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, JULY 26, 2007 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 Ms. Mary D. Nichols, Chairperson Ms. Sandra Berg Ms. Judith G. Case Ms. Dorene D'Adamo Mr. Jerry Hill Mr. Ronald O. Loveridge Mrs. Barbara Riordan Supervisor Ron Roberts Dr. Daniel Sperling 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. Lori Andreoni, Board Secretary Ms. Nargis Ahmed, Population Studies Section, Research Division Mr. Tony Brasil, Manager, In-Use Control Measures Section, MSCD Mr. Bob Cross, Chief, Mobile Source Control Division Ms. Kim Heroy-Rogalski, Staff Air Pollution Specialist, In-Use Control Measures Section, MSCD PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF Mr. Mike Terris, Senior Staff Counsel Ms. Barbara Weller, Manager, Population Studies Section, RD Mr. Erik White, Chief, Heavy-Duty Diesel In-Use Strategies Branch, MSCD ALSO PRESENT Mr. Gregg Albright, State Department of Transportation Mr. James Atkins, Cobra Equipment Rental Company Ms. Diane Bailey, NRDC Mr. Bruce Balala, Bruce Balala Excavating Mr. Bob Berlage, Big Creek Lumber Mr. Harvey Beigle, Reed Thomas Co., Inc. Ms. Ina Bendich, Summer Internship Ms. Amber Bishop, Summer Internship Mr. Geoff Boraston, Granite Construction, Inc. Mr. Skip Brown, Delta Construction Co. Mr. Peter Bruenke, Huss LLC Mr. Tim Byrne, Richie Brothers Auctioneers Ms. Brittney Collins, Summer Internship Mr. Howard Cooper, Cooper Crane Rigging Mr. Ted Costa, People's Advocate Mr. Daniel Curtin, California Conference of Carpenters Mr. William Davis, Southern California Contractors Association, Inc. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Gordon Downs, Downs Equipment Rental Mr. Sean Edgar, Clean Fleets Coalition Mr. Jose Escobedo, R&L Brosamer, Inc. Mr. Dan Fauchier, EGCA Ms. Donna Fox, CA Nurses Association Mr. Shane Gara, Camarillo Engineering, Inc. Mr. Travis Hagen Ms. Brittnie Hamilton, Summer Internship, Rose Foundation for Communities and the Environment Mr. Adam Harper, California Construction and Industrial Materials Association Mr. Jessica Henn, RAMP and CAFA Supervisor Sue Horne, Regional Council of Rural Counties Mr. Robert Ikenberry, California Engineering Mr. Doug Jeffe, Transportation California Ms. Irfana Khan, Summer Internship Mr. Andy Katz, Breathe California Ms. Kerry Lawrence, Golden Interstate Sweeping Ms. Jackie Le, Summer Internship Ms. Katie Lefkowitz, Union of Concerned Scientists Mr. Jonathan Lewis, Clean Air Task Force Mr. Michael Lewis, Coalition to Build a Cleaner California Mr. Dave Louden, California Professional Association of Specialty Contractors PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. Joe Lyou, South Coast AQMD Mr. Steven Matich, Matich Construction Mr. Richard McCann, Ph.D., Construction Industry Air Quality Coalition Mr. Rick McCourt, Sukut Construction, Inc. Ms. Christina McGee, Summer Internship Mr. Scott Molloy, BIA San Diego Ms. Ashley Nathaniel, Summer Internship Mr. Gregg Oxley, Allen A. Waggoner Contractor Ms. Tiana Pittman, Summer Internship Ms. Kathleen Phillips, Environmental Defense Ms. Mary Pitto, Regional Council or Rural Counties Mr. David Porcher, Camarillo Engineering, Inc. Mr. Guy Prescott, Operating Engineerngs Local 3 Mr. Bradley Reed Mr. Bob Roberts, California Ski Industry Mr. Lowell Robinson Mr. Gary Rohman, Heavy Construction Equipment Rentals Mr. Seyed Sadredin, San Joaquin Valley APCD Mr. Mike Self Ms. Carolina Simunovic, Fresno Metro Ministry Central Valley Air Quality Coalition Ms. Katie Stevens, Office of Community and Economic Development PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi APPEARANCES CONTINUED ALSO PRESENT Mr. Ted Stevens, Blue Mountain Minerals Mr. Richard Taliaferro Mr. James Thomas, Nabors Well Services Co. Mr. Ed Walker, Robinson Enterprises, Inc. Mr. Mike Whalen, Ferma Corp. Ms. Linda Weiner, ALA Mr. John Williams, Pipeline Contractors, Inc. Ms. Danyale Willingham, Summer Internship Ms. Becky Wood, Teichert Mr. Joshua Wood, Sacramento Builder's Exchange Mr. David Yow, representative for Assembly Member JOel Anderson PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX PAGE Pledge of Allegiance 1 Item 7-8-1 Chairperson Nichols 1 Acting Executive Officer Cackette 4 Staff Presentation 5 Q&A 9 Item 7-5-6 Chairperson Nichols 10 Acting Executive Officer Cackette 12 Staff Presentation 16 Ombudsman Quetin 53 Q&A 54 Mr. Yow 86 Mr. Gara 88 Mr. Porcher 89 Mr. Byrne 95 Mr. Prescott 100 Mr. Self 103 Mr. Downs 105 Supervisor Horne 116 Ms. Pitto 121 Mr. Beigle 122 Mr. Albright 125 Dr. Lyou 128 Mr. Sadredin 131 Mr. Edgar 134 Ms. Lefkowitz 138 Ms. Fox 140 Mr. Katz 142 Mr. Matich 146 Ms. Hamilton 150 Ms. Le 151 Ms. Khan 152 Ms. McGee 154 Ms. Collins 156 Ms. Pittman 158 Ms. Bishop 159 Ms. Nathaniel 160 Mr. Wood 162 Mr. Walker 165 Mr. Roberts 166 Ms. Bailey 170 Mr. Lewis 172 Ms. Stevens 175 Mr. Robinson 176 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX CONTINUED PAGE Mr. Bruenke 177 Mr. Ikenberry 188 Mr. Berlage 190 Mr. Curtin 193 Ms. Simunovic 196 Ms. Henn 200 Mr. McCann 201 Mr. Rohman 207 Mr. Williams 209 Mr. Fauchier 213 Mr. Davis 215 Mr. Molloy 216 Mr. Lewis 220 Mr. Brown 229 Mr. Balala 239 Mr. Whalen 242 Ms. Phillips 245 Ms. Weiner 248 Mr. Oxley 252 Mr. Thomas 255 Mr. Boraston 258 Mr. Stevens 262 Ms. Wood 264 Mr. Louden 267 Mr. Wilkie 274 Mr. Costa 276 Mr. Kelter 278 Mr. Lassen 279 Mr. Atkins 282 Mr. Aguilera 283 Mr. Anair 285 Mr. Jeffe 288 Mr. Hogo 289 Q&A 294 Ex Parte 296 Motion 310 Vote 358 Vote 359 Adjournment 359 Reporter's Certificate 360 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON NICHOLS: Good morning, ladies and 3 gentlemen. I know there's still people trying to get into 4 the room, but it looks like we've got a more than critical 5 mass of people here already, so I think we should get 6 started. 7 I'm going to call the meeting to order. My name 8 is Mary Nichols, and I'm the new incoming Chairman of the 9 Board. I think the other Board members -- do we have our 10 names up so people can see who we are? So the audience 11 will know who we are? 12 We will begin then with the Pledge of Allegiance 13 before we do anything else. Please join me. 14 (Thereupon the Pledge of Allegiance was 15 recited in unison.) 16 CHAIRPERSON NICHOLS: Thank you. 17 The Clerk will now call the roll. 18 SECRETARY ANDREONI: Ms. Berg? 19 BOARD MEMBER BERG: Here. 20 SECRETARY ANDREONI: Supervisor Case? 21 BOARD MEMBER CASE: Here. 22 SECRETARY ANDREONI: Ms. D'Adamo? 23 BOARD MEMBER D'ADAMO: Here. 24 SECRETARY ANDREONI: Dr. Gong? 25 Supervisor Hill? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 SUPERVISOR HILL: Here. 2 SECRETARY ANDREONI: Ms. Kennard? 3 Mayor Loveridge? 4 BOARD MEMBER LOVERIDGE: Here. 5 SECRETARY ANDREONI: Supervisor Roberts? 6 BOARD MEMBER ROBERTS: Here. 7 SECRETARY ANDREONI: Mrs. Riordan? 8 BOARD MEMBER RIORDAN: Here. 9 SECRETARY ANDREONI: Professor Sperling? 10 BOARD MEMBER SPERLING: Here. 11 SECRETARY ANDREONI: Chairman Nichols? 12 CHAIRPERSON NICHOLS: Here. 13 CHAIRPERSON NICHOLS: Ms. Chairman, we have a 14 quorum. 15 CHAIRPERSON NICHOLS: Thank you. 16 I would just note that one of our Board members 17 is not with us this morning. Dr. Henry Gong was 18 hospitalized earlier in the week. We believe he is going 19 to make a full recovery. And we've been in touch with 20 him. But he sends his regards to the Board, and we all 21 wish him the very best for a speedy recovery. 22 I have a couple of general sort of housekeeping 23 announcements that I need to make. 24 First of all, there is an item on our agenda 25 called a closed session which is routinely put on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 agenda in order to receive reports on litigation to which 2 the Board is a party. However, since there is no report 3 on any litigation items, there will not be a closed 4 session. So that session is canceled. 5 If there's anyone in the audience who wishes to 6 testify, you need to make sure you have signed up with the 7 Clerk of the Board. And if you wish to do so, we would 8 appreciate it, but it's not required, it's good to include 9 your name on the speaker card. 10 Also we will be imposing a time limit on speakers 11 this morning. Based on the importance of the rule and the 12 size of the group which is to testify, we are going to 13 impose a three-minute limit on individual speakers. If 14 you're part of an organized group that wishes to group 15 your time together, please let me know or let the Clerk 16 know at the beginning so we can try to organize that and 17 make sure that people are grouped together whose comments 18 are to go together. 19 It's easier for the Board to follow your 20 comments, if you haven't been to one of these meetings 21 before, if you will go straight to your principle points. 22 And you also don't need to read your written 23 testimony if you've prepared written testimony. We can 24 read faster than we can listen or than you can talk. And 25 your comments will go straight into the record of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 hearing. They will be included in the record regardless. 2 I also need to point out to you for safety 3 reasons that there are emergency exists at the rear of 4 this room. In the event of a fire alarm, which we're not 5 expecting, but if one should happen, we're required to 6 evacuate this room immediately and go downstairs and out 7 of the building and not return until the all-clear signal 8 is given. That's part of the routine procedures I need to 9 tell everybody about. 10 We have this morning -- we're beginning I guess 11 as has become a custom now and a very good custom here 12 with a report, which is a monthly health update. It's 13 going to be a report on findings of a new study on the 14 health effects of short-term exposure to fine particulate 15 matter in individuals with coronary artery disease. And 16 this is obviously useful information for the Board to have 17 to keep in the back of our minds as we go about our 18 business. 19 But I hope it's going to be of interest to the 20 audience as well. If nothing else, it's a reminder of why 21 we're here and why we do the work we do here at the Air 22 Resources Board. Tom Cackette, our Acting Executive 23 Officer, will introduce this item. 24 ACTING EXECUTIVE OFFICER CACKETTE: First, on 25 behalf of the staff, let me welcome you, Chairman Nichols, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 to the first Board meeting at least of the 21st century. 2 I know you've been here before in the past. 3 Getting to the item here, scientists have 4 demonstrated that long-term exposure to particulate matter 5 air pollution is associated with cardiovascular disease 6 and mortality. Two of these studies were previously 7 presented to the Board, the American Cancer Society's 8 study which found an association between long-term 9 exposure to fine particle matter and increased mortality 10 particularly from cardiovascular causes, and the Women's 11 Health Initiative Study, which detected an even greater 12 association for postmenopausal women. 13 In contrast, the study we will discuss today 14 provides evidence that short-term exposure to fine 15 particle matter may also increase the risk of 16 cardiovascular events. The results of this research 17 supports the need for a short-term PM2.5 ambient standard 18 and other strategies for controlling fine particles to 19 provide greater protection of public health. 20 Ms. Nargis Ahmed from our Health and Exposure 21 Branch will make the staff presentation. 22 (Thereupon an overhead presentation was 23 presented as follows.) 24 MS. AHMED: Thank you, Mr. Cackette. Good 25 morning, Chairman Nichols and members of the Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 Today's health update will focus on the results 2 of a new study that evaluates the relationship between 3 short-term exposure and PM2.5 air pollution and 4 cardiovascular events in patients with coronary artery 5 disease. 6 CHAIRPERSON NICHOLS: Excuse me. If you could 7 speak more loudly. Maybe put the microphone a little 8 closer to you, I think it would help. Thank you. 9 --o0o-- 10 MS. AHMED: In past health updates, we have 11 highlighted the consistent association between particulate 12 matter exposure and adverse health effects. 13 Evidence was presented which suggests that 14 long-term exposure to particulate air pollution 15 contributes to inflammation, progression of 16 atherosclerosis, or hardening of the arteries, and the 17 risk of heart disease and death. 18 Short-term ambient PM2.5 exposure has been 19 associated with atherosclerosis complications and 20 aggravation of heart disease, including hospital 21 re-admission in heart attack survivors which can lead to 22 premature death. 23 This hypothesis tested in this study was that 24 short-term exposures can contribute to heart attacks and 25 other coronary events, especially among patients with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 underlying coronary artery disease. 2 --o0o-- 3 MS. AHMED: The study being highlighted today is 4 titled "Ischemic Heart Disease Events Triggered by 5 Short-Term Exposure to Fine Particulate Air Pollution," 6 published in November 2006. 7 The investigators analyzed the relationship 8 between PM2.5 and heart disease events in almost 13,000 9 patients who lived in Utah for ten years. 10 Heart disease events were defined as unstable and 11 stable heart associated chest pain and initial and 12 subsequent heart attack. The investigators provided 13 detailed information on a number of health variables, 14 including information on the number of severely diseased 15 coronary arteries in each participant. 16 --o0o-- 17 MS. AHMED: This study found a 4.5 percent 18 increase in risk of acute heart disease events associated 19 with each 10 micrograms per cubic meter increase in 20 ambient PM2.5. The events that were significantly 21 associated with PM2.5 were unstable heart associated chest 22 pain and heart attacks. The strongest associations were 23 with exposures on the same day or an average of the 24 previous two days prior to the onset of the coronary 25 event. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 Effects were larger for patients with unstable 2 heart disease. Age, gender, smoking, and body mass index 3 had no influence on the risk level. 4 Significant PM2.5 effects estimates were observed 5 for individuals who had at least one severely diseased 6 coronary artery compared with those who did not. 7 --o0o-- 8 MS. AHMED: In summary, the study highlighted 9 today suggests that reducing ambient levels of PM2.5 can 10 reduce the number of heart attacks, particularly in areas 11 of California where the exposure to PM2.5 can be 12 significant. For example, the monitored data from ARB 13 shows that 48 days in the South Coast and 57 days in the 14 San Joaquin Valley air basins were above the national 15 PM2.5 standard in 2006. 16 A major goal of ARB's regulatory program is to 17 reduce PM2.5 pollution, including particulates from diesel 18 engines. The information in this study supports the 19 Board's regulatory activities and policy decisions that 20 affect the health of Californians and illustrates the need 21 to continue progress in PM2.5 reductions toward attaining 22 the 24-hour standard. 23 This concludes my presentation. We will be happy 24 to answer any questions. Thank you very much. 25 CHAIRPERSON NICHOLS: Thank you for your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 presentation. 2 Do any Board members have any questions they 3 would like to ask about this study? 4 I would just ask the question, since it always 5 comes up in my experience in debates about health effects 6 research, what you can tell us about this study that 7 you're reporting on here today? Who was it funded by and 8 was it part of a bigger study? And what's the context 9 here? 10 POPULATIONS STUDIES SECTION MANAGER WELLER: This 11 was a study of individuals who all underwent a certain 12 medical procedure. So the group of people they got 13 together had all undergone cardiac catheterization. So 14 they knew they were all either people who had been 15 diagnosed with heart conditions or had concern about their 16 previous heart conditions. 17 The source of funding for this was from funds 18 from the Mary Lew Fullerton Professorship. And the study 19 took place through Brigham Young University, because the 20 study as you know took place in Utah. 21 The one thing about this cohort is they will be 22 continuing to look at these individuals and try to look at 23 one of the things they were not able to look at in this 24 study, which is, is there more of an effect on the high 25 air pollution days versus the lower air pollution days. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 In this study, they were looking at more of an 2 average exposure so they want to look at the peaks versus 3 the average. So that is something that's going to 4 continue with this cohort. 5 CHAIRPERSON NICHOLS: Well, obviously the health 6 effects they were looking at here, which is heart attack, 7 is a very serious health effect. So those numbers are 8 actually quite dramatic. 9 POPULATIONS STUDIES SECTION MANAGER WELLER: Yes, 10 it is. And I think one of the things to understand about 11 this study as opposed to a lot of studies that look at 12 cardiac effects is they were able to look at the severity 13 of disease these individuals had and were able to 14 correlate the fact that the people who had more severe 15 disease do have more severe effects. I think that's very 16 important. 17 CHAIRPERSON NICHOLS: Great. Thank you very 18 much. 19 We now will move on because there's no -- oh, I'm 20 sorry. If there's any public comment or public testimony 21 on this item, is there anybody who was signed up? No. 22 Okay. Thank you. 23 We'll then move on to our consideration of the 24 proposed regulation for in-use off-road diesel vehicles. 25 This is a matter which is continued from the May Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 meeting in San Diego, during which the staff summarized 2 the regulation and its costs and benefits. 3 I have had an opportunity to review the 4 transcript and testimony from the San Diego hearing. So 5 I'm happy to say I will be able to participate in this 6 deliberation. 7 This is a proposal that affects many people and 8 fleets of vehicles. But it also achieves more emissions 9 reductions than all of the other diesel toxics air control 10 measures than this Board has previously approved put 11 together. So we recognize that this has both major impact 12 and major benefits potentially. 13 And I understand that the proposal has been 14 designed to meet the goals of the Board's Diesel Risk 15 Reduction Program as well as the State Implementation 16 Plans from the South Coast and the San Joaquin Valley, 17 which are relying on the Board to fill in this area of 18 regulation as part of their plan to attain the air quality 19 standards. 20 Since the May Board meeting, several Board 21 members and staff have visited with representatives of 22 affected fleets to hear their concerns and to better 23 understand and discuss the cost issues. And I want to 24 thank those Board members who took the extra time and made 25 the effort to go out and meet with our constituents and to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 learn more about what this rule may do. I think that's 2 going above and beyond what's necessarily required. But 3 it's clearly I think appropriate under the circumstances. 4 I'm also encouraged that since May the staff has 5 worked with the South Coast and San Joaquin districts as 6 well as with industry for looking for ways in which they 7 could achieve additional emissions benefits and make the 8 rule as workable and efficient and cost effective as 9 possible. 10 At some point or another I guess we're all going 11 to be asked to disclose our ex parte communications. Do 12 we do that at the beginning or the end? At the end. 13 Thank you. 14 I'm particularly grateful to have our four time 15 Acting Chairman sitting here on my left to put me back on 16 track if I go astray here. Thank you. 17 So before we proceed, is there any further 18 discussion or hearing? I'll ask our Executive Officer to 19 introduce this item, Mr. Cackette. 20 ACTING EXECUTIVE OFFICER CACKETTE: Thank you, 21 Chairman Nichols. 22 At the May Board meeting, staff presented a 23 proposal to reduce the health damage caused by the 24 emissions of 180,000 in-use off-road diesel engines used 25 in construction and other non-agricultural activities in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 California. These vehicles are responsible for nearly a 2 quarter of the diesel PM emissions and nearly a fifth of 3 the oxides of nitrogen emissions from mobile diesel 4 engines. 5 Diesel PM is listed by the Board as a toxic air 6 contaminant. Diesel PM and NOx emissions increase ambient 7 concentrations of PM2.5, while NOx emissions also lead to 8 more ozone formation. 9 The proposed regulation before you today will 10 reduce both PM and NOx emissions. It will exceed the goal 11 of reducing diesel emissions by 85 percent set forth in 12 the Board's Diesel Risk Reduction Program. The NOx and PM 13 reductions will help the South Coast and the San Joaquin 14 Valley Air Districts meet federally mandated deadlines for 15 ambient PM2.5 and ozone. 16 Since the May Board meeting, staff has worked 17 with stakeholders to further assess the impacts of its 18 proposal. We have held dozens of meetings, met with 19 individual companies to explore compliance options, 20 evaluated retrofit device installations, and analyzed 21 regulatory alternatives. 22 We have paid particular attention to the economic 23 impacts of our proposal having assessed cost estimates 24 provided by industry consultants, and evaluated the 25 economic impacts on individual businesses, many who PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 testified at the May hearing. 2 We appreciate the willingness of the businesses 3 to discuss with us the economics and innerworkings of 4 their companies and thank those Board members who assisted 5 in our evaluation. 6 We held two additional workshops on economics to 7 ensure that all stakeholders could comment on our 8 findings. One of our major findings is that the use of 9 early action provisions or credits of the proposed 10 regulation helped smooth out and reduce costs in the 11 initial years of implementation. Staff will discuss this 12 further in its presentation. 13 As the Board may recall at the May Board meeting, 14 the South Coast District and San Joaquin Air Districts 15 both asked the Board to tighten the proposed rule to 16 achieve more NOx reductions. Discussions between the 17 South Coast District and the construction industry 18 identified a potential program to achieve greater NOx 19 reductions utilizing available incentive moneys. The San 20 Joaquin Valley District has also shown interest in such a 21 program. 22 Also since the Board meeting, the principle 23 construction industry trade group presented a proposal 24 that they indicated would achieve equivalent emission 25 reductions to the staff's proposal. Following much PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 discussion, the staff and industry focused their attention 2 on an element of the industry proposal that reduces the 3 frequency of demonstrating compliance to every third year, 4 compared to the staff proposal of annual compliance 5 demonstrations. 6 Industry has argued that less frequent compliance 7 demonstrations provide additional flexibility allowing 8 them to choose the lower cost path to compliance. 9 Environmental groups have expressed concerns that 10 less frequent demonstrations of compliance will reduce the 11 health benefits of the proposed regulation by encouraging 12 companies to delay compliance. 13 We will share with you our quantification of how 14 much the industry proposal affects health benefits. 15 So where are we today? We have not been able to 16 achieve consensus on a package of amendments to revise the 17 staff's proposal. As a result, staff is recommending you 18 adopt the proposal we offered at the May hearing with a 19 few minor amendments. Regulatory language for the revised 20 staff proposal can be found on the back table or outside I 21 believe and was sent to our list serve and posted on our 22 website last night. 23 We are not making a recommendation on whether the 24 district-funded incentive program to increase NOx benefits 25 or an industry suggested program to allow fewer compliance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 demonstrations should be adopted. However, to help the 2 Board and the public better understand these two policy 3 choices, we have made available to the public a discussion 4 paper available in the back of the room or outside and 5 will provide additional comments on this issue during the 6 staff presentation. 7 I will now ask Erik White of the Mobile Source 8 Control Division to give staff's presentation. 9 (There upon an overhead presentation was 10 presented as follows.) 11 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 12 WHITE: Thank you, Mr. Cackette. Good morning, Madam 13 Chairman and members of the Board. 14 At the May Board meeting, staff presented the 15 proposal in-use off-road diesel vehicle regulation in 16 detail, along with the need for its adoption, the process 17 by which it was developed, its cost and benefits, and a 18 number of issues about it raised by stakeholders. 19 Today, I will update the Board on the staff's 20 proposal, including discussing additional proposed 21 modifications, and discuss the efforts staff has 22 undertaken since that meeting to address issues that have 23 been raised. 24 --o0o-- 25 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 WHITE: Here's an outline of today's presentation. I will 2 begin with a short review of the proposed regulation and 3 its cost and benefits. 4 Then I will discuss staff's recent effort since 5 the May Board meeting to respond to issues that have been 6 raised. This will include responses to several questions 7 raised by Board members and witnesses. 8 I will update you on several proposals from 9 industry and air districts to change the regulation and 10 staff's analysis of these proposals. 11 Then I will go over staff's changes to the 12 original proposal. 13 Finally, I will conclude with staff's 14 recommendation. 15 --o0o-- 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: The proposed regulation primarily targets two 18 pollutants: Diesel particulate matter and oxides of 19 nitrogen, or NOx. It is a crucial next step in 20 implementing the Diesel Risk Reduction Plan adopted by the 21 Board in 2000. It is also a major component of the State 22 Implementation Plans for both the South Coast and the San 23 Joaquin Valley, and will provide desperately needed short- 24 and long-term emission reductions in those areas, both of 25 which face rapidly approaching attainment deadlines for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 fine particulate matter and ozone. 2 Allow me to walk you through the proposed 3 regulation's main provisions. 4 --o0o-- 5 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 6 WHITE: The regulation would apply to any mobile, 7 diesel-powered, self-proposed off-road vehicle 25 8 horsepower and up. It does not apply to portable 9 equipment or on-road vehicles. 10 The regulation would impose labeling and 11 reporting requirements beginning in 2009 as well as limits 12 on unnecessary idling. 13 Fleets would also be prohibited from adding the 14 dirtiest vehicles, commonly known as Tier 0 or 15 uncontrolled vehicles, to their fleets after 2009. 16 The control requirements would begin in 2010 for 17 the largest fleets and phase in over the next decade. The 18 requirements for medium fleets would begin in 2013 and 19 phase in through 2020. Those for small fleets would begin 20 in 2015 and phase in through 2025. 21 --o0o-- 22 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 23 WHITE: In general, the proposed regulation would require 24 fleets to either meet NOx or PM fleet average targets, or 25 if they cannot or choose not to, to demonstrate a certain PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 amount of annual progress in reducing emissions. This 2 required demonstration of annual progress is known as the 3 best available control technology, or BACT, requirement. 4 The BACT requirement provides a safety valve for 5 fleets that cannot meet the proposed fleet average 6 targets. In any year, fleets are never required to turn 7 over more than 8 or 10 percent of their horsepower, nor 8 retrofit more than 20 percent of their horsepower. 9 Fleets can chose among a number of different 10 options to comply with the proposed regulation, finding 11 the mix of actions that is most cost effective and 12 feasible for their particular situation. Fleets may 13 install PM and/or NOx retrofits, buy cleaner new or used 14 vehicles, replace old engines with cleaner ones. That is, 15 power and/or retire the dirtiest vehicles. 16 --o0o-- 17 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 18 WHITE: The proposed regulation contains a number of 19 special provisions and compliance extensions to give 20 fleets more flexibility and address special situations. 21 Low-use vehicles, those used less than 100 hours 22 per year, would be subject only to labeling and reporting 23 requirements. 24 Vehicles in federal attainment areas that are not 25 upwind contributors to downwind non-attainment areas would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 be subject only to the PM portion of the regulation. 2 The regulation contains provisions such that 3 fleet owners are not penalized if there are manufacturer 4 delays in the availability of retrofits, new engines, or 5 new vehicles. 6 The regulation exempts certain vehicles from the 7 retrofit requirements. It does not require retrofit of 8 vehicles less than five years old. It never requires a 9 retrofit if there is none verified for the engine or if 10 one cannot be safely installed. 11 The regulation also exempt certain vehicles from 12 turnover requirements. It never requires any turnover of 13 small fleets. Similarly, public fleets in low population 14 counties are also exempt from all turnover requirements. 15 It also will not require turnover of a vehicle if 16 there is no repower or used replacement available. It 17 never requires turnover of a vehicle less than ten years 18 old, nor does it require turnover of vehicles that have 19 been recently retrofit. 20 --o0o-- 21 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 22 WHITE: The public health impacts of the proposed 23 regulation are significant. The proposed regulation is 24 expected to prevent 4,000 premature deaths. This is 25 nearly double the total lives saved from all previous PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 in-use diesel control measures approved by the Board 2 combined. 3 Those health benefits translate into dollar 4 savings as well, 18 to $26 billion in health care and 5 premature death costs. 6 The regulation would also achieve significant PM 7 benefits and achieve the 2020 goals of the Diesel Risk 8 Reduction Plan. 9 The regulation would reduce diesel PM by 6.9 tons 10 per day in 2015 and by 5.2 tons per day in 2020, which 11 represents a 60 and 74 percent reduction respectively 12 below the levels expected without the regulation. 13 The regulation would also reduce diesel NOx 14 emissions by 30 tons per day in 2015 and 48 tons per day 15 in 2020, which is a 13 and 32 percent reduction 16 respectively, below the levels we would expect without the 17 proposed regulation. 18 --o0o-- 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: Just as the overall benefits of the proposed 21 regulation are significant, so are the total costs. Staff 22 estimates the total costs of the proposed regulation are 23 between three and three and a half billion dollars. These 24 are large numbers. But to put them in perspective, the 25 cost imposed on the construction industry is equivalent to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 an increase of 0.3 percent per year in statewide 2 construction costs. 3 Another way of looking at this is that if higher 4 construction costs are passed onto new homes, staff 5 estimates the cost in the price of a $450,000 house might 6 increase by about a thousand dollars, thereby increasing 7 the average monthly mortgage payment by about $6.00. Also 8 the proposed regulation is within the cost effectiveness 9 range of previous measures approved by this Board. 10 --o0o-- 11 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 12 WHITE: Now that I've reviewed the proposed regulation and 13 its expected benefits and costs, I would like to brief you 14 on staff's efforts since the May 25th Board meeting. 15 First, to ensure interested parties were aware 16 the Board had continued consideration of the proposed 17 regulation today, earlier this month, staff mailed over 18 300,000 postcards to licensed contractors notifying them 19 of this hearing. 20 Also, since the May hearing, staff has continued 21 to meet with stakeholders, including individual fleets, 22 industry representatives, environmental organizations, and 23 local air districts to address the outstanding issues that 24 were raised. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 2 WHITE: In many of the written and verbal comments on the 3 proposed regulation, industry stakeholders have stated 4 that the proposed regulation would cost $13 billion, which 5 is much higher than staff's estimate of three to three and 6 a half. 7 Since the May meeting, staff has continued to 8 evaluate the sources of the discrepancy between the two 9 cost estimates. First, we received a copy of the model 10 developed by the industry to estimate the statewide costs 11 of the proposed regulation. Staff then reviewed the model 12 and met with industry representatives, the consulting 13 company that developed the model, Caltrans, and the 14 Business, Transportation, and Housing Agency to discuss 15 the differences in the methodologies used to estimate 16 costs. 17 Based on this evaluation, staff found that the 18 industry estimate is based on a baseline fleet turnover 19 rate that is too low and not supported by data used by 20 either ARB or the U.S. EPA to estimate off-road vehicle 21 populations, thereby contributing to an overestimation of 22 the regulation's cost. 23 Staff also found that the industry estimate had 24 incorrectly assumed no fleets would ever meet the proposed 25 fleet averages. Thus, under the industry model, all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 fleets would have to do the maximum turnover and 2 retrofiting each year throughout the life of the program. 3 Finally, staff found that the industry estimate 4 is predicated on the purchase of new vehicles only. 5 Whereby, a common industry practice is to purchase lower 6 cost used vehicles. Staff also believes that the new 7 vehicle prices used are quite a bit higher than is 8 realistic. 9 Staff believes these effects alone can explain 10 over $8 billion of the difference, and that staff's 11 original estimate of three to three and a half billion is 12 still the best estimate of total statewide cost. 13 In order to share these findings with 14 stakeholders, staff held a public work group meeting on 15 June 18th to review staff's cost estimate methodology and 16 share the explanation for the findings I have just 17 discussed. 18 --o0o-- 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: In addition to evaluating the total statewide 21 costs, staff continued to conduct further analysis of the 22 financial impact of the proposed regulation on individual 23 fleets and the options available to these fleets to 24 minimize this impact. 25 In our analysis, staff confirmed, as many fleets PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 have testified, that the cost in the first few years of 2 compliance with the regulation can be significant. These 3 initial costs are typically driven by the retrofit 4 requirements of the regulation in the early years. 5 However, staff also found that these early costs 6 can be significantly lowered and defrayed by taking 7 advantage of the proposed regulation's early credit 8 provisions typically through the use of retrofits or 9 repowers or a combination of both. 10 As staff met with fleets, we found a majority of 11 the fleets we talked to either already have or are 12 planning on taking advantage of these early credit 13 provisions. 14 But even with the early credit, many fleets will 15 still need to secure financing to spread the cost of 16 compliance out. Most fleets we spoke with already borrow 17 money to purchase vehicles, typically with a loan period 18 of two to five years. And most fleets will need to pass 19 on costs to their customers by bidding higher on jobs. 20 As staff looked in more detail at the CARB flow 21 implications of compliance with the proposed regulation, 22 staff found that the accelerated turnover costs that the 23 regulation imposes are often offset by other cost saving 24 considerations. Put another way, there are real cost 25 benefits to having newer vehicles. Newer vehicles have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 lower repair costs. They are more reliable and can often 2 raise productivity and income. 3 Also, when companies buy newer vehicles, they can 4 deprecate them, which leads to considerable tax 5 advantages. 6 Like staff's evaluation of the statewide costs, 7 so staff can share their findings with all stakeholders, 8 we held a public workshop meeting on July 16th to discuss 9 the individual fleet impacts. 10 --o0o-- 11 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 12 WHITE: Now that I've discussed the main findings of our 13 continued fleet analysis, I would like to talk in more 14 detail about some of the fleets we met with and evaluated. 15 Since the May meeting, staff met with and performed 16 detailed analysis on nine fleets. These nine fleets 17 included rental, general construction, and mining fleets, 18 and were geographically located throughout the state. We 19 found that six of the nine already had early credits, 20 primarily through engine repowers. 21 Staff requested financial information from each 22 of these fleets, and four of the fleets opened their books 23 to us. Staff would like again to thank these fleets for 24 their openness in allowing us to understand the proposed 25 regulation's financial impacts on them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 --o0o-- 2 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 3 WHITE: There were several common themes in the meetings 4 we had with these nine fleets. First, the fleets were 5 concerned regarding the level of capital investment 6 required under the regulation in the first two to three 7 years. 8 Fleets were also concerned about their ability to 9 pass their costs on to their customers. In particular, in 10 years when the requirements for medium and large fleets 11 differ, large fleets were concerned about their ability to 12 bid higher without losing business. 13 Many fleets were concerned about PM retrofit 14 technology and in particular its availability and 15 feasibility, especially for older high horsepower 16 vehicles. 17 Fleets were concerned regarding the small number 18 of retrofit systems currently verified. As I will discuss 19 later, staff believes that more retrofit systems will be 20 available in the marketplace in the near future and is 21 working hard towards that end. 22 --o0o-- 23 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 24 WHITE: Staff performed a detailed cash flow analysis for 25 the four fleets who shared their financial data. The goal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 was to gauge the affordability of the regulation for these 2 fleets. 3 After performing our analysis, staff found that 4 the four fleets analyzed could absorb the cost of the 5 regulation, bringing them to less than a 10 percent impact 6 on net income, with price increases of less than one 7 percent. However, if these fleets didn't increase their 8 prices, the cost of the regulation could be up to 20 9 percent of their average net income. Clearly, these 10 fleets will need to find ways to pass through these costs. 11 I would now like to discuss the four fleets in 12 more detail. Because one of the fleets testified at the 13 May hearing, I will speak about them by name. The other 14 fleets have requested to remain anonymous. 15 --o0o-- 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: First, I'd like to talk about Downs Equipment 18 Rentals, a rental fleet from Bakersfield. As the Board 19 may recall, Downs Equipment testified that they estimated 20 the proposed regulation's cost to be more than $2 million 21 per year and expressed concerns that such costs would be 22 unbearable for their company, which has only $1 million in 23 annual profits. However, they testified as well that the 24 cost of $400,000 per year would be manageable. 25 Since the Board meeting, the Downs family has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 graciously spent a lot of time with ARB staff and has been 2 open in sharing their company's information, and we are 3 very appreciative of their openness. 4 In meeting with them, staff explored a number of 5 potential compliance alternatives, including the use of 6 early credit provisions of the regulation for both 7 retrofits and repowers, opportunities to utilize financing 8 to bridge the higher cost of compliance year to year in 9 which the compliance costs are not so great and the 10 ability to realize higher rental rates. 11 --o0o-- 12 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 13 WHITE: Perhaps the best way to show how incorporating 14 these compliance options can reduce the economic impacts 15 of the proposed regulation is to compare potential costs 16 for two compliance scenarios. 17 This slide shows the compliance assumptions which 18 were the basis for the cost estimates Downs Equipment 19 Rental shared at the May meeting. The vertical axis is 20 the number of actions, such as retrofits or equipment 21 turnover, that leads to compliance with the proposed 22 regulation. 23 As you can see, this strategy is comprised of 20 24 percent of their fleet being retrofit in each of the first 25 three years. And essentially the fleet is undergoing the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 maximum amount of turnover required each year through 2 2021. The capital costs associated with this strategy 3 could well be over $2 million in each of the first three 4 years as reported by Mr. Downs. 5 --o0o-- 6 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 7 WHITE: However, when alternative compliance options are 8 utilized, staff found that this same fleet could 9 significantly spread out their costs by utilizing the 10 early credit provisions of the regulation. 11 Using one potential alternative, Downs Equipment 12 could repower 7 percent of its horsepower to Tier 1 in 13 2008 and install PM retrofits on these same engines. They 14 could also replace their oldest vehicles with cleaner used 15 vehicles and install PM retrofits on their dirtier engines 16 first. If these action were taken -- 17 MR. DOWNS: May I be recognized? Chair, may I be 18 recognized? 19 CHAIRPERSON NICHOLS: Excuse me, sir. Can you 20 wait until the end of the presentation? 21 MR. DOWNS: I don't think your mike is on. 22 CHAIRPERSON NICHOLS: You're right. 23 You're interrupting the presentation 24 MR. DOWNS: I know, but I'm Gordon Downs. I'm 25 the owner of Fleet A. Erik White is discussing our fleet. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 CHAIRPERSON NICHOLS: Why don't you come forward 2 and you can speak as soon as he finishs describing what he 3 believes he found. As soon as he finishs with just that 4 portion that relates to you, then I will recognize you. 5 MR. DOWNS: Fine. But the point is -- 6 CHAIRPERSON NICHOLS: You're completely out of 7 turn, sir. Thank you. 8 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 9 WHITE: If these actions were taken, their compliance path 10 would look more like this. 11 As you can see, the big cost peaks in the early 12 years the have been smoothed out. Strategic utilization 13 of financing could further help defray these costs 14 overtime. Also helping the bottom line is the fact that 15 in this fleet, newer vehicles rent for more than older 16 vehicles, while depreciation also significantly reduces 17 the net annual cost of the replacement vehicles. 18 --o0o-- 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: Based an our analysis, staff believes with the use 21 of the alternatives discussed the company can remain 22 profitable in ever year. The net lose in profits on 23 average should be less than 5 percent of their after tax 24 income. 25 However, at the same time, this fleet will be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 acquiring newer vehicles which have lower repair costs and 2 can command higher rental rates. And the equity of the 3 company will increase as they add more valuable vehicles 4 to their fleet. 5 And while still significant, even in the highest 6 cost year, the proposed regulation's cost, that is the 7 impact on the company's cash flow, will still be less than 8 what the company indicated it could bear in terms of 9 compliance options. 10 And I'll pause at this time. 11 CHAIRPERSON NICHOLS: Thank you very much. 12 Mr. Downs obviously disagrees with something in 13 what you said, and he wants to speak right this minute. 14 So we're going to let him speak. 15 MR. DOWNS: I had a hard time sitting still in my 16 chair. 17 CHAIRPERSON NICHOLS: I understand. 18 MR. DOWNS: Mr. White is -- Erik White is a very 19 nice guy. You can't help but like him. My wife even said 20 that if she had a daughter, he's the kind of guy she'd 21 like her to grab onto. 22 (Laughter) 23 CHAIRPERSON NICHOLS: Something good could come 24 out of this regardless of what happens. 25 MR. DOWNS: So, Erik, believe me, it's not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 personal. It's just what staff has come up with. 2 First of all, he mentioned that we could afford 3 $400,000 a year, which would be manageable. I've tried to 4 explain to staff on several occasions -- and I don't know 5 if their particulate filter up here was gathering this 6 information. But I tried to tell them that all that 7 million dollars that we make after tax per year is already 8 obligated to purchasing late model high tier equipment. 9 You know that everybody in this room I believe 10 knows that principle payments can only be made with 11 after-tax money. Everybody follow that? So you have to 12 have after-tax money to make principle and interest 13 payments. All of that after-tax money is going to 14 purchase right now 16 late model high tier machines. Just 15 because this rule goes into effect, that doesn't mean we 16 have another $400,000 to comply with this regulation. 17 That's my point. 18 There isn't one member of staff that I know of 19 that has ever been in business. None of them have ever 20 owned a diesel machine. 21 Chair, I have a statement to make a little later 22 on, and I don't want to be using up my time. But I just 23 wanted to make the point that as we went through and heard 24 Erik White's presentation that we clarify some of these 25 things as we go. Because this is a long complex rule, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 this one simple little point will just get lost in a pile 2 of other points if we don't make them as we go. 3 CHAIRPERSON NICHOLS: Mr. Downs, I don't think 4 we're going to continue this kind of back and forth 5 exchange. 6 But I appreciate the fact that you were both very 7 cooperative in terms of sharing data and that you're very 8 concerned about what you feel may be a misinterpretation 9 of the information that you shared. So for that reason, 10 we were happy to call on you. And I won't prevent you 11 from testifying later when it comes your time to testify. 12 MR. DOWNS: Thank you very much. I'll sit down. 13 (Applause) 14 CHAIRPERSON NICHOLS: All right. 15 --o0o-- 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: Thank you, Madam Chairman. And thank you, Gordon, 18 for your words on our assessment. 19 Continuing with the presentation, this slide 20 summarizes the cash flow analysis for another fleet that 21 shared its fleet and financial data with us. 22 This fleet is a grading contractor in southern 23 California. This fleet starts out with an average age of 24 about 13 years, and over half of the vehicles are Tier 0. 25 This particular fleet has already repowered about 10 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 percent of their horsepower. 2 Their revenue for the past four years has 3 averaged $15 million per year, with an after-tax income of 4 about half a million dollars per year. 5 Based on staff's analysis of the anticipated 6 compliance costs, we estimate that this fleet's net income 7 would drop by about 11 percent if no cost could be passed 8 on. However, this impact on net income could be lowered 9 by more than half if the fleet raised its prices by about 10 one percent. Staff believes this fleet would face 11 significant but not unbearable costs to comply with the 12 proposed regulation. 13 --o0o-- 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: Here's a summary of our analysis for anther 16 grading contractor that shared its fleet and financial 17 data with us. 18 This fleet starts out with an average age of 19 almost ten years, and almost 30 percent of its vehicles 20 are Tier 0. They have already repowered about 30 percent 21 of their fleet. It's a somewhat bigger and newer fleet 22 than the one shown on the previous slide. The revenue for 23 the past four years has averaged $40 million per year with 24 an after-tax income of about $900,000 per year. 25 The average capital compliance costs for this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 fleet are about $700,000 per year. If none of these costs 2 could be passed on, the fleet's net income would drop 3 about 13 percent. However, similar to the previous fleet, 4 this impact on net income could be lowered to about 8 5 percent in the fleet could raise revenues by 1 percent. 6 Again, staff believes these represent significant but not 7 unbearable costs. 8 --o0o-- 9 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 10 WHITE: The final fleet that shared financial data with us 11 is an excavation contractor. Here's a summary of the 12 information that was shared with us. 13 This fleet starts out with an average age of ten 14 years and has 29 percent Tier 0 vehicles. They do not 15 have any early action credit. 16 The revenue for the past four years has averaged 17 $64 million with an after-tax about a million dollars per 18 year. The fleet's net income would drop about 8 percent 19 if no costs could be passed on. The impact on net income 20 could be eliminated if the fleet could raise revenue by 1 21 percent. 22 --o0o-- 23 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 24 WHITE: The last fleet I would like to talk about this 25 morning is Red Mountain Machinery, a rental firm in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 San Diego area. As you may recall, Red Mountain testified 2 at the May meeting in San Diego. 3 At that meeting, Red Mountain testified that the 4 rule would cost them $23 million over four years. We 5 worked closely with Red Mountain over the past several 6 weeks to evaluate their fleet and better understand these 7 costs. In working with them, we learned that their $23 8 million estimate included costs for vehicles Red Mountain 9 would normally purchase. Red Mountain typically turns 10 over about 6 percent of its horsepower each year. So much 11 of the $23 million is turnover costs that would occur even 12 in the absence of the proposed regulation. 13 Also Red Mountain had assumed they would have to 14 control their whole national fleet. Red Mountain operates 15 vehicles in three states and only about 30 percent of 16 their horsepower resides in California on a regular basis. 17 The $23 million estimate included bringing 18 vehicles outside the state into compliance with the 19 proposed regulation. Where, in reality, Red Mountain 20 could comply by managing their fleet in such a way as to 21 ensure only their cleanest vehicles operated in the state. 22 If Red Mountain chooses not to bring their 23 cleanest vehicles to California, they could comply by 24 maintaining their normal turnover rate and installing 25 retrofits on their vehicles or by increasing their normal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 annual turnover rate from about 6 percent to about 7 1/2 2 percent. 3 Staff estimated that under either of these 4 scenarios their capital compliance costs would be no more 5 than 1.3 million for the purchase and installation of 6 exhaust retrofits, which is significantly less than the 7 $23 million estimate. 8 --o0o-- 9 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 10 WHITE: With industry's testimony at the May hearing that 11 our estimates of the statewide employment impacts of the 12 proposed regulation was too low, staff went back and 13 double checked our estimates. We found that with a more 14 careful calibration of the model used to estimate job 15 loss, known as eDRAM, that our estimates of job losses 16 should be higher and could be as high as 3400 in the worst 17 year. This higher estimate occurs if costs accrue to 18 those portions of the industry where employment is most 19 sensitive to regulation costs. 20 However, on average, we estimate that the 21 statewide employment impacts of the proposed regulation 22 are about 1,400 per year, still a factor of ten less than 23 the industry consultant estimates. 24 --o0o-- 25 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 WHITE: I would now like to take a few minutes to respond 2 to some questions and issues raised at the Board meeting. 3 --o0o-- 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: First, I would like to address the issues and 6 questions raised by members of Board. 7 After a witness pointed out that the majority of 8 the 200 fleets used by staff to predict the regulation's 9 emission benefits were public fleets, Supervisor Hill 10 requested staff to verify that an over-reliance on the 11 public fleet data did not skew our results. The witness 12 was concerned that public fleets might be much younger 13 than private fleets and therefore might have an easier 14 time complying with the regulation. 15 Staff re-evaluated our data and confirmed that 16 although most of the fleets in the 200 fleet sample were 17 indeed public, over 75 percent of this horsepower belonged 18 to private fleets. We also confirmed that the use of the 19 public fleets did not skew the age distribution of the 20 sample either. 21 This chart compares the age distribution from the 22 200 fleets used by staff to predict the regulation's 23 emission benefits to the private fleets contained in that 24 same sample. As you can see, the age distributions are 25 almost indistinguishable. In fact, while not shown on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 this graph, if anything, the public fleets were on average 2 slightly older than the private fleets used. 3 --o0o-- 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: Supervisor Hill also asked us to look into the 6 request from the US Navy to accept alternatives to the 7 required labeling of vehicles with an equipment 8 identification number. Staff met with the Navy and found 9 that the Navy's concern was that if their labels were 10 damaged or missing during an inspection by ARB enforcement 11 staff, that despite their best efforts to keep vehicles 12 labeled and reported properly, the military might be 13 subject to violations and fines. 14 After reviewing the Navy's concerns and meeting 15 with ARB enforcement staff, we concluded that discretion 16 already allows inspectors to not levy finds against fleets 17 that have just a few missing labels but that clearly have 18 made a good faith attempt to comply with the labeling 19 provisions. 20 Because existing ARB policy already seemed to 21 address this concern, staff does not propose to change the 22 labeling requirement out of concern that changing the 23 regulation could open a loophole for fleets to 24 intentionally fail to properly label and report their 25 vehicles. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 --o0o-- 2 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 3 WHITE: In addition, Supervisor Hill asked us to report 4 back on a request from some environmental groups that the 5 proposed regulation contain a sunset for the low-use 6 provision in 2020. A sunset would require these vehicles 7 be subject to the retrofit and turnover elements of the 8 regulation beginning in 2020. Staff reviewed our analysis 9 of low-use thresholds and still recommends maintaining the 10 exemption. 11 Staff found that controlling such vehicles is not 12 cost effective today and will still not be cost effective 13 in 2020. Exempting such vehicles does not sacrifice much 14 emission reductions, as they represent less than 3 percent 15 of the total emissions in 2020. 16 However, to address the concern that the low-use 17 exemption may provide a way to subvent the regulation, 18 staff is recommending a small change to the regulation by 19 adding a requirement that low-use vehicles report annually 20 indefinitely. This will add additional enforceability to 21 the regulation. 22 --o0o-- 23 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 24 WHITE: I would now like to address some of the issues 25 that were raised by witnesses at the May Board meeting. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 Many witnesses expressed concerns about PM retrofits. As 2 I've mentioned, the regulation will require nearly all 3 vehicles in the state to have such retrofits installed. 4 Witnesses were concerned about the availability of these 5 retrofits, their cost, and their durability. 6 Currently, there are only three level three 7 retrofit systems verified for off-road applications. All 8 three of these are actively regenerated systems and two 9 are systems that have to be periodically plugged into 10 electric power to be recharged, creating logistical 11 concerns. 12 Because of their added complexity, active systems 13 are more expensive than passive systems. Thus, some 14 quotes that fleets have received for installation of these 15 active systems, particularly for high horsepower vehicles, 16 are higher than the average retrofit costs assumed by 17 staff in our cost estimates. 18 Some witnesses were also worried that retrofits 19 may not hold up in the dusty construction environment. 20 They pointed to what was described and shown to the Board 21 as a poor installation of a HUSS particulate filter on a 22 loader in Fresno. 23 I would like to let the Board know staff has gone 24 and inspected this vehicle, and that while we agree it is 25 less than an optimal installation with some elements of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 the installation needing further attention, on the whole, 2 there was nothing about the installation that did not seem 3 correctable. 4 Now allow me to address some of the more specific 5 concerns regarding PM retrofit systems. 6 --o0o-- 7 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 8 WHITE: First, it is important to know that although 9 retrofit diesel particulate filters are still emerging in 10 the off-road industry in the United States, the use of 11 particulate filters on diesel engines as a matter of 12 practice is becoming commonplace throughout the world. 13 Every new on-road engine sold in the US is now 14 required to have a particulate filter. In addition to 15 tens of thousands of installations on off-road equipment 16 in Europe, diesel particulate filters have been installed 17 on dozens of off-road construction vehicles throughout the 18 United States, and especially in New York and California. 19 To give a flavor for the types of off-road 20 retrofits that are being used today, I would now like to 21 share some photos of off-road retrofits that are 22 successfully operating in California today. 23 --o0o-- 24 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 25 WHITE: Here are two pictures of a passively regenerated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 diesel particulate filter, one working on a wheel loader 2 and one on a scraper. Both of these vehicles are 3 currently in operation here in the state. 4 --o0o-- 5 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 6 WHITE: Here are two more pictures of an installed 7 actively regenerated diesel particulate filter, one which 8 is periodically removed from the vehicle for regeneration. 9 These two vehicles are shown operating at L.A. 10 International Airport during the construction of a new 11 runway and have accrued thousands of hours operating at 12 the airport. 13 --o0o-- 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: In order to achieve early emission reductions in 16 the South Coast, as well as spur the verification of new 17 off-road retrofit devices, ARB, the South Coast Air 18 Quality Management Districts, and the MSRC are working 19 together on an off-road showcase demonstration project. 20 Towards this program, the South Coast MSRC has committed 21 one million dollars in funding to the showcase with 22 district funding also committed. 23 One of the principle goals of the showcase is to 24 encourage verification of more off-road devices. 25 Seventeen manufacturers with 28 different devices have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 applied to participate in the program. The devices are 2 all level three and represent a mix of technologies, with 3 eight of the devices reducing NOx as well as PM. 4 Eighteen fleets have applied to participate. All 5 together, these fleets have 245 off-road vehicles. Staff 6 expects retrofits installed through the showcase to be 7 operating this fall. 8 In considering the retrofit provisions of the 9 regulation, staff is confident that retrofits are 10 technologically feasible and can be successfully 11 installed. However, staff has built provisions into the 12 regulation so that the regulation never requires the 13 impossible. That is, retrofits are not required if none 14 are verified or if they cannot be safely used. 15 --o0o-- 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: Now, I'd like to describe several proposals that 18 staff has received requesting modifications to the 19 regulations. These proposals include recommendations and 20 comments from the Construction Industry Air Quality 21 Coalition, or CIAQC, and South Coast Air Quality 22 Management District, which I'll describe further in the 23 following slides. 24 A discussion of these proposals is provided in 25 the summary of key issues document which is available on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 the tables outside the hearing room and is part of the 2 Board's package. 3 --o0o-- 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: Earlier this morning, CIAQC proposed a major 6 change to the regulation, which they believe would achieve 7 emission reductions equivalent to the staff proposal. 8 Staff has reviewed CIAQC's proposal. And to summarize, it 9 would: 10 Provide that each fleet would have to achieve a 11 certain percent reduction off its own individual baseline; 12 Have no enforceable targets until 2015; 13 Re-define medium fleets as those up to 10,000 14 horsepower as opposed to the 5,000 horsepower definition 15 in the proposed regulation; 16 And re-define small fleets as those with up to 17 2500 horsepower as compared to the current proposed 18 definition of 1500. 19 --o0o-- 20 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 21 WHITE: Staff has evaluated the July CIAQC proposal and 22 overall finds that it falls short of the emission benefit 23 parody it claims. 24 With no enforceable deadline until 2015, staff 25 could not be confident actions taken to reduce emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 would occur prior to then. 2 Also, the proposal's individual percent reduction 3 targets are problematic, because due to the nature of the 4 new engine standards, it would sometimes be impossible for 5 some fleets to meet the percent reduction targets because 6 cleaner new engines won't be produced. 7 After staff shared our concerns with CIAQC 8 regarding their proposal, CIAQC suggested maintaining the 9 structure of ARB's current proposal, but changing the 10 annual compliance dates from annual to triennial with the 11 first fleet average being effective in 2011. 12 --o0o-- 13 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 14 WHITE: In considering opportunities for additional 15 flexibility in the proposed regulation, staff has 16 evaluated the idea of triennial targets as proposed by 17 CIAQC, instead of the annual targets that are in the 18 proposed regulation. 19 First, staff indicated to CIAQC that waiting 20 until 2011 for the first target was a de facto delay in 21 program startup and it would be necessary to have a 2010 22 compliance date. 23 Staff also indicated to CIAQC that triennial 24 targets without requirements for reasonable progress in 25 the intervening years would allow fleets to delay PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 achieving reductions until the end of each three-year 2 period. Thus, triennial targets would sacrifice emission 3 benefits in the years where there is no target. 4 In response to this, CIAQC offered another 5 alternative that would ensure that 40 percent of the 6 benefits expected between any two compliance dates were 7 realized as reasonable progress. Staff has evaluated this 8 proposal and has concluded that it could result in a loss 9 of benefits of 12 percent relative to staff's current 10 proposal. This impact is shown graphically on the next 11 slide. 12 --o0o-- 13 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 14 WHITE: This chart shows the cumulative benefits in 15 equivalent PM2.5 emission reductions, which are 16 proportional to health benefit. As you can see, the loss 17 in benefits if the rule were changed from annual to 18 triennial targets would translate to a 12 percent loss in 19 cumulative health benefits by 2015. This is a substantive 20 loss of benefit given the severity of the health impacts 21 of diesel exhaust. 22 --o0o-- 23 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 24 WHITE: At the May hearing, the South Coast and San 25 Joaquin Valley Air Districts testified that they would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 like the proposed regulation to achieve additional NOx 2 reductions prior to 2015. Such additional NOx reductions 3 would assist those districts in attaining the federal 4 PM2.5 standard. 5 Recently, the South Coast Air District proposed a 6 concept that would provide a way to claim additional NOx 7 reductions towards their demonstration for attainment of 8 the federal PM2.5 standard. The district proposes 9 requiring older larger fleets that operate vehicles in the 10 district to either meet NOx targets stricter than those in 11 the proposed statewide rule or to apply for incentive 12 funding. 13 In support of this, the District has committed 14 $120 million of their Carl Moyer fund allocation to 15 off-road projects over the years 2008 through 2011. 16 Fleets that receive incentive funds would then be required 17 to use them to achieve additional NOx reductions, most 18 likely through engine repowers. 19 Under this proposal, fleets would be required to 20 keep vehicles that are controlled through the program 21 within the district for 75 percent of their operating 22 hours over the contract life of the incentive funding. 23 --o0o-- 24 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 25 WHITE: In conjunction with the South Coast and CIAQC, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 based on the South Coast concept, staff has developed 2 draft regulatory language that could create such a 3 program. This program is called the South Coast/San 4 Joaquin Valley Off-Road Opt-In for NOx, or SOON Program. 5 Staff's draft proposed regulatory language would open up 6 the program only to the San Joaquin Valley and South Coast 7 Air Districts and would require these districts' governing 8 boards to formally opt into the program before it would 9 take effect. 10 The SOON Program would require affected fleets to 11 apply annually for incentive funding, but would only 12 require additional action of fleets if they are funded. 13 Affected fleets are defined as large fleets with 20,000 14 horsepower in the statewide fleet and having more than 40 15 percent Tier 0 or Tier 1 vehicles. 16 Because this program is predicated on the use of 17 incentive money, any reductions funded through SOON must 18 conform to state law and need to be surplus to those 19 achieved through compliance with the proposed statewide 20 in-use off-road diesel vehicle regulation. 21 A copy of the draft regulatory language is 22 contained as Attachment 1 to the Summary of Key Issues 23 document that is available outside the hearing room. 24 --o0o-- 25 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 WHITE: The emission reductions provided by the SOON 2 Program will provide additional emissions reductions not 3 already accounted for in the South Coast's PM2.5 4 attainment demonstration. Staff estimated these emission 5 reductions can range from 5 to 12 tons per day in 2014 6 depending on the amount of funding ultimately made 7 available, the cost effectiveness of the projects funded, 8 and the interaction with the statewide in-use off-road 9 diesel regulation. 10 --o0o-- 11 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 12 WHITE: I would now like to summarize some minor changes 13 to the regulation that staff is proposing. A copy of the 14 proposed changes has been provided in the Board packets 15 and is available to the public on the tables outside the 16 hearing room. 17 --o0o-- 18 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 19 WHITE: As CIAQC requested at the May hearing, staff is 20 proposing to raise the threshold for small fleets to 2500 21 horsepower. This will define approximately an additional 22 7 percent of fleets as small, giving them more time to 23 comply with the regulation's PM provisions and exempting 24 them from the NOx requirement. 25 Staff estimates that this change will reduce the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 NOx emission benefit by about 1 to 3 percent and have no 2 impact on the proposed regulation's PM benefits. Staff is 3 also proposing refinements to the safety exemption 4 language to make them more clear and to provide for an 5 appeals process. 6 Staff heard from several fleets that were 7 concerned that the three-month grace period we had 8 proposed for out-of-state fleets to meet the fleet average 9 targets could give out-of-state fleets an unfair 10 advantage, especially for short duration projects. So we 11 have proposed to remove that grace period. 12 We are also proposing to define operator training 13 facilities operated by the unions as small fleets such 14 that they may have additional time to take advantage of 15 the Carl Moyer Program. 16 We also have proposed some minor other clarifying 17 changes. While staff has not included the SOON Program as 18 part of the proposed changes, staff may consider including 19 that regulatory language as part of these modifications 20 and subject to a subsequent 15-day public comment period. 21 I would now like to conclude with staff's 22 recommendation. 23 --o0o-- 24 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 25 WHITE: Staff recommends the Board adopt the proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 regulation with the proposed minor changes just discussed. 2 This concludes my presentation. 3 CHAIRPERSON NICHOLS: Thank you. 4 Before I go to Board member questions, we need to 5 hear from our Ombudsman about the public participation 6 process and any concerns she may have. 7 OMBUDSMAN QUETIN: Chairman Nichols and members 8 of the Board, since this regulation was heard in May, 9 staff has given eleven additional presentations to various 10 stakeholders in the construction and defense industries, 11 as well as to several counties and air quality coalitions. 12 They have obviously also met with many individual 13 companies impacted by this proposal. 14 As you heard, on June 18th and July 16th, staff 15 held public workshop meetings in Sacramento. 16 Approximately 80 to 100 people attended each meeting, 17 which were also webcast. 18 In April, staff established a toll-free phone 19 number to allow stakeholders to call in and get 20 information on the proposed regulation. So far, they have 21 received over 60 phone calls with the majority of the 22 calls occurring since the week of July 16. 23 The notice for extended deliberations for the 24 regulation were posted on June 7th, 2007. In July 2007, 25 staff sent a mailing to 312,000 licensed contractors in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 the state notifying them that the proposed regulation was 2 postponed until July 26th, 2007. 3 The revised staff report was available at 6:00 4 p.m. last night. There are many outstanding issues which 5 will be presented by individual speakers. I'll let them 6 speak for themselves. Thank you. 7 CHAIRPERSON NICHOLS: Thank you very much. 8 I'll now go to the Board before we begin calling 9 our witnesses. And I'll just start at the far end here to 10 my right. 11 BOARD MEMBER BERG: Thank you, Madam Chairman. 12 I think I'd like to start on the actual 13 presentation. But first of all, I would like to put into 14 the public record my thanks to both Erik and Tony and all 15 the work that you have done. And I appreciate the way 16 that you have engaged me in the process and the dedication 17 with which you have really looked at these issues. 18 And I understand we still have a lot of very 19 pertinent issues on the table that we weren't able to come 20 to consensus. But that does not change the fact that 21 tremendous time and effort on your department's part and 22 your leadership has been exemplary. And I'd like to put 23 that into the record. 24 Okay. I'd like to understand on when you talked 25 about the exemption, I get a couple of things out of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 way. I would like to understand that Job Corps under the 2 nonprofit is going to be exempt so I can just cross that 3 off my list. 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: That is correct. 6 BOARD MEMBER BERG: Thank you. 7 Also, could you just review the safety appeal 8 process very quickly and specifically the timing? If 9 somebody has a safety issue on a particular piece of 10 equipment, how will that affect the timing of their 11 compliance? 12 SENIOR STAFF COUNSEL TERRIS: Basically, if a 13 party is unhappy with the initial determination by the 14 Executive Officer regarding safety, they would have the 15 right to file an appeal immediately. And during the 16 appeals process, they would basically be -- they can stay 17 compliant until the reconsideration takes place. And that 18 would -- basically, reconsideration would be directed to 19 an independent hearing officer who would basically 20 establish a record and hold a hearing or could do a 21 basically hearing from written submissions and make a 22 determination. That determination would be then forwarded 23 to the Executive Officer, who would then make -- could 24 accept or reject that determination. 25 BOARD MEMBER BERG: And is that going to also be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 true with -- one of the safety nets that I feel is present 2 in the regulation is the fact that you do not have to put 3 retrofit or repowers in equipment that there is none 4 available. Yet, from a sales and marketing perspective, 5 there could be some overeager individuals that say mine 6 can fit into anything. 7 So how are we going to reconcile so that 8 equipment owners are not spending a significant amount of 9 time trying to figure out what the heck to do? 10 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 11 WHITE: One of the additional changes we've made is to 12 reference OSHA requirements that may be in place. I don't 13 believe at the present there is much that addresses this. 14 However, in conversations with some of the stakeholders, 15 we've committed to work with OSHA on the development of 16 appropriate guidelines for retrofit safety moving into the 17 future. So there will always be an ability then when we 18 get those in place for fleets to have some standard to 19 point to that would indicate whether or not a retrofit 20 would be safe on its face. 21 So I think we've tried to move towards that 22 direction and have a more definitive benchmark if you will 23 for this and certainly if we've fallen a little short of 24 the mark with the proposed changes we've made, we'll 25 continue to work with stakeholders on clarifying that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 through this process. 2 BOARD MEMBER BERG: Thank you. 3 And also on the verification process, when a 4 particular piece of equipment is verified, it's verified 5 for a specific horsepower and piece of equipment so that 6 the consumer is able to make wise choices without having 7 to become an engineer themselves? 8 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 9 WHITE: That is correct. The decision tree for whether or 10 not a retrofit will work is really a two-step process. 11 One is, is the device verified for a particular engine? 12 So on our web page, there is a listing for each device and 13 the engines for which it is verified. 14 And the second piece is to work with installers 15 on whether or not that is the right device for that 16 application, whether it will fit, whether the duty cycle 17 is appropriate, et cetera. 18 So I think there's very clear steps through the 19 process as a fleet owner or vehicle owner would try to 20 decide whether or not or what was the most appropriate 21 device to install on their vehicle. 22 BOARD MEMBER BERG: And we acknowledge out of the 23 180,000 pieces of equipment that are going to fall under 24 this rule that we need significantly more retrofit and 25 repowers verified in order to meet the need of this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 regulation. 2 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 3 WHITE: Yes. And that is certainly -- from the ARB's 4 perspective as we've looked at the opportunities and the 5 showcase program to do just that. And I can tell you that 6 as we went into that program, the response has exceeded 7 our expectations in terms of the variety and the number of 8 devices that were submitted for inclusion in that program. 9 I think it was a phenomenal response on behalf of 10 the retrofit manufacturers. And so I'm very optimistic 11 that out of that program we will emerge into a marketplace 12 that has much more variety for the fleet operators in the 13 very near future compared to what we have today. 14 BOARD MEMBER BERG: And in that showcase, will we 15 be demonstrating all tiered engines, so there will be a 16 demonstration of Tier 0 engines through Tier 2? 17 And the reason I'm asking that is it appears to 18 me that the older engines are much more challenged. And 19 to have all Tier 2 or Tier 3 in the showcase to me would 20 be demonstrating the easier options. And I think that the 21 older options are the ones that are going to give us the 22 larger challenges. 23 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 24 WHITE: Yes. The showcase is designed to spur 25 verification over all engine tier levels over a variety of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 engine and horsepower ranges and a variety of different 2 equipment types. 3 With the equipment type profile that we're really 4 looking for in that program, trying to mirror what is in 5 the statewide fleet so that we're not focusing all on 6 scrapers or all on graders, but we'll be hopefully being 7 able to develop -- the retrofits will be verified that 8 will work across a broad variety of equipment types, 9 across a broad variety of horsepower ranges and be able to 10 address both older technology, the Tier 0 technology, as 11 well as the newer Tier 2 or Tier 3 technology. 12 BOARD MEMBER BERG: We didn't mention that a 13 technology and some reporting back to the Board. And I 14 don't know, Madam Chairman, if this is an appropriate 15 time, but I certainly would like to put on the table that 16 we would have a technology and cost review in January 17 2009, which would be three months before the March 2009 18 implementation date where staff would come back and give 19 us an update on the technology that has been verified 20 along with the current cost. And allow us -- oh, and 21 maybe we can also get a review of the showcase. 22 And it would be an opportunity not only to 23 provide another safety net, but really to have a strong 24 feeling that those areas where we're going to take a leap 25 of faith today that we would be able to check in. So I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 would just like to put that on the table 2 CHAIRPERSON NICHOLS: I see quite a few heads 3 nodding. But what I'm going to do is keep a list of 4 suggestions like that, and we'll come back to them at the 5 end. 6 BOARD MEMBER BERG: That would be wonderful. 7 Thank you. 8 And resources are another big item on my list, 9 resources specifically for staff in the way of education 10 and outreach, as well as the verification program, and 11 then compliance and enforcement. 12 Could you speak a little bit to the fact of the 13 resources that are going to be needed and how we can 14 assist to make sure that that becomes a reality? 15 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 16 WHITE: Sure. We certainly recognize as we've gone 17 through this process the need for additional resources to 18 support the implementation and enforcement of a regulation 19 of this scope and have identified a need for at least an 20 additional 25 staff to support in those efforts. 21 With those staff being broken up into staff that 22 would assist the fleets in education, in outreach, in 23 complying with the regulation, understanding its 24 provisions, and also on the other side of the house have 25 new staff dedicated to the enforcement of this regulation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 as well. 2 And on the enforcement side, we see a lot of 3 synergies with some of the existing programs that we 4 already have in place, including our smoke inspection 5 program, our roadside inspection program where we have 6 inspectors out in the field looking at heavy-duty trucks 7 going down the road, doing stops at weigh stations, truck 8 stops, other facilities. 9 And since most of this equipment does get 10 trailered around the state, there will certainly be ample 11 opportunities for those existing staff to see these 12 vehicles as they're being transported, have access to the 13 information that the fleets are reporting at their 14 disposal in the field, and be able to check those vehicles 15 at the time we're looking at the on-road truck. 16 So we've begun conversations certainly internally 17 on how to coordinate enforcement and how to begin the 18 implementation effort, which we really see needing to 19 begin tomorrow. We recognize we cannot wait, you know, 20 several months down the road to begin undertaking these 21 activities. And we've made a commitment to the industry 22 to work with them through work groups, through very good 23 working relations to begin a process of letting all the 24 fleets know who haven't been part of this process of what 25 the requirements are, holding forums throughout the state PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 so we can educate the fleets, trying to bring equipment 2 manufacturers and fleet operators together, since many of 3 these fleets may not have heard of any of these devices or 4 some of these companies, and doing everything we can to 5 try to make sure we're successful in the implementation of 6 this regulation. 7 BOARD MEMBER BERG: And I think I'll jump and ask 8 this question of Mr. Cackette. Do we have the proper 9 staffing and the proper funding in the verification 10 program? Are you comfortable that we are going to be able 11 to go verification on steroids to accomplish the goal over 12 the next 18 months? 13 ACTING EXECUTIVE OFFICER CACKETTE: We have the 14 bare bones structure and some flexibility to put new 15 people on from other projects. But to do this 16 effectively, we are going to have to obtain additional 17 staff. And that's a one-year process. So we're not going 18 to wait for one year from now until next July. But we 19 will get people on the road right away. But it will be 20 somewhat limited initially compared to what is optimum, 21 but enough to get going. 22 BOARD MEMBER BERG: I don't know what our 23 position as Board members is to help you. It seems to me 24 like we're up here stating the obvious. And I just don't 25 feel very comfortable that -- I don't want to feel that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 we're being cavalier up here recommending what you do, 2 when you already are very capable of knowing that. So 3 whatever it is that you need from myself, and I'm sure the 4 other Board members would echo this, please let us know. 5 Because we want to be supportive and we want to help you 6 fight the fight to get the job done. 7 Also on my list is a level playing field. As 8 outlined in the Board presentation, some of this cost is 9 going to have to be passed on. And maybe that 10 conversation will come up through testimony and I can 11 address it through testimony. But keeping that playing 12 field level and for those individuals that are reviewing 13 these bids, reviewing these projects to keep in mind that 14 they should be asking if they have compliant equipment 15 coming to their job site is critical, because the people 16 that are complying are going to have these costs in their 17 bids. And people that may not know or for whatever reason 18 are not complying may not. And that is going to be 19 problematic. And I don't know how to address that. But 20 it is a concern for me. 21 The last disconnect I have, and maybe we'll also 22 deal with this through public testimony, I'm a little 23 confused on CIAQC's recommendation for a triennial 24 compliance period and the concern for them to deliver the 25 reductions and their willingness to join South Coast Air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 Quality and the San Joaquin Valley to give even additional 2 reductions. That seems to be a disconnect to me. Because 3 if you can't give originally what we are asking for, then 4 how can we give more? Similarly, if they're saying that 5 they're willing to give more, it would seem to me that 6 they're figuring out how to give us the first part if 7 they're going to give more. And I'd like to hear more 8 about that and maybe that will come out also through 9 testimony. 10 CHAIRPERSON NICHOLS: I would like to suggest 11 that we address those questions directly of the people who 12 made the proposals, rather than using staff as 13 interpreters, if you don't mind. 14 BOARD MEMBER BERG: No. I think that's a great 15 suggestion. 16 And finally, when we're weighing correct and very 17 effective implementation against job loss, which we see on 18 slide 23, against the overall health benefits but maybe 19 also a difference in effectiveness versus the 12 percent, 20 that's a very, very fine balancing act. And I'll be 21 looking forward to also some additional testimony so I can 22 figure out how we are walking that line. 23 And so with that, thank you very much for your 24 patience for my questions. 25 CHAIRPERSON NICHOLS: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 SUPERVISOR HILL: Thank you, Madam Chair. 2 Just a couple of comments. Thank you, Erik, for 3 thoroughly analyzing and articulating the analysis of the 4 questions I raised. I appreciate that. It was very 5 thorough and it was great. 6 And I also appreciate the recognition of and 7 sensitivity to the Job Corps and the recommendation. I 8 think that's a tremendous suggestion and well warranted. 9 Also, I wanted to thank the -- make sure for the 10 record that the fleets that you analyzed and especially 11 Downs Equipment Company for their willingness to allow you 12 to get in there and sit under the microscope and take all 13 aspects of their business and their tax returns and their 14 profits. I think that goes well above and beyond what 15 many would do and what most people would expect them to 16 do. So thank you. 17 The question in one of the slides and actually 18 slide 11 you talked about the cost in the first few years 19 can be significant. And then you address some of the 20 total costs in the fleet analysis later on. As a 21 percentage of total cost, how would you determine the 22 initial costs and the significance of that in the early 23 years? 24 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 25 I think ultimately the answer depends on the individual PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 company and what they have done already. The costs 2 obviously in the initial years would be the ones that are 3 required to do the maximum turnover that would have the 4 high capital cost depending on the age of equipment they 5 buy to comply. If they're buying newer equipment, there's 6 higher capital investment than if they buy used. 7 The other aspect is do they take advantage of the 8 early credit or not. Most fleets would have to do the 20 9 percent retrofits in 2010 if they do not take any early 10 actions. If they were to take advantage of the early 11 actions and for example retrofit ten percent of the 12 horsepower in 2008, they would be required to do none in 13 2010. Also the strategy they use on whether they are 14 controlling their cleanest engines, some fleets found that 15 was the better strategy because they keep them the longest 16 and others found they're better off retrofitting dirtier 17 engines because they'll need the averages sooner. So 18 ultimately that balance is going to be tailored to the 19 individual company's philosophy. 20 But the retrofit costs are front-loaded. The 21 emissions reductions on the PM side are a much greater 22 percentage of magnitude than the NOx provisions would 23 require reductions in NOx. And because of that, the 24 retrofits also have operating costs associated with them 25 and do not provide any business value to operate them on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 your machines. You do not get better revenue for having a 2 retrofit. You don't get better fuel economy. There's no 3 advantage on the business perspective to have those 4 retrofits. And that's where the cost burden I think is 5 the most obvious and the greatest concern for most fleets 6 is in that initial period and primarily because of the 7 retrofits. 8 SUPERVISOR HILL: Thank you. 9 There's no overall percentage of the $3 10 billion -- 11 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 12 Maybe I can address that. 13 If you look for all the fleets in total in the 14 state, there's about $1.5 million in cost in the first 15 three years. And if you think the total cost of the reg 16 is 3 to 3.5 billion, that's 40 or 50 percent of the cost 17 occurring in those three years. 18 SUPERVISOR HILL: That was what I was looking 19 for. 20 The other question -- and Board Member Burg 21 raised it -- and that's the education question. I know 22 when you were analyzing some of the fleets and some of the 23 work that was done, especially with the Downs fleet and 24 the equipment rental analysis, the compliance alternatives 25 I think was the question. And that seems to be crucial in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 terms of how a fleet operator will implement the rule if 2 it's adopted. And there's a broad range of how that can 3 be done, from what it seems like. And we certainly would 4 want them and I'm sure they would want to do it in the 5 most cost effective manner. 6 How will we be outreaching to those operators to 7 make sure they take advantage of the best compliance 8 alternative available? 9 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 10 WHITE: Well, I think there's a number of things that we 11 have done in the past for different rules that we 12 certainly intend to pull from as a building block for some 13 of this. 14 I use, for example, on the public fleets on-road 15 regulation, which this Board approved a few years ago and 16 is being implemented just this year, we held I want to say 17 it was eight or nine workshops throughout the state in 18 various parts of the state, both urban and rural. And as 19 part of those, we brought retrofit manufacturers together 20 to these work group meetings along with the fleets to 21 discuss what actions would be necessary under that 22 regulation to come into compliance. And then there were 23 half a dozen to a dozen retrofit manufacturers there that 24 the fleets could get information on the variety of 25 products that were out there. So certainly we would want PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 to build on that type of a program as we look moving 2 forward. 3 Another example that's been suggested by industry 4 is a working group that they've had for the portable 5 equipment and the successes they've had in that in terms 6 of working through implementation issues, helping get the 7 outreach there, helping look over materials I think that 8 ARB produces to try to educate, you know, fleets on what 9 the requirements are. 10 We also know that there's several companies and 11 individuals out there that would very much like to have an 12 opportunity to play a role in assisting fleets in 13 complying. And I would certainly see ourselves working 14 closely with them so that whether they go to individual A 15 or B or C and how do I come into compliance with this, 16 they're getting the same message. And the data is being 17 developed and complied in the same way. And we don't have 18 any issues in terms of compliance on our end. 19 And it's going to require ARB being very 20 proactive. And that's where as Ms. Berg pointed out the 21 need for additional resources is going to be so key where 22 we really see those on the implementation side of the 23 house being utilized to do activities like that. 24 SUPERVISOR HILL: Thank you. 25 Thank you, Madam Chair. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 CHAIRPERSON NICHOLS: Before we go on, I'm 2 holding in my hand a cell phone which has been turned off. 3 I have been advised that really annoying sound that we're 4 getting is when somebody is receiving an incoming call, 5 even if your cell phone is tuned to silent. It still 6 interferes with the sound system in this room. 7 So I would like to ask everybody who has a cell 8 phone or similar equipment to step outside the room if you 9 need to make or receive a call. That will make the whole 10 proceeding better for everybody. Thank you. 11 BOARD MEMBER CASE: Madam Chair, thank you for 12 the opportunity to comment. 13 And I really appreciated the staff's presentation 14 this morning. A lot of work has gone into this rule. And 15 as the newest member, I've spent a lot of time going over 16 the transcripts of that meeting in May to understand what 17 the issues are. 18 I do have a question. On slide number ten, there 19 appears there have been two models, one at which the ARB 20 staff has worked with and one which industry has had a 21 consultant working with that. And slide ten refers to 22 apparently a modeling difference in the fleet turnover 23 rate, that the normal turnover rate was too low in the 24 model. Can you expand on what you found there? Because 25 there were significant differences in estimated costs PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 between 3 1/2 billion and 13 billion. Please, go ahead. 2 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 3 WHITE: Early on in the development of this regulation, 4 one of the key foundation pieces that staff always does is 5 try to get a good handle on what are the emissions from 6 these sources? How many vehicles are there? How are they 7 used? How many hours are they operated? 8 And we looked at a wide variety of data, national 9 data, California specific data to characterize the 10 California fleet. And based on the compilation of that, 11 we came up with an average turnover rate in the state of 12 California that was about 5 percent. 13 When the industry analysis was done, the turnover 14 rate I believe was assumed to be 3 percent, which is -- 15 while it may seem close to ours, if we're talking about a 16 lot of vehicles with a lot of emissions, that becomes very 17 significant. And the justification for using that lower 18 turnover number was that that was what the U.S. EPA uses 19 in their model for off-road equipment nationwide. 20 So we went back and we spoke with the U.S. EPA. 21 We looked at their model. And in fact, we're not able to 22 come up with a number that was 3 percent. And oddly 23 enough, came up with a number that was higher than ours 24 suggesting the turnover occurred even faster than what we 25 had assumed. We felt our number was a very good PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 representation, certainly the best representation that's 2 out there of how the California gets turned over with 3 time. That 2 percent difference translates to a very 4 substantial difference in cost if you are looking at what 5 fleets are doing on their own and what fleets are going to 6 have to do above and beyond what they're doing to comply 7 with the regulation. 8 BOARD MEMBER CASE: Thank you. 9 One of the other areas I'm interested in focusing 10 a bit more on is incentive funding. We heard and I've 11 received correspondence, I believe everybody probably has, 12 between South Coast Air Quality and the San Joaquin Valley 13 Pollution District to look at doing an opt-in program that 14 would actually provide more stringent rules but with 15 incentive funding attached to it. And I also understand 16 the Bay Area is now part of that effort, that I'm sure 17 we'll hear testimony about. 18 Can you talk a little bit about the opportunities 19 for business and incentive funds to help offset some of 20 the costs related to getting their fleets cleaner? 21 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 22 WHITE: Certainly. The opt-in element is certainly 23 completely predicated on the use of incentive money. So 24 participation on that for fleets that are pulled into that 25 program, if the Board does in fact move to bring that into PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 the proposed regulation, would make that money available 2 to those fleets. 3 But as we've gone through this process, we've 4 certainly recognized that especially for the medium and 5 small fleets, we need to make some considerations for 6 them. The economic impacts are as challenging as the 7 large fleets, but the resources may not be as adequate or 8 readily available to them as some of the larger fleets. 9 So we've structured some of this piece of the 10 regulation to provide additional time for fleets to 11 utilize existing incentive moneys. And in particular, the 12 Carl Moyer Program, to take actions before they have to 13 under the regulation and have those actions be surplus and 14 then visive be able to be funded through the Moyer 15 Program. 16 When we looked at the medium fleets, for 17 instance, we moved the compliance date back from 2010 to 18 2013. That was intended to give three more years of Moyer 19 eligibility to those fleets. As we looked at the small 20 fleets, we move that compliance date to 2015. And under 21 the Carl Moyer Program, exhaust retrofits can be fully 22 funded by the local air districts through that program. 23 So there's an opportunity for small fleets if they meet 24 the criteria for the program to have their retrofits fully 25 paid for through the use of incentive moneys. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 So we tried very hard to try to find that balance 2 of we want to get the emission reductions as soon as we 3 can, but we recognize there's economic challenges. And 4 are there some things we can do within the existing 5 programs that are in place to facilitate that compliance 6 and try to ease the burden as these fleets are coming into 7 the program, especially the mediums and smalls, so they'll 8 be better prepared when the initial compliance dates come 9 about. 10 BOARD MEMBER CASE: In your opinion, do we have 11 adequate Carl Moyer funding? How does that all fold in? 12 I believe it's something that has to be in the state 13 budget on an annual basis where are we today and what do 14 we need to try to get to that next step? Because I know 15 funding has been continually an issue. 16 ACTING EXECUTIVE OFFICER CACKETTE: We have Carl 17 Moyer funding from various pots that adds up to $140 18 million a year. And the funding source that provides 19 those moneys is through 2014. So there is money 20 available. 21 We've discussed this with the South Coast quite 22 extensively, and their agreement to put $30 million a year 23 towards this add on or the SOON Program should you decide 24 to go forward with that does not empty the bank. They've 25 indicated they have money left over that could to go to a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 number of sources. But certainly funding the small and 2 medium people who are not affected by the add on program 3 but affected by the Base Program, there should be some 4 money available for that. We have not thoroughly explored 5 that yet with the San Joaquin Valley. We've had some 6 discussions about money that could be made available out 7 of their Moyer funds. 8 BOARD MEMBER CASE: And then just one last 9 question on financing. Mr. Downs got up and spoke to the 10 fact that his after-tax profits is what's paying for the 11 financing on new equipment. I believe there would also be 12 a depreciation expense prior to that. But did we look at 13 that commitment that's already been made in terms of 14 impacts on companies that have commitments to pay for the 15 cost of purchasing that are spread over a number of years? 16 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 17 No. When we did the analysis -- my name is Tony Brasil, 18 the Manager of the In-Use Control Manager Section. 19 When we looked at the impact to individual 20 fleets, we looked at them not growing their fleet size and 21 looking at the impact of the regulation on their fleet if 22 it stayed at the same size. If the fleet does grow by 23 adding newer vehicles to its fleet, then its averages will 24 get getter and the overall impacts to their cost as a 25 percentage of the revenue would actually be smaller than PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 our estimates. 2 So we looked at the static fleet size to, one, be 3 more conservative and, two, that again for each company 4 their growth rates and how they make changes in the future 5 is very uncertain. So we did not -- and we are, of 6 course, projecting for the next ten years what they might 7 be doing. And so to some degree, the impact on their cash 8 flow would reduce their ability to grow their company to 9 the extent that the financial impact would be on their 10 cash flow ability to borrow, but would get the emission 11 reductions by removing the dirtier vehicles from the fleet 12 and being replaced by cleaner ones. 13 BOARD MEMBER CASE: Thank you. 14 CHAIRPERSON NICHOLS: Thank you. 15 Ms. D'Adamo. 16 BOARD MEMBER D'ADAMO: I'm going to move quickly, 17 because I see we have a number of witnesses here and I 18 want to give them the opportunity. 19 Also want to echo what the other Board members 20 said, to thank staff, Mr. Downs, the other companies that 21 shared information with staff. And really do appreciate 22 the economic analysis in closing the gap. Because at the 23 last hearing, just the huge difference between 3 billion 24 and 13, I just didn't see how we could move forward. So I 25 feel much more confident in the figures that were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 presented today. 2 A couple of questions starting off with Job 3 Corps. I thought the idea was not necessarily to exempt 4 Job Corps, because I'm concerned about worker exposure. 5 And I understood that perhaps instead there would be 6 opportunities for them either through federal funding or 7 donations from some of the turnover equipment. I would 8 just like staff to comment on that. 9 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 10 WHITE: Certainly. Initially, we thought it seemed most 11 appropriate -- Job Corps is already a small fleet. And 12 when we looked over -- initially, when we looked over the 13 information that they provided in terms of what types of 14 vehicles that they had, it seemed appropriate to keep them 15 in that classification. And then as we looked at other 16 activity data for them in terms of how much fuel do they 17 use, how are their vehicles operated, we realized that 18 there's very few hours there that are operated in. And it 19 was going to be very unlikely that they would meet the 20 minimum Moyer criteria for cost effective to be able to 21 get retrofits through that program, which is really a big 22 part of the intent for the small fleets and the timing for 23 the small fleets. 24 And so because it was a limited number of 25 vehicles. And the operation was so limited and it seemed, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 you know, such a good program to be supportive of and not 2 impact with this regulation, we felt that it would be 3 appropriate, we can either work with them to try to get 4 those -- because I think staff shares the concern that not 5 only are the health benefits, you know, important to 6 realize, it's a good opportunity for the people who go 7 through that program to get an exposure to this 8 technology, vehicles that have this technology, for when 9 they move into the work force. But that the obligation 10 might be more than this particular program could bear. 11 And that we got swayed in that way, that it made some 12 sense to have them report, be in the program, but not have 13 to do the retrofits beginning in 2015. 14 BOARD MEMBER D'ADAMO: Okay. And then you'll 15 continue to work with them -- 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: Yes. 18 BOARD MEMBER D'ADAMO: -- on any other options 19 that become available. 20 As far as enforcement, just want to clarify, 21 because I am concerned about the unfair advantage that -- 22 for those companies that don't comply. We are requiring a 23 certificate of compliance? 24 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 25 WHITE: Yes. We went back and looked at what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 opportunities we had within existing regulation to include 2 that in and if there was opportunities for obligations on 3 behalfs of people who, you know, contract for this 4 equipment to require that, and it didn't appear that that 5 would be within the scope of what we could do. 6 But what we thought was important would be, since 7 we had all the information and we knew how fleets were 8 reporting, who was reporting, and what they were 9 reporting, that we would take on the obligation to issue a 10 certificate of report compliance. So we will issue 11 something to the fleets annually that says you have met -- 12 you have stated and claim that you have met the 13 requirements of the regulation, and we certainly will be 14 going out and doing checking and our other enforcement 15 activities, so it's not a leap of faith in that regard. 16 But then that would provide a tool for those who 17 do the business, whether it's, you know, local governments 18 contracting for work. But it would add something that the 19 people who hire for this work could add onto the bid 20 requirements that they have. 21 And so we're hopeful that this will catch on, 22 perhaps through the CEQA process and other things, that 23 lead agencies will look for this piece of paper as they 24 would for, you know, certificates of compliance for 25 workers' comp., certificates of compliance for insurance, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 and other types of obligations that the fleets have to 2 have. So -- and then we will continue to evaluate whether 3 that is sufficient or I think we can look in the future if 4 we need to, you know, address that further. 5 BOARD MEMBER D'ADAMO: Terrific. And then the 6 last question on retrofits. Mr. White, you and I met with 7 an industry representative yesterday who expressed concern 8 about particulates and felt that there might be 9 additional -- if additional incentive were there for those 10 companies that choose to retrofit early on. Just 11 wondering if there's anything we can do to further 12 incentivize that because of the potential health benefits. 13 I -- recognizing that there may not be very many companies 14 that would want to exercise that option. 15 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 16 WHITE: Yeah. We went back and looked to see what -- how 17 the regulation would handle fleets that, for whatever 18 reason, felt that exceeding the 20 percent retrofit 19 requirements or going beyond the PM fleet average targets 20 made sense, how that wouldn't help them in the back years, 21 if you will. 22 And what we looked at -- we looked at the 23 interaction of if a filter is put on a dirty vehicle, 24 let's say, in the early years of the program, and then 25 that fleet would be compelled to turn that over later, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 were they going to -- because of their good deed early on, 2 they were going to be penalized later on in the program. 3 And we looked at whether or not that potential could 4 occur. It dawned on us that while we're very aggressive 5 on our PM retrofit rates at 20 percent per year, the 6 turnover rates never exceed 10. So we would never have a 7 situation where a fleet would exceed that 20 percent and 8 then have to turn over that whole block of vehicles at the 9 same time in a subsequent year. That because the turnover 10 is capped at 10 percent, they would still have several 11 years where those retrofits were on. They wouldn't have 12 -- they wouldn't be compelled under the regulation to turn 13 it over. 14 So as we went back to look to see if that type of 15 scenario were to occur, it doesn't appear as though the 16 regulation would allow that type of scenario to occur. 17 BOARD MEMBER D'ADAMO: Because they've got that 18 10 percent that would keep being -- 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: Correct. Yes. 21 BOARD MEMBER D'ADAMO: -- being moved out. 22 Okay. 23 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 24 WHITE: Yes. 25 BOARD MEMBER D'ADAMO: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 2 WHITE: That cap will protect them in the future years. 3 BOARD MEMBER D'ADAMO: All right. Thank you. 4 CHAIRPERSON NICHOLS: Thank you. I'm going to 5 defer my comments and questions until later. But before I 6 move on down the dais here, I would like to talk for just 7 a minute about process, because I know there have been 8 people looking a little bit restless out there in the 9 audience. And I don't blame you, because it's a long time 10 that the Board and the staff get to talk before we get to 11 hear from you. 12 So let me just explain the intention here, which 13 is, as soon as we finish with Board member comments and 14 questions so we've sort of set the stage here, we will go 15 directly to the list of witnesses. I have a list which I 16 now see totals 57 people. And it's quite a good mix of 17 people who are planning to testify in favor or oppose or 18 neutral. And we look forward to hearing from all of you. 19 We will be giving three minutes, as I think I 20 said at the beginning, to everybody who speaks. We'll 21 take a break at 11:30 for the court reporter and for 22 ourselves, for ten minutes. And then come back until 23 12:30, and we will take a one-hour lunch break. So you 24 can plan on the fact that you will get lunch. And if my 25 estimates of all of this are correct, we should be able to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 finish all of our testimony by around 3:00 o'clock or 3:30 2 or so. And then proceed to final discussion and a 3 decision on the part of the Board. 4 So that at least gives you some sense what's 5 facing you for the remainder of the day. 6 Board members may from time to time get up to go 7 into the back room if they need to, but they are actually 8 able to hear witnesses at all points during the 9 proceeding. Just so you know, if a particular Board 10 member isn't here when you speak, they will have heard you 11 anyway because there's no escaping from the sound system 12 here. 13 All right. With that, I will now turn to my left 14 and proceed on here with Ms. Riordan. 15 BOARD MEMBER RIORDAN: Thank you. Madam Chair, 16 I'm going to do as you did. I'll defer until some of the 17 presentations because they're going to cause me, then, to 18 go back to staff and get some clarification. So I'd like 19 to defer right now. 20 CHAIRPERSON NICHOLS: Okay. Thank you. 21 Sterling? 22 SUPERVISOR HILL: Ditto here. 23 CHAIRPERSON NICHOLS: Mr. Loveridge. 24 BOARD MEMBER LOVERIDGE: Just two very quick 25 questions. One, we can adopt soon today, is that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 something that this Board can do if we choose? 2 ACTING EXECUTIVE OFFICER CACKETTE: Yes, it can. 3 BOARD MEMBER LOVERIDGE: Second, just a quick 4 comment on what I understand, some legislation appeared to 5 require green requirements for construction projects that 6 are funded by state bonds. Does that relate or have 7 anything to do with what we're doing today? 8 ACTING EXECUTIVE OFFICER CACKETTE: I'm actually 9 not sure of what the status of that in the overall budget 10 negotiations are. If Rob happens to be here, he could 11 come up, if he is. 12 CHAIRPERSON NICHOLS: I think not. I don't see 13 him. 14 ACTING EXECUTIVE OFFICER CACKETTE: It doesn't 15 look like that. 16 BOARD MEMBER LOVERIDGE: Maybe you can ask him 17 to -- 18 ACTING EXECUTIVE OFFICER CACKETTE: Yes. But in 19 general, the concept, I believe, would be that there would 20 be some minimum requirements on individual projects, that 21 at least older equipment use filters. And so it would not 22 conflict with the rule, but it could resolve in a compound 23 requirement that is more stringent for a given fleet for 24 that rule, because they might have to put on -- depending 25 on how much of their equipment's going on one project, you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 could see how they might have to put on more filters than 2 our implementation schedule would cause. But since our 3 schedule for putting the filters on is relatively 4 aggressive, I would think that any conflict would be only 5 in the first few years. 6 CHAIRPERSON NICHOLS: Okay. Any additional Board 7 member comments or questions at this time? 8 Yes. 9 BOARD MEMBER ROBERTS: I have just a single 10 question regarding the SOON Program, which sounds like 11 it's aimed at two districts. And I'm wondering if 12 consideration had been given, since it's a voluntary 13 thing, to having other districts opt into that. 14 ACTING EXECUTIVE OFFICER CACKETTE: Yeah. We did 15 -- we looked at those two districts mainly because it came 16 out of discussions and negotiations between the 17 Construction Industry Association and those districts, 18 that's where they were focusing on could they do more. 19 BOARD MEMBER ROBERTS: No, I understand that. 20 ACTING EXECUTIVE OFFICER CACKETTE: Yeah. That's 21 why it was limited to that. 22 BOARD MEMBER ROBERTS: Okay. 23 ACTING EXECUTIVE OFFICER CACKETTE: Right now, 24 the rule would limit as -- not the rule, but as our 25 suggested amendments of what has been discussed with those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 two districts, would limit it to those two districts. But 2 there's nothing -- 3 BOARD MEMBER ROBERTS: Is there any reason why 4 that can't be made available to any districts that wanted 5 to, when they chose to opt in? 6 ACTING EXECUTIVE OFFICER CACKETTE: I think that 7 would be strictly up to the Board, and I'm sure that's 8 within the scope of the notice. 9 BOARD MEMBER ROBERTS: Okay. So that would be 10 possible for us to modify anything that we do here -- 11 ACTING EXECUTIVE OFFICER CACKETTE: Yes. 12 BOARD MEMBER ROBERTS: -- today, should we decide 13 to opt -- to include that. Okay. Thank you. 14 CHAIRPERSON NICHOLS: Thank you. We will now 15 proceed, then, to call the witnesses in the order that 16 they are on my sign-up sheet. I'm going to call you three 17 at a time just so you know that you're on tap. 18 So we're going to start with David Yow, followed 19 by Shane Gara and David Porcher. 20 MR. YOW: Thank you very much. With the last 21 name of Yow, it's rare that I get to go first. So thank 22 you. 23 CHAIRPERSON NICHOLS: There you are. 24 MR. YOW: My name is David Yow, and I am here on 25 behalf of Assembly Member Joel Anderson who was unable to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 attend today. Thank you for holding this hearing. 2 There's going to be an awful lot of concerns 3 expressed here today and Assemblyman Anderson shares many 4 of them. I think the chief one, one that we're all 5 familiar with, is the cost. Three billion dollars is an 6 awful lot of money, especially for a relatively small 7 number of people in the state to be bearing. And then 8 passing that price along to the constituents that the 9 Assemblyman represents. 10 I think where we move forward from, from all this 11 today is in the direction of continued cooperation, and 12 the reality that this is an incremental process that we 13 have to do together. And it may require a number of 14 steps, but this regulation in particular is too large of a 15 jump forward and we're going to need to all get on the 16 same page before we can -- before we can support this. 17 Thank you very much. 18 CHAIRPERSON NICHOLS: Thank you. 19 I think in the interest both of time and of 20 everybody's eardrums, I'm going to ask you all to refrain 21 either from booing or from clapping. You can nod or shake 22 your head, or, you know, frown or smile, feel free to do 23 that. But let's, let's keep this moving forward without a 24 lot of demonstrations, please. 25 Okay, Mr. Gara, followed by Mr. Porcher. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 MR. GARA: Hello. I'm Shane Gara with Camarillo 2 Engineering, and we're a large fleet with 112 pieces of 3 equipment. 4 We are asking you to look at the complexity of 5 the off-road rule. We have a printout of the fleet 6 calculator to show everyone, from our -- from contractors 7 to our environmental partners, that setting up a strategy 8 is not an easy task. It takes weeks and months to do cost 9 analysis and then to add that strategy use to accomplish 10 your compliance goals. Once you understand how to enter 11 all your compiled information, this calculator comes to 12 life. 13 We have heard testimony from our environmental 14 partners questioning why we waited so long to come forward 15 to be heard. In our case, it is because until recently we 16 did not have the fleet calculator to show us the 17 complexities and many different and costly ways to comply. 18 We have made many projections with retrofits 19 only, retrofitting and repowering, retrofitting only 20 higher tier engines, to buying new tractors and repowering 21 and retrofitting in the same year. 22 With the help of MSRC Funding, Carl Moyer 23 Funding, and with the help of the South Coast Air Quality 24 Management District, along with Ventura County Air Quality 25 Management District, we have repowered 25 tractors in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 three and a half years at a cost of $3,127,978. Even 2 after spending that money, our cost to comply for one year 3 ranges from $1,045,000 to $2,676,000. We will all spend 4 millions of dollars a year over the next five years just 5 to re-spend that money when Tier 4 technology is 6 available. 7 We have used to Air Resources Board's tools, the 8 fleet calculator, to uncover an interesting fact. We have 9 found that if we retrofit all Tier 0 engines in our fleet 10 with PM filters first before repowers or retrofitting 11 higher tier engines, that we can cut PM emissions by 12 50 percent in the first two years of the regulation. It 13 is by far the most beneficial reduction in PM emissions 14 that we have found. 15 Thank you. 16 CHAIRPERSON NICHOLS: Thank you. 17 MR. PORCHER: My name is Dave Porcher with 18 Camarillo Engineering. One of our -- the fleets that was 19 presented is our fleet. We have the utmost respect for 20 the staff and all the time they have spent with us. 21 We have supplied data to show that the actual 22 cost of compliance is 33 percent to more than a hundred 23 percent higher than the staff estimates. We have shown 24 staff that by allowing us to keep our Tier 0 equipment in 25 our fleet until Tier 4 technology is available, then PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 phasing this equipment out of our fleets, we would achieve 2 by retrofitting with level Three V-dex and retrofitting at 3 a rate of 10 percent a year, we would achieve a 50 percent 4 reduction in PM emissions in the first four years of 5 compliance. We have given staff guidelines to, also to 6 achieve this goal. 7 We feel strongly that the NOx devices needed for 8 these tractors will be available by the end of 2008 and 9 that would take care of the second part of the rule. 10 We ask you to consider a 10 percent instead of 11 the 20 percent a year on retrofits. The early years of 12 compliance are front loaded. If you make the first years 13 of compliance less financially burdensome, we could still 14 compete in the marketplace. That will give the Air 15 Resources Board time to work out the enforcement issues 16 that are going to be critical in creating a level playing 17 field. 18 If the rule stays as written, and we cannot pass 19 on the high cost of this rule, then we will borrow 20 ourselves into bankruptcy. In our efforts to pressure one 21 major equipment manufacturer into coming up with more cost 22 effective and Tier 3 repower solutions, we were given the 23 complex issues that they face. They are concerned that 24 they could lose up to a billion dollars in research and 25 development money that they will not be able to recover. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 The pressure that they are under to come up with Tier 4 2 technology has given them concerns that the money spent on 3 repowers will be lost because those engines will be 4 obsolete in a few short years. Along with that, we have 5 shown that our Tier 0 equipment has devalued by 75 6 percent. This represents our down payments, and on newer 7 equipment. It is -- 8 CHAIRPERSON NICHOLS: Could you wrap up, please? 9 MR. PORCHER: Pardon me? 10 CHAIRPERSON NICHOLS: Sorry. Could you wrap up, 11 please? 12 MR. PORCHER: Okay. This has severely changed 13 our debt to asset ratio and bonding capability. 14 I'd just like to thank staff, the Board members 15 that have met with us, the Ombudsman, and especially to 16 Elizabeth Yura for allowing us to uncover this emissions 17 jewel. 18 Thank you. 19 CHAIRPERSON NICHOLS: Thank you. 20 Oh, there's a question. I'm sorry. Your time is 21 extended if somebody has a question. 22 BOARD MEMBER RIORDAN: I do have a question. 23 Mr. Porcher -- and I will disclose this. I have 24 met with Mr. Porcher. And one of the things, though, that 25 you didn't mention in your presentation today, that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 concerned me was, that you actually use your equipment in 2 three air quality basins. And when you go to access Carl 3 Moyer moneys, that has worked as a negative for you 4 because you can't necessarily always guarantee that that 5 money will stay in that district with that piece of 6 equipment that you've retrofitted. 7 I just want to note that for the staff. Because 8 I think your company is not unusual. You do have to 9 operate in different areas. You have to go where the jobs 10 are -- 11 MR. PORCHER: That's correct. 12 BOARD MEMBER RIORDAN: -- and the projects are. 13 And so, therefore, I think that is one thing that we might 14 want to address in the future, and that is how do we help 15 a company access the Carl Moyer funding, and that works in 16 multiple air pollution control districts? 17 ACTING EXECUTIVE OFFICER CACKETTE: And if I 18 could just comment on that briefly. We do have -- we 19 withhold 10 percent of the Carl Moyer money or about 20 $14 million a year specifically for that purpose now. And 21 then companies can bid on what we call multi-district or 22 statewide basis for funds. And one of the reasons for 23 doing that was, in fact, for large construction equipment 24 that moves around. So there is an opportunity for them to 25 compete that is not -- does not have this geographical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 limitation to it. 2 BOARD MEMBER RIORDAN: Okay. Mr. Cackette, then, 3 would they apply through the Air Resources Board for that 4 money? 5 ACTING EXECUTIVE OFFICER CACKETTE: Yes. 6 BOARD MEMBER RIORDAN: Okay. 7 ACTING EXECUTIVE OFFICER CACKETTE: We have an 8 annual solicitation for that. 9 BOARD MEMBER RIORDAN: Then what we need to do 10 is, in our education program, make that abundantly clear 11 to those companies that would fall in the category of 12 Camarillo and working in multiple air pollution control 13 districts. 14 ACTING EXECUTIVE OFFICER CACKETTE: I should say, 15 though, on the specific application here for Camarillo as 16 a large company, they probably will not be able to qualify 17 for further Carl Moyer money if the Board adopts this 18 regulation because they come up -- it becomes to the point 19 where we are now paying for compliance and that's not 20 allowed under Carl Moyer. 21 But the availability of that money in general and 22 for medium size fleets that may move around was, was what 23 I was responding to. 24 BOARD MEMBER RIORDAN: Okay. If other moneys 25 were to become available later, that is a component we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 need to keep in mind. I recognize Carl Moyer may now be a 2 problem. But if we, you know, are aggressive and work 3 towards some other funding mechanism, then that just needs 4 to be kept in the back of our minds to, to address. 5 Thank you. 6 CHAIRPERSON NICHOLS: Thank you very much. 7 MR. PORCHER: Thank you. 8 BOARD MEMBER BERG: Madam Chair, I just have a 9 quick question on the Tier 0. 10 CHAIRPERSON NICHOLS: I'm sorry. Yes. 11 BOARD MEMBER BERG: Could staff respond on the 12 request on the Tier 0 with traps and filters and the fact 13 can we keep them in the fleet until 2014? Was that the 14 date, Mr. Porcher. 15 MR. PORCHER: Well, until Tier 4 technology is 16 available. Whether that be 2014 or '15. It would 17 severely -- help us if we can reduce these PM emissions 18 and the NOx devices are available, we should be able to 19 bring the NOx down. If -- 20 BOARD MEMBER BERG: Okay. I -- 21 MR. PORCHER: -- we are all gambling on the 22 technology -- 23 BOARD MEMBER BERG: I understand -- I understand 24 that we're looking at Tier 0 retrofitted, can they stay in 25 the fleet until Tier 4 comes out? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 2 WHITE: Yes. There is a provision in the regulation that 3 provides a safe harbor, if you will, for a vehicle that 4 has been retrofit. It gets six years of useful life in 5 the regulation. In other words, it's never required to be 6 turned over once that retrofit is put on for six years. 7 So retrofits that happen in the 2010, 2011 time frame, 8 would not have to be turned over until 2016 or 2017 and 9 that would be the period of time in which Tier 4 vehicles 10 would be -- would be available in the marketplace. 11 BOARD MEMBER BERG: And since the Board might be 12 looking at a review prior to that, then we could also take 13 a look at it at that time. 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: Correct. 16 BOARD MEMBER BERG: Thank you. Thank you, 17 Mr. Porcher. 18 MR. PORCHER: Thank you very much. 19 CHAIRPERSON NICHOLS: Okay. We're next going to 20 hear from Tim Byrne, followed by Guy Prescott, and Mike 21 Self. 22 MR. BYRNE: Good morning. My name is Tim Byrne. 23 I'm from Ritchie Brothers Auctioneers. I've been asked to 24 speak on behalf of some of the customers in my area which 25 is the Central Valley. I work out of the Los Angeles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 office. And I've been asked specifically to review the 2 part seven, regulation H, on the impact of the resale 3 value of used equipment. 4 I provided you with a map that shows basically 5 where our buyers come from out of Los Angeles sale, but I 6 think it's a representative of our Sacramento sales as 7 well. The front page is dollars and the back page is 8 buyers. And it shows you basically where the buyers come 9 from, from around the world to buy at a Ritchie Brothers 10 in California sale. 11 In reviewing the -- in Section H, one of the 12 things I found was, it's interesting how at the beginning 13 of that section, it says that the -- there will be a 14 decrease in older equipment, but at the end the cost 15 associated with that only refers to transportation, really 16 no decrease in cost. And what we're finding already, even 17 without the regulation being implemented, is that buyers 18 are already not coming to the sale. I had one buyer in 19 Bakersfield tell me, "What's the point? If I buy a piece 20 from you, I'm going to have to replace the engine anyway. 21 So unless you're selling Tier 2 or Tier 3 engines, there's 22 no reason to go, because I'm going to have to spend money 23 on it." 24 So basically one tenet of our industry is more 25 buyers bring more sales. And if you remove the California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 buyers, as can you see on that map, that's two-thirds of 2 the people that come to our sales. So, absolutely, 3 there's beginning to be a decrease in the dollars. And 4 we're already seeing that. 5 As an example right now, because of the housing 6 market, we've seen a slowdown in large scrapers. And I 7 think it's a good example of what happens when you remove 8 the California market out of a sale. Yes, scrapers get 9 sold in Australia. Yes, scrapers are used in the Middle 10 East. We do sell them worldwide. We also sell them in 11 Arizona. But there's a lot of buyers in Arizona that are 12 anticipating when this regulation goes through, that 13 Arizona's going to have a similar one. So they've already 14 changed their buying patterns as well. 15 But right now, with just the slowdown in the 16 housing market, scrapers have dropped off about 20, 30 17 percent in price. And that equates to more -- to 70 to 18 $90 per horsepower loss on a contractor trying to sell one 19 today. 20 And in that mix is also Tier 2 and Tier 3 21 engines, or mostly Tier 2. Those aren't just Tier 0 22 engines. So that 70 to 90 could actually be higher than 23 that. So based on that -- and what we're seeing generally 24 in the marketplace, we feel that the impact on this. And 25 we do feel like we're kind of an outside objective third PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 party, that it's clearly going to be higher than $10 per 2 horsepower cost to a contractor to sell his equipment. We 3 think conservatively, it's probably going to be 20 to $40 4 per horsepower, maybe on average 40 to 70, and maybe 5 realistically, it could be as high as 70 to $100 per 6 horsepower. 7 Large iron, big dozers, big scrapers, maybe an 8 anomaly, it's hard to say with loaders and worldwide 9 general equipment like loaders and backhoes. But even if 10 you average $50 a horsepower as the cost to sell used 11 equipment, when it comes to capital in updating the fleet 12 and repowering, it's going to have a huge impact on the 13 contractors. 14 CHAIRPERSON NICHOLS: Mr. Byrne, your time is up 15 and I think -- 16 MR. BYRNE: Thank you. 17 CHAIRPERSON NICHOLS: -- you just finished 18 perfectly. Thank you very much. 19 MR. BYRNE: Thank you. 20 CHAIRPERSON NICHOLS: Yes. Question, Mayor 21 Loveridge. 22 BOARD MEMBER LOVERIDGE: Your -- what would be 23 your proposal or your counter or your recommendation? I 24 understand your description, I was interested in your 25 prescription. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 MR. BYRNE: Well, my job I was asked to review 2 that section and ask -- and answer whether I felt that the 3 $10 per hour horsepower was realistic or not. I don't 4 feel it is. 5 Where is it? It's really hard. I mean it's a 6 question for us that we're studying ever day because it's 7 going to have a huge impact one way or the other on our 8 business. I think it's probably, on average, I don't 9 think $50 a horsepower is, is, I think that's 10 conservative. I think it could be considerably higher, 11 because the majority of this equipment is going to be 12 heavy iron, it's going to scrapers and large dozers that 13 are going to take the biggest hit. And I think it's going 14 to have the biggest impact to contractors. 15 So I think it's probably going to be closer to 16 the 70 to a hundred dollar range than 50. But even if you 17 use 50, it's 500 percent higher than what you're -- what 18 you're estimating. And when you, you know, when you pull 19 in examples of companies and the profitability, that's a 20 huge impact. 21 BOARD MEMBER LOVERIDGE: That's fine. 22 CHAIRPERSON NICHOLS: Thank you. 23 MR. BYRNE: You bet. 24 CHAIRPERSON NICHOLS: Okay. 25 Mr. Self -- I'm sorry, Mr. Prescott and then PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 Mr. Self. And that's going to be followed by Mr. Watts 2 and Mr. Downs. And then it will be time for our break, I 3 think. 4 MR. PRESCOTT: Thank you. Members of the Board, 5 staff, my name's Guy Prescott. I'm the Director of Safety 6 for Operating Engineers Local Union Number 3. 7 I would like to start by thanking all of you for 8 the work you have done with us in making some of the 9 changes proposed by staff today and encourage their 10 adoption. In particular, the change in the V-dex section 11 that equals safety with help. I appreciate the changes 12 that staff has worked with us there. 13 Also I thank you for the change for a training 14 institutes. However, I do request a change in the 15-day 15 period without which it will not work. Under definition 16 36, it shows nonprofit training institutes as falling 17 under Tax Code 501(c)(3). And these are actually 18 nonprofit educational associations, one of which falls 19 under 501(a), the other falls under 501(c)(5). Without 20 that changing and wordsmithing in the definition, it won't 21 work. So I'd appreciate if we could get that in the 22 15-day period. 23 Finally, on behalf of the members of the Job 24 Corps, and could I ask the Job Corps members to please 25 briefly stand? I'd like to thank you for the exemption PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 for the Job Corps. 2 And with that, I will not be asking each and 3 every one of these people to speak today, as of that 6:30 4 change last night. I thank you. 5 Gentlemen, you can be seated. 6 Thank you. 7 CHAIRPERSON NICHOLS: Thank you for joining us. 8 Appreciate all those colorful shirts. 9 MR. PRESCOTT: I have one last request for you, 10 ladies and gentlemen of the Board. And that's that we 11 have jobs for these individuals when their training is 12 done. Everyone is talking about the cost of equipment, 13 the cost to the owners, the cost to the manufacturers. I 14 want to talk about the cost to the employees and their 15 families. 16 Every time this regulation speaks of reduction of 17 equipment, early retirement of equipment, downsizing of 18 numbers of piece of equipment, it should read downsizing 19 of workforce and loss of jobs. Every piece of equipment 20 has a chair and that has an operator. For every three 21 pieces of equipment, there's a laborer on the ground, 22 there's a surveyor. For every eight, there's somebody 23 oiling and fueling that. For every 12, there's a 24 mechanic. And this goes on and on. 25 The loss of employment in the construction PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 industry is going to be huge because of this regulation. 2 The changes that have been made here do not address that. 3 The cost, the real cost of this regulation, is going to be 4 beared by the working men and women of the construction 5 industry who lose their jobs, who can't make their house 6 payments, and can't put food on the tables for their 7 family. And that is a cost, not in dollars, but in the 8 health of that family. We cannot trade the health of the 9 environment for them. They cannot be the sole bearers of 10 the cost of this regulation. 11 This industry has asked repeatedly for more time 12 and flexibility. With that, we can save some of these 13 jobs. Regardless what happens with this regulation, we 14 will unfortunately lose jobs. It will occur. But if you 15 will please give this, this industry the maximum amount of 16 flexibility and any additional time you can foresee, it 17 will help save some jobs. 18 And I appreciate all consideration you can give 19 to that. Thank you. 20 CHAIRPERSON NICHOLS: Mr. Self, followed by 21 Mr. Watts and Mr. Downs. 22 BOARD MEMBER BERG: Before Mr. Self speaks, can I 23 just confirm that we're going to address that 15-day 24 change on the definition of -- 25 CHAIRPERSON NICHOLS: I have it down on a list, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 but I think that's likely to get fixed. 2 BOARD MEMBER BERG: Okay, so we're just going 3 to -- 4 CHAIRPERSON NICHOLS: Yes. Yeah. Yeah. 5 BOARD MEMBER BERG: Thank you for -- thank you. 6 CHAIRPERSON NICHOLS: Yes. 7 MR. SELF: Good morning. First of all, I'd like 8 to thank the Board for the time this morning to listen to 9 the different arguments. 10 My name is Mike Self. I work for the Stockton 11 Builders Exchange. I represent approximately 650 12 different construction and related companies throughout 13 the San Joaquin Valley. And of those, many of them are 14 site-work people that use the off-road equipment and the 15 vast majority of those people in that field are -- would 16 be considered in the small fleet size. 17 And I've thought kind of long and hard about the 18 different arguments I might present to give you a view of 19 what the hardship for that this proposal is going to be on 20 them. And I think the best thing that I kind of came up 21 with was we all have a personal budget that we work with 22 on a monthly basis. We get our paychecks and we decide 23 how we're going to spend them. And let's just say for 24 argument's sake, that our budget says we can drive a 25 medium age Chevrolet as our vehicle. And then a third PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 party comes in and does an evaluation of our budget and 2 says, well, in two years, you need to drive a Mercedes and 3 you say well, we can't possibly afford that, but you don't 4 have a choice in the matter. And I'm not saying I -- with 5 all respect to the numbers that are being evaluated, 6 that's just the nature of a third party kind of an 7 evaluation, I think. It's when it's your money, it's a 8 lot different than when somebody else is looking at it. 9 If I were to tell you that you needed to do that, you 10 would probably have a lot of arguments. 11 And I think that the group that I speak for, 12 they're all out there every day. They're out there today 13 busting their rear-ends to make ends meet, and they don't 14 have the kind of money to make those changes in the time 15 line of the proposal. So I guess what I'm saying is that 16 I would more than ask, I would plead with you to look at 17 the CIAQC proposal and approve that. It's a much more or 18 it's moderately more lenient than the proposal, as shown, 19 and it would give the people that I represent, you know, a 20 large number of companies in the industry, a chance to 21 comply at a more reasonable timetable. 22 Thank you. 23 CHAIRPERSON NICHOLS: Thank you. 24 Mr. Downs. 25 I'm sorry. I missed Mr. Watts. Excuse me, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 Mr. Watts is first. If he's here. Mark Watts. 2 Okay. Then it's your turn. Welcome back. 3 MR. DOWNS: Thank you, Madam Chair, and Board 4 members. And thank you for excusing my earlier outburst. 5 And Erik, you're probably glad I'm not your 6 father-in-law, today. 7 But anyway, look, there are a couple of 8 misconceptions flying around out there that, if I could 9 just point them out without taking from my time, it will 10 only take a few seconds. 11 Number one, it was pointed out in the slide show 12 this morning that this rule is going to save 4,000 lives 13 over the duration of the rule. Well, that is true. But 14 it leads everyone to think and everyone to state that our 15 industry is killing 4,000 people a year. That's not the 16 case. The rule -- the 4,000 people prematurely saved is 17 divided by 21, over the term of the entire 21-year rule. 18 That is 190 premature deaths eliminated. So there, 19 already, we've saved, gosh, 3800 people just by clearing 20 that one point up, because staff had that misconception. 21 They've been saying this saves thousands and thousands of 22 people a year. 23 I want to point out it's 190 according to their 24 assumptions. 25 The second is that there is no, at this point, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 Carl Moyer's funding available for companies like us. We 2 have 80 applications in with the Carl Moyer's group and 3 they say there is no money. There will not be one of our 4 machines repowered, refitted, none. In fact, there's so 5 many applications that it would be April before our name 6 would come to the top of the list. 7 Now, and I'm a slow talker, and I would -- so I'm 8 going to go through my statement as quick as I possibly 9 can. 10 My name is Gordon Downs. My wife and I are 11 owners of Downs Equipment Rentals in Bakersfield and Santa 12 Maria. We found out with the in-use off-road rule at a 13 Fresno workshop on February 23rd of this year. Since that 14 date, I have worked full-time every day to inform State 15 regulators and many others how this rule will adversely 16 affect our industry. 17 According to staff members Elizabeth Yura and 18 Tony Brasil, it will cost our company about $2 million 19 each year for the first three to five years to comply. 20 $2 million amounts to double our annual tax profit, our 21 annual after-tax profit. There is no regard for payment 22 of our current debt in which we are purchasing 16 late 23 model high tier machines. There is no regard for the 24 economic slowdown. 25 My wife and I met in Sacramento with the CARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 staff on April 18th to discuss the matter of high 2 unaffordable costs on our company and many others like us. 3 We met with Board Members D'Adamo, Hill, Riordan, and 4 Berg. We told our story at the San Diego CARB meeting on 5 the 25th of May. We later had a meeting with staff, Sandy 6 Berg and Kathleen Quetin, in our office on June 13th to 7 show our actual cost numbers. Staff presented me with a 8 cost of compliance for the first year of $2.1 million. 9 Staff expects us to borrow $2.1 million a year for three 10 to five years to finance compliance. 11 We are not foolish enough to borrow money to 12 purchase V-dex or diesel particulate filters, which after 13 one year, have no value. Now that is because there is no 14 resale market, as confirmed by staff at our 16th meeting. 15 There is no resale market for V-dex. So lenders, 16 commercial lenders are equity lenders. They lend on 17 things that retain their value, not something that has a 18 value one day and is gone the next. Or, purchase new 19 equipment that cannot pay for itself. 20 We think many others -- excuse me. We and many 21 others think our words have fallen on deaf ears. Our time 22 has been wasted. What does it take to be heard? The CARB 23 is forcing Downs Equipment Rentals and many others in this 24 room into a very desperate situation. The cost of 25 compliance for our industry is so high that some large PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 companies are already saying they do not intend to comply. 2 And I can produce names, but I won't. Others will reach 3 the same conclusion when they wake up to this very complex 4 and expensive rule. 5 You must keep in mind our industry has done 6 nothing wrong. The equipment we have operated to build 7 California was never illegal and did not come with a 8 factory emissions warning. So why are we being punished 9 by the very state we helped to build? We think CARB is 10 going too far and the consequences of burdening our 11 industry with an unlimited, unfunded mandate will ignite 12 an industry-wide decision to organize into a powerful 13 bargaining block. It is only then that we will secure a 14 position of equality at the bargaining table. Because 15 we're not being heard now. 16 I can only tell you the entire experience of 17 working with staff has been frustrating and a waste of 18 time and money. Most of them talk, but they have a hard 19 time listening to our suggestions. I have heard the 20 phrase "we will look into that" many times. None of staff 21 have been in business or own diesel equipment. How could 22 they know the finer details of our industry? There are no 23 exceptions for economic hardship in the regulation. You 24 are forcing our industry to band togetheR&Defend 25 ourselves. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 So I thank you, and I would take questions. 2 CHAIRPERSON NICHOLS: I don't think we have 3 any -- excuse me. 4 (Applause.) 5 CHAIRPERSON NICHOLS: Mr. Downs, excuse me. I 6 don't have any questions for you. I think you're a very 7 effective witness. If we don't end up agreeing with 8 everything you have said, that doesn't mean that we 9 haven't listened to you. And I think if you stick around 10 and listen to the conversation, you will find that there 11 will have been some very careful consideration of all of 12 the comments that you're making. 13 But I just have to reiterate while the audience 14 is cheering, cheering you on and you are a very effective 15 witness for your position, your statements are heartfelt, 16 and I'm sure they're sincere and accurate as best you can 17 give them. But I would just say that the reason why we're 18 here today is because this industry is a very major 19 contributor to the air that all of us have to breathe, you 20 and your potential grandchildren, if you have them, 21 despite not being Mr. Smith's father-in-law. And we all 22 are going to have to try to do the best we can to balance 23 the overriding concerns that we have, the mandate that we 24 have legally to consider the public health with the state 25 of the economy, the state of the technology, what's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 reasonable to do here. And that's all that we are all 2 here trying to do. So I really thank you for your time 3 and your efforts in this. 4 MR. DOWNS: Sure. And am I able to comment on 5 your comment? 6 CHAIRPERSON NICHOLS: I think we could keep this 7 going, but we're going to take a break, But you -- 8 BOARD MEMBER ROBERTS: I have a question -- could 9 I ask before Mr. Downs leaves? 10 CHAIRPERSON NICHOLS: Yes, please do. 11 BOARD MEMBER ROBERTS: I think in both meetings, 12 Mr. Downs, you've been very open, you're one of the few 13 companies that I think was accessible to at least some of 14 the members of this Board. And I thank you for that. But 15 I'm having trouble with, and we're, we're struggling with 16 this as much as you are because I don't think we're trying 17 to punish anybody. What we're trying to do is end at a 18 more healthy solution, if you will. But that doesn't, you 19 know, we wouldn't be successful if it puts people out of 20 business in large numbers. 21 MR. DOWNS: Yes. 22 BOARD MEMBER ROBERTS: It's -- as the day has 23 developed, though, it seems like we're getting further and 24 further apart. This morning, and may be incorrectly our 25 staff, assumed that you had may be $400,000 that you could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 invest a year and they basically proposed a solution for 2 your company, just as a -- as one model -- 3 MR. DOWNS: Yes. 4 BOARD MEMBER ROBERTS: -- that, if I understood 5 the testimony, approached in one year or maybe a couple 6 years, 300,000, but never got up to 400,000. And you 7 corrected them and said you didn't have 400,000. 8 MR. DOWNS: That is correct. I've made that 9 statement to staff many times. 10 BOARD MEMBER ROBERTS: But now, you're saying 11 that this rule will cost $2 million a year. 12 MR. DOWNS: Absolutely correct. 13 BOARD MEMBER ROBERTS: So the staff, in analyzing 14 your operation, forgot about whether $400,000 was a proper 15 assessment based on something you shared with them. 16 MR. DOWNS: Yes. 17 BOARD MEMBER ROBERTS: Where they're saying it 18 doesn't even approach 300,000 a year, and you're saying 19 no, it's two million. I mean, we're off by multiples of 20 ten in terms of what the -- what you're saying this is 21 going to do to you as opposed to what staff is -- 22 MR. DOWNS: That is correct. 23 BOARD MEMBER ROBERTS: Okay. Is there something 24 glaring now? Forget about the 400,000. You've corrected 25 them on that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 MR. DOWNS: Yes. 2 BOARD MEMBER ROBERTS: But why do you think 3 they've outlined your retrofits and other things, why do 4 we have such a discrepancy here? 5 MR. DOWNS: Well, I don't have it with me. 6 BOARD MEMBER ROBERTS: Can you put the slide back 7 up that you showed the program of how we would get to a 8 solution for Mr. Downs? 9 CHAIRPERSON NICHOLS: I think what we're dealing 10 with here could be also sort of a worse case scenario in 11 terms of the business that Mr. Downs has and maybe the 12 staff can describe it a little bit why he think he doesn't 13 represent either the average or even the most common 14 scenario of most fleet operators, if we're really going 15 the take the time to try to delve into this inconsistency. 16 MR. DOWNS: We have a typical fleet. Our fleet 17 tier average is typical of the state of California. We 18 have 50 percent Tier 0. We have 33 percent Tier 1. We 19 have 18 percent Tier 2. We have very few Tier 3s. We are 20 typical. We're no different than about, I'll say, 80 21 percent of the people in this crowd. 22 CHAIRPERSON NICHOLS: But you don't agree that 23 you have a choice, whereas, the choice -- I mean, you're 24 choosing not to go with the low cost alternative. 25 MR. DOWNS: Well -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 CHAIRPERSON NICHOLS: That's your choice. 2 MR. DOWNS: I have asked staff, these people 3 right here, Elizabeth Yura, Tony Brasil, to do the most 4 cost effective spreadsheet on us complying that they could 5 possibly dream up, even with rosy scenario assumptions. I 6 have those cost spreadsheets with me. Tony Brasil gave us 7 one on our 13th meeting of $2.1 million the first year to 8 comply. Over 700,000 of it was for V-dex. The other part 9 was to purchase 15 five-year-old machines and sell off 15 10 Tier 0 machines. We can't do that. Tony has never 11 purchased a machine in his life. I've purchased hundreds 12 and hundreds of machines. Like from Ritchie Brothers, the 13 fellow that was here testifying earlier. I know what I'm 14 doing when I buy a machine. 15 But what Tony is recommending us to do cannot be 16 done. It's just, if you not -- if you're not in this 17 business, you don't really know how it operate. So I'm 18 just giving you some facts. And everyone I've met with, 19 if you can show where I've been dishonest by one word, I'd 20 like to you point it out to me right now. 21 BOARD MEMBER ROBERTS: Mr. Downs, nobody's -- 22 nobody's saying you're being dishonest. What we're trying 23 to do is get to the -- and understand the differences here 24 in the conclusions. This chart was put up earlier, and I 25 heard you take exception to the 400,000. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 MR. DOWNS: Yes. 2 BOARD MEMBER ROBERTS: But this -- the successive 3 chart here, the slide, made the claim that this would not 4 be over $300,000 in any given year. And you're saying 5 that that's -- that's not the case. 6 MR. DOWNS: I can produce right now, if you'd 7 like to see it, Tony Brasil's -- 8 BOARD MEMBER ROBERTS: No. 9 MR. DOWNS: -- spreadsheet. 10 BOARD MEMBER ROBERTS: I don't want to see Tony 11 Brasil's -- 12 MR. DOWNS: Okay. 13 BOARD MEMBER ROBERTS: -- spreadsheets. I 14 just -- 15 MR. DOWNS: But that's the most cost-effective 16 way for us to comply because he said so. 17 BOARD MEMBER ROBERTS: Well, he's saying that 18 this is, this is a model of that. Does that -- -- 19 MR. DOWNS: That's a theory that if -- I'll tell 20 you what, this is my offer. I will put Tony Brasil on my 21 payroll. I will double -- I will double his salary if he 22 can show us how to comply with that chart up there and not 23 break us. 24 (Applause.) 25 MR. DOWNS: Or three times. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 CHAIRPERSON NICHOLS: I think -- I think this 2 is -- that could prove to be -- 3 MR. DOWNS: We've got nothing to lose. 4 CHAIRPERSON NICHOLS: That could prove to be very 5 cost-effective. 6 MR. DOWNS: I think he's on. Tony. 7 CHAIRPERSON NICHOLS: But I think, I think we've 8 exhausted the amusement factor here and we're really not 9 making any progress in terms of actually getting to a 10 resolution on this issue. 11 And so at that point, you've used up your time. 12 I appreciate it. 13 MR. DOWNS: Okay. 14 CHAIRPERSON NICHOLS: We have heard you. 15 MR. DOWNS: Sure. 16 CHAIRPERSON NICHOLS: We will be thinking about 17 what you said as we move forward and listen to other 18 witnesses. We're giving our court reporter her ten-minute 19 break and everybody else a ten-minute break -- 20 MR. DOWNS: Okay. 21 CHAIRPERSON NICHOLS: -- and we'll be back -- 22 MR. DOWNS: Thank you very much. 23 CHAIRPERSON NICHOLS: -- at a quarter of. 24 Thank you. 25 (Thereupon, a recess was taken.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 CHAIRPERSON NICHOLS: If we can get people back 2 in their seats and the Board back to the dais here. 3 Everybody who testifies now, you know that you're between 4 yourself and the lunch break, so that's an incentive for 5 people to be -- to be crisp in their remarks. 6 Okay. We're going to be calling Sue Home, 7 followed by Harvey Beigle or Beigle, I'm not sure how you 8 pronounce your name. And Mary Pitto. Actually, we have 9 two people from RCRC. Maybe they want to go together. 10 Sue Home and Mary Pitto. 11 MS. HORNE: Sue Horne. 12 CHAIRPERSON NICHOLS: Horne, sorry. Horne. 13 MS. HORNE: Good morning, Madam Chair and members 14 of the Board. I am Sue Horne, a Supervisor in Nevada 15 County and also Chair of the Regional Council of Rural 16 Counties, which represents 30 rural counties in 17 California. 18 On behalf of the member counties, I'd like to 19 express our appreciation for your staff's efforts to 20 address our concerns. 21 We are asking you to consider three additional 22 provisions today. Please consider increasing the low use 23 vehicle exemption hours in small fleets and municipalities 24 in low population counties. RCRC had initially requested 25 the hundred hours be increased to 300 hours. 100 hours PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 represents only 12 and a half eight-hour working days out 2 of a year. To provide additional relief to small business 3 owners and low population counties, we ask the Board to 4 consider increasing the threshold to minimally 200 hours, 5 ideally to 300 hours. 6 For off-road equipment use for snow removal 7 operations, in addition to other uses, please exclude the 8 hours used during snow removal operations when determining 9 low use status of a vehicle. This provision was included 10 in the public fleet rule for the on-road diesel vehicles 11 and we request the same provision in the off-road rule. 12 Additionally, this proposed regulation already excludes 13 hours used for emergency operations when determining low 14 use status and we consider snow removal to be emergency 15 operations. 16 And finally, and the most important, please 17 extend the captive attainment area provision to counties 18 that are classified as non-attainment strictly due to 19 transport. There are six or seven counties that fall 20 under that classification. Meeting NOx reductions is a 21 considerable financial impact to our small to medium 22 fleets which will have a negative economic impact to our 23 rural counties. 24 Compliance with the NOx requirements of the 25 proposed regulations in those counties will not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 significantly reduce the emissions and will not bring 2 those counties into attainment. The request -- this 3 request is supported by certain local air districts and 4 CAPCOA. 5 Again, RCRC would like to express our gratitude 6 to you and to your staff for your efforts to understand 7 the constraints that rural counties face. 8 Thank you very much for your consideration. 9 CHAIRPERSON NICHOLS: Thank you, Supervisor 10 Horne. 11 Any questions? 12 BOARD MEMBER RIORDAN: Well, I might just ask 13 staff for a response. I'm trying to think about snow 14 removal. Snow removal, usually I think of it as a truck 15 that's got a blade on the front. Maybe they use 16 something -- you probably get a lot more snow where you 17 are than where I live, but usually it's a -- it's a truck 18 that I -- I've used all these years. 19 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 20 There are a variety of -- 21 BOARD MEMBER RIORDAN: Are there? 22 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 23 -- types of snow removal equipment, like you said, it 24 could be a truck with a blade but also a vehicle with an 25 auger-type attachment in the front that's permanently PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 attached to the vehicle. The regulation does have 2 provisions that would exempt the dedicated snow removal 3 equipment, but there are other types of equipment, like 4 loaders that might load salt into a truck or motor graders 5 that would use -- could be used for construction, but also 6 be used to facilitate snow removal. Those we have not 7 defined as dedicated snow removal equipment types. 8 BOARD MEMBER RIORDAN: Thank you. 9 CHAIRPERSON NICHOLS: Okay. 10 BOARD MEMBER CASE: Madam Chair, if I might, 11 also. Could we have a response in regards to the 12 extension for small counties for the captive attainment 13 element for those counties that actually are out of 14 attainment by virtue of being downwind from a -- an area 15 that's increasing their pollution, but in and of 16 themselves as a county they're not having that level of 17 pollution? 18 CHAIRPERSON NICHOLS: This is a SIP world, I 19 think. Ms. Terry. 20 DEPUTY EXECUTIVE OFFICER TERRY: Yes, we did look 21 carefully at this issue and as we face the eight-hour 22 ozone standard, some of these smaller downwind areas have 23 some of the highest ozone values. And as we look at the 24 challenge of meeting the ozone standard, every ton of 25 reduction counts. And we consider under our transport PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 policy that it's a shared responsibility for the locals 2 and the upwind areas to reduce emissions as such as 3 feasible. 4 BOARD MEMBER CASE: So they would have problems 5 either way with the ozone problems. So if they're not 6 reducing their own that will be even more significant in 7 terms of impacts to businesses? 8 MS. HORNE: Well, the point being that reducing 9 or having the NOx requirements on the counties that only 10 are in non-attainment because of the transport issue, by 11 eliminating the NOx requirement, you are going -- or 12 keeping the NOx requirement, you are not going to achieve 13 attainment for those counties whether or not you have this 14 requirement in place. It's a significant financial impact 15 to our rural counties and our rural public fleets and 16 private as well, by having the NOx requirement. And 17 you're trying to affect an issue that will not have the 18 effect that you want by keeping the NOx requirement on the 19 transport counties. And so we're asking you to take that 20 into consideration, and, and, and since you're not going 21 to be getting the benefit that you're -- that you're 22 seeking, but there is a substantial economic disadvantage 23 and impact to our rural counties, we're asking you to take 24 that into consideration. 25 CHAIRPERSON NICHOLS: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 MS. HORNE: Thank you. 2 CHAIRPERSON NICHOLS: That's actually an item of 3 some dispute in terms of the technical aspects of what you 4 just said, but I don't think that we need to debate it at 5 the moment. 6 We're going to hear, I think, from Ms. Pitto 7 first just because you're also with RCRC, and then we'll 8 go back to Mr. Beigle. 9 MS. PITTO: Thank you. And good morning, Madam 10 Chair, and members of the Board. I'm Mary Pitto with the 11 Regional Council of Rural Counties. And RCRC has been 12 working with your ARB staff over the last couple of years, 13 working on the regulation to make it reasonable for our 14 rural counties to be able to comply with. 15 We recognize and appreciate the provisions that 16 have been included that do help our counties, and as you 17 heard from Supervisor Horne, we still have some remaining 18 issues. I won't elaborate on those any more. I just 19 wanted to take this opportunity to express our 20 appreciation of ARB staff working with our rural counties. 21 Throughout the process, your staff has been very 22 cooperative and availed themselves to be -- to meet with 23 our county representatives, in our counties, to help 24 understand what their operations are. And I just want to 25 extent our appreciation, especially to Kim, Tony, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 Erik. 2 And also let you know that we will continue to be 3 available for -- to work with your staff and we are 4 committed to be a resource during implementation of this 5 rule for outreach in our rural counties. 6 Thank you. 7 CHAIRPERSON NICHOLS: Thank you very much. 8 Okay. Beigle, followed by Gregg Albright and 9 Joseph Lyou. 10 MR. BEIGLE: Thank you. And thank you, Board, 11 for taking our comment this morning. 12 My name is Harvey Beigle. I'm the president of 13 Reed Thomas Company in Southern California. We're a 14 mid-size general engineering contractor that, up until 15 April, was in the mid-size category. But when that 16 category got moved from 20,000 horsepower down to 5,000 17 horsepower, we're sitting at about 12,000 to 13,000 18 horsepower. 19 I want to answer a couple things that the Board 20 members brought up today. I heard the words "level 21 playing field," being the ability to pass on the costs, 22 triennial observation, triennial example, and job loss. 23 Whenever you have steps in a plan, it's not 24 level. It's not a level playing field, it's got steps in 25 it. So, for example, for my company, we compete about 70 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 percent of the time with what is now still the medium-size 2 fleet, under 5,000 horsepower. But they have Carl Moyer 3 funding available to them for several years, of which we 4 have no funding available to us. 5 And then I also heard in testimony today about a 6 new option of a SOON program for those districts that are 7 out of attainment. And I think that sounds great 8 conceptually. But if you think about, there's a program 9 for the 20,000 and up. There's a program for the 5,000 10 and under. That's leaving the companies of my size, the 11 5,000 horsepower to the 20,000 horsepower, with no options 12 for subsidized funding what over. 13 The next thing I want to talk about is when we 14 look at the cost to do our fleet. And everybody seems to 15 understand now that the main cost is in the first four or 16 five years. That's the because most of the fleets are on 17 the BACT method, the best available control technology. 18 So that requires you to retrofit 20 percent of your fleet 19 every year. So in five years you're a hundred percent 20 retrofitted. So you're paying that huge load cost in 21 those first few years. How -- and staff's costs and my 22 costs in dollars per year came out very close. The 23 difference is they have suggested that we borrow about 24 three years average profits in order to soften that load 25 the first years and then divide the costs by 21 years to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 spread the cost out to make it look or to -- because they 2 believe there's an -- there's a gain, like a cost benefit 3 approach. The problem is the cash has to come out of 4 pocket in the those first few years. 5 So speaking on that, what I want to get to here 6 is an off-ramp. When staff first put the plan out, and 7 even lately, their off-ramp was the BACT, the BACT method 8 or the best available control technology. Well, now, they 9 recognize in their staff report that that is the main 10 program that we're going to be on. There's very few 11 people that are going to be immediately on the fleet, the 12 fleet average. So if that's the main plan, that's not an 13 off-ramp or it's not a safety valve as they're calling it 14 in their plan. 15 So what we need is in that time period, if we 16 cannot spend the kind of money that it takes to do it, I 17 suggest that in a year if we're required to turn over 18 eight percent, in lieu of that, without repowering or 19 without replacing, but if you eliminate 150 percent of 20 that from your fleet. So if you eliminate that much 21 horsepower from your fleet, you've taken that pollution 22 out of the air, that those tractors are no longer legal in 23 California, so the state and the area has gained from that 24 loss of pollution. That year, those people be exempt from 25 the 20 percent exhaust retrofit. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 Thank you. 2 CHAIRPERSON NICHOLS: Thank you. 3 Mr. Albright. Welcome. 4 MR. ALBRIGHT: Good morning. Thank you, 5 Chairperson Nichols and the Board. I appreciate the 6 opportunity to come before you. 7 Gregg Albright, California Department of 8 Transportation. Also would like to note that Director 9 Will Kempton would have liked to have been here today, but 10 he's testifying before the California Transportation 11 Commission down in Glendale. I also want to be -- point 12 out that we have been very impressed with the Board and 13 the staff's investment of time and energy in this whole 14 discussion. And I also want to thank the construction 15 industry. They have put an enormous amount of time and 16 effort into providing information and having a very strong 17 dialogue. 18 On the 25th, we had specifically asked that there 19 be more time to analyze this so that there's better 20 informed decision-making. We asked for collaborative 21 discussions and an exchange, particularly on cost issues, 22 between staff, and all that has happened. And I want to 23 let you know that we really appreciate that. You have 24 gone the extra mile to be informed, and we have seen Board 25 members and staff really put their hearts and soul into PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 this effort and have done an enormous amount of research 2 to be better informed. 3 Caltrans understands necessity of in-use off-road 4 diesel vehicle regulation, and we are committed to work 5 with the Board to accomplish this in a productive and 6 cost-effective manner. We appreciate also that the Board 7 recognizes that this impacts the construction industry. 8 We expect project costs to increase. We expect the fact 9 that a portion of this business practice will have to be 10 moved on to private project costs. We also understand 11 that there will be some small business contractors that 12 are impacted by this and that will reduce the capacity of 13 the industry. And that could also turn around and have 14 impacts on the project delivery of our transportation 15 projects. 16 We can't really fully assess the impacts at this 17 time of these on the program at-large, but we know that 18 you have taken that into consideration and that's all 19 we've asked. 20 We are particularly pleased that you've 21 considered taking the horsepower threshold for small 22 fleets and moving it from 15 to 25 horsepower. This will 23 have very complimentary impact on the small contractors 24 and we feel that this reduces some of our concerns that we 25 had concerning the small business contractors and their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 opportunities towards economic -- their economic 2 opportunities. 3 We also are very supportive of some of the 4 discussions that occurred between the South Coast and San 5 Joaquin Air Quality Districts and the idea of incentives 6 and early compliance. We think that's very positive and 7 we see that as a -- we hope that goes further and the 8 opportunities are there to move compliance quicker. 9 And also in your staff report on, I think you 10 label it, "Key Outstanding Issues," you noted that there 11 continues to be a debate over availability, cost, 12 durability of the technology necessary. And we're very 13 supportive and we have gone on record of the idea of 14 having these check-in periods. And I think you've 15 suggested '09, '13, and '17 as points to check-in and see 16 how things are doing. We want to just say that is a good 17 business practice and we support that. We think that's a 18 very wise course of action. 19 We stand with Governor Schwarzenegger in moving 20 towards improving the quality of life here in California. 21 And so the department, in partnership with ARB, as well as 22 regional and local transportation agencies, we're going to 23 pursue our goals towards air quality by decreasing 24 congestion, reducing the use of single occupant vehicle 25 use and increasing mobility choices. We're going to try PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 to do our part to bring about change, significant change 2 within California. 3 So with that, I thank you for this opportunity to 4 speak. 5 CHAIRPERSON NICHOLS: We appreciate your support. 6 Thank you for coming. 7 Dr. Lyou, followed by Seyed Sadredin and Sean 8 Edgar. 9 DR. LYOU: Good afternoon, Madam Chair, members 10 of the Board. Thank you. My name is Dr. Joseph Lyou. I 11 serve on the Governing Board of the South Coast Air 12 Quality Management District. I am also the Co-Chair of 13 the Cal/EPA Advisory Committee on Environmental Justice, 14 and I am the Executive Director of the California 15 Environmental Rights Alliance, a nonprofit organization 16 dedicated to achieving environmental justice and improving 17 community health in California. However, today, I'm here 18 testifying solely on behalf of South Coast AQMD. 19 The decision you make today will determine 20 whether or not the South Coast can achieve the deadline 21 for federal PM2.5 standards and your decision will also 22 determine if the South Coast has any chance at all at 23 meeting the more stringent 24-hour PM2.5 standard in 2019, 24 the maximum allowable date. 25 We truly appreciate the hard work of your staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 in developing this complex and far-reaching regulation to 2 address in-use off-road diesel emissions. We support an 3 approach to establish a stringent baseline regulation 4 applicable statewide and a limited scope, a limited scope 5 specific enhancement included by the staff proposal as 6 Attachment 1 to meet the local attainment needs in the 7 regions worst air quality such as South Coast. And 8 obviously we'd be open to including other air districts as 9 well. I think we would propose some minor tweaking to the 10 language on cost effectiveness, but staff from the South 11 Coast will testify to that effect later today. 12 The proposed enhancements have been described by 13 your staff. They're intended to ensure the certainty and 14 timing of the emissions reductions that are critical to 15 the well being of our residents. It is important to 16 recognize that the off-road equipment and the on-road 17 trucks represent the top two sources of NOx in the South 18 Coast inventory and they contribute to the non-attainment 19 of the health standards, both for ozone and particulate 20 matter. 21 In Southern California, our PM2.5 levels are some 22 of the worst in the country, resulting in thousands of 23 premature deaths annually by your own calculations. In 24 addition to this public health crisis, there is a horrible 25 economic toll as well as in days lost, asthma attacks, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 hospital admissions due to lung and heart damage. 2 Obviously, timely cleanup of the legacy diesel fleets 3 including off-road engines is a key component to the 4 remedy. Your regulation will literally shape the 5 livability of our communities for years to come. 6 We recognize that a local enhancement, the opt-in 7 option, will increase costs for affected fleets. 8 Therefore, last week, our Board's administrative 9 committee, which includes the chairman of our Board and 10 the chair of each of the standing committees at the 11 agency, unanimously agreed to recommend that the Moyer 12 program funding and other public funding totaling 13 $120 million during a four-year period be set aside to 14 assist fleets affected by the proposed enhancements to the 15 statewide regulation. But only if the proposed 16 enhancements become regulation and they help close the gap 17 in our region between the air quality improvements we've 18 identified and those that we have to have in order to 19 comply with the State Implementation Plan. 20 Thank you, again, for considering our proposed 21 enhancement and for adopting a rule that will provide 22 great, tremendous -- great and tremendous public health 23 benefits and greater certainty in our ability to comply 24 with federal PM2.5 standards. 25 CHAIRPERSON NICHOLS: Thank you very much. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 thank you for coming all this way and for your service on 2 the AQMD Board. That's great. 3 Next, Mr. Sadredin. 4 MR. SADREDIN: Good morning, Madam Chair, 5 Members. Seyed Sadredin, I'm the Air Pollution Control 6 Officer and Executive Director for the San Joaquin Valley 7 Air Pollution Control District. 8 First of all, I want to express our gratitude and 9 appreciation to you, Madam Chair, for your recent comments 10 of concern and support for the Valley. Also, the similar 11 comments from the Governor and the rest of the Board 12 members. It is encouraging that we can count on your 13 support to bring the Valley into attainment, given our 14 unique and very difficult challenges and the fact that 15 your Board, the state of California, has control over 80 16 percent of the pollution that we need to reduce. I also 17 want to assure you that all of us in the Valley, and by 18 that I mean the district staff, the district governing 19 Board, all valley residents and businesses, share your 20 view that 2024 for attainment of the eight-hour ozone 21 standard is not acceptable. And we need to do everything 22 we can to strengthen the SIP and get there sooner. 23 Today, I believe, is the first opportunity for 24 your Board, a major opportunity for your Board to back 25 those sentiments with real action. So with all due PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 respect, we have three recommendations for your Board. 2 First, to adopt the enhanced provision to allow 3 South Coast and San Joaquin to opt into these enhanced 4 requirements. This is entirely consistent with the dual 5 path fast track approach that our Board has adopted and we 6 think we can participate, both regulatory and financially 7 in that program. 8 Two, we ask that your Board also allow at least 9 Bay Area Air Quality Management District to participate in 10 this program. I have talked to my colleagues in Bay Area. 11 They have no objection to that. And given the fact that 12 the district is in extreme non-attainment. Every ounce of 13 emission reductions count. And given the transport from 14 the Bay Area, that is something we need to deal with and 15 have that tool in our arsenal. 16 And finally and most importantly, I ask that your 17 Board today with your decision to approve this rule with 18 the enhancements also direct your staff to commit 19 $5 million per year to match our contribution to this 20 enhanced program. We believe in the Valley we need about 21 $10 million per year for a total of $40 million compared 22 to the South Coast's need of $120 million. And at this 23 point, we have $5 million per year from local funds to 24 contribute into that program. Anything more than that 25 would mean that we have to shift and divert expenditures PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 from other sources that reduce emissions into this program 2 and, therefore, we will not see the net benefit in air 3 quality. 4 Therefore, we ask that you direct your staff to 5 come up with that matching fund out of the statewide Moyer 6 program over which your Board has total discretion. You 7 have about $14 million a year available to you and we ask 8 that, dedicate $5 million of that to help projects like 9 this in the Valley. And they will have multi-district 10 benefit because the proposal only requires that these 11 operations be in the Valley and to participate in this 12 district only 50 percent of the time, and we will get 13 multi-district benefits. Therefore, we hope for your 14 support on this matter. 15 Thank you very much. 16 CHAIRPERSON NICHOLS: Thank you for your 17 comments. 18 Questions? Yes. 19 BOARD MEMBER D'ADAMO: Well, just want to thank 20 you for your support of this SOON proposal. And I totally 21 agree that this is a good first step in the right 22 direction of beating the SIP. 23 As far as the commitment, I don't think that it's 24 necessarily appropriate through this resolution, it's not 25 before us on Carl Moyer, but I would pledge to do anything PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 I can to work with staff and CAPCOA and the other 2 stakeholders to see what we can do to get you those 3 additional dollars. 4 MR. SADREDIN: Just -- I may mention that for 5 PM2.5, we -- it appears based on our preliminary analysis 6 that we may be about three to four tons a day short in 7 terms of meeting the deadline by 2015. So as you consider 8 that deliberation, we hope that we come up with an 9 objective based methodology to distribute those funds as 10 opposed to the pork barrel project where you just divvy up 11 the money statewide. 12 So thank you very much. 13 CHAIRPERSON NICHOLS: That's good advice. Thank 14 you. 15 All right. We'll now hear from Mr. Edgar, 16 followed by Katie Lefkowitz, and Donna Fox. 17 MR. EDGAR: Madam Chair and members, good 18 afternoon. Sean Edgar, Executive Director of the Clean 19 Fleets Coalition, collaboration of Valley family-operated 20 businesses doing businesses in all eight counties of the 21 San Joaquin Valley Air District. I'm here to speak in 22 support Mr. Sadredin's comments just delivered to you 23 relative to adopting the SOON program. And we appreciate 24 Ms. D'Adamo's commitment to try to achieve as much 25 leveraging of funding as could be possible, as described PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 under that program. 2 The SOON proposal for the San Joaquin Valley and 3 also beyond represents -- merits your support and 4 represents a great opportunity to, for early implementers 5 of this regulation. It's regrettable that the expanded 6 SOON relative to other air districts -- apparently the 7 agreement between staff and the other air districts may 8 not have fully jelled. 9 But specific to San Joaquin Valley, we think it's 10 important because the businesses, family-operated 11 businesses that are part of our coalition in San Joaquin 12 Valley, come with the unique experience of implementing 13 the trash truck rule which over the past seven years we've 14 noted there are few successes and failures, which I'd like 15 to briefly address so we can draw upon and to create a 16 more achievable rule here. 17 First off, we're at the midpoint of this rule. 18 This was directed at on-road vehicles, solid waste 19 collection vehicles, numbering approximately 12,000 in the 20 state of California. Look back provisions such as you're 21 looking toward adopting in this rule are very helpful in 22 order to gauge progress over time. I'd offer that the 23 look back provisions in our solid waste rule has been 24 helpful, albeit, it's a little bit delayed. The most 25 current -- we're only able to get kind of information from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 what occurred two years ago, but if the indicators from 2 what occurred during 2004 are any helpful and your staff 3 consolidates that information and issues it on a regular 4 basis, but we're kind of two years behind. 5 But the pass-through provision and industry here 6 will have some concern as do our solid waste collectors 7 because since we've been implementing the rule since 2003, 8 we find that the pass-through has been hit and miss. In 9 the case of your staff keeps, a survey in 2004, 24 10 collection companies throughout the state were fortunate 11 to be able to pass the cost through. And I'll single out 12 Supervisor Case. In Fresno County, you had the courage in 13 your capacity as a supervisor to allow collectors in that 14 area for this on-road vehicle project to pass through 15 increased costs. However, there were seven out of the 16 subsection or somewhere around 30 percent of the folks who 17 requested were denied and that's a little bit difficult 18 because our expectation and your staff's expectation is 19 that, in all cases, industry will figure out how to pass 20 it through. So just as an indicator of the on-road 21 project, we've had some successes and some lack of 22 success. 23 Moving on, like Mr. Cackette observed, the Moyer 24 rules specific to large fleets will dry up as a result of 25 your action. And so that's why SOON will be very critical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 to try to try and allow for folks who want to implement 2 early because our experience was Moyer funds dry up. 3 Moyer was not enough and it was not accessible to -- once 4 the rule got done. 5 Just wrapping up, you're generally robust 6 suppliers for the technology; however, there was a 7 technology off-ramp that the executive officer implemented 8 in the context of the trash truck rule that was 9 successfully implemented, so CARB stuck by its word on 10 giving industry a break when a break was needed. However, 11 it took a month of Sundays for our collection companies to 12 figure out. 13 So just in wrap up, back to Mr. Sadredin, 14 leveraging early dollars as a result of the SOON program, 15 I think, will be very helpful. We appreciate the Board's 16 commitment to make that happen because the Valley families 17 and businesses that are part of our coalition feel that 18 this is an important program, but it needs to be made 19 achievable. And the number one achievement is not so much 20 the technology filling in. I think that will happen over 21 time with an off-ramp, but the funding is the key element. 22 And so appreciate your attention this morning. Available 23 to answer any questions you may have. 24 CHAIRPERSON NICHOLS: Thank you. You just made 25 it in your three minutes, by a second or two. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 All right. Ms. Lefkowitz, and then Ms. Fox, and 2 Andy Katz. 3 MS. LEFKOWITZ: Good afternoon. My name is Kate 4 Lefkowitz, and I'm the California Outreach organizer with 5 the Union of Concerned Scientists. 6 I'm here today to urge the California Air 7 Resources Board to adopt today's off-road regulation in 8 the state of California. Today's proposed rule has been 9 developed over many years and it is essential that CARB 10 makes a commitment to adopt this rule today. I strongly 11 support the off-road rule regulation, as it is vital to 12 California's air quality environment and public health. 13 I spent 18 years living in the Los Angeles area. 14 A part of the state where extreme air pollution not only 15 impacts daily life, but the health of those who are most 16 vulnerable such as young children and the elderly. My 17 mother spent significant time working as a registered 18 nurse at Martin Luther King, Junior, Harbor Hospital in 19 South Central Los Angeles. As an RN in the pediatrics 20 unit, my mother constantly cared for children who are 21 suffering from air pollution-related illnesses like asthma 22 and other respiratory problems. Area pollution has real 23 impacts on real people. They are not just statistics. 24 The rule before you today will save lives and 25 prevent lung and heart illnesses throughout the state of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 California. This off-road regulation will prevent 1600 2 hospital admissions due to cardiovascular causes and the 3 savings in avoided deaths and health care costs will add 4 up to 18 to $25 billion. Construction workers, children, 5 and adults who live and work near construction sites will 6 benefit from a reduction in exposure to harmful levels of 7 toxic diesel exhaust creating a healthier work environment 8 and cleaner air. 9 I would like to specifically comment on some of 10 the options that are being considered by the Board today. 11 Implementing the proposed off-road regulation is necessary 12 to help attain clean air throughout the state. But some 13 air districts are in need of even further reductions. The 14 proposal to allow air districts to opt in to a program to 15 achieve greater emission reductions coupled with incentive 16 funding is a good idea. We urge the Board to allow this 17 option and to be open to all area districts to get greater 18 emission reduction from off-road equipment. 19 The proposal before you has been developed over 20 three years and incorporates numerous flexibilities and 21 exemptions to ensure companies have a feasible pathway to 22 compliance. Annual compliance targets for direct PM are 23 critical to reducing exposure to those living and working 24 near diesel off-road equipment. The staff's proposal with 25 annual enforceable targets has been discussed throughout PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 the rulemaking process and ensures that a constant steady 2 level of investment in clean-up technology occurs. 3 We urge you not to put communities at greater 4 risk by removing annual compliance targets. Additional 5 flexibility should not come at the expense of public 6 health. 7 Thank you for the opportunity to comment and 8 considering this essential regulation for the state of 9 California. We urge your support on this regulation. 10 CHAIRPERSON NICHOLS: Thank you. 11 Ms. Fox, and then Mr. Katz. 12 MS. FOX: Good afternoon, Madam Chair and Board 13 members. My name's Donna Fox. I'm the Regulatory Policy 14 Specialist for the California Nurses Association. And I'd 15 like to focuses on health. We haven't heard enough about 16 health yet this morning. As we have heard mentioned in 17 different ways, though, health -- emissions are dangerous 18 and can cause serious health impacts. Predominantly in 19 the respiratory system. Unfortunately -- fortunately, I 20 am a nurse. Unfortunately, I have taken care of many 21 individuals who are children, adults, and elderly who 22 suffer both respiratory problems and cardiovascular 23 problems. 24 We need to focus on preventing disease. There 25 was a discussion earlier about the 4,000 fewer premature PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 deaths over the course of the rule, which I'm here to 2 support. That number is a large number. What is at least 3 as important is the amount of disease we can prevent. The 4 amount of illness we can prevent. The amount of 5 disability that we can prevent. All of these are 6 achievable. 7 Many communities are especially hard hit by poor 8 air quality. Particularly urban areas where the 9 population is highly concentrated. They're impacted by 10 construction when there may be a small lot with a large 11 building, so this small, short-term exposure has a major 12 potential long-term health impact on thousands of 13 individuals who live within a one mile radius. Many low 14 income populations and other vulnerable populations live 15 right near highways. So in addition to the highway 16 exposure, they also have the exposure from the 17 construction that is occurring, underway across the state. 18 There are 110,000 fewer cases of asthma-related 19 deaths that we could hope to experience through the 20 benefit of this rule. Also 2,440 fewer hospital 21 admissions and, importantly, also, fewer lost work days. 22 With the emphasis on cost and cost savings, it's 23 important to look at the relationship between individual 24 and public health and population health and the economy. 25 When children or adults or elderly are ill or disabled, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 they have the economic lost impact in the workforce, but 2 many people here would relate to the fact that you are all 3 caring for other generations. You're caring for maybe 4 younger generations or older generations. And so the 5 extent to which any one of the generations is impacted by 6 poor air quality -- and we've talked about even very young 7 children have significant disease which will affect them 8 across their life span. 9 So I'd like to thank the person who presented 10 this study earlier today, and I'm pleased that it's being 11 published in the Journal circulation. And it's of 12 particular use, I think, because it's talks about 13 short-term impact. I think sometimes it's hard to attend 14 to prevention because it's looked at as the consequences 15 will be down the road. Well, I think it was well 16 illustrated that the consequence and health consequence 17 and economic consequence due to illness occurs in the 18 short term and the long term. 19 Thank you for your attention. Do you have any 20 questions? 21 CHAIRPERSON NICHOLS: Thanks, Ms. Fox. 22 MR. KATZ: Good afternoon, Chairman Nichols and 23 Board members. My name is Andy Katz. I'm the Director of 24 Air Quality Advocacy for Breathe California, a lung health 25 advocacy organization. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 Californians need this regulation for protecting 2 public health and our environment. The 4,000 premature 3 deaths that this regulation will prevent doesn't just talk 4 about, doesn't just mean that that's the only health 5 benefit from this regulation. It doesn't include that 6 tens of thousands of people who experience asthma attacks 7 and hospitalizations every year. Hospitalizations are the 8 number one cause of school absences and they're also -- 9 it's a significant cost on our health care system. I'm 10 not sure if this was the number that your staff used in 11 the study, but $15,000 is the cost of an asthma 12 hospitalization. And if we're talking about the overall 13 burden on the public health care system and health care in 14 general, that's a very significant cost. And so in 15 addition to preventing lung disease, preventing 16 cardiovascular disease, this is a very important rule for 17 Californians. And this is a very far reaching rule. 18 Seventy-five percent of diesel emissions reduced. And 19 that's because this is really one of the last sectors to 20 get regulated. And many other sectors that pollute the 21 air have already had the -- have already had regulations 22 put on them by government, and it's time for the 23 construction industry to also come forward and do their 24 part. 25 The staff proposal balances the economy, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 environment, and public health. The economic models that 2 the staff have shown you are based on actual budgets. 3 They show you that it's a very, very tiny portion of the 4 overall construction revenue, .3 percent of the overall 5 revenue spent in California is what this proposal will 6 cost them. And it explains the discrepancy. Why are you 7 hearing different numbers? Why did you hear different 8 numbers in San Diego? 9 You're hearing different numbers because the 10 worst case scenario is being put out to you, but the rule 11 gives you flexibility. So you really can do that game 12 with numbers. The staff have shown you where that 13 discrepancy comes from, that the flexibility is built into 14 the rule. And if you look at the model with all of the 15 flexibility and all of the options that are in the rule 16 for using emissions control technology, avoiding complete 17 changeover at, all at once, and also using financing 18 techniques. Businesses are able to borrow. But somebody 19 who's impacted by lung cancer or asthma, they can't take 20 out a loan. This is health. This is public health. And 21 that's why the staff have been able to show you reasonable 22 numbers and reasonable regulations. 23 The South Coast and other air districts need this 24 rule also to meet their state deadlines and federal air 25 quality standards. And that's why this rule is also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 needed. 2 Reducing reporting hurts public health, and 3 there's no justification in terms of costs. 4 I'll wrap up just saying that 12 percent 5 emissions reduction is not justified and will end up 6 causing increased health effects. And I encourage the 7 Board to keep annual reporting. 8 Thank you. 9 CHAIRPERSON NICHOLS: Okay. Thank you. I need 10 to make people aware of the fact that we have now heard 11 from 18 witnesses out of a list of 61. So we're not doing 12 as well as I had hoped in terms of making it through the 13 agenda. We are going to take a lunch break. And I 14 suspect there will be people coming in who will want to be 15 added to the list. But if you find that someone else has 16 already said what you were planning to say or you think 17 you could shorten your time from three minutes to two and 18 a half or even two, that will, I think, contribute to the 19 overall quality of the decision-making here. 20 So I ask you to think about that as you go out to 21 lunch. And we'll see you all back here at 1:30. 22 Thank you. 23 (Thereupon, a lunch recess was taken.) 24 CHAIRPERSON NICHOLS: Okay. We're ready to 25 resume, if I can get folks to their seats. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 Well, we went out to lunch and the list of 2 speakers expanded. Really delighted that so many people 3 are interested in coming to speak here. And I mean that 4 seriously. But we are going to have an issue about 5 getting people enough time to speak. So one of my 6 colleagues had a really interesting idea, I thought, which 7 is kind of an incentive program. It's like a market-based 8 program. We're not -- we're not going to give you 9 anything, except we're going to give priority to people 10 who are willing to limit their remarks to two minutes or 11 less. So anybody who would like to go to the head of the 12 line and is willing to limit their comments to only two 13 minutes or less, you will automatically get a free pass to 14 come up to the front ahead of everybody else who's 15 waiting. And I'll repeat that as time goes on. 16 Do I have any takers? One already. Very good, 17 sir. Come on forward. 18 MR. MATICH: Well, I think I'm next. 19 CHAIRPERSON NICHOLS: Come on down. 20 MR. MATICH: I'll keep it to two minutes. Give 21 me a 30 minutes heads up that my time's running out. 22 Anyhow, if I might, Madam Chair, your fellow 23 Board members here on CARB staff, let me tell you I thank 24 you for the opportunity to speak to you today. I think I 25 can -- let me introduce myself, if I may. My name is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 Steven Matich, and I head up a 90-year-old family 2 construction business based here in California for 90 plus 3 years. And I think I can speak on half of my industry, 4 the construction industry. I'd like to think I can speak 5 on behalf of all business in California. I think we've 6 paid our dues, those dues being called taxes in this great 7 state. 8 With that, let me tell you, Madam Chair, with my 9 involvement and the fact that I have been asked to come 10 and speak today by a number of parties, our current 11 administration, this Board staff, our industry, I feel 12 obligated, particularly when you look at these regulations 13 that are in front of you today. And let me say a couple 14 of things, is that, number one, after I've looked at the 15 regulations and in the last 90 days that I've jumped into 16 it -- and I apologize for being derelict in duty for 17 regulations that have been drafted for three years. 18 'Cause after looking at them, one comment I have to say 19 are to credit staff for what they've done, credit staff 20 for the time they put into it. 21 Some of the language, the industry, I think, can 22 buy. Some of it, I have some heartburn, particularly, 23 real quick, when you talk cash flows, when you talk profit 24 margins. I'm sorry. In my 27 years of business, I don't 25 have a crystal ball to tell me out two, three, five years PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 and on what my margins are going to be, what my cash 2 flow's gonna be. Because in the market I am in, yes, 3 construction, but in business in general, it's cyclical. 4 And times change, as we see with the housing market. 5 However, that aside, what I'm asking is two 6 things of the Board. When I was here at the workshop, 7 here last Monday, I did plead that -- maybe a 8 request/recommendation to delay the vote. But if it is 9 the consensus of this Board, if I could ask two things. 10 One number, number one most important, 11 communication. Communication with our people, 12 particularly the voters in this state with, not just 13 construction industry but all business, there's a lack of 14 communication on what's happening today. And I admit it 15 was only until the last 90 days that I became aware and 16 alarmed of what was happening. That's my fault. But with 17 the entities that I talked to and other state agencies are 18 in the dark as well on what is happening today with this 19 Board. And I'm talking our Transportation Commission, 20 even the License Board and other entities are asking me, 21 calling me up, what do you take of it? What is your 22 opinion? Would you be willing to express that to the 23 Board? And I wondering, well, we have a lack and a 24 breakdown in communication on what's going on here in this 25 great state. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 The other thing I plead and ask is cooperation. 2 You know, we've heard in our health care industry that I'm 3 involved with on the operating boards, on our foundation 4 boards. I contribute to a number of our health care 5 industries. Our hospitals as well. I commend them on the 6 work they do. I do support them, when asked for their 7 understanding, because obviously it's important to all of 8 us, the health care of this great state. It is. Myself, 9 my children and grandchildren, but what I'm asking for is 10 understanding what the industry is trying to tell you 11 today and I think you all understand it. I finally did. 12 It's cooperation. Cooperation with staff on a -- say, 13 that we do go ahead and pass these regulations today. 14 Whatever the consensus of the Board to be, I respect, and 15 I think industry will. 16 But cooperation, and I'll call it, what we have 17 in our industry, a design build. That as we go on with 18 our businesses, large and small, that as we are allowed to 19 help you design these regulations, draft, revise these 20 regulations, as we go in, you know, under the years to 21 come to try to clean up the air here in this state, 22 because that is what has worked with my company and 23 others, particularly in some of our great regional 24 authorities like South Coast, what I've been working with 25 for 27 plus years, since their inception, on equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 It's a heck of a lot dirtier than our off-road equipment. 2 But because of the cooperation with South Coast, 3 ourselves, and factory, we made it work. 4 I'll leave it right there. Thank you very much. 5 CHAIRPERSON NICHOLS: Thank you. That was well 6 done. Thank you, Mr. Matich. And I -- those are good 7 sentiments, believe me. 8 Okay. Our next presentation is actually a group 9 of summer interns, and I think they're all going to come 10 forward together. And they've told me that there's nine 11 of them, I believe it is. And they're going to take 15 12 minutes as a group. They are from the Rose Foundation for 13 Communities and the Environment. So I'll give them a 14 minute here to get themselves setup down in front here. 15 All right, ladies. 16 MS. HAMILTON: Good afternoon, Chairman Nichols 17 and members of the Board. Thank you for the opportunity 18 to speak this afternoon. My name is Brittney Hamilton and 19 I'm a junior at McClymonds Excel High School in West 20 Oakland, California. I am working with the Rose 21 foundation for Communities and the Environment. I am 22 joined by other students who are also part of the program 23 and also attend high schools throughout Oakland. 24 We are here today to urge you to pass the 25 off-road vehicle rule and to emphasize the importance of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 not postponing the implementation of the emissions 2 regulation. We understand the importance of the 3 construction industry and its concerns about how much it 4 will cost to fix their fleets. But there are other things 5 such as our personal health, the health of all 6 Californians, and the health of our environment that must 7 be prioritized. Today, my peers will explain why we are 8 here and why we cannot wait for this rule to be passed. 9 After a brief review of the negative impact of 10 construction equipments, diesel emissions on citizens 11 statewide, we will tell you about how we experience the 12 impacts of particulate matter pollution in our 13 neighborhoods. We will also tell you a little bit about 14 other sources of air pollution in our neighborhoods to 15 give you more context as you consider cumulative impacts 16 of diesel pollution from construction. 17 Once again, thank you for your time. 18 CHAIRPERSON NICHOLS: Okay. 19 MS. LE: Good morning, Chairman Nichols and 20 members of the Board. Thank you again for the opportunity 21 to be here and speak. My name is Jackie. I'm a junior at 22 Excel McClymonds High School in West Oakland. We have 23 been learning about the health impacts of the particulate 24 matter that goes into the air when diesel fuel is burned 25 we have without the proper filters and technology. We are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 all here because off-road vehicles like construction 2 equipment put a lot of diesel particulate matter into the 3 air that we breathe. According to the Union of Concerned 4 Scientists, construction equipment is the second largest 5 source of diesel pollution in California. Accounting for 6 20 percent of particulate matter and 16 percent of 7 nitrogen oxides. For example, the USC found that 8 operating the average excavator in California for one hour 9 produces the particulate emissions equivalent to driving a 10 new big rig more than 1100 hundred miles. 11 My friends is going to explain what those 12 particulates can do to our health. Again, we hope you 13 adopt the strongest rule possible today. 14 Thank you. 15 MS. KAHN: Okay. Good morning, Chairman Nichols 16 and members of the Board. My name is Irfana, and I'm a 17 junior at Oakland Tech High School. As Jackie mentioned, 18 one of the main problems with diesel is the particulate 19 matter that is created when it's burned. We know the 20 health impact of the particulate matter has been brought 21 to your attention before. We think it is important enough 22 to mention again. When the larger particles are released 23 into the air, they can be inhaled and settle in our noses, 24 throats, and lungs. The first particles travel deep into 25 our lungs. Those particles cause inflammation and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 scarring of the air passageways and lung tissue causing 2 the amount of oxygen to travel to the rest of the body to 3 decrease. This causes coughing, shortness of breath and 4 can lead to severe or even fatal asthma attacks. 5 Particulate matter also contributes to heart 6 disease, cancer, and other serious respiratory symptoms. 7 It's not just individuals and families with asthma who pay 8 for dirty diesel with their poor health. The state of 9 California is losing money on top of losing clean air and 10 healthy people. 11 According to the Union of Concerned Scientists, 12 construction equipment emissions cause about 30,000 asthma 13 attacks, 180,000 lost work days, 331,040 school absences, 14 and 1,100 premature deaths each year. The cost of the 15 significant health impact is approximately $9 billion 16 annually. 17 Now my friend is going to explain why we think 18 the issue of construction equipment is particularly 19 important for our communities. 20 Thank you for your time. 21 MS. MCGEE: Good afternoon, Chairman Nichols and 22 members of the Board. My name is Christina McGee from 23 Oakland High School. I'm here today to attempt to get 24 this off-road vehicle bill passed. We cannot wait for 25 construction equipment emissions to be regulated because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 there are many projects that are happening now and lots 2 more proposed for the near future. So it wouldn't make 3 sense to wait until these construction projects are 4 committed. 5 Today, I would like to describe a few of the many 6 construction projects taking place in our community. And 7 I believe we have a PowerPoint presentation? 8 CHAIRPERSON NICHOLS: Okay. We have printed 9 copies, I believe, that have been distributed, so if you 10 want to go ahead. 11 MS. MCGEE: Oh, okay. But basically there were 12 eight pictures that -- yes, thank you. There are eight 13 pictures about all the construction equipment that went on 14 in our neighborhood and we went onto explore how there 15 was -- there was construction going on in parts of Oakland 16 that were already stressed and were already compact in too 17 much -- there was already too much going on and it was 18 already squeezed in, and certain construction sites were 19 near freeways and already going onto, they were already in 20 places that were already over stressed. And so we just 21 wanted to show how places, in particularly, West Oakland, 22 East Oakland, had a lot of over stressed areas that 23 were -- 24 CHAIRPERSON NICHOLS: Yes. You also mentioned 25 there's some text on the back here about problems with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 construction equipment. 2 MS. BENDICH: I just wanted to point out because 3 she can't see the pictures, that the first one that says 4 new luxury home construction in West Oakland is a bit, 5 when you look at it, you think, oh, well, that doesn't 6 look so bad. There's a big, you know, bunch of land in 7 front and some buildings in the back. But in reality this 8 is directly in front of Highway 580, 880, where all of 9 that interchange takes place, where we had problem, you 10 know, where the construction had to happen where the guy 11 with the truck. Okay. And they're also homes surrounding 12 that entire area. It's a very congested part of West 13 Oakland, so there's people living there, right up under 14 this new construction, right next to a freeway, and you 15 don't necessarily know that from looking at this. 16 CHAIRPERSON NICHOLS: Right. 17 MS. BENDICH: And the thing that she also wanted 18 to point out as well, is that there's off-road equipment 19 adjacent in West Oakland, in the second picture with 20 the -- I guess it's a bulldozer of some sort, in front a 21 new construction of townhomes. It's about a block from 22 the West Oakland BART station. And, again, it's a very 23 highly populated, very dense neighborhood. 24 And the other pictures also illustrate that, of 25 course, our all-time favorite, is the off-road equipment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 that's parked right behind the Oakland YMCA, so as people 2 are inside working out, trying to get healthy, they've got 3 off-road parked directly outside of the gym. 4 And so I will let Christina finish up with the 5 last piece here. 6 CHAIRPERSON NICHOLS: I'm sorry that the 7 technology didn't work for you. 8 MS. MCGEE: It's okay. It's fine. 9 Without pollution control technology, 10 construction equipment creates dangerous working 11 environment for construction workers, as well as harsh 12 breathing environments for surrounding communities. This 13 matters because Oakland is an industrial city that needs 14 construction to grow. For safety of the construction 15 workers and the community, construction equipment needs to 16 be retrofitted or replaced. We shouldn't have to 17 sacrifice our health in order to stay economically strong. 18 So I believe that this off-road vehicle rule should pass. 19 Now my friend Brittney is going to talk about 20 cumulative impact. 21 Thank you for your time. 22 CHAIRPERSON NICHOLS: Thank you. 23 MS. COLLINS: Good morning, Chairman Nichols and 24 members of the Board. My name is Brittney Collins, and 25 I'm a junior at McClymons Excel High School in West PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 Oakland. I'm here to tell you why I'm in favor of passing 2 the strongest rule possible, off-road vehicle -- sorry -- 3 strongest possible off-road vehicle rules. I live in West 4 Oakland -- 5 --o0o-- 6 MS. COLLINS: -- where there is already so much 7 pollution that the impact of construction equipment on top 8 of everything else is too much to take. When you consider 9 this rule, you need to think about all the other 10 particulate pollution that we face. 11 --o0o-- 12 MS. COLLINS: I actually experience the diesel 13 trucks driving through our community every day. There are 14 trucks on the freeways all around us and going in and out 15 of the Port of Oakland, which is the fourth largest port 16 in our country. Also located in West Oakland on 7th 17 Street. There is also industrial pollution in my 18 neighborhood. During the school year, my Environmental 19 Justice class collected particulate matter in pie plates 20 outside of our classroom. We collected metal debris 21 outside a wire rope factory just three blocks from our 22 school. We sent the sample to be tested and the results 23 showed that both in the particulate samples in the metal 24 debris were high in lead and chromium. With all that 25 background pollution, the pollution from the construction PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 equipment hits us even harder. 2 Please adopt the strongest rule you can today. 3 Thank you. 4 MS. PITTMAN: Good morning, Chairman Nichols and 5 members of the Board. My name is Tiana Pittman. I'm a 6 senior at LaSalle in West Oakland. 7 Since we live in Oakland, I want to tell you 8 about the facts and rates of health problems in Oakland 9 and Alameda County. According to the Alameda County 10 Health Status Report of 2006, the rates of asthma 11 hospitalizations in Alameda County are the second largest 12 among the state's 58 counties. In West Oakland where I 13 live, kids under five years old had to go to the hospital 14 for asthma twice as often as the county average. In 2005, 15 2,299 sixth graders at 14 schools in the Oakland Unified 16 School District were given an asthma questionnaire. 17 Seventeen percent of those student said that they 18 currently had asthma. For all 390 student who reported 19 that they had asthma, a quarter of them needed emergency 20 care. More than half had difficulty sleeping, more than 21 two-thirds had used inhalers, and almost half said they 22 weren't able the do certain activities. All because of 23 their asthma and all in one year. 24 At the middle school on the McClymons campus, 25 over 35 percent of the sixth graders completing the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 questionnaire said that they currently had asthma. This 2 was the highest incidence of current asthma of all 14 3 schools. These health impacts explain why we came here to 4 urge to you adopt the strongest off-road vehicle rule you 5 can. Every day that implementation is delayed means more 6 kids in my community will suffer from asthma. 7 Thank you. 8 MS. WILLINGHAM: My name is Danyale Willingham, 9 and I'm a junior at McClymons High School in West Oakland. 10 And I just wanted to give you a feeling for what those 11 asthma rates mean in West Oakland. 12 I have three cousins with asthma. One is 19. He 13 has never played a sports in his life because he was 14 afraid of having an asthma attack. He is getting better, 15 but he's still has all the asthma equipment in his room 16 because he is afraid that one day he might end up having a 17 asthma attack. 18 My other cousin is eight years old. Sometimes 19 she has a hard time catching her breath after she comes 20 outside from playing with other children. 21 My youngest cousin is four years old. She can't 22 really play with other children because she can't keep up 23 with them. They run a lot, so she's not able to run with 24 them without getting out of breath. And I don't think 25 it's fair to make my cousins wait for cleaner air. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 Thank you. 2 MS. BISHOP: Good afternoon, Chairman Nichols and 3 members of the Board. My name is Amber Bishop, and I am a 4 sophomore at Skyline High School. I live in East Oakland 5 and I have been diagnosed with asthma since the age of 6 two. The older I get, the more progressively worse my 7 asthma becomes. I am constantly short of breath 8 throughout the day and night. When I become ill, it 9 becomes harder for me to get better. 10 I am one of four people in my household that deal 11 with asthma on a daily basis. Certain smells trigger 12 attacks to come on. Being that I'm surrounded by an 13 industrialized area, the smoke from trucks or smells that 14 come from the factories cause me to use my asthma pump two 15 out of three times in the day. 16 Asthma also interferes with physical activities I 17 take part in. For example, I love to dance. But I'm 18 limited to doing certain things because I can never catch 19 my breath. 20 Please adopt a really important rule today. 21 Thank you again for taking your time. 22 MS. NATHANIEL: Good morning, Chairman Nichols 23 and members of the Board. My name is Ashley Nathaniel, 24 I'm a junior at Excel High School in West Oakland. I 25 would like to thank you for taking the time out to listen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 to me and my peers to talk about the off-road vehicle 2 rule. 3 As my fellow classmates stated, the people in our 4 neighborhoods cannot wait for you to regulate the diesel 5 emissions that cause us asthma, heart disease, and other 6 serious respiratory problems to the people in our 7 communities. The construction industry is worried about 8 the cost of cleaning up their vehicles. But we want to 9 remind everyone that we are already paying. We are 10 already paying a high price ever day by suffering with 11 poor health. All Californians are paying the $9 billion 12 burden that the construction equipment places on our 13 economy. 14 We hope you take this in consideration as you 15 make your decision. And please remember, you have our 16 lives in your hands. 17 Thank you once again for your time. 18 CHAIRPERSON NICHOLS: Thank you very much to this 19 group from West Oakland. We appreciate your taking the 20 time and putting together your presentation for us. That 21 was very effectively done. 22 We have a question, I think, though, before you 23 leave. 24 BOARD MEMBER D'ADAMO: Well, it's not a question. 25 Just really want to compliment you. You all did such a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 good job speaking. And I actually have two daughters that 2 are in high school, so I appreciate the fact that you took 3 time out and especially this wonderful PowerPoint 4 presentation, Christina. I know we didn't get the benefit 5 of seeing it as you had expected, but we've got copies 6 here, so just want to thank you very much. 7 CHAIRPERSON NICHOLS: Thank you. We all 8 appreciate it. 9 Okay. Next, John McNair, followed by Manny 10 Gonzales, and Joshua Wood. 11 John McNair, are you here? No. 12 Manny Gonzales, are you here? 13 Joshua Wood. 14 MR. WOOD: I'm here. 15 CHAIRPERSON NICHOLS. Good. Okay. 16 MR. WOOD: And actually Manny was from our 17 organization, so I would be willing to also take his time 18 as well. 19 CHAIRPERSON NICHOLS: No. That's okay. But 20 we'll be happy to hear from you. Nice try. 21 MR. WOOD: Okay. My name's Josh Wood. I'm the 22 Governmental Affairs Coordinator for the Sacramento 23 Builder's Exchange. We're a commercial construction 24 association. We have 1500 members in the region. Usually 25 do local government stuff, but today we're here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 While the stuff that you guys are doing today is 2 noble and we definitely think that, you know, things need 3 to be done to clean up the air in California, there are 4 some negative effects that I think we need the talk about. 5 And, first, I don't want to talk about it in a 6 vacuum. First, you guys, this Board, has already passed 7 the portable equipment registration program which will be 8 putting an additional burden on the construction industry. 9 We have a downturn in the market. And these are some of 10 the factors that play into the decision that's being made 11 today. 12 One of the things that troubles us, is there is a 13 significant difference in the cost estimates from your 14 Board, from your staff, and from the construction 15 industry. We're talking the difference between three and, 16 I think, $13 billion. That's a pretty scary disparity. 17 And to be frankly, to be frank, I guess, it's kind of 18 dangerous to make a decision of this magnitude that 19 affects so many people's lives without really having a 20 firm number of what your decision is going to do. And 21 then, especially, you know, in the state, you know. We're 22 talking about a significant amount of money that's going 23 to affect people. 24 And I don't necessarily think that it's safe to 25 make a decision like this without knowing is it three or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 13 billion? This is my personal opinion on just judging 2 the Board. 3 If it was the 13 billion mark, if it was, then I 4 think this Board would probably go about the decision 5 they're making a little bit differently. Maybe not 6 changing the regulation, but maybe going with some of 7 CIAQC's proposals as far as, you know, softening up the 8 timeline some to make this all work out, so that people 9 can still come in line with this proposal, but in a time 10 that's more economically feasible for their companies. 11 The problem is the Board doesn't know which one 12 it is. And I don't know if necessarily today is a safe 13 way to go about voting on this. And maybe what needs to 14 really be done, opinion from our association, is to have a 15 third party perspective. Someone to look at the numbers 16 from the construction industry, someone to look at the 17 numbers from your organization, from ARB, and to come up 18 with look at the methodology of the different studies and 19 find out which number is it? Because that's something 20 that plays into this drastically. And to make a decision 21 that affects so many people's lives, that affects so many 22 people's pocketbooks without really knowing how much it is 23 very dangerous. 24 So to sum up, we do support a lot of the 25 proposals that CIAQC has been putting forward. And I'll PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 let the representatives of CIAQC do a little more speaking 2 on that. 3 But, again, I would really like you to 4 investigate our option, from the Builder's Exchange, which 5 is to have a third party analysis look at the numbers from 6 both sides so that when you vote on this, you know whether 7 it's going to be three billion or $13 billion. Because 8 way too much hangs in the balance. 9 Thank you. 10 CHAIRPERSON NICHOLS: Thank you. 11 We'll next hear from Ed Walker, Bob Roberts, and 12 Diane Bailey. 13 MR. WALKER: I'm Ed Walker of Robinson 14 Enterprises. We work out of Nevada County. But we have 15 an operation in Yuba County. And what I want to talk 16 about is a captive attainment area fleet requirement. 17 The last sentence in that requirement says that 18 your entire fleet has to be operated in that county. 19 We're a small-large, right on the edge is our construction 20 and mining side. We have all this big equipment, it's not 21 easily moved, 50 ton trucks. Large excavators. And for 22 us to be punished because we have operations in other 23 counties, we'd like to see you delete that last sentence. 24 CHAIRPERSON NICHOLS: Thank you. That was crisp 25 and to the point. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 Hi, Mr. Roberts. 2 MR. ROBERTS: Hi, Chairman. 3 CHAIRPERSON NICHOLS: Good to see you again. 4 MR. ROBERTS: Welcome back. 5 CHAIRPERSON NICHOLS: Thank you. 6 MR. ROBERTS: Madam Chair, members of the Board, 7 my name is Bob Roberts. I am the Executive Director for 8 the California Sky Industry Association. And I will be 9 brief, but may be not quite as brief, but I will be brief 10 as well. 11 We are a very small industry, and we are so small 12 that we really don't figure out in your inventories. But 13 the ski industry really has concerns because we do operate 14 diesel equipment. Our entire fleet of the 21 resorts in 15 California is about a hundred thousand horsepower, and 16 about 60 to 70 percent of that are snowcats. And this is 17 what we're really concerned with. I think we got last 18 night some of the language. We still need to go through 19 it with our technical people, but it would look like our 20 snowplows have been eliminated from some of the more 21 onerous dimensions of this issue. 22 Our concern is that we have reached a point where 23 we are such a small industry and so focused, we only have 24 two manufacturers who supply snowcats in the world. 25 They're both European, and we work with them fairly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 closely. And they have tried equipment. Kasenboro in 2 Germany has actually gone through a testing program 3 they've done in Switzerland as well as in Italy, and they 4 can't make it work. Largely because of altitude. We 5 operate between seven and 11,000 feet. 6 Now, when we went through this with a stationary 7 program, we really didn't have the concerns because our 8 stationary equipment, we were able to work out with the 9 staff. And your staff was terrific, by the way, in the 10 stationary process. All of our generators and the large 11 equipment is encased. The snowcats are a real problem for 12 us because they're out there working at night, difficult 13 visibility, obviously the weather is about as angry at 14 times as it can be anywhere in this whole world that we're 15 talking about right now. We're operating at very high 16 elevations. What we have to do is look at a feasible 17 technological solution. And those aren't on our horizon, 18 yet. 19 So what we're -- what we'd like to see is some 20 kind of breathing room in the next two to three years for 21 us a sit down and work with the V-dex manufacturers. Now, 22 I'm sure there will be a lot of them saying they can do 23 it. We've heard this about our small little industry for 24 a lot of years and a lot of different products, be they 25 either electronics or what have you, and it is such a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 strange world that seldom do they work well. And we don't 2 want to find ourselves in the position of buying this 3 equipment, putting it on in the summer, and finding out 4 when we're doing our normal operations or our search and 5 rescue or our avalanche that the stuff doesn't work. So 6 we are concerned about that dimension of it. 7 Now, staff has been working with our consultants 8 and we're comfortable that if we can work within this, I 9 think you have a 15-day period, we'd like be to be able to 10 support this legislation. Right now, we're in a neutral 11 position until we can really see how these dimensions are. 12 But we were early supporters of AB 1493. We were 13 absolutely on board. In fact, the original -- one of the 14 sponsors of AB 32, we are the canary in the 7,000 foot 15 mineshaft. We understand climate change, and we have a 16 commitment to the environment that extends as well to the 17 dimensions of this particular project. 18 So we hope that we'll be able to continue to work 19 with the staff to make sure that our screwy little 20 industry, which is a very, very small part of this 21 incredibly large important problem, can come out of this 22 thing and be a full fledged supporter of this. 23 Thank you. 24 CHAIRPERSON NICHOLS: Thank you. We appreciate 25 your past actions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 BOARD MEMBER RIORDAN: Madam Chairman. 2 CHAIRPERSON NICHOLS: Yes. 3 BOARD MEMBER RIORDAN: If I might, just to staff, 4 would there be the ample, I guess, room to allow for the 5 same consideration when you don't have equipment available 6 for some sort of a retrofit, that you would be given some 7 exemption until that equipment became available to the 8 industry? 9 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 10 WHITE: Well, the way the verification program is 11 currently set up, as I was saying earlier, is a two-step 12 process. And the second step is looking to see whether a 13 device will work in a given application, has sufficient 14 temperature and some other considerations. And as 15 we've -- as we've talked through some of this with the 16 industry, we've always felt that that element of it would 17 be that safeguard that I think they're looking for, and 18 that they've got some concerns whether the technology will 19 work for a number of reasons that we just heard. And that 20 the program itself has that built in. So it certainly was 21 never going to require you to force fit a device onto a 22 vehicle for which it won't operate properly. 23 And so I think the safeguards that they're 24 looking for are already there within the existing program. 25 BOARD MEMBER RIORDAN: That's what I was hoping PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 for, because, obviously, they do have a unique situation. 2 And I think, hopefully, we've covered that for you. 3 MR. ROBERTS: As I say, our technical expert is 4 actually in Europe as we speak, and we only got the 5 documents last night. So we're really not in a position, 6 certainly the layman here is not in a position to pass any 7 kind of technical judgment. 8 CHAIRPERSON NICHOLS: But I think -- 9 MR. ROBERTS: We'd just like this 15-day period 10 to focus in on what's really there. 11 BOARD MEMBER RIORDAN: But it appears to me that 12 in general, not from a technical point of view, that 13 you -- probably you nor I really would know, but I think 14 just in a general way, we've got a safeguard built in for 15 you. 16 MR. ROBERTS: We'll work -- well, we hope so. We 17 understand that the God and devils are both in the details 18 and so we're hoping that we're praying to the right God. 19 Thank you. 20 CHAIRPERSON NICHOLS: Thank you. 21 Diane Bailey, followed by Jonathan Lewis and 22 Katie Stevens. 23 MS. BAILEY: Good afternoon, Madam Chair, members 24 of the Board and staff. And thank you for the opportunity 25 to comment. My name is Diane Bailey, and I'm a scientist PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 with the Natural Resources Defense Council. 2 I'm here today in strong support of the proposed 3 rule before you, and I urge you to adopt this important 4 rule today without further delay and also with some 5 strengthening provisions that were offered to you. 6 Before I comment further, I really want to offer 7 a heartfelt thank you to staff for their very hard work 8 and exceptional dedication on this rule. And I know some 9 of you Board members have been actively engaged on this 10 rule as well as, and I thank you. 11 We want this rule to work for everyone, including 12 Gordon Downs and some of the businesses who may struggle 13 to comply. 14 We are most concerned, however, with those who 15 struggle to breathe or worse. In California, ever year we 16 know that 9,000 people die prematurely from the impacts of 17 air pollution. And while air pollution is never written 18 as the cause on a death certificate, we know that these 19 deaths occur and these people can't be here today to 20 testify and urge your support for a stronger rule. 21 If the industry proposal for triennial compliance 22 is adopted, the 12 percent loss in health benefits that 23 you heard from staff this morning would translate to 480 24 premature deaths extra that could have been avoided. And 25 I want to point out here that we have tried very hard to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 talk to industry and explore ways to offer more 2 flexibility. We understand that flexibility is important. 3 However, we haven't really seen any ideas put forward that 4 can make up these lost health benefits that are so 5 important. 6 And I urge you to keep your eye these 480 7 premature deaths that can be avoided and to reject the 8 amendment today to, or the proposal today, to increase 9 flexibility in this rule without further public health 10 protections. 11 This rule is a reasonable, flexible, 12 cost-effective means of getting reductions from a sector 13 that is highly polluting and that is contributing to 4,000 14 premature deaths that can be avoided. 15 Finally, I want to extend support for the SOON 16 program that has been offered to increase the health 17 benefits from this rule. We urge you to accept the SOON 18 program for more health benefits. And we also urge to you 19 open that program up to other area districts. Seyed 20 Sadredin mentioned, the transport issue from the Bay Area 21 and I think that other air districts can also benefits 22 from this program. 23 I hope that you will adopt the strongest, most 24 health protective rule today. 25 Thank you so much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 CHAIRPERSON NICHOLS: Thank you. 2 Okay. Mr. Lewis, followed by Katie Stevens and 3 Lowell Robinson. 4 MR. LEWIS: Good afternoon. My name is Jonathan 5 Lewis, and I work for the Clean Air Task Force. CATF is 6 non-profit environmental organization dedicated to 7 restoring clean air and healthy environments through 8 scientific research, public education, and legal advocacy. 9 We're presently working in partnership with environmental 10 and health advocates in over a dozen eastern and 11 midwestern states to reduce emissions from existing diesel 12 engines, including off-road diesels. 13 As the Board has recognized, exhaust from diesel 14 engines allege causes substantial harm to public health 15 and the environment, including premature death, lung 16 cancer, heart attacks, strokes, and many other heart and 17 lung problems. The reduction of diesel pollution is one 18 of the most pressing public health problems in California 19 and the rest of the United States today. 20 CATF generally supports ARB's proposal 21 regulation. We have submitted two sets of comments for 22 the number of other environmental and public health groups 23 dated May 23rd and July 23rd. Today, I'd like to focus on 24 one of the issues raised in our July 23rd comments. In 25 particular, I want to highlight that the Board's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 regulation of off-road diesel emissions is very important, 2 not only in California, but to the rest of the country. 3 Nineteen other states and the District of Columbia contain 4 areas that do not meet even the minimum health standards 5 represented by NAX, for either ozone or PM2.5 or both. 6 For example, 70 million people outside of California live 7 in PM2.5 non-attainment counties. Unfortunately, other 8 states have very limited options to regulate emissions 9 from non-road diesels. 10 Under the current judicial interpretation of the 11 exemption provisions in the Federal Clean Air Act, only 12 California has the legal authority to implement emission 13 standards for existing non-road engines. Other states can 14 implement such standards only by copying the California 15 regulation. Therefore, we urge ARB to do what it can to 16 make its proposed non-road regulation easier for other 17 states to copy without sacrificing California's inherent 18 interest in the process. 19 We believe that there is one simple step ARB can 20 take to make it easier for other states to opt in to ARB'S 21 off-road diesel regulation. We urge ARB to bifurcate the 22 rule as proposed by staff into two distinct rules, one 23 requiring NOx reductions from in-use off-road diesel 24 engines and the other requiring PM reductions. We believe 25 that this is a purely technical administrative exercise PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 that need not delay the proposal nor should it affect the 2 application or enforcement of the rule as currently 3 proposed. Attachment A to our July 2007 written comments 4 includes our section-by-section suggestion for how this 5 could be achieved. 6 Separating the existing proposals into two 7 separate and distinct rules would allow the states other 8 than California to adopt the rule addressing either NOx or 9 PM without having to address both at once. This would 10 give states needed flexibility to better address their 11 particular health concerns and air quality problems in 12 light of their own circumstances which may well be 13 different from California's. 14 Thank you for the opportunity to testify. 15 CHAIRPERSON SAWYER: Thank you. 16 Ms. Stevens. 17 MS. STEVENS: Hi, thank you. My name is Katie 18 Stevens, and I'm with the California Partnership for the 19 San Joaquin Valley. I'm here on behalf of the convener of 20 the Air Quality Work Group of the California Partnership. 21 His name is Pete Webber, and he had a chance to discuss 22 this with Seyed Sadredin and the district that testified 23 earlier. And he finds that the rule with the enhancements 24 and the incentive funding that were discussed, as proposed 25 by the district, would support the actions of the work PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 group in reducing harmful NOx emissions in the Valley and 2 improving the health of its residents. 3 I've also submitted a letter that you have in 4 front of you from Mayor Allen Autry from the City of 5 Fresno. In it he writes: The May 24th, 2007 off-road 6 rule proposed by the ARB staff offers an opportunity to 7 accelerate attainment if a proviso is added as proposed by 8 the San Joaquin Valley Air Pollution Control District to 9 enable the San Joaquin Valley, South Coast, and Bay Area 10 Air Districts to opt in to an enhanced program coupled 11 with dedicated incentive funding to obtain additional 12 emissions reductions. 13 That's quick. Thank you for your time. And 14 thanks again for your commitment to accelerate attainment 15 of air quality standards in San Joaquin Valley. And 16 thanks to the matching comments to Ms. D'Adamo. 17 CHAIRPERSON NICHOLS: Thank you. 18 Mr. Robinson, followed by Peter Bruenke, Robert 19 Ikenberry. 20 MR. ROBINSON: Thank you, Madam Chairman and 21 members of the Board. I only have a couple of quick 22 points to bring up. 23 In regard to repower and retrofitting in some air 24 districts, like Feather River Air District hasn't got 25 enough money to do the paperwork, let alone help anybody PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 put any engines in, the fits that they need to put in 2 these machines. 3 One of the other things is equipment is used very 4 little. We have like a very large grader that's only 5 needed less than one day a week. And there's nobody 6 that's in business in their right mind could retrofit and 7 put an engine in that grader and only use it may be one 8 day a week. It just won't work. 9 So I hope that they'll give us a little bit of 10 more hours for equipment that is not needed and used very 11 little. 12 Thank you. 13 CHAIRPERSON NICHOLS: Thank you. 14 Mr. Bruenke. Ikenberry, and Berlage or Berlage 15 for our next. 16 (Thereupon an overhead presentation was 17 presented as follows.) 18 MR. BRUENKE: Chairman Nichols, members of the 19 Board, my name is Peter Bruenke, I'm the managing director 20 of HUSS in the United States. And we are one of the three 21 manufacturer of a level three V-dex device. And I just 22 want to use my three minutes for giving you a short 23 overview about our company, our products, and about the 24 steps that we've already undertaken here in the California 25 market. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 --o0o-- 2 MR. BRUENKE: Here you can see our headquarter in 3 Palm Springs. The facility that we use in our warehouse 4 which has the capacity of storage of 500 filter systems at 5 one time in our warehouse which means we're not shipping 6 the products out of Germany. They are available here in 7 California. 8 --o0o-- 9 MR. BRUENKE: And the company itself, the German 10 mother company, was found in 1920s, and since the, the mid 11 1980s we are focusing only diesel particulate filters 12 which is our core business, it's not a side business. 13 This is what we do and this is what we can. The history 14 of the American business here, we did a market research 15 for almost two years and after getting the verification in 16 November last year, we founded a legal entity in January, 17 and since April, we own the facility Palm Springs and 18 having the warehouse there, doing the same thing on the 19 East Coast in New York pretty soon. 20 --o0o-- 21 MR. BRUENKE: The product itself, we have an 22 installed base of over 20,000 pieces of equipment in 23 Europe and Latin America. And these installed base 24 consist of dual and single systems as well. The current 25 model that we are selling here in the states is seven PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 years, which is not a new technology, it's not a new 2 product, it's not a better version of something. It has 3 proven its durability a couple of thousand times. And not 4 a single system of our diesel particulate filter has 5 caused any personal injuries or exploding any filter or 6 any engine. And all DPFs that we're selling are reaching 7 already Tier 4 and Tier 5 requirements. 8 --o0o-- 9 MR. BRUENKE: As you can see here, this is -- we 10 only verified one product so far with you guys. And we 11 got a complete portfolio and reported, another, three 12 other products in the showcase for getting the 13 verification, so there are more products to come. 14 --o0o-- 15 MR. BRUENKE: This is a picture of that was 16 posted on the Board meeting in San Diego, showing one of 17 our installations, and the question was put there, does 18 anyone expect this equipment to survive the rigors of 19 construction applications? Of course not, because it's an 20 unfinished installation. This should be the right 21 picture. This is the finished installation of the same 22 product, almost the same angle, and that actually does 23 survive in the construction equipment. 24 --o0o-- 25 MR. BRUENKE: These are examples of recent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 installations that we've done here in California. On 2 bigger equipment, which, if you can see, 367 to 450 3 horsepower. They all do the job without having any 4 issues and there's also big Komatsu crane which goes 5 directly after the installation to the World Trade Center 6 site in New York ^ burning up the New Freedom Tower at 7 ground zero. 8 --o0o-- 9 MR. BRUENKE: Besides that, this is a screen shot 10 from our website. We already setting up a network of 11 local HUSS authorized installers. Three of them you can 12 see here already on our website have already qualified, 13 two in California, one in the New York area. 14 --o0o-- 15 MR. BRUENKE: And there are more come. So we 16 have to, going to have distributors here in California. 17 The warehouse capability, as I said, 500 filters 18 immediately available in delivery time of four weeks. And 19 this is, the delivery capabilities right now, we can 20 provide California with 50 DPFs a month, and about six 21 month, we're going to have 200 per month. And I took over 22 just two months ago in Palm Springs and I hired in the 23 last seven weeks, seven employees. I got six job openings 24 right now and this is the forecast running between 40 and 25 50 employees on the East Coast and on the West Coast as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 well as. 2 Thank you very much for your attention. 3 CHAIRPERSON NICHOLS: Thank you. 4 A question here. 5 BOARD MEMBER D'ADAMO: What percentage of the 6 California market do you estimate that you have that your 7 company has currently? 8 MR. BRUENKE: Well, this is just a single math 9 thing. When you're talking about having 180,000 pieces of 10 equipment which are applied for through that law, and the 11 estimation was 90,000 of them is going to be repowered, so 12 90,000 left in a period of 18 years, which means 6,000 a 13 year. And there are three manufacturers out there which 14 comes down to 2,000 per manufacturer which would come up, 15 we're ready for doing 200 a month, would be 2,200 a month 16 and that would work for the market and for us as well. 17 BOARD MEMBER D'ADAMO: And can you just give us a 18 better sense of the technologies that you've employed 19 elsewhere and whether or not they're transferable to the 20 type of equipment that we are considering in this 21 regulation? 22 MR. BRUENKE: Well, one reason why we actually -- 23 why I'm standing here today, why we entered the American 24 market, because we have the product that fits perfectly on 25 the low temperature equipment here. The regulation that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 you're putting in place here, today, is a regulation which 2 is in place in the European Union since 15 years. That's 3 why we just -- we have the product working since seven 4 years. It was just for us, the challenge is just entering 5 a new market, not coming with a new product. It's just 6 entering a new market. 7 And, also, as the other manufacturers out there, 8 we have also electrical power. We have passive systems as 9 well, but we are coming here with the diesel burner 10 technology because it's independent from the exhaust gas 11 temperature and you don't need to plug it in overnight, 12 which can be very tricky, if you're on a big construction 13 site and you don't have the possibilities to plug in 14 overnight. 15 BOARD MEMBER D'ADAMO: Would you that say the 16 technology is transferable in -- I understand that there 17 are a number of industry representatives that are 18 concerned in particular about the Tier 0 engines and the 19 ability to retrofit because a lot of those engines quite 20 old. 21 MR. BRUENKE: Well, I just could come up with an 22 example that we done just four weeks ago here in the 23 Riverside area. We retrofitted a machine which was very 24 dirty, 40 years old, with one of our systems, and a Tier 0 25 obviously, and it's complying with the law, and, of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 course, it's not running for eight hours a day because if 2 you have a diesel particulate filter, it's just a trap, 3 you're trapping real material and if it's full, you have 4 to regenerate it. And this machine is actually at the 5 Port of Los Angeles and it works only two hours a day and 6 it work fine. Complies with the law instead of taking it 7 away and buying new one. 8 BOARD MEMBER D'ADAMO: Okay. And then a question 9 of staff just to get a better idea of what the market is 10 out there for companies such as HUSS. What do you expect, 11 millions of dollars or, you know, that would be available 12 to these types of companies in implementation of this 13 regulation? Just to get a better sense of the incentive 14 that's out there in order to develop products that can be 15 verified? 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: Well, we find that, get you some more specific 18 numbers, certainly, the intent is to move quickly on 19 getting the filters on the vehicles. And so the market 20 will develop very quickly in California for the 21 installation of these. And so, I think, they're going to 22 be very well positioned and certainly at 200 a month, 23 they'll be a, you know, I think they could be a 24 significant supplier, but certainly won't be, there'll be 25 plenty to go around in terms of lots of opportunities for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 other companies. And that really kind of gets back into 2 the staff's intent to have a successful showcase where we 3 get multiple manufacturers coming in. 4 And I think, as you saw on that slide, while they 5 have one product verified -- and I don't think they're 6 unique among companies in that regard. There are other 7 products that they use elsewhere that are not quite as 8 traditional. Some use fuel borne catalysts, and other 9 technologies which are also effected. There's some 10 additional hurdles with those that they'll have to go 11 through, through the verification process. But there's 12 certainly lots of opportunities for other technologies 13 like that. We are seeing that in the showcase, as 14 companies bringing forward with us. 15 I think we have a number now, so I -- 16 CHAIRPERSON NICHOLS: Stop filibustering. 17 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 18 Yeah. The estimate that we have in the appendix of our 19 technical support document is that there would be about 20 35,000 filters required in the 2010 time frame. And then 21 a smaller number in the subsequent years, as the first 22 year is the highest number necessary. And, of course, if 23 fleets do take advantage of the early retrofit provisions, 24 then it would essentially behalf that number, but earlier. 25 CHAIRPERSON NICHOLS: Yes. There's another PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 question here. 2 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 3 WHITE: Yeah, just looking at this and out of the corner 4 of my eye, I see numbers that we expect at some point in 5 time, they're to -- to be well over a hundred thousand of 6 retrofits of off-road vehicles under this regulation in 7 service in the state. So, obviously, that's with time and 8 that's after several years of implementation. But at its 9 peak, that's what we would estimate would be coming into 10 the state. 11 BOARD MEMBER D'ADAMO: Thank you. The point 12 being made, just plenty of incentive out there to get the 13 job done correctly and get systems that are verified. 14 CHAIRPERSON NICHOLS: Yes. There's something 15 worthwhile for companies to get into. 16 Ms. Riordan, and then Ms. Berg. 17 BOARD MEMBER RIORDAN: Sort of a general question 18 that can be answered in a ballpark. What would your cost 19 be for one of your installations? 20 MR. BRUENKE: Well, in the comparisons with the 21 other competitors, we got four, we got -- from this model, 22 the diesel burner technology, we got 22 different sizes 23 and the sizes depend on age of the model and horsepower 24 rating. So we're starting from 5,500 and going up to 25 40,000. And if you look at the big, the one, the examples PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 that I mentioned, big scrapers, 633 D, something like 2 that, you end up on the, on the top level between 35 and 3 40,000. 4 BOARD MEMBER RIORDAN: Okay. Would you 5 anticipate as the market grows that, and your production 6 is larger, any economy in numbers? 7 MR. BRUENKE: Sure. Well, that's also simple 8 math, it's just economy of scale. I'll be interested in 9 markets in three months, to be honest here. So if you're 10 coming into numbers selling 200 a month, then there's 11 going to be also some improvement on the pricing, and what 12 we already doing with -- well, requests for big fleets, 13 you also get better prices if you order ten or 50, of 14 course. That's the same like in each business. If you 15 give me a call and request a price, this is a price for a 16 single machine. If you say, we make -- I got just an 17 order in from New York for six Caterpillar 315s. They're 18 coming in. And we do it just on the job, they get a 19 better price, of course. 20 BOARD MEMBER RIORDAN: Okay. Thank you. 21 CHAIRPERSON NICHOLS: Okay, Ms. Berg. 22 BOARD MEMBER BERG: Thank you. I don't want to 23 get lost on the Tier 0 and that particular piece of 24 equipment in the Port of Los Angeles working for two 25 hours. Do you have any data on the crane that's in New PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 York? Isn't that also an older piece of an equipment? 2 MR. BRUENKE: No, it's a brand-new. It's a brand 3 new. 4 BOARD MEMBER BERG: That's a brand-new piece of 5 equipment? 6 MR. BRUENKE: That's a brand-new. 7 BOARD MEMBER BERG: Has it been your experience 8 on the Tier 0s that there is a significant reduction in 9 running time? 10 MR. BRUENKE: Well, our system, and that's the 11 main advantage of this technology works on any diesel part 12 engine, if it's Tier 0, Tier 1, Tier 2 or Tier 3. The 13 only limitation and that's what you are actually 14 addressing is the running time. If you have a dirty 15 machine, then you could -- well, you can extend the filter 16 medium and come up with a trailer and put some big things 17 on the back, then it would run for eight hours. 18 But if you have a dirty machine, that's not 19 practical, that's not practical, and it's not 20 cost-effective, of course not. If the customer is fine 21 with running twice, I don't know, doing the return twice a 22 day, which means you can run for four or five hours, then 23 you can comply with the law with a Tier 0 machine. 24 BOARD MEMBER BERG: And how long does it have to 25 be down in order to regenerate? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 MR. BRUENKE: Half an hour, 35 minutes. 2 BOARD MEMBER BERG: Thirty-five minutes. 3 MR. BRUENKE: Right. 4 BOARD MEMBER BERG: Thank you very much. 5 CHAIRPERSON NICHOLS: Okay. Thanks. 6 MR. BRUENKE: Thank you very much. 7 CHAIRPERSON NICHOLS: Robert Ikenberry, followed 8 by Bob Berlage, followed by Daniel Curtin. 9 MR. IKENBERRY: Thank you, Chairman Nichols and 10 the Board. I'm Robert Ikenberry with California 11 Engineering Contractors. I want to urge you not to adopt 12 the proposed regulation. 13 Among the many problems with this extremely 14 complex regulation, including mandating unavailable 15 technology in some cases, and what we consider to be 16 insurmountable enforcement problems, I just want to talk 17 briefly about the cost. 18 A lot of people have talked about cost. There's 19 been a lot of disparity between the estimates. I don't 20 have a sophisticated evaluation. I just want to add some 21 common sense to the information that's already been 22 provided by your staff, but is not included in their three 23 to 3.4 billion estimate that they used to put a price tag 24 on this. 25 In their evaluation, they already had indicated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 that there's about a thousand dollar cost increase for any 2 new home. According to the National Association of 3 Realtors, there's about 5700 new homes sold a month in 4 California as of 2006. That would be, if we average that 5 over a year for the life of this project, a cost 6 originally in their estimate, it was $5 a month, now they 7 $6 a month, of $3.1 billion for those million and 44,000 8 homes over the life of their mortgages. That $3.1 billion 9 is not considered. The staff's original report estimated 10 that there would be a thousand jobs lost on average with a 11 $2.3 billion in lost wages. That is not factored into 12 their evaluation. Now they say 1400 jobs average, 3400 13 jobs at a maximum with using their same numbers, a range 14 of 3.2 to $7.8 billion. 15 In this staff's evaluation, they indicated a 16 total increase in construction costs would be on the order 17 of .3 percent. But when they looked at specific fleets, 18 they found they had to increase their pricing by one 19 percent to make those economically viable. So even if 20 their estimate is only off by a factor of three, that 21 three to $3.4 billion becomes $10 billion. 22 For the type of equipment that our company uses, 23 we looked at replacement costs because repowering and 24 retrofitting is not an option, and we found that the 25 average cost per horsepower was on the order of $1400, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 more than ten times the staff's estimate. So if we take 2 $10 billion for the staff's estimate, which I think is 3 very generous, for the cost of construction, three billion 4 to homeowners, three billion to employees, we're talking 5 $16 billion for the total cost to California of this 6 project. It makes our cost benefit ratios against the 7 health savings and the cost per pound look extremely poor. 8 I think that this is too much, too soon, and I 9 urge you to proceed with caution so that we have an 10 effective regulation that will be able to be complied with 11 by the industry and will not cause a burden to California. 12 And these are all numbers that are just coming from your 13 own staff's evaluation, but it seems like somebody's 14 taking a big picture look. 15 Thank you very much. 16 CHAIRPERSON NICHOLS: Thank you. Okay. 17 Now we'll hear from Mr. Berlage, Mr. Curtain, and 18 then Carolina Simunovic. 19 MR. BERLAGE: Madam Chair and members of the 20 Board. My name is Bob Berlage, and I'm here -- that's 21 okay, close enough -- representing Big Creek Lumber 22 Company. We're a small family-owned business on the 23 Central Coast of California. We have a saw mill and five 24 retail outlets and stores that operate in four counties. 25 Four out of six of our facilities are in captive PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 attainment areas. And we have equipment that's going to 2 be subject to this regulation, if it's passed. We're 3 opposed to this regulation. I'm going to modify my 4 recommendation in case my times runs out, to suggest 5 strongly, based on testimony you've heard today, that you 6 postpone making a decision on this regulation and I'll 7 hopefully have time to explain that. 8 We've calculated the initial phase, and I'm just 9 talking about retrofitting not replacing and retiring 10 equipment and replacing with new equipment. The initial 11 costs are going to be $360,000 for us to comply with the 12 regulations. 13 I'd like to comment briefly on an implicit sense 14 that I picked up on from staff that somehow businesses are 15 going to be able to makeup the difference by charging 16 more, changing a few things. We're in competition with 17 big box stores, but we don't have the luxury, as they do, 18 to average out costs and profit and loss because they're 19 operating in other states. And we have to compete against 20 those companies at an economic disadvantage. 21 One of the things that I'd like to point out, 22 also, was that this regulatory body is not the only 23 regulatory body that we have to deal with. You know, as 24 Madam Chair Nichols knows from resource secretary 25 position, you know, people in our business have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 multitude of agencies and regulations we have to cope 2 with. And I'm going to be brutally honest. California is 3 a hostile environment for small business. It's very 4 difficult for us, and we're barely hanging on. And this 5 proposal isn't going to help. 6 But I'd like to, because I'm afraid I'm running 7 out of time, I want to point out something. I've known a 8 lot of people in my life. I'm getting along in years, and 9 I've met some really good people, some scoundrels, and 10 lots of people in between. And I can tell you after 60 11 seconds, I knew Mr. Downs is an honest man. And I'm also 12 certain that your staff took the information they had and 13 did the very best at presenting truthful information and 14 to give you a quality report. But there's something 15 egregiously wrong if there's that big a disparity between 16 honest people. And as Madam Chair knows, when you're 17 dealing with resource issues and with environmental 18 issues, we always look for the best science. We should be 19 looking for the best economic information. 20 I'd like to reiterate a point that was brought up 21 by a previous speaker and suggest that you do hold on 22 this. Don't move forward. And get something analogous to 23 a best science review to review the economics. Because if 24 your three million versus 12 million, coming from two 25 honest entities, or you're -- you've got an individual PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 affected business this's saying it's $2 million versus 2 less than $300,000, you've got a serious problem. And I 3 think that that's something that needs to be looked at 4 before you proceed with this. Because if you're going to 5 do this and it's going to affect that many people, you 6 need to make sure you've got the right information that's 7 being interpreted correctly before you move forward. 8 CHAIRPERSON NICHOLS: Thank you for that. 9 MR. BERLAGE: I want to thank you for your time. 10 CHAIRPERSON NICHOLS: You're out of time. But 11 appreciate your comments. They were well heard. 12 Daniel Curtin, Carolina Simunovic, Travis Hagen. 13 MR. CURTIN: Chairman Nichols and members of the 14 Board, my name is Daniel Curtin. I'm the Director of the 15 California Conference of Carpenters. I've also been 16 appointed by the Governor to the Chairmanship of the 17 Industrial Welfare Commission. And I'm a commissioner on 18 the California Commission on Economic Development, which 19 had our first meeting recently. 20 The last time I was in this room, I was up on 21 that podium. And there was a crowd very similar to this, 22 and the testimony was also quite compelling and complex. 23 But I have to tell you, I think you are beginning to -- 24 you may be the first place on earth that's really feeling 25 the heat of global warming. Maybe it's all focused on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 this meeting today. And so I suggest you're going to have 2 to get used to it because all of the issues that you will 3 be dealing with at CARB are going to be complex trade-off 4 issues. 5 Now, I've been listed -- and I've listed myself 6 here in support of these regulations. And I say that 7 because I believe, like the Governor, that we can grow the 8 economy and have a strong economy, and at the same time, 9 clean the air and, as he's doing, leading the world on 10 global warming. 11 You are really at the point of that conversation. 12 And this is one of the first, and probably most 13 complicated, but they're all going to be tough. 14 I have three or four simple points I want to 15 make. First, I want to do what everybody else has done, 16 is congratulate the Board for taking a longer look at 17 this, the staff for the hard work they've done. But I 18 want to say that the industry, and I've been working in 19 the industry for 25, almost 30 years. That last gentleman 20 is beginning to look young. So I know how things are. 21 But the industry has done marvelous in terms of 22 trying to bring issues to this Board to try to work this 23 issue out. I come to this because I believe in the 24 guidelines or the regulations that you're trying to do. I 25 don't think the industry came at this, as they have over PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 the years, not just this industry but many others and 2 particularly in the timber area which I also am involved 3 in, where they are trying to fight the regulations. This 4 industry was not trying to fight these regulations. This 5 industry is trying to figure out how to comply with these 6 regulations. That's a significant difference. And there 7 are some vast points of difference, as you've heard 8 repeatedly and will continue to hear. 9 The first thing I want to talk about is the 10 health concerns. They're always there. I have to tell 11 you, construction is one of the most dangerous, unhealthy 12 industries to work in. We are very, very concerned about 13 the health issues regarding the air that the workers 14 breathe on those jobs. Those are our members. It's not 15 like we are unconcerned and dismissing the idea that there 16 may be this many or that many more deaths. They are our 17 members. We want clean air. We want safe jobs. So we 18 are here to help put these regulations together. 19 CHAIRPERSON NICHOLS: Mr. Curtain, you're down to 20 about 30 seconds. 21 MR. CURTAIN: All right. 22 CHAIRPERSON NICHOLS: So give me your points, 23 please. 24 MR. CURTAIN: Well, we're not going to fight 25 that. Okay. Good. Here's the two issues -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 CHAIRPERSON NICHOLS: Okay. 2 MR. CURTAIN: -- I really want you to consider. 3 First of all, you'll hear the South Coast and San Joaquin 4 proposals. We would love you to adopt those. We also 5 want you to look at the compliance alternatives, to go 6 from a one-year regulation that has to be met, to a moving 7 target within those three years with some minimum targets. 8 Let the industry figure out how to comply. They're 9 willing to get there. There's a lot at stake. And this 10 is the first chance to sort of find a blended point where 11 everybody can sort of come together. I think this is as 12 close as I've seen it in a long, long time. And you have 13 to have the opportunity to make that decision. 14 Thank you very much. 15 CHAIRPERSON NICHOLS: Thank you for coming and 16 sharing your wisdom with us. We appreciate it. 17 Before I go on actually, I know Carolina 18 Simunovic is next. I know there are people who are 19 beginning to run out of time who have planes, trains, 20 et cetera, that they have to catch. So I'm going to make 21 my offer one more time. If you can promise me that you 22 can stay under two minutes, you can come to the front of 23 the line. And I believe we have one taker for that. And 24 that is Jessica Henn. Jessica Henn? So you'll be next 25 after Ms. Simunovic. Thanks. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 Go ahead. 2 MS. SIMUNOVIC: Thank you. Since I also have to 3 be in Parlier by 6:00. 4 Well, thank you very much for the opportunity to 5 address your Board. My name is Carolina Simunovic. And I 6 am the co-chair of the Central Valley Air Quality 7 Coalition. I also work for Fresno Metro Ministry as 8 Environmental Health Director and I'm speaking also on 9 behalf of Latino's United for Clean Air based in Fresno. 10 As I walked in the meeting earlier this morning, 11 I saw a big machine with a sign in front that said: Why 12 is this cleanest engine in this world still not good 13 enough for CARB? And I read it, I looked at it, I took 14 two steps, and then I realized why the answer was very 15 clear. It was parked right in front of the child care 16 center for Cal/EPA and all the children were outside 17 playing and laughing and giggling and going down the 18 slide. And I thought, that's why. And that's why, for 19 me, this engine is not good enough for me or for my 20 daughter, for our children, for California's future, and 21 that's exactly why I think that this rule is so important, 22 and for you to be able to pass a very strong rule that 23 would leave a positive legacy for all of our futures. 24 All of my organizations realize that this will 25 pose an economic difficulty for the, for the businesses PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 involved. Especially the members of the Latino United for 2 Clean Air, as it is their husbands, their sons, their 3 friends that work in the construction industry that will 4 be affected. But they also realize that it is their loved 5 ones that are bearing the most significant impact of the 6 dirty pollution. 7 I also want to remind the Board -- actually I 8 don't have to remind Supervisor Case or Dee Dee D'Adamo, 9 they are intimately aware of these figures, but just for 10 the rest of the Board. In the San Joaquin Valley, there 11 was a study conducted by Jane Hall from CSU Fullerton that 12 showed a $3.2 billion cost each year for unhealthful area 13 in the San Joaquin Valley. So that figure just about 14 matches the cost for this rule. And that's what Valley 15 residents are paying every year in terms of health tests, 16 lost wages, and just reduced productivity for dirty air. 17 So the economics are spread all around, and we are paying 18 for this dirty air. 19 Without this rule, also, the San Joaquin Valley 20 would not be able to meet the ozone standards by 2024. 21 And that's, that's very important for us because it gets 22 us even farther from reaching the goal that Governor 23 Schwarzenegger, Central Valley Air Quality Coalition, the 24 Air District, and your Board, and all San Joaquin Valley 25 breathers share, which is clean air much before then. So PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 this rule is critical for that. 2 It's also going to make the difference for our 3 ability to meet the PM2.5 deadline by 2015. 4 We support, along with the Air District including 5 the SOON proposal and recommend allowing the Bay Area and 6 other air districts to participate, as we see that it will 7 benefit all of the California, including the San Joaquin 8 Valley. We also recognize the unique financial situation 9 of the Valley and hope that you find within your budgets 10 the matching dollars that Mr. Sadredin is requesting. And 11 if you need more urging in that, you can look at the audit 12 on the Carl Moyer program and show that our district is 13 doing very well in achieving cost-effective emission 14 reductions. And I think that they will try to please you 15 as much as possible in order to do that. 16 CHAIRPERSON NICHOLS: Your time is up, if you can 17 finish. 18 MS. SIMUNOVIC: Oh, my thing is flashing one 19 minute. 20 CHAIRPERSON NICHOLS: That was a second. 21 MS. SIMUNOVIC: Dang it. Okay. 22 CHAIRPERSON NICHOLS: I'm sorry. 23 MS. SIMUNOVIC: Oh, my goodness. Okay, well, I 24 just want to -- 25 CHAIRPERSON NICHOLS: Make a final point if you'd PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 like to. 2 MS. SIMUNOVIC: -- make a final point -- 3 CHAIRPERSON NICHOLS: Yes. 4 MS. SIMUNOVIC: -- that -- please retain the 5 current PM reduction target and look beyond this room when 6 you make your decision today. A very informative survey 7 was released by the Public Policy Institute of California 8 this morning that showed the residents of California want 9 this Board to set air quality policy and about 70 percent 10 of it think that we need to have tougher regulations even 11 though they cost money. 12 So thank you very much. 13 CHAIRPERSON NICHOLS: Thank you. Thanks for 14 taking the time. Okay. 15 We will now hearing Ms. Henn, and then we'll go 16 back to Travis Hagen and Kerry Lawrence. 17 MS. HENN: Thank you, Chairman Nichols and 18 members of the Board. My name is Jessica Henn, and I'm 19 here representing the Regional Asthma Management and 20 Prevention Initiative, RAMP, and the Community Action to 21 Fight Asthma, CAFA, a statewide network of asthma 22 coalitions working to reduce environmental triggers of 23 asthma for school age children. 24 I'm here to ask for your support of the proposed 25 regulation because all Californians deserve to breathe PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 clean and healthy air. One in six children in California 2 has been diagnosed with asthma, and in some areas of the 3 state, the rates are even higher as the students from 4 Oakland highlighted. Statewide asthma affects nearly 1.4 5 million children and costs $667 million a year in hospital 6 stays. While there is no cure for asthma yet, much is 7 known about what causes or contributes to it. We know 8 that poor outdoor air quality and diesel pollution are 9 likely to contribute to the onset of asthma in otherwise 10 healthy people, making the adoption of the proposed 11 regulation a public health priority. 12 This regulation will make it possible to clean up 13 the second largest source of diesel pollution in the state 14 which is essential given its contributions to asthma. 15 Health savings in the age of 18 to $26 billion far 16 outweigh the cost associated with this regulation. 17 These emissions reductions will lead to the 18 reduction of 100,000 asthma attacks and the prevention of 19 4,000 premature deaths. In order to reduce the 20 detrimental asthma outcomes and protect public health, I 21 urge to you adopt this regulation today. We can't afford 22 the wait any longer. 23 Thank you. 24 CHAIRPERSON NICHOLS: Thank you very much. 25 Okay. Travis Hagen, are you here? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 Kerry Lawrence, are you here? 2 Richard McCann. 3 MR. MCCANN: Good afternoon, Madam Chair and 4 Board members. I'm Richard McCann, I'm with M Cubed. I 5 represent CIAQC. And the series of speakers who are going 6 to follow me are also sponsored by CIAQC, concluded with 7 Mike Lewis, who's the executive director of CIAQC. 8 I want to just begin by mentioning I'm going to 9 talk about the cost impacts, the health benefit estimates, 10 and the job loss estimates that the staff has prepared. 11 And first off, the analytic comparison that you have seen 12 on slide 10 is obsolete, because we have updated our cost 13 estimates substantially since that time. 14 The -- what we did is we changed our analysis to 15 rely on the staff analysis in terms of turnover and 16 retrofit rates for the fleet estimates. And we also have 17 extended our cost estimates for out to 2030. What we've 18 done is, in using the staff assumptions, we found that the 19 costs were about 3.9 to $5.1 billion. And actually with 20 our own assumptions, which I'll discuss in a moment, we 21 came up with an estimate of about $12.9 billion over that 22 21-year period. I'm, just for comparison purposes, our 23 original estimate had been out to 2020 and our cost 24 estimate for that period was $9.5 billion. So we have 25 done some revisions to our estimate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 Basically what happens is that the difference 2 between our estimate and the staff's estimate turns on two 3 particular issues. One is how are the incremental 4 additions to the statewide fleet treated, in terms of 5 where do they come from? And the second one is what are 6 the -- what's the underlying base retirement rate within 7 the fleet? And we've actually done some empirical 8 research on both of these topics and have come up with 9 some significantly different conclusions than the staff. 10 The first is that the turnover rate, which 11 actually drives all of this, that's driven by the 12 regulatory process is divided into two components. The 13 first being the turnover -- a churning component, which is 14 the transactions between fleets, between firm fleets, of 15 used vehicles in order to comply with the rule. For 16 example, that one fleet retires its Tier 0 piece of 17 equipment and goes out and buys a Tier 2 piece of 18 equipment from another fleet. We've actually ignored 19 those costs in our cost analysis. We basically said all 20 of that churning is basically zero, has a zero cost. And 21 we're being conservative in that because there is, in 22 fact, a cost associated with that. 23 There is a second component, though, which is the 24 incremental additions of new technology to the fleet that 25 are necessary in order to comply with the regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 That is, the Tier 3 and Tier 4 engines that need to come 2 into the fleet in order to improve, accelerate the 3 improvement of the overall fleet emission rate. And 4 that's the component that we focused on, which is the 5 small portion, the incremental rate. The staff has 6 estimated that that incremental turn over rate is about 7 3.4 percent per year, in addition to the current turnover 8 rate of 6.2 percent, over the period of 2010 to 2012, and 9 three percent over the period 2013 to 2020. So they're 10 basically saying that the incremental retirement rate is 11 accelerated by over 50 percent, according to the rule. 12 CHAIRPERSON NICHOLS: Mr. McCann, you've actually 13 used three minutes, but you've also revealed an 14 interesting fact to me which I had not previously known, 15 which is that you're part of a group that has eight people 16 who are planning to speak. If you each had three minutes, 17 that would give you 24 minutes for your entire group. Now 18 you can divide that time up any way you want to. But 19 something is going to have to give here. We're not going 20 to, you know, extend your time and then extend the next 21 person's time and the next person's time. So if you have 22 an organized presentation and you'd like to explain how 23 you're going to do it, that would be fine. But I'm going 24 to give your group until 3:15 to do it all, including 25 Mr. Lewis. So how do you guys want to do it? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 MR. MCCANN: No, Mr. Lewis is here. He's 2 organizing this. 3 CHAIRPERSON NICHOLS: Mr. Lewis isn't here yet. 4 MR. MCCANN: I can wrap this up fairly quickly. 5 CHAIRPERSON NICHOLS: Okay, but you're -- we'll 6 take it out of somebody else's time. 7 MR. MCCANN: Okay. Appreciate that. 8 CHAIRPERSON NICHOLS: All right. Thank you. 9 MR. MCCANN: Also, the second -- and so basically 10 what we did is we looked at the question of, these 11 vehicles have to come in as Tier 3 and Tier 4. And the 12 additional factor that we looked at is what are the prices 13 of new vehicles that would have to come apply with Tier 3 14 and Tier 4? We got dealer quotes for, from three fleet 15 owners of several hundred vehicles, and we estimated that 16 the new vehicle prices are about 60 percent higher than 17 what the staff had used. The staff had done their 18 estimate from a survey of used vehicles. They did not 19 survey new vehicles in doing their cost estimates. 20 Second component that is important is looking at 21 the turnover rate. What we did is we got sales data from 22 the Engine Manufacturer's Association. There's about 8500 23 vehicles sold in California over the '98 to 2006 period. 24 In order to -- the turnover rate in the fleet that would 25 match that amount of sales is 3.7 percent per year versus PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 the staff has an assumptions of 6.2 percent in their 2 model. These two components which are empirically 3 derived, are the explanation for the large difference 4 between the staff estimate and our estimate. So you 5 basically have to decide as to whether you are going to 6 rely on the empirical estimates for these particular key 7 components are not. 8 The second thing, just quickly, on the health 9 benefits, is that I've submitted comments on reviewing the 10 health benefit estimates. Fundamentally, there was a 11 review, panel review by nine experts of the Pope and 12 Dockery study in 2006, that was the basis for much of the 13 analysis done by the staff. Those experts were unanimous 14 in saying that there was no way to quantify the emission 15 reductions benefits, that there is, there is evidence that 16 PM emissions do cause increased mortality and morbidity, 17 but there's no ability to put numbers on it. So that any 18 estimates that you see are, in fact, not supportable by 19 any of the science at this present moment. 20 And then just, finally, a quick point on the job 21 impacts estimate. The staff estimate is basically 22 assuming that the industry can pass through 90 percent of 23 the costs to customers. In fact, U.S. EPA and other 24 sources estimate only about 50 percent can be passed 25 through. That would mean that the job impacts would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 about 7,000 rather than 1400. 2 Thank you. 3 CHAIRPERSON NICHOLS: Okay. Thank you. And 4 stick around. We may have questions. 5 Mr. Rohman, followed by McCort and Williams. 6 MR. ROHMAN: You know the paper that I had to 7 write to -- I had to redo it. So I had to bring my 8 computer up here, but that's okay. 9 First of all, my name is Gary Rohman. I'm 10 vice-president of Echo Equipment Corporation, a heavy 11 equipment rental company that's been in business since 12 1962. 13 I've been working on this regulation for three 14 years. I've worked with Kitty Howard. I worked with 15 Annette Abair. And I've been working with Erik White, so 16 I understand it. I've been around. And, quite frankly, 17 I've spent countless hours working on this rule and 18 sincerely hope that my input was useful and it didn't go 19 on deaf ears. 20 Early this year, the San Joaquin Valley Air 21 Pollution Control District voted nine to two to extend the 22 federal attainment date from 2013 to 2024. I might add 23 this action was supported by CARB. One Board member was 24 quoted as saying that: Engine technology does not 25 currently exist to meet the strict emission standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 They further stated that they were not going to sacrifice 2 businesses by requiring equipment owners to meet an 3 emissions standard that is currently unachievable with 4 current technology. 5 I admire the courage of this Board to take this 6 stand and to acknowledge that the construction -- what the 7 Construction Industry Air Quality Coalition, which is 8 CIAQC, has been trying to articulate it to staff. 9 All of the equipment owners sitting in this room 10 today really should not be here. This meeting, in my 11 opinion, is completely wrong. What should be taking place 12 is a meeting of every equipment manufacturer, emission 13 control system manufacturer, and even the individual 14 that's working in his garage to try to find answers to 15 California's diesel emission problem. 16 CARB should be encouraging the development of 17 these control systems that will help equipment owners 18 clean up construction equipment. Instead, CARB is putting 19 the caboose in front of the engine and placing the 20 emissions enhancements on the backs of the end users. The 21 equipment owners, us, we do not have the technical 22 experience to find the answers to emissions -- engine 23 emissions, but the manufacturers do. The way that this 24 rule is currently being presented, it will only result in 25 derailment after derailment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 As we begin to climb the grade of this 2 regulation, we need to know -- we need you to know, the 3 Board -- excuse me -- we need you, the Board, to place the 4 engine back in front of the caboose. If the San Joaquin 5 Valley, an air district with some of the worst air quality 6 in the nation, can acknowledge that technology does not 7 exist to give equipment owners the tools to meet 8 quantifiable emission reductions, we would ask this Board 9 to grant our industry additional time. 10 This not only will give us time for Tier 4 engine 11 solutions to enter the marketplace, it will allow each 12 company to use their own business plan to find 13 cost-effective solutions. 14 And I just want to put one other thing in. This 15 afternoon, Seyed, the executive director of the San 16 Joaquin District, asked for a $5 million funding. I live 17 in that area. I know what the difficult challenges that 18 we have to meet there. And I want to support that. And 19 if we could, I'd like to double it to $10 million. 20 That's all I have. Thank you. 21 CHAIRPERSON NICHOLS: Okay. Thank you. 22 The rest of this group. Mr. McCort, 23 Mr. Williams, Mr. Fauchier, Mr. Davis, Malloy, Lewis, come 24 on down, please. 25 (Thereupon an overhead presentation was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 presented as follows.) 2 MR. WILLIAMS: My name is John Williams. I'm 3 with Williams Pipeline Contractors, and I had a little 4 PowerPoint in there. 5 --o0o-- 6 MR. WILLIAMS: If implemented, the proposed 7 regulations would have a profoundly negative impact on our 8 ability to stay in business. 9 --o0o-- 10 MR. WILLIAMS: We're a small family-owned 11 underground construction firm specializing in public works 12 infrastructure rehabilitation. We replace old and 13 outdated sewer and water pipelines, primarily in the 14 Los Angeles basins. 15 --o0o-- 16 MR. WILLIAMS: Our primary customers are the city 17 of Los Angeles, municipalities in Los Angeles, Orange, and 18 Ventura Counties and various municipal water and sewer 19 districts. 20 --o0o-- 21 MR. WILLIAMS: This is the kind of work we do, 22 replacing broken sewers that are bleeding sewer water into 23 the environment. 24 --o0o-- 25 MR. WILLIAMS: We operate with five crews PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 consisting of five to seven men. 2 --o0o-- 3 MR. WILLIAMS: This -- we're replacing a water 4 main here. 5 --o0o-- 6 MR. WILLIAMS: Our equipment is late model and 7 well maintained with Tier 2 engines. 8 --o0o-- 9 MR. WILLIAMS: Our equipment; we have ten 10 backhoes, a small loader, an asphalt grinder, and two 11 three to five ton rollers, and we have some other 12 equipment that was a little bit more detailed than I 13 wanted to list here. 14 --o0o-- 15 MR. WILLIAMS: Picture of our crews working on a 16 sewer line. 17 --o0o-- 18 MR. WILLIAMS: And these backhoes are two years 19 old. 20 --o0o-- 21 MR. WILLIAMS: Our approximate current value is 22 500,000. We think after the regulation that it will be 23 essentially valueless. The replacement value in our 24 normal time frame would be $1.2 million. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 MR. WILLIAMS: We think we'll have to do this 2 twice. If the regulation was voted into effect, all our 3 equipment will have to be replaced twice within 12 years. 4 One would be normal and one time would be driven by these 5 regulations. Aftermarket devices we've determined on our 6 stuff is impractical. 7 --o0o-- 8 MR. WILLIAMS: We have a 50 percent chance of 9 survival. If we survive, downsizing is inevitable. 10 Several of our crew and office staff will be unemployed. 11 Infrastructure rehabilitation will be severely retarded. 12 We'll have to charge more money for our work. 13 --o0o-- 14 MR. WILLIAMS: A solution. Extend the 15 implementation by five years. Replacement of equipment 16 would be accelerated but manageable. Additional time 17 would allow for the development of practical and safe 18 aftermarket devices. 19 --o0o-- 20 MR. WILLIAMS: Williams Pipeline Contractors 21 agrees with the goals of the proposed regulation, but we 22 need to be able to afford it. 23 Thank you for your time. 24 CHAIRPERSON NICHOLS: Thank you very much. 25 BOARD MEMBER RIORDAN: Madam Chair, just one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 question. What's your horsepower? What's your total 2 horsepower? 3 MR. WILLIAMS: We're around 1400 horsepower, 4 probably we're going, small going to medium. On your time 5 frame 1400 to 1600. We're going to buy some more 6 equipment soon. 7 BOARD MEMBER RIORDAN: Okay. But doesn't that 8 help you tremendously? I mean, I'm looking down at the 9 staff, just -- wouldn't that help him tremendously, being 10 a small -- 11 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 12 WHITE: Well, I think he's got two things in his favor 13 here. First is, you know, if the Board decides that 2500 14 is an appropriate level for small fleets, even with his 15 growth, he would still be a small fleet. And the second 16 piece is what we are looking at is if he's, in fact, all 17 Tier 2, and a level, the PM emissions that come out of 18 those engines in the regulation, he is probably not even 19 have to put filters on, even consider them until the 2018 20 time frame. So we're talking, you know, ten, 11 years 21 from now that this impact of this would be. And if he is 22 small, there is no turnover element to his fleet. 23 BOARD MEMBER RIORDAN: Thank you. 24 CHAIRPERSON NICHOLS: Thank you. That's helpful. 25 Okay. Is Dan Fauchier -- I'm sorry if I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 butchering your name. 2 MR. FAUCHIER: One of those was right. 3 CHAIRPERSON NICHOLS: Fauchier, good. William 4 Davis and Scott Malloy are coming after you. 5 MR. FAUCHIER: I represent the Engineering and 6 General Contractors Association of San Diego. And this is 7 an interesting problem for the Board. Because you're 8 really going to need the wisdom of Solomon. 9 The staff are proposing a certificate of 10 compliance be issued each year to assure that companies 11 meet the enforcement targets. And that certificate of 12 compliance becomes an enforcement tool so that public 13 agencies won't let people bid or perform work if they 14 haven't been able to produce that. And if it's sewn into 15 CEQA, then developers won't allow them on the property 16 because they haven't met the targets. 17 That's fine in normal business cycle. But every 18 now and then is a dip year, like this one is, where 19 revenues are off about 40 percent. Contractors survive a 20 dip like that by pulling in their horns, spending no extra 21 money, and in a year like that, without the ability to add 22 additional bank financing, which they won't have, and 23 they'll have no profits, they won't be able to meet the 24 enforcement targets in one year and, therefore, they won't 25 get the certificate of compliance and, therefore, they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 will have zero revenues in the next year because they 2 won't be able to bid or perform any work. So this 3 combination of a one-year fleet average and a certificate 4 of compliance is a torpedo under the water until we hit a 5 bad year, and then you're going to take down dozens, 6 hundreds, thousands of medium-sized businesses. We really 7 need the three-year fleet average. 8 Thank you. 9 CHAIRPERSON NICHOLS: Thank you. 10 BOARD MEMBER BERG: Madam Chairman? 11 CHAIRPERSON NICHOLS: Yes. 12 BOARD MEMBER BERG: My understanding on that 13 certificate is that is a certificates of reporting 14 compliance. In other words, they submitted their report. 15 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 16 WHITE: It would be that they submitted their report and 17 that that report said they met whatever the requirement 18 was for that year. 19 BOARD MEMBER BERG: Okay. Thank you. 20 CHAIRPERSON NICHOLS: All right. Do we have 21 Mr. Davis or Mr. Malloy? And then Mike Lewis is going to 22 finish up here, if he's here. 23 MR. DAVIS: Good afternoon, Mrs. Nichols. My 24 name is Bill Davis. I'm the Executive Director of the 25 Southern California Contractors Association. And I heard PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 what you were saying about our time limit, so I'm going to 2 eliminate everything that I was going to say except for 3 three things. 4 Welcome. We're glad you're here. 5 Second thing, we hope Dr. Wong is recovering and 6 doing very well. 7 Third thing is our association has already begun 8 the process of implementing whatever your rules become. 9 We're in contact with the ever charming Mr. White, and his 10 boss, equally charming Mr. Cross, and they have agreed to 11 already come and speak to our members and get involved in 12 the process of explaining what this rule is. But the 13 problem is our association only represents 350 out of the 14 234,000 contractors in California. We asked your 15 predecessor and we ask you, please invite us into the 16 implementation process. We can help. 17 Thank you. 18 CHAIRPERSON NICHOLS: You can. Thank you. 19 MR. DAVIS: And I cede the rest of my time 20 upstairs. 21 MR. MALLOY: Good afternoon, my name is Scott 22 Malloy. I'm with the Building Industry Association of San 23 Diego County. I want to thank very much today for having 24 this hearing, and I want to thank you again for your 25 thoughtful consideration of all the comments that have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 been raised by the construction industry today. 2 We support our partners in the construction 3 industry and we strongly support the proposal by CIAQC, 4 specifically extending the horizon to a three-year period 5 versus a one-year. 6 We are very concerned about the cost of staff's 7 proposed regulations. Based on the numbers I've heard 8 today from the example that staff gave earlier of about 9 112 -- fleet of 112 pieces of equipment, staff's estimate 10 was $300,000 on average per year. There's 180,000 pieces 11 of equipment out there. If you project that out, that's 12 $.6 billion per year. And that fleet was ostensibly a 13 pretty standard fleet. Pretty representative of the 14 overall condition of our fleet today. $.6 billion per 15 year times 20 years amounts to $12 billion. So based on 16 staff's specific analysis of a fleet, we have an impact of 17 $12 billion. Which, not surprisingly, is pretty close to 18 the impact that we're estimating. And that's just the 19 direct impact. So hopefully we can get a little 20 clarification on that. 21 The indirect impacts, the cost of these 22 regulations will increase the cost of constructing 23 housing, office space, and retail space. It will have a 24 major impact on development impact fees. Development 25 impact fees for everything from schools, parks, roads, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 public facilities, sewer and water, everything that is 2 infrastructure related will go up, which will also be 3 reflected in cost of building homes, offices, and retail. 4 We are very concerned about this given the state 5 of affordable housing in this state. We're also very 6 concerned about these cost increases due to the fact that 7 our climate is not particularly considered business 8 friendly at this point. It's very difficult to be a 9 successful business in this state. And we do wonder, you 10 know, at what point the state will come to a realization 11 of perhaps we've gone too far with some of these 12 environmental regulations when we lose Sisco Systems or 13 Qualcom or another major employer, when they say we can't 14 afford to hire people here, we can't afford to expand our 15 business here, we're going to have to go somewhere else. 16 Will we then realize that perhaps some of the impacts of 17 these regulations had negative social and environment and 18 economic impacts. 19 And we're also very concerned about that issue as 20 well, the loss of jobs, the lack of analysis of the 21 indirect cost effects of this, the lack of analysis of the 22 potential loss of other environmental solutions which no 23 can't be implemented because we're raising the cost of 24 housing. We're raising the cost of building roads. We're 25 not going to be able to achieve as much congestion relief. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 What are the environmental impacts of that? If my house 2 costs more, that prevents me from being able to 3 potentially put solar panels on my roof. It precludes me 4 from maybe buying a car that's less -- that is more fueled 5 efficient. What are the environmental effects of all 6 that? The ripple effect as this goes out into the 7 economy. 8 So those are the kinds of things that really need 9 to be analyzed very carefully when you're considering a 10 regulation of this size and scope. We believe the CIAQC 11 has come up with a very reasonable proposal. It was said 12 earlier that this is probably one of the first times 13 you've an industry here saying we support this. Just give 14 us a more flexibility way to achieve it. And, again, in 15 consideration of that, you'll have plenty of time to 16 reconsider this. This is a 20-year implementation phase 17 in. You don't have to do everything today. You can -- 18 you'll have the ability to fine tune this regulation as 19 time goes on. If in 2012 or 2015, you realize you're not 20 starting to see the reductions in emissions associated 21 with these regulations, you can refine the rule and 22 tighten them up. Look at new technologies. Find a better 23 way to get to the end goal, which we're all saying we want 24 to achieve. We just don't want to break the backs of this 25 industry in the process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 Thank you very much. 2 CHAIRPERSON NICHOLS: Thank you. Okay. Next. 3 MR. WHELAN: Madam Chairman, members of the 4 Board, my name is Mike Whalen with Ferma Corporation, a 5 general engineering contractor in Mountain View, 6 California. 7 CHAIRPERSON NICHOLS: Excuse me, Mr. Whalen, 8 you're not part of this group, or you're not in the list 9 that I've got anyway. 10 MR. WHELAN: I'm sorry, I thought I heard you 11 call Mike Whelan. 12 CHAIRPERSON NICHOLS: No, I apologize. I said 13 Michael Lewis. 14 MR. WHELAN: I'm sorry. 15 CHAIRPERSON NICHOLS: That's okay. Is Mike Lewis 16 here? Well, we'll get to you soon. You're not far away. 17 MR. LEWIS: Good afternoon, ladies and gentlemen. 18 I'm Mike Lewis, I'm here today on behalf of the Coalition 19 to Build a Cleaner California, which is the construction 20 industry group that's come together to deal with this 21 regulation. 22 I think what you've probably heard from us is 23 we're not against a regulation. We want a regulation that 24 works. We think that the proposal that we've crafted with 25 the air districts is one that gets there. We recognize PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 that a proposal in order to work has to accommodate both 2 the needs of the Air Resources Board, the construction 3 industry, and the air district, and I appreciate the 4 effort of the CARB staff to give it a name, so soon after 5 we submitted it and call it "SOON." I like the analogy, 6 if you will. 7 We think it's a beneficial program for a number 8 of reasons. First of all, it gives the contractors an 9 opportunity to have more flexibility and how they manage 10 their fleets. That's why we propose the three-year 11 milestone measures. 12 Most of these contractors have business plans. 13 We know that there are going to be tier, new tier engines 14 coming in at a certain time. We've timed those increment 15 to match those so that they have an additional tool in 16 their toolbox, if you will, to meet the standards, which 17 is to buy new equipment that actually meets the standards, 18 rather than having to repower or retrofit something that 19 they're going to have to change later on. 20 I want to make it clear that from our standpoint 21 you can't uncouple the three year milestones from the SOON 22 program because it's that SOON, it's that three-year 23 milestone that gives these larger contractors who are 24 going to be impacted by this, the ability to manipulate 25 their fleets in order to participate in the SOON program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 And participation in the SOON program isn't free. They're 2 going to have the match the cost of those engines and 3 they're going to have to pay a hundred percent of the cost 4 of those particulate traps. So, this isn't something that 5 is free to the contractors. It's going cost them more to 6 do it. It has some advantages in that later on when those 7 equipment comes back in the fleet, they'll be able to take 8 credit for it. But they're going to have to do earlier 9 compliance than they normally would. 10 The SOON program is going to start before your 11 starting times. So we're on the hook, but this is an 12 enormously creative and innovative and entrepreneurial 13 industry and we think that given the flexibility, no two 14 contractors are going to approach it the same way. But we 15 think that given the flexibility they can get to those 16 goals and still achieve what it is the air districts want 17 to do, but it's important that we tie together the two, 18 the three year fleet averages with the SOON program. 19 And we're also insisting that that be statewide 20 for all contractors because, in effect, what happens is 21 the big contractors, by their ability to access these 22 funds and do this over compliance, are helping the small 23 contractors who frankly can't comply or can't qualify for 24 Carl Moyer funds simply because in many cases they don't 25 operate their equipment enough hours. They can't qualify PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 for the funds. 2 We are in the process of working with the 3 Legislature to get without the limitations, frankly, of 4 Carl Moyer so that they can qualify. We think that's 5 going to happen. We think it's going to allow them to 6 start compliance much earlier than the dates that are 7 established in your program. But obviously, there's a 8 leap of faith on our part that you're going to have these 9 V-dex in place and on time for us to do this. We are 10 hoping for a little leap of faith on your part that we're 11 going to be able to deliver on what we say we can, if you 12 can deliver on what you say you can. 13 I think on the whole you're going to see a much 14 more significant reduction in emissions statewide as a 15 consequence of the SOON program. We know that there are 16 other districts that are interested in opting in. I'm not 17 going to reserve comment on that at this point. This was 18 designed to help two districts who desperately need 19 additional reductions in order to meet a very critical 20 deadline for ozone, and we want to help them. If there's 21 a way other districts feel they can work with local 22 contractors and opt in, it may be beneficial. But it 23 starts to change the complexion of the whole program if 24 everybody in the state starts opting in to it. So I'm 25 cautious about what impact that's going to have on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 industry. 2 We said -- as we said, I think the net result is 3 a significant early reduction, much more flexibility for 4 an industry that, that can, given a little bit of time in 5 managing their fleets, can make better decisions than your 6 annual fleet averages can in terms of how and what they 7 retrofit, what they repower, what they replace, and what 8 they retire, which are their four options, and give them 9 the chance to figure that out in three year windows 10 matching their business plan and you're going to get a far 11 better result, I believe, than with the annual sort of 12 forced decision-making that you're imposing on them with 13 your, with your annual fleet averages. 14 CHAIRPERSON NICHOLS: Mr. Lewis -- oh, okay. 15 You're done. Sorry. 16 MR. LEWIS: I thank you for your consideration. 17 CHAIRPERSON NICHOLS: You were winding up just as 18 I was telling you to. Very good. Good timing. 19 BOARD MEMBER BERG: Madam Chairman. 20 CHAIRPERSON NICHOLS: Yes. 21 BOARD MEMBER BERG: Madam Chairman, I have a 22 question. Mr. Lewis? 23 CHAIRPERSON NICHOLS: Yes. Please stay. You've 24 got a question. 25 BOARD MEMBER BERG: On the three-year window, was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 it within the plan that the companies would continue to do 2 annual reporting. 3 MR. LEWIS: Yes. The annual reporting would 4 remain in place, yes. 5 BOARD MEMBER BERG: And are you suggesting that 6 the 20,000 horsepower, which would -- was the minimum 7 horsepower, as I understood it, for the SOON program, that 8 you would lower that to include people under 20,000 9 horsepower. 10 MR. LEWIS: No. I think the idea was to keep the 11 20,000 horsepower in place to sort of minimize the number 12 of contractors who are going to have to be under the 13 mandate, if you will, and allow both the districts, the 14 districts some limited group of folks that they were going 15 to have to deal with to make their funding determinations. 16 BOARD MEMBER BERG: And so your comment on the 17 upcoming potential legislation was to fill the gap for 18 small and the medium companies that might not qualify for 19 Carl Moyer because -- 20 MR. LEWIS: Right. 21 BOARD MEMBER BERG: -- of equipment time or 22 productivity -- 23 MR. LEWIS: Right. 24 BOARD MEMBER BERG: -- that would kind of fill 25 in. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 MR. LEWIS: Yeah. That's kind of, it's a little 2 bit of a separate issue but it all fits together. I -- I 3 was only illustrating the fact that I think you're going 4 to see fleets start to comply much earlier than the 5 schedule calls for if funding becomes available. We saw 6 it with the large fleets. They've been -- they've been 7 using Carl Moyer funds since 2000. Very early compliance 8 because the money was there. The small and the mediums 9 simply can't qualify so they're doing little or nothing 10 and they're stuck, and they're going to -- they're facing 11 later start times, but they really don't have any options 12 right now to be able to access the funding to get them 13 started on that path. 14 BOARD MEMBER BERG: And, finally, does CIAQC 15 agree to the 40 percent at the end of the second year as 16 kind of a benchmark as to that we'll agree that we'll have 17 some sort of percentage along the way. 18 MR. LEWIS: We recognize that there has to be 19 some demonstration of reasonable further progress, if I 20 can use that term, that you don't want a contractor 21 necessarily doing nothing in one year, although under the 22 current, the current annual increments, the PM emission 23 averages only change ever other year. So if you hit it 24 one year, you don't have to do anything the second year. 25 So what we said is take the delta between the two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 milestones of 2011 and 2014 and you have to achieve 40 2 percent of it within the first two years. So that you 3 have to do something, and you have to have, obviously hit 4 the balance by the third year. But that assures you that 5 everybody's doing something in that window. 6 We also would suggest to the staff that you -- 7 because the starting times for the fleets are staggered 8 with the large and ten, the medium and 13, and the small 9 and 15, if you keep the staggered starting times and you 10 keep the three years staggered, you'll have one or the -- 11 one of the fleets in a hundred percent compliance every 12 year, if you stagger the start time. So that will 13 guarantee that progress and emissions are being reduced 14 every single year, rather than putting them all on the 15 same three year cycle. So it will assure you that, that 16 reductions are being made every single year. We think 17 that makes sense. 18 BOARD MEMBER BERG: Okay. Thank you. 19 CHAIRPERSON NICHOLS: Yes. Mr. Loveridge. 20 BOARD MEMBER LOVERIDGE: Let me ask maybe the 21 obvious question. When you talk about annual, when you 22 talk about three years, what if it was two years? 23 MR. LEWIS: Well, I don't think that two years 24 gives the contractors any real flexibility. I mean, we're 25 talking about the particulate increments now. Basically, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 it's -- if you can hit the fleet average, you don't have 2 to do anything the next year, anyway. You have a two-year 3 program in effect. 4 Now, the question is how many people are going to 5 be able to hit it and get the free year? I don't know and 6 I'm not sure the staff knows. We think that, you know, 7 from a business planning standpoint -- and these are not, 8 these are not small decisions. It's not like running out 9 and buying an automobile. I could do that this afternoon. 10 Or getting my muffler installed, I can do that in an hour 11 at a muffler shop. These are substantial financial 12 decisions. They're usually made well in advance. They 13 decide several years in advance what they're going to 14 alter, what they're going to replace, what they're going 15 to repower. And we think, you got to keep them on the 16 same cycle. You can't -- it's not going to make sense. 17 It's going -- it's going to require much more complicated 18 reporting if you're reporting on one cycle NOx and another 19 cycle PM. We think to keep everything on the same cycle 20 and keep it all on a -- on a reasonable period of time 21 with demonstrations of progress each year that will work 22 most effectively for the largest number of contractors. 23 CHAIRPERSON NICHOLS: Thank you. I just want to 24 say, I don't usually commend groups for their testimony, 25 but I do want to say that I appreciate the fact that your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 organization has really come together and made a lot of 2 constructive suggestions and had a very positive impact on 3 the development of the rule so far. We're listening. 4 We're thinking. And we may be able to do something along 5 the lines of what you're suggesting. I can't say that at 6 this point. 7 But I feel that, in general, our concern is, as 8 you've correctly identified, that we need to see the 9 progress and we need to start seeing benefits soon and not 10 stretch this program out. And I do appreciate the fact 11 that the industry has at least come together to 12 acknowledge that need and to be supportive of it. I think 13 that's very helpful. 14 MR. LEWIS: Well, I think this industry has a 15 reputation, at least in the air quality arena, of being 16 resourceful and creative. We certainly -- you know, we 17 drafted the most strict dust control provisions in the 18 world with South Coast. We were responsible for creating 19 the legislative authority so you could adopt the PERP 20 program. So we're no strangers to the industry and we 21 understand the need to cooperate and we're asking for a 22 little flexibility in terms of how we manage our business 23 in exchange. 24 CHAIRPERSON NICHOLS: Thank you. 25 MR. LEWIS: Thanks. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 CHAIRPERSON NICHOLS: Okay. We are going to be 2 taking a break at 3:30, but I'll call a couple of 3 additional witnesses at this point. We have Skip Brown, 4 Bruce Balala, and then Mike Whelan, who was up here before 5 by mistake. 6 MR. BROWN: Good afternoon, Chairman Nichols and 7 the Board. Thank you very much for this opportunity. My 8 name is Skip Brown. I'm president and owner of Delta 9 Construction Company. Been in business in the state of 10 California for 64 years, at this time, trying to survive 11 to 65. 12 I've got the same comments to make about the 13 staff. They've done -- they've done an excellent job of 14 listening, although the results have been somewhat spotty, 15 in my opinion. 16 But one of the major things I wanted to make -- I 17 want to make this quick -- is the tax base. The tax base 18 in the state of California comes basically from the small 19 community. I believe my firm, I used to be small, the 20 Board made me big. Medium size. Now they've made me 21 small again. I appreciate that. Thank you very much. I 22 think you really -- I only got one crew. You know, I 23 mean, how I got to be medium. 24 But anyway, I think you need to take another look 25 at the medium limits because the major tax base comes from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 the small contractors. That's the major employer. And I 2 say the major tax base on the basis of I've done a survey 3 of my own company, the taxes paid on a $10 million volume 4 my firm paid or caused to be paid $1.446 million in taxes 5 to the state of California and the federal government. 6 And out of this amount of money, $320,000 in sales taxes 7 were paid on construction products that I buy. Now you 8 could say that, well, if we lose a few small firms, 9 construction products will still be sold. But that's not 10 true. The large companies do not pay this sales tax. The 11 reason is, is they don't sell the material, they 12 manufacture it for themselves and it goes to the customer. 13 It's the small contractor and the medium contractor that 14 buys this material from the large contractors and then 15 pays the sales tax. 16 So when you take out one small business with 20 17 employees, you've taken $320,000 in sales taxes that go to 18 the state of California out of the picture. And I don't 19 think that's wise. I think that the pebble that we're 20 throwing into the pond amounts to a boulder for the small 21 and medium contractors. And I think that the tsunami wave 22 that's going come out of that boulder will make the 1400 23 unemployment picture look somewhat puny. I think it's 24 going to be considerably larger. 25 With that said, I really think that the industry PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 is really trying to step up and meet this. We all want 2 clean air. I've got children, I've got grandchildren. I 3 have two daughters, Erik, I'm sorry, they're both taken. 4 I've got a son, but let's don't go there. 5 We are trying to step up. We'd like to survive 6 in business. I'm on my way out. I'm in my reclining 7 years, I guess, is a nice way of putting it. But I'd like 8 to see this 64 year business go to 65 and to 70 and 75. 9 So we need to look at your size limits for your 10 medium contractors. We need to give the people that don't 11 have these Moyer programs a break and allow us to try to 12 survive in this industry and continue to pay the taxes to 13 the state, which we all needs pretty badly, we can't even 14 pass a budget. 15 Thank you very much. 16 CHAIRPERSON NICHOLS: Thank you. And with we 17 have one question here. 18 BOARD MEMBER D'ADAMO: I have a question of 19 staff. Mr. Brown raises a point that I don't know how 20 many fall in this category. He said he was small, then he 21 was big, now he's small again. For those that are sort of 22 on the fringe, that end up suffering from the business 23 cycle downturn, can they recalculate so that if they have 24 a year that is slow in terms of actual use, could they 25 recalculate, say they're medium in one year, next year, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 they're considered small? 2 CHAIRPERSON NICHOLS: This was raised by another 3 witness and I had it on a list of questions, also. I 4 think it's a good we one. 5 MR. BROWN: Well, it's based on horsepower. If 6 you have 2501 horsepower, you're medium. And if somehow 7 or another -- 8 CHAIRPERSON NICHOLS: Even if you're not using 9 your equipment? 10 BOARD MEMBER D'ADAMO: Yeah, what about in terms 11 of use? 12 MR. BROWN: Well, no, it's just horsepower. 13 Well, the 100 hour limitation, now, the two and a half 14 weeks that you're allowing us to use it and not being 15 charged for may fit into that picture, if we just didn't 16 use it at all. 17 CHAIRPERSON NICHOLS: Right. 18 MR. BROWN: If I'm not using a piece of equipment 19 for two and a half weeks, I don't own it. 20 CHAIRPERSON NICHOLS: Okay. 21 BOARD MEMBER D'ADAMO: I don't know the answer, 22 but it does -- 23 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 24 But I think -- 25 CHAIRPERSON NICHOLS: Oh, there's a comment here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 2 So I believe the question was what happens to like small 3 fleets that grow over time and become medium, do they 4 suddenly have to comply with the medium fleet 5 requirements, that's the question? 6 BOARD MEMBER D'ADAMO: Well, I hope they grow, 7 but I think the concern we have is what happens if it's 8 the other way around? 9 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: The 10 question is can they contract if they need to when there's 11 a business downturn? 12 CHAIRPERSON NICHOLS: Right. 13 BOARD MEMBER D'ADAMO: Sure. 14 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: And 15 the answer is yes. In other words, they can, they can set 16 aside some of their horsepower and not count it. But 17 then, if they need to bring the horsepower back in, then 18 they have to bring it into compliance. So there is a, for 19 the ones on the fence, there is a system which, which 20 allows them to do that. 21 BOARD MEMBER BERG: Yeah, but I think we need to 22 be very careful here because this sizing of these 23 businesses has to do with horsepower, not with revenue. 24 So when you have a downturn and you have a downturn in 25 revenue and they have a compliance schedule, which they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 have to comply with a certain percentage regardless of the 2 credits and how they can schedule it, but a certain 3 percentage of NOx and a certain percentage of PM, they 4 could effectively sell a piece of equipment and, 5 therefore, have that much less horsepower which then would 6 solve some of the problem. But for them to put a piece of 7 equipment into non-use, when the revenues came back up 8 they not only would have to bring that piece of equipment 9 up to compliant, but they would have to be back on -- they 10 would have to make up the percentage that they were down. 11 So we've got to be careful because this -- 12 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: I 13 think we can work that. 14 BOARD MEMBER BERG: -- regulation does not allow 15 for a downturn in revenues. 16 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: 17 Well, I think that the way it's set up, though, they 18 could, and I think that is what's very likely to happen, 19 is they, they can park horsepower that is sort of marginal 20 in use anyway or the most marginal in use, and then, and 21 then put it into low use and not bring it back in. So if 22 they keep it under a hundred hours a year, following the 23 downturn, they could basically keep it as a piece of low 24 use equipment that doesn't show up on their count of 25 horsepower. It's only when they decide that they really PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 need to run that equipment a lot and put it back into high 2 production mode that they would have to make it comply. 3 BOARD MEMBER BERG: And they'd have to make that 4 comply plus the other new eight percent or 20 percent. 5 It's still a cascading effect, I believe. 6 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: 7 Yeah. Well, I hear what you're saying. I think that 8 you're saying that basically if they, if they're jumping 9 back and forth, they could be jumping back and forth 10 between timelines when they change categories. And I 11 think that's something staff -- we could work -- right, 12 that's what I'm saying, they jump back and forth. I think 13 that's may be something staff could work with to try and 14 make that. 15 BOARD MEMBER BERG: Okay, thank you. 16 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 17 Can I -- can I clarify -- 18 CHAIRPERSON NICHOLS: Excuse me. Let's have one 19 person speaking at a time here. Did you have another 20 comment? 21 BOARD MEMBER RIORDAN: Well, I just wanted to 22 build on that. In talking to one of those construction 23 companies that we reviewed with staff, we talked 24 specifically about that and about taking out of service 25 certain pieces of equipment, and I turned to the owner and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 I said: And if you bring them back, obviously that means 2 you're bringing them back because there's a revenue stream 3 that you've got a job that you want to do. So when you 4 bring them back and you have the ability to retrofit them 5 or do whatever you need to do to make them part of your 6 fleet, then that would be okay with you? And he totally 7 agreed with that premise, oh, sure, I can do that. 8 So I know that in reality there's at least one 9 company out there that totally agrees with what staff is 10 saying. 11 MR. BROWN: Well, if I may, I disagree with that 12 premise. I've survived four recessions. I can't? Oh, 13 I'm sorry. 14 I've survived four recessions in the 40 some 15 years that I've been active in this business. And I can 16 tell you that when it comes back around, it doesn't back 17 around with all kinds of gold on the horizon. You start 18 to get going and you get a little bit more and you get a 19 little bit more. And you can't just bring a piece of 20 equipment back in and just spend a lot of money on it, 21 because we're still trying to pay back the bank that got 22 us through it, which, by the way, I brought these 23 headlines of yesterday's newspaper, "Record Home 24 Defaults," and this is a good subject matter that you're 25 talking about. And I really hope you come up with some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 way of solving the problem, should there be a serious 2 downturn in the market. 3 CHAIRPERSON NICHOLS: I think you've made a good 4 point, and I think we will be discussing it further. 5 Staff, do you have an additional comment that you 6 wanted to make? I didn't mean to cut you off. 7 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 8 Okay. I thought it would be useful to clarify what's in 9 the proposed language right now. There's a couple things, 10 one is if a fleet changes size from small to medium, they 11 have two years to meet the medium fleets requirements. If 12 they go from medium to small, they can immediately start 13 just complying with the small fleet requirements. 14 Now, on the issue of what if I have a piece and 15 there's an economic downturn and my usage drops below the 16 low use threshold, you could choose to designate it as low 17 use and count it as part of whatever required turnover you 18 would have had to do, or if you know, gosh, you know, I'm 19 just waiting to get another project next year, I may need 20 to use it again, you don't have to count it as that. 21 So it isn't like you automatically have to 22 designate it as low use and then suddenly control it when 23 you -- when the usage increases again. If you do choose 24 to designate it as low use, you're sort of promising, 25 okay, I've looked ahead, I'm not going need to use this as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 a backup piece. I'm not going to need to use it more than 2 a hundred. If you then subsequently decide to add this 3 piece back into your fleet, you would have to meet the 4 add-in vehicle requirements. And so that's when it would 5 have to be cleaner than a certain amount. So cleaner than 6 Tier 2 at the beginning and then cleaner than Tier 3 7 towards the middle of the reg. 8 CHAIRPERSON NICHOLS: Okay. Thank you. We're 9 going to take our afternoon break now. And I'm going to 10 ask people in the audience if you know that you're not 11 going to testify, please let the clerk know so they can 12 take your name off. And if you have suddenly been seized 13 by the urge to speak and you weren't on the list, I want 14 your name on the list by the time we get back because 15 we're going to close the list of witnesses at this point. 16 So we'll see you back here at quarter of. 17 (Thereupon, a recess was taken.) 18 CHAIRPERSON NICHOLS: All right. Ladies and 19 gentlemen, we have about 30 witnesses, I believe, left to 20 go. We need to move on. 21 Is Bruce Balala here? He's going to be next. 22 Mike Whelan and Kathleen Phillips. 23 Mr. Balala, you've been patiently sitting in the 24 front row. 25 MR. BALALA: Hi. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 CHAIRPERSON NICHOLS: Hi. 2 MR. BALALA: My name's Bruce Balala. I'm Bruce 3 Balala Excavating. I'm the smallest contractor here, I 4 guess. I got me. I'm the only owner-operator. I operate 5 in Solano County. I have 25 mowers of different 6 configurations. They're all Tier 0. They're all earlier 7 than '92. And I never got any Moyer's money at all. 8 Whenever I'd mention it, they just didn't give it to you. 9 I mean, I don't run 50,000 miles a year on my trucks. The 10 tractors do go more than couple hundred hours, something 11 like that. 12 So all this particulate traps and all that stuff 13 is going to come out of my pocket. And the tractors were 14 legal yesterday. I don't even know they'll be legal 15 tonight, you know. Financially it's a disaster because 16 what happens is you have the old debt that you got to pay 17 out, and if you people make the tractors not qualify, then 18 you have to get new tractors. But you can't use the old 19 tractors and you still have the debt from that. You got 20 to go out and buy some more tractors when are much more 21 expensive than the use I use. And so you, it just 22 financially can't work, just like Mr. Downs said. 23 I'm trying to make it, you know, stay positive. 24 But what happens is you get people in the corner, 25 sometimes it doesn't work so good. They fight back, you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 know. And nobody's mentioned eminent domain, but this is 2 kind of what it is. I mean, I'm not a lawyer and I don't 3 know for sure whether it qualifies. But both the state 4 Constitution and the federal Constitution guaranteed just 5 compensation when you lose property. When you lose 6 property to the government. And that could make your 7 program cost a lot more than you're talking about. 8 So I think you got to make sure that somehow 9 we're not killing -- you're not getting the guy's riled 10 up. Everybody is really on your side. They want to do 11 it. But we're all in business and banks just don't give 12 them money for free. 13 I was suggesting that maybe you could figure the 14 whole cost of the thing, and then actually make a tax out 15 of it and spread it over the people, the total number of 16 people, because what you're doing is everybody, all the 17 air breathers here are, are getting the benefit, but 18 you're taking it out on the contractors. I'm not sure 19 who, one of your members here said that you weren't trying 20 to punish us, but, geez, from down here, it sure looks 21 like it, you know. 22 Anyway, I just wanted to say that small 23 contractors don't seem to be very well represented here. 24 They haven't got the word out. If you send out 240,000 25 postcards and these are all people that are here, I mean, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 that's not even representative. 2 So anyway, I just notice that the people who want 3 the health benefits are the ones that are for, for asthma 4 and so forth, they're the ones that are all telling us, 5 yes, you have to except the program. And on the other 6 side, the guys that have to pay for it aren't. And so I 7 think you got to work out the funding better. It sounds 8 like you got a pretty good program, that, you know, we've 9 worked out a lot of the details and still working on it. 10 But you got to make it so it isn't killing the little guys 11 'cause, otherwise, at you'll get legal challenges, even if 12 they're not successful, and it'll slow your program down. 13 I think you want to have people all be on your side. 14 CHAIRPERSON NICHOLS: Thank you, Mr. Balala. 15 MR. BALALA: You're welcome. 16 Mr. Whelan, Kathleen Phillips, Jessica Henn has 17 already spoken, and then Linda Weiner. 18 MR. WHELAN: You already know who I am. 19 CHAIRPERSON NICHOLS: We do. 20 MR. WHELAN: I rise in opposition to the proposed 21 regulation as it is written. While positively 22 appreciating the goal the Board to reduce off-road diesel 23 NOx and particulate materials, and the efforts of the 24 Board staff to do it well, I'd like to make two statements 25 and make some suggestions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 Most effective leaders don't ask their followers 2 to take on a task unless they have accomplished that same 3 task themselves. In addition, most effective leaders 4 spend their own money first on R&D before demanding 5 sweeping changes from stakeholders to implement unproven 6 technology. 7 The state of California, each county in 8 California, each town and city in California has a 9 significant fleet of off-road diesel equipment. I suggest 10 that we start this project by implementing the regulations 11 on each piece of this equipment first. Instead of 12 exempting it. Let them choose their options. Keep the 13 required records and provide the required routine and 14 emergency services expected of them for the first phase of 15 implementation. Let them start immediately if they 16 choose. But require them to start in 2009. 17 This is a captive fleet that should be easy to 18 study and to evaluate and report results from. 19 In 2012, take a year to prepare a comprehensive 20 report of regulatory compliance, real measured emission 21 reduction, machine productivity changes, manpower 22 adjustments, compliance costs, unforeseen challenges and 23 work arounds, and suggestions for the model of 24 implementation strategies. The rationale is this: The 25 asset value of off-road diesel equipment is quite high PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 when purchased and it shouldn't be devalued by a premature 2 regulation or retirement. Nor should its productivity be 3 compromised. Routine and emergency work such as 4 snowplowing and removal, shoulder reconstruction, pavement 5 remediation, et cetera, is no more or less demanding than 6 the work that the California contractor risks his net 7 worth on every time he agrees to do a job. 8 No reasonable action of this scope should be 9 implemented without a controlled trial ahead of it. In 10 2013 -- 11 CHAIRPERSON NICHOLS: Mr. Whelan. 12 MR. WHELAN: -- require implementation along the 13 lines of the CIAQC recommendation. 14 CHAIRPERSON NICHOLS: Excuse me, you've used up 15 your three minutes. Do you want to summarize your final 16 points there. 17 MR. WHELAN: The final point would be -- 18 CHAIRPERSON NICHOLS: I know you've prepared 19 quite a bit of testimony. 20 MR. WHELAN: Yeah. Yeah. 21 CHAIRPERSON NICHOLS: If you want to submit your 22 written testimony or if you already have, we will have it. 23 MR. WHELAN: The final point is that California 24 Resources Board is perceived to have a lot of clout. This 25 has been demonstrated where market forces are a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 significant factor. That's not the case with this 2 off-road diesel equipment. And so I would like you to 3 take that into consideration. I would like to you take my 4 suggestions into consideration. And I urge you to oppose 5 pose the regulation as currently proposed. 6 Thank you. 7 CHAIRPERSON NICHOLS: Thank you. And we do have 8 your written comments here. 9 Kathleen Phillips, followed by Linda Weiner, and 10 Gregg Oxley. 11 MS. PHILLIPS: I'm Katherine Phillips with 12 Environmental Defense. And I'm bringing back the thing 13 about what you should say to the benefit of the court 14 reporter. Carolina accidentally walked away with it. 15 I just wanted to make a few quick comments about 16 some of the issues that have been raised. One is I really 17 do appreciate all the effort staff has gone through over 18 the last three years. We have followed this rule probably 19 as closely as anybody in the industry has followed the 20 rule. We have had a lot of arm wrestling matches with the 21 staff. They have been very effective in, in using science 22 and good analysis to come up to the conclusions that we 23 didn't always appreciate or approve of, but we could 24 always be confident in the end that it was factually 25 based. And we're -- we appreciate that and we also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 appreciate staff's patience. 2 Given that, I would like to just note, again, 3 that as staff analyzed analysis showed today, if you 4 change the PM targets from an annual target, you do end up 5 to a two or three year target. You do end up with a 6 disbenefit in health impacts, so you won't get as great a 7 reduction in emissions. So I would like to reemphasize 8 the need to keep those targets annual. 9 I understand the industry's desire for more 10 flexibility you, but I think it's important to point out 11 that this rule has a lot flexibility built into it and 12 that flexibility has been built in at request of industry 13 over the last three years. Sometimes we've gone kicking 14 and screaming as environmentalists thinking that that was 15 going too far, but it is still in there and I think that 16 needs to be taken into consideration. 17 About reports. I think the idea of doing some 18 reports on what's going on with the technology is a good 19 one. That's, but I would suggest that maybe January 2009 20 is too soon. You won't be able to tell what the price is 21 actually going to be until the market starts up. This 22 also would be probably just about a year after this is 23 formally kind of going into effect, after you get through 24 your 45 days or 15 days and all that. So I would suggest 25 that you not have that first report until 2010, at the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 earliest. 2011 would probably make more sense. 2 Verification. I think everybody recognizes that 3 there needs to be more resources for CARB for getting 4 staff, as much staff as they need for verification. I'm 5 certainly committed to helping if that needs to be a play 6 in the budget next year, if you need environmental help, 7 you have that. 8 Moyer and other incentive money. There are a 9 number of efforts going on, and I think that things are 10 finally coming to a -- starting to gel to help raise 11 additional incentive money. We worked with the 12 Legislature last year to get some budget money and for 13 some construction equipment that was used by public 14 fleets. I know that we've worked this year to try to get 15 some additional budget money in for that would have 16 allowed some additional Moyer money. That was rejected by 17 the industry. I think, though, that there are other 18 opportunities to find additional incentive money. Some of 19 it may have to have different kinds of rules than Moyer to 20 ensure that some of these very small companies, both in 21 this industry and others, have access to money longer. 22 Finally, I just want to -- a couple of things. 23 The SOON program, that's a great idea. It ought to be 24 extended to more than a couple of districts. There are 25 more than a couple of districts that could use those extra PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 NOx reductions. 2 And finally, the role of trade associations. I 3 think a lot of the issues that have been raised today 4 about difficulty in understanding the rule, difficulty in 5 figuring out how each company will be able to accommodate, 6 this seems like something that would be ideal for the 7 trade association to participate in. A couple of years 8 ago or -- I was in a meeting and I was complaining about 9 how the trade associations, the Associated General 10 Contractors, had spent a lot of time complaining about 11 upcoming rules and then other things we've done over at 12 the Legislature to try to clean up construct equipment, 13 but they hadn't started doing anything to inform their 14 members about the Moyer program. 15 One member of the AGC heard me and started 16 organizing some seminars around the state to inform 17 members about the Moyer program. I think that's the kind 18 of thing that would be appropriate for these trade 19 associations to do and probably more productive than 20 stirring up their members with misinformation about what 21 this rule does and doesn't do. And I think going forward, 22 the trade associations could play an important rule in 23 helping link CARB to their members to do some analysis 24 about how they -- their members can best comply with this. 25 Thank you. I look forward to seeing a good rule PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 adopted today. And, again, I just want to compliment the 2 staff for the good work they've been doing. 3 Thanks. 4 CHAIRPERSON NICHOLS: Thank you. 5 Ms. Weiner, Mr. Oxley, followed by James Thomas. 6 MS. WEINER: Good afternoon. My name is Linda 7 Weiner, I represent the America Lung Association of 8 California. And we're here today to express support for 9 this regulation. We believe it to be cost effective, 10 flexible, reasonable, and affordable. Certainly given the 11 health costs related to the projected pollution. CARB's 12 study says the health of implementing the regulation are 13 substantial, and they are. 14 You've heard -- I won't go through the whole 15 litany of numbers, but, obviously, the long term effects 16 of the premature death and short term and every day 17 effects of asthma, bronchitis, chronic obstructive 18 pulmonary disease, heart disease, and not to forget the 19 680,000 fewer work loss days. With 18 to $26 billion 20 saved in health care costs, whether it's 3 billion or even 21 13 billion in terms of construction costs, you still have 22 a stronger economic health benefit savings, and that's 23 something important to remember. 24 I also don't want to forget in terms of health 25 impact that the health impacts are especially dangerous to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 low income communities that are already overburdened with 2 multiple sources of pollution and often suffer 3 disproportionate health impacts, to say nothing of the 4 workers that work around this equipment day in and day 5 out. 6 Every year, as you can see, new research sheds 7 new light on the impact of air pollution. And as people 8 have already said, in addition to the health benefits, 9 California will not be able to achieve the federal air 10 quality standards for both NOx and PM in 2015 without 11 strong regulations of construction equipment and the cost 12 of being in violation, as you know, is billions of dollars 13 in state transportation funds. 14 We believe there's been a extensive public 15 process, over three years, extensive state outreach to the 16 regulated community with much investigation and 17 recognition of industry issues and concerns, much of which 18 has been written into the regulation now. 19 We would like to say we support the opt-in 20 provision, but, again, if we can be open to all air 21 districts, we would strongly prefer that. We do not 22 support the idea of multi-year targets simply because 23 compliance targets ensure a steady decrease in emissions 24 over the life of the regulation. And this is critically 25 important to reduce the emissions from the oldest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 polluting equipment as soon as possible. Recent surveys 2 showed that over 50 percent of construction equipment is 3 either uncontrolled or the Tier 0 equipment. We also 4 believe proposed regulation currently has the ample 5 flexibility to allow companies a choice of feasible 6 technology. We feel additional flexibility would delay 7 reduction of emissions and this rule has been written, we 8 feel, with generous timelines and incentives. 9 And now for a personal note. I have been 10 involved in the public health arena for 25 years. Much of 11 that in policy. And just to give some historical context, 12 as I'm sure you're aware, any time a new industry sector 13 is regulated, whether it's tobacco industry or auto 14 industry, the claims -- there are claims about cost of 15 compliance and often understandable. But California has 16 always taken the lead by forcing technology with air bags, 17 seat belts, catalytic converters, and other vehicle 18 controls, California has always benefited by taking the 19 lead. As with other CARB diesel regulations, this 20 regulation will provide many more benefits to public 21 health and the cost of the regulation. 22 The public and other industries are already on 23 the hook for cleaning up smog and soot. We feel it is 24 time for the construction industry to do their part and we 25 believe the Board should adopt a strong clean construction PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 goal. And I do want to say thank you to the CARB staff 2 for of your work and to the Board for your endurance. And 3 thank you for the opportunity. 4 CHAIRPERSON NICHOLS: Thank you, Ms. Weiner. 5 Appreciate it. 6 All right. Gregg Oxley, James Thomas, Geoff 7 Boraston. 8 MR. OXLEY: Good afternoon. My name's Gregg 9 Oxley. I'm representing Al Waggoner Construction. We're 10 a general engineering construction in Ripon, California. 11 We've been in business for about 20, over 20 years in the 12 Valley. I wanted to make a comment sitting here listening 13 to the testimony, that I find it interesting that there's 14 been a number of people who have come up and said that 15 this rule, as written, is flexible, it's affordable, it 16 makes sense, although I've heard nobody that makes their 17 living owning and operating heavy equipment say that. 18 Our company, like many others in the Valley, was 19 built one piece of equipment at a time. The company was 20 started by my father-in-law and mother-in-law. And was 21 run on credit cards to begin with. When we talk about 22 equipment turnover rates, we still own and operate the 23 very first excavator and the very first backhoe that were 24 bought by our company. 25 The other thing that scares me about this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 regulation is that, like any other company, we have built 2 up over the years and our equity and ability to bond for 3 jobs is wrapped up in that equipment. The first year that 4 this regulation goes into effect and that equipment is no 5 longer to be able to be sold or purchased in the state of 6 California, that equipment value is going to take a 7 nosedive. Our bankers and our bonding agents are going to 8 be looking at that the first year that it happens. 9 The regulation, as written, is going to force us 10 to comply in two or three possible ways. The first would 11 be taking on new equipment payments. We've looked at our 12 fleet. We've analyzed it. We've talked to the experts. 13 Better than 70 percent of our fleet is Tier 0 and Tier 1. 14 There are no retrofits available. The industry is 15 concentrating on much larger pieces equipment than what a 16 small underground contractor uses or is practical for our 17 industry. A loss of equity, obviously, to the plummeting 18 equipment values. And if we choose to comply by reduction 19 of our fleet size we will also reduce jobs. Because every 20 piece of equipment that I have to retire, I'm going to 21 retire an operator and probably two to three laborer that 22 would follow that equipment around on a daily basis 23 working. 24 To give you an idea, we've analyzed this and 25 we're estimating that the first year of compliance for us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 will take between 250 and $300,000. If we buy a new piece 2 of equipment, we would take it out on two to a five-year 3 loan. Probably, actually, more likely three to five 4 years. We would be forced to do this every year. We 5 simply can't afford it. I'm not going to stand here and 6 say that it's impossible for us to survive with this rule 7 in place, but it makes it considerably scarier of a 8 proposition with this in rule in place. 9 The administrative staff has made reference in 10 their presentations that a lot of these costs will be 11 spread out and I'd like to address a couple of those 12 things real quickly. One is that they would be passed on 13 to the customer. Well, anybody who has been in 14 construction knows that this is an extremely competitive 15 industry in the state of California. Our jobs are won by 16 dollars, not by tens of thousands or hundreds of thousands 17 of dollars. So if we try to pass on the cost of new 18 equipment to the customer, we will simply bid ourselves 19 out of a job. 20 CHAIRPERSON NICHOLS: Mr. Oxley, you are out of 21 time. 22 MR. OXLEY: Am I out of time? Okay. 23 CHAIRPERSON NICHOLS: If you can summarize, if 24 you want to make a last point. 25 MR. OXLEY: Well, I would like to make three PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 recommendations. One would be that if the companies 2 choose to comply by buying newer machines, then the Tier 3 3 machines or above should be excluded from their overall 4 horsepower, that it doesn't penalize them and put a 5 heavier burden on the older machines. 6 Two would be to expand if hours from limited use 7 equipment to over a hundred. 8 And three, if the V-dex technology is that 9 practical, and we can get compliance on a Tier 4 or Tier 5 10 basis with those additions, then why do we have to get rid 11 of those pieces of equipment at all. 12 Thank you. 13 CHAIRPERSON NICHOLS: Thank you. 14 Okay. Mr. Thomas, Jeff Boraston, Ted Stevens. 15 MR. THOMAS: I'm James Thomas with Nabors Well 16 Service. I'd like to thank you for the opportunity to 17 speak. I'd like to start with talking about the early 18 repowers in the regulation. It has a credit for repowers. 19 And you get it on NOx, but you do not get it on PM. And I 20 would like to note that the reductions that my company is 21 experiencing is 71 percent in NOx and 80 percent in PM, 22 yet we don't get any credit or there's no credit built in 23 the regs for PM. 24 So, today, I want to try to bridge some of the 25 differences I keep hearing as I'm sitting in the audience. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 First of all, I've heard, talking about passing this cost 2 on to your competitors. I'd like to tell you what happens 3 in the real world. When you walk into the marketplace, 4 you walk in to get bid on your portion of that business. 5 And while you're there, you're like me, a large fleet. 6 And there beside you is a medium fleet and a small fleet. 7 And we're going pass this cost on to these people. As a 8 large fleet, you will not pass the cost on until five 9 years, whenever the field levels and it's a level playing 10 field for all, then you can pass on the cost. So that is 11 one thing. 12 The next thing I keep hearing, well, you can buy 13 new equipment. Well, I'd like to tell you about any 14 industry. Between 1984 and 2005, that's a 21-year period, 15 not a single workover rig was built. So, if that's true, 16 the only opportunity we have is for repower. I am proud 17 of my company. We have repowered 72 percent of our fleet 18 today. And of that 72 percent and with that 72 percent, I 19 cannot comply with this regulation. 20 I'd like to talk about the cost of repowers. And 21 here's the disconnect between the analysis. Now, I didn't 22 do, I didn't run a program and I didn't do any 23 spreadsheets. I just looked at my fleet. When you look 24 at the staff report on page 41, they say that if you're a 25 large fleet between the ages of 20 years and greater, that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 the cost for compliance in this regulation is between 110 2 and $180 dollars per horsepower. Well, I'm here to tell 3 you, when you repower 72 percent of your fleet, you kind 4 of learn. And in that process, it cost us $330 to repower 5 that engine. And that's a 450 horsepower engine. And 6 staff will tell you, well, the difference is, is JT, they 7 called me JT, JT's cost, is he has a transmission in 8 there. Well, guess what? You have to have a 9 transmission. When you have an engine that doesn't marry 10 up to the transmission, then you have to have a 11 transmission. So the cost is different. You have to 12 engineer. You have to cut the frame. You have to put in 13 larger radiators. But we're doing it. We're going from 14 Tier 1, Tier 2, Tier 3. And whenever Tier 4 comes out, 15 we'll go to that. 16 The last thing I want to talk about is V-dex. 17 And this is where the biggest disconnect. And this where, 18 as an end user, I'm petrified. First of all, we've got a 19 quote, for 450 horsepower engine, is $23,00 for my V-dex 20 to go on that engine. That's 51 horsepower. 21 Now, the HUSS guy was here and he said that you 22 can operate for two hours and then you can generate. 23 There's a small problem. I operate ten to 12 hours a day. 24 So if I operate two and regenerate 30 minutes, and operate 25 two and generate, I'll never get home. I'll never get PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 home. 2 The next thing is he, you talk about the useful 3 life, you talk about the useful life of these, these 4 filters. They're warranted for 4,200 hours. I have an 5 engine today that has 36,000 hours. How many filters is 6 it going to take to put on that unit. The HUSS man, if 7 you notice, had two on the 450 horsepower engine and he 8 could operate two hours. Am I'm going to have to have 9 four. Are they going to operate for 15,000 hours and then 10 I have to do it again. 11 CHAIRPERSON NICHOLS: Excuse me, sir. 12 MR. THOMAS: That's the difference between these 13 regs. 14 CHAIRPERSON NICHOLS: Okay. Thank you. You 15 ended just about as the bell was about to ring. 16 Geoff Boraston, Ted Stevens, Richard Taliaferro. 17 MR. BORASTON: Good afternoon, my name is Geoff 18 Boraston, and I represent Granite Construction Company. 19 We're a California based contractor. We've been here 20 since 1922. We probably own one of the largest fleets in 21 California represented here today. 22 In concept, we're in full support of a regulation 23 like this. We think it's in everybody's long term 24 interest, including industry's long term interest. 25 With respect to the, you know, specific language PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 that's before the Board today, we do have a few concerns. 2 One concern, you know, towers over all the other concerns. 3 And that's basically that we don't know how we're going to 4 do this. And you've heard this from other contractors, 5 today. Our first targets are March 1st, 2010. That's our 6 first compliance deadline. To ramp up for compliance, we 7 need to be able to start installing V-dex early next year, 8 early 2008, and that's coming fast. I mean my daughter's 9 in school in three weeks. This year is going by very 10 quickly. And to start implementing a compliance program, 11 we need to have a selection of V-dex that we can install. 12 That selection is not there right now. And in order for 13 us to plan for compliance, we need to have an assortment 14 of V-dex, so the V-dex can be best suited for the machine 15 application. 16 And there is an off-ramp in the regulation 17 related to the safety. It's a very narrow off-ramp. It 18 is certainly not enough to satisfy our concerns. 19 We have, you know, we're fortunate enough to have 20 a -- really a first-class equipment department. And these 21 guys are very sophisticated. They're very technical. 22 They're engineers. They know the equipment. They know 23 the businesses. We've researched the V-dex. We also have 24 an operation in New York, and working out of the New York 25 Trade Center and other locations in Manhattan. We have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 contract there. And we're running some of these diesel 2 particulate filters. We have experience with them. And 3 in summer, they're a problem. I mean this is not a simple 4 just slap it on and make it work. And, but incidentally, 5 these, these devices that we can use in New York, we 6 cannot use them in California. They're not verified by 7 CARB. And we're in a situation where we're dependent on 8 CARB approving a regulation to create a market to attract 9 vendors to the marketplace and go through the verification 10 process. And that takes time. And if there is an 11 appropriate selection of V-dex available, we're certainly 12 willing to employee them. 13 But as things sit right now, we cannot come up 14 with the plan for complying with this regulation. And in 15 the time frame that we have between now and the time we 16 need to start installing these V-dex, which would be early 17 2008, we don't see how we're going to get there. And that 18 is probably the crux of our most serious concern. 19 The second one, which we voiced again and again 20 is ensuring that there's a level playing field. This 21 regulation is very burdensome on contractors. There is 22 180,000, over 180,000 pieces of equipment out there that 23 are going to be difficult to find. And it's expensive 24 enough that companies could gain a competitive advantage 25 but not being in compliance. And that doesn't include the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 people here today. The people that are here today are 2 here because they intend to be in compliance. But this is 3 an extremely small minority of equipment owners in 4 California. 5 And so we believe that the enforcement mechanism 6 in the proposal, today, the language, really is not strong 7 enough. We think there needs to be much stronger 8 enforcement. 9 And lastly, with respect to the SOON program, 10 this is an 11th hour deal that's just recently come 11 through. It's really not right for consideration. It 12 hasn't been thought through. It hasn't been vetted. 13 There's certainly been no workshops on it. And we would 14 recommend to the Board that that proposal needs further 15 consideration before it's adopted. 16 CHAIRPERSON NICHOLS: You're out of time. 17 MR. BORASTON: I'm out of time? Okay. And that 18 was the last point so -- 19 CHAIRPERSON NICHOLS: Oh, excellent. 20 MR. BORASTON: -- perfect timing. 21 CHAIRPERSON NICHOLS: Well done. 22 MR. BORASTON: Okay, thank you. 23 CHAIRPERSON NICHOLS: Thank you. Appreciate your 24 comments. Do you have a suggestion -- I guess I'm going 25 to ask you a question, it'll give you one more second. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 Excuse me. There's one more question about the 2 enforcement issue. What -- do you have a specific 3 suggestion on what you want to see in the way of the 4 strengthened enforcement program. 5 MR. BORASTON: We had made a suggestion that 6 there be periodic third party verification of the 7 compliance reports. And this could be in the form of, you 8 know, spot checking equipment against the inventories. It 9 may not be a matter of checking every piece of equipment, 10 but something like an accountant checks your books where 11 they do spot checks. 12 CHAIRPERSON NICHOLS: Uh-huh. Okay. Thank you. 13 Thanks. 14 All right. Mr. Stevens, Mr. Taliaferro, Adam 15 Harper. 16 MR. STEVENS: Good afternoon. My name is Ted 17 Stevens. I'm an employee of Blue Mountain Minerals. I 18 believe we're the first mining company that you've heard 19 from today. 20 CHAIRPERSON NICHOLS: That's true. 21 MR. STEVENS: I'd like to tell you about the 22 uniqueness of our situation and ask for your help in 23 dealing with that. We own and operate a dolomitic 24 limestone quarry in Tuolumne County. We employ 60 people. 25 Because of the nature of our operation, we're a small PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 company with very big equipment. Unlike a lot of the 2 construction fleets you've heard about. We also operate 3 in a low population county. 4 We have worked with staff several times. We're 5 one of the companies that you heard about that met with 6 them and shared our fleet information and they were very 7 helpful with us. We thanked them for their time and their 8 effort in explaining to us how to use their models and we 9 worked to model our compliance with the rule. 10 Unfortunately, we never reached a consensus on the cost. 11 I'm not going to repeat -- we have a very similar story 12 that you've heard from everyone else today in terms of the 13 cost. 14 One of the uniqueness we have is that our prices 15 are not set by bids. They're -- our products are low cost 16 and they are dependent on transportation. We can't ship 17 very far. We're one of the very handful of mines left in 18 California that produce this material. And we have very 19 long term price commitments with our customers. They're 20 in glass manufacturing, farmers. We sell -- that's used 21 to reduce sulphur emissions, things like that. So we 22 believe that the estimates that you've heard today don't 23 apply to us in terms of the ability to pass on costs. 24 And, also, we second or third all of the comments made 25 earlier that we believe the cost to comply with the rule PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 would be more than the models that we work with staff 2 with. 3 So we're going to prepare ourselves to pay more. 4 And it's going to cost more to comply with the rule. 5 So what we'd ask for your help in is, we believe 6 that the rule already recognizes there are special unique 7 circumstances. And, for example, you've already said in 8 captive attainment areas, they have different compliance 9 requirements. We'd ask that you extend the captive area 10 attainment to our county. This is supported by our Air 11 Quality Control Board and our Assemblyman and our Senator 12 as well. 13 CHAIRPERSON NICHOLS: That's Tuolumne County. 14 MR. STEVENS: Tuolumne County. This would give 15 us a few additional years to be able to prepare and comply 16 with the rule. That's all we're seeking. And another 17 alternative would be to, in low population counties, where 18 the fleets are completely captive in those low population 19 counties, like us, our resources are there, we can't want 20 move anywhere else. And in recognizing that our fleets 21 are higher horsepower than in general, we would ask that 22 you consider an amendment that would increase the 23 horsepower in low population counties so that we could 24 become a small fleet. That would give us a few additional 25 years to be able to pass the financial burden that we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 expect of the rule. 2 Thank you for your time. 3 CHAIRPERSON NICHOLS: Thank you very much. 4 Okay. Richard Taliaferro, Adam Harper, Howard 5 Cooper. 6 Mr. Taliaferro? Mr. Harper? Mr. Cooper. 7 Becky Wood, followed by Bradley Reed, and Dave 8 Louden. 9 MS. WOOD: Good day. I represent Teichert. We 10 are a mining and contracting firm that operates in the 11 Central Valley. We've been involved with some of this 12 rulemaking actually since the late 1980's when the diesel 13 risk was being discussed. And in 2000, when the diesel 14 risk plan was adopted, a lot of companies who knew about 15 it and realized the impact it was going to have had two 16 different choices that they could make. Some chose to do 17 absolutely nothing short of the bare minimum that they had 18 to, to keep operating, waiting to see how this all played 19 out and how it would affect their business. Others of us 20 chose to do everything we can to clean up our fleets. 21 Teichert, I believe, has one of the cleanest 22 fleets in the state. We have less than ten percent Tier 0 23 engines. And with that, we still do not meet the PM 24 requirements in this rule, as they are extremely 25 aggressive. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 So that does cause us some concern. Staff's own 2 examples in the handouts show the different cost impacts. 3 And even by their own examples, the very cleanest fleet 4 with the newest equipment suffers the greatest economic 5 impact due to this rule. And that just seems a little bit 6 inherently unfair that that would be the result of trying 7 to do early implementation when you knew that diesel was 8 an issue. 9 We also have a concern operating in the Central 10 Valley where ozone is a huge health risk. The diesel 11 particulate is a chronic exposure. It as a 70-year 12 exposure that causes issue. Ozone causes lung damage in 13 small children immediately. So, and we really feel that 14 this rule sacrifices a lot of ozone reductions early on in 15 favor of the particulate reductions which, I agree are 16 very important, but require a longer exposure to in order 17 to have the kind of health impacts that people are talking 18 about. So I would really like to see the ozone provisions 19 of this strengthened, if at all possible. 20 The other problem, which Granite brought up, the 21 availability of V-dex that you can use in Europe. They 22 are approved in Europe. They are approved in New York. 23 They are approved by Federal EPA. We can't use them here. 24 So that does limit the available pool that we have. 25 And then because of these costs differences and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 the greater impact on the cleaner fleet from a cost 2 standpoint, we start with -- we start with equipment that 3 has higher depreciation on it, and so, you know, our costs 4 just start out higher. And if there's not even 5 enforcement of this, then we're really going to be at an 6 economic disadvantage. So enforcement is going to become 7 very, very crucial. 8 CHAIRPERSON NICHOLS: You've used up your time. 9 MS. WOOD: That's it. 10 CHAIRPERSON NICHOLS: Thank you. 11 MS. WOOD: Thank you. 12 CHAIRPERSON NICHOLS: And we do have your written 13 testimony. Thank you very much. 14 MR. Reed. 15 Mr. Louden. And then Jose Escobedo, Tara Haas, 16 Mark Watts. 17 MR. LOUDEN: Thank you, Madam Chair. Dave Louden 18 with the California Professional Association of Specialty 19 Contractors. We represent approximately 500 trade 20 contractor and supplier companies throughout the state of 21 California. 22 First issue I would like to bring up on the 23 nonprofit trading center language. Gentleman addressed it 24 earlier. CALPASC, along with many other trade 25 associations, are a 501(c)(6). So if you could also add PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 that to your definition, that would help us tremendously. 2 One issue our association's brought up in the 3 past is, well, it's real obvious the lack of consensus 4 between the industry folks and the staff here. And what 5 we would recommend is that this Board and the staff 6 contact your counterparts over at Cal OSHA. Cal OSHA has 7 been very effective with their advisory committee process. 8 You've seen various regulations move through that process. 9 And with those regulations, you've seen a significant 10 amount of consensus between all the various stakeholders, 11 be that labor, management and staff of the various 12 regulatory agencies as well as those in the environmental 13 community. So we would definitely challenge this body to 14 contact those folks, may be employ some of their best 15 practices. And maybe that will help incite or create some 16 consensus in the process. 17 And then finally, just like to address that CIAQC 18 has brought to the attention of the triennial compliance 19 component. CALPASC feels strongly that this component 20 would aid significantly in allowing the industry to comply 21 more effectively, and we would ask this Board to examine 22 that when making your vote today. 23 Thank you so much. 24 CHAIRPERSON NICHOLS: Thank you. 25 Jose Escobedo, are you here? Tara Haas, followed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 by Mark Watts, and Wilkie Talbert. 2 MS. HAAS: Hi, good afternoon. My name is Tara 3 Haas, and I'm the Director of Government Relations for the 4 Engineering and Utility Contractors Association. And, 5 yeah, we're one of those apathetic trade associations that 6 was mentioned earlier. So I'm going to have to address 7 that comment, because it's my job to make sure that our 8 members are aware of what's going on and that they're able 9 to comply. That's what I do everY day. 10 And I can tell you that I know all of the trade 11 associations that are represented in this room. It's us, 12 it's AGC of California, it's the Engineering Contractors 13 Association in both Northern and Southern California, it's 14 the Engineering and General Contractors in San Diego, and 15 it's the Southern California Contractors Association. And 16 I can tell you that every single person on their staff is 17 aware and is making their members aware of what's going 18 on. 19 And EUCA has taken a further step by contracting 20 with a compliance assistance firm to make sure that our 21 members are able to take advantage of the opportunities 22 out there for early compliance and for compliance 23 assistance along this whole regulation time frame. 24 So I want to just make sure that you understand 25 that we're doing everything that we can as the staff is. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 I hope to make the members that are going to be -- or make 2 the members of this industry that are going to be subject 3 to this rule aware of what's going on. 4 Another thing that I wanted to bring up was that 5 there was only nine fleets that they had referenced in the 6 presentation this morning, and I just wanted to be clear 7 that those were the nine fleets that were analyzed. But I 8 talked to some of the other apathetic trade association 9 representatives here, and I counted, you know, over 50 10 fleets that have been submitted to staff. I don't know if 11 all of the information was adequate. I know in some cases 12 of the fleets that I submitted, that they, our members 13 were not able to get the cost information because they 14 weren't able to get it from the manufacturer or there was 15 no retrofit available or they didn't know how they were 16 going to comply. So we have been cooperative in providing 17 feedback to CARB staff. 18 CHAIRPERSON NICHOLS: I think we could stipulate 19 that those nine just happened to be the ones that were 20 there, that made their information available. But we 21 can't consider them to be representative, particularly. 22 They were just people who spoke up and, therefore, they 23 got analyzed. 24 MS. HAAS: And that's great. And I'm 25 appreciating that you're saying that, because I know Downs PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 was looked at possibly as a worst case scenario, and I've 2 seen worse. So -- 3 CHAIRPERSON NICHOLS: I'm sure Mr. Downs will be 4 happy to hear that. 5 MS. HAAS: Anyway, we represent 250 or so, all 6 union, heavy construction contractors throughout the 7 western United States. So I've had a little experience 8 with this. The only thing that I wanted to mention are 9 two things, which is that we do support the idea of 10 increasing the low use hours because that will help some 11 firms that are just on that borderline. 12 And, also, I was wondering if this has been 13 considered. Has there been a cost comparison of the cost 14 to this industry for cleaning up the particulate and NOx 15 emissions versus who else is emitting these emissions? 16 So, for example, is this industry bearing more of the cost 17 to reduce those emissions than they are actually putting 18 in it? I think that's important to note. 19 And I also want to add that in a down 20 construction market like we're in right now, and probably 21 won't pick up, you know, cross my fingers that it will, 22 but it not pick up for a while, you're looking at a 2010, 23 2009 and 2010 deadline at this same time that the portable 24 engine rule, all those Tier 0s have to go away. So you're 25 double-dinging the same industry to clean up the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 emissions. And I just think it needs to be noted. 2 Now, then, you go over and you ask, you know, the 3 Governor's office and people on the other side of the 4 street, and they're looking at expanding the industry. 5 The industry capacity expansion. You know. We just 6 passed all these bond measures. Okay, great. But it 7 hurts fleets to expand. If you're a medium fleet, you 8 don't want to become a large fleet. There's no incentive 9 for you to want to grow your company in this -- under this 10 regulation. It's what, CARB staff, I have to argue with, 11 by saying that increasing your horsepower will help you 12 meet this regulation and this's not true. I think you 13 have to look at each fleet and make an analysis there. 14 But overall, I would say that that's not true. 15 So, that's all I want to say. 16 CHAIRPERSON NICHOLS: Thank you, Ms. Haas. 17 MS. HAAS: Thank you. 18 CHAIRPERSON NICHOLS: I extended your time 19 because I've interrupted you, but you're at your end. 20 MS. HAAS: I appreciate it. 21 CHAIRPERSON NICHOLS: Thank you. 22 Staff, do you want to address the issue of the 23 relative cost effectiveness of this rule or the relative 24 burden? Do you -- I know you may -- you have a figure in 25 the staff report that gives a range of cost effectiveness. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, I 2 think there's a number of ways of looking at, but, 3 clearly, in this case, the benefits were upward of 4 $20 billion and the cost are three and a half billion 5 dollars. So I would say that from a cost benefit 6 standpoint, they're not being disproportionately impacted. 7 Yes, there's a rule on some of the other 8 equipment that these people own, but it's really not any 9 different than if they were included in this rule. I 10 mean, there's a piece of equipment that has to have 11 something done it to it under the portable rule and 12 there's pieces of equipment that are not under the 13 portable rule that are under this rule that have to have 14 things done to them. And so I -- 15 CHAIRPERSON NICHOLS: It's not the same piece of 16 equipment that's getting two rules. It's the business 17 that was -- 18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: So, it 19 is, you know, it's got complexity, two different rules, et 20 cetera, but it isn't like it, we're doing something twice 21 to the same twice of equipment. 22 CHAIRPERSON NICHOLS: Right. 23 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And I 24 guess the industry that has not had to face this kind of 25 rule, so far, is the trucking industry. And we're working PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 on that for a rule next summer. So -- and then after 2 that, there's the agriculture industry. So, but other 3 than that, everybody, you know, we've adopted six or eight 4 different rules so far for narrower sectors like trash 5 trucks, buses, portable equipment, stationary engines, et 6 cetera, that are all facing the same kind of -- 7 CHAIRPERSON NICHOLS: The Board hasn't been 8 slacking off on adopting rules. 9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. 10 I mean it's hard to say it that way. You know, gee, we 11 want to get everybody. That's not the point. But the 12 point is that I think there's an equitable approach to 13 trying to put similar requirements on all the various 14 sectors until we meet our emission reduction goal. 15 CHAIRPERSON NICHOLS: I appreciate that. 16 Okay. Mark Watts, are you here? 17 Wilkie Talbert, are you here? Yes, you are. 18 Okay. Followed by Ron Turner and Ted Costa. 19 MR. TALBERT: My name is Wilkie Talbert. I'm -- 20 I live in Red Bluff in Northern California, in Tehama 21 County. I'm a member of the Tehama County RAC, the 22 Resource Advisory Committee in forestry issues, and a 23 nonprofit CHC, Citizens for a Healthy Community. 24 My subject is the availability of biodiesel. 25 There was a term, pyrolysis. Pyrolysis is often applied PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 to a high temperature process that involves a plasma arc, 2 basically using a welding torch to do things. And that's 3 a subject of another discussion with the Board. But not 4 my topic today. 5 My topic today is flash pyrolysis that is at a 6 very much lower temperature, on the order of, oh, 504, to 7 500 degrees C. It's a process that uses the forest wastes 8 and agricultural wastes as feedstock. So they're 9 relatively low cost and fairly widely available. 10 And the -- and more importantly, there are no 11 pollutant elements involved in these wastes. So the 12 product of any process involving them also does not have 13 the chlorines and sulphurs and other pollutants. 14 The process itself yields a bio oil and a char. 15 The bio oils immediately can be used for heating oils, 16 fairly low level of technology. With some refinement, 17 they can be a moderate quality diesel, biodiesel, and with 18 more sophistication, a very high quality biodiesel. But 19 that requires a Fischer-Tropsch process. It's somewhat 20 more expensive. 21 Basically, the flash pyrolysis to develop the bio 22 oils are ones that deal with wood and cellulose. The 23 material is reduced to a fairly fine product, thrown in an 24 oxygen-free environment against a heated steel surface, 25 instantly liquefies and vaporizes and is then condensed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 all within about two seconds. 2 CHAIRPERSON NICHOLS: Mr. Talbert, you've used up 3 your time. I'm sorry. 4 MR. TALBERT: Yes. 5 CHAIRPERSON NICHOLS: I know you have information 6 you want to give us about biodiesel, but if you could 7 possibly submit something in writing, that we'd be happy 8 the add to the record. 9 MR. TALBERT: I will submit written material. 10 And I think the essential thing is that this is a process 11 that does yield, that can yield high quality biodiesel and 12 also can be developed in rural communities. 13 CHAIRPERSON NICHOLS: Right. No, I understand. 14 It's a very useful suggestion. 15 Ron Turner, are you here? Ted Costa, are you 16 here? Yes. 17 MR. COSTA: Hello. Thank you very much for the 18 opportunity. I'm with People's Advocate. We're a 19 California corporation doing business here in the state of 20 California. We represent the people who pay the bills. 21 We don't make any bones about that. And we have like 22 about 40,000 members, right about that, and 300,000 people 23 on our mailing list here in the state of California. 24 We've done 13 statewide initiatives and the voters, in 25 their wisdom, have passed ten of those into law in this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 state. 2 I'm very concerned, because -- I apologize, I'm 3 getting here late, because I don't really keep up on this 4 Board. But I've had a lot of calls from my members. And 5 they're very concerned. And what I heard here this 6 morning -- two things that have not been answered that the 7 people have stated this morning. One man actually got up 8 here and said that he would double the salary of any of 9 you to go to his place, implement this thing with him not 10 going bankrupt, and that hasn't been answered. That's 11 confiscatory. I go back to my Board and I tell them that. 12 Don't smile, because that's very serious. This is 13 confiscatory. 14 Now, the second thing is that, is this a taking? 15 I think this is going to be before the judges, folks. You 16 -- I've never seen a people more put out than this group 17 to come before you today. We hear about catalytic 18 converters and everything. But remember, the old cars 19 were grandfathered in and just the new ones came in. This 20 is much different. And when I go back to my Board, 21 they're going to be very upset, folks, and I think there 22 ought to be a cooling down period. I just went out there 23 during the break and I joined stopwork.org, and I hope 24 everybody does and I hope these people organize. You're 25 taking on the wrong group. These are people of means, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 they aren't going to just lay down and go out of business 2 and go bankrupt. They're not going to do that. 3 So I -- you need a fresh look at the economics of 4 this. Can these people stay in business and implement 5 your thing? If they can't, it is confiscatory, and we're 6 in a collision course between the taxpayers of this state 7 and your Board. 8 All right? I'm sorry to bring you that news, but 9 that's about what it is. Thank you. 10 CHAIRPERSON NICHOLS: Okay. Thank you for your 11 comment. 12 Alex Kelter, Dr. Keller, followed by Martin 13 Lassen, followed by James Atkins. 14 DR. KELTER: Thank you, Madam Chair and members 15 of the Board. My name is Alex Kelter. I'm a physician 16 and epidemiologist, just retired from 24 years in the 17 state health department. I'm here today because of my 18 affiliation with the American Lung Association and the 19 Sierra Sacramento Valley Medical Society, both of whom 20 signed a letter to the Board, which I believe is in the 21 record, urging the adoption of a very strong regulation to 22 protect public health. 23 At this time of the day, I'm not going to repeat 24 a bunch of testimony about what the health effects are of 25 toxic air contaminants, criteria pollutants and particles. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 But what does give me a sense of urgency about, 2 particularly the construction equipment regulations, has 3 to do with what I see as the changing pattern of 4 development for the next century. Unlike the experience 5 of the past century, almost, ultimately almost all new 6 development in California will wind up occurring where 7 there is already development. So that means construction 8 equipment is going to be much more proximal to vulnerable 9 populations than ever before. 10 As we urge that farmland and habitat be preserved 11 and that we try to find homes and businesses and schools 12 and workplaces for 36 million more Californians by 2060, 13 the requirements to do that and still improve our 14 environmental footprint means that virtually all new 15 development will some day have to occur where there is 16 already development. And so that means under our very 17 noses. It means next door to hospitals, nursing homes, 18 child care centers and schools, churches, businesses, 19 offices, gymnasia, et cetera. Not out in the middle of a 20 cotton field. 21 So these emissions will not just be averaged over 22 air basins, but there will be hot spots. And as this 23 pattern of development continues, it increases the sense 24 of urgency I have to assure that this construction 25 equipment is as clean as possible to protect public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 health. 2 Thank you. 3 CHAIRPERSON NICHOLS: Thank you, Dr. Kelter. 4 Thanks for sticking with us. 5 Martin Lassen, followed by James Atkins, and 6 Rafael Aguilera. 7 MR. LASSEN: Good afternoon, Madam Chair and 8 members of the Board. My name is Marty Lassen, and I'm 9 the Director for Commercial Development for Johnson 10 Matthey's Heavy Duty Diesel Group. I want to thank you 11 for the opportunity to make comments on this rule. 12 Johnson Matthey is a technology company that has 13 been providing advanced catalytic solutions to reduce 14 emissions for over 30 years. We worked with both ARB and 15 the EPA to provide new technology to reduce emissions from 16 both mobile and stationary sources. Johnson Matthey fully 17 supports your goals in the diesel risk reduction program. 18 Johnson Matthey has existing business 19 relationships with a number of North American engine OEs. 20 We're a major suppliers of emission control technology for 21 EPA's 2007 on-road rule and we are working with the engine 22 OEs for the second phase for 2010. At the same time, 23 we're working with a number of non-road OEs, both engine 24 and machine manufacturers, to provide technology for the 25 EPA's non-road rule coming effective for Tier 4 engines. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 With regard to retrofit, Johnson Matthey 2 technology has been verified by both ARB and the EPA for 3 on-road engines. Additionally, Johnson Matthey technology 4 has approval from a number of other governmental bodies in 5 both Europe and the Far East. And this is both for 6 on-road engines as well as non-road engines. In fact, 7 we've retrofitted over 150,000 vehicles over the last 8 20 years. 9 Johnson Matthey has several verification 10 applications in place with ARB for technology that reduces 11 both PM and NOx from non-road machines. We recognize that 12 non-road applications are not the same as on-road 13 applications. Do we think retrofitting non-road vehicles 14 will be easy and straightforward? Maybe it will be easy 15 on some applications, but certainly not on all 16 applications. There is no doubt that special attention 17 will be have to be paid to such things as duty cycles, 18 space constraints, line of sight safety, vibration, and 19 other issues specific to non-road machines. And in some 20 cases, we may not be able to retrofit machines at all. 21 We know that uncertainty is not a good thing for 22 business. My business or the businesses that are 23 represented here. However, we are confident that with a 24 targeted effort, smart engineering, and the right 25 technology, there will be solutions for non-road PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 retrofits. 2 Thank you. 3 CHAIRPERSON NICHOLS: Thank you. 4 BOARD MEMBER RIORDAN: May I ask just a quick 5 question, Madam Chair? 6 CHAIRPERSON NICHOLS: Yes, please. 7 BOARD MEMBER RIORDAN: Your verifications, are 8 they in progress right now with us? 9 MR. LASSEN: Yes, Ms. Riordan, they are, for both 10 NOx and PM. 11 BOARD MEMBER RIORDAN: Great. 'Cause obviously 12 you've heard today, and I hope you can take back to your 13 company, that there is real strong desire to have some, 14 you know, equipment available to some of these companies 15 almost immediately. 16 MR. LASSEN: Absolutely. And with the certainty 17 of this rule in place, the business case is there to do 18 that. So thank you. 19 BOARD MEMBER RIORDAN: Great. Thank you. 20 CHAIRPERSON NICHOLS: James Atkins, Rafael 21 Aguilera, Don Anair will be following them. 22 MR. ATKINS: I'm James Atkins with Cobra 23 Equipment Rental Company. I'm born and raised in 24 California. We have a small family-size business. We 25 have 20 machines, but they're all twin engine scrapers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 We have a total of 19,000 horsepower. So, therefore, 2 we're lumped into the group of large, and I don't really 3 think that's fair. Being a rental company, we gross about 4 five to five and a half million dollars a year. I just 5 received some Carl Moyer funds. It's going to cost $1.7 6 million to repower 25 percent of our machines. So I don't 7 know how adding one percent is going to cover our cost. 8 We're -- I guess, we'll miss the horsepower 9 limits for the SOON program, so we kind of fit in the 10 middle there. And I really think the rental companies are 11 getting the short end of this deal, because we can't -- 12 you know, we can't add on to our bids. We're just stuck 13 with our base rental base. 14 As far as the V-dex go, on the Tier 3 motors, 15 it's $88,000 for the HUSS system for one machine, for four 16 mufflers. And that's going to cost $5 an hour to maintain 17 the mufflers, also. 18 The Tier 0, someone was asking about that and 19 I've checked. It's going take a total of six mufflers to 20 put on our Tier 0 scrapers for a cost of over $120,000. 21 So I'm asking you to put this off so we can get 22 some more Moyer funding. You know, otherwise, our only 23 business plan is to, to be honest with you, is to start 24 phasing out of state. I mean, there's no way that, you 25 know, the numbers that you guys have come up with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 represent us. 2 Thank you. 3 CHAIRPERSON NICHOLS: Thank you for staying and 4 for giving your testimony. 5 We'll hear from Rafael Aguilera, if you're here, 6 and then Don Anair, Henry Hugo. 7 MR. AGUILERA: Good afternoon, Chairwoman Nichols 8 and Board members. First like to say welcome to 9 Ms. Nichols and look forward to working with you on this 10 and many other things at the ARB. 11 My name is Rafael Aguilera. I'm a consultant, 12 but today I'm here in my capacity as a Sierra Club member 13 and representing Sierra Club California. 14 Just wanted to make some brief comments. I think 15 a lot has been said today. You know, this rule is very 16 important, because it will address significant public 17 health issues in the Central Valley and the San Joaquin. 18 The analysis states that it would benefit the residents to 19 the tune of 18 to $26 billion in public health benefits. 20 Given the ongoing research on super fine 21 particles, I'd like to assert that the benefits would 22 probably even amount to even greater than what they've 23 projected. 24 Also want to say it's a very good reg because 25 it's complementary to clean construction requirements that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 would, hopefully, stay on the table in the budget 2 negotiations that are going on over at transportation, 3 dollars that would be spent. We feel it's complementary. 4 Also want to urge you to take a step further and 5 include the opt-in program for other districts so that 6 they might also take advantage of this program. 7 And I mean, in closing, we just wanted to say 8 that this is very important because without this rule 9 South Coast and the Central Valley will be hard pressed to 10 actually attain ambient air quality standards. We agree 11 with Chairwoman Nichols saying that, you know, we have to 12 move quicker, not slower, and the Governor, that we have 13 to clean up the Central Valley quicker as well. And we 14 urge you to put this proposal into action. 15 Thanks. 16 CHAIRPERSON NICHOLS: Thank you very much. 17 Don Anair. The last scheduled witness was Henry 18 Hugo from the South Coast AQMD, but we do have one sort of 19 anomalous situation, somebody who wasn't here asked to be 20 represented by another person who is here. So Doug Jeffe, 21 are you going to want to testify? 22 MR. JEFFE: Briefly. 23 CHAIRPERSON NICHOLS: All right. Well, then, you 24 can follow Mr. Anair and then we'll hear last from the 25 South Coast District. I think that's fair. Okay. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 MR. ANAIR: Okay. Thank you. Good afternoon. 2 It's been a long day. My name is Don Anair. I'm a 3 vehicles analyst with the Union of Concerned Scientist. 4 And as you heard previously from Kate Lefkowitz, my 5 colleague, we are in strong support of this regulation. 6 She also made comments in support of the opt-in program 7 with South Coast, San Joaquin Valley. And the fact that 8 we would like it opened to other air districts. And also 9 rejecting the notion of a three-year compliance window for 10 these companies. We think that the -- we don't disagree 11 with the flexibility. We do disagree with losing health 12 benefits. And I'll talk a little bit about that more in a 13 minute. 14 We've also submitted comments twice now with over 15 20 health organizations, community organizations, 16 environmental groups, science based groups, who are in 17 support of this regulation and in support of clean air. 18 We've also attached a long with our comments editorials 19 from major newspapers around the state, Bakersfield, L.A., 20 Sacramento, San Francisco, San Bernardino, in support of 21 this regulation. Everyone knows that this equipment needs 22 to be cleaned up. In fact, just today when I was driving 23 up here, heard on the radio, the Public Policy Institute 24 of California recently released their, today, released 25 their survey results of their annual survey of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 Californians. Sixty-eight percent of Californians support 2 stronger environmental standards. Even if they raise the 3 cost of doing business in California. I just want to put 4 that out there. It reaffirms California's strong will for 5 clean air and a healthy environment. 6 Now, I'd like to talk just briefly about the 7 implications of the three-year extension deadline. 8 Basically, it would provide more flexibility. But it does 9 come at a high cost. And that cost is reduction in 10 benefits of particulate matter and nitrogen oxide 11 emissions and those happen throughout the state. 12 And I want to prevent sort of this becoming a 13 false choice between an opt-in program that would use 14 incentive funding to get additional NOx reductions in 15 certain areas of the state, and trading that off for 16 direct toxic PM emission reductions that occur throughout 17 the state and they're local pollutant -- it's a local 18 pollutant. These are pollutants that are in communities. 19 People who live near construction sites are affected by 20 these. It's not just a 70-year cancer risk. There are 21 direct short-term effects of particulate matter. 22 And I think just, in your deliberation today, 23 just to keep that in mind. It's a false choice the 24 tradeoff the health benefits from an opt-in program with 25 moneys that essentially, they're essentially Moyer moneys, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 they would be used to fund other projects if they weren't 2 being used to fund these construction projects. They're 3 not necessarily additional reductions beyond what we would 4 get from an incentive program. 5 I agree with the program, because it does require 6 companies to use the incentive funds. And it will result 7 in emission reductions. I just don't think the tradeoff 8 for direct PM reductions into other parts of the state 9 should be compromised to do that. 10 And I know I'm running short on time here. I 11 just want to reiterate a point that was made earlier today 12 about the language and how it's presented and the option 13 of other states adopting California's regulations. This 14 is critical. I think it's a small change. Staff has 15 looked at it. If that could be included in the 15-day 16 change, be very supportive of that. 17 CHAIRPERSON NICHOLS: You are out of time. 18 MR. AGUILERA: And just, just finally, I want to 19 thank the staff for their dedication and commitment over 20 the last three years. And also to congratulate Tony on 21 his new arrivals. 22 CHAIRPERSON NICHOLS: Okay. Thank you. I think 23 we're going to have do pin-ups of our staff pretty soon. 24 Okay. Doug, why don't you just come forward. 25 MR. JEFFE: I'm Doug Jeffe representing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 Transportation California. And Mark Watts, the executive 2 director sends his apologies, but he's being held prisoner 3 in the Capitol trying to salvage transit moneys. 4 Transportation California is a coalition of 5 business, labor, transportation agencies, automobile 6 clubs, and other members of the transportation community 7 whose mission is to fight for more money for 8 transportation infrastructure. Proposition 1B was one of 9 the major points in Transportation California's platform, 10 if you will, and as you know, it was overwhelmingly passed 11 by the voters. 12 A major purpose, priority purpose of Proposition 13 1B was to improve air quality through relief of traffic 14 congestion, funding of transit, and measures to reduce 15 emissions from goods movement activity. This rule will 16 come into play probably in exactly the wrong time in terms 17 of when the Proposition 1B moneys are being ramped up, 18 when equipment is needed, when contractors are needed. 19 There seems to be a pretty uniform consensus 20 within the transportation community that adequate 21 technology and equipment resources for retrofit are not 22 likely to be there within the next two years. If that 23 happens and equipment is pulled out and contractors are 24 forced to pull back from projects, there are a lot of 25 projects that will benefit air quality that will be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 undermined and delayed. So that in considering your 2 action in the implementation schedule of this, please 3 consider that there are other air quality ramifications 4 that should be taken into amount. Thank you. 5 CHAIRPERSON NICHOLS: Thank you. 6 And now we'll hear from Henry Hogo from the South 7 Coast Air Quality Management District. And Henry, you're 8 going to get the same three minutes that everybody else 9 does. 10 (Thereupon an overhead presentation was 11 presented as follows.) 12 MR. HOGO: Thank you, Madam Chair, and members of 13 the Board. 14 --o0o-- 15 MR. HOGO: For the record, I'm Henry Hogo with 16 the South Coast Air Quality Management District. 17 My comments are limited to the SOON proposal 18 before you today. And the South Coast staff have had a 19 chance to actually put the provisions -- the proposed 20 provisions into the regulatory model that your staff is 21 using to estimate the benefits of the program. 22 --o0o-- 23 MR. HOGO: Thank you. This slide shows the 24 nitrogen oxide benefits of having a SOON Program as well 25 as the proposed statewide regulation. We consider these PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 two to be together, not a separate entity of each other. 2 So when we look at the total nitrogen oxide emission 3 benefits, you'll see it actually adds up to almost double 4 to what the statewide program would get. So we're looking 5 in the South Coast at one program that has the statewide 6 element in it and the SOON element in it. 7 What we found in addition to that if we go to the 8 next slide -- 9 --o0o-- 10 MR. HOGO: -- the benefits of the SOON Program 11 actually cross over into the PM side. As you can see 12 here, the dotted line in green shows a greater PM emission 13 reductions compared to if there were no SOON Program in 14 place in the South Coast. And this actually goes over 15 multiple years all the way out to 2020. So there is some 16 benefits. And it's the way the provisions are written in 17 the SOON Program that gives this greater benefit. 18 Next slide. 19 --o0o-- 20 MR. HOGO: Such as was mentioned earlier by our 21 Governing Board Member Dr. Lyou, that our Governing Board 22 Administrative Committee is looking at putting forward 23 $120 million over the next four years to help out with 24 this program. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 MR. HOGO: We do have some proposed minor 2 revisions to the language that staff has offered in 3 Attachment 1. The first being Section 2449.1(d)(2) that 4 we wanted to clarify the cost effectiveness calculation 5 that we want to ensure that to get the 12 tons reduction 6 mentioned, that we look at the most cost effective 7 projects first. So we would want applicants to submit the 8 most cost effective projects under $5,000 per ton or 9 better. And if the project applicant did not have any 10 projects like that, then we would except all the other 11 projects, but in cost effective order. 12 Next slide. 13 --o0o-- 14 MR. HOGO: And then we wanted to offer some 15 language. And it's suggested addition to Attachment 1 16 relative to this three-year target. As proposed in the 17 SOON Program, we have three-year milestones. We believe 18 that for nitrogen oxide that districts under the SOON 19 Program could have three-year milestones for nitrogen 20 oxides. And as such, we have suggested language in how 21 that could work relative to the statewide program. That's 22 Section 2449, which is Table 1 that shows the NOx targets. 23 Instead of meeting NOx targets every year, it would be met 24 on a triennial basis. 25 However, we do want to keep the PM NOx targets on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 an annual basis. It's very important the way the model 2 works and the way we evaluated the SOON Program, it is 3 assuming that the PM is NOx -- PM targets on an annual 4 basis. So we do not want to see that change. But we are 5 proposing that your Board consider the flexibility of 6 allowing the NOx targets to be three years. 7 CHAIRPERSON NICHOLS: Have you done a calculation 8 on what loss of control that gets you going from one to 9 three years under this program? 10 MR. HOGO: We believe you wouldn't lose much. 11 Because under the SOON Program, the Executive Officer has 12 the ability to require compliance plans. And we believe 13 the compliance plans, the way for fleets to identify 14 either yearly basis, over the three years, how are they 15 going to meet the Base Statewide Program and how they're 16 going to meet the SOON Program. 17 CHAIRPERSON NICHOLS: So you're going to take on 18 the job of reviewing every fleet's annual compliance 19 program or compliance program administratively under this 20 opt-in program? 21 MR. HOGO: At this point, because the fact that 22 we actually will be implementing the funding programs, we 23 do have that reporting provision in the SOON Program. In 24 addition, the Executive Officer can, as stated in one of 25 the provisions that may require compliance plans. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 So we believe working with your staff we can run 2 this program fairly efficiently. Not only that, the 3 fleets have the flexibility of identifying over a 4 three-year period what they're going to do with each of 5 their vehicle or equipment in order to meet these targets. 6 BOARD MEMBER LOVERIDGE: Mary, can I ask staff to 7 comment on both the revision and the addition to the 8 language that -- 9 CHAIRPERSON NICHOLS: Sure. We can do that at 10 this point if you'd like. 11 Is that the conclusion of your testimony? 12 MR. HOGO: My last slide is to urge you to adopt 13 the SOON Program. 14 CHAIRPERSON NICHOLS: Thank you. I thought it 15 was. 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: I think from the staff perspective, I'll speak to 18 the first suggested amendment in regards to changes 19 relative to the cost effectiveness. 20 In conversations we've had with the district, we 21 indicated that it made sense to have some flexibility 22 around that as time went on in case some changes to that 23 number were necessary, since it is hard written into the 24 regulation. I think that makes some sense. So we will 25 take a look at that and see if that's the appropriate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 language. But I think in concept that certainly has some 2 merit to have in there. 3 BOARD MEMBER LOVERIDGE: And this addition. 4 CHAIRPERSON NICHOLS: And this addition of the 5 three-year averaging provision for South Coast or whoever 6 opts in. 7 ACTING EXECUTIVE OFFICER CACKETTE: Well, I think 8 our first read on this is that that language would impose 9 triennial compliance intervals on the ARB Base Plan for 10 NOx as well as on the SOON Program. And so we have this 11 sort of mixed thing. And we have some analysis to I think 12 help you address this issue of intervals if you get to 13 that point. So maybe we could just leave this as sort of 14 contingent right now. 15 CHAIRPERSON NICHOLS: We'll close the hearing and 16 move on to the discussion. 17 ACTING EXECUTIVE OFFICER CACKETTE: I don't think 18 we should have any problem with it in the SOON Program 19 itself. It's when we get down into the Base Program I 20 think there's some choices to be made. 21 CHAIRPERSON NICHOLS: Okay. If it's okay, let's 22 proceed to make sure I'm correct that we have gone through 23 our list. 24 MR. HOGO: Madam Chair, we're not recommending 25 that outside of the SOON Program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 CHAIRPERSON NICHOLS: Yes. Understood. But I'm 2 not sure it can be implemented that way, was the issue as 3 I understood what Mr. Cackette was saying. 4 ACTING EXECUTIVE OFFICER CACKETTE: I was saying 5 I think the language perhaps -- 6 CHAIRPERSON NICHOLS: It's a language issue. 7 ACTING EXECUTIVE OFFICER CACKETTE: -- does that. 8 CHAIRPERSON NICHOLS: Okay. All right. We 9 understand that's not your intent. 10 MR. HOGO: Thank you. 11 CHAIRPERSON NICHOLS: All right. At this point, 12 we are going to conclude the public hearing and move on to 13 discussion of the Board and final action on this matter 14 that's before us. 15 Before we do that, I think the Board members are 16 required to disclose any ex parte communications that they 17 may have had. I think we'll start down on the other end 18 from where we did this morning. We'll start with you, 19 Supervisor Roberts. 20 BOARD MEMBER ROBERTS: Thank you. 21 On April 4th, I met with Building Industry 22 Association Officials San Diego County. And participating 23 in that meeting were Mike Reynolds, Paul Trayon, Mike Shaw 24 and Scott Molloy. And the conversation involved staff 25 proposals including availability of engines in the new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 tiers, repowering issues, and similar issues on the lines 2 of the testimony that we heard in May. 3 On April 5th, I met with the Associated General 4 Contractors of San Diego. And participating in that 5 meeting were John Dunlap, Mike Shaw, Mike Carcioppolo. 6 I'll give you the spelling of that. And -- 7 CHAIRPERSON NICHOLS: This will go in writing 8 anyway. 9 BOARD MEMBER ROBERTS: The items covered were 10 cost and implementation schedules, distribution of engine 11 types, assembly line supply issues, warrantee issues, 12 repowering issues, possible solutions focused on time 13 lines, advantage of new credit for changes of engine 14 fleet, changes of Carl Moyer program, and other similar 15 program. 16 And on April 11th, I had a conference call with 17 the National Electrical Contractor's Association. And 18 participating in that along with staff member Gary Rotto, 19 Karen Prescott from the NECA, and Andre Berg from NECA. 20 And the discussion was about the provisions of the 21 proposed regulations that focused on the impact of the 22 regulations on the evaluation of the on-road diesel 23 equipment and that subsequent impact on a company's 24 bonding capacity. 25 On May 17th, there was a conference call with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 Bonnie Holmes-Gen, the American Lung Association, and Don 2 Anair of the Union of Concerned Scientists. Gary Ratto of 3 my staff also participated in that. And that conversation 4 was about a number of things, including postcards from San 5 Diegans advocating for approvals of the rules, a study 6 conducted by UCS demonstrated health impacts. We 7 discussed the need for regulations and agreed that science 8 supported that we need. Talked about the time lines for 9 adoption. Touched on the economic impacts and analysis. 10 Talked about Tier 4 engines not required in the near 11 future. Discussed the NOx reduction proposal, its effect 12 on South Coast and the San Joaquin Air Districts and 13 whether NOx reductions could go further. Discussed the 14 reasoning for fleet average versus equipment requirements. 15 Discussed whether regulations should have a section on 16 sensitive sites near construction sites. Discussed the 17 possible need for a sunsetting of the low use exemption. 18 And discussed the increased enforcement of the diesel 19 control measure to assure that parties affected are in 20 compliance. 21 On July 12th, I again met with the AGC, 22 Associated General Contractors of San Diego. Brad Barnum 23 Bar and Jim Ryan of AGC and Mike Furby of Marathon 24 Construction were in the meeting with a discussion of the 25 CIAQC proposal, including maintaining period goals while PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 creating flexibility on an annual basis and goals for 2 2025. Gary Ratto of my staff was also in that meeting. 3 On July 17th, there was a call with Don Anair, 4 Union of Concerned Scientists, and Kathryn Phillips with 5 Environmental Defense. Gary Ratto of my staff 6 participated in that. And that concerned the new staff 7 proposals and the dates of compliance. And I think 8 generally the conversation was along the lines of their 9 presentation here today. 10 That does it. 11 CHAIRPERSON NICHOLS: Okay. 12 BOARD MEMBER LOVERIDGE: Supervisor Roberts said 13 he'd be brief. I will be briefer. 14 May 21st, a condition conference call with Don 15 Anair and Joe Lyou. 16 Phone call on July 19th with Don Anair. 17 Phone call yesterday from Mike Duval. 18 Sorted conversations with Barry Wallerstein. All 19 comments are sort of consistent related to what we heard 20 today. 21 CHAIRPERSON NICHOLS: Thank you. 22 BOARD MEMBER SPERLING: May 3rd, I met in Davis 23 with Kathryn Phillips, Environmental Defense; Diane 24 Bailey, NRDC; and Don Anair regarding the testimony 25 they've presented today, the same issues. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 July 12th, with Jane Lea representing Job Corp. 2 And her concerns have been dealt with by the staff 3 proposal I understand. 4 Conference call with Diane Bailey, NRDC; Don 5 Anair, Union of Concerned Scientists on July 18th 6 regarding their testimony. The same issues that 7 Supervisor Roberts described. 8 And July 18th, a call with John Dunlap and Mike 9 Lewis about the issues that were much discussed today. 10 BOARD MEMBER RIORDAN: Madam Chair, on the 24th 11 of April and July 25th, I met with Kathryn Phillips from 12 Environmental Defense here at the Air Resources Board in 13 Sacramento. Much of our discussion mirrored her testimony 14 today. 15 In April, I met with Steven Matich, Matich 16 Construction, and Mike Lewis from CIAQC regarding the 17 request for flexibility for this rule. 18 On May 9th and July 6th, I met with John Dunlap 19 and Mike Lewis again with CIAQC representing CIAQC, and in 20 El Monte once and in Redlands the other time. And very 21 much mirrored their request for flexibility. 22 And on May 29th, I received a call from Larry 23 Jacinto, Larry Jacinto Construction. And that led to a 24 meeting with staff on July 3rd where we visited the 25 construction company and looked at their equipment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 records. And we met with Larry Jacinto, owner; Eric 2 Nixon, Executive Vice President; Doug Straw, equipment 3 manager; and Steve Hopkins, who is the financial officer 4 for that company. 5 On June 20th, I met with Dave Porcher and Shane 6 Gara of Camarillo Engineering in Los Angeles prior to our 7 meeting there in Los Angeles as I say on June 20th. Much 8 of their comments mirrored their testimony today. 9 I met on July 5th in Redlands with Mr. and 10 Ms. Gordon Downs of Downs Equipment Rental. And what we 11 spoke about was mirrored in Mr. Down's testimony today. 12 Received on July 15th a call from Steven Matich, 13 Matich Construction regarding the workshop on July 16th. 14 And on July 16th, I spoke to Tom Aja and Tom 15 Prescott, Operating Engineers Local District 3 regarding 16 the apprentice program and the Jobs Corps. program which 17 we have discussed. And we have essentially taken care of 18 their issue. 19 On July 23rd, had a call from John Dunlap and Bob 20 Roberts representing the California Ski Industry. And I 21 think those issues were well represented in the testimony 22 today. And response from staff seems to have alleviated 23 their concerns. 24 And on July 25th, I had a field trip to the 25 Sacramento Landfill to view retrofitted equipment that was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 operating there. The tour essentially was sort of led by 2 Rick Jesse from Cummins/West and Steven Utterback from the 3 landfill staff. 4 And on July 25th, I had a follow-up call from 5 John Dunlap regarding CIAQC's response to final staff 6 report. 7 That concludes mine. 8 CHAIRPERSON NICHOLS: Thank you. I feel like a 9 relative slacker in terms of my communications. 10 I do want to -- in case anybody in the audience 11 is wondering why we're doing this. The Board members are 12 not only permitted, they're actually encouraged to 13 communicate with people about rulemakings outside of Board 14 proceedings. But when we do have such contacts, we have 15 to disclose the names of the people that we had contact 16 with and the general content of those communications for 17 the record. 18 And this is really designed so that once there's 19 been a notice of a hearing and we're moving forward on a 20 regulation, the public is entitled to know what the Board 21 is hearing and to have a fair understanding of why we're 22 making the decisions that we're making. So that's the 23 purpose of all of this disclosure. 24 I had two meetings, both on July the 11th. One 25 was with representatives of the environmental community, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 Kathryn Phillips of Environmental Defense; Diane Bailey of 2 NRDC; Bonnie Holmes-Gen of the American Lung Association; 3 and Don Anair from the Union of Concerned Scientists all 4 came in and expressed their concerns about the rule, the 5 same comments they made here. 6 And that same day, I also met with John Dunlap 7 and Mike Lewis regarding the CIAQC proposal. And again I 8 think the substance of that has been fully aired here 9 today. 10 BOARD MEMBER D'ADAMO: On April 24th, I met with 11 Bonnie Holmes-Gen, American Lung Association; and Kathryn 12 Phillips with Environmental Defense here in Sacramento. 13 On May 9th, met in my Stockton office with Dr. 14 Barry Wallerstein with South Coast. 15 On May 9th, conference call with John Dunlap and 16 Mike Lewis representing the CIAQC. 17 On May 9th, I met in my Merced office with Mr. 18 and Mrs. Gordon Downs. 19 July 12th, conference call with John Dunlap and 20 Mike Lewis again representing CIAQC. 21 July 12th, meeting in my Merced office with Tom 22 Aja and Tom Prescott representing the Operating Engineers 23 Local District Number 3. 24 July 18th, conversation with Kathryn Philips 25 while we were both in Washington, D.C. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 On July 20th, a phone conversation with Sayed 2 Sadredin with the San Joaquin Valley Air Pollution Control 3 District. 4 On July 24th, meeting in my Modesto office with 5 Dave Porcher, Camarillo Engineering. 6 On July 24th, meeting in Modesto with Mike 7 Spencer representing Job Corp. 8 July 25th, telephone conversation with Robin 9 Adam, Chief of Staff to Assemblywoman Galgiani. 10 And today, July 26th, conversation with John 11 Dunlap. 12 All of these conversations are consistent with 13 testimony presented today. But I will note Robin Adam 14 representing Assemblywoman Galgiani did not present 15 testimony. So I will just specifically note that in that 16 conversation he had many general questions about the 17 proposal and expressed concerns regarding economic impact. 18 CHAIRPERSON NICHOLS: Thank you. 19 BOARD MEMBER CASE: Madam Chairman, when you 20 referenced being a slacker, I think I have a shorter list. 21 Part trying to balance my newness to this Committee as 22 well as being a County Supervisor with the challenging 23 budget. 24 But on June 20th, I did meet in Los Angeles with 25 Dave Porcher and Shane Gara of Camarillo Engineering. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 That was immediately prior to the ARB meeting at the 2 Marriott Hotel in Los Angeles. 3 And today, I spoke briefly at our lunch break 4 with Dr. Gordon Downs in regards to clarifications of his 5 testimony that we all received today. Thank you. 6 SUPERVISOR HILL: Thank you, Madam Chair. 7 On May 11th, I met in Redwood City with the 8 Engineering and Utility Contractor's Association. And the 9 attendees were Tara Haas, Director of Government 10 Relations; Ron Smith, Shop Supervisor for North Bay 11 Construction; Mitchell Hanner, Resource Manager for 12 McQuire Hester; Gregg Oxley, Allen Waggoner Construction. 13 May 17th, met in Redwood City with Dr. Barry 14 Wallerstein, Executive Officer of the South Coast AQMD. 15 May 17th, met with Mr. and Mrs. Gordon Downs, 16 Downs Equipment Rentals in Bakersfield. 17 May 18th and July 25th, phone calls with Diane 18 Bailey, NRDC. 19 July 5th, met in Redwood with Jane Lea with Job 20 Corp. And the discussions and conversations all mirrored 21 the testimony they all gave today and they gave in May in 22 San Diego. 23 BOARD MEMBER BERG: On May 1st, I met at South 24 Coast Air Quality Management District in Diamond Bar with 25 Dr. Barry Wallerstein, Executive Officer of South Coast PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 Air Quality Management District. 2 On May 10th, in a meeting at Ellis Paint Company, 3 I met with Bonnie Holmes-Gen, American Lung Association; 4 and Diane Bailey, NRDC, joined the meeting via telephone. 5 On May 10th, I had a meeting at Ellis Paint 6 Company with John Dunlap and Mike Lewis with the 7 Construction Industry Air Quality Coalition. 8 On May 22nd, I had a meeting at Ellis Paint 9 Company with Mr. and Mrs. Gordon Downs, owner of Downs 10 Equipment Rental. 11 On May 22nd, I had a meeting at Ellis Paint 12 Company with Doug Jeffe of Granite Construction. 13 On June 13th, I had an on-site visit at Downs 14 Equipment Rental in Bakersfield. And present at that 15 meeting was Gordon Downs, Joyce Downs, Brent Downs, and 16 the ARB staff. 17 On June 14, I had a side bar discussion in Fresno 18 with Construction Industry representatives Bill Davis and 19 Mike Lewis of the Construction Industry Air Quality 20 Coalition. 21 On July 3rd, I had an on-site visit with fellow 22 Board Member Barbara Riordan at Larry Jacinto 23 Construction. And present at that meeting was Larry 24 Jacinto, President and Owner; Eric Nixon, Executive Vice 25 President; Doug Straw, Equipment Manager; Steve Hopkins, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 CFO; and the ARB staff. 2 On July 5th, had a meeting at Ellis Paint Company 3 with Kevin O'Bryant, the regional coordinator of Job Corp. 4 On July 6th, I had a meeting at Ellis Paint 5 Company with John Dunlap; John Hakel, VM, Government 6 Relations with Associated General Contractors of 7 California; Clayton Miller, Construction Industry Air 8 Quality Coalition; Bill Davis, Executive Director of the 9 Southern California Contractors Association; and Richard 10 Paine, Executive Director of the Engineering Contractor's 11 Association. 12 On July 13th, I had a conference call with Guy 13 Preston, Director of Safety; and Tom Aja, both of the 14 Operating Engineers Local District 3. 15 On July 19th, I had a meeting at Ellis Paint 16 Company with Dave Porcher, Equipment Superintendent for 17 Camarillo Engineering, and Shane Gara also of Camarillo 18 Engineering. 19 On July 23rd and 24th, I had follow-up phone 20 calls with Diane Bailey from the NRDC, and Bonnie 21 Holmes-Gen, American Lung Association. 22 On July 24th, I had a follow-up phone call with 23 Guy Prescott, Operating Engineers Local District 3. 24 I had a follow-up phone call with George Bragg, 25 President of Bragg Crane in Long Beach. Because Mr. Bragg PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 had not testified today, our conversation revolved around 2 current status of the regulation and the fact that we were 3 going to cover cranes in the upcoming on-road regulation. 4 On July 25th, I had a follow-up phone call with 5 Doug Straw, Equipment Manager from Jacinto Construction, 6 although I put a call into him and he did not respond. So 7 please strike that on July 25th, because I didn't have 8 that follow-up phone call. 9 On July 25th, I had a field trip with ARB staff 10 to the Sacramento County Landfill to review retrofit 11 equipment and operation. The tour was led by Rick Jesse, 12 the Cummins/west coast sales manager. 13 During the month of June and July, I called the 14 following banking experts to understand the financial and 15 banking implications of asset to debt ratio and capital to 16 debt ratio: Klaus Schilling, Executive Vice President of 17 First Regional Bank of Los Angeles; and Jane Netherton, 18 President of the International City Bank of Long Beach. 19 I had several follow-up conversations and 20 correspondence during the month of June and July with 21 Gordon and Brent Downs and the ARB staff reviewing the 22 regulation and documents to understand the financial 23 implication of repowering and retrofits. 24 I had the following follow-up conversations with 25 Dave Porcher of Camarillo Engineering to understand the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 interpretation of the regulations for Tier 0, turnover, 2 and Tier 1 credits as referred to on page A 18 of the 3 regulation. 4 I had follow-up conversation with John Dunlap 5 yesterday on July 25th and a side bar conversation this 6 morning on the 26th. 7 And also had a follow-up conversation this 8 morning with Brent Downs, Downs Equipment on July 26th. 9 Thank you, Madam Chair. 10 CHAIRPERSON NICHOLS: Are you sure that's all you 11 did? 12 BOARD MEMBER BERG: Yes. And my father would 13 like to know when I'm coming back to work. 14 SUPERVISOR HILL: I was waiting to see if she 15 would beat Ron. 16 CHAIRPERSON NICHOLS: It's an impressive list, 17 folks. And it's really a sign people have been doing 18 their homework. 19 I want to make it clear at this point we have 20 closed the record for this agenda item, and we're going to 21 proceed to a discussion now on the proposed regulation. 22 And when we do that, we will not be taking further 23 testimony. 24 If the Board wishes to make changes to the 25 regulation that was presented by staff, we can direct that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 changes be made within the scope of a notice that was put 2 out originally so that what might appear would not 3 necessarily be exactly what was proposed, as long as it's 4 within that general area. 5 But regardless of what we do, there will be a 6 period after the action when there will be a 15-day notice 7 and there will be additional opportunity for comment on 8 whatever it is that we change, which would be written 9 comment only. There won't be any further public meetings 10 of the Board at this point. 11 But any of the comments that would be received 12 during that final period would be considered and responded 13 to in writing as part of the final Statement of Reasons 14 supporting the regulation as it finally comes out of this 15 process. So that's the way that we're going to proceed. 16 I made a list as we were going through. And it 17 may not be complete, but I want to mention the items as we 18 go forward. 19 But I think before I do that, I'd first like to 20 have a motion and second on the proposed regulation and 21 then we can enter into some further discussion. 22 BOARD MEMBER D'ADAMO: I'd be prepared to make a 23 motion that we adopt Resolution Number 07-19. 24 BOARD MEMBER LOVERIDGE: Second. 25 CHAIRPERSON NICHOLS: And we have a second from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 Mayor Loveridge. 2 Okay. I'd like to say before I mention some of 3 the items that I think the Board may want to consider 4 before we finally vote on this regulation that, as most of 5 you know, I was on this Board about 30 years ago. It's 6 been a long time since I've been in a hearing that began 7 at 9:00 and didn't conclude until after 5 o'clock. And I 8 guess I'm pleased to know I can still do it. That's good 9 to find out. 10 But in some ways I feel as though I never left. 11 And I think that's partly because we're really breaking 12 new ground here with this proposed regulation. 13 I know it has taken a long time to get to the 14 Board. People talked about three years in which it was 15 under preparation. Some would argue it was longer than 16 that, when it should have been brought forward and wasn't 17 able to be brought forward. And I think there's an 18 important reason for that. And some of the testimony that 19 we've heard today indicates why that is. 20 And the fact is that although we're dealing with 21 pollutants that everyone acknowledges are of grave concern 22 from a health perspective, particulates and NOx, everyone 23 agrees that the industry we're talking to here and about 24 is a major source of emissions of those pollutants. It is 25 a diverse, complex industry characterized by many small PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 businesses as well as some very large businesses, people 2 who are in the rental business, people who mine, people 3 who do all different types of construction. 4 And it hasn't been an easy task to come up with a 5 proposal that is both effective and cost effective and 6 fair. And while I think nothing in life is perfect, I 7 think the staff has done a really excellent job of working 8 through all of these issues and coming up with a proposal 9 that is balanced, that is strong, and progressive in terms 10 of the impact that it will have on the air of the state, 11 but that also attempts to recognize the very legitimate 12 concerns of the industry and of the population of this 13 state that we not regulate anybody or anything in a way 14 that is going to make whole sectors of our economy suffer 15 as a result of what we're doing. 16 So I'm just tremendously uplifted by the quality 17 and the quantity of the analysis that's gone into this. 18 And although needless to say I'm not happy about the fact 19 that there are still people out there in the industry who 20 are not enthusiastic about this rule and who have grave 21 doubts about whether they're going to be able to comply, I 22 guess my own experience in this program indicates to me 23 that we're on pretty solid ground when it comes to having 24 something here that will be able to be complied with and 25 that will, in fact, be less expensive and more effective PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 than we know, and that we've built fail safe provisions in 2 that would allow us to react quickly if we turn out to 3 have made any mistakes along the way or if life in some 4 way changes the calculations that we've made. 5 But having said all of that, I do think that 6 there is always room for some consideration of 7 improvements that have been recommended. And so let me 8 just quickly tick off the ones that were on my list. And 9 some of them we may be able to dispose of very quickly 10 because there won't be any real interest in pursuing them. 11 And others we may want to talk about it more. 12 So let me just start off. The first one was the 13 one that related to having a technology and cost review in 14 2009. Although one member of the public indicated that 15 they thought that 2010 was more appropriate and that we 16 wouldn't really know anything by 2009. But one way or 17 another, I think we need to clarify when and how we want 18 to hear back from the staff on this issue. So that would 19 be my first. 20 The second would be to adopt the SOON proposal, 21 the very well named SOON proposal, but to open it up to 22 any district that might wish to partake of this program. 23 The third was whether we wanted to come up with 24 some form of special treatment or consideration for the 25 ski industry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 These aren't in any particular order, but that 2 was an issue that was raised. 3 A fourth was this issue of captive counties. 4 That term reminds me of when eastern European countries 5 were under the influence of communism were called captive 6 nations. It's really not a very good term. I think I 7 understand what it means. Anyhow, whether that needed to 8 be expanded to include some counties that would normally 9 be considered to be outside the scope of the rule, 10 particularly Toulumne. Toulumne was one that was 11 specifically added. 12 The adjustment in the language that would make it 13 clear that all nonprofit training institutes are covered 14 by the exemption. So that would not be just 501(c)(3), 15 but also 501(a) and (c)(5) and (c)(3) and (c)(6) and any 16 other provisions of the Internal Revenue Code that would 17 cover nonprofit training institutes. I assume that's a 18 given, but I think we need to actually act on it. 19 And the next one would be to expand the number of 20 hours that would qualify as limited service above the 100 21 hours that the staff had proposed, if that has any merit 22 that would justify adding to the exemptions there. 23 There's a concern or a question about whether we 24 would have the sufficient enforcement program without 25 adding in some specific provision about periodic spot PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 checks or third party verification or some other program 2 for beefing up enforcement. 3 There's the suggestion that we separate the rule. 4 I think this is a surgical separation between the NOx and 5 the particulate matter aspects of the rule to facilitate 6 its being adopted in other areas. 7 And then last, but not least, in terms of the 8 regulatory proposal in front of us, would be whether the 9 Board wishes to continue to pursue some additional methods 10 of averaging or alteration of the compliance period as 11 proposed by CIAQC. 12 Are there any other specific areas that people 13 wanted to add? D.D. and then -- 14 BOARD MEMBER D'ADAMO: I would just note the 15 South Coast proposal on the opt-in. 16 CHAIRPERSON NICHOLS: Oh, sorry. 17 BOARD MEMBER D'ADAMO: On NOx. 18 CHAIRPERSON NICHOLS: On the opt-in. Right. 19 Okay. 20 BOARD MEMBER D'ADAMO: And then I have an 21 additional -- on the report back, whether it's 2009 or 10, 22 I would also like to include enforcement on that. And I 23 think it goes without saying, but I'd like to say it 24 anyway. On the economic impact issue, to have a specific 25 report back on flexibility provisions. I think we've been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 told a lot today by staff about how flexible the rule is. 2 And I think we really need to see if that flexibility 3 plays out. 4 CHAIRPERSON NICHOLS: So you want that covered -- 5 both of those things covered in the report. Okay. 6 Additional items? Yes. 7 ACTING EXECUTIVE OFFICER CACKETTE: Could I add 8 one thing? Is that in the 2009 time frame, Ms. D'Adamo? 9 Included in that review? Or that is a separate review 10 you're talking about? 11 BOARD MEMBER D'ADAMO: I think it would be 12 included within. But I would defer to staff. I don't 13 have a strong opinion on '09 or '10. 14 CHAIRPERSON NICHOLS: It should be one report. 15 ACTING EXECUTIVE OFFICER CACKETTE: I just wanted 16 to point out in our suggested issues there was one on 17 reviews back to the Board, which suggested multiple ones, 18 which suggests different years. I just want to be clear 19 exactly what you're asking. 20 CHAIRPERSON NICHOLS: From the Board, any 21 other -- yes. 22 BOARD MEMBER BERG: I believe there were two 23 other review dates that staff had talked about. One was 24 January 2013 or '14. 25 ACTING EXECUTIVE OFFICER CACKETTE: We had PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 suggested that one in '13 that would focus on looking at 2 the progress to date in the initial years. Years '10, 3 '11, '12, for example, would be feedback the Board might 4 be interested in. And then one in 2017, which would 5 address the issue that wasn't raised too much here today, 6 but the ongoing question and uncertainty in many of the 7 industry folks' minds about whether they'll be Tier 4 8 equipment and whether there'll be enough of it if it is 9 available. 10 CHAIRPERSON NICHOLS: So that would be a separate 11 report. 12 ACTING EXECUTIVE OFFICER CACKETTE: Those were 13 the three we outlined in the supplemental document, and 14 they're sort of separate purposes. 15 BOARD MEMBER BERG: And then -- I'm sorry. There 16 was a couple of pieces of testimony from people that 17 wanted to be able to get full credit for equipment that 18 they -- Tier 0 or Tier 1 equipment that they got rid of 19 and did not replace with anything. And so they were 20 talking about getting full credit for the NOx and the PM. 21 And I think that's worthy of conversation. 22 And I would like to at least -- I'm very 23 concerned about the small revenue companies with large 24 horsepower and the small and medium-size companies and 25 this bonding issue and to make sure that we have taken PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 that in consideration. It is going to be a large impact 2 if we have loss of equity and their balance sheets are 3 affected as well. 4 I think at least we should agree to see where we 5 stand in January of 2009 at a minimum. I don't have any 6 good solutions right now. But I'm very concerned about 7 it. 8 And then I just would like to clarify the early 9 credit for NOx and why not PM. And I think if we have a 10 discussion on the economics, I can bring up the particular 11 subjects I have. 12 CHAIRPERSON NICHOLS: Okay. Well, I'm open to 13 suggestions about how to proceed. I thought maybe we 14 could just go through these items quickly one by one and 15 deal with them. 16 BOARD MEMBER RIORDAN: And vote perhaps to 17 include in the main motion. 18 CHAIRPERSON NICHOLS: Right. That would be 19 appropriate. 20 So let's start out with the nature of the reviews 21 we're going to do and whether they're in 2009 or 2010. Do 22 we want to specify that in the rule? If so, does somebody 23 have a proposal they want to put out to have a vote on? 24 BOARD MEMBER LOVERIDGE: Just could I ask Tom, 25 what would make sense as far as you understand? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 ACTING EXECUTIVE OFFICER CACKETTE: Well, first, 2 I think most of these are typically covered in the 3 Resolution, not in the rule. If you just ask us to do 4 something, the Resolution covers it. 5 I think we favor all three reviews. Certainly, 6 it's more work. But you know, we have the same curiosity 7 that you do to make sure that things haven't gone astray. 8 And also we may be reporting back, you know, great 9 progress as well, which would be our hope. 10 So in that document I think we wrote down some 11 language that could be captured in Resolution. If that 12 sort of meets your need, that might be a way of -- 13 BOARD MEMBER LOVERIDGE: The question was 2009 or 14 2010. 15 CHAIRPERSON NICHOLS: For an early assessment. 16 ACTING EXECUTIVE OFFICER CACKETTE: The 2009 -- 17 the principle reason for the 2009 as I understand it would 18 be to make sure, first of all, that there's retrofit 19 devices available and verified. 20 CHAIRPERSON NICHOLS: Otherwise, there would be 21 people who have to comply -- 22 ACTING EXECUTIVE OFFICER CACKETTE: There's 23 companies that can say I provide thousands of them and the 24 installations of the early ones have gone well, that kind 25 of thing. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 You also referenced the flexibility provision. 2 And I think if that means have people take advantage of 3 early credits as one of the flexibility provisions, we 4 would know that. 5 CHAIRPERSON NICHOLS: In 2009. 6 ACTING EXECUTIVE OFFICER CACKETTE: The other 7 flexibility, which is your Item Number 9, the compliance 8 interval, wouldn't have happened yet. 9 BOARD MEMBER LOVERIDGE: 2009. 10 CHAIRPERSON NICHOLS: Is everybody comfortable 11 with 2009? 12 BOARD MEMBER RIORDAN: Are you including the 13 bond? You wanted the bonding issue? 14 BOARD MEMBER BERG: No. On the reporting, I'm 15 just talking about exactly what Mr. Cackette was speaking 16 about for the report. 17 SUPERVISOR HILL: The question was January or 18 June? 19 CHAIRPERSON NICHOLS: The question was when in 20 2009. 21 ACTING EXECUTIVE OFFICER CACKETTE: Well, the 22 first report we get is in March 2009. And then the first 23 compliance date, at least pending the discussion on 24 compliance intervals, is March of 2010. So we could do -- 25 CHAIRPERSON NICHOLS: Let's make it June. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 BOARD MEMBER BERG: May I just make a comment? 2 Here's my issue. These people -- what I'm hearing from 3 the industry is grave concern whether we are going to have 4 equipment that is going to be ready for them to start 5 complying with. And they have to comply in March of 2009. 6 CHAIRPERSON NICHOLS: '10. 7 BOARD MEMBER BERG: But they have to start 8 putting it on. They have to be ready and done for the 9 first interval in 2010. And if it isn't there, this Board 10 should know about that and take appropriate steps. And I 11 think it's a safety net. It's a safe gap. And I think it 12 should absolutely happen in January of 2009. 13 CHAIRPERSON NICHOLS: But they won't be getting 14 the report until March. 15 BOARD MEMBER BERG: But the report is from 16 industry saying where they are. I want to know where you 17 guys are in the V-dex, in the repowering. Do we have this 18 equipment, and what does it cost? 19 ACTING EXECUTIVE OFFICER CACKETTE: Well, in 2009 20 we'll be able to tell you what's verified. Are there more 21 than three, which is the current status quo. What types 22 they are. What a typical cost is. Perhaps what the cost 23 for some of the early action installations. 24 BOARD MEMBER BERG: The showcase. 25 ACTING EXECUTIVE OFFICER CACKETTE: Yeah, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 showcase results. What we won't be able to tell you is 2 what larger number of people have paid for it in different 3 volumes, which we might not get until well into 2009. 4 BOARD MEMBER RIORDAN: I don't think that's a big 5 issue. It's the first part that's the important one. 6 ACTING EXECUTIVE OFFICER CACKETTE: We can do 7 that, whatever you want. 8 CHAIRPERSON NICHOLS: We're talking about 9 Resolution language. So I don't know we need a formal 10 vote, but I'd like a consensus on this. 11 BOARD MEMBER CASE: If I can ask for 12 clarification. As we get information coming back as to 13 the availability of the technology -- as one of the 14 testimonies we heard asks that ARB consider allowing 15 federally and internationally tested V-dex to be included 16 in that group. And I don't know your opinion on that. 17 But is it reasonable they be included in what those 18 technologies are? 19 I'm not clear on any constraints we'd have for 20 any verification. But we did hear testimony that there 21 are products that are out there that haven't been verified 22 here in California but have been verified in other 23 countries and areas of the world. 24 ACTING EXECUTIVE OFFICER CACKETTE: Right. A 25 little bit of a long story. I'll try to make it very PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 short. 2 On the on-road rules, we have harmonized with EPA 3 on the testing that is required to demonstrate 4 verification. But there are other requirements that the 5 regulations you've adopted governing verification require. 6 So, for example, they require warrantee. They require 7 demonstration of durability. There's a standard that you 8 adopted which limits the amount of NO2 that a device could 9 put out. And those are things that EPA does not check on, 10 nor do international agencies. And so we at a minimum on 11 on-road, we have to add those on. 12 Some people have chosen that their market is New 13 York and they don't bother with it. Other people have 14 said the market is going to be California, so they come 15 here first or they going in parallel. In off-road, I 16 think we have some other differences regarding test 17 procedures and things like that that we're still 18 struggling to try to get more in line with. 19 But the point being, there will never be complete 20 alignment. There will probably be some devices that are 21 okay in New York and in Switzerland, like Beirt is one of 22 the verifying organizations there that will not available 23 here. Many of them they're referring to are lower 24 efficiency devices which we verify out here. But our 25 rules essentially don't allow them to be used. They only PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 get reductions like 25 percent particulate, instead of the 2 higher 85 percent. 3 It's a complicated thing, but that's some of the 4 differences and why we don't have complete and why we 5 couldn't say at this point in time even though we've tried 6 that we can except EPA verification. 7 CHAIRPERSON NICHOLS: Okay. 8 BOARD MEMBER D'ADAMO: What I would like to 9 suggest, it seems that we have two levels of information 10 that we're going to need at the beginning. First of all, 11 before this program really gets kicked off, what's the 12 status on verification. 13 And Ms. Berg has spent a lot of time on this. So 14 I think we ought to defer to her suggestion. So I'm 15 comfortable with January '09 for basically technology 16 review and verification. 17 But then the other issues of economic impact, 18 flexibility, enforcement, we're not going to know that in 19 '09. So I would suggest sometime in 2010. So adding yet 20 another review. So we have technology in '09, 2010 of the 21 rest of the list, and then what you had recommended on 22 2013 and 2017. 23 ACTING EXECUTIVE OFFICER CACKETTE: I want to 24 check with staff for a second to see if they think there 25 is a particular date when they think we'll have more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 information on this. 2 CHAIRPERSON NICHOLS: I think basically the tenor 3 of this is the Board wants to keep an eye on this rule as 4 it goes out and not just wait. 5 ACTING EXECUTIVE OFFICER CACKETTE: Since the 6 first compliance date is March of 2010, I would guess that 7 what would work most efficiently for us would be able to 8 look at sampling of compliance reports and actual 9 compliance, perhaps a little field work, and then also an 10 attempt to contact individual fleets and say, okay, now 11 that have your toe in the water, what has happened? Has 12 there been particular difficulties and actual costs. To 13 do that probably means that a meaningful report would be 14 the end of 2010. 15 BOARD MEMBER D'ADAMO: I'm comfortable with that. 16 CHAIRPERSON NICHOLS: I see heads nodding. Okay. 17 So we're going to add some language to the Resolution, 18 which we will not attempt to craft here. But Mr. Jennings 19 has got it all and is going to make sure it's properly 20 reflected. 21 CHIEF COUNSEL JENNINGS: Along with the court 22 reporter. 23 CHAIRPERSON NICHOLS: Yes. Between the two of 24 you. 25 So that was our first item. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 Next we were going to talk about SOON and whether 2 we would use the South Coast language and also whether we 3 would open it up to any district that wanted to opt in. 4 Any comments from the Board? Yes, Mr. Roberts. 5 BOARD MEMBER ROBERTS: Well, when I first heard 6 this, I thought it was a good idea. And it seems to me 7 especially with respect to the larger air districts that 8 it offers an opportunity to actually accelerate some 9 things and incentivize those things. 10 And I would like to -- I don't know where you 11 want to draw the line, whether it's everybody that goes in 12 or maybe the larger more urbanized air districts. But I'd 13 like to see this as a more widespread option rather than 14 just in the two districts. 15 I also -- there was kind of suggested, although 16 I'm having trouble seeing -- there was some linkage 17 between this and the possibility of the different 18 increment. I didn't know if we should be discussing those 19 at the same time. 20 CHAIRPERSON NICHOLS: Did you want to comment on 21 that? 22 BOARD MEMBER RIORDAN: Just a quick question. I 23 did not hear, and so I don't know. Has this program been 24 adopted by the South Coast at this moment, the Board? Or 25 is this something that the staff has worked on and is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 going to propose? 2 ACTING EXECUTIVE OFFICER CACKETTE: I think -- 3 BOARD MEMBER LOVERIDGE: The Administrative 4 Committee, which is in this case five members of the 5 Board, concurred with that today. 6 BOARD MEMBER RIORDAN: But it probably needs to 7 be blessed by the Board. 8 My point is I'm wondering if though in the 9 expansion, which I do support, but we better have a pretty 10 uniform program for these air districts. Because I can 11 see how you can juggle and twist and get some variations 12 that may not be in the interest of everybody having "the 13 level playing field". 14 So I don't know how to craft that, Madam 15 Chairman. But I certainly support those districts who 16 want to opt into something like this. I think it's a good 17 thing. I think it can help a lot of companies that may 18 need the additional assistance or can leverage money. But 19 I can also see some problems. 20 ACTING EXECUTIVE OFFICER CACKETTE: I think just 21 one comment is the way we've tried to structure the sample 22 language, which is also in your package, is to structure 23 in the sort of governance of how this would work would be 24 established by State regulation, your regulation. 25 What the options would be is whether you opt in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 and how much money you opt in and what happens if the 2 money you promised doesn't all show up. That has to do 3 with not requiring anybody to actually do the V-dex or the 4 modernization without having a substantial amount of 5 money. 6 There would be some -- I think there would be 7 some variance in districts because of the way they use the 8 Carl Moyer moneys and the matching requirements, which are 9 generally small. But there's some negotiation surrounding 10 the cost effectiveness calculations, which could be 11 different I guess in different districts. But in general, 12 it would be the same thing. And only the amount of money 13 would be different. 14 CHAIRPERSON NICHOLS: I was troubled by the 15 language that South Coast brought us for this very reason, 16 that what works as cost effective in the South Coast may 17 not be the same as what's cost effective in another 18 district that might want to opt into the program. And 19 before we go too far down the track of tailoring these 20 things for individual districts, this is really a big 21 breakthrough as far as I know for the Air Resources Board 22 in creating a two tier rule like this that gives us much 23 ability to local districts to implement a motor vehicle 24 control regulation. I very much want to see us move in 25 this direction. But I want to see us do it in a way PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 that's going to succeed. That's really what I'm hearing 2 also from Ms. Riordan. 3 BOARD MEMBER BERG: Madam Chairman, is it 4 possible then to allow the definition of cost effective to 5 be defined by the individual local boards, that we set the 6 framework and allow what definitions they can fill in the 7 blank for? 8 CHAIRPERSON NICHOLS Well, as far as I'm 9 concerned -- this is just a personal opinion. I think 10 they can spend the money however they want to. It's 11 whatever priorities they have. 12 My only concern about this -- there are really 13 two. One is that we make sure the devices they're using 14 are, in fact, certified devices and that the emissions 15 reductions that are being claimed are real. Otherwise, we 16 don't have -- 17 BOARD MEMBER BERG: And over. 18 CHAIRPERSON NICHOLS: Right. 19 BOARD MEMBER CASE: Madam Chairman, just one 20 other element. I think we should be supportive of this 21 expansion. I'm very mindful that there are a couple of 22 areas in our state that are really having difficulties and 23 are depending on black box technology in a big way because 24 it's allowed in the law. But it makes the public very 25 uncomfortable. And anything that can move forward that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 date of attainment for those that are severely out of 2 attainment I think would be a very large benefit to the 3 public. 4 So I think we need to be mindful of targeting our 5 resources to those who are most out of compliance and 6 working with the California State Legislature to make sure 7 this program is adequately funded. Because it is a 8 request to match dollar for dollar with local Moyer money 9 to really create a bigger opportunity for mitigation. And 10 it seems reasonable we should focus on wherever in the 11 state of California has the most severe problem that is 12 most likely impacting the most people. 13 So I think a piece of it is making sure we're 14 working with the State Legislature. I would like to see 15 this everywhere in California, because I think we will all 16 benefit. I'm mindful some areas face challenges that 17 other areas don't, and you have to really target your 18 money if you're restricted to the amount of dollars. So 19 how do we balance that becomes part of the question. 20 CHAIRPERSON NICHOLS: I wrote down communication, 21 cooperation about seven times. We can all just say that 22 to ourselves and try to make it so. 23 But based on this discussion, do you have a 24 recommendation for how we should deal with the language 25 proposal? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 ACTING EXECUTIVE OFFICER CACKETTE: Well, I think 2 first we need to know from you whether what Supervisor 3 Roberts was talking about, are we talking about urban 4 areas? Are we talking about Tehama County can do this if 5 they want? Probably not likely but -- 6 CHAIRPERSON NICHOLS: I think it's not very 7 likely. 8 BOARD MEMBER RIORDAN: No, because small air 9 pollution control districts have very little extra moneys 10 to do a program such as this. You're talking big dollars. 11 CHAIRPERSON NICHOLS: I don't think we need to 12 worry about limiting it. 13 SUPERVISOR HILL: I would suggest that any 14 district that decides to do it would be the appropriate 15 way to go. Those that can't opt in, wouldn't. And I 16 think the language should be such it should be consistent. 17 CHAIRPERSON NICHOLS: And it gives them that 18 opportunity to make the decision. So we want to open it 19 up, I think is the answer. And we also want to make sure 20 that there's flexibility for the locals to define how much 21 money they're going to put in and what benefits they're 22 going to -- 23 ACTING EXECUTIVE OFFICER CACKETTE: One thing I 24 didn't mention before is I think there's a way we have it 25 structured, there's a requirement for guidelines which the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 districts would adopt as part of their management of this. 2 And those guidelines would have to be approved by ARB. 3 And that would help make sure it's cost effective. 4 And I don't know if we need more language than 5 what's in the South Coast's approach on cost 6 effectiveness. If there's any flaws in this or things 7 that come up, I'll just ask if we could have the 8 flexibility after this to -- 9 CHAIRPERSON NICHOLS: During the 15-day period to 10 make the minor adjustments. Is that acceptable to 11 everyone? All right. Great. 12 This is easy. Does anybody want to do 13 anything or do you feel satisfied we've dealt with the ski 14 industry's concerns for the time being at least? 15 BOARD MEMBER RIORDAN: You know, I would just ask 16 again -- I think we have the flexibility; correct? Am I 17 correct? 18 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 19 WHITE: Yes. 20 CHAIRPERSON NICHOLS: Yes. That answers that. 21 Captive counties, anybody want to do anything 22 about the rural counties that are -- 23 BOARD MEMBER RIORDAN: Well, I think the issue 24 that was raised for Tuolumne -- and I would just like the 25 staff's opinion if there is some reasonableness to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 request. I mean, believe me, I don't know. But maybe 2 there is some interest there to -- 3 ACTING EXECUTIVE OFFICER CACKETTE: Well, I may 4 need some help from Erik on this one. 5 We did look at this with Blue Mountain Minerals I 6 think it was in Tuolumne County. We looked at some if we 7 included special provisions for counties like them, what 8 other counties would it bring in? It brings in quite a 9 few other mid- to small-size counties that have somewhat 10 severe or air pollution problems caused by transport but 11 also contribute to their own emissions. So our thinking 12 on this was more along the lines of no. 13 But let me ask if there are any other nuances for 14 your consideration. 15 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 16 WHITE: No. I think that's a fairly safe characterization 17 of what our analysis was on that. 18 CHAIRPERSON NICHOLS: How about the language on 19 nonprofit training institutes? Is there any question or 20 concern about that? No. We're going to fix that. Okay. 21 How about the issue of whether that we want to or 22 need to expand the number of hours that qualify for 23 limited service? This is a way of dealing with this issue 24 about not so much the small firms, but the heavily 25 impacted firms that Ms. Berg is concerned about. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 ACTING EXECUTIVE OFFICER CACKETTE: First, I'd 2 like to ask the staff if they have any sense of what the 3 environmental impact would be if you made it 200 hours 4 versus 100. I don't know if we've looked at this. 5 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 6 WHITE: Yes. As part of the original assessment in 7 support of the May proposal, we did look at this. This is 8 an issue that came up numerous times through the 9 regulatory development process with some requests. And as 10 we looked at could we expand it to higher numbers of hours 11 a year, we started to see an erosion of the benefits that 12 the regulation would provide anywhere from a factor of two 13 to a factor of four reduction in some of the benefits as 14 we went to more hours. 15 One of the solutions we tried to craft in this 16 was to allow a three-year average around those. So that 17 would allow flexibility and fluctuation year to year for 18 fleets to allow for more use in one year, less in another 19 to try to address some of the concerns. But ultimately 20 raising a cap seemed to be the environmental -- 21 CHAIRPERSON NICHOLS: Sacrificing too much 22 benefit from the rule. I didn't hear anybody pick up on 23 it. I just thought I should raise the issue, because it 24 was brought up in testimony and not something that staff 25 had addressed before. So I'm comfortable with leaving it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 as is, unless somebody wants to re-raise it. 2 What about we agree that we can write the rule in 3 a way that allows separation of the NOx and PM? I mean, 4 that's doable. Okay. 5 So then other issues that were raised about the 6 economic impact had to do with whether there was a way to 7 give credit for early retirement that's already taken 8 place of Tier 0 or Tier 1 and whether we should be giving 9 credit for early particulate matter in addition to NOx. I 10 think those are kind of similar issues here. They're 11 design issues with the program. But they deserve to be at 12 least answered I think. 13 ACTING EXECUTIVE OFFICER CACKETTE: Yes. And I 14 asked Erik to sort of give you the background, because 15 these issues have come up before. 16 CHAIRPERSON NICHOLS: This would be helpful. 17 ACTING EXECUTIVE OFFICER CACKETTE: There are two 18 issues. Go ahead. 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: This is in relation to counting the replacement 21 with cleaner engines towards retrofit requirements. 22 We gave this -- again, this is another issue that 23 came up throughout the regulatory development process from 24 a number of stakeholders. And when we looked at are 25 there -- looked at the whole package in terms of what do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 filters provide in terms of environmental benefits. And 2 certainly I think we all clearly understand the mass 3 emission reductions they get the percent reduction off of 4 what's coming out of the engine. But we also tried to be 5 mindful of as we start to move forward and get into some 6 of the health effects of looking at the particles that are 7 coming out of the engine, and when you put a filter on an 8 engine, that filter effectively collects the particles 9 pretty much regardless of the size. 10 And one of the concerns that we had is although 11 you get some mass emission reductions from going from 12 let's say a Tier 0 engine to Tier 2 or 3 engine, neither 13 the Tier 2 or 3 engine still does not have a filter. 14 There was some concerns that as the data started to come 15 in on particles, that those types of engines may 16 preferentially produce ultra fine particles that there 17 would be no control device on that tailpipe to collect it. 18 So we had some concerns that we didn't fully understand 19 that. And to provide the credit for control that we knew 20 was going to come with the use of the filters versus one 21 that we were unsure of, that wasn't appropriate at this 22 time to grant that equivalency, if you will, for engine 23 turnover relative to retrofit. 24 ACTING EXECUTIVE OFFICER CACKETTE: A real bottom 25 line number is the engine controls have reduced the mass PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 of particles, but not the numbers of particles. And the 2 filters are the only devices that really reduce the 3 numbers of particles and do it by three orders of 4 magnitude. 5 So if we give credit for the mass reduction 6 because they bought a newer engine. But without a filter, 7 I think we only get one of the two possible health-driven 8 impacts taken care of. 9 BOARD MEMBER BERG: But my understanding is what 10 we were looking at was early credit. And so in fact have 11 they contributed to less PM as a result of going from a 12 Tier 0 to a Tier 3? 13 ACTING EXECUTIVE OFFICER CACKETTE: They've 14 reduced the amount of mass, but not the number of 15 particles. 16 BOARD MEMBER BERG: Okay. 17 ACTING EXECUTIVE OFFICER CACKETTE: That's the 18 concern. 19 BOARD MEMBER BERG: And what about the issue of 20 retiring a Tier 0 and not replacing it at all or a Tier 1? 21 That came up in testimony. 22 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 23 WHITE: As we looked at that, we kind of did it on a mass 24 balance. In other words, the work is going to be done. 25 So if the vehicle was retired, I don't think there was an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 assurance that another vehicle that was equally as dirty 2 may not do that work. 3 And, you know, as we looked at some of our other 4 regulations that we have that deal with retirement, some 5 of the existing fleet rules, there are requirements that 6 to claim retirement credit in those rules, the vehicle has 7 to be destroyed or certified it's been shipped out of 8 state. In other words, any dirty replacement will never 9 come back in the state to replace that vehicle. 10 We don't have these same restrictions here. And 11 part of it is to provide the flexibility for fleets to 12 retire those vehicles and maybe another fleet may be able 13 to utilize that or has a use for that because they have 14 the resources to potentially clean it up in a way that the 15 original fleet didn't. 16 So we couldn't really structure a way to make 17 sure we were whole on the retirement action if we simply 18 gave them credit for a retrofit by moving that out that 19 somebody else wouldn't have another vehicle, purchase that 20 vehicle, or some other thing that might negate that 21 benefit that the retrofit would provide. 22 BOARD MEMBER BERG: I think what you're looking 23 at is companies that for one reason or another don't have 24 the funds to clean up that piece of equipment, so they 25 sell it. The rule clearly provides that you can't add PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 Tier 0 to your equipment after 2009 or '10. Okay. So we 2 know no one is adding it to their fleet, because it would 3 show up on their inventory. And really, you're giving 4 them a choice of going out of business. There's no other 5 choices at that point. And I don't know that I agree with 6 that. 7 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 8 WHITE: Are we talking about before 2009 and -- 9 BOARD MEMBER BERG: No. After. We're talking 10 about after 2009, after the inventory has been given that, 11 one of the options if you don't have the money to retrofit 12 or repower or buy a new piece of equipment, that you could 13 sell that piece of equipment, in effect reducing your 14 inventory. And it would be out of your inventory, and you 15 would get credit for that. 16 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: One 17 of the concerns in that is if you ended up with sort of 18 bogus counts of equipment -- in other words, if I wanted 19 to deal with a rule like this, I could, you know, 20 basically count stuff that's not running or barely running 21 and retire it and get credit for it. 22 BOARD MEMBER BERG: Well, people are going to do 23 that anyway. And there's nothing, I mean -- I don't think 24 we can prevent -- 25 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: But PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 the benefit they get from it changes. 2 CHAIRPERSON NICHOLS: You're giving an inventive 3 for people to game the system if you do it that way, I 4 think would be the concern. 5 This is a detail. Maybe it's a little late in 6 the day to be examining it. And I realize you have a much 7 more in-depth appreciation of some of the specific fleet 8 concerns that some companies may have. 9 But if you wanted to pursue it and if others 10 wanted to pursue it, I would favor looking at it in the 11 context of compliance as opposed to trying to amend the 12 rule at this point, unless somebody has an idea. 13 Yes. 14 BOARD MEMBER ROBERTS: I think we need to pursue 15 it. The only option is you have to destroy the piece of 16 equipment. And it seems to me we're putting in effect all 17 the rules that if they're working, we're not going to see 18 that equipment in California. And we're saying we don't 19 trust that. I mean, I think we need to deal with this, 20 because there's no option. 21 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 22 WHITE: This is purely in the context of retirement. 23 Retirement only in the context of turnover. 24 I think you're right in the sense that the 25 vehicle can't be added back in by another operator, that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 we wouldn't have that concern I was discussing. I was 2 thinking you were talking pre-2009. 3 CHAIRPERSON NICHOLS: In fact, there won't be any 4 market for this equipment in the state of California 5 anyway as I understand it. 6 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 7 WHITE: As we've heard. I think in that context I think 8 it might be okay in that context and I haven't really 9 given that a thought in that way. 10 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: 11 Because that's equivalent. We were hung up on the idea of 12 how do you get them to destroy it. But clearly if it's 13 not usable -- 14 BOARD MEMBER BERG: It's not in any company's 15 best interest to load their inventory with Tier 0s. 16 There's no incentive to do that. 17 CHAIRPERSON NICHOLS Do you understand the 18 modification that's being suggested here and where it 19 would come in the regulation? 20 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 21 Ms. Berg, may I ask a question? So are you talking 22 about -- right now, for instance, say it's one of the 23 earlier years in regs and fleets are on the BACT path and 24 doing 8 percent turnover. So it's bad economic times. 25 The fleet is shrinking. Are you saying if they shrink PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 more than 8 percent that we then give them credit towards 2 the 20 percent PM retrofits they would otherwise be 3 required to do for additional -- 4 BOARD MEMBER BERG: No. I'm not talking about 5 the PM anymore. I'm just talking about the testimony that 6 was given that if financially a company decided that the 7 best way for that given year, because they didn't have any 8 money to do repowers or retrofits, that they sold a piece 9 of equipment that they did not replace. And that would 10 count then towards, you're right, their NOx and their PM 11 as if they had retrofitted and repowered it. 12 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 13 In lieu of the retrofits, they can do additional turnover 14 beyond the 8 percent? 15 BOARD MEMBER BERG: Not beyond; including. It 16 would be a compliance option to meet the 8 percent. 17 Because it wouldn't be polluting. 18 STAFF AIR POLLUTION SPECIALIST HEROY-ROGALSKI: 19 If we do that, we'd give up benefits. 20 BOARD MEMBER BERG: How? 21 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 22 Let's clarify. If they do retire a vehicle or designate 23 it low use, it does count towards the NOx portion of the 24 rule. It does count as turnover already. So the only 25 thing that would be different than what we have right now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 would be to then give them credit towards reducing the PM 2 exhaust retrofits they would be required to do. 3 BOARD MEMBER BERG: Because they would no longer 4 be using that piece of equipment, their inventory would be 5 lower. 6 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 7 Correct. But the question is they still might have to do 8 20 percent of their remaining fleet. Are you suggesting 9 we say you would have had to do 20 percent, but you 10 retired 8 percent of your vehicles? Now you only have to 11 do 12? 12 BOARD MEMBER BERG: Correct. 13 SUPERVISOR HILL: We get the benefit either way. 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: What you're hearing from the staff is we're trying 16 to on the fly see how do the numbers work out. I don't 17 know that we have an answer right now. 18 The question is what would be the appropriate 19 credit to give for that action. Do you give -- you know, 20 is it equivalent to putting on a filter? Is it -- as 21 we've done with NOx, is there a partial credit that would 22 be provided? And what would that appropriate level be? I 23 think we can go back and look at that so that we stay 24 whole on the benefit side, but recognize that action. 25 BOARD MEMBER BERG: But mathematically to me, it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 would be equivalent to and you actually would gain more 2 benefit, because a filter does not give you 100 percent 3 benefit. And not having that piece of equipment in their 4 yard is 100 percent reduction. 5 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 6 WHITE: Now it's been clarified to me. Under the 7 regulation, you would do the 8 percent turnover and then 8 do on top of that the 20 percent of the filters. And that 9 8 percent turnover, while it is intended to get NOx 10 reductions, it does bring along PM reductions with it. 11 And that's where -- and as I was just reminded, that's the 12 reason why there's two actions there that get PM benefits. 13 And what we're saying by doing the one action it's going 14 to count towards both. That's where we may come up a 15 little bit short. We'll need to go back and maybe we can 16 look at what the appropriate level is so we stay whole on 17 it. I think we can certainly do that. 18 CHAIRPERSON NICHOLS: Can we agree then -- I 19 really want to be able to vote while we've got everybody 20 here, and I know we may lose some people. 21 Can we agree that the staff is being directed to 22 add a compliance provision that gives equivalent 23 recognition -- and I know you're going to be honest about 24 how do you the calculations -- to the rule as it's 25 currently envisioned for retirements of equipment? That's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 the direction. Okay. 2 BOARD MEMBER RIORDAN: And I'm assuming this is 3 permanent retirement, because you can take out equipment. 4 We've always said you can take it, park it, and save it 5 for another day. But this is a permanent retirement. 6 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 7 WHITE: Yes. We will go back and see if we can make that 8 work. 9 CHAIRPERSON NICHOLS: Good. We've earned our pay 10 here. 11 All right. Let me just quickly move on through 12 the rest of this then. Actually, that may be the last of 13 the issues. 14 BOARD MEMBER BERG: I think the final one, Madam 15 Chair, is the compliance to triennial. 16 CHAIRPERSON NICHOLS: The three-year versus one 17 year. 18 ACTING EXECUTIVE OFFICER CACKETTE: We have a 19 quantification for you. If we can put it up on the 20 screen, you can look at it. 21 CHAIRPERSON NICHOLS: There's also a three-year 22 NOx issue for the South Coast compliance. 23 ACTING EXECUTIVE OFFICER CACKETTE: I think, as 24 we understand it, that one would be part of SOON. Unless 25 you want to change that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 CHAIRPERSON NICHOLS: If you're in SOON, you get 2 to do now and get the benefits that would give you, 3 whatever they are -- 4 SUPERVISOR HILL: Madam Chair, the three year is 5 just for the SOON Program? 6 CHAIRPERSON NICHOLS: Yes. 7 BOARD MEMBER BERG: And there's no discussion 8 about discussing whether the three year is an appropriate 9 period? Any will to discuss that? 10 CHAIRPERSON NICHOLS: Well, I mean, that was what 11 South Coast was proposing. I don't -- 12 BOARD MEMBER BERG: I know what South Coast was 13 proposing. Is there any will on the Board to discuss 14 whether industry, who is going above and beyond and 15 saying, yes, we'll be part of the SOON, but we need this 16 flexibility, is there any discussion? 17 CHAIRPERSON NICHOLS: I think three years is a 18 lot myself. I wouldn't feel comfortable going any further 19 than that. 20 BOARD MEMBER ROBERTS: I wouldn't feel 21 uncomfortable. You talking about initial three years? 22 BOARD MEMBER BERG: Yes, I'm talking about one 23 three-year period. 24 BOARD MEMBER ROBERTS: Not the proposal to keep 25 going? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 BOARD MEMBER BERG: Yes. Just one three-year 2 period at the very beginning of the rule from 2010 through 3 2013 to get us into the rule and allow industry that 4 three-year period to get started. 5 CHAIRPERSON NICHOLS: Well, you can give us the 6 numbers of what the benefits are that we'd be sacrificing. 7 ACTING EXECUTIVE OFFICER CACKETTE: Can you see 8 them on your screen? 9 CHAIRPERSON NICHOLS: Yes. I think that is what 10 we're talking about. 11 ACTING EXECUTIVE OFFICER CACKETTE: What we have 12 is the third row is what we analyzed, and that was CIAQC's 13 proposal as of yesterday I think it was or day before, 14 which was 40 percent in the second year of a three-year 15 window and then full compliance in the third year. No 16 requirement in the first year. 17 And they had it pegged to start at 2011, and we 18 said that's tantamount to a delay of the reg for one year. 19 We added into our analysis 2010. 20 And so we have 100 percent compliance in the 21 first year, the first interval, and then the first 22 three-year interval starting. In 2010, you'd have to 23 comply. In 2011, you wouldn't necessarily have to do 24 anything more. In 2012, you would have 40 percent of the 25 total required in the next year. And then in the final PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 year, which would be 2013, you'd have to be in full 2 compliance. So then it would start over again, unless you 3 did what you were just discussing about limiting it to one 4 window. 5 That was a 12 percent lose of benefit that we -- 6 and these are PM benefits in 2015, which is the target 7 year for PM2.5 compliance. That's why we picked that 8 analysis. Then there was some discussion floating around 9 today that the industry did not agree to the 100 percent 10 in 2010. And they thought 20 percent in 2010 would be an 11 appropriate substitute. So that's the second row going 12 up. That shows a 16 percent lose in benefit. 13 Then going into the discussions when we were 14 still trying to seek a consensus among all the parties, 15 the original proposal of CIAQC was just three years and 16 only have to demonstrate compliance in the third year. 17 And we were saying that that had a big impact on air 18 quality. And so we came up with the idea, well, what 19 about if you have to do at least 80 percent, but we're not 20 going to make you do 100 percent in the interim years. 21 So, you know, that is sort of like an annual 22 compliance, but it's essentially a possible relaxation of 23 the standard for two out of the three years by 20 percent. 24 And that got 3 percent reduction in benefit, but the 25 indications we had is that CIAQC was not at all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 comfortable with that. Their members would not support 2 it. 3 CHAIRPERSON NICHOLS: And the thing to remember 4 about all of this, folks -- and I know you do and I know 5 we're all here trying to accomplish the same results. But 6 my going-in tendency is always to look for flexibility on 7 the compliance side if it saves industry money and doesn't 8 cost you much of anything in terms of the air quality 9 benefit. Because it just makes everything so much easier. 10 And there are no guarantees about 100 percent compliance 11 in anything we do, realistically. 12 But when you're talking about numbers like 12 13 percent or 16 percent, then you're talking about levels of 14 control that we're not going to be able to make up in 15 other places. I mean, the fact is that meeting the PM2.5 16 standards is going to be a very, very challenging and 17 expensive operation. So however difficult this is, it's 18 going to get more difficult as we look at other rules. 19 BOARD MEMBER ROBERTS: Help me, because maybe I'm 20 not understanding this. When you get to the third year, 21 you have full compliance. So the 12 percent is 12 percent 22 of the cumulative to that point. 23 CHAIRPERSON NICHOLS: It's what you've lost in 24 the interim. 25 ACTING EXECUTIVE OFFICER CACKETTE: It's what you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 lost in the interim. Let's use one of the BACT off-ramps. 2 You have to do 20 percent filters per year. So in a 3 three-year increment, with no restrictions, you can 4 arguably do none in the first year, none in the second 5 year, and 60 percent in the third year. This is 6 hypothetical. And in those first two years, you get no PM 7 reduction. 8 So the health effects add up the, lost health 9 effects. In the third year, you've accomplished what you 10 would have done in the third year. And there's no loss of 11 health effect. So there's a loss in year one, year two -- 12 BOARD MEMBER ROBERTS: Once you get to that third 13 year, that percentage as a percentage of any subsequent 14 years goes down. 15 ACTING EXECUTIVE OFFICER CACKETTE: No. It 16 doesn't make up. 17 BOARD MEMBER ROBERTS: It isn't made up. But 18 it's a small part now in an ever smaller part of your 19 cumulative. 20 CHAIRPERSON NICHOLS: But you're never going to 21 get back the impacts on the people who had to breath 22 dirtier air during the first two years. 23 BOARD MEMBER ROBERTS: I understand. But we're 24 down to talking about some very, very small percentages 25 and as you go past that -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 ACTING EXECUTIVE OFFICER CACKETTE: The 2 percentages are what's up there. We showed the graph 3 before of what's the cumulative line and the difference 4 between one and -- 5 BOARD MEMBER ROBERTS: If I took the impact out 6 to the year 2018 or the year 2020, that number would go 7 down. 8 ACTING EXECUTIVE OFFICER CACKETTE: In cumulative 9 terms, no, it wouldn't go down. It would tend to approach 10 as isentrope and stay there. It would be -- 11 BOARD MEMBER ROBERTS: But the 12 percent would 12 have to go down, Tom. 13 ACTING EXECUTIVE OFFICER CACKETTE: On a yearly 14 basis, yes. 15 BOARD MEMBER ROBERTS: That's what I'm saying, on 16 a cumulative. 17 ACTING EXECUTIVE OFFICER CACKETTE: What you've 18 lost in the first two years under this, you've lost. 19 People have been exposed. And whatever the health effects 20 are, they are. 21 BOARD MEMBER ROBERTS: I think I understand that. 22 Okay. But if you were to graph that out is what I'm 23 saying, that percentage as you accomplish more and more 24 would become a declining percent. You're picking kind of 25 the point of where it's at a maximum. Three years later PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 it's going to be a much smaller percentage. And three 2 years after that it's going to be a smaller percentage. 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: But the 4 proposal was to have repeating three-year periods. 5 BOARD MEMBER ROBERTS: But if I'm listening to 6 Sandy, and I thought she said one three-year period. See, 7 I would agree with you. But your analysis is based on 8 that, but that's not what she's saying. And I think the 9 numbers are misleading. 10 CHAIRPERSON NICHOLS: It wasn't analyzing that 11 question. 12 BOARD MEMBER ROBERTS: No. As we're discussing 13 it, she just said -- 14 CHAIRPERSON NICHOLS: Right. But it's not on the 15 chart. 16 BOARD MEMBER ROBERTS: I'm trying to discuss what 17 I heard. 18 CHAIRPERSON NICHOLS: It's not on his chart. 19 BOARD MEMBER ROBERTS: You may not have the 20 number. But the number clearly once you get to that 21 year -- because you have full compliance when you get to 22 that year. 23 CHAIRPERSON NICHOLS: Understand. 24 BOARD MEMBER BERG: The other thing with the SOON 25 Program is the industry is making a commitment to do more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 than the benchmark. So they can't put off until year 2 three. And I'm just comfortable saying they have to do 40 3 percent by the second year. But I just think going into 4 this thing that the flexibility is an important issue. 5 BOARD MEMBER CASE: Can I ask for a point of 6 clarification, because I've gotten a little confused? 7 I think, if I'm understanding, do we have two 8 different conversations here? One is the regular 9 regulation that is currently on an annual cycle versus 10 consideration for the SOON Program, which is a whole new 11 effort to reach a level of clean air that's much higher 12 than the original proposed regulation. Am I understanding 13 that correctly? 14 BOARD MEMBER LOVERIDGE: SOON is NOx, too. 15 ACTING EXECUTIVE OFFICER CACKETTE: All of the 16 discussion in the graphs we've been showing you are based 17 not on the SOON Program, but on the Base Program. 18 BOARD MEMBER CASE: My understanding is this 19 question was coming up in regards to the SOON Program. 20 BOARD MEMBER BERG: Now we're talking about in 21 regards to the regulation. The overall regulation. 22 BOARD MEMBER RIORDAN: And giving flexibility the 23 first three year, as Ms. Berg said. But following that, 24 it would be the same as the regulation is proposing. So 25 you have to go back to that -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 ACTING EXECUTIVE OFFICER CACKETTE: Look at 2012 2 and you can see what the cumulative lost lives from the 3 first -- health benefits from the first three years if it 4 was a one-year increment. And I think beyond that, the 5 lines would be absolutely parallel. 6 BOARD MEMBER ROBERTS: Well, they should start to 7 go together I would think. 8 ACTING EXECUTIVE OFFICER CACKETTE: That's 9 cumulative, so they don't ever go back together. What 10 that means is that there would be no more -- 11 BOARD MEMBER ROBERTS: But it's not 12 percent. 12 ACTING EXECUTIVE OFFICER CACKETTE: In this 13 chart, it's whatever it is in 2012, which looks like maybe 14 7 percent or something. 15 BOARD MEMBER ROBERTS: That's the point I was 16 making from a percentage basis. But, yeah, they would 17 graph out parallel. But on a cumulative basis, it's going 18 to be a much smaller number. And that's the point I think 19 we were trying to make was that you -- while you have some 20 initial impact, that impact is over -- 21 CHAIRPERSON NICHOLS: You know, we've been 22 sitting here dealing with every different possible groups 23 and their concerns. And I'm going along with you really 24 emotionally and every other way with all of those 25 compliance, flexibility issues you've talked about for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 small fleets or especially impacted people. 2 But now we're talking about something that would 3 apply to every single fleet, regardless of their cost of 4 compliance or regardless of their ability to comply, 5 simply giving up three years worth of control, or at least 6 a good two years worth of control to give the extra 7 flexibility. And I think it's a questionable -- 8 SUPERVISOR HILL: Madam Chair, I would agree with 9 you, and I would support the original recommendation. I 10 think that's the direction we should go. 11 CHAIRPERSON NICHOLS If you want to make a 12 proposal to amend the regulation to deal with the extended 13 compliance period, I would entertain that motion and we 14 can vote on it. 15 BOARD MEMBER BERG: I'm hearing that there isn't 16 the votes to -- I put it on the table, Madam Chair, for a 17 discussion like we did those other things. Am I seeing 18 that there's enough discussion to put a vote on? 19 CHAIRPERSON NICHOLS: Well -- 20 BOARD MEMBER RIORDAN: Well, I think that's the 21 way to solve the problem, to test it. 22 BOARD MEMBER BERG: I'll move to include the 23 triennial compliance for the first three years of 2010 24 through 2013, one-time window. 25 CHAIRPERSON NICHOLS: Is there a second? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 BOARD MEMBER ROBERTS: First, I think you have to 2 add to that that's with -- we don't have the numbers up 3 here. There were a number of options. That's with 40 4 percent. 5 BOARD MEMBER BERG: With the 40 percent 6 compliance at the end of the second year. Thank you, Ron. 7 BOARD MEMBER ROBERTS: And no additional 8 three-years period? 9 CHAIRPERSON NICHOLS: Yes. 10 BOARD MEMBER ROBERTS: I would second that. 11 BOARD MEMBER D'ADAMO: I have a question of staff 12 on local air district plans. And if we can bring that 13 chart up again. I'd like to understand the impact this 14 would have on in particular South Coast and San Joaquin 15 Valley on PM. I just don't recall the dates, the PM dates 16 for compliance. 17 ACTING EXECUTIVE OFFICER CACKETTE: Well, they 18 have to -- for the PM standard, they have to demonstrate 19 their clean air in 2014 for a 2015 attainment date. So 20 that's what's sort of driving this whole discussion is how 21 much PM can you get in those five years. 22 BOARD MEMBER D'ADAMO: I would say then -- and I 23 really appreciate Ms. Berg, because she has spent so much 24 of her time on this. 25 And I do favor flexibility. But I feel compelled PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 to oppose this, mainly because of the attainment 2 demonstration. And I just know because Supervisor Case 3 and I have spent a lot of time on this and we're going to 4 try to squeeze more out of the reductions than we already 5 have. So reluctantly I'll be opposing it. 6 BOARD MEMBER CASE: I would concur with the same 7 element. When you look at the health impacts of 8 particulate matter, we've dealt with PM10. But really 9 when you look at the studies, PM2.5 is so much more 10 significant from a health perspective that it embeds 11 itself much deeper in the body in terms of causing damage. 12 So any exposure to that over any period of time is more 13 troublesome than any even PM10. 14 The other piece is as people are so exposed to 15 air pollution and we're struggling with making those 16 findings for ozone and the San Joaquin Valley -- and many 17 people are very frustrated with the timelines because the 18 technology doesn't exist. I just don't see how we can 19 support not getting at least particulate matter. We have 20 many challenges with ozone. And the bottom line is it's 21 very, very damaging to the lungs. So I'm in agreement. 22 I like to support industry. I believe it's 23 really important. But to have a healthy population, you 24 also have to have a healthy economy so we have the 25 resources. But to go there and expose people, I can't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 support that at this time. 2 CHAIRPERSON NICHOLS: Excuse me. We have a 3 motion and a second. We're having discussion now. I'll 4 call on you next and then -- 5 BOARD MEMBER RIORDAN: I just want to remind the 6 Board with the motion that's before us, at the end of the 7 three years, you're going to be at the same point with a 8 minor variation that you would have been with the 9 regulation that's before us. 10 I think this does provide flexibility and takes 11 into consideration the air quality because we're getting 12 to the same end point. And as Supervisor Roberts pointed 13 out, when you look at it over a long term, it becomes a 14 very small number in the whole scheme of things. But 15 you've allowed some flexibility to an industry that's 16 really got to come up with a lot of effort in those first 17 few years. So that's why I'm supportive of the motion. 18 CHAIRPERSON NICHOLS: Additional comments? Yes. 19 BOARD MEMBER LOVERIDGE: Supervisor Case really 20 made the same point I would make. We've declared a 21 virtual emergency in South Coast in PM 2.5. And we're 22 doing all kinds of things to bring attention to it, bring 23 extra resources. And to vote to extend and increase the 24 amount is something I just can't do at all. I think the 25 South Coast Board would be appalled at that kind of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 choice. 2 CHAIRPERSON NICHOLS: I think if there are no 3 more comments, I'll ask the Clerk to call the roll. 4 SECRETARY ANDREONI: Ms. Berg? 5 BOARD MEMBER BERG: Yes. 6 SECRETARY ANDREONI: Supervisor Case? 7 BOARD MEMBER CASE: No. 8 SECRETARY ANDREONI: Ms. D'Adamo? 9 BOARD MEMBER D'ADAMO: No. 10 SECRETARY ANDREONI: Supervisor Hill? 11 SUPERVISOR HILL: No. 12 SECRETARY ANDREONI: Mayor Loveridge? 13 BOARD MEMBER LOVERIDGE: No. 14 SECRETARY ANDREONI: Supervisor Roberts? 15 BOARD MEMBER ROBERTS: Yes. 16 SECRETARY ANDREONI: Mrs. Riordan? 17 BOARD MEMBER RIORDAN: Aye. 18 SECRETARY ANDREONI: Professor Sperling? 19 BOARD MEMBER SPERLING: No. 20 SECRETARY ANDREONI: Chairman Nichols? 21 CHAIRPERSON NICHOLS: No. 22 SECRETARY ANDREONI: The motion defeated. 23 CHAIRPERSON NICHOLS: Very good discussion. I 24 appreciate the intentions of everybody who spoke on both 25 sides of this one. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 We're now at the main motion. I think the rule 2 is before us at this point, and it's time to act. 3 Do we have need to call the roll on this one, or 4 can we do a voice vote on the main regulation? All right. 5 I would ask for your aye vote then. All in favor 6 please say aye. 7 (Aye) 8 CHAIRPERSON NICHOLS: Any opposed? 9 Thank you. The motion carries unanimously. 10 Thank you. 11 CHIEF COUNSEL JENNINGS: Chairman Nichols, just a 12 short comment on process. We have a court reporter here, 13 and she's going to be able to a put out the transcript 14 within ten days normally. That will be posted on our 15 website. 16 I'm confident that looking at the transcript 17 we'll be able to translate your action into a text for the 18 Resolution. And we'll make that available as soon as 19 possible after the transcript is posted. 20 CHAIRPERSON NICHOLS: Thank you. 21 Thanks, everybody. We will be adjourned until 22 tomorrow morning. Good work. 23 (Thereupon the California Air Resources Board 24 recessed at 6:34 p.m.) 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 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 8th day of August, 2007. 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