DOCUMENT ISSUE DATE: APRIL 27, 1995 MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD CALIFORNIA AIR RESOURCES BOARD 2020 L STREET SACRAMENTO, CALIFORNIA THURSDAY, APRIL 27, 1995 9:40 A. M. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT John Dunlap, Chairman Joseph C. Calhoun Lynne T. Edgerton M. Patricia Hilligoss John S. Lagarias Jack C. Parnell Barbara Riordan James W. Silva Doug Vagim Staff: Jim Boyd, Executive Officer Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Mike Kenny, Chief Counsel John Holmes, Ph.D., Chief, Research Division Bob Barham, Assistant Division Chief, RD Ralph Propper, Staff, Research Division Manjit Ahuja, Research Division Gary Agid, Assistant Division Chief, Technical Support Division Dennis Goodenow, Manager, Emission Inventory Systems Section, TSD Larry Morris, Chief, Fiscal Branch Administrative Services Division Skip Campbell, Staff, Technical Support Division Vicky Davis, Staff Counsel Pat Hutchens, Board Secretary, EO Ron Wetherall, EO Bill Valdez, Administrative Services Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii I N D E X PAGE Proceedings 1 Call to Order and Roll Call 1 Opening Remarks by Chairman Dunlap 1 AGENDA ITEMS: 95-4-1 Public Meeting to Consider an Information Report on Innovative Clean Air Technology Introductory Remarks by Chairman Dunlap 4 Staff Presentation: Jim Boyd Executive Officer 4 Ralph Propper Research Division 6 Questions/Comments 15 95-4-2 Public Hearing to Consider Adoption of Permit Fee Regulations for Nonvehicular Sources Introductory Remarks by Chairman Dunlap 25 Staff Presentation: Jim Boyd Executive Officer 26 Skip Campbell Technical Support Division Questions/Comments 40 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX, continued. . . PAGE AGENDA ITEMS: 95-4-2 PUBLIC COMMENTS: Ted Holcombe Pacific Gas & Electric 44 Questions/Comments 46 Summary of Board's concerns by Chairman Dunlap 58 Reply by Mr. Boyd 60 Questions/Comments 63 Record on Agenda Item 95-4-2 officially closed to await notice of 15-day comment period 66 Questions/Comments 66 Motion by Riordan to Approve Resolution 95-19 72 Roll Call Vote 73 Adjournment 74 Certificate of Reporter 75 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 --o0o-- 3 CHAIRMAN DUNLAP: This, the April meeting of the 4 California Air Resources Board, will please come to order. 5 Pat, could I get you to take the roll, please? 6 MS. HUTCHENS: Boston? 7 Calhoun? 8 MR. CALHOUN: Here. 9 MS. HUTCHENS: Edgerton? 10 MS. EDGERTON: Here. 11 MS. HUTCHENS: Hilligoss? 12 MAYOR HILLIGOSS: Here. 13 MS. HUTCHENS: Lagarias? 14 MR. LAGARIAS: Here. 15 MS. HUTCHENS: Parnell? 16 Riordan? 17 SUPERVISOR RIORDAN: Here. 18 MS. HUTCHENS: Roberts? 19 Silva? 20 SUPERVISOR SILVA: Here. 21 MS. HUTCHENS: Vagim? 22 SUPERVISOR VAGIM: Here. 23 MS. HUTCHENS: Chairman Dunlap. 24 CHAIRMAN DUNLAP: Present. 25 Thank you. Before we begin today's meeting, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 would like to announce that I have approved a schedule of 2 staff workshops and other public meetings on the California 3 low-emission vehicle program adopted by the Board in 1990. 4 The purpose of these forums is to identify issues 5 and barriers to be overcome for the successful introduction 6 of the zero-emission vehicle technology in the California 7 marketplace starting in 1998. 8 Copies of the fact sheet and LEV/ZEV workshop 9 schedule are available on the table outside the hearing 10 room. 11 And my colleagues on the Board were all sent 12 copies of this schedule. 13 Another announcement I am pleased to be able to 14 make is to acknowledge the attainment of the national health 15 standard for ozone in the Bay Area. The U.S. EPA Regional 16 Administrator, Felicia Marcus, officially recognized and 17 redesignated the San Francisco Bay Area as having attained 18 the Federal Clean Air Act's ozone standard this past Monday 19 at the ceremony jointly sponsored by U.S. EPA and the Bay 20 Area Air Quality Management District, the Metropolitan 21 Transportation Commission, the Association of Bay Area 22 Governments, and the California Environmental Protection 23 Agency. 24 This achievement is surely good news for the six 25 million people that live in the greater Bay Area. The air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 is now substantially healthier than it was 25 years ago, 2 even though the number of motor vehicles has doubled since 3 1970, and the population has increased by about 50 percent. 4 The Bay Area is the largest metropolitan area in 5 the nation to meet the federal ozone standard. 6 I would like to acknowledge Mayor Hilligoss, who 7 is a member of the Bay Area Air Quality Management District 8 Board, and congratulate her on this significant milestone, 9 and impose upon her to say a few words, if she would, on 10 this achievement. 11 MAYOR HILLIGOSS: Well, we're very happy with it. 12 For four years now, we have had clean air, according to the 13 national standards. We're still working for the California 14 standards, and it's going to be more difficult because it is 15 so much tighter. 16 But we're very pleased. 17 CHAIRMAN DUNLAP: Thank you very much. Jack? 18 MR. LAGARIAS: The Deputy APCO of the Bay Area 19 District is standing in the background. I think he ought to 20 be complimented for the success of his district in making 21 that achievement. Peter Hess. 22 (Applause.) 23 CHAIRMAN DUNLAP: Well, congratulations again. 24 We're very proud of the work done by the Bay Area and, of 25 course, appreciative of the tremendous contributions of this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 Board, as well, in this area. 2 That brings us to the first agenda item, 95-4-1. 3 I would like to remind those of you in the audience who 4 would like to present testimony to the Board on any of 5 today's agenda items to please sign up with the Board 6 Secretary. 7 If you have any written statements, please give 20 8 copies, also, to the Board Secretary. 9 The first item on the agenda today is a public 10 meeting to consider an informational report on innovative 11 clean air technology. 12 This item is an overview of the Air Resources 13 Board's innovative clean air technologies program. The 14 purpose of this new program is to support technologies that 15 not only have high potential for improving air quality in 16 California, but also offer great promise for stimulating the 17 State's economy through significant commercialization 18 opportunities. 19 After the presentation, we will welcome questions 20 and comments about the program; however, because proposals 21 submitted for funding are still being reviewed, comments on 22 particular proposals are inappropriate at this time. 23 At this point, I'd like to ask Mr. Boyd to 24 introduce the item and begin the staff's presentation. 25 Good morning, Mr. Boyd. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 MR. BOYD: Good morning. Thank you, Mr. Chairman, 2 and good morning, Board members, and to the members of our 3 audience. 4 As the Chairman has indicated, we today will be 5 providing you and the audience an overview of the innovative 6 clean air technologies program. In this day of acronyms, 7 ICAT, we say for short. 8 As you understand, I believe the program will 9 indeed provide seed money for projects -- to move them from 10 a research and development phase to a commercialization 11 phase. As indicated, we have received quite a large number 12 of proposals for funding commercialization development under 13 the program. And, as the Chairman indicated, we're now 14 evaluating these proposals to determine which ones we can 15 support or which ones that will also support the goals of 16 cleaning up California's air, protecting our public's 17 health, while simultaneously helping stimulate the State's 18 economy. 19 Let me point out to you that in order to be 20 eligible for consideration under this program, proponents 21 themselves must commit significant resources and also show 22 resource commitments from outside sources. So, it truly 23 becomes a fairly large effort and/or partnership on the part 24 of the project proponents. 25 After the evaluations have been completed, we will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 bring to you the top contenders at the June Board meeting 2 for your final consideration for funding of the projects 3 immediately following your approval. 4 And with that brief introduction, I'd like to turn 5 the presentation over to our research division, which 6 manages this program, and to Mr. Ralph Propper of the 7 Research Division. 8 Ralph, if you would? 9 MR. PROPPER: Thank you, Mr. Boyd. 10 The purpose of my presentation is to provide an 11 overview of the ARB's innovative clean air technologies, or 12 ICAT, program. 13 As Mr. Boyd said, we intend to come back to you in 14 June to make recommendations for funding under this program. 15 Let me begin by explaining why we need this 16 program. ARB staff often receives extramural research 17 proposals from universities and from businesses for the 18 development of technologies to clean the air. They are 19 seeking government funding for projects that they believe to 20 be of mutual interest to themselves and the State. 21 However, because divisions within the ARB annually 22 request more research projects and studies than the ARB can 23 fund and because of the need for quick responses to current 24 problems, proposals to develop innovative technologies have, 25 in the past, seldom been funded. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 For these reasons, the ICAT program was 2 established this fiscal year. Funding was requested for two 3 purposes. 4 First, to assist others performing research and 5 development of technologies of interest to the ARB and, 6 second, to assist in the commercialization of such 7 technologies. 8 This commercialization should foster job creation 9 opportunities as entrepreneurs move these technologies from 10 the prototype stage to the production stage. 11 A million dollars is available for this program 12 each fiscal year. This will be used as seed money available 13 for researchers who have begun to work on these technologies 14 and need to funds to bring technologies from the proof-of- 15 concept stage to something approaching a more commercial 16 stage. 17 In this way, the money will support the ARB's 18 goals by attempting to promote growth of new technologies 19 that will not only clean up the air but will also have 20 market potential to succeed as viable industries here in 21 California. 22 In designing the ICAT program, ARB staff met with 23 several agencies, such as the California Trade and Commerce 24 Agency, and attended three conferences that convinced us 25 that ICAT would fulfill a real need that is currently not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 being addressed. 2 Lack of certainty and availability of funds for 3 the application demonstration and commercialization stages 4 was often mentioned as the reason for the demise of 5 promising new technologies. 6 For example, at a recent round table discussion 7 held by Los Angeles Mayor Riordan, one of the main points 8 emphasized was the need to help move new technologies 9 through commercialization. 10 We found that the South Coast Air Quality 11 Management District provides about $5 million per year to 12 commercialize projects that involve alternative fuels and 13 mobile sources. 14 The district generally participates in 15 partnerships with private companies. Also, the California 16 Energy Commission provides commercialization funding for 17 energy and transportation related projects. 18 This fiscal year, the CEC is funding about a 19 million dollars for each of these two categories of 20 projects. 21 We also met with staff from the U.S. EPA to better 22 understand their federal environmental technology 23 initiative, or FECI program, and to explore opportunities to 24 fund projects through FECI. 25 We recently submitted several proposals to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 federal government, but have not yet received a response. 2 In addition, ARB staff believes that ICAT is 3 compatible with the Board's recent emphasis on promoting 4 economic incentives to reduce air pollution. ICAT funding 5 should encourage more people to develop and market new 6 technologies, and the results of ICAT projects should 7 provide users with more options to meet regulatory 8 requirements. 9 The next slide shows the objective of the ICAT 10 program. The object of the ICAT program is to co-fund the 11 development and demonstration of technologies that will 12 reduce air pollution. 13 Some of the projects being proposed for co- 14 sponsorship are still in the research and development stage. 15 Before commercial development can occur, an infusion of 16 funds is needed to develop working prototypes. 17 The next slide shows the goals of the ICAT 18 program. The goal of the program is to support technologies 19 that have high potential for commercialization and improving 20 air quality in California, while simultaneously helping to 21 stimulate the State's economy. 22 Basic research will not be funded. Emphasis is on 23 demonstration of prototypes and on projects closer to 24 commercialization. 25 The next slide shows the steps to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 commercialization and capital availability that new 2 technologies must surmount before they can make money in the 3 general economy. 4 Capital is usually available, often from federal 5 sources, for development of an idea and for proof of concept 6 and sometimes even for a pilot project. 7 Similarly, once an application has been 8 demonstrated, venture funds are usually available to move 9 the technology into commercial sales. 10 In between, however, somewhere around Steps 3, 4, 11 and 5 on the figure shown, lies what is called the "Valley 12 of Death." This is the point in the development process at 13 which foreign companies have often obtained American 14 technologies and successfully commercialized them. 15 Although the United States has excellent research 16 and development capabilities, we have not been proficient -- 17 as some other countries -- at promoting commercialization of 18 the resulting innovations. 19 Businesses frequently find that money is difficult 20 to obtain for building a prototype or for application 21 demonstration. ICAT funds will be used to help California 22 businesses bridge this gap so that good ideas can lead to 23 cleaner air and a stronger economy. 24 State funds may also provide additional 25 credibility to projects that may help bring in other funding PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 sources or investors. 2 The next slide shows general criteria for rating 3 potential ICAT projects. ICAT projects must increase the 4 efficiency of existing air pollution prevention and control 5 technologies, increase their cost-effectiveness, or develop 6 new cost-effective alternatives. 7 Air pollution prevention and control technologies 8 are eligible for funding under this program. 9 The next three slides are pie charts showing the 10 matching funds requirement. Matching funds are required for 11 all projects funded under the ICAT program. 12 The applicant must provide at least 20 percent of 13 the project cost as shown. 14 An additional 30 percent of the project cost must 15 be provided either by the applicant or by other co-funding 16 partners as shown. 17 This means that ICAT will provide no more than 50 18 percent of the total project cost as shown. 19 In fact, based on the proposals received, ICAT 20 funds will be leveraged at about 4 to 1. That is, each 21 dollar of ICAT funds will lead to $4.00 of total project 22 funds. 23 In addition, as shown on the slide, ARB funding 24 under ICAT is limited to a maximum of $250,000 per proposal. 25 The next slide shows the results of our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 solicitation efforts. We mailed out over 1500 letters to 2 prospective bidders announcing the new ICAT program, and 3 received back over 300 letters of interest. 4 Last December, we mailed the request for proposal, 5 or RFP, to each of these. 6 We anticipated great interest in this RFP and did 7 not want to unfairly burden potential proponents with the 8 State's requirements of submitting a lengthy proposal. 9 Therefore, we asked for brief preproposals that 10 staff would review prior to submission of full-blown 11 proposals. 12 We received 56 pre-proposals by the January 13th 13 due date. 14 The next slide shows our screening criteria. We 15 screened the 56 pre-proposals for projects that have 16 potential to reduce air pollution, support ARB priorities, 17 have technical merit, have business merit, and have 18 potential for creating jobs in California. 19 Back to the previous slide -- Of the 56 pre- 20 proposals, 22 passed the screening. To compete for ICAT 21 funding, each of these applicants was invited to submit a 22 complete and detailed final proposal, along with all 23 administrative requirements. 24 We received 17 final proposals by the April 10th 25 due date. Three proposals were disqualified, because the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 applicants did not include all the information we needed to 2 fully evaluate their proposals. 3 The remaining 14 proposals are currently being 4 evaluated. The cumulative cost of all these projects would 5 be about $11 million, of which close to $3 million of State 6 funding is requested. 7 Because of limited funds available, we will be 8 able to fund from this year's fiscal budget only about one- 9 third of the cumulative amount requested. 10 The next six slides show how the 14 final 11 proposals may be categorized. This slide shows the three 12 that involve emissions control for engines; specifically NOx 13 control for diesel engines. 14 These would develop a plasma device, a microwave 15 device, and a device using filtered exhaust gas 16 recirculation. 17 Two additional proposals involving emissions 18 control for engines are for a light-weight, inexpensive 19 catalytic converter prototype, and for a two-stroke utility 20 engine to meet 1999 emission standards. 21 Three are in the area of emissions control for 22 stationary sources and involve NOx control for petrochemical 23 gas-fired burners, for gas-fired boilers and furnaces, and 24 for cement kilns by using enhanced gas reburn. 25 Two would help promote electric vehicles -- a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 catalytic combuster for use on a hybrid electric bus, and 2 demonstration of battery-powered bicycles and scooters. 3 Two offer mobile source emission monitoring. 4 These are a hydrocarbon emission sensor for moving vehicles 5 and emission monitoring screening for commercial vehicles. 6 And finally, two would make use of biological 7 treatment for VOC control -- VOC control by improved 8 landfill design and agricultural field burning reduction by 9 fermentation. 10 The next slide shows the selection criteria that 11 are being used by the proposal reviewers. Note, that 12 although 35 percent of the total score is allocated to 13 technical merit, an even larger percentage is allocated to 14 business merit. 15 The next slide shows that internal and external 16 reviewers are involved. Staff from ARB's Research, 17 Stationary Source, and Mobile Source Divisions are using 18 these criteria to evaluate the proposals. 19 In addition, six outside reviewers are assisting 20 ARB staff in these evaluations. They are all from the 21 State's University System. 22 Three reviewers were chosen for their technical 23 expertise and, due to the importance of the 24 commercialization aspect of ICAT, three reviewers were 25 chosen for their business expertise. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 The last slide shows the forthcoming time line for 2 this year's ICAT program. We expect to complete our 3 proposal reviews in early June. At your June Board meeting, 4 we intend to present the projects that we will recommend for 5 your consideration. 6 The selected proposals, when approved and put into 7 place, should enhance environmental technology and create 8 jobs in California. 9 This concludes my presentation. I'll be happy to 10 answer any questions you may have. 11 CHAIRMAN DUNLAP: Thank you, Mr. Propper. 12 Do any of my colleagues on the Board have any 13 questions for staff? 14 SUPERVISOR VAGIM: Yes, Mr. Chairman. 15 CHAIRMAN DUNLAP: Supervisor Vagim. 16 SUPERVISOR VAGIM: The four to one ratio is based 17 on what? Is it because you have a cap of $250,000; there's 18 other investment beyond that from private sector and, 19 because of that, even though it's 50 percent of the 20 component, usually you don't have the 50 percent, much less 21 from ARB's standpoint? 22 MR. BARHAM: That's correct. 23 SUPERVISOR VAGIM: So, the average, then, would be 24 what? 25 percent? 25 MR. BARHAM: The average would be -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 SUPERVISOR VAGIM: Across the spectrum? 2 MR. BARHAM: The average would be about 25 3 percent; that's correct. 4 SUPERVISOR VAGIM: Okay. Thank you. 5 CHAIRMAN DUNLAP: Any other questions or comments? 6 MR. CALHOUN: Yes, I have. 7 CHAIRMAN DUNLAP: Mr. Calhoun. 8 MR. CALHOUN: Would you care to elaborate on the 9 people you've chosen for the -- to review these proposals? 10 I guess I'm thinking about the people chosen to review the 11 business aspects of the proposal, and if they've ever been 12 in business themselves, or they're consultants, or -- can 13 you give us a little bit their background? 14 MR. AHUJA: Yes. We went out looking for people 15 who had specific marketing background, but we tried to 16 restrict ourselves to the University Systems, because we 17 were concerned about people that are giving us confidential 18 information, as they have given us confidential information, 19 were concerned about they would share that information with 20 outside folks. 21 So, upon looking, we found one person, Dr. 22 Cornelia Pechmann, who has specific marketing experience. 23 She has done private consulting for marketing of products. 24 The other two individuals we have is Dr. Samuel 25 Doctors from Cal State, Hayward. He also has marketing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 experience. His background is an attorney, as well as he's 2 an MBA. 3 The third individual we picked up for the business 4 is Dr. Jane Hall from California State University, 5 Fullerton. And she is an economist. And she has worked 6 with the Board for several years. So, we felt very 7 comfortable, because we know of her background. 8 But we restricted ourselves to the State System, 9 and thereby we will not have to tap into the market outside 10 for people who do consulting outside. 11 MR. BARHAM: We recognize that as a major concern. 12 And probably the biggest weakness of this program is 13 identifying those technologies that have the greatest 14 potential for moving through that valley of death, and 15 whether the business plan that's put together was done in a 16 way that would give us some confidence, give you some 17 confidence, and the outside reviewers as well -- enough 18 information to be able to somewhat assured that there is a 19 market potential for that, for that particular technology. 20 CHAIRMAN DUNLAP: Ms. Edgerton. 21 MS. EDGERTON: How are you working with the Trade 22 and Commerce Strategic Technologies Office? 23 MR. AHUJA: We met with Trade and Commerce, 24 because they had issued a solicitation for defense 25 conversion, so we wanted to find out if there's overlap PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 between our program and their program, how we can help them, 2 how they can help us. And we found that their program was 3 not as specific as ours. 4 So, we left the door open and told them that if 5 they find some proposals which are more specific towards 6 environmental technology, they should direct them towards 7 us. 8 So far, we have not gotten anything from them. 9 MS. EDGERTON: But my understanding is they have a 10 lot more money. 11 MR. AHUJA: I'm sure they do. When we met with 12 them, their program was not as focused as ours. So, they -- 13 although they have more money, they have a very wide area 14 where they could fund a project. So, their project's, you 15 know, not well defined. 16 We have not heard anything from them regarding 17 specific projects for environmental technologies. 18 MS. EDGERTON: Well, my understanding is that they 19 spent a lot of time trying to focus on funding projects that 20 had true commercial promise and had good, strong business 21 plans. 22 So, I would recommend that you follow up on that a 23 little bit more, too. And I'm not sure whether we might not 24 want to send some of our proposals over to them if we have 25 overflow of good proposals, rather than encouraging them to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 send more of theirs over to us, since they have more money 2 than we have. 3 Just I had a question about the ARB priorities, 25 4 percent weighting. Is that -- can you comment on the 5 thought -- I love the program. I think it's an excellent 6 program. Mobile source versus consumer products, I mean, 7 how -- is there -- I'm sure you've thought about it, in 8 terms of how do you prioritize the proposal in terms of its 9 ability to help the Board achieve its priorities? 10 Just like to hear a little bit about that 11 difficult item. 12 MR. CACKETTE: Well, there were a couple of 13 objectives in providing weight to priorities. One is that, 14 if you just go with the numerical scores, you could find 15 that, for example, you have -- the three top rating projects 16 might all be for NOx control of diesel truck engines. And 17 we might not want to have all three of those funded, but 18 fund some in stationary source, some in bioremediation, or 19 whatever. That kind of priority had to be placed in there. 20 Second of all, we have other projects that are 21 funded by other mechanisms. So, some of the research 22 projects might be already focusing on one area, and we get a 23 proposal that's very good, but is -- I won't say 24 duplicative, but you'd have to raise the question about 25 whether we should fund two projects in that area, given we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 have one underway under another funding source. 2 So, we'd have to give some weight to its relative 3 merit to the program. And then, you know, there always are 4 current high-priority items that the Board has. The SIP, 5 for example, in this case, gives, you know, high emphasis to 6 diesel NOx control, because that's one of the major sources 7 of emissions. 8 And so, we would think we'd want to make sure 9 that they're -- if they were good projects, that we'd give 10 some extra weight and consideration to those types of 11 projects that matched up with the SIP. 12 So, that was kind of the way we thought about it. 13 And we haven't done that yet, so I can't tell you what the 14 real implications are. It may be that the projects just 15 fall in line kind of on their technical merit, or the top 16 four, or whatever it is, get -- are fine with our 17 priorities. But we won't know until we see. 18 CHAIRMAN DUNLAP: Mr. Lagarias. 19 MR. LAGARIAS: I, too, am supportive of this 20 program. I think it's potentially a very good program. 21 I was interested in the graph you showed in steps 22 to commercialization, where the nadir of the curve is shown 23 as the valley of death. That's a new description to me. 24 I think there's a greater problem when you go from 25 the prototype to the application demo, in that, if a person PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 is trying to put a new technology into a district as an 2 application, the requirements may be that the equipment make 3 a 95 percent efficiency. 4 Well, going from a pilot plant to a demonstration, 5 there are always difficulties. And if that demonstration 6 project only makes 93 percent efficiency, the districts are 7 likely to say, "Okay. Pull it out. It didn't work." 8 Are we in any position to indemnify or to be 9 supportive of a project going from pilot to the 10 demonstration stage, where it might not quite meet the 11 requirements of the district; be able to assist in covering 12 that gray area? 13 MR. BARHAM: At this point, no, we haven't. I 14 know that, in terms of the overall permitting process, there 15 are a number of programs within Cal-EPA trying to accelerate 16 the permitting process in general. And there has been some 17 talk about things like that. 18 But in terms of this particular program, we 19 haven't discussed that particular issue. 20 MR. BOYD: Mr. Lagarias, let me elaborate on the 21 potential in this arena a little bit, and also go back to 22 Mr. Calhoun and Ms. Edgerton's questions about what we can 23 and can't do. 24 There is, of course, within Cal-EPA, a program to 25 deal with certification of emission control equipment and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 equipment in general, which certification would validate the 2 use of this equipment for particular -- various pieces of 3 equipment for various applications. 4 It does seem to me that working something through 5 this program and into that certification process would start 6 to provide some of the assurances that you are looking for 7 with regard to the use of a piece of equipment. 8 Now, I realize the first time through, it's going 9 to do what it does, even if it's projected high. And if it 10 falls short, I think we're going to have to do something 11 relative to accepting the fact that it fell short and look 12 to other ways to make up the difference in an effort to not 13 stifle or chill people's desire to take risks and do things 14 like this. 15 And going beyond that with regard to, you know, 16 our knowledge of what's going on out there, Mr. Barham's 17 been far too modest in terms of his own role here at the Air 18 Resources Board. Because he is in charge of our entire 19 activity with regard to Cal-EPA's environmental technology 20 program. 21 And it cuts across all the boards and departments 22 within Cal-EPA. It is a program for stimulating 23 California's development of environmental technology (a) to 24 solve our own problems, (b) to provide and economic base for 25 export purposes and what have you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 So, this program is integrated in that effort, in 2 that it's resident in the same part of the organization, and 3 we have the ability to call upon all those resources, or get 4 some expertise from others to help us evaluate technology as 5 well as to help market future technologies that show real 6 promise within that program. 7 And that includes a direct tie to Trade and 8 Commerce. Somewhere in that very large resource base that 9 we have going here, I think maybe we can better address and 10 further address the question you bring up, because it is a 11 good one. And it chilled me instantly to think that we 12 could have a chilling effect on this development. And we 13 need, indeed, to address that situation and, indeed, we 14 will. 15 MR. LAGARIAS: Fine. Thank you. 16 CHAIRMAN DUNLAP: Supervisor Vagim. 17 SUPERVISOR VAGIM: Mr. Chair, I just have another 18 question. 19 A few months or many months ago, we funded a 20 project, I believe out and around this particular method, 21 which was a demonstration for a two-stroke engine emission 22 capability. How does that flow? 23 I mean, if you run fast and prove your point, you 24 can go around this, or -- 25 MR. KENNY: If I could interrupt at this point. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 Because the contracts are still under evaluation by the 2 staff, I think the question you've asked will be more 3 appropriate for next month when the evaluations have been 4 completed. 5 CHAIRMAN DUNLAP: In June? 6 MR. KENNY: In June. 7 SUPERVISOR VAGIM: That's fine. Okay. Thank you. 8 CHAIRMAN DUNLAP: Thank you. Any other questions 9 or comments of staff? 10 Okay. Very good. 11 Mr. Boyd, do we have -- no one has signed up to 12 speak to the Board on this item. Were there any written 13 comments provided that we need to summarize? 14 MR. BOYD: There's no written comments that we're 15 aware of, Mr. Chair. 16 CHAIRMAN DUNLAP: Okay. Thank you very much for a 17 fine report. 18 Why don't I give staff a moment to adjust their 19 seating before we take up the next item. 20 I should mention that we have some special guests 21 in the audience today. Today is "Bring Your Daughter or Son 22 to Work Day." And I know that some of the staff have 23 brought some of their sons or daughters to work. And I'd 24 like to recognize them. 25 If they're here, if they would stand up and wave PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 to us, we'll recognize them. I know there's a few back 2 there. There's one or two back there. Some may have gone. 3 And also recognize that Supervisor Silva's brought his 4 daughter here. Welcome, I'm glad to have you with us. 5 Our next item is 95-4-2. Again, I'd like to 6 remind those in the audience that wish to speak to please 7 sign up with the Board Secretary, and give us the necessary 8 copies, 20, to be handed out to the Board members on this 9 item if you have written comments. 10 This item is a public hearing to consider the 11 adoption of permit fee regulations for nonvehicular sources 12 pursuant to the California Clean Air Act. 13 This item is a proposal to amend the fee 14 regulation for these nonvehicular sources pursuant to the 15 State Clean Air Act. The fee programs administered by the 16 Board were authorized by the Legislature to support specific 17 programs at the Air Resources Board. The largest of these 18 are the air toxic hot spot fee program and the California 19 Clean Air Act motor vehicle fee program, which collectively 20 generates about $12 million annually. 21 The fee program to be discussed today, the 22 California Clean Air Act nonvehicular source fee program, is 23 capped at $3 million per year. 24 For the last six years, the Board has required 25 that large stationary sources in California pay fees to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 partially cover the State costs of implementing this 2 provision of the California Clean Air Act. 3 The revenue generated by these fees is required, 4 of course, to reimburse the Board. The staff is proposing 5 that these fees be continued for the 95-96 fiscal year, and 6 the program would maintain the revenue at the existing 7 level. 8 So, with that, I'd like to ask Mr. Boyd to 9 introduce the item and begin the staff's presentation. 10 MR. BOYD: Thank you, Mr. Chairman. And I'm going 11 to do the unusual thing of referring back to the last item 12 for just a half a second to mention an omission on my part, 13 in terms of throwing laurels about. 14 Mr. Lagarias is much too modest in admitting his 15 role in that ICAT program, because it was his suggestion, 16 and his encouragement, and his insistence for several years 17 that led finally to the budget augmentation that funds that 18 program we were just talking about. 19 And I just wanted a large number of Board members 20 to know that. Thank you. 21 With regard to this item, I think the Chairman 22 knows the members of the Board know that the Clean Air Act 23 continues to make considerable demands on this Board and the 24 Board staff, and on the local districts that many of you 25 represent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 The proposed fees support activities to, as 2 indicated, control nonvehicular sources, such as power 3 plants, and refineries, and oil production facilities and 4 operations, and a host of large commercial and industrial 5 facilities. 6 As indicated, the fees are not to exceed $3 7 million a year, and have remained constant at this level 8 since the year 1989. 9 By law, the fees affect only large sources; that 10 is, they're collected only from large sources, those that 11 emit at least 500 tons per year of specific pollutants. 12 And, as you know, in this State, that's a fairly sizable 13 number. 14 So, there is a fairly limited group of industries 15 that are assessed these fees. And, in turn, these funds do 16 not by a longshot fully support the Board's activities to 17 carry out the requirements of the California Clean Air Act. 18 The staff presentation will discuss details of the 19 proposed Clean Air Act regulations, including the 20 preparation of emissions inventories that are used to 21 calculate the fees for this program. That's an important 22 ingredient each year of what drives the annual fee. 23 The staff will also discuss what will be the 24 application of these fees and very definitely the 25 calculation of the -- the annual calculation of the fee PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 rate. 2 So, with that, I'd like to call upon the technical 3 support division, and Mr. Skip Campbell of the Emissions 4 Inventory Analysis Section to give you a detailed 5 presentation on this item. 6 Mr. Campbell. 7 MR. CAMPBELL: Thank you, Mr. Boyd. 8 Good morning, Chairman Dunlap, members of the 9 Board. As Mr. Boyd stated, my name's Skip Campbell, and I'm 10 an air pollution specialist for the Technical Support 11 Division's Emission Inventory Analysis Section. 12 The proposed regulation amendments that I'll 13 describe today are to secure the funding needed to implement 14 the provisions of the California Clean Air Act relating to 15 nonvehicular sources for the 1995-96 fiscal year. 16 This proposal is based on regulations adopted by 17 the Board for this program for the last six years. Before I 18 outline the proposal, I should note that there have been 19 some changes to the calculation of fees since the staff 20 report was published in March. 21 The updated fees will be reflected in the 22 presentation, and they're also incorporated in the package 23 you have before you. 24 I will describe and explain all these changes made 25 to the fee calculations since the publication of the staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 report later in this presentation. An updated package 2 containing changes of the emissions and the fee rate is 3 available to the public on the table outside the back of the 4 room. 5 That changes are reflected in Table 3 of this 6 package and are incorporated in Section 90800.6 of the 7 proposed regulations. 8 Next slide, please. 9 I'll now outline my presentation for you. First, 10 I'll provide an overview of the proposal. Next, I'll 11 explain the process we used in developing the regulations, 12 and outline the provisions that remain unchanged. 13 I'll then explain how the fee rate is calculated 14 for the proposed regulations. And, finally, I'll discuss 15 the range of cost to facilities resulting from this 16 proposal. 17 Next slide, please. 18 In the California Clean Air Act, the Legislature 19 imposed a number of requirements on the Board and the 20 districts. The Act also provides a mechanism to help defray 21 the State costs of implementing the nonvehicular source 22 requirements in the form of fees on permitted stationary 23 sources which emit 500 tons or more per year of any 24 nonattainment pollutant or its precursors. 25 Please note that these only apply to the State's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 largest facilities -- those emitting the greatest amount of 2 emissions. And, as mentioned earlier, the fee program is 3 authorized to extend through fiscal year 1996-97. 4 We're proposing today that the Board collect 5 sufficient fees to provide $3 million to support the Board's 6 work to carry out the mandate of the California Clean Air 7 Act in fiscal year 1995-96. 8 This year's proposed fee rate is $17.75 per ton of 9 nonattainment pollutants. This is a different rate than was 10 published in the notice and the staff report, and I'll 11 explain the reasons for these differences later on this 12 presentation. 13 Next slide, please. 14 Requirements of the Act that are supported by this 15 program include consumer products regulations, the emission 16 inventory, air quality progress indicators, air quality 17 analysis and models, transport studies, planning guidelines, 18 and new planning requirements. 19 Can I have the next slide, please? 20 Now, Ill discuss the process we used in developing 21 the proposed regulations. We first identified those 22 facilities in the State that might be subject to the fees. 23 This included all facilities for which we had preliminary 24 1993 emission data, which indicated the facilities that 25 emitted 500 or more tons of any nonattainment pollutants or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 their precursors. 2 We used the 1993 inventory because it represents 3 the most recent statewide emissions data available. 4 We then deleted from the list those facilities 5 that are not located in districts designated as 6 nonattainment for those pollutants. 7 On December 22nd, 1994, we provided the affected 8 districts with preliminary 1993 emission estimates for 9 sources which might be subject to the proposed fee 10 regulations. 11 Districts were asked to review and verify the 12 emission figures to be used in the fee calculations. 13 In February, we invited the staffs of the affected 14 districts and representatives of affected facilities to a 15 consultation meeting to provide them with an opportunity to 16 comment on the development of the proposed fee regulation. 17 Two people attended this meeting, and no suggested 18 amendments to the proposal were identified. 19 Also, in February, notification was sent to all 20 parties that could be affected by this regulation. And, as 21 part of the public review process, the staff report and 22 proposed regulation were sent on March 14th to all districts 23 and all affected facilities. 24 We have received no written comments to date. 25 Now, I'd like to go into each of the elements of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 the proposed regulations in more detail. 2 Next slide, please. 3 This slide shows the pollutants subject to the 4 fees. On the left are the substances for which the Board 5 has established ambient air quality standards, and on the 6 right are pollutants and precursors that contribute to 7 ambient concentrations of these substances. 8 I'll now review for each pollutant the areas of 9 the State which the Board has found to be in nonattainment. 10 These areas serve as the basis for determining which 11 facilities are subject to the fees. 12 For ozone, all areas of the State are 13 nonattainment, except for Lake, Plumas, Sierra, Alpine, and 14 Inyo Counties, and counties in the North Coast, Lake Tahoe, 15 and the Northeast Plateau Basins. 16 There are no violations in the State in which the 17 sulfur dioxide standard is violated. Excuse me, there are 18 no "areas" in the State. 19 A small area in the Southeast Desert Air Basin is 20 the only nonattainment area for sulfates. 21 The nitrogen dioxide standard is violated only in 22 the South Coast Air Basin. And for carbon monoxide, 23 nonattainment areas include the South Coast Air Basin 24 portion of Los Angeles County, the metropolitan areas around 25 Sacramento, Fresno, Chico, and the South Lake Tahoe area. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 The entire State is nonattainment for PM10, except 2 for the Counties of Lake and Lassen and the Southern 3 Mountain County Air Basin counties. 4 The last three pollutants on the slide has not 5 been used for the fee program to date, and no facilities 6 will be assessed fees for these pollutants in the 1995-96 7 fiscal year for the following reasons: 8 For visibility reducing particles, all areas are 9 designated as unclassified, except for Lake County, which 10 has been designated as attainment. 11 Hydrogen sulfide is not included in the fee 12 program, because there are no sources emitting 500 tons or 13 more per year of that pollutant in the nonattainment area of 14 the State. 15 Finally, all areas of the State are currently 16 designated as attainment for lead. 17 As I've already mentioned, the proposed fees are 18 based on emissions of nonattainment pollutants or their 19 precursors. Each year, the Board reviewed the attainment 20 designations and updates them as necessary. 21 Next slide, please. 22 The current proposal is based on the attainment 23 designations that will be effective on July 1st, 1995. At 24 an August, 1993 hearing, the Board determined that 25 overwhelming transport from the broader Sacramento area and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 from the San Joaquin Valley caused all the violations of the 2 State ozone standard in the Mountain Counties Air Basin. 3 Because of this determination, districts and 4 facilities in the Mountain Counties are not subject to the 5 planning requirements of the California Clean Air Act and, 6 therefore, not subject to these fees. 7 Amador County is the only district within this 8 nonattainment portion of the Mountain Counties Air Basin 9 which currently has a facility emitting 500 or more tons of 10 ozone precursors. 11 This is the second year that a 500-ton-per-year 12 source of ozone precursors has existed in a district 13 designated by the Board as nonattainment for ozone due to 14 overwhelming transport. 15 Next slide, please. 16 There are several provisions which have been 17 included in the regulations for the last six fiscal years 18 that we propose to retain for next fiscal year's regulation. 19 The first covers the handling of carryover 20 revenues collected by the program. We propose to continue 21 the provision that requires the revenues collected in excess 22 of $3 million to be carried over and used to reduce fees in 23 a future of the program. 24 Next is the provision which addresses the 25 assessment of fees to newly identified facilities. It is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 possible that facilities might be identified subsequent to 2 the adoption of these regulations that should have been 3 subject to the fees. 4 For the sake of equity, the Board has adopted in 5 previous years a provision which requires that these newly 6 identified facilities be subject to these fees. 7 This provision was applied after last year's Board 8 hearing when two facilities were identified as subject to 9 these fees, while a third facility was removed. 10 This provision also is proposed to remain 11 unchanged for the fiscal year 1995-96 regulations. 12 These regulations provide for districts to recover 13 administrative costs. 14 Also included in the regulations adopted in the 15 last six years is a mechanism that releases districts from 16 the responsibility of collecting fees for reasons beyond the 17 district's ability to control, such as facility closure or 18 refusal of a facility operator to pay the fees despite the 19 district's having made all reasonable effort to collect the 20 fees. 21 We are not proposing to change this provision. 22 Next slide, please. 23 I'll now discuss how the fee rate for the proposed 24 regulation was calculated. First, we determined that to 25 continue the task specified by the California Clean Air Act, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 the Board would need to collect the full $3 million. 2 Second, the regulations include a requirement that 3 any revenues in excess of $3 million collected during any 4 program year shall be carried over and applied to reduce fee 5 assessments in future years. 6 For fiscal year 1993-94, approximately $3,273,000 7 has been collected. Therefore, we subtracted the excess 8 $273,000 from the total fee amount to be collected for 9 fiscal year 1995-96. 10 The result is that the amount to be collected to 11 satisfy fiscal year 1995-96 budget requirements is 12 approximately $2,727,000. 13 To get the fee rate in dollars per ton, the total 14 dollar amount, $2,727,000, to be collected is divided by the 15 total applicable fees for approximately 154,000 tons for 16 1993. This results in a final fee of $17.75 per ton. 17 As I mentioned earlier, there have been some 18 revisions to the emission data since the staff report was 19 published. As a result, we are now proposing a fee rate 20 which is different from what was in the staff report. 21 The new fee rate being proposed for 1995-96, is 22 $17.75 per ton rather than the $15.42 per ton fee rate in 23 the notice. 24 This $2.33 difference is due to the current 25 emission estimates from districts received since the notice PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 was published. 2 A cutoff date of January 20th was established for 3 districts to verify preliminary 1993 emission estimates so 4 that a draft staff report could be prepared. 5 As district emission numbers were received, 6 emission estimates overall went down, which caused the 7 dollar per ton rate to increase. 8 We first noticed that there would be an increase 9 when changes were received from districts in late February. 10 Changes submitted before March 9th were included 11 in the final staff report. Emission estimate corrections 12 submitted since March 9th include 13 changes from four 13 districts affecting nine facilities. These changes resulted 14 in a net decrease of emissions in this program of 15 approximately 18,000 tons per year. 16 Table 2, dated January 27th, on page 8 uses the 17 fee of $15.42 a ton published in the notice. In order to 18 provide a more accurate table of emissions and fees, we also 19 included in the staff report Table 3 on page 9, which 20 incorporates the fee rate of $17.04. 21 This rate was calculated using the most current 22 emission estimates available at the time that the staff 23 report was published on March 10th, 1995. 24 Again, emission estimate changes confirmed by 25 districts to this date replaced the proposed fee rate of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 $17.75 per ton (sic). 2 Next slide, please. 3 The cost of the proposed fees to affected 4 businesses vary, depending on how much they emit. We have 5 calculated that the fees of individual companies will vary 6 from a minimum of approximately $9,000 for a facility 7 emitting close the 500-ton-per-year threshold to about 8 $357,000 for a very large corporation operating at numerous 9 locations in the State. 10 The Administrative Procedures Act requires that 11 agencies determine impact of regulations on businesses. 12 Based on the staff's methodology for evaluating fiscal 13 impacts, we believe that adoption of these regulations will 14 not have a significant fiscal impact on companies subject to 15 the fees because the affected companies are among the 16 largest in the State both in size and financial strength. 17 Also, we believe that adoption of the regulations 18 will not significantly affect the ability of California 19 businesses to compete with businesses in other states, and 20 will not affect the creation or elimination of jobs within 21 California, and will not impose a noticeable impact on the 22 profitability of California businesses. 23 Next slide, please. 24 This next slide compares the proposed fee program 25 to the previous year's regulation. Fiscal year 1995-96, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 eight facilities have dropped out of the program and six 2 have come into the program. This net reduction of two 3 facilities is due to emission reductions and changes to 4 nonattainment area designations. 5 The total amount of emissions subject to these 6 fees dropped by about 18,000 tons from last year. 7 Next slide, please 8 In conclusion, the major change being proposed to 9 the California Clean Air Act nonvehicular source fee 10 regulation for fiscal year 1995-96 is revised fee rates. 11 The fee amount has been recalculated for the new 12 fiscal year based on 1993 emissions. The fees that will be 13 collected for the California Air Resources Board, if the 14 proposed regulations are adopted, would be used to defray 15 some of the Air Resources Board's cost of continued 16 implementation of the California Clean Air Act. 17 The fees which we are proposing will result in the 18 collection of approximately $2,727,000. If the Board 19 approves the changes which have occurred since the staff 20 report was published, the resulting fee per ton that would 21 be assessed is $17.75 per ton. 22 Because the changes that have occurred since the 23 publication of the staff report have not undergone public 24 review, these changes will be subject to a 15-day public 25 comment period following the hearing. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 I'd like to go back just for a moment and mention 2 a number that I had said in regards to the changes resulting 3 in the net increase (sic) of emissions in this program due 4 to the changes received since March 9th. 5 I stated that was 18,000 tons per year. And, 6 actually, that's 6384 tons a year -- per year of emissions 7 that have changed since the March 9th cutoff we had. 8 Finally, that completes my presentation, and I'll 9 be glad to answer any questions that you may have. 10 CHAIRMAN DUNLAP: Thank you, Mr. Campbell. 11 Any questions of staff? Supervisor Silva. 12 SUPERVISOR SILVA: Yes. Does the Clean Air Act 13 mandate the fees or the programs? 14 MR. SCHEIBLE: The Act mandates the programs and 15 allows us to assess the fee at the Board's option in order 16 to pay for the programs. 17 SUPERVISOR SILVA: Okay. 18 CHAIRMAN DUNLAP: Supervisor Vagim. 19 SUPERVISOR VAGIM: Thank you. Under this 20 increasing per ton, but lessening of facilities, if we end 21 up with one facility with 501 tons, will their charge be 22 $6,000 a ton? 23 MR. CAMPBELL: No. Actually, it would be 501 tons 24 at the rate $17.75 per ton. 25 SUPERVISOR VAGIM: Well, no, I'm talking about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 years out. I mean, is that where we're going with this? 2 If we get down to where there's only one facility 3 left that emits over 500 tons, it would have to, 4 theoretically, pay the $3 million. 5 MR. SCHEIBLE: We wouldn't let it get anywhere 6 close to that. 7 SUPERVISOR VAGIM: Okay, but -- 8 MR. SCHEIBLE: If we did, I'm sure the Board 9 wouldn't allow us to. 10 SUPERVISOR VAGIM: Okay. All right. Now that 11 we've established that, at what point does that kick in? 12 Obviously one is beyond what anybody can imagine. We'd 13 never do that. But is two, three, six, 18, 25? When will 14 that decision be made? 15 How will this Board make that decision? What will 16 you folks do to bring back to help us make that decision? 17 MR. AGID: Next year is the last year of this 18 program under the current authorization, and it's not likely 19 that -- 20 SUPERVISOR VAGIM: There's no talk about 21 lengthening its time at all or any advocacy for that? 22 I mean, $3 million is a lot of habit-forming 23 money. 24 MR. SCHEIBLE: No. When the legislation was 25 passed, it included a sunset date on the fee authority. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 But, clearly, all of the requirements of the program, in 2 terms of the mandated elements, continue. 3 And I think it's been our experience with the 4 Federal Clean Air Act and others is that we are, if 5 anything, putting more and more effort into the planning 6 area and into meeting those types of requirements. 7 So, our view would be that we'd continue to need 8 to conduct the program, and will have to go before the 9 Legislature in terms of a debate over whether or not the 10 funding mechanism they established with the first eight 11 years ought to continue, some other mechanism ought to be 12 found, or the program ought to be -- because of lack of 13 funds -- be shrunk accordingly. 14 SUPERVISOR VAGIM: Well, that's the exact point 15 I'm trying to get at. $3 million is going to have to be 16 made up somewhere if you want to continue the program. 17 The issue is, as you narrow or lessen the number 18 of facilities, the requirement per ton goes up. And, at 19 some point in time, either we need to look at how to 20 rearrange the program so it becomes more equitable for those 21 who are left, or expect them to really pay out of their eye 22 teeth for this program. 23 MR. SCHEIBLE: And one would also hope that, as 24 the emissions from the facilities go down, that's an 25 indication that areas are going into attainment, and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 program will naturally shrink because there'll be less work 2 to do in order to accomplish what the legislative 3 requirements are. 4 SUPERVISOR VAGIM: And that always has 5 traditionally followed, right? 6 MR. SCHEIBLE: Well, I think we've gotten the 7 message that some of the traditional things done in 8 government shouldn't be repeated in the future if we want to 9 keep the public support, so. . . 10 SUPERVISOR VAGIM: Thank you. Thank you, Mr. 11 Chairman. 12 CHAIRMAN DUNLAP: Good point, Supervisor, about 13 shrinking programs. I might mention that Supervisor Riordan 14 made a point that you may not have heard -- that if we were 15 left with very few sources, under the current authority, we 16 could charge them very large amounts. But the 17 administrative requirements necessary for this program would 18 naturally shrink. 19 And so, it would be on a par with that. 20 Yes, Mr. Lagarias. 21 MR. LAGARIAS: I have several questions. 22 You indicated, for the largest facility in the 23 State, that they would pay $357,000 in fees for the Clean 24 Air Act. What additional fees do they already pay? Because 25 this is obviously a surcharge for the Clean Air Act. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 MR. SCHEIBLE: Well, the larger companies pay 2 several to many times the $17 fee, and they are in the South 3 Coast. Most of these larger sources are in the South Coast. 4 In other districts, it's less. But it's still quite a bit 5 more. 6 MR. LAGARIAS: So, for example, this company might 7 be paying a million dollars or more already in fees, and 8 this is a surcharge over and above that. 9 MR. SCHEIBLE: The companies that we're talking 10 about with the larger emissions in this program are the 11 utilities and oil industry, which are very large entities. 12 CHAIRMAN DUNLAP: If we may, we have a witness 13 requested to speak. Mr. Ted Holcombe from Pacific Gas & 14 Electric Company. If I might call him forward, his company 15 is subject to this program, and he might be able to answer 16 that question. 17 MR. HOLCOMBE: Good morning. I'm Ted Holcombe 18 from Pacific Gas & Electric. I don't have a great amount to 19 say here. I will say that when I contacted Skip Campbell 20 basically about a week ago, he was very cooperative. 21 At one of our plants, we had a NOx control 22 project, and it significantly reduced the NOx emissions. 23 And after contacting Mr. Campbell, it appears that the 24 calculations have been appropriately corrected and, as a 25 result, our fee's gone down by $36,000. We appreciate it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 We have a concern about the overall program and it 2 being equitable. In other words, if somebody has 499 tons, 3 that company doesn't pay the fee, because the fee's based on 4 501 tons. Should be fee be based on that one ton, or 5 anything over that 500? A rethinking of that might be 6 worthy of consideration. I don't know whether we'd benefit 7 from that or not. 8 Another question that sort of came across about 9 the staff presentation, which is that the carryover of 10 fees made a lot of sense to me, when it basically means that 11 you didn't spend all the money. In other words, you have 12 the authorization to collect $3 million. If, for some 13 reason, you scale back your program one year and you 14 undercollect, and then the next year you spend more, to me, 15 that's not such a bad idea, because -- because you've 16 basically gone through the process of making a more 17 efficient decision when to spend the money, so to speak. 18 But if, as could potentially happen here, what 19 you're actually doing is when you're collecting more than $3 20 million, then you've gone on -- now, you set your fee and 21 your tonnage to collect $3 million, which is the maximum 22 amount. But then you put in there a little provision 23 saying, well, if we find somebody else that we can collect 24 more money from, we're going to do that in addition. And 25 what I'm saying is, if you come across those -- ah, we can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 get more money here -- and you end up collecting $3.5 2 million, then you've exceeded your authorization to collect. 3 And rather than just carry that over, that extra half 4 million dollars could perhaps be refunded back to people in 5 the form of a rebate or fee adjustment. 6 I don't know if that's something that happens with 7 enough regularity to be worthy of concern. 8 Thank you. 9 CHAIRMAN DUNLAP: Mr. Holcombe, Mr. Lagarias has a 10 question for you. 11 MR. LAGARIAS: Before you leave, the 500 ton limit 12 was set by the legislation. It's like a 55-mile an hour 13 speed limit. You go over it, you get fined. If you don't 14 go over it, you don't get fined. 15 So, if you want to change it, you're going to have 16 to do something with the legislation. 17 MR. HOLCOMBE: Yeah, I don't know if it says per 18 ton. I don't know if the legislation is very clear as to 19 whether or not you start paying per ton over 500 or whether 20 you start paying for every ton when you're over 500. 21 MR. LAGARIAS: Well, it just says those 22 organizations subject to this regulation are those emitting 23 over 500 tons. 24 MR. HOLCOMBE: Right. And so, the question -- I 25 think you would have the ability to subtract 500 tons from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 the start tons (sic) if you wanted to. I don't think it's 2 clear that the mechanism of how you assess the fees -- 3 MR. LAGARIAS: Well, that's a possibility. 4 MR. HOLCOMBE: -- starts at 500 or starts at 501. 5 CHAIRMAN DUNLAP: Supervisor Silva. 6 SUPERVISOR SILVA: Yes. Thank you, Mr. Chairman. 7 Mr. Holcombe, I have a couple of questions. And 8 actually, I called staff on that. I think it was -- it goes 9 back to ton one. You pay all the way through to 501 tons; 10 is that not correct? 11 MR. AGID: That's correct, yes. If you're over 12 500, you pay for each ton that you emit. 13 MR. HOLCOMBE: I know that's the way it's done, 14 yes. 15 SUPERVISOR SILVA: Yeah, okay. I don't think 16 that's fair. Anyway, you're with Pacific Gas & Electric. 17 MR. HOLCOMBE: Yes, sir. 18 SUPERVISOR SILVA: And you do not compete really 19 with out-of-state businesses, do you? 20 MR. HOLCOMBE: We may in the future, but we don't 21 yet. 22 SUPERVISOR SILVA: Right now, you're not. Okay. 23 Would a company that is assessed these fees, would 24 this be detrimental to them in having to compete with out- 25 of-state businesses that are not under the same regulations? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 MR. LAGARIAS: Absolutely. 2 MR. HOLCOMBE: If you're paying a higher fee than 3 your competitors are, which typically is probably the case 4 for anybody operating in California versus out of state, 5 yes. 6 The Clean Air Act specifies -- the Federal Clean 7 Air Act specifies a fee of $25 per ton minimum that 8 everybody has to pay, in theory programwise, and if you're 9 over that $25 per ton in total fees paid for whatever your 10 emissions are, then you could presumably figure that you're 11 paying a higher fee and noncompetitive. 12 SUPERVISOR SILVA: Okay. Thank you very much. 13 MR. LAGARIAS: May I? 14 CHAIRMAN DUNLAP: Yes, Mr. Lagarias. 15 MR. LAGARIAS: I noticed in the nonattainment 16 pollutants, we list sulfur oxides. And yet, you say the 17 State is in attainment for sulfur oxides. 18 Now, you also list sulfur oxides as being a 19 nonattainment precursor for visibility and PM10, suspended 20 particulate. But that's a very small part of the PM10. And 21 it seems to me that if we're in attainment for sulfur 22 oxides, maybe that should be taken out of the fee adjustment 23 analysis. 24 MR. GOODENOW: That -- this is Dennis Goodenow. 25 I'm with the Emission Inventory System Section. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 That is an option. It would raise the cost per 2 ton higher, because you would have a smaller emissions base 3 in which to assess the fees against, although -- 4 MR. LAGARIAS: Well, the basis is not how you 5 figure the cost per ton. The question is, should it be 6 subject to this regulation if it's an attainment pollutant? 7 MR. SCHEIBLE: Well, the rationale why it is, is 8 because it is a precursor of PM10, and second -- 9 MR. LAGARIAS: But it's a small precursor. You 10 look at the contributors to the PM10, and that's not a 11 significant one. 12 MR. SCHEIBLE: It's in the order of 5 to 10 13 percent in the Valley and in the South Coast, I believe. 14 MR. LAGARIAS: I don't deny it's a contributor to 15 PM10. But I think that's a sneaky way of trying to get 16 sulfur oxides put into the fee structure. I think that 17 ought to be examined carefully. 18 Now, I have another question. What is the basis 19 for making the fee assessment from the various districts? 20 It's based on their emission inventory? 21 MR. AGID: The districts work most closely with 22 the facilities in estimating the emissions, and we rely on 23 what the districts provide to us for this fee regulation. 24 MR. LAGARIAS: What percent of these fees are 25 fugitive fumes in these large installations? Do you have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 any idea? 2 MR. GOODENOW: The emissions on fugitives are 3 primarily associated with the refineries and oil production 4 types of facilities. 5 MR. LAGARIAS: And they're the biggest payers. 6 MR. GOODENOW: They are the largest payers. 7 Fugitive emissions, of course, are only related to 8 hydrocarbons, and they are around, I would say, 25 to 30 9 percent of the hydrocarbon load. And the hydrocarbon load 10 would be about 25 to 30 percent of the total from the 11 facilities. So, we're talking about six, eight, or ten 12 percent of the total emissions from those large facilities. 13 MR. LAGARIAS: Well, are the emissions factors for 14 fugitive fumes calculated on the same basis throughout the 15 State? 16 MR. GOODENOW: Currently, there is an EPA approved 17 emission factor methodology that the districts follow. They 18 do provide some variation to that based on location. As I'm 19 sure you know, the size of the tank, the color of the tank, 20 and those types of things are factors to be considered. 21 On the fugitive side, you also have number of 22 accounts and the products that are in those valves and 23 flanges that would cause some differences. But, generally 24 speaking, currently, they do use the same methodology. 25 MR. LAGARIAS: Well, I had understood that there PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 was a new study by Radian that the South Coast was looking 2 at -- is that the basis for their emission factors, or are 3 they using AP42? 4 MR. GOODENOW: There is a new study that's out. 5 It hasn't gone through complete review, and we have not 6 authorized the South Coast to use that for this fee 7 regulation. 8 MR. LAGARIAS: So, they are using the EPA approved 9 process? 10 MR. GOODENOW: That's correct. 11 MR. LAGARIAS: Now, in the description off 12 refineries, is there a common language to identify tanks, 13 pipes, pipe sizes, valves, and so forth in calculating 14 fugitive fumes? 15 MR. GOODENOW: I guess I don't understand that 16 question. 17 MR. LAGARIAS: Well, I understood that how you 18 define a refinery or the emissions from a refinery, whether 19 it includes the distributing tanks, stations, different size 20 tanks, different size valves, whether this is common or 21 consistent throughout the State in estimating the fee for 22 the fugitive emissions? 23 MR. GOODENOW: To the best of my knowledge, it is. 24 MR. LAGARIAS: Let's see. I had one other point. 25 There seems to be a great discrepancy between the South PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 Coast and the Bay Area in total emission fees. And while 2 the districts don't deny this or don't disagree with this, 3 it still seems inconsistent to looking at the fee structure 4 when you compare the size of the areas and the size of the 5 facilities. And I'm thinking particularly about the 6 Torrance facility as being under 500 tons per year in 7 emissions. 8 Can you look into this? 9 MR. GOODENOW: Certainly. 10 MR. LAGARIAS: Thank you. 11 CHAIRMAN DUNLAP: Thank you, Mr. Lagarias. Any 12 other -- 13 MAYOR HILLIGOSS: Mr. Chairman? Yes. 14 CHAIRMAN DUNLAP: Yes. Mayor Hilligoss. 15 MAYOR HILLIGOSS: Are the figures collected in the 16 same way in each district? For instance, in our district, 17 we send our people out to actually get the figures. 18 MR. GOODENOW: Each district does collect 19 emissions data roughly the same. But there are some 20 variations. 21 Some of the larger districts do send out surveys 22 and rely more heavily on the facilities' response to those 23 surveys, where other smaller districts have the ability -- 24 with smaller facilities and less facilities -- to rely more 25 heavily on the permit engineer's judgment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 There are only so many ways, to be perfectly 2 honest with you, to estimate emissions from like processes. 3 And, generally speaking, most districts use the same 4 methodology, use the same type of activity data, the same 5 source of activity data, the same emission factors, the same 6 source of emission factors. 7 There are some variations; but, generally 8 speaking, they are consistent. 9 MR. SCHEIBLE: With respect to the emissions in 10 the South Coast, NOx and SOx especially have probably been 11 scrutinized as never before in the development of the 12 reclaim program. Because there, sources of emissions were 13 very fundamental in terms of its initial allocations and its 14 future allocations, and became very important. So, they 15 went through an extensive effort working with all of these 16 sources to try to tie down and fully understand and quantify 17 well the NOx and SOx emissions from the categories. 18 So, there's probably some recent advancement in 19 checking them. That district, anyway, it would be hard to 20 conceive of a program that would go and do more work in that 21 area. 22 CHAIRMAN DUNLAP: Very current inventory is what 23 you're saying. 24 MR. SCHEIBLE: That's correct. 25 MR. LAGARIAS: Can I have one last comment? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 CHAIRMAN DUNLAP: Sure, Mr. Lagarias. 2 MR. LAGARIAS: It seems odd that since the start 3 of this program, the number of facilities subject to this 4 regulation has gone down, the total volume of emissions that 5 are coming from these sources has gone down dramatically. 6 And our fee structure is adjusted to reflect that. But the 7 cost of the State has not changed at all. It goes right up 8 to $3 million, and stays there essentially. 9 And I would think that if the number of facilities 10 is going down, the emissions going down, a lot of the work 11 associated with going down, our program supporting that 12 should reflect -- be reflective of this as well. 13 MR. AGID: Actually, our cost for implementing the 14 Clean Air Act provisions are greater than the 3 million. 15 The 3 million has just been a partial part of the overall 16 program's costs. 17 MR. LAGARIAS: But this is the cost for the 18 stationary sources over 500 tons we're talking about. We're 19 not talking about the total Clean Air Act. 20 MR. SCHEIBLE: Well, I think that's not the -- the 21 way the fee mechanism was set up, it was to -- authorized to 22 be used to reimburse the State for a portion of the cost to 23 implement the California Clean Air Act related to 24 nonvehicular sources. 25 So, these large industries, in effect, are paying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 for activities that they in part contribute to, but aren't 2 totally -- it's not like a permit program or something else 3 where all the money gets returned directly to activities 4 that affect only these sources. 5 MR. LAGARIAS: I agree with that. But if we're 6 talking about this is the cot for stationary sources, then I 7 would think all stationary sources would be asked to 8 contribute to this, and not just the largest ones. 9 MR. BOYD: Mr. Lagarias, as Mr. Scheible 10 indicated, through, it was a legislative policy decision 11 that, if you were privileged enough to belong to this 12 exclusive club, you would get the right to pay a 13 contribution to the cost of all stationary source 14 activities, not just those allocable to people who emit at 15 that level. 16 So, it was legislative policy, and they have the 17 prerogative to change that policy. But while these 18 industries are reducing their emissions, unfortunately, 19 we're not -- you know, we're not so far ahead of the game 20 that the costs are going down. 21 MR. LAGARIAS: Well put. 22 CHAIRMAN DUNLAP: Supervisor Vagim. 23 SUPERVISOR VAGIM: Thank you, Mr. Chairman. 24 Back to my original point, when you calculate the 25 fee increase, it's almost 20 percent or a 15 percent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 increase from last year to this year. 2 Based on that, as we reduce the number of sites 3 that cross this threshold, it could go up another 15 or 20 4 percent. There's going to be a point where you're going to 5 have industries getting more and more, let's say, 6 contentious about this. 7 At $9.92, there's less contention than at 17.75. 8 And I'll bet when it goes to 20 to 25, there'll be even more 9 dramatization of that. 10 My point, I guess, is from a question. When this 11 was put in effect to obviously help offset the cost of 12 implementing the Clean Air Act in '89; in this industry, I 13 guess a lot of things have happened. You've had a lot of 14 maturing of districts and a lot of maturing of regulations 15 and rulemaking throughout California in the 34 air 16 districts. 17 Do we really need to have this type of oversight, 18 and can we come into a lesser, more cost-effective oversight 19 into the districts' stationary source prerogative? Indeed, 20 that's what this is all about. And how more effective can 21 we implement, obviously, a cost offsetting for CARB to be 22 able to promulgate the Clean Air Act? 23 I mean, I think that's what we ought to examine. 24 Someone's going to be coming up with some suggestions. I 25 presume it comes out of here as the genesis to give some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 direction to those who want to take the lead in the 2 Legislature. So, any gazing in the crystal ball here? 3 MR. SCHEIBLE: Staff has already been tasked with 4 addressing all of those issues in anticipation that those 5 questions will be asked in any legislative debate prior to 6 making any legislative initiative. And the industry would 7 be very concerned. 8 I'd also like to point out that, again, most of 9 these activities and the mandates that are supported by this 10 are not directly back on ARB's oversight of the districts. 11 It's to do the attainment demonstration, to do the air 12 quality trends, to do the modeling, the emission inventory 13 work, all of those things that lead into doing the good 14 planning that we found were so valuable in our SIP process 15 last year, and our ability to deliver on those things. 16 And, definitely, we will streamline and become 17 more efficient as time goes by. But the basic requirements 18 aren't going away. For each success story we have, like the 19 Bay Area, we have the continuing problem in Southern 20 California and in the Valley of how to make sure our plans 21 work out. 22 So, it's not a good picture; that the problem is 23 only a quarter or half-solved, and the remaining half is 24 going to be that much more difficult to address. 25 SUPERVISOR VAGIM: But the irony is, though, when PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 the Valley did its ozone study, this was only a small 2 fraction of the real cost of doing that study. And, indeed, 3 when we look at the PM10 studies that are going on in the 4 State, the insignificant part of the total cost of those 5 study programs are having to go out and get other monies in 6 addition to that. 7 So, maybe it would be best to take a look at how 8 you would do that more holistically than just hammering a 9 few large sources. 10 MR. SCHEIBLE: Yeah, I will say that relative to 11 the Valley study, there's a large in-kind contribution of 12 ARB staff for inventory and modeling, and staff was there 13 because of this funding source. 14 SUPERVISOR VAGIM: Always that good "in-kind" 15 thing. We appreciate "in kind." 16 CHAIRMAN DUNLAP: Let me, I guess, summarize a few 17 points for staff as we continue this discussion over the 18 next few minutes. 19 There is a heightened sensitivity at the Board 20 level to make sure that our programs reflect true 21 administrative needs and that we are not perpetuating fees 22 unnecessarily that don't reflect real work. 23 And so, I would encourage -- perhaps later, when 24 we wind this down, Jim, for you to take a -- Mr. Boyd, take 25 a few moments and talk about resources deployed internally PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 to fulfill the obligations associated with this Clean Air 2 Act program. 3 Before we do that, if there are no other comments 4 from the Board at this juncture, I would ask staff to 5 summarize some of the written comments or letters that we 6 may have received on this item. 7 MR. GOODENOW: We have received no written 8 responses on this item to date, sir. 9 CHAIRMAN DUNLAP: Okay. Mr. Scheible? 10 MR. SCHEIBLE: I'd just like to clarify something 11 that the witness from PG & E talked about; that basically we 12 overcollected in one year. 13 The mechanism that we are suggesting to basically 14 return those fees to the payers is, in the next year fee 15 regulation, to target less than 3 million to be collected. 16 There are other mechanisms -- you could issue a check and 17 rebate or lower the bill. We thought that, 18 administratively, that was the easiest one, and it would 19 benefit by and large people in proportion to the amount that 20 they overpaid. 21 CHAIRMAN DUNLAP: What was the feedback you got 22 from the sources that were impacted, that overpaid? Were 23 they supportive of doing it that way? Did they have 24 problems with it? 25 MR. AGID: I don't believe we've heard any PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 negative comments to that approach. 2 MR. SCHEIBLE: And it's been done for several 3 years as the mechanism. 4 CHAIRMAN DUNLAP: Several years. How many? A 5 couple? Two, three, ten, twenty? How many does this -- 6 MR. SCHEIBLE: The type of source that wouldn't 7 benefit from this was one that was lucky enough to fall out 8 of the program completely. So -- 9 CHAIRMAN DUNLAP: Okay. 10 MR. SCHEIBLE: -- perhaps they are happy to get no 11 bill. 12 CHAIRMAN DUNLAP: Okay. With that, Mr. Boyd, 13 could I call upon you maybe to address the earlier question? 14 I think it might clarify some things for the Board if you'd 15 do that. 16 MR. BOYD: Well, I'll do the best I can, Mr. 17 Chairman, with regard to what kinds of activities we carry 18 out. 19 I think many Board members are very familiar with 20 the -- although not of late, because we've been dealing with 21 the Federal Clean Air Act and the ozone SIP -- but many 22 Board members are familiar with the several years' worth of 23 activities and reviews by this Board of plans that were 24 required under the State Clean Air Act. This Board's and 25 staff's responsibility is to provide guidance to local PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 districts on how to meet the requirements of the Federal 2 Clean Air Act. And there's a library shelf full of those 3 guidance documents that you've seen over time, some 4 controversial this day and age, because they did venture, 5 when it was safe to do so, into transportation control 6 measures, employee commute options, and what have you -- 7 others in the more technical and esoteric area of how to do 8 emission inventories, and so on and so forth. 9 In addition, your staff was given a substantial 10 amount of responsibility under the State Clean Air Act to do 11 things that had not been done before, such as consumer 12 products. And the whole long history of the consumer 13 products area is a mixture of what we do to meet the needs 14 of the State Clean Air Act while, at the same time, trying 15 to meet the need to reduce emissions in this arena that are 16 allocable to the responsibility to meet the Federal 17 standards. 18 Another major issue was a very strong mandate from 19 the Legislative. Of course, now I'm venturing into another 20 arena, the vehicular arena. But the LEV/ZEV program was 21 almost born of the controversy that arose as we neared 1987, 22 and the fact that we're not going to have clean air in the 23 nation, what's more in California -- and certainly not our 24 own standards -- the need to devise programs to go beyond 25 that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 But getting back into what's the stationary source 2 arena -- what these funds pay for -- when we talked about 3 the system of the motor vehicle and its fuel, when we began 4 to devise that entire low-emission vehicle/clean fuels 5 program, the clean fuels component -- your RFG 1, your RFG 6 2, that's all a product of efforts of your staff to carry 7 out, in effect, mandates of the State law that called upon 8 substantial reductions in this particular arena. 9 And the law, although State law we champion as a 10 better model, and we tried championing it to the Congress 11 when they were debating the Federal Clean Air Act as one 12 that sets up performance standards and not specific 13 prescription; nonetheless, the Legislature did point us in 14 specific directions as to where to try to achieve emissions 15 reductions. 16 And then they gave us all an obligation to make 17 progress against plan, to make a percentage reduction, 18 without setting up a calendar-year deadline, percentage 19 reduction towards attainment of the State standard, while 20 giving your Board the power and the flexibility to ascertain 21 that your own staff and local districts, area by area, were, 22 in fact, doing anything and everything -- everything 23 feasibly possible to do and perhaps were not able to meet 24 that percentage of progress against plan. 25 And for our most severe areas, of course, that has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 been the rule, not the exception. That is, we have tended 2 to fall percentage points short, and yet, you, we have all 3 ascertained that, with the resources we have and with the 4 technology that exists, and with the good efforts of 5 everybody involved, no one could deny -- although some 6 people allege perhaps we aren't trying hard enough -- we 7 felt we were doing everything feasibly possible to get 8 there. 9 So, in a global, generic sense -- and Mr. Scheible 10 could maybe think of some specific directives of the law -- 11 those are the kinds of activities that the staff has been 12 carrying out every since the genesis of the California Clean 13 Air Act. 14 CHAIRMAN DUNLAP: And that this program supports. 15 MR. BOYD: And the fee revenues -- 16 CHAIRMAN DUNLAP: Okay. 17 MR. BOYD: -- help support. Because it does not 18 come close, as indicated before, even close to the total 19 cost involved. 20 CHAIRMAN DUNLAP: Okay. 21 MR. SCHEIBLE: And I might add, the vast majority 22 of the Board's programs are paid by fees related to motor 23 vehicle, either through the motor vehicle account or to 24 reimburse us for things related to smog check. This is 25 about three percent of the total program costs supported PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 directly by industrial sources of air pollution in 2 California for the State, the whole program. 3 CHAIRMAN DUNLAP: Okay. Supervisor Vagim. 4 SUPERVISOR VAGIM: Thank you, Just a quick 5 technical question here. I'm trying to figure out the 6 collating sequence of the charts in the back here. I need 7 to know the sort sequence. I mean, it's jumping all over 8 the place. 9 MR. CAMPBELL: Would this be in the staff report? 10 SUPERVISOR VAGIM: Yeah. 11 MR. CAMPBELL: You might want to take a look at 12 the package that you have before you that outlines the 13 changes. 14 In the staff report -- 15 CHAIRMAN DUNLAP: Hold it up, if you would. Hold 16 it up. 17 MR. CAMPBELL: Okay. This "Changes to the Staff 18 Report" -- 19 SUPERVISOR VAGIM: Right. Okay. 20 MR. CAMPBELL: There's another one back there 21 that-- Item 2, that doesn't do that. 22 SUPERVISOR VAGIM: A little bit better collated? 23 MR. CAMPBELL: In the staff report itself, during 24 reproduction, there was a misplaced, I guess, one of the 25 pages that allows it to go to double-sided. And that sort PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 of mixed up the order and also the direction of that. 2 So, you might want to take a look at that other. 3 SUPERVISOR VAGIM: I have this (holding up 4 document) and I have this. And you say there's a better 5 collating sequence here. Okay. I'll look at that. 6 But it does -- 7 MR. CAMPBELL: That would be Item 2. 8 SUPERVISOR VAGIM: You have a basis for a new 9 board game here the way this thing jumps around. 10 (Laughter.) 11 MR. BOYD: I'd be glad to have the staff sit down 12 for a moment with you, Supervisor Vagim, right after this 13 meeting to make sure you have a correctly collated, 14 hopefully comprehensive, set. 15 SUPERVISOR VAGIM: Thank you. 16 CHAIRMAN DUNLAP: Okay. Any other questions, 17 comments by the Board? 18 Staff, anything else before we close the record? 19 SUPERVISOR SILVA: Just one comment. 20 CHAIRMAN DUNLAP: Supervisor Silva. 21 SUPERVISOR SILVA: You know, when we talked about 22 the fee increase, and it's from 15 -- was it 15.83 per ton, 23 this year per ton, to 17.75. Okay, that's an increase. And 24 we say that there really isn't a fiscal impact. 25 There is. These companies aren't going to bear PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 the cost. They're going to pass it on. And in my county 2 right not, we're going through a crisis. And I look at any 3 increase right now as being detrimental to business. And it 4 might be nice to sit in this room and say, well, it won't 5 have an impact when I know darn good and well it will have 6 an impact. 7 And I'm having a hard time supporting this. 8 Although, I am relatively new on the Board, I probably will. 9 But I would think that next year, we're going to be taking a 10 closer look at this, and especially the $3 million. 11 If the emissions are going down and everything 12 else seems to be going down, I can't see continuing with the 13 $3 million. 14 Thank you. 15 MR. AGID: Supervisor Silva, I might point out 16 that there are no facilities in Orange County that are 17 subject to this regulation, if that helps you personally. 18 SUPERVISOR SILVA: But we buy some of the products 19 in Orange County, and we're all in the same State. 20 MR. AGID: Correct. 21 CHAIRMAN DUNLAP: Okay. At this point, I will 22 close the record on this agenda item. However, the record 23 will be reopened when the 15-day notice of public 24 availability is issued. 25 Written or oral comments received after this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 hearing date but before the 15-day notice is issued will not 2 be accepted as part of the official record on this item. 3 When the record is reopened for 15-day comment 4 period, the public may submit written comments on the 5 proposed changes, which will be considered and responded to 6 in the final statement of reasons for this regulation. 7 Just a reminder to Board members of our policy on 8 ex parte communication. While we may communicate off the 9 record without outside persons regarding Board rulemaking, 10 we must disclose the names of our contacts and the nature of 11 the contents on the record. 12 This requirement applies specifically to 13 communications which take place after notice of the Board 14 hearing has been published. 15 Are there any communications which need to be 16 disclosed on this item? 17 Okay. Why don't we take a moment or so and review 18 the staff resolution that is before us. 19 SUPERVISOR RIORDAN: Would you like a motion, Mr. 20 Chairman? 21 CHAIRMAN DUNLAP: Sure, I think we may need 22 another moment. 23 I apologize to the audience. There's a couple 24 pages before us, and it takes us a moment to review them. 25 But, Supervisor, hold that thought. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 SUPERVISOR RIORDAN: I'll hold that thought. 2 CHAIRMAN DUNLAP: Supervisor Silva made a point a 3 moment ago, Mr. Boyd, about the increase in the fee from 4 last year's level of $15.83. 5 What would be the fiscal impact if we were to hold 6 the line at last year's levels? 7 MR. BOYD: I think it would be roughly about 8 $185,000 reduction in the resources available to the ARB. 9 CHAIRMAN DUNLAP: Okay. 10 And last year's level was at 15.83? 11 MR. BOYD: 15.83. 12 CHAIRMAN DUNLAP: This year it was 17.58? 13 MR. BOYD: 17.75. 14 CHAIRMAN DUNLAP: 17.75. 15 MR. BOYD: And I have to remind the Board that in 16 the current year -- last year's Legislature reduced the 17 ARB's budget by $4.9 million, putting a pretty significant 18 strain. 19 So, I recognize these are not good times. And I 20 agree with Supervisor Silva's observation. Although the 21 point that emissions in this area are going down doesn't 22 offset the fact they aren't going down in total. 23 I do recognize this is kind of a watershed year in 24 terms of the sentiments of the public and everyone else 25 relative to the future. And we discussed at staff -- this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 didn't go down easy with us either. We recognize the 2 jeopardy it puts this in, and we do recognize the need to 3 sit down, not only internally, but with the districts to 4 talk about how we continue to deliver the requirements of 5 the California Clean Air Act in these times and the cost 6 related thereto. 7 So, over the next year, we'll be collectively 8 having to look at this a little more closely. 9 MR. SCHEIBLE: I'd also like to add that last 10 year's fee was somewhat lower than it would have otherwise 11 been because it included a greater amount of rollover; and, 12 secondly, that the rate is not a full measure of what a 13 source pays. It's really the amount that the source pays. 14 So, it's more like, I think, to characterize it, 15 they're not getting the benefits of a lower fee because of 16 reflecting lower emissions as opposed to being paid more. 17 The true amount that's not paid is simply the 18 emissions of sources that dropped out completely out of the 19 program. And that's relatively minor. The sources that 20 dropped out completely were the lowest fee payers, because 21 they were at the closest to the 500 tons. 22 The most common mechanism for a source dropping 23 out of the program is that it had emissions close to 500 24 tons one year, slightly over, and then went to slightly 25 under the next year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 CHAIRMAN DUNLAP: Ms. Edgerton. 2 MS. EDGERTON: Which actually is my point, which 3 is that the fee -- even the rate doesn't go up for 4 everybody. There were important winners, the people who are 5 no longer -- the companies that are no longer in the program 6 at all were winners, and their rates went down dramatically. 7 The ones whose rates went up are the ones who were 8 unable to cut their emissions. So, there were winners as 9 well as lowers in this. 10 CHAIRMAN DUNLAP: Yes. 11 SUPERVISOR VAGIM: Mr. Chairman, back to my point. 12 I think something has to be done if, indeed, the whole $3 13 million needs to be made up at the end of this program. I 14 presume you're going to say $3 million has got to be made up 15 somewhere if you're going to continue your programs. 16 I would hope, Mr. Chairman, this Board would give 17 direction, either today or sometime in the future, that 18 maybe this program, and its methodologies, and how this is 19 disbursed -- this $3 million -- is through some other 20 process. 21 Indeed, there might be industries that are not on 22 here anymore, but that we analyze why they're not on here. 23 Maybe they went out of business, or maybe they lost 24 business. 25 You don't know that for sure. They might have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 improved some technology, hopefully, but the districts force 2 that as much as this program. So, maybe this is compelling 3 on us to spread this load more to more of the permitted 4 sources in our State than just these large emitters. 5 I think we need to look at that. 6 CHAIRMAN DUNLAP: Yes. I think, as there's 7 discussions about possible reauthorization of this component 8 part of the State statutes, that that should be discussed 9 and examined. 10 So, everyone has had -- Mr. Lagarias? 11 MR. LAGARIAS: I think this program has been very 12 successful, in that it has forced the large sources to look 13 at their emissions and to address it, and the fact that 14 organizations have taken the effort to get under the 500-ton 15 emission limit is a positive sign. 16 The fact that they're paying on excessive 17 emissions is an incentive to reduce them. So, I think there 18 are positive aspects to it. 19 At the same time, I agree with the comments of Mr. 20 Silva and Ms. Edgerton that these are assessments that have 21 to be looked at. 22 I think, in particular, I would want to look at 23 whether sulfur oxides should be considered in this program. 24 And I think next year should be a very interesting 25 year in this program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 MR. BOYD: Mr. Chairman, if I might, I'm taking 2 this as a directive, as well as an invitation, from the 3 members of the Board to sit down with the regulated 4 industries of this State, as well, who were extremely 5 instrumental in effecting the outcome of the California 6 Clean Air Act in the first place, and the setting of this 7 statutory limit, to sit down with all affected parties -- 8 districts, the State, and industry -- to see if we can find 9 equity. 10 CHAIRMAN DUNLAP: I would also suggest that 11 perhaps an invitational meeting rather than a workshop 12 notice be used for the next round, in light of the fact that 13 very few people attended. 14 With that, Supervisor Riordan has been holding a 15 thought for some time. 16 SUPERVISOR RIORDAN: Oh, I've held this thought, 17 and I think now it's appropriate to move approval of 18 Resolution 95-19. 19 CHAIRMAN DUNLAP: Is there a second? 20 MR. LAGARIAS: Second. 21 CHAIRMAN DUNLAP: Okay. I have a motion and a 22 second. 23 Is there any further discussion by members of the 24 Board? 25 All right. What I will do is ask the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 Secretary to call for a vote on Resolution 95-19. 2 MS. HUTCHENS: Calhoun? 3 MR. CALHOUN: Aye. 4 MS. HUTCHENS: Edgerton? 5 MS. EDGERTON: Aye. 6 MS. HUTCHENS: Hilligoss? 7 MAYOR HILLIGOSS: Aye. 8 MS. HUTCHENS: Lagarias? 9 MR. LAGARIAS: Aye. 10 MS. HUTCHENS: Parnell? 11 MR. PARNELL: Aye. 12 MS. HUTCHENS: Riordan? 13 SUPERVISOR RIORDAN: Aye. 14 MS. HUTCHENS: Silva? 15 SUPERVISOR SILVA: Reluctant aye. 16 MS. HUTCHENS: Vagim? 17 SUPERVISOR VAGIM: Aye. 18 MS. HUTCHENS: Chairman Dunlap. 19 CHAIRMAN DUNLAP: Aye. 20 MS. HUTCHENS: Resolution 95-19 passes 9 to 0. 21 CHAIRMAN DUNLAP: Very good. Thank you. 22 Mr. Boyd, is there any other business that the 23 Board needs to be aware of? 24 MR. BOYD: No, Mr. Chairman. That concludes our 25 agenda for today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 CHAIRMAN DUNLAP: Okay. Very good. Thank you. 2 The meeting is adjourned. 3 (Thereupon, the meeting was adjourned 4 at 11:18 a.m.) 5 --o0o-- 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 CERTIFICATE OF SHORTHAND REPORTER I, Nadine J. Parks, a shorthand reporter of the State of California, do hereby certify that I am a disinterested person herein; that the foregoing meeting was reported by me in shorthand writing, and thereafter transcribed into typewriting. I further certify that I am not of counsel or attorney for any of the parties to said meeting, nor am I interested in the outcome of said meeting. IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of May, 1995. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 Please select one of the following: A ... July 21-22,1994 Part 1 B ... July 21-22,1994 Part 2 C ... August 5, 1994 D ... November 9, 1994 E ... November 10, 1994 F ... November 15, 1994 G ... November 29, 1994 H ... December 9, 1994 I ... December 22, 1994 J ... January 26, 1995 K ... February 23, 1995 L ... March 23, 1995 M ... April 27, 1995 (MEETINGTRANSCRI) Make your selection (A,B,C,D,E,F,G,H,I,J,K,L,M,? for help, or X to exit):