, micro-turban manufacturers, utility 17 companies, consultants, and local air districts. Staff 18 initiated the regulatory process in June 2004, and the 19 first draft of the amended regulation was published in 20 February 2006. 21 They held one public workshop, July of 2006, and 22 eight stakeholder work group meetings over the past year 23 and a half. Seven of these meetings provided a conference 24 call option for the participants. Nearly 30 stakeholders 25 attended the workshops and each work group meeting. There PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 were numerous meetings in person and via phone with 2 individual companies. All events were held in the 3 Sacramento area. The staff report and Board notice were 4 released on September 1st, 2006, approximately 1200 5 stakeholders were noticed via the list serve. Thank you. 6 CHAIRPERSON SAWYER: Do the Board members have 7 any questions? 8 I have one. The fee which is proposed to be 9 increased, I have no sense of what an appropriate fee is. 10 And how is that arrived at? And have there been comments 11 from the affected parties about the magnitude of the fee? 12 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Good 13 afternoon. I'm Mike Waugh, Manager of the Program 14 Assistance Section. 15 As Dave's presentation said, SB 1298 allowed us 16 to charge fees to recover the cost for the certification 17 program. In 2001, when the regulation was initially 18 adopted by the Board, staff had estimated $2500 to be that 19 level. We did not receive any applications until 2003 20 when the program became effective. We've since certified 21 ten technologies. And certainly because of our experience 22 we found out that the $2500 was definitely not enough to 23 offset our costs. 24 The largest amount of effort that we use for our 25 review is source test review. And since we're certifying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 at a state level, we really pour over that data quite 2 well. We're certifying these equipment at the 3 manufacturer's level for statewide use. So we went back 4 to look to see how much time we had spent on these 5 applications and determined that based upon the cost of 6 staff time that $7500 was really commensurate with the 7 amount of effort that goes into certifying these 8 equipment. 9 CHAIRPERSON SAWYER: Ms. Berg. 10 BOARD MEMBER BERG: Could we just have a comment 11 on our last witness and being able to bring that guidance 12 document up to be consistent with the certification? 13 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: As 14 Dave said, the two things we had to do was issue the 15 guidance and then set up the certification program. 16 In 2001, the guidance was established. We worked 17 with stakeholders to establish this guidance based on best 18 available control technology for turbans and IC engines at 19 the time. Since that time, we did recommend that BACT 20 will get you to a certain level of emissions reductions. 21 But as with our certified equipment, CHP is really 22 required to get you down to the level that's equivalent to 23 a central power plant emission standard. 24 In our guidance, we said, you know, the district 25 should consider 60 percent minimum efficiency and a 75 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 percent average efficiency over the year. We had similar 2 language in our certification regulation. We dropped the 3 75 percent and then stuck with the 60 percent minimum. 4 With regard to the consistency, the districts really deal 5 with BACT, and the efficiency doesn't really come into 6 play when they issue the permits. We think that we said 7 we'd come back and deal with the guidelines as necessary. 8 One of the things we do, however, is because it's 9 BACT based, we have a BACT clearinghouse. We work with 10 the local air districts now. As BACT changes over the 11 years, the guidelines kind of refresh themselves anyways. 12 So with regard to the consistency, we feel like the 13 guidelines kind of update themselves as BACT updates 14 itself as well. 15 BOARD MEMBER BERG: And then the certification. 16 I guess what I'm hearing, if you look at one place, the 17 certification, you have one criteria. And if you look at 18 the guideline, there's another criteria. From somebody 19 looking at that from the outside, that could be confusing. 20 Is that correct? 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The 22 guidelines apply to a different set of sources that go 23 through the district permitting process. If you're going 24 to the district permitting process and the guidelines 25 which were done a while ago are what the districts use as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 the minimum, and if additional control technology has 2 evolved, they would apply that to the source. 3 CHAIRPERSON SAWYER: One more question. The 2007 4 regulation, will that severely restrict the availability 5 of mirco-turbans, or does it appear that industry will be 6 able to comply? 7 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: We 8 knew at the time in 2001 it would be a challenge for 9 mirco-turbans. We have certified a micro-turban to 2007 10 standards. We are aware that there is additional efforts 11 being made. We expected another application imminent 12 really. And we don't know exactly where that stands. But 13 mirco-turbans have been certified. A mirco-turban has 14 been certified for 2007. 15 CHAIRPERSON SAWYER: But this is -- prior to 16 that, there were four certified, and there will be one 17 certified now? 18 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: That's 19 four certified and one currently certified to 2007. So 20 for natural gas applications, after 2007, at this point 21 until we received some more applications, there's one 22 model that can be used for natural gas with the proposed 23 waste gas standards which are similar to the 2003. Those 24 other models, should they be able to certify under waste 25 gas applications, will continue to be able to be used in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 California. 2 EXECUTIVE OFFICER WITHERSPOON: Dr. Sawyer, the 3 way the law works, the Legislature set for this Board what 4 the emission standards should be identical to central 5 station power and then left to this Board the 6 determination of when is that feasible. And since one 7 manufacturer has certified, staff concluded that it's 8 feasible. And that's why we're recommending that the 9 standard remain in effect for '07. 10 If we wanted to further -- you wish to further 11 conclude, well, it's feasible, but it's not desirable 12 because there's now not enough units, that would take a 13 legislative correction to the underlying statute. 14 CHAIRPERSON SAWYER: And we were given the 15 responsibility for determining the -- 16 EXECUTIVE OFFICER WITHERSPOON: When it was 17 feasible. 18 CHAIRPERSON SAWYER: The credit for heat power? 19 EXECUTIVE OFFICER WITHERSPOON: Yes. 20 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Yes. 21 The SB 1298 said we have to give credit for combined heat 22 and power. And we worked with the stakeholders to 23 determine exactly how much credit should be given for 24 that. 25 CHAIRPERSON SAWYER: And briefly, what is that? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 Simple energy basis? 2 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: 3 Combined heat and power is that when you have an output 4 based standard like pounds per megawatt hour that the 5 megawatts is a combination of the electrical output plus 6 the useful thermal heat that is captured from the exhaust. 7 So that goes into the total work done by the device. And 8 therefore with CHP credit, the emissions can be met at a 9 lower output based basis. 10 CHAIRPERSON SAWYER: Okay. 11 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: In 12 other words, if you had X amount of electricity and an 13 additional X amount of heat that you captured, well, 14 that's two X output. And therefore, your emissions basis 15 drops in half, because you get credit for the heat. 16 CHAIRPERSON SAWYER: And these units are all 17 basically electric generating units that you get heat from 18 and not boilers that you get electricity from. 19 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: That's 20 correct. 21 BOARD MEMBER BERG: I had one clarifying question 22 on the fees. I understand the increase in the proposed 23 fees for the initial application or the initial 24 certification. But I understand there's a recertification 25 process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: There 2 is a recertification process. The certification is good 3 for five years. And if there are no changes to the 4 technology, then the original $2500 would be charged. If 5 there is a need for an additional source testing, then 6 that extra effort will have to put forth by staff. So 7 certification is good for five years, and recertification 8 thereafter for another five years. 9 BOARD MEMBER BERG: And then with no changes, it 10 will stay at the $2,500? 11 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Yes. 12 It will. 13 CHAIRPERSON SAWYER: Are there any other 14 questions from the Board? 15 Any comments from the staff? 16 EXECUTIVE OFFICER WITHERSPOON: Nothing further. 17 CHAIRPERSON SAWYER: Since all testimony, written 18 submissions, and staff comments for this item have been 19 entered into the record and the Board has not granted an 20 extension of the comment period, I'm officially closing 21 the record on this portion of the Agenda Item 6-9-5. 22 Written or oral comments received after the comment period 23 has closed will not be accepted as part of the official 24 record on this agenda item. 25 Our ex parte statement. Do we have any? No. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 No. No. No. No ex partes. 2 I assume that we've been able to review the 3 resolution. Do I have a motion? 4 BOARD MEMBER LOVERIDGE: So move. 5 BOARD MEMBER RIORDAN: Second. 6 CHAIRPERSON SAWYER: And a second. All those in 7 favor please signify by saying aye. 8 (Ayes) 9 CHAIRPERSON SAWYER: Opposed? 10 Carried. Thank you very much. 11 The next agenda item is the 6-9-6, a progress 12 report on the staff's report to develop an alternative 13 fuels incentive program. This year's budget provides $25 14 million to the Air Resources Board for this purpose. The 15 budget also required that the Air Resources Board 16 coordinate closely with the California Energy Commission 17 in designing the alternative fuel incentive program which 18 staff has done. 19 I will now ask Ms. Witherspoon to begin this 20 item. 21 EXECUTIVE DIRECTOR WITHERSPOON: Thank you, Dr. 22 Sawyer. 23 As you indicated, staff worked jointly with the 24 California Energy Commission to develop initial concepts 25 to categorize and prioritize the use of these funds. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 There are very specific requirements in the budget bill 2 for expenditures, and all of the funds must be encumbered 3 by June 30th, 2007, and fully spent two years later. 4 We're planning to release Request for Proposals 5 in January of next year, then to bring you specific awards 6 for approval next April. So the Board doesn't need to 7 decide anything at this meeting. We just wanted to keep 8 you informed of the budget bill and the process that we're 9 following to develop a decision package for you. 10 As you'll see in just a moment, staff's own 11 proposal is an approximation of what we would like to see 12 funded. The actual projects will depend on what we're 13 able to solicit from the business community, governmental 14 agencies, and other participants in each of the proposed 15 subject areas. 16 Dean Simeroth and Analisa Bevan are going to 17 jointly make staff's presentation. We also have a special 18 guest with us from the Energy Commission to talk about 19 have CEC's perspective on these alternative fuel 20 incentives, Peter Ward, who is an Advisor to the 21 Commissioner Jim Boyd. Thank you for coming, Peter. 22 Dean Simeroth is going to lead off. Dean. 23 (Thereupon an overhead presentation was 24 presented as follows.) 25 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Thank PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 you, Ms. Witherspoon. 2 Taking a breath. 3 The budget bill was approved last June and 4 authorized one-time allocation of $25 million to the Air 5 Resources Board to incentive the use of alternative 6 transportation fuels and vehicles in California. 7 The bill also directed the Air Resources Board to 8 work with the Energy Commission to develop and implement 9 these concepts for spending these moneys. Today, we're 10 here to brief the Board on our efforts to date to 11 implement the program. 12 --o0o-- 13 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 14 Budget language specifically focuses on incentives for 15 public and private alternative fuel vehicles and fueling 16 stations, especially for E-85 and the production of 17 alternative fuels. In addition, the budget language 18 provides for grants for alternative fuels in vehicle 19 research and development. And staff also proposes to 20 complement these objectives with consumer education and 21 outreach efforts. The key goal of this program is to 22 reduce air pollution from greenhouse gases. 23 --o0o-- 24 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: The 25 language requires 25 million to be encumbered by June PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 30th, 2007, and the fund to be fully expended by June 30, 2 2009. In addition, staff is required to provide quarterly 3 reports to the Legislature. 4 Air Resources Board, Energy Commission, Water 5 Resources Control Board, and Integrated Waste Management 6 Board staffs are working to implement the program. Public 7 workshop was held on September 21st in Sacramento with 8 over 100 stakeholders participating. 9 Staff proposes to have solicitations for projects 10 in January and to review the project proposals by early 11 spring. Based on the merit of each project proposal, 12 staff will then make recommendations on grants by 13 mid-spring and subsequently to the Board. 14 --o0o-- 15 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Next 16 we'll cover the development of the proposed concepts. 17 --o0o-- 18 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: To 19 facilitate the development concept for solicitations, 20 staff identified a number of guiding principles. As shown 21 on this slide, these principles include ensuring the Navy 22 project funded, advanced California state of knowledge, 23 result in an increase in the safe production of biofuels 24 and the distribution infrastructure, and the result in 25 deployment of new vehicle technology. For example, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 plug-in hybrids. In addition, the projects need to reduce 2 air pollution and greenhouse gases. 3 --o0o-- 4 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 5 Additionally, these funds are not to be used for long-term 6 research. And if the program is to be effective, 7 flexibility is needed to be able to respond to the merits 8 of the submitted proposals. 9 --o0o-- 10 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: In 11 brief summary, comments received from stakeholders both 12 verbally and written for funds should not be used to 13 provide fuel price incentives. And funding should be 14 increased for plug-in hybrids and biofuel production. And 15 finally, general support for funding research and emission 16 testing and education efforts. 17 --o0o-- 18 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: The 19 proposed concepts were developed by Air Resources Board 20 and Energy Commission staff and others and are based on 21 the budget control language or designed to be compatible 22 with State policies and considered public comments. Final 23 awards will be based on the merit and quality of the 24 proposed projects. That is, money may be shifted from one 25 category to another based on evaluation of the received PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 proposals. 2 --o0o-- 3 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Also 4 the proposed concepts and budget proposals are designed to 5 be consistent with the Governor's Executive Order on 6 biofuels, bioenergy action plan, and the Climate Action 7 Plan, and the draft results of Air Resources Board and 8 Energy Commission staff evaluations of alternative fuels 9 per AB 1007. 10 --o0o-- 11 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Staff 12 proposes to tentatively budget about $7 million for 13 fueling infrastructure; $5 million for biofuels 14 production; $8 1/2 million alternative fuel vehicles; 3 15 1/2 million for fuel and vehicle research; and 1 million 16 for consumer education and public outreach. 17 However, I will elaborate on the first two 18 categories and then turn the presentation to Ms. Analisa 19 Bevan to complete. 20 --o0o-- 21 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Funds 22 are tentatively budgeted for increasing the fueling 23 infrastructure for both public and private fleets and 24 retail fueling stations. This will include funds for 25 underground storage tanks, vapor recovery equipment, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 dispensers. 2 The concept for retail stations is to equip 3 enough stations in a metropolitan area such as Sacramento 4 to determine if E-85 when readily accessible, will the 5 public purchase the fuel. 6 Staff expects project proposals for fueling 7 infrastructure to include information on volume expected 8 to be dispensed and how E-85 will be marketed among other 9 information. 10 --o0o-- 11 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: About 12 $5 million is proposed for increasing biofuels production 13 in California. They expect proponents to provide at least 14 matching funds. Examples of qualifying biofuel production 15 projects include biodiesel and the use of biomethane or 16 biomass to produce transportation fuels. An example would 17 be a project that takes landfill methane and converts it 18 to liquified natural gas produced by local waste haulers. 19 Proposals will be evaluated for practicality and 20 the potential to provide fuels in the next few years. 21 At this time, I'll turn the presentation over to 22 Ms. Bevan. 23 --o0o-- 24 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 25 CHIEF BEVAN: Thank you, Mr. Simeroth. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 I will now describe funding intended to support 2 alternative fuel vehicles. The proposed programs are 3 broken into three categories. 4 First, we are proposing an allocation directed 5 toward demonstration programs to enhance or accelerate 6 commercialization of the plug-in hybrids. Like the 7 program that Mr. Simeroth has described, we will solicit 8 grant proposals. We expect these proposals to be for 9 projects that help demonstrate the commercial viability of 10 plug-in hybrid vehicle technology, answer questions about 11 commercial acceptance, use, and fueling or charging 12 patterns. 13 Within this program, we may also consider 14 demonstrations of medium- and heavy-duty hybrid vehicles 15 that utilize alternative fuels, such as biodiesel. The 16 amount identified in this program is $5 million. 17 --o0o-- 18 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 19 CHIEF BEVAN: The second allocation for vehicles is 20 focused on clean transit bus projects. Grant proposals 21 would be accepted for battery electric fuel cell hydrogen 22 internal combustion engine and hydrogen C&G fuel blend 23 transit bus applications. 24 Our goal in this project sector is to support 25 zero-emission buses and technologies that enable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 zero-emission buses. The amount identified in this 2 program is $2 million. 3 The third program is a consumer and fleet 4 incentive program. Simply, purchasers or leasers of zero 5 emission or alternative fueled advanced technology PZEVs 6 would be for a one-time fixed amount grant. Vehicle types 7 to be included would be: Hydrogen fuel cell vehicles; 8 battery electric cars including some conversions; plug-in 9 hybrids; compressed natural gas cars; and hydrogen 10 internal combustion engine cars. 11 The amount identified for this program is $1.5 12 million. 13 --o0o-- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: We have allocated $3.5 million for 16 alternative fuel and alternative vehicle fuel research. 17 The issues to be addressed by this research 18 include emission testing, vehicle performance and 19 durability, vapor recovery certification, vehicle 20 operation characteristics, fuel characteristics, 21 economics, and feedstock sources. 22 The fuels and vehicle types to be covered by this 23 effort include E-85, biodiesel, and plug-in hybrids. 24 These research efforts will assist in the Board's 25 understanding of emission impacts and alternative fuel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 commercialization and develop tools to assist with 2 certification efforts for alternative fuel vehicles. 3 --o0o-- 4 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 5 CHIEF BEVAN: The final area of funding proposed by staff 6 is consumer education. Critical to alternative fuel 7 success is public understanding and acceptance. 8 The education and outreach proposed by this 9 program will promote alternative fuel vehicles and 10 infrastructure. The audiences for these efforts include 11 the public, car dealers, and mechanics. Additionally, the 12 efforts include development of materials to assist with 13 the review and approval of alternative fuel stations and 14 production facilities. 15 In addition to providing basic information about 16 the available technologies in fuels, the materials 17 produced for this program will publicize air quality, 18 climate, energy benefits of alternative fuel choices. 19 The amount identified for this program is $1 20 million. 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 23 CHIEF BEVAN: In summary, these funds provide us with a 24 unique opportunity to advance alternative fuel 25 commercialization. Within the parameters established by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 the budget bill with regard to timing, scope, and goals, 2 it is important to spend these one-time funds effectively 3 on meaningful projects that will accelerate transition to 4 clean alternative fuels. 5 Of course, the responses to the grant proposal 6 solicitations will determine the final slate of projects 7 to be considered for funding. Based on our public 8 consultations and comments received about this program, we 9 expected to have a broad set of proposals to choose from. 10 And we plan to brief the Board on our recommendations for 11 project funding next spring. 12 This concludes our presentation. Thank you. 13 CHAIRPERSON SAWYER: Thank you. 14 Maybe Mr. Ward can tell us about the coordination 15 with the California Energy Commission. 16 MR. WARD: I'm pleased to be here today to 17 support the proposal from the staff. This is a very short 18 time frame to encumber the funds, $25 million. And to my 19 experience, alternative fuels hasn't had this much money 20 in one year since basically dirt was a rock. 21 I'm very pleased that this staff is taking a 22 flexible approach toward allocating this money and 23 encumbering it in all the different areas that are 24 proposed. We do support the Governor's Executive Order to 25 bioenergy and climate change and are in support of the AB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 1007 process in tandem with the Air Resources Board as 2 well. This is a cooperative effort, and the Energy 3 Commission is looking forward to moving forward with the 4 Air Resources Board staff to make sure we have a complete 5 success of encumbering and utilizing the $25 million for 6 this important task. Thank you. 7 CHAIRPERSON SAWYER: Thank you very much. 8 Do the Board members have any questions? 9 Mayor Loveridge. 10 BOARD MEMBER LOVERIDGE: What will be the 11 translation process once the awards have been given? It 12 seems to me this is not communication simply among a few 13 specialists about what they found. This information needs 14 to have a more visible light. I guess what will be the 15 outcome of this work? 16 EXECUTIVE OFFICER WITHERSPOON: We are required 17 to report quarterly to the Legislature on what we're doing 18 and what we're learning. And the public information 19 aspect of the funding will create documents as well for 20 circulation. I think probably we need to prepare a 21 summary report on all of it, both for you and for anyone 22 else who is interested in what we've learned with this $25 23 million. 24 BOARD MEMBER LOVERIDGE: Is it beyond the 25 expenditure of the money and the good research, it seems PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 to me we need to tell the stories. 2 EXECUTIVE OFFICER WITHERSPOON: Especially if we 3 want more money. 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And that's 5 our intention, because we recognize this money is not only 6 to do, but to learn. So the things that are done and work 7 well we want to advertise. And the things that are done 8 and they don't work as well as we anticipate or they show 9 us problems, we need to learn from them. So we're going 10 to be putting a lot of effort in as the projects go on to 11 analyze them and figure out what's the appropriate next 12 steps. 13 BOARD MEMBER LOVERIDGE: Good. 14 BOARD MEMBER BERG: For those technologies that 15 aren't being considered because they don't fit within the 16 parameters of the 25 million such as evidently the hybrid 17 electric truck, is that my understanding? How are we 18 handling that? Because I'm sure there's going to be a lot 19 of project people believe very passionately in. If they 20 don't fit within the parameters, how are we going to work 21 that out? 22 EXECUTIVE OFFICER WITHERSPOON: Although Mr. 23 Simeroth didn't stress it, two or three of the slides 24 showed a bullet that the budget bill prohibits us from 25 investing this money in petroleum, coke, and I forget what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 the other one was -- conventional fuel essentially. 2 So interesting question has arisen, does a diesel 3 vehicle with a battery on board qualify for funding? And 4 we've already determined that plug-in batteries qualify 5 for funding because they're drawing power off the grid. 6 But the battery in a diesel hybrid is powered by the 7 diesel fuel and then makes additional fuel available -- 8 energy available to operate the vehicle. 9 So we're looking closely at the language and 10 whether it's permissible. It wasn't quite we don't think 11 what was intended. What we suggest people do while we're 12 sorting through all the applications is go ahead and 13 apply. Can't hurt them. And we will look at those 14 projects and their worthiness as the whole slate comes in. 15 Because as Peter Ward indicated, it's going to be hard to 16 spend this money in as little time as we have. The 17 quality of projects matters a lot. 18 CHAIRPERSON SAWYER: I have four people who have 19 asked to speak in the order of Todd Campbell, Arthur 20 Douwes, Mike Eaves, and Bill Van Amburg. Todd Campbell, 21 please. 22 CHIEF COUNSEL JENNINGS: Mr. Chairman, while 23 we're awaiting Mr. Campbell, perhaps it's worth noting we 24 may no longer have a quorum. But a quorum is not 25 necessary because this item is solely informational. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 CHAIRPERSON SAWYER: Thank you for noting that. 2 MR. CAMPBELL: Thank you, Chairman Sawyer and 3 members of the Board. 4 I want to just thank staff and thank the Board 5 for putting this program together. I think it's extremely 6 important and well thought out. 7 I had the honor to actually speak in front of 8 Chairman Sawyer on Monday through the AB 1007 process and 9 stress the need for alt fuels that are alternatives to 10 petroleum to advance. Given the fact that we are dealing 11 with 85 million barrels per day in terms of demand, and 12 the supply is on declining production -- or we believe we 13 think that the demand is going to continue to increase we 14 think about 120 million barrels per day in 2020. And so 15 we have a lot to make up. And hopefully through this -- 16 even though it's $25 million of seed money, and hopefully 17 we'll continue to get seed money, we will be able to meet 18 our needs before the decline curve hits. So we want to 19 thank staff for their leadership and the Board for their 20 leadership. 21 CHAIRPERSON SAWYER: Thank you. 22 Mr. Douwes. 23 Mike Eaves. 24 MR. EAVES: Good afternoon, again, Dr. Sawyer and 25 Board members, and staff. Mike Eaves of the California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 Natural Gas Vehicles Coalition. 2 We are pleased to see how this initiative has 3 evolved over time. I know there's a great emphasis for 4 E-85 given the Governor's Executive Orders. But there's 5 also a real mandate in California to look at all 6 alternative fuels. And we're very pleased to see that the 7 scope has been broadened to include natural gas in terms 8 of infrastructure, vehicles, even the bio-resources, 9 landfill gas to LNG, and maybe even biomethanes. So we 10 are very pleased to see where this proposal is today and 11 compliment staff on their work. Thank you. 12 CHAIRPERSON SAWYER: Thank you very much. 13 Bill Van Amburg. 14 MR. VAN AMBURG: Good afternoon, Mr. Chairman, 15 members of the Board and staff. Thank you for just giving 16 us a couple of minutes on this as we do a check in. I 17 must say really congratulations I think to the staff. And 18 the integration while we're integrating health and 19 environmental and energy, it's great to integrate the 20 Energy Commission and CARB in really looking at the 21 balance on these things. So I really applaud what staff 22 has come up with. 23 I think one thing I would like to stress is 24 really considering as you look at your portfolio -- 25 because really for California this is 25 million of public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 investment that you want to use intelligently. I think 2 you want to look at where you place the funds as well as 3 kind of the timing, if you will, the near-term, 4 medium-term, long-term. I think you've got a really good 5 pallet for your portfolio right now in terms of where 6 you've placed it. And I would encourage you to think 7 about some flexibility in terms of potentially especially 8 since you have to spend the funds so quickly, where you 9 place your near-, medium-, and long-term investments. 10 And one of the things that's on my mind -- 11 because I think you've hit a lot of the right areas where 12 there's tremendous growth and biomethane and some of the 13 biofuel production in the state and the like is 14 tremendous. We are seeing right now though something else 15 that really has tremendous global warming impact as well 16 as impacts for reducing criteria emissions and a potential 17 business case behind it, but it's not locked down. And 18 that's really medium and heavy hybrids. I think a lot of 19 people have thought about hybrids, and they've seen 20 Priuses. And we're up to almost two percent of the market 21 now in terms of the some of the light duty. But we don't 22 have hybrids that are moving into the heavy-duty arena 23 yet. And yet, if they are able to make this transition 24 and the truck industry is usually ten to 15 years behind 25 on it, you'll have a huge impact on urban work trucks and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 the like. 2 So we'd really like to stress, take a close look 3 and see how you can stretch your boundaries a little bit 4 when it comes to some of these enabling technologies for 5 hybrids as you look at your pallet of vehicle investments 6 you're going to be making. Because these really are some 7 of the enabling technologies that will allow a much lower 8 emitting, much greater reduction of even if they're using 9 a traditional fuel. And eventually they will allow for 10 certainly even now biofuels to be used, and we hope 11 eventually natural gas and other alt fuels. 12 The reason this is on our mind is right now I'm 13 involved in a national program called HTUF, Hydrogen Truck 14 Users Forum, for the last four years. We're just now 15 starting to see this technology move to what I would call 16 the tipping point. It is not the market. It's not going 17 to happen yet, and it may not happen if we can't continue 18 to push things forward. 19 What has happened is four years ago, no truck 20 maker in the nation would use the term hybrid. Now the 21 international is looking at maybe moving into the very low 22 first market production. Peterbilt, Volvo, some of the 23 others including Freightliner are starting to make 24 prototypes and move them out there. So I think we're at a 25 tremendous point where California can use some start PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 investments targeted at some key areas to really use 2 leverage to move these technologies forward. 3 Now right now at low volume they're very high 4 price. But they show the promise of moving down in price. 5 And even with an increment, there was a business case 6 eventually because there is a reduction in fuel. There is 7 no obligation right now, as you know on traditional fleet 8 users, in the heavy truck market for better fuel economy. 9 But with hybrids, we see the opportunity for them to 10 incentivize fuel savings to buy technologies that then 11 eventually lead to global warming reductions, in some 12 cases at 50 percent, and criteria emission reduction at 13 the same time while offsetting the petroleum they would 14 have used or eventually the alt fuel they will use. 15 So again, I would just say I applaud what the 16 staff has really come up here yet with. And I would 17 really encourage -- think about flexibility and how you 18 could place your investment out of this strategy. And I 19 think you can use some tremendous leverage now to use a 20 little bit of it to move something forward that will 21 really have a national impact. 22 By the way, we have our sixth national HTUF 23 meeting going on this year in California. It's the first 24 time we have had it back in the state. So if you're 25 available the 15th or 16th of November, please come to San PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 Diego and join us. We'll probably have three new hybrid 2 announcements in heavy-duty trucks that come out of that 3 meeting. I welcome you to join us. 4 CHAIRPERSON SAWYER: Thank you very much. 5 And I'm sure you noted there are three million 6 tons of CO2 equivalent in the Climate Action Plan from the 7 heavy-duty sector. So we'll need your help. 8 MR. VAN AMBURG: Absolutely. And we need to help 9 move that forward. 10 CHAIRPERSON SAWYER: Does staff have further 11 comments? 12 EXECUTIVE OFFICER WITHERSPOON: Just one, Dr. 13 Sawyer. Because of the Governor's intense interest in the 14 alternative fuels area and Cal/EPA's involvement in those 15 policies documents, we have invited them to join with our 16 staff in the review of projects when they come in. So 17 when we bring back a slate to you, it will reflect ARB, 18 CEC, and Cal/EPA recommendations on what should be funded. 19 CHAIRPERSON SAWYER: Are there any comments from 20 Board members on this item? 21 If not, since there this is not a regulatory 22 item, it is not necessary to officially close the record. 23 In addition, there is no Board resolution since we're not 24 making any specific awards today. 25 Staff will return to the Board next April with a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 slate of proposed projects, and we will vote on actual 2 funding at that time. 3 At this point, I will take any comments from 4 Board members on any matters of interest. 5 I would certainly comment that we're going to 6 miss Supervisor DeSaulnier. Here he is back. What 7 timing. 8 (Laughter) 9 SUPERVISOR DE SAULNIER: More accolades. I'm a 10 politician. I'm insecure. 11 CHAIRPERSON SAWYER: I was just inviting comments 12 from Board members, and I looked down to see and you 13 weren't there. So I had to -- 14 SUPERVISOR DE SAULNIER: That's why I came back. 15 I wanted to make sure I didn't inhibit anything. 16 CHAIRPERSON SAWYER: We are certainly going to 17 miss you here, but we look forward to working with you in 18 your presumed new position. 19 SUPERVISOR DE SAULNIER: I'll be back next month. 20 CHAIRPERSON SAWYER: This is now the time for 21 comments from the public, and I have two such requests 22 from Muriel Strand and Lance King. Muriel Strand, please. 23 MS. STRAND: Good afternoon. Thank you very much 24 for the opportunity to comment. 25 What I have to suggest to the Board this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 afternoon is a fairly radical idea which I actually first 2 proposed back in 2000 at the time that Dr. Nancy Steal 3 presented her report on particulate to the Board. And 4 leaf blowers, also known as dirt blasters, are one of the 5 sources of particulate pollution as well as noise 6 pollution that insight a particularly visceral response as 7 I've observed from the public. 8 So I am requesting again and strongly suggesting 9 that the Board actively seek the authority to regulate 10 noise pollution. 11 And the clerk is kindly handing out some of the 12 materials a reprise my original letter and a little essay 13 which the Sacramento Bee neglected to publish that I wrote 14 in 2002. 15 Since I first drafted these two items, concern 16 about peak oil and global climate change have really 17 appeared on the political radar screen. So this may also 18 support my request. 19 I believe that ARB is just about the most logical 20 agency at this point to address this form of pollution 21 which I call the orphan form of air pollution, because 22 most of it is conveyed through the air and a great deal of 23 it is associated with internal combustion engines. 24 I believe that ambient noise levels have been 25 increasing, although nobody is really paying attention. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 And I feel that people are noticeably effected by this 2 exposure. I believe that it heightens our modern sense of 3 stress. 4 As I indicate in the letter, I believe that the 5 DBA noise measurement which is prescribed for leaf blowers 6 cannot accurately assess their actual effect on a human 7 being. When I look at what I find in the scientific 8 literature for human hearing as a function of noise 9 frequency and the DBA prescribed noise response of the 10 actual instrument, the filter in the instrument that 11 measures this, I see gaps between these two curves. And I 12 see them particularly in the higher frequencies. And it's 13 my hypothesis that it's the fan, the high-speed air flow 14 in the nozzle of the leaf blower that is the real culprit 15 here. 16 CHAIRPERSON SAWYER: Can I ask you to conclude, 17 please. 18 MS. STRAND: There are a lot of reasons which I 19 won't go into now that I've highlighted in this second. 20 But I would in addition add one point, two 21 points. When I was studying engineering many years ago, 22 one of the things that really struck me was the power of 23 just mechanism by itself without an engine. And there is 24 a lot of unmined potential here that I commend to you both 25 on this issue and on the issue of global climate change PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 overall. 2 And again, just to close, as I say, there are a 3 lot of people out there who really have a visceral 4 reaction to this issue. And if you bring it up, they will 5 come out of the woodwork. And if there are any here, I 6 have some leftover bumper stickers if anyone would like 7 one. Thank you. 8 CHAIRPERSON SAWYER: Thank you very much, Muriel. 9 Is that any history of -- this isn't the first 10 time that somebody has suggested to me that somebody ought 11 to be controlling noise. Has this come up before or has 12 the Legislature ever dealt with it? 13 EXECUTIVE OFFICER WITHERSPOON: Leaf blowers have 14 come up many times both here and in the local air 15 districts. And there have been attempts to have 16 zero-emitting devices, switch back to brooms, do various 17 studies on risk to the users and to passers-by. 18 And the one that was referenced, Dr. Nancy Steal 19 of our staff did, was inconclusive with respect to the 20 risk posed to general public such that there wasn't a 21 foundation for a ban. 22 On the topic of noise, that comes up from time to 23 time too. And it's been pointed out to us many times that 24 the Europeans have regulated noise far more aggressively 25 than the United States and treat it as a public health PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 threat, have much more medical research about the effect 2 on the heart and other conditions and are more used 3 national regulations not just local ordinances to combat 4 loud machinery and operations and the rest of it. Where 5 in the United States we rely on nuisance laws principally 6 and then worker protections as the operative noise 7 standards. And they have not moved into environmental 8 agencies as the place of responsibility. 9 But you know, I'm thinking a new assemblyman 10 might want to take this up and conduct a special hearing 11 and learn all about it. 12 BOARD MEMBER RIORDAN: Mr. Chairman, I think most 13 local jurisdictions have noise ordinances. They have 14 enforced it, and there's hours and there's levels, et 15 cetera, et cetera. Given our tremendous responsibility, I 16 think the speaker might approach the local agency or 17 jurisdiction in which she lives and see what indeed has 18 been accomplished there. Because most agencies have them, 19 depending on where you are, what you're regulating. In 20 rural areas, they regulate roosters and chickens and all 21 those sorts of things. 22 CHAIRPERSON SAWYER: Do you have a quick comment? 23 MS. STRAND: Noise pollution used to be part of 24 U.S EPA. Reagan got rid of it. And used to be part of 25 DHS in California, and through recession of the early '90s PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 got rid of it. And so local staff are left hanging in the 2 breeze. 3 CHAIRPERSON SAWYER: Our second public commentor 4 is Mr. Lance King. Dr. King, is it? 5 MR. KING: No. No. Lance King. 6 Dr. Sawyer, members of the Air Resources Board, I 7 appreciate the opportunity to appear again before you. I 8 was here in February of this year concerning the Santa 9 Cruz harbor dredging operations and the hydrogen sulfide 10 pollution in particular. 11 I have put together a rather lengthy statement I 12 actually didn't get a chance to read because I've been in 13 transit and I was sitting outside working on it. But I 14 know I can't possibly cover what's in the nine-and-a-half 15 page statement, and so I'm just going to highlight a few 16 points. 17 And first let me explain why I'm here today. As 18 you know, your staff and staff from the Department of 19 Health Services have been examining public exposure to 20 hydrogen sulfide during Santa Cruz harbor dredging 21 operations. And I came today because in the next six 22 weeks to two months a number of regulatory agencies are 23 going to have to decide whether, for instance, a new 24 disposal zone will be approved for Santa Cruz dredging 25 operations in the coming season. And that basically PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 involves a decision about whether we will increase public 2 protection from hydrogen sulfide or authorize a new 3 untested disposal system that would expand the area 4 effected in the east cliff community and lengthen the 5 duration people are exposed over the six-month dredging 6 cycle. 7 And I'm going to jump to a couple of points. I 8 mean, there's a lot of background provided in here, a lot 9 of detail, probably more than you need as Board members. 10 And I really in some ways am directing to this staff. And 11 I want to make a few corrections in there and resubmit it. 12 In general terms, you've got a dozen major 13 federal and state laws that regulate dredging of Santa 14 Cruz harbor and harbors like it around the country. 15 You've probably got something approaching 50 sets of 16 regulations. And yet, over the last decade you've had 17 this disposal pipeline, if you can visualize the circle 18 with all of these agencies and all of these laws and 19 regulations arrayed around it. And still, you have this 20 hydrogen sulfide pollution problem that's led dozens of 21 individuals to make hundreds of complaints. And the 22 problem hasn't been solved. And it's a perfect example of 23 fragmented authorities. Each agency can claim it's doing 24 its own job and yet you've still got the problem there. 25 And the air resources officials, the regional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 agency in Monterey, and you all are really the lead on 2 this, because it becomes an air pollution problem. 3 Although as they used to say at EPA when I was working for 4 Bill Ruckelshouse 35 years ago, it's one of these problems 5 that's an intermediary problems. It starts out as a water 6 pollution problem, becomes a land use problem, and air 7 pollution problem. 8 And essentially, what I'm trying to raise today 9 is the fact that I believe there are solutions. And the 10 best solution to date has been off-shore disposal. And 11 where you're in water at a sufficient depth, the hydrogen 12 sulfide breaks down naturally. 13 After nine years of doing off-shore disposal for 14 as much of the time as they could when they had hydrogen 15 sulfide, the port district wants to back away from that 16 and start dumping in near shore waters at three different 17 places on the beach where it's going to be more shallow 18 and closer to the people who are effected. And there's 19 been no scientific or engineering data presented to 20 indicate that would mitigate the problems that we found 21 when they're exceeding the state health standards and 22 exceeding the Monterey Bay district rules. 23 So I will stop, because I see the red button 24 here. I'd be happy to answer questions. I would 25 appreciate the opportunity to correct my typos and things PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 and resubmit this to your staff. And I hope to continue 2 the conversation. 3 But I do want to commend you and your staff for 4 the investigation you've started. I'm hopeful that the 5 proposed new monitoring that will happen this winter will 6 be useful and that the assessment by DHS can improve our 7 understanding of the nature and extent of the health 8 risks. 9 CHAIRPERSON SAWYER: Thank you very much. 10 Does staff have any comments on status? 11 ENFORCEMENT DIVISION CHIEF RYDEN: Not unless 12 you've like to ask us some questions. We're going to 13 engage in a monitoring program where it -- for those of 14 you who don't know me, I'm Jim Wright. I'm the 15 Enforcement Division Chief. 16 We're down working with the district and with the 17 harbor and with the Department of Health Services. What 18 we've done so far is we're in the process of collecting 19 process and information which we're submitting to the 20 Department of Health Services for their analysis to see if 21 in fact there's a problem. 22 One of the information gaps that we truly have 23 was whether or not H2S was actually migrating far enough 24 away from the shore line to the residents. As far as the 25 complaints go, there are three main residents that are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 complaining out of the entire neighborhood. So we're 2 going to place a continuous H2S monitor on the deck of one 3 of the homes and continuously monitor it for probably a 4 couple months first when dredging starts. 5 The problems that the harbor has with the 6 situation is they've had a long pipe that's gone 7 off-shore. They have to first of all dredge the harbor. 8 The harbor is a safe harbor. It's the home to I believe 9 the Coast Guard and their fishing vessels in there too. 10 One of the problems they have is they have the largest 11 kelp bed there in the central coast. And of course, all 12 this stuff migrates in there and ends up in the dredges. 13 They're dredging out the channels of the harbor. And it 14 does emit certain H2S. 15 The air district came up with a protocol wherein 16 the harbor continuously monitors the dredge that comes out 17 of the dredging devices. And when it reaches a certain 18 levels, they shut down for the day. And if it spikes at a 19 certain level, they shut down for the day. 20 The problem they have is they do have an 21 off-shore disposal system for the dredge. But the problem 22 they have is even though they anchor it with 4,000 pounds, 23 the huge winter storms rips it out. And they've lost the 24 pipe, and the thing moves around. And there's no safe way 25 for them to go out and fix it, given the nature of where PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 it's located, how the waves come in, and the flat bottom 2 nature of the dredge and the cranes that might flip over. 3 What the harbor has proposed to do is to have 4 alternative dredging system. What they're going to do is 5 put pipes out onto the beach, shove them into the water, 6 and at almost the same depth as the long pipe they have 7 out there and see if that works. 8 We will also be monitoring this situation while 9 it happens. We're going to have the monitor at one of the 10 houses of the people who complained the most. And we'll 11 see what the data results. We have conflicting 12 information. There's been conflicting data. There's been 13 complaints on days when the dredge doesn't even operate. 14 There's other issues, sewer pipe and sewer 15 transfer station on the beach. So we're going to 16 eliminate all those factors and see what we can come up 17 with. 18 But the critical data we don't have to determine 19 whether or not it's truly a problem of the dredging which 20 has to happen is, you know, whether or not it's migrating, 21 whether it has such volume it can migrate to the homes. 22 Basically, with the program in place, we're going 23 to monitor it during the dredging process. We're talking 24 to the complainants and the residents presumably to people 25 who are paying Mr. King. And we're going to -- if in fact PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 we don't find anything, we're going to move around and see 2 what we can find. We're going to go with whatever the 3 data present. 4 CHAIRPERSON SAWYER: Fine. Thank you very much. 5 I'd like to make one final statement, sort of 6 generally about the public comment period. I think it's 7 been very useful. It establishes our openness to receive 8 information from the public about things that are 9 concerning them. 10 And I'd like to follow up on the comments that we 11 received at our September hearing concerning our portable 12 equipment registration program. You may recall Amber 13 Parsons who is the lead-off speaker of that group and 14 primarily involved people with cement pumping equipment. 15 Staff has told me they intend to bring a 16 proposal -- an emergency proposal to amend our regulation 17 at the December 2006 Board hearing to deal with this. I 18 want to commend Mike Scheible for coordinating this and 19 steering a path which I think is a reasonable compromise 20 between taking care of people such as Amber Parsons and 21 also fairness out of people who have been complying with 22 our rules for a large number of years. He's been working 23 not only with the individuals involved but also the air 24 pollution control officers. And assuming that this all 25 comes together, which it appears that it is, I think we'll PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 have a solution which allows us to deal with this problem. 2 And it's I think good for us once in a while to put a 3 personal face on the consequences of our regulations and 4 how they're carried out. So I want to compliment Mike and 5 his staff for dealing with this problem. Thank you. 6 And do I have a motion to adjourn? 7 BOARD MEMBER KENNARD: So moved. 8 BOARD MEMBER RIORDAN: Second. 9 CHAIRPERSON SAWYER: So moved. We are adjourned. 10 Thank you. 11 (Thereupon the California Air Resources Board 12 adjourned at 3:32 p.m.) 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 CERTIFICATE OF REPORTER 2 I, TIFFANY C. KRAFT, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing hearing was reported in shorthand by me, 7 Tiffany C. Kraft, a Certified Shorthand Reporter of the 8 State of California, and thereafter transcribed into 9 typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said hearing nor in any 12 way interested in the outcome of said hearing. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 2nd day of November, 2006. 15 16 17 18 19 20 21 22 23 TIFFANY C. KRAFT, CSR, RPR 24 Certified Shorthand Reporter 25 License No. 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345