BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA JR. BUILDING CALEPA HEADQUARTERS BUILDING 1001 I STREET BYRON SHER AUDITORIUM SACRAMENTO, CALIFORNIA THURSDAY, MAY 26, 2005 9:00 A.M. JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Mrs. Barbara Riordan, Acting Chairperson Ms. Sandra Berg Supervisor Mark DeSaulnier Dr. Henry Gong Ms. Lydia Kennard Mayor Ronald Loveridge Supervisor Ron Roberts CALIFORNIA EPA Dr. Alan C. Lloyd, Agency Secretary STAFF Ms. Catherine Witherspoon, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Mr. Tony Andreoni, Manager, Process Evaluation Section Dr. Robert Barham, Assistant Chief, Stationary Source Division Mr. Richard D. Bode, Chief, Health and Exposure Assessment Branch Ms. Analisa Bevan, ZEV Implementation Section PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF Mr. Richard Corey, Chief, Research and Economics Branch Ms. Barbara Cook, Process Evaluation Section Dr. Bart E. Croes, Chief, Research Division Ms. Lesley Crowell, Air Resources Engineer Ms. Vicki Davis, Staff Counsel Mr. Dan Donohoue, Chief, Emissions Assessment Branch Dr. Shelley Duteaux, Health and Ecosystems Assessment Mr. Bob Jenne, Senior Staff Counsel Mr. Tom Jennings, Senior Staff Counsel Mr. Jack Kitowski, Chief, On-Roads Control Regulations Branch Ms. Annmarie Mora, Air Pollution Specialist, Research Division Mr. George Poppic, Senior Staff Counsel Mr. Dean Simeroth, Chief, Criteria Pollutants Branch Ms. Linda T. Smith, Manager, Health and Ecosystems Assessment Branch Mr. Peter Venturini, Chief, Stationary Source Division Mr. Gary Yee, Manager, Industrial Section ALSO PRESENT Ms. Shirely Batchman Ms. Shannon Baxter-Clemmons, Special Advisor on Hydrogen & Alternative Energy, CalEPA, Office of the Secretary Mr. Rick Bishop, John Deere PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Manual Cunha Ms. Brighid Desmond, Chadwick School Ms. Catherine Dunwoody, Executive Director, California Fuel Cell Partnership Mr. Tim French, Engine Manufacturers Association Mr. Randal Friedman, California Government Affairs Mr. Ron Friesen, Executive Director, California Stationary Fuel Cell Collaborative Mr. Karl Lany, SCEC Mr. John Martini, CIPA Mr. David Maul, California Energy Commission Mr. Rick Morrow, San Diego Gas and Electric Southern California Gas Co. Mr. Charlie Simpson, Quinn Power System Mr. Joe Sparano, President, Western States Petroleum Association Mr. John Whitney, Clarke Fire Production Products, Inc. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX PAGE Pledge of Allegiance 1 Roll Call 1 Item 05-5-4 Acting Chairperson Riordan 16 Executive Officer Witherspoon 17 Ms. Baxter-Clemmons 19 Ms. Dunwoody 30 Mr. Friesen 40 Discussion and Q&A 50 Item 05-5-1 Acting Chairperson Riordan 67 Executive Officer Witherspoon 67 Staff Presentation 68 Discussion and Q&A 73 Item 05-5-2 Acting Chairperson Riordan 77 Staff Presentation 77 Discussion and Q&A 80 Motion 82 Vote 83 Afternoon Session 85 Item 05-5-3 Acting Chairperson Riordan 85 Executive Officer Witherspoon 85 Staff Presentation 86 Ombudsman Tschogl 97 Mr. French 98 Mr. Friedman 105 Mr. Bishop 107 Mr. Whitney 114 Mr. Lany 119 Mr. Simpson 124 Mr. Cunha 130 Ms. Batchman 135 Discussion and Q&A 138 Motion 138 Vote 140 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX CONTINUED PAGE Item 05-5-3 Acting Chairperson Riordan 140 Executive Officer Witherspoon 141 Staff Presentation 143 Mr. Maul 162 Mr. Sparano 164 Mr. Martini 168 Mr. Morrow 170 Public Comment 172 Adjournment 176 Reporter's Certificate 177 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 ACTING CHAIRPERSON RIORDAN: Good morning. And 3 let me call the May 26th public meeting of the Air 4 Resources Board to order. 5 And I would like to invite Ms. Kennard to lead us 6 in the pledge. And so if you'd all rise please. 7 (Thereupon the Pledge of Allegiance was 8 Recited in unison.) 9 ACTING CHAIRPERSON RIORDAN: Thank you, Ms. 10 Kennard. 11 And now will the clerk please call the roll. 12 BOARD CLERK ANDREONI: Ms. Berg? 13 BOARD MEMBER BERG: Present. 14 BOARD CLERK ANDREONI: Ms. D'Adamo? 15 Supervisor DeSaulnier? 16 Dr. Gong? 17 BOARD MEMBER GONG: Here. 18 BOARD CLERK ANDREONI: Ms. Kennard? 19 BOARD MEMBER KENNARD: Here. 20 BOARD CLERK ANDREONI: Mayor Loveridge? 21 BOARD MEMBER LOVERIDGE: Here. 22 BOARD CLERK ANDREONI: Supervisor patrick? 23 Ms. Pineda? 24 Supervisor Roberts? 25 BOARD MEMBER ROBERTS: Here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD CLERK ANDREONI: Madam Chairman Riordan? 2 ACTING CHAIRPERSON RIORDAN: Here. 3 Thank you very much. 4 Before we proceed I'd like to inform everyone of 5 a few changes in our agenda today. It's a change simply 6 in the order of the agenda. We have moved Agenda Item No. 7 05-5-4, the update on the hydrogen highway, to first. 8 This change will allow the Board to recess at 11 a.m. this 9 morning so that we can attend a press event in the 10 courtyard of this, the CalEPA Building, where three 11 hydrogen vehicles will be delivered to the state by 12 DaimlerChrysler. These vehicles will be assigned as fleet 13 vehicles to the ARB, to the Governor's office and to the 14 California Energy Commission. 15 The Board meeting will resume promptly at 1 p.m. 16 with Agenda Item 05-5-3. This is the ATCM stationary 17 compression ignition engine item. And we will deal with 18 that at that time. 19 Also I've been informed that we perhaps will have 20 a fire drill today. And of course I've lost the 21 instructions. But that's all right. Artavia will help 22 us. But should this occur, the audience is asked to exit 23 those rear doors and follow the instructions of Octavio to 24 the -- to my left, your right, as you're outside. We as 25 Board members will exit another door. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 We are hopeful those fire drills will not occur 2 during the hearing. But I'm not sure, and so we need to 3 be prepared. 4 As soon as we're given an all-clear signal, we 5 will move back of course for the balance of the hearing. 6 And that drill can come at any time at a moment's notice. 7 Having said that, and wanting to begin our agenda 8 with an item that is not calendared but it's an official 9 agenda item. 10 Those of us who have been with ARB for a number 11 of years know how very special Peter Venturini is to the 12 ARB. He's the Chief of the Stationary Source Division, 13 and after 33 years of service he's going to retire. And 14 this is a very special day. And we want to honor him by a 15 resolution, as well as I think there are some in the 16 audience who would like to make some comments. 17 And, Peter, I'm looking -- oh, there's Peter. I 18 kept looking for you, and you're sort of hiding there. 19 Peter, I just would like to say, whoever drafted 20 this resolution, it is quite wonderful. And so I'm going 21 to read it. And I think all of you will enjoy how well 22 this has been crafted for such a special person. 23 And it begins as: 24 "Whereas, after a rewarding and successful 33 25 year career with the Air Resources Board, Mr. Peter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 Venturini, Chief of the Stationary Source Division, has 2 officially announced his retirement from public service. 3 "Whereas, the young, enthusiastic Peter began his 4 career at the ARB in 1972, after graduating from the 5 University of California at Berkeley, with both Bachelor's 6 Master's degrees in mechanical engineering, he described 7 himself as a new type of emerging engineer, one whose 8 engineering competence includes an awareness of the 9 environmental and social implications of his work. Peter 10 was well trained in his initial years at the ARB to endure 11 and persist through a management system that progressively 12 agonized, terrorized, harmonized, tailored, and simonized 13 his work products. 14 "Whereas, he quickly established himself as an 15 expert in air pollution control engineering, and in 1977 16 moved into a management position in the energy strategy 17 section. By 1978, he was appointed Chief of the Research 18 and Economic Studies. And became the Regional Programs 19 Division Chief in 1981. And then in 1983 he became Chief 20 of the Stationary Source Division. As he moved up the 21 organizational ladder, we gained respect and gratitude 22 from those who worked in his ARB family. Peter has 23 demonstrated his belief that people rarely succeed unless 24 they enjoy what they're doing. He has consistently made 25 sound technical and policy recommendations to this Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 on a substantial array of air pollution control 2 strategies, ranging from cleaner burning motor vehicle 3 fuels, air toxic identification and control, diesel risk 4 reduction, consumer products, best available retrofit 5 technology, energy issues, air toxic hot spots, and more. 6 "Whereas, he has doggedly wrestled with the U.S. 7 Environmental Protection Agency over issues such as the 8 OCS negotiated rule-making, the Title 5 Operating Permit 9 Program, and the Equivalency of California Air Toxics 10 Control Program. Peter has complemented his technical 11 competence with a great sense of humanity, kindness and 12 ethical behavior. As our valued colleague leaves his post 13 here at the ARB, he takes with him the respect of the 14 Board members and staff, regulated industry, environmental 15 advocates, and the nationwide air pollution control 16 community, and every Californian that breathes clean air. 17 "Peter has utilized his skills as a trained 18 Porsche race car driver to run the Stationary Source 19 Division with precision. Peter now wishes to reinvent 20 himself in his retirement as a gentleman rancher; world 21 traveler; grandfather; retired annuitant; seasoned 22 mechanic, pit crew, race car driver; and man about town. 23 "And, whereas, Peter is a man who knows how to 24 make the most of any golden opportunity, and that is why 25 we have no doubt that he will enjoy every moment of his PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 life after ARB with his wife, Jeannie; daughters Kathryn, 2 Laura, Jean Marie; and his son-in-laws Dean and John. 3 "Therefore, be it resolved that the Board gives 4 tribute to the superb achievements of Peter Venturini for 5 his successful career and extends heartfelt thank you for 6 his superb and superior accomplishments over the years." 7 And it's signed by all of us, Peter. 8 And I'll meet you down here and invite you to 9 make a comment. And then people from the audience would 10 like to also. 11 But let's give Peter a hand after 33 years. 12 (Applause.) 13 ACTING CHAIRPERSON RIORDAN: I think we'll frame 14 this for you, Peter, but we need to get two or three more 15 signatures. And so it will be framed. But 16 congratulations to you. 17 STATIONARY SOURCE DIVISION CHIEF VENTURINI: 18 Thank you very much. 19 ACTING CHAIRPERSON RIORDAN: And it's now your 20 turn. 21 Then I'll invite the others up. 22 STATIONARY SOURCE DIVISION CHIEF VENTURINI: Wow, 23 kind of find myself at a loss for words, which is not what 24 I'm known for. 25 I am truly humbled by these very, very kind words PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 and expressions. And I'm very thankful and appreciate 2 very much this. 3 I truly consider it being an honor and a 4 privilege to have had this opportunity to spend my career 5 in such a worthwhile endeavor, and with an organization 6 that has such -- has had such an important focus over the 7 many years. And, that is, to protect the public health of 8 the people of California. And I'm very proud to have been 9 part of that, very proud to have worked with such 10 wonderful people and to see the work just continue. 11 And I have had the luxury of working for every 12 Board at the ARB. And there's one constant throughout all 13 of those boards; and that has been their unfaltering 14 commitment to the protection of the public health of the 15 people of California. 16 So thank you, thank you very much. I look 17 forward to my retirement. I will be around and you'll be 18 seeing more of me, but a little less stress in my life. 19 That's all. 20 So thank you all very much. 21 ACTING CHAIRPERSON RIORDAN: And you deserve 22 that. 23 (Applause.) 24 ACTING CHAIRPERSON RIORDAN: Peter, why don't you 25 just sort of stand to the side of the podium and let me PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 call first Manny Cunha. 2 Manny, if you'd come forward with -- and 3 introduce your colleague. 4 MS. BATCHMAN: Well, I'm going to go first. 5 But first of all, I'm Shirley Batchman. And I'm 6 also part of the agricultural group with Manuel. Peter 7 knows us well, trust me, as one of the newest regulated 8 industries that your board is seeing a lot of lately. And 9 I'm sure we're not the easiest industry that has come 10 before you in the last couple years. 11 But I want tell you, Peter, we want to thank you. 12 This gentleman has gone out of his way to truly understand 13 agriculture, our concerns, our issues. And you have been 14 an example for everyone at ARB as far as how staff is to 15 work with industry so that ARB can achieve your objectives 16 and we can still continue to do business. And so, Peter, 17 for that we thank you. We're sorry that you're leaving. 18 But you're glad that you've come to our side as a 19 gentleman farmer. 20 (Laughter.) 21 MS. BATCHMAN: Manuel. 22 MR. CUNHA: Thank you very much. This is quite 23 a -- to have him retire before me, I mean, you know. But 24 on behalf of the entire agriculture, you know, we -- you 25 used to have a lot of hair. I remember in '92 when we got PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 involved. And I think Lynn Terry was even back there and 2 a few other folks that were starting to work with 3 agriculture. But you have been a gentleman. You've made 4 our lives to continue farming in this state a real -- a 5 real thing to continue happening versus command and 6 control, all of agriculture. 7 Many of the folks that are not even here today 8 really do send their warmest, you know, sadness that 9 you're leaving the industry, the agency; but like Shirley 10 said, you're going to do the other side now that's going 11 to start producing the food that feeds this country. 12 So the ag industry, your little group from the 13 San Joaquin Valley would like to present you with a couple 14 items. 15 Madam Chair, if you could indulge for about six, 16 seven minutes of this, because it has to go through a 17 process, because he really needs to know what it feels 18 like to be a real farmer now. He was driving race cars 19 and all that. Now he's going to be a real farmer. 20 So the first thing we're going to do is you're 21 going to open up this big green box. But to do that you 22 need a knife. And so we have a little knife for you to 23 open up things, Peter, so you don't strain fingers or 24 anything. 25 There's a little tin pocket knife in there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 Why don't we come over here where it will be 2 safer where you won't hit anybody, just in case. 3 ARB has workers' comp? 4 (Laughter.) 5 ACTING CHAIRPERSON RIORDAN: Of course, Manny. 6 MR. CUNHA: Just tear it apart. Just go for it. 7 Shirley and Roger Isem, Carla Fullerton, and 8 Dennis Tristo and many of those folks, people that have 9 worked for years with Peter, decided to get him something 10 that no one can say was bribing Peter on any issues today. 11 So we have to make sure that under the law of lobbying 12 that this is exempt from any lobbying records. So he 13 doesn't have to record it. 14 Peter's got 160 acres in the hill. That's a 15 thing for taking the weeds down. 16 The next tool is a pruning shear for pruning out 17 poison oak and poison ivy. 18 This is to remove huge rocks in the areas and a 19 garden. 20 You can put them down. You got more coming, 21 Peter. 22 We have a shovel that has a rubber cushioned 23 handle because of the softness of his hands over the last 24 umpteen years. We have to fill them up slowly with the -- 25 and a hand saw to cut trees that folds away so he doesn't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 get hurt. 2 STATIONARY SOURCE DIVISION CHIEF VENTURINI: This 3 sounds like work. 4 MR. CUNHA: And here are some gloves because the 5 hands have to be protected, the most important thing for a 6 farmer. 7 And of course the last item is to have a 8 pitchfork to pull away the poison oak and the poison ivy. 9 I don't know if there's anything else in there. 10 There probably is. 11 Oh, and a posthole digger. 12 Again, Peter, we thank you so much for everything 13 you've done for agriculture in California. 14 And Shirley's got something here for you that she 15 wants to share with you as well. And Les Clark has a 16 little something in there for you as well. So we want to 17 make sure you get that. 18 MS. BATCHMAN: All we're saying is those who have 19 been around agriculture know that the grower, the farmer, 20 whatever we wish to call him, the hats always get ugly and 21 they never throe them away. They have sweat bands and 22 sweat rings around them forever. 23 So, Peter, we have all kinds in here for you. 24 You can just model one if you'd like. And, once again, we 25 thank you. You have truly been a pleasure to work with. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 STATIONARY SOURCE DIVISION CHIEF VENTURINI: 2 Thank you very much. 3 (Applause.) 4 ACTING CHAIRPERSON RIORDAN: That hat looks 5 relatively new. I don't know -- 6 MS. BATCHMAN: We gave him four different models. 7 STATIONARY SOURCE DIVISION CHIEF VENTURINI: I'm 8 going to lose it here. 9 I can just say thank you Shirley, Manuel and the 10 other folks. It's been a true pleasure working with all 11 of your. And I don't know what to say. I'm just touched. 12 Thank you very much. 13 (Applause.) 14 ACTING CHAIRPERSON RIORDAN: Ms. Witherspoon, is 15 there anyone else that -- I thought the -- Secretary 16 Lloyd. 17 (Laughter.) 18 ACTING CHAIRPERSON RIORDAN: It's been so long 19 since we've seen you, I hardly recognize you. 20 (Laughter.) 21 CAL EPA SECRETARY LLOYD: How quickly she 22 forgets. 23 (Laughter.) 24 CAL EPA SECRETARY LLOYD: Again, I came down 25 to -- wasn't aware that this suddenly is on for Peter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 today. 2 But obviously, Madam Chair and distinguished 3 members of the Board, it gives me great pleasure to -- and 4 sadness -- to be here to witness Peter's retirement. I've 5 come to work with Peter over the years I've been here. 6 I've got tremendous respect for Peter. As many in this 7 building, people work tremendously hard. But what Peter's 8 brought to the Board I think was -- Manuel described it 9 very appropriately -- epitomizes the very best of what 10 this Governor is trying to do, balance the environment 11 with the economy. 12 But also Peter's integrity, his willingness to -- 13 also to train people I think is very, very important. And 14 that's something that the Air Resources Board will need 15 over the years. 16 So I'd like to thank Peter for all his service 17 from the time I've worked with him and for his great 18 contribution to California. I think it's wonderful. 19 The one memory I remember of Peter however was 20 also getting on the race track at Sears Point there when 21 we both admired, as did Tom, I know, getting these 22 light-duty diesel which had so much horsepower. I took it 23 for a trip around there, Peter with me, and of course very 24 mildly. But I knew I could kill myself getting on there 25 with Peter. Scared the "H" out of me. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 (Laughter.) 2 CAL EPA SECRETARY LLOYD: But you could see his 3 talent there. And so I'm so delighted that in fact that 4 he's in such great health that he was able to enjoy that, 5 enjoy the vehicles. 6 And, Peter, we hope you will live long enough so 7 light-duty diesel vehicles get into California, with all 8 of the many things that you can do. 9 So thank you, Peter, very much. And I wish you 10 all the very, very best. 11 (Applause.) 12 ACTING CHAIRPERSON RIORDAN: Thank you very much. 13 Mr. Secretary, thank you very much. 14 Madam Ombudsman. 15 OMBUDSMAN TSCHOGL: As the ombudsman, I have to 16 say that he's been one of the most wonderful people to 17 work with with industry. 18 And yesterday I got a call from Jay McKeeman from 19 California Independent Oil Marketers Association. And he 20 wanted to come and speak and tell him how much he 21 appreciated this. But a conflict came and at the last 22 minute he was unable to do it. So I promised him that I 23 would extend my -- or his appreciation and actually my 24 appreciation for working with industry so well. 25 And also my favorite time with Peter was at the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 demolition derby, when he drove. And I was on the pit 2 crew and so was my son. And my son's favorite memory 3 honestly is Peter letting him wear the helmet and being in 4 that demolition derby car. He didn't get to ride in a 5 race though because I -- they had an age limit. 6 But, anyway, thank you. Thank you so much for 7 working so well with industry. Appreciate it. 8 (Applause.) 9 ACTING CHAIRPERSON RIORDAN: Well, Peter, again 10 we say thank you. We wish you the very best. And I think 11 with the tools that you've been given just recently, 12 you're going to have one wonderful time. I hope that you 13 know how to use all of those tools. And it's going to be 14 a challenge. But we will look forward to some reports 15 back on your gentleman farming. 16 Thank you, Peter. 17 STATIONARY SOURCE DIVISION CHIEF VENTURINI: 18 Thank you very much. 19 (Applause.) 20 EXECUTIVE OFFICER WITHERSPOON: Oh, Look at that. 21 ACTING CHAIRPERSON RIORDAN: Oh, how nice. 22 Does Peter have a picture of this? Is this 23 something that can be captured for posterity. That's very 24 nice. 25 That will be fun, Peter, to have that picture, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 for sure. 2 Let me now move back to our regular agenda. And 3 this is Agenda Item 05-5-4. 4 And let me remind anyone in the audience who 5 wishes to testify on today's agenda items, to please sign 6 up with the Clerk to the Board, who's down here to my 7 left. And if you have a written statement, please provide 8 her with 30 copies. 9 The first item is an informational briefing on 10 the Hydrogen Highway Network and fuel cell activities. 11 As you know, the Governor has committed to 12 establish a network of fueling stations spanning the state 13 to provide hydrogen to a growing number of fuel cell and 14 hydrogen combustion vehicles. CalEPA organized a group of 15 over 200 experts from the private sector, government and 16 NGOs to develop an implementation plan for the Hydrogen 17 Highway Network. That plan has been recently completed 18 and approved. 19 I've asked staff to provide the Board with a 20 briefing on the Hydrogen Highway Blueprint Plan. And we 21 have also invited directors of the California Fuel Cell 22 Partnership and the California Stationary Fuel Cell 23 Collaborative to address the Board and describe their 24 involvement in the hydrogen highway implementation. 25 Ms. Witherspoon, would you please introduce this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 item. 2 EXECUTIVE OFFICER WITHERSPOON: Thank you, Madam 3 Chairman. 4 In California's pursuit of clean air, hydrogen 5 has emerged as an alternative fuel that can provide both 6 environmental and economic benefits to our state. Much 7 effort has already been put forth in California to support 8 hydrogen. For example, the low emission vehicle 9 regulations adopted by this Board provide mandates to 10 produce air emission vehicles and credits that encourage 11 production of hydrogen. 12 Two partnerships have also been formed in 13 California, the California Fuel Cell Partnership and 14 Stationary Fuel Cell Collaborative, to begin paving the 15 way towards commercialization of hydrogen technologies. 16 And most recently, just yesterday, the Governor announced 17 these efforts in the hydrogen blue print plan calling for 18 a highway in California by 2010 to provide convenient 19 fueling for operators of hydrogen vehicles. 20 Hydrogen has the potential to address several 21 high priority areas for the state: Energy independence 22 and diversity, environmental protection and economic 23 development. For these reasons and because they see a 24 strong business case and market for hydrogen, industry has 25 supported the development of hydrogen technologies. In PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 fact, we see the level of support for hydrogen unlike any 2 other alternative fuel and from the broad scope of 3 stakeholders. 4 The auto industry is investing billions into 5 hydrogen vehicle research and development. And every 6 major manufacturer is demonstrating hydrogen vehicles. 7 All the major car manufacturers are members of the 8 California Fuel Cell Partnership. Likewise, the energy 9 sector's expanding their portfolios to include hydrogen 10 and installing hydrogen stations where needed to support 11 demonstration vehicles. 12 These industries, along with technology 13 companies, the environmental community, and many 14 government and non-government organizations supported the 15 hydrogen highway by their participation and input into the 16 blueprint plan. 17 In California all of us are working together to 18 advance hydrogen. Today we'd like to share with you 19 recent progress. 20 Dr. Shannon Baxter-Clemmons, CalEPA's special 21 advisor on hydrogen and alternative energy projects will 22 brief you on the California Hydrogen Highway Blueprint 23 Plan. 24 Catherine Dunwoody, Executive Director of the 25 California Fuel Cell Partnership, will speak about how the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 partnership is moving forward and the role it can play in 2 implementing the hydrogen highway. 3 Ron Friesen, the Executive Director of the 4 California Fuel Cell Collaborative, will share information 5 on their related activities and the role the collaborative 6 can play in implementing the hydrogen highway. 7 And now Dr. Baxter-Clemmons will begin the staff 8 presentation. 9 (Thereupon an overhead presentation was 10 Presented as follows.) 11 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 12 ENERGY BAXTER-CLEMMONS: Okay. Madam Chair and 13 distinguished members of the Board, thank you for inviting 14 us to speak today. 15 ACTING CHAIRPERSON RIORDAN: Let's see if we can 16 get your microphone closer -- either close to you and be 17 sure it's on -- 18 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 19 ENERGY BAXTER-CLEMMONS: A little bit more like this? 20 ACTING CHAIRPERSON RIORDAN: Yes. Thank you. 21 All right. Our opening slide you I can see that 22 they're just the logos from three different distinct 23 activities. But these activities are all working in 24 concert to bring fuel security to -- or energy diversity 25 and fuel security to California and environmental quality PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 with our transportation and energy sectors in California. 2 There we go. Wonderful. 3 --o0o-- 4 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 5 ENERGY BAXTER-CLEMMONS: I'll start with the California 6 Hydrogen Highway Network effort. 7 I would like to acknowledge a few folks at the 8 Air Resources Board who have made a big -- played big 9 parts in the success that the Hydrogen Highway Network has 10 seen to date. And those would be Catherine Witherspoon, 11 Tom Cackette, and Analisa Bevan, Eileen Tutt, Melissa 12 Meuser and Fereidun Feizollahi. 13 --o0o-- 14 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 15 ENERGY BAXTER-CLEMMONS: First I'll tell you a little bit 16 about the Governor's vision, and then the implementation 17 strategy and where we are presently in this process. 18 --o0o-- 19 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 20 ENERGY BAXTER-CLEMMONS: This goes -- the Hydrogen Highway 21 Network goes all the way back to the beginning of 2004. 22 And in the Governor's State of the State address, he says, 23 "I'm going to encourage the building of the hydrogen 24 highway to take us to the environmental future. I intend 25 to show the world that economic growth and the environment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 can coexist." A very strong message I think in a lot of 2 Governor Schwarzenegger's activities. 3 "And If you want to see it, then come to 4 California." 5 (Laughter.) 6 --o0o-- 7 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 8 ENERGY BAXTER-CLEMMONS: What the Governor saw and that 9 Tarry Tamminen, his cabinet secretary pointed out, is that 10 there's a chicken and egg issue going on in California. 11 And I think the fuel cell partnership will tell quite a 12 bit how they've got the chicken part coming to California 13 and running around on our roads, but we don't have the 14 eggs. We don't have the fueling stations. And, in fact, 15 one auto manufacturer's told us that if there was -- there 16 were a network of accessible -- publicly accessible 17 hydrogen stations, that they would have been able to start 18 their leasing program one year earlier. And so the 19 Governor, in his wisdom, started the California Hydrogen 20 Highway Network. 21 --o0o-- 22 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 23 ENERGY BAXTER-CLEMMONS: Okay. So I think what you will 24 hear at the press event at 11:10 is a little bit about the 25 California Hydrogen Blueprint Plan. And this plan was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 started just after the Governor signed an executive order 2 in April of 2004 where he designated the 21 interstate 3 freeways in California as the California Hydrogen Highway 4 Network. And he tapped CalEPA to lead the development of 5 the California Hydrogen Blueprint Plan. 6 This blueprint plan suggests the pathway to 7 implement the Governor's vision to have a network of 8 stations and to have vehicles for consumers in California 9 hydrogen vehicles. 10 This process to put together the hydrogen 11 blueprint plan involved over 200 stakeholders. We had a 12 blue ribbon advisory panel that met approximately six 13 times, and we had five topic teams that worked on the 14 different challenges associated with the Hydrogen Highway 15 Plan. And just to give you an idea of the importance that 16 these companies and organizations put on this plan is -- 17 BMW would fly one of their senior vice presidents into 18 every one of the advisory panel meetings from Germany and 19 then fly him back. 20 The same thing with Ford, with their vice 21 president from Michigan, DOE from the East Coast. So I 22 think that there was a recognition that this was a very 23 important effort, not just for California but for the 24 future of hydrogen and fuel cell vehicles. 25 The report is in two volumes. The first volume PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 is recommendations from the executive order team to the 2 Governor. An executive order team includes Secretary 3 Lloyd, myself, and Daniel Emmett with Energy Independence 4 Now. 5 Volume 2 is the recommendations of the advisory 6 panel as supported by the work of the topic teams. 7 And then what you'll hear in that press event is 8 that this plan has been adopted by the administration. 9 I'm going to give you a few highlights of this 10 plan as quickly as possible. 11 --o0o-- 12 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 13 ENERGY BAXTER-CLEMMONS: The Implementation Strategy. 14 --o0o-- 15 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 16 ENERGY BAXTER-CLEMMONS: With the Schwarzenegger 17 administration, action, action, action is a recurring 18 theme. And I can't get any action on this clicker. 19 Should I be pointing this somewhere else? 20 --o0o-- 21 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 22 ENERGY BAXTER-CLEMMONS: All right. So the action plan 23 has five points to it. 24 A funding mechanism. We ask that the Governor 25 propose funding for the Hydrogen Highway Network in his PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 budget. And he has done that for the first year. 2 We recommended that a public/private partnership 3 be formed building on the structure that we've built to 4 date with the 200 stakeholders. 5 Environmental goals. I'll point these out to 6 you. But it's not just about putting in hydrogen. As 7 you're probably aware, there are many different ways to 8 produce hydrogen. Hydrogen does not normally exist 9 freely. It's in water. It's in methanol. It's in 10 ethanol. It's in gasoline. And so the way that you get 11 that hydrogen and the source you use for your hydrogen 12 makes a big difference with regard to the emissions that 13 are released. 14 We wanted to see some policies implemented in the 15 state to promote a business environment for hydrogen. 16 And an outreach plan. Our stakeholders need to 17 be contacted early and often. And so the outreach plan is 18 very important for the acceptance of this blueprint plan. 19 --o0o-- 20 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 21 ENERGY BAXTER-CLEMMONS: The next highlight I want to make 22 of the plan is a phased approach. 23 What we've done is we've made a very common sense 24 approach to implementing the Governor's goals. So we see 25 that there would be three phases. And this would poise PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 California for full commercialization of hydrogen vehicles 2 and stations. 3 And in Phase 1 we believe this can be 4 accomplished by the Year 2010. And it would include 2,000 5 hydrogen light-duty vehicles. And those would include 6 hydrogen internal combustion engine vehicles and hydrogen 7 fuel cell vehicles. And we believe that to support these 8 number of vehicles we would need 50 to 100 fueling 9 stations. 10 Phase 2 would increase the number of stations to 11 250 to support 10,000 light-duty vehicles. 12 And then in Phase 3 we would see a doubling of 13 the utilization of the hydrogen stations with 20,000 14 vehicles. 15 You may notice this last row, stationary off-road 16 vehicle applications. This includes the idea of an energy 17 station that I believe Ron Friesen will discuss a little 18 bit later. 19 --o0o-- 20 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 21 ENERGY BAXTER-CLEMMONS: To give you an idea of the 22 station buildup philosophy that goes along with these 23 different phases, I have a couple of maps to show you. 24 And what these maps indicate is that the way we 25 want to build up the hydrogen stations is -- initially you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 saw a map that there was a station every 20 miles along 2 California's interstate freeways. But what we've learned 3 using some of the research at UC Davis, UCLA, and the 4 guidance of the California Fuel Cell Partnership is that 5 if we cluster these stations in the densely urban areas in 6 California, like the San Francisco Bay Area and Sacramento 7 or the L.A. area and San Diego, that we'll get higher 8 utilization of the stations. More people can own the 9 vehicles and be able to fuel. 10 So with 50 stations in each of these two areas, 11 most folks would be within ten minutes of a hydrogen 12 station. And when these numbers are built up to 250 13 stations, consumers are usually within five minutes of a 14 hydrogen station. And so you can see where people could 15 start to live their lives normally and they wouldn't have 16 to always think about, "I'm driving this hydrogen vehicle. 17 I have to get fuel." 18 The other thing that's very important about our 19 plan is that we're not stressing so much individual 20 demonstration projects, which has been the DOE objective 21 to date and has been where the industry's been heading. 22 But we want to see California be the first place where 23 there's a network of stations. And that means that 24 there's third-party accessibility and so that folks can 25 use the different stations so they can go ahead and live PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 their lives. If none of these are third-party accessible, 2 then the plan does not work. 3 --o0o-- 4 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 5 ENERGY BAXTER-CLEMMONS: So you'd build up the stations in 6 these two urban areas and then you would link them with 7 stations along one of the interstates that links the two 8 areas. So I could drive around in Sacramento, the Bay 9 Area, drive down to L.A. or San Diego and get around 10 without feeling encumbered by getting fuel. 11 --o0o-- 12 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 13 ENERGY BAXTER-CLEMMONS: There are environmental goals 14 that are associated with the plan that are very important. 15 And those environmental goals are that we'd like 16 to see by the Year 2010 from an aggregate of all of the 17 stations and vehicles a 30-percent reduction in greenhouse 18 gas emissions relative to a comparable number of today's 19 fuels and vehicles. 20 --o0o-- 21 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 22 ENERGY BAXTER-CLEMMONS: And we'd also like to see 20 23 percent new renewable resources used in the production of 24 hydrogen for the use in the vehicles and increasing 25 thereafter. We believe -- oh, thank you. We believe that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 it's important to begin thinking about hydrogen coming 2 from renewables, to think about sustainability with regard 3 to our energy usage. 4 --o0o-- 5 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 6 ENERGY BAXTER-CLEMMONS: Also in the plan is a 7 recommendation for investments. And those would include 8 incentives for hydrogen stations. That would include a 9 50/50 cost share for the capital costs of the stations, 10 incentives for hydrogen fuel cell vehicles, and incentives 11 for the hydrogen internal combustion engine vehicles. And 12 so all totaled these incentives that we recommend come to 13 a total of $53.5 million of the state's cost share, which 14 would be leveraged many times over with the federal 15 government, local governments and, more importantly, 16 private industry. And this would occur over five years. 17 --o0o-- 18 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 19 ENERGY BAXTER-CLEMMONS: Presently the Air Resources Board 20 has a spring finance letter -- or they submitted a budget 21 change proposal and then the Governor submitted a spring 22 finance letter. And the spring finance letter would 23 accommodate staff at the Air Resources Board money for 24 contracts to do additional technical work and incentives 25 that I just outlined for you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 --o0o-- 2 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 3 ENERGY BAXTER-CLEMMONS: There's also one other piece. 4 And this is also part of the action plan which is 5 implementing policies in California. And what we'd like 6 to see is Senate Bill 250 pass. This is a bill that's 7 sponsored by Senator Campbell. And it would classify 8 hydrogen as a transportation fuel and it would direct the 9 Department of Food and Ag's Division of Measurement 10 Standards to develop specifications for hydrogen as a 11 transportation fuel. 12 So what this would do is send a signal to the 13 locals that if you have your land zoned for a fueling 14 station -- hydrogen is a transportation fuel. The state 15 recognizes it. And it would be appropriate to put that 16 station in an area zoned for fueling stations. 17 It also would allow for hydrogen to be sold in 18 California. Presently it's sold as a service. And it's 19 approximated the price by the approximate kilograms. 20 Letting the Division of Measurement Standards -- they 21 would be able to set standards, purity and flow rate 22 standards. 23 So we believe that would be a very important step 24 in California. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 2 ENERGY BAXTER-CLEMMONS: And, finally, I think a few of 3 our implementation advisory panel members are here, and 4 I'd like to recognize them if they are. 5 If you'd just please stand up. 6 There's Cynthia Verdugo-Peralta, Al Weaverstadt, 7 Ed Kjaer, Rick Morrow, and Ben Knight. Thank you so much. 8 I appreciate your work. 9 (Applause.) 10 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 11 ENERGY BAXTER-CLEMMONS: And with that, I'd like to turn 12 this over to Catherine. 13 --o0o-- 14 MS. DUNWOODY: Okay. Thank you very much, 15 Shannon. And Madam Chairwoman and members of the Board. 16 It's a pleasure to be here this morning to present to you 17 the activities of the California Fuel Cell Partnership's 18 collaborative demonstration program. 19 --o0o-- 20 MS. DUNWOODY: We were formed six years ago. And 21 the Air Resources Board was a founding member of this 22 organization. We had eight original members and have 23 since joined -- since grown to 32 members representing 24 automotive, energy, technology -- fuel cell technology, 25 and government entities in California and, in fact, around PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 the world. 2 We have a joint demonstration facility that's 3 located just across the river in West Sacramento. 4 --o0o-- 5 MS. DUNWOODY: The California Fuel Cell 6 Partnership is a unique organization. We are a 7 public/private collaborative. We make our decisions by 8 consensus of our 21 member steering team committee. We 9 have very diverse members, as you saw in the previous 10 slide. And, in essence, we bring competitors together to 11 collaborate on a common goal. 12 --o0o-- 13 MS. DUNWOODY: And that common goal -- oh, dear. 14 I'm sorry. I've got a terrible -- there we go. 15 That common goal is expressed in our mission 16 statement. And, that is, to promote fuel cell vehicle 17 commercialization as a means of moving towards a more 18 sustainable energy future, from both an environmental 19 standpoint and an energy efficiency standpoint. 20 --o0o-- 21 MS. DUNWOODY: Clearly hydrogen when used in a 22 fuel cell provides significant environmental and energy 23 efficiency benefits. Fuel cell vehicles are in the 24 demonstration phase at this point. They're not yet 25 commercially available. But they hold tremendous PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 potential for the future. They offer improved vehicle 2 performance, number 1. These are fun cars to drive. They 3 have great acceleration and wonderful performance. They 4 offer the potential for energy independence from petroleum 5 fuels. They offer zero emission transportation and they 6 offer reduced greenhouse gases. 7 It's interesting to note that, although the 8 partnership has been working together for six years, it's 9 the only been three years that we have worked 10 collaboratively together and exclusively on hydrogen as 11 the fuel for these vehicles. When we started this 12 organization there were thoughts of having methanol 13 reformers on board vehicles, gasoline reformers on board 14 vehicles. But clearly the members have determined at this 15 point that hydrogen is the preferred fuel for this 16 technology, and we're moving in that direction. 17 --o0o-- 18 MS. DUNWOODY: A little bit about the 19 organization. How do we go about achieving our mission? 20 In essence, the members of the partnership have 21 established a leading information resource and exchange 22 forum for themselves, for their stakeholders and for the 23 public as we move toward this commercial market. 24 --o0o-- 25 MS. DUNWOODY: We share learnings from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 real-world demonstration programs. What the members want 2 to do is to experience and build on that experience that 3 comes out of the individual demonstration programs. Even 4 if it's what Shell Hydrogen learns at one of their fueling 5 stations, they pass that along to the other members as 6 well. So we only have to do things once and then apply it 7 to the next situation. 8 --o0o-- 9 MS. DUNWOODY: We work collaboratively to develop 10 technical solutions. I'll explain a few more of those in 11 a moment. 12 --o0o-- 13 MS. DUNWOODY: We provide training. We have 14 significant in-house expertise amongst our members on 15 safety. And we have a very active first responder 16 training program. 17 --o0o-- 18 MS. DUNWOODY: And we do public outreach. After 19 the press event we will have a ride-and-drive with many of 20 our members' vehicles. And the public will have a chance 21 and you all will have a chance to experience these 22 vehicles firsthand. 23 --o0o-- 24 MS. DUNWOODY: Currently our members have placed 25 87 cars and 5 buses on public roads in California. We aim PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 to have 300 fuel cell vehicles by the end of 2007. 2 There's currently 16 fueling stations open, and they're 3 indicated on this map in the background. Ten new stations 4 are scheduled to open in 2005. 5 We actually have an interactive website map where 6 public can get more detailed information about each of 7 these programs. And that's at our website cafcp.org. 8 Now, I'd like to real quickly run through some of 9 our members' programs to give you an idea of exactly 10 what's happening in California communities today. 11 --o0o-- 12 MS. DUNWOODY: I'll start off with Honda. 13 Honda's placed vehicles with municipalities, city 14 governments in California, with the City of Los Angeles, 15 the City of San Francisco, and the City of Chula Vista, as 16 well as with the South Coast Air Quality Management 17 District. 18 --o0o-- 19 MS. DUNWOODY: DaimlerChrysler has placed 20 vehicles throughout California, and primarily again 21 located in Los Angeles, San Francisco, and the Sacramento 22 areas. 23 --o0o-- 24 MS. DUNWOODY: Toyota has vehicles placed with 25 the University of California at both Irvine and Davis. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 --o0o-- 2 MS. DUNWOODY: Ford will be -- I'm sorry -- 3 General Motors will be placing vehicles primarily located 4 in southern California. 5 --o0o-- 6 MS. DUNWOODY: Hyundai has vehicles that will be 7 operating in the Los Angeles and the San Francisco areas. 8 And they recently opened a fueling station in Chino a 9 couple of months ago, along with their partner Chevron. 10 --o0o-- 11 MS. DUNWOODY: Ford's vehicles will primarily be 12 located in the Sacramento area. 13 --o0o-- 14 MS. DUNWOODY: For buses, AC Transit will be 15 taking delivery of three fuel cell buses; and SunLine 16 Transit will be taking delivery of one bus this fall. 17 There's a fueling station that will be built by 18 Chevron. And perhaps you've seen some of the ads that 19 have been running in major worldwide publications such as 20 the Economist where Chevron is really highlighting their 21 activities in California, in particular with AC Transit 22 and the buses. 23 These buses are fuel cell hybrid buses. They're 24 being integrated by a California company, ISE Corporation, 25 located in the San Diego area. And they will be operating PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 this fall. In fact, we may get a preview of this bus next 2 week at World Environment Day. 3 --o0o-- 4 MS. DUNWOODY: Santa Clara VTA has been operating 5 their buses for a couple of months now. These are built 6 by a California bus manufacturer, Gillig, located in the 7 Bay Area. They have Ballard fuel cells. And they're 8 operating in everyday service in the Silicon Valley today. 9 --o0o-- 10 MS. DUNWOODY: So with all of these programs 11 happening and all of the experience that our members are 12 gaining, what are we doing with this information and how 13 is it relevant to the Hydrogen Highway Network? 14 Right now we have these demonstration programs 15 active. We want to move toward a future where the 16 technology of the fuel cell vehicles can be 17 commercialized. To get there we do need the practical 18 real-world experience of the California Fuel Cell 19 Partnership as well as the public policy visionary drivers 20 of the California Hydrogen Highway Network. 21 --o0o-- 22 MS. DUNWOODY: Together we can help move from the 23 demonstrations of today to the commercial markets of 24 tomorrow. So I'm going to give you some examples of the 25 practical experience that the partnership offers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 --o0o-- 2 MS. DUNWOODY: Accessibility to fueling stations 3 is critically important. Ideally any vehicle operated by 4 any driver should be able to fuel at any station at any 5 time. Unfortunately this isn't yet the case in 6 California. Factors such as physical access, technology 7 interface, training, and payment methods should be 8 consistent so that hydrogen is easy for consumers to 9 obtain and easy for energy companies to provide. Through 10 our collaborative process we will be making 11 recommendations regarding guidelines for accessibility for 12 California fueling stations. 13 --o0o-- 14 MS. DUNWOODY: The interactive map that I 15 mentioned earlier is a way for fuel cell vehicles 16 operators to know where to fuel their vehicles. We 17 launched this interactive map on our website just a couple 18 of months ago. And we're going to work closely with the 19 Hydrogen Highway Network to share and sustain this tool 20 over time. 21 --o0o-- 22 MS. DUNWOODY: One of the areas that we've been 23 very actively engaged with the partnership is in 24 technology interface. Fueling with hydrogen, it's a 25 gaseous fuel, and it's different than fueling with a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 liquid, so different issues arise. Our technical programs 2 focus on the interface between the vehicle and the fueling 3 station. And this has been critically important given 4 that eight different auto makers have used a single common 5 station at our West Sacramento facility for the past five 6 years. 7 Our work has focused on hardware, such as fueling 8 nozzles, fueling performance -- that's things such as 9 temperature, pressure, fill time and completeness of fill 10 and hydrogen quality. And we will be providing 11 consensus-based protocols in these and other areas of 12 inter-operability. 13 --o0o-- 14 MS. DUNWOODY: One of the technical devices that 15 was established last year is the station testing 16 apparatus. This device mimics a vehicle and can assess 17 the performance of fueling stations to promote safe and 18 complete fills. And this device will be available for the 19 state to use for the operating costs only through an -- 20 that's through an independent contractor. 21 --o0o-- 22 MS. DUNWOODY: As I mentioned, we have a program 23 to train first responders in California. We have trained 24 over 300 first responders directly ourselves to date. We 25 also recently produced an emergency response video to go PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 along with our guidebook for first responders. We're 2 working closely with national and state efforts to move 3 this training program into a regular program for first 4 responders -- the established training programs for first 5 responders. 6 --o0o-- 7 MS. DUNWOODY: And then, finally, we have a very 8 active community outreach program. We found that it's 9 vitally important to create local advocates for fuel cell 10 vehicle and hydrogen programs in California communities. 11 Local officials, first responders, businesses and the 12 public need to understand this technology and the benefits 13 it can provide, not only so that they feel comfortable, 14 but that they can then spread the word to the people that 15 are in the communities. And we have a strong established 16 program that we will work with the Hydrogen Highway 17 Network to coordinate these demonstration activities. 18 --o0o-- 19 MS. DUNWOODY: In short, California leads the 20 world in fuel cell vehicle and hydrogen programs through 21 the California Fuel Cell Partnership and the California 22 Hydrogen Highway Network. We're working together and 23 making good progress toward a future where this technology 24 can provide real benefits to California citizens and the 25 world. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 --o0o-- 2 MS. DUNWOODY: Thank you very much. 3 Now, I'd like to hand the microphone over to Ron 4 Friesen, Executive Director of the California Stationary 5 Fuel Cell Collaborative. 6 --o0o-- 7 MR. FRIESEN: Thank you very much, Madam 8 Chairwoman and members of the Board. 9 I would like to tell you a little bit today about 10 the California Stationary Fuel Cell Collaborative and its 11 members, provide you some background information on 12 stationary fuel cells, and some of the recent developments 13 that we've seen from some of the manufacturers. 14 I guess I need to push the button. 15 There we go. 16 --o0o-- 17 MR. FRIESEN: And then provide you some 18 information on how stationary fuel cells will play a 19 significant role in the Hydrogen Highway Network. 20 --o0o-- 21 MR. FRIESEN: The California Stationary Fuel Cell 22 Collaborative is a key initiative of the Air Resources 23 Board, just like the partnership, as well as the 24 California National Fuel Cell Research Center at UC 25 Irvine. It was established by senior executives to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 advance the commercialization of stationary fuel cells. 2 As with the partnership, the organization of the 3 collaborative is unique and innovative as well, and its 4 operating core is anchored in various government agencies 5 that I have listed here on the slide. 6 What this allows for is key strategic issues 7 associated with policy, regulation and legislative action 8 to be addressed very efficiently along with members of the 9 industry. 10 There's considerable interest on the part of 11 industry to work with the collaborative, including members 12 of the fuel cell manufacturing industry, utilities, 13 end-users, and other non-government organizations working 14 together to try to accomplish commercialization in as 15 effective and efficient manner as we possibly can. 16 As you can see, the co-chairs of the 17 collaborative are Dr. Lloyd, who initiated this effort in 18 the beginning, and Dr. Samuelsen, who is the Director of 19 the National Fuel Cell Research Center. 20 I have not mentioned the individual members of 21 the industry advisory panel today because we are in the 22 process of a membership drive. And it looks like we'll be 23 announcing a formal organization sometime this summer. 24 --o0o-- 25 MR. FRIESEN: This next slide represents the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 mission of the collaborative. As you can see, many of the 2 benefits and the potential benefits of stationary fuel 3 cells as well as fuel cells used in other application have 4 already been mentioned today and you can see those listed 5 here. 6 In pursuing its mission, the collaborative 7 envisions fuel cell installations at state, local and 8 private institutions as well as by private entities. And 9 I'll present some examples of those today. 10 Also, California represents a very critical 11 market for the fuel cell industry. And we've seen a 12 significant amount of activity and investment in 13 California by the fuel cell community and by other 14 government entities such as the Department of Energy and 15 the Department of Defense. 16 --o0o-- 17 MR. FRIESEN: This slide presents the different 18 types of fuel cells that are out there in the market today 19 and some of the characteristics of these fuel cells. 20 Basically, as you can see from the slide, the application 21 of fuel cells is dependent upon the specific 22 characteristics such as temperature and other operating 23 characteristics. And I'll show you some examples of how 24 all of these fuel cells can be used in various stationary 25 applications. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 --o0o-- 2 MR. FRIESEN: Here we show that stationary fuel 3 cells can provide power for different types of 4 application. 5 The first category there, stationary and 6 distributed power, is power generation that we refer to as 7 distributed generation, or DG. And DG has been defined by 8 many organizations. But generally it's the generation of 9 electrical power and thermal energy at the location where 10 a substantial fraction of the product is used. 11 In other words it's not distributed through 12 transmission lines from a central station powerplant. 13 And generally DG is electrical power in the range 14 of a few kilowatts to 50 megawatts. 15 We're also very interested in the use of portable 16 power for battery replacement. And you can see several 17 applications that I've listed there on the slide. 18 --o0o-- 19 MR. FRIESEN: Fuel cells used in distributed 20 generation are identified here. We have several examples 21 of companies that have manufactured fuel cells for various 22 applications. And as you can see, with the high cost of 23 local power these days, the fuel cells are becoming more 24 and more attractive. 25 The fuel cell today can, depending on the current PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 electrical cost, demonstrate substantial savings in 2 operating costs. The original cost of fuel cells is still 3 rather high. But there's many incentive programs 4 available in California and at the federal level that 5 provide a reduction in the initial cost of the fuel cells. 6 The other interesting thing to note here is the 7 possible development on the world market where distributed 8 generation has the paradigm of offering a cost savings in 9 parts of the world where they have no central station 10 powerplants or distributed generation -- or distributed 11 transmission of electrical power. It's similar to the 12 cellular phone analogy. We could go directly to 13 distributed generation. 14 --o0o-- 15 MR. FRIESEN: Here are some examples of portable 16 power applications and products that have been developed. 17 And I'd like to point out today that Altergy Systems is a 18 manufacturer of fuel cells here in the Sacramento area. 19 And we have an Altergy unit operating as we speak here. 20 It's running the laptop computer behind me. 21 Altergy fuel cell systems was one of the first 22 companies to join the Fuel Cell Collaborative, and they 23 have a member in the audience. 24 This particular unit is owned by CalTrans, also a 25 member of our organization, who are actively looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 how they can install fuel cells for various applications 2 in the CalTrans system. 3 --o0o-- 4 MR. FRIESEN: I won't go through all the details 5 of the next two slides. But these two slides are here to 6 demonstrate that there has been a significant amount of 7 activity by some of the major manufacturers of fuel cells. 8 And as you can see, many systems have been developed and 9 are out there operating and in logging a lot of hours. 10 All of this has led us to the potential for some very 11 important installations in California. I just want to 12 give you a few examples. 13 Plug Power has a unit operating now in Yosemite 14 National Park. It's a five kilowatt unit that's providing 15 all the power that's needed for the headquarters office 16 there in the park. So if any of you are traveling to 17 Yosemite, you should stop by and take a look at that. 18 United Technology's fuel cell has three units 19 that are providing all the heating and cooling for the 20 federal building in downtown Fresno. And those units were 21 just installed this last year. 22 FuelCell Energy has been quite active in 23 California. We have two units that have been providing 24 power for the City of Santa Barbara using bio-digester gas 25 from the city's waste water treatment plant. And they're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 showing a significant cost savings in energy generation at 2 that plant. 3 FuelCell Energy will be having a dedication for 4 two units that are operating the Sierra Nevada Brewing 5 Company in Chico, California, as well. 6 BOARD MEMBER LOVERIDGE: That's good. 7 (Laughter.) 8 MR. FRIESEN: So when you have your Sierra Nevada 9 Pale Ale, You'll think about fuel cells. 10 (Laughter.) 11 MR. FRIESEN: Siemens Westinghouse is not quite 12 on the market yet. They've had a lot of demonstration. 13 But, importantly, they have installed a unit at the 14 University of California at Irvine and they've made it a 15 hybrid with a gas turbine. And they've been demonstrating 16 efficiencies in the neighborhood of 70 percent. So we see 17 that as a potential future technology that will be very 18 beneficial from a system's electrical point of view. 19 --o0o-- 20 MR. FRIESEN: With that background then I just 21 wanted to briefly tell you a little bit about what the 22 collaborative is doing and how it's participating on the 23 hydrogen highway. 24 This slide shows eight specific tasks that we are 25 working on. But the one that I wanted to highlight PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 specifically for today is number 5 there, the support of 2 the Hydrogen Highway Network implementation. 3 --o0o-- 4 MR. FRIESEN: We've been quite active working 5 with Shannon and others in the development of the Hydrogen 6 Highway Blueprint Plan. And I've listed several things 7 that we have done at this point in time, including a 8 positive position statement in support of the highway. 9 And of course the statement represents the manufacturers 10 an all the end-users who have come together to support 11 this effort. 12 We've identified specific features that would be 13 a part of the Hydrogen Highway Plan. We've identified the 14 number of energy stations that could be included in the 15 highway and provided some other technical backup reports 16 and so forth to support what is going on. 17 --o0o-- 18 MR. FRIESEN: I'd like to just briefly show you a 19 couple of examples of how stationary fuel cells can be 20 integrated into the Hydrogen Highway Network. 21 This slide is just simply a distributed 22 generation product such as a fuel cell or solar power or a 23 micro-turbine generator that is used to provide 24 electricity and thermal heat for some external use, such 25 as an office building or some other application. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 I want to note there that the fuel that's 2 provided to these products can be from renewable sources, 3 such as bio-digester gas, landfill gas and other blends 4 with natural gas. This is of course the goal that we 5 ultimately hope to achieve. 6 The dotted line up there just represents the 7 potential for using some of this product for hydrogen 8 refueling. And I'll give you two or three examples of how 9 that can be done. 10 --o0o-- 11 MR. FRIESEN: This slide shows that if you can 12 produce electricity and thermal heat for some external 13 use, in some of the products there's some additional 14 hydrogen that's available. They don't use all the 15 hydrogen to provide the heat and power. And that hydrogen 16 can be provided to also fuel a vehicle. 17 So what we see here is the potential for the 18 spreading of the cost across two different types of 19 applications and of course the ultimate lowering of the 20 cost of the hydrogen for fueling vehicles. 21 --o0o-- 22 MR. FRIESEN: This is just another variation of 23 the same type of thing. Only in this case some of the 24 natural gas is used before it goes into the device and is 25 run through a natural gas reformer. And then the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 hydrogen's extracted and then used for refueling. 2 --o0o-- 3 MR. FRIESEN: In this case, the same diagram -- 4 only in this case the electricity from the distributed 5 generation unit is used for an electrolyzer. And, again, 6 hydrogen is extracted and used for hydrogen refueling. 7 --o0o-- 8 MR. FRIESEN: These are all examples of how 9 stationary distributed generation technologies can be used 10 in the Hydrogen Highway Plan. And the Stationary Fuel 11 Cell Collaborative has dedicated one of its tasks and its 12 members to supporting this implementation of the Hydrogen 13 Highway Plan. And you can see several items here that we 14 are specifically working on. 15 In summary, I just wanted to say that what we 16 plan to do is to fully develop the energy station design 17 strategy, continue to work on the evolution of high 18 temperature fuel cells for co-production of heat and power 19 and to provide advocacy for public education and outreach 20 as well as help identify specific sites where these things 21 will be located. 22 That completes my presentation. And I'm open to 23 any questions that you might have. 24 ACTING CHAIRPERSON RIORDAN: Thank you all very 25 much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 Ms. Witherspoon, any comments? 2 EXECUTIVE OFFICER WITHERSPOON: No. We just 3 wanted to provide an opportunity for the Board to ask 4 questions at this point. 5 ACTING CHAIRPERSON RIORDAN: All right. And 6 we'll take that opportunity in just a moment. 7 I want to thank the three speakers. And it shows 8 me that you're really making great strides. It's really 9 very impressive about the work that you're doing and the 10 future that we have with this. 11 I'm sorry that Dr. Lloyd had to step out a moment 12 ago, because I wanted to thank him, because I think he's 13 played a key leadership role in this and in inspiring all 14 of you and those who are in the private sector to join the 15 effort. It's truly incredible, the strides that you've 16 made. 17 Let me open it up to Board questions at this 18 time. 19 Board members, let me start to my left here. 20 Mayor Loveridge. 21 BOARD MEMBER LOVERIDGE: Several sort of big 22 picture questions. 23 But as I understand from the comments, that if 24 you look around the world, not simply in the United States 25 but around the world and try to find a leader in this, we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 are the leader, is that correct? I mean that's -- there's 2 no one else that's somehow further ahead in developing 3 infrastructure, et cetera? 4 EXECUTIVE OFFICER WITHERSPOON: That's correct. 5 BOARD MEMBER LOVERIDGE: One of the -- I think 6 the first presentation you have these phases, three 7 phases, but there's no time listed. Or maybe you said it 8 but I didn't hear it. Phase 1, Phase 2, Phase 3. What's 9 the timeline on those three phases? 10 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 11 ENERGY BAXTER-CLEMMONS: Sure. That's a good question. 12 Phase 1, our time -- our milestone is the Year 13 2010. And that's what our advisory panel, who is made up 14 of implementers of this technology, could agree to. 15 Now, we will incorporate biennial reviews. So 16 every two years we'll go through a process of looking at 17 where's the technology, how effective is our program, how 18 is the state moving forward, and then we'll revise where 19 we think we are and how we need to move forward. 20 We actually did not put a timeframe on Phase 2 21 and Phase 3. We felt like it was more credible to just 22 put that time frame on Phase 1. 23 EXECUTIVE OFFICER WITHERSPOON: If I may 24 elaborate on that answer. The Department of Energy has a 25 similar structure for the expansion of hydrogen. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 they've added between the phases performance tests to tell 2 you that you're ready to move to the next level. And 3 so -- and California is drawing on that experience, and 4 our partners are as well, to say that the readiness is 5 such that -- ready to multiply the number of vehicles that 6 we've proved out whatever the technological barrier is and 7 move up to many more. 8 BOARD MEMBER LOVERIDGE: I guess there's an 9 obvious question, Catherine, that you have when you look 10 at phases. And optimistically, I mean if the first one is 11 2010, others are somewhere -- we're still talking about a 12 fairly small number of vehicles. That even Phase 3, which 13 sounds like it may be 2020 or later, you're only talking 14 about 20,000 vehicles. And how many do we have on the 15 road right now in California? 16 EXECUTIVE OFFICER WITHERSPOON: What was that 17 number? About a hundred. 18 BOARD MEMBER LOVERIDGE: All vehicles? 19 EXECUTIVE OFFICER WITHERSPOON: To have hydrogen, 20 yes. 21 BOARD MEMBER LOVERIDGE: No, no. 22 EXECUTIVE OFFICER WITHERSPOON: Fuel cell. 23 Oh, 28 million, yes. 24 BOARD MEMBER LOVERIDGE: Yeah, okay. Sorry. I 25 mean -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 CALEPA SPECIAL ADVISOR ON HYDROGEN & ALTERNATIVE 2 ENERGY BAXTER-CLEMMONS: Didn't you carpool? 3 (Laughter.) 4 BOARD MEMBER LOVERIDGE: That's not what I find 5 when I go outside. 6 Well, let's just take that 28 million versus 7 20,000 thousand. What's that percentage? 8 EXECUTIVE OFFICER WITHERSPOON: It's too small to 9 calculate. 10 BOARD MEMBER LOVERIDGE: Yeah, we're not -- but I 11 mean the point I think, which seems to me important, is 12 that rather than simply kind of an experimental emphasis, 13 which I think deserves the kind of applause offered, I 14 mean why shouldn't this have a kind of -- kind of 15 interstate freeway? Why shouldn't this, you know -- and 16 rather than look at 2010 with -- why isn't there some more 17 harder commitment to really changing. So rather than have 18 it be an small percentage of something like 28 million, 19 that we're indeed aggressively are going to change what we 20 find on the roads in our lifetime. Because the current 21 pattern we'll get us experiments, but doesn't get us to 22 a -- I don't really like the word -- but a paradigm shift. 23 EXECUTIVE OFFICER WITHERSPOON: I think the 24 answer is that it's all about technological readiness. 25 And we've learned ourselves through our experience with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 battery electric vehicles that mandating penetration does 2 not make it so. It inspires all kinds of activity. It 3 inspires very close competitors to the ultimate goal, such 4 as the PZEVs in the standard gasoline technology, the 5 advent of hybrids. But until the vehicles in fact have 6 accomplished ten time reductions across sort of all 7 aspects of their operation, the durability of the fuel 8 cell and the capacity of the fuel tank, the price of the 9 individual components, we won't be ready to mandate that 10 degree of penetration. 11 And then the federal government won't be ready to 12 spend, nor will the industry, on an international fueling 13 system until they likewise see that the market is ready. 14 And the reason we formed the fuel cell partnership six 15 years ago was to put energy companies across the table 16 from car companies so they could look each other in the 17 eye and understand a) that the car companies were 18 absolutely committed to this, and that the energy 19 companies could assess that for themselves without 20 prodding from the government what the true market 21 potential was, and that they could decide when to put 22 their dollars forward to assist us in reaching these 23 goals. Because it can't be a hundred percent government 24 mandated either. 25 And if Tom Cackette wants to get into this, why PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 don't -- 2 BOARD MEMBER LOVERIDGE: Yeah, I wasn't so much 3 pursuing the mandated question, but just the kind of 4 question as: How do you begin to have a kind of -- and 5 maybe hybrids, which I'm -- and I'm delighted to drive a 6 Prius around. But it seems to me maybe that's the kind of 7 bridging, kind of. 8 But it's just that -- besides doing good, it 9 seems to me you'd like to -- I mean if I asked you the 10 question: When would you expect to get on the -- one of 11 the California interstates and have a majority of cars be 12 something other than gasoline? 13 EXECUTIVE OFFICER WITHERSPOON: Me personally? 14 (Laughter.) 15 EXECUTIVE OFFICER WITHERSPOON: Well, I'm looking 16 at Tom. 17 He said way after 2020, a majority of. I mean I 18 think we'll see many more in the 2015-2020 time frame. 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I mean 20 recognize that what your question implies is a turnover of 21 the fleet, which is at least a ten-year effort there. So 22 even after the vehicles are commercialized and every one 23 being sold is a fuel cell, it'll take another ten years. 24 So we're talking about all the vehicles or a lot of them 25 being hydrogen, you know, way into the decades away. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 But we're not going to get there if we don't 2 start. And the challenges that are so momentous at the 3 moment, you know, just need to be dealt with I think on a 4 small scale so that we walk before we run. And we all 5 want to run, but it's -- 6 BOARD MEMBER LOVERIDGE: Okay. I'll retreat. 7 But I was just looking for the date and we go outside and 8 we get into a -- we have a traffic congestion of other 9 kind of vehicles. 10 ACTING CHAIRPERSON RIORDAN: Fuel cell cars. All 11 right. 12 Supervisor Roberts. 13 BOARD MEMBER ROBERTS: Well, I was just thinking 14 that one of the things that may not have been present in 15 this presentation but was when we got into this is sort of 16 the development and all the problems that have to be 17 solved and the evolution of the -- you know, do the 18 research, get the feedback, redesign the product. And 19 where we saw waves of these other -- the numbers may not 20 be large, but the way they -- the development process here 21 I think has been very well thought out with respect to how 22 you really moved this issue technologically over time. 23 And I think while we're all excited, I guess some of us 24 were here, once we were all excited about the batteries 25 and the technologies that we're going to develop and we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 going to all be driving electric cars by now. I'm very 2 satisfied that this program's maybe going along in a more 3 thoughtful way. And in spite of some enormous costs, I 4 like this chicken and the egg thing that's happening. 5 ACTING CHAIRPERSON RIORDAN: So true. 6 Thank you. 7 Dr. Gong. 8 BOARD MEMBER GONG: I just have several small 9 picture questions for my own interest and clarification. 10 You mentioned in several slides about first 11 responders. What do you mean training first responders? 12 What do you mean by that? Are you worried about fires 13 from the actual hydrogen filling stations or -- I didn't 14 quite understand that. Would you clarify that? 15 MS. DUNWOODY: Sure. Yeah, I'd be glad to 16 clarify that. 17 What we do at the California Fuel Cell 18 Partnership is primarily to train firefighters in the 19 vehicle technology and to show them, for example, where is 20 the hydrogen stored on board; where are the electrical 21 components; if they need to come into a fuel cell vehicle 22 with a jaws of life, where can they safely cut into the 23 vehicle without running into those lines? We have a 24 guidebook that has diagrams showing electrical, showing 25 hydrogen lines for all of the different vehicles that our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 members put out on a road. 2 We feel that it's very important. We've been 3 fortunate to not have had any accidents. But we want to 4 shake sure that the people in the communities that are 5 putting their lives on the line when they do respond know 6 what the vehicles have on board. 7 And they've been very -- we've been very -- it's 8 been very well received. 9 Interestingly, since we started this program 10 about three years ago, the questions that we're getting 11 from the firefighters have much less to do about hydrogen 12 and much more to do with the electrical componentry tree 13 on board the vehicle. 14 We also of course do quite a bit of outreach and 15 our members do a lot of outreach when they put in a 16 hydrogen fueling station. The fire departments are key in 17 getting those permitted in the California communities. So 18 there's a lot of education that goes on about the fire -- 19 the hydrogen stations themselves. 20 BOARD MEMBER GONG: Sounds like there's a very 21 good safety track record so far -- 22 MS. DUNWOODY: Absolutely. That's the number 23 one -- 24 BOARD MEMBER GONG: -- both for the cars and for 25 the refueling stations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 There's been no public concern about having a 2 hydrogen fueling station put in their neighborhood, I 3 assume, because of this outreach? 4 MS. DUNWOODY: Yeah, we really focus in on 5 getting into the community and doing education early on. 6 And that's made a world of difference. People understand 7 it much better and they're much more accepting. 8 BOARD MEMBER GONG: How do you put out a hydrogen 9 fire? 10 MS. DUNWOODY: Very similar to a conventional 11 fire. You use water. But it depends on whether or not 12 you have a liquid hydrogen -- liquid hydrogen source. You 13 don't want to put water on liquid hydrogen because it's so 14 cold. It will freeze and turn to ice. 15 The other way to do it is to shut off the source. 16 That's the primary way to do it, is shut off the source of 17 the hydrogen. And the vehicles that are on the road have 18 built-in systems that on any kind of impact will shut off 19 the source of hydrogen from the tank. 20 So a lot of redundant safety features built in. 21 BOARD MEMBER GONG: And I was just wondering on a 22 practical aspect. How many miles do you foresee per fill 23 up? Is that how you would say it? I don't know what the 24 metric you would use, but -- 25 MS. DUNWOODY: Sure, that's the range of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 vehicle. And currently the vehicles that are on the road 2 have a range of anywhere between 100 and 200 miles before 3 they need to refuel. And that shows the range of type of 4 vehicle that the manufacturers are putting out, everything 5 from the very small passenger car to a larger SUV. And 6 the mileage ability is, you know, anywhere in that range. 7 Clearly we need to improve that. Hydrogen 8 storage is one of the challenges that is between here and 9 commercialization. There's a lot of work that's being 10 done, a lot of promising work with not only high pressure 11 hydrogen, but also other ways of storing hydrogen on board 12 the vehicle that can move us towards a 300-mile-range-plus 13 vehicle. 14 BOARD MEMBER GONG: And, finally, the fuel cells 15 themselves, do they have a certain life span? I mean do 16 you have to change them every so many fill ups or 17 whatever? 18 MS. DUNWOODY: Well, the goal is that they will 19 last of course the life of the vehicle. And that is one 20 of the key reasons why the auto companies are doing these 21 validation programs in real-world operating conditions. 22 They've got a lot of data on a test stand in a laboratory. 23 But to put these things on the road in very harsh 24 operating conditions is critical to proving it out. And 25 they're making great progress in that regard. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 durability is improving significantly. 2 BOARD MEMBER GONG: One last comment. It's 3 amazing that the emissions from the hydrogen car or 4 vehicle is basically water; is that correct? 5 MS. DUNWOODY: Yes. 6 BOARD MEMBER GONG: Is there any way for any 7 contamination to get into that system? And I'm not an 8 engineer. But lubricants or whatever can get into that 9 system as well? I don't know. 10 MS. DUNWOODY: The water that comes out of the 11 tailpipe is quite pure. I mean some people have even gone 12 as far as to drink it. I'm not sure I'd recommend that. 13 But it is quite pure. 14 So is that what you're asking? 15 BOARD MEMBER GONG: But if there's a malfunction 16 in the system, is it possible for contaminants to get into 17 that exhaust as far as we know? 18 MS. DUNWOODY: Not that I'm aware of, no. 19 BOARD MEMBER GONG: Okay. 20 ACTING CHAIRPERSON RIORDAN: Thank you. 21 EXECUTIVE OFFICER WITHERSPOON: Dr. Gong, we've 22 ended up focusing on fuel cells because the second or 23 third presentation were about that. But I just want to 24 remind the Board that there are hydrogen internal 25 combustion engines as well, which are not zero emitting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 because combustion is involved. Though when we recently 2 visited with BMW manufacturing in Germany, they showed us 3 their latest rendition with after treatment and are ready 4 to prove the case to us that they have a near zero -- 5 virtually zero automobile. 6 And so the combustion process though is a little 7 bit different and the answer would be different than what 8 Catherine was just giving you. 9 ACTING CHAIRPERSON RIORDAN: Comments, questions? 10 Yes, Supervisor DeSaulnier. 11 BOARD MEMBER DeSAULNIER: Well, first off, I 12 apologize for being late. Having heard much of this 13 before. 14 I think one of the things that Ron brought up is 15 so important. And I hope we don't -- having somewhat 16 different feelings about the ZEV ruling. You know, 17 there's still somewhere out there locked in the basement 18 somewhere a -- I think a rechargeable electric battery for 19 25 cents that someone's hiding. But -- 20 (Laughter.) 21 BOARD MEMBER DeSAULNIER: -- Oliver Stone will do 22 a movie about it some day. 23 (Laughter.) 24 BOARD MEMBER DeSAULNIER: But I think one of the 25 things that's really important for me, and I think for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 this Board, is to use the bully pulpit we have, and to 2 what Ron said, at the appropriate level. We don't want to 3 get too far ahead of ourselves to be unrealistic. 4 But on the other hand I think we should be 5 pushing and maybe a little bit more than we are. And 6 particularly to the fuels folks, who I get a sense will 7 have an appropriate role. 8 And I'm with you, Catherine. As you know, I 9 think there's an in-between possibility. What if you had 10 Priuses that were hydrogen-fueled Priuses internal 11 combustion engines? Those kind of things would transition 12 us through this chicken and egg process to the ultimate -- 13 the gold at the end of rainbow, the fuel cell product, 14 which is maybe a long time off, but they're -- why do we 15 have to wait for that? There are some transitional things 16 that -- as we've learned here, for instance, on the ZEV 17 rule that there are other unintended actions that came to 18 play, hybrids and the development of PZEVs, that were 19 really beneficial by us pushing for that gold standard. 20 So I hope that we don't -- we don't get shy 21 about -- as an agency about pushing for this technology 22 and looking for creative ways for applications. 23 And then, secondarily, I really think it's 24 important, and I'm glad to see that it's happening, that 25 there's lots of cross pollinization just within PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 government. I remember many years ago a board member from 2 Toyota saying, "Is there one person in the California 3 government who we could have a contact with rather than 4 trying to deal with the whole bureaucracy?" And I've 5 always been a big fan, as you know, of having, for 6 instance, those discussions with Jeff Morales when he was 7 head of CalTrans that the infrastructure providers, the 8 fuel providers, the car manufacturers, and the local MPOs 9 all have to be involved in this discussion and start to 10 use some of the smart mobility things that of course UC at 11 Riverside and Irvine and Berkeley and Davis are 12 developing. 13 So I'm really excited about this, but I don't -- 14 I just hope that we don't in any way back off. And I go 15 back, Tom, many years ago we were back in Detroit talking 16 about LEV II. And there was a constant admonition from 17 the car folks that: "Don't require us to put all this 18 money into batteries when fuel cells are right around the 19 corner." And that was eight years ago. And now I'm 20 hearing beyond 2020. So I don't want to have a little 21 bait-and-switch going on the vision side that we are going 22 to push for this and we should push for other applications 23 as well. 24 And, Tom, if you have something to add, I'd be 25 delighted to hear it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, I 2 just wanted to add that there's a constant thread here 3 that follows the original ZEV mandate from 1990 all the 4 way through the several-decade-away vision of a hydrogen 5 transportation system. And, that is, that the vehicles 6 are all electric vehicles. You know, we started out with 7 battery electric vehicles, and the issue was kind of the 8 battery. 9 But what spun out of that was the hybrid electric 10 vehicles, which right now are selling like hot cakes and, 11 you know, people have to wait in line for them. Those 12 have all the similar componentry to those original battery 13 electric vehicles. It's just that they have a gasoline 14 engine that provides the electricity instead of a plug-in 15 to the wall. 16 And what's happening here is the fuel cell 17 vehicle's exactly the same thing. It has a battery on it. 18 It's driven by an electric motor. You don't plug it in, 19 but you have a fuel cell that provides the electrons. 20 So this constant theme I think, you know, it's 21 happening in part because of the Board's action on ZEVs, 22 which pushed these technologies forward. And many of them 23 did become commercial and are now used in the hybrids and 24 will be used in the future. 25 So it's not like we're sort of a steel ball PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 bouncing off of steel walls. You know, there's actually a 2 pathway here to the future. 3 EXECUTIVE OFFICER WITHERSPOON: One other 4 comment. 5 In starting in '06 and before the Board in '07 6 you'll have your next biennial review of the ZEV mandate 7 and the penetration requirements for fuel cell vehicles 8 and for alternate technologies, and we'll have a chance to 9 sort of dig in on the entire issue. And it will be just 10 as colorful as every ZEV review has been until now. 11 BOARD MEMBER DeSAULNIER: Okay. We just can't 12 let go of the vision thing. And, you know, as somebody 13 who doesn't believe entirely in the invisible hand, I 14 think we have to keep as a regulatory agency pursuing it, 15 and I hear you doing that. Just a little bit of caution 16 that we should continue to push, but be realistic at the 17 same time. 18 Thank you. 19 ACTING CHAIRPERSON RIORDAN: Thank you for your 20 wise words, yes. 21 BOARD MEMBER DeSAULNIER: Just call me Yoda. 22 (Laughter.) 23 BOARD MEMBER DeSAULNIER: I look like him. 24 ACTING CHAIRPERSON RIORDAN: Let me again say 25 thank you to our partners actually that are in the room. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 And you are our partners in many of the efforts that we've 2 heard about today and look to in the future for success. 3 I just would remind the Board members, I think 4 I'm right in saying that the three presenters all had some 5 beginnings at the Air Resources Board. Am I right? 6 EXECUTIVE OFFICER WITHERSPOON: Yes, they did. 7 And they were all stolen by one entity after another. 8 ACTING CHAIRPERSON RIORDAN: Well, that's what 9 happens to great staff people at the Air Resources Board. 10 But, anyway, thank you again very much. 11 And we will move on -- we'll just transition from 12 this to our next item, which has to do with the health 13 update. 14 So if we could change staff. 15 All right. Next item on our agenda today is 16 05-5-1, our monthly informational health update. 17 Ms. Witherspoon, would you like to introduce this 18 item please. 19 (Thereupon an overhead presentation was 20 Presented as follows.) 21 EXECUTIVE OFFICER WITHERSPOON: Yes, thank you, 22 Madam Chairman. 23 Today's health update describes findings from a 24 recent epidemiological study of pregnant women and their 25 newborns in New York City. Researchers found a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 significant association between prenatal polyaromatic 2 hydrocarbon exposure and postnatal environmental tobacco 3 smoke exposure to the development of cough, wheeze, 4 difficulty breathing and probable asthma in newborns. In 5 essence, having PAH exposure during pregnancy and 6 environmental tobacco smoke after pregnancy worsens the 7 conditions. 8 The results of this study are important for 9 increasing our knowledge of how incidental exposures 10 during pregnancy may alter respiratory health later in 11 life. 12 Today Dr. Shelley Duteaux from the Research 13 Division will update the Board on these findings. 14 DR. DUTEAUX: Thank you, Ms. Witherspoon. 15 Good morning, Madam Chairman and members of the 16 Board. 17 In today's health update we will discuss the 18 results of an epidemiological study that evaluates the 19 possible link between prenatal exposures to air pollution 20 and respiratory health in newborns. 21 --o0o-- 22 DR. DUTEAUX: There is a growing body of evidence 23 supporting a causal link between air pollution exposures 24 early in life and adverse effects in infants and children. 25 What researchers have shown us thus far is that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 exposure to certain ambient pollutants during pregnancy 2 may increase the risk of sudden infant death, low birth 3 weight, and a variety of other birth outcomes. Likewise, 4 researchers have demonstrated that air pollution can 5 impact the respiratory health of children as they grow and 6 develop. 7 The missing puzzle piece, however, is if or how 8 exposures to the fetus during pregnancy are related to the 9 respiratory health of infants in children. The study we 10 will review today is the first to examine this potential 11 relationship. 12 --o0o-- 13 DR. DUTEAUX: This is an epidemiological study 14 conducted by Dr. Rachel Miller and her colleagues at the 15 Columbia Center for Children's Environmental Health. Over 16 300 nonsmoking pregnant women were recruited from prenatal 17 clinics and hospitals in the Washington Heights, Harlem, 18 South Bronx neighborhoods of New York City. 19 These communities are largely Latino and 20 African-American, with median household incomes ranging 21 from 12 to $22,000 a year. 22 As seen on the map, the neighborhoods studied are 23 at the center of a very large metropolitan region 24 inundated with commercial truck traffic, diesel exhaust 25 from bus depots, and various air contaminants generated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 from waste incinerators to powerplants and the takeoff and 2 landing corridors at LaGuardia Airport. 3 --o0o-- 4 DR. DUTEAUX: For the study, exposure assessment 5 was conducted using three methods: 6 First, questionnaires were given to each 7 participant in the third trimester of pregnancy and 8 throughout the infant's first two years of life, which 9 detailed secondhand smoke, heating and cooking sources and 10 other relevant exposures. 11 Second, individual level air sampling data were 12 collected for each participant in her third trimester. 13 Each woman carried a portable backpack monitor for 48 14 hours that measured the levels of particles as well as 15 semi-volatile vapors and aerosols. 16 Lastly, blood from the mothers was collected 17 within one day after giving birth, and umbilical cord was 18 collected at the time of delivery. These blood samples 19 were analyzed for plasma cotinine, a metabolite of 20 tobacco, that is used as a surrogate measure of exposure 21 to direct or environmental tobacco smoke. 22 After delivery the health of each baby was 23 followed closely, with special attention paid to 24 respiratory problems and early signs of asthma. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 DR. DUTEAUX: The investigators analyzed the 2 personal air samples for levels of polycyclic aromatic 3 hydrocarbons, also known as PAH's. PAH's were the focus 4 of this study because they are components of combustion 5 air pollution, such as diesel exhaust, residential heating 6 and tobacco smoke. They are also highly toxic and combine 7 to DNA and certain growth factors. 8 The results from the study suggest that pregnant 9 women had universal exposure to one or more PAH's, 10 averaging four nanograms per meter cubed. Exposure to 11 PAH's varied significantly among the participants. 12 However, their values were comparable to concentrations 13 measured in California. 14 Questionnaire results in plasma cotinine analysis 15 also showed that at least one-third of mothers and 16 newborns were exposed to environmental tobacco smoke. 17 Neither prenatal exposures to PAH's nor 18 environmental tobacco smoke alone were associated with 19 discernable increases in respiratory symptoms. However, 20 infants exposed to both PAH's during pregnancy and 21 environmental tobacco smoke after birth experienced 22 between 25 and 60 percent more respiratory symptoms. 23 These symptoms also worsened as the infants got older. 24 The implication being that exposure to PAH's exacerbated 25 or somehow worked in concert with environmental tobacco PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 smoke to effect the respiratory health of infants. 2 Other factors like quality of housing most likely 3 varied among participants. If these factors had a major 4 influence on the respiratory symptoms, we would have 5 expected to see an effect in the study. However, no such 6 effects were reported. 7 --o0o-- 8 DR. DUTEAUX: The results from the stud's add to 9 our knowledge of prenatal effects of air pollution and 10 complement other published research. For example, a 11 number of researchers have considered the link between 12 prenatal exposures to air pollution and various birth 13 outcomes, as summarized in this table. 14 Two southern California studies conducted with 15 the assistance of Scott Fruin of ARB's Research Division 16 evaluated the association between ambient air pollution 17 and heart defects and pre-term birth. These studies are 18 important to our understanding of the impact of ambient 19 air pollutants on pregnancy, and underscore the importance 20 of considering all life stages when assessing the adverse 21 health effects of exposure to air pollutants. 22 --o0o-- 23 DR. DUTEAUX: There are limitations to this study 24 we reviewed today such as when they air sampling was 25 conducted and the absence of a control group. However, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 this is the first study to consider an association between 2 prenatal exposure to air pollution and the respiratory 3 health of developing infants. 4 We are beginning to understand the fetuses and 5 infants may be particularly sensitive to a variety of 6 environmental insults, including air pollution. This 7 sensitivity may be due in part to a fetus's vulnerability 8 during specific windows of development or because of 9 specific biological mechanisms associated with pregnancy 10 or because of a direct effect of individual pollutants. 11 The research described in this health update is 12 an example of how each of these factors might affect the 13 respiratory health in the very young. 14 Future research in these areas will likely yield 15 additional important information on how early exposures to 16 air pollution can affect respiratory health later in life. 17 Thank you for your attention. And I would be 18 happy to answer any questions. 19 ACTING CHAIRPERSON RIORDAN: Thank you very much. 20 Appreciate this health update. 21 Let me start -- Dr. Gong, why don't you. 22 BOARD MEMBER GONG: Oh, Okay. 23 Well done. And I think this is a very intriguing 24 health update that you've presented, going before birth, 25 in fact. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 One thing that I think is fundamental to this is 2 the big-picture question. And it really revolves to me 3 around whether or not antenatal exposures to air 4 pollutants influence asthma risk, as this study was trying 5 to do. Probably -- obviously it influences other risks, 6 such as allergy and even malignancy perhaps. 7 But just going back to this study, I was a little 8 surprised at the PAH's, given that -- of their toxicity -- 9 potential toxicity, weren't really considered 10 statistically or clinically relevant in a sense in terms 11 of prenatal exposure. It was only the combination of 12 prenatal exposure, I guess, plus environmental tobacco 13 smoke after birth that it really came up. I would have 14 thought that PAH's would transfer the placental blood flow 15 into the fetus as well and cause whatever damage it does 16 as well. But, again, I'm not sure about that. 17 The study really is an excellent study in the 18 sense that it actually raises more questions. And that's 19 I think fundamentally good. 20 But, again, I was a little surprised at the PAH 21 exposures before delivery didn't show more significance. 22 DR. DUTEAUX: And I think, as you and I know, 23 when you look at a particular outcome, what you're 24 measuring might not tell the whole story. And in this 25 study they were looking for actual effects, cough, wheeze, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 probable asthma, that might have been diagnosed by a 2 pediatrician. But what we know from toxicology studies is 3 that PAH's can bind to certain growth factors; alter 4 hormone receptors; bind to DNA, creating adducts, which 5 are irreversible. 6 Those things can affect lung development, as 7 we've seen in rat and mouse models. Now, whether that's 8 happening in the human at exposure levels that are 9 relevant to environmental sources, I don't know. But if 10 we could -- and I don't know how we could do this with a 11 human study -- possibly look at markers for lung 12 development, that might give us a clue. How large are the 13 lobes? How well developed are the alveoli? Things like 14 that. 15 BOARD MEMBER GONG: Right. Not in humans though. 16 DR. DUTEAUX: Not in humans. 17 BOARD MEMBER GONG: The other aspect is that they 18 show changes within the first year in terms of respiratory 19 symptoms. It doesn't necessarily mean that these changes 20 are irreversible or are permanent. That's a downstream 21 question. Important, but another long-term study 22 obviously. 23 Thank you. 24 DR. DUTEAUX: Right. In terms of setting up an 25 immunological or an inflammatory response too, you can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 maybe see long-term effects. 2 BOARD MEMBER GONG: And I was just at a recent 3 pulmonary -- lung -- meeting and heard actually a 4 symposium on this general topic in which the author 5 presented something, but very little from this paper. But 6 the other speakers really brought up the point that 7 environmental tobacco smoke or personal smoking by the 8 mother really is bad. There was a pediatrician who 9 basically showed multiple examples of how adverse health 10 effects were happening in the newborns. And you could 11 just name it. And such a potent stimulus tobacco smoke 12 is. But it also contains PAH's. So that's sort of why, 13 how can you disassociate the two in a sense? 14 15 EXECUTIVE OFFICER WITHERSPOON: Later this fall 16 staff will be bringing to the Board a proposal to list 17 environmental tobacco smoke as a toxic air contaminant, 18 which it wouldn't surprise you that hasn't happened 19 already. But that's been winding its way through the 20 evaluation process and is going before the scientific 21 review panel this summer. And depending on how long they 22 wish to engage with staff and with other parties on the 23 work done today, you should be seeing that between 24 September and December at the Board. 25 ACTING CHAIRPERSON RIORDAN: Okay. Other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 comments or questions by Board members? 2 Thank you, staff, very much. 3 We'll move on to the next item, which is a 4 research item. 5 The next item on the agenda is Item 05-5-2, one 6 research proposal. This project will characterize 7 off-road equipment population and will provide a basis for 8 and improved and updated inventory. 9 Staff, could you give us a few more details on 10 this particular proposal. 11 AIR POLLUTION SPECIALIST MORA: Sure. 12 Good morning, Madam Chair and member of the 13 Board. 14 (Thereupon an overhead presentation was 15 Presented as follows.) 16 AIR POLLUTION SPECIALIST MORA: Today we are 17 presenting one research proposal for your approval. 18 This proposal is a result of a competitive 19 solicitation we issued in November. Two proposals were 20 received. And the selected contractor, Eastern Research 21 Group, was deemed the most technically qualified. Both 22 proposals were reviewed by staff and by the Research 23 Screening Committee. 24 I'll now briefly explain the problem this project 25 will attempt to address, its objectives, and the expected PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 results. 2 --o0o-- 3 AIR POLLUTION SPECIALIST MORA: Our understanding 4 of the contributions of various off-road mobile emission 5 sources is critically dependent on knowing how much of the 6 various equipment types are in service and how much and 7 when they are being used. 8 Information gathered from previous studies did 9 not examine the question of whether some of these 10 equipment types are properly categorized with respect to 11 federal preemption which exempts farm and construction 12 equipment under 175 horsepower from California new engine 13 control programs. 14 The data supporting previous preemption decisions 15 are now over ten years old and should be updated. 16 The objectives of this study are to identify 17 types of off-road equipment powered by internal combustion 18 engines less than 175 horsepower and gather information 19 needed to estimate emissions from such equipment. 20 --o0o-- 21 AIR POLLUTION SPECIALIST MORA: Additionally, 22 although not part of the original scope, we ail also 23 gather information about electric equipment. 24 Note that as we implement this project, we will 25 work closely with stakeholders and plan a special outreach PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 effort with the agricultural industry. 2 --o0o-- 3 AIR POLLUTION SPECIALIST MORA: This project will 4 conducted in two phases. 5 Phase 1's first task will involve identifying the 6 types of off-road equipment powered with internal 7 combustion engines that use diesel, gasoline, gaseous or 8 other alternative fuels and have a maximum rating less 9 than 175 horsepower; and categorizing equipment by 10 building upon and enhancing existing equipment lists. 11 Next, the contractor will design a survey of 12 California households, commercial businesses and 13 governmental entities that may operate off-road equipment. 14 The last task of Phase 1 will include a pilot 15 trial of the surveys and data analysis. Results of the 16 trial will be forwarded to ARB staff and the Research 17 Screening Committee for review and comment. 18 --o0o-- 19 AIR POLLUTION SPECIALIST MORA: Phase 2 will 20 commence only upon staff's and the RC's determination that 21 based on the trial results the full plan could be 22 successful. Upon RC approval, the contractor will 23 implement a full scale survey to determine off-road 24 equipment population and analyze the results using 25 standard statistical methods. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 --o0o-- 2 AIR POLLUTION SPECIALIST MORA: The results will 3 be a profile of equipment populations, applications, users 4 and activity patterns of off-road equipment less than 175 5 horsepower. Results will help clarify and provide a 6 better understanding of the impact of preempt engines on 7 California's emission inventory and provide a basis for 8 dialogue with stakeholders on any changes needed. 9 --o0o-- 10 AIR POLLUTION SPECIALIST MORA: This concludes 11 the presentation. We recommend that you accept this 12 proposal and approve funding this project. 13 I'll be happy to answer any questions. 14 ACTING CHAIRPERSON RIORDAN: Okay. Thank you. 15 I do have a quick question. I think I know the 16 answer, but I want to be sure it's on the record. 17 The requirement to reach out to the community 18 that uses the equipment, that's part of the contract -- 19 that's written into the contract, correct? 20 AIR POLLUTION SPECIALIST MORA: Yes. They've 21 listed several trade groups that we'll reach out to. And 22 we're going to assist in that effort. 23 ACTING CHAIRPERSON RIORDAN: All right. Because 24 to me that's a very critical item. 25 AIR POLLUTION SPECIALIST MORA: Yeah, and ARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 staff -- 2 ACTING CHAIRPERSON RIORDAN: But I want it 3 written into that contract exactly what's expected of 4 them. 5 EXECUTIVE OFFICER WITHERSPOON: Madam Chair, it's 6 absolutely crucial, because unless the stakeholders are 7 willing to provide their activity data to the contractor, 8 we won't get accurate survey results. And so we also 9 consider that vital. 10 ACTING CHAIRPERSON RIORDAN: Yeah. But I want 11 them to know it when they read the contract that's their 12 responsibility. 13 All right. Other questions that you might have 14 for staff? 15 Dr. Gong. 16 BOARD MEMBER GONG: Thank you. 17 This is related to actually Madam Chairman's 18 question. 19 How representative will this profile be? You're 20 reaching out to stakeholders. But how broad is that? How 21 representative are these stakeholders? I think there's so 22 many hundreds of different types of 23 less-than-175-horsepower vehicles out there. 24 How do you expect to get a reasonable 25 representative population or sample? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 EXECUTIVE OFFICER WITHERSPOON: In many cases, 2 Dr. Gong, there are trade associations who can help us 3 marshal their membership and help us explain to their 4 membership what it is that we're seeking. And so, you're 5 right, there are hundreds of thousands of pieces of 6 equipment we're attempting to inventory here. But we will 7 use simplifying methods too to get at broad categories 8 through centralized points 9 And then we'll use statistics to say: Did we get 10 a good sample? Do we need to go out again and spend some 11 more money and dig into one particular category because 12 the survey response was too small to be statistically 13 valid? 14 ACTING CHAIRPERSON RIORDAN: Okay. Other 15 questions or comments, Board members? 16 Well, in seeing or hearing none, I hope you've 17 had an opportunity to review the proposal that's been 18 presented today. 19 And I'm going to ask for a motion and a second to 20 take some action. 21 BOARD MEMBER GONG: I would make the first 22 motion. 23 ACTING CHAIRPERSON RIORDAN: Okay. It's been 24 moved by Dr. Gong to accept staff recommendation. 25 Is there a second? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 BOARD MEMBER KENNARD: I'll second. 2 ACTING CHAIRPERSON RIORDAN: Second it, Member 3 Kennard. 4 Is there any further discussion? 5 If not, then all those in favor signify by saying 6 aye. 7 (Ayes.) 8 ACTING CHAIRPERSON RIORDAN: Opposed, no. 9 Motion carries. We will adopt the staff 10 recommendation. 11 Thank you very much. 12 Ms. Witherspoon, we have two options. We have 11 13 minutes to 11 o'clock. We could start the item -- not the 14 item that has to do with the equipment, but the item on 15 the update of liquefied natural gas. Or do you want to 16 stop here. 17 What would you like to recommend? Because I'm 18 willing to go, take -- 19 EXECUTIVE OFFICER WITHERSPOON: I would propose 20 that we recess at this time and start again promptly at 1. 21 ACTING CHAIRPERSON RIORDAN: All right. We'll do 22 that. 23 Board members, what we're going to do then is 24 adjourn at this moment. You may want to get a cup of 25 coffee or whatever. We should be down in the courtyard of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 this building at about 5 after 11, would you say, Ms. 2 Witherspoon? About 5 after 11. And the presentation 3 should start at 10 after 11. And then we'll take a lunch 4 break and then back at precisely 1 o'clock. I really want 5 to get started right on time so that we can hear the next 6 item before we have any problems with a quorum issue. 7 So we'll take a break now, and we'll be back here 8 at 1 o'clock sharp. 9 (Thereupon a lunch break was taken.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 AFTERNOON SESSION 2 ACTING CHAIRPERSON RIORDAN: I'd like to 3 reconvene our meeting. 4 And staff, if you would come forward, for our 5 next item. This item is 05-5-3, proposed amendments -- 6 Catherine, don't hurry. I'll take a moment -- proposed 7 amendments to the airborne toxic control measure for 8 stationary compression ignition engines. 9 This item is a follow-up to the emergency 10 regulation the Board approved at the March 17th meeting 11 and makes permanent the modifications the Board adopted at 12 that time. 13 The staff has also identified some other closely 14 related adjustments to the rule that are necessary, which 15 they will describe in just a moment. 16 At this time I'll ask our Executive Officer, Ms. 17 Witherspoon, to introduce them. 18 EXECUTIVE OFFICER WITHERSPOON: Thank you, Madam 19 Chairman. 20 In March we committed to return to the Board this 21 month with staff's recommendation as to how we should 22 treat agricultural engines in our stationary diesel engine 23 rule after July when the emergency rule-making expires. 24 As Madam Chairman indicated, staff is proposing that you 25 make the emergency adjustments permanent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 During the 45-day comment period staff received 2 additional comments regarding the need to adjust our 3 regulation as it applies to wind machines engines, 4 emergency standby engines used for fire pumps, emergency 5 standby engines at missile launch sites, and emergency 6 standby engines at boarding schools where children are 7 present around the clock. Staff will be addressing these 8 issues as well today. 9 Tony Andreoni, Manager of the Process Evaluation 10 Section in the Stationary Source Division will make the 11 staff presentation. 12 (Thereupon an overhead presentation was 13 Presented as follows.) 14 PROCESS EVALUATION SECTION MANAGER ANDREONI: 15 Thank you, Ms. Witherspoon. I'm just waiting for 16 the slides to come up here. 17 Good afternoon, Madam Chairman and members of the 18 Board. As Ms. Witherspoon said, today I will present the 19 staff's proposed amendments to the airborne toxic control 20 measure for stationary compression ignition engines. From 21 hereon I'll refer to this measure as the ATCM. 22 --o0o-- 23 PROCESS EVALUATION SECTION MANAGER ANDREONI: I'll 24 begin my presentation with a brief review of the public 25 process leading to the proposed amendments. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 In February 2004 the Air Resources Board adopted 2 the ATCM in order to reduce diesel particulate matter, or 3 PM emissions, exposure and adverse health effects from new 4 and existing stationary compression-ignited engines. 5 Among other provisions PM limits of .15 grams per 6 brake horsepower-hour new stationary ag and emergency 7 standby engines became effective January 1st, 2005. Just 8 prior to the effective date, local air districts and ag 9 equipment distributors and dealers contacted ARB staff to 10 express concern about the availability of compliant new 11 diesel ag engines any greater than 50 to less than 175 12 horsepower size range. 13 Based of staff's investigation and testimony from 14 the ag community diesel engine manufacturers, 15 distributors, and dealers, the Board approved temporary 16 emergency regulatory changes to the ATCM at the Board 17 meeting on March 17th, 2005. These emergency amendments 18 became effective on April 4th, and are scheduled to expire 19 on August 3rd of this year. 20 --o0o-- 21 PROCESS EVALUATION SECTION MANAGER ANDREONI: The 22 emergency amendments adopted by the Board replaced the 23 0.15 PM emission limit for new stationary diesel ag pump 24 engines greater than 50 to less than 175 horsepower with 25 requirements that such engines comply with the California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 and federal new off-road engine certification PM 2 standards. 3 Because an emergency action automatically 4 terminates 120 days after it takes effect, the Board 5 directed staff to further investigate this issue and to 6 develop a recommendation for revising the ATCM, if 7 necessary. The Board also directed staff to investigate 8 the availability of new greater than 50 to less than 175 9 horsepower emergency standby engines meeting .15. 10 During this presentation you'll also here me 11 refer to engines in the greater than 50 to less than 175 12 horsepower range as small-to-medium-size engines. 13 --o0o-- 14 PROCESS EVALUATION SECTION MANAGER ANDREONI: On 15 April 8th, a staff report also known as the initial 16 statement of reasons was published. In conjunction with 17 this report staff proposed amendments to the ATCM that 18 would make provisions of the emergency regulation 19 permanent. Two public workshops were held to discuss the 20 proposed amendments on April 2nd in Sacramento and on May 21 4th in Fresno. In addition, staff participated in 22 numerous meetings and conference calls with ag industry 23 and diesel engine manufacturers, distributors and dealers. 24 --o0o-- 25 PROCESS EVALUATION SECTION MANAGER ANDREONI: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 During public workshops and meetings with 2 stakeholders, staff received comments and information that 3 resulted in the investigation of additional items, 4 including new small-to-medium ag machines engines, new 5 direct drive emergency standby fire pump engines, in-use 6 emergency standby engines used to track missile launches, 7 in-use emergency standby engine maintenance and testing 8 requirements at hospitals and at boarding schools where 9 students also live, and small-to-medium emergency standby 10 generators. 11 In the next few slide I will discuss staff's 12 findings and proposals regarding each of these items. 13 --o0o-- 14 PROCESS EVALUATION SECTION MANAGER ANDREONI: In 15 California most of the stationary diesel engines used in 16 ag are used to pump water. This slide shows a typical 17 stationary diesel ag pump. Most of the estimated 5300 18 stationary diesel ag pump systems operating in the state 19 have been designed and installed by local dealers based on 20 individual customer specifications and pumping needs. 21 As discussed on March 17th, the availability of 22 greater than 50 to 99 horsepower diesel ag meeting .15 PM 23 is very limited, while 100 to less than 175 horsepower ag 24 pump engines are available from a limited number of 25 manufacturers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 New stationary diesel ag pump engines greater 2 than or equal to 175 horsepower are not an issue because 3 engines of that size already meet the .15 PM standard and 4 are fully available. 5 --o0o-- 6 PROCESS EVALUATION SECTION MANAGER ANDREONI: As 7 outlined in this slide, and based on our further 8 investigation, staff proposes these permanent changes to 9 the ATCM. 10 --o0o-- 11 PROCESS EVALUATION SECTION MANAGER ANDREONI: 12 Stationary ag wind machines are primarily used to 13 protect citrus crops from freezing temperatures. They are 14 also used to protect grapes, avocados and citrus. 15 Most of the estimated 15,000 to 18,000 wind 16 machines in California are powered by propane. Only about 17 10 to 15 percent are powered by diesel engines statewide. 18 Wind machines typically operate less than 45 19 hours per year. And about 10 new diesel wind machine 20 engines are purchased each year in California. 21 --o0o-- 22 PROCESS EVALUATION SECTION MANAGER ANDREONI: 23 Based on the issues listed here, staff is 24 treating ag wind machine engines similar to ag pump 25 engines of the same size. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 --o0o-- 2 PROCESS EVALUATION SECTION MANAGER ANDREONI: 3 Another category of engines that staff received 4 comment on is stationary direct drive emergency standby 5 fire pump engines. For these types of fire pumps, the 6 diesel engines are directly coupled to the water pumps. 7 The sole use for these water pumps is for fire protection 8 systems. Fire protection engines must be modified to meet 9 special National Fire Protection Act performance and 10 reliability requirements. Based on the 2004 data from the 11 largest fire pump manufacturer in the United States, staff 12 estimate that approximately 100 to 150 new direct drive 13 fire pump engines are purchased in California each year. 14 --o0o-- 15 PROCESS EVALUATION SECTION MANAGER ANDREONI: 16 Staff is proposing that direct drive emergency 17 standby fire pump engines meet the current tiered PM 18 standard. 19 Staff is also proposing to extend the compliance 20 with Tier 3 and Tier 4 certification standards by three 21 years. This extension would ensure sufficient time to 22 design, test and produce the engine and associated 23 equipment modifications that will be needed to comply with 24 the National Fire Protection Act. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 PROCESS EVALUATION SECTION MANAGER ANDREONI: As 2 a result of comments from the United States Air Force, 3 staff investigated stationary emergency standby engines 4 used to track missile launches. There are three military 5 launch tracking stations in California. These three 6 stations use a total of seven emergency standby engines to 7 track relatively infrequent test launches. 8 --o0o-- 9 PROCESS EVALUATION SECTION MANAGER ANDREONI: 10 Staff is proposing to clarify that missile launch 11 tracking be considered an emergency use to allow the 12 Department of Defense emergency standby engines to operate 13 in conjunction with and as a backup for the electric power 14 grid. 15 --o0o-- 16 PROCESS EVALUATION SECTION MANAGER ANDREONI: The 17 current ATCM limits most emergency standby engines to 20 18 to 30 hours per year for maintenance and testing. New 19 Joint Commission on Accreditation of Healthcare 20 Organizations, or JCAHO, standards issued in January of 21 '05 require more frequent testing of hospital emergency 22 power systems than were required when the ATCM was adopted 23 back in February of 2004. 24 Staff are proposing to amend the ATCM to allow 25 hospital emergency standby engine maintenance and testing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 consistent with the new JCAHO hospital accreditation 2 standards. 3 --o0o-- 4 PROCESS EVALUATION SECTION MANAGER ANDREONI: 5 Staff is proposing a clarification to allow 6 emergency standby engine maintenance and testing when 7 students are present at or near school grounds that also 8 serve as students' place of residence. 9 --o0o-- 10 PROCESS EVALUATION SECTION MANAGER ANDREONI: 11 This slide lists additional clarifications being 12 made to the ATCM. We have one additional proposed change 13 shown here on what constitutes the engine installation 14 date. 15 --o0o-- 16 PROCESS EVALUATION SECTION MANAGER ANDREONI: 17 Staff also investigated the availability issues 18 for new stationary small-to-medium-size diesel-powered 19 emergency generators meeting .15. Emergency generator use 20 is widespread. These diesel engines run generators which 21 provide electric power during electric power failures or 22 other emergencies. This power may be used to provide 23 lighting or ventilation, operate elevators or to pump 24 water. The current ATCM does not limit the operation of 25 such engines during emergency situations, but does impose PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 annual operating limits for the routine maintenance and 2 testing of engines. 3 At the March 17th, 2005, Board meeting, concerns 4 were expressed about the availability of small-to-medium 5 emergency generators meeting .15 PM. 6 --o0o-- 7 PROCESS EVALUATION SECTION MANAGER ANDREONI: 8 Based on the staff's review of the ARB's 2005 new 9 off-road engine certification database and comments and 10 information submitted by small-to-medium emergency 11 generator manufacturers, staff is recommending maintaining 12 the 0.15 PM limit for new emergency generators at this 13 time. 14 In contrast to other engines for which we are 15 proposing PM limit revisions, we found in the greater than 16 50 to 99 horsepower range five manufacturers currently 17 produce 11 generator-type engine models meeting .15 PM. 18 In the 100 to less than 175 horsepower range we found two 19 manufacturers producing five engine models meeting the .15 20 PM standard. 21 We also did not find the same compatibility 22 issues regarding replacing generator-type engines, similar 23 to what we had found with the ag pump engines. 24 --o0o-- 25 PROCESS EVALUATION SECTION MANAGER ANDREONI: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 Staff estimate that 600 to 800 more -- excuse 2 me -- 600 to 800 or more new small-to-medium emergency 3 standby generators are purchased each year statewide. 4 Further, emergency generators are frequently 5 located in densely populated urban areas where their 6 operation is likely to result in increased exposure to 7 diesel PM for nearby residents. 8 Stakeholders have expressed concern that 9 small-to-medium stationary diesel engines including 10 generator-type engines that currently meet the .15 PM may 11 not be available to maintain that emission level in the 12 2007-2008 time frame when more stringent ARB and federal 13 new off-road engine certification standards for NOx take 14 effect. 15 To address these concerns staff is committed to 16 work with the end-users and the engine manufacturers, 17 distributors and dealers to continue to evaluate the 18 availability of these engines to meet the .15 PM standard. 19 --o0o-- 20 PROCESS EVALUATION SECTION MANAGER ANDREONI: 21 Staff does not expect an increase in emissions, 22 exposure or health risks resulting from the proposed 23 action. 24 Furthermore, staff anticipate reduced emissions 25 exposure and health risk under the proposed revisions as a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 result of allowing voluntary old engine replacement to 2 proceed because of the new Tier 2 certification 3 replacement engines will be significantly cleaner than the 4 existing uncontrolled engines. 5 --o0o-- 6 PROCESS EVALUATION SECTION MANAGER ANDREONI: 7 Staff anticipate no increase in stationary diesel 8 ag pump, Ag wind machine or direct-drive emergency standby 9 fire pump engine costs as a result of the proposed 10 amendments. We believe that the proposed amendments will 11 actually allow farmers and others who are affected to 12 avoid the additional costs of larger than necessary 13 engines and new auxiliary equipment when they need to 14 replace a failed engine or acquire a new engine. 15 --o0o-- 16 PROCESS EVALUATION SECTION MANAGER ANDREONI: The 17 staff recommend the Board approve the proposed amendments 18 with 15-day changes that I discussed today. Staff asks 19 the Board to direct us to request an immediate effective 20 date for the proposed revisions due to the impending 21 expiration of the emergency regulations. 22 We also recommend that you encourage Moyer 23 funding priority be given to .15 engines where available, 24 in that we also continue to monitor the availability of 25 new stationary emergency standby engines meeting .15 PM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 Thank you. This concludes my presentation. And 2 I'll be happy to answer any questions. 3 ACTING CHAIRPERSON RIORDAN: Okay. Before we 4 have any questions, let's ask Madam Ombudsman to comment. 5 And then we'll open it up for questions for staff. 6 Thank you. 7 OMBUDSMAN TSCHOGL: Thank you. Madam Chairman 8 and members of the Board. 9 As Tony Andreoni mentioned already, staff has 10 conducted an extensive investigation including numerous 11 stakeholder meetings and conference calls to assess the 12 availability of small-to-medium-size diesel agricultural 13 pump engines and emergency generators compliant with 14 ATCM's PM standards and other issues. These stakeholders 15 specifically included representatives from the local air 16 districts, the diesel PM ag working group, and engine 17 manufacturers, distributors and dealers representing Case, 18 Newhall, Caterpillar-Perkins, Cummins, John Deere, Detroit 19 Diesel and the Engine Manufacturers Association. 20 I won't repeat the dates and locations of the 21 workshops. I would only add that these documents and 22 notices were posted to ARB's website and mailed to more 23 than 1300 stakeholders including representatives from 24 industry, environmental and citizens groups and federal, 25 state and local agencies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 The Sacramento workshop had approximately ten 2 industry and district representatives in attendance; and 3 the workshop held in Fresno had approximately 15 industry 4 and district stakeholders in attendance. 5 That concludes my comments. Thank you. 6 ACTING CHAIRPERSON RIORDAN: Thank you. 7 Ms. Witherspoon, any final comments? 8 EXECUTIVE OFFICER WITHERSPOON: Nothing further. 9 ACTING CHAIRPERSON RIORDAN: All right. Let me 10 open it up, Board members, to any questions that you might 11 have. 12 Any questions? 13 Seeing none, then we'll move to those who have 14 expressed an interest in speaking. Let me indicate to you 15 that there is going to be a time frame for those 16 presentations, and that will be five minutes each. 17 And I would invite the following to come forward: 18 Tim French from EMA. Randal Friedman and Rick Bishop, if 19 you would be ready to speak. 20 And, Mr. French, we're going to start with you. 21 MR. FRENCH: Thank you, Madam Chairman. 22 Members of the Board, good afternoon. My name is 23 Tim French. I'm with the Engine Manufacturers 24 Association. 25 EMA's the trade association that represents the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 leading manufacturers of internal combustion/compression 2 ignition engines used in stationary applications that are 3 the subject of the ATCM that you're reviewing this 4 afternoon. 5 EMA fully agrees that it is necessary to amend 6 the ATCM and align its PM emission standards for engines 7 in the 50 to 174 horsepower range with the corresponding 8 ARB and EPA non-road emission standards. Indeed, EMA 9 first raised this issue to staff back on April 11, 2003. 10 Since that time, and as we anticipated, the underlying PM 11 standard for these engines has served to severely limit 12 the availability of needed products for the agricultural 13 industry and the emergency standby engine market in 14 California. 15 This unique lack of suitable and compliant 16 products is a direct consequence of the fact that the ATCM 17 establishes more stringent PM emission standards only for 18 engines in the 50 to 174 horsepower category. It is in 19 fact the ATCM's one and only exception from regulatory 20 alignment with federal and ARB non-road engine standards. 21 All of the other standards in the ATCM are fully aligned. 22 The more stringent PM standard for these smaller 23 horsepower engines is causing product availability 24 concerns, as you've heard about, and other adverse market 25 impacts, because engine manufacturers do not design and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 build compression ignition engines specifically for 2 stationary applications. Instead the industry's practice 3 is to manufacturer compression ignition engines for the 4 much larger non-road engine market and then utilize those 5 same non-road engines in stationary applications. The 6 result is that virtually every manufacturer or stationary 7 engines are designed and manufactured to meet the EPA and 8 ARB non-road emission standards. 9 Product availability and suitability arise when, 10 as in the case of the ATCM, stationary emission standards 11 are more stringent than or otherwise unaligned with the 12 prevailing non-road engine standards. Again, 13 manufacturers do not have the resources to separately 14 manufacture these engines for stationary applications. 15 And so the importance between alignment -- or the 16 important of alignment between the non-road standards and 17 stationary engine standards is paramount. And significant 18 in this regard and a telling example is pending action by 19 U.S. EPA right now. It reinforces the necessity and 20 appropriateness of aligning non-road and stationary engine 21 standards. Specifically, the anticipated U.S. EPA new 22 source performance standards for stationary compression 23 ignition engines, which will be proposed later this 24 summer, will establish standards requiring new stationary 25 engines to meet the corresponding non-road standards. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 that's what should be done here as well. 2 So, as clearly indicated by the testimony that 3 you heard from end-users and dealers in March and that I 4 think you'll hear more from today, the current ATCM is 5 causing hardships due to resultant non-availability of 6 engines, and so EMA fully supports the staff proposal to 7 amend and align the ATCM's PM emission standards for 8 agricultural pumps, for fire pumps and for wind 9 generators. But additional action is also required. The 10 same regulatory alignment issues that caused lack of 11 product availability for ag pump engines and those other 12 applications is creating the same exact effect for 13 emergency standby engines in the same power rating. 14 Accordingly, and just as in the case of those ag that 15 we've discussed, alignment should be directed for these 16 emergency standby engines as well. 17 There's a chart that we've assembled that is 18 included in the copy of my oral remarks that I've 19 hopefully circulated to all of you. And unlike the staff 20 presentation, our data shows that of the available power 21 ratings for emergency standby applications in 22 California -- there are 35 -- only 9 of those ratings 23 currently comply with the .15 gram per horsepower standard 24 for PM. So that's less than 25 percent of available 25 ratings comply with that .15 standard. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 Now, that availability is very likely to go down 2 even further next model year as manufacturers start to 3 comply with the 2007 Tier 3 standards in the non-road side 4 of the equation for NOx. NOx emissions for Tier 3 5 non-road engines are going to go down by about a third, 6 which is very good. But there's a NOx PM trade-off, as 7 you're aware of when you're designing your engines. 8 So right now, again, manufacturers don't build 9 stationary engines to meet the .15 standard. They build 10 it to meet the federal .2 or .3 standard. The fact of the 11 matter is some engines are designed in a certain way that 12 when you test them, their PM emissions are actually lower 13 than .2 or lower than .3. They come out to .15 and those 14 can be sold. 15 That margin below the federal standard for PM 16 will be utilized in control strategies to reduce NOx. So 17 the number of engines that happen to meet the .15 standard 18 for these applications will go down and probably 19 dramatically. 20 And so the point is: Should we wait for another 21 emergency situation to develop such that we have to come 22 to the Board and ask for emergency relief, or should we 23 tackle this issue head on right now? And we would submit 24 that it's better to do that now. Again, this is the only 25 standard in the ATCM that is not aligned with the non-road PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 standards. 2 Bear in mind that emergency standby engines 3 typically operate 37 hours a year, less than two days a 4 year. So there's not a material public health concern 5 here. But there is a material product availability 6 concern here. 7 Also bear in mind these engines -- 8 ACTING CHAIRPERSON RIORDAN: Mr. French -- 9 MR. FRENCH: My time's up? 10 ACTING CHAIRPERSON RIORDAN: Your time is up. 11 MR. FRENCH: Okay. Thank you very much. 12 Again, these engines do perform vital service. 13 So we encourage you to look at that amendment. We support 14 the other amendments proposed by the staff. 15 Thank you very much for your time. 16 ACTING CHAIRPERSON RIORDAN: Thank you. 17 Staff, any comment to the speaker's comments? 18 EXECUTIVE OFFICER WITHERSPOON: Madam Chairman, 19 while we're very supportive of harmonization and alignment 20 when it meets California's needs, there is a key 21 distinction here, that we've identified diesel as a toxic 22 air contaminant and the federal government has not. 23 And so it's not surprising that we find a need to 24 move ahead on tighter PM standards than U.S. EPA currently 25 has. Farther out in the future we may have an opportunity PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 to align as the standards become more stringent in the 2 2011-2012 time frame. But even then EPA is not paying 3 attention to the smallest of the engines, and so 4 California might still need to have a mandate that's 5 slightly more stringent for these engines that are close 6 to population -- the residence of California. 7 ACTING CHAIRPERSON RIORDAN: Thank you. 8 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I -- 9 ACTING CHAIRPERSON RIORDAN: Any questions? 10 Oh, I'm sorry, Mr. Scheible. I apologize. 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: That's okay. 12 Just to add a little deeper perspective to EMA's 13 testimony. 14 We actually are not aligned uniformly -- 15 completely in the ATCM with the new engine standards. For 16 urban engines that are used extensively, our requirement 17 is that they meet a .01 standard. It's not based on the 18 new engine standards. It's based on an engine being 19 retrofit with a control device. 20 When we were adopting the ATCM and proposing it 21 we decided that the emergency back-ups, given their 22 limited operation and use and lesser risk, really didn't 23 merit the retrofit control. But we don't have alignment. 24 But in return for that, we expected that they -- we would 25 make them as clean as possible and apply the basic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 stationary source principle of best available control 2 technology. And we felt then and we continue to feel now 3 that sufficient numbers of these engines that will be used 4 in urban areas can meet a better standard than the federal 5 standard. 6 So it's not strictly an alignment issue like it 7 is on the mobile source side. 8 ACTING CHAIRPERSON RIORDAN: Okay. Thank you. 9 Any questions for either the speaker or staff at 10 this time? 11 Seeing none. 12 Thank you, Mr. French. 13 MR. FRENCH: Thank you. 14 ACTING CHAIRPERSON RIORDAN: Moving right along. 15 Randal Friedman. 16 MR. FRIEDMAN: Good afternoon. My name is Randal 17 Friedman from Navy Region Southwest here on behalf of Rear 18 Admiral Betancourt, who also represents the Department of 19 Defense on environmental issues in California. 20 There's two issues we've brought to your staff's 21 attention. We'd like to thank your staff for working with 22 us. We have no issues with the flight hardware provisions 23 that you were -- that were discussed. 24 We do have one small issue with the treatment of 25 hospitals. This is an issue that we brought to your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 staff's attention. I think it was news to all of us. We 2 are still doing some research on this. We're not sure 3 that the assumption that your staff made that these new 4 JCAHO requirements can be done simultaneously with other 5 tests and, therefore, they're not additive. We're 6 confirming that. We're also talking with some other 7 representatives of hospitals who are also unaware of this. 8 What we would ask is that, given this, ten hours 9 may not be sufficient time to do the additional testing. 10 We would ask that you allow your staff to have the 11 discretion that in the next couple of weeks as we confirm 12 this, if it ends up being 15 hours, for example, that 13 there can be the flexibility built in to have that in 14 there as we confirm that and work with your staff. 15 And we're available for any questions. And, 16 again, I'd like to thank you staff for working these 17 issues with a late submittal that we provided. 18 ACTING CHAIRPERSON RIORDAN: Thank you. 19 Let me ask staff, is the request a reasonable 20 one? 21 STATIONARY SOURCE DIVISION CHIEF VENTURINI: 22 That's fine, Madam Chairman. This was a recent 23 issue having to do with some new federal regulations or 24 any need to comport. And we just have this one minor 25 point that we need to sort out. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 ACTING CHAIRPERSON RIORDAN: Right. And it's for 2 the hospitals to meet their requirements. 3 STATIONARY SOURCE DIVISION CHIEF VENTURINI: 4 That's correct. 5 ACTING CHAIRPERSON RIORDAN: And I think that's a 6 reasonable request. And we'll work with that. 7 Next person -- and thank you, Mr. Friedman. 8 Rick Bishop, followed by John Whitney. 9 MR. BISHOP: Good afternoon. 10 My name is Rick Bishop. I'm Manager of Emissions 11 Compliance for John Deere Power Systems. We produce the 12 engines that are used in the Deere machines that are 13 subject to the mobile source regulations developed by the 14 Air Resources Board. And we also produce engines that are 15 used in over 2,000 different models of machines made by 16 other companies, many of which are the machines that are 17 subject to today's ATCM that's under consideration. 18 There's really two areas of concern that we have, 19 both of which are relative to the point .15 particulate 20 standard. The first is the applicability of that to the 21 stationary ag engines. And then the second is to the 22 emergency stationary engines. 23 The presentation that the staff had given on the 24 ag engines, I think the only concern that we have on that 25 is that the staff proposal was to separate out the pump PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 engines and the wind tower engines and align them with the 2 CARB and EPA non-road standards, but not align the rest of 3 the ag stationary engines. And our recommendation would 4 be that all ag stationary engines, whether it be the ag 5 stationary pumps, wind towers, whatever other types of 6 applications there might be for ag engines that are 7 equally vital to the California agricultural economy, that 8 those so be aligned with the CARB and EPA non-road 9 standards as well. 10 So that I think is the only area that we differ 11 from the staff recommendations from the ag side. 12 And on the emergency side, as EMA has said, while 13 there may be adequate availability today -- and emphasis 14 on "maybe" because I'm not sure that we totally know that 15 yet -- but when the Tier 3 standards take effect in 2007 16 and 2008 for what Tony called the middle and the smaller 17 size engines, we're quite sure that there will not be 18 adequate availability at that time because of the NOx 19 particulate trade-off. And so, there again, our 20 recommendation, as Tim French has indicated, would be to 21 align with the EPA and CARB non-road standards for 22 emergency rather than having to appear before the Board in 23 a March of 2007 emergency hearing where we find that there 24 is in fact not adequate availability. 25 So, in summary, we do support making changes -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 making changes permanently for the ag pumps between 50 and 2 175 horse. We also support making changes permanently to 3 the wind towers between 50 and 175 horse. But we would 4 recommend that that applies also to all other ag 5 stationary engines between 50 and 175 horsepower. We 6 support the changes that have been recommended for the 7 emergency fire pumps, which is kind of a new subset of the 8 existing ATCM. But then our final recommendation would be 9 that all emergency engines, not just fire pumps, be 10 aligned with the CARB and EPA non-road standards. 11 I'd be happy to answer any questions you have. 12 ACTING CHAIRPERSON RIORDAN: Okay. Mr. Bishop, 13 just let me ask staff maybe to respond. 14 Let's clarify the ag pumps and then on to the 15 other issue. 16 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 17 Thank you, Madam Chair. This is Don Donohoue. 18 With respect to the one area where -- with 19 respect to the potential ag applications where we've not 20 aligned with the federal, that is on ag -- on generator 21 sets that may be used in ag operations. Basically what 22 we've done, generator sets are generally -- are provided 23 as a system, the engine with the generator. And the vast 24 majority of those are used in building urban non-ag 25 applications. We elected not to split out those for ag PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 and non-ag because basically those are manufactured as gen 2 sets with no, you know, preference as to where they go, 3 how they come into the state. 4 And with the fact that their worthy availability 5 that we've talked about about .15 engines, and we weren't 6 dealing with the compatibility issues with pumps as we 7 were with the ag pump engines and those type of things, 8 since they're basically -- we're only looking at new 9 applications, we felt it was appropriate to leave those at 10 this point in time with the .15 standard and look, as 11 we've suggested, as the 2007 and 8 standard come on line 12 to see if there's any need to further align those. 13 Any of the other ag applications other than gen 14 sets that would be used in ag would fall in to the overall 15 category that we would be using that we would have aligned 16 with the federal requirements. 17 ACTING CHAIRPERSON RIORDAN: Okay. Any 18 questions? 19 MR. BISHOP: If I may comment on that? 20 ACTING CHAIRPERSON RIORDAN: Well, let's not get 21 into a debate. If you want to clarify something -- 22 MR. BISHOP: I don't want to debate. I think I 23 agree with what he's saying. I just want to -- I think 24 the difference between what he said and what I asked for 25 is it was going to be split between ag sets and everything PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 else ag and while I may not agree with the gen set part, I 2 do think the "everything else ag is a better way to 3 characterize it than trying to list pumps and wind towers 4 and so forth. 5 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 6 Don't we specifically in the reg do all other? 7 PROCESS EVALUATION SECTION MANAGER ANDREONI: 8 This is Tony Andreoni. 9 Right now what we're doing is basically 10 identifying in the modification of the reg that there is a 11 need for ag pump, ag wind machines and other ag within 12 those categories, for the 50 to 99 and the 100 to 175. 13 And that was a recent change from the original proposal 14 that was sent out in April. So that would be part of the 15 15-day changes. 16 MR. BISHOP: Thank you. I missed that "and other 17 ag" in your presentation. 18 ACTING CHAIRPERSON RIORDAN: Okay. Any 19 questions, Board members? 20 Yes, Ms. Berg. 21 BOARD MEMBER BERG: I do have a question 22 regarding the emergency engines. 23 And my understanding is that we're saying that 24 the current rule or the rule that is going to go into 25 effect the next tier, we're concerned about that there PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 will not be enough engines available to meet that rule in 2 an emergency case? 3 MR. BISHOP: Yes. The engines that meet it 4 today -- I'll say happen to meet it. They weren't 5 designed to be less than .15. It's just that that's the 6 way they turned out. But with Tier 3 there was a lowering 7 of the NOx standard, but not a lowering of the particulate 8 standard. And because of the NOx/particulate trade-off, 9 the efforts that will happen in Tier 3 to meet that lower 10 NOx standard will cause those engines' particulate levels 11 to go up. And so there will not be as many engines that 12 happen to meet .15 at the Tier 3 NOx level as there are at 13 Tier 2. 14 And, as Tim French had indicated, these engines 15 are not being specifically designed for this ATCM market. 16 They're just there because of the non-road regs. 17 BOARD MEMBER BERG: And so we're saying that 18 within the next year you don't feel that the technology 19 will move us such that they will be available? 20 MR. BISHOP: That's correct. And it's not next 21 year, it's the year after. Tier 3 takes effect in 2006, 7 22 and 8. The engines that take -- for which it takes effect 23 in 2006 do have to meet .15. That's what the non-road 24 standard is. 25 And so there's not an issue associated with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 2006 engines above 175 horsepower being able to meet .15. 2 That's the standard they'll have to meet. The issue is 3 for the 2007 engines between 100 and 175 horsepower and 4 the 2008 engines between 50 and 100 whether it will be the 5 same kind of limited availability for those engines as we 6 were faced with -- as you were faced with in March with 7 the ag engines. 8 BOARD MEMBER BERG: And then would it be the 9 recommendation of staff we'd rather deal with it later 10 than sooner? 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Our 12 recommendation is that we don't know exactly what will 13 happen and what the availability will be. We will watch 14 it. 15 The prospects that things get dirtier as 16 technology advances is not very attractive. We understand 17 the engineering behind it. But we'd like to see the PM 18 levels stay the same or go down as the NOx goes down. And 19 if we find that there is a problem with sufficient 20 availability, we will also assess the feasibility and 21 advisability of applying after-control standards to these 22 engines as they're installed so that we don't lose 23 emission controls that we think are feasible. 24 Additional control is feasible on these engines 25 in terms of a technology. So it's a cost determination. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 So we'd like to wait until we see what the 2 situation is and then evaluate the entire options 3 available before recommending to the Board how to address 4 this issue. 5 BOARD MEMBER BERG: Okay. Thank you. 6 Thank you, Mr. Bishop. 7 MR. BISHOP: Thank you. 8 ACTING CHAIRPERSON RIORDAN: Thank you very much. 9 John Whitney, followed by Karl Lany. 10 MR. WHITNEY: Hello. I'm John Whitney. I'm Vice 11 President of Engineering with Clarke Fire Protection 12 Products I'm one of 28 members that sets on the NFPA 20 13 Committee. 14 The Committee is the committee that writes the 15 rules for stationary fire pump engines. That Committee 16 represents all disciplines of the fire pump -- fire 17 protection industry, as well as the equipment users. 18 I'm also a member of UL's advisory panel for fire 19 pump engines. 20 I'm here today speaking on behalf though of 21 Clarke Fire Protection Products. 22 Clarke is an Ohio corporation whose business is 23 dedicated solely to the unique design manufacturing 24 challenges of compression ignition engines used for 25 stationary fire protection around the world, with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 manufacturing facilities in Cincinnati, Ohio, and 2 Coatbridge, Scotland. 3 At the world's leading supplier of emergency fire 4 pump engines certified to meet the rigorous requirements 5 of fire pumps, Clarke has a working relationship with many 6 compression ignition engine manufacturers. 7 Although Clarke's specific market share in 8 California is unknown, we have no reason to believe that 9 it is significantly different than the whole of the U.S., 10 where Clarke's market share has been above 70 percent for 11 the last two years. 12 Regarding the air toxic control measure for 13 stationary compression ignition engines and the use of 14 these engines for life safety and facility protection from 15 the dangers of fire, Clarke recognizes ARB's obligation to 16 regulate emissions from these engines. And we ask that 17 ARB and this Board consider the unique challenges the ATCM 18 regulation poses to the development and manufacture and 19 installation of these engines. 20 Emergency fire pump engines must satisfy the 21 rigorous requirements of NFPA 20. The NFPA 20 requires 22 independent third-party certification that these engines 23 meet ail equipment, material and performance requirements 24 of the standard. 25 There are two nationally recognized certifying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 agencies used for NFPA 20 fire pump engines: Underwriters 2 Laboratory, known as UL, and Factory Mutual Research, as 3 FM. 4 Because of proven reliability, NFPA 20 only 5 allows compression ignition engines to drive a fire pump. 6 Clarke has the following concerns about future 7 ATCM requirements and their impact on emergency fire pump 8 engines relative to Tier 3 requirements: Clarke will not 9 be able to comply with the current Tier 3 ATCM 10 implementation schedule. To design and develop Tier 3 11 engines to the special features required for NFPA 20 12 application, which are further complicated by the 13 technologies of Tier 3 engines, to then submit them to be 14 tested and received UL and FM certification, prepare for 15 manufacture, and begin the selling and long quoting 16 process to get them to the job site, three years are 17 required. That's after the off-road schedule for Tier 3 18 takes effect. 19 The reliability of Tier 3 technology has been 20 called into question recently. Exhaust gas recirculation, 21 known as EGR, variable geometry turbochargers systems and 22 the electronic engine control modules that manage these 23 engines on off-highway Tier 3 engines have proven to have 24 some reliability issues. And this is without the added 25 stresses that a fire pump engine must endure. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 My comments that I submitted to the Board ahead 2 of time has documentation to all of that. 3 The ATCM PM requirements. My engine 4 manufacturers advise me that Tier 3 engines will have PM 5 emission levels conforming to the off-road rules, that PM 6 levels as defined by the ATCM for California are not 7 commercially viable products to develop. Therefore, 8 Clarke will not be able to provide UL/FM certified fire 9 pump engines to California that comply with the current 10 Tier 3 ATCM particulate matter limits, which are lower 11 than the off-road rules. This will leave the fire 12 protection industry with no engines. 13 ACTING CHAIRPERSON RIORDAN: Mr. Whitney, as you 14 probably know, you've just run out of time. So do you 15 want to make a conclusion? 16 MR. WHITNEY: Yes. We do speak in support of the 17 proposals that the staff has put forth for amending the 18 rule. We do, however, hold out that we are against the 19 installation of after-treatment devices for life safety 20 engines. And we look forward to working with the Board 21 staff in the future to reevaluate the implementation of 22 those devices. 23 Thank you. 24 ACTING CHAIRPERSON RIORDAN: Thank you, Mr. 25 Whitney. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 Staff, response? 2 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: This 3 is Dan Donohoue. 4 As part of the presentation, we did indicate that 5 with respect to the Tier 4 standards and the applicability 6 of those on fire pump engines, we would be relooking in 7 the 2009-10 time frame to see if in fact there are some 8 compatibility issues associated with that. And we've 9 committed to do that. 10 ACTING CHAIRPERSON RIORDAN: Good. And you can 11 work with Mr. Whitney and associates of Mr. Whitney's? 12 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Yes, 13 we've seen a lot of him. 14 Thank you. 15 (Laughter.) 16 ACTING CHAIRPERSON RIORDAN: Great. Thank you 17 very much. 18 BOARD MEMBER BERG: Excuse me. Would that also 19 include the Tier 3? Because I heard Tier 3 concerns as 20 well as Tier 4. 21 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: What 22 we've done within the regulation to address the issue of 23 that is that for the direct drive fire pump engines the 24 implementation date of that is three years after the Tier 25 3 standards originally come in. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 The issues with respect to the Tier 3 engines, 2 reliability, durability, is something that's being worked 3 on now. Those engines will have to be in three years 4 sooner for all the other applications. So that is 5 something that we're going to be following, you know, in 6 all our regulation development with respect to the 7 off-road engines. 8 BOARD MEMBER BERG: Thank you very much. 9 ACTING CHAIRPERSON RIORDAN: Thank you, Mr. 10 Whitney. 11 Karl Lany, followed by Charlie Simpson. 12 MR. LANY: Good afternoon. I'm Karl Lany with 13 SCEC Air Quality Specialists, a consulting firm and 14 emission source testing firm. We have engine operators as 15 clients and engine distributors as clients throughout 16 California. 17 SCEC supports staff's proposal to harmonize PM 18 standards for agricultural pump engines with non-road 19 standards between 50 and 175 horsepower. But we request 20 that CARB also provide the same flexibility for all 21 stationary emergency engines. 22 Alternatively, we request that CARB give 23 consideration to an alternative compliance program that 24 would allow non-road or non-road equivalent engines with 25 emission rates greater than .15 grams to be permitted with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 appropriately reduced allowable testing and maintenance 2 hours. This would help to mitigate the risk that CARB is 3 trying to manage. 4 The stationing the ATCM does appropriately 5 reflect non-road standards for most classes of emergency 6 engines. And the same should hold true for this class of 7 engines. We've already heard about the uncertainty with 8 Tier 3 and the limited product availability today. Even 9 though CARB fashioned ATCM standards upon non-road 10 standards, for this unique class of engines we have all 11 seemed to ignore the principles that support the 12 aggressive non-road program. The foundation of the 13 non-road program lies within a clear understanding by 14 CARB, EPA and industry that the small number of engines 15 sold in California makes unique California emission 16 standards infeasible. CARB has consistently reaffirmed 17 its commission -- or its commitments to nationwide 18 non-road standards beginning in 1996 and continues today. 19 If CARB's commitments to non-road standards is 20 justified, then it is even more justified for stationary 21 engines, due to the shared technology and the fact that 22 the volume of stationary emergency engines is even lower 23 than the volume of non-road engines being sold in 24 California. 25 It is the volume of engines manufactured in a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 regulatory program that drives technology. We do not have 2 the volume in a stationary market. 3 I want to point out that staff has been very 4 gracious in attempting to device alternative methods 5 through which manufacturers and end-operators can 6 demonstrate compliance with a .15 gram standard for this 7 class of engines. 8 But as someone who deals regularly with engine 9 operators and local permitting agencies, I have to tell 10 you that I experienced firsthand the implications of 11 non-road -- or of emergency engine standards that are out 12 of alignment with the non-road standards. 13 Convincing permitting engineers that an engine is 14 in compliance with the ATCM, even though the non-road 15 executive order suggests otherwise, is often difficult and 16 sometimes fruitless. 17 Additionally, any alternative demonstration of 18 compliance that relies upon source tests are unbearably 19 expensive. Typically the expenses exceed the cost of the 20 engine itself. 21 In summary, the inconsistency between non-road 22 standards and the ATCM for this class of engine has 23 resulted in increased cost to operators and fewer cost 24 effective and technologically viable solutions to diverse 25 emergency energy management needs, while offering only PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 minor reductions in PM emissions. 2 Again, SCEC requests that the PM standards for 3 all emergency engines rated from 50 to 175 horsepower 4 mirror the adopted non-road standards or adopt an 5 alternative compliance option allowing non-road engines 6 with emissions greater than .15 to be permitted with 7 accordingly reduced testing and maintenance hours. 8 Thank you. 9 ACTING CHAIRPERSON RIORDAN: Thank you very much. 10 Staff, do you want to respond to the speaker's 11 comments? 12 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 13 Yeah. With respect to the first issue that came up as far 14 as an alternative compliance approach using limiting the 15 maintenance and testing hours to go along with what the 16 emission rate is, that is a potential option that we could 17 look at as we move towards and make a determination that 18 there actually is an availability issue with the .15 19 engine. As we've stated, at least at the current time, we 20 do believe the .15 engines are available. 21 One of the other issues that come up here within 22 this regulation, what we tried to do was limit the hours 23 of maintenance and testing in the original regulation. 24 And we really don't address the emergency use hours. So 25 when you do allow an engine that's, instead of being .15, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 is .3, you do result in that additional emissions during 2 the emergency use hours. And those vary greatly. 3 Sometimes there's only around eight or ten hours a year, 4 but depending on location and higher in other locations. 5 So we really were trying to structure the regulation at 6 .15 to get those benefits an emergency use also. And we 7 might lose those. 8 With respect to -- not quite the way the issue 9 was characterized, but the issue about when are they in 10 the pipeline? We have -- we are trying to address that 11 issue through language as indicating what constitutes the 12 date of installation or the date of purchase, that thing. 13 And we have addressed that, so that there's more certainty 14 with respect to, if you procured an engine but it's not 15 yet been installed, that you have this window of 16 opportunity to be able to meet -- you know, to put that 17 engine in. 18 The last thing, with respect to what engines are 19 available, we have made a commitment and we are currently 20 putting together a web page that lists those engines that 21 based on their certification testing are .15 engines. We 22 will maintain that. And those will be split up both for 23 gen set engines and for pump engines to have a ready 24 reference for the districts to go to be able to see what 25 manufacturers have engines that meet the .15 requirement. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 Did I miss anything? 2 ACTING CHAIRPERSON RIORDAN: Okay. Thank you. 3 Any questions by the Board at this time? 4 Thank you very much. 5 Mr. Simpson, followed by Manual Cunha. 6 MR. SIMPSON: Thank you very much, Madam Chairman 7 and the Board. My name is Charlie Simpson and I work with 8 Quinn Power Systems. We are the Caterpillar dealer for 9 the central California area. 10 This is my second opportunity to come and speak 11 to you folks. And we really appreciate you hearing from 12 the local dealers, because I think -- and sometimes we get 13 separated out, and you hear from factories, you here from 14 associations, and you don't actually hear from the actual 15 dealers. 16 First of all I'd like to say that we do also 17 support the ag engines, pump engines for permanent change 18 to the rule. And thank you to staff. They worked very 19 hard with us on that. 20 We have some huge issues with the pipeline issue. 21 We have products that are in this pipeline that projects 22 can actually take a year, two or three to go forward; so 23 from the actual spec writing of the project to the bid 24 process going forward through the authority to construct 25 and then actually getting product. Product today with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 worldwide demand can be anywhere from three to six months 2 coming out of a factory. Plus you have lead times of 3 getting it transported. 4 So we actually have -- somebody could have 5 ordered something in November of last year. That product 6 may not even actually be ready to deliver to the customer 7 this year. The new rule went into effect in January, so 8 it would not meet the new rule. 9 And, furthermore, we actually have a contract or 10 a purchase order from a customer that we have legally said 11 we would supply him a product. And in many cases we will 12 not have another engine to supply him with besides that 13 engine that we had, because we will not have an engine 14 that will meet this rule. 15 It's my understanding at this point that 16 Caterpillar -- it's my understanding as a dealer that 17 Caterpillar at this point does not have an engine in the 18 emergency generator set, emergency engines that will meet 19 the .15 standard of the ATCM. Although keep in mind, they 20 all do meet the non-road standards, which is what all 21 manufacturers build towards at this point. 22 Doing just a quick analysis of the five 23 Caterpillar dealers that serve California, we came up with 24 approximately 600 units that were possible to be sold this 25 year into this market in this size range. With an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 approximate value of about $20,000 per unit, you're 2 looking at about a $12 million hit to just five companies 3 within California. 4 Going even further than that, the ATCM will not 5 align with the non-road standard until 2012, the first 6 one. And so that's seven years. So if you wanted to, you 7 could take that even further out. 8 Not only is it a sales issue. It is also our 9 technicians and our office support that support the units 10 that are out in the field with parts and maintenance. So 11 in that, if you took an average of -- and if everybody 12 maintained their unit properly and bought a maintenance 13 contract of approximately $2,000 a year, you would be 14 looking at an additional $1.2 million. 15 This creates a huge economic loss to dealers, to 16 technicians, to the community. And I think it needs to be 17 considered. 18 As we go forward with this rule -- I understand 19 after-treatment -- and we also would like to have 20 after-treatment. But we want it to come from our 21 manufacturers, because we will be the ones that will be 22 held liable if it does not operate properly. 23 Unfortunately, our manufacturer does not build it for us. 24 But yet we will have to go outside and try and find 25 somebody that will build it. But yet we will be left PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 holding the bag if it does not perform correctly or if it 2 damages the engine, because it will not be a warrantable 3 situation. 4 One other thing about after-treatment -- and as 5 we go through these meetings we learn and more -- we have 6 to meet other certifications just like hospitals do. One 7 of those is UL 2200. 8 As you look at UL 2200 -- and I'm not the sure at 9 this point. I need to go back and check. But basically 10 I'm wondering if by installing a DOC or DPF 11 after-treatment, will we lose our certification because we 12 have now changed that package? 13 Once again, I think, in closing, this is a huge 14 economic loss to the dealers, which there are five in 15 California, their employees in the community. And I would 16 push towards going back to the non-road standards which 17 engines are available today and in our inventory. 18 Thank you. 19 ACTING CHAIRPERSON RIORDAN: Thank you, Mr. 20 Simpson. 21 Staff, comments? 22 STATIONARY SOURCE DIVISION CHIEF VENTURINI: I'd 23 like to make a general comment with respect to this. And 24 it basically I think takes me back somewhat when we first 25 considered this regulation in late '04. At that time we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 had estimated the availability of the .15 engines in this 2 category to be about 20 to 30 percent. And that's 3 basically the situation where we are today. We knew in 4 '04 that Caterpillar probably would not have engines 5 available to meet the .15. But there were other 6 manufacturers that did have engines. It's somewhat 7 unfortunate Caterpillar's chosen not to have an engine 8 available the meet this application. And the philosophy 9 at that time was that -- as was reiterated earlier -- that 10 the -- because of these emergency standby engines, they're 11 used many, many years, they're around a long time, 12 typically in urban areas, we felt it was very appropriate 13 that for when someone buys a new generator set, that they 14 purchase the cleanest of the clean that are available. 15 And I think that's where we still are -- the market demand 16 will be met by other dealers, other manufacturers' 17 engines. So the end-user will still be able to get 18 engines. 19 ACTING CHAIRPERSON RIORDAN: Okay. Any 20 questions, Board members? 21 Ms. Berg. 22 BOARD MEMBER BERG: What are we going to do about 23 the amount of time for the pipeline? Somebody that is 24 placing an order today, that by the time they get the 25 delivery of the engine, that they would have purchased a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 non-compliant engine? 2 STATIONARY SOURCE DIVISION CHIEF VENTURINI: Mr. 3 Berg, we think we've addressed that with the proposal that 4 we made today, one of our clarification proposals. That 5 will be made available as part of the 15-day comment 6 period. We'll talk to Mr. Simpson to see if that does 7 address the pipeline concern. We were aware there's a 8 pipeline concern. We think we've addressed it. We'll 9 share that language with Mr. Simpson. 10 BOARD MEMBER BERG: But would it be then our 11 intent that they will be able to take ownership of that 12 engine and it would be acceptable? 13 STATIONARY SOURCE DIVISION CHIEF VENTURINI: Yes. 14 That once a decision's been made, for example, a 15 district's issued it's authority to construct, the engine 16 that went with that authority to construct would be 17 satisfactory. 18 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: This 19 is Don Donohoue. Just a further point on that. 20 Some of these engines in some districts require 21 permits, others don't. There are a variety of mechanisms. 22 What we're trying to do with this language in further 23 clarifications that we make is to try and to outline some 24 of the types of things that districts could look at to 25 make a determination as to whether there has been a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 commitment, financial, and possibly design commitments to 2 have those engines. And that could range from purchase 3 order on the engine, even though you own it and it's being 4 built someplace else, the initial buy-off on the building 5 construction, authority-to-construct application for those 6 cases where it needs to be a permit. And to kind of 7 outline those type of documentations that the district 8 could use to actually say there's been a commitment made 9 to have that engine. And then that's appropriate even if 10 it's 18 months later when it finally gets installed in a 11 building, or that type of thing. 12 BOARD MEMBER BERG: Thank you. 13 ACTING CHAIRPERSON RIORDAN: Any other questions? 14 Thank you very much. 15 MR. SIMPSON: Thank you. 16 ACTING CHAIRPERSON RIORDAN: Mr. Cunha. And you 17 will be followed by Shirley Batchman. 18 MR. CUNHA: Good afternoon, Madam Chairman, Board 19 members, staff. 20 I will guarantee Peter that this would be his 21 best meeting and we would not make his life's as 22 non-rememborable. We want him to remember his last 23 meeting -- his last hearing. So we're going to do it 24 right. 25 First thing is I want to thank the staff, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 Board for allowing at the last in March to go back and 2 reevaluate the problems and issues. Sitting down very 3 closely with the industry, the industry that develops the 4 engines, as well as the user, being us. And we appreciate 5 the work and efforts that was done on the ag sector. The 6 wind machines taking the staff, Shirley will talk about 7 that part. 8 The part that I have, Madam Chair, is a question. 9 We have 35 air districts. And each of the air districts 10 sometimes do their own things. So especially under this 11 part that I would like to see if we can come to some type 12 of better language. In the middle of page 3, "What is the 13 environmental impact proposed revisions?" And staff's 14 recommendation is, first, we will recommend that Carl 15 Moyer program funding priority be given to stationary 16 agricultural pump applications meeting the .15. We 17 believe that this action will motivate engine dealers and 18 farmers to install a lower emitting engine. 19 The problem I have is that when you get into 20 that, you could have people that are applying under Carl 21 Moyer, and individual staff at an air district saying, 22 "Oh, you're going to fall into this line. You're going to 23 go buy this Komatsu" -- this Deutz, whatever -- "engine if 24 you want to get Carl Moyer funding." 25 Now, they have superseded what the Board has said PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 of California. No, there will not be this mandate under 2 the 175 of a .1 gram. It will be .22 or for Tier 3 3 standards, Tier 2 standards. 4 So I have great concerns. I know what the staff 5 is trying to do, and I respect and appreciate that. But I 6 know what 35 air districts will do and I know what staff 7 has done with Carl Moyer funding. To me, Carl Moyer 8 funding has standards that the state has developed. You 9 are going to hear some changes in November on Carl Moyer 10 activities on the regulations. That's where that 11 discussion should be. It should not be in here by saying 12 that. Because I could see what my farmers in other air 13 districts are going to be told. "You want money, you go 14 buy and you go find a .1." And there's three dealers out 15 there, but none of those are on my farm. It's a Komatsu 16 or it's Isuzu. But I've got John Deere parts. I've got a 17 John Deere stand for my pump and everything. Now I've got 18 to get rid of all of that because you're forcing me into 19 something. And the staff can use that as a leverage. 20 So I don't agree where it's at in this 21 discussion. Carl Moyer funding belongs in Carl Moyer 22 funding guidelines, not in something that gives too much 23 flexibility to staff and air districts. 24 And that's my main thing. 25 And there is an issue about the generators, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 emergency standby generators. And that issue needs to be 2 seriously looked at. 3 Yes, some engine manufacturers did not, for 4 whatever reasons. But I would hope today maybe that -- 5 this item needs to be really continually studied and not 6 too far out in the future. And maybe the staff and some 7 of those folks can come in with some workable solution on 8 that generator engine. Yeah, I am greatly concerned about 9 five dealers, because two of those dealers are in the San 10 Joaquin Valley. And they're in rural communities. If I 11 lose one of my dealerships I can cause severe economic 12 damage to my community, to our rural communities. 13 And so we need to try to figure out -- and staff 14 has been very cooperative in trying to go outside of the 15 box and deal with this issue. And I think we need to try 16 to deal with that on this generator issue. 17 I serve on the hospital -- the largest hospital 18 in the San Joaquin Valley. We own three major hospitals 19 plus a heart hospital. I just put in five V16 engines, 20 800,000 apiece. I don't want to touch those engines. I 21 want to put money into health care, the indigent and poor. 22 I don't want to touch those big old huge engines that 23 probably five of them fit in this entire room. So I think 24 we need to look at little tiny generators and things. 25 And I appreciate the staff's concerns about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 health care. That is very, very crucial. 2 So, again, I want to thank the staff. Madam 3 Chairman, I really do mean that. I appreciate it. 4 Peter, thank you for your openness of working 5 with us. Dan, Tony, we really do appreciate it. And I 6 think we can try to get through this generator thing 7 without hurting our dealers and our families and 8 communities. But we have to worry about health care. 9 But, again, we need to remove that language out 10 of there, because I know what's going to happen and we're 11 going to get jabbed. And it will go against everything 12 you've asked the staff to do. 13 ACTING CHAIRPERSON RIORDAN: Okay. Thank you, 14 Mr. Cunha. 15 Staff, do you want to comment on that issue of -- 16 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, we 17 propose the concept of saying where the state is paying a 18 substantial portion of the engine and where a cleaner 19 engine will serve the purpose and not be a hardship on the 20 grower, then that ought to be encouraged in the program. 21 I think we understand Mr. Cunha's concern that at times 22 this will get turned from an encouragement and something 23 to use for prioritization to an absolute regulation. And 24 I agree that we should work that out in the Carl Moyer 25 program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 But I think we still believe it's an important 2 way to mitigate this. Because we think in many instances 3 there will be a choice. And the only difference between 4 the engines and the utility to the grower will be the 5 emissions. And we would be hopeful then in that situation 6 Carl Moyer would say, "We'd like to buy the cleaner 7 engine." 8 ACTING CHAIRPERSON RIORDAN: I think, if I 9 could -- it would seem to me that at least that's on the 10 record. And, Mr. Cunha, if you need to point to Mr. 11 Scheible's comments, you can. 12 MR. CUNHA: Got it. Thank you very much. 13 ACTING CHAIRPERSON RIORDAN: Thank you very much. 14 Any questions for staff at this time? 15 Then let's move on to the final speaker, Shirley 16 Batchman. 17 MS. BATCHMAN: Madam Chairman and members of the 18 Board. Good afternoon. I'm Shirley Batchman. I am with 19 California Citrus Mutual. I haven't appeared before you 20 for a long time. So as a way of introduction. We're a 21 trade association. We represent all the citrus growers in 22 the State of California. 23 I'm here to speak specifically to the wind 24 machine issue. Wind machines are a critical component of 25 the citrus industry, as they are pretty much our only PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 means of protecting our crops from freezing conditions. 2 As Tony explained to you, there are other commodities that 3 use the machines. But citrus is by far and away the 4 largest user of them. 5 Tony demonstrated to you that they are used very 6 infrequently, most of the time not at all or significantly 7 less than 50 hours a year. 8 So having said all of that, I just wanted the 9 Board to hear that the industry that would be the most 10 impacted by this rule is very supportive of the amendments 11 that are being put forth by the staff. 12 And, number 2 -- and I think this is really 13 critical. I've run into this a lot since agriculture is 14 now being regulated. No one has known what a wind machine 15 was. Believe me, I've had lots of questions about them. 16 I want to compliment this staff right here for truly -- 17 when I went to them with my concerns, that they reached 18 out, they came down, they looked, they saw and they really 19 wanted to understand. And I think with their openness and 20 willingness to listen and to learn, we've come up with the 21 amendments that we have today. So I wanted you to be 22 aware that I am very appreciate of their outreach. 23 Thank you. 24 ACTING CHAIRPERSON RIORDAN: Thank you. It's 25 always very nice to hear when there are compliments for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 our staff. And I'm sure that they learned a lot from you 2 and about wind machines. 3 MS. BATCHMAN: Well, and I want tell you it's 4 very nice to be able to give compliments, because 5 sometimes I think we don't always do that. So -- 6 ACTING CHAIRPERSON RIORDAN: That's correct. 7 MS. BATCHMAN: -- thank you. 8 ACTING CHAIRPERSON RIORDAN: Thank you. 9 That ends our list of speakers. 10 I'm going to close our record. But before I do 11 that, Ms. Witherspoon, do you have any more comments on 12 this item? 13 EXECUTIVE OFFICER WITHERSPOON: Only if Board 14 members have remaining questions. 15 ACTING CHAIRPERSON RIORDAN: All right. And I'll 16 get to that in a moment. 17 I would like to close the record on this agenda 18 item. And the record will be reopened when the 15-day 19 notice of the public availability is issued. Written or 20 oral comments received after this hearing date but before 21 the 15-day notice is issued will not be accepted as part 22 of the official record on this agenda item. When the 23 record is reopened for a 15-day comment period, the public 24 may submit written comments on the proposed changes, which 25 will be considered and responded to in the final statement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 of reasons for regulation. 2 If there are any ex parte comments or disclosures 3 at this time -- are there any that we need to make as part 4 of the record? 5 Okay. Now, Board members, comments or questions 6 to staff, are there any at this time? 7 Then -- yes, Ms. Berg. 8 BOARD MEMBER BERG: I just would like to 9 reiterate the concern for the emergency standby equipment, 10 and really encourage staff to continue to work with the 11 stakeholders, especially on the Tier 3 and 4 issues. 12 Realizing that for the manufacturers we all need to keep 13 pushing forward to see what additional technologies we can 14 bring that are feasible. We always have to weigh though 15 the fact that if the non-road volume is low and we've made 16 allowances and the emergency equipment is low, we do have 17 to balance the economics. And so you guys have got to 18 continue to work together, and I would encourage both 19 sides to do that. 20 Thank you. 21 ACTING CHAIRPERSON RIORDAN: Okay. Any other 22 comments? 23 Okay. Board members, there's a resolution that 24 is before us. It's Resolution 05-33. If you'd take a 25 moment to look at it or if you already have -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 BOARD MEMBER LOVERIDGE: So moved. 2 ACTING CHAIRPERSON RIORDAN: There is a motion to 3 accept the resolution. 4 Is there a second to that motion? 5 BOARD MEMBER DeSAULNIER: Second. 6 ACTING CHAIRPERSON RIORDAN: Several seconds. 7 Any further discussion? 8 BOARD MEMBER DeSAULNIER: Well, I'd just like to 9 say if it doesn't work out, I think Peter should come 10 back. 11 (Laughter.) 12 BOARD MEMBER LOVERIDGE: That's an amendment to 13 the resolution. 14 ACTING CHAIRPERSON RIORDAN: That's an amendment. 15 All right. We'll add that, Peter. 16 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think 17 there's a wind machine on his property actually. 18 ACTING CHAIRPERSON RIORDAN: Oh, yes. He will 19 come back -- 20 BOARD MEMBER DeSAULNIER: That's a different wind 21 machine. 22 ACTING CHAIRPERSON RIORDAN: He'll come 23 back with -- he'll be one of those stakeholders when he 24 comes back. 25 Any further discussion? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 All those in favor of the acceptance of this 2 resolution please signify by saying aye. 3 (Ayes.) 4 ACTING CHAIRPERSON RIORDAN: Opposed, no. 5 Motion carries. 6 And we thank you all who've participated. 7 And, Peter, again thank you very much. And we'll 8 look forward to seeing you back as an annuitant. 9 STATIONARY SOURCE DIVISION CHIEF VENTURINI: 10 Thank you all. It's been a pleasure. 11 (Applause.) 12 ACTING CHAIRPERSON RIORDAN: And we'll move right 13 along to our next item. And that is going to be on Item 14 05-5-5. This is an informal update on liquefied natural 15 gas and compressed natural gas in California. 16 And we'll let staff sort of exchange places here. 17 As many of you know, several LNG import projects 18 have been proposed along the California coastline and 19 Baja, Mexico. The Schwarzenegger Administration has been 20 closely involved in monitoring these efforts and is 21 seeking to protect the state's prerogatives with respect 22 to siting environmental and safety requirements. These 23 are ongoing issues and will be very interesting to follow. 24 And the press of course has given us a lot of that 25 opportunity already. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 What hasn't gotten as much attention is how 2 important these facilities are and how they could affect 3 our programs here at the Air Resources Board. So that the 4 purpose of this briefing today is to have staff bring us 5 up to date on the status of the LNG projects; and then, 6 most importantly, to explain the air quality implication 7 of what's being considered and the steps being taken to 8 deal with those issues. 9 Let me call on our Executive Officer, Ms. 10 Witherspoon, to introduce the item. 11 EXECUTIVE OFFICER WITHERSPOON: Thank you, Madam 12 Chairman. 13 Staff's presentation will summarize several 14 ongoing efforts to import liquefied natural gas, or LNG, 15 into California and possible impacts that could have if 16 California's natural gas quality changes significantly as 17 a result. 18 Most sources of LNG have significantly different 19 energy content than the natural gas that currently exists 20 in California. Essentially they are hotter. Without 21 controlling the quality of this fuel, emission increases 22 and adverse impacts to the operation of stationary and 23 mobile sources could occur. 24 However, on the other hand, imposing strict 25 specifications may limit the sources of LNG supplies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 available to California. So there's a tension we need to 2 work our way through. 3 We also have a longstanding issue with respect to 4 the quality of domestic natural gas. Previously your 5 Board adopted specifications for compressed natural gas 6 used in motor vehicles. Those specifications limit the 7 amount of lighter ends in the gas. It increased the 8 temperature of combustion and, therefore, emissions. 9 Major pipeline companies have borne the primarily 10 responsibility for meeting those specifications through 11 blending of super clean out-of-state gas with less clean 12 gas emanating from the south central coast, southern San 13 Joaquin and parts of the L.A. Basin. But now they would 14 like us to shift some of that burden back to the gas 15 producers themselves by adopting new requirements for 16 natural gas quality in motor vehicles. 17 The management of natural gas involves several 18 different state and local agencies in California. Staff 19 is coordinating with these agencies on a regular basis to 20 address issues related to LNG importation and our natural 21 gas specifications. 22 With us today -- I hope when I turn around I'll 23 see him I will -- is Mr. David Maul from the California 24 Energy Commission, who will assist us in responding to any 25 questions the Board may have on natural gas supply and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 cost issues. 2 And at this time I'll ask Ms. Lesley Crowell of 3 the Stationary Source Division to make the presentation. 4 (Thereupon an overhead presentation was 5 Presented as follows.) 6 AIR RESOURCES ENGINEER CROWELL: Thank you, Ms. 7 Witherspoon. 8 Good afternoon, Madam Chairman and members of the 9 Board. 10 I am here today to provide an update on the 11 potential importation of liquefied natural gas to 12 California and our activities regarding compressed natural 13 gas. 14 --o0o-- 15 AIR RESOURCES ENGINEER CROWELL: Natural gas is 16 an important commodity in California because of its air 17 quality benefits. As we look to the future, we need to 18 evaluate our need for natural gas and its potential 19 sources. 20 Liquefied natural gas is a potential source of 21 natural gas for California as well as for the nation. 22 However, liquefied natural gas has energy-content issues, 23 as does compressed natural gas. 24 I will summarize these activities that we believe 25 envelope the significant issues and outline our steps to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 address them. 2 --o0o-- 3 AIR RESOURCES ENGINEER CROWELL: First background 4 on natural gas. 5 --o0o-- 6 AIR RESOURCES ENGINEER CROWELL: Historically 7 U.S. production of natural gas met our country's demand. 8 However, over the past two decades demand has outgrown our 9 production abilities. This gap is being met by natural 10 gas imports and is forecasted to become even larger. 11 Although most U.S. gas imports are delivered by pipeline, 12 a small but growing percentage will be delivered from 13 off-shore facilities as liquefied natural gas. 14 --o0o-- 15 AIR RESOURCES ENGINEER CROWELL: California's 16 demand accounts for about 10 percent of the U.S. 17 consumption. As you can see from the graph, natural gas 18 production in California only accounts for a small 19 fraction of this consumption. To make up for this 20 shortfall, California relies on imports via the pipeline 21 system. On the graph you will notice an increase followed 22 by drop in demand just before the forecasted data. This 23 increase is due to the cold spell, which increased demand 24 in the winter of 2000 and 2001. This was exacerbated by 25 the energy crisis of that time period. The public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 industry and commerce responded by reducing consumption. 2 This was done through conservation. However, population 3 and economic growth is projected to overcome this in the 4 future. 5 --o0o-- 6 AIR RESOURCES ENGINEER CROWELL: The interstate 7 pipeline system supplying California is very diverse and 8 has adequate capacity to support demand. However, 9 California is at the terminal end of these lines. If we 10 are to maintain adequate supply, the U.S. and California 11 needs new sources of supply. 12 --o0o-- 13 AIR RESOURCES ENGINEER CROWELL: Californians 14 receive 84 percent of their natural gas supply from 15 imported gas. Twenty-four percent is imported from 16 Canada, while the remaining imports are U.S. sources. 17 California domestic gas accounts for only 16 18 percent of the supply and comes from gas wells and 19 associated gas. Associated gas is gas produced in 20 conjunction with crude oil. 21 --o0o-- 22 AIR RESOURCES ENGINEER CROWELL: Californians 23 consume approximately 7 billion cubic feet of natural gas 24 a day, with the majority of its use in the industrial and 25 power generation sector. Residential accounts for about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 23 percent and commercial around 12 percent. Motor 2 vehicles account for less than 1 percent of the state's 3 consumption. 4 It should be noted that if natural gas were not 5 available for fueling electric powerplants, we would need 6 about 300,000 barrels of fuel oil, which is a much dirtier 7 fuel. 8 Natural gas continues to be a critical element in 9 our air pollution control strategies. 10 --o0o-- 11 AIR RESOURCES ENGINEER CROWELL: The wholesale 12 cost of natural gas is currently about $5 per million BTU, 13 or about 11 billion is spent annually on procuring natural 14 gas. 15 The consumer's cost for home heating is about 16 twice this rate. If supply does not keep up with our 17 growing demand, economics dictate that costs will 18 increase. 19 Note what the price spike was during the 20 previously mentioned energy crisis, where natural gas went 21 from $2 per million BTU to over $10, then settled back to 22 about $3, subsequently increased to about $5 and is 23 trending upward. 24 --o0o-- 25 AIR RESOURCES ENGINEER CROWELL: In California, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 two specifications exist for natural gas depending on its 2 use. The California Public Utilities Commission adopted 3 specifications to address safety issues and provide an 4 acceptable range of fuel quality for equipment. These 5 specifications have limits on energy content, inerts, 6 water and other parameters needed to insure equipment 7 performance and safety. 8 The ARB specifications were developed for motor 9 vehicles. Vehicle manufacturers desired to know the fuel 10 properties to allow them to optimize air quality, 11 performance and durability for vehicles. 12 The ARB specifications limit the amount of 13 specific components. We will discuss the significance of 14 this composition-type specification later in the 15 presentation. 16 --o0o-- 17 AIR RESOURCES ENGINEER CROWELL: Natural gas is 18 comprised primarily of methane and contains other 19 hydrocarbons such ethane, propane and butane in smaller 20 varying amounts. Ethane, propane and butane are 21 longer-chain hydrocarbons and have a higher energy content 22 than methane. The more ethane and propane in the natural 23 gas, the higher the energy content. Ethane, prop0ane and 24 longer-chain hydrocarbons can be processed out of the 25 natural gas. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 The amount of other hydrocarbons present in 2 natural gas is dependent on two factors: The quality of 3 the natural gas at the production source and the local 4 value of the other constituents that would warrant 5 additional processing costs. 6 --o0o-- 7 AIR RESOURCES ENGINEER CROWELL: In California, 8 the energy content of natural gas is fairly consistent and 9 does not typically fluctuate within an area. Historically 10 this quality of natural gas has been the result of the 11 natural gas provided through the interstate pipeline 12 system and far exceeds any regulatory requirement in 13 California. 14 On average, natural gas contains about 96 percent 15 methane and has an energy content of about a thousand 16 twenty BTU's per cubic foot. Natural-gas-burning 17 equipment has been optimized for this fuel to minimize 18 emissions and optimize performance. 19 However, the current Public Utilities Commission 20 specifications for natural gas have the potential to allow 21 an increase in the energy content. This may potentially 22 increase emissions and may affect performance and 23 durability of the equipment. 24 --o0o-- 25 AIR RESOURCES ENGINEER CROWELL: Imported PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 liquefied natural gas is expected to become an 2 increasingly significant source of natural gas supplies. 3 Quantities of liquefied natural gas imports into the 4 United States has risen dramatically in recent years, more 5 than doubling, from 85 billion cubic feet in 1998 to over 6 500 billion cubic feet in 2003. 7 --o0o-- 8 AIR RESOURCES ENGINEER CROWELL: There are 9 currently four liquefied natural gas storage and brief 10 vaporization terminals located long the Atlantic and Gulf 11 coasts. Historically these facilities have been 12 under-utilized. However, this situation has dramatically 13 changed. Utilization has increased and has warranted the 14 expansion of these facilities. 15 These expansions alone are not enough to 16 accommodate expected future increases of our natural gas 17 demand. Additional terminals are necessary. 18 --o0o-- 19 AIR RESOURCES ENGINEER CROWELL: To address 20 demand, about 50 new liquefied natural gas facilities have 21 been proposed since 2002, with 14 liquefied natural gas 22 facilities proposed on the west coast. However, the 23 proposed additional capacity far exceeds the growth in 24 demand for natural gas. Therefore, staff anticipates that 25 only a fraction of these facilities will be built. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 --o0o-- 2 AIR RESOURCES ENGINEER CROWELL: This slide shows 3 the potential sources of liquefied natural gas for 4 exporting to the West Coast. 5 --o0o-- 6 AIR RESOURCES ENGINEER CROWELL: The proposed 7 liquefied natural gas -- whoops -- the proposed liquefied 8 natural gas projects in California and Baja, California, 9 are shown here. Each facility is projected to cost about 10 $600 million to build and an additional 200 million for 11 each specialized ship. 12 Based on demand, staff anticipates that only one 13 or two projects will be successful. One terminal could 14 represent as much as 14 percent of California's demand. 15 Depending on the energy content of the liquefied natural 16 gas, this could impact the energy content of the natural 17 gas in the area surrounding the terminal, since emissions 18 from gas-fired source depend on the energy content of 19 natural gas. This is an important issue. 20 --o0o-- 21 AIR RESOURCES ENGINEER CROWELL: The siting 22 process includes filing applications with appropriate lead 23 agencies, obtaining permits, and may need government 24 approval. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 AIR RESOURCES ENGINEER CROWELL: The energy 2 content of the currently available liquefied natural gas 3 varies by source location. Most liquefied natural gas 4 sources have a higher energy content than our current 5 California natural gas. Typically liquefied natural gas 6 from the Pacific Rim has less methane and more ethane and 7 propane. These components increase the energy content and 8 could impact the operation of stationary and mobile source 9 equipment. As energy content increases, combustion 10 temperatures increase. Increases in combustion 11 temperatures typically translate to increases in NOx 12 emissions and reactivity. 13 In addition, equipment performance and durability 14 may be adversely impacted. 15 --o0o-- 16 AIR RESOURCES ENGINEER CROWELL: The energy 17 content of natural gas in California is typically around 18 1020 BTU's per cubic foot. The energy content of 19 liquefied natural gas is typically much higher than the 20 California average. In the chart above we have shown fuel 21 parameters of existing potential West Coast sources. 22 New liquefied natural gas sources are likely to 23 have different fuel parameters. From the chart, you can 24 see that small increases in ethane and propane can 25 significantly increase the energy content. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 --o0o-- 2 AIR RESOURCES ENGINEER CROWELL: To preserve 3 California's existing natural gas energy content, 4 liquefied natural gas needs to be processed. If 5 California insists on a consistent energy content for its 6 natural gas, it is unlikely that Californians will bear 7 all the costs of the processing. For instance, when 8 processing liquefied natural gas propane, which is a 9 valuable fuel, can be separated out. Economics may 10 encourage supply sources to separate propane at 11 production, which is closer to potential international 12 propane markets. 13 Another option is for the liquefied natural gas 14 terminal to possess the fuel. If the processing facility 15 is built during initial liquefied natural gas terminal 16 construction, the additional processing cost would be 17 small compared to the total facility cost. 18 Most potential liquefied natural gas suppliers 19 are willing to process the natural gas to meet the 20 existing energy content. They desire a standard that will 21 not change over time since they must make a capital 22 investment in equipment to meet our standards. 23 It is interesting to note that not all users 24 liquefied natural gas value low energy content natural 25 gas. Other areas, such as Japan, require higher energy PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 content natural gas and have optimized their equipment to 2 accommodate this fuel. 3 This completes our general discussion on 4 liquefied natural gas issues. I will return to liquefied 5 natural gas later in the presentation. 6 --o0o-- 7 AIR RESOURCES ENGINEER CROWELL: The second topic 8 for today's report is compressed natural gas. Compressed 9 natural gas is made by pressurizing natural gas supplied 10 by the pipeline for fueling motor vehicles. As discussed 11 with liquefied natural gas, the energy content of 12 compressed natural gas affects emissions and vehicle 13 performance. 14 --o0o-- 15 AIR RESOURCES ENGINEER CROWELL: In 1992 the Air 16 Resources Board adopted alternative fuels regulations for 17 motor vehicles. One of the specifications is for 18 compressed natural gas. The specifications for compressed 19 natural gas identify compositional limits for different 20 components and were based on the natural gas energy 21 content and composition generally available at the time. 22 Gas companies, engine manufacturers and other 23 interested parties helped in the development process of 24 the specifications. Based on these specifications, 25 engines were optimized for performance, durability and to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 minimize emissions. These specifications are more 2 stringent than the Public Utilities Commission's 3 specifications for pipeline gas. 4 In addition, it is important to note that there 5 are no corresponding national specifications for 6 compressed natural gas for motor vehicles. 7 --o0o-- 8 AIR RESOURCES ENGINEER CROWELL: The current 9 compressed natural gas specifications are prescriptive or 10 compositional. Each component has limits and you cannot 11 trade between two components such as ethane and propane. 12 --o0o-- 13 AIR RESOURCES ENGINEER CROWELL: Currently 88 14 percent of the California's supply meets the compressed 15 natural gas motor vehicle specifications. Associated gas 16 typically does not meet the compressed natural gas 17 specifications. 18 As previously mentioned, associated gas is gas 19 that is produced in conjunction with crude oil. 20 Associated gas has higher percentages of ethane, propane 21 and other components than natural gas from gas wells and 22 interstate pipeline gas. As a reminder, our 23 specifications apply to natural gas that is supplied for 24 motor vehicle use. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 AIR RESOURCES ENGINEER CROWELL: Associated gas 2 is mainly produced in the south central coast, marked as 3 SCC on the map, and the southern San Joaquin Valley, or 4 SSJV. As a result, these two areas of the state have 5 natural gas that has a higher energy content. 6 Small amounts of associated gas are produced in 7 Los Angeles Basin. However, due to the quantity produced 8 in relation to the amount of imports, this gas is able to 9 be mixed in the pipelines and generally does not affect 10 overall natural gas energy content. 11 --o0o-- 12 AIR RESOURCES ENGINEER CROWELL: Staff believes 13 that modifications to the compressed natural gas 14 specifications can be made that could provide flexibility 15 without sacrificing air quality or vehicle performance. 16 We believe that the provisions should be optional 17 and that emission benefits and vehicle performance should 18 be preserved. An optional specification to the current 19 prescriptive specifications could incorporate performance 20 parameters instead and could accomplish the same goal. 21 We will be investigating potential parameters, 22 specifically the Wobbe Index, which would control energy 23 content, and methane number, which would protect vehicle 24 performance and durability. Together, with the 25 appropriate values, these two parameters could be as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 protective as the current compositional specifications. 2 --o0o-- 3 AIR RESOURCES ENGINEER CROWELL: Currently staff 4 are working with various stakeholders to investigate the 5 effects of a fuels composition on stationary and mobile 6 sources. 7 --o0o-- 8 AIR RESOURCES ENGINEER CROWELL: The potential 9 for liquefied natural gas to significantly change the 10 existing natural gas's energy content has a broader impact 11 than issues related to the California compressed natural 12 gas specification. In fact it is a national issue. 13 At the national level the Federal Energy 14 Regulatory Commission and the U.S. Natural Gas Council is 15 looking into establishing an interchangeability standard 16 to address issues related to liquefied natural gas. 17 In addition, California has several ongoing 18 efforts. Staff is working with the Public Utilities 19 Commission, the Energy Commission, Department of Oil, Gas 20 and Geothermal Resources, and other stakeholders to 21 evaluate the issues. 22 --o0o-- 23 AIR RESOURCES ENGINEER CROWELL: In the late 24 1990's in response to concerns related to 25 high-energy-content natural gas several studies were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 initiated to evaluate the effects of the fuels parameters 2 on vehicle performance, durability and emissions. These 3 studies were supported by a collaborative government and 4 industry group. 5 Recently the Southern California Gas Company 6 directed a study to evaluate the fuels effects on 7 stationary source emissions and performance. This study 8 evaluated residential, commercial and industrial 9 equipment. 10 --o0o-- 11 AIR RESOURCES ENGINEER CROWELL: The impact of 12 fuel quality on total emissions is a function of several 13 variables, such as energy content and operational 14 parameters. Both test programs confirm that generally an 15 increase in energy content will increase oxides of 16 nitrogen, or NOx, emissions. Current information 17 indicates that NOx emissions increases are large enough to 18 be of concern. Additional tests will need to be conducted 19 to quantify the impact of the changes in energy content on 20 the emissions inventory. We are working with the Energy 21 Commission and industry to facilitate these additional 22 tests. 23 We'll continue to work with industry and other 24 interested stakeholders to evaluate issues and identify 25 potential solutions. The energy content of the fuel will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 become even more important as vehicle emission standards 2 become more stringent. 3 --o0o-- 4 AIR RESOURCES ENGINEER CROWELL: The energy 5 content of the fuel may also impact performance and 6 durability. Initial tests indicate that engines equipped 7 with advanced feedback control systems do not experience 8 any significant effects. 9 However, not all heavy-duty compressed natural 10 gas engines are equipped with advanced feedback controls. 11 Those engines with this technology -- without this 12 technology can experience significant performance and 13 durability effects from high energy content fuels. In the 14 same way, stationary applications can also experience 15 flame and combustion characteristics that will affect 16 performance and durability. 17 --o0o-- 18 AIR RESOURCES ENGINEER CROWELL: In February, the 19 ARB participated in a joint workshop with the Public 20 Utilities Commission, Energy Commission, and the 21 Department of Oil, Gas and Geothermal Resources. At the 22 workshop all the previously mentioned natural gas issues 23 were discussed, in addition to potential revisions to the 24 existing natural gas specifications and the potential 25 impacts of those revisions. This workshop helped provide PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 a foundation and perspective for agencies to develop 2 recommendations for resolving the issues related to the 3 energy content of natural gas. 4 All agencies and stakeholders are working 5 together cooperatively to address the issues. 6 --o0o-- 7 AIR RESOURCES ENGINEER CROWELL: The stakeholders 8 involved in this process represent a wide range of 9 interests. 10 --o0o-- 11 AIR RESOURCES ENGINEER CROWELL: Generally the 12 stakeholders agreed that the pipeline specifications 13 should be updated to limit the potential variation in the 14 energy content of natural gas. In addition, the 15 stakeholders agreed that the ARB should revise its 16 compressed natural gas specifications to incorporate 17 performance-based specifications, such as methane number 18 and Wobbe Index. However, optimum values for these 19 parameters are still being discussed and evaluated. 20 Generally, it was also agreed that any changes to 21 the pipeline and ARB's compressed natural gas 22 specifications should address air quality, performance and 23 durability impacts. 24 --o0o-- 25 AIR RESOURCES ENGINEER CROWELL: I would now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 discuss the next steps we plan to pursue. 2 --o0o-- 3 AIR RESOURCES ENGINEER CROWELL: We'll continue 4 to work with other state agencies and interested 5 stakeholders as we develop a draft proposal to revise our 6 compressed natural gas specifications. In developing the 7 proposal, consideration will be given to cost, supply, 8 equipment performance, durability, and air quality issues. 9 In the following months we plan to conduct 10 workshops to discuss these issues. We plan to bring 11 proposed revisions to the compressed natural gas 12 specifications to the Board for consideration in the first 13 half of next year. 14 This now concludes my presentation. 15 ACTING CHAIRPERSON RIORDAN: Thank you very much. 16 Very well done. 17 EXECUTIVE OFFICER WITHERSPOON: Madam Chairman, 18 when we scheduled this item for a Board update, we were 19 most concerned about telling you about fuel specification 20 issues, whether or not when you burned hotter fuel in 21 controlled sources like powerplants emissions would 22 increase, whether or not appliances would burn up, what 23 would happen to the vehicles in the fleet on the road. 24 But now we have other issues that are just coming to a 25 head with respect to the permitting of LNG facilities. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 And at the appropriate time we'll need to brief you on 2 those as well. 3 There is a facility offshore of Ventura that you 4 saw on the slide. And the federal government has asserted 5 that it is the permitting authority. The Governor has 6 answered that states have prerogatives as well. There is 7 some congressional activity seeking to sort of identify 8 who has what role. And because we are the pathway into 9 the rest of the country, President Bush has also staked 10 out sort of his territory and said he's prepared to 11 override any barriers to LNG importation. 12 So some of the finer points will be what 13 permitting requirements apply, whether offsets are needed 14 for offshore facilities, what is BACT. I guess the 15 closest analog might be power plants across the Mexican 16 border that he got involved with last year. 17 So it will be very interesting over the next 18 several months. And we'll continue to work on the fuel 19 specification issues for what happens when you burn the 20 gas. But on our way there we'll have to also resolve 21 questions about jurisdictional authorities and permitting 22 requirements and the like. 23 ACTING CHAIRPERSON RIORDAN: All the challenges 24 of siting. 25 We have four people signed up to speak. I'd like PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 to offer you about three minutes. 2 And David Maul, Joe Sparano, John Martini and 3 Rick Morrow, in that order. 4 David. 5 MR. MAUL: Good afternoon, Madam Chair and Board 6 members. I'm David Maul, Manager of the Natural Gas and 7 Special Projects Office at the Energy Commission. Just 8 want to make a few brief remarks here. 9 Primarily my reason here today is to let you know 10 that our Energy Commission's staff, management and 11 commissioners all strongly support the efforts of your 12 staff, looking at this particular issue and trying to 13 resolve it. As you know, there is a natural gas vehicle 14 specification that your Board has adopted. Your staff is 15 reexamining the need to either continue that or to modify 16 that, to allow greater sources of natural gas to be used 17 in California consistent with air quality requirements. 18 We very strongly support and actually share those same 19 requirements. 20 Current energy policy directs us and most 21 agencies to do what we can to increase production of 22 California domestic natural gas resources to try to 23 resolve our natural gas problems that we see today and in 24 the future, and also to explore and consider new 25 additional sources of natural gas including LNG. There PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 are issues associated with both of those. But our own law 2 that directs us, and we share a common principal in, that 3 we also must make sure that anything we do in the energy 4 area does not cause a significant environmental impact, 5 including air quality impact. So we share the duel 6 principles that your Board staff shares, and we encourage 7 this investigation. 8 Having worked very closely with your Board staff 9 throughout this process, I'm very optimistic that we will 10 find a resolution that allows more gas to be considered in 11 California to help resolve our natural gas price crisis 12 today. And it helps us -- keeps us out of a natural gas 13 supply crisis in the future. And does that in a way that 14 also meets air quality requirements that your board and 15 the districts must enforce. 16 According to that area, as your staff mentioned, 17 there are some additional actions that are needed. We 18 believe there's some additional data that needs to be 19 developed to determine the exact level of this air quality 20 specification and natural gas vehicle specification. 21 We're committed at the Energy Commission to provide 22 funding under our R&D program. We're working very closely 23 with your Board staff and other stakeholders to fund some, 24 if not most, of the needed R&D that's required to test 25 various sources of natural gas on some engines PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 applications that have not yet been tested. We developed 2 that program last year in working closely with your staff 3 and are committed to work closely together with that R&D 4 program. 5 With that, I'm available to answer any detailed 6 questions. But I think your staff have been very well 7 versed. I meet monthly -- at least monthly with most of 8 your staff on natural gas issues, including LNG. And 9 they've educated us, we've educated them. So it's been a 10 very good partnership so far. 11 Thank you very much. 12 ACTING CHAIRPERSON RIORDAN: Thank you very much. 13 And thank you for sharing some of that R&D funding. 14 That's very, very helpful. 15 MR. MAUL: Okay. Thank you, 16 ACTING CHAIRPERSON RIORDAN: Any questions, Board 17 members? 18 Thank you. 19 Joe Sparano. 20 MR. SPARANO: Good afternoon, Madam Chair, 21 members of the CARB Board. My names's Joe Sparano. I'm 22 President of the Western States Petroleum Association, or 23 WSPA. We're a nonprofit trade organization. We represent 24 26 companies that explore for or produce, refine, 25 transport and market petroleum and petroleum products here PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 in California and five other states. 2 Our members provide consumers and businesses in 3 the west the energy supplies they need through policies 4 that we believe and enforce that are socially, 5 economically and environmentally responsible. 6 I'd like to give you a little quick background on 7 this particular issue. The California Independent Oil 8 Producers Association, or CIPA, from whom you'll here in 9 just a minute, and WSPA have worked closely together on 10 natural gas issues; and on this particular issue probably 11 for five years closely with the your staff, and I think 12 cooperatively and to a good end as I'm seeing it. 13 Our position as the petroleum industry is 14 straightforward. We support natural gas supply that's 15 reliable, affordable, clean and safe. We carry broad 16 interests in the security of California's natural gas 17 market and in supplying California's overall energy needs. 18 And I think that's a critical element that needs to be 19 tied with just about everything that this organization 20 does and that the Energy Commission does and other 21 groups -- PUC. We have what appears to be a significant 22 gap growing between the sources of energy that are 23 available to us, the clean ones, and the demand for all 24 different types of energy. And I think something -- if I 25 can leave you with anything, that's a factor that I think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 must be considered in every debate from this point forward 2 until we satisfy ourselves that we're going to have enough 3 supply to meet demand and that it's going to be clean 4 enough to meet our needs. 5 We've been working, as I said, with CARB, the 6 Energy Commission, DOGGR, and Southern California Gas over 7 the past several years and more recently at the workshop 8 that was mentioned with the Public Utilities Commission. 9 I want to commend Dean and the CARB staff as well as the 10 Energy Commission and others for staying the course on 11 this difficult issue. It has been a long time and there 12 have been many debates and differences. But I think I see 13 us heading in a very good direction. 14 The issues are complicated and the stakes are 15 high. And usually that means money and markets and supply 16 capabilities and all of those come into play here. 17 The Energy -- the Integrated Energy Policy Report 18 prepared by the Energy Commission recognizes that natural 19 gas has a crucial role, and production of that gas is 20 needed to meet California's energy needs. As was showed, 21 our current natural gas is 16 percent of the total natural 22 gas that's used in the state. 23 I've got some specific observations and 24 suggestions. First we need to maximize existing 25 resources, whether they're in-state or intra -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 interstate, and allow opportunities for LNG to enter the 2 marketplace. 3 I think we're going to need to maximize our own 4 in-state production, and that benefits our consumers by 5 reducing the long-term upward price pressure that we've 6 seen and by reducing short-term price volatility that 7 results from shortages. 8 As I said earlier, the demand for energy of all 9 sorts including natural gas is expected to increase. We 10 feel a stable regulatory frame work is required to make 11 this work. 12 ACTING CHAIRPERSON RIORDAN: Mr. Sparano, can you 13 kind of conclude there with -- some concluding remark. 14 MR. SPARANO: Sure. 15 As I mentioned earlier, the importance here is to 16 balance operational flexibility, air quality and energy 17 supply impacts to the state from a variety of natural gas 18 sources. And they include in-state, interstate and the 19 proposed importation of natural gas. And we're fully 20 vested in this process. And I want the Board to know 21 that. The companies that I represent are anxious to 22 ensure that there is an adequate and affordable and clean 23 supply and that we are interested in working closely with 24 the CARB staff to make sure that happens. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 ACTING CHAIRPERSON RIORDAN: Thank you. And we 2 appreciate that very much. 3 John Martini, followed by Rick Morrow. 4 MR. MARTINI: Good afternoon, Madam Chair, 5 members of the Board. My name is John Martini with the 6 California Independent Petroleum Association. By way of 7 background, we represent the independent producers of oil 8 and natural gas in California. We have roughly 400 9 members, represent probably 95 percent of the 10 independently produced natural gas in California 11 currently. 12 We work very closely with WSPA. You just heard 13 from Mr. Sparano. And I would say we share in our 14 alignment with their recommendations and concerns. 15 My point in appearing here today is simply, one, 16 to commend the work of the staff. As Mr. Sparano 17 indicated, this has been an issue that has been 18 longstanding for our industry. It is, frankly, in our 19 mind, one of the most critical issues facing our industry 20 in California. And we would urge the Board's emphasis and 21 attention on this issue in the months going forward and 22 expedited revision of the ARB standards pursuant to 23 staff's recommendations. 24 We've taken a number of years getting to this 25 stage. And, frankly, it's been a very difficult road to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 haul for the smaller producers in the state. Now that -- 2 we've made some progress, we've had some setbacks over the 3 year. But your staff is to be commended because, frankly, 4 they've kept charging ahead and pulling us all along when 5 there were a number of times all of us wanted to step back 6 and fall back into some ditches and just shoot at each 7 other. 8 But now that they've pulled us to this point that 9 we're making some progress, we do feel -- we appreciate 10 where we're at and we again would urge the Board to take 11 as expeditious steps in implementing the recommendations 12 as absolutely possible. 13 In the current situation where we are my members 14 are limited in the amount of natural gas they can 15 ultimately put into the pipeline. We are 16 percent of 16 the supply. In-state production will never be the sole 17 provider of natural gas supply to California. We won't 18 represent that it is. However, we do believe that with 19 some modifications to some of the hurdles that are in 20 place right now, we can increase the amount of energy 21 we're providing to California's needs. 22 So with that, thank you for the opportunity to 23 speak here. We look forward to continue working with your 24 staff. 25 ACTING CHAIRPERSON RIORDAN: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 Appreciate that. 2 Mr. Morrow. 3 MR. MORROW: Thank you. And I will keep this 4 very brief, Madam Chair and the Board. 5 It's a privilege to be here. I think I've worked 6 on this problem about as long as anybody around; at least 7 about ten years now. And I am quite pleased to see the 8 fact that we are bringing the forces together where I can 9 follow CIPA and WSPA representatives to say we generally 10 agree on where we need to be going here. We agree more 11 than we disagree. And I think there's been some really 12 good progress over the last two years in particular, as we 13 all see the future of California looking at LNG being a 14 new supply source that we desperately need and to get the 15 rules right so we get economic supplies to our customers 16 and California can continue to prosper. 17 So we're very engaged on finding solutions that 18 will work for all of the stakeholders involved, without 19 degrading the environment, without degrading safety, and 20 without degrading performance of either the equipment or 21 the facilities that we have to deliver natural gas to over 22 6 million customers, including customers of San Diego Gas 23 and Electric, which is a very large customer of So Cal 24 Gas. 25 So we are really committed to this process. In PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 my capacity as Vice President of Customer Service, I deal 2 not only with the producers on one side and the suppliers 3 who interconnect with us, but also the large customers 4 that we serve. 5 And I also have responsibility for the Natural 6 Gas Vehicle Program. And nothing frustrates me more than 7 to have to a natural gas vehicle operator that they can't 8 run their vehicles now because the gas in the system 9 doesn't comply with the available specs in finding out 10 that they might have to drop back to using diesel. And 11 that is a concern that I have. And I'd like to get this 12 all resolved so the communities we serve, the customers we 13 serve can continue to prosper and develop clean air 14 solutions for their communities. 15 So with that, I will close my comments because I 16 think we're pretty well aligned. And we look forward to 17 getting resolution in a timely fashion. 18 Thank you, Dean, for teeing this up. 19 ACTING CHAIRPERSON RIORDAN: Thank you, Mr. 20 Morrow. Thank you very much. 21 I think staff, if you have anything else that 22 you'd like to contribute. We'll look forward to hearing 23 from you soon as you work on this project. 24 And, Mr. Maul, thank you again for joining us 25 today from the Energy Commission. And thank you for your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 dollars. We love to have those dollars. 2 And we'll conclude this item. 3 We do have one more item under Public Comment. 4 Ms. Desmond, if you'd come forward please. 5 I'm going to give you three and a half minutes to 6 make your presentation. 7 This is of course on -- no agenda item that's 8 before us, but on something that is of interest to the 9 Board. 10 MS. DESMOND: Thank you, Madam Chairman AND 11 members of the Board. Good afternoon, everyone. My name 12 is Brighid Desmond. I'm a parent volunteer at Chadwick 13 High School in Palos Verdes, California. And I'm here to 14 speak on behalf of our Biodiesel Club. 15 We have a dozen bright enthusiast teenagers who 16 have come up with a brilliant idea of making clean 17 renewable biodiesel fuel from waste restaurant vegetable 18 oil to run their school buses. They've done their 19 homework and know that they can produce this fuel for 20 about 70 cents a gallon. School administration is 21 thrilled with their idea and love the kids' passion for 22 sustainability, their entrepreneurial, spirit. They love 23 the positive impacts on air quality and health that would 24 come from this. They love the opportunity to reach out to 25 their immediate and larger communities. And they can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 certainly think of better things to do with their money 2 than spend it unnecessarily on diesel fuel. 3 One of the first things I did was to contact the 4 South Coast Air Quality Management District to see about 5 support and guidance. Initially I was told to submit a 6 proposal for partial funding through the Clean Air 7 Technologies Program. But later Dr. Ospital informed me 8 that the South Coast Air Quality Management District could 9 not support biodiesel because, I quote, "The fuel has not 10 been certified by the State of California since there are 11 no standards and it actually increases NOx, a precursor to 12 smog." 13 We're confused because a biodiesel board states 14 that biodiesel is registered as a fuel and fuel additive 15 of the Environmental Protection Agency and meets clean 16 diesel standards established by the California Air 17 Resources Board. Neat 100 percent diesel has been 18 designated as an alternative fuel by the Department of 19 Energy and the U.S. Department of Transportation. 20 Dr. Ospital has been extremely kind and patient 21 and supportive. And he's made it abundantly clear that 22 the last thing he wants to do is discourage the kids from 23 doing something clean and renewable. But that's just what 24 he's doing. And he's discouraging them from being 25 entrepreneurs and from engaging in our democratic process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 And we're all missing the opportunity to raise and groom 2 visionary stewards of this planet. 3 These kids come from the most advantaged, 4 educated sector of our society. They go to an extremely 5 academically rigorous school. And they are, without a 6 doubt, tomorrow's leaders. They're not willing to accept 7 what they're being told because it just doesn't make sense 8 to them. 9 They get the cost of our dependence on foreign 10 oil and the negative impacts of it on our national 11 security, economy and environment. They can tell you off 12 the top of their head what our gross national product is, 13 what our trade deficit is, what our national deficit is, 14 what our unemployment rates are. They get that we're 15 paying thousands of farmers millions of dollars to keep 16 millions of hectors of land fallow in order to 17 artificially inflate prices and we're spending billions of 18 tax dollars to pay the difference between what gas costs 19 at the pump and what it actually costs. 20 We understand there are a great number of issues 21 that come into play and we understand that the ARB and the 22 AQMD are in fact charged to deal with air quality. 23 We also understand the greenhouse effect on 24 global warming and get that biodiesel is carbon neutral. 25 We don't get the AQMD's position that biodiesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 will cause air pollution because it increases NOx 5 to 10 2 percent. We see that, but we also see and wonder does 3 anyone else see the 43 percent decrease in carbon 4 monoxide, the 56 percent decrease in hydrocarbons, the 55 5 percent decrease in particulates, the 90 percent decrease 6 in air toxics, the 80 to 90 percent decrease in -- and 7 we're only talking about the point at which that fuel is 8 burned in a motor vehicle. Where is the will to weld 9 piece of the equation? 10 ACTING CHAIRPERSON RIORDAN: Let me do this, 11 because I -- we have, believe it or not, somebody who has 12 a similar interest in a similar area, but in the northern 13 part of the state. And what we need to do for you and the 14 students that you're working with is to put you together 15 with staff. 16 MS. DESMOND: Okay. Thank you. 17 And what I would like to do, Madam Ombudsman, 18 who's sitting right back -- Ms. Desmond, turn around so 19 you can see Kathleen. Let me ask that you meet with her 20 immediately after our meeting. And then I'm going to ask 21 her to put you in touch with the appropriate staff. And 22 let's see what we can do -- get you on a course to perhaps 23 get some information that will be very helpful to you and 24 the students. 25 MS. DESMOND: Excellent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 ACTING CHAIRPERSON RIORDAN: And we appreciate 2 your coming all that distance and making your presentation 3 today. 4 MS. DESMOND: Thank you. We appreciate the 5 opportunity to be heard. 6 ACTING CHAIRPERSON RIORDAN: Thank you very much. 7 Board members, anything else that you'd like to 8 bring before us today? 9 I'll adjourn the meeting and say thank you to 10 staff. I appreciate all the hard work that went into 11 today's meeting. And we look forward to seeing you next 12 month in Fresno. 13 (Thereupon the California Air Resources 14 Board meeting adjourned at 3:00 p.m.) 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 CERTIFICATE OF REPORTER 2 I, JAMES F. PETERS, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing California Air Resources Board meeting was 7 reported in shorthand by me, James F. Peters, a Certified 8 Shorthand Reporter of the State of California, and 9 thereafter transcribed into typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said meeting nor in any 12 way interested in the outcome of said meeting. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 7th day of June, 2005. 15 16 17 18 19 20 21 22 JAMES F. PETERS, CSR, RPR 23 Certified Shorthand Reporter 24 License No. 10063 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345