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, MARCH 27, 2008 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 Dr. John R. Baums Ms. Sandra Berg Ms. Dorene D'Adamo Mr. Jerry Hill Mr. Ronald O. Loveridge Mrs. Barbara Riordan STAFF Mr. Tom Cackette, Chief Deputy Executive Officer Mr. James Goldstene, Executive Officer Mr. Bob Jenne, Acting Chief Counsel Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Quetin, Ombudsman Ms. Lori Andreoni, Board Secretary Ms. Analisa Bevan, Chief, Sustainable Transportation Technology Branch, MSCD Mr. Bart Croes, Chief, Research Division Mr. Joe Calavita, Mobile Source Control Division Mr. Earl Landberg, Mobile Source Control Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED ALSO PRESENT Mr. Lydell Anderson Mr. Thad Balkman, Phoenix Motorcars Mr. Phil Baxley, Shell Hydrogen Mr. Adam Borelli, Google.org Ms. Sherry Boschert, Sierra Club of California Mr. Paul Buttner, California Rice Commission Mr. Tim Carmichael, Coalition for Clean Air Mr. Tom Carroll, Shasta Union High School District Mr. Robert Cassidy, Nissan Mr. Francois Choquette Mr. John Clements, Kings Canyon Unified School District Mr. Daniel Davids, Seattle Electric Vehicles Association Mr. Bill Davis, Southern California Contractors Association Mr. Besir Dunlap, EV Driver Mr. Ze'ev Dvori, Tesla Motors Mr. Stephen Ellis, American Honda Motors Co. Mr. Daniel Emmett, Energy Independence Now Ms. Jennifer Ehn, John Deere Mr. Ron Feund, EAA Mr. Dave Flanaghan, UTC Power Mr. Steven Flint, New Yort State Dept. Environmental Conservation Mr. Ted Flittner, 1 Ample World PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Tom Folks, Mighty Com Mr. Andrew Frank, UC Davis Mr. Jay Friedland, Central Coast EAA (Plug In America) Mr. Ron Freund, Electric Auto Association Mr. Marc Geller, SFEVA Mr. Warren Gifford Mr. David Greene, Oak Ridge National Laboratory Mr. Peter Greer Mr. Sigmund Gronich, Charisma Consulting Mr. Steve Heckeroth, ASES Mr. Karl Heinz Ziwica, BMW of North America Ms. Bonnie Holmes-Gen, American Lung Association Mr. Kirk Hunter, Southwest Transportation Agency Mr. Stuart Johnson, Volkswagen Mr. Rick Kasper, Global Electric Motorcars Mr. Richard Kelly Mr. Earl Killian Ms. Jamie Knapp, ZEV Alliance Mr. Ben Knight, Honda Mr. Doug Korthof Mr. William Korthof Mr. Joe Kubsh, Manufacturers of Emission Controls Association PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Ms. Camille Kustin, Environmental Defense Fund Mr. Allan Lind, CCEEB Mr. Michael Lord, Toyota Mr. Ralph Meza, Fresno Unified School District Mr. Fred Minassian, South Coast AQMD Mr. Matt Miyasato, SCAQMD Mr. Dave Modisette, CA Electric Transportation Coalition Mr. Reg Modlin, Chrysler Ms. Linda Nichols, Plug In America (Rain Forest Action Network) Mr. Bernie Orozco, Sempra Energy Mr. Chris Paine Mr. Bill Pascarella Mr. David Patterson, Mitsubishi Ms. Cynthia Verdugo-Peralta, Asthma and Allergy Foundation of America Mr. Marcus Platt, Boatswain's Locker Mr. Norman Plotkin, CAWA/AAIA Mr. Walter Puentz, Mercedes-Benz Mr. Spencer Quong, Union of Concerned Scientists Mr. Bill Reinert, Toyota Mr. Randy Reisinger, CalCars Mr. Gary Rohman, ECCO Equipment Corporation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi APPEARANCES CONTINUED ALSO PRESENT Ms. Lisa Rosen Ms. Sara Rudy, Ford Motors Mr. Robert Sawyer, UC Berkeley Mr. Paul Scott, Solar City Ms. Chelsea Sexton, Plug In America Mr. John Shears, Center for Energy Efficiency and Renewable Technologies Mr. Adam Smith, Google.org Mr. Jay Smith Mr. Andrew Simpson, Tesla Motors Mr. Luke Tonachel, NRDC Mr. Leonard Tramiel Mr. David Turock Ms. Joy Turock Mr. Dave Underwood, Plug Power Mr. Alan Weverstad, General Motors Mr. James Woolsey Mr. Aki Yasuoka, Honda PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX PAGE Item 080-3-1 Chairperson Nichols 3 Executive Officer Goldstene 4 Staff Presentation 4 Q&A 9 Item 08-3-5 Chairperson Nichols 10 Executive Officer Goldstene 14 Staff Presentation 15 Board Member Comments 45 Motion 47 Mr. Greene 60 Mr. Gronich 64 Mr. Cassidy 66 Mr. Flanaghan 68 Mr. Kelly 71 Mr. Simpson 74 Ms. Rudy 77 Mr. Frank 79 Mr. Killian 82 Mr. Geller 84 Mr. Gifford 87 Mr. Reinert 89 Mr. Lord 93 Mr. Flint 96 Mr. Woolsey 99 Mr. Miyasato 102 Ms. Sexton 105 Mr. Underwood 108 Mr. Paine 111 Mr. Friedland 114 Mr. Greer 117 Mr. Freund 119 Mr. Plotkin 122 Mr. Knight 124 Mr. Modisette 127 Ms. Holmes-Gen 131 Mr. Sawyer 136 Mr. Emmett 139 Ms. Knapp 143 Mr. Davids 145 Mr. Modlin 147 Mr. Kasper 150 Mr. Ellis 152 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX CONTINUED PAGE Mr. Scott 154 Mr. Dvori 157 Mr. Smith 159 Mr. Weverstad 163 Mr. Reisinger 165 Mr. Yasouka 167 Mr. Flittner 169 Mr. Turock 173 Mr. Smith 174 Mr. Quong 175 Mr. Tonachel 179 Mr. Shears 182 Mr. Choquette 185 Mr. Turock 187 Mr. Johnson 190 Mr. Korthof 191 Mr. Pascarella 195 Mr. Puetz 197 Ms. Rosen 200 Mr. Tramiel 202 Mr. Heinz Ziwica 203 Mr. Patterson 205 Mr. Balkman 208 Mr. Dunlap 209 Ms. Nichols 212 Mr. Anderson 214 Mr. Korthof 216 Ms. Boschert 218 Mr. White 221 Mr. Carmichael 224 Mr. Baxley 226 Mr. Heckeroth 230 Ms. Verdugo-Peralta 233 Mr. Folks 237 Board discussion 240 Vote 299 08-3-3 Chairperson Nichols 301 Executive Officer Goldstene 302 Staff Presentation 305 Mr. Minassian 318 Mr. Buttner 320 Mr. Lind 321 Mr. Davis 324 Mr. Rohman 333 Mr. Platt 335 Ms. Ehn 337 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ix INDEX CONTINUED PAGE Mr. Carmichael 338 Ms. Kustin 340 Q&A 342 Motion 344 Vote 346 08-3-4 Executive Officer Goldstene 346 Staff Presentation 348 Mr. Meza 365 Mr. Rhoads 366 Mr. Clements 370 Mr. Hunter 373 Mr. Carroll 375 Mr. Orozco 378 Mr. Kubsh 378 Mr. Carmichael 381 Ms. Holmes-Gen 383 Mr. Minassian 385 Motion 387 Vote 391 Q&A 392 Public Comment Mr. Korthof 406 Mr. Rohman 409 Mr. Davis 411 Mr. Hogo 415 Adjournment 418 Reporter's Certificate 419 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON NICHOLS: Good morning. Ladies and 3 gentlemen. This is the March 27th public meeting of the 4 Air Resources Board, and I'll ask that we all come to 5 order here. 6 We are expecting a large crowd for the next item 7 on our agenda, but we're going to get started first as we 8 do every month with a briefing on an update on research. 9 So before we get into the regular meeting, we will begin 10 with the Pledge of Allegiance and I'll ask everybody to 11 stand and face the flag. 12 (Thereupon the Pledge of Allegiance was 13 recited in unison.) 14 CHAIRPERSON NICHOLS: The clerk will please call 15 the roll of the Board. 16 SECRETARY ANDREONI: Dr. Baums? 17 Ms. Berg? 18 BOARD MEMBER BERG: Here. 19 SECRETARY ANDREONI: Ms. D'Adamo? 20 Supervisor Hill? 21 SUPERVISOR HILL: Here. 22 SECRETARY ANDREONI: Ms. Kennard? 23 Mayor Loveridge? 24 BOARD MEMBER LOVERIDGE: Here. 25 SECRETARY ANDREONI: Ms. Riordan? PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD MEMBER RIORDAN: Here. 2 SECRETARY ANDREONI: Supervisor Roberts? 3 Professor Sperling? 4 BOARD MEMBER SPERLING: Here. 5 SECRETARY ANDREONI: Chairman Nichols? 6 CHAIRPERSON NICHOLS: Here. 7 SECRETARY ANDREONI: Madam Chair, we have a 8 quorum. 9 CHAIRPERSON NICHOLS: Thank you. 10 I have a couple of announcements before we begin. 11 First of all, we have listed on our agenda for today a 12 closed session to be briefed on litigation. That will not 13 occur. There will not be a closed session today. 14 If there's anybody in the audience now or 15 listening who is not familiar with our procedures, we ask 16 everyone that wishes to testify on any item to sign up 17 with staff. We have tables outside the auditorium today, 18 and you have the option to include your name on a speaker 19 card if you wish. 20 In order to give everybody a chance to speak we 21 set up two podiums today. We'll be using both of them. 22 We're going to be alternating between the podiums, and 23 staff will be available to help people line up so we can 24 manage the large numbers that we are expecting for the 25 next item. I'll probably make this announcement again PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 later. 2 We're also going to be strictly imposing the 3 three-minute time limit, and there will be a buzzer that 4 will go off. Instead of the gentle lights, we'll be using 5 the sound system. So people will really know when their 6 time is up. And I'll talk more about how we'll deal with 7 this later. 8 Finally, I need to announce there are emergency 9 exists at the rear of the room. If there should be a fire 10 drill or an actual emergency, people are to exit through 11 those doors and go out into the street and return when we 12 get the all-clear alert. 13 So with that, I think we can turn to our health 14 update. And this is an opportunity for the Board to hear 15 about some of the latest research findings on the health 16 affects of air pollution. Today, staff is going to be 17 presenting a first paper that has addressed the issue of 18 wild fire smoke on respiratory health of children. I'm 19 sorry that Supervisor Roberts isn't here for this one. 20 But I know he has an excused absence today. We all make 21 sure he's updated on this as well since this was a huge 22 issue in his district a few months ago when we had serious 23 fires there. 24 So Mr. Goldstene, would you please introduce the 25 item? PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 2 Nichols. 3 As Californians, we know that wild fire season is 4 of concern for multiple reasons, including threats to 5 property, national resources, and public health. Few 6 studies have investigated the relationship between adverse 7 health effects and exposure to wild fire smoke. 8 This morning, staff will present the results of a 9 recent paper that investigated children's respiratory 10 systems during a group of major wild fires in southern 11 California in October 2003. 12 Dr. Deborah Drechsler from our Health and 13 Exposure Assessment Branch will make the presentation. 14 Dr. Drechsler. 15 (Thereupon an overhead presentation was 16 presented as follows.) 17 DR. DRECHSLER: Good morning, Chairman Nichols 18 and members of the Board. As we all know, one of the 19 perils of living in California is the wild fire season 20 which effects air quality in addition to other more direct 21 effects. There have been several published studies on the 22 health impacts of specific wild fires, but the results 23 have not been consistent. The impacts of any fire are 24 unique to that event and are influenced not only by the 25 magnitude, intensity, and duration of the fire, but also PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 by the extent to which the smoke plume moves across the 2 populated areas. 3 --o0o-- 4 DR. DRECHSLER: In October 2003, a group of wild 5 fires broke out in southern California, which burned 6 portions of six counties. The time of peak fire activity 7 varied by location but encompassed the period between 8 October 20th and November 2nd. 9 Listed on this slide are highlights of what these 10 fires destroyed. The fires impacted six children's health 11 study sites directly and six others indirectly, offering a 12 unique opportunity to conduct a population based large 13 scale investigation of the consequences of wild fire smoke 14 exposure on respiratory health in children. For 15 comparison, the 2007 fires burned about two-thirds of the 16 acreage and about half the number of homes as the 2003 17 fires. 18 The paper we are presenting this morning is by 19 Kunzli, et al, and is entitled, "Health Effects of the 20 2003 Southern California Wire Fires on Children." It 21 appeared in the American Journal of Respiratory and 22 Critical Care Medicine in 2006. 23 The objective of the study was to assess the 24 acute effects of wild fire smoke exposure on participants 25 in the children's health study which was started with ARB PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 funding. 2 --o0o-- 3 DR. DRECHSLER: The study population included 873 4 high school seniors and 5,551 first graders. 5 Smoke exposure was estimated in two ways, first 6 by self reports of the number of days the child smelled 7 smoke when indoors during the fire period. And second, by 8 the average PM10 concentration over the five days of 9 highest fire activity. PM10 concentration proved to be 10 the strongest marker of smoke exposure. 11 Selection of the five-day average PM10 exposure 12 period was based on observations that the highest PM10 13 concentrations periods during the fires typically lasted 14 for about five days. 15 The children filled out questionnaires on 16 respiratory symptoms or illnesses, eye irritation, and 17 asthma attacks experienced, along with medication usage 18 during the fire period. 19 --o0o-- 20 DR. DRECHSLER: The five-day average PM10 21 concentrations ranged from 104 to 252 micrograms per cubic 22 meter in the effected communities, which was about three 23 to eight times the long-term averages for these regions. 24 Risk of experiencing symptoms was related to length of 25 exposure. This risk increased 60 to 500 percent with more PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 than six smoky days, in contrast to 30 to 250 percent with 2 one to five smoky days. 3 Comparisons between communities showed that risk 4 of experiencing symptoms was increased 30 to 300 percent 5 in communities with the highest compared to the lowest 6 PM10 levels across the symptoms studied. 7 Unexpectedly, the risk of symptoms was higher for 8 non-asthmatics than for asthmatics, although asthmatics 9 had a higher base line symptoms rate and smoke related 10 symptoms were added on top of disease related symptoms. 11 In addition, the relationship between smoke 12 exposure and asthma attacks was not statistically 13 significant. The results also showed that asthmatics were 14 more likely to take preventative action than 15 non-asthmatics. This is the first study to show that 16 preventative actions reduced the risk of smoke related 17 symptoms. 18 --o0o-- 19 DR. DRECHSLER: ALB is often asked how to advise 20 the public during wild fire events. The results of this 21 paper suggest that public health advisories based on PM10 22 using the air quality index would be useful for expressing 23 the level of risk fire smoke poses to the public. 24 Further, preventative actions, including 25 remaining indoors, wearing masks when outdoors, and using PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 air conditioning, have been shown to provide some 2 protection. 3 In addition, ARB has a major statewide role in 4 air quality emergencies, including wild fires. The 5 emergency response team coordinates with local or unified 6 incident commands to provide air monitoring, 7 meteorological and related support service in times of 8 substantial air emission releases that might impair public 9 health, such as large wild fires. 10 These efforts are coordinated with Cal/EPA, its 11 boards, departments, offices, and the State Office of 12 Emergency Services, and the US Environmental Protection 13 Agency. Much of this work is carried out using the rapid 14 response trailer, pictured on this slide. 15 Another useful resource available on the ARB 16 website is a multi agency report entitle, "Wild Fire 17 Smoke, a Guide for Public Health Officials," that was 18 designed to give guidance to local health officers faced 19 with communicating wild fire risks to the public. 20 --o0o-- 21 DR. DRECHSLER: One concern looking forward is 22 the influence of future climate change and warmer 23 temperatures on wild fire frequencies. Analyses performed 24 for the Governor's climate change initiative suggest that 25 as temperature rises, there will be an increase in the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 frequency of wild fires as shown on this slide. This 2 means that fire smoke contributions to air pollution will 3 become greater and that related public health concerns 4 will become more important. Consequently, advice on 5 effectively communicating wild fire risk to the public is 6 likely to become a larger issue than currently. 7 Thank you for your attention. Staff will be 8 happy to respond to any questions you may have. 9 CHAIRPERSON NICHOLS: Thank you for the report. 10 I might ask our representatives from the South Coast in 11 particular if you heard of any of these advisories that 12 were discussed in fire situations in your part of the 13 world. I know we've been communicating with the South 14 Coast District, and they use very similar systems, but 15 they have a lot more outreach and the press generally 16 calls them when there is a forest fire to ask questions 17 about the health effects. And I think we're completely in 18 sync as far as I know in terms of getting that information 19 out to the public. 20 But I think what's new here is that we actually 21 have now some hard evidence about the effects and the 22 effectiveness of these methods of dealing with personal 23 protection that we can use. So there is some progress. 24 Are there any questions or comments by Board 25 members? PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 BOARD MEMBER RIORDAN: Just a comment, Madam 2 Chairman. Because much of this fire was in very close 3 proximity to actually where I live, I would be interested 4 in knowing if in the study they differentiated amongst 5 those that they tested and if they broke out in the study, 6 for instance, those who were closest versus those who were 7 a little further away and then maybe looked at the wind 8 patterns of those. There's a lot of wind during that 9 fire, as you will recall. That's what was driving the 10 fire. It was incredible. Is there -- 11 DR. DRECHSLER: They were not able to resolve the 12 spacial relationship between closeness to the fire. These 13 are more regional measurements of the air quality. 14 BOARD MEMBER RIORDAN: But when they interviewed 15 the children or did the interviews, do they have the 16 schools where they were located? 17 DR. DRECHSLER: Oh, yes. 18 BOARD MEMBER RIORDAN: I would be interested in 19 asking for a copy of the study. I would be very 20 interested in reading the details of it. 21 DR. DRECHSLER: Essentially. 22 BOARD MEMBER RIORDAN: Thank you. 23 CHAIRPERSON NICHOLS: All right. Thank you. 24 We'll just shift personnel here I guess briefly and move 25 on to the next item on the agenda, which is the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 consideration of proposed modifications to the Zero 2 Emission Vehicle Program. 3 The way we'll proceed is the staff will give a 4 presentation and we'll have an opportunity for Board 5 members briefly to express views and indications about 6 their response to the report staff before we go to 7 comments from the public. This is such a large and 8 contentious matter that I think it's important that we 9 give our audience some indications of the Board members' 10 initial thinking at least before we begin to take people's 11 testimony. 12 I would also like to talk a little bit about the 13 timing of this hearing. This is not the only item on the 14 Board's agenda for today, although we are prepared to go 15 late into the evening. But looking at the numbers of 16 people that indicated they wanted to testify, I do want to 17 give some kind of general comments. And I may repeat this 18 again at some later point. But we are asking all 19 individuals to limit their testimony to three minutes, 20 which is what we usually do. We're allowing 21 organizations, whether corporations or nonprofit 22 organizations that are testifying as organizations, to 23 have two speakers if the two speakers have different 24 topics that they are going to be addressing and not just 25 sort of a continuation of the same piece of testimony. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 As I mentioned earlier, we have two podiums set 2 up. And we're going to ask people to in advance line up 3 so that we don't lose precious time while we wait for 4 people to get up to the microphones. 5 And other than that, we're just going to try to 6 keep things going as smoothly as we possibly can. We're 7 really interested in hearing from everybody, but there's a 8 limit to what humans beings can absorb. There's also a 9 limit to what our court reporter can do. And in 10 consideration of her needs and the needs of others, we're 11 going to schedule ten-minute breaks about every two to 12 three hours. She's indicated she's willing to work 13 through lunch, and so we're going to work through lunch 14 too. 15 But what will happen is from time to time a Board 16 member may get up and leave to go to the back area there 17 to grab a bite or take care of other personal needs. 18 However, for those of you who haven't ever been to the 19 back recesses of this floor of the Cal/EPA building, it's 20 completely wired with the auditorium. So there's no place 21 you can be back there where you're not listening to the 22 testimony that's going on. So please be assured that 23 we're all going to be listening attentively throughout the 24 entire hearing. 25 I think we have the staff here for this item. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 Let me say a few words before the staff presentation. 2 I think it's important to note that this program 3 since its adoption in 1990 has been through a number of 4 iterations and has been modified several times to make 5 adjustments. I wasn't around when the program was 6 adopted. I don't think any current member of the Board 7 was here at the very early stages of it. But several of 8 us did live through at least the last version of changes. 9 And it's been a difficult process as the program in some 10 respects seemed to have lost its way. 11 I think I can speak for every member of the Board 12 here today in saying that our goal here today is to emerge 13 with a clear direction that will get this program on 14 track. And that's our goal is to have California vehicle 15 program be the test bed and California be the state where 16 manufacturers first bring their best cleanest technology. 17 In order to do that, we obviously have to weigh a 18 lot of considerations about what it takes to actually 19 bring new technologies to market. We have a track record 20 of considerable succeed in California. We've also had a 21 few hiccups along the way in terms of our abilities to 22 predict when and where technologies would be available or 23 to bet on which ones would win. 24 One of the things that I'm really intent on 25 having happen here today is to have as much clarity in the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 discussion as we can. I know there's a lot of passion on 2 all sides of this. But one of the things that I have 3 found probably most disturbing in the meetings I've had 4 leading up to this meeting has been the way in which 5 sometimes people feel it necessary to disparage 6 alternative technologies if it's not their own favorite. 7 And so I just want to sort of put down a marker here which 8 may have to come later that as far as the Board is 9 concerned, our goal is to advance all technologies that we 10 think have a promise of being effective in both cleaning 11 up the air and reducing our contribution to greenhouse gas 12 emissions and to make sure that we're not tilting the 13 scales in one direction or another simply in order to 14 favor some particular technology that happens to be our 15 favorite. 16 And with that, I'm just going to let the staff 17 proceed to their report and then we'll have some more 18 discussion. Mr. Goldstene. 19 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 20 Nichols. 21 While our expert panel reported findings in May 22 that fuel cell and battery technology had not progressed 23 sufficiently to warrant implementation of the regulation 24 without changes, technology is advancing rapidly. As 25 such, the proposed amendments before you strike a balance PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 between feasible implementation requirements and 2 aggressive acceleration of advanced and zero emission 3 technologies. 4 The proposal before you today reflects the result 5 of extensive deliberations with auto makers and interested 6 stakeholders. Staff believes that the proposed 7 modifications will advance pure ZEV technology research 8 and development, support the commercialization of the 9 ZEV-enabling advanced technology vehicles, and achieve 10 significant criteria pollutant emission reductions. 11 Analisa Bevan of the Mobile Source Control 12 Division will now begin the staff presentation. Analisa. 13 (Thereupon an overhead presentation was 14 presented as follows.) 15 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 16 CHIEF BEVAN: Thank you, James. Good morning, Chairman 17 Nichols and members of the Board. 18 Staff brings to you today proposed amendments to 19 the zero emission vehicle regulation. We bring these 20 amendments to the Board at your direction from the May 21 2007 hearing, at which the Board heard a report from our 22 independent expert panel on the status of technologies 23 used to comply with that regulation. 24 Your directions at that time were to adjust the 25 regulation to better match the state of vehicle PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 technologies, address treatment of emerging ZEV 2 technologies, and wherever possible, simplify the program. 3 We believe the amendments before you today address these 4 directives. 5 --o0o-- 6 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 7 CHIEF BEVAN: My presentation this morning will review the 8 structure and status of the current regulation, provide 9 you with an overview of the path we've taken to develop 10 these proposed amendments, describe briefly the main areas 11 of change that are proposed, prepare you for some of the 12 issues you will likely hear about from those testifying, 13 and finally summarize the proposal with staff's 14 recommendations. 15 --o0o-- 16 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 17 CHIEF BEVAN: Given its lengthy history and complex 18 structure, it is important to reflect on why we have the 19 ZEV mandate. 20 First, the ZEV mandate is needed to achieve 21 significant air quality benefits in order to reach our 22 health-based air quality standards. 23 Second, the program pushes research, development, 24 and deployment of zero emission vehicles. A performance 25 standard alone does not accelerate the development of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 transformative technology. 2 And third, the program encourages ZEV 3 commercialization through introduction of ZEV enabling 4 technology. While maintaining the goal of zero, the 5 program rewards and commercializes evolutionary 6 technologies that move us to the ZEV end game. 7 The ZEV program is an incubator that hatches 8 technologies and then introduces them to the market for 9 commercial acceptance. Each of these goals has been kept 10 in mind as the program has evolved since 1990 and is 11 present today in the staff's proposed amendments. 12 --o0o-- 13 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 14 CHIEF BEVAN: The ZEV mandate has long been described as a 15 requirement for ten percent ZEVs. This was the goal when 16 first adopted in 1990. Since that time, the percentage 17 requirement has increased and it has had four major 18 revisions that have responded to technology readiness 19 challenges as well as opportunities. These amendments 20 have incorporated new vehicle categories that have both 21 maximized emissions performance from combustion engines 22 and commercialized ZEV-enabling technologies. 23 The structure of the current regulation is as 24 follows. 25 In 2012, the requirement is for auto makers to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 generate credits equal to 12 percent of their annual 2 sales. They may generate those credits from a variety of 3 vehicle types earning different levels of credit. The 4 actual percentage of annual sales works out to be about 42 5 percent. 6 About one percent of the vehicles have to be ZEVs 7 like battery electric vehicles and hydrogen fuel cell 8 vehicles. We refer to this category as the gold category. 9 Auto makers may meet part of their obligation with partial 10 zero emission vehicles, or PZEVs. 11 These super ultra low emission vehicles certify 12 to zero evaporative emission standards and must maintain 13 their emissions performance with a $150,000, 15-year 14 warranty. We refer to this category as the bronze 15 category. The PZEV option accounts for about 30 percent 16 of annual sales. 17 Auto makers may also used advanced technology 18 PZEVs to comply with their requirements. These vehicles 19 meet the emissions requirements of a PZEV and make use of 20 technology that enables ZEV commercialization, such as 21 batteries, regenerative breaking, and electric motors as 22 used in hybrid electric vehicles. This category is 23 referred to as the silver category. Advanced technology 24 PZEVs can account for nearly 11 percent of sales. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 2 CHIEF BEVAN: The 2003 amendments to the program provided 3 auto makers with an alternative path for compliance. 4 Under this path, if auto makers produced new vehicles 5 instead of using banked credits from early compliance, 6 they could fulfill their requirements with their market 7 share of a target number of fuel cell vehicles. In 8 exchange for this lower requirement for fresh ZEV 9 production, auto makers had to backfill the remainder of 10 their gold requirement with AT PZEVs. 11 This chart shows the targets set for each phase 12 of implementation between 2005 and 2017. The alternative 13 path establishes a ramp up schedule that increases the 14 target number of fuel cell vehicles by a factor of ten for 15 the first three phases and then doubles the requirement 16 before returning the program to the original structure. 17 Creation of this implementation schedule in 2003 18 was one of the factors that prompted the Board to ask 19 staff to conduct a technology review prior to 2009 in 20 order to ensure that the pace of the ramp was appropriate. 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 23 CHIEF BEVAN: The ZEV program has been a success. Since 24 1990, a number of achievements have taken place that staff 25 believes would not have happened had the goal of zero PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 emissions not been established. 2 First, in 1998 with the introduction of PZEVs, 3 auto makers showed that near zero emissions could be 4 achieved with combustion engines. To be a part of the ZEV 5 program, these PZEVs not only showed near zero emissions 6 at the tail pipe, but also demonstrated two other factors 7 that set ZEVs apart: Evaporative emissions and lifetime 8 durability. 9 Second, California saw introduction of hybrid 10 electric vehicles. In 2001, by recognizing the role that 11 enabling technologies could play in advancing zero 12 emission vehicle development, California became leader in 13 the placement of hybrid like vehicles. 14 Third, the program has progressed the development 15 of battery electric and fuel cell vehicles. 16 Demonstration, preparation of the marketplace, 17 infrastructure deployment have all taken place in 18 California as a result of the ZEV mandate and have made 19 the state ready for ZEV commercialization. 20 --o0o-- 21 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 22 CHIEF BEVAN: Presented in this slide are the numbers of 23 vehicles we've seen placed in California as a result of 24 the ZEV program. We've seen more than half a million 25 bronze vehicles, over a hundred thousand hybrids, and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 compressed natural gas silver vehicles, and the largest 2 demonstrations of battery electric and fuel cell vehicles 3 in the world. 4 --o0o-- 5 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 6 CHIEF BEVAN: As I described a few slides back when the 7 Board adopted the amendments to the regulation in 2003, 8 they directed staff to conduct a technology review. This 9 review took place in late 2006 and early 2007. The 10 findings of the independent expert review panel and the 11 assessment of the program's implementation were presented 12 in May 2007. 13 Taking the Board's direction to propose 14 amendments to the regulation, staff held a public workshop 15 in July of 2007 at which a range of options were presented 16 for comments. A concept paper was released in November 17 2007 with a more refined staff approach. Staff received 18 feedback on the concept paper through individual meetings 19 and written comments. Finally, the Initial Statement of 20 Reasons was released on February 8th, in preparation for 21 this hearing. 22 --o0o-- 23 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 24 CHIEF BEVAN: I'll now turn to staff's proposed amendments 25 to the ZEV regulation. As I started my presentation, I'll PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 review why we are proposing changes, primarily to respond 2 to the Board's direction in May 2007 to align the 3 requirements to more closely reflect the state of 4 technology as presented by the expert panel, create 5 opportunities for emerging technologies, specifically 6 plug-in hybrid electric vehicles and battery electric 7 vehicles, and to simplify the program wherever possible. 8 --o0o-- 9 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 10 CHIEF BEVAN: The most difficult to contemplate of the 11 directives was the need to address the pace of technology 12 development. The expert panel found that fuel cell 13 vehicles were farther from commercial readiness than 14 expected due primarily to durability and cost hurdles. 15 Battery electric vehicles also continue to face 16 cost concerns. From the expert panel's finding, it was 17 clear that more development was needed before gold 18 technologies could be ready for commercialization. 19 However, the current regulation requires a premature 20 ramp-up to large scale fuel cell production. 21 Additionally, the way the current regulation is 22 structured, little to no flexibility, is allowed to pursue 23 ZEV technologies besides fuel cells, specifically if an 24 auto maker choose to pursue development have batter 25 electric vehicles, they would have to do so in addition to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 fuel cell vehicles and at a significantly greater volume 2 than fuel cells. 3 This cap and substitution ratio did not encourage 4 multiple ZEV technologies. When we established the 5 implementation schedule for ZEVs in 2003, we knew that the 6 pace of future development would be difficult to predict. 7 And the Board acknowledged that difficulty by directing 8 staff to assess technology progress and return if 9 necessary for mid course corrections. 10 --o0o-- 11 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 12 CHIEF BEVAN: I'll turn now to a summary of significant 13 proposed amendments. I'm highlighting the amendments with 14 the greatest impact and/or greatest controversy. The 15 initial statement of reasons detail all of the proposed 16 changes to the regulation. 17 Additionally, since posting on the ISOR for the 18 45-day comment period, a number of minor suggestions have 19 been made that provide further clarity, correct minor 20 errors, and are appropriate to the overall goals of the 21 program. These have been listed and are posted at the 22 back of the room. They will be made available for a 23 15-day comment period as staff suggested changes to the 24 proposed amendments. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 2 CHIEF BEVAN: As a broad overview, our significant 3 proposed amendments include: 4 Creation of a new path for compliance that will 5 replace the two-path system currently in place and set new 6 floor requirements for ZEV production as well as provide a 7 backfill category at ATPZEVs that use a zero emission 8 vehicle fuel, electricity, or hydrogen; 9 A revision to the credit system that addresses 10 concerns about banked credits; 11 And establishment of new categories of ZEVs and 12 ATPZEVs to encourage emerging ZEV technologies. I'll 13 describe these in greater detail in the slides to come. 14 --o0o-- 15 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 16 CHIEF BEVAN: Additional changes proposed include 17 amendments to the way silver credits are calculated to 18 address all manner of plug-in hybrids; 19 An increase in the credit earned by neighborhood 20 electric vehicles, extension of the travel provision which 21 affects the number of cars sold in other states with the 22 ZEV regulation to align this provision with the 23 developmental stages of technology still being 24 experienced; 25 Creation of a ramp-up period for intermediate PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 volume manufacturers that are transitioning to large 2 volume manufacturers; 3 And a requirement that data pertaining to ZEV 4 compliance that is submitted to the Air Resources Board, 5 specifically the earning and expending of ZEV credits, is 6 public from a specified date forward. 7 I'll now go into more detail on each of these 8 topics. 9 --o0o-- 10 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 11 CHIEF BEVAN: The focus of much of our proposal has been 12 establishing a feasible and appropriate requirement for 13 the 2012 through 14 time frame. The changes proposed for 14 the 2009 through 2011 primarily add flexibility rather 15 than changing vehicle volumes. And fundamental to the 16 2012 and subsequent model year changes is the creation of 17 a new path. 18 Before the 2003 amendments, auto makers had a 19 single path for compliance. Prior to the program's full 20 implementation, auto makers demonstrated battery electric 21 cars and delivered large numbers of neighborhood electric 22 vehicles. When the program was changed in 2003, we 23 established the two path system: The base path and 24 alternative path. Auto makers had a choice then: To 25 deliver a relatively small number of fuel cell vehicles in PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 demonstration quantities, or provide many more, on the 2 order of ten times, more new vehicles and/or banked 3 credits. 4 The bifurcation of the program has resulted in a 5 mix of compliance strategies, uncertainty about how many 6 vehicles the program generates, and the uneasiness about 7 the role of banked credits in the program. And on top of 8 all of that, it has greatly complicated the program. 9 This is why staff has proposed returning the 10 program to a single compliance path referred to as the new 11 path. Within this path, battery, electric, and fuel cell 12 vehicles will make up the core of the requirement. 13 Plug-in hybrids or hydrogen internal combustion engine 14 vehicles will be allowed to backfill a portion of the 15 obligation. And silver and bronze portions of the 16 regulation will remain unchanged. 17 --o0o-- 18 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 19 CHIEF BEVAN: The new path has its roots in the 20 alternative path requirements. 21 The requirement for gold vehicles is established 22 by the targets set in the alternative path for the 2012 to 23 2014 and 2015 to 2017 phases at 25,000 and 50,000 vehicles 24 respectively. Within that requirement, for the 2012 to 25 2014, period we are proposing an optional approach that PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 establishes a minimum floor requirement for ZEVs set at 2 2,500 fuel cell vehicles or a proportional number of other 3 ZEV types based on the credit ratio. 4 The balance of the 25,000 vehicle requirement 5 could then be made up with a proportional number of 6 enhanced ATPZEVs. This is a new category of vehicles 7 referred to as silver plus that I'll describe in the next 8 slide. The result of this floor requirement plus the 9 silver plus backfill option is that while fewer pure ZEVs 10 may be produced, the combination of fuel cell vehicles 11 and/or battery electric and plug-in hybrid vehicles will 12 be much greater than the 25,000 vehicle requirement. This 13 will be illustrated further in subsequent slides. 14 CHAIRPERSON NICHOLS: Could I interrupt for one 15 second here? Because I think I just want to make sure 16 that I understand and others do too that this minimum 17 number that you're talking about is not a maximum. That 18 is, a manufacturer could sell all pure ZEVs. This is the 19 floor you're talking about here. 20 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 21 CHIEF BEVAN: Correct. 22 CHAIRPERSON NICHOLS: The hope would be 23 presumably they would choose to do better. That's what 24 you're proposing to mandate. 25 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 CHIEF BEVAN: Yes. And a similar approach is proposed for 2 the 2015 to 2017 time frame, except that the 50,000 3 vehicle requirement, one half or 25,000 vehicles must be 4 ZEVs and than the portion to use silver plus vehicles is 5 allowed for the other half. 6 --o0o-- 7 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 8 CHIEF BEVAN: The creation of the silver plus category is 9 important. It singles out characteristics that move ZEV 10 enabling technologies further towards practical 11 application of pure ZEVs. Silver plus vehicles are 12 defined as earning silver credit greater than one and they 13 must use a fuel that can be used in a ZEV, electricity or 14 hydrogen. Examples of such vehicles are plug-in hybrids 15 and hydrogen internal combustion engine vehicles. Both of 16 these technologies push us closer to commercialization of 17 pure ZEVs through componentry used on board the vehicle, 18 establishment of infrastructure, and through raising of 19 market awareness of electric drive through plugging in or 20 hydrogen as the transportation fuel. 21 Setting these vehicles apart in a new silver plus 22 category also gives us the opportunity to treat them 23 exclusively as part of the gold requirement in the new 24 path. 25 It is important to note those are not vehicle PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 technologies that are available today in the marketplace. 2 While staff is confident they may be ready for 3 commercialization very soon, not all auto makers are 4 prepared to market a plug-in hybrid or hydrogen ICE car in 5 the near term, which means that either this is an 6 aggressive new category for auto makers to take on or the 7 gold requirement is really their market share of 250,000 8 vehicles, not 2,500, which is to say for some auto makers 9 this silver plus option may not be available. Therefore 10 this is essentially no change to the gold requirements 11 relative to the current regulation. 12 --o0o-- 13 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 14 CHIEF BEVAN: As promised, here we illustrate the total 15 number of vehicles that results in each phase if maximum 16 use of the silver plus category is used. Where the gold 17 requirement is 25,000 in 2012 to 2014, the floor of 2,500 18 fuel cell vehicles with backfill of 75,000 plug-in hybrids 19 with an assumed 22 miles of all-electric rang results in 20 77,500 vehicles instead. 21 This is a combination of pure zero emission 22 technology that requires significant further development 23 prior to commercialization coupled with nearer term 24 available technology that results in significant zero 25 emission miles in aggressive market introduction volumes PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 for a total of more than three times as many total program 2 vehicles. 3 Similarly, in the 2015 to 2017 time frame, the 4 total number of program vehicles doubles compared to the 5 target. In this case, the number of ZEVs is required to 6 ramp up by a factor of ten compared to the previous phase. 7 --o0o-- 8 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 9 CHIEF BEVAN: Staff is proposing two new ZEV types to 10 capture two emerging categories of vehicle. 11 The first advertise creation of the type 1.5 ZEV. 12 This type of ZEV is expected to be a city type battery 13 electric vehicle. The requirement for the type 1.5 ZEVs 14 is a range between 75 and 100 miles. It has been 15 suggested this range is an attractive niche in the 16 potential BEV market and should be provided recognition 17 and credits greater than our previous definition of city 18 BEVs with ranges as low as 50 miles. It is proposed that 19 the type 1.5 BEV earn 2.5 credits. 20 The Type 4 ZEVs are proposed as a way to advance 21 progress in fuel cell technology. The Type 4 ZEV must 22 have a range of at least 200 miles and be faster refueling 23 capable. It is proposed that this ZEV type earn five 24 credits per vehicle. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 2 CHIEF BEVAN: To put these two new ZEV types into 3 perspective, this ruler of credits is presented to show 4 how much credit different vehicle types within a program 5 earn. 6 The PZEV is at the bottom of the spectrum, 7 earning .2 credits. 8 ATPZEVs earn between .5 and 2.7 credit. The 9 example shown here is a blended type hybrid with 22 miles 10 all-electric range earning 1.5 credits. 11 It is proposed that NEVs earn .3 credits each. 12 Battery electric vehicles can earn between two to 13 four credits based on their range. 14 And fuel cell vehicles earn between four and five 15 credits based on their range. 16 As I alluded to, the target and floor number of 17 vehicles required are based on the use of Type 4 ZEVs or 18 fuel cells with range greater than 200 miles. Staff is 19 proposing allowing other types of ZEVs to meet the 20 requirement at a ratio proportional to the credit earned 21 per vehicle. For example, if all auto makers were to 22 choose to make Type 2 BEVs instead of Type 4 fuel cells, 23 the number of vehicles needed would be 2,500 times 24 five-thirds or 4,167 cars. NEVs are not allowed to be 25 used to meet the floor requirements in the new path. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 --o0o-- 2 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 3 CHIEF BEVAN: In the current regulation, there is a cap on 4 the use of battery electric vehicles of 50 percent. Staff 5 is proposing to remove these caps. 6 --o0o-- 7 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 8 CHIEF BEVAN: Neighborhood electric vehicles are the only 9 commercially available ZEV today. Staff estimates that 10 15,000 are in operation in California currently. Although 11 their initial volumes were high, most likely because of 12 the lucrative ZEV credit offered prior to 2003 amendments, 13 their sales have leveled off and are at a modest level. 14 The staff have reviewed the environmental 15 contribution of NEVs to reducing emissions from the motor 16 vehicle fleet and have concluded that they deserve more 17 credit than they currently earn. 18 Staff propose amending the credit from .15 to .3 19 per vehicle to reflect the emission reductions achieved 20 from reducing cold starts and the zero emission miles 21 accumulated for short trips. Staff believe that adjusting 22 the credit to .3 is the appropriate balance between 23 rewarding environmental benefit and recognition of the 24 limited functionality and range. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 2 CHIEF BEVAN: The issue of banked credit use has been 3 forefront in the complexity of making amendments to the 4 ZEV regulation since the 2003 hearing. The availability 5 of banked credits for compliance has created substantial 6 uncertainty around the true pace of progress on ZEV 7 technologies. 8 Concern about blackout in product and an 9 inability to accurately predict how many vehicles will 10 result from the program requirements have lead staff to 11 re-think how banked credits are handled. Staff proposes 12 to extend carry back provisions. Meaning the amount of 13 time an auto maker has to demonstrate compliance and to 14 create a carry forward provision which limits how gold 15 banked credits may be used after being banked for three 16 years. 17 The example shown in the slide illustrates the 18 extremes of these provisions. In the carry forward 19 provision, gold credits earned may only offset gold 20 obligations for three years. After the three years, these 21 gold credits may be used to offset silver plus, silver, 22 and bronze categories only. 23 In the carry back provision, if the gold vehicle 24 obligation is not met in one year or the next year, the 25 auto maker may make up the obligation in the third year PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 after the missed year. These provisions in combination 2 provide auto makers a window of flexibility to align their 3 product cycles and demonstration programs that may span 4 multiple model years. It is consistent with the 5 flexibility allowed in the alternative path which set 6 vehicle requirements in three-year windows. 7 It is important to note that staff believe that 8 banked credits will largely be depleted by the 2012 model 9 year and that in that time frame the program will operate 10 in a much more real time mode. 11 --o0o-- 12 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 13 CHIEF BEVAN: Also related to the issue of banked credits 14 is the transparency of the information contained in the 15 bank of ZEV. Staff proposed to require production data be 16 made public starting in the 2009 model year and to release 17 the ZEV credit bank balances in model year 2010. However, 18 the language in the regulations does not define whether 19 credit trades are public. These amendments will open up 20 clearer understanding of the magnitude and role of banked 21 credits in compliance of the program. 22 --o0o-- 23 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 24 CHIEF BEVAN: The ZEV regulation has been adopted by 12 25 other states and the number is likely to grow. The effect PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 of this on auto makers is the nation wide increase in the 2 volume of vehicles needed for compliance by a factor of 3 almost three. To recognize that for the earliest stages 4 of development and demonstration, requiring more vehicles 5 isn't always helpful. In 2003, the ZEV regulation 6 incorporated a provision which allows fuel cell vehicles 7 placed in California to count towards compliance in other 8 states and vice versa. This provision is called the 9 travel provision. 10 Because the volumes of fuel cell vehicles 11 required will continue to be below pre-commercial volumes, 12 staff proposes to extend the travel provision to 2017. 13 Additionally, with the anticipation of the battery 14 electric vehicles may come back to the market, staff are 15 proposing to offer the travel provision until 2014 to 16 battery electric vehicles to encourage their 17 re-introduction. 18 --o0o-- 19 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 20 CHIEF BEVAN: At the May 2007 hearing, staff presented to 21 the Board a suggestion that the definition of intermediate 22 volume manufacturers be modified to reflect the overall 23 growth in the vehicle market. The Board expressed their 24 clear direction to not change the definition. However, 25 staff were directed to look at ways to soften the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 transition to the large manufacturers status. 2 In consultation with the affected IVMs, staff 3 developed the proposal shown on this table. The current 4 regulation allows a six-year lead time after an 5 intermediate volume manufacturer has hit the sales volume 6 of a large auto maker. 7 Staff propose a ramp-up period of six years after 8 the lead time during which they would be subject first to 9 a 25 percent requirement for ATPZEVs and then a 33 percent 10 requirement for ATPZEVs. This would allow them to enter 11 into the advanced technology vehicle market before being 12 asked to comply with the full portfolio of ZEVs and 13 ATPZEVs. 14 --o0o-- 15 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 16 CHIEF BEVAN: This completes our description of the major 17 amendments proposed. I'll wrap up now with a summary of 18 the effects of the proposed changes and a discussion of 19 some of the main issues you'll be hearing about and our 20 recommendations. 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 23 CHIEF BEVAN: This table presents the anticipated number 24 of vehicles produced to meet the ZEV requirements. In the 25 2009 through 2011 phase, we accounted for an aggressive PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 use of credits for compliance, which is reflected mostly 2 in the number of expected fuel cell vehicles. Because we 3 are unaware of large auto maker plans to introduce any 4 battery electric vehicles in this time frame, we assume 5 none. 6 The silver plus volume expected is based on 7 announcements by auto makers regarding new product 8 launches and associated volumes. In the 2012 to 2014 time 9 frame, we assume that the ZEV bank has been spent down and 10 that the volumes of vehicles we'll see reflect the 11 requirements. The same is true for the 2015 to 2017 time 12 frame. 13 --o0o-- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: Breaking this down further to look at just 16 the gold and silver plus categories over the 2012 to 2017 17 period, staff expects to see either the same number of 18 vehicles as in the current proposal, i.e., 75,000 if auto 19 makers make maximum use of gold vehicles for compliance or 20 nearly two-and-a-half times that many vehicles if they 21 maximize the opportunities to comply with silver plus 22 vehicles as well as gold vehicles, i.e., about 186,000 23 vehicles. 24 --o0o-- 25 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 CHIEF BEVAN: Turning now to the air quality impact of the 2 proposed amendments, we see there is an improvement in air 3 quality resulting in the changes compared to the current 4 regulation. The emissions impacts presented in this table 5 are well to wheel lifetime emissions using the Greek 6 model. Overall, there is a 7,000 ton reduction in ROG and 7 oxides of nitrogen and 5.5 million on the reduction in 8 carbon dioxide emissions. 9 --o0o-- 10 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 11 CHIEF BEVAN: My presentation will now focus on the major 12 issues we expect to be the subject of testimony and 13 discussion here today. 14 --o0o-- 15 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 16 CHIEF BEVAN: The staff proposal establishes a gold 17 requirement of 25,000 ZEVs in the 2012 and to 14 time 18 frame, of which at least 2500 must be ZEVs and for which 19 the remaining obligation may be met with silver plus 20 vehicles. There has been much discussion and comment 21 surrounding whether 2,500 is the right floor requirement. 22 Proponents of higher numbers have mentioned 23 between 5,000 and no change or 25,000 vehicles. Arguments 24 in favor of changing the floor requirement upward include 25 the need to accelerate ZEV volumes in order to set us on PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 the right pace for meeting smog emissions and climate 2 change goals and the need to accelerate deployment for 3 fueling infrastructure. 4 Arguments against raising the floor requirement 5 have centered around the readiness of the technology for 6 demonstration in larger volumes and the costs associated 7 with such numbers. It is argued that the costs spent to 8 demonstrate larger volumes does not advance or accelerate 9 the commercialization of ZEVs. The difference in cost of 10 compliance of requiring 25,000 gold versus the staff 11 proposal of 2,500 gold vehicles is in the billions. 12 --o0o-- 13 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 14 CHIEF BEVAN: In the current regulation, fuel cell 15 vehicles earn 40 credits each and battery electric 16 vehicles earn ten. The current regulation ramped down the 17 credits for both fuel cell vehicles and battery electric 18 vehicles to three starting in 2012. Staff is proposing to 19 maintain a distinction between fuel cell and battery 20 electric credits with four to five credits for fuel cells 21 and two to three credits for battery EVs depending on 22 range performance. 23 At issue has been whether fuel cell vehicles 24 should have an even greater credit ratio compared to 25 battery EVs. Proponents argue that a higher credit ratio PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 helps assure continued investment in fuel cell vehicles. 2 It is also argued that since fuel cell vehicles are 3 further from commercialization they need more regulatory 4 incentive than battery EVs to remain a viable compliance 5 path. 6 On the other hand, opponents of raising the 7 credit for fuel cell vehicles argue that companies working 8 on fuel cells are committed to them and are unlikely to 9 abandon a product they describe as their ultimate goal. 10 Additionally, an argument can't be made on an 11 environmental basis to substantiate higher credits for 12 fuel cell vehicles. 13 --o0o-- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: The issue of disclosing ZEV credit data has 16 been before the Board several times in the last few 17 months. The groundwork has been laid for making 18 production data and bank balances public in the 2009 and 19 2010 model years respectively. However, the issue of 20 whether trades between companies should be made public 21 remains a point of debate. 22 Proponents argue that making trades public 23 provides all interested parties with the facts they need 24 to adequately analyze the status of the program. 25 Opponents argue the release of trade information PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 compromises the trade market and will effectively end the 2 practice as companies would be concerned that the 3 existence of trades may forecast their product plans and 4 expose them to liability associated with a third party 5 manufacturer. They also argue that disclosure of trades 6 could impact the credit's monetary value. 7 --o0o-- 8 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 9 CHIEF BEVAN: The staff proposal provides a ramp up period 10 for intermediate volume manufacturers who are 11 transitioning to the large volume status with a 12 requirement to produce silver vehicles. It has been 13 suggested this ramp up period is too generous and should 14 be shortened. 15 The proponents of this suggestion argue that all 16 but one transitioning intermediate volume manufacturer is 17 already demonstrating ZEVs. Additionally, they argue that 18 the six-year lead time provided in the current regulation 19 is sufficient time to develop product in response to the 20 large volume manufacturer obligations. The opponents of 21 such a change argue that the additional ramp up time is 22 necessary to continue work on promising silver plus 23 technologies that may prove ultimately to be as valuable 24 as ZEVs. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 2 CHIEF BEVAN: As I mentioned before, the issue of the 3 impact of the adoption of the ZEV regulation in other 4 states been huge for the auto makers. Our proposal allows 5 ZEVs placed in California to count towards compliance in 6 other states and vice versa. It has been suggested that 7 while silver plus vehicles are also pre-commercial that 8 they also be allowed to travel, the credits to travel. 9 The proponents argue this softens the ramp up of 10 this new technology. Opponents argue that it will reduce 11 the number of silver plus vehicles that are introduced to 12 California and that this technology is ready for 13 commercialization. Additionally, one of the reasons for 14 creating the travel provision was to provide adequate time 15 for other states to develop infrastructure. For silver 16 plus vehicles, this isn't an issue. 17 --o0o-- 18 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 19 CHIEF BEVAN: This program has been a success. Look at 20 the half a million bronze vehicles and over 100 million 21 silver vehicles commercialized to date. California has 22 forged the way in the demonstration and commercialization 23 of the world's cleanest cars and is the home of the most 24 ambitious demonstrations of advanced near and near zero 25 emission vehicle technologies. We are making progress. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 The program has become complex because the Board 2 has thoughtfully and methodically tweaked the program to 3 keep the effort moving forward towards the never wavering 4 goal of commercializing zero emission vehicles while 5 acknowledging the pace of technology development and 6 taking advantage of the incremental technologies that 7 could be brought to market sooner. 8 Staff recommends that the Board adopts the 9 proposed amendments. They increase air quality benefits, 10 encourage emerging technology, and maintain the state's 11 progress towards transformation of the vehicle fleet to 12 zero emissions. 13 Lest our audience think we believe our regulation 14 alone will make the transition to zero emission vehicles 15 happen, I'd like to quickly review the other activities we 16 are engaged in that demonstrate our commitment to 17 achieving success for these technologies. Last year's 18 budget included $25 million for support of alternative 19 fuels. The alternative fuel incentive program has awarded 20 $6 million in grants for the better understanding and 21 development of plug in hybrids and electric vehicles; 1.62 22 million for alternative fuel vehicle incentives supporting 23 CNG vehicles, neighborhood electric vehicles, and battery 24 electrics vehicles purchased by consumers in the next 25 year; and 175,000 to support battery electric vehicle PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 infrastructure development and to support installation of 2 level two and three public BEV charging stations. 3 With the establishment of AB 118 fund to develop 4 and deploy technology and alternative and renewable fuels 5 and to fund air quality improvement projects, we're 6 hopeful that additional incentives for purchasers of ZEV 7 program vehicles will be made available. The 8 collaborative work done as a partner in the California 9 Fuel Cell Partnership has made substantial progress toward 10 preparing California for fuel cell vehicle 11 commercialization. And the state's commitment to ensure 12 that hydrogen stations are available for fuel cell vehicle 13 deployment has been exemplified by the efforts of the 14 California Hydrogen Highway Network. 15 Finally, I'll make a plug for our consumer 16 oriented website, driveclean.ca.gov, which provides 17 information to prospective new car buyers about new 18 environmental vehicle technologies and helps them choose 19 the cleanest cars available as well as providing consumers 20 with information about incentives at the federal, state, 21 and local level. 22 This concludes staff's presentation. 23 CHAIRPERSON NICHOLS: Thank you very much, 24 Ms. Bevan. It was a very thoughtful and thoughtful 25 presentation, and I think we should acknowledge at the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 outset the time and care that the staff put into this 2 proposal. Obviously, you've weighed a lot of 3 consideration and I think you've listened to a lot of 4 different inputs. And the proposal reflects that attempt 5 to balance all of the input that you've received as well 6 as the expertise that the Board staff brings to this 7 matter through a technical background. And we appreciate 8 that very much. 9 Needless to say, however, as a Board of 10 appointees, and a Board of appointees of a Governor who 11 himself is a zero emission vehicle enthusiast, we all have 12 our own ideas about how we might possibly wish to improve 13 upon the staff proposal. And I think some of those ideas 14 are probably going to emerge during the course of the 15 hearing. 16 But I thought it might be useful, because I have 17 had opportunities to talk in the last few days with less 18 than a quorum but a couple of my fellow Board members. 19 And in particular, I want to call upon our Board's 20 resident automotive engineer, since that is a position 21 that the Board enjoys. We have a current incumbent, 22 Professor Dan Sperling runs the Institute for 23 Transportation studies at U.C. Davis and we've relied a 24 lot on his views in the past as well. So wanted to ask 25 Dan if he'd like to offer any thoughts at this point about PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 where we are with the program. 2 BOARD MEMBER SPERLING: Well, thank you. 3 Obviously, I do have many thoughts. 4 Let me start off by saying I think Analisa Bevan 5 deserves an honorary Ph.D. for her efforts. There were 6 plenty of equations in the report and a tremendous amount 7 of thought and creativity that went into that. And I 8 think a lot of credit goes to her and the staff and her 9 mentor, her faculty advisor Tom Cackette perhaps. 10 Having said that, you know, as Chairman Nichols 11 said, this ZEV program has led a very tortured life. Many 12 people characterize it as a failure. Many characterize it 13 as a huge success. I tend to fall on the side of thinking 14 it's been very much a success in terms of motivating 15 investments and interest in electric drive technology. 16 You know, in 1990 when this started, almost no one was 17 thinking about the future of vehicles being electric 18 drive, based on electric drive technology. And now almost 19 everyone in the industry would agree that that is the 20 future. There's uncertainty about exactly what that means 21 in terms of electric drive, but there's agreement on that. 22 And the ZEV mandate deserves a lot of credit for that 23 paradigm change for that paradigm shift in how we think 24 about the vehicles. 25 Having said that, there's one other major thought PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 I want to offer. And that is that having gone through 2 this tortured life and being one of the most complex 3 policy instruments I've ever seen -- and it's evolved that 4 way for many different reasons -- but it is incredibly 5 complex. And a lot of circumstances have changed. And 6 some parts of the ZEV program have been very successful, 7 not just in terms of electric drive, but in terms of 8 creating much cleaner gasoline vehicles. 9 So I'm going to make a resolution at some point 10 here, whenever it seems appropriate. I defer to Chairman 11 Nichols and the others when that would be. But the 12 resolution would be that we overhaul this program 13 completely. Start from scratch. 14 Right now I think we have a job to fix what's 15 here. And the proposal fix a lot of the pieces. One of 16 the most important parts is that we want to make sure that 17 blended plug-in hybrids are part of the program. And so 18 some changes is needed at least for that reason and a lot 19 of other reasons that were explained. So I think I would 20 like to suggest that the focus of this discussion be as 21 much as possible on this 2012 to 2014 time period fixing 22 what we have here, trying to make it a little better. 23 But that we within a year begin a process of 24 starting from scratch, overhauling this whole ZEV program. 25 And what that would mean is essentially spinning off what PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 we call the bronze category, which are essentially very 2 clean gasoline vehicles, spin that off to a LEV III 3 program. Spin off the silver category which is mostly 4 hybrid vehicles as well natural gas into the Pavley 1493 5 program, because it's in commercial production. It's no 6 longer appropriate I don't think for a ZEV mandate type 7 program to be influencing and micro managing the 8 development of gasoline hybrids. So spin that off to the 9 Pavley 1493 program when that is enforced and implemented. 10 And that ends up with us being focused back on 11 what the real focus of this ZEV program was from the 12 beginning. And I think what's appropriate for the focus 13 to be now, and that is on battery EVs, plug-in hybrids, 14 and fuel cells and come up with a much simpler program. 15 And I would just say to make people feel comfortable with 16 it this should be at least as aggressive as this phase 17 four program in the current proposal. In other words, the 18 2015 to 2017, which I don't think we're going to talk 19 about a lot today. 20 And so I would suggest that there will be some 21 discussion of course. But that this new program would 22 focus on that period, would be simplified, would be 23 aggressive. And when I say aggressive, I think one of the 24 things that all of us have become very concerned about -- 25 and this is the reason for transforming the ZEV program is PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 that historically it was premised on conventional local 2 pollutants. But now with the advent of climate change and 3 AB 32 and the focus on reducing greenhouse gases, 4 increasingly many of us believe that the ZEV program 5 should be more and more focused on reducing CO2 and 6 greenhouse gases. And importantly as we look at the 2020 7 requirements and targets beyond that, we need dramatic 8 reductions in CO2 and greenhouse gases from the 9 transportation sector. And that calls for a very much 10 accelerated commercialization of these ZEV technologies. 11 So I think as we think about it, if we agree to 12 this transformation, the focus would be on accelerating 13 the development of these very low carbon electric drive 14 technologies at least as fast as what's already in it. I 15 would argue considerably faster even. But that would be 16 part of the review. 17 And so, you know, to just kind of end my thoughts 18 here -- and I provide that as a context because I think as 19 we go on here we need to have some focus on what exactly 20 we're talking about and what are we going to do with this 21 hugely complicated ZEV program that we have now. 22 You know, one other thought is that as we go 23 forward, the ZEV program, at least in my mind, 24 philosophically is a program to jump start these very 25 promising technologies. It shouldn't be a permanent PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 program. We all have the Pavley program in place. We'll 2 have the LEV III program in place. These have performance 3 metrics. And I think that's the best way to guide the 4 commercialization of these technologies. 5 But there is a need. There are real barriers. 6 There are real challenges to getting these battery EVs, 7 plugs-in's, and fuel cells in the market. There are none 8 on the market now. And there's really not any really firm 9 announcements even to do so in a commercialization sense. 10 So the role of this is to kick start these technologies, 11 and that's what the program should be. And you know, if 12 battery EVs become successful at some point in the future, 13 we call it a success and we don't have to continue with 14 ZEV mandate for it. 15 And so the last piece of that of course will be 16 that we need to stay focused on developing incentives as 17 was presented in the staff report. And I think all of us 18 should be committed to helping provide incentives to 19 consumers and to the industry to bridge this gap. Because 20 these technologies are going to be very expensive for some 21 period of time. And, you know, these are in the public 22 interest. So there is a responsibility to provide some of 23 these incentives to make it work. 24 CHAIRPERSON NICHOLS: Thank you. I'm going to 25 treat the substance of your comments as a resolution -- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 motion to support a resolution. And I'm going to second 2 it. But I'd like to table it for discussion until after 3 we've completed today's business. 4 But I do think there's a few other framing 5 comments that deserve to be made. And I'd like to call on 6 Board Member D'Adamo who was here at the last Board 7 meeting and has some thoughts. I think we should hear 8 from too. 9 BOARD MEMBER D'ADAMO: Thank you. Feeling a 10 little bit like a veteran today, having been through this 11 not just once before but twice. 12 What I'd like to do is maybe put things in 13 context a little bit more, especially where I'm coming 14 from, because I was a critic of the 2003 amendments. I 15 was in the minority and actually opposed the amendments 16 because I felt we'd be back sometime soon with a request 17 by industry to again change the numbers. And so I think 18 some of what the minority of us at that time has 19 actually -- what we predicted has actually occurred here. 20 I'd like to though echo some of the comments of 21 Professor Sperling before getting into some specific 22 recommendations. I really do want to compliment staff for 23 its very hard work. I know staff has been so very 24 dedicated to this program. In fact, when I came on the 25 Board in 1999, one of the first individuals that contacted PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 me was Tom Cackette. It was important to him that I be 2 brought up to speed about the very important and visionary 3 ZEV mandate. 4 So what I'm about to say I just want to 5 underscore that it's not meant to be critical of staff in 6 any way. I think I'm just coming at this from a different 7 point of view. Not being a technical expert, not really 8 understanding as Professor Sperling does the intricacies 9 of what's technologically feasible and also not coming 10 close to understanding the complex accounting system, I 11 have always approached this with taking several steps back 12 and looking at it from a much broader policy perspective. 13 That's where I'm coming from today. 14 So in 2001 when I first had an opportunity to 15 vote on the ZEV mandate, it was rather clear that where we 16 were headed was to push forward with the vision, 17 especially on battery electric. Back then, we weren't 18 talking much about fuel cell. There was the Fuel Cell 19 Partnership. And that was the focus at that time on fuel 20 vehicles. So the focus was clearly battery electric and 21 on the number of battery electric vehicles that we hoped 22 would come into the marketplace. 23 The focus in 2001 was to provide for flexibility 24 in terms of the credit scheme. And that's exactly where 25 we ended up. But in the end, we did whittle away at the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 numbers. 2 And then 2003, the focus became this alt path and 3 providing another path to the auto makers for fuel cells 4 with significantly reduced numbers. And I want to 5 underscore that again. Significantly reduced numbers in 6 2003. But the idea being that there would be another 7 alternative for those that wanted to pursue fuel cell 8 technology, but the battery path was still quite available 9 but the numbers were much higher. So in order to give on 10 the fuel cell side and the reduction in numbers, we I 11 thought were going to receive vast improvement in terms of 12 technology. So that's why we reduced the numbers. 13 And so now here we are today looking at another 14 round of changes. And we are suddenly -- my feeling is 15 we're just looking at that alt path as the base line. But 16 the true base line is the base path. And those numbers 17 are much higher than 25,000. In fact, if we go back and 18 look at the base path from 1990, I don't know what it 19 would be. But it would be along the lines of -- well, I 20 think at 2001 perhaps staff could comment on this later. 21 But I think in 2001 it was at least 45,000 which is what 22 we would be looking at now. I wouldn't venture to guess 23 what the numbers would be if we looked all the way back to 24 1990. 25 So I think it's important for us a realize that PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 whatever changes we make on the numbers that we can 2 consider those numbers are low to begin with because there 3 was an expectation in huge costs that would be associated 4 with fuel cells. 5 So I would like to just outline a couple of areas 6 where I think that we can be more visionary and exercise 7 more leadership here than what's being proposed. 8 First of all, I think it's important in that 9 phase three to phase four time frame that we not fall off 10 the cliff, which is what got us here to begin with in 11 phase three. The numbers ramped up to 25,000, and it is 12 clearly a challenge for the auto makers to reach that 13 25,000. I think in phase four those numbers jump up to 14 50,000. And what's being proposed here today doesn't deal 15 with the transition in between those two periods of time. 16 And so although I fully embrace Professor 17 Sperling's comments that we need to transform this program 18 and have spin-off in terms of LEV and Pavley for the 19 bronze and silver categories, but I do think we need to be 20 mindful of that transition period between phase three and 21 phase four. I don't think we should just assume that 22 somehow those numbers can be ramped up to 50,000 or 23 whatever we end up with. I think we have to have a 24 gradual ramp up so we're not all back here in a couple of 25 years from now with the call for making some additional PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 changes. Because it's just not attainable. 2 So even in the event we do transform the program, 3 which I think we should, I think we should plan for a ramp 4 up so that -- we just don't know how it's going to turn 5 out. I think it's important for us to have some leverage 6 in this program as we move into the future. So I would 7 support increasing the numbers. Right now, the number in 8 phase three being 25,000 I think we should ramp up to 9 40,000 in the out years of phase three. 10 Another area that I think we can do much better 11 on is on the floor. We're looking at numbers of 2,500. I 12 think that we don't even know what those numbers really 13 mean in terms of banked credits and also with the back 14 fill. I think those numbers should be much higher. They 15 should be more along the lines of 10,000. The reason I 16 say that again is because we're including batteries in the 17 mix and those numbers were low to begin with because we 18 were looking at fuel cells. I do think we need to bring 19 batteries back, and the way to bring them back is to have 20 a higher floor. 21 Another area that I think that -- 22 (Applause) 23 CHAIRPERSON NICHOLS: I appreciate if you would 24 hold applause. 25 BOARD MEMBER D'ADAMO: Another area that I think PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 that we need to seriously consider is this issue of 2 intermediate manufacturers. They've had plenty of time to 3 know that this requirement was coming upon them. Their 4 numbers ramped up over a period of years, and I don't 5 think that they should be given any additional time. 6 I did favor at one time some way to have an 7 incentive so that if they somehow include some vehicles in 8 the market before that transitionary period is over that 9 this be given some additional time. But for a variety of 10 reasons, it really doesn't appear that that will work out. 11 So I would favor no additional no changes to intermediate 12 volume manufacturers. 13 Another area that I think that we really should 14 start looking into -- and I don't have any specific 15 suggestions here just yet -- but that has to do with 16 infrastructure. We've had this ongoing problem with a 17 lack of infrastructure, and I just don't think that we're 18 taking enough advantage of incentives we could offer. I 19 do think it's the responsibility of the fuel providers to 20 provide for the infrastructure. But in the mean time, I 21 do think we ought to consider some form of credit to the 22 auto makers for those that do provide for the 23 infrastructure. So I don't know if this would be the 24 appropriate time or not, but I think we should mull this 25 over at today's hearing. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 And additionally I think we ought to consider -- 2 I don't know what the vehicle would be -- but I think we 3 ought to consider an infrastructure requirement on the 4 fuel providers. It's about time that they participate in 5 this program, and I think that the best way to do it is to 6 provide a mandate such as we have with the auto makers. 7 Another area that I feel pretty strongly about is 8 this issue of transparency with credit. In order to have 9 a meaningful dialogue, it needs to be fully transparent as 10 far as not just the credits that the auto makers have, but 11 any trading that's going on in order for us to understand 12 the impact of this program and the actual numbers of 13 vehicles. So when I say there should be a floor of 14 10,000, I would really like to be able to know how many 15 actual vehicles are we going to get on the road. And the 16 only way we can do that is to have transparency with the 17 entire program so that the stakeholders can review those 18 numbers and comment on what they believe the real numbers 19 ought to be. That I think will give us as a Board the 20 best opportunity to provide for improvement. And where we 21 do need to make adjustments, we would have a better 22 understanding of what those adjustments actually mean. 23 So just fuel for thought here on some 24 suggestions, and I look forward to hearing from the 25 witnesses. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 CHAIRPERSON NICHOLS: Thank you very much for 2 laying out some considerations. When the appropriate time 3 comes, I think a number of us are going to be looking for 4 ways to strengthen this proposal, including the numbers of 5 vehicles we're talking about. So I expect we'll hear 6 suggestions about how we should be doing that, because it 7 is complicated. But I'm certain that that's going to be 8 part of our discussion. 9 Are there other Board members that would like to 10 put some additional thoughts out here now? Yes, Mayor 11 Loveridge. 12 BOARD MEMBER LOVERIDGE: I'm here to listen to 13 the 64 plus people who identified readiness to speak. But 14 I guess my own personal bias is to try to see if we can 15 get vehicles out of the lab and onto the street. Identity 16 the goals of air quality. We identity the goals of global 17 warming and greenhouse gas. We've identified the goals of 18 technology forcing. I just want to put another goal out 19 there which I think is the political stage we're now a 20 part of. 21 It's also a national security issue. The last 22 five years, the cost of gasoline has gone from $25 to well 23 over $100. We've seen the greatest transference of wealth 24 in the history of mankind from our country to other places 25 in the middle east. I think the new administration, no PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 matter who it is, is going to see a major national 2 security emphasis on looking for alternatives to gasoline. 3 CHAIRPERSON NICHOLS: Thank you for that 4 reminder. And I think the point that was made in the 5 staff presentation about the other state programs that are 6 focused on trying to get us as a state off of our extreme 7 dependence on imported oil really do need to be brought 8 into the equation here. I know we've been working with 9 the Energy Commission on developing plans for 10 implementation AB 118. It was a significant measure 11 signed by the Governor last year with money attached to it 12 that comes from an increase in vehicle registration fees. 13 And it's going to be an ongoing large amount of funds that 14 we hope to help leverage in the direction of working 15 through this program as well. So it's very important 16 reminder. 17 All right. Well, without further ado then, I'm 18 going to call witnesses in groups and ask you to come 19 forward and be prepared to testify when your time comes. 20 And we're going to begin with David Greene, followed by 21 Sigmund Gronich, Robert Cassidy, Dave Flanaghan, and 22 Richard Kelly. If you want to line up at one side. And 23 then Andrew Simpson, Sara Rudy, Andrew Frank, Earl 24 Killian, and Mark Geller. That will get us through our 25 first ten witnesses. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 And I should say while you're all assembling that 2 we have received the written submittals in advance. I've 3 have the opportunity to read them. Some of them are 4 similar and identical. Some are very different and very 5 substantive. We would appreciate it if you do not read 6 your prepared testimony if you submitted it because we 7 will have read it and it will be in the record. We also 8 would appreciate it since the time is limited if you would 9 focus as much as possible on the specific recommendations 10 you have about what the Board should do as opposed to 11 general statements about support or opposition. 12 We'll start out with Mr. Greene then. 13 (Thereupon an overhead presentation was 14 presented as follows.) 15 MR. GREENE: My name is David Greene. I'm a 16 corporate fellow at Oakridge National Laboratory. I'm 17 here at the request of the Department of Energy's Hydrogen 18 Fuel Cell Infrastructure Technology Program to bring to 19 the attention of the Board a study conducted last year 20 that's just been published on the transition to hydrogen 21 in transportation. 22 --o0o-- 23 MR. GREENE: And the importance of scale 24 economies I'm learning by doing in making that transition. 25 Like any analysis, ours is strongly dependant on PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 assumptions and premises. These are key premises of the 2 study that the R&D goals of the DOE program are met on 3 time, 2010 and 2015. Those are ambitious goals that our 4 hydrogen costs are based on DOE's state-of-the-art 5 hydrogen supply model. We assume the energy information 6 administration's high oil price case, which looks like a 7 low oil price case from today's perspective, but 8 nonetheless. And we have three scenarios of which I will 9 talk mainly about the second one. They are assumed, 10 constrained, and then from 2025 to 2050 a market 11 simulation is carried out. 12 --o0o-- 13 MR. GREENE: This shows the rate of penetration 14 of vehicles. Fuel cell vehicles are in the scenarios 15 initially concentrated in a few regions. The key regions 16 is Los Angeles area and the rest of the pacific coast. 17 Fuel cell production in the scenario reaches 60,000 units 18 per year in the scenarios two and three which I'll be 19 talking about. 20 --o0o-- 21 MR. GREENE: The cost of fuel cell vehicles comes 22 down very rapidly partly depending on the advantage in 23 technology but mainly depending on annual production 24 volume and learning by doing. We obtained proprietary 25 information from manufacturers on cost as a function of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 scale and a function of cumulative production. And we fit 2 it to these scale elasticities on the order of -.28. A 3 progress ratio for learning by doing of -.9. These are 4 fairly typical of technologies found in the literature. 5 And our cost estimates as shown here are consistent with 6 what the manufacturers believe and were approved by them. 7 Next. 8 --o0o-- 9 MR. GREENE: One of the features of our study was 10 to calculate the cost to the industry of the transition. 11 These graphs show the costs to the automotive 12 manufacturers if, for example, they were required by 13 mandate to supply the number of vehicles shown. And there 14 is a very large and prolonged period of excess cost to 15 them. Billions of dollars of losses over 10 to 15 year 16 period. 17 We also explore the potential for government 18 policies to absorb these costs. And essentially the 19 second graph here shows a policy that more or less holds 20 the industry harmless throughout that period. 21 Next slide. 22 --o0o-- 23 MR. GREENE: And this shows the cost to the 24 government which peak at about four billion dollars a 25 year. And the cumulative cost of this scenario reached PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 $25 billion a year. These we think are practicable costs 2 from the perspective of the national government, but do 3 require both not only that states like California and the 4 northeast states do their program but the federal 5 government also do its part. 6 --o0o-- 7 MR. GREENE: Now, although this analysis is 8 dependant on many assumptions, we think there are some key 9 insights. First is that driving down costs by scale 10 economies I'm learning by doing is essential to reaching 11 competitive cost targets for hydrogen fuel cell vehicles. 12 Meeting the technology goals is also very 13 important, but in sensitivity analysis we found that we 14 don't necessarily have to hit exactly the goals for 15 storage and for fuel cell costs. Some deviation is 16 possible with still a chance of success. But it does 17 appear that government cost sharing and at a national 18 scale a program to promote the development of 19 infrastructure will be necessary in order to overcome the 20 natural barriers of fuel availability, make and model 21 availability scale, and learning by doing. 22 --o0o-- 23 MR. GREENE: I'd like to thank you for the 24 opportunity to make these remarks and point out that the 25 reports that I referred to are available on line. Thank PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 you. 2 CHAIRPERSON NICHOLS: Thank you very much. 3 Mr. Gronich. 4 MR. GRONICH: Thank you. I previously worked at 5 the Department of Energy for the last ten years in the 6 hydrogen program. I'm now retired and a Californian and 7 proud to be a Californian looking at the work that 8 California is doing. 9 The next slide. 10 --o0o-- 11 MR. GRONICH: We do need a policy to stabilize 12 the environment. It's very important. But we need to be 13 realistic. We have to understand the vehicle costs will 14 be higher to these advantaged technology vehicles. But in 15 reality, fuel costs are likely to be lower, both the 16 hydrogen and electricity. As a society, we have to 17 understand that the long-term cost effectiveness of 18 achieving AB 32 goals is paramount. We need a balanced 19 social policy. Mandates by themselves do not ensure that 20 industry can sell the vehicles to the public at the cost 21 of the vehicles. What we need is both a stick regulation 22 and cost share by the government to work in concert 23 requiring both state and federal cooperation. I think 24 that is essential. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 MR. GRONICH: We need to let the marketplace 2 decide. All low carbon emission vehicle technologies have 3 risk. And the lowest cost option is unknown. Policy 4 support is needed to bring all these vehicles to the 5 marketplace so that consumers can select and the cost to 6 society can be minimized. 7 What is needed for hydrogen fuel vehicle 8 vehicles? 9 --o0o-- 10 MR. GRONICH: I want to cover these points. 11 Hydrogen fuel cell vehicles can be competitive with 12 relaxed 2007 DOE targets when they are competing against 13 plug-in hybrids and battery electric vehicles. They are 14 all going to be more expensive than your traditional 15 vehicles. 16 The ARB's expert panel was conservative in that 17 they made their recommendations on meeting 2015 DOE 18 targets. There is a very excellent report by Cromer and 19 Hayward. They talk about storage system costs that are 20 seven times more than the DOE 2015 targets and fuel cell 21 costs of 50 to $75 a kilowatt. 22 A policy that is put forward needs to include an 23 understanding of what it's trying to do, whether it's in 24 technology development or trying to get to 25 commercialization. Looking at economy of scale PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 strategies. 2 I believe that there should be a review in 2009 3 of the progress in fuel cell vehicles against these 4 revised 2010 targets. If that is positive, then it is 5 possible to consider mass production of fuel cell vehicles 6 by 2015. And I'm trying to put forward that 2015 to '17 7 is actually the critical time period, more so than 2012 to 8 2014 with the technologies still in technology 9 development. 10 As David went through -- 11 CHAIRPERSON NICHOLS: Your time is up. I'm 12 sorry. We do have your written presentation. And I think 13 the bottom line here is that we understand your 14 recommendations for how to better, you feel, bring on the 15 hydrogen fuel cells. 16 MR. GRONICH: I would say the 2012 to '14 period 17 is well constructed by the staff. There needs to be 18 additional attention paid to 2015 to '17. 19 CHAIRPERSON NICHOLS: Thank you very much. 20 Mr. Cassidy. 21 MR. CASSIDY: Madam Chairman, members of the 22 Board, I'm Bob Cassidy. This morning I'm representing the 23 Nissan Technical Center and Nissan North America 24 United States and Nissan Motor Limited Japan. 25 It's my pleasure to first began by describing PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 Nissan's battery electric vehicle programs. We have 2 announced the introduction of battery electric vehicles in 3 2010 in the United States and Japan. We will follow that 4 up with program in 2011 in Israel as part of Project 5 Better Place. We are also pleased to announce in 2012 we 6 will have a new global electric vehicle which will impress 7 us all. We think this vehicle has great merit and it is 8 our full commitment to make this mandate in battery 9 electric transportation a success. 10 Based on this preview of our plans, I'd like to 11 now comment on the regulations as they're proposed. 12 Nissan endorses the proposed amendments as articulated in 13 the 45 day notice. We think this is the careful blend 14 between technology forcing and feasibility. We support 15 that. 16 We see the drive towards more vehicles as 17 challenging and perhaps a direction that we really don't 18 want to take. We have a program in place that promises 19 success. We think we're bringing you success. And we 20 would look to achieve that. If we can over achieve, we're 21 very pleased to do that. Ms. Nichols, as you pointed out, 22 the floor does not mean that's the max. That's the min. 23 We're would certainly encourage targets higher than that. 24 We also like to maintain some flexibility in our program 25 with our global launch, and the current regulation allows PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 us to do that. 2 In terms of some of the other issues which we've 3 been discussing, Nissan certainly supports parity between 4 electric vehicles and fuel cell vehicles. We fully 5 support the public disclosure issue that has been raised 6 and as articulated in the language. Nissan would further 7 support disclosing the names of trading partners and also 8 those selling credits. We understand the issue of 9 transparency and support it completely. 10 Last, on the intermediates, current regulation, 11 they got three years they know they're intermediate. They 12 have another five or six to do it. I think that's enough. 13 So in parting, we're offering you success. We 14 ask for your support. 15 CHAIRPERSON NICHOLS: Thank you for your 16 comments. 17 Mr. Flanaghan. 18 MR. FLANAGHAN: Good morning. My name is Dave 19 Flanaghan, and I am the automotive general manager at UTC 20 Power. We appreciate an opportunity to speak today. 21 We've also submitted a written statement, but my 22 comments today will be a summary of that statement. UTC 23 has been producing fuel cells for over 50 years in on-site 24 transportation and space applications. In transportation, 25 we have worked with many of the world's leading automotive PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 manufacturers to develop fuel cell technology and fuel 2 cell vehicles. 3 UTC, along with its partner Chevron and Hyundai, 4 will be operating 32 fuel cell vehicles under the 5 Department of Energy's hydrogen learning program, and 27 6 of these vehicles will be operating in California. 7 We have 21 vehicles on the road in California 8 today with over 10,000 hours of operation and 200,000 9 miles. UTC is also powering six fuel-cell powered buses. 10 Three of these buses are located at AC Transit in Oakland 11 and one at Sun Line Transit in Palm Desert. These buses 12 have more than 10,000 hours of operation and 100,000 13 miles. 14 CARB's vision and leadership in zero emission 15 technology has served as a catalyst for substantial 16 investment and progress in the commercialization of fuel 17 cell vehicles. California's initiatives have been 18 instrumental in the deployment of fuel cell vehicles that 19 have achieved over one million combined miles by members 20 of the California Fuel Cell Partnership. 21 UTC has been a strong and consistent advocate of 22 California ZEV activities and the positive impact they 23 have made in technology development. The ZEV rule is 24 ground braking and has been followed by 12 other states. 25 While it might be tempting to put a greater emphasis on PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 enhanced advanced technology PZEVs and battery EVs as an 2 interim step, to remain a leader in ZEV initiative, 3 California must not lose focus on hydrogen power 4 transportation. 5 Therefore, UTC opposes changes to the current 6 legislation that would dilute or delay the requirement for 7 pure ZEVs and infrastructure. We believe the regulation 8 should be founded on performance-based metrics were a 9 definition of zero is not up for debate. Any wavering or 10 definition of zero or program delays will send a strong 11 signal to stakeholders that are currently working on fuel 12 cell vehicles. Investment capital, component 13 manufacturers, vehicle OEMs, energy suppliers are heavily 14 influenced by CARB ZEV decisions. Any effort to slow the 15 ZEV initiatives will likely result in a major shift in 16 investment away from pure ZEVs and infrastructure. 17 Significant progress has been made towards the 18 ZEV commercialization, and changes made to the regulation 19 must not affect their introduction. It is essential that 20 all proposed changes to ZEV regulations be carefully 21 considered along the long-term state goals and the 22 potential for creating even further delays down the road. 23 CHAIRPERSON NICHOLS: Thank you. Your time is 24 up. 25 Mr. Kelly. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 MR. KELLY: Chairman Nichols and members of the 2 Board, my name is Richard Kelly. I'm a production battery 3 electric vehicle driver, and I spoke at the May 2007 4 meeting. 5 I want to comment on one of the less discussed 6 provisions in the staff's proposal. In 2003, this Board 7 under Alan Lloyd became concerned about the multiplicative 8 effects of its own legislation across the country as 9 others states adopted our ZEV regulations. These states 10 are referred to as Section 177 states. So this Board 11 created the travel provision which allows ZEVs placed in 12 one state to account towards compliance in California. 13 It was supposed to sunset in 2012. The stated 14 rational for this provision was to allow manufacturers of 15 lower production volume until the technology is 16 commercially available or viable. However, this provision 17 simply does not work, and it is just one example of bad 18 legislation contained in this proposal. 19 This Board which is tasked with maintaining 20 healthy air quality in California is concerned about 21 whether other states will ask for ZEVs as well. Why is 22 this an issue when this Board should be focusing on 23 California? 24 You legislated that a ZEV placed in Massachusetts 25 would count as a California ZEV. What good does a ZEV in PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 Boston do for air pollution in Los Angeles? The core 2 problem is this legislation reduces the overall number of 3 ZEVs in California and nationwide. 4 Arthur Marin, Executive Director of the Clean Air 5 Association of the northeast states wrote the following to 6 CARB in May of last year. "By creating uncertainty as to 7 the volumes and locations of future vehicle placements, 8 the travel provision could hinder the development of 9 refueling infrastructure that is a prerequisite to 10 successful commercialization of Type 3 ZEVs." He realized 11 that this travel provision meant that no state could know 12 if they would be to ones to win the ZEV lottery or not. 13 How do they plan for their own fueling infrastructure? 14 As soon as CARB opened up this loophole, the auto 15 makers jumped right through. EV advocates started hearing 16 about ex-California EV ones being trucked over to New York 17 and Massachusetts. These EVs had been on California roads 18 for more than three years. They had earned California 19 in-service and would now earn ZEV credits in another 20 state. The auto makers gamed CARB and doubled the credits 21 the vehicles deserved. 22 Finally, most if not all the ZEVs manufactured 23 and placed on the road in California were done so before 24 2003. This provision has not had the effect in incenting 25 manufacturers to produce fleets of EVs. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 So the travel provision does not encourage 2 production of EVs. It interferes with the state's ability 3 to deploy fueling infrastructure. It opens up a loophole 4 the auto makers are more than happy to exploit. And it 5 was simply bad legislation. After all this, one would 6 think staff would retract the provision or at least let it 7 expire as scheduled. But no. Last year, staff 8 recommended extending it until 2015. And now staff is 9 proposing extending its to 2017 for some ZEVs. They want 10 to extend a failed provision. This is why the public 11 perception is that CARB is back sliding with this 12 proposal. 13 In Ms. Bevan's presentation, the only pro 14 argument offered for this travel provision was that it 15 eases the pressure on auto makers. CARB persists in 16 wanting to get more auto out of auto makers by asking for 17 less. This is ridiculous as anyone can see. The only 18 time any significant number of ZEVs were placed on the 19 road in California was when CARB asked for a lot. 20 Chairman Nichols, you have stated you wish to get 21 this program back on track. Why not start by rejecting 22 ineffective legislation such as the travel provision? 23 Thank you. 24 CHAIRPERSON NICHOLS: Thank you. You made it 25 just on time. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 Andrew Simpson. 2 (Thereupon an overhead presentation was 3 presented as follows.) 4 MR. SIMPSON: Good morning, members of the Board. 5 My name is Andrew Simpson. I'm an engineer at Tesla 6 Motors, and we are the sole manufacturer of full 7 performance zero emission vehicles in the country and in 8 this state. Several of you have driven our cars, so you 9 know they're real. 10 Next slide. 11 --o0o-- 12 MR. SIMPSON: We are here today to testify that 13 zero emission vehicle technology is ready for the market. 14 And by ready for market we mean the technology provides 15 sufficient performance and utility such that it can be 16 packaged into attractive cars that motorists are ready and 17 willing to buy today. 18 Based on this market readiness, we feel there is 19 no justification to reduce the proposed required numbers 20 of fewer ZEVs. And if anything, you should increase the 21 requirement. 22 Next slide. 23 --o0o-- 24 MR. SIMPSON: Our market readiness has been 25 enabled by advances in automotive lithium ion technology, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 by ourselves, and by our competitors. In terms of our 2 specific achievements, we've developed a 120 watt hour per 3 kilogram battery system, including charge and thermal 4 management, that has more than twice the energy storage 5 density of previous generation technology and also exceeds 6 criteria established by the DOE for market readiness. 7 Furthermore, our battery is so safe you can ship it by air 8 as certified by the UN. 9 We've also developed an adaptable on-board 10 charging system that allows motorists to get full recharge 11 in as quickly as four hours with no additional need for 12 infrastructure. 13 Using the technology, we developed the fully 14 certified 227 mile Tesla Roadster, and it competes on its 15 merits of price and performance in its target market 16 segment. We have already pre-sold 1,000 cars. We started 17 production of the roadster on March 17th and will ramp up 18 to 1,800 units in 2009. 19 Next slide. 20 --o0o-- 21 MR. SIMPSON: Automotive lithium ion technology 22 is on a rapid trajectory that will soon penetrate more 23 segments of the market. In the past ten years, the 24 performance has doubled as you see and the price has 25 decreased by a factor of four. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 --o0o-- 2 MR. SIMPSON: We plan to leverage these advances 3 in 2010 and commence production of a sports sedan, ramping 4 up to a volume of 10,000 cars per year. By this time, 5 however, we hope to have some competition. Mitsubishi, 6 Nissan, Subaru, Daimler, and Think have announced 7 production plans to launch full function electric vehicles 8 within the next two years. But this regulation will 9 determine whether or not they are available to 10 Californians, I think. 11 Next slide. 12 --o0o-- 13 MR. SIMPSON: So during the next two phases, 14 phases three and four -- two and three, Tesla expects to 15 produce and sell approximately 40,000 full function zero 16 emission vehicles in the state of California. But we're 17 just one player, and we're a small one too. Yet, we will 18 greatly exceed the requirements. 19 The only reward we get for placing ZEVs in this 20 state is the incentives provided by this regulation. So 21 if the mandate is weakened as proposed, it will 22 disadvantage our company. It will delay the introduction 23 of ZEVs. And it will redirect industry's capital onto 24 other technologies. 25 So we ask you please strengthen the mandate. The PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 technology is ready, and it deserves your support so that 2 Californians can breathe clean air as soon as possible. 3 Thank you. 4 CHAIRPERSON NICHOLS: Thank you. Thanks for the 5 opportunity to drive that wonderful car, too. I didn't 6 have my $100,000 check with me, but any day now. 7 Ms. Rudy. 8 MS. RUDY: Chairman Nichols, members of the 9 Board, appreciate the opportunity to comment on the 10 California zero emission vehicle regulations. 11 The ZEV regulation is technology forcing and has 12 needed to be modified on numerous occasions because the 13 expectations have not been met. We are here again today 14 based on the feedback from the independent expert review 15 panel with the need to revise the regulation again to 16 implement a program that furthers the ARB's goal. 17 Ford believes the ARB is moving in the right 18 direction by emphasizing zero emission technology that is 19 closer to commercialization. We also feel that 20 significant progress has been made on zero emission 21 technology such as fuel cells and advanced batteries. 22 However, pushing this technology into the market before 23 they are commercially viable ties up resources that could 24 be better utilized advancing the core technologies. 25 It is important at this state to be nimble and to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 apply the lessons learned from a few vehicles to the next 2 generation of prototypes. However, if the ARB decides to 3 force high volumes, we believe more is needed to enable 4 progress. We believe all stakeholders, including 5 automotive manufacturers, technology suppliers, energy 6 providers, research laboratories, the government, and the 7 consumers should work collaboratively and be fully 8 committed to achieving the high volume goals of the ARB. 9 There are now 13 states that have adopted 10 California's lower emission vehicle regulation. 11 California needs to consider these states when setting 12 their aggressive targets. Ford supports the so-called 13 travel provision in recognition of the substantial 14 resources needed to bring these vehicles to mark. 15 However, we believe a transition is needed to phase out 16 the travel provision. Otherwise, the step function change 17 from one phase of the program to the next is too 18 overwhelming. 19 We appreciate the ARB's provisions to recognize 20 blended operation plug-in hybrids. However, we believe 21 blended operation plug-in hybrids should be on more equal 22 footing with all-electric range hybrids. Furthermore, we 23 believe a simplification of the plug-in credit 24 calculation, and we have recommendations in our written 25 comments. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 The ZEV regulations are designed to be technology 2 forcing, but it is difficult to judge the pace of 3 technology. We recommend that the Board initiate another 4 review in a couple of years to assess the 2015 model year 5 and beyond requirements. 6 In light of the technology uncertainty, it is not 7 appropriate to apply a no back sliding rule in the future 8 when such aggressive targets are set. In conclusion, Ford 9 supports the ARB's goal for a sustainable zero emission 10 vehicle transportation system. However, we believe a 11 collaborative approach that commits and holds accountable 12 all stakeholders is a more viable approach than just large 13 volumes of vehicles on the road. Thank you. 14 CHAIRPERSON NICHOLS: Thank you. 15 Mr. Frank. 16 (Thereupon an overhead presentation was 17 presented as follows.) 18 MR. FRANK: Many of you know me. And I've been a 19 proponent of the plug-in hybrid for probably 20 years or 20 30 years. But I'm glad to see it all come to a major 21 consideration here at CARB for the ZEV program. But I 22 just have a quick few slides and I probably will not use 23 my three minutes. 24 --o0o-- 25 MR. FRANK: The next slide shows the technology PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 for battery electric vehicles is here and plug-in hybrids 2 especially. So here are 13 vehicles that are planned for 3 production and production dates. 4 And as already mentioned, Nissan and a whole 5 bunch of other car companies are also planning to 6 introduce battery electric vehicles. So we don't need to 7 lead the industry any more in this area. 8 Next slide. 9 --o0o-- 10 MR. FRANK: So what is the problem? The problem 11 is petroleum displacement. I think Ronald Loveridge 12 mentioned the real big issue is petroleum displacement and 13 greenhouse gas emissions are much more critical issue 14 today facing our society. Why is that? Price of gasoline 15 is probably going to cause massive disruption in our 16 society if we don't have an alternative for 17 transportation. So the key is what transportation do we 18 have? And fundamentally it's electricity. 19 One thing that has not been mentioned is that the 20 price of electricity in a car is about the price of 21 equivalent of 70 cents a gallon of gasoline. That's going 22 remain constant as the price of gasoline rises. Why not 23 get these numbers that CARB is proposing here, get them 24 up? Get them up high enough so that we can begin -- CARB 25 can begin to lead industry towards faster introduction, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 much faster introduction into battery electrics and 2 especially using electricity. 3 Next slide, please. 4 --o0o-- 5 MR. FRANK: Now, specific suggestions. I'd like 6 to suggest changes in the ZEV definition. That's 7 something that has not been viewed or discussed. We 8 should define ZEV as that -- miles achieved of ZEV. What 9 that does, is opens the door to hybrids and other new 10 technologies. So for a plug-in hybrid, for example, we 11 could define ZEV as all-electric range. All-electric 12 range fits with Tesla and pure electric cars as well. 13 CHAIRPERSON NICHOLS: You have used up your three 14 minutes. Sorry. 15 MR. FRANK: Anyway, so all-electric range. Okay. 16 Let me go to one final slide. 17 CHAIRPERSON NICHOLS: Just last slide. 18 --o0o-- 19 MR. FRANK: So the most important thing is that 20 CARB use the successful formulas of the past to structure 21 ZEV rules and get the vehicle numbers up. 22 And one thing I suggest that you not forget, and 23 that's solar and wind. 24 Last slide, please. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 2 CHAIRPERSON NICHOLS: That was the in conclusion 3 slide. All right. Thank you very much. 4 Mr. Killian. 5 MR. KILLIAN: Yes. Earl Killian. I'm here as an 6 individual. Basically, I represent a beneficiary of what 7 Dr. Sperling called the first CARB kick start. I'm a RAV 8 4 EV driver. And primarily my purpose today is, you know, 9 to put in a plug that you look at the written comments 10 that I submitted. 11 I particularly support, Chair Nichols, your 12 comments about tilt. And my concern and the reason I'm 13 here today is that I see that CARB is actually having a 14 tilt, a tilt towards fuel cell vehicles that I think is 15 inappropriate. I would rather see a more level playing 16 field. So I fully support what you called for. 17 I also wanted to call attention to an issue that 18 I think CARB is not looking at which is the 2050 context. 19 And so when -- we very often we're so concentrated on 20 short term goals, but we need to look at, you know, our 21 Pavley goals for 2050 which calls for rather dramatic 22 reductions in greenhouse gases. And those goals can only 23 be met by renewable energy. If you look at other 24 technologies, they don't get us there. They call for 25 about a 90 percent per capita reduction. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 The renewable energy needs to be looked at in the 2 context of efficiency. And if you do that, you find that, 3 for example, hydrogen fuel cell vehicles require about 4 twice as much renewable energy production, which means in 5 most cases twice as much land area for its production. In 6 addition, because it's got twice the last area, it has at 7 least twice the cost. But if you factor in the estimates 8 from people like the National Renewable Energy Lab, it 9 looks more like three times the cost. 10 So my purpose is to ask why are we going to use 11 up so much extra land, you know, hundreds of square miles 12 and why are we going to make Californians pay more? And 13 all for a tilt towards something that could be better 14 served by getting battery electric technology. Something 15 that I drive today. 16 And by the way, I've heard many people disparage 17 battery electric for cost reasons. I expect based on my 18 RAV 4 EV purchase to actually have a total of ownership 19 that's less than if I had purchased a gasoline vehicle. 20 And the analysis I do based on battery costs I've seen 21 suggest that is the case for future purchases. So I would 22 like to not see CARB staff disparage battery electric 23 vehicles based on cost. 24 CHAIRPERSON NICHOLS: Thank you. We did get your 25 written testimony. I saw it last night. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 Mr. Geller, and then we're going to take a 2 ten-minute break. 3 MR. GELLER: Chair Nichols, members of the Board, 4 I'm Mark Geller representing the San Francisco Electric 5 Vehicle Association. We're obviously extremely supportive 6 of the zero emission vehicle program. However, it appears 7 to us that structural preferences and conflicts of 8 interest within the ARB are preventing the achievement of 9 our mutual goals of putting ZEVs on the road. 10 As I mentioned tirelessly every time I appear 11 before this Board, I drove here today from San Francisco 12 directly in an electric car charged with solar power. It 13 has 60,000 miles on it, and it works great. And I thank 14 you. 15 But the haunting trajectory of greenhouse gas 16 emissions and the current impact of petroleum addiction on 17 our pocketbooks and politics demands ZEVs for others 18 clamoring for choice. The courageous and forward-looking 19 actions of this Board in the past have already proven that 20 beginning the process of making ZEVs available to regular 21 consumers is possible. In order to get back on track, 22 CARB must not only maintain the phase three numbers, it 23 must stop treating ZEV technologies in an unequal manner. 24 To see this structural preference, one need look no 25 further than the ARB home page where hydrogen and fuel PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 cells, not generically ZEVs, receive prominent placement 2 with no equivalent recognition of battery electrics. 3 The same members of staff that administered the 4 ZEV program made recommendations to this Board are charged 5 with promoting and administering the hydrogen highway and 6 fuel cell projects. A bias towards one technology is 7 reflected in the titles and job descriptions of many 8 staffers who wrote the recommendations you're considering 9 today and give a fuel cell vehicle more credit that a 10 battery electric vehicle with the same rage. 11 We all hope that hydrogen fuel cell vehicles have 12 been able to achieve rapid and economic deployment. 13 Everyone interested in electric drive and its 14 environmental benefits maintains a strong interest in the 15 seductive promise of hydrogen and fuel cells. However, we 16 cannot be blind to the actual pace of advancement of this 17 technology. And we must not prevent a proven and more 18 affordable technology, battery electric vehicles, of 19 making the positive near-term benefit the Board desires. 20 There is no logic to a credit preference for the 21 technologies that will not put ZEVs on the road in the 22 year term. The Board's decision should be based on a 23 performance standards, an environmental benefit standard. 24 When Alan Lloyd was Chair, he perceived a bias towards 25 BEVs. The auto makers favored a move toward hydrogen and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 fuel cell vehicles, and he said, "Is our job to clean the 2 air or is it to force a type of technology on the road," 3 meaning BEVs. As the Chair of CARB, and then the recently 4 named director of the Fuel Cell Partnership, an apparent 5 conflict of interest in itself, the move away from BEVs 6 perhaps seemed logical. 7 But now the tables have turned. Auto makers are 8 now saying they can't make thousands of fuel cell 9 vehicles. At a million dollars a pop, it's not 10 surprising. But the battery electric cars put on the road 11 that weren't shredded continue to performed well. Battery 12 electrics have proven themselves over time and over 13 millions of miles in regular consumer's hands, like me. 14 This Board has the opportunity to lead once again. When 15 the California government leads, California citizens 16 respond. 17 The San Francisco Electric Vehicle Association 18 calls upon the Board to reject the staff recommendation to 19 lower by 90 percent the number of ZEVs, to hold onto the 20 25,000 number, to demand parity for various ZEV 21 technologies, and to have a separate category of 75,000 22 plug-in hybrid vehicles. Thank you. 23 CHAIRPERSON NICHOLS: Thank you, Mr. Giller. 24 We will now take a ten-minute break. And we'll 25 come back and hear from the next group of witnesses. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 (Thereupon a recess was taken.) 2 CHAIRPERSON NICHOLS: We're back. Next up we 3 have Warren Gifford, Bill Reinert, Michael Lord, Steven 4 Flint, James Woolsey, Adam Borelli, Matt Miyasato, Chelsea 5 Sexton, Dave Underwood, and Chris Paine. 6 MR. GIFFORD: Hi. I'm Dr. Warren Gifford from 7 New Jersey. I retired from laboratories where I spent 8 most of my career managing technology choices like these. 9 When I first heard of the California ZEV 10 Initiative in 1990, I was electrified. Finally, 11 leadership -- 12 CHAIRPERSON NICHOLS: Somebody was. 13 MR. GIFFORD: You were heroes. 14 When I heard the current proposals, I was 15 appalled. First, they're too little, too late. Other 16 countries are racing ahead with more aggressive programs. 17 The EU has already set aggressive standards. Congestion 18 pricing in London has already cut 70,000 cars a year and 19 by the way added 123 million pounds to the budget. Even 20 Milan, Italy has set congestion pricing. And let's face 21 it. The Italian passion for automobiles is even greater 22 than Californians. 23 Further, consumers are driving the marketplace 24 much faster than your proposals for smaller, more 25 efficient cars. And four-dollar a gallon gasoline will PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 moved that even faster. 2 Thus, if we proceed on your current path, 3 California and the US will become followers in 4 transportation. 5 Second, we're clearly in a period of disruptive 6 technology. Silicon Valley has been the source of 7 revolutions in many industries and transportation time is 8 up. For example, Bob Lutz last week as Vice Chairman of 9 the General Motors and he announced that recent research 10 at Stanford allowed for an increase by a factor of ten in 11 the energy density of lithium batteries. That's what 12 disruptive technologies are all about. And that's the 13 kind of change that can take place. 14 My experience is when you're trying to estimate 15 which of these technologies are going to win, that's a job 16 for entrepreneurs. It's not a job for regulators. It 17 changes too fast for you to be able to track it and keep 18 up with it. My guess is the technologies that are going 19 to win in the marketplace aren't even on your radar screen 20 right now. 21 There are many available approaches. For 22 example, you could set innovative programs of direct 23 economic incentives to help buyers make more appropriate 24 choices. If you had registration fees that were 25 proportional to pollution -- so, for example $5,000 for a PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 Hummer and $25 for a electric vehicle, then customers are 2 going to make those choices. If you provide express lanes 3 for zero emission vehicles, provide parking fees 4 proportionally, and provide tolls proportionally, 5 consumers will make those choices every day. 6 So with appropriate economic incentives in the 7 marketplace, those decisions will happen and you don't 8 have to worry about what decisions you're making. 9 CHAIRPERSON NICHOLS: Thank you. Your three 10 minutes are up. 11 MR. GIFFORD: Thank you. 12 CHAIRPERSON NICHOLS: Mr. Reinert. 13 (Thereupon an overhead presentation was 14 presented as follows.) 15 MR. REINERT: Chairperson Nichols and Board, it's 16 a pleasure to be here today. I'm one of the old guys 17 that's been around through EV, CNG, and fuel cells. And I 18 knew Craig Childers back when he had hair and it wasn't 19 gray. So he's obviously been ridden pretty hard. 20 And I was involved in the planning of the 21 original Prius and the Prius we have today. 22 I just want to make some general comments and 23 perhaps provide some understanding of where we're headed. 24 Next slide. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 MR. REINERT: I think everybody in this room is 2 an advocate for advanced technology. That's not a 3 problem. The problem is we have 16 million consumers per 4 year in the United States who are not ready for some of 5 the changes we're talking about. We need to do three 6 things. We need to develop the technology. We need to 7 prepare society. And we need to have established 8 standardized codes and regulations that help ease these 9 changes in the marketplace. If we don't bring the 10 consumers along with us, we're going to have a glut of 11 vehicles and of customers. 12 Next slide. 13 --o0o-- 14 MR. REINERT: We want to balance the reduction of 15 environmental impacts consistent with meeting the market 16 evolution and product evolution. We need mass market 17 appeal. And we need to do a better job on life cycle 18 assessment impact. 19 Next slide. 20 --o0o-- 21 MR. REINERT: Accordingly, Toyota is working on a 22 wire variety of technologies. The ones that are in play 23 today might be the plug-in hybrids and fuel cells and even 24 some discussion of electric vehicles along with much 25 cleaner gasoline cars. It's important to get the right PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 technology in the right place. And I would point out when 2 we started off with project G21 that lead to the Prius, we 3 didn't intend to design a hybrid. We intended to design a 4 car for the 21st century. It turned out to be a hybrid. 5 So please keep that in mind as we choose one technology 6 over the other. 7 Next slide. 8 --o0o-- 9 MR. REINERT: We've had phenomenal growth in our 10 hybrids. We're selling over a million dollars a year now. 11 We've reduced pollution by 35 million metric tons. And 12 we've announced a goal late next decade to sell a million 13 hybrids a year. More than half of these will be sold in 14 the United States. We think this is a key to the mass 15 market of low emission vehicles. 16 Next slide. 17 --o0o-- 18 MR. REINERT: This little pictograph shows the 19 sales increase of the Prius worldwide and shows the 20 important role of California in helping us make the Prius 21 successful. 22 Next slide. 23 --o0o-- 24 MR. REINERT: So we've had a big argument today 25 about EVs and fuel cell vehicles and which is right and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 wrong. I urge all of you who are interested to stay over 2 a couple nights here and attend a National Hydrogen 3 Association program that will start next week and learn 4 not from us or not from any particular manufacture, but 5 the people in the industry where this is headed and how we 6 can get there. 7 We do have a lot of challenges with hydrogen. 8 Next slide. 9 --o0o-- 10 MR. REINERT: We do need a strong program to 11 increase hydrogen infrastructure. As Sig pointed out, 12 this has to be between states and the federal government. 13 And finally and most importantly, we need a 14 pathway to zero carbon hydrogen. That pathway is not 15 identified and is critical to the success of hydrogen 16 programs. 17 Next slide. 18 --o0o-- 19 MR. REINERT: The next frontier will be our 20 plug-in hybrids. We have two in California right now 21 along with several others for demonstrator units. 22 And I'm out of time. If I could go to the last 23 slide. 24 --o0o-- 25 MR. REINERT: This is AB 1811, and we think this PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 is how you bring a program to the state. This is the way 2 you bring a partnership between the auto makers, between 3 the various state governments, between the ARB, between 4 the universities. It doesn't just involve plug-ins but it 5 does involve a great deal of plug-ins. Also it provides 6 urban infrastructure and how we might use advanced 7 vehicles in the transportation scheme. Thank you very 8 much. 9 CHAIRPERSON NICHOLS: Thank you. 10 Mr. Lord. 11 (Thereupon an overhead presentation was 12 presented as follows.) 13 MR. LORD: Chairman Nichols, Board members, 14 ladies and gentlemen, thank you for the opportunity to say 15 a few words at today's public hearing. My name is Michael 16 Lord. I'm a manager for vehicle registration and 17 certification engineering at the technical center. 18 With ARB's help, Toyota has successfully 19 commercialized an advanced technology. And of course I 20 mean hybrid technology. 21 At Toyota, we believe that a technology must be 22 mass marketed to make a difference, and our comments today 23 are based on that fact. 24 Next slide. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 MR. LORD: Let me focus on the main issues with 2 the primary interest in this review. The fuel cell 3 requirement, recognition of blended plug-in hybrid 4 technology, and incentivizing plug-in technology in the 5 near term. 6 Next slide. 7 --o0o-- 8 MR. LORD: Hydrogen and fuel cell vehicles remain 9 a priority for Toyota. Though we see this as a key 10 technology, we generally agree with the technical review 11 panel and the staff that significant progress must be 12 still met before fuel cells are ready for the mass market. 13 These include the issues highlighted in the slide, the 14 most important being stack durability and cost. 15 Next slide. 16 --o0o-- 17 MR. LORD: Regarding blended plug-in hybrids, we 18 support staff's proposal regarding enhanced ATPZEVs or 19 silver plus. 20 We appreciate and thank the Board for the 21 recognition of blended hybrid technology. And we support 22 staff's proposed EAER concept and credit structure 23 including the ten mile minimum, EAR. Actually, I'd like 24 to make a few comments on that in the next slide, please. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 MR. LORD: You can tell I made this graphic. 2 Range is directly -- what we're trying to say 3 here is range is directly related to battery size. So you 4 could put range or battery size. There is a balance 5 between cost, utility charging time, and infrastructure. 6 Next slide. 7 --o0o-- 8 MR. LORD: If we add batteries to extend EV 9 driving range, space for passengers and luggage would 10 decrease. This reduces the functionality and adds cost, 11 hurting market ability and we believe limiting mass market 12 appeal. We believe we need to have some flexibility in 13 finding optimum range. 14 CHAIRPERSON NICHOLS: Mr. Lord, I've just been 15 notified the court reporter is having a hard time hearing. 16 I'm afraid the system is not working as well as it should. 17 If you could speak right into the microphone. 18 MR. LORD: Sorry about that. 19 CHAIRPERSON NICHOLS: I'll take that off your 20 time. 21 MR. LORD: Thank you. 22 So we think we need to have some flexibility in 23 determining the appropriate range based on these important 24 issues. 25 And as summary -- next slide. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 --o0o-- 2 MR. LORD: Fuel cell volumes in Phase 2 and 3 are 3 still higher than necessary from the development 4 perspective. Additionally, infrastructure issues need to 5 be addressed. And Bill mentioned that. 6 Plug-in hybrids, especially blended, is a concept 7 viable for mass market. Been many issues both 8 technological and societal that remain unanswered. 9 And for plug-ins, we request that you keep the 10 ten mile minimum range and ask for further incentives in 11 the earlier years. 12 Thank you very much. 13 CHAIRPERSON NICHOLS: Thank you. Okay. 14 Mr. Flint. 15 MR. FLINT: Good morning. I'm Steve Flint from 16 the New York State Department of Environmental 17 Conservation. 18 Want to thank the Board for the opportunity to 19 testify today on behalf of the Department relative to the 20 zero emission vehicle element of the low emission vehicles 21 program. 22 California has established a great deal of 23 leadership in emissions controls. And this is of critical 24 importance to New York and many other states as we 25 progress to meet our air quality objectives. We have PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 adopted a number of programs that California has 2 introduced. And we will continue to evaluate new programs 3 to see if they are appropriate for our states. 4 The Clean Air Act specifically permits states to 5 adopt California motor vehicle emission standards. This 6 is a right embrace and we expect to fully continue to 7 exercise. And in fact we're proud to have stood side by 8 side with the State of Vermont in their successful 9 defense, their adoption of the Pavley standards in federal 10 court in Vermont. 11 We look forward to continuing to work with 12 California and other states in support of these critical 13 standards. 14 A key element of California's emission standards 15 is the way it continues to drive technology to cleaner 16 levels. The continues push in the zero emission vehicle 17 area is the ultimate technology forcing which addresses 18 both the zero miles as well as deterioration of motor 19 vehicles over their lives. 20 We recognize that New York and other states 21 adoption of the program has an impact on how automobile 22 manufacturers respond and react to the changes in the 23 program here. This is particularly true in the area of 24 ZEV and the ZEV mandate. In the past, we have 25 acknowledged and accounted for the complex PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 interrelationships between State programs by exercising 2 regulatory flexibility of New York adoption the ZEV 3 requirements. 4 We focus our comments today on what have become 5 known as the traveling provisions and offer three specific 6 recommendations for these provisions. 7 First, limit the traveling provisions for battery 8 electric vehicles to Type 2 and greater, excluding the 9 Type 1 and 1.5 vehicles. 10 Second, include provisions to limit windfall 11 credits from the traveling provisions in Section 177 12 states. 13 And third, full forward the sunset of the 14 traveling provisions for Type 3 and 4 ZEVs to 2014, with 15 the understanding that this segment will need to be 16 closely monitored and the date changed if appropriate. 17 Previously, in 2003, we testified in support of 18 provision that allowed for considering of Type 3 ZEVs 19 against the ZEV requirements for all states adopting the 20 program. These provisions are significant. New cutting 21 edge motor vehicles technology are introduced and 22 evaluated in the marketplace. We continue to believe 23 there are benefits to be gained from judicious and 24 introduction in monitoring of ZEV technology in this way. 25 However, while many of the ZEV technologies can PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 benefit from the more deliberate deployment that will 2 occur under the traveling provisions, we don't believe the 3 Type 1 and 1.5 ZEVs warrant this treatment. These 4 vehicles do not need the careful oversight of the 5 manufacturers once deployed, nor do they need extensive 6 further development to be ready for market. 7 I spoke of the windfall credit. I note that is 8 covered in staff's 15 day notice, so I'll move on from 9 that. 10 CHAIRPERSON NICHOLS: And your time is up. 11 MR. FLINT: And finally we just ask that you 12 consider pulling the fuel cell provisions sunset on 13 traveling forward. It may require probably will require 14 additional regs down the road. We're not looking forward 15 to more regs, but we think it's most important to get it 16 right. 17 CHAIRPERSON NICHOLS: Mr. Woolsey, welcome. 18 MR. WOOLSEY: Thank you, Madam Chair. I'm here 19 today solely on my own behalf, but by way of 20 identification, I'm a venture partner in Vantage Point of 21 San Bruno, California, a firm that invests in clean 22 technology including transportation technology. Over my 23 career, I served in the US government five times holding 24 four presidential appointments in two republican and two 25 democratic administrations, all in the field of national PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 security. 2 I was particularly delighted to hear you, Madam 3 Chairman, and Member Loveridge, address briefly the 4 national security aspects of what is involved here today 5 and to hear Member Sperling and Member D'Adamo talk a bit 6 about climate change and urgency. 7 Both with respect to traditional national 8 security and our oil dependence, shipping between one and 9 two billion dollars a day worth of IOUs abroad in order to 10 buy foreign oil and in terms of climate change, we have a 11 serious set of problems on our national agenda and I think 12 on the agenda of the state of California that I think 13 should at least inform and have some impact upon the 14 debate about where we are headed. 15 Now there are three aspects of the staff proposal 16 I would like to suggest the Board take a different 17 approach to. It would be a bid glib I think to say that 18 reducing the ZEV requirements by 90 percent is going 90 19 percent of the direction toward killing the electric car 20 as this Board tried to do five years ago. That would be a 21 bit glib, because there is in fact a requirement for 22 plug-in hybrids. 23 And the second point is that the plug-in hybrid 24 requirement, at least in my judgment, should be separated 25 from the ZEV requirement, particularly when one company PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 standing up here a few minutes ago said they could more 2 than meet the ZEV requirements themselves. And if you 3 separate, it seems to me it's very important to have a 4 substantial spread in credit for a 35 to 40 mile plug-in 5 hybrid that is all electric for that range and 6 considerably lower mileage on a single battery charge 7 plug-in hybrids that are blended. 8 All of these are useful in terms of emitting 9 emissions. But a 40-mile battery charge plug-in hybrid is 10 essentially in three quarters of the country three 11 quarters of a ZEV. Because three quarters of the cars in 12 the country go less than 40 miles a day. And even in 13 southern California about two-thirds of the cars go less 14 than 40 miles a day. If you are able to operate home to 15 home, the infrastructure requirements that you have for 16 your ZEV are that, 4.97 at K-Mart yesterday an extension 17 cord. 18 All of the planning that you are doing about 19 infrastructure could in the case of plug-in hybrids with a 20 substantial all-electric mileage or in the case of zero 21 emission vehicles all-battery, all-electric vehicles be 22 reduced to that. 23 Finally, the proposals of the staff tilt very 24 heavily still towards hydrogen fuel cells and away from 25 electricity. In my judgment, this is extremely unwise. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 My co-chairman on the Committee on the present danger, 2 former Secretary of State George Schultz, has written to 3 the Governor yesterday and a copy to you, Madam Chairman, 4 calling hydrogen an R&D project. It is. It is a useful 5 R&D project. 6 But in terms of immediate early impact upon the 7 matters that both you, Madam Chairman and Member Loveridge 8 and Member Sperling and Member D'Adamo raised, battery 9 vehicles, plug-in hybrids, and all-electric vehicles are 10 far, far and away ahead. And the emphasis on hydrogen in 11 my judgment -- final point. The emphasis on hydrogen in 12 this staff report is like the 13th chime of a clock. Not 13 only is it strange in and of itself, it calls into 14 question everything that emanates from the same source. 15 Thank you, Madam Chair. 16 CHAIRPERSON NICHOLS: I'm treating your extra 17 time as belonging to Mr. Schultz. Thank him for your 18 letter as well. 19 Mr. Borelli. Mr. Miyasato. 20 (Thereupon an overhead presentation was? 21 presented as follows.) 22 DR. MIYASATO: I'd like to thank whoever put me 23 right after James Woolsey. 24 For the record -- I hope my slides will be coming 25 up. I'm Dr. Matt Miyasato, the Assistant Deputy Executive PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 Officer for the Technology Advancement Office at the South 2 Coast AQMD. 3 Thank you, Madam Chair and members of the Board. 4 It's a pleasure to be here. I'm going to speak briefly on 5 one issue that we bring up in our written comments that 6 were submitted to your executive officer from our 7 executive officer. 8 And I think I'd first like to also acknowledge 9 the staff's work. I think it is an important piece of 10 work they did. Very thoughtful. They made some very 11 useful improvements to the proposed regulation. I think 12 you're going to hear a lot of emotion and a lot of 13 complexity today. What I'd look to focus on is just a few 14 facts. One the South Coast Air Basin has the worst air 15 quality in the nation as you see on this chart. 16 and a 16 half million residents are subjected to air quality that 17 are either unhealthy or very unhealthy in major parts of 18 our region. 19 --o0o-- 20 DR. MIYASATO: That's why we are concerned about 21 the back sliding as it were from 25,000 true zero tailpipe 22 emission vehicles to an order of magnitude decrease to 23 2500. Any reduction in zero tailpipe emission vehicles is 24 cause for concern. So we would support the Member 25 D'Adamo's motion for a larger floor. However, we do also PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 acknowledge the difficulties and the technical challenges 2 with respect to bringing fuel cell vehicles and battery 3 electric vehicles to mass market or large numbers. So we 4 do support the idea of enhanced ATPZEVs as a backspill. 5 If you go to the next slide. 6 --o0o-- 7 DR. MIYASATO: We are concerned about the 8 equivalency of the credits that are used to calculate the 9 backfill. This is showing you it's a credit mechanism and 10 not tied directly to air quality or for that matter 11 greenhouse gas emissions or energy displacement. And so 12 the currency in which you're dealing with in terms of this 13 technology credit is cause for great consternation from 14 AQMD staff. 15 --o0o-- 16 DR. MIYASATO: We bring this up as comparison. 17 Alone in 2007, california hybrid sales was 75,000 18 vehicles. 19 If you go to the next slide. 20 --o0o-- 21 DR. MIYASATO: In five years, the staff is 22 suggesting -- if you click it one more time -- that hybrid 23 sales could be lower at 65,000. And then one more click 24 will show you this is the enhanced ATPZEVs. One more 25 click will show you the arrow bar. It could change. It PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 could be lower or higher than that. And in comparison to 2 the California hybrid sales for one year, we think this is 3 too low. 4 Next slide. 5 --o0o-- 6 DR. MIYASATO: We think it's too low because they 7 are using the existing architecture to produce blended 8 plug-in hybrids. Two companies already do that. There 9 are several others. This agency in tandem with AQMD are 10 testing these types of vehicles. It shows that major OEMs 11 are testing it. And furthermore, in the medium duty 12 scale, there are OEMs that are working on plug-in hybrids. 13 So with that, if you go to the next slide, I'll 14 simple summarize. 15 --o0o-- 16 DR. MIYASATO: We believe the number for enhanced 17 ATPZEVs or backfill are too low and we recommend that you 18 increase that number. Thank you. 19 CHAIRPERSON NICHOLS: Thank you. 20 Chelsea Sexton. 21 MS. SEXTON: Thank you. Chelsea Sexton, Plug In 22 America. 23 Like many of you and many of the other people in 24 this room, I've been working in this industry for quite a 25 while, before I was old enough to vote. And I am as I PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 hope you are very, very frustrated with the fact that 18 2 years into this particular piece of policy we have yet to 3 have a single zero emission vehicle available in show 4 rooms. Certainly reducing the phase three 90 percent is 5 not going to get us any further toward that goal. 6 Worse, requiring an average of 140 vehicles per 7 auto maker per year ensures these vehicles permanently 8 allude commercial viability by remaining too expensive for 9 mainstream adoption. We need tens of thousands of zero 10 emission of vehicles and hundreds of thousands to even 11 begin to address the environmental and energy security 12 issues we face. And we ask you to hold firms in these 13 requirements. 14 The reality is these cars will come. Consumers 15 are demanding it and nearly every major auto major has 16 announced concept or production plug-in vehicles, 17 including several pure electric cars. Their combined 18 announcements amount to several times as many vehicles as 19 CARB itself is requiring. By requiring so few cars, CARB 20 is blocking progress, not driving it. 21 This has led to the question posed mostly by 22 reporters in 148 new articles since yesterday to ask the 23 question how relevant is CARB's decision in making zero 24 emission vehicles available? Unfortunately, the only 25 answer I've been able the give is, "I don't know yet. Ask PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 me Thursday. I hope so." 2 CARB's biggest opportunity may be in effecting 3 the timing of vehicle availability in making a variety of 4 the products available sooner than later so that the 5 market can take over as it should. Choice for consumers 6 means cleaner air for everyone. We must prioritize 7 near-term technologies instead of the longest term one. 8 Vehicles must be credited on the basis of air quality 9 benefits they provide, not their cost or any other 10 arbitrary value. CARB must adopt a stance of technology 11 neutrality and give electric vehicles and fuel cells equal 12 credit in the gold category. 13 Additionally, the requirements for zero emission 14 vehicles and enhanced ATPZEVs must be disconnected. Both 15 of part of the solution, but we can't create an either/or 16 scenario. We know from experience with electric cars and 17 hydrogen it just doesn't further the cause. 18 Additionally, we must focus on quality in 19 addition to quantity. We recommend changing the PHEV 20 metric from miles to kilowatt hours in order to level the 21 playing field between small vehicles and large ones and 22 encourage maximum electrification of vehicles resulting in 23 the greatest petroleum reduction in air quality benefits. 24 We recommend making not only credit balances transparent, 25 but all of the transactions between auto makers to avoid PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 gaming the system or allowing auto makers to invisibly 2 encourage the deployment of inferior vehicles. 3 Finally, we support the reduction of the battery 4 warranty for plug-in hybrids through phase three to seven 5 years to strike a balance between emissions protection and 6 getting cars on the road sooner than later. The Board's 7 decision today has even bigger implications. CARB has a 8 number of even more ambition policies it's trying to 9 implement, among them AB 32. 10 Continuing to give in on the ZEV program will 11 result in not only not having the hundreds of thousands of 12 zero emission vehicles required to achieve those CO2 13 reduction goals, but it furthers the precedent of 14 non-enforcement and make it more difficult to be taken 15 seriously by industry as you try to implement your bolder 16 policies. 17 CHAIRPERSON NICHOLS: Your time is up. 18 MS. SEXTON: Thank you. 19 CHAIRPERSON NICHOLS: Dave Underwood. 20 MR. UNDERWOOD: Good morning, Chairman Nichols 21 and members of the Board. My name is Dave Underwood. I'm 22 the strategic account director for Plug Power. And I'm 23 testifying as part of the Board's deliberations on the 24 rulemaking to consider amendments to the fuel cell 25 component for the ZEV regulation. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 Plug Power is the leader in the development of 2 energy systems utilizing fuel cells for stationary power 3 applications, emergency backup power, and material 4 handling lift trucks. Plug Power has long espoused the 5 values of sustainability and is commercializing fuel cell 6 systems that contribute to our country's energy 7 independence. And in fact, we have over 700 stationary 8 backup power systems deployed worldwide as of today. 9 We wanted to point out to you that there is 10 another way to achieve critical mass of fuel sales in 11 addition to on-road hydrogen systems. Fuel cells are 12 proving attractive to replace traditional solutions such 13 as batteries and diesel generators. Fuel cell products 14 for extended run backup power and material handling are 15 commercially available today. And I might add they're 16 actually being use in the greater Sacramento area as we 17 speak. And to provide an environmental friendly way to 18 increase fuel cell volume in California and comply with 19 the pending FCC ruling on backup power requirements for 20 the telecom industry. 21 California has long taken a leadership role in 22 adopting new energy technologies and building the hydrogen 23 economy. We come here today to suggest to the Board that 24 stationary fuel cells for emergency backup power is a 25 short-term step in building the hydrogen infrastructure PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 and using commercially available fuel cells across 2 California now. To make this point, Plug Power has 3 learned their approximately 30,000 cell phone towers 4 operating in California today. A number of them have 5 backup power provided by a diesel generator that is 6 restricted by operational permit limits by local air 7 quality districts. Your Board has spoken many times in 8 the recent past on the important priority you place on 9 controlling diesel emissions and in promoting fuel cells. 10 The Governor himself has yet set forth goals on building 11 the hydrogen highway. 12 It is our belief that our company and others in 13 the industry can replace over 10,000 diesel generators 14 used in the state's telecom industry with clean fuel cell 15 backup power units. 16 Our request of the Board is to look to us to 17 assist to the effort in the short term, which would give 18 the auto makers and others working with us the time to 19 develop on-road fuel cells that can help meet clean air 20 and GHG goals. 21 Someone suggested the Board consider an incentive 22 program or rulemaking to prohibit local dirty backup 23 diesel generators in favor of clean power generating 24 sources, like our fuel cells. The Board could request it 25 of the industry, and an action like this would immediately PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 move thousands of fuel cells into the marketplace right 2 away. 3 On a personal note, I will tell you I've been in 4 the state for a last month in a variety of cities working 5 with various carriers on field trials for fuel cells in 6 lieu of generators and batteries because of zoning, weight 7 constraints on rooftops, permitting issues, and pending -- 8 they're actually waiting to see what CARB is going to say 9 with respect to the emissions of diesel because it's going 10 to impact how the carriers deploy their backup systems. 11 That combined with the FCC Katrina report that's going 12 through litigation right now is going to have a tremendous 13 impact. And the fuel cells not only from Plug Power but 14 our other competitors in the industry, we are ready with 15 the technology. It's proven. It's deployed. You have 16 200 fuel cells up in Napa Valley. Plug Power just had one 17 on site at a PG&E site for Vallejo for the last six months 18 because a utility grid could not be brought in. So the 19 hydrogen fuel sell was set in place. 20 CHAIRPERSON NICHOLS: Thank you. 21 Chris Paine. 22 MR. PAINE: Madam Chair, members of CARB, thank 23 you. I'm Chris Paine. I directed "Who Killed the 24 Electric Car." And I must admit coming into this room is 25 a bit like a cast reunion. So many people you see FROM PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 over the years. And it is encouraging to think so many 2 people have invested so much time in thinking about our 3 future and the future of our vehicles, including the 4 members of CARB staff and you on the Board. 5 I've been touring with the film since we filmed 6 here about five years ago when the electric car was killed 7 in our estimation by the changes, the amendments to the 8 ZEV regulation in those days. 9 And for me as a five year EV driver at that point 10 and now a ten-year EV driver, thanks to Toyota's RAV 4 and 11 before that GM's EV, I cannot tell you what a sensational 12 experience it has been driving these cars and how sad it 13 is that over the last five years these cars haven't been 14 available to people everywhere. 15 When I tour in Europe and universities across the 16 country, everyone asks when can I get a plug-in car. Wow, 17 isn't it great that CARB forced the car makers to make 18 these cars, even though it was a disruptive technology. 19 Even though car companies weren't in as good a position to 20 make money on them in the short term. Even though they 21 went up petroleum interests. California said you have to 22 make these cars. Car companies did, and they turned out 23 to be terrific products. 24 I think California is considering what you're 25 considering to do today and rolling back the ZEV PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 requirements is a mistake. It's the wrong direction. We 2 need to go back in the other direction. The way that 3 California, the way the Air Resources Board led the state 4 in the earlier days in its production. 5 I think hydrogen as you know from my film I have 6 never seen convincing arguments in the years since then to 7 make me believe hydrogen is anything but an R&D program as 8 Mr. Woolsey said. We already have tens of thousands of 9 plugs all over this country, millions all over the world. 10 That's our infrastructure. Not 60 or whatever one of the 11 car makers claim today. That's not an infrastructure. 12 Electricity is much more efficient than turning other 13 kinds of fuels into hydrogen. 14 So I won't go on. I know we're trying to get 15 through today. But I urge the CARB to think about what 16 it's going to do right now. Maybe it's not the right time 17 to vote on this. 18 My mom called me on the way to CARB today. She 19 goes, "It sounds like CARB is almost worse than it was 20 five years ago." And I said I don't think that's true. I 21 really hope it's not true. Thank you for your time. 22 CHAIRPERSON NICHOLS: Thank you for your 23 testimony. 24 We'll hear from the next ten witnesses. I'll 25 just call this whole group. Jay Friedland, Peter Greer, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 Ron Freund, Norman Plotkin, Ben Knight, David Modisette, 2 Bonnie Holmes-Gen, Robert Sawyer, Daniel Emmett, and Jamie 3 Knapp. We'll start with Jay. 4 MR. FRIEDLAND: Chairman Nichols, members of the 5 Board, I want to actually thank you. I've met with a 6 number of you personally, and it's been a pleasure. I 7 also want to take a minute to the thank the staff for 8 their hard work. They are in deed really trying to do 9 something very, very complex. And they're doing a lot of 10 work. And we really want to thank them because they spent 11 some time listening to us. And I think you can see some 12 of the results of that. And I think now it really does 13 come up to you guys to make the right decision here. 14 So to help you with that, I think today's 15 testimony has really shown there are a variety of ways to 16 reach the kind of aggressive and necessary clean air and 17 AB 32 goals. Particularly when you think about it, 25 18 percent reductions by 2020, 80 percent reductions by 2050. 19 We see the ZEV program -- today's ZEV program as a down 20 payment on those goals. 21 To that end, it's really critical to 22 accelerate -- not go backwards -- but to accelerate true 23 ZEVs and plug-in hybrids. And when I say plug-in hybrids, 24 I'm talking about plug-in hybrids with a minimum 20 mile 25 range. These are true plug-in hybrids. De-couple those PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 from each other and get them out in volumes and phases 2 three and phases four. So I'll reiterate that 25,000 true 3 ZEV number here. 4 Ms. Nichols, we also agree that the public policy 5 should advance all the technologies. And in fact it seems 6 like it will be appropriate now to start a California 7 electric vehicle partnership and maybe even a California 8 electric vehicle highway. In fact, I'll donate my plug 9 right here as the first station in that and you can go 10 ahead and sort of plug me in. I mean, infrastructure is 11 key. 12 And I think Board Member D'Adamo's comments about 13 having the fuel companies start to sign up for this is 14 very, very important. Because it's not just the auto 15 makers. It really is a wide variety of constituencies 16 that all need to be part of the solution here. 17 So as we move forward, we also think that the 18 regulation has really become so complex that the gaming 19 continue to be likely. In fact, I think we should not 20 even think of this as gaming but that the OEMs are trying 21 to find the minimum path to compliance. 22 A great example of that is the Nissan Ultima 23 hybrid. I drove one. I didn't drive an electric car. It 24 was too far today. So I drove a Nissan Ultima hybrid. 25 It's only available in CARB states. And you have to ask, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 well, that's a success in the sense that it's available in 2 those CARB states. But why isn't it available everywhere? 3 So the regulations actually work. 4 And we have a clear insight into the ways the 5 auto makers might try to game the system. Possibilities 6 include using the banked credits they have achieved 7 against either gold or the new silver plus enhanced 8 ATPZEVs requirements. Skewing the credit amounts for 9 particular vehicles, buying credits from other 10 manufacturers, and abusing any of the carry forward or 11 Travel provisions. And just by asking for low numbers in 12 the first place. 13 In fact, so I have to do this because I always do 14 something like this. If you take that -- we've been 15 talking about arbitrary numbers. We talked about 25,000. 16 But really if you take 25,000, which is what we're talking 17 about in phase three, divide by three equals -- it's 8,333 18 a year. If you then divide that by the six major 19 manufacturers, you get 1388 cars per manufacturer. If you 20 then divide that by three, which is what we estimate the 21 travel provision probably throws in from a simple thing, 22 that 462.96 cars. I'll take the 96. But these -- 23 CHAIRPERSON NICHOLS: Mr. Friedland, you have 24 used up your time. 25 MR. FRIEDLAND: It's less than 500 cars a year. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 In that sense, what we think -- you know, Tesla could meet 2 that. 3 The simple argument here is those numbers need to 4 start really, really big. So it's 25,000 ZEVs and 5 hundreds of thousands of plug-in hybrids. We really 6 encourage. Thank you very much. 7 CHAIRPERSON NICHOLS: All right. 8 Peter Greer. 9 MR. GREER: Yes. Chairman Nichols and members of 10 the Board, I'm grateful that you allow me to address you. 11 As a former educator for 40 years, as a father of 12 two children, grandfather of five children, two boys, 13 three girls, like you, I worry about the environment. I 14 worry about the polluted air, the vanishing resources. I 15 picked up a bad case of asthma living in New Jersey. 16 My point is that children are extremely observant 17 and shrewd. And they look at our example. And I fear 18 that we failed them. We're teaching them perhaps that 19 there's no difference between wishing and willing 20 something good to happen in terms of the use of less oil 21 improving the environment. 22 When I told our son, Tucker, I was going to fly 23 in Washington, DC, to here to address the Board, he was 24 excited and said I studied alternative energy in the sixth 25 grade. And I thought that was 1979. What has happened? PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 It's almost like -- I was reminded of the movie with Bill 2 Murray, Groundhog Day, endless and fruitless repetition. 3 But at the end, Bill Murray changes for the good and likes 4 it. Finds pleasure in it. There is a rebirth. 5 And I've been sitting here listening and there 6 are charts going up that show 2025, and then I hear 1990, 7 and I say what the heck is going on? I hear code words 8 such as we need coalitions. It's complicated. You know, 9 what is going on, I wonder. And so I think we might be 10 letting our children down. 11 As a conservative republican who served in the 12 Reagan administration, I'm outraged by the effects of 13 consumption of foreign oil. But that's covered. 14 I'm frustrated for all our ambition and all our 15 talent my country has not had the foresight, courage, or 16 political leadership to genuinely commit to the most 17 viable alternatives to the petroleum we now consume. The 18 best way to get them to use less oil is to give them the 19 opportunity to use less or none. 20 Now others have called for an Apollo type 21 project. I actually drove an electric car in New Jersey 22 for just a few minutes. And I now realize we don't need 23 an Apollo project. We could put it on the charts showing 24 2045. 25 My wife said that I better come back with an PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 electric car from this whole thing or she's going to be 2 really angry. 3 What is desperately needed is a commitment to 4 what your state began in the 1990s as I understand it. So 5 I respectfully request that you put electric vehicles back 6 on the road by adopting the changes to the ZEV program 7 proposed by Plug In America. 8 Maybe we failed children in another way. They 9 must not believe what Glocon said to Sarcitis that if we 10 were to be invisible, we would all do bad or unproductive 11 things. I choose to believe there are many fine and 12 determined people like yourselves and others who when 13 invisible like Lamont Cranston in the 1940s Topper -- if 14 you're as old as I am in the 1950's the TV show. 15 Currently, Harry Potter with the invisibility cloak. 16 People who are invisible will do the right thing, will not 17 go on rampages of self-indulgence or foot dragging or 18 gaming, but will do things to solve telling problems. 19 Thank you 20 CHAIRPERSON NICHOLS: Thanks for coming out. 21 Ron Freund. 22 MR. FREUND: Good afternoon, chairman Nichols and 23 distinguished members of the Board. 24 CHAIRPERSON NICHOLS: We need you to speak up 25 right into the mike. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 MR. FREUND: As Chairman of the Electric Auto 2 Association, I'm here to convey a pretty simple message. 3 Our members have driven eight-and-a-half million miles 4 zero emission vehicles since the 2003 mandate change. I 5 believe you've been misinformed about the current 6 viability of pure ZEVs and that the CARB staff has 7 completely erred in recommending that you become track for 8 years to come with requirements that can in fact be met 9 today. 10 As CARB progressively gutted the 1990 ZEV 11 targets, two percent in '98, five percent in '01, and ten 12 percent in '03, decided we should wait for fuel cell 13 research instead of proceeding with proven battery 14 electric vehicle technology. BEVs need no research while 15 clearly fuel cells still need much. 16 Today fuel cell research is not living up to your 17 2003 dreams. So the February 2008 staff report, the ISOR, 18 proposes further delays, reducing 2012 targets so much to 19 make the ZEV regulation irrelevant. Please hold the 20 course. In fact, increasing those numbers would be 21 appropriate given the state of battery electric vehicle 22 technology. 23 Your 2003 retreat was blamed on the infamous 24 lawsuit by the auto makers. In your ISOR, CARB staff 25 writes the ZEV program was last modified in 2003 to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 resolve legal challenges and better address the state of 2 technology. Why wait when the program's success with 3 pre-2003 ZEV requirements was demonstrated conclusively in 4 '96 to '03 that indeed battery electric vehicle technology 5 could succeed if given a chance. My own car is proof of 6 that. 7 Furthermore, CARB is giving undue preferential 8 treatment to fuel cells. It's inappropriate for you to 9 decide which ZEV technology is best. Very recently, GM 10 and Toyota openly stepped back from fuel cell technology 11 while Ballard Power System, the fuel cell pioneer, sold 12 its automotive fuel cell assets. Why? Due to the long 13 time frame to commercialization and to high cost of 14 development. And yet CARB continues to lean towards fuel 15 cells with its zero emission program. As a technologist, 16 I recognize this as misguided tilting. 17 Fuel cells only make it more expensive for 18 Californians to drive every mile. Using over three times 19 the precious renewable energy that BEV 's even hydrogen 20 production goals if they were ever to be met would be 21 using. Why should we burden the California drivers with 22 these costs, which would no doubt delay market acceptance? 23 Will technological advances make fuel cells ever more 24 competitive? No. The laws of thermal dynamics won't 25 allow it. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 Electric vehicles are fundamentally more 2 efficient. Both batteries and fuel cells have finite 3 lifetimes, yet battery technology is moving rapidly due to 4 the heavy use of cell phones and in laptops. While you 5 know there is still major hurdles to overcome in the fuel 6 cells, not the least of which is developing the 7 infrastructure to refuel them, virtually every American 8 today has power grid access to recharge their cell phones 9 and maybe some day their cars. So there is no new 10 infrastructure needed. 11 I urge you to reconsider and increase your 12 numbers. Don't tilt toward the vagueness of the true 13 unknowns. Thanks. 14 CHAIRPERSON NICHOLS: Thank you. 15 Norman Plotkin. 16 MR. PLOTKIN: Thank you, Madam Chair, honorable 17 Board members. Norman Plotkin representing the California 18 Automotive Wholesalers Association, the Automotive 19 Aftermarket Industry Association. Representing industries 20 that are often on the pointed end of technology forcing, 21 we note its shortcomings at times. But whether zero 22 emission vehicles are PZEVs, we're rather agnostic in that 23 question as we support emissions reductions. In fact, the 24 biggest thing we think you can do to reduce tailpipe 25 emissions is to support a robust independent aftermarket, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 for it is we who service the fleet of vehicles. Eighty 2 percent of vehicles of the fleet are serviced by the 3 aftermarket. And as we know, well maintained vehicles 4 lead to lower tailpipe emissions. 5 Our opposition is based upon the expansion of the 6 PZEV program and its extra legal super warrantee 7 provisions. The statutory warranty provisions at 43205 of 8 the Health and Safety Code are unambiguous. They direct a 9 three year, 50,000 mile warrantee period, or 7 year, 10 70,000 mile warranty period for more expensive parts. And 11 consequently, CARB has no legal authority to establish the 12 15 year, 150,000 mile warrantees. 13 As noted numerous times in the past by our 14 organization, there is no evidence that extended 15 warrantees lead to more durable parts, the stated reason 16 for extending these warrantees. 17 Moreover, in the initial PZEV proceeding, CARB 18 commissioned the Vand corporation which found that 19 economic impact to the automotive aftermarket industry of 20 these extended super warrantees in the billions of 21 dollars. If PZEV is to be expanded, we believe that a new 22 economic analysis should be performed at the very least. 23 To do otherwise will do considerable harm to the 24 aftermarket industry at a time when hat aftermarket 25 industry is critical to vehicle maintenance which is PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 critical to emissions reductions. It's been pointed out 2 other states have adopted the low emission vehicle 3 program. I will further point out that in doing so many 4 of them have adopted your low emission vehicle program and 5 not adopted the extended warrantee provisions. 6 With that said, please consider that as you 7 expand partial zero emission vehicles a reconsideration of 8 the super warrantee is due as well as economic impact. 9 Thank you. 10 CHAIRPERSON NICHOLS: Thank you. 11 Ben Knight. 12 (Thereupon an overhead presentation was 13 presented as follows.) 14 MR. KNIGHT: Bring the slides up. 15 I'm Ben Knight with Honda. I want to talk about 16 the importance of CARB establishing sufficient credits for 17 fuel cell vehicles so that companies like Honda that 18 believe in the technology are not discouraged from 19 continuing their evolution of the vehicles. 20 We see fuel cell vehicles as the key path to long 21 term zero emissions and energy sustainability goals. But 22 the amendments proposed specifically to the vehicle 23 substitution and credit ratios harm the fuel cell option. 24 --o0o-- 25 MR. KNIGHT: Our president stated our belief in PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 fuel cell technology prospects and recent progress. We're 2 taking critical steps to overcome the hurdles to realize 3 their mass market potential. 4 --o0o-- 5 MR. KNIGHT: This slide illustrates some of our 6 extensive activities to lay a foundation for fuel cell 7 electric vehicles and hydrogen infrastructure in 8 California. They include real world fleets and consumer 9 use. 10 --o0o-- 11 MR. KNIGHT: Advancing the performance of 12 technology is the key to progress. We're making effective 13 progress on a number of key vehicle technology challenges. 14 For example, the efficiency is greater than anyone 15 expected at this stage and over three times conventional 16 vehicle. The greenhouse gas emission reductions of 60 17 percent are achieved even with hydrogen made from natural 18 gas to date. And driving range is up 70 percent in just 19 four years to 270 miles, probably over 300 miles on CARB's 20 own EDDS test. Progress is real and verifiable. 21 We still face hurdles including fuel cell and 22 battery life. We're using lithium ion in this vehicle. 23 And we want to improve vehicle range. 24 --o0o-- 25 MR. KNIGHT: We have a sudden shift in the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 mandates focused which changes the waiving of options, 2 effectively removes the fuel cell option. Current rule, 3 vehicle substitution ratios are ten to one decreasing to 4 five to one. But in the latest proposed amendments 1.6 5 to one. 6 We are prepared to spend to get best results and 7 balanced numbers in R&D efforts to advance the technology. 8 It's critical to use resources effectively. 9 Current rules, fuel cell path recognize the need 10 to reflect cost in the credit ratios. Want to encourage 11 new or additional technology or simplify the regulation. 12 That's okay as well as the credit given is in proportion 13 to the technologies that other companies are already 14 encouraged by CARB to pursue. Those companies should not 15 be disadvantaged. In general, manufacturers must collect 16 the lowest cost compliance option because ultimately 17 customers have to bear the cost. 18 For stations, a focus on reliable -- 19 --o0o-- 20 MR. KNIGHT: -- accessible stations in California 21 is critical. And I welcome any questions, especially if 22 you have any doubt about whether our fuel cell and vehicle 23 efforts are real and progressive. This is an extremely 24 serious issue for Honda. We've aggressively committed to 25 California's near zero and zero emission goals and efforts PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 solving gasoline ULEV and SU LEV, first in the world. 2 Sold the first hybrids in California, the first two 3 ATPZEVs, the first advanced battery EVs and HEVs and the 4 first and only fuel cell car certified for public use and 5 leased to consumers and fleets. Respectfully -- 6 CHAIRPERSON NICHOLS: Your time is up. We 7 appreciate your testimony. And you've given us some 8 extensive written comments too. Thank you. 9 Mr. Modisette. 10 MR. MODISETTE: Thank you, Madam Chair, members 11 of the Board. I'm Dave Modisette with the California 12 Electric Transportation Coalition. 13 I put together a little checklist of the issues I 14 thought just to make it easier for you to follow along 15 because these are complicated. 16 Let me first say that we support the call this 17 morning for a revisioning of the ZEV program, an overhaul 18 or a start from scratch of the ZEV program that Professor 19 Sperling and some of the other Board members mentioned. 20 But I would like to emphasize with regard to the current 21 staff proposal there are some very good and important I 22 would say necessary provisions in the current staff 23 proposal. Let me just tick down these. 24 First of all, creation of the enhanced ATPZEV 25 category which does include the plug-in hybrids and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 includes them in significant numbers. This is the shining 2 jewel within the staff report. We think it's particularly 3 important. 4 Second, adding blended plug-in hybrids into the 5 definition of plug-in hybrids. 6 Third, more equal treatment of battery electric 7 vehicles versus fuel cell vehicles. 8 Fourth, a limit on the use of these old banked 9 credits, mostly NEV credits, that have been built up in 10 the 1990s. 11 And lastly, simplification of the compliance 12 paths. We would urge you to adopt these provisions in the 13 staff report today. 14 There are a couple of -- next slide. 15 --o0o-- 16 MR. KNIGHT: A few additional recommendations 17 that we would make for additions that we think would even 18 further strengthen the proposal. 19 First of all, adding an additional category for 20 even stronger plug-in hybrids. The top category in the 21 staff proposal right now is actually relatively easy to 22 meet. Auto makers are already talking about and proposing 23 stronger plug-in hybrids. We suggest that you add an 24 additional category, make the regulation more forward 25 looking to even stronger plug-in hybrids. The way we PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 would define that is a plug-in hybrid that can meet a more 2 stringent test known as the federal US 06 test on 3 all-electric range alone. 4 Secondly, if you are going to increase the 5 numbers of pure ZEV vehicles as has been talked about this 6 morning, we think you should de-couple the plug-in hybrid 7 numbers from the ZEV numbers so we don't have a decrease 8 in the number of plug-in hybrid numbers below what staff 9 has proposed. 10 Third, we would suggest that you ramp down the 11 early introduction credits for plug-in hybrids in the 12 years 2012 and 2013. Right now, they end rather abruptly 13 at the end of 2011. And we think this will have two 14 beneficial aspects. First of all, it will encourage auto 15 makers to make plug-in hybrids in larger volumes in these 16 years. And secondly, we think this provides an incentive 17 to avoid blackout. Auto makers do have a lot of banked 18 NEV credits which they could use. And if they wanted to, 19 they could entirely avoid the production of any plug-in 20 hybrids whatsoever during the phase three time period. 21 Lastly, we are concerned about the plug-in 22 hybrids battery warrantee requirement which is ten years, 23 150,000 miles. Remember, this is new battery technology. 24 It's lithium battery technology that we have very little 25 experience with at this time. So we are concerned that a PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 battery warrantee requirement of that magnitude may 2 actually act as an impediment to early introduction of 3 these plug-in vehicles. 4 We would encourage you to investigate options to 5 share the risk of these extended battery warrantees with 6 battery suppliers, with auto makers. It might be a 7 situation where money could be invested from funds in AB 8 118 or other sources to help spread the risk of this new 9 battery technology. 10 CHAIRPERSON NICHOLS: Thank you very much. 11 BOARD MEMBER D'ADAMO: I'm trying not to ask 12 questions, but I am confused and could use clarification. 13 Point number one on creation of the -- could you explain 14 what you mean about in terms of stronger PHEVs. I'm 15 assume you're talking about range and drive cycle issues. 16 MR. MODISETTE: The test which is proposed in the 17 staff report, it's a federal driving cycle test proposed, 18 which is used to value these vehicles and the credits they 19 get. And it's the urban driving cycle test which is a 20 relatively mild test. And I think there's consensus in 21 the technical community that that driving cycle test 22 really does not represent the way people drive in the real 23 world. And there is a new test that's been adopted by the 24 federal government called the federal US 06 test, which is 25 a much more aggressive driving schedule test. And auto PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 makes have proposed some plug-in hybrids that can meet the 2 test. Our proposal is to create an additional category 3 that would use the more stringent test. If you can meet 4 the test on all-electric range alone, then we think you 5 should get rewarded for that. We want to encourage you 6 that -- 7 BOARD MEMBER D'ADAMO: What credit would you 8 recommend and what range, assuming this more stringent 9 drive cycle test were incorporated in the definition? 10 MR. MODISETTE: Well, it would be a higher credit 11 level than vehicles would currently get. You know, one of 12 the vehicles which has been proposed in this category 13 would currently get a 2.4 credit level under the current 14 lower test, the urban driving cycle test. We think in 15 this new category that credit level might bump up to 2.7, 16 2.8, something like that. 17 BOARD MEMBER D'ADAMO: Thank you. 18 CHAIRPERSON NICHOLS: Thanks. Bonnie-Holmes Gen. 19 MS. HOLMES-GEN: Good afternoon, Chairman Nichols 20 and members of the Board. My name is Bonnie Holmes-Gen 21 with the American Lung Association of California. And I 22 do have a couple slides in a minute from our report. 23 The American Lung Association of California has 24 been a strong supporter of this zero emission vehicle 25 program from the beginning due to the tremendous public PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 health and air quality benefits. And as we've said many 2 times before, every zero emission vehicle on the road 3 means less air pollution and fewer public health 4 emergencies, including asthma attacks, hospitalizations, 5 premature deaths, and of course reduced children who are 6 suffering from reduced lung capacity. 7 At the same time, we strongly believe the ZEV 8 program has been successful as we've discussed. At the 9 same time, we're concerned that the requirement on auto 10 makers have continued to decrease over time and are 11 proposed to be deceased today. As you are aware, the 12 staff proposal before you would relieve the auto makers of 13 over six billion dollars in requirements to produce zero 14 emission vehicles. 15 The American Lung Association is very concerned 16 about the zero emission vehicle program because of the 17 important public health impacts. 18 The opportunities to protect public health and 19 reduce greenhouse gases with the ZEV program are 20 tremendous. In a study that was completed for the 21 American Lung Association by TIAX, the road to cleaner 22 air, the benefits to California and society of converting 23 existing of motor vehicles to pure zero emission vehicles 24 was estimated on a full fuel cycle basis and found that 25 ZEV technologies pay back the state in a big way. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 Or -- next slide. 2 --o0o-- 3 MS. HOLEMS-GEN: The existing fleet of motor 4 vehicles is costing society about ten billion per year in 5 health and greenhouse gas costs, including the cost of 6 illness and death due to air pollution. These costs are 7 unacceptable, especially given the benefits of zero 8 emission vehicle technologies. The American Lung 9 Association study found this converting to zero emission 10 vehicles would result in approximately $142 billion of 11 benefits to society, billions of benefits from reduction 12 of global warming pollution and reduction of public health 13 impacts. 14 These benefits are much greater than converting 15 the entire fleet to the lowest emitting gasoline 16 technology. So we need to continue rapidly our progress 17 toward zero emission vehicles and keep ramping up and 18 strengthening the numbers, not reducing the numbers of 19 pure zero emission vehicles and plug-in hybrids. 20 We need to increase plug-in hybrids. The study 21 found that by converting to zero emission vehicle 22 technology and cutting particulates from tailpipes -- next 23 slide. 24 --o0o-- 25 MS. HOLEMS-GEN: -- that California would PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 annually avoid at least 300 cases of premature death, over 2 260 cases of chronic bronchitis, over 7,000 asthma 3 attacks, more than 18,000 cases of upper and lower 4 respiratory symptoms. 5 These numbers are estimates. A more detailed 6 analysis would need to be done to perfect these numbers, 7 but they give us a helpful understanding of the magnitude 8 of the problem. 9 Next slide. 10 --o0o-- 11 MS. HOLEMS-GEN: The America Lung Association 12 study also shows 110 million tons of greenhouse gas 13 emissions could be avoided by converting to zero emission 14 vehicle technology. 15 Based on this analysis and the tremendous 16 advances in technology we've seen in the past two years, 17 the American Lung Association believes that the Board 18 needs to expand and accelerate the zero emission vehicle 19 program. We're urging you today to take the initiative to 20 set a bold new vision for the zero emission program. 21 And we appreciate the proposal that's put on the 22 table today by Board Member Sperling to strengthen the 23 program, to restructure the program. But we believe we 24 need to have some strong new goals incorporated into that 25 restructuring of the program. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 First of all, we need to strengthen the existing 2 staff proposal by substantially increasing requirements 3 for pure gold vehicles and silver plus vehicles beginning 4 in 2012 and recapture some of that $6 billion investment 5 by auto makers that was planned for fuel cell vehicles. 6 CHAIRPERSON NICHOLS: You're time is up. 7 MS. HOLMES-GEN: I didn't get a one-minute timer. 8 CHAIRPERSON NICHOLS: I have zero. We'll let you 9 finish. 10 MS. HOLMES-GEN: I'm quickly run through this. 11 So when one key point we'd like to make is, 12 number one, we're urging the Board to ramp up the pure ZEV 13 component. Get back to the ten percent pure ZEV vehicles 14 and make that a requirement by 2020. 15 Second of all, let's set a visionary new goal, 16 not just for the zero emission vehicle program, but the 17 entire motor vehicle fleet to require an increasing level 18 of integration of electric drive technology in a hundred 19 percent of the vehicles by 2020. Why shouldn't every 20 vehicle sold in California utilize zero emission 21 technology such as the available hybrid technologies that 22 we are using today to clean the air and reduce to 23 greenhouse gases. 24 And finally, we're urging you to come back in the 25 next year when the restructuring of the ZEV program that PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 will include milestones to reach the goal of at least 10 2 percent of pure ZEV vehicles, hundreds of thousands of 3 pure ZEV vehicles on the road by 2020 and to reach the 4 goal of 100 percent integration of electric drive 5 technology across the vehicle fleet. Public health 6 demands your visionary leadership today. 7 Thank you for your time. I'm sorry. I was 8 watching this. 9 CHAIRPERSON NICHOLS: Of course. Well done. 10 Thank you. Appreciate it. 11 Robert Sawyer. 12 DR. SAWYER: I'm Bob Sawyer, professor of energy 13 at the University of California at Berkeley. 14 Chair Nichols and Board members, I'm delighted to 15 be here to comment upon the future of the ZEV program and 16 to experience from this side of the room what the meaning 17 of a three-minute limit really 18 The California Air Resources Board zero emission 19 vehicle program when adopted in 1990 required that ten 20 percent of the light-duty vehicles sold in California have 21 zero tailpipe emissions for the lifetime of the vehicles. 22 The primary goal and benefit was to be vehicles that did 23 not suffer the problems of real world lifetime tailpipe 24 emissions that were greater than the new vehicle 25 certification values. Zero was to mean zero. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 As technology forcing, the ZEV program resulted 2 in the introduction in California during the late 1990s of 3 eight battery electric vehicles by major original 4 equipment manufacturers, a major accomplishment. About a 5 thousand of these vehicles remain in operation in 6 California today. Depressingly small fraction of the 7 anticipated ten percent. 8 The Board's redirection of the ZEV program in 9 2003 from battery electric vehicles to fuel cell vehicles 10 was based on an assessment of unacceptably high battery 11 owner vehicle cost, limited range, related issues in 12 battery performance and cost, and the promise of full 13 performance fuel cell vehicles. 14 In retrospect, five years later, all of these 15 assessments were in error. Fuel prices have more than 16 doubled. The lithium ion battery with performance and 17 potential manufacturing costs appropriate to battery 18 electric vehicles is entering production and fuel cell 19 vehicles remain decades away. 20 Most importantly, the ZEV program could be a 21 major contributor to meeting California's 2020 and 2050 22 greenhouse gas reduction commitments. Electricity is the 23 alternative motor fuel that is truly low carbon. It will 24 become even lower carbon in the future. And the 25 distribution infrastructure is already in existence. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 Battery and plug-in hybrid electric vehicles are existing 2 technologies that enable decreasing our dependence on 3 petroleum, reducing greenhouse gases, and meeting air 4 quality standards. 5 As you recall, as Chair, I was reluctant to 6 include the ZEV program in the state's greenhouse gas 7 reduction efforts. I was concerned it would become part 8 of the auto industry's legal challenges to AB 1493. 9 However, with the Air Resources Board three major court 10 victories and the promise of a new global warming 11 conscious and waiver friendly administration in Washington 12 of either party, that concern is now minimal. 13 As difficulties in implementing AB 1493 14 demonstrate, California needs every tool at its disposal 15 to meet global warming and air quality goals. I have two 16 recommendations. 17 First, direct the staff to plan the coordination 18 of AB 32 Global Warming Solutions Act; AB 1493, the low 19 emissions vehicle program; AB 118, the low carbon fuel 20 standard; and the ZEV programs to accelerate the reduction 21 of greenhouse gases. Attainment of air quality standards, 22 a reduction of dependence upon petroleum in California and 23 to ensure that the Air Resources Board regulatory programs 24 and the light-duty vehicle sector are complimentary and 25 cost effective. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 At this time, restore the ZEV program to its 2 original goal of ten percent annual sales of zero emission 3 vehicles to be attained by 2020 as a major contribution to 4 meeting greenhouse gas reductions. 5 Successful PZEV and ATPZEV programs should become 6 part of the LEV program. Other than a possible interim 7 credit for plug-in hybrid electric vehicles based on the 8 actually displacement of hydrocarbon fuels, the ZEV 9 program should be returned to a zero means zero simple, 10 easy to understand, easy to enforce program. Continue to 11 promote fuel cell vehicles as a promising technology if 12 combined with low carbon hydrogen technology and a 13 distribution infrastructure for meeting 2050 greenhouse 14 gas reduction goals. 15 California is the place where electric vehicles 16 can and should happen. Our climate, our multi-vehicle 17 families, our commitment to the environment, and our 18 tradition all argue for the Air Resources Board to 19 reassume leadership. Thank you. 20 CHAIRPERSON NICHOLS: Thank you very much. There 21 was a small extension of time there. Former Board Chairs 22 get a little extra consideration. Thank you very much. 23 Daniel Emmett 24 MR. EMMETT: Hi. I'm Daniel Emmett, executive 25 director of Energy Independence Now, member of the ZEV PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 Alliance. 2 First of all, like to thank staff for their 3 excellent work on this proposal, much of which we strongly 4 support. 5 I just have a couple of recommendations. First 6 off, I'd like to support -- strongly support the proposal 7 put forward this morning by Professor Sperling and echoed 8 by others on the Board for a bold revisioning of the ZEV 9 program over the next year. And we think that's a 10 critical move for the future given our goals of climate 11 change, air quality, and public health. 12 In the mean time, I'd like to address two 13 recommendations, one having to do with the numbers in 14 phase three or 2012 to 2014 time frame. The other having 15 to do with infrastructure. 16 The staff proposal of 2500 pure ZEVs required in 17 the 2012 to 2014 time frame represents -- obviously we've 18 talked about this -- a 90 percent reduction from the 19 existing requirement. We urge the Board to act now to 20 boldly strengthen the staff proposal, maintaining the 21 current requirement, at least until the revisioning of the 22 ZEV program is complete. Not only are more pure ZEVs 23 possible in this time frame, they are essential to meeting 24 our collective air quality, public health, and global 25 warming goals. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 In addition, the Board must send a strong and 2 consistent regulatory signal to drive investment in ZEV 3 technology infrastructure and supporting technologies and 4 suppliers. Auto makers often argue that large numbers of 5 fuel cell vehicles are not necessary in this time frame to 6 achieve the engineering progress required for 7 commercialization. EIN submits this should not be the 8 only metric or consideration for determining the 9 appropriate or necessary number of vehicles in this time 10 frame. 11 Equally critical to the future of 12 commercialization and viability of ZEVs, is the need the 13 adequately prepare consumers, first responders, permit 14 officials, and the general public. In addition, larger 15 numbers of vehicles will be necessary to make ZEV 16 infrastructure commercially viable both EV fast charging 17 and hydrogen. 18 Further, on the topic of infrastructure, the ZEV 19 program does not currently include a Mechanism to ensure 20 availability of fueling infrastructure sufficient to 21 support increasing numbers of fuel cell vehicles for 22 research, development, deployment, and ultimately 23 commercialization. 24 To accomplish this, we recommend the Board should 25 establish requirements for ZEV fueling infrastructure PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 either under this program, the LCFS, or direct staff to 2 revise the clean fuels outlet regulation to require 3 availability of fuel for ZEV, whichever is fastest. 4 The current 20,000 trigger under the clean fuels 5 outlet program does not address the near term need to 6 deploy infrastructure in tandem with vehicles, and 7 incentives have proven insufficient to ensure availability 8 to fuel for ZEVs. 9 In closing, given the scale of the air quality 10 and climate change challenges facing California and the 11 world and given the battered history of the ZEV 12 regulation, 25,000 vehicles is an incredibly small down 13 payment on cleaner transportation future, especially given 14 the fact over two million new cars are sold in California 15 every year. Thank you. 16 CHAIRPERSON NICHOLS: Thank you. 17 For the people who came into the room after we 18 began this proceeding, I just want to let you know the 19 process that we're going to be using is that we're going 20 to keep on going without a major break. We'll take 21 another ten minute break at about 1:00. So for those of 22 you with low blood sugar or just like to eat lunch, I 23 recommend that you look at where you are on the schedule 24 maybe duck downstairs and grab a salad or sandwich or 25 something. That's what Board members are going to be PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 doing as we continue forward here. So you may see a 2 little bit of back and forthing. But folks will be able 3 to listen from the back room. 4 Okay. Jamie Knapp. 5 MS. KNAPP: As luck would have it, I am one of 6 those low blood sugar people at this very moment. 7 Good afternoon, Madam Chair, members of the 8 Board. I'm Jamie Knapp. I coordinate the environmental 9 coalition known as the ZEV Alliance. Today I'm speaking 10 on behalf of one of our members, Danielle Fugere, Friends 11 of the Earth. 12 I'd like to address this issue of public 13 disclosure. Specifically, our Public Records Act request. 14 We appreciate your and staff's efforts to work with us on 15 this to settle this issue through negotiation. And we 16 also acknowledge the auto makers for coming to the table 17 with us in January. 18 It did take 12 months of pushing on this Public 19 Records Act request. And I will add that was five years 20 after we first commented on the record that we thought the 21 information in the ZEV credit bank should be public. I 22 wrote that letter. It was on September 3rd, 2002, and I 23 had to go back in my files to find it, but we did. 24 So we appreciate that staff is proposing to make 25 certain documents available to the public, including auto PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 maker production data and credits earned. We are seeking 2 some clarification on exactly what that term credit 3 balance means. Under this proposal, they're provided -- 4 the credit balance is provided in 2010. We ask that the 5 staffer and Board define that term in the regulation and 6 that we'd also like to see these credit balances made 7 available in the 2009 model year along with the other data 8 that is made available at the same time. 9 Finally, we're mostly concerned that under the 10 current staff proposal the auto maker credit trading 11 information continues to be kept secret from the public. 12 This means that in instances where auto makers buy credits 13 to meet their compliance obligations, the public cannot 14 ascertain necessarily the basis of those credits, where 15 they came from, how they were deprived, whether they were 16 issued or accounted for accurately, or whether they're 17 real. 18 This was not our understanding when we left the 19 room that day in January. And as we've heard this 20 morning, at least one auto manufacturer shares our 21 position that trading of credits should also be public. 22 Public accountability in credit trading is 23 necessary and important. Absent public accountability, 24 trading systems can go badly wrong as they have in the 25 past. And you know that we had that experience with PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 reclaim when the regulated community knows that the public 2 has access to compliance data, it has an incentive to 3 produce accurate information. And we think that full 4 transparency around credit trading may help discourage the 5 auto makers from trading with low cost, low technology 6 providers, creating unintended loopholes that we also know 7 have happened with this program. 8 We have on several occasions now provided some 9 language that we thought might be helpful in defining 10 exactly the kind of information that we think needs to be 11 made public. And we respectfully ask you again to take a 12 look at that, review it, and please incorporate into the 13 regulation. Thank you very much. 14 CHAIRPERSON NICHOLS: Thank you. And we will be 15 taking that issue up as part of our consideration of the 16 final action at the end here. 17 I'm going to call the next group of ten: Daniel 18 Davids, Reg Modlin, Rick Kasper, Stephen Ellis, Paul 19 Scott, Ze'ev Dvori, Adam Smith, Alan Weverstad, Randy 20 Reisinger. 21 Mr. Davids. 22 MR. DAVIDS: Hi. My name is Daniel Davids, and 23 I'd like to thank Madam Chair, Board, and staff for the 24 opportunity to testify today. 25 I'm from Seattle, Washington. Speaking on behalf PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 of myself and the Seattle Electric Vehicle Association, 2 Washington is one of the states that follows California 3 enthusiastically. 4 Like Mark Geller, I drive and own a RAV 4 EV that 5 was produced for the California market. And would like to 6 echo Mark's sediment in thanking the Board for making that 7 possible. It's a great car. 8 I would in general just say I agree with the 9 written points submitted Chelsea Sexton on behalf of Plug 10 In America. I think they pretty well lay out my 11 positions. 12 I do have two main points though today. I would 13 like to first reiterate my testimony from San Diego last 14 year where I pointed out an analysis of battery and cost 15 estimates is deficient if it does not basically speak to 16 the issue of reduced maintenance and operating costs of 17 battery electric vehicles. For my RAV 4 EV, maintenance 18 is certainly zero. And fuel costs could equate to between 19 two and three cents per mile. 20 I agree with Bill Reinhard as he states regularly 21 when he speaks we really have to look at total life cycle 22 cost when evaluating battery electric vehicles. 23 My second point is I strongly agree with Dorene 24 D'Adamo remarks. I think she's clearly outlined where we 25 need to go in the future. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 The bottom line for me is number of vehicles on 2 the road. In the near term, 2500 is simply too low. CARB 3 should be pushing specifically the manufacturers, but 4 Detroit specifically. I would just observe that ten years 5 since the introduction of the Prius the fact that no U.S. 6 auto manufacturers has introduced a car that even comes 7 close to matching the performance of a Prius is a scandal. 8 So in conclusion, I agree with Andy Frank. It's 9 about the numbers. We need to get more vehicles on the 10 road. Thank you very much. 11 CHAIRPERSON NICHOLS: Thank you. 12 Reg Modlin. 13 MR. MODLIN: Thank you, Madam Chair. Appreciate 14 the opportunity to be here today. And thank you to the 15 Board and the staff for hosting us. 16 You have my comments. So I'm going to keep this 17 very staccato if you don't mind. 18 Review the ZEV mandate have two essential drivers 19 we've learned to appreciate and respect over the course of 20 time. One is to trend vehicles towards zero emissions. 21 The other is to encourage early deployment of zero 22 emission vehicle technologies. Many of the aspects of 23 staff's proposal meet those objectives, but there are a 24 couple that we think fall short. 25 Intermediate volume manufacturer phase in in PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 looking at an extended time frame to allow intermediate 2 manufacturers to phase into this requirement I think is 3 one of those that holds back on where ARB really wants to 4 be. I think this limits the number of vehicles at a time 5 when they can actually be encouraged. 6 Just using the staff's figures, the large volume 7 manufacturers put in $2.6 million of investment that's 8 just hardware. At the same time, intermediate size 9 manufacturers aren't committed to do anything. 10 But I'm not doing anything more than highlighting 11 that the companies that we're talking about are huge 12 multi-international that have been involved with this 13 topic as long as we have. 14 I think it's an accurate assessment probably a 15 couple of those guys are doing a heck of a lot better than 16 we at Chrysler. 17 So my point here is that the program would gain 18 an advantage to bringing more manufacturers sooner rather 19 than later. We ask the Board in this regard to leave 20 intermediate volume manufacturers phase in as written in 21 the current regulation. 22 Second is absence of travel provision for silver 23 credits. When the conversation draft was first put out 24 last November, I think it was a stroke of brilliance to 25 move technology into the marketplace more rapidly than we PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 might otherwise do because it is expensive. It is 2 immature for the next phase. 3 But when the travel provision was removed, that 4 essentially drove the cost of the program by three times. 5 Next slide, please. 6 --o0o-- 7 MR. MODLIN: Program that was going to cost us 8 about 2.6 billion using the staff's figures, to extend 9 that takes up to 6.4. 10 Money matters along with the technology. This is 11 not something that volume can drive cost down. This is a 12 generational topic where the next generation is going to 13 cost to fix them out and generation we hope is going to be 14 much reduced in cost. 15 The reason I'm particularly anxious is the next 16 slide. 17 --o0o-- 18 MR. MODLIN: Is that from a Chrysler view point, 19 our operating profit over the last few years have been 20 bad. We're working diligently to improve this. This is 21 an a cumulative profit figure for Chrysler group since 22 over 2000. And it's not a matter of just selling cars and 23 making money. This is a tough competitive business. And 24 you have to fight hard to make every dime and nickel. 25 Coming up with that extra 300, 600 million or next 6 PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 billion is hard. That's the only point I want to make 2 here. 3 CHAIRPERSON NICHOLS: Thanks, because you used up 4 your three minutes. Thank you for your testimony. Those 5 are two points that had not been addressed. So appreciate 6 that. 7 Rick Kasper. 8 MR. KASPER: Thank you, Chair Nichols, members of 9 the Board, and ARB staff. My name is Rick Kasper. I'm 10 the president and chief operating officer of Global 11 Electric Motor Cars. I certainly appreciate the 12 opportunity today to comment on the staff's proposed 13 amendments to the zero emission vehicle program. 14 Global Electric Motor Cars, or GEM, is a Chrysler 15 company has been manufacturing and selling neighborhood 16 electric vehicles now for over ten years. During that 17 time, we've committed to vast resources to research, 18 development, sales, and support of our electric vehicles, 19 in particular battery technology, to make them a major 20 contributor to the ZEV program. 21 With over 15,000 GEM NEVs and over 20,000 total 22 NEVs in California alone, the state has grown to represent 23 the largest concentration of battery electric vehicles in 24 the world. Chrysler and GEM appreciate that staff has 25 recognized the positive environmental benefits of NEVs by PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 increasing the credit level from .15 to .30 for 2009 and 2 subsequent model years. However, we feel that the credit 3 value should be increased to .625 or greater. 4 Air quality improvement due to NEV use is 5 significant. Although NEVs may have limited usage 6 relative to other ZEVs, they have the same ability to 7 eliminate cold start emissions, which is a key 8 environmental benefit as we know. Using a NEV instead of 9 a conventional vehicle can eliminate up to one-third of an 10 owner's yearly tailpipe emissions due to the reduction of 11 these cold starts. 12 NEVs are used every day, averaging 13 three-and-a-half to eight trips per day, averaging about 14 3,000 miles per year by our commercial customers, and over 15 1200 miles by our residential customers. By comparison, a 16 P-10 plug-in hybrid used as a commuter vehicle and plugged 17 in once a day achieves ten electric miles per day or 3600 18 miles per year, 20 percent greater than the average 19 commercial NEV yet the credit for this plug-in is five 20 times higher than the 2012 to 2014 time frame. 21 In addition, 2006 through 2008 model year NEV 22 credit levels should be increased accordingly as they're 23 currently at .15. We believe the increased credit level 24 should commence with the 2006 model year because the 25 environmental benefit of NEVs have been accruing since PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 that time. NEVs ultimately should not be penalized solely 2 because of regulatory timing. 3 I'm proud to say that GEM has created a 4 successful zero emission vehicle company with a serious 5 commitment to producing legitimate marketable neighborhood 6 electric vehicles. Please acknowledge the environmental 7 benefits of our high quality NEVs by maintaining the 8 incentives and increasing the credit levels as mentioned. 9 Thank you for your time. 10 CHAIRPERSON NICHOLS: Thank you. I'm a driver of 11 a GEM myself. So I appreciate it. 12 Stephen Ellis. 13 (Thereupon an overhead presentation was 14 presented as follows.) 15 MR. ELLIS: Madam Chair, Board and staff, my name 16 is Steve Ellis. I'm the manager of fuel cell vehicles 17 sales and marketing at American Honda. Been with our 18 alternative fuel vehicle effort for the last ten years. 19 My credentials include direct involvement back to 20 1997 with introducing our EV plus electric car, at least 21 to consumers, direct responsibility for our Civic natural 22 gas vehicle, our F6 fuel cell car, and now introducing our 23 F6 Clarity to retail customers. 24 Honda has been a pioneer in marketing of natural 25 gas vehicles, fuel cell vehicles for consumer use. This PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 is very challenging in deed given the infrastructure 2 challenges alone. Of course, we are working on that, too. 3 Many thought we might even quick this challenge and some 4 already have. 5 Honda proposes that near zero emission dedicated 6 NTVs qualify as silver plus, for an interim period, for 7 example through 2014. NTVs provide a real path forward to 8 zero emission vehicles. We know firsthand as the only OEM 9 left to face the challenges of consumer marketing of a 10 dedicated alternative vehicle using gaseous fuel and the 11 clear links with our zero emission vehicle program. 12 I kind of phrase that these drivers are 13 apprentices for fuel cell vehicles in the future. We're 14 proving that today but taking it even further with our 15 dealership operations, sales, and service technicians. 16 They learn from us too. 17 --o0o-- 18 MR. ELLIS: Here's our proposal for transitional 19 qualification of NTVs as silver plus through 2014 qualify 20 the direct use of natural gas as a ZEV fuel. Electricity 21 and hydrogen today in California are predominantly made 22 from natural gas. 23 Next slide. 24 --o0o-- 25 MR. ELLIS: This shows a comparison of the credit PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 values according to the latest staff proposal. And as you 2 can see in red, the natural gas vehicle ATPZEV credit has 3 not been adjusted to reflect this relative value, nor 4 proper credit given for the demonstrated significant 5 emissions reductions. 6 If credit values and categories get too far out 7 of alignment with environmental value, with cost, with our 8 own real experience, an effective ZEV pathway we may 9 defeat ourselves as we all strive to advance our 10 collective zero emission programs and goals. 11 I mentioned Honda's experience, history, and 12 commitment to innovation for environmental technology. We 13 have serious ideas about constructive pathways forward to 14 adjust the ZEV goals. We take advantage of our early 15 experience and our learnings and don't want to see them 16 disregarded by the complex structure of ZEV. 17 Thank you for your attention to this important 18 matter. And I respectfully ask for your serious 19 consideration of my recommendations. Thank you very much. 20 CHAIRPERSON NICHOLS: Thank you. 21 Paul Scott. 22 MR. SCOTT: Thank you. I am representing the 23 Electric Vehicle Association of Southern California. 24 It's been about five year since EV proponents 25 stood here and unsuccessfully pleaded with this Board to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 keep the original ZEV program numbers for electric cars. 2 So what's happened in those five years? 3 According to the World Health Organization, tens 4 of thousands of American have died as a result of auto 5 related pollution in each one of those five years. Also 6 since 2003, the US has spent over a trillion dollars for 7 foreign oil. The burn rate is well over a billion dollars 8 a day and climbing fast. The price of gas five year ago 9 was $1.40. It's now 4 dollars, even though oil industry 10 has agreed that peak oil will occur within the coming 11 decade. 12 Bush's multiple entreaties to the Saudis over the 13 last three months to increase production have all been 14 denied. In times of both record prices and record demands 15 for oil, the only possible reason is because they cannot. 16 According the Matthew Simmons and his important book, 17 "Twilight in the Desert," if the Saudis have peeked, the 18 globe has peeked. 19 We've also spent close to a trillion dollars 20 fighting a war in Iraq. And we all know we're there 21 because of the oil under the ground. The Chinese are 22 buying up oil contracts all over the world with the intent 23 to lock up as much of this resource as possible for their 24 own growing needs. 25 Over the past five years, the scientific evidence PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 of climate change has been widely accepted, and according 2 to NASA's James Hanson we are rapidly approaching a 3 tipping point after which we cannot stop significant 4 climate change. If 100 percent of the vehicles sold every 5 year were ZEVs, it would still take over 20 years to 6 convert the American fleet to zero emission. The auto 7 industry sold about 85 million cars in the US over the 8 past five years, not one of those vehicles was zero 9 emission. 10 Car makers say they cannot build EVs fast enough 11 to meet the goals in the current regulation. But I'll 12 remind you that in 1941 the entire auto industry switched 13 inside of 12 months to making tanks and planes for the war 14 effort. I submit that the problems we are facing today 15 are every bit as crucial as system. The consequences of 16 delaying implementation of ZEVs means more Americans will 17 die from pollution. We will move closer to the 18 devastating tipping point of climate change and more 19 billions of our dollars will go out of the country with 20 much of that money going to buy the bombs and bullets that 21 will kill our soldiers. 22 The decision you are making today is historic. 23 Whether you choose to continue down the hydrogen highway 24 on the hopes that fuel cells will solve these problems is 25 a huge gamble. The clock is ticking, however. And I'll PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 remind you that the capital you are using in this gamble 2 is the environment, our national security, and human 3 lives. I ask that you please vote with this in mind. 4 Thank you. 5 CHAIRPERSON NICHOLS: Thank you for your 6 testimony. Mr. Dvori. 7 MR. DVORI: Chairman Nichols, Board members, my 8 name is Ze'ev Dvori. I'm the President and COE of Tesla 9 Motor. And yes my name is true is Ze'ev. 10 Contrary to the ISOR assertions, commercially 11 viable battery powered ZEVs are manufactured today. 12 Currently Tesla has received over 1,000 orders backed by 13 deposit for the Roadster. We are now in production. By 14 the end of the year will be producing the Roadster at the 15 rate of 12.8 automobiles per year. 16 Consider this. If Tesla, a young company based 17 in Silicon Valley, can produce enough pure ZEV without any 18 governmental assistance, why is then that giant auto 19 makers within infinitely more capital and engineers have 20 not done it yet? The CARB requirement was not sprung 21 suddenly on the auto makers. They have known them for 22 years. 23 ISOR is seriously flawed. Among other erroneous 24 conclusions are that "No manufacturers will produce any 25 battery EV prior to 2012." The fact clearly dispelled PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 that finding. What's more, in the ISOR report, staff 2 showed a proposed amendment will not have adverse impact 3 on California businesses. This statement is factually 4 incorrect. The staff proposal if enacted will have a 5 severe adverse impact on Tesla, the only car maker based 6 in California since having the ability to sell the 7 cumulative ZEV credit. 8 The staff recommendation to reduce the pure ZEV 9 requirement for the years 2012 to 2013 by 90 percent and 10 exempt the most prosperous OEM the like of Mercedes, BMW, 11 and VW from making pure ZEV vehicle for 12 years 12 ostensibly because of the financial hardship and not 13 indirect contradiction to the Board's specific 14 instruction. Specific instruction was this any change 15 should strengthen the overall objective of the program. 16 It is, in fact, quite disturbing to see the staff 17 recommendation. 18 Undoubtedly, not just California, the nation, is 19 watching your decision. I implore you not to accept the 20 staff recommendation for reducing and delaying the ZEV 21 requirement. In fact, you need to increase and accelerate 22 the pure ZEV requirement since there is no technical 23 barrier, only the self-serving interest of some car 24 makers. 25 At the bear minimum, I urge you to implement the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 following: To truly incentivize all car makers, do not 2 reduce the number of pure ZEV credit earned. For the year 3 2009 through 2011, keep the credit earned for Type 2 the 4 same as for 2008 at ten ZEV credits for each pure ZEV 5 sold. For the years 2012 through 2014, do not reduce the 6 minimum pure ZEV requirement. And lastly, do not allow 7 for substitution of pure ZEV with partial ZEV. Thank you. 8 CHAIRPERSON NICHOLS: Thank you. 9 Adam Smith. 10 (Thereupon an overhead presentation was 11 presented as follows.) 12 MR. SMITH: Good afternoon. My name is Adam 13 Smith. I'm speaking for Google.org. You might be asking 14 why is Google here. We are really want to look at how 15 information and technology can address global challenges, 16 and we've created a philanthropic arm we call .org. 17 Next slide. 18 --o0o-- 19 MR. SMITH: One of our focuses is climate change, 20 and the first thing we looked at is transportation is the 21 second larger emitter of greenhouse gases after power 22 generation. And then if you look at that chart, you know 23 the passenger vehicles 55 percent. So Google wanted to 24 get together a fleet of cars for our employees to use, 25 because we have a number of employees who commute to work PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 using our bus system. 2 What we did is we took some cars that are 3 regular -- we have others that are hybrids. And then we 4 have conversions to have plug-in hybrids. The goal being 5 we want to see how these three can compete head to head. 6 What you're seeing from our website is sort of real data 7 from a drive that happened March 17th. We track every 8 ride that anyone takes, whether they speed or not and let 9 them know. 10 So what I'd like to do is go to the next slide. 11 --o0o-- 12 MR. SMITH: Based on our experience, listen, we 13 can get clean air in years, not decades. We're excited 14 about plug-in hybrids. We're excited about EVs. And we 15 see, you know, as a technology company ourselves, we're 16 constantly trying to innovate. There's innovation in 17 front of you. Why aren't we using it? 18 --o0o-- 19 MR. SMITH: Our first recommendation is the 25 20 mile minimum all-electric range. These numbers get tricky 21 because there's so many of them. But think about it. 22 Fifty percent of people who commute to work can go there 23 and come back in all electric if it's 25 miles. It's 24 actually more than that. There's manufacturers saying 25 they can do greater. You know, ten miles is just not PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 interesting enough. It makes me believe these 2 neighborhood electric vehicles are good because ten is so 3 small. And the reason it's important is because you're 4 not going to plug in your car unless you see feedback. If 5 you plug in your car and you notice I don't go to the gas 6 station but once a month now. Or, wow, I used to go every 7 five days but now I go every seven days, it's a very 8 different customer experience. We've got to get that to 9 people so they understand the value of plug-ins and 10 electrification. 11 Next slide. 12 --o0o-- 13 MR. SMITH: The next thing -- and I think ZEV and 14 the Tesla guys have nailed this. Tesla is not only better 15 than an OEM, it's better than all six. They're basically 16 saying we have enough credits for every but six most 17 popular OEMs and we can sell it to them. They're claiming 18 that's crazy. They're in the market to have something 19 that's going to be very valuable they can make money off 20 of. I think it's a testament to them, but really a 21 testament to how low these numbers are. We're 22 recommending 40 percent. But that's us trying to be 23 conservative. Really these number are silly. 24 If you notice from this graph, what we're trying 25 to show you is the staff proposal is completely covered by PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 Tesla, and we want it to be at least greater than Tesla if 2 we're using them as a benchmark. And they're someone that 3 didn't exist five years ago. We're really proud of them. 4 Next slide. 5 --o0o-- 6 MR. SMITH: The travel provision has been spoken 7 about quite a bit here. And, you know, there's pluses and 8 minuses. For us, what bothers me is a state like 9 California or any state that adopts these ZEV programs may 10 be in a situation where they're going to get zero air 11 quality improvement. That's not fair. I don't think 12 California should adopt a program where it doesn't get 13 benefits. I don't think Vermont is going to adopt a 14 program where they don't get benefits. And my reasoning 15 is these cars can go anywhere. I think if the state says 16 we want to have cleaner air, they deserve to get it. 17 Next slide. 18 --o0o-- 19 20 CHAIRPERSON NICHOLS: You are out of time. So 21 please finish up. 22 MR. SMITH: Finish up right here. 23 Mild hybrids, neat technology. They're not 24 really going to get us there. Same with neighborhood 25 electric vehicles. I'm really glad they're out there. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 They're not ZEVs. Thank you. 2 CHAIRPERSON NICHOLS: Okay. Thank you. 3 Al Weverstad. 4 MR. WEVERSTAD: Good afternoon. My name is Al 5 Weverstad. I'm with General Motors. And we have a broad 6 array of advanced technology vehicles. We build hybrids. 7 We build gasoline vehicles that have improved fuel 8 economy. We build plug-in hybrids. We'll have a plug-in 9 hybrid available in 2009 model year. We also build the 10 Chevy Volt which we call an extended range electric car. 11 And we are building fuel cell vehicles. We call that gas 12 friendly to gas free. 13 I want to let everyone know that we have not 14 given up on fuel cells. And in fact have delivered over 15 40 fuel cell vehicles to the state of California already. 16 We've got wonderful results from all of our drivers. 17 We've had over 1500 drivers in these vehicles already. 18 And we've had 50,000 volunteers to be part of our project 19 driveway, which says there is really a market for 20 alternative fuel vehicles out there if we can get it to 21 them affordably. 22 Our biggest threat to commercialization with 23 regard to fuel cell vehicles is the lack of 700 bar 24 infrastructure. We see that as our largest impediment, 25 and we implore you to help and to create incentives for PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 the energy providers to get us that kind of fuel. 2 But the real reason I'm here today is to talk 3 about a suggested improvement to your program that you all 4 have worked so hard on. And that involves the extended 5 range electric vehicle or what we like to call practical 6 ZEV. It's our Chevy Volt technology. It does have a 7 plug-in, but it's really an electric car with a range 8 extender. It can drive the US '06 schedule all electric. 9 It can drive 40 miles all electric. And so we're asking 10 that we take advantage of that -- create a different 11 category, a type G, or change type F to allow for some 12 additional credits for that. 13 The vehicle has zero tailpipe emissions for 40 14 miles. We've studied over 600 drivers in southern 15 California. Sixty-four percent of those drivers would 16 leave home all electric and arrive back home all electric. 17 Those vehicles, if they would plug in one time, that 18 number would increase to 84 percent would be all electric 19 all the time. 20 We' even went to the trouble of putting a 21 pressurized fuel system on board so there won't be any 22 evaporative emissions, because we're not sure how often we 23 would purge that vehicle. It also is our e-flex which 24 means it has capability of having a fuel cell as the 25 charging entity if or when hydrogen becomes available. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 So what we would ask is that you give us some 2 additional credits and you also give us a phase out of the 3 multiplier. We understand at 2014 it needs to be one. It 4 is three in 2011. We'd like to see a phase out of that. 5 CHAIRPERSON NICHOLS: Your time is up, if you 6 could just finish. 7 MR. WEVERSTAD: We also are in agreement that 8 kilowatt hours is the most appropriate measurement. 9 CHAIRPERSON NICHOLS: Okay. Thank you. 10 Randy Reisinger. 11 MR. REISINGER: Chairman Nichols, Board. I'm 12 speaking today on behalf of Felix Cramer of Cal Cars who 13 was unable to be here today as he's receiving an award. 14 He'll submit additional commentary shortly. 15 The Board has an opportunity today to lead the 16 transition from petroleum to fuels that are based on 17 electricity and to propel our transportation vehicles in 18 this new manner. 19 The vehicles propelled by petroleum were burning 20 in internal combustion engines that average about 20 miles 21 per gallon or roughly 10 to 12 percent efficient and 22 account for significant emissions of greenhouse gas air 23 pollution. If most drivers knew that 90 percent of the 24 gas they purchase is wasted as heat and air pollution and 25 only ten percent moves the vehicle forward, I'm sure they PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 would look for a more efficient alternative. 2 Electric vehicles on the other hand can be up to 3 80 percent efficient and emission free. And the cost of 4 electricity is significantly less than one dollar per 5 gallon equivalent. So this transition from fossil fuels 6 to electricity has recently been accelerated by Toyota's 7 Prius, hugely popular hybrid vehicle, that primarily uses 8 electricity to propel the car but uses petroleum to 9 generate that supply of electricity. This interim 10 approach has developed fuel saving from 20 miles per 11 gallon to 40 miles per gallon, doubling the mileage. 12 Cal Cars has extended this transition by creating 13 and demonstrating and promoting the plug-in hybrid 14 electric vehicle by converting the Prius into the PH EV. 15 By adding battery capacity electronics, the owner now has 16 the opportunity to use electricity from the grid as a part 17 of the fuel that's used. 18 Yet, this is just the beginning. Vehicles have 19 the opportunity to go from 100 miles per gallon that's 20 being achieved with the plug-in Prius up to 100 miles per 21 gallon plus. These are real solutions that should not be 22 overlooked. 23 The PH EV represents a significant step in this 24 process to get toward pure ZEVs. The Board's historical 25 response has been to set standards for California's air PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 quality by regulating criteria pollutant emissions. The 2 game has changed with the passage of AB 32. AB 32 directs 3 the ARB to address climate change through greenhouse gas 4 emission regulations. EVs and PH EVs have the potential 5 to significantly reduce our CO2 emission footprint from 6 the transportation sector which is currently responsible 7 for 42 percent of California's emissions. 8 EVs and PH EVs have the additional benefit of 9 reducing the trade deficit. Today, the US is accumulating 10 a trade deficit of two billion dollars a day, half of 11 which is used for the purchase of oil often from countries 12 or governments that favor the demise of the US and the 13 death of our citizens as mentioned earlier. 14 CHAIRPERSON NICHOLS: Your time is up. 15 MR. REISINGER: Okay. I'll finish. 16 We therefore support a level playing field and 17 require full 25,000 ZEVs as does the Plug In America 18 position. 19 CHAIRPERSON NICHOLS: Thank you. 20 Mr. Yasuoka, and then we're going to take a break 21 for the court reporter. We'll try to make it ten minutes. 22 MR. YASUOKA: Good afternoon, Chairman Nichols 23 and Board. My name is Aki Yasouka from Honda. 24 All of you guys know me very well. I always 25 speaking away from the legal side, away from the political PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 side, purely engineering side. 2 I have very same feeling as the former Chairman 3 Dr. Sawyer testified here because now in 1990 the ZEV 4 regulation was set. It was zero. And based on that, we 5 are changing many things. And then we have to realize now 6 the social priority is not only the smoke forming gases, 7 greenhouse gas, and also the national security is a 8 concern. 9 If we promote some technology forcing, three 10 factor has to be integrated and to arrange that. Now we 11 are looking at -- I'm looking at the discussion battery 12 EV, fuel cell, and plug-in hybrid. Those three supporters 13 come. But if we tried and then we found that the five 14 years ago that driving range and the refueling time -- 15 that means to go the amount of 400 miles I think we have 16 to fueling time -- are very difficult. 17 I think once the customer getting used to the 18 current convenient gasoline car I think will revolt and 19 switch to the fuel cell vehicle. And Ben testified. And 20 I think that of course great difficulty to technical 21 discussion there and somebody doubting. It's true. 22 But now next one is coming, plug-in hybrid. 23 Plug-in hybrid try to solve that charge time and the 24 driving distance. Driving range problem. So some kind of 25 compromise. But also we have to scientifically evaluate PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 all three technologies and with current electricity grid 2 and future how much electricity is going to be clean up. 3 And currently the staff proposal don't allow the 4 travel for the plug-in hybrid, that means that 5 Massachusetts or some -- those states -- other states will 6 adopt this and we have to place there. But in those 7 states, their greenhouse gas is going to be increased, not 8 decreased. Of course some years later it will happen. 9 But I think we have to carefully adjust the timing. 10 CHAIRPERSON NICHOLS: Thank you. Your time is 11 finished 12 MR. YASUOKA: I conclude. 13 To make these three technologies positive but to 14 acquiring the quantity is I think we have to be careful 15 watching. 16 CHAIRPERSON NICHOLS: Thank you. We will 17 reconvene at ten past 1:00. Thanks, everybody. 18 (Thereupon a recess was taken.) 19 CHAIRPERSON NICHOLS: I'm going to call the names 20 of the next ten witnesses, and we'll continue along the 21 path that's been working well until now. 22 The next group is Ted Flittner, Joy Turock, Jay 23 Smith, Spencer Quong, Luke Tonachel, John Shears, Francois 24 Choquette, David Turock, and Stuart Johnson. 25 MR. FLITTNER: Good afternoon. I'm Ted Flittner. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 I'm a Californian, also a founder of 1 Amp World, which 2 has a charter of improving our world climate through the 3 proliferation and commercialization of plug-in vehicles. 4 I'd like to talk today about the ZEV requirement, 5 the numbers for vehicles. And I'd like to first allude to 6 one of the statements earlier by Dr. Sperling this morning 7 said almost anyone in industry agrees that electric drive 8 is the future. I totally agree with that. I'll take that 9 a little further and it seems that almost everybody in 10 industry agrees that plug-in electric drive is the future. 11 What you see up on the screen is just a few 12 examples of that. I want to give a little more 13 illustration to what has been in demonstration and concept 14 vehicles to really illustrate that point even further. 15 Today, actually producing cars, we have two 16 battery electric cars that are being produced, Tesla and 17 Think. We had a couple people speak on behalf of Tesla 18 this morning. We had an announcement this morning from 19 Nissan. They have three battery electric vehicles that 20 they have formerly announced in 2010, 11, and 12. 21 Mitsubishi has formally announced a battery electric 22 vehicle for 2009. Subaru, battery electric. Mercedes and 23 Tesla have spoken of a serious plug-in hybrid. That was 24 2010. General Motors of course you've seen the GM Volt 25 2009 or 2010. Volkswagen, a battery electric fuel cell PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 combo. BYD of China, one of the largest auto makers in 2 China, plug-in hybrid electric vehicle 2009. These are 3 formal announcements. 4 In addition to that, we have quite a few 5 development actual cars in demonstration that are on the 6 streets that includes Saab and Volvo partnership, the Ford 7 plug-in hybrid Escape. Some of those are on the roads in 8 California as demonstration vehicles. Toyota with their 9 plug-in Prius in demonstration in California and in Japan. 10 We've got concept vehicles from many auto makers including 11 Audi with the plug-in hybrid. We have Volvo with the 12 Recharge. We have Chrysler who have announced one battery 13 electric concept car and two plug-in hybrids. BMW with 14 their 3 series car. Nissan with another plug-in concept. 15 And start-ups, we have many start-ups. And I think 16 there's over 20 battery electric and plug-in hybrids 17 concept vehicles from start-up companies. 18 There's more than just a few things out there. 19 There's more than just a possible indication that that's 20 where industry is going. Industry has announced it. And 21 many of the companies I just mentioned are not among the 22 six that we're focusing on with the ISOR and the ZEV 23 program here. 24 This illustrates that industry in mass has 25 recognized that this is the future. This is where we're PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 going. And with that I believe that the numbers need to 2 be raised. We need to get back to the base numbers, as 3 Ms. D'Adamo mentioned earlier. We need to get back to the 4 base numbers and in fact raise those numbers. I really 5 would recommend that we look at those numbers and we raise 6 those numbers for both BEVs and plug-in hybrids. 7 CHAIRPERSON NICHOLS: Thank you. Your time is 8 up. 9 BOARD MEMBER D'ADAMO: A question and I don't 10 know that the witness would have an answer, but maybe 11 staff could work on this. You raise a good point and 12 there have been many auto makers that have actually made 13 announcements, and I've picked up on it occasionally in 14 the press and have met with some of them individually. 15 But I don't feel I have a very good handle on the specific 16 announcements. And perhaps if you have that information 17 or hopefully staff would they could plug it in within the 18 time frame. Because that's the other challenge when the 19 announcements come out, sometimes it's not necessarily in 20 line with the time frame for phase three and four. Maybe 21 if you have that information, you can get back to that. 22 EXECUTIVE OFFICER GOLDSTENE: We'd be happy to 23 get back with that. 24 CHAIRPERSON NICHOLS: A quick overview with where 25 we are with the announcements that have come down since PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 the announcements have come down. 2 BOARD MEMBER RIORDAN: That might cause us to be 3 more optimistic too. 4 EXECUTIVE OFFICER GOLDSTENE: It may. 5 MR. FLITTNER: I would be happy to meet with any 6 of the staff people to talk about this in more detail. 7 CHAIRPERSON NICHOLS: Thank you. 8 Joy Turock. 9 MS. TUROCK: I'm Joy Turock, a high school 10 student from New Jersey. For some of you, I'm young 11 enough to be your granddaughter. And as I prepare to go 12 to college this fall, I worry about the world my 13 generation will inherit. I've had pollution induced 14 asthma since I was eleven. Although I take daily medicine 15 for it, damage is still done to my lungs. 16 I wonder about how the world will be many years 17 from now if action is not taken to change the direction in 18 which the environment is currently headed. When I am a 19 grandmother, will I have clean air to breath? Will I be 20 able to have healthy children and grandchildren, or will 21 be bringing them into a pollution filled, oil dependant 22 world? 23 The initial statement of reasons paper says 24 hydrogen or battery electric vehicles are impractical for 25 the general public. I agree with you on hydrogen. I know PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 from my high school chemistry classes that reforming 2 natural gas energy into hydrogen is extremely inefficient. 3 However, having driven an EV for more than two years and 4 taken one apart, I can tell from you personal experience 5 that they are a practical form of transportation now. 6 They're quiet, efficient, non-polluting, powered by 7 renewable energy that doesn't cost $100 per barrel. 8 Revise your proposal to support electric vehicles 9 by requiring tens of thousands of them, not hundreds. Let 10 consumers like me choose what works best in the real 11 world. Make a positive difference in the environment. Be 12 responsible for the decline of pollution related disease 13 and our dependence on foreign oil and strengthen our 14 national security. Champion Plug In America's proposal 15 and bring back the electric car. In support of EVs now, 16 it will brighten my future as well as that of your 17 children and grandchildren. Thank you. 18 CHAIRPERSON NICHOLS: Thank you. 19 Jay Smith. 20 MR. SMITH: Thank you, all. My name is Jay 21 Smith. And I'm 17. And I have a message from my friends 22 and from my generation in general. 23 I think global warming is the most serious 24 challenge facing the world today, and we have to deal with 25 it really soon. And I'm here because I drive an electric PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 car. I have an old Ford Escort that I've been fixing up 2 and driving. I've talked to hundreds of people about it, 3 my friends. And I tell them all when you plug in an 4 electric car, you're releasing one-third the CO2 of a gas 5 car. And it's only going to get better as more renewables 6 are added to the grid. 7 That's why I think this mandate, the zero 8 emissions program, is the most important part of 9 California's commitment to fighting global warming. 10 So I would like to see higher numbers. I'd like 11 to see 25,000 pure ZEVs, and I'd like to see a level 12 playing field for battery electric and hydrogen. And I'd 13 like to see 75,000 plug-in hybrids with a significant 14 all-electric range, which would be at least 20 miles. 15 Thank you, all. 16 CHAIRPERSON NICHOLS: Thank you. And thank you 17 for your very specific suggestions. Appreciate your 18 coming and spending the day with us. 19 Spencer Quong. 20 MR. QUONG: Chairperson Nichols, Board members, 21 and ARB staff, Spencer Quong. I'm the senior vehicles 22 engineer for the Union of Concerned Scientists. 23 Before I begin the main subject of my talk, I 24 wanted to bring to your attention to a report that we have 25 submitted along with NRDC and five other organizations PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 which highlight nine potential loopholes in the proposed 2 amendments. We don't have time to discuss them here, but 3 we ask that the Board direct staff to review the report 4 and modify the regulations appropriately. 5 What I'd like to focus on, however, is the 6 importance of the ZEV program to California's long term 7 global warming goals. We all know that California has the 8 goal to reduce global warming emissions by 80 percent 1990 9 levels in 2050. And using ARB and CEC's data from the 10 State Alternative Fuels Plan, U.C. has estimated in order 11 for California to meet its 2050 global warming targets, 12 the state must have 379,000 pure zero emission vehicles on 13 the road by 2020. 14 If you remember any numbers today, I hope it is 15 these. In 12 years, California needs to have 379,000 16 battery electric and fuel cell vehicles on its streets and 17 highways to meets its global warming goals. This is a 18 significant number of vehicles in a short period of time. 19 This is a significant number of battery factories and 20 hydrogen fueling stations and public chargers and fuel 21 cell manufacturers in a short period of time. 22 In the near term, if you take the staff proposal 23 and our 2020 estimate, you create an aggressive advanced 24 technology program with the growth rate similar to the 25 Pruis in 2012 to 2020. However, if you increase the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 phrase three requirement to 10,000 as proposed by Board 2 Member D'Adamo, you start investing in technologies 3 sooner, thereby creating a more reasonable and moderate 4 growth rate between 2012 and 2020. 5 All of this cannot be done with the current 6 regulations and especially with the proposed amendments. 7 So UCS recommends the following three changes. 8 First, have the staff review and address the nine 9 potential loopholes. 10 Second, overhaul the ZEV program next year and 11 place it on the road to meeting California's long term 12 environmental goals. 13 Finally, the Board must begin increasing the 14 number of gold vehicles today and place the program on a 15 realistic near-term path as suggested by Board Member 16 D'Adamo that places the technology challenges -- balances 17 the technology challenges and the fact that the ZEV 18 program is crucial in the fight against global warming. 19 To be frank, the ZEV program needs to stop taking 20 baby steps and needs to grow up and become part of our 21 fight against global warming. What the Board does today 22 with the ZEV program will echo across the state and the 23 nation for 30 years and beyond. 24 Therefore, we ask the Board to look at the 25 scientific evidence in front of you and have the courage, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 the determination, and the foresight to create a new 2 vision for the ZEV program. Thank you. 3 CHAIRPERSON NICHOLS: Excuse me, Mr. Quong. I 4 have this document in my packet here. Is there something 5 additional that you were referring to when you mentioned 6 the specific loopholes that you were pointing out? 7 MR. QUONG: We submitted two documents. One 8 discussing the global warming and the ZEV program, and the 9 other one discussing the nine loopholes? 10 BOARD MEMBER HILL: Dated March 26th. 11 CHAIRPERSON NICHOLS: I'll have to borrow a copy. 12 MR. QUONG: Be glad to provide you one. 13 CHAIRPERSON NICHOLS: Perhaps if you have extras. 14 BOARD MEMBER D'ADAMO: I have a question. Is 15 there a number that you would recommend for the ramp up in 16 order to provide for a more smooth transition between 17 phase three and four. Right now we're at 25 for phase 18 three and 50 for phase four. 19 MR. QUONG: Well, whatever you do, you need to 20 make sure that you're looking at the long term global 21 warming goals. You need to ramp up not just the gold 22 vehicles but the plug-in hybrids. You need to close the 23 loopholes. 24 The numbers that you suggested earlier today are 25 something that is feasible and provides a longer time line PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 to advance the technology, because these advanced vehicles 2 do require more research. But it also balances the need 3 to get these vehicles on the road sooner. 4 CHAIRPERSON NICHOLS: Okay. Thank you. 5 Luke Tonachel. 6 (Thereupon an overhead presentation was 7 presented as follows.) 8 MR. TONACHEL: Good afternoon, Chairman Nichols 9 and members of the Board. My name is Luke Tonachel, a 10 vehicles analyst with the Natural Resources Defense 11 Council. 12 I'm pleased to be before you today to talk about 13 a specific proposal to strengthen the plug-in hybrid or 14 silver plus or enhanced ATPZEV portion of the ZEV program. 15 And the slide that's up right now gives a comparison of 16 the staff proposal versus what we are proposing for the 17 plug-in volume requirements. 18 The top row you can see it's about 25,000 19 vehicles a year from 2012 to 2014 and then goes to about 20 28,000 per year from 2015 to 2017. So you can see the 21 requirement is basically flat. It's like a car stuck in 22 second gear and can't get to its full potential. 23 My request for the Board is basically that you 24 lock in a commitment from the auto makers to actually 25 produce large volumes of plug-in hybrids, commercialize PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 them, and then put California on a path to meet its air 2 quality and greenhouse gas reduction goals. My proposal 3 shown in the second row does just that. It starts at 4 25,000 and then ramps up at 40 percent per year. Our 5 proposal would produce one-and-a-half more times in phase 6 three and two-and-a-half times more in the same six year 7 period. 8 Our proposal is just an initial step. Even at 9 the volumes we propose, there is still a large gap between 10 these volumes and the trajectory that we need to be on to 11 in order to meet our 2050 greenhouse gas reduction goals. 12 This gap is clear when you consider a moderate case 13 scenario from the AB 1007 state alternative fuels plan -- 14 this is mentioned in the note on the slide -- adopted by 15 the Board which calls for 1.3 million plug-in hybrids on 16 California's roads by 2020. 17 Next slide, please. 18 --o0o-- 19 MR. TONACHEL: This slide just shows another 20 example of how the staff proposal I don't think goes far 21 enough. The flat lines at the bottom are examples of the 22 volumes that would be required from the staff proposal for 23 a 40 mile and 20 mile plug-in hybrid versus the Toyota 24 Prius from 2000 to 2005 is the sales of the Toyota Prius. 25 You can see the sales rate just does not keep up, and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 there's no real increasing ramp for plug-in hybrid 2 vehicles. 3 The Prius ramp up is 74 percent per year. My 4 proposal is for 40 percent per year. 5 Next slide. 6 --o0o-- 7 MR. TONACHEL: This is a repeat of the table. 8 And again, my proposal here is to lock in a commitment 9 from the auto makers to get more plug-in hybrids on the 10 road and in the volume shown in this table. 11 I've actually suggested some language, and I 12 started with a May 2007 resolution that the Board provided 13 that talked about how plug-in hybrids including blended 14 mode plug-in hybrids have great benefit. And I added the 15 language in bold blue which suggests a way that you can 16 actually achieve these larger volumes within the context 17 of the regulation. However, there's other ways to achieve 18 this, and Member D'Adamo her proposal for larger volumes 19 overall is another way to achieve these larger plug-in 20 volumes. Thank you very much. 21 CHAIRPERSON NICHOLS: Thank you. 22 Mayor Loveridge. 23 BOARD MEMBER LOVERIDGE: The numbers you offer, 24 what are they premised on, the 25, 45, 110? Where do 25 those numbers come from? PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 MR. TONACHEL: Those numbers start with the staff 2 proposal in 2012 and then they ramp up at a 40 percent per 3 year rate. 4 BOARD MEMBER LOVERIDGE: That's 40 percent. 5 Okay. 6 MR. TONACHEL: That's right. That's an increase 7 in the annual sales year to year. 8 BOARD MEMBER LOVERIDGE: Okay. 9 MR. TONACHEL: And that can be compared against 10 as I showed in the other slide a 74 percent increase that 11 the Toyota saw with the Prius. 12 CHAIRPERSON NICHOLS: Great. 13 Mr. Shears. 14 MR. SHEARS: Good afternoon, Chair Nichols, and 15 members of the Board. Thank you for the opportunity to 16 comment on the proposed ZEV regulation. My name is John 17 Shears. I'm research coordinator with the Center for 18 Energy Efficiency and Renewable Technologies. 19 The focus on my comments today are the classic 20 chicken and egg issue of vehicles and infrastructure in 21 California. 22 CEERT is concerned about the order of magnitude 23 reduction in ZEV numbers proposed by ARB staff for the 24 phase three of the ZEV program from the 25,000 vehicle 25 floor required by the current regulations to the 2500 PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 vehicles in the February ISOR. We have offered many 2 cautions in the past regarding the challenges and 3 precipitous drop in the pure ZEV numbers could pose when 4 it comes to ensuring that pure ZEV vehicles are available 5 for market conditioning and in order for there to be 6 sufficient build up in infrastructure necessary to support 7 the required fleet of vehicles in phase four and beyond. 8 We have also cautioned that a significant 9 reduction in the number of required pure ZEVs could pose 10 problems for independent component supplier and 11 infrastructure companies. This raises questions about how 12 the State's perceived commitment to the regulation as 13 indicated in the proceedings as they evolve during this 14 rulemaking may have influenced recent events at companies 15 such as Ballard Power Systems and Hydrogenics. 16 Our colleagues at the Union of Concerned 17 Scientists -- Spencer Quong spoke to this -- have 18 conducted an analysis submitted to the Board earlier this 19 week that estimates that a ten-fold reduction in ZEV 20 numbers in phase three could result in battery, fuel cell, 21 and hydrogen storage manufacturers losing 68 to 135 22 million dollars in revenue due to the decline in vehicle 23 numbers. 24 Moreover, the UCS analysis also determined that 25 the moneys directed toward hydrogen fueling and battery PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 charging infrastructure could fall by $163 million in 2 phase three. 3 There is a very real danger that in drastically 4 reducing phase three ZEV numbers there will be 5 insufficient time and resources available for sufficient 6 infrastructure due to be deployed to support the fleet 7 envisioned for California in phase four, thus leading to 8 further delays in the program and ultimately in meeting 9 California's longer term air quality goals. This could 10 also delay the ramp up of the critical climate-friendly 11 vehicle technologies that the state is also seeking to 12 capitalize upon in meeting its 2050 emissions reduction 13 targets. We note that staff are also recommending a 14 50 percent reduction in the minimum requirement for pure 15 ZEVs to 25,000 vehicles in phase four. 16 Given the millions of vehicles that will have to 17 be introduced into the market and the lag in the turnover 18 of older vehicles in the existing fleet, California needs 19 to start building a pure ZEV fleet sooner rather than 20 later if it is to increase the chances of meeting its 21 longer term air quality and climate goals. 22 We therefore respectfully request the Board 23 ensure there are sufficiently high gold vehicle numbers in 24 place during phase three to serve as the foundation to 25 realistically ramp up the infrastructure needed to support PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 the routine daily use of what would otherwise by the 2 current regulation, not the proposed regulation, equate to 3 a 20 fold increase in pure ZEV vehicle numbers in phase 4 four relative to what is proposed in the February ISOR. 5 As the USC analysis submitted to the Board 6 earlier this week indicates, that analysis based on data 7 in the California Energy Commission's AB 1007 report, the 8 Alternative Fuels Plan, the State would need many hundreds 9 of thousands of ZEVs by 2020 if it wants to increase its 10 chances of success in meeting its long-term climate goals. 11 CHAIRPERSON NICHOLS: Your time is up. 12 MR. SHEARS: I just finished. We thank you for 13 the opportunity to comment. 14 CHAIRPERSON NICHOLS: Mr. Choquette. 15 MR. CHOQUETTE: I'm just a concerned citizen of 16 California. I don't work for the oil companies, car 17 companies, battery companies, or fuel cell companies. I'm 18 just giving you my straight opinion here. I have some 19 recommendations in general and specific suggestions. 20 In general, this mandate needs to be simplified. 21 So simplify instead of complexify. It seems every version 22 is more and more complex. There's no need for the 23 advanced ZEV math or alphabet soup. Keep things simple. 24 You need to strengthen the mandate or drop these 25 changes all together. Maybe go back to 1990 if that's PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 necessary. 2 Use common sense. I know you have -- you get the 3 advice from expert panels, but you can also use your own 4 common sense. You'll see what make sense technologically 5 by what you know. 6 Needs to be fair. Again simple. We also need 7 transparency of all the ZEV credit business. 8 Just this morning I was surprised to see there is 9 a ten to one ratio between fuel cell credits and battery 10 electric vehicles. That's insane. Why? 11 As for the specific suggestions, for plug-in 12 hybrid vehicles, basically the silver plus category. If 13 you're not going to drop everything, you want to keep the 14 current changes. 15 Base the ZEV credits on energy capacity. This 16 has been mentioned a few times here already. So basically 17 instead of range, just assign a certain number of 18 kilowatts for one ZEV credit. Let's make it approximately 19 50 miles for a normal vehicle for one ZEV credit. And the 20 advantage of this, this gives a lot of flexibility, a lot 21 of freedom to manufacturers. They don't have to redesign 22 all their cars to make them extremely light so the range 23 is going to be longer and they can use existing vehicles. 24 It will spur a lot of innovation, and it's really also 25 valid for any technology. It will work for fuel cells, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 hydrogen, whatever. It's just the amount of energy that's 2 stored on the vehicle. It's going to work for delivery 3 trucks, vans, pickup trucks, small buses. These are all 4 vehicles that stay in the city that do a lot of stop and 5 start driving. Pollutes a lot could. Even work for 6 motorcycles, BEVs, whatever. 7 So please consider that change alone. If you are 8 only going to make one change, make it dependant on the 9 energy capacity. And what I would say to auto 10 manufacturers here as my friends know for the last 11 two years I don't own a car. And if there's no plug, I 12 don't buy it. So okay. Thank you. 13 CHAIRPERSON NICHOLS: So here's a customer. 14 David Turock. 15 MR. TUROCK: Thank you. I'm David Turock, 16 retired entrepreneur from New Jersey. 17 Dr. Nichols and members of the Board, nearly 18 every country in the world eventually adopts your air 19 quality standards. Your bold actions could free billions 20 of people from suffering. And your failure to act could 21 condemn those same billions to death. 22 I speak from personal experience. I lost my 23 father to lung cancer recently, fifteen years before the 24 actuarial table said he would leave this earth. He lived 25 in an area of New Jersey saturated with transportation PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 pollution. 2 The oil companies will go down in history I 3 believe as the tobacco companies of the 21st century. 4 They have distracted you with a hydrogen R&D program. 5 CARB's own analysis is it takes the energy equivalent of 6 four gallons of gasoline to refine enough hydrogen to move 7 the car the same distance that one gallon would have 8 carried it in the first place. They want you supporting 9 in the near term a solution that Cal Tech and MIT and 10 other institutions tell us is decades away. As Mr. 11 Woolsey pointed out earlier, there are solutions, better 12 alternatives that are ready now. 13 In my life, I worked for Noble Prize winning 14 scientists, built laboratories, created new companies and 15 industry, and I meet many interesting people still. And 16 recently I had an opportunity speak with a Board advisor 17 to two of the largest oil companies. When I asked him to 18 explain their position on hydrogen he said, "Dave, we 19 spend less than one-tenth of one percent of our resources 20 on hydrogen. It's an advertising initiative that's 21 designed to make us look green. It's true that the cheap 22 oil will run out soon, but we have the technology now to 23 extract the increasingly expensive oil and there is 24 another 150 years of that. Keep your eye on the money. 25 We are. Hydrogen, maybe in 50 years." PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 So given these obvious problems with hydrogen, 2 why is CARB's initial statement of reasons document so 3 obviously biased toward this technology? Shouldn't your 4 position be one of technological neutrality, setting the 5 air quality standards and letting the marketplace do the 6 rest? Why the complicated system of credits? And why 7 allow manufacturers to cheat the system with double 8 counting travel clauses? And moreover, why allow them to 9 endlessly reduce the requirements? That's the big puzzle. 10 Economic viability I can tell you from starting 11 many different things is impossible without volume. 12 25,000 ZEVs in my opinion is the bare minimum. Less than 13 that and you run the risk of the entire program becoming 14 irrelevant. 15 When I read this, the weight of the stakeholder 16 lobby is so heavy in it that it's crushing the good that 17 wants to come out of it. 18 Chris Paine and his cameras are here recording 19 your actions for posterity. And while there may only be 20 100 people in the room tonight, the eyes of the world are 21 on you. And we are begging you to do the right thing. 22 Please make a bold ZEV mandate happen. Leave a legacy 23 they'll be proud of when your life draws to a close. You 24 have the power. Use it, please. Thank you. 25 CHAIRPERSON NICHOLS: Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 We will now hear from Bill Pascarella. No. I 2 got this wrong. Stuart Johnson. Sorry. 3 MR. JOHNSON: I'm Stuart Johnson. I work for 4 Volkswagen North America. We're one of the intermediate 5 companies. So I can talk specifically about our 6 situation. 7 Based on our predicted sales, we will become a 8 large manufacturer and have a large volume obligation in 9 the 2015 model year. That's one reason why we have some 10 concern, because we're coming in right at the 2015 point 11 where there's a big step change in volume. So we have 12 asked for some kind of ramp to help us get into the 13 program. 14 I can talk a little bit about our fuel cell 15 program too. We are working on fuel cells. We're 16 developing our own stack technology. It's promising. 17 It's a high temperature stack. We are optimistic about 18 it, but it will not be ready for a 2015 ZEV mandate. 19 What that means to us is that we will be probably 20 introducing a battery electric vehicle and potentially a 21 plug-in hybrid in that time frame leading up to 2015. 22 I just wanted to say that I agreed with the 23 comments that Dan made at the start of the day. And I 24 have one slide to show. And it's kind of an artifact of 25 the ZEV mandate. But it shows here the difference when PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 you look at an intermediate volume manufacturer versus a 2 large volume manufacturer that actually our performance as 3 an intermediate volume manufacturer is better than it is 4 when we've become a large manufacturer. 5 So as you were talking about LEV III and what to 6 do with PZEVs, I mean this is a message that PZEVs are 7 actually a great success. And they're a great success to 8 the ZEV mandate. And they significantly lower our NMOG 9 curve. We're performing better under the intermediate 10 volume requirement of large numbers of PZEVs than we do as 11 a large volume manufacturer. 12 So I agree with what Dan has said. I think the 13 program does need to be overhauled. But from our 14 perspective, the 2015 model year is not far away. I would 15 urge you to overhaul it quickly and get some numbers out 16 there that we can start to work towards. Thank you very 17 much. 18 CHAIRPERSON NICHOLS: Okay. Thank you. 19 We'll go to the next group of ten. Doug Korthof, 20 Bill Pascarella, Walter Puetz, Lisa Rosen, Leonard 21 Tramiel, Karl-Heinz Ziwica, David Patterson, Thad Balkman, 22 Besir Dunlap, and Linda Nichols. 23 MR. KORTHOF: I hope you have this document that 24 I passed around to the Board today. It has some color 25 pictures on it. Every picture tells a story. I'm not PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 going to read the whole document, but it makes a lot of 2 the points that others have made and it goes into some 3 detail. 4 I want to talk about other things. Five years 5 ago, the Air Resources Board made a wrong turn at the 6 behest of the auto manufacturers. And they're asking you 7 to repeat that same mistake again. 8 Now, the I hope you'll realize this one fact. If 9 you bring nothing else out of this meeting, we don't need 10 research. The people who are saying we need research or 11 batteries or research program should re-think their well 12 meaning thought. Research is great. We need production. 13 Our family has ridden over 500,000 miles in 14 electric cars. Zero emission vehicle electric cars since 15 CARB once stood by the ZEV mandate. But there is no the 16 electric car, no ZEV car for sale in the open market now 17 and never will be a fuel cell car because they're far too 18 expensive. 19 But this can be done again. The only cars -- the 20 only ZEV that are on the street right now in the hands of 21 people are electric cars that were sold in 2002. And 22 that's all there are. We don't need research. We don't 23 need research programs. We need production. Production. 24 And the only way we're going to get production is to go 25 against the auto manufacturers. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 What we see in that huge squid job of document 2 that you're handing out here is the influence of the auto 3 lobby. You're seeing a massive lack of courage in facing 4 up to them. The idea of being a regulatory Board is that 5 you have to make hard choices. You know, we've seen this 6 in industry. You know, there's a gradual curb towards a 7 goal and then it gets more steep and then emergency 8 recovery plan and then a red team and a swat team. You're 9 pushing everything off until the end. 10 And once again you're being asked to do this. 11 Staff is asking you to push it off until 2017 or 2018. We 12 have these cars now. We don't need these cars some day. 13 We need them now in massive numbers. And this can be done 14 if you go up against the auto manufacturers, make them do 15 what they should do. 16 The scandal is that there is no zero emission 17 vehicle for sale now. It was for sale in 2002. I'm still 18 driving them and a lot of people are, too. 19 As far as infrastructure, people talk about it as 20 if it's just a matter of putting in some pumps. No. 21 That's the whole problem. Hydrogen is extremely expensive 22 to refine, almost impossible to store. The green 23 infrastructure I have is on my roof. It's an electric 24 solar power system that produces more electricity than I 25 need to drive two zero emission cars. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 Make no mistake. You are being asked to weaken 2 the zero emission mandate in this proposal. You're being 3 asked to weaken it and complicate it. 4 But you don't have to do that. You can stand 5 fast. And the worst that can happen to you is say, well, 6 we're not going to change it. Let them stick to their 7 promises of 2003. Let them produce their fuel cells cars 8 they promised. If they can't, produce the battery 9 electric cars and sell them on the open market. None of 10 this business about 43,000 ZEV credits and only 4,556 11 actual ZEV cars on the road. 43,000 credits ZEV gold 12 credits, only 45,060 cars on the road. And out of those, 13 4400 are battery electric cars most of which were taken 14 off the road because they were on boomerang leases. 15 You need to require production of ZEV cars and 16 sales to buyers who want to buy them. That will eliminate 17 a lot of the scamming jobs they're doing. Let them stick 18 to these proposals that they made in 2003. According to 19 Mercedes Benz, they're going to be in a position to 20 produce 100,000 fuel cell cars by 2015. If they can do 21 it, the others can too. Let them stick to their promises. 22 Don't say we're going to weaken the mandate that staff is 23 requesting. We don't have to do that. 24 You need to stand up for the people and require 25 them to sell ZEV cars, because we're driving them. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 There's a whole bunch of them on the road. We've taken 2 pictures of this. We are going to take pictures of this 3 too and it's going to be on the record. 4 CHAIRPERSON NICHOLS: You're such a good speaker 5 we didn't dock you for your time. Thank you. You carried 6 on without a breath. Good work. 7 Bill Pascarella. 8 MR. PASCARELLA: Please excuse me. This is the 9 first time I've spoken like this. I'm a little nervous. 10 I'll Bill Pascarella. I work for the city of 11 Pasadena Water and Power at a power generating station. 12 US Navy four years prior to that on an aircraft carrier. 13 My experience with the gas turbans and gas fired boilers 14 and such has allowed me to get a lot of understanding of a 15 lot of things. 16 I would just like to say without pushing it too 17 hard, I like the idea of V to G, vehicle to grid. We're 18 at a distance away from that. But the idea of having a 19 vehicle that can actually push electricity back onto the 20 grid. By thinking that way ahead down the road that would 21 help the utilities be able to generate electricity at 22 nighttime when they're idling and be able to pick up the 23 load and prevent peeking units starting up in the 24 afternoon and putting electric cars I think should be 25 looked at down the road and should be a goal that will PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 help increase the utilities efficiency along with the 2 electric vehicles. 3 So therefore, with that thought in mind, looking 4 at electric vehicles that have a battery pack that has a 5 higher KW to give a better credit because it's down the 6 road. This is really going to help out the state of 7 California. Help out the ISO California independent 8 supply operators. And if you have a congested area on the 9 grid there, like in L.A. SB 15 always has problems, that 10 can assist. 11 The other thing I would like to talk about 12 quickly is about the hydrogen fuel cell cars. The only 13 thing I haven't heard is if you're talking about the fuel 14 cell car using hydrogen through electrolysis, I'd like you 15 to seriously consider the efficiency. I know they talk 16 about the efficiency of the car. If you're doing it 17 through electrolysis, you have to look at you're pumping 18 the water out of the ground. Those cities are treating 19 that water. Then it has to go through a treatment plant 20 that has to purify that. That water then has to go 21 through a lot of different filters and typically a reverse 22 osmosis. And a certain part of this goes to the sewer 23 system. 24 The sewer system then has to take on that 25 problem. Those hardness of water, the calcium and all PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 that, and has to pump that back to the ocean. So when you 2 look at it from the beginning to end, I cannot see how it 3 worked. 4 I'd dare to ask the California Air Resources 5 Board to challenge -- have like a challenge. For example, 6 you have a 3,000 watt solar panel. How far can your car 7 go on this 3,000 watts during the daytime? If you're 8 going to use a fuel cell car, you have to start off with 9 water. Can't start off with hydrogen. And how many miles 10 will it really go against -- I'll even suggest my electric 11 truck. 12 CHAIRPERSON NICHOLS: That's a really interesting 13 point. And your time unfortunately is up. 14 I do want to say as far as the grid issue is 15 concerned, I'm aware of several manufacturers that have 16 partnerships with electric utilities where they are 17 testing out that kind of idea you're talking about and 18 optimizing the two systems. Thank you. 19 Walter Puetz. 20 MR. PUETZ: Madam Chairman, members of the Board, 21 my name is Walter Puetz. And I'm in charge of regulatory 22 affairs for Mercedes Benz. Mercedes Benz is researching 23 and developing and commercializing a portfolio of 24 technologies that will increase fuel efficiency and 25 reduced tailpipe emissions ultimately to zero. And one of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 these technologies that I would like to highlight is 2 hydrogen fuel cell vehicles. 3 We believe fuel cell vehicles have the best 4 chance of giving customers what they want. Three-hundred 5 miles or greater range and fast refueling. So far we have 6 spent over one billion dollars in fuel cell vehicle 7 development. And recently our top management made another 8 historic decision, and that is to launch a small series of 9 fuel cell vehicles in 2010. 10 We are on a path that by 2015 fuel cell vehicles 11 produced in an annual volume of 100,00 or more can be 12 equivalent in cost to a diesel hybrid vehicle. However, 13 there is one critical point of the commercialization plan 14 that we have little to no control over and the deployment 15 of hydrogen fueling infrastructure in California which has 16 been discussed today already. 17 Through the California Fuel Cell Vehicle 18 Partnership, we work with ARB staff, the auto industry, 19 and energy industry to identity the location of 40 to 50 20 fueling stations that are needed for the next phase of 21 commercialization of fuel cell vehicles in California. 22 Recent events, including the closure of several existing 23 fueling stations and statements by energy companies that 24 there is no interest in deploying new fueling stations, 25 have us very, very concerned. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 Mercedes understands and appreciates the attempt 2 and proposal of the revised ZEV mandate to be technology 3 neutral and have the oil industry deciding with which 4 technology to use for their requirements to be fulfilled. 5 Unfortunately, the proposal might be understood as a 6 signal from CARB fuel cell technology is not of interest. 7 Why? The new proposal allows OEMs to achieve gold all 8 credits at the end with plug-in hybrids and battery 9 electric vehicles. And as the result of this energy 10 company see higher risk in investing in hydrogen 11 infrastructure. 12 Therefore, we ask the Board, first of all, as a 13 clear signal of CARB commitment, keep a certain number of 14 fuel cell vehicles mandatory in the revised ZEV 15 regulation. Second, increase the number of gold credits 16 for fuel cell vehicles to reflect the current, high, and 17 long-term consumer benefits. And third, develop a plan 18 that we can count on to ensure there is a hydrogen 19 infrastructure in California. Let me say there's always a 20 discussion about chicken and egg. I say the chicken is 21 already available. Now we need to see the egg. 22 We thank you for your time and we are open for 23 further discussion on this. Thank you. 24 CHAIRPERSON NICHOLS: Thank you. Questions? 25 Lisa Rosen. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 MS. ROSEN: Good afternoon, Chairman Nichols and 2 members of the Board and staff. Good afternoon. Thank 3 you for hearing me. 4 I really appreciate the vast amount of effort 5 that's gone into your proposal and your negotiations. I'm 6 hard put to think of any deliberative body that is 7 confronted with as much controversy or important results 8 that you deal with every day. 9 I've already submitted my written comments to the 10 Board. I hope I'll be a considered along with the rest. 11 I'm impressed with your procedure today that gives us an 12 equal footing and an equal opportunity to be heard. 13 I have even one additional thing I would like to 14 propose today and that's a linguistic thing. I noticed 15 when you talk about vehicles in service, you're talking 16 about placement. And I guess I take a dim view of 17 placement, because there were vehicles placed with us that 18 were certainly displaced from us, taken away, and crushed. 19 I don't think it does the people of the state any great 20 benefit to have a number of fuel cell vehicles on the road 21 for some testing that may or may not benefit us in the 22 long run if we can't have them permanently in service if 23 they aren't part of a long term solution. 24 I feel like you're in a competition where you're 25 going to be running a triathlon event. And I think that PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 with anything of this nature, there's a tendency to 2 procrastinate the hard part. You want to contemplate this 3 immense event you're going to have to run, the reports 4 you're going to have to write, the additional things 5 you're going to have to consider if you're going to revise 6 it and make the program work. 7 I urge you to begin on the hardest parts of it 8 now and make all of us whatever we have to endure in the 9 way of change and sacrifice to get with the program and 10 start doing it now. 11 I'm reminded of an Indian monitor that we worked 12 with on a rather difficult construction program in 13 southern California. And at the conclusion of this 14 particular program, which was successful but was not in 15 other cases, he had stood in front of a bull dozer along 16 with other Indian monitors and the program was shut down 17 for 18 months while the matter was conducted to a 18 satisfactory conclusion. When he spoke at the end of that 19 long time, he said sometimes when you work very hard to 20 get something accomplished and you do the right thing, you 21 can change people's minds and everyone will cooperate. 22 Sometimes you can't change anyone's minds, but you can 23 change their actions. Sometimes you give it your best and 24 you do every thing you can and nothing changes, but you do 25 have to try. Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 CHAIRPERSON NICHOLS: Thank you. 2 Are you going to tell us about the t-shirt? I'll 3 give you an extra few seconds. 4 MS. ROSEN: Being a probation officer give me a 5 unique understanding of how little people like to be 6 regulated. Thank you. 7 CHAIRPERSON NICHOLS: Thank you. 8 MR. TRAMIEL: I'd like to thank you for the 9 opportunity to address you today. Hello my name is 10 Leonard Tramiel, and I'm a recipient of a ZEV incentive 11 for my battery electric vehicle. 12 The weakening of the ZEV mandate in 2003 and the 13 continuation of this in the current proposal saddens me. 14 The details of how to improve the ZEV program is certainly 15 a complex issue, and I will not address that since it has 16 been the subject of lots of input that you've had both in 17 written testimony and orally today. But I would like you 18 to pay close attention to the information you got from 19 Plug In America. 20 However, I would like to bring one thing up. In 21 the section of the Initial Statement of Reasons labeled 22 "Effective Proposed Amendments," it states, "The ZEV 23 program continues to provide positive air quality impacts 24 as compared to no program." 25 Is this really the right standard against which PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 the program should be compared? Is better than nothing 2 really what we as Californians expect from our government 3 and ourselves? We have been talking all day about the 4 numerous states that follow California's lead, our great 5 world changing technologies, and the claim that we make is 6 that it's better than nothing? I don't think that's 7 right. Thank you. 8 CHAIRPERSON NICHOLS: Thank you. Good point. 9 Mr. Ziwica. 10 MR. ZIWICA: Good afternoon, Chairman Nichols and 11 members of the Board. My name is Karl Heinz Ziwica. I 12 appreciate the opportunity to testify on behalf of BMW. 13 We have submitted written comment for your review which 14 focus on the transition of intermediate volume 15 manufacturer to large volume manufacturer. 16 Worldwide, BMW market share is approximately 2 17 percent. In automotive terms, we are a relatively small 18 manufacturer. At the present time, BMW is an intermediate 19 volume manufacturer. Without a change in the current ZEV 20 requirement, BMW will become a large volume manufacturer 21 in California by 2012. This will have dire consequences 22 to our hydrogen internal combustion engine program which 23 BMW has so heavily invested in over the last 25 years. 24 Currently, we operate 100 hydrogen 7 series 25 vehicles that are built on full scale production PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 development program. Twenty-five of these vehicles are 2 operated here in the state of California. 3 BMW has invested nearly half a billion dollars 4 over the years in these activities without any regulatory 5 mandate. Without a change in the ZEV mandate, we will 6 have to refocus our development efforts away from the 7 current hydrogen internal combustion engine to 8 technologies of fuel cell or battery technology. BMW's 9 added value to these technologies is at best minimum. 10 In contrast, BMW is a leading company focusing on 11 the advancement of hydrogen internal combustion engines 12 and is now able to demonstrate extremely low emission 13 performance. We believe this technology is in line with 14 ARB's ZEV goal to achieve the sustainable clean 15 environment, while at the same time maintaining consumer 16 choice in systems. 17 Furthermore, the change in BMW's manufacturer 18 status would have the effect of increasing its average 19 emissions significantly. Despite the achievements with 20 our hydrogen technology, we still need to pursue 21 additional research and development efforts and to advance 22 efficiency of the engine and storage capability. In order 23 to demonstrate comparable efficiencies to battery electric 24 or fuel cell vehicles, we need first an investment in 25 research and development over the next years. To make PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 these investments, our board in Munich needs a signal from 2 you adopting the additional transition period of six years 3 by as proposed by staff to do that. We urge you to adopt 4 it. Thank you. 5 CHAIRPERSON NICHOLS: Thank you. 6 Mr. Patterson. 7 (Thereupon an overhead presentation was 8 presented as follows.) 9 MR. PATTERSON: Good afternoon. My name is David 10 Patterson. I'm senior manager of Mitsubishi Motors R&D of 11 America. Thank you very much for your time this 12 afternoon. 13 --o0o-- 14 MR. PATTERSON: Mitsubishi Motors, we have some 15 specific comments about the regulation. This shouldn't be 16 a surprise to anyone in the room. 17 Mitsubishi Motors supports the staff proposal 18 creating a new 1.5 EV. We believe the new type 1.5 EV 19 should not be a city EV. The definition should include 20 the capability for operation on all classes of roadways 21 and should be a full function EV. An EV with a 75-mile 22 range has a much greater potential to replace the existing 23 commuter vehicle. 24 --o0o-- 25 MR. PATTERSON: As we just announced at the New PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 York auto show in New York, the IMIEV, Mitsubishi 2 Innovative Electric Vehicle, this is an example of the 3 proposed 1.5 battery electric vehicle. Top speed of 81 4 miles an hour with a 70 to 80 mile range utilizing 5 advanced lithium ion batteries. This would directly 6 replace an existing or second commuter vehicle. We have 7 plans for mass production of thousands planned for Japan 8 in calendar year 2009. And we are going to be kicking off 9 a fleet test here in California in the fall of 2008. 10 --o0o-- 11 MR. PATTERSON: There occurred a few questions as 12 I read through the ISOR. One of them was the ZEV 13 discontinuity between battery electrics and plug-in 14 hybrids. The question being here is a Type 1 battery 15 electric with more or all electric range but it receives 16 three-and-a-half times less credit than a similar plug-in 17 hybrid. Or also should that same plug-in hybrid have more 18 credit than a Type 4 vehicle? And we'll just jump right 19 to the solution. There it is. 20 We should correct this discontinuity. What we're 21 proposing is there should be a gold to silver credit 22 multiplier that allows the conversion of these gold to 23 silver credits. I know some in the room is going, David, 24 what are you talking about? From our standpoint as that 25 immediate volume manufacturer, we're looking at numbers of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 credits, not the classification of credit. 2 --o0o-- 3 MR. PATTERSON: Mitsubishi also supports the 4 extension of the travel provision for all pure electric 5 vehicles. It is important and beneficial to focus our R&D 6 within California and leverage the existing California 7 based R&D facilities and charging infrastructure. 8 It's also important and really recognized that 9 there's some significant advance technology service 10 facilities that are required to service these vehicles and 11 keep them in operation. 12 And the problem being here if we spread those R&D 13 facilities out and put a program in each and every one of 14 the section 177 states, we'd have a greatly increased 15 complexity in cost by maintaining those redundant 16 facilities. 17 --o0o-- 18 MR. PATTERSON: The last thing would be we ask 19 for an allowance that allows intermediate volume 20 manufacturers to indefinitely retain gold ZEV credits. If 21 there's going to be a carry forward and carry back 22 provision, intermediate volume manufacturers have no 23 regulatory requirement to create gold vehicles. This is a 24 voluntary effort on our part of our company. And we would 25 like to see that we will be allowed to bank these credits PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 to ease a future transition to the large volume 2 requirements. 3 CHAIRPERSON NICHOLS: Okay. Thank you. Your 4 time is up. 5 MR. PATTERSON: Okay. Last slide, I'll walk 6 away. I think you've heard it before. One more. Thank 7 you very much. 8 CHAIRPERSON NICHOLS: Thank you. 9 Thad Balkman. 10 MR. BALKMAN: Thank you, Madam Chair. I'm Thad 11 Balkman, Vice President of External Relations for Phoenix 12 Motorcars. And I wanted to come this afternoon to just 13 briefly tell you why from the perspective of Phoenix these 14 modifications, specifically lowering the required ZEVs, is 15 simply not needed. We at Phoenix Motorcars are making 16 zero emission battery electric vehicles in California, I 17 might add, right now. We've demonstrated to CARB a 18 ten-minute recharge capacity. In fact, we are going into 19 production of our first 64 vehicles in April and expect to 20 deliver those in July. We hope -- we plan by the end of 21 2008 to deliver an additional 350 vehicles. And we have a 22 waiting list of over 8,000 people that want our cars. 23 The ZEV program in its current state is working. 24 It's allowing companies like ourselves, like Tesla and 25 others to bring zero emission vehicles to the marketplace, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 to consumers who want them, as has been demonstrated 2 today. 3 Speaking of consumers, we even had the 4 opportunity last year to demonstrate our vehicle to 5 President Bush. I don't know that he's going to buy one. 6 But we did get to demonstrate the car to him at the White 7 House. 8 The modifications that the Board is considering 9 are based upon the assumption that the battery technology 10 is not yet available. And that's simply not the case. As 11 Dr. Frank testified, Dr. Woolsey testified, the battery 12 technology is here. Thanks to the ZEV program, Phoenix is 13 set to deliver vehicles this year using zero emission 14 technology. In fact, I would invite the Board members to 15 take a ride in one of our practical battery electric 16 vehicles at some point. But I urge you not to adopt these 17 modifications. 18 And I guess to sum it all up, to use a saying I 19 learned back in Oklahoma where I'm from, "If it ain't 20 broke, don't fixed it." 21 CHAIRPERSON NICHOLS: Thank you. 22 Is Besir Dunlap here? You were called before. 23 MS. DUNLAP: Good afternoon. Yes, Besir Dunlap, 24 an enthusiastic ex-EV1 driver. Sorry about my voice. I 25 have my allergies currently. And so that's the strongest PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 I can do. 2 Currently I'm driving a RAV4 and a Ford Ranger 3 electric, that I affectionate call the green neck truck. 4 And, unfortunately, all these three vehicles are not being 5 built anymore. I mean the first one was crushed, as you 6 know, violently. And the current two cars are charged by 7 solar panels. So it's a seriously zero emission vehicle, 8 both of those, I'd say. And I shared these vehicles with 9 my two adult children and my husband. 10 When I entered this building, the first thing 11 that caught my eye, besides the lovely landscape at the 12 entrance, were the banners in the lobby that I hope don't 13 serve only as mere decoration, for they do have some 14 poignant messages, such as: We do not inherit the earth 15 from our ancestors, but borrow it rather from our 16 children. And I'm here on behalf of my -- not only my two 17 children but all the others that are not represented here. 18 I happen to be also a teacher. 19 I hope -- I'm here actually to urge you to 20 thoroughly contemplate the severe gravity of your decision 21 that you're just about to make. 22 Another message on one of those banners was: The 23 supreme reality is the vulnerability of our planet. And 24 that was by JFK almost half a century ago, but 25 nevertheless still very urgent -- an urgent message. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 So I'd like to urge you to be true to your 2 original mission and mandate, that is, ensuring clean air; 3 and if I may stay within the same metaphor, be the 4 standard-bearer in making sure that the planet's 5 vulnerability is not perpetuated. Your allegiance is to 6 the people you represent and not to some car companies or 7 other entities. 8 I want you to acknowledge, embrace, and promote 9 the technology that is currently available and a reality 10 as demonstrated by GM -- that's prior to their infanticide 11 of the EV1 -- and currently now by Tesla, luckily, as they 12 demonstrated earlier, and also IMU right now -- like just 13 a minute ago. And so -- and actually with a fraction of 14 all the subsidies that have been going towards the oil 15 companies, we could make Tesla affordable for Ms. Nichols 16 and myself and many others too, with a little bit of that 17 money. 18 Time is -- 19 CHAIRPERSON NICHOLS: Your time is up. 20 MS. DUNLAP: Okay. Yeah, exactly. Time is very 21 costly. I'm sorry. 22 CHAIRPERSON NICHOLS: Our time is passing too. 23 MS. DUNLAP: Well, yes. And delayed tactics are 24 irresponsible. I really urge you to make the right 25 decision. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 Thank you very much. 2 CHAIRPERSON NICHOLS: Thank you. 3 All right. Linda Nichols. 4 MS. NICHOLS: Good afternoon. Today I am 5 actually representing Rain Forest Action Network. 6 The staff proposals suggest cutting ZEV 7 production from 25,000 to 2,500 by the year 2014, which 8 will of course substantially reduce near-term ZEV 9 automaker requirements to a production trickle. As 10 gasoline prices spiral ever upwards, as 11 tailpipe-emission-induced illnesses and premature deaths 12 continue to increase along with greenhouse gas climate 13 change, why would the Board even consider lowering 14 automakers ZEV requirements? 15 Those of us who insist on driving our much 16 appreciated production electric cars, against all odds, 17 are actually paving the way to assist you, CARB, in 18 achieving your clean air goals with battery technology 19 that works now. And we are glad to do it. Everyday we 20 demonstrate to CARB and the world that a feasible solution 21 to a myriad of transportation woes already exists. 22 Historically CARB has either been wrestling with 23 or aligning with automakers for 18 long years. But the 24 glaring fact is that the ZEV program has yet to make zero 25 emission vehicles commercially available. The ZEV program PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 got off to a great start in 1990 when CARB sparked -- 2 sparked the creation of electric vehicles and put more 3 than 5,000 freeway-capable zero-emission vehicles on the 4 road, which reduced carbon dioxide by one million metric 5 tons. And that's something to be proud of. Why weaken 6 the ZEV program now when the Board has the enviable power 7 to propel our state and then our country towards a 8 pollution-free future? 9 Can the Board really imagine that 150, 200 or so 10 zero emission vehicles from each automaker through 2014 11 will accomplish the Board's goals? Sadly, the staff's 12 initial statement of reasons would result in fewer zero 13 emission vehicles than required in 2003. Why would the 14 Board choose to move backwards? Especially now, at this 15 moment in history? 16 Automakers like to argue sometimes and frequently 17 that battery technology is not quite ready for the big 18 time, i.e., mass production of all-electric cars. 19 However, as technology continues to mature, while price 20 per barrel of crude reaches stratospheric levels, that 21 position is getting harder and harder for automakers to 22 defend and CARB to support. 23 CHAIRPERSON NICHOLS: Ms. Nichols, your time is 24 up. 25 MS. NICHOLS: One thing is clear. We're entering PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 a new transportation era. Tesla has set the bar. And 2 it's going to happen whether CARB chooses to lead with 3 all-electric vehicles or chooses to follow with less 4 available technologies. 5 Thank you. 6 CHAIRPERSON NICHOLS: Thank you. 7 All right. We are now down to the last group of 8 witnesses. So I will call on you to come forward. And 9 then when we finish the list we'll go discussion and 10 questions that the Board, I'm sure, has for the staff 11 about various things we've heard. 12 So we'll start with Lydell Anderson, followed by 13 William Korthof, Sherry Boschert, Tim Carmichael, Phil 14 Baxley, Steve Heckeroth, Cynthia Verdugo-Peralta, and Tom 15 Folks. 16 DR. ANDERSON: Good afternoon. 17 CHAIRPERSON NICHOLS: Mr. Anderson. 18 DR. ANDERSON: Yes. Actually I'm a physician. 19 And I'm glad to see that Dr. Baums is a physician here. I 20 believe he's probably -- has the capacity to do more good 21 for the state than any one of us in any other capacity. 22 I'm not here on any environmental special 23 interest group. But I have seen and highly recommend 24 viewing the movie, "Who killed the electric car?" and Al 25 Gore's "An inconvenient truth." And if you can see those PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 two films and still vote for this amendment, then I don't 2 know what to say. 3 My biggest motivation for coming here today is my 4 five nephews and a niece, to whom I wish to bequeath the 5 future of clean air and water. In 1978 -- I may look 6 young, but I was a high school senior in 1978, and I was 7 debating whether I should go into engineering. And an 8 engineer that I visited told me about the hydrogen fuel 9 cell that was used on the Apollo mission. He said that 10 was the future of transportation. I was so excited about 11 that that -- I brought my 1978 high school annual. And 12 one of my classmates in chemistry class said, "Keep 13 working on the hydrogen car. And if you ever need a 14 customer, I'll buy it." Well, we're here 30 years later. 15 And as far as I can tell, we're very, very far away from 16 getting a fuel cell car commercially available. There is 17 no infrastructure. And I don't know how to make hydrogen 18 if you don't use electricity. 19 My oldest nephew is about the same age I was when 20 I first heard about hydrogen fuel cells. And I've been 21 following it since. And another 30 years from now I don't 22 want him to have to be here begging for a clean-powered 23 vehicle. Please vote no on the amendment to weaken zero 24 emission requirements. California can lead America and 25 America can lead the world. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 Thank you. 2 CHAIRPERSON NICHOLS: Thank you, Dr. Anderson. 3 Bill Korthof. 4 MR. KORTHOF: Yes, I'm William Korthof. I'm a 5 lifetime resident of the South Coast Air Quality -- AQMD 6 smog basin, as you might call it. A business owner and a 7 ZEV driver for other a decade. My RAV4 has about 110,000 8 miles now. And I have yet to have to take it back for any 9 routine service or maintenance over that six-year period 10 and over a hundred thousand miles. 11 Smog is still one of our biggest quality-of-life 12 issues in southern California. Between refineries, older 13 cars that become gross polluters, and just the general 14 emissions that come out of all of our oil-based vehicles, 15 smog is still our biggest problem. The ZEV mandate is a 16 critical piece of dealing with that. And according to 17 even our President, we need to kick the oil addiction. So 18 oil in 1998 was selling at $10 a barrel. In 2003 it was 19 $25 a barrel. And today it's over a hundred dollars a 20 barrel. It seems like we should be able to see the 21 writing on the wall, between that and the fact that we're 22 fighting wars for oil at this point. 23 We've got a proven ZEV alternative. It's ready 24 to go. It's been proven. We've used it. I'm driving one 25 today. But we have problems. Since 2003, thanks to some PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 modifications, there's been a ZEV blackout. There have 2 been secret deals. Conflicts of interest have been 3 pointed out. And, you know, underlying all this is CARB 4 has been backsliding. Your requirements for ZEVs have 5 been essentially zero since 2002. And that's got to 6 reverse. 7 If we had simply stuck with the 1990 regulations, 8 we'd have seen 100 to 200,000 zero emission vehicles on 9 the road every year. Large numbers. Even if we assume 10 the high incremental cost that industry was arguing years 11 ago of maybe $10,000 a car, that would represent something 12 like one to two billion dollars a year in subsidies. 13 Interestingly, today we're spending between one and two 14 billion dollars per day for imported oil and we're 15 spending a similar amount on fighting wars in the Middle 16 East. 17 Solutions today, we need to look at going back 18 toward what was promised by that 1990 regulation. We need 19 ZEVs that are for sale, not on boomerang leases. And I 20 think the staff needs to look at how they can require that 21 the vehicles be sold so that they don't go back to the 22 manufacturer to be crushed after a nominal trial period. 23 We need to eliminate portable credits. That should be 24 phased out as quickly as possible. The cars need to be 25 placed in service. And there needs to be a real PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 commitment to the market by all manufacturers. Putting 2 cars on the road in California and then transporting them 3 to New York for secondary credits raises questions. 4 CHAIRPERSON NICHOLS: Thank you, Mr. Korthof. 5 Your time's up. 6 MR. KORTHOF: Thanks. 7 CHAIRPERSON NICHOLS: Sherry Boschert. 8 MS. BOSCHERT: Yes, hello. My name's Sherry 9 Boschert. And I'm here today on behalf of the 200,000 10 members of Sierra Club California. I've submitted written 11 comments. But here's a summary and few additional 12 comments that we hope will strengthen the ZEV program. 13 First and foremost, please require full 14 transparency of the automakers and how they meet the ZEV 15 program, including trading of credits. The Public Records 16 Act requires no less; just follow the law. 17 Secondly, please make meaningful progress. The 18 CARB staff very kindly provided me with data showing that 19 compared with today the staff proposal by 2017 would 20 eliminate only one-fifth of the smog-forming emissions 21 from tailpipes that doom thousands of people to lung 22 disease and death. 23 In addition, the proposal would eliminate an 24 average of only 291,000 tons a year of greenhouse gases in 25 2017. California needs more than 200 times that amount of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 progress to meet our 2020 goals for greenhouse gas 2 reductions from automobile tailpipes alone. 3 So Sierra Club California asks that you require 4 automakers to offer 100,000 zero emission vehicles for 5 sale in 2012 to 2014. This is four times more than the 6 25,000 ZEV requirement, but it still is less than 6,000 7 ZEVs per year from each of the six largest car companies. 8 They can do it. In an industry that sells over 70 million 9 vehicles worldwide in a single year, 6,000 ZEVs are not 10 going to put any company out of business. 11 Secondly, after setting a strong goal for ZEVs, 12 hold the line. Don't let 90 percent of that requirement 13 be fulfilled by silver-plus vehicles. Now, some of you 14 may know that I'm the author of "Plug-in Hybrids, the Cars 15 that will recharge America." So you know I love plug-in 16 hybrids. But they should not be in competition with zero 17 emission vehicles. Find a way to give us both. And we 18 need both to meet the goals of reducing smog and 19 greenhouse gases. If you do insist on the backfilling, if 20 you set a high enough bar, like a hundred thousand ZEVs, 21 we would be in favor of no more than 50 percent 22 backfilling with silver-plus vehicles. And that should 23 not include hydrogen internal combustion engine vehicles, 24 which I haven't heard anyone talk about today, which don't 25 further our drive towards ZEVs and shouldn't be PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 silver-plus. They're just going to be gamed with that. 2 Please be technologically neutral. Any ratio or 3 any system that favors one ZEV technology over another is 4 only going to delay and possibly even prevent the 5 commercialization of ZEVs, which is what we need to get 6 these into the hands of lots of people very soon to meet 7 our goals. Progress and battery technology has zoomed 8 ahead of the conclusions of CARB's expert panel report. 9 Members of this Board, including Professor Sperling, have 10 acknowledged that the expert panel report is outdated. 11 But the staff and others continue to rely on this, and it 12 infuses many things that CARB is in charge of, the ZEV 13 program, the ETAC report, the low carbon fuel standard, 14 the alternative fuel program. 15 We need better data to inform what you're doing 16 so that we don't get these lopsided arguments in many of 17 these programs that we need to just go with plug-in 18 hybrids and hope that fuel cells will be next. And 19 battery electric vehicles are left out of many of those 20 scenarios. So please give us better data as you're moving 21 forward with this bold new vision of revising all these 22 programs. But today we need a bold commitment to much 23 higher numbers of ZEVs in 2012 to 2014. 24 Thank you. 25 CHAIRPERSON NICHOLS: Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 We had made a mistake -- there was a mistake on 2 my version of the list. So we left off John White, who 3 was supposed to have been ahead of Tim Carmichael. 4 Is he here? Yes, you are. 5 All right. Then why don't you come forward. 6 And then Tim will be next. 7 MR. WHITE: Thank you, Madam Chairman and Board 8 members. 9 I was here in 1990, so I have a certain historic 10 perspective on this program. And I've heard a lot of 11 really excellent testimony today, and I'm not going to try 12 to repeat it. But I have a couple of thoughts that came 13 to mind as I was reflecting on where we've been and where 14 we might need to go. 15 Well, first of all, It seems to me that we need 16 to return to first principles. And the first principle we 17 need to get back to is technology-forcing for real. Not 18 technology-forcing based on projected costs and estimates 19 that we have to come up with to justify the technology. 20 The original principle of the Clean Air Act up was that 21 technology should be driven by the needs of public health 22 and the environment, not based on estimated or projected 23 costs. And I think inadvertently with the periodic 24 reviews, that we sort of got ourselves boxed into a 25 situation where it becomes incumbent on the staff to prove PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 to the car companies that they can do what we need them to 2 do. And we need to restore that balance or that burden of 3 proof on to the car companies and, in fact, to assert the 4 principle that the public health and the planet's health, 5 as so well documented in the Lung Association report, 6 ought to be what drives a policy. So that's the first 7 principle. 8 The second principle is that you all have a lot 9 of tons to make up because of the failure of the Bush 10 Administration to approve the waiver. Those are not just 11 tons in California, I might add. The AB 32 requires that 12 those tons be made up overall. And I think there's no 13 time than like the present to at least retain the leverage 14 to get those tons. This is no time to be giving what was 15 estimated to be a $6 billion relaxation to the auto 16 industry when we have other matters outstanding. So 17 that's the second thing I think we need to keep in mind, 18 is that this is not a disconnected decision from the 19 Pavley, even though it's a separate proceeding and so 20 forth and so on. 21 The other thing is that we need to -- as Jamie 22 Knapp pointed out, we need to get transparency back. And 23 we lost that sometime ago. With all these banked, 24 forward-looking -- there's sort of a market mechanism gone 25 array because nobody knows what's going on. So we need to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 restore transparency. And this needs to be more than 2 simply an R&D mandate, which is effectively what I think 3 the staff proposal would leave us with. 4 The other thing that has been talked about by 5 other people that I think is missing from our recent 6 thinking but wasn't from the very beginning, the early 7 opponents of the ZEV program were the oil companies, and 8 they're not here. Because they somehow found themselves 9 off the hook. We got them over here in a low carbon fuel 10 standard, which is -- needs more transparency itself. 11 And, in fact, the low carbon fuel standard needs to have a 12 gold standard associated with the infrastructure planning 13 needed for both electric and hydrogen vehicles. Now, I'm 14 technology neutral too. I like plug-ins. But we got to 15 make sure the electricity from whence the plug-ins are 16 charged is as green as the planet needs it to be. So that 17 means renewable infrastructure, transmission and 18 distribution infrastructure needs to be integrated with 19 the ZEV program in order for that program to achieve the 20 level of results that we can achieve. And the oil 21 companies need to give us the hydrogen infrastructure 22 somehow. We maybe have to help pay for it. 23 CHAIRPERSON NICHOLS: Thank you. Your time's up. 24 MR. WHITE: Thank you. 25 CHAIRPERSON NICHOLS: Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 Tim. 2 MR. CARMICHAEL: Tim Carmichael, Coalition for 3 Clean Air. Thank you for the opportunity to comment. 4 I agree with everything Mr. White said. 5 I want to start with a sense of urgency and 6 encourage the Board to keep this in mind as you deliberate 7 on this. Just the news this week: A massive chunk of 8 Antarctica breaking off; the inability of the Bush 9 Administration to get the Saudis to increase their oil 10 production; the stats coming from around the world about 11 the health impacts of air pollution and the number of 12 people dying prematurely. All three of those, climate, 13 oil dependency reduction, and health impacts, need to be 14 drivers for this agency. 15 The staff has talked about this program as a 16 success. And though I don't agree that we're at a point 17 where it's just better than nothing, you know, the 600,000 18 vehicles that the staff showed on one of their slides 19 needs to be taken in the context of how many vehicles have 20 been bought in this state since this program started. And 21 the smallest number you can come up with is 20 million. 22 So you're talking about 600,000 in the context of 20 23 million. And I think the number's probably bigger than 24 that over the last 17 or 18 years. And the same thing 25 goes looking forward. The number of vehicles that are PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 going to be sold over the next decade: In this state, a 2 million and a half plus per year; 69 million per year 3 globally -- 69 million new vehicles per year globally. 4 I think it's important to consider the 5 fundamentals. And some of the fundamentals that I think 6 your staff missed in developing this proposal was the 7 ramp. And the reality check, that if we really want to 8 achieve any of the goals that this program talks about, 9 even in the staff proposal, but certainly the other 10 programs that this agency's committed to, climate goals, 11 petroleum reduction goals, health protection goals, a ramp 12 is just common sense. And that's missing from the staff 13 proposal, at least a realistic and assertive ramp from our 14 perspective. 15 The other thing that we think is missing are 16 numbers. And there's been a lot of talk about the 17 numbers. And, you know, we think the numbers should be 18 much bigger. And I personally think 25,000 is the lowest 19 we should go. 20 But I'm looking at, you know, Jim Hanson and 21 others that are talking about the next decade as being the 22 most critical that this planet's ever faced, at least 23 humanity's every faced. You know, not 2050 but 2020. 24 What can we get done between now and 2020? Not 40 percent 25 penetration across the fleet but 100 percent penetration PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 across the California fleet and most of the US fleet and 2 most of the global fleet. I think that's the vision this 3 Board needs to have as we talk about the next year and how 4 can we revision this program and make it more than it is 5 to align it with the goals that this Board has adopted. 6 That's one of the things that I think staff has not done a 7 good job of, and they need to do a better job for this 8 Board going forward, is show how this program and every 9 other program they bring to you fits into the mission, 10 fits into the achieving the goals that you have adopted, 11 which we support. And that is fundamental. Because a 12 program here, a program there, we're not going to get 13 there. We're not going to achieve our SIP goals, we're 14 not going to achieve our climate goals. How does this fit 15 in? And that gives you a better perspective to say, you 16 know what, this is enough or this isn't enough. 17 CHAIRPERSON NICHOLS: Time's up. 18 Thank you. 19 MR. CARMICHAEL: Thank you very much. 20 CHAIRPERSON NICHOLS: Thanks for your help. 21 Mr. Baxley. 22 MR. BAXLEY: Good afternoon, Chairman Nichols, 23 distinguished Board members. Thank you for allowing me to 24 speak today. My name is Phil Baxley. I'm the President 25 of Shell Hydrogen, one of those big oil companies. I'm PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 President of Shell Hydrogen here in the U.S. And I also 2 have the honor of being the Chairman of the Board of the 3 National Hydrogen Association. 4 My comments today reflect Shell's views on this 5 matter. However, the National Hydrogen Association has 6 also submitted written testimony that is consistent with 7 mine. 8 Through the leadership of the California Fuel 9 Cell -- California Air Resources Board and the California 10 Fuel Cell Partnership, California has been setting the 11 national and global agenda on issues of energy, air 12 quality, and transportation. In no small part because of 13 your influence and cultivating a progressive regulatory 14 environment, auto manufacturers are clearly responding and 15 making impressive progress and demonstrating increasingly 16 functional and attractive fuel cell vehicles. In fact, as 17 Bill Reinert mentioned earlier, as Chairman of the NHA, I 18 invite you next week to come out and see all of the 19 progress that's being made and hear about it. And 20 actually I invite all of you to come and learn about the 21 facts about hydrogen, about the real efficiency and how 22 you make it and how it can work. So that's a great 23 opportunity for all of you to learn and I think that's 24 important. And it's great to hear everyone here. 25 I would also make a comment -- although it's not PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 in my notes, that we just finished here in California last 2 week a construction of a new hydrogen station at a Shell 3 retail site, using renewable energy. We're hoping to open 4 it very soon. So we're making great progress on that and 5 we're very pleased with that. It's very hard but we're 6 making great progress. 7 So let me get right down to it. Despite this 8 impressive progress on fuel cell vehicles, the draft 9 statement of reasons has injected a significant degree of 10 uncertainty into the process, sufficient to call into 11 question the approach that has been clearly outlined in 12 the California Hydrogen Highway Program. This new 13 proposal has caused significant concern among auto and 14 energy companies that are committed to hydrogen fuel cell 15 vehicles and to flex us from the approach we were 16 supporting and working together towards. 17 Specifically, plug-in hybrid vehicles and other 18 technologies still under development appears significantly 19 overweighted in the current proposal. Plug-in hybrids are 20 also not a silver bullet. There are a number of 21 authoritative studies indicating that well-to-wheel cost 22 in terms of CO2 emissions for plus-in hybrids can be 23 higher than that of fuel cell vehicles, depending of 24 course on the carbon intensity of the grid-supplied 25 electricity versus the carbon intensity of the hydrogen PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 source. 2 While fuel cell vehicles are potentially a very 3 promising longer-term solution, other more conventional 4 alternatives should also be deployed in the near term. 5 This, however, does not mean that CARB should cease its 6 encouragement of such major long-term solutions such as 7 hydrogen fuel cell vehicles. Shell sees multiple mobility 8 pathways, and CARB should take the approach of "and" 9 instead of "or". It is simply too early now to choose the 10 winning technology; and therefore we should keep all 11 reasonable options open. To keep such options open, CARB 12 needs to rebalance credits back toward the fuel cell 13 vehicles to better reflect the long-term development costs 14 of this breakthrough technology and the intrinsic 15 environmental and energy security benefits. By doing so, 16 CARB will also send a clear signal to the auto and energy 17 companies of your sustained long-term support and 18 determination. 19 The State of California is a national and 20 international leader in promoting innovative solutions to 21 transportation and environmental challenges. This is an 22 important decision facing the Board, a decision that will 23 have far reaching ramifications for the direction of the 24 state and the nation. CARB should keep the pressure on 25 and provide the leadership needed to develop a truly PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 sustainable solution to air quality problems, increased 2 energy diversity, and addressing the climate changes. 3 Thank you. 4 CHAIRPERSON NICHOLS: Thank you, Mr. Baxley. 5 Are there any questions from Board members? 6 All right. Thank you. 7 Steve Heckeroth. 8 MR. HECKEROTH: My name's Steve Heckeroth. I'm 9 the Chair of the Renewable Fuel and Transportation 10 Division of the American Solar Energy Society. 11 I have made comments at every CARB meeting -- 12 public meeting since 1992. I've seen a lot of change in 13 staff and the Board since then. 14 Next slide please. 15 --o0o-- 16 MR. HECKEROTH: I also manufactured electric 17 vehicles based on the zero emission -- 1990 zero emission 18 mandate. I was very hopeful that that would be a 19 long-term business. I made electric Porsche Spiders with 20 a 100-mile range back in 1993, zero to 60 in 8 seconds, 21 proving that electric vehicles weren't golf cart 22 technology even way back then. 23 I've been making electric tractors. I am the 24 largest full function agricultural electric tractor 25 manufacturer in the world. I've only done eleven of them. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 (Laughter.) 2 --o0o-- 3 MR. HECKEROTH: I want to talk a little bit about 4 the potential of solar-charged electric vehicles and it's 5 potential to reduce CO2 emissions. This is what we have 6 to shoot for right here. 7 --o0o-- 8 MR. HECKEROTH: And here's what we have to work 9 with. Fifty percent transportation. Oil refining could 10 also go away if we can limit transportation. Here's what 11 we're looking at in oil production in California. 12 --o0o-- 13 MR. HECKEROTH: And here's a chart that you can 14 study maybe later on. But it just shows -- it's CEC 15 information. It shows the demand in California; the 16 production going down; the imports going up; and AB 32, 17 what we have to do with that. So we've got some big 18 challenges. 19 --o0o-- 20 MR. HECKEROTH: And here's the real good news. 21 That big yellow ball there is the direct solar radiation 22 striking the earth ever year. And that little 23 multi-colored ball is all the stored resources in the 24 earth. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 MR. HECKEROTH: So you can see that on an annual 2 output of solar energy, we've got plenty of solar energy 3 to satisfy all our electric needs, all our energy needs. 4 That little black dot there is the oil that we've 5 used in the last 100 years. The big yellow dot is the sun 6 that's come in over the last 100 years and strike the 7 earth. It's 70,000 times more solar energy available than 8 we have oil -- have used oil in the last 100 years. 9 --o0o-- 10 MR. HECKEROTH: Burning oil for mobility is 11 unnecessary. And I hope that we can make the same 12 transition that we made when we stopped burning candles 13 and kerosene very soon. 14 --o0o-- 15 MR. HECKEROTH: We can rely on an alliance 16 between utilities, PB infrastructure to totally charge all 17 our transportation needs. 18 --o0o-- 19 MR. HECKEROTH: I hope we can eliminate 20 combustion. 21 CHAIRPERSON NICHOLS: We agree. 22 MR. HECKEROTH: And here's what I -- I used to 23 think that the agrarian economy was going to be our 24 savior. And I tried that. It's a lot of work. You can 25 go through a lot of wives trying to grow all your own PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 food. I milked a cow for eight years. 2 (Laughter.) 3 MR. HECKEROTH: I now know it's the solar 4 electric economy that's going to save us. 5 (Laughter.) 6 MR. HECKEROTH: So please choose wisely. 7 (Laughter.) 8 CHAIRPERSON NICHOLS: Thank you. That was great. 9 (Applause.) 10 CHAIRPERSON NICHOLS: Yeah, this is what makes, 11 you know, public hearings worth while. We all agree. 12 Otherwise you could just read the stuff, you know. 13 Cynthia Verdugo-Peralta. 14 MS. VERDUGO-PERALTA: Good afternoon, Madam Chair 15 and Honorable Board members. And how do I follow that? 16 My name is Cynthia Verdugo-Peralta. I am the 17 President of the Asthma and Allergy Foundation of America, 18 the Southern California Chapter. 19 We are the ones who have put the nine breath 20 mobiles on the road who administer medical care and 21 medication to school children in the southern California 22 basin. These breath mobiles actually go to the schools 23 and they take care of the children there instead of the 24 other way around. 25 Our task is not an easy one, as asthma and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 respiratory ailments continue to rise, causing increased 2 school and work absences due to the cumulative effects of 3 the air pollution in our basin, 85 percent of which comes 4 from mobile sources. 5 I'm also a former South Coast AQMD Board member 6 and former Chairman of the California Fuel Cell 7 Partnership. So I understand the great responsibility you 8 carry on your shoulders as regulators, as well as the 9 complexities of new technologies which can help us reach 10 our clean air goals. 11 First, let me command CARB and the CARB staff for 12 all of the hard work that's gone into the original ZEV as 13 well as all of the work on the revision since then. I 14 know it hasn't been an easy task. 15 My purpose here today is to plead for clean air, 16 knowing we can we cannot get there without state policies 17 that encourage and support a phased approach to a new and 18 cleaner vehicles as well as new fuel technologies. While 19 we wholeheartedly support the near-term and mid-term 20 pathways, such as battery electric vehicles, BEVs, plug-in 21 hybrids, we are extremely concerned that CARB staff 22 proposal regarding the credit levels does not support the 23 long-term true zero emission vehicles such as hydrogen 24 fuel cell vehicles. 25 The current staff proposal greatly reduces the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 incentive for a more significant potential breakthrough 2 through fuel cell vehicles. An important goal of a 3 technology-forcing policy such as the ZEV program is to 4 stimulate continued investments in progress while focusing 5 on the particulate technology option, in this case 6 hydrogen fuel cell vehicles, for those believing it has 7 promise and are interested in continuing their investment. 8 While the ZEV framework expands the gold credit 9 options, it sends the wrong message. The new credit 10 structure has the unintended consequences of possibly 11 killing the fuel cell vehicle program and the hydrogen 12 infrastructure investments which local, state, and federal 13 agencies, along with the energy companies and OEMs, have 14 together worked to bring forward here in California. 15 A three-phased approach is needed to reach our 16 clean air goals and reduce toxic emissions from mobile 17 sources throughout the state. Without support for the 18 third phase, there is no continued vision for the future 19 of zero emission vehicles and the necessary refueling 20 infrastructure. We encourage CARB to keep the goals high 21 to ensure a robust suite of options, near term, mid term, 22 and long term, to address this critical issue of air 23 pollution. The ZEV mandate needs to assure that fuel cell 24 vehicles are a viable option for car manufacturers 25 seriously considering production of zero emission PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 vehicles. 2 Phase 3 requirements in terms of the numbers of 3 fuel cell vehicles, if that is the option that is chosen, 4 should recognize the high near-term cost for this path, as 5 was in the original ZEV mandate. 6 There should be a viable option for those 7 interested in challenging that most promising technology. 8 California is the model for a public/private partnership 9 dedicated to the commercialization of fuel cell vehicles. 10 It started with the activities of the South Coast AQMD in 11 1987 and continued with the establishment of the 12 California Fuel Cell Partner hip in 1999, which has been a 13 unique successful model of bringing together competitors 14 who are cooperatively working towards the goal of fuel 15 cell vehicle commercialization. 16 CHAIRPERSON NICHOLS: I'm sorry. Your time has 17 expired. 18 MS. VERDUGO-PERALTA: Oh, sorry. 19 CHAIRPERSON NICHOLS: You can sum up. 20 We just basically are asking you to take another 21 six months or so to review the ZEV mandate and bring 22 forward some technology encouraging. 23 CHAIRPERSON NICHOLS: Thank you. 24 MS. VERDUGO-PERALTA: Thank you. 25 CHAIRPERSON NICHOLS: And our last witness is Tom PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 Folks. 2 MR. FOLKS: Hi. Can you hear me all right with 3 this? 4 CHAIRPERSON NICHOLS: Yes. 5 MR. FOLKS: My name's Tom Folks. I work for a 6 company called Mighty Com. We are here frequently or in 7 front of your staff representing automotive advanced 8 technology interests and so forth. Today I'm representing 9 no one but myself. I just wanted to make that clear. 10 Earlier I heard from references to movie 11 recommendations. And I would like to make another one to 12 you while I'm up here. In addition to "Who Killed the 13 Electric Car?" and Al Gore's movie, you ought to check out 14 "Thank You for smoking". As a frequent representative of 15 the diesel industry, I can really -- that was near and 16 dear to my heart. 17 (Laughter.) 18 MR. FOLKS: Anyway, what I wanted to do was drill 19 down a little bit into the particulars of this requirement 20 and talk about neighborhood electric vehicles. Our 21 company did quite a bit of research for DaimlerChrysler at 22 the time about user behavior of NEV owners. And some of 23 you have heard this before. But the research -- two 24 separate pieces of research, one is a baseline, one 25 two years later of a statistically accurate sampling of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 NEV users, found that people who owned these NEVs used 2 them for three out of four trips, hands down. They leave 3 their vehicles on average in the driveway for three out of 4 four times. 5 Ms. Nichols, that may be different for you. But 6 on average we found that was the case. 7 And of those three trips that were taken every 8 day by someone in the NEV, two-thirds of them were for 9 three miles or less. And of those three mile or less 10 trips, three out of four were one mile or less. So what 11 we found was the metric for success for a NEV wasn't in 12 VMT -- it wasn't in vehicle miles traveled, which seems to 13 be the common metric that's used to measure the worth of 14 an electric vehicle. So when I heard some previous 15 speaker sort of bad mouthing NEVs, I just felt compelled 16 to throw my name up here and say, "Wait a second." NEVs 17 actually are a valuable component in the overall ZEV sort 18 of matrix simply because people who have them use them in 19 a really smart way, for these small trips. And, yes, they 20 reduce cold starts and so forth. 21 But to me, what's really important about this is 22 that -- there are 20,000 of them now in California. And 23 when you take into consideration the low carbon fuel 24 standard work that's being done now, and there is this 25 need to develop a credit mechanism, a credit scheme in PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 some way so that the fuel producers can find a way to 2 reduce the carbon content of their petroleum-based fuels. 3 The electric utilities are going to need to find some 4 customers to plug in, in the short term until we get a 5 fleet of plug-in hybrids, until we get a big fleet of 6 battery electrics -- the neighborhood electric vehicle, 7 20,000 of them exist today that actually can at least 8 begin the process of credit banking under the low carbon 9 fuel standard for the electric utilities to begin 10 monitizing -- or providing a currency of low carbon fuel 11 credits at least for the electric vehicle end of the 12 spectrum. 13 So we wanted to -- because of that and because of 14 everything I've just said, I'd like to argue that the ZEV 15 credit for the NEV ought to be .75. I know some of my 16 friends in the NGO community are going to laugh me out of 17 the room. But I think it's worthy of that, simply because 18 if you take a look at the math and you see that people who 19 own these drive them for three out of four trips, that's 20 75 percent of their trips, why wouldn't it be worth .75 21 credits. 22 So there you go. I certainly hope you don't go 23 back on what your staff has recommended of .3, because I 24 think that's a good start but it really ought to be 25 higher. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 So thank you. 2 CHAIRPERSON NICHOLS: And you've ended us on a 3 high note here. Thank you. 4 All right. I am declaring the hearing portion of 5 this closed at this point. We've heard all the witnesses. 6 And now it's time to bring this back to a conversation 7 with the Board and the staff. 8 Mr. Hill. 9 BOARD MEMBER HILL: Thank you, Madam Chair. I 10 just wanted to share some thoughts that I've had and based 11 on some of the comments before the public hearing. 12 But first I want to thank the members of the 13 public who were here today. And the comments were just 14 outstanding. The information that was presented just kind 15 of guided my thinking and helped tremendously the 16 direction that I think this Board will probably wind up 17 going today. 18 And I also want to thank the staff for the 19 exceptional work and detail and the depth of their 20 investigation over this period of time, just on a personal 21 level. 22 Saying that, you know, I look at zero emission 23 vehicles, they're the California dream of the future. We 24 should not in the short run give up on that promise of 25 zero emission vehicles. But giving up is what I think PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 some of this proposal before us today represents. Giving 2 up is unacceptable and giving in to what I think are some 3 great influences of the auto manufacturers is intolerable. 4 Gas, as Mayor Loveridge indicated and testimony 5 has, is $4 a gallon and a barrel at $100 a barrel. And 6 the public is demanding that we adopt policies that reduce 7 our tremendous impacts from the use of fossil fuels and 8 our tremendous dependence on foreign oil, and all at the 9 same time. Zero emission vehicles do both. 10 What a terrible, terrible signal to send to the 11 people of this state and others around the world if we 12 abandon -- and even the stiff mandates that have been 13 proposed before some of those zero emission vehicles. I 14 think that that's a terrible message that we would be 15 sending. 16 We've led the nation with AB 32, and the nation 17 looks to California for this leadership. We must show 18 that leadership today, and I feel this Board is really in 19 a position to do that and to show the leadership and do 20 just that. 21 You know, it's interesting, our country was built 22 and grew great because of innovators, visionaries and risk 23 takers. And with Tesla Motors, which actually happens to 24 be in the district, in the country that I represent, which 25 is nice. But also all of the auto manufacturers. And PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 we've seen great innovation over the years. And I think 2 they deserve to be congratulated. And I think this is 3 just the beginning of what we will see from them in the 4 future. 5 So I'm excited about some of the changes that I 6 think this Board can look at and adopt today. And If I 7 could just make a couple of specific comments about the 8 direction that I'd like to see us go. It's amazing, if we 9 didn't change that path in 2003, we could be where I think 10 we wanted to be back in 1990 when we first started this 11 process. I certainly agree with Professor Sperling's 12 comments of overhauling the program in the next year. I 13 think that's a good point which to start that. Good 14 suggestion regarding the spinning off of the bronze and 15 the silver categories. I think that's a great idea. 16 Also, Board Member D'Adamo's comments of kind of 17 where we've been and where I think she'd like to see us 18 go. And I think I agree with most of those, especially 19 with regards to the infrastructure issue that was 20 discussed, and she had mentioned it, and certainly there 21 was a lot of discussion there. We can't succeed without a 22 strong infrastructure. And I think that's something that 23 we should make sure is part of the program as we go 24 forward. 25 Just looking at a couple of issues as well. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 Looking at a base or a minimum or a floor of the number of 2 ZEVs, I think that the 25,000 is a good number. I think 3 it's a strong number. And I haven't seen a lot of 4 reasoning -- and hopefully we'll discuss that and I can be 5 informed a little more of why we should go much below 6 that. 7 I think the sunset of travel provisions has 8 evolved, and I'd like to see that end sooner rather than 9 later. 10 The disclosure of bank credits, it's another 11 issue that I haven't really seen why we would look at the 12 production numbers in 2009 and why it's necessary to wait 13 until 2010 for the release of the bank credits that we've 14 talked about. And I think that the full transparency -- 15 and I've said that at previous Board meetings -- is 16 critical and something that's very important to this Board 17 and I think the entire State of California. The sunset 18 laws that we have are tremendous and it's kept us a very 19 open government. 20 I do hope -- and I'd like to get some responses 21 to those loophole questions that were raised from the 22 Coalition for Clean Air, the Union of Concerned 23 Scientists -- there's a number of them -- and how that 24 will be handled as we move forward to see -- I don't know 25 if we want to get a response to all of those. But they do PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 seem to be -- in looking at them over the last couple of 2 days, I saw a number of areas here where they made sense 3 and that there are loopholes are in existence. And I'd 4 like to see if that's true and correct or not. 5 And that really I think kind of just says it all 6 as I feel at this point. And I'm just looking forward to 7 the discussion as we move on each individual item. 8 So thank you for allowing me that, Madam Chair. 9 CHAIRPERSON NICHOLS: Okay. Of course. 10 I think it is helpful. You've hit on many of 11 them. But just to kind of call out the specific areas 12 where Board members want to focus in and potentially offer 13 amendments, but at least get our questions answered, 14 before we move to the big question, which of course is the 15 numbers issue. But the numbers issue really depends, I 16 think for a number of reasons, on some other things that 17 are related to those numbers in terms of how valid the 18 program is going to be. 19 I think it is interesting, by the way, that 20 there's been this sort of seesaw back and forth all day 21 between people who thought that we were insufficiently 22 giving recognition to batteries and people who thought 23 that we were giving insufficient recognition to the need 24 for hydrogen fuel cells and the progress on each of them. 25 It's almost been like a seesaw back and forth. And I PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 think that really indicates that both of these 2 technologies, although in perhaps different spaces in 3 terms of how ready they are to be marketed right away, are 4 looking to this program as a place that will make a 5 difference in the future. 6 I want to reiterate just one thought before we go 7 back to the list here, which is to remind all of us that 8 the ZEV program is not the only place where we push for 9 better cars. We are pushing in the Pavley program, we're 10 pushing in the LEV program. It is the only place where 11 we've created this special program aimed at 12 commercialization. And the difference between programs 13 where we set performance standards, which is really the 14 way that I think most of us believe one ought to go, which 15 is to look only at the need for what comes out of the 16 tailpipe and just set your standards there and let the 17 market compete, versus these very specific requirements 18 that we've gotten into for specific kinds of vehicles, is 19 based on the fact that there is a need for a special push 20 to get people over a certain hump into the marketplace. 21 And that's where we're aiming for wisdom, where we need 22 wisdom about how production ramps up, how people go from 23 invention to testing to building prototypes to putting 24 them in customers' hands. And I love the comment about 25 placement not being what we want, but really purchase and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 use. That was a key point, because placement is just kind 2 of one step along the way. 3 But for all of that, we still have to deal with 4 the program as we have it today. And I think we have to 5 make some changes in the 2012 to 2014 piece before we can 6 get to the kind of bigger picture, redoing of the program 7 that we all I think want to see happen in the next year or 8 so. 9 And I see a hand down here. So while we're doing 10 opening comments, let's go to you. 11 BOARD MEMBER LOVERIDGE: I was really trying to 12 shorten opening comments and get to specific acts that 13 this Board could take. 14 CHAIRPERSON NICHOLS: Okay, great. 15 BOARD MEMBER LOVERIDGE: And thought maybe if -- 16 I'd like to beginning I think with Professor Sperling's 17 sort of call for a look at this whole -- as you listen for 18 how many hours we have, it seems to me the importance of 19 what he advocated as we started is even more compelling. 20 And I thought also perhaps you could identity the 21 issues that have come up and we could as a Board see what 22 we could do. I guess I'm probably -- I should confess. 23 I'm doing this so -- I need to catch a plane. I was 24 hoping to participate in the vote before I have to go. 25 CHAIRPERSON NICHOLS: I would like to make sure PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 you're able to do that. 2 Well, let's just get started then. 3 Oh, go ahead. 4 BOARD MEMBER RIORDAN: Well, in recognition -- I 5 do know you have an issue of -- and several of us do. I'm 6 wondering though if staff should be given an opportunity 7 to at least respond to some of the issues. And maybe 8 that's after we make a list. But we've not really allowed 9 staff -- in the interest of being sure that everybody had 10 the ability to testify, we really didn't stop and ever 11 say, "And, staff, what do you think of that particulate 12 issue that has been raised?" At some point in time I 13 would like the benefit of their knowledge. 14 CHAIRPERSON NICHOLS: I understand. 15 I guess what my hope would be is we would ask 16 them to comment on the issues that were on the list and 17 give us their response on those, if that would suit. 18 Okay. So here's what I heard, and there's 19 probably more. A mandate for infrastructure. Can we do 20 it? When do we do it? How should we do it in connection 21 with this program, to make sure that it's viable? 22 The travel provision. When does it sunset, and 23 why shouldn't we let it sunset? 24 The intermediate manufacturer -- intermediate 25 volume manufacturer issue. Why can't we just bring them PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 into full parity with the larger volume manufacturers. 2 None of these are small companies, even if they may not 3 have hit the target in California until recently. 4 The issue of a credit. A special credit or more 5 credit or a separate category recognizing better 6 batteries -- that not all plug-in hybrids are created 7 equal. Basically the volt argument. 8 The question about how we measure or how we 9 define the categories of plug-in hybrids in terms of 10 energy versus range. I want that question answered too. 11 It makes a lot of sense to me. 12 And then the issue of the transparency on the 13 credits. I think every member of this Board who has 14 spoken to this issue believes that not only should the 15 banks be -- you know, the holdings of the companies be 16 open and available, but also that information about trades 17 should be available. We're not sure exactly how that 18 would be done. But we think we should have a mechanism by 19 which anyone can find out if trading has occurred and who 20 traded. 21 Are there others that I've left off the list that 22 need to be put on? 23 BOARD MEMBER D'ADAMO: I've got a couple. 24 CHAIRPERSON NICHOLS: Okay. 25 BOARD MEMBER D'ADAMO: Whether or not we should PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 consider a higher credit for an increased range fuel cell 2 vehicle, 200 mile plus. 3 CHAIRPERSON NICHOLS: Right. Okay. 4 BOARD MEMBER D'ADAMO: This would -- I don't know 5 if it falls in the category of a question or action. But 6 banked credits. There were several witnesses that spoke 7 about banked credits for ATP ZEVs. And I don't know if 8 that falls in the category of a loophole, but I'd like to 9 hear from staff on that. 10 And then this one seemed like something we ought 11 to credit. And that is Mitsubishi's request to allow 12 conversion of gold into the silver category. That seemed 13 reasonable. 14 CHAIRPERSON NICHOLS: Right. That was an 15 interesting point, yeah. 16 BOARD MEMBER D'ADAMO: And then of course the 17 issue of the floor. I'm sure you have that on the list 18 anyway. 19 CHAIRPERSON NICHOLS: That comes at the very end. 20 BOARD MEMBER D'ADAMO: But I had raised the issue 21 of increasing the overall numbers, which I think plays 22 into the goal. 23 CHAIRPERSON NICHOLS: Yeah, yeah. 24 BOARD MEMBER RIORDAN: Madam Chair? 25 CHAIRPERSON NICHOLS: Yes, ma'am. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 BOARD MEMBER RIORDAN: On travel provisions, the 2 testimony from the State of New York, maybe staff could 3 just work in their response to that in the travel 4 provision item. 5 CHAIRPERSON NICHOLS: You got all that? 6 They do. 7 All right. Well, why don't we turn to staff. 8 More? Sorry. 9 BOARD MEMBER LOVERIDGE: Yeah, I guess you're 10 going to come back to the numbers. I may not be here when 11 you get here. 12 CHAIRPERSON NICHOLS: When do you have to leave? 13 BOARD MEMBER LOVERIDGE: Let me just make the 14 argument that in terms of the ATP ZEVs, I would like the 15 number, if we would call it 75,000. And I think there has 16 been different kind of calls by two groups. And one 17 talked about a 40 percent increase. The South Coast 18 talked about a 50 percent increase. I'd like to put those 19 on the table. 20 CHAIRPERSON NICHOLS: Okay. Thank you. 21 I hope we can get to a vote before you have to 22 depart. 23 All right. Who's going to handle these, 24 Ms. Bevan or Mr. Cackette? 25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We'll PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 tag team this, I think. 2 We'll start with the absolute easiest ones first. 3 I think the New York requests we have in as 4 15-day changes on the back table. Correct? 5 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 6 CHIEF BEVAN: Yes. 7 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. 8 So that one -- we read that and thought that's a pretty 9 good idea. We have to get that off the table. 10 More credit for a better plug hybrid electric 11 vehicle. That was the request to create a new type or 12 additional increment of credit for plug hybrid vehicle 13 that can do fast accelerations and go at high speeds, and 14 more than what you might expect some of the other vehicles 15 to do. We've had a lot of discussions about that, and we 16 think there's probably some merit to that. But what the 17 credit is, how much more it is. And of course as credits 18 go up, numbers of vehicles go down. And so we think that 19 if you want to do that, maybe we ought to just put that in 20 the 15-day change, and our discussion perhaps could figure 21 out what the boundaries are. 22 The vehicle that GM would produce is a 2.4 credit 23 vehicle. If you give it too much credit, then it -- you 24 know, our scale, which tries to keep some relative 25 environmental and state of readiness, spread out over a PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 number line would get kind of messed up. So I'm thinking 2 that the numbers might be, you know, one or two-tenths 3 more credit would be what would be in play. And what we 4 could do is just go out and, you know, suggest that, ask 5 for comments in the 15-day period and find out what people 6 other than GM would think. They obviously would like 7 more. But I don't know exactly how it will affect all the 8 other categories. 9 CHAIRPERSON NICHOLS: Well, the vehicles are 10 obviously going to be a lot more attractive too. So one 11 would assume that they will naturally do well. 12 Anyway -- 13 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 14 they'd be more attractive but they'd also be more 15 expensive, because they've got a lot of battery on board. 16 So it's a trade-off of that, I think. But if that's okay, 17 unless you'd rather try to decide some of that now. 18 CHAIRPERSON NICHOLS: Well, let's just leave that 19 on the list then. We're just kind of running through your 20 reactions to these comments. 21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Okay. 22 Well, let's just go down the list in order then and we'll 23 just tell you whether we have any comments or not. 24 Mandate for infrastructure on hydrogen. There is 25 a regulation now that mandates infrastructure for various PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 fuels. It's trigger point is quite high, like 2 20,000-vehicles type number. And so it wouldn't be -- it 3 wouldn't work here until we've already failed with fuel 4 cells at least, because we wouldn't have any -- not the 5 infrastructure to report. 6 CHAIRPERSON NICHOLS: Is that in statute or in 7 our regulations? 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It's in 9 regulation. It was adopted back in the alcohol fuel days 10 of the 80s. 11 CHAIRPERSON NICHOLS: So we would need to go back 12 and -- oh, probably can't do that in a 15-day notice. 13 But -- 14 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: No, 15 that would have to be looked at as to whether that's the 16 best vehicle for trying to look at infrastructure 17 requirements -- 18 CHAIRPERSON NICHOLS: Well, I heard Mr. White 19 suggest that we do this through the low carbon fuel 20 standard. But that has a lot of perils of its own to go 21 through. And I must say that having now spent sometime, 22 you know, at the fuel cell partnership and seeing the 23 struggles that they've had to get the fuel suppliers to 24 match the commitment that the auto companies have made, if 25 we can directly go to something that's focused on a PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 regional basis and a smaller number of vehicles as the 2 trigger for a mandate, I'd like to see us do that. 3 And the additional idea I think that you raised 4 of also giving credit to an auto manufacturer if they were 5 to partner with a fuel supplier would also have some 6 benefits. So it could be like three different ways we 7 could go at this problem. 8 BOARD MEMBER SPERLING: Could I chime in on this 9 one? 10 CHAIRPERSON NICHOLS: Yes, please. 11 BOARD MEMBER SPERLING: Let me add my thoughts to 12 this. I do think -- I mean I would like to send it back 13 to staff to make this a high priority to figure out how to 14 deal with the fuel infrastructure question. And, you 15 know, if it's a mandate or it's part of that clean fuel 16 provision from 1990, you know, LEV program, we would want 17 to do it in a way that there's a close coordination 18 between the automakers and the fuel suppliers, both in 19 time and place. And, you know, so I kind of -- you know, 20 I'm personally pretty amenable to a mandate-type program 21 at this very low volume, but that it has to be done in a 22 very strategic way. So that we don't just say, you know, 23 a company has to do X number of fuel stations and they can 24 sprinkle them wherever they want. We wouldn't want to do 25 that. And I'm not quite sure exactly how to orchestrate PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 something like that, nor even the mechanism. 2 But, you know, the one you mentioned sounds like 3 a good one to look at more closely. And I would support 4 what Chairman Nichols said about not putting it into the 5 low carbon fuel standard. You know, we've tried to make 6 that a very pure performance-based, you know, 7 straightforward as possible program. And we don't want to 8 turn that into another ZEV mandate. 9 CHAIRPERSON NICHOLS: Okay. So next on your 10 list. 11 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Next 12 one was travel sunsetting. And just again as a quick 13 summary, starting in 2012 there's no travel, meaning that 14 the number of silver plus vehicles would be multiplied by 15 that other states that adopt California standards. 16 For BEVs, it would -- that would not start it 17 until 2015, I guess -- yeah, the beginning of 2015. And 18 for fuel cells it would not start until the beginning of 19 2018. 20 So that's what we've got right now. It's 21 staggered. The rationale for why it's staggered like that 22 is twofold. One is, is the technology truly in the 23 demonstration mode? If that's the case, we don't really 24 need more demonstrations in more states. And I think it 25 would be quite unwieldy to have to have 12 more PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 demonstrations of various sizes, one to match each of the 2 states that have adopted us. And that would be kind of a 3 fuel cell situation. 4 On the other end, plug -- and there's a need for 5 infrastructure to support them, and those other states 6 don't have the infrastructure. 7 On the other end of the spectrum is the plug 8 hybrid vehicles. And I think we don't see an 9 infrastructure issue. They plug into your garage. And we 10 think they're going to launch from good idea to commercial 11 quantity without going through a big demonstration phase. 12 So that's why we had no travel provision there. In other 13 words the numbers would get multiplied by the other 14 states. 15 CHAIRPERSON NICHOLS: I think the big concern 16 that I've heard from my colleagues in other states is with 17 the battery electric vehicles and the sort of protected 18 status that, you know, California wants them and other 19 states would like to have them too. And they feel that 20 we're holding back on that particulate technology. I know 21 for Vermont and Massachusetts and perhaps some of the 22 other northeastern states this has been a very contentious 23 issue. I appreciate the fact that New York is not in 24 exactly the same place. 25 But we are working hard in alliance with our PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 sister states now in a number of areas on trying to 2 advance a national program for dealing with CO2. I 3 just -- I feel like I'd prefer to err on the side I guess 4 of risking that this might be more difficult for the 5 manufacturers if it would mean that it would be something 6 that could significantly benefit other states that are 7 trying to do the same things that we're doing as well. 8 So maybe you'd want to talk about that, what it 9 really means -- 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, I 11 think the only -- let me just mention what the maybe not 12 to obvious risk is before you go ahead and discuss this. 13 Because I think the way it really plays out is 14 whether that decision favors fuel cells or not. Because 15 if doing battery vehicles is made a whole bunch more 16 harder in 2012 through 14 not only from a numbers 17 standpoint but also from the standpoint that these are new 18 technologies, that people have to manage them, worry about 19 them, introduce them through the dealerships, all that 20 kind of stuff -- it's a completely different vehicle -- if 21 that was seen as a big barrier, then it would discourage 22 battery vehicles and tend to shove people more towards 23 fuel cell for the compliance. That's probably where the 24 hinge point is on all of this. 25 CHAIRPERSON NICHOLS: Okay. Just make it PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 complicated. All right. 2 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I'm 3 sorry. 4 CHAIRPERSON NICHOLS: Did you have any additional 5 comment on that? 6 BOARD MEMBER BERG: No, I think my overriding 7 concern is the fact that we're trying to find such a 8 balance between at what point do we have provable 9 technology that's ready to go from a concept into the next 10 step of a pilot program and then become commercialized. 11 And from a pure R&D point of view it's my personal opinion 12 that the number of vehicles is not relevant to how quickly 13 it gets to the marketplace. And actually a good case 14 study is the Tesla car, that roadster. I asked the Tesla 15 people. They created 23 cars to bring that car to market. 16 And so I'm really struggling with the fact that the number 17 of cars that we're representing aren't in fact the number 18 of cars. It's a point system. And that tweaking a little 19 bit here and a little bit there I'm very uncomfortable, 20 because I don't know what the whole picture looks like by 21 when we're attacking one thing or another, and I'm having 22 a hard time keeping score. 23 CHAIRPERSON NICHOLS: Good point. 24 Okay. On with the list. 25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 on the intermediate volume manufacturers, I don't think we 2 have any comment on that. We have a proposal, and it's, 3 you know, just whether that's too lax or short. So we 4 don't have anything to offer there. 5 We mentioned the more credit for the Volt. We 6 could perhaps do that in the 15-day change and home in on 7 what the number would be. 8 The how to define sort of the energy versus range 9 metric that we use for the plug hybrid vehicles in 10 particular, you know, we've been going with range because 11 that's traditionally what we look at from a pollution 12 standpoint, grams per mile savings, that kind of thing. 13 And so that's been the metric. 14 There is some merit in the idea of using 15 kilowatt-hours. That's been brought up at a log cabin 16 meeting that we had. It was advocated by some of the 17 staff of South Coast District. And some of the enviros 18 have thought there was some merit to it. We've talked to 19 some of the car companies. There was some mixed reaction 20 there, but some of them positive too. What I don't think 21 we can do is figure it out today. And so what I would 22 suggest there is that perhaps that's something that we 23 need to deal within the redesign a couple of years from 24 now. I don't think that it's fatal either way. They're 25 both good metrics. The question is, well, does one have PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 more positive aspects and more directionally correct 2 signals with it than the other? So that would be our 3 comment on that. 4 Transparency on credits. The way we wrote the 5 regulation -- the proposed regulation that affects 6 trade -- everything's transparent. But the trades we kind 7 of didn't make it very clear. And I think given that the 8 way we've written it and proposed it, the trades have 9 probably not made public. So, you know, if you want to 10 make it public, we'll change the wording so that it's 11 clear that the trades -- that's what would be required. 12 Higher credits for fuel cell vehicles. We were 13 aware of that debate. It was on our list of issues. And 14 so we have some back-up -- the back-up slide that deals 15 with numbers of vehicles and costs if you change that 16 variable and if you change the floor variable. So at some 17 point in time if you want to talk about those either 18 independently or together, we have a graphic that might 19 help with that. 20 Bank credits for too much silver. And, again, 21 Alisa said in her presentation -- and I believe that was 22 the question, that it might black out the silver plus 23 vehicles, that was what was raised in the audience. Is 24 that the sense of what that question was? 25 CHAIRPERSON NICHOLS: Yes. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Then, 2 you know, we don't think that's going to happen, because 3 we believe that a number of the manufacturers are -- that 4 have a lot of credits don't have as many P ZEVs and 5 conventional silver hybrid vehicles in the marketplace 6 yet. And they need those credits to buy down those. So 7 we really don't think there will be a lot of credits that 8 are in the bank today available starting in 2012. So we 9 don't see that. 10 We also don't see a logic in it. If someone is 11 going to put forward silver plus vehicles, which are not 12 demonstrations but might be thousands and thousands of a 13 model of a plug hybrid vehicle, why would they introduce 14 it for one year, two years, or three years and then say, 15 "Oh, I got lots of credit. I don't want to sell it any 16 more"? It just wouldn't make any sense, unless of course 17 the technology was failing in the marketplace. 18 So I don't think it's going to have the same kind 19 of impact as what might happen with demonstration levels 20 of BEVs and fuel cell vehicles where, you know, "we're 21 doing 50 this year. But, boy, we'd really rather not do 22 50 more next year, so let's use credits." That's what 23 created the blackout in the BEV and fuel cell area. 24 I don't know what the Mitsubishi issue was. 25 CHAIRPERSON NICHOLS: They want to be able to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 gain gold credits. And you convert them to silver when 2 they -- 3 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: 4 I mean normally if you have a gold credit, you 5 can spend it down the line, you can spend it on a lower 6 metal quality. You know, silver plus silver. But I think 7 the problem is that since they're intermediate, they don't 8 generate gold credits. And we'll just -- we could go back 9 and look at the rule and make sure that if that's the 10 case, that we create some way where they -- if they make 11 gold vehicles, they get credit for gold vehicles, and then 12 they could use them anywhere. 13 CHAIRPERSON NICHOLS: That's what, well, I 14 thought people did, just -- I mean we've assumed that 15 Tesla would get credit for their vehicles. 16 MR. PATTERSON: The point is the discontinuity 17 between gold and silver. Silver could get seven credits, 18 where a gold vehicle could get a maximum of five. There 19 needs to be a conversion factor between gold and silver. 20 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: 21 Analisa's going to jump on this one. 22 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 23 CHIEF BEVAN: What Mr. Patterson is talking about 24 is that in certain cases if there's a plug-in hybrid 25 electric vehicle introduced in the 2009 to 2011 timeframe, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 it has a multiplier of three, which pops its credit if 2 it's got -- if it's earning, say, two credits, it makes it 3 six. And that's much more than a gold vehicle, which 4 Mitsubishi make, which would be earning about three 5 credits. So they're asking that we take a look at that 6 inequity, given that they don't need gold credits as an 7 intermediate manufacturer. 8 CHAIRPERSON NICHOLS: Right. 9 Is the staff agreeable to doing that? 10 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 11 CHIEF BEVAN: We'll look at that. 12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, 13 we could certainly look at that and make a proposal in the 14 15-day change. 15 CHAIRPERSON NICHOLS: Okay. All right. Fine. 16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And 17 then I guess the last one was the general comment about 18 the 40 percent ramp-up of silver-plus plug hybrid electric 19 type vehicles over time. And if you look at the -- 20 remember the chart that I think Luke Tonachel put up there 21 that showed the Prius introduction versus the numbers of 22 plug hybrids that we have, our numbers sort of did match 23 what happened in the first three years with the Prius. 24 Which is typical that, you know, the early adopters buy 25 some and then there's kind of a stagnation period because PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 prices are high and the product is new. And this is true 2 of cell phones and microwaves as well. And then all of a 3 sudden it takes off when people see the utility and when 4 the volume gets up enough to drop the price. And our line 5 just kept going flat in the 2015 through 17, and the Prius 6 of course took off. And they're saying, "Well, make it 7 take off." 8 So I think we match up pretty closely to what's 9 likely to happen in '12 through '14, but we don't in '15 10 and beyond. And part of the reason we don't is because of 11 the way the reg is structured right now, we have this 12 where you push in on one side, something else pops out. 13 So if you want more ZEVs, you get fewer plug-in hybrid 14 vehicles. They're all connected in some way. And what we 15 need to do is disconnect that. And I think again we would 16 suggest we do that in the redesign for 2015 through 17, 17 because I think we're not that far off from '12 through 18 '14. 19 CHAIRPERSON NICHOLS: That is definitely an issue 20 that needs to be addressed though as part of fixing this 21 program. The big fix that we're talking about. 22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That 23 was the list that I have. 24 And so what's left is the floor and the -- 25 CHAIRPERSON NICHOLS: Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 Yes. 2 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: What we 3 did discuss is the floor and the fuel gold credit -- 4 relative credit. 5 CHAIRPERSON NICHOLS: Right. 6 BOARD MEMBER HILL: -- these tentative loopholes 7 that were mentioned. 8 CHAIRPERSON NICHOLS: Oh, the tentative -- the 9 loophole list? 10 BOARD MEMBER HILL: The loopholes that were 11 discussed. I mean there are a number of them. There are 12 nine that are sort of listed here. And I don't know -- 13 CHAIRPERSON NICHOLS: NRDC's list? 14 BOARD MEMBER HILL: Yeah, that's in the group 15 of -- Coalition for Clean Air. I mean -- and some of them 16 seem -- you know, defining the advanced battery to -- do 17 you have a copy of that, Tom? 18 You know, I don't know if we need to go through 19 every one of them or how that could be reviewed to see 20 if -- 21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 22 there's nine, as I recall. 23 BOARD MEMBER HILL: Right. Maybe if you'd like 24 to see if that would work. 25 CHAIRPERSON NICHOLS: If you have it in front of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 you, you -- 2 BOARD MEMBER HILL: I'm concerned about Mayor 3 Loveridge this time because -- 4 CHAIRPERSON NICHOLS: Right. 5 All right. We'd previously been warned that 6 Mayor Loveridge was going to have to leave because he has 7 an event back at home that he has to get to tonight, 8 unfortunately. But, you know, his heart is with us. 9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 10 there's two suggestions. One, when we were talking to the 11 authors of this, they told me at least that their desire 12 was to put them on the table and then make sure they got 13 looked at, not necessarily today. So one option is to see 14 if there are any, you know, legitimate concerns here, real 15 concerns, and try to deal with them in 15 day if they're 16 not too far -- you know, if they're relatively minor 17 changes. Or at your request, we can try to go through 18 them one at a time. 19 BOARD MEMBER HILL: I think that's fine, Madam 20 Chair, because some of these we've already talked about. 21 CHAIRPERSON NICHOLS: A couple of them we've 22 already dealt with that rose to our attention, especially 23 the last one about the extension of the timeline for the 24 intermediate volume and the travel issue. Some of these 25 others were raised, but I think the Board would like to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 see them dealt with later, at least speaking for myself. 2 BOARD MEMBER HILL: Yeah, I think so. 3 CHAIRPERSON NICHOLS: They're legitimate issues, 4 but they're rather dependant on other changes that may be 5 made to the program. So I think we can leave it at that. 6 The resolution that was presented to us about 7 strengthening the credit for plug-in hybrids, we talked 8 about that. So, yeah. 9 Okay. So I think the time has come for some 10 proposals then and look up numbers. 11 BOARD MEMBER BERG: Madam Chair? 12 CHAIRPERSON NICHOLS: Yes. 13 BOARD MEMBER BERG: Could I just suggest as a 14 matter of moving forward, if we could look at Professor 15 Sperling's idea or motion, maybe this would be an 16 appropriate time to propose the motion to deal with the 17 future piece. 18 CHAIRPERSON NICHOLS: Yes. 19 BOARD MEMBER BERG: So that then I can check that 20 off my list of trying to keep things in some perspective. 21 And then maybe we could address specifically the 2012-2014 22 timeline. And I may be able to get my arms around that. 23 CHAIRPERSON NICHOLS: Good. 24 All right. Well -- excuse me. 25 ACTING CHIEF COUNSEL JENNE: Chairman Nichols, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 before we get too much farther, I just wanted to mention 2 two very quick procedural matters. 3 CHAIRPERSON NICHOLS: Yes. 4 ACTING CHIEF COUNSEL JENNE: One is, although the 5 record is closed now, it will be reopened during the 6 15-day notice of public availability. And the written or 7 oral comments received after today's hearing but before 8 the 15-day notice is issued will not be accepted as part 9 of the official record. And when the record is reopened, 10 the public may submit written comments on the proposed 11 changes. 12 And the second item is to remind that we need to 13 do the ex parte statements either now or after the 14 resolution sometime. 15 CHAIRPERSON NICHOLS: Thank you. 16 You know, I want to ask a question about that, 17 because they're going to be lengthy, I think. Although we 18 did receive an indication that if one of us goes forward 19 with their list, the others could just say, "Me too," and 20 not have to read it all. But even so, in other situations 21 that I'm familiar with people just file their ex partes 22 with the clerk and then they're available to be reviewed, 23 as opposed to having to be read out loud. 24 I'm perfectly willing to go through this list. 25 I'm just worried about the time it may take. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 CHIEF COUNSEL JENNE: I understand. My 2 understanding is that they're supposed to be read on the 3 record so people here can hear them. 4 CHAIRPERSON NICHOLS: Okay, fine. We'll do it 5 then. 6 Let's actually clarify what the resolution is 7 that we're looking at first though. This is the 8 resolution that -- or I took it as a resolution without 9 having written it up, and we haven't written it up. But 10 it was based on the comment -- and I'll see if I can 11 restate it and then it can be tweaked by others from 12 Professor Sperling -- that the Board direct the staff to 13 review the ZEV, LEV, and Pavley programs from the 14 perspective of the Board's mission, which we're defining 15 as being to reduce smog-forming pollution, to address the 16 problem of the state's contribution to global warming, and 17 to reduce our dependence on petroleum, all of which are 18 mandates that we're required to consider; and to come back 19 to us with a set of recommendations which we'd like to 20 have at least the beginning of the process within a year, 21 I think, at least have the first phase of this before us 22 to start looking at within a year, that would both move us 23 forward as aggressively as possible towards addressing all 24 three of those missions and also to clean up or to 25 simplify the ZEV program in a way that returns it to its PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 roots as a pure technology commercialization program for 2 the most advanced pre-commercial technology vehicles that 3 we're trying to get to be commercial. 4 Is that an accurate statement? Or you can amend 5 it. 6 BOARD MEMBER SPERLING: Or refine it. 7 CHAIRPERSON NICHOLS: Would you refine it? 8 Right. 9 BOARD MEMBER SPERLING: I will defer to you on 10 terms of the timing. But I would have thought that we 11 probably should wait a year -- start the process in a 12 year. But -- you know, I'm seeing the staff nodding their 13 heads over there. 14 CHAIRPERSON NICHOLS: I meant they would be doing 15 the work and bringing us the proposal within a year. 16 No, you think that's too fast? 17 BOARD MEMBER SPERLING: I mean it seemed -- you 18 know, it seems to me if we're adopting rules now, as long 19 as we provide some insight into our thinking about what 20 our expectations are so that, you know, the industry is 21 not taken by surprise but gives them some sense of the 22 body, then perhaps, you know, more than a year might be 23 fine. 24 CHAIRPERSON NICHOLS: Well, maybe I'm just 25 impatient. I don't want to ask the impossible. But I'd PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 like to see this done in 2009 if there's any way that we 2 can, because of our AB 32 requirements that are also -- 3 BOARD MEMBER SPERLING: That's true. 4 CHAIRPERSON NICHOLS: -- kicking in. 5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Just 6 one consideration is, you know, we can't do Pavley 2 right 7 now because we can't do Pavley 1 because we've been denied 8 the waiver. So the whole structure that you discussed is 9 kind of predicated on us getting that waiver first, and 10 I'm not sure that we're going to -- you know, when exactly 11 we will get it. 12 CHAIRPERSON NICHOLS: January 21, 2009. 13 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I hope 14 you are right. 15 CHAIRPERSON NICHOLS: No questions about that 16 one. If not before. 17 BOARD MEMBER SPERLING: In any case, for the -- 18 you know, the rest of it would be -- I think to add just a 19 little more substance to what we're suggesting, it would 20 be -- the idea would be to spin off, you know, the bronze 21 category, the P ZEV, into LEV III, to spin off the silver 22 category into the Pavley program, and keep only the gold 23 categories, as Chairman Nichols said, that would be just 24 battery EVs, fuel cells, and plug-in hybrids, where we 25 would define plug-in hybrids as one of the ZEV PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 technologies. And that the other part of it would be that 2 it would be our intent that, this being focused on the 3 2015-plus time period, that that program would be at least 4 as aggressive as what exists now and probably much more so 5 as we focus more explicitly on the AB 32 goals. 6 CHAIRPERSON NICHOLS: And if that was the motion, 7 I was the seconder for that motion. 8 So is there further discussion? 9 Yes. 10 BOARD MEMBER D'ADAMO: I'm Just wondering on 11 process. Do you want to adopt that separately and then 12 move on to the other -- 13 CHAIRPERSON NICHOLS: I think that was -- Sandy's 14 suggestion was that it would be better to that out and, 15 you know, have it resolved, and then we can move on. 16 BOARD MEMBER RIORDAN: Right. And it's on the 17 table. 18 CHAIRPERSON NICHOLS: Yes, it is on the table. 19 And so -- 20 BOARD MEMBER BAUMS: I'd just like a 21 clarification on the timing. 22 So did your impatience win out? 23 CHAIRPERSON NICHOLS: Well, we hadn't really -- 24 we have not resolved that completely. That was left a 25 little bit open-ended. I guess I would just say that the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 Board wants to see this back as soon as it's feasible, and 2 understanding that it's going to take the staff some time 3 to do this work. And that we're not asking for the 4 impossible, but we would like this to be a high priority. 5 BOARD MEMBER HILL: With the goal, Madam Chair, 6 by the end of next year? 7 CHAIRPERSON NICHOLS: The goal would be that by 8 the end of next year we could have this in front of us as 9 a full -- for a full discussion. 10 Does that seem -- are we getting -- we're getting 11 partial nods. 12 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: 13 It's whatever you want, we'll do it. 14 CHAIRPERSON NICHOLS: All right. They'll do it. 15 Okay. So, yes, that would be the timeline. 16 All right. So do we have any further comments, 17 questions, discussion? 18 All right. All in favor please say aye. 19 (Ayes.) 20 Any opposed? 21 All right. So we know where we're headed. Now 22 we need to decide what we're going to do with the matter 23 that's before us right now. 24 And I guess before we get into the resolutions, 25 we might as well get these ex partes out of the way. I'm PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 guessing that I have more than the rest of you do. So I'm 2 going to start. And then everybody else can just say, "I 3 have the same, except I didn't have X" or "I did have" 4 something else. 5 So do we need to do the timing of the meeting and 6 all the other details, Mr. Jenne, or just the statement 7 that there was a meeting and what the substance was? 8 CHIEF COUNSEL JENNE: I think it's good enough if 9 you just mention that there was a meeting during the, you 10 know, public comment period. 11 CHAIRPERSON NICHOLS: Okay. Mine start in 12 February with a meeting with Mitsubishi. I had a meeting 13 with BMW. I met with Friends of the Earth and Plug In 14 America. And these were all in-person meetings. I met 15 with Dean Kato representing Toyota separately. And then I 16 met with a number of Toyota executives in person. I met 17 by telephone with Cynthia Verdugo-Peralta. I've met in 18 person with Al Weverstad and others from General Motors. 19 Met with a group of environmentalists through the ZEV 20 Alliance, which included NRDC, Coalition for Clean Air, 21 Union of Concerned Scientists, America Lung Association, 22 Sierra Club, Energy Independence Now. I met with Nissan 23 in person. I met with the California Electric 24 Transportation Coalition by phone. Met with Google in 25 person. I met with Tesla in person, as I previously PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 discussed. Met with Ford Motor Company here in 2 Sacramento. And of course I've also met with the Fuel 3 Cell Partnership, which is a list of individuals too long 4 to read, but essentially most of the auto companies and a 5 number of fuels suppliers. We didn't discuss ZEV 6 amendments per se. But I think the issue about fuel and 7 how to get the fuel there for the vehicles was certainly 8 on the table, so I put that on my list as well. 9 So we can start down at the end here with you, 10 Dr. Baums. 11 BOARD MEMBER BAUMS: Well, I've only met with 12 people on your list, different timing. The only 13 difference might be that I met with Bonnie Holmes-Gen of 14 the American Lung Association over the phone last week. 15 CHAIRPERSON NICHOLS: Okay. Great. 16 By the way, I guess I should say, in all of these 17 meetings people presented the same information that they 18 presented either in their written comments or their oral 19 comments today. So I didn't learn anything that isn't 20 already in the record. 21 BOARD MEMBER BERG: I met with also the people on 22 your list starting in February. And I didn't meet with 23 anybody in addition to that. 24 BOARD MEMBER RIORDAN: Madam Chair, in March I'd 25 met with Nissan, Ford, and Google Dot Org. And, again, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 their comments reflected what their testimony was today. 2 And I'll provide a list for the record. 3 CHAIRPERSON NICHOLS: Okay. 4 BOARD MEMBER SPERLING: Chairman Nichols, I think 5 I matched you, with one other -- there was only one other 6 one. I met with Ben Oshinsky, who's part of a start-up 7 company for electric vehicles -- or for plug-in hybrids. 8 BOARD MEMBER D'ADAMO: I met with the same 9 individuals that the Chair did, with the exception of I 10 did not meet with Ms. Peralta or with the Fuel Cell 11 Partnership. And then I was trying to go through pretty 12 quickly here. I don't know if I heard you mention Daimler 13 or not, but I did meet with Daimler. 14 CHAIRPERSON NICHOLS: I did not mention them 15 because I don't think they're on my lift, but they should 16 be. 17 BOARD MEMBER D'ADAMO: So I met with Bill Craven, 18 Walter Puetz, and Christian Morishideck on March 10th. 19 BOARD MEMBER SPERLING: Ditto for me. 20 CHAIRPERSON NICHOLS: Thank you. 21 BOARD MEMBER HILL: Madam Chair, I met with the 22 same organizations and individuals. I don't know if you 23 mentioned Dave Modisette of the California Electric 24 Transportation Coalition, but I met with him also. And 25 also BMW in February. I think you mentioned that. But PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 it's not on my list. So thank you. 2 CHAIRPERSON NICHOLS: All right. 3 BOARD MEMBER BERG: Madam Chair, may I just 4 clarify that I did not meet with everybody on your list. 5 I think we're going to have a problem with the Brown Act 6 here. I think they have to stay within a certain number 7 of Board members. But I also will submit a list for 8 clarification. 9 BOARD MEMBER BAUMS: And I have that same 10 clarification as well. 11 CHAIRPERSON NICHOLS: All right. Obviously we 12 all had meetings and have been working diligently to try 13 to understand what our options are here. And, you know, 14 speaking for myself, if I could just leave this where it 15 was and not make any changes at all, that would be my 16 preference until we got to the point of our resolution. 17 I am concerned by all of the pleas that we've 18 heard about the signals that we send with what we do or 19 don't do today, because everything is interpreted as a 20 signal, even though what we're talking about is 2012 to 21 2014, and by that period of time I'm hoping that we are 22 going to have our new revised ZEV program in place. And 23 therefore in a sense except for things like getting the 24 credit straightened out, you know, the transparency issue 25 resolved, it's almost in a way moot if we are able to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 increase the numbers substantially. 2 But the staff report recommends a floor for the 3 gold ZEVs which I think is just too low. And I think -- I 4 want to honor the work that our staff did and the 5 seriousness of their intention to try to keep this program 6 moving forward while at the same time not upsetting the 7 apple cart with numbers that they feel are just not doable 8 in the timeframe or not likely to be doable. 9 At the same time they've gotten more optimistic 10 since the expert panel came out. And I think we've all 11 gotten more optimistic as we think not only about what the 12 needs of California are, but about the needs of the 13 country and the need to make sure that the auto companies 14 understand that this is not just a collaborative effort 15 that we're involved in with them, that it really is a 16 serious push on our part to transform the auto fleets. So 17 there's a lot of tension around those numbers. And I 18 think that there's a need to move them upwards 19 significantly. But I'm not sure that we can just leave 20 things where they would have been if we hadn't, you know, 21 gone down the path that the Board went down in the past 22 with making the alterations that they made in the program, 23 you know, every time they revisited it from 1990 on. 24 So I'm kind of looking to my right because I 25 think both of the two individuals to my right have done PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 more thinking about the various trade-offs among the 2 different numbers. And I'm just going to ask you for your 3 thoughts about what you think is doable. 4 BOARD MEMBER D'ADAMO: Well, maybe if I could 5 just start off here. I agree with you, Madam Chair, about 6 maybe we ought to just leave things the way they are. 7 Because those numbers are bold, and back where we left off 8 in 2003 there was a sense that those numbers could be met. 9 But when this came before us, I think it was in May, I was 10 really struggling with that same issue at the time, and 11 then I viewed it as an opportunity to make up for some 12 lost ground. And so I think that if we were to make a 13 couple of changes so that we could get a good increase in 14 BEVs and in plug-ins, then in fact we have made up for 15 some lost ground and the numbers and the backfill and the 16 credit, if it would -- the various credit schemes, if it 17 would actually result in real numbers, then I feel that I 18 could walk away feeling that we have made a significant 19 change. 20 And the other point that I think is very crucial 21 is that -- I really appreciate Professor Sperling's motion 22 about transforming the whole program. But we've got to 23 send a very strong message so that as staff moves forward, 24 the stakeholders realize we mean business in whatever it 25 is we're going to do when we transform the program. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 So in light of that, I would like to make a 2 motion that we increase the floor to 10,000 and that we 3 also increase the number in Phase 3 -- right now we have 4 25,000 for the overall number for Phase 3 -- I would like 5 to make a motion that we increase that to 40. And that we 6 leave staff with the discretion to determine exactly what 7 level of credit would be provided for for an increased 8 credit for a fuel cell with the maximum range of -- with a 9 range of 200 plus, and also that extended range plug-in. 10 No matter what we do here, if we make some changes to 11 those credits, it could have an impact in the overall 12 numbers. 13 And just one last point. The reason I feel it's 14 important to increase the overall number beyond 25,000 is 15 because if we increase the floor, then we're going to be 16 robbing from the category of the silver plus. And so 17 that's the only way to deal with that conundrum. 18 CHAIRPERSON NICHOLS: Do we have a second for 19 that motion? 20 BOARD MEMBER HILL: I will second that motion. I 21 think that's a good compromise and a reasonable solution. 22 BOARD MEMBER RIORDAN: A clarification. 23 So essentially we're changing the minimum goal to 24 10,000, correct? Is that right? Is that what you're 25 saying? PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 CHAIRPERSON NICHOLS: Uh-huh. That's the 2 proposal. 3 BOARD MEMBER RIORDAN: And the gold only to 40, 4 right? 5 CHAIRPERSON NICHOLS: The total. 6 BOARD MEMBER SPERLING: The total. 7 CHAIRPERSON NICHOLS: The total. The gold only 8 would be the 10 -- or I mean the floor is the 10. And 40 9 is the overall. 10 BOARD MEMBER D'ADAMO: And, Madam Chair, what I 11 would suggest also -- I know Professor Sperling has much 12 more experience in this area and has been very thoughtful 13 about some other alternatives. I think if we turn it over 14 to him and staff, I think he's prepared a chart, that 15 might help to put some better perspective on these 16 numbers. 17 CHAIRPERSON NICHOLS: Let's have some -- we can 18 have some discussion on that motion. And it may be that 19 we'll want to consider some amendments. 20 All right. So do we have a chart? 21 BOARD MEMBER D'ADAMO: Do you have a chart? 22 BOARD MEMBER SPERLING: Yes. 23 BOARD MEMBER D'ADAMO: Where's this chart? 24 CHAIRPERSON NICHOLS: Where is the chart? 25 BOARD MEMBER RIORDAN: I made my own chart and it PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 was obviously wrong. 2 BOARD MEMBER SPERLING: So let me talk about what 3 chart she's referring to. 4 So this chart, I'll give a lead-in for it. My 5 colleague here, Dede D'Adamo, has come up with a -- you 6 know, I think reflects the frustration of a lot of us 7 that, you know, this has been a long path that we've been 8 following since 1990. And it's been frustrating because a 9 lot of us would like to see the advanced technologies, the 10 ZEV technologies come into being. And there have been 11 hiccups, is one way to describe it. 12 But let me come up with another counter-proposal. 13 Well, here lays out -- some of the, you know, ways to 14 think about it is the first row there is the staff 15 proposal. It's 2500 for the gold. And then if you add in 16 how many -- what that means in terms of total vehicles, 17 you have -- there's a lot of the plug-in hybrids that 18 follow. And so the total -- 19 CHAIRPERSON NICHOLS: That's the total that you 20 get for the three years. 21 BOARD MEMBER SPERLING: So that's the real -- you 22 know, we keep talking about these -- 23 CHAIRPERSON NICHOLS: It's the real number. 24 BOARD MEMBER SPERLING: This is the real number 25 of vehicles, would be -- in this case it would be 2500 PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 fuel cells. It would actually be -- in terms of battery 2 EVs, that would be a little over 4,000 battery EVs. So it 3 would be 2500 fuel cells or 4,000 battery EVs -- 4 CHAIRPERSON NICHOLS: -- or a combination of the 5 two. 6 BOARD MEMBER SPERLING: -- or a combination of 7 the two. And ending up with a total of about 75,000 8 vehicles. And as you see there, the staff estimates that 9 the cost would be 875 million. 10 If we pushed it up to 5,000 -- if we pushed the 11 gold number up to 5,000 -- so that's 5,000 fuel cells or 12 about 8,000 battery EVs, and then the rest being 13 plug-ins -- there would be a total of about 67,000 14 vehicles. And that would add another $180 million. 15 Another proposal, which is what I would like to 16 put forth here, would be to put the -- create a target 17 where the fuel cell vehicle -- where the plug-in hybrid 18 vehicles get a little more credit for what we've been 19 talking about for the Volt-type vehicle, extended range 20 vehicle. And there would be a couple more credits for the 21 fuel cells as well. And that would end up with either 22 5300 fuel cells or about 11,000 of the standard battery 23 EVs, total of about 60,000 vehicles. And that would 24 actually add less money. It would only be 147 more than 25 the 875. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 And the next number, which is what was just 2 proposed here by Member D'Adamo, and that would be 3 10,000 -- in that case it would be 10,000 fuel cell 4 vehicles. But if you gave the extra credits for the fuel 5 cells, the actual fuel cell credit number would be 7,000, 6 7100 plus -- excuse me -- or -- this is the simple 7 version, by the way -- or about 14,000 -- 13 to 14,000 8 battery EVs, with a total of 50,000. 9 So, you know, this -- so that third line there is 10 actually what I would propose. And that represents a huge 11 increase beyond what, you know, the staff was proposing. 12 It's a lot of vehicles. You know, some might say it's a 13 lot, some might say it's a little. 14 CHAIRPERSON NICHOLS: But those are real 15 vehicles. That's not credits. That's not things in the 16 bank, right? 17 BOARD MEMBER SPERLING: Those are real vehicles. 18 And, you know, I would add the observation that 19 this really is pushing the envelope. You know, I've spent 20 a lot of time studying, you know, these vehicle 21 technologies and, you know, working these numbers both in 22 an academic sense as well as with the industry. This is 23 going to be tough. And I don't think -- you know, I know 24 lots of people would like to see a lot more vehicles. But 25 we're really talking about, you know, a transition period PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 here. And as I suggested before, when we get to 2015, we 2 can have a dramatic ramp-up. But the reality is that in 3 battery EVs the market is still very uncertain. The 4 battery technology, you know, is just about here but not 5 quite here. The market is very uncertain, how many city 6 EVs, you know, market is there really? How many people 7 are really going to be willing to buy those? The fuel 8 cell vehicles still need technological development. 9 So I would suggest this is the outer reach of 10 what is responsible. Not to say your proposal is not 11 responsible. But, you know, so that's -- I mean we can 12 talk about these numbers more. But that's what I would 13 propose. 14 CHAIRPERSON NICHOLS: That's in terms of people 15 who are playing the numbers game as far as, you know, our 16 commitment to this program, the target number that you're 17 talking about in the pure gold category -- I guess what we 18 would define as pure gold -- would be triple -- 19 BOARD MEMBER SPERLING: Right. 20 CHAIRPERSON NICHOLS: -- what it was under the 21 staff proposal, which I suspect is going to make the staff 22 queasy. But -- 23 BOARD MEMBER SPERLING: Never mind a few 24 companies. 25 CHAIRPERSON NICHOLS: Yeah, Well, and not to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 mention the regulated community, right. 2 But, you know, one of the questions is really 3 those cost numbers. I heard some criticism of whether our 4 baseline cost numbers were realistic or were really too 5 high. And we haven't focused on that in the course of 6 this hearing. I suppose that's one element of skepticism 7 about, you know, whether we were being aggressive enough. 8 I certainly -- I should just say I was concerned that 9 maybe we were potentially overestimating the cost. So I 10 don't want to put out hard numbers on any of these items. 11 BOARD MEMBER SPERLING: Right. Yeah, I would 12 say -- I believe the numbers are significantly less than 13 that, partly also because we've -- there's been a lot of 14 the learning over the last couple of years before those 15 estimates were made, and I think that also these don't 16 reflect scale and learning improvements because we're just 17 kind of extrapolating out these numbers. And so as you 18 get, you know, beyond a thousand or 2,000 or 3,000, the 19 cost per vehicle would be coming down. And these 20 estimates don't reflect that. 21 CHAIRPERSON NICHOLS: Could I just pursue that 22 for a second, because I heard during the course of 23 conversations with both environmental groups and 24 industries sort of different -- very different statements 25 about when costs actually start to come down. Certainly PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 it's not when you're building more demonstration vehicles 2 or more prototype vehicles, because there's no economy of 3 scale there at all. But in the production process how 4 many it really takes before you start to see some 5 improvements. Do you have a comment on that? 6 BOARD MEMBER SPERLING: I'll take a first cut at 7 it. And, that is, that, you know, industry -- you know, 8 when they go into some sort of serial production and 9 that's, you know, in the thousands per year, the costs 10 come down -- start coming down considerably. And I think 11 that's where we are. You know, with these gold vehicles, 12 not so much. But definitely with the plug-in vehicles, 13 that would definitely be the case. And much of that cost 14 is from the plug-in vehicles. 15 I don't know, maybe Tom Cackette would know what 16 proportion. But a big proportion of it is plug-ins, not 17 the gold vehicles. 18 CHAIRPERSON NICHOLS: Do you have an answer on 19 that? 20 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 21 CHIEF BEVAN: Depending on which compliance scenario we're 22 talking about, whether it's fuel cells or battery electric 23 vehicles, yeah, the number of plug-in vehicles, it's sort 24 of a -- let me check real quick. 25 CHAIRPERSON NICHOLS: Got to get back to the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 computer here. 2 BOARD MEMBER SPERLING: But these are very 3 difficult numbers to pin down in any case. 4 CHAIRPERSON NICHOLS: Of course. Well, it's a 5 very competitive market out there. These companies are 6 not all the same. They don't have the same research, the 7 same product mix, the same -- I mean we understand that 8 it's going to be a range and it's going to be much tougher 9 for some than for others. 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: If you 11 look at the first line, you can see there's 30 times more 12 vehicles at silver plus than the others. So that tells 13 you why that one I think tends to -- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: They're in the same order of magnitude, the 16 plug-in hybrids and the fuel cell vehicles. The plug-in 17 hybrids do outweigh the fuel cell vehicle expenses in 18 staff's proposal, and even at, say, the 5,000 floor. 19 CHAIRPERSON NICHOLS: Dr. Baums. 20 BOARD MEMBER BAUMS: Yes. Well, as the new kid 21 on the block, I'd like a little clarification. 22 Given the gravity of the health concerns and the 23 climate concerns, not to mention dependence on oil, I am 24 concerned about sending a signal that -- even though both 25 Dede's and Dan's proposal, I understand the merit of, and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 I'm not saying I'm against either one at this point, but I 2 was impressed that we'd be sending a signal if we move 3 away from the current standard. And so I think it's 4 important for me to understand why either one of these 5 proposals is better than just keeping things the way they 6 are, given that we're going to review the whole program in 7 a year. Because -- you know, I'd definitely second all 8 the people that have said we need to simplify the program, 9 because as somebody trying to get their arms around this 10 program, it's very difficult. And, you know, so I am 11 worried about the signal that we send. Even if this makes 12 sense to us and to staff, is it going to make sense 13 outside of this room, except to a select group? 14 CHAIRPERSON NICHOLS: I think that's a very valid 15 question, a very valid concern. I guess in my own mind 16 what convinced me that we needed to do something today as 17 opposed to waiting was the fact that I was told by staff 18 that companies had been waiting since earlier this year, 19 and maybe before, making decisions about investments that 20 they're making now for their plans for the 2012 to 2014 21 timeframe, that they actually do have to make decisions 22 this far in advance, and that some of those decisions 23 could pretty drastically affect what would be offered for 24 sale in California as well as what they would be putting 25 money into in their research and development -- in their PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 current development programs. I mean every one of them is 2 looking at a future in which they've got to make a 3 transition. But the question is, what do they do in the 4 near term to stay within our guidelines and still keep 5 doing business? And so in that sense I would invite 6 comment here. But that seemed to be the principle reason 7 why we needed to say something today, not only about where 8 we're headed long term, but specifically about, you know, 9 what we want them to be banking on right now. 10 BOARD MEMBER SPERLING: There is one other 11 important procedural reason and, that is, the blended 12 plug-in hybrids were not taken care of before. And so if 13 we left it alone, there'd be no credit at all for any of 14 the blended plug-in hybrids. And so we have to fix -- 15 that's probably the biggest thing we have to fix. 16 BOARD MEMBER D'ADAMO: And BEVs. One's a fuel 17 cell strategy that clearly is not sustainable and the 18 other is sort of a mix: BEVs, fuel cell, plug-ins. 19 CHAIRPERSON NICHOLS: Yeah, the big bet on the 20 fuel cells obviously didn't pan out. And we have to cope 21 with that. 22 BOARD MEMBER RIORDAN: Madam Chair, just a quick 23 question to the staff. 24 The proposal by Dr. Sperling at this point in 25 time -- and I know I'm putting you in a very difficult PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 position -- but are you comfortable with that given his 2 research? I don't know whether you have had benefit of 3 his research. And I think sometimes it's good to have 4 somebody who's spent a great deal of time looking at it 5 from kind of an outside perspective. But I just feel I 6 need to ask you how you feel, because you're going to have 7 to implement it. 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, I 9 think there's a balance here. And the Board is equally 10 capable of deciding that balance point as the staff is. 11 And, that is, the need for forward progress versus the 12 need to spend -- to not spend money that may not be the 13 best use of that money. And so we tended to go for the 14 lower number of gold vehicles because we weren't sure that 15 the extra expenditure of money really moved development 16 and solution of problems that, in fact, fuel cells 17 vehicles have. Like they're not fully durable for the 18 lifetime of the vehicle yet, and cost reduction. We 19 didn't think it was necessarily the best expenditure to go 20 higher. 21 But on the other hand, you know, we've got to 22 build infrastructure, we've got to show a positive upward 23 inclination for investors in this area. And if the 24 numbers aren't going up, we're not going to ever to get to 25 the giant numbers that we ultimately need. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 So it was a balance there, and I don't know where 2 the right point is. We thought it was at the 2500. I 3 think numbers that are, you know, 10,000 or above are 4 probably getting pretty big. 5 I want do make one clarification on the table 6 too, which I didn't realize until the moment. But the 7 number of vehicles are for the three-year period. The 8 dollars are per year. 9 CHAIRPERSON NICHOLS: These are per year. 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. 11 But for the three-year window we're talking about, the 12 numbers are actually three times higher here, and I -- 13 CHAIRPERSON NICHOLS: Okay. So that's a 14 significant -- 15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: 16 -- forgot to say that or recognize that. 17 CHAIRPERSON NICHOLS: Well, you know, I have to 18 say that, put that way, that kind of seals me in the 19 direction that we're right to be moving forward to 20 increase these numbers dramatically. Because, you know, 21 the companies have been clinging to the past for a long 22 time, and it's time to be moving on. And I think pushing 23 them to make a bigger investment than they chose or wanted 24 to do is the right thing to be doing at this stage of the 25 game. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 BOARD MEMBER HILL: That's the way we'll drive 2 that technology. 3 CHAIRPERSON NICHOLS: But as between the two 4 proposals, I guess I'd have to say that, although my heart 5 is in the direction of just raising the number to the 6 higher level, that I feel like I need to really 7 acknowledge that I'm not the biggest expert on the 8 technology and I'd be inclined to back the proposal that 9 Professor Sperling has put before us as an alternative. 10 If we could get that on the table, I would do that. 11 BOARD MEMBER D'ADAMO: You know, I'd actually be 12 prepared to amend my motion, because I do think 13 Dr. Sperling has spent a lot more time and he knows the 14 detail much better than I do. I just really felt it was 15 important to put out a target -- a high target and then 16 have a discussion. 17 CHAIRPERSON NICHOLS: Okay. So you would amend 18 your motion to basically include his table there? 19 BOARD MEMBER D'ADAMO: Right. 20 CHAIRPERSON NICHOLS: All right. Do we have a 21 second for that? 22 BOARD MEMBER HILL: I will amend my -- I will 23 also -- 24 CHAIRPERSON NICHOLS: All right. And that would 25 be the seconder. Good. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 Okay. Further discussion? 2 EXECUTIVE OFFICER GOLDSTENE: Madam Chair, we 3 want to clarify, it's the bottom line, the 7 -- 4 CHAIRPERSON NICHOLS: No, it's the middle. 5 BOARD MEMBER RIORDAN: The 5357. 6 CHAIRPERSON NICHOLS: Yeah. 7 BOARD MEMBER SPERLING: It's really -- I mean in 8 terms of the way it's crafted, it's 7500 is the real 9 number -- I mean is the -- what is real? 10 EXECUTIVE OFFICER GOLDSTENE: We understand, a -- 11 CHAIRPERSON NICHOLS: What is "is," right? 12 Just make it 7500 and then put some footnote -- 13 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 14 next line Dr. Sperling tells us to simplify the 15 regulation, I'll remember this moment. 16 CHAIRPERSON NICHOLS: Fair enough. 17 All right. Ms. Berg. 18 BOARD MEMBER BERG: I have a point of 19 clarification. 20 In looking at the current increase and also 21 increasing the credits for the fuel cell, then what impact 22 will that have on the BEVs, if any? Because what we've 23 been hearing today is so much a tug of war between, you 24 know, favoring a technology. And I, like the Chair, would 25 really like to think that we are approaching this from a PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 technology neutral, supporting what -- you know, the 2 entrepreneurship and the consumers and pushing it forward. 3 So I just get a little bit nervous when it looks like we 4 might be again favoring one technology over another. 5 BOARD MEMBER SPERLING: Let me give you a simple 6 answer, if I can do such a thing. Give it a try. 7 I think what we're doing is raising everything in 8 the gold category forward in lock step. So we're 9 basically tripling and then we're making -- but we're 10 making two adjustments. One is -- it doesn't show up in 11 that, but it's part of the resolution, is to provide 12 another category of plug-in hybrids. And so that there 13 would be more credits potentially for a plug-in hybrid, 14 you know, the one that meets the US 06 drive cycle. And 15 at the same time we also provide another category of fuel 16 cells for also another high performing category. And that 17 would get two extra credits. We haven't specified how 18 many extra credits for the plug-in. You know, it's 2. -- 19 somewhere between 2.4 and 3.0. I guess I might even 20 subject 2.7, you know, split the difference. We're being 21 very scientific here. 22 So that's what we're -- but we're being -- at 23 least in terms of the proposal we're being fuel technology 24 neutral even though -- of course nothing is completely 25 neutral. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 CHAIRPERSON NICHOLS: And we are creating an -- 2 we're creating an incentive for better batteries and 3 better fuel cells. 4 BOARD MEMBER SPERLING: Right. Because we're 5 tripling the number of battery EVs and, you know, tripling 6 the number of fuel cells, unless you do -- if you do a 7 better fuel cell, you do a little less. If you do a 8 better plug-in, you do a little less. But you triple the 9 number of battery EVs. 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 11 battery number for line three I think is around 12,500 if 12 you did hundred mile battery vehicles. 13 CHAIRPERSON NICHOLS: I think it has to be 14 acknowledged that we're recognizing the fact that the fuel 15 cells have farther to go in the development process. So 16 we are giving -- 17 BOARD MEMBER BERG: And that is part of the 18 regulation. We understand that in that technology 19 forcing. I'm not disagreeing with that. But I appreciate 20 your explanation and I understand that. Thank you. 21 CHAIRPERSON NICHOLS: Other questions, comments 22 before I call for a vote on this item? 23 BOARD MEMBER BERG: Are we going to vote for one 24 item at a time or are we going to not discuss anything 25 about the travel or the -- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 CHAIRPERSON NICHOLS: Ah, sorry. I was just 2 going for the number. We might as well deal with the 3 other amendments that were proposed at the same time and 4 do it all at once if we can. 5 BOARD MEMBER D'ADAMO: Well, I would like to -- 6 I'm not sure -- procedurally I guess amend the main 7 motion. 8 CHAIRPERSON NICHOLS: You have a main motion on 9 the floor. I think you can -- 10 BOARD MEMBER D'ADAMO: Right, I would make a 11 motion to include in the proposal that we go back to 12 current regulation with respect to intermediate volume 13 manufacturers. 14 CHAIRPERSON NICHOLS: That's accepted by your 15 seconder. 16 BOARD MEMBER HILL: Yeah. 17 CHAIRPERSON NICHOLS: Good. Okay, so we're 18 adding that. 19 And I'd like to add a provision that we're going 20 to alter the staff proposal on transparency of the credits 21 to include trades within that as well. 22 And were there other changes that other -- I 23 think we're going to leave the -- I will accept the staff 24 recommendation as modified by New York for the travel 25 provision. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 BOARD MEMBER BERG: And I just want to make sure, 2 on the intermediate then, would that change the hydrogen 3 program for BMW? Does that allow them to continue their 4 hydrogen program? 5 Staff. 6 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, I 7 don't know what they'll do. But they testified that it 8 would probably end that program because they would have to 9 start a fuel cell program, because they're the only 10 intermediate volume manufacturer that I think doesn't 11 really have -- that's going to become big that doesn't 12 have a fuel cell program underway. 13 BOARD MEMBER BERG: I just want do make sure that 14 that's not an unintended consequence. 15 CHAIRPERSON NICHOLS: I think they've been 16 nurturing that program for a long time. And maybe 17 they'll -- you know, they may have to cut it back some 18 because it just doesn't meet the needs of the times. 19 BOARD MEMBER SPERLING: You know, I realize 20 there's one clarification -- in that proposal, when we 21 talked about another category of fuel cells, we didn't 22 specify what that was, I don't believe. My intention was 23 it would be something -- it would be with a range of 300 24 miles, which would match what Honda says is their, you 25 know, latest generation state of the art. And most of the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 fuel cells are less than that. So it's not clear how many 2 of them would be able to achieve that. But that would be 3 the extra -- the higher category. 4 CHAIRPERSON NICHOLS: Any other clarifications, 5 last minute issues that people have? 6 If not, I will call the question. And I guess we 7 might as well make it a roll call vote. 8 So the clerk will call the roll, please. 9 SECRETARY ANDREONI: Dr. Baums? 10 BOARD MEMBER BAUMS: Yes. 11 SECRETARY ANDREONI: Ms. Berg? 12 BOARD MEMBER BERG: Yes. 13 SECRETARY ANDREONI: Ms. D'Adamo? 14 BOARD MEMBER D'ADAMO: Aye. 15 SECRETARY ANDREONI: Supervisor Hill? 16 BOARD MEMBER HILL: Yes. 17 SECRETARY ANDREONI: Ms. Kennard? 18 Oh, wait. She wasn't here. Sorry. 19 Mayor Loveridge? 20 Oh, he left? Okay. 21 Mrs. Riordan? 22 BOARD MEMBER RIORDAN: Aye. 23 SECRETARY ANDREONI: Professor Sperling? 24 BOARD MEMBER SPERLING: Yes. 25 SECRETARY ANDREONI: And Chairman Nichols? PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 CHAIRPERSON NICHOLS: Yes. 2 SECRETARY ANDREONI: Motion passes. 3 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: On my 4 list there was one -- we weren't certain if you included 5 in that the Mitsubishi issue about the gold credits. 6 And -- 7 CHAIRPERSON NICHOLS: I think we asked you to 8 look at that in the context of the future. 9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That 10 15-day? 11 CHAIRPERSON NICHOLS: Fifteen-day, yes. 12 BOARD MEMBER HILL: As well as that loophole 13 question too. 14 CHAIRPERSON NICHOLS: Yes, that was on the list 15 for the 15-day. 16 All right. 17 BOARD MEMBER BAUMS: And energy versus range 18 also. 19 CHAIRPERSON NICHOLS: Yes, and -- well, that's 20 really kind of for the long -- I think for more than 15 21 days. That's part of the major revision. 22 I really want to thank everyone who participated 23 in the hearing. It's been at a very high level. And we 24 appreciate all of your input and all of your 25 thoughtfulness and care for this program. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 We're going to take a minute or two -- maybe a 2 ten-minute break just to give ourselves a stretch. And 3 then we'll come back, and we have a couple other items to 4 deal with. 5 Thank you. 6 (Thereupon a recess was taken.) 7 CHAIRPERSON NICHOLS: Ladies and gentlemen? 8 Excuse me, ladies and gentlemen. We have two 9 other items before the Board. We also have the staff 10 actually writing up the resolution, because I think 11 there's a fair amount of confusion out there about what 12 was actually adopted. And rather than to continue to try 13 to explain it -- I thought I had it on -- I'd like to have 14 those of you who care about this item stick around and 15 wait to actually see the resolution so we can clarify it 16 for you in writing. 17 CHIEF COUNSEL JENNE: Chairman Nichols, we just 18 talked about that a few minutes ago. I think it might be 19 difficult to get all the nuances in the resolution. But 20 what we could do is just put kind of together a plain 21 English statement of what occurred so people can have, and 22 then leave the final resolution until later. 23 CHAIRPERSON NICHOLS: That's fine. That will 24 work. That's fine. That's what we need is the plain 25 English version. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 Thanks. 2 You know, we worked our way through a lot of 3 material there, and I think it's going to take people some 4 time to digest it. But from a policy perspective -- 5 EXECUTIVE OFFICER GOLDSTENE: Madam Chairman, 6 staff is working on a write-up. 7 CHAIRPERSON NICHOLS: -- I think it was a good 8 process. And I think where we ended up is in a place that 9 we're all going to look back on and think move the ball 10 considerably forward. 11 Okay. So the next item is the Proposed Revisions 12 to the Lower Emission School Bus Program Guidelines, 13 including allocations of funding. 14 It's not? 15 EXECUTIVE OFFICER GOLDSTENE: No, this is Moyer. 16 CHAIRPERSON NICHOLS: Oh, it's Moyer first. 17 Sorry. 18 Okay. Well, let's see. 19 Here we are. Right you are. 20 Item 08-3-3, Proposed Revisions to the Carl Moyer 21 Program Guidelines. Thank you. 22 For the past ten years the Carl Moyer Program has 23 provided financial incentives to individuals to 24 voluntarily purchase cleaner engines and technologies. 25 This incentive program complements California's regulatory PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 program by funding emissions reductions that are early or 2 are in excess of what's required by regulation. 3 The Carl Moyer Program has been very successful, 4 with the demand for funding typically outstripping 5 available funds in spite of a large expansion in funding 6 in recent years. About 7500 engines have been cleaned up 7 throughout California during the first seven years of the 8 program, reducing smog-forming emissions by about 24 tons 9 per day and diesel particulate emissions by about 1 ton 10 per day. 11 The Carl Moyer Program Guidelines define basic 12 implementation requirements to ensure that public funds 13 are spent wisely on real, enforceable, and cost effective 14 projects that can be credited in our state implementation 15 plans. The guidelines also include administrative 16 procedures to ensure program transparency and 17 accountability. 18 These guidelines need to be revised periodically 19 to keep pace with technological, regulatory, and policy 20 changes and to benefit from the experience that ARB and 21 the local air districts have accumulated in overseeing and 22 implementing the Carl Moyer Program. 23 Mr. Goldstene, will you please introduce the item 24 and begin the staff presentation. 25 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 Nichols, members of the Board. 2 As you mentioned, for more than ten years the 3 Carl Moyer Program has successfully accelerated the 4 voluntary turnover of old, higher polluting engines and 5 achieved much-needed surplus emission reduction. The Carl 6 Moyer Program has served as a model in the design of other 7 incentive programs, most notably the ARB's Goods Moment 8 Emission Reduction Program, the one billion dollar program 9 for which the Board approved implementation guidelines 10 last month. 11 Along with the need to update the Carl Moyer 12 Program Guidelines to keep them current and relevant, the 13 proposed guidelines reflect the need to remain responsive 14 to new challenges. Some of the challenges staff faced in 15 preparing the proposed guidelines involved balancing 16 conflicting goals; for example, balancing the desire for 17 more program simplicity with the need for more 18 accountability and oversight. Another challenge involved 19 identifying additional possibilities for achieving surplus 20 emission reductions in the face of new regulations that 21 decrease the opportunities for such reductions. Of 22 special note is the proposed new off-road equipment 23 replacement category that expands opportunities for 24 funding cleaner off-road equipment. 25 Staff also took on the challenge of coordinating PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 the Carl Moyer Program with the Goods Movement Emission 2 Reduction program to make sure that these two incentive 3 programs make the best use of public funds and do not 4 compete with each other. 5 Staff worked in close cooperation with the local 6 air districts in developing the proposed guidelines, 7 receiving useful input during three public workshops and 8 numerous work group meetings that focused on specific 9 guideline areas. Staff also received valuable input on 10 key policy issues from an advisory group convened for that 11 purpose. And of course I'd like to extend my appreciation 12 to Board Member Sandra Berg for her leadership of that 13 group. 14 I'd like now to turn the presentation over to Mr. 15 Joe Calavita of the Mobile Source Control Division, who 16 will go over the proposal in more detail. 17 AIR POLLUTION SPECIALIST CALAVITA: Good 18 afternoon, Chairman Nichols and members of the Board. 19 This presentation will provide an overview of the 20 proposed 2008 Carl Moyer Program Guideline revisions. 21 I'll start by providing some brief background on the Carl 22 Moyer Program before highlighting the key issues related 23 to these guideline revisions. 24 --o0o-- 25 AIR POLLUTION SPECIALIST CALAVITA: Since 1998, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 the Carl Moyer Program has filled a critical niche in 2 California's strategies TO achieve clean air. The program 3 provides grant funding to encourage the voluntary purchase 4 of cleaner-than-required engines, equipment and 5 technologies. The program's statutory incremental cost 6 requirement ensures applicants literally buy into the 7 program, and the cost effectiveness limit ensures projects 8 achieve a certain bang for the buck. 9 Moyer is implemented as a partnership between the 10 Air Resource Board and the local air districts. ARB 11 develops and adopts guidelines which, along with state 12 law, define the minimum program requirements. And ARB 13 allocates state program funding to local air districts. 14 Air districts implement the program on the ground, 15 evaluating and selecting projects and contracting with 16 vehicle and equipment owners. Air districts retain the 17 flexibility to adopt requirements that are more stringent 18 than those identified in the Moyer guidelines. 19 --o0o-- 20 AIR POLLUTION SPECIALIST CALAVITA: The Carl 21 Moyer Program has been highly successful, achieving 22 significant air quality benefits in its first seven years, 23 and has proven extremely cost effective at about $3,000 24 per ton of NOx reduced. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 AIR POLLUTION SPECIALIST CALAVITA: As you can 2 see, legislation in 2004 significantly boosted available 3 funding for the Carl Moyer Program. Districts are now 4 receiving their year ten funds from ARB, and with these 5 funds ARB will have distributed a total of more than $400 6 million in Carl Moyer Program funds to air districts. 7 --o0o-- 8 AIR POLLUTION SPECIALIST CALAVITA: With multiple 9 years of Moyer implementation under our belts, we know the 10 importance of modifying the Moyer guidelines as necessary 11 to adjust for regulatory changes and to continue to 12 improve the program. As such, I'll now describe the 13 guideline revisions before you today. 14 This slide outlines our goals for the 2008 Carl 15 Moyer Program Guideline revisions. I'll touch on these 16 goals in summarizing the proposed guidelines in the slides 17 ahead. 18 --o0o-- 19 AIR POLLUTION SPECIALIST CALAVITA: One of the 20 comments we heard from air district and applicants is that 21 they'd like more flexibility in program implementation. 22 At the same time, the California Department of Finance and 23 Bureau of State Audits recent Carl Moyer Program 24 evaluations included recommendations for more program 25 specificity and oversight. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 Our goal, therefore, has been to strike a balance 2 between streamlining the program's administrative 3 requirements and addressing did DOF's and BSA's 4 recommendations. 5 --o0o-- 6 AIR POLLUTION SPECIALIST CALAVITA: We held 13 7 Program Administration Work Group meetings with air 8 district staff to strike this balance between program 9 flexibility and more specifics and oversight. This slide 10 highlights some of the issues addressed through this admin 11 work group. 12 In addition to the changes listed here, we're 13 also proposing to update the Moyer guidelines every four 14 years rather than every two to three years, to make the 15 program more predictable and easy to implement. 16 We're also continually striving during 17 development of new rules to provide user-friendly analyses 18 of how rule adoption would impact Moyer funding 19 eligibility. These analyses are typically included in 20 proposed rule staff reports. Our goal is to make this 21 discussion as clear and frank as possible up front so the 22 implications of each new rule on Moyer funding 23 opportunities can be fully vetted. 24 And, finally, to ensure accountability, these 25 guidelines commit ARB to conduct regular audits of air PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 districts Moyer programs. ARB plans to audit enough 2 districts to have reviewed at least ten percent of annual 3 program funds each year. 4 --o0o-- 5 AIR POLLUTION SPECIALIST CALAVITA: To reflect 6 the impact of inflation, we're also proposing to increase 7 the program's cost-effectiveness cap from $14,300 to 8 $16,000 per weighted ton. 9 And we now have enough data from the program's 10 first seven years to calculate an average incremental cost 11 as a percentage of total project cost. We're proposing 12 project incremental cost, or the applicant cost share, to 13 be based on this historical percentage instead of a dollar 14 value. This approach simplifies program implementation 15 and provides an added incentive for an applicant to shop 16 for the best deal. 17 --o0o-- 18 AIR POLLUTION SPECIALIST CALAVITA: We're also 19 exciting to be proposing a new off-road equipment 20 replacement category for the Carl Moyer Program. This 21 program would allow for the accelerated replacement of an 22 older piece of equipment with new equipment. This program 23 would be particularly useful for projects for which a 24 repower is infeasible or impractical. The project 25 criteria we're proposing are intended to ensure grants PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 accelerate replacement of old equipment with new, cleaner 2 equipment and to assure we're not paying for equipment 3 replacement that was going to occur anyway. 4 This program also addresses the requirement of SB 5 467, which directs ARB to develop a program that funds 6 replacement of internal combustion equipment with electric 7 equipment that can do the same job. 8 --o0o-- 9 AIR POLLUTION SPECIALIST CALAVITA: This slide 10 highlights some of the specific elements of the equipment 11 replacement program. Like the on-road fleet modernization 12 program, districts would submit a program implementation 13 plan to ARB for approval prior to funding projects. 14 The resolution in front of you today also 15 authorizes and directs the ARB Executive Officer to 16 evaluate updated agricultural equipment fleet turnover 17 data within one year and, if warranted by the data, update 18 the maximum project life for ag equipment. 19 --o0o-- 20 AIR POLLUTION SPECIALIST CALAVITA: This past 21 December and January, we also held two Carl Moyer Program 22 advisory group meetings, which we were privileged to have 23 led by Board Member Sandra Berg. The advisory group was 24 informal and open the all interested stakeholders. 25 These first two advisory group meetings focused PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 on policy issues related to these proposed Moyer 2 guidelines. However, we're very excited that Board Member 3 Berg has offered to continue leading this group focused on 4 emerging policy issues related to Moyer and our other 5 incentive programs. 6 --o0o-- 7 AIR POLLUTION SPECIALIST CALAVITA: This slide 8 identifies the four issues discussed at our two Moyer 9 advisory group meetings. For the first issue, program 10 complexity, we summarized for the advisory group the steps 11 taken to streamline program implementation. 12 The advisory group also discussed the Carl Moyer 13 Program's existing minimum project life, which is three 14 years, except for stationary ag engines, for which it is 15 one year. 16 Some stakeholders commented that we should 17 shorten project life for all source categories to one 18 year. However, a shorter project life would reduce the 19 cost effectiveness of the Carl Moyer Program and could 20 result in paying for regulatory compliance. We're 21 therefore not recommending a change to minimum project 22 life with these guidelines. 23 Our recommendations regarding the retrofit 24 requirement and coordination with the Proposition 1B Goods 25 Movement Emission Reduction Bond Program are summarized on PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 the following slides. 2 --o0o-- 3 AIR POLLUTION SPECIALIST CALAVITA: The existing 4 Moyer guidelines require that for all off-road repower 5 projects, a retrofit device must also be installed if one 6 is verified for the project engine. Districts have 7 commented that they would like the flexibility to pursue 8 the most cost-effective projects, which may or may not 9 include installation of a retrofit. Districts and some 10 applicants have also expressed concern that requiring 11 retrofits as the off-road retrofit market is developing 12 can be an administrative burden. 13 ARB remains committed to an aggressive retrofit 14 program. We're proposing today limited flexibility in 15 implementing the retrofit requirement for Moyer off-road 16 projects. Districts would have to offer a retrofit as 17 part of off-road projects. Applicants may decline the 18 retrofit, but must be informed that they may have to pay 19 for one in the future due to ARB's off-road rule adopted 20 last year. This flexibility would expire after one year 21 unless renewed by the Executive Officer. As indicated on 22 this slide, we believe the off-road rule will continue to 23 drive demand for retrofit projects. 24 Moyer staff has also worked closely with staff 25 from the Proposition 1B Bond Program to ensure the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 programs are complementary and maximize the effectiveness 2 of our state incentive funds. The guideline revisions 3 clearly delineate what's eligible for Moyer, what's 4 eligible for the bond and, where it makes sense, what 5 projects should be eligible for either program. Our 6 approach has been to direct bond-eligible projects to the 7 bond in source categories where the bond has significantly 8 more funds to expend. 9 We've also aligned the Moyer funding limits for 10 some of the project types to deter applicants from 11 favoring one program over the other. I'll discuss these 12 issues further on the following two slides. 13 --o0o-- 14 AIR POLLUTION SPECIALIST CALAVITA: This slide 15 indicates what projects would be directed to the Bond 16 Program versus Moyer. The Carl Moyer Program also funds 17 ag pumps, farming construction equipment, cap scrap and 18 other categories not eligible for goods movement bond 19 funding. 20 In general, port trucks, Class One freight 21 locomotives, and shore power for cargo berths, which are 22 targeted to receive significant bond funds, would be 23 restricted from receiving Moyer funds. 24 We're recommending that these categories only be 25 eligible for Moyer funding if bond funds are unavailable. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 This strategy is to help ensure timely expenditure of the 2 much larger pot of available bond funds. 3 At this point I'd like to note that we've 4 provided in the Board's information packet a strikeout 5 underlined document detailing staff's proposed 6 modifications to these guideline revisions. These are 7 also available for the public on the table in the lobby 8 and on our website. These modifications are based on 9 comments we received during the 45-day public comment 10 period. In this document we're proposing additional 11 flexibility to fund freight locomotives with Moyer funds 12 if bond funds are unavailable. 13 --o0o-- 14 AIR POLLUTION SPECIALIST CALAVITA: As mentioned 15 earlier, we're also proposing to align maximum eligible 16 funding for some source categories with that allowed by 17 the bond - typically 50 percent. We're not proposing to 18 align other project requirements, such as percent 19 operation in California, with the bond at this time. 20 We believe these strategies to align Moyer with 21 the bond are critical to ensure the effective 22 implementation of both programs, particularly since bond 23 program legislation requires unspent funds and funds under 24 contract which fall through must be returned to the 25 Legislature for reappropriation. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 The strikeout underlined document I just 2 mentioned also includes modified language for the funding 3 of truck fleet modernization projects. Some stakeholders 4 have indicated that grants for only half the cast of a 5 truck would limit the ability for owner-operators to 6 participate in the program, and therefore allowable 7 funding should remain 80 percent as it is in the current 8 Moyer guidelines. We've heard these concerns and are 9 recommending that, if cost effective, owner-operators be 10 eligible to receive up to 80 percent funding. Maximum 11 allowable funding for larger fleets would remain 12 50 percent. 13 Finally, a brief look ahead. Part of the Carl 14 Moyer Program's success has been in its ability to evolve 15 to meet new challenges. In the years ahead it will be 16 increasingly critical that we coordinate the Carl Moyer 17 Program with emerging grant programs to meet California's 18 diverse air quality goals. 19 New regulations for in-use engines are also 20 impacting Moyer eligibility for many source categories. 21 There are still opportunities for funding these 22 categories, but we must increasingly target early 23 reductions, reductions which go beyond regulatory 24 requirements and exempt sources such as small businesses. 25 We're also evaluating potential innovative new PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 approaches, such as vouchers to streamline the program or 2 loans to help our state dollars go further. And we 3 continue to pursue new program opportunities such as the 4 off-road equipment replacement program included in these 5 guidelines. 6 While the types of projects funded vary from year 7 the year, demand for Carl Moyer Program funds continues to 8 exceed available dollars. Given the cost of cleaning up 9 California's in-use diesel engine fleet, we expect this 10 demand to remain high for years to come. 11 --o0o-- 12 AIR POLLUTION SPECIALIST CALAVITA: In 13 conclusion, staff has worked closely with districts and 14 other stakeholders to develop guidelines that are 15 flexibility, yet provide ample oversight, transparency, 16 and accountability. These Carl Moyer program guidelines, 17 the fifth edition since the program's inception, ensure 18 the program's continued success in an evolving regulatory 19 and policy landscape and the continued ability of the 20 program to achieve surplus, cost effective and SIP 21 creditable emission reductions. 22 We recommend that you approve the proposed Carl 23 Moyer Program Guideline revisions as well as the minor 24 underline strikeout modifications provided by staff. 25 Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 CHAIRPERSON NICHOLS: Thank you. 2 I'd like to ask Board Member Berg to lead off the 3 discussion here and preside over this proceeding. 4 BOARD MEMBER BERG: Thank you, Chairwoman. 5 First of all, I'd like to really thank staff. 6 They have done just a yeoman's job on this. And I'm very 7 pleased with the revisions. 8 I think as we move down to aggressively adopting 9 rules, that the incentive funding is going to be an 10 important area, whether it's bond money or Carl Moyer 11 funds. And how we continue to be very clear on how to 12 take advantage of these types of programs is going to be 13 critical to the success of these regulations. 14 So we're pleased to present these revisions. And 15 great job, staff. They're a delight to work with. 16 Oh, and I just might also say that I'm really 17 thankful for the participation. We had two very lively 18 meetings and we had great representation between the 19 districts, the environmental and health groups, as well as 20 users of the program. And it was very well set up. It 21 was a lively discussion, and I think we were able to 22 really put a lot of issues on the table and resolve those 23 types of things. And I was appreciative, Joe, of you 24 running the administrative group. 25 And so those types of things were set up. I was PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 just at the right place at the right time to be able to 2 walk in and chair the group, and I thank you for that. 3 CHAIRPERSON NICHOLS: Great. Well, thank you. 4 Given the hour, I'm not going to -- I mean I'm 5 going to give everybody their three minutes. But you will 6 be appreciated if you take less than that. And especially 7 if you just want to say supportive things, that would -- 8 just be supportive briefly. 9 All right. We'll just go down in order. Fred 10 Minassian, followed by Paul Buttner, and Allan Lind. 11 MR. MINASSIAN: Chairman Nichols, members of the 12 Board, good afternoon. My name is Fred Minassian. I'm 13 the Manager of Incentive Programs at the South Coast AQMD. 14 My comments are related to the fleet 15 modernization segment of the guidelines. We appreciate 16 the close cooperation we have had with ARB staff on 17 working on the new guidelines. We have implemented the 18 fleet modernization program for the last year and a half 19 where we have replaced pre-1990 heavy-duty diesel trucks 20 with new trucks and provided funding equal to 80 percent 21 of the cost of a new truck or up to that amount. The new 22 guidelines allow the continuation of that program. And we 23 do support that. 24 However, it leaves another equipment category 25 that qualify for funding but is not included in the new PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 guidelines. And that is the truck model years 1990 to 2 1993. According to ARB staff's own calculations and 3 analysis, relative to Carl Moyer Program and all other 4 rules and regulations, these vehicles qualify for funding 5 under the fleet modernization program. So there's no 6 reason to leave them out. 7 We are in a situation that the -- due to the 8 complication of rules and regulations, it's becoming more 9 and more difficult to find equipment categories under 10 Moyer. So if there's a category that qualifies for 11 funding, it should be funded. 12 Again, based on ARB's evaluations, these qualify 13 for funding. Within our own basin we have over 6,000 14 trucks model years 1990 through 1993 with emission 15 contribution equals to 10 percent of the total emission 16 inventory of heavy-duty trucks. So we propose to include 17 funding of these trucks under the fleet modernization 18 program by providing up to only 50 percent of the cost of 19 a new truck and replace these trucks. 20 The Moyer program has been very effective. We 21 evaluate every single truck based on their own operation 22 and merits, pre- and post-inspect every truck and crush 23 the old trucks. And the emissions benefits are real and 24 quantifiable. So there's no reason to leave them out. 25 And we ask your Board to include this -- to support the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 inclusion of our proposal. 2 Otherwise we do support the adoption of the 3 program guidelines and we appreciate your cooperation -- 4 ARB staff cooperation with us. 5 Thank you. 6 CHAIRPERSON NICHOLS: Thank you. 7 Mr. Buttner. 8 MR. BUTTNER: Thank you. I guess I get to be one 9 of the first to say good evening, Madam Chair and members 10 of the Board. I'll be very brief. 11 My name is Paul Buttner with the California Rice 12 Commission. And I mostly want to thank staff for working 13 with us. We have a concern that the five-year project 14 life for agricultural equipment is probably too low. We 15 recognize that the staff really did a good job in trying 16 to find a lot of data that didn't exist to try to deal 17 with that. And so we've committed to working with staff, 18 along with the equipment manufacturers, especially 19 California Farm Bureau Federation in cotton will join the 20 Rice Commission to try to get data that's needed to really 21 answer this question. 22 You have a letter before you that asks for a 23 particular addition to the resolution. And I notice that 24 there's a line item in the resolution on page 6, it's the 25 second bullet on page six, and I believe it gets us right PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 where we need to be. 2 So again I want to really thank staff for working 3 with us and we continue to work with you over the next 4 year. 5 MR. LIND: Thank you, Madam Chair. My name is 6 Allan Lind. I'm here on behalf of the California Council 7 for Environmental and Economic Balance. And we are also 8 here to support the Board's adoption of the Carl Moyer 9 guideline regulations -- changes in the guidelines. 10 CCEEB was very pleased to be a part of the 11 advisory group that was chaired by Board Member Sandra 12 Berg. And we strongly support the continuation of that 13 Board. I agree with you that it was a lively discussion, 14 and I think it was very, very constructive. And an 15 informal environment that I think perhaps some of your 16 other rule and guideline development processes could 17 benefit from. 18 We're hopeful that the continuation of the 19 advisory group will be able the touch on things like 20 refining the boundaries between some of the major 21 funding -- incentive funding sources that we have. Not 22 only Carl Moyer, but of course Prop 1B and AB 118 and, for 23 that matter, significant sums of money that are available 24 in the districts themselves. 25 And we appreciated the efforts that went into PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 this guideline revision to look at it from the standpoint 2 of streamlining the process to make it work better for the 3 Board, for the districts, for the auditors and so forth. 4 And we're looking forward to the next generation of effort 5 that will streamline the process from the perspective of 6 the applicants. And so that was sort of a novel twist I 7 think on the phraseology here. But it really is -- and I 8 know that Board Member Berg is going to be with us on this 9 to look at it from the perspective of the users to make 10 this program as accessible and useful and approachable for 11 as many users as possible. 12 But the main thing is I think to look forward now 13 to what direction is the Carl Moyer Program going in. And 14 is it in the right direction? Does it need to stay right 15 where it is? Or are we going to be morphing a little bit? 16 And I have a feeling that we are going to be morphing in 17 the future as regulations now become more and more 18 comprehensive with mobile sources. We're going to have to 19 think of new ways and new approaches to making use of the 20 Carl Moyer Incentive Program. 21 The Board still has some unfinished business. 22 And CCEEB urges the Board to give consideration to 23 expanding the protocols that describe or facilitate the 24 ease at which new kinds of projects can be brought into 25 the system. We want to be -- we want to reinforce what PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 you have already begun last year in the off-road rule by 2 including appendix information about how the adoption of 3 that regulation affects the use of incentive funding. And 4 we think that that really needs to be a very important 5 part of the overall discussion of regulations, 6 understanding where the boundaries are between the command 7 and control regulation and the opportunities for financial 8 incentives and how they work together and what makes the 9 most sense. So I think that's an important topic for the 10 advisory committee in into the future. 11 One of the suggestions that we'd like to make 12 that I think you can actually deal with today, that is not 13 a change in the regulations or your resolution 14 necessarily, but is to consider expanding the Carl Moyer 15 Program website to include information about what's going 16 on at the local level, to make it a bit of a clearing 17 house, so that we have an understanding or for -- the 18 public has an understanding of what's going on from 19 district to district in the implementation of the Carl 20 Moyer Program. 21 And then we thought that you might wish to give 22 consideration to annual performance goals for the Carl 23 Moyer Program. What is it we're really trying to achieve? 24 Is it just getting the dollars out or the number of 25 projects? It certainly has to be to clean the air, and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 that should be our number one priority. 2 And, frankly, now I'd like to also support the 3 staff's remarks a few minutes ago about talking about 4 looking at alternative funding mechanisms into the future, 5 such as the voucher program and possibility of loans. We 6 think that those have some value and potential to expand 7 the program in useful ways. 8 And I think that's about all that I have to say. 9 Thank you very much. 10 CHAIRPERSON NICHOLS: Okay. Thank you. Your 11 time is up. I haven't been strictly enforcing here. I'm 12 sorry. 13 Okay. William Davis, followed by Joe Wyman. 14 15 MR. DAVIS: New sheriff in town, right? 16 CHAIRPERSON NICHOLS: Right. 17 MR. DAVIS: Hi. My name is Bill Davis, Chairman 18 Nichols, members of the Board. I'm the Executive Vice 19 President of the Southern California Contractors 20 Association and a member of the Board of Directors of the 21 Construction Industry Air Quality Coalition. 22 Our association members have repowered under the 23 Moyer program more than a thousand engines over the last 24 five years. We've been very active participants in this 25 effort. However, with the passage of the off-road diesel PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 regulation, about two-thirds of our members will no longer 2 be able to access those funds. 3 We have several suggestions to make some 4 improvements in the staff recommended program. The first 5 is that we cannot support the amendment that equipment 6 replacements must destroy the existing chassis. 7 Destroying the engine may be sound to air policy. But the 8 chassis has no emission factors and it's value as parts 9 and salvage far exceeds the cost -- will help reduce the 10 cost of the new replacement machines. We recommend only 11 requiring the destruction of the engines and not the 12 entire replaced machine. 13 Second, the geographic constraints within the 14 Moyer program are a disincentive to participate. Your 15 guidelines require that the equipment operate in the state 16 75 percent of the life of the contract. And we think 17 that's fair enough. The local districts, however, are 18 allowed to adopt their own requirements, and some require 19 that the equipment remain in the district 75 percent of 20 the time. Contractors go from job to job. In southern 21 California a contractor can be in as many as four to six 22 different air districts over a life of this contract. So 23 many of them will not apply for this funding because they 24 can't meet the local district requirements. We hope that 25 there's a more equitable criteria that can be used to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 establish district residency issues. 2 Third, we believe the program should allow the 3 flexibility to install on-road engines in off-road 4 equipment. The off-road rule that you recently adopted 5 allows such flexibility, and it would appear that on-road 6 engines will actually offer a greater opportunity for us 7 to repower more kinds of construction equipment than we 8 can currently. Currently there's only about seven models 9 of construction equipment that can be repowered. We think 10 there's enough potential benefit that you should harmonize 11 the Moyer guidelines with the off-road diesel regulation. 12 Finally, we think that you should go a lot 13 further than these guidelines and changes to the Moyer 14 program. The program needs to be structurally changed to 15 keep pace with the regulatory environment. Our industry 16 is currently under three rules. It will be five rules 17 soon with the off-road rule and the large spark ignition 18 rule taking effect. And we need to be able to get the 19 Moyer money addressed in that area. 20 The Moyer requirements are not conducive to 21 post-regulated industries. Within the next two years 22 virtually every diesel engine in the State of California 23 that you have the power to regulate will be under some 24 form of regulation. And the Moyer money will start to go 25 begging under those circumstances. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 Overcompliance programs like the SOON program, 2 emission reductions in this area are important to achieve. 3 So the priority should be to diminish the restrictions on 4 overachieving emission reductions rather than having 5 additional requirements. 6 We want to go with you to the Legislature to talk 7 about this. Our legislative group is called the 8 Construction Coalition. It's composed of our associations 9 and our trade unions that we work together with. We'd 10 like to meet with your people to see if we can find a 11 mutually agreeable path to legislative change for the 12 Moyer program to expand its ability to improve emissions 13 here in the State of California. 14 Thank you very much. 15 CHAIRPERSON NICHOLS: Thank you for your 16 comments. I think -- 17 BOARD MEMBER D'ADAMO: Question. Oh, sorry. 18 CHAIRPERSON NICHOLS: Excuse me. 19 Thank you for your comments. I think we all 20 agree with you about the need to expand the program. It's 21 been tremendously successful. 22 MR. DAVIS: It has been very successful. And our 23 people are -- they spent over a hundred million dollars 24 doing this. 25 CHAIRPERSON NICHOLS: Ms. D'Adamo. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 BOARD MEMBER D'ADAMO: I'd just like to have 2 staff respond to some of the recommendations, specifically 3 the issue regarding destruction of the chassis, let's see, 4 the on-road engine -- possibilities for utilization of 5 on-road engines. 6 And then there was a third issue. 7 There was the district issue. 8 BOARD MEMBER BERG: There was operate in the 9 district -- district versus the state residence. 10 CARL MOYER OFF-ROAD SECTION MANAGER SALARDINO: 11 To respond to the first issue there of destroying 12 the piece of equipment, Moyer generally does have a 13 destruction requirement within the guidelines. And -- 14 MR. DAVIS: In the past it's only been the 15 engines. 16 CARL MOYER OFF-ROAD SECTION MANAGER SALARDINO: 17 And the reason for doing it in this case is 18 because we don't want those pieces of equipment to just be 19 repowered and then entered back into the market. 20 MR. DAVIS: But if they're repowered with 21 appropriate engines, engines that meet the standards under 22 the state law, why not? The hydraulic systems don't 23 contribute to emissions. The tires don't contribute to 24 emissions. The tracks, the teeth -- you know, these 25 machines last for 40 years. It's just -- we recycle in PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 our business. 2 BOARD MEMBER D'ADAMO: Yeah, that's what I'm -- 3 I'm just concerned regarding the waste issue and if 4 there's any way that we could ensure that we're talking 5 about a clean engine so that we could allow some 6 flexibility. 7 MR. DAVIS: Under the off-road rule we don't have 8 very many choices about that. 9 RESEARCH DIVISION CHIEF CROES: I think part of 10 the concern also is whether the entire machine gets 11 repowered as something dirtier or equal to what it was 12 when it got its Moyer money. In other words, you know, 13 they get the money to buy a new one and then the other one 14 get fooled on. 15 BOARD MEMBER D'ADAMO: I absolutely agree with 16 that point of view. But is there a way to address those? 17 RESEARCH DIVISION CHIEF CROES: So maybe we can 18 work with them in terms of seeing whether or not at least 19 parts recycling can be handled in a way that that makes 20 sense. There are -- you know, in other programs, for 21 example, they do thing where they -- maybe they do disable 22 a chassis and allow all the other parts to be recycled, 23 for example, or find some other way to make sure that the 24 piece of equipment doesn't come back as something that is 25 bad. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 EXECUTIVE OFFICER GOLDSTENE: And while it's 2 not -- this is not a direct comparison. The Passenger 3 Vehicle Retirement Program that is run by the Bureau of 4 Automotive Repair requires that the entire car be 5 destroyed, including many of the parts the collectors 6 want, because the idea of the program is to not have those 7 older cars on the road. And I think some of that thinking 8 obviously is part of here. But we should work -- see if 9 we can work something out that makes sense. 10 MR. DAVIS: Be more than happy to sit down with 11 you guys about this. This is truly a case of where the 12 sum of the parts is greater than the whole. 13 EXECUTIVE OFFICER GOLDSTENE: Collectors say the 14 same thing. We just want to make sure these vehicles are 15 not repowered with some similar engine. We want to get 16 them off the road. 17 MR. DAVIS: We have to meet fleet averages under 18 this off-road diesel regulation and we wouldn't be doing 19 that. 20 RESEARCH DIVISION CHIEF CROES: On the 21 multi-district issue, we basically, as I understand it, do 22 have ways of using multi-district funds that the staff -- 23 MR. DAVIS: Have a statewide program that we're 24 aware of. But very few people qualify. 25 RESEARCH DIVISION CHIEF CROES: Well, maybe we PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 can work with you in terms of how they qualify, because 2 they're -- I guess what I'm saying is that the Moyer 3 program already has a mechanism in it where, quote, 4 there's multi-district funds which are set aside to deal 5 with projects that cover over -- that cross district 6 lines. 7 MR. DAVIS: How is that as a percentage of the 8 total Moyer $140 million program? 9 ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI: It's 10 currently -- this is Jack Kitowski, Chief of On-road. 11 It's currently 10 percent of the funding that we 12 have available. There is a legislative bill in place by 13 Senator Florez to increase that to 20 percent per the 14 recommendations of the Bureau of State Audit. 15 The other point of that is we've noticed in the 16 last couple of years that several of the districts who 17 used to have very strict requirements within their own 18 district, 75 percent or 100 percent was very common, 19 they've started to loosen those up. San Joaquin is, you 20 know, is very -- 21 MR. DAVIS: Very accommodating and interested in 22 getting their funding out into the industry. 23 ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI: Others 24 are assessing that as well. 25 MR. DAVIS: We welcome that. The issue really is PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 the multi-district funding levels are -- you know, they're 2 10 percent of the total money that's available. And our 3 guys operate in, like I said, anywhere from two to six 4 different districts. 5 BOARD MEMBER BERG: But I think the problem here 6 also is the fact that the districts have very challenging 7 emissions to hit. And so they need to go after the 8 dirtiest equipment that's going to be in their districts 9 for the longest. And until the point that the demand does 10 not exceed the funding dollars, there's no reason for them 11 to look at that. At the point where their demand is less 12 than the funding dollars, then the market demand will then 13 change their thinking because you'll be able -- you'll 14 want to get the next level that maybe is in the district 15 for 75 percent of the time and 65 percent of the time. 16 And that's the way that works. 17 CHAIRPERSON NICHOLS: I think we need to bring 18 this conversation to a close here. 19 If there are more questions -- 20 BOARD MEMBER D'ADAMO: Well, I have a 21 recommendation on maybe how we could move forward. This 22 doesn't -- it kind of reminds me of the 1B funding issue. 23 There are multi-district projects that we're hoping that 24 the districts will be able to benefit from. And so I 25 would just suggest that maybe if you work with staff and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 we bring CAPCOA into it, there may be instances where some 2 light could be shed on this. And the districts that have 3 the more onerous requirements would see that they could 4 stand to benefit because of other districts being a little 5 more flexible. I suspect that -- 6 ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI: We have 7 engaged them in that in the past and we'd be happy to do 8 it again. 9 RESEARCH DIVISION CHIEF CROES: The answer on 10 on-road engines is we'll work with them on that as well. 11 MR. DAVIS: Thank you all very much. 12 CHAIRPERSON NICHOLS: Thank you. 13 Mr. Wyman. 14 Joe Wyman? 15 All right. Gary Rohman. 16 MR. ROHMAN: Good afternoon, Chairperson Nichols 17 and members of the Board. My name is Gary Rohman. I'm 18 Vice President of ECCO Equipment Corporation. 19 ECCO is a heavy construction equipment rental 20 company that started business in 1962. And we rent 21 equipment up and down the State of California. 22 We requested and were granted Carl Moyer fundings 23 to the tune of $4.4 million over the last two years and we 24 repowered 23 pieces of equipment. It was helpful in 25 reducing emissions on our fleet. And when you combine PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 Carl Moyer and our own emission -- company emission 2 reduction policy, we improved our fleet from 98 percent 3 Tier 0 engines in 2000 to 23 percent in 2008. 4 Carl Moyer funding is no longer available for our 5 company since the adoption of the off-road diesel rule. 6 And we have -- currently we have no discretionary dollars 7 to fund additional repowers. Our rental business is off 8 47 percent and our yards are full of idle rental 9 equipment. We decreased our fleet by 79 machines last 10 year, not because we were trying to meet the requirements 11 of the off-road regulation, but because we were attempting 12 to survive the downturn in the economy. 13 We have real concerns that we are unable to meet 14 the hour requirements attached to the Moyer funding. We 15 are even more concerned that neither the CARB staff or the 16 Board have felt it necessary to place a trigger provision 17 in the regulation that would protect the shareholders -- 18 or the stakeholders during times of economic downturn. 19 We believe that we have a very tough road ahead 20 of us. And we are trying to comply -- and trying to 21 comply with the off-road regulation will have devastating 22 effects on the construction industry. We are, however, 23 optimistic. We think that we may see some type of a 24 release in 2010. 25 In conclusion, it is our desire to have your PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 Board stay on top of the Moyer program, making sure that 2 dollars are deemed where they can do the most good. We 3 think that the construction industry is worthy of funding 4 on an ongoing basis. I echo Bill Davis's remarks on 5 geographic limits and the destruction of chassis, et 6 cetera. We also desire the flexibility to install on-road 7 engines in off-road applications. 8 Thank you. 9 CHAIRPERSON NICHOLS: Thank you. 10 Questions? 11 No. 12 Thank you. 13 Marcus Platt, followed by Jennifer Ehn. 14 MR. PLATT: Madam Chair, members of the Board. 15 Thank you for having us today. 16 Most of my questions were answered. I just have 17 a few things. 18 I work for Boatswain's Locker. We distribute 19 high efficiency Tier 2 diesel engines here in California, 20 in Nevada, Arizona, Hawaii, and the Country of Mexico. 21 We are primarily in the marine industry, which 22 is -- I know in the whole scheme of things seems fairly 23 small. But in actuality there is thousands of charter and 24 fishing boats up and down the California coast. 25 I would also like to reiterate on the last PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 gentleman's multi-district reference, that a lot of these 2 fishermen and these charter companies transit the coast, 3 up and down from the coast of Mexico to the Oregon border, 4 but do reside and work in California also. And I'm 5 wondering how that we can help them to repower these 6 vessels with more efficient engines. 7 One of our primary clients is one of the largest 8 charter fleets in California and in the United States, is 9 Hornblower Cruises. I don't know if any of you know of 10 them. They run San Francisco, Los Angeles, Newport Beach, 11 San Diego, New York, and various other places. They have 12 seven or more vessels on the West Coast, and would love to 13 have some funding. 14 The applications also I believe are a little bit 15 daunting for some of our clients. They seem to be a 16 little caught up in the red tape. But you answered that. 17 Apparently they're going to ease that up a little bit and 18 make it a little bit easier to deal with. That's a good 19 thing. 20 A lot of our other clients work in the Delta 21 area. These are heavily populated areas. One such client 22 is Salt River Construction. I don't know if you know of 23 them. They run levee support systems up and down the 24 Delta. They repair levees in storm situations and things 25 like that. They have equipment that's not necessarily PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 older but could use to be replaced. And as they are 2 working in highly populated areas, I think that to reduce 3 their particulate matter would be a definite, you know, 4 plus. 5 So I just would like to ask that you look 6 closer -- I know that the funding for marine industry is 7 small in the whole scheme of Carl Moyer. But if you guys 8 could maybe look at it a little bit more closely and maybe 9 think of these guys a little bit better, let's get them 10 some cleaner engines and, you know, see if we can't make 11 them happy and clean up the air a little bit. 12 And that's all I have. Thanks. 13 CHAIRPERSON NICHOLS: Thank you very much. 14 Jennifer Ehn. 15 MS. EHN: Good evening, Chairman Nichols, members 16 of the Board. My name is Jennifer Ehn. I work for John 17 Deere. I'll be very brief. 18 We just wanted to come up and support the 19 resolution allowing additional time for project life for 20 ag equipment. Currently we are gathering data on ag 21 equipment and we're working with various ag groups in 22 order to compile all this information. We look forward to 23 working with the ARB staff in the future to provide you 24 this information. 25 Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 CHAIRPERSON NICHOLS: Thank you. 2 Tim Carmichael. 3 MR. CARMICHAEL: Good evening. Tim Carmichael 4 with the Coalition for Clean Air. Just a couple of brief 5 comments. 6 Is this working? 7 CHAIRPERSON NICHOLS: Yes. Thanks. 8 MR. CARMICHAEL: Thank you. I appreciate Mr. 9 Goldstene looking out for my interests. 10 Thank you to Board Member Berg for -- she talked 11 about how dynamic the meetings were. What she didn't 12 share with her colleagues was what a good job she did in 13 facilitating those meetings, because not everybody in the 14 room agreed, and we all had opinions, pretty strong 15 opinions. And I thought she did a very good job in 16 facilitating those discussions. 17 The second point I want to mention is, the staff 18 didn't specifically call out one of the things that we 19 agreed to talk more about this year, which is the need for 20 the Moyer program to evolve, and to consider greenhouse 21 gas and petroleum reduction goals along with the PM and 22 NOx goals that the state has. We're not right now making 23 the most of the public money. And we want to, you know, 24 make sure that we make the most of it going forward. 25 There was a reference to the coordination between PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 the Moyer program and Prop 1B. And I know just from a few 2 conversations with the staff over the last couple of weeks 3 that that is not going as smoothly as people thought it 4 was going to. And I just want to note for the record I'm 5 aware that Mr. Goldstene has agreed to sit down with his 6 staff and Barry Wallerstein and the staff of the AQMD to 7 talk about how these programs right now may actually be 8 working against greater use of alternative fuels in the 9 way they're coordinating. And we're very concerned about 10 that. We appreciate that your staff is going to very 11 shortly be sitting down to try and work through that 12 issue. 13 And, finally, just talking with my colleague, 14 Allan Lind, about communications around this program. We 15 think it would be valuable as regulations are adopted by 16 this Board that the Executive Officer send an advisory to 17 the Carl Moyer participants. It could be on the web, 18 could be through the list serve. But the more notice you 19 give to the industries that feel like there's a funding 20 stream there and it's going to go away a year, two, three 21 years from now, the better off we will all be. And I 22 don't know that that proactive communication is happening 23 right now. 24 Thank you. 25 CHAIRPERSON NICHOLS: Thank you. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 I think that's an important point is this -- 2 although the demand is very high for this program, not 3 everybody who ought to know about it does know. And I 4 don't think it's wrong to get even more requests in, 5 because it will help establish what the true funding need 6 really is out there. So I think it's -- I think that's a 7 good point. 8 RESEARCH DIVISION CHIEF CROES: We are doing that 9 actually. We're mailing out to all -- reaching out to all 10 these industries, both the construction industry and the 11 trucking industry, letting them know what's going on. 12 CHAIRPERSON NICHOLS: Good. Thank you. 13 Camille Kustin. 14 I'm sorry. 15 MR. CARMICHAEL: I just want to clarify. We 16 should follow up on that, because we're not sure that 17 everybody that's participating in the Carl Moyer Program 18 is actually getting that notification. And so we'll 19 follow up with your staff on that. 20 CHAIRPERSON NICHOLS: To work on how to improve 21 that process. 22 All right. Thank you. 23 Camille Kustin. 24 MS. KUSTIN: Hi. Good afternoon. Camille Kustin 25 with Environmental Defense Fund. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 I just wanted to say a quick thank you to the 2 staff for their work on this and for including us as part 3 of the process. And also a especial thank you to Board 4 Member Berg for her leadership and work with the working 5 group. It was a spirited bunch. And a lot got 6 accomplished during those meetings. 7 And just that -- you know, the Moyer program was 8 designed to not cover everything and to provide for early 9 reductions, and the staff has continued to follow in that 10 spirit of the program. So we're generally pleased with 11 the revisions, and we hope it will continue to be a 12 successful program. 13 Thank you. 14 CHAIRPERSON NICHOLS: Thank you. Thank you for 15 coming and spending your evening this us. 16 That concludes the list of witnesses that I have 17 in front of me. And I don't see anybody else rising. So 18 I think we can finish the hearing. 19 Does the staff have any additional comments at 20 this time before we close the hearing? 21 SUPERVISOR HILL: Madam Chair, I have some 22 questions when you get time. 23 CHAIRPERSON NICHOLS: Questions of the staff? 24 SUPERVISOR HILL: Yes. 25 CHAIRPERSON NICHOLS: Yes. Okay, go ahead. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 SUPERVISOR HILL: Thank you. 2 One is the issue raised by Mr. Buttner from the 3 Rice Commission. And I notice he had a issue that he 4 raised about directing staff to come back in six months to 5 look at the useful life of farm equipment in California 6 and reevaluate that five-year project life factor. Is 7 that something that you feel would be worthwhile? I think 8 it never hurts to do that. 9 ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI: Yeah, 10 we've been coordinating with the agricultural industry, 11 Paul -- Mr. Buttner, Mr. Isom and others in that industry 12 in development of the off-road fleet modernization quite a 13 bit. 14 We had -- in our resolution we do have existing 15 language. It's not quite what he had, but I think he was 16 comfortable with it. Basically we can put a timeframe on 17 it, but it's really going to be dependant on when the data 18 is available for us to analyze. And we're very willing to 19 go earlier if the data's there and do what we can. But we 20 need that data in order to move forward on it. And I 21 think he's in a place where he's comfortable with it. We 22 have talked and I think he concurs with our current 23 resolution. 24 SUPERVISOR HILL: Thank you for that. 25 And then the other question. South Coast raised PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 the issue of the fleet modernization program and there's 2 trucks '90 to '93 and how they're excluded. Is that true 3 and -- 4 ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI: Let me 5 characterize it a little differently. Our fleet 6 modernization program since it was adopted in the 2005 7 guidelines has always been limited to 1991 and older -- 8 you know, pre-1991 trucks. We were looking at expanding 9 the program. You know, when we expand the program and go 10 into a new category area, we take it quite seriously. And 11 we look at whether the emission reductions are real and 12 surplus, whether they'll be quantifiable and SIP 13 creditable. And so there is quite a bit of work that goes 14 into it. 15 And we were starting that process and then, you 16 know, along came the bond. And the bond's putting 760 17 million into replacing trucks, and we're 1 percent of 18 that. It really did not seem worthwhile to spend a lot of 19 staff resources for, you know, 1 percent of the issue. 20 We will be watching the bond. And if we think 21 there's a gap there, a niche that Moyer can fill, we will 22 look at it. But at this point we didn't think it was 23 worth investing. 24 SUPERVISOR HILL: Okay. And I did like the idea 25 of expanding the Carl Moyer website to include a lot more PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 information related to the districts and the application 2 there. I think that would be important. 3 Thank you, Madam Chair. 4 CHAIRPERSON NICHOLS: Thank you. 5 Any other questions or comments to staff about 6 it? 7 BOARD MEMBER D'ADAMO: Move adoption of the 8 resolution. 9 CHAIRPERSON NICHOLS: Okay. Do we have a second? 10 BOARD MEMBER BERG: Second. 11 CHAIRPERSON NICHOLS: A second. 12 Before we vote, I just want to also add my thanks 13 to those of the others, to Board Member Berg for having 14 taken on this assignment. It was above and beyond the 15 call of duty, and obviously it worked out well. But it's 16 also saved I think the rest of us a tremendous amount of 17 time and effort in presiding over all of these sometimes 18 contentious meetings. So we really appreciate your help 19 here. 20 With that, I'll ask everybody in favor to 21 please -- 22 CHIEF COUNSEL JENNE: Chairman Nichols, I note 23 that there's not a -- doesn't seem to be a quorum up there 24 now. I'm not sure where the sixth person went to. 25 CHAIRPERSON NICHOLS: Sorry. Mr. Sperling had to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 step out of the room to take a call. He is planning to 2 return, however. So if we can't vote until he gets here, 3 we'll just have to postpone the vote. That's too bad. He 4 was planning to be here. And he is here in the building. 5 BOARD MEMBER BAUMS: Yeah, I'm driving him back 6 to Berkeley, so I think he's still around. 7 CHAIRPERSON NICHOLS: Yeah. No, no, he's 8 definitely -- 9 (Laughter.) 10 CHAIRPERSON NICHOLS: He's definitely in the 11 building. He was just responding to some of the questions 12 that came up from folks about the earlier Board action. 13 All right. We'll just table this for the moment 14 then and bring it back as soon as we get him back in the 15 room. 16 We're going to have a similar problem with the 17 next item. We can hear it, but we won't be able to vote 18 until he returns. 19 I was not expecting him to be gone for this 20 length of time, however. Maybe I should send a clerk. 21 Is somebody going? 22 Okay, good. 23 Well, we can begin, I think -- unless you think 24 we should just take a break. 25 Why don't we just take a ten-minute break then. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 Thanks, everybody. 2 We'll take the vote when he gets back. 3 (Thereupon a recess was taken.) 4 CHAIRPERSON NICHOLS: All right. We need to get 5 back to work, ladies and gentlemen. Everybody wants to go 6 home. 7 We had a motion, a second, and we were ready to 8 call the vote when we realized that we didn't have the 9 quorum in the room to actually vote. But that's okay, 10 because Board Member Sperling was doing, if not God's 11 work, at least the Air Resources Board's work. 12 (Laughter.) 13 CHAIRPERSON NICHOLS: So at this point I think we 14 need to have a vote. 15 So would all in favor please signify by saying 16 Aye. 17 (Ayes.) 18 Any opposed? 19 There are none. 20 Good. We've done it. 21 All right. Now we can move to the Lower-Emission 22 School Bus Program. 23 EXECUTIVE OFFICER GOLDSTENE: Thank you, 24 Chairman Nichols, Board members. 25 The Lower-Emission School Bus Program protects PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 the health and safety of California's school children. 2 Since the program's inception in 2000, over $100 million 3 in state funds have been used to replace approximately 600 4 of the oldest, most polluting public school buses and to 5 retrofit another 3,800 middle-aged diesel buses. 6 Eight years ago we estimated that about 6600 high 7 polluting pre-1987 school buses were still operating in 8 our public schools. Today, less than half of these buses 9 remain in use and only 74 are of the oldest vintages, the 10 pre-1977 buses built before minimum federal motor vehicle 11 safety standards went into effect. 12 This significant progress in upgrading 13 California's school bus fleet is the result of dedicated 14 funding efforts at the local and state levels and their 15 cooperative partnerships with local air districts and 16 school districts. 17 With Senate Bill 88, the Governor and the 18 Legislature appropriated $193 million from Prop 1B to the 19 ARB to continue our success with the Lower-Emission School 20 Bus Program. This funding level represents nearly twice 21 the amount of the funds the program has received since it 22 began eight years ago. 23 As you'll hear in the staff presentation, these 24 funds now provide us the opportunity to eliminate the 25 remaining pre-1977 school buses from our public school bus PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 fleets and to replace about 40 percent of the remaining 2 1977 to 1986 model year buses. In addition, these funds 3 will allow school bus fleets to retrofit significant 4 numbers of middle-aged diesel buses that still have 5 substantial road life. Dollar for dollar, the air quality 6 and health benefits of diesel retrofits are huge. 7 Now, I'll turn the presentation over to Mr. Earl 8 Landberg of our Mobile Source Control Division, who will 9 provide an overview of the staff's proposed revisions. 10 Earl. 11 AIR POLLUTION SPECIALIST LANDBERG: Thank you, 12 Mr. Goldstene. 13 Chairman and members of the Board. I know it's 14 been a long day. My presentation will take less than 20 15 minutes, as I present the staff's revisions to the 2008 16 Lower-Emission School Bus Program Guidelines and the 17 proposed funding allocations. 18 --o0o-- 19 AIR POLLUTION SPECIALIST LANDBERG: In today's 20 presentation I will be giving a little background on the 21 goals and history of the program, including the effect an 22 upcoming regulation may have on school buses. I will then 23 discuss the current authority for this program's source of 24 funding and the direction that has been given by the 25 Governor and the Legislature. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 I will go over the most significant revisions to 2 the guidelines and present the estimated emission 3 reductions and the number of bus replacements and 4 retrofits that we are expecting from the program. 5 I will wrap up by presenting several issues that 6 have had impact on the development of the guideline 7 revisions and end with staff's recommendations. 8 --o0o-- 9 AIR POLLUTION SPECIALIST LANDBERG: The primary 10 goal of the Lower-Emission School Bus Program is to reduce 11 children's exposure to both cancer-causing and 12 smog-forming pollutants through the replacement of old 13 buses with safe, clean buses and the installation of 14 retrofits on the in-use fleet. 15 The program provides funds to accelerate 16 replacements of pre-1987 buses with an emphasis on the 17 pre-1977 model year school buses, which predate any 18 minimum federal safety standards. The program also funds 19 particulate retrofits for middle-aged buses. With an 20 upcoming regulation, retrofits will play a stronger role 21 in this round of program funds. 22 --o0o-- 23 AIR POLLUTION SPECIALIST LANDBERG: The Board 24 established the Lower-Emission School Bus Program in 25 December of 2000. And since then, over $100 million in PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 state funds has gone to replace 600 public school buses 2 and retrofit 3800 in-use middle-aged buses. At the start 3 of the program, there were about 1,900 pre-1977 public 4 school buses transporting students within the state, and 5 currently fewer than 100 remain. All in all, since 2000 a 6 significant number of older school buses have been 7 replaced. 8 Such substantial progress has been a cooperative 9 effort at both the state and local level. However, this 10 progress also serves to illustrate that our work is not 11 yet finished. 12 --o0o-- 13 AIR POLLUTION SPECIALIST LANDBERG: In the fall 14 of 2008 the Board is scheduled to consider a proposed 15 regulation to reduce emissions from in-use heavy-duty 16 diesel-fueled vehicles. This regulation as currently 17 proposed would require all diesel-fueled school buses to 18 have a diesel particulate filter. This would necessitate 19 about 10 to 15,000 retrofits statewide. 20 For most school districts, the first potential 21 compliance milestone would be December 31st of 2010. The 22 Lower-Emission School Bus Funding Program can help reduce 23 the cost of compliance with this proposed regulation. 24 --o0o-- 25 AIR POLLUTION SPECIALIST LANDBERG: Proposition PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 1B, the Highway Safety, Traffic Reduction, Air Quality, 2 and Port Security Bond Act of 2006, was approved by 3 California voters in November of 2006, and provides $200 4 million for new school bus purchases and retrofits for 5 existing buses. After taking off the costs for bond 6 financing and less than one percent for the program 7 administration for the ARB, about $191 million is 8 available for grants to the local air districts. 9 Senate Bill 88 provides the legislative direction 10 for funds expended by Prop 1B funds, including the school 11 bus portion. 12 Finally, the Governor signed Executive Order 13 S-02-07 that applies to all the bond funds approved in the 14 November 2006 election, not just Proposition 1B funding or 15 the school bus element of the Prop 1B. This Executive 16 Order requires robust accountability of bond fund 17 expenditures. 18 --o0o-- 19 AIR POLLUTION SPECIALIST LANDBERG: As in past 20 iterations of the Lower-Emission School Bus Program 21 guidelines, we have attempted to create a balanced program 22 that emphasizes the importance of retrofitting in-use 23 middle-aged school buses and replacing the oldest school 24 buses still in operation within the state. 25 In support of these proposed guidelines, staff PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 has engaged in two public workshops, in El Monte and 2 Sacramento in September of last year. We also held an air 3 district coordination meeting in February of this year and 4 several meetings with environmental organizations, school 5 district representatives, and industry stakeholders. 6 ARB staff has ramped up our ongoing outreach to 7 get school districts involved in this program ahead of the 8 proposed regulation so they understand the requirements of 9 the regulation and the technology needed to meet the 10 regulation and how the Lower-Emission School Bus Program 11 can help them comply while the emission reductions are 12 still surplus. 13 --o0o-- 14 AIR POLLUTION SPECIALIST LANDBERG: Before I 15 discuss the proposed funding allocation, let me highlight 16 the legislative direction that we have received regarding 17 the allocation. 18 --o0o-- 19 AIR POLLUTION SPECIALIST LANDBERG: The key 20 allocation provisions of Senate Bill 88 require that funds 21 be used to first replace the remaining 1976 and older 22 model year buses in California, followed by allocating the 23 remaining funds to air districts based on each district's 24 share of the 1977 through 1986 model year school bus 25 population. SB 88 allows air districts the discretion to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 determine how to split their funding allocations between 2 new school bus purchases and retrofits after ensuring 3 funds for pre-1977 bus replacements. 4 --o0o-- 5 AIR POLLUTION SPECIALIST LANDBERG: The pie chart 6 on top is the population of in-use pre-1977 model year 7 school buses by air district. These buses are slated for 8 replacement first. 9 The pie chart on the bottom shows the 10 distribution of pre-1987 school buses in the air districts 11 and the proposed allocation based on the provisions of SB 12 88. 13 Recognizing that Prop 1B funds used for the 14 school bus program require increased accountability and 15 necessitate additional air district resources, air 16 districts may use up to 2 percent of their total 17 allocation of state program funds for administration. 18 Additionally, an air district may use a total of 7 percent 19 of funding that it designates to retrofits for 20 implementation and outreach for the retrofit component of 21 its program. 22 --o0o-- 23 AIR POLLUTION SPECIALIST LANDBERG: Here are some 24 of the most significant changes to the program that I will 25 cover in the next few slides. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 Staff is proposing new air district 2 implementation options and a detailed timeline with 3 performance milestones so air districts will know in 4 advance what is required of them and when they need to 5 have it done. 6 Modifications to the replacement and retrofit 7 requirements have been incorporated into the proposed 8 guidelines to reflect the current state of school bus 9 engine technology. 10 Increased oversight and accountability are common 11 themes throughout the proposed guidelines, due to the 12 additional contract, reporting, and document retention 13 requirements required by the Governor's Executive Order 14 and SB 88. 15 --o0o-- 16 AIR POLLUTION SPECIALIST LANDBERG: In the past, 17 the CEC has provided assistance in implementing the school 18 bus program in those air districts that did not operate 19 their own program. However, the CEC has been given new 20 responsibilities in other areas and will not be able to 21 assist the ARB with the school bus program. So ARB 22 proposes to provide air districts with one of the 23 following: 24 They implement the program on its own. 25 Partner with a neighboring air district or a PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 larger regional district. 2 Or they can call on us with assistance from the 3 California Air Pollution Control Officers, or CAPCOA, to 4 implement their local program. 5 The funds spent within each air district will be 6 the same regardless of what organization implements the 7 program. 8 In air districts for which the ARB implements the 9 Lower-Emission School Bus Program, ARB will initiate grant 10 award agreements directly with school districts, and 11 CAPCOA will assist with outreach to school districts and 12 will assist school districts with the application process. 13 --o0o-- 14 AIR POLLUTION SPECIALIST LANDBERG: It is 15 important to note that awards will go to districts in 16 April to give them the most time to expend their funds, a 17 little over three years. Funds will be made available to 18 districts once they can demonstrate readiness and that 19 they have a robust program in place that covers the 20 required accountability. Up to 65 percent of the funds 21 will be available through June 30th, 2009. 22 We have built in milestones to ensure that the 23 oldest pre-1977 buses are replaced first, while pushing 24 districts to also get some retrofits in place early, well 25 in advance of the first proposed regulatory compliance PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 milestone. 2 As noted on the timetable, June 30th of 2010 is 3 six months before the first compliance milestone for the 4 upcoming regulation. As currently drafted, retrofit funds 5 for some buses may no longer be available after this date 6 since these funds require emissions to be surplus. 7 --o0o-- 8 AIR POLLUTION SPECIALIST LANDBERG: I will next 9 discuss the school bus replacement and retrofit portion of 10 the proposed guidelines. 11 --o0o-- 12 AIR POLLUTION SPECIALIST LANDBERG: Public school 13 districts will apply for funding from their local air 14 district or ARB. 15 A school bus eligible for replacement must be 16 owned by a public school district or several public school 17 districts acting as a Joint Powers Authority. 18 The bus must be a model year 1986 or older. The 19 bus must be operational. This is demonstrated by having 20 maintained a current CHP safety certification as of 21 December 31st of 2005. And the bus must have a gross 22 vehicle weight rating greater than 14,000 pounds. 23 And the old bus must be scrapped as required by 24 SB 88. 25 --o0o-- PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 AIR POLLUTION SPECIALIST LANDBERG: We propose to 2 allow engines at 1.4 gram NOx or cleaner to be eligible 3 for funding. 4 In order to maximize state funds, funding for 5 school bus replacements will be limited to a maximum of 6 $140,000 per bus. If the school district selects an 7 alternative fueled bus replacement, then 10 percent may be 8 added for infrastructure. 9 For the replacement of pre-1977 model year school 10 buses there will not be a match requirement from the 11 school district. However, staff is proposing a $25,000 12 match for the replacement of 1977 to 1986 buses. 13 As in previous versions of the guidelines, these 14 proposed guidelines continue the policy of requiring a 15 match contribution for new bus replacements. This ensures 16 a cooperative relationship between the state, local air 17 districts, and the school district further extending funds 18 to maximize the number of eligible school buses that can 19 be replaced. 20 The match funding can either be paid by the 21 school district or the local air district from eligible 22 funding sources such as motor vehicle surcharge fees. 23 --o0o-- 24 AIR POLLUTION SPECIALIST LANDBERG: In this slide 25 we look at the cost, including tax, of a typical PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 transit-style school bus. A 2008 model year diesel-fueled 2 school bus costs a little under $140,000. With the school 3 district's 25,000 buy-in, the school bus program pays 4 $115,000. A 2007 model year CNG school bus came in around 5 $160,000. With the buy-in the program would pay $135,000. 6 Finally, the cost for a plug-in hybrid bus is at 7 about $210,000. In this example, the program pays 8 $140,000 and the district would pay the remaining $70,000. 9 Because these funds will be carried over a 10 three-year period, there are uncertainties in future 11 school bus pricing over this time; hence, we would like 12 the Board to grant the Executive Officer the authority to 13 raise the cost cap for school bus replacements if needed. 14 --o0o-- 15 AIR POLLUTION SPECIALIST LANDBERG: Retrofits 16 continue to be a vital components in the ARB's regulatory 17 and incentive programs. Because retrofits are the most 18 cost-effective method of reducing emissions from school 19 buses, they provide the greatest health benefits per 20 dollar spent. 21 We are requesting that air districts commit to a 22 set percentage goal for retrofits. In those air districts 23 that request the ARB and CAPCOA to assist in implementing 24 the program, ARB proposes that 25 percent of those funds 25 go toward retrofits. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 It is important to remember that school buses 2 that are retrofitted row fitted now, with the assistance 3 of the Lower-Emission School Bus Program, will be in 4 compliance with the proposed in-use on-road regulation. 5 This will significantly reduce the future cost of 6 compliance for schools. 7 We are proposing a $20,000 cost cap for 8 retrofits, although most retrofits will come in 9 significantly less. This includes the cost of the 10 retrofit for installation, as well as maintenance costs, 11 data logging costs, and a back-up filter for every 20 12 retrofits installed. This is to reduce the bus downtime 13 when the filters are being cleaned. 14 --o0o-- 15 AIR POLLUTION SPECIALIST LANDBERG: Eligible 16 applicants are public school districts that own their own 17 buses, and private companies that contract with public 18 schools are eligible to receive funding for retrofits. 19 We are proposing to allow funding for the 20 retrofit of model year 1987 and newer models with 21 ARB-verified Level 3 devices only. 22 --o0o-- 23 AIR POLLUTION SPECIALIST LANDBERG: Some of the 24 major administrative changes to this year's proposed 25 guidelines are the requirements for the air districts to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 develop a policies and procedures manual. This manual 2 will describe the air district's day-to-day operations of 3 the program. The requirements of the Governor's Executive 4 Order and SB 88 require additional contract, reporting, 5 and documentation retention requirements, which we have 6 incorporated into the proposed guidelines. 7 The Governor's Executive Order also requires the 8 ARB to develop a three-part accountability plan and an 9 on-line database. The Department of Finance, or DOF, has 10 approved our accountability plan. The plan consists of, 11 first, front-end accountability. This will take the form 12 of these proposed guidelines, and when approved by the 13 Board will contain the requirements for running the 14 program. 15 Second, in-progress accountability. This will 16 consist of an on-line database, where the ARB and the air 17 districts will directly enter data so that the ARB and the 18 DOF can track how funds are spent. This database will 19 also be available to the public, where an individual can 20 see what new school buses have been replaced at their 21 child's school or how many buses have been retrofitted in 22 their area. 23 Finally, this database will serve as a report 24 generator for the air districts to help them comply with 25 the increased reporting requirements. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 1 The third part of the plan is follow-up 2 accountability. This will consist of the ARB and DOF 3 performing audits on the implementing agencies and also 4 means that ARB will be audited as well. 5 --o0o-- 6 AIR POLLUTION SPECIALIST LANDBERG: As a result 7 of the implementation of these proposed guidelines, all of 8 the remaining pre-1977 school buses will be replaced. At 9 this point we believe there to be less than 100 remaining 10 in service. The shear fact that fewer than 100 pre-1977 11 school buses remain in service is a testament to the hard 12 work and dedication of the ARB, the local air districts 13 and school districts. When these oldest school buses are 14 taken off the road in less than a year, we will all have 15 done something that we can be proud of. 16 And if replacing the last of the pre-1977s wasn't 17 enough, about 1,000 of the remaining 2700 1977 to 1986 18 public school buses will be replaced with this funding and 19 3500 Level 3 retrofits will be installed on middle-aged 20 in-use school buses. 21 Staff estimated that through 2020 emissions from 22 school buses replaced or retrofitted under these 23 guidelines will reduce about 3,000 tons of NOx, 200 tons 24 of PM, and 22,000 tons of carbon dioxide. 25 Based on early back-of-the-envelope calculations, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 362 1 prop 1B funds will pay for almost one-third of the buses 2 that need to be cleaned up to meet the upcoming retrofit 3 regulation. 4 --o0o-- 5 AIR POLLUTION SPECIALIST LANDBERG: Historically, 6 it has been the policy that the air districts split their 7 funding allocation for replacement buses between 8 alternative-fueled and diesel-fueled buses. 9 The purchase of alternative fuel school buses, 10 primarily CNG buses, has been an integral strategy in 11 advancing the programs' goals. However, as heavy-duty 12 diesel engines have achieved significantly lower emission 13 levels once only attainable by alternative-fueled engines, 14 the number of available alternative-fueled engines 15 certified each year has decreased. John Deere, the 16 primary manufacturer of school bus CNG engines, exited the 17 market in 2007. Currently, the only certified 18 alternative-fueled engine eligible for the program is a 19 propane-fueled engine. Although, a CNG engine may soon be 20 certified for use in a school bus configuration, but that 21 has not yet happened. 22 So at this point it is impractical to advocate an 23 alternative-fueled school bus funding split. 24 Staff is proposing a cost cap for new school 25 buses at $140,000. This represents the current PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 363 1 replacement cost, including tax, of the largest 2 diesel-fueled school buses. Staff has had discussions 3 with all of the new school bus vendors in the state, and 4 all agree that this cost cap is very reasonable for 5 diesel-fueled buses. The cap provides some modest 6 pressure on maintaining the prices low, and without it we 7 may see price increases. 8 Since the program has three years to expend these 9 funds, and the future price increases in buses are 10 currently an unknown, as I mentioned earlier we are 11 proposing that the Board grant the Executive Officer the 12 authority to raise the cost cap as needed to accommodate 13 future price increases. 14 The final issue that I'm going to discuss is the 15 requirement for school districts to provide match funding. 16 In these revised guidelines, we propose to continue the 17 policy in previous guidelines of requiring a match 18 contribution for new school bus replacements. As 19 proposed, the school bus program would pay over 80 percent 20 of the cost of a new bus, and the remaining 15 to 20 21 percent would be provided by the local air district or 22 school district. We are aware of the current financial 23 concerns of the school districts. However, we are also 24 aware that this is an issue of children's health and that 25 the state cannot entirely solve this issue alone. The PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 364 1 match requirement is modest but is enough to ensure about 2 200 more buses are replaced. Tough decisions will need to 3 be made. Eventually some school districts are likely to 4 pass on this funding at this time. However, we are 5 confident there will be enough interest in the program to 6 spend the entire 200 million and more if it becomes 7 available. 8 --o0o-- 9 AIR POLLUTION SPECIALIST LANDBERG: Finally, 10 staff recommends that the Board approve the proposed 11 guidelines with minor clarifications included in your 12 packet, funding allocations, and grant to the Executive 13 Officer authority to increase the cost cap on new school 14 bus purchases as needed, to ensure that the program can 15 cover significant portions of the school bus replacement 16 cost in the future. 17 This concludes my presentation. Thank you. 18 CHAIRPERSON NICHOLS: Thank you. 19 We have a list of speakers here, a number of them 20 from school districts here who are opposed, all of them. 21 I hope we have some supporters. Well, we've got a few. 22 All right. Let's just go to the list. I'll ask 23 you to come down front, if you could. We'd like to get 24 through this if we can. 25 Ralph Meza, Stephen Rhoads, John Clements. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 365 1 MR. MEZA: Good evening, Madam Chair, members of 2 the Board. My name is Ralph Meza and I'm with the Fresno 3 Unified School District. I'm the Director of 4 Transportation. 5 And I think the bill is good to replace the 6 buses. We need to replace a lot of old buses. We qualify 7 for 46 of them. But, as you know, funding is scarce. 8 Funding is cut back. They've asked us to cut back 8 9 percent of our funding in transportation. So with that 10 cutback, that means that we're going to have to come up 11 with a $25,000 match on top of the cost of the additional 12 cost of the bus. 13 We transport 75 students -- I mean our district 14 is 75,000 students. We transport on a daily basis over 15 12,500 students. So the cost of transportation is 16 enormous. With cutbacks and additional costs to our 17 budget, it's going to be significantly impossible to run 18 our operation. And I propose that you go back to the 19 table and reevaluate the whole outlook of this bill. 20 Thank you. 21 CHAIRPERSON NICHOLS: Thank you. 22 Are you only looking at buying new buses versus 23 retrofitting buses? 24 MR. MEZA: Well, we have 46 buses that qualify 25 under '77 through '86. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 366 1 CHAIRPERSON NICHOLS: But I mean you can -- 2 MR. MEZA: They're up for replacement. But on 3 top of the replacement of buses, we're also looking at 4 reduced capacities of buses. So every time we replace 5 three buses, we're going to have to add another one. So 6 that means we have additional funds coming out of our 7 general fund to replace buses. For every three buses that 8 we replace because of reduced capacities, we have to add 9 another bus to a route. 10 CHAIRPERSON NICHOLS: Okay. Thank you. 11 MR. MEZA: Because we're going from 78 passengers 12 to 90 passengers down to 62-passenger and 52-passenger 13 buses. 14 CHAIRPERSON NICHOLS: Thank you. 15 Stephen Rhoads, followed by John Clements and 16 Nikki Hughes. 17 MR. RHOADS: The reason for that is because of 18 the seat belt law, because all of the new buses will have 19 seat belts. 20 First of all, I'd like to take a minute, if I 21 could, and thank the Coalition for Clean Air and the other 22 environmental groups, because they were the ones that 23 pushed this issue of new school buses. And we owe this 24 money more to them than we do to anybody else. And so I 25 would like to thank them. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 367 1 Secondly, I've submitted a testimony and I also 2 am passing out a little PowerPoint. And there's two 3 issues I want to talk about. One is -- before I get to 4 the recommendations. One is the current crisis facing our 5 school transportation. 6 We have been horribly, horribly underfunded. You 7 will see that for the last 20 years we have only had our 8 transportation funding from the state increase 40 percent. 9 We've had a decline of 40 percent in the number of 10 children that ride school buses. We are the last in the 11 nation. We only have 16 percent of our kids who ride on 12 school buses. 13 Many, many school districts -- and you'll hear 14 some from today, are closing down. They can't afford it. 15 The state match, how much the state gives for 16 reimbursement, is less than 50 cents to a dollar. On page 17 5 of this handout, you'll see ten sample districts. 18 You'll find that the districts that are doing school 19 busing now either are rural districts or have a lot of 20 poor kids, because that's the only way they can get to and 21 from school. That list of ten schools on page 5, on the 22 average they got 70 percent of those kids qualify for free 23 and reduced lunch. And their reimbursement is on the 24 average much less than 50 percent. 25 When I was doing this last night I got a little PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 368 1 tired and I forgot to add Fresno and Selma from the 2 valley. I meant to put them on the list. And their 3 numbers are indicative of everybody else. When you 4 require a match, this money only is going to come out of 5 the classroom, and it's mainly these type of kids that are 6 going to be suffering. 7 The second thing I want to talk about is the 8 Governor's budget. The Governor's budget is proposing 9 that school transportation and special ed and the other 10 categorical programs be cut 6 1/2 percent from this year's 11 level. And -- from this year's level they'll cut this. 12 And they're also proposing that general aid be cut. There 13 is no way that these school districts are going to be able 14 to come up with a match. It's very, very difficult. It's 15 going to -- either they're not going to get the buses or 16 they're going to have to cut more. 17 As far as the requirements, the specific 18 regulations -- I'm sorry -- specific guidelines, we're 19 obviously opposed to the school district match of $25,000. 20 We think if you wanted that, you should have put that into 21 the SB 88, the enabling legislation. The last time you 22 had school buses and in the school bus program, you had no 23 match. 24 Your cap -- we think what your cap's going to do 25 is -- if you're in the South Coast Air Quality District, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 369 1 you're going to have to get a CNG bus. If you're any 2 place else in the state, you're going to get a diesel bus. 3 Because the $140,000 even for a diesel bus is unrealistic 4 if you've got to put air conditioning and other things 5 into a bus. So if you're outside of the South Coast, for 6 $165,000 you can buy a diesel bus with everything you 7 want. You've got to spend another 30 or $40,000 or 8 $50,000 if you're going to do a CNG bus. That's what the 9 people in South Coast are going to have to spend. Not a 10 match of 25,000, but a match of somewhere probably around 11 40 to $50,000. Those numbers -- the cap is unrealistic. 12 As far as how much should be spent on traps, SB 13 88 was very clear. That decision is a local air quality 14 district. They are the ones who are determining how much 15 gets spent on traps and how much gets spent on school 16 buses. They could have, as they did in the past -- I say 17 "they," being the Legislature, gave that authority to ARB. 18 But this time they did not. They gave it to the local air 19 quality district. I don't think it's appropriate really 20 to make a recommendation. 21 The last thing -- the final thing is you got, I 22 think it's 2 1/2 million, 2.4 million for outreach for 23 traps. This is a bond measure. These are bond funds. It 24 is totally inappropriate to use bond funds to support 25 outreach. This is very important to us. And we think PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 370 1 this is very unwise. Because we hope to be able to use 2 school bonds and other types of bonds for future school 3 bus funds through the ARB. And we don't want any 4 publicity that might occur because of the misuse of the 5 funds. 6 Thank you very much. I forgot to introduce 7 myself. My name's Steve Rhoads. I represent the School 8 Transportation Coalition. 9 Thank you very much. 10 CHAIRPERSON NICHOLS: Thank you. We had you on 11 our list. 12 John Clements and then Nikki Hughes. 13 I'm going to have to start paying attention. 14 MR. CLEMENTS: Good evening. John Clements, 15 Kings Canyon Unified School District. I'm just south of 16 Ralph's district, Fresno. I cover eastern portions of 17 Fresno and Tulare County, about 600 square miles, having 18 64 school buses transporting 3,000 of my 9,000 students, 19 and serving about five or six environmental justice, I 20 guess you would say, communities, as over 80 percent of 21 our population is free or reduced lunch. 22 We've played the game well up to this point. I 23 praise the Energy Commission for their pioneering spirit 24 in beginning with AB 35. And I thank Jack and his staff 25 for the low emissions program. We've replaced over PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 371 1 one-third of our school buses up to this point and we 2 built our own CNG station and we've retrofitted everything 3 we could possibly retrofit to Tier 1 level. 4 And now I'm poised with: Am I going to be able 5 to play this game? I'm on the list for possibly 21, three 6 of which are pre-77s. And I'm on the third engine for 7 those pre-77s, and they have diesel oxidation catalysts. 8 And so when you add it up, I'm going to need about 525,000 9 for my match to replace those 21 buses, roughly. And I go 10 before my school board this next Tuesday night and ask 11 them for a resolution in preparation to go to my local air 12 district to allow me to play the next round. And I'm 13 hopeful that our -- or I'm going to just say it -- bean 14 counters will allow me to go out and finance that 525,000 15 that I'll need to match. As in the past we've had the 16 cash flow and been able to pay that up front, we're not 17 going to be in that position. My district cut my budget 6 18 percent this year. I'm thankful at this point they're 19 going to keep that same base limit as I go in for 20 operations this coming year. 21 But I can tell you, I've got neighbors that have 22 4 and 5 buses, unlike my 64 -- and I've also been 23 privileged to add to my fleet going after local SEMAC 24 funds, praise God, through our Council of Governments. 25 But I've got neighbors with four or five, ten buses that PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 372 1 are cannibalizing buses right now because they can't 2 afford to run their entire fleets; that they've increased 3 walking distance. And they're asking me how they can 4 play. And they can't even afford to go out and get a loan 5 for 25,000 for a bus as their local match. 6 So I would like to play the CNG game, as 21 of my 7 newer buses are natural gas and I have the infrastructure. 8 But with 140,000 cap, it's only going to be affordable for 9 me to continue to operate diesel buses in my fleet, 10 unfortunately. 11 So I'm available for questions. And thank you 12 for the voters for this initiative. And we're going to 13 play it the best we can. But I'm worried that our small 14 neighbors are going to get left out. They won't retrofit. 15 They haven't up to this point. Many of them have not 16 participated in other low emissions programs, simply 17 because they don't have the grant writers or the technical 18 staff to go for it. 19 Thank you. 20 CHAIRPERSON NICHOLS: Thank you. 21 Nikki Hughes and then Kirk Hunter, Tom Carroll. 22 MR. RHOADS: Nikki Hughes is the Transportation 23 Director for San Juan. She had to leave for personal 24 reasons. 25 Okay, understood. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 373 1 They have 210 buses there; 54 are eligible. And 2 she has been directed to cost-out what it would take to 3 eliminate their whole regular school transportation 4 program because of the proposed cost. 5 CHAIRPERSON NICHOLS: Thank you. 6 Is Kirk Hunter here? 7 Yes. 8 MR. HUNTER: Yes. Good evening. Kirk Hunter, 9 CEO, Southwest Transportation Agency. Just a little 10 background. 11 We're a joint powers authority in Fresno County 12 handling transportation for 14 school districts, 7,000 13 students a day, 1200 extracurricular trips, 1.2 million 14 miles a year. We have 39 compressed natural gas school 15 buses in a fleet of a hundred. And we have a 15,000 16 gallon liquid compressed natural gas fueling station, and 17 are partnering with Harris Ranch to bring the first 18 liquefier to the Central Valley hopefully in a couple of 19 years if we play our cards just right. 20 First, I want to talk a little bit about 21 retrofits, which I have aptly renamed glorified mufflers. 22 Last year the Southwest Transportation Agency took a grant 23 for $550,000 from the air district to put 31 mufflers on 24 our diesel buses -- on our middle-age diesel buses. A 25 hundred ten thousand of that was used to upgrade our PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 374 1 electrical so we could plug these things in and buy a 2 gloried muffler cleaning machine for $56,000. 3 After we put the units on our buses we 4 immediately began seeing increased electrical cost; loss 5 of horsepower; increased fuel consumption; increased oil 6 consumption; the requirement to regenerate them daily, not 7 monthly like the literature and the salesman promised us; 8 and increased payroll cost as a result of maintenance work 9 and road calls. 10 Unfortunately for us, these retrofits have been 11 nothing short of a boondoggle. They do not work for us. 12 And our recommendation -- my recommendation was, is, and 13 will always be not one red cent of school bus money be 14 spent on mufflers. They need to be put in school buses. 15 Our kids in California deserve to ride on the most 16 technologically advanced, seat-belt equipped school buses, 17 not continuing to ride on old school buses with fancy 18 mufflers. 19 Secondly, as for the match. Are you kidding? We 20 can't even -- we're having a hard enough time paying 21 attention, let alone our bills, nowadays. It is very 22 difficult out there with this $25,000, as John said -- I 23 have 14 rural school districts -- they're not going to be 24 able to afford for the match. I know that's hard for some 25 people to grasp. I realize that 25 grand is not a lot of PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 375 1 money to a lot of people. But to a small school, that's 2 looking at laying teachers off to make ends meet. 3 Twenty-five thousand dollars is a half a teacher. 4 So, anyway, the match needs to go away, the money 5 needs to put -- 100 percent of the money needs to be put 6 into school buses. 7 And thank you very much. 8 CHAIRPERSON NICHOLS: Thank you. 9 Tom Carroll. 10 MR. CARROLL: Good evening. Thanks for allowing 11 us to speak on this matter before you tonight. 12 Now, my name is Tom Carroll. I represent Shasta 13 Union High School District up in northern California. 14 My district is 1900 square miles of Shasta 15 County's 3700 square miles. And in looking at the data, 16 approximately 10 percent of the buses that you're 17 targeting for replacement -- or ten percent of the total 18 number of school buses in California which you're 19 targeting for replacement, 25 percent of the buses in my 20 county fit into that category. We actually have 57 buses 21 that would be eligible for replacement and $4 million 22 proposed for replacements and retrofits. 23 If we used all that money for replacement, we 24 could replace almost half of those school buses in our 25 county. In Shasta County we have approximately 220 school PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 376 1 buses. So 57 of those, if we could replace half of them, 2 we'd be half way there. That is a much better bang for 3 our buck as far as we're concerned. It would allow our 4 students to ride the best buses that are available with 5 the most recent safety features - seat belts. 6 When we start getting into the retrofit, if we 7 use 25 percent of this money for retrofitting, we'll lose 8 approximately six to eight school bus replacements in our 9 county. That means -- if you figure 50 students per bus, 10 that mean's there's going to be 300 students riding some 11 kind of a school bus back and forth to school next year 12 without a seat belt. I don't think that's a very good 13 option. 14 On the $25,000 replacement match, as Kirk and 15 everybody else before me has said, although it may seem 16 like it's a very low amount, it's extremely unreasonable 17 for some of the school districts that we have. We have 18 many school districts in my county. There's 25 school 19 districts in my country. And many of them, their entire 20 operating budget is less than $2 million. That's 21 teachers' salaries, fuels, heating/air conditioning, 22 everything. So a $25,000 match for a school bus is very 23 unrealistic in my area. 24 Also, the cap for the bus of $140,000, the most 25 recent bus that I looked at cost about $155,000 to replace PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 377 1 a diesel bus in my fleet. So I don't believe that the 2 $140,000 cap is realistic. That would add an additional 3 $15,000 to the district's replacement costs. 4 As an industry, we're interested in accelerating 5 the replacement of older equipment but allowing for the 6 maximum emission reductions, and getting the most improved 7 safety equipment out there on the road for the kids. 8 That's the most important thing for us as far as we're 9 concerned. 10 So I would respectfully request that you take a 11 look at the $25,000 match and the $140,000 cap for school 12 buses -- and I can share with you that I've been in the 13 school transportation industry for over 22 years. My 14 school district has 23 school buses. One of them is one 15 of the three pre-77 school buses on this list for 16 replacement. It has almost 700,000 miles on it. And I 17 road that bus to school. That's the kind of shape that 18 the school transportation industry is in in California. 19 That's ridiculous. So I respectfully request that you 20 guys reconsider the match and the cap and allow -- let the 21 local air districts take a look at that themselves. 22 Thank you. 23 CHAIRPERSON NICHOLS: Thanks. 24 Bernie Orozco, followed by Joseph Kubsh. 25 MR. OROZCO: Good evening, Madam Chair, Board PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 378 1 members. Bernie Orozco with Sempra Energy, here today 2 representing San Diego Gas and Electric and the Southern 3 California Gas Company, collectively known as the Sempra 4 Energy Utility Companies. 5 We've been asked by school districts in our 6 service territory -- and we have the largest natural gas 7 distribution service territory in the United States. 8 There's no one larger delivering natural gas to customers. 9 A number of our school districts have come to us and asked 10 if we would make comments today basically stating 11 everything that's been said to far. 12 The cap of $140,000 does not work for most school 13 districts. The match does not work. 14 And, also, one other issue was the retrofitting 15 of natural gas vehicles. Folks have asked that we request 16 that for natural gas vehicles -- natural gas bus, CNG, 17 that you be allowed to replace the fuel tanks. So another 18 consideration for you. 19 I won't belabor the points. I think everyone's 20 been making a very good show for today. So thank you. 21 CHAIRPERSON NICHOLS: Thank you. 22 Joseph Kubsh, followed by Tim Carmichael. 23 MR. KUBSH: Good evening, Madam Chair and members 24 of the Board. My name is Joe Kubsh. I'm the Executive 25 Director of the Manufacturers of Emission Controls PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 379 1 Association. 2 Our industry provides many of the verified Level 3 3 technologies that will be used for retrofit options as a 4 part of this Clean School Bus Program. And our industry 5 certainly applauds the state's efforts to provide funding 6 to clean up these buses. 7 I'm here tonight though to ask you to do a bit 8 more when it comes to the retrofit side of this program. 9 Putting Level 3 devices in the exhaust stems for retrofits 10 on these school buses is the right thing to do because 11 it's the best available technology, provides the greatest 12 reduction with respect to diesel particulate matter. 13 But this program fails to recognize another 14 source of diesel PM on existing school buses; and, that 15 is, crankcase emissions. Pre-2007 school bus engines vent 16 their crankcases directly to atmosphere. And this is 17 another source of diesel PM and toxic contaminants that is 18 an exposure risk for children that ride school buses in 19 this state. And there are technologies available to put 20 essentially filters on these crankcase systems to remove 21 essentially all of these crankcase emissions from the 22 school bus footprint. 23 There are three manufacturers that have verified 24 technologies for crankcase filters, either through ARB's 25 verification program or through the U.S. EPA's PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 380 1 verification program. And it's our recommendation that 2 the retrofit portion of this school bus -- Clean School 3 Bus Program allow funding to include a more complete 4 retrofit package that includes not only a Level 3 filter 5 in the exhaust system, but a verified crankcase filter on 6 the crankcase vents of these same school buses. We 7 believe that verified crankcase filters could be combined 8 with any verified Level 3 diesel particulate filter to 9 provide this more complete retrofit package for the school 10 bus programs. 11 These crankcase filters are very cost effective. 12 The typical installed cost is less than a thousand dollars 13 per bus. So it represents a small incremental additional 14 retrofit cost on top of the filters that are part of the 15 retrofit program that is before you this evening. 16 So our recommendation is to please find a way to 17 include crankcase filters as a part of funding a more 18 complete retrofit package as a part of this program. We 19 believe that the school children of California deserve the 20 cleanest ride available. 21 Thank you. 22 CHAIRPERSON NICHOLS: Thank you. 23 I'm sorry. My list just disappeared. 24 MR. CARMICHAEL: Tim Carmichael. 25 CHAIRPERSON NICHOLS: Tim Carmichael, yes. And PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 381 1 then Bonnie Homes-Gen. Thank you. And then Fred 2 Minassian. 3 MR. CARMICHAEL: Good evening again. A couple of 4 quick points. 5 First of all, I appreciated the compliment from 6 Mr. Rhoads. But to give credit where credit is due, we do 7 deserve credit for shining a spotlight on this problem 8 about ten years ago and encouraging Governor Davis at the 9 time to start putting real money towards this problem. 10 I noted in the staff presentation there was a 11 photo taken by one of our staff members at the time, Todd 12 Campbell, of that yellow bus with the black cloud behind. 13 I'm sure his attorneys will be talking to you about the 14 fact that you left off the credit for the photo. I'll 15 talk to him about it. 16 The other issue -- the more serious issue -- 17 actually before I do that, the near term, this $200 18 million money in the bond, I want to give credit to Bonnie 19 Holmes-Gen and American Lung, because among the 20 environmental advocates she really was the leader in 21 driving that piece of the bond funding. We supported but 22 she was really the driver. 23 So to the substance before you, the Coalition for 24 Clean Air supports the staff proposal. But we share the 25 concerns raised by Mr. Rhoads. And I just want to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 382 1 highlight a couple of the points. 2 On the match, when we asked your staff about the 3 match, they said, yes, there may be an issue here but 4 they're trying to stretch the money as far as they can. 5 And we support that. They said that the air districts 6 could in fact cover this match. We agree with that. And 7 it's probably true that most of the big air districts have 8 the funds to do that. But the question is: Will they? 9 There's a lot of pressure on the air districts just like 10 there's a lot of pressure on the Air Board, not to mention 11 the school districts, for various funding needs. 12 So we would flag that as a very important issue 13 for this Board to consider. And at a minimum you should 14 give the discretion to your Executive Officer to make 15 adjustments as necessary if in the early going as this 16 program is rolling out you find that it's a serious 17 problem and the districts are not -- either the school 18 districts or the air districts are not coming through with 19 that match, that, you know, the program would be adjusted 20 appropriately. 21 The second point is the alternative fuels piece. 22 And whether you look at it as a cap limitation or an 23 alternative fuels carve-out, we continue to have concerns 24 that Air Board staff see a clean diesel bus as good as 25 this standard that we should measure things against. We PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 383 1 believe that today we need this agency to be seeing a 2 clean alternative fuel vehicle as the standard that 3 everything is geared towards. And so if Mr. Rhoads and 4 his colleagues from the school districts are right in that 5 outside of the South Coast the money's just not going to 6 cut it for an alternative fuels bus, we're concerned about 7 that. And that's another issue that we would urge you to 8 urge your Executive Officer to pay close attention to, 9 because we frankly think that this agency needs to be 10 doing more to encourage and support alternative fuels in 11 all applications. 12 Thank you very much. 13 CHAIRPERSON NICHOLS: Thank you. 14 Is Bonnie here? 15 Yes, she is. 16 MS. HOLMES-GEN: Good evening, Chairman Nichols, 17 members of the Board. And I'm Bonnie Holmes-Gen. I'm 18 with the American Lung Association of California. 19 And we've been very pleased to work with you and 20 your staff and other organizations, like the Coalition for 21 Clean Air, over the years to continue to ramp up the 22 funding available for the Low Emission School Bus Program. 23 We think it's been a real success story in terms of diesel 24 pollution reduction and improving children's health. And 25 we're very pleased that your Board is acting quickly to PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 384 1 get this additional $200 million out the door and get it 2 out to the school districts. 3 And, you know, we appreciate the issues that have 4 been raised about the match, and we certainly do want to 5 get the money out to both replace buses and for retrofits. 6 And we do hope that you'll work with the air districts to 7 see if you can resolve some of these issues of the match 8 funding and help identity sources of funds and help push 9 the air districts to help provide some of this extra 10 needed funding. 11 And we also think it's going to be very important 12 for you to work hard in the outreach efforts to make sure 13 that school districts take advantage of the retrofit 14 funds. I mean we would love to replace, you know, all the 15 school buses -- all the pre-87 school buses. 16 Unfortunately, you know, with the funds that are 17 available, I think that there's been a wise choice made 18 that we need to put a portion of these funds toward 19 retrofit so we can get emission reductions now over a 20 large number of buses. And those retrofits are going to 21 be needed to comply with your on-road truck and bus rule. 22 So I do think it's important that you do put effort into 23 the outreach to make sure that school districts take 24 advantage of these retrofit funds and are able to use 25 those monies in advance of the requirements that are PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 385 1 coming down. 2 We do encourage staff to continue to investigate 3 the problem of crankcase emissions. We have a very 4 helpful discussion with staff about this issue and some of 5 the technologies they're looking at. It sounds like 6 there's more work to be done. And we do want to ensure 7 that you keep looking at this issue and how we can resolve 8 this. 9 And, finally, we hope we can work with you to 10 identity additional funds, so that we can finish the job 11 of replacing all these pre-87 buses. It's very important 12 for our children's health. 13 Thank you for your attention, and we support the 14 proposal. 15 CHAIRPERSON SAWYER: Thank you very much. 16 Fred Minassian. 17 MR. MINASSIAN: Thank you, Madam Chair and 18 members of the Board. Fred Minassian from South Coast 19 AQMD. 20 I would like to make a statement on behalf of our 21 agency that we do support ARB's proposal for the 22 Lower-Emission School Bus Program. 23 We have been very proactive in implementing this 24 program since Year 2000. And the slide that was put there 25 a few minutes ago by your staff that 3500 buses have been PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 386 1 retrofitted to date, I'm proud to say that approximately 2 2600 of those buses have been done within our district. 3 We have paid the entire cost of the retrofits of those 4 buses. Practically every bus owned by public school 5 districts that are 1994 and newer qualifying for retrofit 6 have been retrofitted. We have provided over 600 new CNG 7 buses and some lower-emitting diesel buses to school 8 districts. 9 So what we are supporting -- and I would like to 10 make a clarification. It is true that schools are going 11 through hard times. But at least within our air district 12 we would like to keep our flexibility. We have maintained 13 and -- established and maintained good working 14 relationships with our local schools. 15 To date, we have spent about $120 million since 16 Year 2000 on the Lower-Emission School Bus Program. A 17 large sum of that has been from our local funds due to our 18 own Chairman's initiative and our Board's initiative. In 19 cases where infrastructure has been needed that the ten 20 percent hasn't been enough, we have provided additional 21 funding for building infrastructure for those buses. And 22 in cases where schools have been in real difficulty, we 23 have tried to work with them to take advantage of the 24 trading opportunity of buses where newer buses could be 25 traded to other schools and then the other schools could PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 387 1 replace their older buses. 2 So it's true that schools are going through hard 3 times. But we are supporting ARB's proposal. We believe 4 we can continue working with our local schools in cases 5 where our funding is needed to be provided. And the 6 program has been a success and we would like to support 7 the program. 8 Thank you. 9 CHAIRPERSON NICHOLS: Thank you very much. 10 That concludes the list of witnesses that I had. 11 I want to take it back to the staff to provide 12 just some comment on that and then to answer Board member 13 questions. 14 Do you have any additional comments based on the 15 testimony? 16 If not, then we'll go to the Board. 17 Supervisor Hill. 18 SUPERVISOR HILL: I think Ms. D'Adamo wanted to 19 say something. 20 CHAIRPERSON NICHOLS: Oh, sorry. 21 SUPERVISOR HILL: Go ahead, Ms. D'Adamo. 22 BOARD MEMBER D'ADAMO: I was just going to move 23 adoption and include some of the suggestions that Tim 24 Carmichael brought up regarding giving the Executive 25 Officer the discretion on the match and some of these PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 388 1 other issues. 2 CHAIRPERSON NICHOLS: I think that would be 3 helpful. 4 SUPERVISOR HILL: Yeah. And that's really what I 5 was going to say too. I think it's critical -- and these 6 school districts are really suffering now. And if we 7 can -- and the match especially, but also on the cap. I 8 think there needs to be some consideration. It would be 9 nice if we could look at the alternative fuel issue. 10 But, you know, you'll be giving one -- they're 11 going to pay in two areas. One is the match, and then 12 they're going to spend an extra 15, $20,000 or more on the 13 above the cap, because they certainly can't purchase a bus 14 for that. So I don't know how we can either raise the cap 15 somewhat to compensate for that. But I'd like to see us 16 do that actually. 17 CHAIRPERSON NICHOLS: I think the tension that 18 has bothered me about this program and all the Moyer 19 programs is that, you know, we want to be out there 20 supporting the shift to alternative fuels and upgrading of 21 all the vehicles in the State of California, but at the 22 same time kids riding the buses today are breathing 23 unacceptable levels of particulate matter. It's not just 24 what they're doing to the air basins; it's what they're 25 doing to the children inside those buses. And PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 389 1 retrofitting is a lot faster. Even though I heard the 2 comment from the guy who said he would never retrofit 3 anything, that's just not been the experience of other 4 areas. And so I guess we have to have some sort of a 5 fairness about these approaches. But we're going to get 6 the money to go a lot faster and farther in terms of 7 actually reducing health risks, I think, if we put this 8 into -- primarily into the retrofits, even though that's 9 not what the districts want. And I understand they 10 don't -- and, believe me, I don't think that they've been 11 getting what they need in terms of upgrading their fleets. 12 But this one program is a little bit of a stopgap. It's 13 not the whole answer, unfortunately. 14 BOARD MEMBER BAUMS: I was just going to echo 15 your concern about the air the kids are breathing on 16 school buses. It's been studied. It's bad, and has 17 immediate health effects especially for kids with asthma. 18 So I understand the tension that you described. 19 And I do support trying to do something to alleviate the 20 financial burden on, you know, very hard pressed school 21 districts with both the cap and the match, but I do think 22 we have to have some provision for retrofits as well. 23 CHAIRPERSON NICHOLS: Well, I'm particularly 24 happy to hear that the South Coast has been doing such an 25 aggressive job with their own funding of making that a PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 390 1 priority. And I hope other districts will do the same 2 thing. 3 All right. We had a motion. 4 Do we have a second? 5 BOARD MEMBER BAUMS: I'll second it. 6 CHAIRPERSON NICHOLS: All right. 7 SUPERVISOR HILL: They had one other question 8 that was raised. And if I -- and that's related to the 9 certification issue -- the CHP certification, that it has 10 to be current. And I guess it -- I know the Bay Area 11 district raised the issue that some buses perhaps are 12 in -- you know, they've been out of service for six months 13 or a year being retrofitted or worked on themselves. And 14 if maybe there could be, if they've been in service for 15 the last year or two of three or something like that. 16 ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI: Right. 17 This issue's come up at the Bay Area and the South Coast, 18 where we put a cutoff point in there. And this was 19 basically to protect the state program. At some point we 20 just drew a line and said this is the point at which you 21 need a CHP certificate. It's got to be valid from that 22 point on. And the reason for doing that, when we went to 23 the point where we were saying we want to -- we were going 24 to pay completely the cost of the pre-77s, we heard 25 comments from both school districts and air districts, PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 391 1 "Well, what if I bring some back from the junkyard and 2 revive them?" And that is completely the opposite 3 direction we were trying to go. 4 The two places where they appear that they may 5 have, you know, legitimate cases where a bus might have 6 been undergoing some refurbishment or something for an 7 extended period, we're both -- the Bay Area and South 8 Coast, both of which have quite an extensive amount of 9 motor vehicle fees, and we encourage them to use their 10 motor vehicle fees, we're talking probably about, you 11 know, two or three buses at the most. And we just -- we 12 were concerned about the risk to this overall state 13 program. 14 SUPERVISOR HILL: Okay. That's fine. 15 Thank you. 16 CHAIRPERSON NICHOLS: Thank you. 17 Yes, Board Member Berg. 18 BOARD MEMBER BERG: Point of clarification. 19 On the motion we are going to give the Executive Director 20 the latitude of being able to take a look on a 21 case-by-case basis not only cap but also the matching? 22 CHAIRPERSON NICHOLS: Yes, we are. And use that 23 power well. 24 All right. Will all in favor of the resolution 25 please say aye. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 392 1 (Ayes.) 2 CHAIRPERSON NICHOLS: Any opposed? 3 Great. It carries unanimously. 4 We're not done yet, however, folks, because we 5 have an open comment period at every Board meeting. It's 6 a time when anyone who's here is allowed to comment on any 7 topic that they wish to for the Board, that's relevant to 8 the ARB's jurisdiction anyhow. 9 And with that, I'm going to call forward the 10 people who've signed up to speak to us. They are Doug 11 Korthof, Gary Rohman, William Davis, Henry Hogo, Fred 12 Minassian, and Francois Choquette, we think. 13 EXECUTIVE OFFICER GOLDSTENE: Madam Chairman, do 14 you want to talk about the ZEV? 15 CHAIRPERSON NICHOLS: Yes, we do want to put up 16 the sort of simplified version of what the Board adopted. 17 EXECUTIVE OFFICER GOLDSTENE: Do you want to do 18 that now before -- 19 CHAIRPERSON NICHOLS: Before the public comment 20 period? 21 EXECUTIVE OFFICER GOLDSTENE: It's up to you. I 22 just wanted to make sure -- 23 CHAIRPERSON NICHOLS: Well, nobody's -- I don't 24 know that it's going to make any difference actually. Why 25 don't we just get through the public comment. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 393 1 Go ahead. 2 MR. MINASSIAN: People are waiting for that. 3 CHAIRPERSON NICHOLS: All right. Well, then 4 let's do it. 5 All right. Never mind. If you don't mind 6 sitting down, let's just quickly -- we have a slide I 7 believe that we can put up, and we'll have a brief 8 discussion. 9 Thank you. 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We 11 tried to capture the essence of the Board's decision in 12 this two-page Word document here. And it's been handed 13 out to the Board members. And what we hope is that if -- 14 we could either go through it. Or if you've read it and 15 you think it captures the essence, then we could make that 16 available to the public, put it on our website. And we've 17 labeled it "preliminary" because there wasn't a great 18 amount of wordsmithing going into it. But I think we 19 caught the essence. And we'd kind of like your 20 confirmation that that's the case. 21 CHAIRPERSON NICHOLS: Can you see it on your 22 screen? 23 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, 24 you've got hard copies there as well. 25 CHAIRPERSON NICHOLS: Great. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 394 1 SUPERVISOR HILL: Madam Chair, I'd just like to 2 add one on the redesign. I know we made it clear, and I 3 just wanted to make sure just for staff, that the redesign 4 the ZEV program by the end of 2009, perhaps we could 5 include that in some statement that we're making, because 6 that was I think the desire. 7 BOARD MEMBER SPERLING: You know, just a little 8 comment on this is that, you know, the way this is 9 presented with the 7500 number, it's really coming out of 10 a mind-set from the alternative fuel compliance path. And 11 having just sat with a bunch of reporters and gotten -- 12 you know, there's a different way of presenting this. And 13 it could just as easily be presented as 12,500 battery EVs 14 or 7500 fuel cell vehicles. And, you know, the battery 15 EVs could be bolded just as well in terms of how we 16 present this. 17 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: In 18 other words -- I mean you did see the parentheticals below 19 it that has the numbers, right? 20 BOARD MEMBER SPERLING: Well, I'm saying the 21 parentheticals could -- 22 CHAIRPERSON NICHOLS: Yeah. But that's like an 23 alternative to the 7500. 24 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And if 25 we did that, then I probably should add the numbers that PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 395 1 would go with the 25,000 too, because there'd be a range 2 there as well. 3 BOARD MEMBER SPERLING: So they could be -- 4 probably the best way is actually just say they're all 5 equal, which is a more accurate way of presenting it. You 6 know, it's this or this or this. And not necessarily 7 bolding any one of them. 8 CHAIRPERSON NICHOLS: So under the gold category 9 you'd have three equal-sized or equally bold numbers? 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Right. 11 CHAIRPERSON NICHOLS: The 7500, the 5,357, or the 12 12,500? 13 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, 14 under the 25,000 would say 25,000 or 17,857 fuel cell -- 15 long-range fuel cell vehicles or 41,667 battery electric 16 vehicles with 100-mile range. That way? 17 CHAIRPERSON NICHOLS: Uh-huh. 18 BOARD MEMBER D'ADAMO: I would just also suggest 19 that under silver plus, most people don't know what that 20 means. 21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, 22 we should -- we'll put in assuming 22-mile plug hybrid 23 electric vehicle. Would that do it for based on a -- 24 CHAIRPERSON NICHOLS: Otherwise I think the 25 specific -- the discussion of the specific changes that PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 396 1 were made is accurate as far as I can tell. 2 EXECUTIVE OFFICER GOLDSTENE: Madam Chairman, we 3 want to clarify that on the redesign we'll add language to 4 bring it back to the Board by the end of 2009. And also, 5 just so you understand, that that would affect -- what 6 we're looking at is that would affect model year vehicles 7 2015 onward. I just wanted to make sure that that's your 8 understanding as well. 9 CHAIRPERSON NICHOLS: Yes. 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: You 11 weren't going to try to revisit 2012 through 14 by the 12 redesign, but just prospectively beyond that. 13 CHAIRPERSON NICHOLS: Yes, from 2015 on, right. 14 And -- 15 SUPERVISOR HILL: I'm sorry. 16 CHAIRPERSON NICHOLS: Sorry. 17 SUPERVISOR HILL: Just a question on the credit 18 banks of manufacturers fully transparent. You know, that 19 was -- 2010 was the suggestion in the recommendation, but 20 2009 was the -- you know, the production data. And I 21 guess I never really got an answer. And I know we're not 22 discussing the issue again, but why we can't make that 23 2009 as well for the credit bank distribution, the 24 transparency of that number as well. 25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And I PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 397 1 thought that -- I'm not sure I remember why it went to -- 2 why the reason for the -- 3 CHAIRPERSON NICHOLS: We didn't do that when it 4 came up the last time, and there was a reason. But I'm 5 trying to remember what it was. 6 SUPERVISOR HILL: But I thought when we were 7 talking today we were planning to make it all at one time, 8 and I thought it was 2009 that we agreed to, though it's 9 not -- 10 CHAIRPERSON NICHOLS: You mentioned it, but we 11 had already, I think -- 12 SUPERVISOR HILL: But that wasn't your 13 understanding? 14 CHAIRPERSON NICHOLS: No, it was not, it was not. 15 SUPERVISOR HILL: Okay. That's fine. 16 Thank you for the clarification. 17 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: So it's 18 okay as written then or -- 19 CHAIRPERSON NICHOLS: On that point I think it 20 is. I think if you're going to put this out and you want 21 to mention the nine loopholes, it was the nine specific 22 loopholes that were recommended or were identified by UCS 23 and NRDC. That was where that came from. 24 BOARD MEMBER SPERLING: I'm not sure loopholes is 25 the -- I mean that's the word they used. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 398 1 EXECUTIVE OFFICER GOLDSTENE: We'll work on 2 language to clarify it. 3 CHAIRPERSON NICHOLS: They're issues. 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: 5 Because, by the way, we have gone over those and we don't 6 consider any or just a few as even bordering on loopholes. 7 CHAIRPERSON NICHOLS: Okay. Well, then let's not 8 call them loopholes even if they did. But you need to at 9 least get back to us, I guess, and let us know what you've 10 decided. 11 MR. CARMICHAEL: Chairman Nichols? 12 CHAIRPERSON NICHOLS: Uh-huh. 13 MR. CARMICHAEL: Just a quick clarification. If 14 this is intended to capture what the Board did, I thought 15 the other piece of this was action on the intermediate 16 manufacturers. 17 CHAIRPERSON NICHOLS: Yes, that's on Page 2. 18 MR. CARMICHAEL: Oh, we couldn't see that. We 19 don't have a hard copy. 20 CHAIRPERSON NICHOLS: Sorry. It's page 2 of the 21 slide. Yeah, it's there. 22 That's what we were -- when we were talking about 23 the issues or the loopholes, that's also on page 2. So 24 you can give everybody a chance to look at it. 25 BOARD MEMBER SPERLING: And, you know, the other PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 399 1 one is on the additional credit for the plug-in hybrids 2 meeting the US 06 cycle. I think -- I had suggested up to 3 3/10 -- you know, 2.4 up to 2.7. I'm not saying it should 4 be that. But it says here one or two-tenths of a credit. 5 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I was 6 thinking it was 2.5 was the base. But it's 2.4, you're 7 right. 8 So one to three-tenths of a credit? 9 BOARD MEMBER SPERLING: Yeah. 10 MR. CARMICHAEL: One other quick question. Would 11 it be possible to get a hard copy of this? 12 CHAIRPERSON NICHOLS: Of course. 13 MR. CARMICHAEL: Or what's the intention for 14 communicating this? 15 CHAIRPERSON NICHOLS: Well, we've got to clean it 16 up and distribute it. But we were going to put copies out 17 as soon as they were ready. 18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We'll 19 readjust it and it will be on the website tomorrow morning 20 or mid-morning maybe. 21 CHAIRPERSON Nichols: This is a summary. The 22 resolution will be more grandiose. 23 EXECUTIVE OFFICER GOLDSTENE: Without the word 24 "loophole." 25 MR. KORTHOF: Excuse me, if I might ask. On the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 400 1 first page it had an either/or on two boxes, the 7,500 2 versus the 25,000. What does that -- does that mean the 3 25,000 is one pathway that they could use? 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Right. 5 It was an attempt to say that if you wanted to make all 6 fuel cell or battery electric or long-range fuel cell 7 vehicles, it would be 25,000 or these other two numbers 8 that reflect the credit rule. Or in the other extreme, 9 you could make only 7500 but you'd have to make the 58,000 10 silver plus vehicles. It boxes the two possible outcomes. 11 MR. KORTHOF: So this would require then at least 12 some fuel cell or battery cars during that period? 13 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yes, it 14 would require anywhere from 5357 to 12,500 of those 15 vehicles. 16 MR. KORTHOF: And would they have to be sold or 17 could they just be placed? 18 That issue wasn't dealt with? 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I 20 believe it has. I think it's -- 21 CHAIRPERSON NICHOLS: -- sold. 22 MR. KORTHOF: It would have to be sold? 23 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 24 it's placed. I don't know if it says sold or leased or -- 25 I'm not sure actually. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 401 1 BOARD MEMBER SPERLING: The language used to be 2 "made available for sale." I don't know if it's still 3 that language, but -- 4 MR. KORTHOF: We wouldn't expect the fuel cells 5 to be available for sale because they're much too 6 expensive. They'd have to be on a lease. But with 7 battery electric cars, they would have to be offered for 8 sale to be meaningful. Otherwise they get taken back and 9 crushed. 10 MR. FRIEDLAND: I'm sorry. I had one other 11 question too. 12 On that 25,000, does it have the same caveat in 13 terms of scaling? How did the different types fit into 14 that 25,000? 15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: The 16 number for a long-range fuel cell vehicle is 17,857. Is 17 that what you're talking about? 18 MR. FRIEDLAND: Exactly. 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: And the 20 number for a battery electric 100-mile range is 41,667. 21 MR. FRIEDLAND: That's still pivoted on five? 22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, 23 it's still pivoted on five, right. 24 Could you introduce yourself for the court 25 reporter. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 402 1 CHAIRPERSON NICHOLS: For the court reporter. 2 MR. FRIEDLAND: Jay Friedland from Plug In 3 America. 4 CHAIRPERSON NICHOLS: We know you but the record 5 doesn't. 6 Yes. 7 BOARD MEMBER D'ADAMO: Maybe to put an asterisk 8 on that 25,000 number, because -- I don't know how to 9 capture this, but that's not going to happen. There's 10 going to be something in between. It could either be the 11 minimum of a combination of 75 or 53 or 12 plus the silver 12 plus. Or their possibly could be more gold and less 13 silver, depending on what the choices are. But we don't 14 expect that there would be 25,000 gold and zero silver. 15 That's what theoretically could occur. 16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That's 17 an option for the -- 18 BOARD MEMBER D'ADAMO: Some way to capture that. 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, 20 each manufacturer chooses. So I -- it is possible, I 21 guess, but we don't think it's probable. 22 CHAIRPERSON NICHOLS: I agree, we don't think 23 it's likely. But that's what the rule calls for. 24 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 25 with your permission, we'll look at this table and see if PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 403 1 there's a way to perhaps more clearly -- but, like 2 Professor Sperling, the few people I've been talking to, 3 it's hard to convey it clearly to people. But we could 4 try it. 5 SUPERVISOR HILL: And, Tom, when you do this 6 tomorrow, when you put it on the website, could you e-mail 7 it to all of us? That would be great. 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Sure. 9 SUPERVISOR HILL: Thank you. 10 CHAIRPERSON NICHOLS: It's the compliance path, I 11 guess, is what I would call it. 12 MR. KORTHOF: I would really feel more 13 comfortable if it would be a footnote saying that any 14 battery electric car would have to be offered for sale. 15 Because if it doesn't say that, wouldn't necessarily do 16 it. 17 CHAIRPERSON NICHOLS: We need to look at the 18 language in the basic rule if that's not a -- I mean 19 whatever it is, it should stay what it was unless we bring 20 it back and fix it. 21 MR. KORTHOF: This goes back to the 1996 22 Memorandum of Agreement. And at that time it was regarded 23 as a substitute for the ZEV mandate that they would put 24 out a demonstration program. And at that time it was 25 stated that this would just be a placement. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 404 1 CHAIRPERSON NICHOLS: Right. That's clearly not 2 what the Board intends. But let's call out the 3 language -- 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 5 we'll look at that. And if it's not -- if we propose it 6 like we did in the past, we'll just put that on the 15-day 7 list if's that's your preference. 8 CHAIRPERSON NICHOLS: We'll either clarify it or 9 fix it in the 15-day period. 10 You understand the point? 11 BOARD MEMBER BERG: But if it's drastically 12 different, I do think that we can't alter anything without 13 a discussion either with -- with everybody. We can't do 14 after the fact. 15 CHAIRPERSON NICHOLS: We're not going to rewrite 16 the whole program. 17 BOARD MEMBER BERG: No. But I mean if it states 18 one thing now, we can't -- if it states that you only have 19 to lease them, I don't think you can go till you have to 20 sell them without a discussion. 21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That's 22 up to you, I think, how much leeway we should have on the 23 15-day. 24 MR. KORTHOF: It is a very significant issue, 25 because when they first did this they didn't represent PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 405 1 that they would make leases that couldn't be converted 2 into sale. They just misrepresented it. 3 BOARD MEMBER BERG: I agree. I just think that 4 you have to honor the process. That's all I'm saying, is 5 you need to honor the process. 6 So why don't you take a look at it. Let's not 7 get worried about what maybe isn't a problem. But I think 8 it's very important that you honor the process. 9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Does 10 Legal want to opine on our -- 11 CHIEF COUNSEL JENNE: Well, I was just about to 12 say that this is most -- these are the changes the Board 13 did. So like Chairman Nichols just said it shouldn't -- 14 whatever the rule said before should still be the same 15 even though it's not reflected on this chart on the 16 screen. But I think during the 15-day comment period if 17 there is some ambiguity in what we -- in the way it's 18 worded, we can fixed that. We wouldn't be inventing a new 19 direction without any discussion. 20 CHAIRPERSON NICHOLS: Are we okay? 21 Okay. We're done with that item. 22 EXECUTIVE OFFICER GOLDSTENE: Yeah, I think 23 that's it. 24 CHAIRPERSON NICHOLS: Okay. So now it just -- 25 EXECUTIVE OFFICER GOLDSTENE: We'll clean it up PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 406 1 and redistribute it. 2 CHAIRPERSON NICHOLS: Okay. Thank you. 3 We'll hear the public comment then, which is not 4 directed to anything that we can take action on right now. 5 But this is for general comment. 6 So general comment, three minutes. You're on. 7 MR. KORTHOF: Thank you. 8 I wanted to explain to you something of why 9 people get involved in electric cars and why their 10 passions are so strong. The first time I went to a CARB 11 meeting was in 1994. I went because the Orange County 12 Register wrote that the Californians Against Higher 13 Taxation was appearing there. And I thought that they 14 were trying to argue against subsidies for oil-based cars. 15 So I was going there prepared to thinking, well, I'm with 16 them. You know, we're going to stop all these oil-based 17 cars and have electric cars. 18 Turns out that they were arguing the other way. 19 And, in fact, they were arguing in a -- they wouldn't let 20 me speak. You know, I had to fight to even talk over 21 their comments. They were arguing that electric cars were 22 the hidden taxation. And I'm curious about why this 23 became such a big issue. 24 And, finally, after the Memorandum of Agreement 25 and electric cars became available, you know, I finally PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 407 1 drove in one, a Honda EV. And I thought, you know, this 2 is great. I had no experience with electric cars at all. 3 But it had this gliding power and, you know, it drove just 4 like a regular car. It had 120 miles range. And it could 5 carry things. It carried tools and construction 6 equipment. And it was wonderful. 7 And I had a horrible time getting it and keeping 8 it from Honda. And then we had the horrible experiences 9 with General Motors and all the other companies. 10 But in 2000, you know, what happened was there 11 was the energy so-called crisis, which we know was foisted 12 by FERC on California, money was stolen from us, $38 13 billion. But we felt guilty driving an electric car. So 14 we put in a solar system on our roof. 15 All of a sudden it all clicked. And people that 16 were like me at the same time, and many did, feeling 17 guilty, they put in a solar system and produced more 18 energy than they used. And they got into this mind-set 19 of, "Well, I'm making my own power. I'm empowering 20 myself. And I'm using this power to drive with." And if 21 I need eventually or once in a while I need to take an 22 airplane or drive a rented car or rent a truck or have a 23 third gas car or something, still on my normal daily 24 routine when I was driving to work I drove on this energy 25 that I made myself. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 408 1 And this combination of effects is something that 2 is -- once you understand it, it's something that really 3 just -- it grabs your heart and you really want to do it. 4 And the most astounding thing was that the money we saved 5 from not buying gasoline with many thousands of miles when 6 I drove to work every day more than paid for our solar 7 system in three years. We avoided cost of gasoline, you 8 know. And it turns out to be significant. It will nickel 9 and dime you to death. But, you know, you buy the solar 10 system and you put up the money and don't have to buy 11 gasoline and you pay off the solar system in three years 12 or less. And that's the key idea that brings people to 13 empowerment. People say, "I want to do this. How can I 14 possibly do this?" All we have to have is electric cars 15 for sale. If we can have a plug-in car that people could 16 buy, you know, that would make solar power self-financing. 17 CHAIRPERSON NICHOLS: Thank you. 18 MR. KORTHOF: You wouldn't even need subsidies to 19 do it. 20 CHAIRPERSON NICHOLS: We hear you. Thank you. 21 MR. MINASSIAN: I wanted to explain that to you 22 and understand why people are willing to wait in the rain 23 for 28 days with the chance of buying even one. 24 Thank you. 25 CHAIRPERSON NICHOLS: We appreciate that. We do PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 409 1 understand the enthusiasm, and hope it gets more widely 2 spread. 3 All right. Gary Rohman, William Davis. 4 MR. ROHMAN: Yeah, I've got a statement I'd like 5 to make. And it's longer than three minutes, so Bill 6 Davis is going to take over when I leave. 7 Good evening, Chairman Nichols and the Board 8 members. My name is Gary Rohman. I come before you today 9 to address a matter that is not on today's agenda per se, 10 but one that is important enough that I felt compelled to 11 share my industry's thoughts and concerns about the 12 off-road diesel regulation. 13 I currently serve as Chairman of the Construction 14 Industry Air Quality Coalition, also known as CIAQC. When 15 I'm not working on air quality issues with my coalition 16 members, I am Vice President of ECCO Equipment 17 Corporation. ECCO was founded over 40 years ago, and our 18 corporate office is in Santa Ana in southern California. 19 We also have a regional office in Visalia and equipment 20 yards in Stockton and Sacramento. We own over 600 pieces 21 of construction equipment and rent this equipment out to 22 contractors, both small and large, that work up and down 23 the golden state. 24 My goal today is to let you know that CIAQC 25 continues to work diligently on issues surrounding the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 410 1 implementation of the off-road regulation. For example, 2 you heard earlier today from others representing the 3 construction industry about the Carl Moyer Program, about 4 how successful it has been in providing early 5 cost-effective and voluntary emission reductions over the 6 past decade. 7 Unfortunately, access to this program is being 8 taken away from us. That is, we are no longer eligible to 9 receive monies from it because of the off-road rules 10 adoption. And that's something that we deeply regret. 11 As you well know, CIAQC and its members have 12 worked tirelessly over the past three years to provide 13 your staff with input on the development of the off-road 14 regulation. We have offered our perspectives and 15 knowledge of how the construction industry works. 16 Collectively we have spent thousands of hours reviewing, 17 examining, considering, and developing data and compiling 18 information for the Board and staff of the Air Resources 19 Board. 20 Since the beginning of this year, we have 21 provided three comment letters on the regulation, 22 including the SOON program. To this end, we believe 23 staff's analysis did not adequately examine the real costs 24 of the regulation. The estimate of the used equipment 25 market is flawed, painting a much rosier picture and PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 411 1 overstating the future availability of Tier 3 equipment 2 that will be necessary to comply with the regulation. 3 This will have a huge impact on the ability of equipment 4 owners to acquire cleaner equipment. 5 And please keep in mind, Tier 3 engines for the 6 175 to 750 horsepower only entered the marketplace in 7 2006; engines for the 100 to 175 horsepower, in 2007; and 8 engines for 75 to 100 horsepower, in 2008, not a long 9 period of time. 10 The regulation now includes the SOON program. 11 This is an entirely new regulation. It was included 12 during the eleventh hour of the rule development process 13 without the ability of the regulated community to review 14 staff proposal or comment on the economic impacts that it 15 will have on the industry in advance. 16 CHAIRPERSON NICHOLS: Okay. Now you can switch 17 horses. 18 MR. ROHMAN: Since its adoption -- let me just 19 finish. Since its adoption we have been deeply involved 20 in its possible implementation, working both the South 21 Coast AQMD and San Joaquin Valley Air Pollution Control 22 District on how to do this. 23 CHAIRPERSON NICHOLS: It's like the Pony Express. 24 You hand it off to the next -- 25 MR. DAVIS: Fast riders. PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 412 1 Unfortunately, the SOON program is not ready for 2 prime time. Staff has still not provided an adequate 3 analysis of the SOON regulation and its effects. In the 4 staff's own April 2007 initial statement of reasons for 5 this regulation, they said, "Staff considered requiring 6 higher turnover rates and more stringent NOx averages. 7 But the higher cost would likely be more than the industry 8 could bear." 9 It's turning out to be exactly the case with 10 SOON. We believe the SOON program is well intentioned. 11 It was initially envisioned and sold to us as a voluntary 12 program to get additional emissions reductions above and 13 beyond those required by the new rule. In order for it to 14 work, it still must be voluntary. It is no longer that 15 today. 16 And it must be fully funded. You've heard the 17 situation our industry is in, with 47 percent drop in 18 revenues in the construction industry over the last three 19 years. We can't contribute any more. And the SOON 20 program is one of the areas where we can't. 21 Chairman Nichols, you said you hadn't heard much 22 about particulate filter failures. We're now engaged in 23 putting particulate filters on construction equipment. I 24 had a conversation with Sean Daly earlier today about 25 this. We're finding that they have four-hour duty cycles PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 413 1 on our equipment, not even a full day's work. And our 2 industry usually works 16 hours. We really need to 3 revisit the question of V-DEC applicability in our 4 industry. 5 At the end of the 18th CENTURY and the beginning 6 of the 19th Century the British Army was engaged in an 7 incredible war with the French. Then Napoleonic wars 8 brought forward a special unit in the British Army called 9 the Forlorn Hope. This unit's job was to provide 10 skirmishers before the army advanced or to cover the 11 retreat of the army in case something bad happened. Gary 12 and I tonight are the forlorn hope of the construction 13 industry. We hope that in the one week left before this 14 regulation goes to the Office of Administrative Law that 15 this Board will ask staff to pull the SOON program out of 16 the off-road diesel rule. It is not ready and it is not 17 going to work. It could. It could. But not the way it's 18 currently constituted. 19 Thank you all very much for your patience with us and for 20 your service tonight. 21 CHAIRPERSON NICHOLS: Thank you for staying with 22 us and for your very cogent comments. 23 We couldn't, I don't think, take action without 24 notice at this point even if the Board was so inclined. 25 But I do want to -- I hear your comment, and you're not PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 414 1 the first person who has mentioned to me, at least, their 2 concerns about the way the SOON program has been developed 3 since it left our hands. And so I do want to ask the 4 staff to look into it and to -- if they can't take action, 5 at least to give us some thoughts about what we might be 6 able to do to acknowledge the problems that have been 7 raised here. Because we are -- we don't want to be party 8 to a program that also breaks the backs of the people that 9 we're trying to get to clean up here. 10 And, again, you know, I can't comment without a 11 full range of facts. We haven't heard from the South 12 Coast about, you know, what they're doing. But we do want 13 to look into it. 14 EXECUTIVE OFFICER GOLDSTENE: We'll get back to 15 you very quickly about the status. We can't stop the 16 regulation because that will kill the regulation. But 17 we'll come back to you with information about other ideas. 18 MR. DAVIS: We were under the impression that 19 during the public comment period the staff had the ability 20 to make changes in the regulation and in fact has made 21 changes in the regulation -- 22 CHIEF COUNSEL JENNE: I think I can clarify that. 23 We could during the period put out a 15-day 24 notice, but there isn't enough time left to do that. 25 There isn't enough time to change the program, put it out PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 415 1 for public comment, and get everything to OAL in the one 2 week that's remaining. So at this point there isn't any 3 option other than to just say we're not going to file the 4 entire program with the Office of Administrative Law and 5 have it -- and have to start all over again from square 6 one. 7 CHAIRPERSON NICHOLS: The repercussions of that I 8 think would not be acceptable, given what we went through. 9 MR. DAVIS: We are hearing that you are 10 considering the possibility of amendment to this program 11 already, perhaps even later this year. If that's the 12 case, then this might be one of those areas that we should 13 visit immediately on the questions of amendment. 14 BOARD MEMBER BERG: And don't forget we do have 15 on the calendar the technical review. And I saw it on the 16 calendar for December. And so that will be an important 17 milestone as well. 18 MR. ROHMAN: We really need your help. 19 CHAIRPERSON NICHOLS: Okay. Henry Hogo and then 20 Fred Minassian and Francois Choquette. 21 MR. HOGO: Good evening, Madam Chair, members of 22 the Board. Henry Hogo, the Assistant Deputy Executive 23 Officer of our Mobile Source Division at South Coast AQMD. 24 I actually wasn't going to comment on the SOON 25 program. But since it's been brought up, we are moving PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 416 1 forward with our program. We have a program announcement 2 that closes on May 2nd actually. And we actually have 3 fleets that are interested in participating. We talked to 4 construction company fleets. And we actually talked to 5 close to 30 fleets about participation and working with 6 them on how to do the compliance plans. 7 One fleet actually said, "We can use all $30 8 million." And we said, "If you can get us our three tons 9 this year, then we're set for this year." But we do need 10 to move ahead with this program. 11 My comment is actually in reference to Mr. 12 Carmichael's comment earlier about a meeting between Dr. 13 Wallerstein and Mr. Goldstene. And I just want to point 14 out that -- expand a little bit on that. And this is in 15 regards to the comments made last month relative to the 16 LNG truck projects under Proposition 1B funding. And as 17 you recall, there was a commitment to work together to see 18 how we can facilitate these cleaner trucks. 19 And, however, the proposal that staff has made to 20 date seems to make it more difficult. And we believe that 21 it may be inconsistent with the criteria that's been set 22 forth in SB 88 and the Carl Moyer Program. 23 So we do want to work your staff, and Mr. 24 Goldstene has committed to work with Dr. Wallerstein. And 25 we hope to get this meeting going very quickly because PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 417 1 the -- we have to resolve this since the deadline is April 2 4th. So I just want to make that comment. 3 And Mr. Minassian will waive his comment. 4 CHAIRPERSON NICHOLS: Okay. Thank you. 5 Is Francois Choquette here? 6 BOARD MEMBER BERG: Could I just make one quick 7 comment. 8 CHAIRPERSON NICHOLS: Sure. 9 BOARD MEMBER BERG: On the SOON program, that 10 does show us that the voluntary part of it for 2009 is 11 working. And so as we can continue to work with the 12 industry and in that voluntary way, I think that will be 13 extremely powerful if we can get the tons that you need. 14 MR. HOGO: If I may just add one comment, Madam 15 Chair, relative to Ms. Berg's comment. 16 Yes, the voluntary portion -- we have to go out 17 and solicit to get fleets to submit. But we believe the 18 mandatory part is needed because we really don't know what 19 the fleet makeups are. And having a compliance plan 20 actually gives us ability to see how many engines can come 21 in and we can look at the cost issue. We're actually 22 doing a socioeconomic assessment of the SOON program. And 23 our initial findings are that over the life of the 24 off-road regulation, there's actually savings when a fleet 25 goes in the SOON program the way that staff has set up the PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 418 1 current version of the regulation. So there is -- 2 BOARD MEMBER BERG: Thank you. We'll look 3 forward to that information. Thank you very much. 4 CHAIRPERSON NICHOLS: All right. And since there 5 is no further business to come before the Board this 6 evening, I will declare us adjourned at this time. 7 Thank you, everybody. 8 (Thereupon the California Air Resources Board 9 adjourned at 7:18 p.m.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 419 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 14th day of April, 2008. 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 (916) 362-2345 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345