0001 01 BEFORE THE STATE OF CALIFORNIA 02 AIR RESOURCES BOARD 02 03 03 04 04 05 05 06 IN THE MATTER OF THE PUBLIC ) 06 HEARING REGARDING AGENDA ) 07 ITEMS: ) 07 ) 08 96-5-1, 96-5-2, 96-5-3, 96-5-4 ) 08 AND 96-5-6. ) 09 _______________________________) 09 10 10 11 11 12 12 13 13 14 14 15 TRANSCRIPT OF PROCEEDINGS 15 16 SAN DIEGO, CALIFORNIA 16 17 FRIDAY, JUNE 14, 1996 17 18 18 19 19 20 20 21 21 22 REPORTED BY: 22 23 MICHELLE HANNAH, 23 CSR NO. 9985 24 24 JOB NO.: 25 NCO9170 25 0002 01 BEFORE THE STATE OF CALIFORNIA 01 02 AIR RESOURCES BOARD 02 03 03 04 04 05 05 06 IN THE MATTER OF THE PUBLIC ) 06 HEARING REGARDING AGENDA ) 07 ITEMS: ) 07 ) 08 96-5-1, 96-5-2, 96-5-3, 96-5-4 ) 08 AND 96-5-6. ) 09 _______________________________) 09 10 10 11 11 12 12 13 13 14 14 15 TRANSCRIPT OF PROCEEDINGS, TAKEN AT 15 16 1600 PACIFIC HIGHWAY, SUPERVISORS CHAMBERS, 16 17 ROOM 310, SAN DIEGO, CALIFORNIA, COMMENCING 17 18 AT 8:30 A.M., ON FRIDAY, JUNE 14, 1996, HEARD 18 19 BEFORE THE CALIFORNIA AIR RESOURCES BOARD, 19 20 REPORTED BY MICHELLE HANNAH, CSR NO. 9985, 20 21 A CERTIFIED SHORTHAND REPORTER IN AND FOR 21 22 THE STATE OF CALIFORNIA. 22 23 23 24 24 25 25 0003 01 APPEARANCES: 01 02 THE BOARD: JOHN D. DUNLAP, III 02 CHAIRMAN 03 PUBLIC MEMBER 03 04 EUGENE A. BOSTON, M.D. 04 PHYSICIAN AND SURGEON 05 MEMBER 05 06 LYNNE T. EDGERTON 06 LAW MEMBER 07 07 JOHN S. LAGARIAS, P.E. 08 SCIENCE MEMBER 08 09 BARBARA RIORDAN 09 SUPERVISOR, SAN BERNARDINO 10 COUNTY 10 OTHER DISTRICT MEMBER 11 11 JOSEPH C. CALHOUN, P.E. 12 AUTOMOTIVE ENGINEERING 12 MEMBER 13 13 M. PATRICIA HILLIGOSS 14 MAYOR, CITY OF PETALUMA 14 BAAQMD MEMBER 15 15 RON ROBERTS 16 SUPERVISOR, SAN DIEGO 16 COUNTY 17 SAN DIEGO APCD MEMBER 17 18 DOUG VAGIM 18 SUPERVISOR, FRESNO COUNTY 19 SAN JOAQUIN VALLEY UNIFIED 19 APCD MEMBER 20 20 PAT HUTCHENS 21 BOARD SECRETARY 21 22 22 23 23 24 24 25 25 0004 01 I N D E X 01 02 02 03 AGENDA ITEM: PAGE 03 04 96-5-1 26 04 05 96-5-2 57 05 06 96-5-3 69 06 07 96-5-4 82 07 08 96-5-6 98 08 09 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0004 01 SAN DIEGO, CALIFORNIA, FRIDAY, JUNE 14, 1996 02 8:30 A.M. 03 04 05 MR. DUNLAP: PLEASE COME TO ORDER. 06 AT THIS POINT, I'D LIKE TO ASK THE AUDIENCE 07 TO PLEASE RISE. 08 WE HAVE ASKED SUPERVISOR ROBERTS TO LEAD US 09 IN THE PLEDGE OF ALLEGIANCE. 10 (WHEREUPON THE PLEDGE OF ALLEGIANCE 11 WAS LED BY SUPERVISOR RON ROBERTS) 12 MR. DUNLAP: THANK YOU. 13 COULD I ASK THE BOARD SECRETARY TO PLEASE 14 CALL THE ROLL. 15 MS. HUTCHENS: EUGENE BOSTON. 16 DR. BOSTON: HERE. 17 MS. HUTCHENS: JOSEPH CALHOUN. 18 MR. CALHOUN: YES. 19 MS. HUTCHENS: LYNNE EDGERTON. 20 MS. EDGERTON: HERE. 21 MS. HUTCHENS: PATRICIA HILLIGOSS. 22 MS. HILLIGOSS: HERE. 23 MS. HUTCHENS: JOHN LAGARIAS. 24 MR. LAGARIAS: HERE. 25 MS. HUTCHENS: JACK PARNELL. 0005 01 BARBARA RIORDAN. 02 MS. RIORDAN: HERE. 03 MS. HUTCHENS: RON ROBERTS. 04 MR. ROBERTS: HERE. 05 MS. HUTCHENS: JAMES SILVA. 06 DOUG VAGIM. 07 MR. VAGIM: HERE. 08 MR. DUNLAP: THANK YOU. 09 GOOD MORNING. I'M JOHN DUNLAP, CHAIRMAN OF 10 THE CALIFORNIA AIR RESOURCES BOARD. AND I AM VERY PLEASED 11 TO CONVENE THE MEETING OF THE BOARD HERE TODAY IN 12 SAN DIEGO. 13 AS I WAS TRAVELING HERE, IT OCCURRED TO ME IT 14 IS A PERFECT TIME FOR US TO SCHEDULE A BOARD MEETING IN 15 SAN DIEGO, BECAUSE SAN DIEGO IS, OF COURSE, BEAUTIFUL ANY 16 TIME OF THE YEAR, BUT IS ESPECIALLY ATTRACTIVE NOW 17 CONSIDERING THE TEMPERATURES IN SACRAMENTO HAVE BEEN WELL 18 OVER A HUNDRED DEGREES FOR SOME TIME. 19 BEFORE WE BEGIN OUR FORMAL AGENDA TODAY, I'D 20 LIKE TO INTRODUCE RICHARD SOMMERVILLE, THE AIR POLLUTION 21 CONTROL OFFICER FOR THE SAN DIEGO AIR POLLUTION CONTROL 22 DISTRICT, TO THE NEWER MEMBERS OF THE AIR RESOURCES BOARD. 23 WE HAVEN'T HAD A CHANCE, SOME OF US, TO GET 24 TO KNOW MR. SOMMERVILLE. MR. SOMMERVILLE HAS BEEN 25 EMPLOYED BY THE SAN DIEGO AIR POLLUTION CONTROL DISTRICT 0006 01 SINCE 1973 AND WAS APPOINTED ITS AIR POLLUTION CONTROL 02 OFFICER IN 1978. DURING HIS TENURE, AIR QUALITY IN 03 SAN DIEGO COUNTY HAS IMPROVED, DESPITE THE AREA'S RAPID 04 POPULATION GROWTH. 05 FOR EXAMPLE, A.R.B.'S ANALYSIS OF SAN DIEGO 06 COUNTY AIR POLLUTION TREND SHOWS A 69 PERCENT DECREASE IN 07 POPULATION-WEIGHTED EXPOSURE TO OZONE LEVELS ABOVE THE 08 STATE STANDARD BETWEEN '82 AND '92. 09 MR. SOMMERVILLE HAS ALSO CONTRIBUTED HIS 10 TALENTS TO MANY STATEWIDE AIR POLLUTION CONTROL PROGRAMS, 11 PARTICULARLY THE SMOG CHECK EFFORTS. AS THE CHAIR OF THE 12 CALIFORNIA INSPECTION AND MAINTENANCE REVIEW COMMITTEE, 13 HE'S ALSO ASSISTED IN DEVELOPING THE ENHANCED SMOG CHECK 14 PROGRAM THAT'S NOW GETTING UNDERWAY. THIS PROGRAM 15 PROVIDES A SENSIBLE ALTERNATIVE TO THE U.S. E.P.A.'S SMOG 16 CHECK REQUIREMENTS. THE U.S. E.P.A. PROGRAM WOULD HAVE 17 FORCED THE CLOSURE OF MANY LEGIT SMOG CHECK STATIONS AND 18 WOULD HAVE FORCED A COSTLY AND INCONVENIENT PROGRAM ON 19 CALIFORNIA DRIVERS. 20 MR. SOMMERVILLE, DID YOU WANT TO SAY A FEW 21 WORDS TO THE BOARD THIS MORNING? 22 MR. SOMMERVILLE: WELL, FIRST OF ALL, CHAIRMAN 23 DUNLAP, BOARD MEMBERS, I WANT TO WELCOME YOU HERE. 24 I HAD A LITTLE PRESENTATION IN TERMS OF JUST 25 UPDATING THE BOARD MEMBERS AS TO WHAT IS GOING ON IN 0007 01 SAN DIEGO. WE HAVE BEEN VERY SUCCESSFUL HERE IN TERMS OF 02 THE AIR PROGRAM WITH DRAMATIC IMPROVEMENTS IN TERMS OF THE 03 FEDERAL AND STATE STANDARDS. 04 THE CLASSIFICATION IN SAN DIEGO FIRST WAS AT 05 SEVERE, BOTH THE STATE RECLASSIFIED US DOWN TO SERIOUS IN 06 1993. THE FEDERAL CLASSIFICATION WAS DROPPED TO SERIOUS 07 IN 1994. AND OF COURSE THAT MAKES QUITE A BIT OF 08 DIFFERENCE IN TERMS OF THE POLLUTION CONTROL REQUIRED ON 09 INDUSTRY AND SAVES THE REGION AND BUSINESSES A LOT OF 10 MONEY. 11 IN TERMS OF THE AIR QUALITY, AS YOU MAY KNOW, 12 WE DO HAVE A SIGNIFICANT TRANSPORT ISSUE WITH THE SOUTH 13 COAST AIR BASIN IN WHICH A LOT OF OUR VERY HIGH DAYS ARE 14 DUE TO TRANSPORT FROM THE SOUTH COAST. AND WE HAVE DONE A 15 LOT OF WORK IN TERMS OF EVALUATING TRANSPORT MECHANISMS 16 AND PROBABLY ARE AT LEAST AMONGST THE LEADERS IN TERMS OF 17 DOING THAT KIND OF ANALYSIS AND BEING ABLE TO DETERMINE 18 WHAT IS HAPPENING IN REGARD TO TRANSPORT. AND, IN FACT, 19 OUR METEROLOGIST WAS RECENTLY AWARDED METEROLOGIST OF THE 20 YEAR BY A NATIONAL ORGANIZATION FOR HIS WORK IN THAT 21 AREA. AND SEVERAL PAPERS HAVE BEEN PUBLISHED AS TO HOW WE 22 HAVE MANAGED TO DO THAT. 23 FOR EXAMPLE, WE ARE DOWN NOW TO, AS FAR AS 24 THE FEDERAL STANDARDS, IN 1993, 1994, 1995, TO A TOTAL OF 25 RANGING BETWEEN 9 AND 14 DAYS OVER STANDARD. AND AS FAR 0008 01 AS THE LOCAL DAYS, THOSE ARE DOWN INTO THE 1 AND 2 DAYS. 02 SO WE ARE VERY CLOSE TO THE FEDERAL STANDARD. IN TERMS OF 03 STATE STANDARD, WHICH AS YOU KNOW, OF COURSE, IS MORE 04 STRINGENT, THERE'S BEEN BETWEEN 80 AND 95 DAYS OVER 05 STANDARD. AND THE RELATIONSHIP THERE IS ABOUT 50/50 06 TRANSPORT. 07 AND THAT JUST SAYS THAT THIS SMOG PRODUCING 08 MECHANISM IS VERY NONLINEAR. AS YOU WORK ON THE HIGH 09 LEVELS, THAT DOES NOT MEAN THAT THE LOWER LEVELS ARE GOING 10 TO REDUCE AT THE SAME RATE. AND, IN FACT, IN SOME CASES, 11 IT CAN BE ARGUED THAT IF YOU DON'T WATCH WHAT YOU ARE 12 DOING, THE LOW LEVELS, NUMBER OF LOW LEVEL DAYS CAN 13 INCREASE. 14 WE HAVE NOT HAD A FIRST STAGE SMOG ALERT 15 SINCE 1991. AND WE ARE IN COMPLIANCE WITH ALL THE STATE 16 STANDARDS EXCEPT OZONE AND PM-10. AND IN REGARD TO PM-10, 17 I'M NOT SURE IF THERE IS ANY PLACE THAT IS IN COMPLIANCE 18 WITH PM-10, ONE OR TWO PLACES. SO THAT'S PRETTY 19 DIFFICULT. 20 ON THE FEDERAL SIDE, THE SAME THING APPLIES 21 WITH RESPECT TO OZONE. HOWEVER, WE ARE UNCLASSIFIED WITH 22 REGARD TO PM-10. SO IF YOU CONSIDER IN 1978 ARENA WE DID 23 NOT MEET ANY OF THESE STANDARDS EXCEPT FOR THE 24 SULFERDIOXIDE, WHICH HAS NEVER EXCEEDED, THERE HAS BEEN A 25 TREMENDOUS IMPROVEMENT IN THE AIR QUALITY IN SAN DIEGO AND 0009 01 THROUGHOUT THE STATE, BECAUSE WHAT'S HAPPENING IN 02 SAN DIEGO IS SIMPLY A SNAPSHOT OF WHAT'S HAPPENING IN THE 03 STATE. 04 OF COURSE IT'S VERY IMPORTANT FOR AN AIR 05 POLLUTION CONTROL OFFICER THESE DAYS TO POINT OUT WHERE 06 THE PROBLEM IS. AND SO I'M GOING TO DO THAT. WHEN YOU 07 LOOK AT THE EMISSIONS THAT ARE INVENTORIED, TOTAL PERSONAL 08 VEHICLES NOW ARE AROUND 49 PERCENT OF THE POLLUTION 09 PROBLEM IN TERMS OF OZONE. THAT WOULD BE OXIDES OF 10 NITROGEN AND HYDROCARBONS. 11 WHEN ONE LOOKS AT THE TOTAL OF ALL MOTOR 12 VEHICLES, IT GETS UP TO ABOUT 60 PERCENT OF THE PROBLEM. 13 AND WHEN YOU LOOK AT INDUSTRIAL AND COMMERCIAL ACTIVITIES, 14 IT'S UNDER 16 PERCENT. THIS NUMBER IS 15.6. SO WE CAN 15 SEE THAT THE TREMENDOUS EFFORT THAT HAS BEEN ACCOMPLISHED 16 SINCE 1980 IN REGARD TO INDUSTRIAL SOURCES. AND THE 17 RIGOROUS PERMITTING PROGRAM IN CALIFORNIA HAS BEEN VERY, 18 VERY EFFECTIVE IN REGARD TO INDUSTRIAL SOURCES. 19 BUT THE MOTOR VEHICLE FOR ALL SORTS OF 20 REASONS IS GOING TO BE THE FOCUS, I BELIEVE, IN THE 21 FUTURE. AND I THINK THAT MEANS A COUPLE OF THINGS. ONE 22 OF THEM IS THAT THE AIR RESOURCES BOARD, OF COURSE, IS 23 GOING TO HAVE TO INVEST MONEY AND RESEARCH TO KNOW WHAT IS 24 ACTUALLY HAPPENING IN REAL LIFE UNDER REAL USAGE 25 CONDITIONS TO THESE EMISSION CONTROL SYSTEMS AND FIND WAYS 0010 01 TO DEAL WITH THOSE ISSUES AND IMPLEMENT, OF COURSE, ALL 02 THE NEW CAR STANDARDS, INCLUDING THE Z.E.V. STANDARD. 03 BUT THE IMPORTANT THING IN THE FUTURE IS THE 04 RESEARCH AND THE EFFORTS TO KNOW WHAT'S COMING FROM 05 AUTOMOBILES, WHY IT IS COMING IN REAL LIFE IN SITUATIONS 06 NOT BASED ON NECESSARILY ON A TEST THAT IS NOT REAL WORLD 07 AND DO SOMETHING ABOUT THAT. AND THERE'S A LOT OF THINGS 08 THAT ARE GOING TO HAVE TO BE DONE. AND ATTENTION TO 09 DETAIL IS GOING TO MAKE THE BIG, BIG DIFFERENCE. 10 OF COURSE, LOCALLY, WE ARE INTERESTED IN 11 ADDRESSING THE MOTOR VEHICLE PROBLEM. WE HAVE DONE SOME 12 OF THE STANDARD THINGS, HELP PURCHASE C.N.G. BUSES, WHICH 13 HAS BEEN WORTH ABOUT 600 TONS OVER A 12-YEAR PERIOD. WE 14 HAVE CAR SCRAPPING PROGRAMS THAT ARE WORTH ABOUT -- THE 15 FIRST ONE IS 125 TONS OVER THREE YEARS. THE SECOND ONE 16 THAT'S IN PLACE NOW IS GOING TO GIVE US ABOUT 500 TONS 17 OVER ANOTHER THREE-YEAR PERIOD. 18 WE ARE SUPPORTING ALTERNATIVE FUELS. WE GAVE 19 MONEY FOR IMPLEMENTING INFRASTRUCTURE FOR NATURAL GAS AND 20 CONVERTING VEHICLES. WE ARE WORKING ON JOINING THE CLEAN 21 CITIES PROGRAM. WE ARE EVALUATING JOINING IN ON THE BLUE 22 SKIES PROGRAM. WE RECEIVE MONEY FROM THE ENERGY 23 COMMISSION AND MATCH THAT TO PROVIDE INCENTIVES FOR 24 PURCHASING ELECTRIC VEHICLES. 25 BUT ONE OF THE THINGS THAT I THINK I WANT TO 0011 01 BRING TO YOUR BOARD'S ATTENTION IS THE TREMENDOUS 02 POTENTIAL OF I & M FOR REDUCING POLLUTANTS, THE EXISTING 03 FLEET. IN MY OPINION, I THINK THAT NOBODY REALLY KNOWS 04 THE TRUE BENEFIT THAT CAN OCCUR THERE, BECAUSE THERE IS A 05 LITTLE BIT OF HAZE ABOUT WHAT HAPPENS WITH REAL VEHICLES 06 AT ALL TIMES. BUT WE KNOW IT'S BIG, VERY, VERY BIG. 07 AND I WOULD LIKE TO BRING YOUR ATTENTION TO 08 THIS NEUTRONICS SIGN OVER HERE. WHAT WE HAVE DONE IS 09 FUNDED A PROGRAM THAT WE THINK WILL FIT INTO WHAT IS GOING 10 ON IN I & M RIGHT NOW. WE HAVE ABOUT A MILLION AND A HALF 11 VEHICLES. 30 PERCENT OF THOSE ARE 1975 TO 1981, WHICH IS 12 THE PRECATALYST OLD TECHNOLOGY. THOSE SYSTEMS ARE WHAT IS 13 TERMED OPEN LOOP. AND THEY HAVE VERY SIMPLE OXIDATION 14 CATALYST IN THEM, WHICH TODAY, UNLESS THEY HAVE BEEN 15 REPLACED, ARE PROBABLY NOT WORKING VERY WELL. 16 THE MAJORITY OF THESE VEHICLES ARE OWNED BY 17 PEOPLE WHO CANNOT AFFORD A BETTER VEHICLE. AND THIS 18 LEAVES A FINANCIAL ISSUE WITH RESPECT TO GETTING THOSE 19 VEHICLES REPAIRED AND BROUGHT BACK UP. 20 AND NEUTRONICS CAME TO US AND TALKED TO US 21 ABOUT A SYSTEM THAT THEY HAD THAT THEY HAD BEEN DESIGNING 22 AND, IN FACT, IMPLEMENTING IN GERMANY. AND I THINK IT WAS 23 SOMETHING LIKE 1986 WHEN THEY STARTED DOING THIS IN 24 GERMANY. AND THERE'S ABOUT 30,000 GERMAN MERCEDES RUNNING 25 AROUND IN GERMANY WITH THIS SYSTEM ON IT. 0012 01 WHEN WE STARTED WORKING WITH THEM, WE SAID, 02 "WELL, THAT'S FINE." YOU KNOW, THE STANDARD THING. "IT 03 MIGHT WORK IN GERMANY OR THE SOUTH COAST, BUT IT MAY NOT 04 WORK HERE." AND SO WE STARTED A PROCESS OF SEEING HOW 05 GOOD THIS SYSTEM IS. AND WE HAVE HELPED TEST THE SYSTEM 06 AND GET IT CERTIFIED, DONE DURABILITY TESTING. 07 AND WE CAN SAY WITH ASSURANCE THAT YOU WILL 08 GET AT ABOUT 30,000 MILES A 50 PERCENT REDUCTION IN 09 HYDROCARBONS AND OXIDES OF NITROGEN. 10 AND IT'S BEEN CERTIFIED BY THE AIR RESOURCES 11 BOARD. AND I AM NOT SURE HOW MANY ADD-ON DEVICES THE AIR 12 RESOURCES BOARD HAS ACTUALLY CERTIFIED AS EFFECTIVE AND 13 DONE ALL OF THIS DURABILITY TESTING ON IT, AND I'M NOT 14 SURE IF IT'S MORE THAN ONE, BUT I KNOW THIS IS ONE OF 15 FEW. 16 WHAT WE ARE DOING IS WE HAVE FUNDED NOW THE 17 NEXT STAGE OF THAT. AND THAT IS WE HAVE A PROGRAM TO 18 RETROFIT ABOUT 1,350 VEHICLES. SO WE HAVE A TWO-PRONG 19 APPROACH THAT WE ARE DEVELOPING IN SAN DIEGO, AND WE ARE 20 HOPING TO HOOK THIS TO I & M AT THE RIGHT TIME, BECAUSE 21 WHEN THESE CARS START TO GET THE LOADED MODE TEST, THEY 22 ARE GOING TO FAIL. THEY ARE NOT GOING TO GET PAST THE 23 LOADED MODE TEST IF THE CUT POINTS ARE SET SO THAT A GOOD 24 CATALYST IS REQUIRED. 25 AND PEOPLE ARE GOING TO EITHER HAVE TO CRUSH 0013 01 THESE CARS, BECAUSE YOU REALLY CAN'T FIX THEM WITHOUT 02 SPENDING TOO MUCH MONEY, OR THERE ARE GOING TO BE VEHICLES 03 THAT NEED QUITE A BIT OF MONEY TO FIX, BUT THE ENGINE IS 04 BASICALLY SOUND. AND IF THE ENGINE IS BASICALLY SOUND, 05 FOR $500 YOU CAN PUT A NEUTRONICS SYSTEM ON THERE AND GO 06 FROM AN OXIDATION CATALYTIC, A VERY SIMPLE CATALYTIC, TO A 07 THREE-WAY CATALYTIC WITH A THREE CLOSED LOOP OPERATION. 08 WE WILL GET ABOUT 57 TONS OVER THE PERIOD OF 09 EVALUATION FOR THIS SYSTEM WITH JUST THAT MANY CARS. IT'S 10 VERY EFFECTIVE, AND THE COST EFFECTIVENESS IS AROUND $5 TO 11 $6 A TON. I & M IS AROUND $6 TO $7 A TON. THIS IS A 12 VERY, VERY COST EFFECTIVE APPROACH. 13 FUNDING IT IS GOING TO BE THE ISSUE. HOW DO 14 WE FUND IT, AND HOW DO WE INTEGRATE IT? BUT THE BENEFITS 15 ARE TREMENDOUS, AND I WOULD STRONGLY SUGGEST THAT THIS IS 16 ONE ASPECT THAT SHOULD BE CONSIDERED IN TERMS OF STATEWIDE 17 IMPLEMENTATION, BECAUSE PERSONALLY, I THINK WHEN ALL OF 18 THESE GROSS POLLUTERS ARE IDENTIFIED, THERE'S GOING TO BE 19 A REAL PROBLEM, BECAUSE PEOPLE ARE GOING TO HAVE A HARD 20 TIME GETTING THEM FIXED. 21 THE COST LIMIT, THERE IS NONE. AND THERE'S 22 EITHER GOING TO BE A HUGE REVOLT OR WE'RE GOING TO HAVE A 23 WAY TO ENABLE THEM TO DO WHAT'S RIGHT. 24 I'D LIKE TO INTRODUCE TO YOU KEITH -- AM I 25 GOING TO SAY IT RIGHT -- FRANKENBINER. AND I WOULD LIKE 0014 01 HIM TO GO THROUGH NEUTRONICS SYSTEM FOR YOU AND RESPOND TO 02 ANY QUESTIONS YOU MIGHT HAVE. 03 KEITH IS THE PRESIDENT OF NEUTRONICS. 04 MR. FRANKENBINER: I KNOW THIS SOUNDS LIKE A 05 COMMERCIAL TO YOU, BUT BELIEVE IT OR NOT, IT'S NOT. IN 06 THE SENSE THAT WE HAVE BEEN IN THIS BUSINESS ABOUT 07 12 YEARS -- 08 MR. DUNLAP: I THINK THERE'S A PORTABLE MIKE THERE 09 YOU MIGHT BE ABLE TO USE. 10 MR. FRANKENBINER: I WOULD LIKE TO SAY THAT WHILE 11 THIS SOUNDS MAYBE LIKE NEW TECHNOLOGY HERE, IT'S NOT NEW 12 TECHNOLOGY AROUND THE WORLD. AND THE PROBLEM IN THE 13 WORLD, BELIEVE IT OR NOT, IS THAT THEY ARE 20 YEARS BEHIND 14 US OR PROBABLY 30 YEARS BEHIND CALIFORNIA IN THE SENSE 15 THAT THEY ARE JUST NOW STARTING TO RECOGNIZE THEIR 16 EMISSION PROBLEM, AND THE MANUFACTURERS OF VEHICLES THERE, 17 THE REAL ANSWER TO THEM HAS ALWAYS BEEN BUY A NEW CAR. 18 IN GERMANY, WE HEARD THIS STORY. AND THEY 19 WERE CERTAIN ENVIRONMENTAL GROUPS, PRIMARILY THE GREENS 20 THERE, WHO SAID THAT'S NOT SATISFACTORY. OUR PEOPLE 21 CAN'T ALL AFFORD NEW CARS. AND EVEN IF THEY COULD, IT'S 22 NOT GOING TO BE THE ANSWER TO THE LONG-TERM PROBLEM, 23 BECAUSE WE STILL HAVE THIS AGING FLEET OUT THERE THAT'S 24 NOT GOING TO GO AWAY. 25 SO SENSIBLY, OURSELVES AND MANY OTHER 0015 01 COMPANIES ADDRESSED THIS PROBLEM WITH THEM. THE SEEKER TO 02 IT REALLY IS CERTIFICATION. IF YOU DON'T HAVE DURABILITY, 03 YOU CAN MAKE ALL KINDS OF CLAIMS. 04 SO WE APPROACHED SAN DIEGO AND RICH AND THE 05 SUPERVISORS ABOUT FOUR YEARS AGO. AND, AGAIN, THERE WAS 06 THIS ISSUE OF DURABILITY, PROOF OF CONCEPT; WE KNOW YOU 07 CAN MAKE THESE CLAIMS IN GERMANY. AND RICH SAID, "WELL, I 08 DON'T OWN A MERCEDES. I DON'T KNOW OF ANYBODY ELSE IN MY 09 GROUP THAT DOES. HOWEVER, WE DO HAVE A LOT OF OLDER 10 VEHICLES HERE, AND WE'D LIKE TO SEE WHAT YOU GUYS CAN DO 11 TO FIX THOSE, TOO." 12 SO WE STARTED ON THIS PROGRAM AT THAT POINT 13 AND DEVELOPED THIS FEEDBACK CONTROL. THERE'S NOTHING 14 UNIQUE ABOUT WHAT WE ARE PROVIDING. IT'S AUTOMOTIVE KNOWN 15 TECHNOLOGY. AND REALLY THE ONLY SECRET THAT WE HAVE DONE 16 IS APPLY NEW CAR TECHNOLOGY TO THESE OLDER CARS. 17 OSTENSIBLY, THEY DIDN'T HAVE CLOSED LOOP AND 18 FANCY COMPUTERS. IT'S NOTHING MORE THAN A MICROPROCESSING 19 CHIP THAN YOU HAVE IN YOUR COMPUTER AT HOME. IT BASICALLY 20 NEEDS A SENSOR. SO WE BRING AN OXYGEN SENSOR INTO PLAY, 21 THE SAME THAT'S ON ALL NEW CARS. THE SECRET IS REALLY THE 22 CATALYTIC. WITHOUT THAT, YOU ARE OUT OF CONTROL. THESE 23 OLD CARS ARE THAT WAY. SO WHAT WE'VE DONE IS PRODUCED A 24 THREE LOOP CATALYTIC. AND THAT'S REALLY THE ANSWER TO 25 FIXING MOST OF THE OLD CARS. 0016 01 ONE OF THE PROBLEMS IN GERMANY -- AND I WILL 02 JUST BRIEFLY MENTION IT TO YOU, AND YOU WILL HEAR IT 03 HERE -- AS VEHICLES FAIL THE LOADED MODE TEST, THE FIRST 04 AND SIMPLEST RESPONSE THAT A MECHANIC'S GOING TO GIVE IS 05 REPLACE THE CATALYTIC AND IT WILL GIVE YOU AN EARLY FIX TO 06 THE PROBLEM. 07 WHEN YOU ARE IN THIS BUSINESS A LITTLE 08 LONGER, YOU START TO REALIZE WHAT CAUSED THAT CATALYTIC TO 09 FAIL. IT DIDN'T FAIL JUST BECAUSE OF AGE, NECESSARILY, 10 BUT IT PROBABLY FAILED BECAUSE THE CAR WASN'T MAINTAINED 11 AND TUNED. 12 SO WHEN YOU GET DOWN TO WHAT DO YOU DO FOR 13 CONTROL WITH THESE SMOG REPAIR CENTERS, YOU'VE GOT TO 14 EDUCATE THEM ON WHAT ARE THE REAL CAUSES OF CATALYTIC 15 FAILURE. MOST OF IT IS IGNITION PREFAIL. SOME OF IT CAN 16 BE JUST POOR TUNING. 17 HOWEVER, THE SECRET TO IT, IN OUR VIEW IS: 18 YES, YOU CAN REPLACE THE CATALYTIC, BUT IF YOU DON'T 19 REALLY GET TO THE HEART OF WHAT CAUSED THE FAILURE, YOU 20 ARE GOING TO HAVE ANOTHER FAILURE. 21 AND THIS IS EXACTLY WHAT HAPPENED IN 22 GERMANY. THEY HAD A TWO-LEVEL PROGRAM. THEY FUNDED 23 CATALYTICS ONLY FOR ABOUT 6,700 DEUTSCHEMARK. THEY FUNDED 24 RETROFIT FEEDBACK CONTROL FOR ABOUT 1,200 DEUTSCHEMARK. 25 AT THE END OF NINE MONTHS, THE FIRST YEAR OF THE 0017 01 PROGRAM THEY HAD 70 PERCENT FAILURE OF THE OPEN LOOP 02 OXIDIZED SYSTEMS. THEY STOPPED THAT END OF THE FUNDING 03 AND SAID, IF YOU DON'T HAVE CATALYTIC THREE WAY CONTROL 04 CLOSED LOOP, WE'RE NOT INTERESTED IN FUNDING YOU. 05 THE SAME ISSUE IS GOING TO HAPPEN HERE. SO 06 ONE OF THE THINGS THAT WE ARE TRYING TO DO IS EDUCATE 07 THROUGH THE DISTRICT AND OBVIOUSLY THROUGH THE SMOG REPAIR 08 THE FACT THAT THE CATALYTIC REPLACEMENT BY ITSELF IS 09 FINE, BUT YOU BETTER UNDERSTAND CLEARLY WHY IT FAILED AND 10 ADDRESS THAT ISSUE, TOO. 11 I'D BE MORE THAN HAPPY TO ANSWER ANY 12 QUESTIONS. 13 MR. DUNLAP: ANY QUESTIONS? 14 MR. CALHOUN? 15 MR. CALHOUN: I WOULD LIKE TO MAKE A COMMENT 16 FIRST. MR. SOMMERVILLE MENTIONED THE FACT THAT WE OUGHT 17 TO TAKE A LOOK AT THE EMISSIONS THAT ARE COMING FROM THE 18 CAR. I KNOW THE AIR RESOURCES BOARD HAS SURVEILLANCE 19 PROGRAMS, SO THAT'S ONGOING. AND MAYBE IT ISN'T AS 20 COMPREHENSIVE AS IT SHOULD BE, BUT IT IS SOMETHING THAT'S 21 ONGOING. AND I WOULD LIKE YOU TO ELABORATE ON IT, IF YOU 22 WOULD LIKE. 23 AND YOU ALSO MENTIONED THE POTENTIAL FOR 24 I & M. I'M A FIRM BELIEVER THAT WE PLACE TOO MUCH 25 0018 01 EMPHASIS ON INSPECTION AS OPPOSED TO THE MAINTENANCE, 02 WHICH IS KIND OF WHAT YOU ALLUDED TO. AND IN TERMS OF THE 03 DEVICES YOU HAVE, I DON'T THINK THERE'S ANY QUESTION ABOUT 04 WHAT TECHNOLOGY OF THAT TYPE WOULD PROBABLY WORK ON THE 05 VEHICLE. 06 ONE OF MY BIG CONCERNS ABOUT THE PROGRAM IS 07 THE DURABILITY OF IT. AND I TALKED ABOUT THAT EARLIER 08 TODAY. I THINK THAT IS ABSOLUTELY ESSENTIAL THAT ANY 09 SYSTEM THAT IS PLACED ON CARS THAT ARE IN USE ALSO APPLIES 10 TO THE NEW VEHICLE TECHNOLOGY. 11 AND I GUESS ONE OF THE QUESTIONS I WOULD LIKE 12 TO ASK IS THE EXTENT TO WHICH THIS SYSTEM HAS BEEN VALUED. 13 MR. SOMMERVILLE: LET ME RESPOND TO THE QUESTION. 14 IN THE FIRST INSTANCE ABOUT THE NEW CAR, 15 ABOUT THE SURVEILLANCE, YES, I'M NOT SAYING THAT THE AIR 16 RESOURCES BOARD IS NOT DOING ANYTHING. I'M SAYING THAT 17 THE AIR RESOURCES BOARD -- AND I RECOGNIZE IT AS A 18 BASELINE -- IS DOING THE MOST SURVEILLANCE IN TERMS OF 19 EMISSION CONTROLS ON MOTOR VEHICLES IN THE WORLD 20 PROBABLY. 21 BUT WITH THAT AS A BASELINE, IT'S BECOMING 22 CLEAR, IN THE DETAILS OF WHAT HAPPENS IN THE REAL WORLD, 23 THAT MORE ATTENTION CAN BE TAKEN IN TERMS OF WHAT'S 24 HAPPENING IN REAL LIFE DRIVING. AND I AM JUST SUGGESTING 25 THE COMMITMENT TO SPEND THE MONEY TO DO THE RESEARCH TO 0019 01 UNDERSTAND WHAT IS REALLY HAPPENING IN THE DETAILS NOW. 02 THIS IS WHAT'S GETTING TO US, IS THE DETAILS. AND DO 03 SOMETHING ABOUT THAT. 04 CLEARLY THE AIR RESOURCES BOARD IS TOP GUN. 05 AND THE SURVEILLANCE IS A GOOD PROGRAM. BUT I'M SAYING 06 THERE'S THIS NEXT INCREMENTAL STEP. 07 IN TERMS OF THIS SYSTEM, WE CAN PROVIDE YOU A 08 REPORT ON THE DURABILITY TESTING. IT'S HERE. IT WAS DONE 09 AND TESTED. THE STANDARD DURABILITY TESTING THAT IS DONE 10 FOR, LIKE, NEW CARS WAS BASICALLY DONE ON A FLEET OF 11 VEHICLES THAT REPRESENTED AN ARRAY. 12 SO THERE'S SUBSTANTIAL WORK DONE. AND IT WAS 13 ALL DONE PURSUANT TO A.R.B. PROTOCOL, AND IT'S ABOUT AS 14 GOOD AS YOU CAN DO. IT'S A STANDARD APPROACH TO 15 DURABILITY TESTING. SIX VEHICLES WERE DONE FOR 30,000 16 MILES EACH. IT TOOK US A LITTLE OVER A YEAR TO DO THE 17 DURABILITY TESTING. THE CRITERIA -- AND THE BOARD IS 18 AWARE OF THIS. YOU HAVE TO MEET A MINIMUM OF A 20 PERCENT 19 REDUCTION OF TWO OF THE THREE MEASURED GASES AND NO 20 INCREASE IN THE THIRD. THAT CRITERIA, WHILE IT DOESN'T 21 SOUND TOUGH, BECOMES VERY TOUGH WHEN YOU ARE DEALING WITH 22 CARS THAT WE DID THAT ARE 135,000 MILES STARTING. 23 WE DID NOT PRESELECT THEM. THE BOARD 24 PRESELECTED THE VEHICLES FOR US. SO WE HAD ACTUALLY NO 25 INPUT OR MODIFICATION TO WHAT THE VEHICLES LOOKED LIKE OR 0020 01 HOW THEY WOULD PERFORM. I'M NOT GOING TO SAY TO YOU THAT 02 OLD CARS ARE NOT A PROBLEM, BECAUSE THEY ARE, AND WE HAD 03 SOME PROBLEMS WITH THIS FLEET PUTTING 30,000 MILES ON 04 THEM. 05 AND THAT'S WHY I GO BACK TO IT AND SAY IT'S 06 ONE THING TO ADD THE TECHNOLOGY AND HAVE A BIG SPLASH TO 07 START WITH. A FRESH CATALYZER IS GOING TO GIVE YOU A BIG 08 REDUCTION IN HYDROCARBONS AND C.O., BUT WHAT ARE YOU GOING 09 TO LOOK LIKE AFTER TWO OR THREE YEARS. 10 WHAT WE'VE LEARNED -- AND I GO BACK TO THIS 11 EDUCATIONAL THING FOR THE REPAIR INDUSTRY -- IS YOU HAVE 12 TO MAINTAIN THE CARS. IF YOU DON'T, I DON'T CARE HOW GOOD 13 YOUR SYSTEM IS, IT WILL ULTIMATELY FAIL AGAIN. AND THE 14 FAILURES THAT WE SEE ARE NORMALLY FROM IGNITION PROBLEMS. 15 THE VEHICLE IS NOT MAINTAINED WELL. IT IS NOT TUNED. 16 BELIEVE IT OR NOT, EVEN OIL CHANGES AND FILTERS MAKE THE 17 DIFFERENCE. 18 MR. DUNLAP: MR. LAGARIAS. 19 MR. LAGARIAS: IS THIS RETROFIT PROGRAM DESIGNED 20 PRIMARILY TO CARS THAT ALREADY HAVE THREE WAY CATALYSTS? 21 ARE YOU PROPOSING TO INSTALL THESE ON PRECATALYST CARS? 22 NOW, THAT'S PRE '82, AND THAT MEANS THAT THESE CARS HAVE A 23 VALUE IN THE ORDER OF A THOUSAND DOLLARS OR SO. 24 SO HOW MUCH ARE YOU GOING TO SPEND ON 25 UPGRADING? 0021 01 MR. FRANKENBINER: YOU HIT ON TWO VERY KEY 02 POINTS. FIRST OF ALL, I THINK YOU HAVE TO LOOK AT YOUR 03 INVENTORY AND SEE WHERE THE BULK OF YOUR EMISSIONS ARE 04 COMING FROM. IF THEY ARE COMING FROM PRE '80, BECAUSE 05 THAT WAS ESSENTIALLY THE INTRODUCTION OF THREE-WAY 06 CATALYSTS, THERE'S ANOTHER ISSUE, BECAUSE THAT FLEET IS 07 AGING, TOO. BUT THERE'S KNOWN TECHNOLOGY TO FIX THOSE. 08 WE SPECIFICALLY WITH THE DISTRICT SAID WE 09 WANT TO ISOLATE A FLEET. AND WE HAVE AN UNUSUAL CONDITION 10 HERE IN SAN DIEGO. WE ARE CLOSE TO THE BORDER. WE HAVE 11 WHAT YOU MIGHT SAY A REOCCURRING FLEET THAT DOESN'T GO 12 AWAY, AND WE KNOW THAT THEIR BASIC TRANSPORTATION IS NEVER 13 GOING TO GO AWAY FOR THIS TYPE OF CAR. SO WE ARE LOOKING 14 AT A VERY NARROW FOCUS ON A FLEET THAT WE CAN GET THE 15 BIGGEST BANG FOR THE BUCK FOR, AND THAT'S INTRODUCING 16 FEEDBACK CONTROL AND THREE-WAY CATALYSTS TO A CAR THAT 17 DIDN'T HAVE IT. 18 I CAN TALK TO YOU JUST A SECOND ABOUT THIS 19 COST ISSUE, WHICH IS THE BIGGEST PROBLEM WE HAVE HAD. 20 YES, VERY HONESTLY, WE ARE NOT MAKING A LOT OF MONEY ON 21 THIS SYSTEM WITH THEM, BECAUSE WE ARE CAUGHT SHARING IT. 22 BUT WE ARE DOING IT FOR A SELFISH REASON. WE WANT TO SHOW 23 THAT IT WILL WORK AND IT WILL WORK HERE. WE CAN THEN 24 EXPAND THAT TO OTHER AREAS. 25 AND OBVIOUSLY, AS WE GROW VOLUME, WE ARE GROW 0022 01 MONEY, TOO. BUT IT IS AN EXPENSIVE SYSTEM. 02 MR. ROBERTS: IT'S ABOUT $500; RIGHT? 03 BASIC TRANSPORTATION WILL LEAVE THE PEOPLE 04 WITH THEIR CARS, AND I THINK YOU SAID, IF I REMEMBER 05 CORRECTLY, RICH, IT WAS 57 TONS OVER THE PERIOD? 06 MR. SOMMERVILLE: RIGHT. ABOUT A 1,300 FLEET. 07 MR. ROBERTS: ABOUT 1,300 CARS, WHICH IS PRETTY 08 SIGNIFICANT. 09 AND WHAT IT REALLY IS DOING IS GIVING US 10 ANOTHER OPTION TO REACH PEOPLE THAT WE ARE NOT REACHING 11 WITH THE CRUSHING PROGRAM AND WANT TO KEEP THEIR CAR WHO 12 ARE NOT IN THE POSITION TO BUY A NEW CAR, EVEN WITH THE 13 $700. 14 IT GIVES US ANOTHER EFFECTIVE OPTION, AND I 15 THINK THAT'S HOW YOU HAVE TO LOOK AT IT. 16 MR. CALHOUN: ARE YOU SUGGESTING, THEN, THAT THIS 17 SHOULD BE AN OPTION THAT'S AVAILABLE TO THE PEOPLE JUST 18 HERE IN SAN DIEGO, OR IN OTHER PARTS OF THE STATE, TOO? 19 MR. SOMMERVILLE: REMEMBER IT IS AVAILABLE TO 20 PEOPLE HERE. AND AS WE GET INTO THIS PROGRAM, I'M ANXIOUS 21 TO GET THROUGH THE 1,300 CARS. AND IF IT WORKS, THEN WE 22 WILL INCREASE THAT. 23 BUT I WANTED YOU TO BE AWARE OF IT, BECAUSE I 24 THINK THAT'S AN OPTION THAT COULD BE PURSUED FOR OTHER 25 DISTRICTS. 0023 01 MR. LAGARIAS: IT SEEMS APPROPRIATE FOR THE AIR 02 RESOURCES BOARD TO REALLY EVALUATE AND SEE WHAT ITS VALUE 03 IS TO US THROUGHOUT THE CITY. 04 MS. EDGERTON: ONE OF THE THINGS THAT'S VERY 05 ATTRACTIVE TO ME IS IT SELLS PART OF MY RESERVATIONS ABOUT 06 THIS CRUSHING PROGRAM, WHICH IS, I DON'T HAVE TO GET 07 ANOTHER CAR. 08 BUT WHAT KIND OF CAR DO THEY GO GET? ISN'T 09 IT REASONABLE TO THINK THEY WOULD GET ANOTHER CAR THAT 10 HAD EXACTLY THE SAME EMISSION PROBLEM? SO YOU REALLY 11 HAVEN'T NECESSARILY CLEANED UP THE AIR. 12 YOU MAY GET MORE CERTAINTY THAT YOU HAVE 13 CLEANED IT UP WITH YOUR PROGRAM. BUT WE WILL WAIT AND 14 SEE. 15 MY QUESTION, THOUGH, IS WITH RESPECT TO THE 16 VERY SERIOUS POINT THAT YOU RAISED ABOUT MAINTENANCE. 17 WHAT EFFORTS, IF ANY, HAVE BEEN SUCCESSFUL OR DO YOU 18 BELIEVE WOULD BE SUCCESSFUL TO UNDERTAKE IN CONNECTION 19 WITH THE PROGRAM TO ASSURE THAT THIS $500 INVESTMENT WOULD 20 BE USEFUL LONGER THAN A YEAR, BECAUSE, OF COURSE, AS WE 21 ALL KNOW HERE, THE CARS LAST AS LONG AS PEOPLE HERE. 22 MR. SOMMERVILLE: WELL, UNFORTUNATELY, THE CARS 23 MAY LAST LONG ENOUGH, AND THEY MAY GO DOWN THE ROAD, BUT 24 NOT ALL CYLINDERS MAY BE WORKING. BUT IF YOU HAVE EIGHT 25 CYLINDERS, HEY, YOU CAN WORK WITH SIX; RIGHT? NO. WHAT 0024 01 NEEDS TO BE DONE -- AND THIS IS WHAT WE ARE DOING -- IS 02 THERE HAS TO BE A QUALIFICATION. AND AS A PART OF THAT 03 QUALIFICATION, IT HAS TO BE DETERMINED THAT THE ENGINE IS 04 RUNNING PROPERLY AND THERE'S NO FUNDAMENTAL CARBURETION 05 PROBLEMS OR IGNITION PROBLEMS OR INTERNAL VALVES OR 06 CYLINDERS. AND IT MAY TAKE $150 OR SO TO FIX THE IGNITION 07 SYSTEM SO THERE'S NO MISFIRES AND DO JUST GENERAL 08 UPGRADING MAINTENANCE. 09 AND IF THERE'S NOTHING FUNDAMENTALLY WRONG 10 WITH THE ENGINE, EDUCATION'S NEEDED TO THE PERSON WHO'S 11 GETTING THIS FIXED ABOUT MISFIRES AND THE NECESSITY OF 12 DOING IT, BECAUSE THAT'S THE MAJOR THING THAT WILL TAKE 13 OUT A CATALYST, NOT ONLY IN THESE VEHICLES, BUT IN YOUR 14 VEHICLE, ASSUMING YOU ARE DRIVING A RECENT ONE. SO A 15 LITTLE BIT OF EDUCATION. 16 AND WE GO THROUGH A PROCESS OF ASSURING THAT 17 WHEN THAT CATALYST IS PUT ON, ALL THE FUNDAMENTAL PROBLEMS 18 ARE TAKEN CARE OF AND THE PERSON KNOWS SOMETHING ABOUT THE 19 NECESSITY OF MAINTAINING AT LEAST BASICALLY THE IGNITION 20 SYSTEM AND CARBURETION. 21 MR. DUNLAP: ALL RIGHT. 22 ANY OTHER QUESTIONS? 23 SUPERVISOR VAGIM? 24 MR. VAGIM: THANK YOU, MR. CHAIRMAN. 25 FIRST OF ALL, I DIDN'T HEAR WHAT LEVEL OF 0025 01 EMISSIONS THAT YOU BRING ANY ONE CAR TO. 02 IS IT RELATIVE TO THE CAR YOU ARE 03 CONVERTING? 04 MR. SOMMERVILLE: NO. IN GENERAL, FOR THE TESTED 05 FLEET AT 3,000 MILES, YOU CAN EXPECT A 50 PERCENT 06 REDUCTION AT 30,000 MILES. 07 MR. VAGIM: FOR ANY ONE CAR? 08 MR. SOMMERVILLE: RIGHT. AND THAT'S OVER THE 09 VEHICLES THAT WE TESTED. 50 PERCENT IS ABOUT A GOOD 10 NUMBER. OF COURSE WHEN YOU PUT IT ON INITIALLY, IT'S 11 HIGHER THAN THAT. OVER 30,000 MILES, 50 PERCENT ARE 12 REDUCTION. 13 MR. VAGIM: WHAT'S THE AVERAGE AGE OF THE FLEET YOU 14 TESTED? 15 DO YOU KNOW THAT NUMBER? 16 MR. FRANKENBINER: THE FLEET AVERAGED FROM A '75 TO 17 '81 VEHICLE. 18 WE HAVE TO BE CAREFUL AND NOT TALK BY AGE. 19 WE TALK MORE BY ENGINE FAMILY, WHICH IS OSTENSIBLY OPEN 20 LOOP OXYGENATION CATALYZED VEHICLES, WHICH COVERS A MUCH 21 LARGER SECTION OF THE FLEET. 22 THE AVERAGE MILES IS 135,000 IN THESE 23 VEHICLES WHEN WE STARTED. SO WE PURPOSELY -- AND I KNOW 24 THE BOARD PURPOSELY PICKED VEHICLES THAT THEY DEEMED A 25 REPRESENTATIVE OF WHAT'S OUT THERE ON THE ROAD TODAY AND 0026 01 WHAT'S GOING TO BE OUT THERE FOR THE NEXT FIVE AND TEN 02 YEARS. 03 MR. VAGIM: DO YOU THROW IN CONVERTING THEIR 04 EIGHT-TRACK TO CASSETTE? 05 MR. FRANKENBINER: I DON'T THINK YOU GET ANY 06 EMISSION GAIN FROM THAT, JUST MAYBE THE NOISE. 07 MR. VAGIM: THANK YOU VERY MUCH. 08 MR. DUNLAP: ANY OTHER QUESTIONS? 09 ALL RIGHT. MR. SOMMERVILLE, THANK YOU FOR 10 THAT PRESENTATION. 11 KEEP UP THE GOOD WORK HERE IN SAN DIEGO. 12 MR. SOMMERVILLE: THANK YOU. 13 AND I HOPE YOU ALL ENJOY YOUR DAY HERE. 14 MR. DUNLAP: ALL RIGHT. I'D LIKE TO REMIND THOSE 15 IN THE AUDIENCE WHO WOULD LIKE TO PRESENT TESTIMONY TO THE 16 BOARD ON ANY OF TODAY'S ITEMS TO PLEASE SEE THE BOARD 17 SECRETARY OVER HERE. 18 PAT, IF YOU CAN WAVE YOUR HAND? 19 WE ARE IN NEW TERRAIN HERE. IF YOU HAVE A 20 WRITTEN STATEMENT, PLEASE PROVIDE HER WITH 20 COPIES SO 21 EACH OF THE MEMBERS OF THE BOARD MIGHT HAVE A COPY OF YOUR 22 REMARKS. 23 THE FIRST AGENDA ITEM TODAY IS 96-5-1, PUBLIC 24 HEARING TO CONSIDER THE ADOPTION OF A REGULATION AND 25 CRITERIA FOR EQUIPMENT AND PROCESS PRECERTIFICATION. 0027 01 THE PROPOSED REGULATION WILL ESTABLISH THE 02 PROCESS WHICH WILL BE FOLLOWED AND REQUIREMENTS WHICH MUST 03 BE MET FOR THE AIR RESOURCES BOARD TO PRECERTIFY EQUIPMENT 04 AND PROCESSES AS BEING IN COMPLIANCE WITH APPLICABLE AIR 05 QUALITY RULES AND REGS. 06 AS PART OF CALIFORNIA'S PERMIT REFORM 07 EFFORTS, THE LEGISLATIVE PRECERTIFICATION AS AN IMPORTANT 08 PROGRAM, A PRIORITY PROGRAM FOR STREAMLINING THE AIR 09 PERMIT PROCESS AND AS A RESULT MANDATED THE A.R.B. TO 10 DEVELOP AND IMPLEMENT A PRECERTIFICATION PROGRAM. 11 AT THIS POINT, I'D LIKE TO ASK MR. BOYD TO 12 INTRODUCE THE ITEM AND BEGIN THE STAFF'S PRESENTATION. 13 GOOD MORNING, JIM. 14 MR. BOYD: THANK YOU, MR. CHAIRMAN. 15 GOOD MORNING, BOARD MEMBERS AND GOOD MORNING 16 TO THE MEMBERS OF OUR AUDIENCE HERE. 17 I THINK AS BOARD MEMBERS KNOW, THE AIR 18 RESOURCES BOARD HAS A LONG AND SUCCESSFUL HISTORY OF 19 CERTIFYING VARIOUS TYPES OF EQUIPMENT PROCESSES AND NEW 20 ENVIRONMENTAL TECHNIQUES AS PART OF OUR EFFORTS TO REDUCE 21 EMISSIONS FROM MOTOR VEHICLES AND MOBILE SOURCES. 22 EXISTING CERTIFICATION PROGRAMS INCLUDE THE 23 CERTIFICATION MOTOR VEHICLE EMISSION CONTROL SYSTEMS, THE 24 CERTIFICATION OF AFTER MARKET PARTS FOR MOTOR VEHICLES, 25 THE CERTIFICATION OF GAS AND VAPOR RECOVERY SYSTEMS AND 0028 01 EQUIPMENT AND THE CERTIFICATION OF MOTOR VEHICLE FUELS AND 02 FUEL ADDED PACKAGES. 03 AND FROM THE LAST DISCUSSION, YOU SAW A PIECE 04 OF EQUIPMENT THAT WOULD HAVE BEEN AND WAS A CERTIFIED 05 PROGRAM, I GUESS, BY THE AIR RESOURCES BOARD. 06 TODAY WE WILL BE PRESENTING A NEW 07 CERTIFICATION PROGRAM, WHOSE GENESIS IS REALLY IN 08 PROVIDING ASSISTANCE TO LOCAL DISTRICTS TO GAIN GREATER 09 EFFICIENCY IN THE ISSUANCE OF PERMITS AT THE LOCAL LEVEL. 10 THE EQUIPMENT AND PROCESS PRECERTIFICATION 11 PROGRAM IS A VOLUNTARY PERMIT STREAMLINING PROGRAM FOR 12 MANUFACTURES OR DISTRIBUTORS OF EQUIPMENT AND PROCESSES 13 COMMONLY ASSOCIATED WITH STATIONARY SOURCES IN 14 CALIFORNIA. 15 THIS IS THE BEGINNING OF THE FIRST FOR US. 16 AS YOU ARE AWARE, STATIONARY SOURCES ARE, OF COURSE, 17 HISTORICALLY REGULATED BY LOCAL DISTRICTS. 18 DISTRICTS ADOPTED THE RULES AND REGULATIONS, 19 WHICH THE REQUIREMENTS SET PERFORMANCE STANDARDS FOR MANY 20 TYPES OF EQUIPMENT AND PROCESS CATEGORIES. 21 THE AIR RESOURCES BOARD HAS BEEN CHARGED BY 22 THE LEGISLATURE TO DEVELOP CRITERIA AND GUIDELINES IN 23 COORDINATION WITH LOCAL AIR DISTRICTS TO PRECERTIFIED 24 EQUIPMENT AND PROCESSES AS BEING IN COMPLIANCE WITH 25 APPLICABLE AIR QUALITY RULES AND REGULATIONS. 0029 01 WE BELIEVE THAT OUR PROPOSED CRITERIA FIRST 02 PROVIDE FOR AN INDEPENDENT VERIFICATION BY THE AIR 03 RESOURCES BOARD OF THE PERFORMANCE OF EQUIPMENT AND 04 PROCESSES; SECONDLY, PROVIDE FOR A DETERMINATION OF 05 COMPLIANCE WITH RULES AND REGULATIONS WITHOUT AFFECTING 06 THE EXISTING PERMITTING AND COMPLIANCE AUTHORITY OF LOCAL 07 DISTRICTS; THIRDLY, RESULT IN A REDUCTION IN COST TO 08 BUSINESSES BY REDUCING THE NEED FOR DUPLICATIVE TESTING. 09 ALL OF THIS SHOULD RESULT IN REDUCTION IN THE 10 TIME NEEDED TO ISSUE PERMITS AT EACH DISTRICT IN THE 11 STATE. 12 I'D LIKE ALSO TO NOTE THAT THE A.R.B.'S 13 EFFORTS ARE INDEED ONE PART OF A LARGER EFFORT UNDER WAY 14 WITHIN CAL/E.P.A. TO IMPLEMENT ENVIRONMENTAL TECH 15 CERTIFICATION PROGRAMS THROUGHOUT THE VARIOUS BOARDS AND 16 DEPARTMENTS OF CAL/E.P.A. 17 AN OFFICE OF ENVIRONMENTAL TECHNOLOGY WAS 18 RECENTLY ESTABLISHED AT THE AIR RESOURCES BOARD TO 19 COORDINATE THESE VARIOUS PROGRAMS, INCLUDING THE HAZARDOUS 20 WASTE ENVIRONMENTAL TECHNOLOGY CERTIFICATION PROGRAM AT 21 THE DEPARTMENT OF TOXIC SUBSTANCE. SO WE TURNED OVER A 22 NEW LEAF AND HAVE LAUNCHED A NEW AREA AND NEW EFFORT. 23 WITH THAT INTRODUCTION, AT THIS POINT I'LL 24 TURN THE PRESENTATION OVER TO MR. BRADLEY BRANSEN, WHO 25 WILL GIVE YOU THE DETAILS OF THE AIR RESOURCES BOARD 0030 01 PROPOSAL. 02 MR. BRANSEN? 03 MR. BRANSEN: THANK YOU, MR. BOYD. 04 GOOD MORNING, CHAIRMAN DUNLAP AND MEMBERS OF 05 THE BOARD. 06 MY NAME IS BRADLEY BRANSEN, AND I WORK IN 07 THE STATIONARY SOURCE DIVISION OF THE AIR RESOURCES BOARD. 08 AND TODAY WE WILL DESCRIBE OUR EFFORTS IN DEVELOPING THE 09 AIR RESOURCES BOARD'S EQUIPMENT PRECERTIFICATION PROGRAM. 10 AND WE'D LIKE TO PRESENT OUR PROPOSED REGULATION OF 11 CRITERIA FOR YOUR ADOPTION. 12 IN TODAY'S PRESENTATION, I WILL DISCUSS WHAT 13 EQUIPMENT PRECERTIFICATION IS, WHY EQUIPMENT SHOULD BE 14 PRECERTIFIED, WHO PARTICIPATED IN DEVELOPING THE EQUIPMENT 15 PRECERTIFICATION PROGRAM, WHAT IS IN THE PROPOSED 16 REGULATION AND CRITERIA, AND HOW EQUIPMENT WILL BE 17 PRECERTIFIED. 18 THE A.R.B. EQUIPMENT PRECERTIFICATION PROGRAM 19 IS A VOLUNTARY STATE-WIDE PROGRAM WHICH CONSISTS OF TWO 20 STEPS: A PERFORMANCE PRECERTIFICATION AND A REGULATORY 21 PRECERTIFICATION. 22 THE PERFORMANCE PRECERTIFICATION IS AN 23 INDEPENDENT VERIFICATION OF PERFORMANCE CLAIMS AND A 24 PRELIMINARY ENGINEERING EVALUATION FOR EQUIPMENT AND 25 PROCESSES. ALL APPLICANTS ARE REQUIRED TO GO THROUGH THIS 0031 01 PERFORMANCE VERIFICATION PROCESS. AND A.R.B. STAFF WILL 02 VERIFY THE PERFORMANCE OF EQUIPMENT, BASED ON APPLICANTS' 03 CLAIMS AND WILL CONFIRM THAT THE CLAIMS ARE ACCURATE AND 04 TRUE WHEN EQUIPMENT IS OPERATED UNDER SPECIFIED 05 CONDITIONS. 06 IN ADDITION TO THE PERFORMANCE 07 PRECERTIFICATION, APPLICANTS MAY REQUEST A REGULATORY 08 PRECERTIFICATION. THIS IS A REGULATORY REVIEW FROM STATE 09 AND LOCAL REGULATORS TO DETERMINE COMPLIANCE WITH NONSITE 10 SPECIFIC AIR QUALITY REGULATIONS. 11 FOR PRECERTIFICATION TO BE USEFUL AS A PERMIT 12 STREAMLINING TOOL, THE APPLICANTS WILL BE ENCOURAGED TO GO 13 THROUGH THIS STANDARD REVIEW PROCESS. COMPLIANCE 14 DETERMINATIONS TO APPLICABLE LOCAL AIR POLLUTION LAWS WILL 15 BE CONDUCTED BY LOCAL AIR DISTRICT STAFF, AND THE A.R.B. 16 STAFF WILL DETERMINE APPLICABLE FEDERAL AND STATE 17 REGULATIONS. AND WE WILL CONSULT WITH U.S. E.P.A. FOR 18 COMPLIANCE WITH THE FEDERAL REGULATIONS. 19 WHEN APPLICANTS REQUEST A PRECERTIFICATION 20 FOR EQUIPMENT THAT AFFECTS MORE THAN ONE ENVIRONMENTAL 21 MEDIA, THEY WILL HAVE THE OPPORTUNITY TO PARTICIPATE IN 22 ANY OF THE ENVIRONMENTAL TECHNOLOGY CERTIFICATION PROGRAMS 23 OFFERED BY CAL/E.P.A., SUCH AS THE DEPARTMENT OF TOXIC 24 SUBSTANCES CONTROL'S HAZARDOUS WASTE CERTIFICATION 25 PROGRAM. CROSS-MEDIA CERTIFICATIONS WILL BE COORDINATED 0032 01 BY THE OFFICE OF ENVIRONMENTAL TECHNOLOGY LOCATED WITHIN 02 THE COMPLIANCE DIVISION OF THE A.R.B. 03 THERE ARE MANY REASONS WHY EQUIPMENT 04 PRECERTIFICATION WILL BENEFIT LOCAL AIR DISTRICTS, 05 INDUSTRY, AND THE STATE. FIRST IT WILL ASSIST IN 06 STREAMLINING THE PERMITTING PROCESS. THE EVALUATION 07 REPORT PRODUCED IN A PRECERTIFICATION PROCESS WILL ACT AS 08 A PRELIMINARY ENGINEERING EVALUATION TO ASSIST DISTRICTS 09 IN REDUCING THE TIME REQUIRED TO EVALUATE EQUIPMENT AND 10 RESULT IN ISSUING AIR POLLUTION PERMITS MORE QUICKLY. 11 SECOND, IT WILL AID IN PROMOTING INNOVATIVE 12 TECHS. PRECERTIFICATION WILL ASSIST IN REDUCING THE 13 DIFFICULTY AND REDUNDANCY IN STATE, LOCAL AND 14 ENVIRONMENTAL APPROVED PROCEDURES AND ASSIST IN BREAKING 15 DOWN BARRIERS TO THE QUICK ACCEPTANCE OF NEW PRODUCTS AND 16 TECHNOLOGIES. 17 THIRDLY, IT CAN ENCOURAGE UNIFORM PERMIT 18 CONDITIONS. STATEWIDE PRECERTIFICATION WILL ASSIST IN 19 ESTABLISHING SOME COMMON OPERATING CONDITIONS FOR 20 EQUIPMENT THAT'S USED AND OPERATED IN THE SAME MANNER 21 THROUGHOUT THE STATE. 22 AND FINALLY, THERE ARE SOME LEGAL 23 REQUIREMENTS TO ESTABLISH PRECERTIFICATION PROGRAMS. THE 24 AIR POLLUTION PERMIT STREAMLINING ACT ESTABLISHED IN '92 25 REQUIRES THE TEN MOST POPULATED DISTRICTS TO DEVELOP AN 0033 01 EQUIPMENT PRECERTIFICATION PROGRAM AS PART OF AN EXPEDITED 02 PERMITTING PROCESS. THROUGH THE C.A.P.C.O.A. PERMIT 03 STREAMLING SUBCOMMITTEE, DISTRICTS AGREED THAT 04 PRECERTIFICATION WILL BEST BE ACCOMPLISHED AS A 05 COOPERATIVE EFFORT AND AS A STATEWIDE PROGRAM. 06 ASSEMBLY BILL 32515 SIGNED BY GOVERNOR WILSON 07 IN SEPTEMBER 1994 AMENDED CALIFORNIA HEALTH AND SAFETY 08 CODE SECTION 39620. THIS AMENDMENT REQUIRES THE AIR 09 RESOURCES BOARD TO DEVELOPMENT AND IMPLEMENT A STATEWIDE 10 EQUIPMENT PRECERTIFICATION PROGRAM IN COORDINATION WITH 11 THE LOCAL AIR DISTRICTS FOR THE PURPOSE OF PRECERTIFYING 12 SIMPLE COMMONLY USED EQUIPMENT AND PROCESSES. 13 DEVELOPING AND OPERATING AS A STATEWIDE 14 CERTIFICATION PROGRAM WILL PROVIDE STANDARDIZED 15 EVALUATIONS AND PERMITTING CONDITIONS. A STATEWIDE 16 PROGRAM WILL PROVIDE CONSISTENCY THROUGHOUT THE STATE AND 17 WILL ASSIST MANUFACTURERS DURING THE EVALUATION OF 18 EQUIPMENT. MANUFACTURERS WOULD HAVE EQUIPMENT EVALUATED 19 ONE TIME AS OPPOSED TO A NUMBER OF TIMES THROUGH THE 20 VARIOUS LOCAL DISTRICTS. 21 IN ADDITION, PURCHASERS OF PRECERTIFIED 22 EQUIPMENT WOULD HAVE A GENERAL IDEA REGARDING THE 23 CONDITIONS THAT WOULD BE PLACED ON THE PERMIT TO OPERATE. 24 ALSO, THE PROGRAM WILL ASSIST IN EXPEDITING 25 LOCAL PERMITTING PROGRAMS. SOME AIR DISTRICTS HAVE OR ARE 0034 01 IN THE PROCESS OF DEVELOPING EXPEDITED PERMITTING 02 SYSTEMS. THE EXPEDITED SYSTEMS ARE TAILORED FOR EACH 03 DISTRICT'S RULES AND REGULATIONS AND ALSO ASSIST TO 04 FULFILL THE AIR POLLUTION PERMIT STREAMLINING ACT. THE 05 EQUIPMENT PRECERTIFICATION WILL PROVIDE STATEWIDE 06 CONSISTENCY IN THE CERTIFICATION PROCESS. 07 THE PROGRAM WILL ALSO ESTABLISH A CENTRAL 08 LOCATION FOR INFORMATION ACCESS. FINAL EVALUATION REPORTS 09 IN COMPLIANCE WITH DETERMINATIONS WILL BE COMPILED AND 10 MAINTAINED IN ONE CENTRAL LOCATION. INFORMATION WILL BE 11 MADE AVAILABLE ON THE A.R.B.'S INFORMATION SYSTEM WHICH IS 12 ACCESSIBLE THROUGH THE INTERNET OR BY COMPUTER MODEM. 13 HARD COPIES OF THE EVALUATION REPORTS WILL BE SUPPLIED TO 14 THE DISTRICTS AND MADE AVAILABLE TO THE PUBLIC UPON 15 REQUEST. 16 WHILE DEVELOPING THIS PROGRAM, IT IS OUR 17 DESIRE TO GAIN INPUT FROM THOSE WHO WOULD BE AFFECTED BY 18 THE PROGRAM. WE WORKED WITH LOCAL AIR POLLUTION CONTROL 19 DISTRICTS INDIVIDUALLY AND THROUGH THE C.A.P.C.O.A. PERMIT 20 STREAMLINING SUBCOMMITTEE. IN ADDITION, WE HAVE SURVEYED 21 THE DEPARTMENTS TO IDENTIFY THE TYPES OF EQUIPMENT THAT 22 WOULD BE MOST BENEFICIAL TO HAVE CERTIFIED. 23 WE HELP FOUR PUBLISH WORKSHOPS TO GAIN INPUT 24 FROM OUR INDUSTRY AND MET INDIVIDUALLY WITH INDUSTRY 25 GROUPS AND CONSULTANTS SUCH AS THE CALIFORNIA 0035 01 ENVIRONMENTAL BUSINESS COUNCIL. 02 WE ALSO WORKED WITH THE OTHER BOARDS AND 03 DEPARTMENTS FROM CAL/E.P.A. AND VARIOUS WORK GROUPS, THE 04 INTERAGENCY TASK FORCE AND THE OFFICE OF ENVIRONMENTAL 05 TECHNOLOGY. 06 THE PROPOSED REGULATION IS A SHORT PARAGRAPH 07 WHICH ADOPTS CRITERIA FOR THE PROGRAM BY REFERENCE. YOU 08 SHOULD HAVE IN YOUR PACKAGE A COPY OF THE MODIFIED 09 REGULATION. IT HAS BEEN MODIFIED TO INCLUDE THE LOCATIONS 10 OF WHERE THE CRITERIA CAN BE OBTAINED. THIS INCLUDES THE 11 MAILING ADDRESS OF THE A.R.B. FOR A HARD COPY AS WELL AS 12 THE INTERNET ADDRESS WHERE THE CRITERIA CAN BE DOWNLOADED 13 BY COMPUTER. THIS IS CONSIDERED A NONSUBSTANTIVE CHANGE 14 AND IS AVAILABLE ON THE BACK TABLE FOR ANY INTERESTED 15 PARTIES. 16 THIS CRITERIA OUTLINES THE PROGRAM ELEMENTS 17 WHICH INCLUDE THE PROCESS WHICH THE A.R.B. AND THE 18 APPLICANT WILL FOLLOW TO CERTIFY EQUIPMENT AND THE 19 REQUIREMENTS AS TO THE INFORMATION AS REQUIRED FOR A 20 COMPLETE APPLICATION PACKAGE AND VERIFICATION TESTING 21 REPORTS. 22 THE CRITERIA ALSO IDENTIFIES THE 23 ADMINISTRATIVE PROCEDURES, WHICH INCLUDES AN APPEALS 24 PROCESS FOR ANY APPLICANT WHO HAS PRECERTIFICATION DENIED 25 OR REVOKED. 0036 01 IN ADDITION, THE CRITERIA OUTLINES A FEE 02 STRUCTURE. WE ARE REQUIRED TO CHARGE A FEE FOR THE 03 PROGRAM, AND WE HAVE ESTABLISHED THIS AS A FEE FOR SERVICE 04 PROGRAM. APPLICANTS WILL BE GIVEN AN ESTIMATE OF THE 05 AMOUNT OF HOURS THAT ARE REQUIRED TO CERTIFY THEIR 06 EQUIPMENT. THE ESTIMATED HOURS WILL BE MULTIPLIED BY AN 07 HOURLY RATE ESTABLISHED BY THE ADMINISTRATIVE SERVICES 08 DIVISION. AND THIS WILL RESULT IN THE ESTIMATED COST FOR 09 A CERTIFICATION. 10 I SHOULD ALSO MENTION THAT THE CRITERIA ALSO 11 ALLOWS A.R.B. STAFF TO DEVELOP GUIDELINES FOR THE PROGRAM 12 TO ASSIST APPLICANTS IN UNDERSTANDING THE PROGRAM 13 REQUIREMENTS AND PROCESS. THESE GUIDELINES ARE THE PLAIN 14 ENGLISH VERSION OF OUR REGULATION, AND CRITERIA AND WILL 15 BE PROVIDED TO ALL PRECERTIFICATION APPLICANTS AND 16 INTERESTED PARTIES. 17 AT THIS POINT, I'D LIKE TO SHARE THE BASIC 18 PROCESS ON HOW EQUIPMENT WILL BE PRECERTIFIED, AND FOR 19 TODAY'S PRESENTATION, I'VE BROKEN IT UP INTO FOUR AREAS: 20 PREAPPLICATION PROCEDURES, APPLICATION AND TESTING 21 REQUIREMENTS, EVALUATION OF TEST REPORTS AND ISSUANCE OF 22 DOCUMENTATION. 23 DURING THE PREAPPLICATION PROCEDURES, WE WILL 24 DETERMINE THE ELIGIBILITY OF THE EQUIPMENT OR PROCESS, 25 CONDUCT A PREAPPLICATION MEETING THE APPLICANT AND 0037 01 ESTIMATE THE APPLICANT'S COST OF PRECERTIFICATION. WE 02 WILL ALSO IDENTIFY THE INFORMATION REQUIRED TO SUBMIT A 03 COMPLETE APPLICATION PACKAGE. 04 AS FOR THE APPLICATION AND TESTING 05 REQUIREMENTS, A WRITTEN AND SIGNED APPLICATION WILL BE 06 REQUIRED FROM EACH APPLICANT, ALONG WITH THE APPLICANT'S 07 PERFORMANCE CLAIM. THE APPLICATION PACKAGE SHOULD ALSO 08 INCLUDE ANY EXISTING TEST REPORTS, WHICH SUPPORT THEIR 09 CLAIMS, PROTOCOLS FOR PROPOSED TESTING AND ONE-HALF OF THE 10 ESTIMATED FEE. 11 UPON RECEIVING THE APPLICATION PACKAGE, 12 A.R.B. STAFF WILL EVALUATE THE TESTING REPORTS PROVIDED BY 13 THE APPLICANT TO ENSURE THAT THE INFORMATION AND DATA 14 SUPPORT THEIR CLAIMS. 15 IF THE INFORMATION AND TEST DATA SUPPORT THE 16 APPLICANT'S CLAIMS, THE A.R.B. WILL ISSUE DOCUMENTATION 17 CONSISTING OF A FINAL EVALUATION REPORT AND AN EXECUTIVE 18 ORDER TO THE APPLICANT. THE GUIDELINES PROVIDE A FLOW 19 CHART AND TIME LINE WHICH ILLUSTRATE HOW EQUIPMENT WILL BE 20 PRECERTIFIED. 21 WE ARE CURRENTLY OPERATING AND CERTIFYING 22 EQUIPMENT AS PART OF A PILOT PROGRAM. THIS HAS ENABLED US 23 TO EVALUATE THE PROPOSED REGULATION AND CRITERIA, TO 24 ESTIMATE RESOURCES NEEDED AND TO IDENTIFY ANY OBSTACLES TO 25 THE PROGRAM'S SUCCESS. PRECERTIFICATIONS WILL BE ISSUED 0038 01 ON PROVISIONAL BASIS UNTIL A REGULATION HAS BEEN ADOPTED. 02 WE ESTIMATE THE ISSUANCE OF 16 PRECERTIFICATIONS BY THE 03 END OF THIS JUNE. 04 THESE PRECERTIFICATIONS WERE ISSUED TO 05 DISTRICT IDENTIFIED PRIORITY EQUIPMENT CATEGORIES. 06 THROUGH THE DISTRICT SURVEY, DISTRICTS IDENTIFIED SMALL- 07 TO MEDIUM-SIZED BOILERS, DRY CLEANING EQUIPMENT AND SOIL 08 REMEDIATION EQUIPMENT AS THE MOST BENEFICIAL FOR PERMIT 09 STREAMLINING. 10 IN ADDITION TO THESE EFFORTS, WE HAVE BEEN 11 WORKING CLOSELY WITH THE SOUTH COAST AIR QUALITY 12 MANAGEMENT DISTRICT TO PROVIDE RECIPROCITY TO 13 MANUFACTURERS OF EQUIPMENT THAT HAVE BEEN PRECERTIFIED. 14 IN CONCLUSION, I'D LIKE TO STATE THAT THE 15 DEVELOPMENT OF THE EQUIPMENT PRECERTIFICATION PROGRAM IS 16 MANDATED BY LAW THROUGH THE CALIFORNIA HEALTH AND SAFETY 17 CODE AND THAT OUR PROPOSED PROCESS HAS BEEN DEVELOPED IN 18 AN OPEN PUBLIC FORUM WITH THE PARTICIPATION FROM INDUSTRY, 19 LOCAL AIR DISTRICTS AND THE BOARDS AND DEPARTMENTS OF 20 CAL/E.P.A. 21 THE PROPOSED STATEWIDE PROGRAM WILL ASSIST IN 22 STREAMLINING AIR POLLUTION PERMITTING PROCESS, PROMOTING 23 THE ACCEPTANCE OF INNOVATIVE TECHNOLOGIES AND ENCOURAGE 24 UNIFORM PERMITTING CONDITIONS. 25 THROUGH OUR EXPERIENCE WITH THE PILOT 0039 01 PROGRAM, WE BELIEVE WE ARE PREPARED FOR FULL 02 IMPLEMENTATION OF THE EQUIPMENT PRELIMINARY. AND IT IS 03 OUR RECOMMENDATION THAT THE BOARD ADOPT THE PROPOSED 04 REGULATION AND CRITERIA TODAY. 05 I'D LIKE TO THANK YOU FOR YOUR TIME AND 06 CONSIDERATION. 07 AND WE'D LIKE TO ANSWER ANY QUESTIONS THAT 08 YOU MAY HAVE AT THIS TIME. 09 MR. DUNLAP: THANK YOU FOR THE OVERVIEW. I 10 APPRECIATE THAT COMPREHENSIVE LOOK AT THAT INNOVATIVE NEW 11 PROGRAM. 12 ANY QUESTIONS OF STAFF? 13 MR. CALHOUN: WHO IS IT THAT OPERATE IT, THE LOCAL 14 DISTRICTS OR THE STATES? 15 MR. BRANSEN: THE LOCAL DISTRICTS ISSUE THE PERMIT 16 TO OPERATE. 17 MR. CALHOUN: DOES THAT INCLUDE AN ON-SITE VISIT TO 18 THE PLANT OR WHEREVER THIS PROCESS IS TAKING PLACE? 19 MR. BRANSEN: BASICALLY, THE PERMITTING PROCEDURES 20 OF THE DISTRICTS WON'T CHANGE IN ANY WAY. OUR DESIRE IS 21 THE PRELIMINARY ENGINEERING EVALUATION WILL BE USED TO 22 REDUCE THE TIME REQUIRED AT THE DISTRICT TO EVALUATE THE 23 EQUIPMENT AND SOME DISTRICTS HAVE IDENTIFIED THAT THEY 24 WOULD WAIVE THE SOURCE TEST REQUIREMENT FOR INSTALLATION, 25 BECAUSE THE CERTIFICATIONS ARE BASED ON SOURCE TEST 0040 01 INFORMATION. 02 SO IT WOULD SAVE COST TO THE APPLICANT AND 03 TIME AT THE DISTRICT. BUT IT DOESN'T CHANGE DISTRICT 04 AUTHORITY FOR PERMITTING. 05 DOES THAT ANSWER YOUR QUESTION? 06 MR. CALHOUN: I GUESS. 07 MR. DUNLAP: ANY OTHER QUESTIONS OF STAFF? 08 MR. LAGARIAS? 09 MR. LAGARIAS: PRECERTIFICATION, I THINK, IS A 10 GREAT IDEA, THAT THIS TYPE OF EQUIPMENT MAY BE APPLIED FOR 11 THIS PROCESS. THE APPLICANT WILL ALSO BE REQUIRED TO HAVE 12 AN OPERATING PERMIT, BECAUSE AN OPERATING PERMIT SPECIFIES 13 THE CONDITIONS UNDER WHICH THIS EQUIPMENT WOULD OPERATE. 14 AND WITHOUT THAT, IT DOESN'T MEAN ANYTHING. 15 MR. BRANSEN: YES. OKAY. AGAIN, THE REQUIREMENTS 16 FOR SOMEBODY THAT PURCHASES PRECERTIFIED EQUIPMENT DON'T 17 CHANGE. THEY HAVE TO APPLY AT THE LOCAL DISTRICT FOR AN 18 OPERATING PERMIT. AND WHAT THE STATEWIDE PROGRAM WILL DO 19 WILL TEST THE EQUIPMENT, VERIFY THE PERFORMANCE CLAIMS, 20 AND THE FINAL EVALUATION REPORT WILL HAVE SOME PROPOSED 21 PERMIT CONDITIONS. AND THE LOCAL DISTRICTS WOULD THEN 22 LOOK AT THE SITE SPECIFIC REQUIREMENTS AND ADD SOME 23 ADDITIONAL ONES AND MODIFY THE ONES THAT WERE THERE, BUT 24 THE DISTRICT WOULD ISSUE THE PERMIT. 25 MR. AMES: ALSO A COMMENT IS THAT THIS PROGRAM IS 0041 01 FOCUSED ON COMMONLY USED EQUIPMENT AND SIMPLER TYPE OF 02 EQUIPMENT. 03 SO IT IS TRUE THERE WOULD BE SITE SPECIFIC 04 CONDITIONS FOR CERTAIN TYPES OF EQUIPMENT WE WILL BE 05 EVALUATING UNDER THIS PROGRAM, BUT WE DON'T ANTICIPATE 06 LOOKING AT MAJOR SOURCES THAT ARE VERY COMPLEX. 07 MR. DUNLAP: MR. AMES, ARE THEY COUPLED, THOUGH? 08 IS IT COUPLED WITH THE PRECERTIFICATION OR NOT? 09 MR. AMES: YES, THERE'S A DIRECT LINK. 10 MR. DUNLAP: OKAY. MS. EDGERTON? 11 MS. EDGERTON: MR. CHAIRMAN, MEMBERS OF THE BOARD, 12 THIS IS ONE OF THE PROGRAMS I'M MOST ENTHUSIASTIC ABOUT. 13 IT'S SUBTLE, BUT IT'S TREMENDOUSLY IMPORTANT, BECAUSE IN 14 ORDER TO HAVE NEW, CLEANER TECHNOLOGIES, THEY HAVE GOT TO 15 BE ABLE TO PERSUADE THE POTENTIAL BUYER THAT IT REALLY 16 DOES WHAT IT DOES, WHAT THEY SAY IT DOES, AND ALSO THAT 17 IT'S VERY LIKELY, IF NOT ALMOST ASSURED, TO QUALIFY FOR 18 THE ENVIRONMENTAL REGULATORY PURPOSES. 19 SO I THINK THIS IS TREMENDOUS. IT'S MY 20 UNDERSTANDING THAT FOUR ARE ALREADY CERTIFIED AND 16 ARE 21 COMING ALONG BY THE END OF THE MONTH. 22 MR. AMES: THAT IS CORRECT. 23 MS. EDGERTON: I JUST CONGRATULATE YOU. I'M 24 EXCITED ABOUT THIS. MAYBE ONLY A LAWYER CAN LOVE A 25 REGULATORY STREAMLINING, BUT I JUST THINK THIS IS TERRIFIC 0042 01 IN TERMS OF TAKING US IN THE DIRECTION OF BEING ABLE TO DO 02 GOOD AND DO WELL AT THE SAME TIME. 03 SO THANK YOU VERY MUCH. 04 MR. DUNLAP: MR. CALHOUN? 05 MR. CALHOUN: I AGREE WITH WHAT YOU SAID, 06 MS. EDGERTON. 07 BUT I THINK MR. LAGARIAS' QUESTION IS POINTED 08 IN THE SAME DIRECTION AS MY QUESTION. AND THAT'S WHAT 09 COMES OUT THE STACK OF THE FUNCTION OF THE PROCESS, AND 10 YOU CAN GET PRECERTIFIED, BUT THERE ARE CONDITIONS, AND I 11 GUESS THAT IS WHAT WE WERE KIND OF FOCUSING ON. 12 MR. AMES: OKAY. THERE'S TWO TYPES OF 13 CERTIFICATIONS. ONE IS PERFORMANCE AND ONE IS 14 REGULATORY. 15 FOR EXAMPLE, OXYGEN BOILERS, SOME OF THE 16 APPLICANTS COME TO US AND WANT TO CERTIFY THE USING OF 17 NATURAL GAS AT THE RATED CAPACITY OF THAT BOILER, IT WILL 18 EMIT SO MANY GRAMS OF NOX PER UNIT OF ENERGY. AND SO 19 THAT'S ONE TYPE OF CERTIFICATION. 20 AND THEN THERE'S A REGULATORY CERTIFICATION 21 THAT RELATES DIRECTLY TO INDIVIDUAL DISTRICT'S 22 REGULATIONS. AND THERE WE WORK WITH THE LOCAL DISTRICTS 23 TO ENSURE THAT ALL OF THEIR CONDITIONS UNDER WHICH THAT 24 UNIT WOULD BE INSTALLED WOULD BE SATISFIED. 25 AND SO IT'S A PARTNERSHIP BETWEEN THE STATE 0043 01 AND THE LOCALS IN ORDER TO STREAMLINE THAT LOCAL PROCESS. 02 MR. DUNLAP: OKAY. 03 MR. BOYD: MR. CHAIRMAN, I WOULD JUST ADD TO 04 MR. AMES, TO PERSUADE ANY CONCERN ANY BOARD MEMBER MIGHT 05 HAVE, NOTHING IN THIS PROCESS IMPEDES THE REQUIREMENTS 06 THAT THE EMISSIONS FROM THE STACK OR EMISSIONS FROM THE 07 FACILITY IN QUESTION MEET EXISTING REQUIREMENTS. 08 WHAT THIS DOES, AS THE STAFF INDICATED, IS 09 PROVIDE A SHORTCUT AND A SPEEDING UP OF THE ENGINEERING 10 PROCESSES THAT HISTORICALLY TAKES PLACE WHEN YOU DO A 11 SITE-BY-SITE REVIEW, AND IT IS PART OF STREAMLINING. 12 AND BOARD MEMBER EDGERTON STOLE MY CLOSING 13 LINES. WITH REGARDS TO THIS, I THINKS IT IS VERY 14 SIGNIFICANT, AND IT IS A BIG FIRST. AND I THINK IT WILL 15 GO A LONG WAY TO SETTING THE STAGE FOR DOING OTHER THINGS 16 LIKE THIS THAT WILL, INDEED, SPEED UP THE PROCESS FOR 17 CALIFORNIA BUSINESSES WHO WANT TO LOCATE, MODIFY AND BUILD 18 NEW FACILITIES HERE. 19 MR. DUNLAP: THANK YOU, MR. BOYD. 20 WE HAVE ONE WITNESS. MR. LACY. WE'D LIKE 21 YOU TO COME FORWARD. 22 GARY LACY FROM FULTON BOILERWORKS IS OUR SOLE 23 WITNESS. 24 AND GOOD MORNING. 25 MR. LACY: GOOD MORNING. GOOD MORNING, BOARD 0044 01 MEMBERS. 02 MY NAME IS GARY LACY WITH FULTON BOILERWORKS 03 OUT OF NEW YORK, UPSTATE NEW YORK. I'M A RESIDENT OF 04 CALIFORNIA FOR 15 YEARS. I LIVE IN ALTA LOMA, 05 CALIFORNIA. 06 I HAVE AN ASTHMATIC SON, SO I AM VERY 07 INTERESTED IN THE AIR QUALITY ISSUES THAT PRESENT TO US IN 08 CALIFORNIA, BUT NOT ONLY IN CALIFORNIA, ACROSS THE 09 COUNTRY. 10 AS A MANUFACTURER OF BOILERS, WE HAVE A 11 MANUFACTURING PLANT IN NEW YORK, ENGLAND, ALSO IN CHINA, 12 AND WE'RE ASSEMBLING BOILERS HERE IN CALIFORNIA PRESENTLY 13 BECAUSE OUR MARKET HAS EXPANDED. 14 WE LOOK AT THIS PRECERTIFICATION PROGRAM AS A 15 BASIS PROBABLY FOR A NATIONAL STANDARD. ONE OF THE THINGS 16 THAT WE HAVE NOTICED IN THE BOILER INDUSTRY IS THERE'S 17 ALWAYS BEEN A CONCENTRATION FROM AN AIR QUALITY DISTRICT 18 STANDPOINT ON LARGE BOILERS. AND THE REASON THEY 19 CONCENTRATED ON THAT WAS FOR GOOD REASON, BECAUSE THOSE 20 BOILERS ARE PRIMARILY REGISTERED WITH THE STATE THROUGH 21 LOCAL AREAS, SO THEY KNOW THEY EXIST. 22 BUT THE PRECERTIFICATION PROGRAM, 23 SPECIFICALLY FROM OUR STANDPOINT, ADDRESSES BOILERS THAT 24 WERE NOT LOOKED AT BEFORE. BOILERS FROM THE SIZE RANGE OF 25 250 B.T.U.'S TO TWO MILLION B.T.U.'S. 0045 01 THE REASON THEY WEREN'T LOOKED AT IS THEY 02 REALLY DIDN'T KNOW THEY EXISTED, BECAUSE THERE WAS NO 03 EQUIPMENT TO REGISTER THOSE PARTICULAR BOILERS. JUST IN 04 ORANGE COUNTY ALONE, THERE ARE APPROXIMATELY 3,000 OF 05 THOSE BOILERS JUST IN THE HOTEL INDUSTRY. 06 TO GIVE YOU AN EXAMPLE, A BOILER THAT HAS AN 07 INPUT OF 840,000 B.T.U. INPUT OPERATING 40 HOURS A WEEK 08 WOULD PRODUCE ABOUT 283 POUNDS OF NOXIOUS OXIDES A YEAR. 09 WITH THE NEW TECHNOLOGY LIKE WE HAVE 10 DEVELOPED THAT'S UNDER THIS PRECERTIFICATION PROGRAM, THAT 11 SAME BOILER, THE EMISSIONS WOULD BE REDUCED DOWN TO 12 34 POUNDS PER YEAR. 13 WHEN WE DEVELOPED OUR TECHNOLOGY, WE TALK 14 ABOUT LOW EMISSIONS, NOT LOW NOX. WE TALK ABOUT LOW 15 EMISSIONS. WE ATTACK NOT ONLY NOXIOUS OXIDES, BUT ALSO 16 C.O. EMISSIONS. 17 IN THAT SAME SCENARIO, THAT AVERAGE BOILER 18 IN THAT CATEGORY WOULD HAVE C.O. EMISSIONS OF ABOUT 19 315 POUNDS PER YEAR, AND WITH THIS NEW TECHNOLOGY, WE CAN 20 REDUCE THOSE EMISSIONS TO 134 POUNDS PER YEAR. 21 IT'S ALWAYS SURPRISED ME, AND I HAVE WATCHED 22 THIS AND BEEN INVOLVED WITH THE AIR QUALITY BOARD, 23 ESPECIALLY IN SOUTH COAST, THAT THIS PARTICULAR TYPE OF 24 BOILER, THE SMALLER BOILERS, WHICH THE PRECERTIFICATION 25 WILL AFFECT, HAS REALLY NEVER BEEN LOOKED AT. 0046 01 AND I'LL GIVE YOU AN EXAMPLE. FULTON HAS 02 PRODUCED SINCE 1949 1,000,000, A SUBSTANTIAL NUMBER. THE 03 AVERAGE SIZE OF THOSE BOILERS THAT THEY PRODUCED IS 04 30 HORSEPOWER, WHICH IS APPROXIMATELY 1.2 MILLION 05 B.T.U.'S, WHICH MEANS IT'S A BOILER THAT NORMALLY ISN'T 06 REGISTERED WITH ANYWHERE IN THE COUNTRY. 07 FROM OUR PERSPECTIVE, THE BULK OF THE AIR 08 POLLUTION HAS COME FROM BOILERS THAT ARE COMING FROM THE 09 SMALLER APPLICATIONS, HYDRONIC HEATING BOILERS LIKE IN 10 THIS BUILDING, OR A HOTEL, IN A DRY CLEANING PLANT. 11 AND IN LOS ANGELES COUNTY, OVER 12 159.5 HORSEPOWER BOILERS, WHICH ARE 309,000 B.T.U.'S, ARE 13 REPLACED EVERY YEAR. THE AVERAGE LIFE EXPECTANCY OF THESE 14 BOILERS ARE BETWEEN FOUR AND SEVEN YEARS. 15 WITH A PRECERTIFICATION PROCESS, WHICH WE ARE 16 IN FAVOR OF, YOU WOULD IMMEDIATELY HAVE A BOILER THAT'S 17 DESIGN CERTIFIED. 18 AND TO ANSWER THIS GENTLEMAN'S QUESTION, 19 THESE BOILERS WHEN THEY ARE PREDESIGNED CERTIFIED, THEY 20 CAN ONLY BE OPERATED UNDER ONE CONDITION, AND THAT IS A 21 LOW EMISSION CONDITION. THEY CAN'T OPERATE ANY OTHER 22 WAY. 23 IT'S A VERY SIMPLE TYPE BOILER, AND THERE'S 24 BASICALLY NOTHING THAT YOU CAN DO TO CHANGE THE EFFECT OF 25 THAT PARTICULAR BOILER. BUT IN THIS INDUSTRY ALONE, IF 0047 01 THERE WAS A PRECERTIFICATION PROGRAM AND IF THE LOCAL 02 DISTRICT HAD A BASELINE, IMMEDIATELY WHEN THAT BOILER WAS 03 TURNED OVER OR WHEN IT WAS REPLACED, IT WOULD HAVE A NEW 04 LOW EMISSION DESIGN. 05 SO WE ARE IN FAVOR OF THIS. WE HAVE INVESTED 06 OVER TWO MILLION DOLLARS IN DEVELOPING LOW EMISSION 07 TECHNOLOGY, NOT ONLY JUST BECAUSE OF CALIFORNIA. WE 08 BELIEVE THAT IT'S GOING TO BE A NATIONAL ISSUE. AND WE 09 BELIEVE THAT THIS PRECERTIFICATION PROGRAM IS SOMETHING 10 THAT WOULD MAYBE BE THE BASIS FOR THAT. 11 AND I THANK YOU FOR THE TIME. 12 IF YOU HAVE ANY QUESTIONS, I'LL BE GLAD TO 13 ANSWER THEM FOR YOU. 14 MR. DUNLAP: OKAY. MS. EDGERTON. 15 MS. EDGERTON: I APOLOGIZE, BUT I DIDN'T CATCH 16 WHERE YOUR PLANT IS IN CALIFORNIA. 17 MR. LACY: WELL, RIGHT NOW WE'RE ASSEMBLING IN 18 SANTA ANA JOINTLY WITH ANOTHER BOILER MANUFACTURER. BUT 19 WE HAVE MADE A COMMITMENT THAT WE WILL HAVE A FACILITY 20 HERE THAT WE WILL BE DOING ALL OF OUR PRODUCTION FROM 21 DENVER WEST. 22 MS. EDGERTON: WHERE DO YOU THINK THAT WILL BE? IS 23 THAT IN SANTA ANA ALSO? 24 MR. LACY: PROBABLY. IT'S GOING TO BE SOMEWHERE IN 25 CALIFORNIA. THEY HAVE MADE THAT COMMITMENT. 0048 01 MS. EDGERTON: IF THERE'S ANYTHING WE CAN DO TO 02 HELP YOU, LET US KNOW. WE APPRECIATE YOUR WORK. 03 THANK YOU. 04 MR. LACY: THANK YOU. 05 MR. DUNLAP: MR. LACY, IT'S NICE TO RECOGNIZE 06 SOMEONE FROM RANCHO CUCAMUNGA. 07 MR. LACY: THANK YOU. 08 MR. DUNLAP: STAFF, DO WE HAVE ANY COMMENTS WE NEED 09 TO SUMMARIZE BEFORE THE BOARD CONSIDERS THE RESOLUTION 10 HERE? 11 MR. BOYD: YES, WE DO. 12 MR. DUNLAP: MR. AMES? 13 MR. AMES: WE HAVE FOUR COMMENT LETTERS WE 14 RECEIVED. 15 THE FIRST LETTER IS A CALIFORNIA PRESIDENT OF 16 THE CALIFORNIA AIR POLLUTION CONTROL OFFICERS 17 ASSOCIATION. AND IN THAT LETTER, MR. HESS STATES THAT 18 C.A.P.C.O.A. SUPPORTS THE ADOPTION OF THE PROPOSED 19 PRECERTIFICATION REGULATION AND CRITERIA. 20 HE ALSO COMMENTS THAT THEIR EFFORT WILL 21 ASSIST APPLICANTS WITHOUT ADVERSELY AFFECTING AIR QUALITY, 22 AND THE AIR DISTRICTS LOOK FORWARD TO WORKING WITH THE 23 A.R.B. IN PARTNERSHIP ON THIS ISSUE. 24 THE SECOND LETTER IS A JUNE 11TH LETTER FROM 25 MR. BRIAN RUNKEL, EXECUTIVE DIRECTOR OF THE CALIFORNIA 0049 01 ENVIRONMENTAL BUSINESS COUNCIL. THE FIRST POINT 02 MR. RUNKEL MAKES IS THAT HE EXPRESSES STRONG SUPPORT FOR 03 ADOPTION OF THE REGULATIONS AND CRITERIA. SECONDLY, THAT 04 THIS EFFORT CAN HELP TECHNOLOGY, DEVELOPERS AND 05 MANUFACTURERS BREAK INTO NEW MARKETS, PARTICULARLY EXPORT 06 MARKETS. THIRDLY, MR. RUNKEL EXPRESSES APPRECIATION FOR 07 DEVELOPING A USER-FRIENDLY PROGRAM AND FOR ADDRESSING THE 08 CONCERNS OF SMALL BUSINESSES. FINALLY, MR. RUNKEL 09 ACKNOWLEDGES THE MANY STATEMENTS MADE BY CHAIRMAN DUNLAP 10 AND PERSONALLY ON BEHALF OF ENVIRONMENTAL TECHNOLOGY AND 11 THE IMPORTANCE OF MAINTAINING CALIFORNIA'S LEADERSHIP IN 12 THIS AREA, AND THIS LEADERSHIP HAS MADE A DIFFERENCE IN 13 MOVING CALIFORNIA FORWARD TO A CLOSER HEALTHIER 14 PARTNERSHIP WITH CALIFORNIA'S ENVIRONMENTAL INDUSTRY AND 15 URGES SPEEDY ADOPTION. 16 THE THIRD LETTER IS A LETTER FROM 17 MR. WALTER BROWN, GOVERNMENT AFFAIRS DIRECTOR OF THE 18 ENGINE MANUFACTURERS ASSOCIATION. 19 THE FIRST COMMENT IS THAT E.M.A. SUPPORTS THE 20 GOALS OF THE STAFF PROPOSAL TO STREAMLINE PERMITS AND TO 21 PROMOTE UNIFORMITY BETWEEN DISTRICTS. 22 HOWEVER, E.M.A. HAS SEVERAL CONCERNS AND 23 SUGGESTIONS AS A PROPOSED REGULATION APPLIES TO STATIONARY 24 COMPRESSION IGNITION ENGINES. THE E.M.A. LETTER RAISES 25 FOUR ISSUES. 0050 01 ON JUNE 12TH, THE STAFF CONTACTED MR. BROWN 02 TO DISCUSS HIS CONCERNS AND TO CLARIFY SOME 03 MISUNDERSTANDINGS THAT E.M.A. HAD CONCERNING THE SCOPE OF 04 THE STAFF PROPOSAL. FIRST, E.M.A. RAISES THAT THE TESTING 05 REQUIREMENTS ARE LIMITED TO INDEPENDENT TESTING, AND 06 E.M.A. SUGGESTS ALLOWING SELF-TESTING BY MANUFACTURERS OF 07 ENGINES. 08 IN RESPONSE, WE POINTED OUT TO MR. BROWN ON 09 THE PHONE THAT THE EXECUTIVE OFFICER MAY APPROVE 10 ALTERNATIVE TESTING LIKE THAT REQUESTED BY E.M.A. THIS 11 OPTION WAS ADDED TO OUR PROPOSED REGULATION IN RESPONSE TO 12 COMMENTS BY CATERPILLAR, INCORPORATED, AT A PUBLIC 13 WORKSHOP LAST JULY. MR. BROWN WAS PLEASED TO HEAR THAT 14 THIS IS THE CASE. 15 SECONDLY, E.M.A. WANTS ABSOLUTE ASSURANCE 16 THAT ALL AIR DISTRICTS WILL ACCEPT STATEWIDE 17 PRECERTIFICATIONS. IN RESPONSE, THE STATE BILL THAT WAS 18 THE BASIS FOR THIS PERMIT DID NOT CHANGE THE AUTHORITY OF 19 THE AIR RESOURCES BOARD OR THE AIR DISTRICTS WITH RESPECT 20 TO PERMITTING. HOWEVER, WE HAVE HAD A VERY GOOD 21 RELATIONSHIP WITH THE AIR DISTRICTS IN DEVELOPING THIS 22 PROGRAM AND HAVE EVERY REASON TO BELIEVE THAT THIS WILL 23 CONTINUE TO BE THE CASE, AND I THINK THAT C.A.P.C.O.A.'S 24 LETTER IS A GOOD DEMONSTRATION OF THAT. 25 MR. BROWN WAS SATISFIED AND PLEASED TO HEAR 0051 01 THAT THE AIR DISTRICTS ARE WORKING WELL WITH US. 02 THIRDLY, E.M.A. WAS CONCERNED WITH THE 03 PERCEPTION THAT ONLY A.R.B. TEST METHODS WOULD BE ALLOWED 04 FOR TESTING ENGINES, AND REQUESTS THAT AN I.S.O. METHOD 05 8178 BE ALLOWED FOR TESTING ENGINES. 06 IN RESPONSE, WE EXPLAINED THAT THE STAFF 07 PROPOSAL DOES ALLOW FOR FLEXIBILITY IN TESTING. AND 08 E.M.A. HAS BEEN IN RECENT CONTACT WITH THE MONITORING AND 09 LABORATORY DIVISION STAFF AT THE A.R.B. ON THIS ISSUE AND 10 PLAN TO MEET SOON WITH THEM TO FOLLOW UP ON IT. 11 THE FOURTH AND FINAL ISSUE E.M.A. RAISES IS A 12 CONCERN BASED ON THE PERCEPTION THAT PRECERTIFICATION 13 MIGHT SOMEHOW MANDATE HARDWARE REQUIREMENTS RATHER THAN 14 PERFORMANCE STANDARDS. AND IN RESPONSE, WE EXPLAINED TO 15 MR. BROWN THAT THE PRECERTIFICATION PROPOSAL DOES NOT 16 SPECIFY THE FORM OF ANY STANDARDS, THAT EACH APPLICANT 17 VOLUNTARILY COMES TO THE A.R.B. FOR PRECERTIFICATION 18 PERFORMANCE OR STANDARDS, WHICH ARE LIKELY TO REFLECT 19 LOCAL DISTRICT REGULATIONS. 20 AND WE OFFERED TO SIT DOWN WITH E.M.A. TO 21 DISCUSS ANY OPTIONS OR CONCERNS THEY MIGHT HAVE, AND HE 22 WAS SATISFIED WITH THAT. 23 THE FOURTH AND FINAL LETTER IS A JUNE 13TH 24 LETTER FROM DR. ANN HEYWOOD, DEPUTY SECRETARY FOR 25 ENVIRONMENTAL TECHNOLOGY AT CAL/E.P.A. MS. HEYWOOD ASKS 0052 01 THAT WE READ HER LETTER INTO THE RECORD. SO PER HER 02 REQUEST, I'LL GO AHEAD AND DO THAT. 03 "I WOULD LIKE TO TAKE THIS 04 OPPORTUNITY, CHAIRMAN DUNLAP AND BOARD 05 MEMBERS, TO EXPRESS SUPPORT FOR YOUR 06 FAVORABLE CONSIDERATION OF THE PROPOSED 07 REGULATION AND CERTIFICATION FOR THE 08 CRITERIA FOR THE PRECERTIFICATION OF 09 SIMPLE, COMMONLY USED AIR POLLUTION 10 EQUIPMENT AND PROCESSES. SINCE THE EARLY 11 1970'S, CALIFORNIA HAS LED NOT ONLY THE 12 NATION BUT ALSO MUCH OF THE WORLD IN 13 ENVIRONMENTAL PROTECTION. ALONG WITH 14 THESE HIGH STANDARDS, A SIGNIFICANT 15 ENVIRONMENTAL TECHNOLOGY STANDARD HAS GROWN; 16 TODAY, THIS 18 TO 20 BILLION DOLLAR INDUSTRY 17 EMPLOYS NEARLY 180,000 CALIFORNIANS. 18 COMPANIES PROVIDING AIR POLLUTION EQUIPMENT 19 AND PROCESSES REPRESENT AN IMPORTANT PART 20 OF THIS INDUSTRY, AND THE MEANS OF 21 ACHIEVING OUR ENVIRONMENTAL GOALS. THE 22 PROPOSED REGULATION, WHICH YOU WILL 23 CONSIDER AT THE JUNE 14TH HEARING, WILL 24 PROVIDE ENVIRONMENTAL TECHNOLOGY COMPANIES 25 A NEW MEANS OF GAINING ACCEPTANCE IN THE 0053 01 MARKETPLACE AND THROUGHOUT THE PERMITTING 02 PROCESS. PRECERTIFICATION AFFORDS 03 OPPORTUNITIES TO ENCOURAGE NEW TECHNOLOGIES, 04 STREAMLINE THE PERMITTING PROCESS, AND 05 ESTABLISH UNIFORM PERMIT CONDITIONS 06 STATEWIDE. 07 "I ALSO COMMEND THE AIR RESOURCES 08 BOARD FOR IMPLEMENTING A PILOT 09 PRECERTIFICATION PROGRAM AND DEVELOPING 10 THE PROPOSED REGULATION AND PROCESS 11 QUICKLY AND EFFECTIVELY. WORKING TOGETHER 12 WITH REPRESENTATIVES OF INDUSTRY, THE LOCAL 13 AIR DISTRICTS, VERIFICATION TESTING 14 ENTITIES AND OTHER INTERESTED PARTIES, 15 YOUR STAFF HAS MADE A NOTABLE EFFORT 16 SEEKING INPUT. THE STAFF REPORT REFLECTS 17 THOUGHTFUL CONSIDERATION OF THE NEEDS OF 18 PROGRAM PARTICIPANTS. THE PROPOSED RULE 19 AND PRECERTIFICATION PROGRAM WILL SERVES AS 20 A MODEL FOR OTHER CERTIFICATION PROGRAMS IN 21 CALIFORNIA. 22 "ALTHOUGH I AM UNABLE TO ATTEND THE 23 PUBLIC HEARING, I WANT TO THANK YOU FOR 24 THE OPPORTUNITY TO EXPRESS SUPPORT FOR THE 25 PROPOSED REGULATION. MY SINCERE THANKS 0054 01 ALSO FOR THE CONTINUED LEADERSHIP YOU, THE 02 BOARD MEMBERS, AND YOUR STAFF HAVE 03 DEMONSTRATED IN PROMOTING ENVIRONMENTAL 04 TECHNOLOGIES AS PART OF OUR ENVIRONMENTAL 05 PROGRAMS. YOUR WORK IS APPRECIATED BY THE 06 PEOPLE OF CALIFORNIA. 07 "SINCERELY, ANN HEYWOOD, DEPUTY 08 SECRETARY FOR ENVIRONMENTAL TECHNOLOGY." 09 THAT'S THE FOURTH AND FINAL LETTER. 10 MR. DUNLAP: THANK YOU, MR. AMES. I APPRECIATE 11 THOSE WORDS FROM DEPUTY SECRETARY HEYWOOD, BECAUSE IT 12 SHOWS CLEARLY, AS WE HAVE COME TO EXPECT AND APPRECIATE, 13 THAT WE HAVE CAL/E.P.A. BEHIND OUR INNOVATED WORK, THAT 14 THEY HAVE TAKEN A DEEP INTEREST IN THIS PROGRAM'S 15 IMPLEMENTATION. AND WE ARE POSITIONED WELL TO BE ABLE TO 16 GO OUT AND SET SOME STANDARDS THAT OTHERS WILL LIKELY 17 FOLLOW. 18 SO WITH THAT, ANY OF MY COLLEAGUES ON THE 19 BOARD HAVE ANY QUESTIONS OR COMMENTS? 20 MR. BOYD INDICATED ARE HERE THAT WE PUSHED 21 HIM TO HAVE HIS WRAP-UP EARLIER THAN HE NORMALLY WOULD 22 HAVE, BUT I THINK THERE'S CONSENSUS WE HAVE GOT A WINNER 23 HERE. 24 MS. EDGERTON? 25 MS. EDGERTON: I THINK I SHOULD TAKE THIS 0055 01 OPPORTUNITY TO THANK THE CHAIRMAN FOR HIS WORK ON 02 ENVIRONMENTAL TECHNOLOGY IN A FORMER LIGHT WHEN YOU WERE 03 OVER AT THE TOXICS DEPARTMENT, AND NO ONE HERE HAS POINTED 04 OUT THAT THIS IS IN PART A RESULT OF YOUR EXCELLENT WORK 05 AS WELL. 06 SO I THANK YOU PERSONALLY. 07 MR. DUNLAP: YOU'RE WELCOME. 08 WELL, THANK YOU. 09 MR. BOYD? 10 MR. BOYD: I ALWAYS DESIRE GETTING A LAST WORD IN, 11 MR. CHAIRMAN, IF YOU WOULD GIVE ME ONE LAST OPPORTUNITY. 12 I WOULD LIKE TO POINT OUT, AND I WISH I DID 13 WHEN MR. LACY WAS AT THE PLATFORM, EARLIER THIS WEEK, 14 E.L.A. ASSERTED FOUR PRECERTIFICATION DOCUMENTS FOR FULTON 15 BOILERWORKS, AND I WOULD JUST LIKE THE BOARD AND THE 16 AUDIENCE -- MR. LACY WAS PROBABLY AWARE OF THAT FACT 17 ALREADY -- TO KNOW THAT THIS WAS KIND OF A FIRST, AND THEY 18 ARE AMONG THE FIRST. 19 AND WE FEEL GOOD ABOUT THE PROGRAM AND GOOD 20 ABOUT THE EFFORT THEY HAVE MADE. 21 SO I COMMEND THAT AND COMMEND THE STAFF. 22 MR. DUNLAP: OKAY. THANK YOU. THAT'S ALL THE 23 TESTIMONY. 24 WRITTEN SUBMISSIONS AND STAFF COMMENTS FOR 25 THIS ITEM HAVE BEEN ENTERED INTO THE RECORD AND THE BOARD 0056 01 HAS NOT GRANTED AN EXTENSION OF THE COMMENT PERIOD. I'M 02 OFFICIALLY CLOSING THE RECORD ON THIS PORTION OF AGENDA 03 ITEM NUMBER 9-5-1. WRITTEN OR ORAL COMMENTS RECEIVED 04 AFTER THE COMMENT PERIOD HAS BEEN CLOSED WILL NOT BE 05 ACCEPTED AS PART OF THE OFFICIAL RECORD ON THIS AGENDA 06 ITEM. 07 ARE THERE ANY EX PARTE COMMUNICATIONS THE 08 BOARD MEMBERS NEED TO MENTION AT THIS POINT? 09 OKAY. WE HAVE BEFORE US RESOLUTION 96-35. 10 WE HAD IT FOR A WHILE. THE CHAIR WOULD ENTERTAIN THE 11 MOTION TO ADOPT THIS RESOLUTION. 12 MR. BOSTON: I MOVE RESOLUTION NUMBER 96-35'S 13 ADOPTION. 14 MR. DUNLAP: THANK YOU. 15 IS THERE A SECOND? 16 MR. HILLIGOSS: SECOND. 17 MR. DUNLAP: THANK YOU. 18 ANY DISCUSSION? 19 I THINK WE CAN GO FORWARD ON A VOICE VOTE. 20 ALL THOSE IN FAVORS SAY AYE. 21 (WHEREUPON EACH AND EVERY BOARD MEMBER 22 RESPONDED "AYE") 23 MR. DUNLAP: ANY OPPOSED? 24 NO OPPOSED. 25 THANK YOU. 0057 01 ALL RIGHT. WE WILL ASK STAFF TO CHANGE 02 POSITIONS AND GIVE OUR COURT REPORTER A MOMENT. 03 (PAUSE IN THE PROCEEDINGS) 04 MR. DUNLAP: THE SECOND AGENDA ITEM IS 96-5-2. 05 AGAIN, I ENCOURAGE THOSE IN THE AUDIENCE WHO 06 HAVE WRITTEN TESTIMONY TO PLEASE SEE THE BOARD SECRETARY 07 TO PROVIDE THE 20 COPIES WE HAVE ASKED FOR. 08 96-5-2 IS A PUBLIC MEETING TO CONSIDER THE 09 ADOPTION OF A NONREGULATORY AMENDMENT TO REMOVE ACETONE 10 FROM CATEGORY III OF THE AB 1807 TOXIC AIR CONTAMINANT 11 IDENTIFICATION LIST. 12 I UNDERSTAND THAT THIS IS THE FIRST OF TWO 13 ACTIONS THE BOARD WILL BE CONSIDERING REGARDING ACETONE, 14 ONE THIS MONTH, THE OTHER NEXT MONTH. TODAY'S ACTION 15 WOULD REMOVE ACETONE FROM THE AB 1807B TOXIC AIR 16 CONTAMINANT IDENTIFICATION LISTING. 17 AT THIS POINT, I'D LIKE TO ASK MR. BOYD TO 18 INTRODUCE THE ITEM. 19 JIM? 20 MR. BOYD: THANK YOU, MR. CHAIRMAN. 21 ON SEPTEMBER 21ST, 1995, THE CHEMICAL 22 MANUFACTURERS ASSOCIATION SENT A PETITION TO THE AIR 23 RESOURCES BOARD REQUESTING REMOVING OF ACETONE FROM BOTH 24 THE TOXIC AIR CONTAMINANT PROGRAM OF THE AIR RESOURCES 25 BOARD, SOMETIMES REFERRED TO AS THE AB 1807 PROGRAM, FROM 0058 01 ITS IDENTIFICATION LIST OF TOXIC AIR CONTAMINANTS AND ALSO 02 FROM THE TOXIC HOT SPOTS PROGRAM LIST, SOMETIMES REFERRED 03 TO AS THE AB 2588 PROGRAM. 04 TODAY WE WILL PRESENT TO THE BOARD THE BASIS 05 FOR OUR RECOMMENDATION TO REMOVE ACETONE FROM THE 06 NONREGULATORY TOXIC AIR CONTAMINANT LIST. AND NEXT MONTH, 07 AS INDICATED, YOU WILL HEAR RECOMMENDATION FOR ACETONES 08 REMOVAL FROM THE AIR TOXIC HOT SPOTS PROGRAM LIST. 09 THESE ACTIONS WILL FACILITATE INDUSTRY'S USE 10 OF ACETONE AS A SUBSTITUTE FOR BOTH TOXIC AND OZONE 11 DEPLETING SUBSTANCES AND ALSO SUPPORT THE STATE'S EFFORTS 12 TO CONTROL EMISSION OF VOLATILE COMPOUNDS. 13 WITH THAT BRIEF INTRODUCTION, I'D LIKE TO 14 INTRODUCE MS. MICHELLE HOUGHTON OF THE STATE RESOURCE 15 DIVISION WHO WILL PRESENT AND SUMMARIZE THE STAFF'S 16 ANALYSIS OF THE PETITION FROM THE CHEMICAL MANUFACTURERS 17 ASSOCIATION. 18 MS. HOUGHTON. 19 MS. HOUGHTON: THANK YOU, MR. BOYD. 20 TODAY WE ARE PROPOSING THAT ACETONE BE 21 REMOVED FROM OUR AB 1807 TOXIC AIR CONTAMINANT LIST. THIS 22 ACTION IS NECESSARY IN ORDER TO ALLOW ITS SUBSEQUENT 23 REMOVAL FROM THE AIR TOXICS HOT SPOTS LIST. 24 TO DESCRIBE THE BASIS FOR OUR RECOMMENDATION 25 AND FOR THE BENEFIT OF OUR NEW BOARD MEMBERS, I WILL FIRST 0059 01 GIVE AN OVERVIEW OF THE PROGRAM AND THE IDENTIFICATION 02 LIST. NEXT, I WILL GIVE SOME BACKGROUND INFORMATION ON 03 ACETONE; OUR EXPOSURE AND HEALTH EVALUATION WHICH FORMS 04 THE BASIS FOR OUR RECOMMENDATION; OUR RATIONALE FOR 05 REMOVAL; AND FINALLY, A SUMMARY AND STAFF RECOMMENDATION. 06 FIRST, THE TOXIC AIR CONTAMINANT PROGRAM. 07 THIS PROGRAM WAS ESTABLISHED IN 1983 BY AB 1807 WITH THE 08 PURPOSE OF PROTECTING PUBLIC HEALTH BY REDUCING EMISSIONS 09 OF T.A.C.'S. IT CONSISTS OF TWO PHASES, THE 10 IDENTIFICATION OR RISK ASSESSMENT PHASE AND THE CONTROL OR 11 RISK MANAGEMENT PHASE. 12 LAST JULY, THE BOARD HEARD A DETAILED 13 OVERVIEW AND UPDATE ON CALIFORNIA'S AIR TOXICS PROGRAM. 14 TODAY I WILL BRIEFLY TOUCH ON THE MAIN POINTS FROM THAT 15 UPDATE. 16 THE TOXIC AIR CONTAMINANT PROCESS IS AS 17 FOLLOWS: AFTER A SUBSTANCE OFFICIALLY ENTERS THE FORMAL 18 PROCESS OF IDENTIFICATION, THE A.R.B. STAFF PREPARES AN 19 EXPOSURE ASSESSMENT AND THE OFFICE OF ENVIRONMENTAL HEALTH 20 HAZARD ASSESSMENT PREPARES A HEALTH ASSESSMENT. 21 THE SCIENTIFIC REVIEW PANEL, WHICH CONSISTS 22 OF SIX INTERNATIONALLY RECOGNIZED EXPERTS, INDEPENDENTLY 23 REVIEWS THE COMBINED EXPOSURE AND HEALTH REPORTS AND THE 24 SCIENTIFIC INFORMATION ON WHICH THEY ARE BASED. THIS 25 REVIEW ASSURES THAT THE BEST SCIENTIFIC DATA ARE USED. 0060 01 A VERY IMPORTANT PART OF THIS PROCESS IS 02 PUBLIC OUTREACH. THIS INCLUDES OPEN PUBLIC WORKSHOPS, 03 MEETINGS WITH INDUSTRY ASSOCIATIONS, AND EXTENSIVE 04 CONTACTS WITH INDIVIDUALS INTERESTED IN OUR PROPOSED 05 ACTIONS. 06 THE FINAL STEP IN THIS PROCESS IS YOUR 07 DECISION AT A PUBLIC HEARING TO FORMALLY IDENTIFY A 08 COMPOUND AS A TOXIC AIR CONTAMINANT. 09 AFTER A SUBSTANCE IS IDENTIFIED AS A T.A.C., 10 THE A.R.B. WORKS WITH LOCAL AIR POLLUTION CONTROL 11 DISTRICTS, AFFECTED SOURCES AND INTERESTED PUBLIC TO 12 INVESTIGATE THE NEED, FEASIBILITY AND COST OF REDUCING 13 EMISSIONS OF THAT SUBSTANCE. THIS ANALYSIS INCLUDES A 14 REVIEW OF ALL RISK REDUCTION OPTIONS. 15 AS IN THE IDENTIFICATION PHASE, PUBLIC 16 OUTREACH IS AN ESSENTIAL COMPONENT OF RISK MANAGEMENT. 17 IF CONTROLS ARE JUSTIFIED, THE A.R.B. ADOPTS 18 A CONTROL MEASURE AT A BOARD HEARING. LOCAL AIR POLLUTION 19 CONTROL DISTRICTS THEN ADOPT AND ENFORCE EQUIVALENT OR 20 MORE RESTRICTIVE MEASURES TO REDUCE EMISSIONS OF THE 21 T.A.C. 22 ACHIEVEMENTS OF THE PROGRAM INCLUDE 23 20 SUBSTANCES WHICH THE BOARD HAS IDENTIFIED AS TOXIC AIR 24 CONTAMINANT UNDER AB 1807, THE LISTING OF ALL 189 25 HAZARDOUS AIR POLLUTANTS AS REQUIRED BY AB 2728, THE 0061 01 DEVELOPMENT AND IMPLEMENTATION OF EIGHT AIR TOXIC CONTROL 02 MEASURES WITH OVER 7,000 SOURCES REDUCING EMISSIONS OF AIR 03 TOXICS. 04 AS PART OF THE IDENTIFICATION PROGRAM, WE 05 MAINTAIN A NONREGULATORY TOXIC AIR CONTAMINANT 06 IDENTIFICATION LIST. THE PURPOSE OF THE LIST IS TO INFORM 07 THE PUBLIC OF SUBSTANCES WHICH HAVE BEEN IDENTIFIED AS 08 TOXIC AIR CONTAMINANTS AND TO ASSIST A.R.B. STAFF WITH 09 SELECTION OF THE POLLUTANTS FOR REVIEW AS TOXIC AIR 10 CONTAMINANTS. 11 THIS LIST IS DIVIDED INTO THREE CATEGORIES. 12 CATEGORY ONE CONTAINS SUBSTANCES WHICH HAVE FORMERLY BEEN 13 IDENTIFIED AS T.A.C.'S AND INCLUDES ALL FEDERAL HAZARDOUS 14 AIR POLLUTANTS. 15 CATEGORY TWO INCLUDES THOSE CHEMICALS THAT 16 ARE CURRENTLY UNDER REVIEW. WE HAVE TWO SUBSTANCES IN 17 THIS CATEGORY, INORGANIC LEAD AND DIESEL EXHAUST. 18 THE LAST CATEGORY CONSISTS OF SUBSTANCES 19 WHICH ARE BEING CONSIDERED FOR REVIEW BUT LACK SUFFICIENT 20 HEALTH AND EXPOSURE DATE. ACETONE IS INCLUDED IN THIS 21 CATEGORY. 22 THIS LIST WAS LAST MODIFIED BY THE BOARD IN 23 APRIL OF 1993 WHEN THE FEDERAL HAZARDOUS AIR POLLUTANTS 24 WERE FORMALLY IDENTIFIED AS TOXIC AIR CONTAMINANTS UNDER 25 ASSEMBLY BILL 2728. 0062 01 NOW FOR SOME BACKGROUND ON ACETONE. LAST 02 JUNE, THE U.S. E.P.A. EXEMPTED ACETONE AS A VOLATILE 03 ORGANIC COMPOUND BECAUSE OF ITS NEGLIGIBLE PHOTOCHEMICAL 04 REACTIVITY. AT THE SAME TIME THEY REMOVED ACETONE FROM 05 THE LIST OF TOXIC CHEMICALS UNDER THE SUPERFUND AMENDMENTS 06 REAUTHORIZATION ACT, S.A.R.A., TITLE III. 07 S.A.R.A., TITLE III COLLECTS RELEASE 08 INFORMATION ON AIR, WATER AND LAND RELEASES PRIMARILY FROM 09 MANUFACTURING INDUSTRIES. THIS INFORMATION IS PUT INTO 10 THE FEDERAL TOXIC RELEASE INVENTORY. 11 LAST SEPTEMBER WE AMENDED OUR V.O.C. 12 DEFINITION TO EXEMPT ACETONE FROM ALL CONSUMER PRODUCT 13 REGULATIONS BASED ON COMPUTER MODELING THAT SHOWS ACETONE 14 HAS LOW PHOTOCHEMICAL REACTIVITY AND WHEN SUBSTITUTED FOR 15 MORE REACTIVE COMPOUNDS, SHOULDN'T RESULT IN ADVERSE 16 IMPACTS TO GROUND-LEVEL OZONE. 17 WE THEN NOTIFIED THE DISTRICTS OF THE CHANGE 18 SO THEY COULD ASSESS THE APPROPRIATENESS IN EXEMPTING 19 ACETONE FROM THEIR OWN V.O.C. DEFINITION. 20 ON SEPTEMBER 21ST, 195, THE CHEMICAL 21 MANUFACTURERS ASSOCIATION OR C.M.A. PETITIONED THE A.R.B. 22 TO REMOVE ACETONE FROM ITS LIST OF AIR TOXICS, INCLUDING 23 THE CALIFORNIA AB 2588 AIR TOXICS HOT SPOTS PROGRAM. 24 IN DECEMBER, WE GRANTED C.M.A.'S PETITION AND 25 AGREED TO SCHEDULE A PUBLIC MEETING TO RECOMMEND REMOVAL 0063 01 OF ACETONE FROM CATEGORY III OF THE NONREGULATORY AB 1807 02 TOXIC AIR CONTAMINANT IDENTIFICATION LIST. WE ALSO AGREED 03 TO SCHEDULE A PUBLIC HEARING PROPOSING TO REMOVE ACETONE 04 FROM THE AIR TOXIC HOT SPOTS LIST. THAT HEARING IS 05 SCHEDULED FOR JULY. 06 ACETONE IS A NATURAL BY-PRODUCT OF THE BODY'S 07 NORMAL METABOLISM. IT IS ALSO PRODUCED AND USED IN MANY 08 INDUSTRIAL PROCESSES. POTENTIAL HEALTH EFFECTS INCLUDE 09 IRRITATION TO THE EYES, NOSE AND THROAT. TO EVALUATE THE 10 POTENTIAL EFFECT OF INCREASED USAGE OF ACETONE, SHOULD IT 11 BE REMOVED FROM OUR LIST, THE A.R.B. STAFF MODELED THREE 12 FACILITIES IN CALIFORNIA USING CONSERVATIVE ASSUMPTIONS TO 13 DETERMINE THE POTENTIAL AIR IMPACTS OF REMOVING ACETONE 14 FROM THE TOXIC AIR CONTAMINANT PROGRAM. 15 SINCE REPORTED, ACETONE EMISSION RATES HAVE 16 DECLINED OVER THE PAST DECADE. WE CHOSE FACILITIES TO 17 MODEL WHICH REPRESENT A HISTORICALLY HIGH ACETONE EMISSION 18 RATE, A CURRENT HIGH EMISSION RATE AND A SMALL FACILITY. 19 THE ESTIMATED DOWNWIND CONCENTRATIONS REPRESENT WORST-CASE 20 METEOROLOGICAL CONDITIONS. 21 FOR THEIR ANALYSIS, O.E.H.H.A. STAFF REVIEWED 22 U.S. E.P.A.'S DOCUMENTATION ON ITS DECISION TO REMOVE 23 ACETONE FROM S.A.R.A., TITLE III AND AGREED THAT INCREASED 24 USE OF ACETONE IS NOT EXPECTED TO POSE A HEALTH HAZARD. 25 THE RESULTS FROM OUR MODELING EXERCISE SHOWED 0064 01 AIR CONCENTRATIONS 10 TO 100 BELOW ACUTE OR CHRONIC HEALTH 02 VALUES. AND THAT IS FOR FACILITIES WITH THE HIGHEST 03 EMISSIONS IN CALIFORNIA TODAY. EVEN IF EMISSIONS INCREASE 04 TO HISTORICALLY HIGH VALUES, AIR CONCENTRATIONS WOULD 05 STILL BE WELL BELOW THE LEVEL OF CONCERN. 06 RATIONALE FOR REMOVAL: ACETONE EMISSIONS ARE 07 NOT EXPECTED TO POSE A HEALTH THREAT, AND WE WILL BE 08 TRACKING FUTURE USE. 09 SHOULD ACETONE BE REMOVED FROM BOTH THE TOXIC 10 AIR CONTAMINANT IDENTIFICATION LIST AND THE AB 2588 LIST, 11 IT MAY BE USED AS A SUBSTITUTE FROM OUR HAZARDOUS AND 12 OZONE DEPLETING SUBSTANCES AND WILL COST EFFECTIVELY AID 13 IN EFFORTS TO CONTROL EMISSIONS OF VOLATILE ORGANIC 14 COMPOUNDS. 15 FINALLY, REMOVAL OF ACETONE FROM CATEGORY III 16 DOES NOT PRECLUDE ITS FUTURE CONSIDERATION AS A T.A.C., 17 SHOULD NEW HEALTH EFFECTS AND EMISSIONS INFORMATION 18 INDICATE THAT SUCH CONSIDERATION IS WARRANTED. 19 TO SUMMARIZE, ACETONE EMISSIONS ARE NOT 20 ANTICIPATED TO POSE ACUTE OR CHRONIC HEALTH HAZARDS OR 21 ADVERSE ENVIRONMENTAL IMPACTS. 22 REMOVING ACETONE FROM THIS LIST WILL ALLOW A 23 SUBSEQUENT REMOVAL FROM THE HOT SPOTS PROGRAM LIST. THIS 24 WILL HAVE A POSITIVE BENEFIT ON AIR QUALITY AS ACETONE MAY 25 BE USED AS A SUBSTITUTE FOR MORE HAZARDOUS AND OZONE 0065 01 DEPLETING SUBSTANCES. 02 FOR THESE REASONS, STAFF RECOMMENDS ACETONE 03 BE REMOVED FROM CATEGORY III OF OUR TOXIC AIR CONTAMINANT 04 IDENTIFICATION LIST. 05 THAT CONCLUDES MY PRESENTATION, AND WE WILL 06 BE GLAD TO ANSWER ANY OF YOUR QUESTIONS. 07 MS. RIORDAN: THANK YOU VERY MUCH. 08 DO YOU HAVE ANY OTHER COMMENTS THAT WOULD GO 09 WITH THE STAFF REPORT BEFORE WE ASK OUR QUESTIONS? 10 MR. BOYD: I THINK WE HAVE SOME COMMENT LETTERS 11 THAT WE COULD PROVIDE, BUT WE COULD DO THE WITNESSES 12 FIRST. 13 MS. RIORDAN: THERE IS NO WITNESS LIST. 14 MR. BOYD: I WONDERED WHY THERE IS NOTHING IN FRONT 15 OF ME. 16 WELL, THEN, LET ME HAVE THE STAFF SUMMARIZE. 17 MS. RIORDAN: ALL RIGHT. BUT THERE MAY BE SOME 18 QUESTIONS FROM THE BOARD MEMBERS. SO MAYBE BEFORE YOU DO 19 THE SUMMARY, LET ME ASK IF THERE ARE ANY QUESTIONS FROM 20 THE BOARD MEMBERS OF STAFF. 21 HEARING NONE, THEN IF YOU WANT TO DO THE 22 SUMMARY OF LETTERS, THEN THAT'S FINE. 23 MS. HOUGHTON: OKAY. WE HAVE RECEIVED ONE LETTER 24 OF SUPPORT FROM THE ACETONE PANEL OF THE CHEMICAL 25 MANUFACTURERS ASSOCIATION. AND THAT LETTER IS DATED 0066 01 JUNE 12TH OF 1996. 02 THEIR SUPPORT IS BASED ON THE BELIEF THAT 03 REMOVAL OF ACETONE FROM THE LIST WILL ENSURE RESOURCES ARE 04 FOCUSED ON REDUCING AIR EMISSIONS OF POLLUTANTS TRULY OF 05 CONCERN AND WILL FACILITATE INDUSTRY'S USE OF ACETONE AS A 06 SUBSTITUTE FOR HAZARDOUS AIR POLLUTANTS AND OZONE 07 DEPLETING SUBSTANCES. 08 MR. DUNLAP: OKAY. ANYTHING ELSE TO ADD, STAFF? 09 MR. BOYD? 10 YES, DR. BOSTON. 11 DR. BOSTON: LET ME JUST ASK WHAT THE CONCERN IS OR 12 WHY THERE IS NO CONCERN ABOUT HUMAN PERSONS THAT MAY BE 13 WORKING IN THE INDUSTRY. I NOTICE THAT YOU DO MENTION 14 THERE IS A POSSIBILITY OF INTERNAL TOXICITY OR PERHAPS 15 REPRODUCTIVE ABNORMALITIES IN ANIMALS. 16 HOW ABOUT THE LADIES THAT WORK IN THIS 17 INDUSTRY? IS THERE A KNOWN CONCERN ABOUT THESE PEOPLE? 18 MS. DENTON: MY NAME IS JOAN DENTON WITH THE AIR 19 RESOURCES BOARD. 20 DR. BOSTON, IF I CAN REPEAT YOUR QUESTION, 21 YOU WERE WONDERING WHY THERE IS NO CONCERN FOR WOMEN WHO 22 MIGHT BE WORKING IN AN INDUSTRY WHICH USE ACETONE; IS THAT 23 CORRECT? 24 MR. BOSTON: OR MANUFACTURER. 25 MS. DENTON: OR MANUFACTURER. 0067 01 AS YOU KNOW, ACTUALLY OSHA, FEDERAL OSHA AND 02 STATE OSHA HAVE THE WORK PLACE STANDARDS CRITERIA, AND WE 03 ACTUALLY HAVE STANDARDS THAT WE HAVE LISTED IN OUR REPORT 04 AS FAR AS LEVELS WHICH ARE DEEMED TO BE PROTECTIVE. 05 BUT WE ARE LOOKING AT POTENTIAL FOR EMISSIONS 06 OF ACETONE ON AMBIENT CONCENTRATIONS. THAT'S WHAT WE 07 FOCUSED ON, AND POTENTIAL IMPACTS ON NEARBY RESIDENTS. 08 MR. DUNLAP: SO YOU ARE LOOKING AT MORE AMBIENT 09 IMPACTS, PRIMARILY MANUFACTURING, RATHER THAN USER 10 IMPACTS; IS THAT CORRECT? 11 MS. DENTON: THAT'S CORRECT. 12 MR. AMES: THAT'S CORRECT. ALSO, IN ADDITION TO 13 THAT, ALL WE HAVE GATHERED FROM WORKING WITH THE INDUSTRY, 14 IT APPEARS THAT ACETONE WILL REPLACE FAR MORE HAZARDOUS 15 SUBSTANCES, SO IT WILL BE A HEALTH BENEFIT. 16 MR. ROBERTS: WORK PLACE STANDARDS WILL STILL BE IN 17 PLACE? 18 MR. AMES: THAT'S CORRECT. 19 MR. DUNLAP: AND ADMINISTERED BY OSHA? 20 MR. AMES: THAT'S CORRECT. 21 MR. DUNLAP: HAS THERE BEEN ANY ISSUE SURROUNDING 22 OSHA'S ADMINISTRATION OF THIS SUBSTANCE, ANY CHANGES, 23 ANYTHING GOING ON THERE? 24 MS. DENTON: NO; NOT THAT WE ARE AWARE OF. 25 MR. DUNLAP: OKAY. ALL RIGHT. VERY GOOD. 0068 01 ANY OTHER QUESTIONS OF STAFF? 02 MR. DUNLAP: ALL RIGHT. 03 SINCE THIS ISN'T A REGULATORY ITEM, IT IS NOT 04 NECESSARY TO CLOSE THE RECORD. 05 HOWEVER, WE DO HAVE A RESOLUTION BEFORE THE 06 BOARD, 96-36. THIS RESOLUTION CONTAINS THE STAFF 07 RECOMMENDATIONS. 08 AND THE CHAIR WOULD ENTERTAIN A MOTION. 09 MS. RIORDAN: I MOVE FOR THE ADOPTION. 10 MR. VAGIM: SECOND. 11 MR. DUNLAP: THANK YOU, SUPERVISOR RIORDAN. 12 IS THAT A SECOND? SUPERVISOR VAGIM, DID I 13 HEAR A SECOND? 14 MR. VAGIM: YES. 15 MR. DUNLAP: ALL RIGHT. ANY DISCUSSION? 16 ALL RIGHT. HEARING NONE, I GUESS WE WILL 17 PROCEED WITH THE VOICE VOTE. 18 ALL THOSE IN FAVOR OF ADOPTING RESOLUTION 19 96-36 WHICH CONTAINS THE STAFF RECOMMENDATION, PLEASE SAY 20 AYE. 21 (WHEREUPON EACH AND EVERY BOARD MEMBER 22 RESPONDED "AYE") 23 MR. DUNLAP: ANY OPPOSED? 24 VERY WELL. MOTION CARRIES, WHICH BRINGS US 25 TO AGENDA ITEM 3. 0069 01 THE THIRD ITEM IS 96-5-3, A PUBLIC MEETING TO 02 CONSIDER APPROVAL OF A PROPOSED REPORT TO THE CALIFORNIA 03 STATE LEGISLATURE ON FUNDING SOURCES OF CALIFORNIA'S AIR 04 POLLUTION CONTROL DISTRICTS WITH ANNUAL BUDGETS EXCEEDING 05 ONE MILLION DOLLARS. 06 THIS ITEM IS THE CONSIDERATION OF THE '96 07 REPORT TO THE LEGISLATURE OF FUNDING SOURCES ON CALIFORNIA 08 AIR POLLUTION CONTROL DISTRICTS. AS REQUIRED BY STATE 09 LAW, THIS REPORT PROVIDES FUNDING INFORMATION FOR THOSE 10 DISTRICTS THAT HAVE BUDGETS OVER ONE MILLION DOLLARS 11 ANNUALLY. 12 AS I'M SURE STAFF WILL DISCUSS IN DETAIL, 13 STATE LAW IS EXPLICIT ABOUT THE INFORMATION TO BE INCLUDED 14 IN THIS REPORT. THE PRIMARY REQUIREMENT IS THAT WE 15 IDENTIFY DISTRICTS' REVENUE SOURCES AND THE ALLOCATION OF 16 THOSE REVENUES TO DISTRICT PROGRAMS. BUDGET INFORMATION 17 WAS PROVIDED BY EACH OF THE 12 DISTRICTS WITH BUDGETS OVER 18 ONE MILLION DOLLARS. SO NEARLY A THIRD -- ACTUALLY, OVER 19 A THIRD OF THE 34 DISTRICTS HAVE BUDGETS IN OUR STATE OF 20 OVER A MILLION DOLLARS. I WOULD LIKE TO RECOGNIZE THEIR 21 EFFORTS TO PROVIDE US WITH THIS INFORMATION SO WE CAN MEET 22 OUR REPORTING REQUIREMENTS. 23 THE LOCAL DISTRICTS WORK WELL WITH STAFF, 24 CERTAINLY MATURED THE RELATIONSHIP RELATIVE TO RAPPORT, 25 AND I APPRECIATED THE INSIGHT THAT THE ASSISTANT EXECUTIVE 0070 01 OFFICER LYNN TERRY SHARED WITH ME ON THIS POINT A FEW DAYS 02 AGO. 03 AT THIS JUNCTURE, I WOULD LIKE TO ASK 04 MR. BOYD TO INTRODUCE THIS BRIEF ITEM. 05 MR. BOYD: THANK YOU, MR. CHAIRMAN, MEMBERS OF THE 06 BOARD. THIS IS THE FOURTH REPORT THAT WE HAVE PREPARED 07 FOR SUBMITTAL TO THE LEGISLATURE RELEVANT TO THIS TOPIC. 08 AS WERE THE PREVIOUS REPORTS, THIS ONE, TOO, 09 IS A STRAIGHTFORWARD PRESENTATION OF INFORMATION ABOUT AIR 10 DISTRICT REVENUES AS SPECIFIED IN STATE LAW. 11 THE REPORT YOU WILL CONSIDER TODAY ADDRESSES 12 THE SAME REQUIREMENTS AS DID LAST YEAR'S REPORT. THERE 13 HAVE BEEN NO CHANGES IN STATE LAW RELATIVE TO THIS REPORT 14 AND THE CONDUCT OF THIS ACTIVITY. 15 THE BOARD CONSIDERED LAST YEAR'S REPORT. YOU 16 REQUESTED THAT WE WORK WITH THE CALIFORNIA AIR POLLUTION 17 CONTROL OFFICERS ASSOCIATION TO DEVELOP STANDARDIZED 18 FORMATS FOR PRESENTING DATA TO THE A.R.B. AND TO THE 19 LEGISLATURE. 20 WE HAVE DONE THIS. AND AS YOU INDICATED, WE 21 APPRECIATE THEIR ASSISTANCE. WE RECOGNIZE THAT EACH 22 DISTRICT HAS ITS OWN ACCOUNTING PROCEDURES, AND THIS MEANS 23 THAT IT TOOK AN EXTRA EFFORT FOR DISTRICTS TO PROVIDE THE 24 INFORMATION IN THE REQUESTED FORMAT. AND THE DISTRICTS 25 DID PUT FORTH THIS EFFORT IN ORDER TO MEET OUR NEEDS AND 0071 01 THE NEEDS OF THE BOARD. AND, AGAIN, WE APPRECIATE THAT. 02 AND SEEING MR. SOMMERVILLE STILL IN THE 03 AUDIENCE, I HOPE HE RELAYS TO C.A.P.C.O.A. OUR 04 APPRECIATION FOR THE WORK THAT ALL THEIR DISTRICT 05 DIRECTORS DID. 06 WITH THAT, AT THIS POINT, I'D LIKE TO TURN 07 THE STAFF PRESENTATION OVER TO MR. GARY HONCOOP WHO'S WITH 08 OUR OFFICE WITH AIR QUALITY AND TRANSPORTATION TO GIVE YOU 09 THE DETAILS OF THE STAFF PRESENTATION. 10 MR. HONCOOP: THANK YOU, MR. BOYD. MR. CHAIRMAN 11 AND MEMBERS OF THE BOARD, AS YOU HEARD MR. BOYD SAY, THIS 12 DISTRICT FUNDING REPORT THAT WE ARE BRINGING BEFORE YOU 13 TODAY FOR YOUR CONSIDERATION IS THE FOURTH EDITION. 14 PREVIOUS REPORTS WERE SUBMITTED TO THE LEGISLATURE IN 15 1990, '92 AND '95. 16 STATE LAW IS QUITE SPECIFIC ABOUT THE 17 REPORT'S CONTENTS, BUT IT DOES NOT REQUIRE AN EVALUATION 18 OR ANALYSIS OF THE DISTRICT'S BUDGETS OR PROGRAMS. AND 19 THIS YEAR'S REPORT PROVIDES BUDGET INFORMATION FOR FISCAL 20 YEAR 1994/95, BECAUSE THAT IS THE MOST RECENT YEAR IN 21 WHICH THE DISTRICTS HAD COMPLETE FISCAL INFORMATION. 22 THE FOCUS OF THE REPORT IS THE DISTRICTS' 23 OPERATIONAL BUDGETS. HOWEVER, SOME OF THE DISTRICTS' 24 BUDGETS INCLUDE FUNDS THAT ARE NOT USED BY THE DISTRICTS 25 BUT ARE PASSED THROUGH TO OTHER AGENCIES. AND THE PRIME 0072 01 EXAMPLE OF THESE FUNDS ARE THE MOTOR VEHICLE FEES. THE 02 DISTRICTS ACCOUNTED FOR THESE FUNDS IN THEIR BUDGETS IN 03 DIFFERENT WAYS. SO WHERE APPROPRIATE, I'LL POINT OUT 04 WHERE THE INCLUSION OF THOSE FUNDS AFFECTS THE COMPARISONS 05 AMONG THE DISTRICTS' BUDGETS. 06 PROVIDING THE INFORMATION NEEDED FOR THIS 07 REPORT, AS YOU HEARD LAST YEAR, THE DISTRICT FUNDING 08 REPORT USED A STANDARDIZED FORMAT FOR REPORTING THE BUDGET 09 INFORMATION. SO WE DID WORK WITH THE CAPITAL BOARD OF 10 DIRECTORS AND ITS FINANCIAL OFFICERS SUBCOMMITTEE TO 11 DEVELOP A SET OF STANDARDIZED CATEGORIES FOR THE DISTRICTS 12 TO USE WHEN REPORTING THEIR FUNDING SOURCES AND 13 EXPENDITURES. 14 HAVING THE STANDARDIZED CATEGORIES PROVED TO 15 BE A CHALLENGE, BECAUSE NO DISTRICTS' ACCOUNTING SYSTEM 16 MATCHES EXACTLY THE SELECTED CATEGORIES. SO WE FOUND THAT 17 SOME OF THE DISTRICTS DATA FIT THE STANDARDIZED CATEGORIES 18 BETTER THAN OTHERS. 19 WE HAD A NUMBER OF LATE CHANGES TO THE 20 REPORT, BECAUSE THE WORK OF MAKING THOSE BUDGET NUMBERS 21 FIT INTO THE STANDARDIZED CATEGORIES AND ALSO BECAUSE THIS 22 YEAR OUR REQUEST FOR DATA FROM THE DISTRICTS CAME AT THE 23 SAME TIME THAT THEY WERE DEVELOPING NEXT FISCAL YEARS' 24 BUDGETS. 25 FOR EXAMPLE, THE SOUTH COAST SACRAMENTO AND 0073 01 SANTA BARBARA DISTRICTS RECENTLY IDENTIFIED CHANGES THAT 02 NEEDED TO BE MADE TO THE BUDGET DATA IN THE REPORT. SO 03 THE NUMBERS THAT ARE PRESENTED TO YOU TODAY WILL BE THE 04 UPDATED NUMBERS, WHICH YOU SHOULD HAVE RECEIVED AS A 05 PACKAGE OF REVISED TABLES. 06 THIS YEAR'S REPORT HAS A NEW FORMAT COMPARED 07 TO LAST YEAR. THE STANDARDIZED REPORT CATEGORIES ALLUDE 08 US TO PRESENT THE BUDGET INFORMATION IN UNIFORM FUNDING 09 CATEGORIES. WE ALSO IDENTIFIED CORE DISTRICT PROGRAMS TO 10 USE WHEN REPORTING HOW THE DISTRICTS ALLOCATED THEIR 11 REVENUES. AND FINALLY, WE ADDED A CATEGORY OF EXTERNAL 12 PROGRAMS TO IDENTIFY SPECIFICALLY THE MONEYS THAT THE 13 DISTRICTS DID NOT USE FOR DISTRICT OPERATIONS BUT PASSED 14 THROUGH TO OTHER AGENCIES. 15 THIS NEXT SLIDE SHOWS THOSE 12 DISTRICTS WITH 16 BUDGETS GREATER THAN 12 MILLION DOLLARS IN FISCAL YEAR 17 '94/95 THAT ARE ADDRESSED IN THE REPORT. AS YOU CAN SEE, 18 THEY RANGE FROM THE LARGER DISTRICTS LIKE THE SOUTH COAST, 19 S.F. BAY AREA, ON DOWN THROUGH THE SMALLER ONES LIKE 20 YOLO-SOLANO AND SAN LUIS OBISPO. 21 AS I STATED EARLIER, STATE LAW SPECIFIES WHAT 22 THE REPORT IS TO CONTAIN. THE REQUIRED ELEMENTS OF THE 23 REPORT INCLUDE THOSE SHOWN ON THIS SLIDE: THE BUDGET OF 24 EACH DISTRICT WITH A BUDGET OVER ONE MILLION DOLLARS; THE 25 DISTRICT'S BUDGET DEVELOPMENT PROCESS; THE DISTRICT'S 0074 01 FUNDING SOURCES; THE SOURCE OF INDUSTRY FEES; HOW 02 DISTRICTS ALLOCATE THESE FUNDS TO THEIR PROGRAMS AND 03 SERVICES; AND FINALLY, FINES AND PENALTIES. 04 THIS SLIDE PRESENTS THE 94/95 BUDGET TOTALS 05 FOR THE DISTRICTS. I NOTED EARLIER SOME PASSED IT THROUGH 06 TO OTHER AGENCIES. FOR EXAMPLE, THE SAN JOAQUIN VALLEY 07 DISTRICT'S BUDGET, WHICH YOU SEE HERE AT 20.9 MILLION 08 DOLLARS, INCLUDES 5.5 MILLION DOLLARS OF PASS THROUGH. 09 SAN DIEGO'S BUDGET OF 16.2 MILLION DOLLARS INCLUDED 10 4.7 MILLION DOLLARS OF PASS THROUGH MONEYS. 11 SANTA BARBARA'S BUDGET OF 10.4 MILLION HAS 3.7 MILLION 12 DOLLARS IN PASS THROUGH. AND SACRAMENTO HAD A BUDGET OF 13 6.5 MILLION, BUT IT HAD 1.2 MILLION DOLLARS IN PASS 14 THROUGH. 15 THIS NEXT SLIDE SHOWS THE BUDGETS FOR THE 16 REMAINING SIX DISTRICTS COVERED IN THE RECORD. AND AGAIN, 17 WE HAVE SOME OF THESE BUDGETS WITH NONOPERATIONAL FUNDS 18 INCLUDED, THE MOST SIGNIFICANT BEING MONTEREY BAY. IT 19 SHOWS A BUDGET HERE OF 8.9 MILLION, BUT THAT INCLUDES 20 APPROXIMATELY 3.2 MILLION DOLLARS THAT CAME FROM A 21 ONE-TIME SETTLEMENT PAYMENT FOR DELAYED COMPLIANCE. 22 THE NEXT ELEMENT OF THE REPORT COVERS THE 23 DISTRICTS' BUDGET DEVELOPMENT PROCESS. FOUR STEPS THAT 24 YOU SEE LISTED ON THIS SLIDE IS A GENERALIZED SUMMARY OF 25 THE PROCESS. DISTRICTS PREPARE DRAFT BUDGETS. THEY HOLD 0075 01 AT LEAST ONE WORKSHOP, WITH SOME DISTRICTS HOLDING 02 SEVERAL. THE PUBLIC'S ALSO GIVEN AN OPPORTUNITY TO 03 PROVIDE INPUT WHEN THE PROPOSED BUDGET IS PRESENTED TO THE 04 DISTRICT BY THE DISTRICT STAFF TO THE GOVERNING BOARD AND 05 AT A SUBSEQUENT MEETING WHEN THE GOVERNING BOARD APPROVES 06 THE FINAL BUDGET. WE ALSO FOUND THAT SEVERAL DISTRICTS 07 PROVIDE ADDITIONAL OPPORTUNITIES FOR PUBLIC REVIEW BY 08 SUBMITTING THE PROPOSED BUDGET TO PUBLIC ADVISORY 09 COMMITTEES. 10 THE NEXT SLIDE LISTS THE DISTRICTS FUNDING 11 SOURCES. INFORMATION THAT YOU SEE HERE IS BASED ON A 12 COMPOSITE OF ALL DISTRICT BUDGETS. THE REPORT CONTAINS 13 THE SPECIFIC DATA FOR EACH OF THE 12 DISTRICTS. 14 AS YOU CAN SEE, THERE ARE THREE MAJOR SOURCES 15 OF DISTRICT FUNDING AND SEVERAL LESSER SOURCES. THE 16 LARGEST SOURCE OF DISTRICT REVENUES WERE THE STATIONARY 17 SOURCE FEES THAT PROVIDE ABOUT 50 PERCENT. THE NEXT 18 LARGEST IS THE MOTOR VEHICLE FEES, WHICH ACCOUNT FOR ABOUT 19 24 PERCENT. AND THEN WE HAVE FEDERAL AND STATE GRANTS, 20 WHICH COMBINED CONTRIBUTED ABOUT 10 PERCENT OF STATE 21 FUNDING, OF TOTAL FUNDING. AND THE LESSER SOURCES INCLUDE 22 LOCAL TAXES, WHICH PROVIDE FOUR PERCENT, AND FINES AND 23 PENALTIES, WHICH PROVIDE ABOUT TWO PERCENT OF TOTAL 24 FUNDING. 25 NEXT I WANT TO DISCUSS THE SOURCES OF THE 0076 01 INDUSTRY'S FEES. THIS IS ANOTHER AREA WHERE WE WORK WITH 02 THE C.A.P.C.O.A. FOLKS TO DEVELOP A STANDARDIZED METHOD OF 03 REPORTING. SO WHAT WE CAME UP WITH AND WHAT YOU SEE HERE 04 ARE CATEGORIES THAT ARE BASED ON S.I.C. CODES. THE FIRST 05 ONE SHOWS MANUFACTURING AND INDUSTRIAL PROVIDED THE 06 HIGHEST PERCENTAGE OF FEES AT 40 PERCENT. 07 THE NEXT SET OF SOURCES ARE GROUPED TOGETHER, 08 BECAUSE THEY FALL UNDER A GENERAL CATEGORY CALLED SERVICE 09 AND COMMERCE. AND THAT GROUP, WHICH COMPRISES ELECTRIC 10 UTILITIES ON GAS, CONTRIBUTE ABOUT 26 PERCENT OF THE FEE 11 REVENUES. 12 THE LAST GROUP SHOWN HERE IS IDENTIFIED IN 13 THE REPORT AS RESOURCE DEVELOPMENT AND IS MADE UP OF THE 14 SOURCES THAT INCLUDE OIL AND GAS EXTRACTION, MEANING AND 15 AGRICULTURE. AS YOU CAN SEE, AS A GROUP, THEY CONTRIBUTED 16 TO ABOUT 11 PERCENT OF THE DISTRICT FEE REVENUES. 17 AS WITH THE BUDGET DEVELOPMENT PROCESS, ALL 18 DISTRICTS SET THEIR FEES THROUGH AN OPEN PUBLIC PROCESS. 19 DISTRICT STAFF SOLICIT INPUT FROM THE PUBLIC AND AFFECTED 20 PARTIES BEFORE PROPOSING THE FEES, BEFORE THE PROPOSED 21 FEES ARE CONSIDERED FOR ADOPTION AT A PUBLICLY NOTICED 22 HEARING. THIS PROCESS FOLLOWS THE REQUIREMENTS LAID OUT 23 IN STATE LAW. 24 NEXT, LET ME COVER HOW THE DISTRICT REVENUES 25 WERE ALLOCATED TO VARIOUS PROGRAMS. WE STANDARDIZE THE 0077 01 CATEGORIES TO FIT THE FOUR PROGRAMS FROM THE DISTRICTS. 02 AND HERE ARE OUR MAJOR FINDINGS: ON A STATEWIDE BASIS, 03 PERMITTING AND COMPLIANCE WHERE THE PROGRAMS ARE RECEIVING 04 MOST OF THE DISTRICT RESOURCES YOU SEE ABOUT 40 PERCENT. 05 THIS HIGH PERCENTAGE IS CONSISTENT WITH THE DISTRICTS' 06 PRIMARY STATUTORY RESPONSIBILITY OF REDUCING EMISSIONS 07 FROM STATIONARY SOURCES. 08 NEXT, WE HAVE THE COMBINED CATEGORIES OF 09 PLANNING INVENTORIES AND RULES. THAT TAKES UP ABOUT 10 15 PERCENT OF COMBINED DISTRICT RESOURCES. AIR MONITORING 11 TAKES ABOUT TEN PERCENT, AS DOES EXTERNAL PROGRAMS. AND 12 BY EXTERNAL PROGRAMS, WE MEAN THOSE FUNDS THAT ARE PASSED 13 THROUGH THE OTHER PUBLIC AND PRIVATE AGENCIES. AND THE 14 LARGEST PORTION OF THESE FUNDS ARE THOSE MOTOR VEHICLE 15 FEES THAT ARE USED TO FUND PROJECTS TO REDUCE EMISSIONS 16 FROM MOTOR VEHICLES. 17 AND OTHER PROGRAMS RECEIVING LESS THAN TEN 18 PERCENT ARE THE LOCAL MOBILE SOURCE PROGRAMS AND PUBLIC 19 OUTREACH. 20 FINALLY, A FEW COMMENTS ABOUT HOW MUCH THE 21 DISTRICTS' REVENUES DROPS FINES AND PENALTIES. WE FIND 22 THAT FINES AND PENALTIES ARE NOT A SUBSTANTIAL 23 CONTRIBUTION TO DISTRICT BUDGETS. IN TOTAL, THEY AVERAGE 24 ONLY AROUND TWO PERCENT AND IN NO DISTRICT ARE MORE THAN A 25 THREE PERCENT CONTRIBUTION. BY COMPARISON, LAST YEAR'S 0078 01 REPORT ONLY SHOWED ABOUT A TWO PERCENT AVERAGE 02 CONTRIBUTION FROM FINES AND PENALTIES. 03 AS I STATED EARLIER, WE RECEIVED THREE 04 LETTERS IDENTIFYING A NUMBER OF CHANGES THAT NEEDED TO BE 05 MADE TO THE REPORT. AND I WILL BRIEFLY SUMMARIZE THEM AT 06 THIS TIME. 07 THE FIRST LETTER WAS DATED JUNE 5, 1996 FROM 08 MR. NORM COVELL (PHONETIC), AIR POLLUTION CONTROL OFFICER, 09 THE SACRAMENTO METROPOLITAN AIR QUALITY MANAGEMENT 10 DISTRICT. 11 MR. COVELL PROVIDED SEVERAL UPDATES. FIRST, 12 ADMINISTRATIVE COSTS WERE REDISTRIBUTED. THE SECOND 13 CHANGE THAT SACRAMENTO REQUESTED WAS THE ADDITION OF 14 FINES, HEARING BOARD FEES AND INTEREST INCOME THAT HAD 15 INADVERTENTLY BEEN LEFT OUT. FINALLY, SACRAMENTO 16 CLARIFIED THE AMOUNT OF CARRYOVER OF MOTOR VEHICLE FEES. 17 THE SECOND LETTER WAS DATED JUNE 7, 1996 WITH 18 DR. JAMES LENS (PHONETIC), EXECUTIVE OFFICER OF THE SOUTH 19 COAST AIR QUALITY MANAGEMENT DISTRICT. DR. LENS PROVIDED 20 CORRECTED FINES AND PENALTIES DATA, REQUESTED THE ADDITION 21 OF DATA THAT IDENTIFIED THE TRANSFER OF FUNDS AMONG 22 PROGRAMS, AND THEN CLARIFIED THAT THE FISCAL YEAR 94/95 23 BUDGET HAD DECREASED BY NINE PERCENT COMPARED TO PREVIOUS 24 YEAR OF 93/94. 25 AND THEN THIS WEEK WE RECEIVED A LETTER FROM 0079 01 THE SANTA BARBARA AIR POLLUTION CONTROL DISTRICT 02 REQUESTING SIMILARLY THAT THE TABLE ON THE APPENDIX BE 03 CLARIFIED TO REFLECT THAT EXPENDITURES FOR THE DISTRICTS' 04 TOXICS PROGRAM. 05 AND AS I NOTED EARLIER, WE REVISED THE 06 APPROPRIATE TABLES AND THEY HAVE BEEN SUBMITTED TO THE 07 BOARD AS A PACKAGE. 08 IN CLOSING, WE RECOMMEND THE BOARD ACCEPT THE 09 CHANGES TO THE REPORT SUBMITTED BY THE SOUTH COAST, 10 SACRAMENTO AND SANTA BARBARA DISTRICTS AND THE APPROPRIATE 11 RELATED CHANGES TO THE TEXT OF THE REPORT. 12 WE ALSO RECOMMEND THAT THE BOARD APPROVE THE 13 REPORT WITH THE CORRECTIONS I'VE JUST NOTED FOR SUBMITTAL 14 TO THE GOVERNOR AND THE LEGISLATURE. 15 THANK YOU. AND I WOULD BE PLEASED TO ANSWER 16 ANY QUESTIONS YOU HAVE AT THIS TIME. 17 MR. DUNLAP: THANK YOU VERY MUCH. 18 I GUESS I WOULD ASK MY COLLEAGUES AND THE 19 BOARD TO AGAIN NOTE THE CLOSE COORDINATION WITH LOCAL 20 DISTRICTS. I KNOW THAT'S NOT AN EASY TASK, NOR 21 NECESSARILY SHOULD IT BE. BUT I KNOW THAT YOU WORKED 22 CLOSELY WITH THEM AND PRIDE YOURSELF ON COORDINATING, 23 MAKING CERTAIN THEY WERE AWARE OF NOT ONLY THE LEGAL 24 REQUIREMENTS, BUT MOTIVES. SO WELL DONE. 25 WITH THAT, DO ANY OF MY BOARD MEMBERS, 0080 01 COLLEAGUES HAVE ANY QUESTIONS OF STAFF ON THIS ITEM? 02 MR. VAGIM: MR. CHAIRMAN, I THINK THE ONLY THING 03 THAT CAN BE DISCUSSED AT THIS POINT IS THE FUTURE OF 2766 04 FUNDS, AND I UNDERSTAND THE LEGISLATURE IS WALKING THROUGH 05 SOME INTERESTING DISCUSSIONS AS WE SPEAK, AND HOPEFULLY, 06 AS YOU CAN SEE, IT IS A DEFINITE LIFELINE OF LOCAL 07 DISTRICTS, AND WE DO A LOT WITH THEM. SO HOPEFULLY WE CAN 08 KEEP A CLOSE WATCH ON THAT. 09 MR. DUNLAP: SUPERVISOR VAGIM, ON THIS POINT, LAST 10 YEAR WAS THE REQUIREMENT TO BE AUDITED, TO REVIEW THE 11 PROGRAM. I THINK NEXT YEAR WE ARE GOING TO BE DOING 12 ANOTHER ONE. 13 IS THAT RIGHT, MS. TERRY? 14 MS. TERRY: THAT'S RIGHT, SCHEDULED FOR NEXT YEAR. 15 MR. DUNLAP: AND WE ARE GOING TO CONTINUE TO 16 SUPERVISE AND TO NUDGE THE DISTRICTS THAT NEED A NUDGE TO 17 MAKE SURE THEY ARE USING CRITERION THAT SHOW NOT ONLY COST 18 EFFECTIVENESS BUT INSURING WE GET THAT BANG FOR THE BUCK 19 PROGRAM ADEQUATELY THAT WE NEED. 20 SO I'M COMFORTABLE AT THIS JUNCTURE WITH 21 STAFF'S TAKES SO TO SPEAK ON THE VALUE OF THOSE VALUES FOR 22 THE LOCAL DISTRICTS. 23 ANY QUESTIONS OF THE STAFF? 24 MR. DUNLAP: OKAY. THEN I GUESS WE WILL GO TO THE 25 WITNESS LIST. AND THERE ISN'T ONE. 0081 01 PAT, WE DON'T HAVE ANYONE SIGNED UP, AS I 02 UNDERSTAND IT. 03 ANY WRITTEN COMMENTS? 04 YOU COVERED SOME CHANGES THAT THE LOCAL 05 DISTRICTS HAD SUBMITTED. ANY ADDITIONS TO THAT? 06 MR. HONCOOP: NO. THOSE WERE THE ONLY COMMENTS WE 07 RECEIVED. 08 MR. DUNLAP: OKAY. THEN WE WILL OFFICIALLY CLOSE 09 OFF THIS ITEM. WE HAVE NO RESOLUTION FOR THIS ITEM. BUT 10 I WOULD ENTERTAIN A MOTION FROM MY COLLEAGUES AND THE 11 BOARD TO MOVE THIS ITEM TO FORWARD THE REPORT TO THE 12 GOVERNOR AND ULTIMATELY TO THE LEGISLATURE. 13 MR. VAGIM: FIRST. 14 MS. RIORDAN: I SECOND IT. 15 MR. DUNLAP: ANY DISCUSSION? 16 OKAY. WITH THAT, WE WILL PROCEED WITH A 17 VOICE VOTE. 18 ALL THOSE IN FAVOR SAY AYE. 19 (WHEREUPON EACH AND EVERY BOARD MEMBER 20 RESPONDED "AYE.") 21 MR. DUNLAP: ANY OPPOSED? 22 VERY GOOD. 23 STAFF, PLEASE MOVE THIS REPORT TO GOVERNOR 24 WILSON'S OFFICE AND THE STATE LEGISLATURE. 25 OKAY. THE FOURTH AGENDA ITEM TODAY IS 0082 01 96-5-4. IT'S A PUBLIC MEETING TO CONSIDER PROPOSALS FOR 02 THE A.R.B.'S INNOVATIVE AND AIR TECHNOLOGY PROGRAM. 03 THIS IS THE SECOND YEAR FOR THIS EFFORT WHICH 04 IS INTENDED TO SUPPORT TECHNOLOGIES THAT NOT ONLY HAVE 05 HIGH POTENTIAL FOR IMPROVING AIR QUALITY IN CALIFORNIA, 06 BUT ALSO OFFER GREAT COMMENTS FOR STIMULATING THE STATE'S 07 ECONOMY THROUGH SIGNIFICANT COMMERCIALIZATION ACTIVITIES. 08 WITH THAT, I WOULD LIKE TO ASK MR. BOYD TO 09 DISCUSS THE FOUR PROPOSALS THAT WE ARE HAVING RECOMMENDED 10 TO US TODAY AND HOW YOU RECOMMEND WE PROCEED. 11 MR. BOYD. 12 MR. BOYD: THANK YOU AGAIN, MR. CHAIRMAN. 13 AS THE CHAIRMAN AS HE INDICATED, WE, INDEED, 14 WILL BE DISCUSSING WITH YOU THE INNOVATIVE CLEAN AIR 15 TECHNOLOGIES PROGRAM. THIS PROGRAM WAS CREATED TO PROVIDE 16 SEED MONEY FOR SELECTED PROJECTS TO MOVE FROM THE 17 SO-CALLED RESEARCH AND DEVELOPMENT PHASE TO THE 18 COMMERCIALIZATION PHASE. 19 LET ME POINT OUT, IN ORDER TO BE ELIGIBLE FOR 20 CONSIDERATION UNDER THIS PROGRAM, PROPONENTS OF PROJECTS 21 MUST COMMIT SIGNIFICANT RESOURCES OF THEIR OWN. THEY MUST 22 ALSO SHOW RESOURCE COMMITMENTS FROM OUTSIDE SOURCES. 23 WE HAVE RECEIVED A NUMBER OF GOOD PROPOSALS 24 FOR FUNDING COMMERCIALIZATION DEVELOPMENT UNDER THIS 25 PROGRAM. WE HAVE EVALUATED THESE PROPOSALS TO DETERMINE 0083 01 WHICH CAN BEST SUPPORT THE BOARD'S GOALS OF CLEANING UP 02 OUR AIR WHILE SIMULTANEOUSLY HELPING OUR STATE'S ECONOMY. 03 LAST FALL WE RECEIVED 38 PROPOSALS IN 04 RESPONSE TO THE REQUEST FOR PROPOSALS THAT WE ISSUED UNDER 05 THIS PROGRAM. 06 AFTER EVALUATION, WE REQUESTED SEVERAL 07 PROPONENTS TO SUBMIT FULL PROPOSALS. TEN PROPOSALS WERE 08 RECEIVED AND WERE EVALUATED. OF THESE TEN PROPOSALS, WE 09 RECOMMEND THAT THE BOARD CONSIDER FOUR TO BE APPROVED FOR 10 FUNDING. 11 WE BELIEVE THE OBJECTIVES OF OUR FOUR 12 PROPOSALS OR OF THESE FOUR PROPOSALS ARE CONSISTENT WITH 13 THE BOARD'S GOALS AND POLICIES, AND ALSO THESE PROPOSALS 14 MEET THE TECHNICAL AND BUSINESS REQUIREMENTS OF OUR 15 PROGRAM. 16 WITH THAT, MR. CHAIRMAN, MEMBERS, I'D LIKE TO 17 TURN THE PRESENTATION OF THE ITEM OVER TO MARLA MUELLER OF 18 OUR RESEARCH DIVISION. 19 MR. DUNLAP: PLEASE PROCEED. 20 MS. MUELLER: THANK YOU, MR. BOYD. 21 GOOD MORNING, CHAIRMAN DUNLAP, MEMBERS OF THE 22 BOARD. 23 THE PURPOSE OF MY PRESENTATION IS TO 24 SUMMARIZE STAFF RECOMMENDATIONS FOR FUNDING OF PROPOSALS 25 RECEIVED UNDER INNOVATIVE CLEAN AIR TECHNOLOGIES, OR 0084 01 I.C.A.T., PROGRAM. 02 I.C.A.T. PROJECTS MUST INCREASE THE 03 EFFICIENCY OF EXISTING AIR POLLUTION CONTROL TECHNOLOGIES, 04 INCREASE THEIR COST EFFECTIVENESS, OR DEVELOP NEW COST 05 EFFECTIVE ALTERNATIVES. ALL PROJECTS MUST HAVE 06 BROAD-BASED APPLICATION AND POTENTIAL FOR CREATING JOBS IN 07 CALIFORNIA. ALL TYPES OF AIR POLLUTION PREVENTION AND 08 CONTROL TECHNOLOGIES ARE ELIGIBLE FOR FUNDING. 09 IN THE UNITED STATES, FUNDING FROM RESEARCH 10 SUCH AS DEVELOPMENT OF AN IDEA AND PROOF OF CONCEPT, 11 STEPS 1 AND 2 ON THE FIGURE, IS MUCH MORE AVAILABLE THAN 12 FOR PROTOTYPE DEVELOPMENT AND APPLICATION DEMONSTRATION. 13 ONCE AN APPLICATION HAS BEEN DEMONSTRATED, VENTURE FUNDS 14 MAY BE AVAILABLE TO MOVE THE TECHNOLOGY INTO 15 COMMERCIALIZATION. 16 HOWEVER, SOMEWHERE AROUND STEPS 3, 4, AND 5 17 ON THE FIGURE, IS THE VALLEY OF DEATH. MANY PROJECTS DIE 18 FROM LACK OF FUNDING AND EVENTUALLY COMMERCIALIZE. 19 I.C.A.T. FUNDS WILL BE USED TO HELP BUSINESSES BRIDGE THE 20 VALLEY OF DEATH, SO THAT GOOD IDEAS CAN LEAD TO CLEANER 21 AIR AND A STRONGER ECONOMY. 22 THIS YEAR WE HELD A WORKSHOP FOR COMPANIES 23 SUBMITTING I.C.A.T. PROPOSALS TO ADDRESS ISSUES WHICH 24 CAUSED CONFUSION LAST YEAR. AT THIS WORKSHOP, WE DISCUSS 25 THE OVERALL I.C.A.T. PROGRAM OBJECTIVES AND ADMINISTRATIVE 0085 01 REQUIREMENTS SUCH AS MATCHING FUNDS AND THE PARTICIPATION 02 OF MINORITY, WOMEN AND DISABLED VETERAN BUSINESSES. 03 MATCHING FUNDS ARE REQUIRED OF ALL PROJECTS 04 FUNDED UNDER THE I.C.A.T. PROGRAM. THE APPLICANT MUST 05 PROVIDE AT LEAST 20 PERCENT OF THE PROJECT COST. 06 IN ADDITIONAL, 30 PERCENT OF THE PROJECT COST 07 MUST BE PROVIDED BY THE APPLICANT OR BY CO-FUNDING 08 PARTNERS. 09 THIS MEANS THAT I.C.A.T. WILL PROVIDE NO MORE 10 THAN 50 PERCENT OF THE TOTAL PROJECT COST. IN ADDITION, 11 A.R.B. FUNDING UNDER I.C.A.T. IS LIMITED TO A MAXIMUM OF 12 $250,000 PER PROPOSAL. 13 THE I.C.A.T. R.F.P. SPECIFIED THAT OVERHEAD 14 IS NOT TO EXCEED 100 PERCENT, FRINGE BENEFITS ARE NOT TO 15 EXCEED 35 PERCENT AND GENERAL AND ADMINISTRATIVE COSTS ARE 16 NOT TO EXCEED 15 PERCENT OF SALARIES. ALSO, APPLICANTS OR 17 PARTNERS CANNOT CHARGE ANY FEE OR PROFIT. WE SET THESE 18 STANDARDS, BECAUSE THE PURPOSE OF THE I.C.A.T. PROGRAM IS 19 TO HELP COMPANIES GET TECHNOLOGIES COMMERCIALIZED. 20 COMMERCIALIZATION OF THE TECHNOLOGY WILL ENABLE THE 21 COMPANIES TO RECOVER THEIR EXPENSE AND MAKE A PROFIT. 22 I.C.A.T. PROPOSALS WERE EVALUATED BY A.R.B. 23 STAFF AND BY AN ADVISORY COMMITTEE WHICH CONSISTED OF 24 EXTERNAL REVIEWERS. 25 LAST YEAR WHEN WE PRESENTED THE I.C.A.T. 0086 01 PROPOSALS, THE BOARD REQUESTED THAT THE I.C.A.T. ADVISORY 02 COMMITTEE BE EXPANDED TO INCLUDE INDIVIDUALS FROM THE 03 PRIVATE SECTOR. WE CONTACTED SEVERAL ORGANIZATIONS TO 04 HELP US IDENTIFY QUALIFIED INDIVIDUALS WHO WOULD BE 05 INTERESTED IN SERVING ON THE COMMITTEE. WE ALSO SOLICITED 06 RECOMMENDATIONS FROM MEMBERS OF THE BOARD. 07 BASED ON THIS RESEARCH, WE EXPANDED THE 08 ADVISORY COMMITTEE TO INCLUDE TWO INDIVIDUALS FROM THE 09 PRIVATE SECTOR, MS. SHEILA WASHINGTON AND DR. SUSAN 10 HACKWOOD. 11 MS. WASHINGTON IS PRESIDENT AND C.E.O. OF THE 12 CALIFORNIA BUSINESS INCUBATION NETWORK. DR. HACKWOOD IS 13 THE EXECUTIVE DIRECTOR OF THE CALIFORNIA COUNCIL OF 14 SCIENCE AND TECHNOLOGY. 15 IN ADDITION, WE REPLACED ONE OF LAST YEAR'S 16 TECHNICAL REVIEWERS WITH DR. ROBERT SAWYER FROM THE 17 MECHANICAL ENGINEERING DEPARTMENT OF THE UNIVERSITY OF 18 CALIFORNIA AT BERKELEY. 19 WITH THESE ADDITIONS, THE I.C.A.T. ADVISORY 20 BUSINESS REVIEWERS WERE PROFESSORS SAMUEL DOCTORS FROM 21 CALIFORNIA STATE UNIVERSITY OF HAYWARD, JANE HALL FROM 22 CALIFORNIA STATE UNIVERSITY AT FULLERTON AND 23 CORNELIA PECHMANN FROM UNIVERSITY AT IRVINE. AND 24 MS. SHEILA WASHINGTON AND DR. HACKWOOD WERE BOTH ADDED 25 THIS YEAR. 0087 01 THE I.C.A.T ADVISORY TECHNICAL REVIEWERS 02 WERE PROFESSORS DANIEL CHANG FROM UNIVERSITY OF CALIFORNIA 03 AT DAVIS, ROBERT SAWYER, WHO'S NEW THIS YEAR, AND 04 FOREMAN WILLIAMS FROM THE UNIVERSITY OF CALIFORNIA AT 05 SAN DIEGO. 06 WE RECOMMEND THAT YOU APPROVE FOUR PROPOSALS 07 FOR FUNDING UNDER THE I.C.A.T. PROGRAM. WE SELECTED THESE 08 PROPOSALS BECAUSE THEY ADDRESS IMPORTANT PROGRAM NEEDS AT 09 THE A.R.B., ARE TECHNICALLY FEASIBLE, HAVE THE POTENTIAL 10 TO IMPROVE AIR QUALITY, HAVE MARKET POTENTIAL AND COULD BE 11 COMMERCIALIZED WITHIN A FEW YEARS. 12 THE FIRST PROPOSAL ENTITLED "ZERO-V.O.C. 13 INDUSTRIAL MAINTENANCE METAL COATING," WAS SUBMITTED BY 14 AERO VIRONMENT ENVIRONMENTAL SERVICES LOCATED IN MONROVIA 15 AND ADHESIVE COATING COMPANY, OR A.D.C.O., LOCATED IN 16 SAN MATEO. 17 THE U.S. E.P.A. PLANS TO PROPOSE REGULATIONS 18 TO CONTROL ORGANIC COMPOUND, OR V.O.C., EMISSIONS FROM 19 ARCHITECTURAL AND INDUSTRIAL MAINTENANCE COATINGS. THE 20 EMISSIONS OF THE V.O.C.'S FROM THESE COATINGS OPERATIONS 21 ARE A SUBSTANTIAL COMPONENT OF TOTAL V.O.C. EMISSIONS. 22 THIS PROJECT WOULD BE AN EVALUATION AND FIELD 23 DEMONSTRATION OF THE ZERO-V.O.C. COATING TECHNOLOGY. THE 24 RESIN FORMULATION FOR THE COATING WOULD BE ADJUSTED DURING 25 THE PROJECT TO PROVIDE ACCEPTABLE DRYING TIMES, 0088 01 FLEXIBILITY AND HARDNESS, AND ULTRAVIOLET, CHEMICAL AND 02 SALT SPRAY RESISTANCE FOR USE AS A TOPCOAT ON METAL 03 FURNITURE. THE TECHNOLOGY WITH THEN BE DEMONSTRATED IN 04 SMALL-SCALE TESTING IN SOUTHERN CALIFORNIA, FOLLOWED BY 05 FULL-SCALE DEMONSTRATION AT A STEELCASE METAL FURNITURE 06 MANUFACTURING FACILITY IN GRAND RAPIDS, MICHIGAN. 07 THE COMMERCIALIZATION OF THIS TECHNOLOGY 08 WOULD CREATE JOBS IN CALIFORNIA IN THE COATING/RESIN 09 SECTOR AND PREVENT THE LOSS JOBS IN FURNITURE 10 MANUFACTURING AND POSSIBLY OTHER INDUSTRIAL COMPANIES. 11 THIS PROJECT WOULD COST ABOUT $447,000 WITH 12 50 PERCENT OF THE FUNDS FROM AERO VIRONMENT AND A.D.C.O., 13 AND THE REMAINING FUNDS FROM THE I.C.A.T. PROGRAM. 14 THE SECOND PROPOSAL ENTITLED "DYNAMICALLY 15 OPTIMIZED RECIRCULATION COUPLED WITH FLUIDIZED BED 16 ABSORPTION TO COST EFFECTIVELY CONTROL EMISSIONS FROM 17 INDUSTRIAL COATING AND SOLVENT OPERATIONS" WAS SUBMITTED 18 BY AIR QUALITY SPECIALISTS, LOCATED IN NEWPORT BEACH. 19 INDUSTRIAL COATING AND SOLVENT OPERATIONS ARE 20 SIGNIFICANT COMPONENTS OF V.O.C. EMISSIONS. CONTROLLING 21 EMISSIONS FROM THESE OPERATIONS IS OFTEN COST PROHIBITIVE 22 DUE TO THE HIGH VENTILATION FLOW RATES AND THE ENERGY 23 INTENSIVE NATURE OF STANDARD EMISSIONS CONTROL SYSTEMS. 24 THE PROJECT WOULD INVOLVE TWO TECHNOLOGIES, A 25 DYNAMICALLY OPTIMIZED RECIRCULATION SYSTEM TO CONTINUALLY 0089 01 MINIMIZE EXHAUST VOLUME FLOW RATES, AND A FLUIDIZED BED 02 EMISSIONS CONTROL AND SOLVENT RECOVERY TECHNOLOGY USING 03 NEW ADSORBING RESINS FOR COST EFFECTIVE OPERATION. 04 FOR THIS PROJECT, AN EXISTING PAINT BOOTH 05 RECIRCULATION SYSTEM ON A STEELCASE FURNITURE COATING LINE 06 IN TUSTIN, CALIFORNIA WOULD BE MODIFIED TO INCLUDE DYNAMIC 07 RECIRCULATION. THE LONG TERM APPLICABLE EFFECTIVENESS OF 08 THE FLUIDIZED BED AND DYNAMIC RECIRCULATION SYSTEMS WOULD 09 THEN BE EVALUATED. 10 THE COMMERCIALIZATION OF THIS TECHNOLOGY WITH 11 WOULD REDUCE OPERATING COSTS AND ALSO ALLOW THE EXPANSION 12 OF EXISTING FACILITIES, WHICH COULD RESULT IN ADDITIONAL 13 CALIFORNIA JOBS IN THE INDUSTRIAL COATINGS SECTOR. 14 THE PROJECT WOULD COST ABOUT $490,000 WITH 15 JUST OVER 50 PERCENT OF THE MONEY FROM AIR QUALITY 16 SPECIALISTS AND THEIR PARTNERS, STEELCASE NORTH AMERICA 17 AND SOUTHERN CALIFORNIA EDISON. 18 THE THIRD PROPOSAL ENTITLED "PROTOTYPE 19 DEMONSTRATION OF C.H.A. NOX REMOVAL SYSTEM FOR TREATMENT 20 OF STATIONARY DIESEL ENGINE EXHAUST" WAS SUBMITTED BY 21 C.H.A. CORPORATION LOCATED IN LARAMIE, WYOMING. 22 STATIONARY DIESEL ENGINES MUST CONTINUE TO MEET EVER 23 TIGHTENING ENVIRONMENTAL AIR QUALITY STANDARDS. BOTH 24 ENGINES AND ASSOCIATED POLLUTION CONTROL DEVICES MUST MEET 25 DIFFICULT REQUIREMENTS, INCLUDING INSTALLATION INTO 0090 01 SPACE-LIMITED SITES AND INTERMITTENT AND/OR FREQUENT 02 OPERATION, VARYING AND/OR CYCLIC PROCESS CONDITIONS AND A 03 HIGH LEVEL OF AUTOMATION AND A VERY HIGH DEGREE OF 04 RELIABILITY. 05 THE C.H.A. NOX PROCESS REMOVES NOX POLLUTANTS 06 FROM THE SMALL STATIONARY DIESEL ENGINES. CURRENTLY THERE 07 ARE NO FEASIBLE CONTROLS FOR THESE ENGINES. THIS PROJECT 08 WOULD INCLUDE CONSTRUCTING A PROTOTYPE C.H.A. NOX CONTROL 09 SYSTEM AND TESTING IT ON A 50 HORSEPOWER DIESEL ENGINE AT 10 THE C.H.A. CORPORATION LABORATORY. THEN THE SAME DEVICE 11 WOULD BE DEMONSTRATED AT MC CLELLAN AIR FORCE BASE ON A 12 15 HORSEPOWER DIESEL MOTOR GENERATOR SET FOR AIRCRAFT 13 GROUND EQUIPMENT. 14 SO SINCE CALIFORNIA CURRENTLY REPRESENTS THE 15 LARGEST MARKET FOR DIESEL EXHAUST CONTROL TECHNOLOGY, 16 PRODUCTION OF THE ACTUAL TREATMENT DEVICES WOULD BE IN 17 CALIFORNIA. THE C.H.A. CORPORATION AND PARTNERS WOULD 18 SUBMIT A MC CLELLAN AIR FORCE BASE REUSE COMMERCIALIZATION 19 PROPOSAL FOR MANUFACTURING THE DEVICES AT THE MC CLELLAN 20 A.F.B. 21 THE PROJECT WOULD COST ABOUT $425,000 WITH 22 50 PERCENT FUNDING FROM THE C.H.A. CORPORATION, THE 23 SACRAMENTO MUNICIPAL UTILITY DISTRICT, MC CLELLAN AIR 24 FORCE BASE GERLING APPLIED ENGINEERING IN MODESTO. 25 THE LAST PROPOSAL ENTITLED 0091 01 "INJECTOR/INTENSIFIER SYSTEM FOR NATURAL GAS FUELING OF 02 TRANSIT BUS" WAS SUBMITTED BY VALLEY DETROIT DIESEL 03 ALLISON, LOCATED IN THE CITY OF INDUSTRY. 04 THE CATEGORY OF HEAVY-DUTY DIESEL VEHICLES IS 05 ONE OF THE LARGEST CONTRIBUTORS TO THE ON-ROAD MOTOR 06 VEHICLE EMISSIONS INVENTORY FOR NOX AND PARTICULATE 07 MATTER. THE STATE IMPLEMENTATION PLAN INCLUDES A NUMBER 08 OF MEASURES DESIGNED TO REDUCE EMISSIONS FROM HEAVY-DUTY 09 VEHICLES. 10 THIS PROJECT WOULD DEMONSTRATE A NATURAL GAS 11 INJECTOR TECHNOLOGY ON TWO TRANSIT BUSES IN CALIFORNIA. A 12 PROTOTYPE NATURAL GAS FUEL INJECTOR SYSTEM WOULD BE 13 FABRICATED, INSTALLED AND CERTIFIED ON TWO DIESEL BUSES. 14 PERFORMANCE, DURABILITY AND RELIABILITY WOULD BE EVALUATED 15 DURING THIS DEMONSTRATION PERIOD. ALSO, EMISSIONS WOULD 16 BE TESTED. 17 COMMERCIALIZATION OF THIS TECHNOLOGY WOULD 18 INCREASE SALES, PRODUCTION AND SERVICE JOBS IN 19 CALIFORNIA. 20 THE PROJECT WOULD COST ABOUT $500,000 WITH 21 50 PERCENT OF THE FUNDING FROM VALLEY DETROIT DIESEL, 22 WESTPORT RESEARCH OF WEST VANCOUVER, BRITISH COLUMBIA, 23 ANTELOPE VALLEY SCHOOLS TRANSPORTATION AGENCY, CULVER CITY 24 TRANSPORTATION DEPARTMENT AND THE SOUTHERN CALIFORNIA GAS 25 COMPANY. 0092 01 THIS CONCLUDES MY PRESENTATION. 02 WE WILL BE HAPPY TO ANSWER ANY QUESTIONS YOU 03 MAY HAVE. 04 MR. DUNLAP: THANK YOU. 05 HAVE YOU TALKED ABOUT THE MATCHING FUNDS? 06 OUR CONTRIBUTION IS A LITTLE UNDER A MILLION DOLLARS FOR 07 THESE FOUR PROJECTS, MR. BARHAM? 08 MR. BARHAM: YES. IT'S APPROXIMATELY THE SAME 09 AMOUNT OF MONEY IN TERMS OF MATCH. 10 MR. DUNLAP: ALL RIGHT. SO A MILLION DOLLARS OF 11 THE STATE'S MONEY, A MILLION DOLLARS OF THE PRIVATE SECTOR 12 AND THE PARTNER MONEY? 13 MR. BARHAM: THAT'S CORRECT. 14 MR. DUNLAP: ALL RIGHT. VERY GOOD. 15 MR. LAGARIAS, I KNOW THERE'S A QUESTION OR 16 TWO COMING FROM YOU. 17 MR. LAGARIAS: MR. BARHAM, AS YOU KNOW, I'VE BEEN 18 VERY SUPPORTIVE OF THIS PROGRAM. 19 HOW MANY PROPOSALS DID YOU RECEIVE THIS YEAR 20 BEFORE YOU GOT DOWN TO THESE FOUR? 21 MR. BARHAM: WE RECEIVED A TOTAL OF TEN. 22 THIS NEXT YEAR, THOUGH, I WANT TO MENTION TO 23 THE BOARD THAT WE ARE TRYING TO THROW THE NET MUCH WIDER 24 THAN WE HAVE THE FIRST TWO YEARS OF THE PROGRAM. WE ARE 25 GOING OUT WITH NOTIFICATIONS AND DIFFERENT PUBLICATIONS. 0093 01 WE HAVE A NOTICE ON THE INTERNET. HOPEFULLY, WE WILL GET 02 MORE SUBMITTALS NEXT YEAR. 03 ANOTHER THING THAT WE ARE PROCEEDING WITH IS 04 TO INCREASE THE UPPER LIMIT OF THE PROGRAM FROM $250,000 05 STATE CONTRIBUTION TO A HALF MILLION DOLLARS NEXT YEAR. 06 AND WE ANTICIPATE THAT THERE WILL BE MORE INTEREST IN THE 07 PROGRAM BECAUSE OF THESE ACTIONS. 08 MR. LAGARIAS: HOW MANY PROPOSALS DID WE RECEIVE? 09 MR. BARHAM: WE RECEIVED TEN THIS YEAR. 10 MR. LAGARIAS: HAVE WE MADE AN ASSESSMENT IN EACH 11 OF THESE INNOVATIVE CONTROL TECHNOLOGIES AS TO IF THESE 12 TECHNOLOGIES WERE TO BE SUCCESSFUL, WHAT CONTRIBUTION 13 WOULD THEY MAKE IN REDUCING AIR POLLUTANTS IN THE STATE OF 14 CALIFORNIA? 15 FOR EXAMPLE, I DON'T WANT TO SEE US SPENDING 16 A MILLION DOLLARS FOR CONTROL TECHNOLOGY, WHICH WOULD 17 RESULT IN ONLY A MINOR BENEFIT TO THE STATE. 18 MR. BARHAM: WELL, IT VARIES, OBVIOUSLY, FROM 19 SOURCE TO SOURCE. 20 I THINK PROFESSOR SAWYER, FOR EXAMPLE, IN HIS 21 ANALYSIS OF THE DYNAMIC RECIRCULATION PROJECT SUGGESTED 22 THAT DIRECTLY THAT MAY NOT HAVE A LARGE BENEFIT OF 23 HYDROCARBON. BUT INDIRECTLY THERE MAY BE SUBSTANTIAL 24 REDUCTIONS IN ENERGY REDUCTION. 25 THE C.H.A. PROCESS, FOR EXAMPLE, RESULTS IN 0094 01 SIGNIFICANT AIR NOX EMISSIONS FROM PORTABLE EQUIPMENT. 02 ALL OF THESE REDUCTIONS WILL GO INTO THE PROVERBIAL BLACK 03 BOX AND ARE NEEDED TO ACHIEVE THE AIR QUALITY STANDARDS IN 04 THE STATE. SO WE HAVE A LITTLE HERE AND A LITTLE THERE, 05 BUT ADDED TOGETHER, IT WILL ALL SUBSTANTIALLY IMPROVE THE 06 AIR QUALITY, IS OUR ASSESSMENT OF THESE PROJECTS. 07 MR. CACKETTE: MR. LAGARIAS, THAT'S ONE OF THE 08 CRITERIAS WHEN WE REVIEW THEM, IT'S TO MAKE SURE THERE'S 09 SIGNIFICANT EMISSION REDUCTIONS. 10 AS YOU KNOW, NO ONE SOURCE IS A MONSTROUS 11 SOURCE ANYMORE. WE DON'T GO FOR THE ONES THAT ARE A FEW 12 POUNDS. WE LOOK FOR THE ONES THAT BOTH HAVE EMISSION 13 REDUCTION POTENTIAL AND POTENTIAL FOR THE TECHNOLOGY TO BE 14 TRANSFERRED TO OTHER SIMILAR SOURCES. SO POSSIBLY THERE'S 15 A BIGGER BANG FOR THE BUCK OUT OF IT. 16 MR. LAGARIAS: WELL, THIS IS THE FIRST TIME I'VE 17 HEARD THIS, AND I APPRECIATE THE FACT THAT THESE 18 TECHNOLOGIES WOULD HELP REDUCE THE BLACK BOX EMISSION 19 REDUCTIONS, BUT HOW WILL IT COME ABOUT? 20 MR. CACKETTE: EITHER SOME OF THEM IN GREATER 21 EFFICIENCY, SOME OF THEM IN THE C.H.A. PROCESS APPLIED TO 22 SOURCES THAT DON'T HAVE CONTROL AT ALL RIGHT NOW. SO IT 23 WILL HELP FROM THAT ASPECT. 24 MR. LAGARIAS: WILL THESE PROCESSES BE PROPRIETARY 25 TO THE DEVELOPER, OR WILL THEY BE AVAILABLE TO OTHER 0095 01 INDUSTRIAL COMPETITORS? 02 MR. BARHAM: THESE ARE PROPRIETARY TO THE DEVELOPER 03 FOR THE MOST PART. 04 MR. LAGARIAS: DO WE HAVE ANY LEGAL PROBLEM IN THAT 05 REGARD? 06 MR. CACKETTE: NO. 07 MR. LAGARIAS: NO. 08 MR. DUNLAP: OKAY. MR. CALHOUN, DO YOU HAVE A 09 QUESTION? 10 MR. CALHOUN: I DON'T HAVE A QUESTION. I JUST WANT 11 TO CITE AN OBSERVATION THAT I HAVE DISCUSSED WITH THE 12 STAFF. 13 IN REVIEWING THESE PROPOSALS, I NOTE THAT I'M 14 NOT SURE WHICH ONE OF THE PARTICULAR APPLICANTS OFFERED A 15 LOT OF IN-KIND SERVICE, AND I THINK IN THE FUTURE, WE JUST 16 OUGHT TO BE A LITTLE CAREFUL ABOUT THAT AND MAKE SURE THAT 17 THEY ARE, IN FACT, CONTRIBUTING RESOURCES TO THE POT. AND 18 I AM NOT DISREGARDING THE IN-KIND SERVICES. I THINK IT'S 19 IMPORTANT. I THINK WE OUGHT TO MAKE SURE THEY DO BRING 20 SOMETHING TO THE PARTY. 21 MR. BARHAM. THAT'S ACKNOWLEDGED. 22 MR. DUNLAP: OKAY. MR. BARHAM, I APPRECIATE YOUR 23 COMMENTS ABOUT CASTING A LARGER NET TO GET MORE 24 SUBMISSIONS, BECAUSE IT IS IMPORTANT FOR US TO BE LOOKING 25 FOR NEW TECHNOLOGIES THAT WE MIGHT BE ABLE TO HELP THROUGH 0096 01 THIS VALLEY OF DEATH. 02 GIVE US SOME GEOGRAPHIC REPRESENTATION IN OUR 03 STATE. I'M GOING TO BE THE LAST ONE TO TELL YOU WE NEED 04 TO HAVE ONE FOR EVERY CORNER OF STATE, PER SE. BUT THERE 05 ARE CERTAIN REGIONS OF OUR STATE. IN PARTICULAR, I'M 06 THINKING OF THE SAN JOAQUIN VALLEY AND SAN DIEGO AREA 07 WHERE THERE'S A LOT OF INNOVATIVE WORK GOING ON, AND WE 08 MIGHT BE ABLE TO MAKE PEOPLE AWARE OF WHAT'S GOING ON. 09 WE HEAR A LOT ABOUT SOUTH COAST. BUT WE HAVE 10 OTHER PARTS OF THE STATE WITH PEOPLE TRYING TO TACKLE 11 THOSE PROBLEMS AS WELL. SO PAY PARTICULAR ATTENTION TO 12 REGIONS, AND I AM CERTAIN, WITH THAT STATEMENT, TWO OF MY 13 COLLEAGUES WILL WANT TO TAKE ME TO LUNCH AFTERWARD. 14 OKAY. IF THERE ARE NO OTHER QUESTIONS OF 15 STAFF, I WILL TAKE THIS ITEM UP AS FAR AS BOARD ACTION. 16 WE HAVE SOME RESOLUTIONS, I GUESS, BEFORE 17 US. THEY ARE IN THE PACKAGE. 18 WHAT PAGE, TOM? 19 MR. CACKETTE: 229. 20 MR. DUNLAP: ANY WRITTEN COMMENTS, STAFF? DID WE 21 RECEIVE ANY? 22 MR. BARHAM: NO, WE HAVE NOT RECEIVED ANY WRITTEN 23 COMMENTS. 24 MR. DUNLAP: RELATIVE TO THE PROCESS, ONE GOES 25 THROUGH THE SCREENING AND THE CONTRACTING PROCESS. 0097 01 MR. BOYD, I KNOW YOU ALWAYS PRIDE YOURSELF ON DOING THAT 02 JUST RIGHT. ARE YOU CONFIDENT, THIS YEAR IN PARTICULAR, 03 THAT THE BASES HAVE BEEN SMOOTHLY COVERED? 04 MR. BOYD: YES, MR. CHAIRMAN. I'M CONFIDENT THAT 05 YOUR DEPUTIES AND I WENT THROUGH A VERY ELABORATE PROCESS 06 OF REVIEWING THIS ALONG WITH DR. HOLMES IN THE RESEARCH 07 DIVISION. SO I AM VERY CONFIDENT. 08 MR. DUNLAP: VERY GOOD. THANK YOU. 09 SO WE HAVE IN OUR PACKAGE FOUR SEPARATE 10 RESOLUTIONS. AND I KNOW THE BOARD MEMBERS HAVE FOUND THEM 11 NOW AND HAVE HAD A CHANCE TO LOOK AT THEM. 12 ARE THERE ANY ADDITIONAL CONCERNS OR COMMENTS 13 ON ANY OF THESE OR COMMENTS ANY OF THE BOARD MEMBERS HAVE 14 ON ANY OF THESE RESOLUTIONS? 15 THEY SEEM TO BE PRETTY STRAIGHTFORWARD. 16 IF NOT, IS THE BOARD PREPARED TO VOTE ON 17 THESE FOUR RESOLUTIONS? AND THE NUMBERS ARE 96-37, 96-38, 18 96-39 AND 96-40. IF SO, I ENTERTAIN A MOTION. 19 MS. HILLIGOSS: FIRST. 20 MR. CALHOUN: SECOND. 21 MR. DUNLAP: WE WILL HAVE A VOICE VOTE AS WELL. 22 IF THERE'S NO DISCUSSION, ALL THOSE IN FAVORS 23 OF ADOPTING ALL FOUR OF THOSE RESOLUTIONS, PLEASE SAY 24 AYE. 25 (WHEREUPON EACH AND EVERY BOARD MEMBER 0098 01 RESPONDED "AYE") 02 MR. DUNLAP: ANY OPPOSED? 03 VERY GOOD. 04 MOTION CARRIES. 05 THANK YOU. THANK YOU, STAFF. 06 THIS BRINGS US TO 5. 07 WE HAVE TWO REMAINING AGENDA ITEMS, AND WHAT 08 I WOULD PROPOSE TO DO IS FLIP-FLOP THE TWO, GET INTO THE 09 CLEANER BURNING GASOLINE ITEM AS OUR FIFTH ITEM. SO WE 10 WILL MOVE ON 96-5-6. 11 AGAIN, I'D LIKE TO REMIND THOSE OF YOU IN THE 12 AUDIENCE WHO WOULD LIKE TO PRESENT TESTIMONY TO THE BOARD, 13 PLEASE SEE OUR BOARD SECRETARY AND PROVIDE COPIES OF YOUR 14 WRITTEN TESTIMONY TO HER. 15 THE SIXTH ITEM IS TO UPDATE THE BOARD ON THE 16 CALIFORNIA CLEANER BURNING GASOLINE REGULATION 17 IMPLEMENTATION EFFORTS. 18 ON APRIL 25TH OF '96, WE HELD AN INFORMAL 19 MEETING TO UNDERSTAND HOW THE BOARD'S GASOLINE AND DIESEL 20 REGULATIONS AFFECTED FUEL SUPPLIES AND TO INVESTIGATE THE 21 DEGREE TO WHICH CLEAN FUEL PROGRAMS CONTRIBUTED TO THE 22 RAPID RISE IN FUEL PRICES THAT OCCURRED IN THE MARCH/APRIL 23 TIME PERIOD. 24 AT THAT TIME, THE PRICE OF GASOLINE AND 25 DIESEL FUEL AND SPECIFICALLY THE INCREASES IN PRICE THAT 0099 01 HAD OCCURRED DURING THE PREVIOUS TWO MONTHS WERE ON MANY 02 PEOPLE'S MINDS. 03 I'M PLEASED TO NOTE THAT THE AVERAGE 04 WHOLESALE PRICES OF GASOLINE AND DIESEL FUEL DROPPED 05 SUBSTANTIALLY IN MAY. RETAIL PRICES, AS IS USUALLY THE 06 CASE, HAVE FALLEN MUCH MORE SLOWLY. 07 AT THE APRIL MEETING, WE HEARD TESTIMONY FROM 08 THE OIL COMPANIES THAT THE RECENT PRICE SURGES WERE 09 PRIMARILY DUE TO INTERNATIONAL, NATIONAL AND REGIONAL 10 FACTORS. CRUDE OIL PRICES HAD RISEN 50 PERCENT OR THE 11 EQUIVALENT OF UP TO 20 CENTS PER GALLON OF GASOLINE 12 EARLIER IN THE YEAR. 13 OTHER CONTRIBUTING FACTORS WERE THE EXPECTED 14 INCREASE IN DEMAND THAT TYPICALLY OCCURS IN THE SPRINGTIME 15 AND UNEXPECTED OPERATING PROBLEMS AT SEVERAL CALIFORNIA 16 REFINERIES. THE INCREASED PRODUCTION COST OF CLEANER 17 BURNING GASOLINE WAS ALSO A FACTOR IN OUR STATE. AND WE 18 HEARD MUCH ABOUT THAT. WE WERE FORTUNATE TO HAVE 19 CHAIRMAN IMBRECT FROM THE ENERGY COMMISSION SPEND 20 SIGNIFICANT TIME WITH US AT THAT APRIL MEETING AS WELL. 21 THE BOARD HEARD CONVINCING TESTIMONY THAT THE 22 AIR RESOURCES BOARD'S CLEANER BURNING GASOLINE PROGRAM WAS 23 A RELATIVELY SMALL PART OF THE PRICE INCREASE, 24 CONTRIBUTING ON THE ORDER OF FIVE TO EIGHT CENTS PER 25 GALLON TO THE CURRENT GASOLINE PRICES. 0100 01 THE BOARD DIRECTED STAFF TO LOOK IN SEVERAL 02 AREAS AND TO REPORT BACK. LAST MONTH WE RECEIVED A 03 WRITTEN REPORT FROM STAFF ON THIS MATTER. TODAY, THE 04 STAFF WILL REPORT WHAT THEY AND THE ENERGY COMMISSION HAVE 05 LEARNED SINCE THE APRIL MEETING. 06 AND AT THIS POINT, I'D LIKE TO CALL ON STAFF 07 AND MR. BOYD IN PARTICULAR TO BEGIN THE PRESENTATION. 08 BUT IT'S IMPORTANT FOR US TO CONSIDER TODAY 09 THAT WHILE ONE CAN'T CLOSE THE FINAL CHAPTER ON WHAT'S 10 GOING ON IN THE MARKET, BECAUSE WE ARE AT A GIVEN POINT 11 THIS YEAR, AND WE, LIKE MANY CONSUMER, MANY MOTORISTS, ARE 12 INTERESTED IN FINDING OUT WHAT EXACTLY IS GOING ON, WHAT 13 THE RESPONSE HAS BEEN IN THE MARKETPLACE. 14 AND I WANT TO COMMEND STAFF AT THE OUTSET AND 15 THE ENERGY COMMISSION STAFF, MS. BROWN, FOR HOW DOGGED 16 YOU'VE BEEN IN TRYING TO GET FACTS PUT ON THE TABLE, 17 QUESTIONS ANSWERED. 18 AND I MUST TELL YOU, TOO, AT THE OUTSET, THAT 19 THERE'S A REAL HUNGER ON THE PART OF MYSELF AND MY BOARD 20 MEMBER COLLEAGUES TO LEARN ALL THAT YOU HAVE LEARNED AND 21 YOU HAVE BEEN ABLE TO DETERMINE. 22 SO WITH THAT, MR. BOYD, WOULD YOU PLEASE 23 ENLIGHTEN THIS BOARD? 24 MR. BOYD: THANK YOU, MR. CHAIRMAN. 25 AS THE CHAIRMAN HAS INDICATED, TODAY'S ITEM 0101 01 WAS SCHEDULED AT YOUR REQUEST AT OUR APRIL HEARING. WE 02 WERE TO INVESTIGATE THE PRICE AND SUPPLY ISSUES OF WORKING 03 ALONGSIDE THE CALIFORNIA ENERGY COMMISSION AND TO REPORT 04 BACK TO YOU WITH ANSWERS TO YOUR QUESTIONS AND CONCERNS. 05 NOW, THIS MORNING MY INTRODUCTORY REMARKS ON 06 THE ITEM PERHAPS WILL BE A LITTLE MORE SUBSTANTIAL, 07 MEANING A LITTLE MORE LENGTHY THAN I ORIGINALLY HAD 08 PLANNED. I FEEL IT NECESSARY TO PROVIDE TO YOU AND, IN 09 PARTICULAR, TO THE AUDIENCE, A BIT OF HISTORY ABOUT THE 10 EVOLUTION AND DEVELOPMENT OF THIS PROGRAM IN ORDER TO DEAL 11 WITH ISSUES AND CONCERNS THAT HAVE BEEN EXPRESSED, 12 PARTICULARLY IN ONE REGION OF THE STATE. 13 THESE CONCERNS COULD UNNECESSARILY AND I SEE 14 IT UNJUSTIFIABLY UNDERMINE SOME PUBLIC CONFIDENCE IN THIS 15 PROGRAM IN THIS PARTICULAR REGION. IT WOULD BE TRAGIC TO 16 HAVE HARM DONE TO THIS PROGRAM ANYWHERE, FRANKLY, IN THE 17 STATE OF CALIFORNIA. IT HAS SUCH A LARGE NUMBER OF 18 PUBLIC, PRIVATE, BUSINESS, ENVIRONMENTAL AND CITIZEN 19 GROUPS HAVE INDEPENDENTLY AND COLLECTIVELY COME TO AGREE 20 THAT THIS PROGRAM IS ONE OF THE MOST EFFECTIVE AIR QUALITY 21 STRATEGIES TO BE INTRODUCED IN THE PAST TWO DECADES. 22 AS YOU MEMBERS OF THE BOARD KNOW AND HAVE 23 HEARD FROM ME AND OTHERS AND THE STAFF ON PREVIOUS 24 PRESENTATIONS, THE CLEANER BURNING GASOLINE REGULATION WAS 25 APPROVED BY THE AIR RESOURCES BOARD IN NOVEMBER OF 1991. 0102 01 AND WAS AT THAT TIME AND STILL IS A KEY COMPONENT OF THE 02 AIR RESOURCES BOARD'S SO-CALLED LOW EMISSION VEHICLE CLEAN 03 FUELS PROGRAM. 04 NOW, WORK ON THIS LOW EMISSION CLEAN VEHICLE 05 PROGRAM BEGAN, QUITE FRANKLY, IN THE '80'S AS A RESULT OF 06 THE BOARD'S FINDINGS AT THAT TIME THAT THE MOTOR VEHICLE 07 WAS STILL THE PRINCIPAL AIR QUALITY PROBLEM IN CALIFORNIA 08 AND THAT WE COULD NOT ATTAIN OUR HEALTH PROTECTIVE AIR 09 QUALITY STANDARDS WITHOUT ADDITIONAL EMISSIONS REDUCTIONS 10 FROM MOTOR VEHICLES. 11 AT THAT TIME, WE SET OUT AND WE HAD THE 12 OBJECTIVE TO DESIGN A PROGRAM THAT DEALT WITH THE MOTOR 13 VEHICLE AND ITS FUEL AS A SINGLE SYSTEM. WE WANTED TO 14 ESTABLISH PERFORMANCE STANDARDS. 15 FRANKLY, WE ENVISIONED A PROGRAM WHERE AUTO 16 MAKERS WOULD WORK WITH FUEL SUPPLIERS TO DELIVER SYSTEMS 17 TO MEET TAILPIPE EMISSION PERFORMANCE STANDARDS AND ANY 18 FUEL COULD BE UTILIZED. 19 DURING THIS SAME TIME FRAME, THE '70'S AND 20 THE '80'S, QUITE FRANKLY, OTHER EVENTS, PARTICULARLY TWO 21 OTHER EVENTS TOOK PLACE THAT WERE TO BECOME, IN MY MIND, 22 THE GENESIS OF TODAY'S CLEANER BURNING GASOLINE. FIRST IT 23 WAS DURING THIS TIME FRAME THAT THE AIR RESOURCES BOARD 24 UNDER ITS TOXIC AIR CONTAMINANT PROGRAM LISTED BENZINE AS 25 A TOXIC AIR CONTAMINANT. AND GASOLINE WAS IDENTIFIED AS 0103 01 THE MAJOR SOURCE OF BENZINE EMISSIONS IN CALIFORNIA. 02 THE AIR RESOURCES BOARD STAFF AND OIL 03 INDUSTRY REPRESENTATIVES BEGAN DISCUSSING WAYS AND 04 EXPLORING FEASIBILITY OF WAYS TO REDUCE BENZINE AND 05 GASOLINE. IT WAS AT THAT TIME THAT THE CONCEPT OF 06 REFORMULATION TO MEET THIS OBJECTIVE WAS TALKED ABOUT, AND 07 THEN BROADER OBJECTIVES BEGAN TO BE DISCUSSED. 08 WE BEGAN TO DISCUSS THE IDEA OF REFORMULATING 09 GASOLINE TO BE CLEANER BURNING. SECONDLY, DURING THE SAME 10 TIME FRAME, CALIFORNIA WAS STUDYING AND EXPERIMENTING WITH 11 ALTERNATIVE CLEANER BURNING FUELS, SUCH AS NATURAL GAS, 12 COMPRESSED NATURAL GAS OR LIQUEFIED NATURAL GAS, ALCOHOL 13 FUELS, BOTH ETHANOL AND METHANOL, SO ON AND SO FORTH. 14 AND I THINK, AS YOU ARE AWARE, THERE WERE 15 MANY EXTENSIVE RESEARCH AND PILOT EXPERIMENTS DONE BY 16 MULTIPLE STATE AND LOCAL GOVERNMENT AGENCIES, MOST 17 PARTICULARLY THE ENERGY COMMISSION. 18 DURING THIS TIME FRAME, THE LEGISLATURE 19 DEBATED THE ISSUE OF ALTERNATIVE FUELS. AND ULTIMATELY 20 LEGISLATION WAS PASSED BY THEN AN ASSEMBLYMEN BUT NOW 21 SENATOR LEONARD DIRECTING THE AIR RESOURCES BOARD IN 22 CONCERT WITH A HOST OF OTHERS TO STUDY THE ALTERNATIVE 23 FUELS. AND AGAIN, MOST PARTICULARLY, METHANOL SEEMED TO 24 BE THE CANDIDATE. 25 NEAR THE END OF THIS STUDY, WHICH WAS 0104 01 EXTENSIVE, DETAILED AND, FRANKLY, VERY INFORMATIVE AND 02 INTERESTING, AT THE END OF THIS STUDY, THE OIL INDUSTRIES 03 AND ONE REPRESENTATIVE IN PARTICULAR ANNOUNCED THAT THE 04 INDUSTRY COULD AND WOULD REFORMULATE GASOLINE TO BURN AS 05 CLEAN AS IT HAD BEEN SHOWN THAT THESE ALTERNATIVE FUELS, 06 MOST PARTICULARLY METHANOL COULD DO. 07 THE REPORT FROM THIS PANEL EVENTUALLY 08 CONCLUDED THAT THE A.R.B. SHOULD DEVELOP REGULATIONS TO 09 REFORMULATE AND TO CLEAN UP GASOLINE. AND I WOULD LIKE TO 10 SAY I THINK THE REST IS HISTORY. 11 AT THIS TIME, THE AUTO OIL STUDY THAT WAS 12 DONE ON A NATIONAL BASIS BEGAN. CONGRESS BEGAN TO EMBRACE 13 CALIFORNIA'S IDEAS. AND THEIR DEBATES RELATIVE TO 14 REAUTHORIZATION OF THE CLEAN AIR ACT, WHICH WAS ULTIMATELY 15 DONE IN '90, AND THE LOW EMISSIONS VEHICLE CLEAN FUEL 16 CONCEPT THAT CALIFORNIA PIONEERED WAS EMBRACED AS WELL. 17 FOLLOWING THIS AND AS PART OF THIS PROGRAM 18 THAT I MENTIONED TO YOU, THE AIR RESOURCES BOARD IMPROVED 19 IN '90 THE LOW EMISSION VEHICLE, ZERO EMISSION VEHICLE 20 PROGRAM. 21 SUBSEQUENTLY, THE AIR RESOURCES BOARD ADOPTED 22 SO-CALLED PHASE ONE AND PHASE TWO OF FORMERLY GASOLINE 23 REGULATIONS IN 1991. NOW, PHASE TWO REFORM OF GASOLINE 24 HAS COME TO BE KNOWN AS CLEANER BURNING GASOLINE, THE 25 CLEANER BURNING GASOLINE OF TODAY THAT WE ARE DISCUSSING. 0105 01 DURING THIS TIME FRAME, OIL COMPANIES BEGAN 02 TO INTRODUCE CLEANER BURNING FORMULAS OF THEIR OWN. I 03 THINK CREDIT HAS TO BE GIVEN TO ARCO, WHO INTRODUCED 04 E.C. ONE AS THEY CALLED IT AND EVENTUALLY E.C.X. WHICH WAS 05 A HIGHER REFORMULATION. 06 ALL OF THOSE PRECEDED OUR REGULATIONS AND 07 EVENTUALLY WERE SUPERSEDED BY OUR REGULATIONS. AS I SAY, 08 THE REGULATIONS WERE PASSED IN '91, AND THE INTRODUCTION 09 OF PHASE TWO OR NOW CLEANER BURNING GASOLINE WAS SCHEDULED 10 FOR AND HAS TAKEN PLACE IN '96, THUS GIVING THE INDUSTRY 11 FIVE YEARS OF LEAD TIME TO DEAL WITH THIS ISSUE. 12 IT ALSO GAVE EVERYONE INVOLVED WITH THIS 13 ISSUE, INCLUDING YOURSELF, THE OPPORTUNITY TO TAKE 14 ADVANTAGE OF THE RESULTS OF MULTIPLE STUDIES GOING ON IN 15 THE NATION, BUT MOST NOTABLY, THE SO-CALLED AUTO OIL STUDY 16 TO ASCERTAIN THE EVENTUAL FORMULA OR REQUIREMENTS THAT 17 WERE USED IN OUR PROGRAM AND TO ASCERTAIN THE VIABILITY, 18 FEASIBILITY AND PRACTICALITY, SAFETY AND SO FORTH OF THESE 19 KINDS OF FUELS. 20 AFTER PASSAGE OF THE REGULATION, AS YOU KNOW, 21 THE OIL COMPANIES WORKED TO MODIFY THE REFINERY, SPENDING 22 SOMEWHERE BETWEEN FOUR AND FIVE BILLION DOLLARS IN 23 CALIFORNIA IN THE PROCESS OF DOING THIS. AND AS YOU KNOW, 24 YOUR STAFF ASSISTED THE OIL COMPANIES IN OBTAINING THE 25 VARIOUS PERMITS AND DEALING WITH SEQUA REQUIREMENTS AND 0106 01 DOING EVERYTHING WE COULD TO STREAMLINE THE PROCESS TO 02 BRING THIS FUEL TO MARKET. 03 THE A.R.B. CREATED AN ADVISORY COMMITTEE OF 04 OVER 75 MEMBERS TO DEAL WITH A HOST OF QUESTIONS THAT 05 WOULD BE ASKED ABOUT THE SUPPLY, THE PERFORMANCE, WHICH BY 06 PERFORMANCE WE MEAN WHETHER OR NOT WE WOULD HAVE 07 MATERIALS, DESTRUCTION COMPATIBILITY PROBLEMS WITH THE 08 FUEL AND TO DEAL, OF COURSE, WITH PUBLIC INFORMATION, 09 PUBLIC EDUCATION. THIS WAS DONE IN 1994. 10 ALSO DURING THIS TIME FRAME, THE AIR 11 RESOURCES BOARD WORKING IN CONCERT WITH ALL THE AFFECTED 12 PARTIES, MOST PARTICULARLY, THE OIL INDUSTRY, CREATED THE 13 GROUND BREAKING PREDICTED MODEL WHICH ALLOWED EVEN MORE 14 FLEXIBILITY TO INDUSTRY TO COST EFFECTIVELY MEET THE 15 REGULATIONS AND TO MEET OUR PERFORMANCE STANDARD, RATHER 16 THAN HAVE TO DEAL WITH ANY KIND OF PERSPECTIVE FORMULA FOR 17 GASOLINE. 18 AND, OF COURSE, DURING THIS TIME FRAME, AFTER 19 THE CREATION OF THE ADVISORY COMMITTEE, A VERY EXTENSIVE 20 TEST PROGRAM WAS UNDERTAKEN RELATIVE TO THE PERFORMANCE 21 CRITERIA THAT LAID OUT THIS FUEL TO ASSURE OURSELVES THAT 22 FUELS MADE TO CALIFORNIA'S REQUIREMENTS WOULD, INDEED, BE 23 PRACTICAL, BE SAFE AND BE NONDESTRUCTIVE TO VEHICLES AND 24 TO HOPEFULLY CORROBORATE ALL THE STUDIES THAT HAD GONE ON 25 BEFORE. 0107 01 WELL, FRANKLY, ALL WENT WELL. ALL HAS GONE 02 WELL. REFINERS IN CALIFORNIA MET THEIR JANUARY 1ST, 1996 03 DEADLINE TO PROVIDE FUEL. THE MARCH DEADLINE WAS MET WITH 04 REGARDS TO HAVING FUEL IN THE INTERMITTENT POINTS IN THE 05 SYSTEM. AND I AM PLEASED TO ANNOUNCE THAT ALL PARTS OF 06 THE SYSTEM MET THE JUNE 1 DEADLINE FOR HAVING FUEL 07 DELIVERED AT THE PUMP FOR MOTORISTS. 08 QUITE FRANKLY, AS YOU'VE HEARD IN PREVIOUS 09 REPORTS, FORMULATED GASOLINE OR CLEANER BURNING GASOLINE 10 WAS MOST LIKELY IN THE SYSTEM ALMOST 100 PERCENT SHORTLY 11 AFTER THE END OF MARCH. 12 CONCURRENT WITH THIS MARCH TO JUNE TIME 13 FRAME, WE BEGAN TO EXPERIENCE THE NATIONAL PRICE RISE. 14 AND I AM NOT GOING TO REPEAT ALL THE INFORMATION THAT YOU 15 LEARNED IN THE APRIL HEARING. BUT THAT PRICE RISE GAVE 16 RISE ULTIMATELY TO YOUR BOARD HAVING ITS MEETING TO 17 INVESTIGATE THE SUBJECT. AND, OF COURSE, THAT WAS THE 18 FIRST INVESTIGATION OF THE ISSUE TO TAKE PLACE IN THE 19 NATION. 20 SO THAT DOES BRING ME TO THE APRIL BOARD 21 HEARING AND TO THE SUBJECT OF TODAY'S PRESENTATION TO 22 YOU. 23 AND SO, WITH THAT, I WOULD LIKE TO TURN THE 24 PRESENTATION OVER TO OUR STAFF AND MR. SIMEROTH, I 25 BELIEVE, TO BEGIN THE PRESENTATION, AND CALLING UPON 0108 01 WHATEVER ASSISTANCE WE NEED OF MS. BROWN FROM THE ENERGY 02 COMMISSION. 03 AND I WILL HAVE SOME ADDITIONAL REMARKS AT 04 THE END OF THAT PRESENTATION. 05 MR. DUNLAP: IF YOU COULD FORMALLY INTRODUCE 06 MS. BROWN BEFORE US? 07 MR. SIMEROTH: THANK YOU, CHAIRMAN DUNLAP. THIS 08 IS SUSAN BROWN OF THE CALIFORNIA ENERGY COMMISSION, 09 ASSISTANT DIVISION CHIEF. AND HER RESPONSIBILITIES 10 INVOLVE MONITORING THE SUPPLY AND PRICE AND THE GENERAL 11 SITUATION REGARDING MOTOR VEHICLE FUELS FOR CALIFORNIA. 12 MR. DUNLAP: OKAY. THANK YOU. 13 CONTINUE, MR. SIMEROTH. 14 MR. SIMEROTH: THANK YOU, MR. BOYD, CHAIRMAN 15 DUNLAP, MEMBERS OF THE BOARD. 16 I'M GOING TO GIVE YOU A BRIEF SUMMARY OF SOME 17 BACKGROUND INFORMATION I KNOW YOU ARE FAMILIAR WITH, BUT 18 THIS WILL BE A LOOK AT WHAT'S HAPPENED SINCE THE APRIL 19 BOARD MEETING REFLECTING ON WHAT WAS GOING ON PRIOR TO THE 20 APRIL BOARD MEETING. FINALLY, MOST IMPORTANTLY, I'LL GO 21 OVER WHAT STAFF'S DONE IN RESPONSE TO QUESTIONS POSED BY 22 THE BOARD TO THE STAFF. 23 OVER 90 PERCENT OF CALIFORNIANS BREATHE 24 POLLUTED AIR. GASOLINE-POWERED VEHICLES AND EQUIPMENT ARE 25 RESPONSIBLE FOR ABOUT HALF OF THE POLLUTION OR THE SMOG 0109 01 FORMING OR HALF OF THE CALIFORNIA SMOG FORMING EMISSIONS. 02 THE BENEFIT OF THE CLEANER BURNING GASOLINE 03 PROGRAM IS IT REDUCES THE SMOG-FORMING EMISSIONS FROM 04 MOTOR VEHICLES BY 300 TONS PER DAY. THAT'S EQUIVALENT TO 05 REMOVING THREE AND A HALF MILLION VEHICLES FROM THE ROAD. 06 THE S.I.P. RELIES HEAVILY ON THE CLEANER BURNING GASOLINE 07 AND GETTING ABOUT ONE-QUARTER OF THE NEEDED S.I.P. 08 REDUCTIONS FROM THE SMOG PROGRAM. 09 AS YOU HEARD FROM MR. BOYD, THE PROGRAM HAS 10 BEEN SUCCESSFULLY IMPLEMENTED. THE FINAL IMPLEMENTATION 11 DATE WAS JUNE 1ST. THAT CAME AND WENT WITHOUT MISHAP OR 12 ANYTHING HAPPENING. 13 PRIMARILY, BY THE END OF MARCH, MOST OF THE 14 SERVICE STATIONS WERE ALREADY SUPPLYING MINIMUM BURNING 15 GASOLINE TO THE MOTORISTS. THEY DIDN'T HAVE TO DO 16 ANYTHING ABOUT JUNE 1ST REGARDING THE CLEANER BURNING 17 GASOLINE. 18 AT THE APRIL BOARD MEETING, THE PURPOSE WAS 19 TO OBTAIN INFORMATION ON PRICE AND SUPPLY ISSUES, AND 20 PARTICULARLY, WHAT ROLE CLEANER BURNING GASOLINE WAS 21 PLAYING IN THOSE ISSUES. 22 WE HEARD TESTIMONY FROM A NUMBER OF 23 INDIVIDUALS. PRIMARILY THE GROUPS ARE SHOWN HERE. AND 24 PARTICULARLY WE HEARD FROM CHAIRMAN IMBRECT OF THE 25 CALIFORNIA ENERGY COMMISSION. 0110 01 THE VERTICAL LINE ABOUT THE MIDDLE OF THE 02 SLIDE SHOWS THE DATE OF THE APRIL BOARD MEETING. THIS 03 SHOWS THAT CALIFORNIA CLEANER BURNING GASOLINE WAS BEING 04 PRODUCED STARTING IN MARCH AND BEING IN THE NORMAL RANGE 05 OF HISTORIC PRODUCTION. 06 ALSO, SOME CONVENTIONAL GASOLINE WAS BEING 07 PRODUCED. CONVENTIONAL GASOLINE IS TO SUPPLY NEIGHBORING 08 STATES, AS WE HAVE ALWAYS DONE. AND YOU CAN SEE THAT MOST 09 OF THE PRODUCTION IN CALIFORNIA IS CLEANER BURNING 10 GASOLINE. APPROXIMATELY 80 TO 90 PERCENT OF OUR 11 REPRODUCTION IS CLEANER BURNING GASOLINE. 12 SINCE THE APRIL BOARD MEETINGS, SUPPLIES HAVE 13 INCREASED. PRODUCTION INCREASED. WE HAD A SLIGHT DIP. 14 BUT OVERALL, WE CONTINUED TO INCREASE OUR PRODUCTION SINCE 15 APRIL 25TH OF THAT BOARD MEETING. INVENTORY, IN SOME 16 SENSE, IS ALMOST MORE IMPORTANT THAN PRODUCTION. THE 17 INVENTORY IS USED TO PROVIDE THE SHIPMENTS AND PIPELINE TO 18 THE TERMINALS FOR THE GASOLINE TANK TRUCKS TO COME AND 19 DISTRIBUTE IT TO THE SERVICE STATIONS. 20 INVENTORIES HAD DECLINED PRIOR TO THE APRIL 21 BOARD MEETING. THEY ARE STARTING TO RECOVER AND INCREASE 22 IMMEDIATELY BEFORE THE APRIL BOARD MEETING AND INTENDED 23 BEYOND THAT TO GET WELL BEYOND THAT TO GET WELL WITHIN THE 24 HISTORICAL NORMS FOR INVENTORY. 25 AGAIN, YOU CAN SEE THAT MOST OF THE STORAGE 0111 01 INVENTORIES, IF YOU WOULD, IN CALIFORNIA, IS OF CLEANER 02 BURNING GASOLINE. WE ARE ONLY KEEPING INVENTORIES OF 03 CONVENTIONAL TO ONLY SHOW THE SURROUNDING STATES. 04 THIS SHOWS WHAT'S HAPPENING TO RETAIL PRICE. 05 THE SPOT MARKET, BRANDED, THE SO-CALLED UNBRANDED, DEALER 06 TANK WAGON AND RETAIL. RETAIL IS THE UPPER LINE. YOU CAN 07 SEE IT PEAKED SHORTLY AFTER THE APRIL BOARD MEETING AND 08 HAS DECLINED SINCE THEN. 09 MORE NOTICEABLE IS THE SPOT, WHICH IS SORT OF 10 THE WHOLESALE MARKET, IF YOU WOULD, WHERE PEOPLE GO FOR 11 LARGE VOLUMES OF SUPPLY, WHICH INCREASED SLIGHTLY AFTER 12 THE APRIL BOARD MEETING. BUT ONCE INVENTORIES AND 13 PRODUCTION REESTABLISHED THEIR EQUILIBRIUM, THE SPOTS 14 STARTED GOING DOWN DRAMATICALLY. IT'S GONE DOWN OVER 15 30 CENTS AND COME BACK SLIGHTLY SINCE THEN. 16 UNBRANDED, WHICH IS ALSO A WHOLESALE TYPE 17 THING, IS WHERE THE INDEPENDENTS GET THEIR GASOLINE. 18 FOLLOW THE SPOT, AND THERE'S A DIFFERENTIAL, BUT THAT'S 19 APPROXIMATELY THE HISTORIC DIFFERENTIAL BETWEEN SPOT AND 20 UNBRANDED. 21 DEALER TANK WAGON AND BRANDED -- THIS IS 22 WHERE 80 PERCENT OF THE GASOLINE IS PURCHASED TO SUPPLY 23 THE SERVICE STATIONS -- DIDN'T FOLLOW THAT PATTERN. AND 24 THAT'S DIFFERENT IN HOW IT'S ACTED HISTORICALLY, AND WE 25 ARE SEEING UP TO 20 CENTS, 16 TO 20 CENTS HIGHER THAN 0112 01 WHERE IT WOULD BE HISTORICALLY. IT SHOULD BE DOWN, BUT 02 SLIGHTLY HIGHER THAN THE UNBRANDED AND THE SPOT. IT 03 DIDN'T FOLLOW THAT PATTERN. THAT'S BASED ON HISTORIC 04 INFORMATION. 05 THESE ARE FAMILIAR FROM THE APRIL BOARD 06 MEETING. IN DECEMBER, $1.15. THAT'S A DECEMBER 1ST 07 PRICE. APRIL 26TH IT INCREASED TO $1.53. JUNE 7TH, THE 08 STATEWIDE AVERAGE -- AND THESE ARE ALL STATEWIDE AVERAGE 09 NUMBERS -- IS DOWN TO $1.52. THAT'S DOWN SLIGHTLY SINCE 10 JUNE 7TH. 11 CRUDE HAS FOLLOWED THE SIMILAR PATTERN. 12 CRUDE IS DOWN. DEALER MARGINS ON AVERAGE ARE UP SLIGHTLY 13 SINCE THE APRIL MEETING. AND REFINERY APPARENT MARGIN IS 14 UP SLIGHTLY SINCE THE APRIL BOARD MEETING AS WELL. 15 LOOKING AROUND THE WESTERN STATES AND HOW 16 RETAIL PRICES VARY, YOU CAN SEE IT'S HIGH VIRTUALLY 17 EVERYWHERE. WE ARE NOT ALONE IN HIGH PRICES. IT'S THE 18 GENERAL SITUATION THROUGHOUT THE SO-CALLED P.A.D.D. FIVE. 19 IT'S A PETROLEUM MARKETING AREA THAT'S USED FOR A NUMBER 20 OF PURPOSES; CALIFORNIA, WASHINGTON, ARIZONA, NEVADA AND 21 ANOTHER WESTERN STATE. 22 AT THE BOARD MEETING, THE BOARDS FOLLOWED 23 DIRECTION AND ASKED THE EXECUTIVE OFFICER QUESTIONS ABOUT 24 THE EFFECTS OF POTENTIAL REGULATORY CHANGES. THE BOARD'S 25 QUESTIONS ARE SHOWN HERE. WE ARE GOING TO GO THROUGH THEM 0113 01 ONE BY ONE, SO I WON'T REVIEW THEM AT THIS POINT. 02 THE FIRST QUESTION. TO INVESTIGATE, TO 03 PROVIDE THE INFORMATION IN ANSWER TO THE BOARD'S 04 QUESTIONS, STAFF MET WITH ALL CALIFORNIA GASOLINE 05 PRODUCERS WITH THE EXCEPTION OF EXXON. THEY PROVIDED SOME 06 COMMENTS. WE DIDN'T MEET WITH THEM BECAUSE OF SCHEDULING 07 DIFFICULTIES. WITH MET WITH THE CALIFORNIA INDEPENDENT 08 MARKETERS ASSOCIATION AND CALIFORNIA TRUCKING ASSOCIATION, 09 AND WE CONTINUED WORKING WITH THE CALIFORNIA EMISSION 10 STAFF. AND ALL OF THAT INFORMATION THAT WE ARE GOING OVER 11 AT THIS POINT HAS BEEN DEVELOPED WITH THEM FOR OUR 12 FINDINGS TO DATE. 13 NOW, THE FIRST QUESTION: HOW MUCH ADDITIONAL 14 FUEL COULD BE MADE AVAILABLE? 15 IT LOOKS LIKE ANY TEMPORARY SUSPENSION WOULD 16 NOT RESULT IN SIGNIFICANT INCREASE IN GASOLINE PRODUCTION 17 IN CALIFORNIA. IT'S THAT THE REFINERIES ARE HARD-PRESSED, 18 BECAUSE THEY CAN'T MAKE QUICK CHANGES. 19 IMPORTS HAVE NOT BEEN LIMITED BY THE 20 REGULATION. CALIFORNIA IS NOT A TRUE HIGH. WE ARE HAVING 21 IMPORTS AND FUEL COMING INTO CALIFORNIA. SINCE MARCH 1ST 22 WE HAVE HAD OVER FOUR MILLION BARRELS. IT'S ABOUT A 23 170 MILLION GALLONS OF COMPLYING FUEL THAT'S COME INTO THE 24 STATES. 25 MR. DUNLAP: MR. SIMEROTH, ON THE ISLAND ISSUE, 0114 01 WHERE HAVE THESE IMPORTS COME FROM? 02 MR. SIMEROTH: CERTAINLY. THEY HAVE COME FROM THE 03 HISTORIC SUPPLIERS TO CALIFORNIA. PACIFIC NORTHWEST HAS 04 BEEN A SOURCE OF SOME. MORE IMPORTANTLY, THE GULF AND THE 05 VIRGIN ISLANDS HAVE BEEN THE MAIN SUPPLIERS. WE HAVE ALSO 06 HAD SOME AMOUNTS FROM AS FAR AWAY AS FINLAND AND 07 INDONESIA. 08 MR. DUNLAP: SO THE ASSERTION OF THE ISLAND IS 09 FALSE, BECAUSE PEOPLE ARE COMING GREAT DISTANCE TO SEND 10 PRODUCT HERE TO SELL IN OUR MARKET; IS THAT CORRECT? 11 MR. SIMEROTH: THAT'S CORRECT. WE HISTORICALLY 12 HAVE GONE TO THE GULF AND THE VIRGIN ISLANDS WHEN WE 13 NEEDED GASOLINE, AND THAT SITUATION IS CONTINUING. 14 MR. DUNLAP: OKAY. I KNOW IT'S DIFFICULT TO 15 PREDICT. MAYBE MS. BROWN COULD ADDRESS THAT. I'M 16 INTRIGUED BY THIS ISLAND POINT, BECAUSE SOME CRITICS HAVE 17 SAID WE ARE SOME SORT OF AN ISLAND. 18 BUT THE NOTION THAT PEOPLE ARE SENDING 19 PRODUCT HERE FROM GREAT DISTANCES TO ACCESS THIS MARKET 20 SIGNALS A VERY DIFFERENT SET OF CIRCUMSTANCES. 21 MS. BROWN OR MR. SIMEROTH, CAN YOU SPEAK TO 22 THAT IN A BIT MORE DETAIL? DO YOU SEE THIS AS A TREND 23 CONTINUING? 24 MS. BROWN: MR. CHAIRMAN, AGAIN, SUSAN BROWN. I 25 THINK WHAT WE'VE LEARNED THROUGH THIS TRANSITION PERIOD IS 0115 01 THAT REFINERS ARE ABLE TO, IN FACT, IMPORT LIMITED VOLUMES 02 IN BOTH COMPLYING GASOLINE AND DIESEL AS LONG AS THE PRICE 03 IS HIGH ENOUGH TO JUSTIFY THE INITIAL TRANSPORTATION 04 COST. 05 I THINK WHAT WE HOPE AND WHAT WE THINK WILL 06 HAPPEN IN THE FUTURE IS AS WE GAIN EXPERIENCE WITH 07 REFORMULATION FUELS, NOT ONLY WOULD REFINERS ACHIEVE SOME 08 EFFICIENCIES OF THE REFINERY THAT WILL ACTUALLY MAKE IT 09 NOT NECESSARY TO IMPORT AS MUCH, BUT IT IS POSSIBLE THAT 10 OTHER MARKETS WILL DEVELOP TO SERVE OUR NEEDS. 11 SO I THINK WE ARE VERY POSITIVELY ENCOURAGED 12 BY WHAT WE'VE SEEN IN THE LAST SEVERAL WEEKS. 13 MR. DUNLAP: OKAY. VERY GOOD. 14 I APOLOGIZE. PLEASE CONTINUE. 15 MR. SIMEROTH: THANK YOU, MR. CHAIRMAN. 16 PRODUCTION PROBLEMS: ONE OF THE CONCERNS 17 WAS WHETHER IT WAS BEING EXACERBATED BY OUR FUELS 18 PROGRAM. EXCEPT FOR ONE MINOR PROBLEM, THE PROBLEMS THAT 19 WERE OCCURRING WERE NOT ASSOCIATED WITH THE REGULATIONS. 20 THEY WERE UNITS THAT WERE ALREADY IN EXISTENCE AT 21 REFINERIES. 22 ANY SUSPENSION -- THIS IS BASICALLY OIL 23 COMPANIES -- COULD HAMPER IMPORTS COMING INTO THE STATE. 24 YOU ARE GOING TO IMPORT IN. THERE'S SOME CERTAINTY IT'S 25 GOING TO HAVE SOME VALUE BY THE TIME IT GETS HERE. 0116 01 QUESTION: HOW LONG WOULD TO TAKE TO MAKE 02 ADDITIONAL FUEL AVAILABLE? FIRST WE LEARNED THAT 03 CALIFORNIA INVENTORIES OF NON-CALIFORNIA FUELING BASICALLY 04 COMMITTED TO SUPPLYING THE NEIGHBORING STATES THAT ARE 05 ACCOUNTED FOR, THAT WE USE THOSE FOR CALIFORNIA. THEY 06 WERE STATES THAT HAD PROBLEMS. THEIR TRUCKS WOULD COME 07 INTO CALIFORNIA AND FILL OUR TERMINALS, AND WE'D BE IN THE 08 SAME SITUATION. THEY ALSO HAVE CONTRACTUAL ARRANGEMENTS 09 TO SUPPLY THAT FUEL TO SURROUNDING STATES. 10 ABILITY TO QUICKLY IMPORT FUEL WOULD ONLY BE 11 CHANGED IN TERMS OF TIME. IT'S ONE OR TWO DAYS IN 12 BRINGING FUEL DOWN THE PACIFIC NORTHWEST. THAT TIME IS 13 BASICALLY THE TIME IT WOULD TAKE TO BLEND UP A BATCH OF 14 COMPLYING FUEL. THE GULF COAST/VIRGIN ISLANDS WOULD ADD 15 APPROXIMATELY AN ADDITIONAL WEEK, AGAIN, THE TIME NEEDED 16 TO BLEND UP A BATCH OF THE GASOLINE SPECIFIC FOR 17 CALIFORNIA. 18 ALLOWING INDEPENDENT MARKETERS TO IMPORT 19 NON-CALIFORNIA FUEL WOULD BE A VERY SHORT TERM, ONE TO TWO 20 DAYS, AND LIMITED BENEFITS. THEY WOULD GO TO THE 21 SURROUNDING STATES AND BRING IT BACK IN BY TRUCK, WHICH 22 WOULD EXACERBATE THE PROBLEMS IN THE SURROUNDING STATES. 23 QUESTION 3: HOW WOULD AVAILABILITY OF 24 ADDITIONAL FUEL AFFECT PRICE? WE HEARD AT THE APRIL 25 MEETING THAT CALIFORNIA CLEANER BURNING GASOLINE IS ONLY A 0117 01 SMALL PART. WE HEARD AT THAT MEETING IT IS APPROXIMATELY 02 FIVE TO EIGHT CENTS PER GALLON. INCREASED SUPPLIES 03 NATURALLY SHOULD HAVE A DOWNWARD EFFECT ON PRICES. IF YOU 04 INCREASE SUPPLIES, THAT TENDS TO RESULT IN DECREASED 05 PRICES. BUT UNFORTUNATELY, AS YOU HEARD EARLIER, THAT'S 06 NOT THE SITUATION. 07 THE LAST QUESTION: WHAT WOULD BE THE 08 SHORT-TERM AND LONG-TERM ENVIRONMENTAL CONSEQUENCES OF 09 TEMPORARY CHANGES IN THE FUEL REGULATIONS? WE FELT THAT, 10 AT MOST -- AND THIS IS THE WORST CASE -- IT WOULD BE UP TO 11 50 PERCENT LOSS OF BENEFITS. AND THE REASON IT'S LIMITED 12 BY THE 50 PERCENT IS THAT WE STILL HAVE TO COMPLY WITH THE 13 FEDERAL REFORM GASOLINE REQUIREMENTS. AND THAT'S 14 ACHIEVING ABOUT 50 PERCENT OF OUR BENEFITS. 15 WE FEEL THAT WE HAVE NOWHERE NEAR APPROACHED 16 THAT. AND IT WOULD REALLY BE SOMETHING MUCH LESS THAN 17 50 PERCENT IN REALITY. IF IT LASTED FOR A LONG TIME, THEN 18 REFINERIES WOULD ADAPT, AND THE BENEFITS WOULD RANGE TO 19 50 PERCENT. 20 WITH THAT, THAT COMPLETES MY PART OF THE 21 PRESENTATION, AND I TURN IT BACK TO MR. BOYD FOR A 22 SUMMARY. 23 MR. BOYD: THANK YOU, MR. SIMEROTH. 24 MEMBERS OF THE BOARD, AS YOU CAN SEE FROM THE 25 SUMMARY SLIDE, WHICH SUMMARIZES THE DETAIL THAT YOU HAVE 0118 01 SEEN BEFORE, THERE'S BEEN NO FINDING BY THE CALIFORNIA 02 ENERGY COMMISSION THAT WE HAVE A SUPPLY PROBLEM IN THE 03 STATE. THUS, WITH NO SUCH FINDING, IT DOESN'T TRIGGER ANY 04 ACTION ON THE PART OF YOUR STAFF AS INDICATED BY THE APRIL 05 BOARD MEETING. 06 WE ARE CONTINUING TO MONITOR THE PRICE AND 07 THE SUPPLY OF INVENTORY IN COOPERATION WITH THE ENERGY 08 COMMISSION. QUITE FRANKLY, IF I HAVE A CRYSTAL BALL, IT 09 DOESN'T LOOK LIKE WE HAVE AN IMPENDING SUPPLY CRISIS ANY 10 LONGER. PRODUCTION IN INVENTORY ARE BACK TO HISTORICAL 11 NORMS. 12 SO, AGAIN, I WOULD SAY THERE IS NO SUPPLY 13 PROBLEM. AS YOU HEARD, CALIFORNIA IS NOT AN ISLAND. VERY 14 SIGNIFICANT SUPPLIES OF FUEL HAVE BEEN PRODUCED IN OTHER 15 PARTS OF THE NATION AND THE WORLD AND TRAFFICKED TO 16 CALIFORNIA BY THE MARKET FORCES. 17 I THINK ONE THING THIS HAS PROVEN TO MANY 18 PEOPLE IS THAT IT IS POSSIBLE TO MAKE CALIFORNIA CLEANER 19 BURNING GASOLINE IN REFINERIES OUTSIDE OF THE STATE OF 20 CALIFORNIA IN SUFFICIENT QUANTITIES TO PROVIDE FAIRLY 21 SIGNIFICANT QUANTITIES OF FUEL TO THE STATE OF 22 CALIFORNIA. 23 WE, OF COURSE, REMAIN CONCERNED ABOUT ONE 24 ASPECT OF THIS ISSUE THAT PERHAPS EVEN PROMPTED OUR APRIL 25 MEETING. THAT IS THE PRICE ISSUE. IN MY PAINFUL 0119 01 EXPERIENCE THAT I REPORTED TO YOU BEFORE IN DEALING WITH 02 THE FUELS ARENA, PRICE SEEMS TO GO UP BY ROCKET AND DOWN 03 BY PARACHUTE. AND WE SEEM TO BE PAINFULLY EXPERIENCING 04 THAT HERE IN THE STATE OF CALIFORNIA AT THIS TIME. 05 BUT IT'S BEEN SEEN THAT CLEANER BURNING 06 GASOLINE PRICE OF PRODUCTION IS BUT A VERY SMALL COMPONENT 07 OF THE TOTAL PRICE RUN-UP THAT HAS OCCURRED. AND I THINK 08 WE ARE UNFORTUNATELY THE VICTIMS OF A PRICE RUN-UP THAT 09 TOOK PLACE CONCURRENT WITH THE IMPLEMENTATION OF OUR 10 REGULATION. 11 AND PERHAPS MANY SOUGHT OUT THIS PROGRAM AS 12 THE KEY CAUSE. AND I THINK IT'S BEEN SHOWN REPEATEDLY NOW 13 THAT IT IS NOT A SIGNIFICANT OR ALMOST AN UNIDENTIFIABLE 14 PIECE OF THE TOTAL RUN-UP. 15 THE JUNE 1ST DEADLINE WAS MET. WE ARE 16 PRODUCING ROUGHLY 35 MILLION GALLONS A DAY OF FUEL IN 17 CALIFORNIA. 18 I THINK THE ADDITIONAL POINT I WANT TO 19 ADDRESS IS CONTINUED REFERENCE WE SOMETIMES SEE TO THE 20 FACT THAT ON A FEW OCCASIONS, CALIFORNIA REFINERIES DID 21 NOT MEET CALIFORNIA DEMAND. AND THEN IT STOPS THERE. 22 THAT TENDS TO LEAD TO THE IMPRESSION THAT THERE IS A 23 SHORTFALL. I THINK YOU'VE SEEN THAT THAT SHORTFALL HAS 24 BEEN ADDRESSED BY IMPORTS FROM OTHER PARTS OF THE WORLD. 25 AND WE WOULD LIKE TO STRESS THAT IN CALCULATING WHETHER OR 0120 01 NOT YOU HAVE A SUPPLY EMERGENCY, ONE MUST TAKE INTO 02 ACCOUNT NOT ONLY THE DAILY PRODUCTION OF CALIFORNIA 03 REFINERIES AT ANY POINT IN TIME, BUT WHAT IS AN INVENTORY 04 AND WHAT IS HERE AND AVAILABLE DUE TO IMPORTS FROM OTHER 05 REGIONS. AND WE HAVE NOT HAD A SITUATION WHERE WE TRULY 06 HAD LESS FUEL IN THE STATE THAN CLEANER BURNING GASOLINE 07 THAN WE HAD THE DEMAND FOR. 08 SO WITH THAT, MR. CHAIRMAN, THAT SUMMARIZES 09 THE FINDINGS THAT WE SOUGHT FOR YOU AND AS YOU REQUESTED 10 IN THE APRIL HEARING. 11 MR. DUNLAP: OKAY. THANK YOU, MR. BOYD. 12 I KNOW MY COLLEAGUES ON THE BOARD HAVE 13 QUESTIONS AS WELL. 14 WHAT I WOULD LIKE TO DO, JIM, IS THERE'S BEEN 15 A NUMBER OF THINGS ASSERTED IN THE MEDIA. OTHER PROMINENT 16 REPRESENTATIVES OF ORGANIZATIONS, SOME PROMINENT, SOME 17 NOT, HAVE ASKED A NUMBER OF QUESTIONS. 18 I'VE HAD A CHANCE TO COVER SOME OF THOSE 19 ISSUES WITH YOU AND YOUR STAFF. JIM, IF YOU COULD, WOULD 20 YOU TAKE A FEW MOMENTS AND HAVE YOUR TEAM COVER THAT 21 GROUND SO THAT THE BOARD MIGHT SEE MORE CLEARLY, NOT ONLY 22 HOW SERIOUSLY STAFF HAS TAKEN SOME OF THOSE QUESTIONS, BUT 23 WHAT THE RESPONSES ARE. AND I THINK IT WILL PERHAPS SAVE 24 SOME OF THE QUESTIONS THAT MIGHT BE COMING FROM THE 25 BOARD. 0121 01 SO, JIM, CAN YOU TAKE A CRACK AT THAT? 02 MR. BOYD: YES, MR. CHAIRMAN. THANK YOU VERY 03 MUCH. 04 WE WELCOME THIS OPPORTUNITY TO ADDRESS YOU ON 05 THESE ISSUES. AS YOU KNOW FROM MY OPENING REMARKS, I DID 06 INDICATE THAT I FELT IT NECESSARY TO GO BEYOND PERHAPS THE 07 SCOPE OF THE ORIGINAL CHARGE OF THE APRIL HEARING TO TOUCH 08 ON SOME OF THE HISTORY OF THE PROGRAM FOR BENEFIT OF SOME 09 MEMBERS OF THE AUDIENCE AND THE PUBLIC. 10 I WOULD LIKE TO HAVE MR. SIMEROTH ADDRESS 11 SOME OF THE QUESTIONS THAT HAVE BEEN PUT IN THE PUBLIC 12 ARENA AND PUT TO THE STAFF. 13 WE DO TAKE ALL ISSUES QUITE SERIOUSLY. WE 14 ARE A PUBLIC AGENCY, AND EVERYTHING WE HAVE IS PUBLIC 15 INFORMATION. BUT MR. SIMEROTH, I THINK, WILL ADDRESS SOME 16 OF THE CONCERNS, BECAUSE AS I SAID IN MY INTRODUCTORY 17 REMARKS, IT WOULD BE UNFORTUNATE, INDEED, IF HARM WERE 18 DONE TO A PROGRAM THAT IS SO EFFECTIVE IF IT WERE 19 PREDICATED ON MISUNDERSTANDING INFORMATION. 20 SO WITH THAT, MR. SIMEROTH, COULD YOU ADDRESS 21 SOME OF THOSE ISSUES, PLEASE? 22 MR. SIMEROTH: THANK YOU, MR. BOYD. 23 I'D LIKE TO START FIRST WITH THE ISSUE THAT 24 IS PROBABLY THE MOST IMPORTANT, IS THAT A.R.B. STAFF 25 UNDERESTIMATED THE FUEL ECONOMY IMPACT OF CLEANER BURNING 0122 01 GAS. AND SPENDING A LOT OF TIME LOOKING INTO THAT, I HAVE 02 A FEW SLIDES TO HELP ADDRESS IT. THESE ARE OVERHEADS, BY 03 THE WAY. 04 WE WENT BACK AND STARTED WITH THE BASIC 05 CONCEPTS. AND LOOKING AT THE AVAILABLE INFORMATION, AUTO 06 OIL IS AN ACRONYM OF A STUDY THAT IS STRONGLY FINANCED BY 07 THE ALL OIL MANUFACTURERS IN THE UNITED STATES AND 08 APPROXIMATELY 14 OF THE OIL COMPANIES IN THE UNITED 09 STATES. 10 THEIR PHASE I STUDIES WOULD COST 11 APPROXIMATELY 13 MILLION DOLLARS TO CONDUCT. ONE OF THE 12 MAJOR FINDINGS OF THESE STUDIES WAS THEY RECONFIRMED THAT 13 THE FUEL ECONOMY IS DIRECTLY RELATED TO THE ENERGY CONTENT 14 OF GASOLINE. SO WITH THAT STATEMENT IN MIND, WE WENT AND 15 LOOKED AT WHAT THE HISTORIC ENERGY CONTENT OF PREVIOUS 16 CALIFORNIA FUELS HAVE BEEN. 17 WE HAD OVER 500 SAMPLES OF '90, '91 18 CALIFORNIA FUELS THAT HAVE BEEN ANALYZED IN '90, '91. WE 19 HAD OVER 40 BATCHES OF CLEANER BURNING GASOLINE ANALYZED 20 FOR ENERGY CONTENT. WHAT COMES OUT OF THAT, THE OVERALL 21 DIFFERENCE BETWEEN CLEANER BURNING GASOLINE AND HISTORIC 22 CALIFORNIA FUELS WAS ABOUT A THREE PERCENT CHANGE TO 23 ENERGY CONTENT FROM NONOXYGENATED ENERGY FUELS COMPARED TO 24 CONVENTIONAL FUELS. 25 THE TEST FUEL, AS YOU CAN SEE THE BARS, THERE 0123 01 ARE TWO STANDARD DEVIATIONS. THE AVERAGE IS THAT MIDDLE 02 SQUARE OR RECTANGLE OR WHATEVER IT IS THERE. THE BARS 03 REPRESENT HOW MUCH VARIATION YOU'VE SEEN IN THE DATA. 04 HISTORICALLY, WE HAVE HAD ABOUT A NINE 05 PERCENT RANGE. CLEANER BURNER GASOLINE HAS RESULTED IN 06 THAT CHANGE BEING MUCH LESS. 07 THE TEST FUELS ARE AT THE LOWER END OF THE 08 RANGE. SO THE TEST FUEL WASN'T DESIGNED TO SHOW AN UNREAL 09 MILEAGE IMPACT. 10 NEXT, PLEASE. 11 OUT OF THE 800 VEHICLES, WE TESTED FUEL 12 ECONOMY, AND FROM 131 VEHICLES, THAT SHOWS DECLINE IN 13 M.P.G. OF APPROXIMATELY 2.4 PERCENT. THAT WOULD BE WITHIN 14 WHAT WOULD BE EXPECTED OF THE AUTO/OIL PHASE. WE ALSO 15 LOOKED CONFIRMING THAT RESULT BY DOING OUR OWN DYNAMOMETER 16 TEST ON A LIMITED NUMBER OF VEHICLES. AND THAT SHOWED A 17 DECLINE FROM 3.5 PERCENT VERSUS CONVENTIONAL VERSUS AN 18 OXYGENATED SOUTHERN CALIFORNIA FUEL. THAT ALSO IS 19 CONSISTENT WITH THE PREVIOUS FINDINGS BY THE OIL STUDIES. 20 SINCE PHASE I, AUTO/OIL HAS GONE TO DO A 21 NUMBER OF OTHER STUDIES. THE TOTAL EXPENDITURES ARE IN 22 EXCESS OF 40 MILLION DOLLARS AT THIS POINT. 23 LOOKING INTO GASOLINE AND VEHICLE PERFORMANCE 24 ISSUES, WE ISSUED A NUMBER. THIS IS AUTO/OIL NUMBER 16. 25 IN THIS CASE, WE WERE ACTUALLY USING A CLEANER BURNING 0124 01 GASOLINE THAT FULLY COMPLIED WITH CALIFORNIA STANDARDS 02 AGAINST AN INDUSTRY AVERAGE REFERENCE FUEL. SO USING 03 THREE VEHICLES, '92 TO '94, THERE WAS A DECLINE OF 04 SLIGHTLY LESS THAN FOUR PERCENT. 05 USING A MUCH LARGER FLEET, 23 VEHICLES, THOSE 06 WERE BROKEN INTO AN OLDER FLEET, A CURRENT FLEET AND 07 FEDERAL TIER ONE FLEET. FEDERAL TIER ONE IS '94 08 TECHNOLOGY TYPE VEHICLES. THE RANGE WAS FROM TWO TO 09 SLIGHTLY OVER THREE AND A HALF PERCENT DECLINE IN MILES 10 PER GALLON. AGAIN, THIS WAS WITH THE NATURAL CLEANER 11 BURNING GASOLINE. 12 TECH BULLETIN 19, THE MOST RECENT ONE, JUST 13 CAME OUT EARLIER THIS MONTH. THIS TIME THEY LOOKED AT NOT 14 ONLY CONVENTIONAL DRIVING PATTERNS, BUT SO-CALLED 15 OFF-CYCLE DRIVING WHERE YOU HAVE TO HAVE ACCELERATION TYPE 16 THINGS HAPPENING. '89 TO '93 MODEL YEAR VEHICLES UNDER 17 CONVENTIONAL DRIVING CONDITIONS DECLINED ABOUT TWO 18 PERCENT. THE OFF-CYCLE WAS APPROXIMATELY THREE PERCENT. 19 THE DEPARTMENT OF ENERGY FUNDED A STUDY OF 20 FIVE VEHICLES. THESE VEHICLES WERE ONE-YEAR-OLD 21 CALIFORNIA VEHICLES THAT WERE PURCHASED AND TRANSPORTED TO 22 THE TEST SITE IN OKLAHOMA. THEY ACCUMULATED 30,000 MILES 23 DRIVING AN ON-ROAD TRACK, WHICH INCLUDED FREEWAY AND CITY 24 DRIVING AND SITTING IN PARKING LOTS CYCLING. COMPARED TO 25 A FEDERAL REFORM GASOLINE, WE SAW A DECLINE OF ABOUT TWO 0125 01 PERCENT. THAT'S CONSISTENT WITH OUR PREVIOUS TEST WE 02 DID. AND THAT SORT OF SUMMARIZES THAT. 03 MR. DUNLAP: ON THAT POINT, YOU PRESENTED CLEARLY 04 THAT ENERGY CONTENT IS REFLECTED IN MILES PER GALLON. AND 05 THAT'S A COMMONLY ACCEPTED AND UNDERSTOOD PREMISE BY THOSE 06 EXPERTS IN BOTH THE AUTO AND OIL INDUSTRY; IS THAT 07 CORRECT? 08 MR. SIMEROTH: THAT'S CORRECT. 09 MR. DUNLAP: CAN YOU CONTRAST FOR ME AND PERHAPS 10 THE AUDIENCE WHAT THE IMPACT IS, SAY, ON RUNNING ONE'S AIR 11 CONDITIONER OR LEAVING ONE'S WINDOW OPEN OR HAVING TIRES 12 THAT ARE LESS THAN WHAT THE RECOMMENDED INFLATION IS IN 13 THEM? 14 DO THOSE FACTORS OUTSTRIP THE NEGATIVE IMPACT 15 THAT ONE COULD SEE BY REDUCING ENERGY CONTENT IN 16 GASOLINE? 17 MR. SIMEROTH: MOST OF THOSE FACTORS WOULD BE MUCH 18 LARGER THAN THE DIFFERENCE WE ARE TRYING TO MEASURE IN 19 TERMS OF THE DIFFERENCES IN ENERGY CONTENT. RUNNING YOUR 20 AIR CONDITIONER, DEPENDING ON THE CAR, CAN HAVE UP TO A 21 20 PERCENT DECLINE IN MILEAGE OR FUEL ECONOMY. INCREASING 22 YOUR SPEED FROM 55 OR WHATEVER YOUR REFERENCE IS ON UP IS 23 NOT A LINEAR IMPACT. GOING FROM 55 TO 65 WOULD HAVE, I 24 THINK, ABOUT A TEN PERCENT INCREASE. WHEN GOING INTO A 20 25 MILE HEAD WIND, IT WOULD HAVE A ONE OR TWO PERCENT 0126 01 DECREASE IN MILEAGE. 02 MR. DUNLAP: OKAY. I READ SOME INTERESTING 03 COMPARISONS THAT THE AUTO CLUB PUT FORWARD IN ONE OF THEIR 04 NEWSLETTERS THAT KIND OF OPENED MY EYES TO SOME OF THE 05 IMPACT OF SOME OF THOSE. 06 MR. LAGARIAS? 07 MR. LAGARIAS: WOULD YOU FILL ME IN? WHAT KIND OF 08 TESTS WERE THESE? DYNAMOMETER TESTS? TO WHAT RANGE WERE 09 THEY? 10 MR. SIMEROTH: MR. LAGARIAS, ALL THESE TESTS WERE 11 DYNAMOMETER TESTS. NOW, THE D.O.E. WAS A COMBINATION OF 12 NATURAL DRIVING AND DYNAMOMETER TEST. 13 MR. LAGARIAS: DID THEY TAKE IT OVER THE FEDERAL 14 TEST CYCLE? 15 MR. SIMEROTH: THEY USED THE FEDERAL TEST CYCLE 16 EXCEPT FOR THE RESULTS IN 19. 17 MR. LAGARIAS: WHEN YOU SAY DECLINED IN NUMBER OF 18 MILES PER GALLON, WHAT ARE YOU COMPARING? REFORMULATED 19 GAS AGAINST WHAT? 20 MR. SIMEROTH: AGAINST AN INDUSTRY AVERAGE THAT'S A 21 NATIONWIDE AVERAGE. IT'S A FUEL THAT'S BEEN USED IN 22 ALMOST ALL THESE STUDIES AS REPRESENTING WHAT EXISTED IN 23 '90 IN THE UNITED STATES. 24 MR. LAGARIAS: SO YOU ARE JUST COMPARING IT TO ONE 25 FORMULATION. THERE ARE A NUMBER OF FORMULATIONS, BOTH IN 0127 01 THE CALIFORNIA REFORMULATED GAS AND AVERAGE GAS? 02 MR. SIMEROTH: THE D.O.E. TEST ALSO LOOKED AT A 03 SECOND FUEL. THEY LOOKED AT A CONVENTIONAL FUEL THAT WAS 04 ON THE MARKET IN TEXAS. THEY SIMPLY BOUGHT IT, AND A VERY 05 HIGH ENERGY CONTENT IS IN THAT FUEL. THE 90 PERCENT 06 DISSOLUTION POINT, WHICH IS A GOOD MEASURE OF INCREASE IN 07 ENERGY, WAS 30 DEGREES HIGHER THAN WHAT THE AVERAGE IS. 08 AND THAT SHOWED A FIVE PERCENT EFFECT BETWEEN CLEANER 09 BURNING GASOLINE. 10 FOR OUR DYNAMOMETER TEST, WE LOOKED AT A 11 PHASE I NORTHERN CALIFORNIA TYPE PHASE I. AND THEN A 12 SOUTHERN CALIFORNIA FEDERAL FORMULATED GASOLINE IN 13 ADDITION TO THE -- 14 MR. LAGARIAS: BUT CALIFORNIA GASOLINE IS ONLY A 15 SPECIFICATION OF EIGHT DIFFERENT PERIMETERS. AND THERE 16 ARE A NUMBER OF DIFFERENT FORMULATIONS THAT ARE -- THERE 17 IS NO SUCH THING AS A CALIFORNIA CLEAN GAS; IS THERE? 18 MR. SIMEROTH: MR. LAGARIAS, YOU ARE CORRECT. 19 THAT'S WHY WE HAD THE 40 BATCHES ANALYZED FOR ENERGY 20 CONTENT TO IDENTIFY THE RANGE OF VARIATION OF GASOLINE. 21 WE ARE SAYING THAT IT'S ABOUT A TWO- TO 22 THREE-PERCENT RANGE IN ENERGY CONTENT OR THE BATCHES THAT 23 ARE BEING PRODUCED FOR CALIFORNIA. 24 MR. SCHEIBLE: MR. LAGARIAS, THE CALIFORNIA TEST 25 FUEL THAT WE DESIGNED HAPPENS TO BE AT THE EXTREME LOW END 0128 01 OF THE RANGE. SO WHENEVER WE USE THE CALIFORNIA TEST 02 FUEL, WHICH WE DID AS MUCH AS POSSIBLE IN THESE TESTS AND 03 IN OUR FLEET EVALUATION, WE HAVE A GASOLINE THAT'S GOT 04 AMONGST THE LOWEST ENERGY CONTENT OF THE FUELS WE FOUND 05 OUT THERE. SO WE ARE, IN EFFECT, ON AVERAGE, 06 OVERESTIMATING. 07 IN TERMS OF WHAT WAS USED HISTORICALLY, 08 PROBABLY USING AN AVERAGE FUEL IS PRETTY GOOD. THERE'S 09 REALLY NO CONSISTENT RELATIONSHIP OUT THERE IN TERMS OF 10 BRAND SO THAT THE INDIVIDUAL CONSUMER, IF HE LOOKS BACK 11 OVER MONTHS OF RECORDS, PROBABLY GOT SOMETHING PRETTY 12 CLOSE TO THE AVERAGE, BECAUSE BATCH TO BATCH IT'S 13 IMPOSSIBLE TO KNOW EXACTLY WHAT YOU HAD IN THE BASELINE 14 COMPARISON POINT. 15 IT WOULD BE TRUE THAT SOMEONE WHO HAPPENED TO 16 FUEL UP HISTORICALLY ON THE HIGH END OF THE ENERGY RANGE 17 AND NOW WOULD FUEL UP WITH A FUEL THAT HAPPENED TO BE ON 18 THE LOW END, WE'D SEE GREATER THAN THE THREE PERCENT 19 IMPACT. 20 MR. LAGARIAS: I DON'T KNOW ABOUT THAT. I KNOW 21 WHEN I CHECK MY MILEAGE, SOMETIMES I'LL GET 20 MILES PER 22 GALLON, AND SOMETIMES I GET 30 MILES PER GALLON. AND I 23 KNOW THAT MOST OF THAT IS DUE TO THE DRIVING PATTERN THAT 24 I AM FOLLOWING, AND I THINK THAT'S MUCH MORE SIGNIFICANT 25 THAN ANYTHING I'VE SEEN SO FAR. 0129 01 MR. SCHEIBLE: YEAH. AND A FEW PERCENT COULD BE 02 BECAUSE OF ENERGY CONTENT, DIFFERENCES BETWEEN THE TWO 03 BATCHES OF FUEL THAT YOU USED ON THAT COMPARISON POINT. 04 MR. LAGARIAS: WHAT ABOUT HORSEPOWER? IS THERE ANY 05 SIGNIFICANT DIFFERENCE IN HORSEPOWER, AND WHAT IF ANYTHING 06 DOES THAT MEAN? 07 MR. SIMEROTH: HORSEPOWER ALSO TENDS TO FOLLOW 08 ENERGY CONTENT. WE'VE TALKED TO OUR MOBILE SOURCE 09 DIVISION AND ASKED THEM TO LOOK INTO THAT. THERE SEEM TO 10 BE NO SIGNIFICANT HORSEPOWER BETWEEN CLEANER BURNING 11 GASOLINE AND CONVENTIONAL. ALSO, THE SACRAMENTO FLEET WAS 12 THE SACRAMENTO POLICE DEPARTMENT FLEET. WE HAD 160 POLICE 13 VEHICLES, AND THEY REPORTED NO SIGNIFICANT DECLINE IN THE 14 HORSEPOWER PERFORMANCE. 15 MR. DUNLAP: IF I MAY, IF MY COLLEAGUE WILL YIELD 16 TO ME FOR JUST A MOMENT, LET ME GET THIS STRAIGHT. 17 THOSE 131 VEHICLES WERE POLICE VEHICLES, 18 EXCLUSIVELY? 19 MR. SIMEROTH: NO. THE 131 WERE VEHICLES FROM 20 THREE DIFFERENT FLEETS. 21 MR. DUNLAP: HOW MANY OF THE 131 WERE THE FLEET OF 22 THE POLICE DEPARTMENT? 23 MR. SIMEROTH: I'D HAVE TO LOOK. BUT IT WAS 24 APPROXIMATELY HALF. 25 MR. DUNLAP: SO IN THAT SENSE, 65 OR SO OF THOSE 0130 01 VEHICLES WERE DRIVEN BY POLICE OFFICERS IN THE FIELD IN 02 USE, HIGH PERFORMANCE REQUIREMENTS, AND NONE OF THEM 03 COMPLAINED ABOUT FUEL? 04 MR. SIMEROTH: I THINK WE ARE MIXING TWO THINGS 05 UP. THE POLICE FLEET WAS ALL THE VEHICLES OUT OF THE 06 NORTHERN SACRAMENTO FACILITY. IT WAS WELL OVER A HUNDRED 07 VEHICLES AND 160 OFFICERS WORKING THREE SHIFTS, SEVEN DAYS 08 A WEEK DRIVING THOSE VEHICLES OVER SIX MONTHS. 09 MR. DUNLAP: AND THEY REPORTED NO PERFORMANCE 10 PROBLEMS? 11 MR. SIMEROTH: CORRECT. WE DOUBLED CHECKED THAT. 12 WE CALLED THEM THIS WEEK AND ASKED THEM IF THEY'VE SEEN 13 ANYTHING DIFFERENT SINCE MARCH, SINCE THEY HAVE BEEN 14 BURNING THE ACTUAL COMMERCIAL FUEL. AND NO PROBLEMS. 15 MR. BOYD: MR. CHAIRMAN, COULD I ELABORATE ON THIS 16 POINT? AND THIS IS A MORE SIGNIFICANT POINT THAN MEETS 17 THE EYE, BECAUSE YOUR STAFF OVER THE YEARS HAS WORKED WITH 18 POLICE AUTHORITIES, MOST PARTICULARLY CALIFORNIA HIGHWAY 19 PATROL ON THE ISSUE OF THE PERFORMANCE OF POLICE VEHICLES 20 AND VARIOUS CHANGES IN THE MECHANICAL COMPOSITION OF 21 VEHICLES, MOST PARTICULARLY EMISSION CONTROL EQUIPMENT. 22 AND LET ME ASSURE YOU THAT MY EXPERIENCE FOR 23 A LOT OF YEARS IS THAT IF THE PERFORMANCE OF A VEHICLE 24 CHANGES FROM AN ACCEPTED NORM IN THIS ARENA, THE POLICE 25 ARENA, YOU HEAR ABOUT IT INSTANTLY. THEY ARE VERY 0131 01 SENSITIVE TO THIS. 02 AND I MUST ADD THAT IN THE EARLY YEARS OF THE 03 ADDITION OF CATALYTIC CONVERTERS TO MOTOR VEHICLES, THERE 04 WERE INCREDIBLE ALLEGATIONS ABOUT REDUCTION IN 05 PERFORMANCE. AND YOUR STAFF DID EXTENSIVE TESTING. AND 06 INDEED THERE WAS A CHANGE IN PERFORMANCE OF A PARTICULAR 07 ANONYMOUS BRAND OF VEHICLES AT ONE POINT IN TIME ONE 08 YEAR. AND THERE WERE BACK PRESSURE PROBLEMS AND 09 MODIFICATIONS WERE MADE TO ALLEVIATE THAT, AND NOTHING TO 10 DO, PER SE, WITH THE CATALYST. 11 THE CASE IN POINT BEING THAT THE POLICE ARE 12 EXTREMELY SENSITIVE TO PERFORMANCE AND THEIR ABILITY TO 13 ACCELERATE INSTANTLY. SO THESE PEOPLE KNEW WHAT WAS 14 HAPPENING, AND I WOULD HAVE EXPECTED INSTANTANEOUS 15 GRIEVANCES IF THEY PERCEIVED THEM, BECAUSE THEY WOULD BE 16 ALMOST LOOKING FOR THEM. 17 MR. DUNLAP: RIGHT. OKAY. 18 MR. LAGARIAS, PLEASE CONTINUE. 19 MR. LAGARIAS: LAST YEAR WHEN WE HAD A SIX-MONTH 20 EVALUATION ON THIS CLEANER BURNING GAS, WE HAD ABOUT 600 21 CARS USING THIS CLEANER BURNING GAS AND 600 CARS THAT WERE 22 NOT. SO WE HAD DIRECT COMPARISONS OF THEM. AND THAT 23 INCLUDED THE TEXACO FLEET, THE CHEVRON FLEET, THE 24 SACRAMENTO POLICE CARS, CARS IN FRESNO AND IN OTHER AREAS, 25 INCLUDING SOUTHERN CALIFORNIA. 0132 01 AND ON THE AVERAGE, WHAT DID YOU FIND IN THE 02 WAY OF PROBLEMS, THE CONTROL FLEET VERSUS THE FLEET USING 03 THE CLEANER BURNING GASOLINE? 04 MR. SIMEROTH: THE RESULTS FROM THE TWO FLEETS WERE 05 VIRTUALLY THE SAME IN TERMS OF PERFORMANCE AND 06 COMPATIBILITY ISSUES. 07 MR. LAGARIAS: CHEVRON REPORTED THEY HAD SLIGHTLY 08 GREATER. I THINK THEY HAD, WHAT, 60 CARS? 09 MR. SIMEROTH: THEY HAD 100 CARS IN, 115. 10 MR. LAGARIAS: THEY REPORTED A SLIGHTLY HIGHER 11 INCIDENT OF PROBLEMS. BUT WEREN'T THESE FLEET NUMBERS 12 ADDED IN THE OVERALL SURVEY? 13 MR. SIMEROTH: YES. WE HAD 800 TEST VEHICLES. AND 14 CHEVRON DID A TEST ON THEIR OWN, WHICH THEY PROVIDED DATA 15 TO US WHICH WE ADDED INTO OUR STUDY. OUR REPORT ON THAT 16 INCLUDES THAT WE ADDED THE CHEVRON DATA TO THE PERFORMANCE 17 SUBCOMMITTEE TEST PROGRAM. 18 MR. LAGARIAS: WAS IT THE LAWYERS THAT TOLD THEM 19 THAT, TO COVER THEMSELVES WHEN THEY ADDED THESE WARNING 20 LABELS? 21 MS. BROWN: OUR SPECULATION IS THAT WHAT WE'VE BEEN 22 TOLD IS THEY WERE ADVISED BY THEIR LEGAL. 23 MR. LAGARIAS: THEY DID HAVE A NUMBER OF LAWSUITS 24 WHEN THE DIESEL FUEL WAS FIRST INTRODUCED, AND I THINK 25 THIS IS ONE OF THE REASONS WHY THEY PROTECTED THEMSELVES 0133 01 THIS TIME? 02 MR. SIMEROTH: THAT'S DEFINITELY ONE OF THE MAJOR 03 REASONS. THEY HAVE A CLASS ACTION SUIT STILL IN THE WORKS 04 AGAINST THEM BECAUSE OF THE DIESEL PROGRAM. 05 MR. LAGARIAS: BUT WHEN WE ARE TALKING ABOUT 06 CLEANER BURNING GASOLINE, WE ARE JUST TALKING ABOUT 07 GASOLINE THAT MEETS ALL THE S.A.E. AND A.S.T.M. 08 SPECIFICATIONS; IS THIS CORRECT? 09 MR. SIMEROTH: YES. OUR REQUIREMENTS DO NOT 10 SUPERSEDE THE A.S.T.M. SPECIFICATIONS. THE STAFF COMPLIED 11 WITH THEM. IT'S STILL FULLY COMPLYING GASOLINE IN EVERY 12 SENSE. 13 MR. LAGARIAS: WHEN I TALKED TO THE 14 SANTA FE PIPELINE COMPANY, THEY TOLD ME THAT THERE WERE 15 ROUGHLY TEN DIFFERENT CLEANER BURNING GASOLINE 16 FORMULATIONS THAT THEY WERE SHIPPING AROUND THE AREA. 17 SUSAN, CAN YOU VERIFY THAT? 18 MS. BROWN: NOT THE EXACT NUMBER, BUT THERE ARE 19 VARIOUS, NOT ONLY FORMULATIONS, BUT OCTANE GRADES OF 20 GASOLINE THAT ARE TYPICALLY SHIPPED, YES. 21 MR. LAGARIAS: SO IT'S POSSIBLE THAT WHEN WE TALK 22 ABOUT THIS GASOLINE, WE ARE TALKING ABOUT DIFFERENT BRANDS 23 OF GASOLINE? 24 MR. SIMEROTH: YES. 25 MR. LAGARIAS: WE SET UP TWO HOTLINES TO ANSWER 0134 01 ANY INQUIRIES AND PROBLEMS PEOPLE MAY HAVE. 02 HOW DO THE INQUIRIES COMPARE BETWEEN 03 NORTHERN CALIFORNIA AND SOUTHERN CALIFORNIA? 04 MR. SIMEROTH: MOST OF THE INQUIRIES WE ARE GETTING 05 BY A WIDE MARGIN, LIKE OVER THREE TO ONE, IS COMING FROM 06 NORTHERN CALIFORNIA. 07 MR. LAGARIAS: DO YOU HAVE ANY REASON FOR THAT, 08 BECAUSE THERE ARE A LOT MORE SOUTHERN CALIFORNIANS THAN 09 THERE ARE NORTHERN CALIFORNIANS? 10 MR. SIMEROTH: PART OF IT COULD BE THAT SOUTHERN 11 CALIFORNIA, THE FEDERAL REFORM OF THE GASOLINE PROGRAM 12 STARTING IN DECEMBER '94 HAD A YEAR-ROUND OXYGENATED 13 FUEL. PART OF IT COULD BE THE ATTENTION THAT'S PAID IN 14 THE MEDIA BETWEEN THE TWO AREAS. 15 MR. LAGARIAS: WELL, WITH THE INTRODUCTION OF 16 CLEANER BURNING GASOLINE, ARE WE TALKING ABOUT AN 17 INTRODUCTION OF MORE OXYGENATE? 18 MR. SIMEROTH: THE OXYGENATE IN NORTHERN CALIFORNIA 19 HAD ONLY BEEN USED IN THE FOUR WINTER MONTHS. AND NOW IT 20 HAD TO BE USED YEAR ROUND AT APPROXIMATELY THE SAME 21 LEVEL. 22 MR. LAGARIAS: WELL, I UNDERSTOOD THAT BECAUSE OF 23 THE SUPPLY AND DEMAND ISSUE, THAT THE REFINERIES WERE 24 PUTTING IN AS MUCH OXYGENATE AS THEY WERE LEGALLY ALLOWED, 25 2.7 PERCENT. 0135 01 MR. SIMEROTH: MR. LAGARIAS, THE PREDICTED MODEL 02 ALLOWS REFINERIES TO ADJUST THEIR FORMULAS TO GO UP TO 03 2.7 PERCENT. SOME OF THE REFINERIES WERE DOING EXACTLY 04 WHAT YOU ARE SAYING. ALSO, SOME PUT IN LESS. SO WE HAD 05 QUITE A WIDE RANGE OF OXYGEN CONTENT. 06 MR. LAGARIAS: WHEN YOU INTRODUCE OXYGENATE, IT'S 07 AT THE EXPENSE OF GASOLINE, AND THE ENERGY CONTENT GOES 08 DOWN SINCE THE OXYGENATE HAS LESS ENERGY; IS THAT CORRECT? 09 MR. SIMEROTH: THAT'S CORRECT, MR. LAGARIAS. 10 MR. LAGARIAS: SO THE IMPACT ON OXYGENATE CAN HAVE 11 A SIGNIFICANT IMPACT ON TOTAL ENERGY? 12 MR. SIMEROTH: THE TWO PERCENT OXYGEN CONTENT WOULD 13 COUNT FOR ABOUT TWO PERCENT OF THE THREE PERCENT ENERGY 14 CONTENT REDUCTION. 15 MR. LAGARIAS: THAT'S ALL FOR NOW. 16 MR. DUNLAP: THANK YOU. 17 MR. CALHOUN: CAN I ASK ONE QUESTION? WOULD YOU 18 VERY BRIEFLY DESCRIBE THE PREDICTED MILE SO THE PEOPLE IN 19 THE AUDIENCE WILL HAVE AN APPRECIATION FOR WHY THE 20 SPECIFICATIONS ARE REQUIRED BY THE RESOURCES BOARD? 21 MR. SIMEROTH: CERTAINLY, MR. CALHOUN. THE 22 PREDICTED MODEL CONCEPT WAS DEVELOPED BY TRADITIONAL 23 FLEXIBILITY TO REFINERS IN PRODUCING GASOLINE THAT 24 COMPLIED WITH OUR REQUIREMENTS. THE PREDICTED MODEL WAS 25 BASED UPON OVER 700 INDIVIDUAL TESTS. OVER A THOUSAND 0136 01 VEHICLES WERE TESTED. IT WAS CREATED INTO A DATABASE AND 02 WE USED A COMPUTER TO DEVELOP A RELATIONSHIP BETWEEN THE 03 SEVEN PERIMETERS AND THE BENEFITS OF V.O.C. REDUCTIONS, 04 NOX REDUCTIONS, TOXICS REDUCTIONS. 05 THIS ALLOWS THE REFINER TO LOOK AT HIS 06 INDIVIDUAL SITUATION, HIS REFINING PROCESSES, SAY, "WELL, 07 I HAVE A VERY LOW SULFUR CONTENT. THAT MEANS I CAN SHIFT 08 MY OTHER PERIMETERS TO TAKE ADVANTAGE OF THAT INHERENTLY 09 LOW SULFUR CONTENT WITH THE GASOLINE THEY ARE PRODUCING," 10 AS AN EXAMPLE. 11 THIS STILL GIVES THE SAME ENVIRONMENTAL 12 BENEFIT. AS MR. LAGARIAS INDICATED, SOME OF THE 13 REFINERIES TOOK ADVANTAGE OF THE PREDICTED MODEL TO 14 ACTUALLY PUT MORE OXYGENATES IN TO INCREASE THE VOLUMES 15 THEY WERE SUPPLYING. 16 MR. CALHOUN: THANK YOU. 17 I HAVE ONE OTHER QUESTION. IT'S BEEN 18 TROUBLING ME SINCE I HEARD OF THIS. AND FOR A MEANINGFUL 19 COMPARISON OF THE FUEL ECONOMY INPACTS ON ANY GIVEN 20 ENGINE, IT SEEMS TO ME THAT THERE HAS TO BE SOME TYPE OF 21 STANDARDIZED TEST. AND THE ENVIRONMENTAL PROTECTION 22 AGENCY EACH YEAR CERTIFIES VEHICLES, AND THEY DID IN THE 23 PAST, AND I ASSUME THAT THEY STILL DO. 24 THE PUBLIC FUEL ECONOMY DATA AND THOSE TESTS 25 FROM WHICH THE DATA ARE OBTAINED ARE BASED ON A 0137 01 STANDARDIZED TEST. AND IT'S CAREFULLY CONTROLLED. AND 02 WHAT I HAVE SAID EARLIER, I THINK FOR A MEANINGFUL 03 COMPARISON, THE TEST HAS TO BE VERY CAREFULLY CONTROLLED. 04 MR. DUNLAP: IF I COULD? THANK YOU, MR. CALHOUN. 05 BACK TO THE STUDY SLIDE, IF YOU PUT THAT UP 06 JUST FOR A MOMENT, THIS IS A QUESTION FOR YOU, 07 MR. CALHOUN. OUR STUDY WAS 131 VEHICLES, AS MR. SIMEROTH 08 OUTLINED. SO YOU'VE HAD A NUMBER OF YEARS EXPERIENCE IN 09 THE PRIVATE SECTOR WORKING FOR AUTO COMPANIES. 10 CAN YOU SPEAK TO THE NUMBER OF VEHICLES IN 11 THESE STUDIES HERE THAT HAVE BEEN DONE BY AUTO AND OIL 12 INDUSTRY STUDY? ARE THOSE REPRESENTATIVE? I MEAN, ARE 13 THOSE STATISTICALLY SIGNIFICANT? WHAT'S YOUR COMFORT 14 LEVEL WITH THE NUMBERS THERE? 15 MR. CALHOUN: OBVIOUSLY THE NUMBER OF VEHICLES THAT 16 YOU TEST INCREASES YOUR CONFLICT LEVEL. AND THE THREE 17 VEHICLES IN THE FIRST ONE UP THERE, I DON'T KNOW HOW MANY 18 TESTS WERE PERFORMED. IT COULD HAVE BEEN REPLICATIONS. 19 AND IT COULD HAVE TESTED THOSE THREE VEHICLES 50 TIMES. 20 SO LIKEWISE, THE SAME IS TRUE WITH ALL THE 21 OTHER VEHICLES THERE. IN MANY, MANY CASES, THEY DO 22 REPLICA TESTING. AND AS I INDICATED EARLIER, THE MORE 23 VEHICLES YOU HAVE AND THE MORE TEST DATA YOU HAVE, YOUR 24 CONFLICT LEVEL INCREASES. 25 0138 01 AND THE AIR RESOURCES BOARD HAD ADVANTAGE OF 02 ALL OF THAT KNOWLEDGE WHEN THEY STARTED PROPOSING THESE 03 REGULATIONS, AND I THINK IT'S VERY, VERY IMPORTANT TO HAVE 04 PEOPLE UNDERSTAND THAT. I DON'T THINK THIS IS A HOAX WE 05 ARE PERPETRATING ON THE STATE OF CALIFORNIA. I THINK THE 06 BOARD HAS ACCESS TO A LOT OF DATA BEFORE THEY PROPOSE 07 THESE REGULATIONS. 08 MR. DUNLAP: WHAT WAS THE PRICE TAG AGAIN, 09 MR. SIMEROTH, OF THESE STUDIES? 10 MR. SIMEROTH: THE ENTIRE AUTO/OIL PROGRAM WAS IN 11 EXCESS OF 40 MILLION DOLLARS. 12 MR. DUNLAP: 40 MILLION DOLLARS. 13 JOE, YOU ARE TELLING ME, EVEN THOUGH IT MAY 14 LOOK LIKE A SMALL NUMBER OF VEHICLES THAT THEY TESTED 15 NUMEROUS TIMES, 50, WHATEVER THE NUMBER IS, THAT THERE'S A 16 HIGH CONFIDENCE YOU WOULD HAVE IN THE RESULTS? 17 MR. CALHOUN: YES, SIR. 18 MR. DUNLAP: THANK YOU. 19 MR. VAGIM: WHAT WERE THE DATES OF THESE, 16, 17, 20 19? 21 MR. SIMEROTH: 19 WAS DONE I BELIEVE ABOUT SIX 22 MONTHS OR SO AGO. THE 16 WAS DONE ABOUT A YEAR AGO. AND 23 THE 17 WAS DONE IN BETWEEN, ROUGHLY. I'D HAVE TO LOOK UP 24 THE EXACT DATES ON THE REPORTS. 25 MR. VAGIM: ROUGHLY A YEAR AGO, YOU SAY? 0139 01 MR. SIMEROTH: OVER THE LAST TWO YEARS THOSE TESTS 02 HAVE BEEN DONE. 03 MR. DUNLAP: DEAN, DO YOU HAVE ANY FINAL POINTS YOU 04 WANTED TO MAKE? 05 SUPERVISOR ROBERTS HAS BEEN VERY PATIENT AND 06 HAS A FEW QUESTIONS HE'D LIKE TO ASK. 07 MR. SIMEROTH: THE FINAL POINT IS THAT THE 08 PERFORMANCE SUBCOMMITTEE, IN LOOKING AT ALL INFORMATION -- 09 AND A LOT OF THOSE MEMBERS HAD SERVED ON THE AUTO/OIL 10 COMMITTEES, AND WE'RE USING A LOT OF EXPERIENCE -- THEIR 11 ASSESSMENT WAS A THREE PERCENT DECREASE WOULD BE 12 REASONABLE COMPARED TO A CONVENTIONAL OF NONOXYGENATED 13 GASOLINE AND A ONE PERCENT DECREASE COMPARED TO AN 14 OXYGENATED GASOLINE. 15 MR. DUNLAP: THIS WAS HOW MANY MEMBERS? 16 MR. SIMEROTH: APPROXIMATELY 50 MEMBERS, MOSTLY 17 REPRESENTING THE AUTO/OIL INDUSTRY, BUT ALSO FLEET 18 MANAGERS AND OTHER USER GROUPS WERE REPRESENTED BY THIS 19 SUBCOMMITTEE. 20 MR. DUNLAP: PEOPLE THAT HAVE REAL WORLD IN-USE 21 EXPERIENCE WITH PERFORMANCE. AND PLUS, MR. LAGARIAS AND 22 MR. CALHOUN ALSO PARTICIPATED. 23 MR. SIMEROTH: YES. 24 MR. DUNLAP: OKAY. VERY GOOD. 25 MR. SIMEROTH: NEXT, OUT OF THE 800 VEHICLES, WE 0140 01 ONLY USED 131. AND THESE WERE SELECTED TO, QUOTE, SKEW 02 THE RESULTS. OUR PROGRAM WAS DESIGNED TO INCLUDE THE 03 WIDEST VARIETY OF VEHICLES TO ALLOW EVALUATION OF 04 PERFORMANCE AND COMPATIBILITY ISSUES. WE WANT TO GET 05 EVERY TYPE OF VEHICLE REPRESENTED. SO THE FLEETS 06 REPRESENTED EVERYTHING FROM HEAVY-DUTY VEHICLES USED IN 07 CONSTRUCTION WITH CAL TRANS TO LIGHT-DUTY VEHICLES SERVED 08 AS RENTAL VEHICLES, THAT EFFECT. 09 THE FUEL ECONOMY EFFECT, AS YOU HEARD, WE ARE 10 LOOKING FOR CONFIRMATION OF THE IMPACT USING REAL WORLD 11 EXPENSE. ALL DATA WAS MADE AVAILABLE TO EVERYONE WHO 12 WANTED ACCESS TO IT. BUT CERTAINLY IT WAS MADE AVAILABLE 13 TO THE MEMBERS OF THE PERFORMANCE SUBCOMMITTEE FOR THEIR 14 REVIEW AND CONCURRENCE WITH THE FINDINGS. 15 PACIFIC BELL HAD TWO FLEETS IN THE PROGRAM, 16 ONE IN ORANGE COUNTY AND ONE IN SACRAMENTO. G.T.E. HAD A 17 FLEET IN SOUTHERN CALIFORNIA, VENTURA. THEY WERE MAINLY 18 VANS FROM LIGHT-DUTY VANS TO VERY HEAVY-DUTY TRUCKS. 19 BANK OF AMERICA TEST VEHICLES WAS RELATIVELY 20 A SMALL FLEET, ONLY APPROXIMATELY 20 VEHICLES. DURING THE 21 TEST PROGRAM, FOR VARIOUS REASONS, THEY HAD TO USE 22 CONVENTIONAL FUEL AS WELL AS THE TEST FUEL ON THE 23 VEHICLES, WHICH COMPLICATED USING DATA FROM THAT FLEET. 24 CAL TRANS'S FLEET WAS PRIMARILY HEAVY-DUTY 25 TRUCKS USED IN CONSTRUCTION AND SUBJECT TO LONG PERIODS OF 0141 01 IDLING. 02 THE CALIFORNIA STATE UNIVERSITY FRESNO FLEET 03 WAS BASICALLY USED ON CAMPUS. THEY GO A MILE OR TWO AND 04 THEN SET FOR A LONG TIME, GO A MILE OR TWO BACK. WE HAD 05 ONE VEHICLE THAT WAS DOING A THOUSAND MILES A YEAR. WE 06 DID USE SOME VEHICLES IN THE STATE CALIFORNIA UNIVERSITY 07 FLEET IN OUR 131 FLEET. 08 FROM THE CITY AND COUNTY OF SACRAMENTO, WE 09 USED A TOTAL OF 161 VEHICLES OUT OF THEIR 279 VEHICLE 10 FLEET THAT WERE COMBINED BETWEEN THE TWO. THE REASON WE 11 DIDN'T USE THE OTHER VEHICLES IS BASICALLY THE LACK OF 12 DATA. WE FOUND OUT THAT THE PEOPLE DRIVING THESE VEHICLES 13 ARE NOTORIOUS FOR NOT PUTTING IN ACCURATE ODOMETER 14 READINGS. IT IS ALMOST IMPOSSIBLE TO GO BACK AND CORRECT 15 THOSE. WE HAD ONE THAT THE STARTING ODOMETER READING WAS 16 OVER A MILLION MILES, AND THAT'S IMPOSSIBLE IN THE FIRST 17 PLACE TO HAVE THAT ON YOUR ODOMETER. SO WE HAD A NUMBER 18 OF COMPLICATIONS THAT MADE IT DIFFICULT TO RECONCILE THE 19 DATA FROM ALL THE VEHICLES USED IN THE PROGRAM. 20 ALL THE DATA WAS AVAILABLE TO THE PEOPLE WHO 21 REVIEWED THE TEST PROGRAM. AND THE CONCLUSION WAS MADE 22 BASED UPON THOSE 50 INDIVIDUALS LOOKING AT THE DATA. 23 MR. BOYD: MR. CHAIRMAN, IF I COULD JUST ADD, THAT 24 IS THE STANDARD SCIENTIFIC METHOD THAT'S FOLLOWED IN ANY 25 REGIME, LOOKING AT DATA TO QUALITY ASSURE THE DATA TO 0142 01 ASSURE THAT THERE ARE NO DATA THAT WERE BIASED RESULTS ONE 02 WAY OR ANOTHER. 03 AND, AGAIN, THIS WAS DONE PUBLIC. 04 MR. DUNLAP: SO THE DATA YOU USED WAS ABSOLUTELY 05 CORRECT; YOU WANTED TO MAKE SURE IT WAS SUFFICIENT QUALITY 06 AND DEFENSIBLE SO THAT IT WOULD ACTUALLY SHED SOME LIGHT 07 ON WHAT WE WERE GOING TO DETERMINE? 08 MR. SIMEROTH: THAT'S CORRECT, CHAIRMAN DUNLAP. 09 WE NEVER CALCULATED THE OVERALL AVERAGES TO 10 EVEN KNOW WHAT THE FLEETS RECEIVED. 11 MR. DUNLAP: VERY GOOD. THANK YOU FOR THAT. 12 THAT'S A KEY CLARIFYING POINT. I HOPE THAT SOME PEOPLE IN 13 THE ROOM WILL PICK UP ON THE IMPORTANCE OF THAT POINT. 14 MR. LAGARIAS. 15 MR. LAGARIAS: WITH REGARD TO THAT SACRAMENTO DATA, 16 IS THAT BOTH THE CONTROL AND THE TEST FLEET, THE 131 CARS? 17 MR. SIMEROTH: THE 131 I MENTIONED IS ONLY THE TEST 18 VEHICLES. 19 MR. LAGARIAS: WAS THERE A CONTROL FLEET GOING ON 20 AT THE SAME TIME? 21 MR. SIMEROTH: THERE'S A CONTROL FLEET GOING ON FOR 22 BOTH THOSE FLEETS AT THE SAME TIME. 23 MR. LAGARIAS: SO THAT THE COMPARISON WAS MADE OF 24 THE SAME TYPE OF CARS IN PERFORMANCE BETWEEN THE CONTROL 25 GAS, THE TEST GAS AND THE OLD GAS? 0143 01 MR. SIMEROTH: WE TOOK THE TEST FLEET AND WENT BACK 02 A YEAR IN TIME. AND OVER THE SAME RELATIVE TIME PERIOD, 03 SAME APPROXIMATE VOLUME OF FUEL FOR THOSE VEHICLES, AND 04 LOOKED AT THE IMPACT ON GAS MILEAGE, LOOKING BACK 05 HISTORICALLY FOR THOSE VEHICLES TO A CONVENTIONAL 06 GASOLINE. 07 WE DID THE SAME THING FOR THE CONTROL FLEET. 08 WE FOUND THAT YOU CAN'T SIMPLY LOOK BACK IN TIME. THERE 09 NEEDS TO BE SOME ADJUSTMENTS MADE. IF WE HAD TO MAKE 10 THOSE ADJUSTMENTS, THE MILEAGE THAT WE WOULD BE REPORTING 11 WOULD BE LESS THAN WHAT WE ENDED UP REPORTING. 12 SO WE USED ALL THE DATA, BOTH CONTROL AND 13 TEST, FOR THOSE VEHICLES. 14 MR. BOYD: WE WENT THROUGH GREATER PAINS TO BE AS 15 CONSERVATIVE AS POSSIBLE IN THE APPROACH AND BE AS 16 THOROUGH AS ONE COULD BE IN THE APPROACH. 17 MR. SIMEROTH: THE OTHER ASSERTION HAS BEEN THAT 18 THE FUEL ECONOMY CALCULATED WERE BASED ON FEDERAL R.F.G. 19 AND NOT TO CONVENTIONAL FUEL. 20 GOING BACK HISTORICALLY TO THE '94 RECORDS, 21 THE BASIS FOR THE FUEL ECONOMY COMPARISON, THERE WAS NO 22 FEDERAL R.F.G. IN '94. ALSO, SACRAMENTO AT THAT TIME 23 WASN'T A FEDERAL R.F.G. AREA, AND NO FEDERAL R.F.G. WAS 24 BEING SUPPLIED TO THAT AREA. 25 IT TURNED OUT TO BE UNFORTUNATE, BUT THE 0144 01 COMPARISON ENDED UP NOT USING THE FUEL FROM SOUTHERN 02 CALIFORNIA. 03 THE OTHER WAS WE TESTED, QUOTE, TEXAS FUEL. 04 IT WAS OUR TEST FUEL. THAT IS CORRECT. FUEL WAS PRODUCED 05 IN TEXAS. 06 THERE ARE TWO REFINERIES IN THE UNITED STATES 07 THAT TEND TO PRODUCE TESTS OR SPECIALTY FUELS OF THE TYPE 08 OF VOLUME THAT WE ARE PURCHASING FOR OUR TESTS. WE PUT 09 OUT OPEN BID FOR PEOPLE TO SUPPLY US WITH THE FUEL. 10 A SUBCOMMITTEE PROBABLY SPENT AS MUCH TIME 11 ON THIS PARTICULAR ISSUE OF DESIGNING SPECIFICATIONS OF 12 TEST FUEL AS THEY DID THE SINGLE PART OF THE TESTS OVER 13 THE SIX MONTHS. THE PERFORMANCE SUBCOMMITTEE WANTED TO 14 MAKE SURE THE FUEL WAS REPRESENTATIVE OF TYPICAL 15 CALIFORNIA CLEANER BURNING GASOLINE THAT WE'D PRODUCE IN 16 THE FUTURE. 17 WE NOT ONLY SET THE SPECIFICATIONS FOR THE 18 '89 PERIMETERS THAT WE REGULATE. WE ALSO SET 19 SPECIFICATIONS FOR THE REFINERY PROCESSES AND WHAT'S TO BE 20 USED IN PRODUCING THE FUEL TO BE PRODUCED IN CALIFORNIA. 21 IF YOU REMEMBER THE PREVIOUS CHART, YOU SAW 22 THAT WE ENDED UP AT THE LOW END OF THE ENERGY CONTENT 23 RANGE, NOT AS A TYPICAL CLEANER BURNING GASOLINE THAT WE 24 USED IN THE TEST PROGRAM. AND ALSO YOU'VE HEARD WE HAD 25 FOUR MILLION BARRELS REPORTED FOR VARIOUS PARTS. WE DON'T 0145 01 JUST USE FUEL IN CALIFORNIA THAT'S ONLY PRODUCED IN 02 CALIFORNIA. WE HAVE A FAIR AMOUNT OF FUEL SUPPLIED FROM 03 TEXAS AND THE VIRGIN ISLANDS AND ELSEWHERE AROUND THE 04 WORLD USED IN CALIFORNIA. 05 MR. BOYD: I WANT TO REEMPHASIZE THOSE TWO POINTS. 06 ONE IS THE CONSERVATIVE FORMULA USED IN THE TEST FUEL AND 07 THE TREMENDOUS AMOUNT OF EFFORT THAT THE ADVISORY 08 COMMITTEE PUT INTO GETTING A FORMULA THAT WOULD BE AS 09 REPRESENTATIVE AS POSSIBLE OF CALIFORNIA FUEL, RECOGNIZING 10 AS, MR. LAGARIAS, YOU POINTED OUT EARLIER, THAT ON ANY 11 GIVEN DAY, FUELS VARY. 12 THE SECOND POINT, OF COURSE, IS THIS TEST WAS 13 OCCURRING AT A TIME WHEN CALIFORNIA REFINERIES WERE 14 CONVERTING OVER. SO THEY WEREN'T ABLE TO MEET FUEL. AND 15 THAT'S IN IRRELEVANT POINT ANYWAY. GASOLINE IS A FUNGIBLE 16 ITEM. GASOLINE COMES FROM ALL OVER THE WORLD. WE HAD 17 PROVEN RECENTLY THAT CALIFORNIA'S NEW CLEANER BURNING 18 GASOLINE IS A FUNGIBLE ITEM. IT CAN COME FROM ANYWHERE. 19 THE POINT IS: DOES IT MEET THE SPECIFICATIONS OF THE 20 STATE OF CALIFORNIA, NOT WHERE IT CAME FROM. THAT'S A 21 TOTALLY IRRELEVANT POINT. 22 MR. DUNLAP: ANYTHING ELSE, MR. SIMEROTH? 23 MR. SIMEROTH: THE FINAL ASSERTION HAS BEEN THE 24 PRODUCTIONS IN FUEL ECONOMY MAY OFFSET THE EMISSION 25 BENEFITS. 0146 01 EMISSION BENEFITS ARE DETERMINED ON A MASS 02 PER MILE TRAVEL OF VOLUME OF FUEL USED. AND FROM THE 03 PREVIOUS TEST PROGRAMS, A LOT OF THOSE PROGRAMS WERE ALSO 04 TO LOOK AT EMISSION BENEFITS AS WELL AS MILEAGE IMPACTS. 05 AND SO THE MILEAGE AFFECT WAS PART OF THE PROGRAM. THE 06 BASIC THING IS WE LOOK AT EMISSIONS ON A MILES TRAVELED, 07 NOT ON VOLUME USED. 08 MR. DUNLAP: OKAY. 09 ALL RIGHT. THANK YOU. 10 WE HAVE ONE PERSON SIGNED UP TO TESTIFY. 11 AND IF IT'S OKAY WITH MY BOARD MEMBER 12 COLLEAGUES, I'LL HAVE HER COME FORWARD. 13 JAN SPEELMAN IS FROM THE AUTOMOTIVE TRADE 14 ORGANIZATIONS OF CALIFORNIA. SHE WANTS TO TALK TO US 15 ABOUT SERVICE STATIONS. 16 GOOD MORNING. YOU ARE OUR SOLE WITNESS. 17 MS. SPEELMAN: THAT'S IT THIS MORNING? LAST TIME 18 YOU INTRODUCED ME, IT WAS AUTOMOTIVE TRADE ORGANIZATIONS 19 OF AMERICA, WHICH MY MEMBERSHIP GREW IN LEAPS AND BOUNDS 20 IN SECONDS. I KIND OF LIKED THAT. BUT IT TRULY IS 21 CALIFORNIA. 22 WE ARE THE LARGEST TRADE ASSOCIATION 23 REPRESENTING SERVICE STATIONS AND AUTOMOTIVE SERVICE 24 RETAILERS IN THE STATE. WHAT I WANTED TO SAY TODAY WAS 25 PRETTY SIMPLE. 0147 01 FIRST OF ALL, THAT THROUGH MY MEMBERSHIP, 02 FAMILY, ACQUAINTANCES, EVEN SOME STRANGERS WHEN I FIGURED 03 I COULD ASK THEM AND DIDN'T GET IN TROUBLE, WE HAVE FOUND 04 NO PERFORMANCE AND NO MILEAGE CONCERNS. AND I THINK 05 THAT'S SIGNIFICANT. 06 WE ARE TALKING ABOUT A GROUP OF PEOPLE WHO 07 NOT ONLY PUMP IT, BUT SEE REGULAR CUSTOMERS WHO WOULD BE 08 COMING BACK. IF THEY ARE COMING BACK MORE OFTEN WITH LESS 09 MILEAGE, I THINK WE'D HEAR ABOUT IT. WE CERTAINLY HEARD 10 ABOUT THE PRICE ESCALATIONS AND ALSO THE REPAIR END OF OUR 11 MEMBERSHIP. 12 I'VE ASKED NUMBERS. I COULD PROBABLY SAY THE 13 TELEPHONE SURVEY WAS WELL OVER A HUNDRED. ALSO, ANYONE 14 WHO CALLS IN, WE SORT OF DO THESE RANDOM QUESTIONS. AND 15 CALIFORNIA REFORMULA GASOLINE HAS BEEN ONE OF THOSE. AND 16 WE HAVE FOUND NO PERFORMANCE PROBLEMS. WE FOUND NO REPAIR 17 PROBLEMS. WE HAVEN'T FOUND AN INCREASE IN EVEN THE HIGHER 18 MILEAGE VEHICLES WITH SOME FUEL PROBLEMS SUCH AS WE WERE 19 PERHAPS EXPECTING. SO I JUST DON'T BELIEVE THAT IT IS A 20 SIGNIFICANT PROBLEM, NO MORE SO THAN PERHAPS CHANGING OVER 21 TO OXYGENATED FROM NONOXYGENATED IN THE PAST. 22 THERE ARE GOING TO BE SOME PROBLEMS, OF 23 COURSE, WHEN YOU CHANGE FUELS. WE JUST HAVEN'T SEEN 24 THEM. AND THESE ARE THE PEOPLE THAT ARE ON THE FRONT 25 LINE. SO I WANTED TO SHARE THAT WITH YOU. 0148 01 MR. DUNLAP: THANK YOU VERY MUCH. 02 CAN YOU GIVE ME A PERSPECTIVE ON YOUR 03 MEMBERSHIP AGAIN? 04 MS. SPEELMAN: CERTAINLY. WE HAVE, OF COURSE, THE 05 GASOLINE RETAILERS, ANY FUEL RETAILERS. MANY OF THEM SELL 06 DIESEL ALSO. MANY OF THOSE ARE CONVENTIONAL SERVICE 07 STATIONS, WHICH ALSO INCLUDE THE REPAIR COMPONENT. MANY 08 OF THOSE ALSO SELL TWINKIES AND DO CARWASHES. 09 HOWEVER, WE ALSO HAVE REPAIR SHOPS, REGULAR 10 REPAIR SHOPS WHO ARE MEMBERS OF OUR ORGANIZATION. IT IS 11 THE FULL SPAN OF AUTOMOTIVE SERVICE, IF YOU WILL, IN THE 12 AFTER MARKET SECTOR. 13 ALSO, I PERSONALLY DID SOME MILEAGE TESTS. 14 LAST OCTOBER AND NOVEMBER, ANTICIPATING WHAT WAS COMING, 15 OF COURSE, AND SERVING ON THE COMMITTEE, AN ADVISORY 16 COMMITTEE WITH MANY OF THE WONDERFUL PEOPLE SITTING UP 17 HERE, I DID SOME TESTS OF MY OWN ON MY OWN PERSONAL CAR. 18 I DRIVE A 1992 FORD. I DO TUNE IT UP. I DO 19 MAKE SURE THAT I HAVE OIL CHANGES REGULARLY AND SO ON. 20 BUT I DID MY MILEAGE OCTOBER, NOVEMBER. AND I STARTED 21 DOING IT AGAIN ABOUT APRIL 15TH WHEN I COULD DEFINITELY 22 SAY TO ANYONE THAT I WAS PUMPING CALIFORNIA REFORMULATED 23 GAS IN MY CAR. 24 AND I HAVE SEEN NO SIGNIFICANT CHANGE IN 25 MILEAGE. I AM WELL WITHIN THE RANGE THAT WE EXPECTED. 0149 01 WHEN I WAS IN THE MOUNTAINS, I HAD A REDUCTION IN MILEAGE, 02 BUT I DID WHEN I WAS USING CONVENTIONAL FUEL. SO THERE 03 REALLY ISN'T A DIFFERENCE IN MY DRIVING. 04 MY FAMILY HASN'T NOTICED THAT, NOR HAVE THE 05 PEOPLE THAT I HAVE TALKED TO, FRIENDS AND ACQUAINTANCES. 06 SO I WANTED TO SHARE THAT TODAY FOR THE RECORD. 07 MR. DUNLAP: THANK YOU. 08 MS. SPEELMAN: I BELIEVE AND I THINK ALSO SOMETHING 09 I WANTED ON THE RECORD IS THAT AUTO BELIEVES IN CALIFORNIA 10 REFORMULATED FUEL. WE HAVE SUPPORTED IT FROM THE 11 BEGINNING. 12 AND WE BELIEVE IT'S A SIGNIFICANT STEP, AND 13 IN CONNECTION WITH OUR SMOG CHECK PROGRAM, IT IS THE ONLY 14 WAY WE ARE GOING TO GET SIGNIFICANT REDUCTIONS IN AIR 15 POLLUTION. AND I THINK IT NEEDS TO BE BACKED. 16 AND I THINK THAT THE REFORMULATION HAS TAKEN 17 HITS BASED ON THE PRICE INCREASES AND THAT THOSE HITS ARE 18 UNWARRANTED. AND WE HAVE TAKEN EVERY OPPORTUNITY TO SHARE 19 THAT WITH MEDIA WHEN WE HAVE HAD A CHANCE, THAT IT IS NOT 20 CALIFORNIA REFORMULATED FUEL THAT WAS EVEN WHAT WE 21 CONSIDER A MINOR PART OF THE INCREASE IN PRICES. HOWEVER, 22 IT'S TAKEN A HUGE AMOUNT OF THE WRAP. 23 I DID WANT TO SHARE FOR THE RECORD THE 24 DEPARTMENT OF ENERGY SUBMITTED A REPORT TO THE WHITE HOUSE 25 YESTERDAY. AND I ONLY HAVE THE ORAL. IT'S A FAIRLY THICK 0150 01 REPORT, AND I DON'T HAVE IT YET IN MY HOT LITTLE HANDS. 02 BUT IT WAS SHARED WITH ME THAT THOSE PRICE INCREASES WERE 03 IN REFINERY MARGINS, AND IT'S IMPORTANT TO NOTE THAT THE 04 REFINERY MARGINS, ACCORDING TO THE DEPARTMENT OF ENERGY, 05 IN CALIFORNIA WENT FROM ABOUT 13 CENTS A GALLON TO ABOUT 06 35 CENTS A GALLON. AND THAT'S WHERE THE PRICES WENT. 07 IT WAS NOT IN THE CALIFORNIA REFORMULATION. 08 AND THAT, TO ME, WAS A REAL SIGNIFICANT PART OF THIS 09 REPORT. WE WERE EAGER TO HAVE THAT BROUGHT OUT. AND 10 THANK GOODNESS IT WAS. IT'S THE FIRST TIME WE HAVE EVER 11 HAD THIS IN A MAJOR REPORT LIKE THIS, AND THEY DID 12 SEPARATE OUT CALIFORNIA, BECAUSE OUR PROBLEMS HERE ON THE 13 WEST COAST ARE DIFFERENT THAN MANY PARTS OF THE UNITED 14 STATES. 15 AND, MOSTLY, I WANTED TO POINT OUT THAT IT'S 16 TIME TO TAKE THE FINGER AWAY FROM CALIFORNIA REFORMULATED 17 GASOLINE AND HOPEFULLY GET MORE PEOPLE ON BOARD TO ACCEPT 18 THIS AND APPLAUD ITS USE AND TO START POINTING THE FINGER 19 OF BLAME AS FAR AS THE PRICE INCREASES AT THE MARKETPLACE 20 WHERE IT BELONGS AND THE LACK OF A COMPETITIVE 21 MARKETPLACE, WHICH UNFORTUNATELY, THIS BOARD CAN'T HELP US 22 WITH. BUT WE PLAN ON WORKING WITH THE LEGISLATURE TO DO 23 JUST THAT. 24 I THANK YOU VERY MUCH. 25 MR. DUNLAP: THANK YOU VERY MUCH. 0151 01 MR. LAGARIAS HAS A QUESTION. 02 MR. LAGARIAS: I THINK YOUR STORY OUGHT TO BE TOLD 03 TO THE BAY AREA. I THINK THERE'S A CHANNEL THAT WOULD BE 04 INTERESTED IN IT. 05 MS. SPEELMAN: YES. I'VE HAD OPEN DISCUSSIONS WITH 06 THEM, MR. LAGARIAS. 07 MR. LAGARIAS: THEY HAD A SERVICE STATION ATTENDANT 08 EVALUATE THE NEW GASOLINE. THEY OPENED UP A VALVE TO THE 09 STORAGE TANK AND SMELLED IT. AND THE SERVICE STATION 10 ATTENDANT SAID IT DIDN'T SMELL AS STRONG AS THE OLD 11 GASOLINE. AND THAT'S AN INTERESTING TEST. 12 MS. SPEELMAN: THAT IS INTERESTING, SINCE 13 REFORMULATED FUEL HAD SUCH A STRONG ODOR. AND THAT WAS IN 14 WISCONSIN, THAT, GOSH, PEOPLE WERE KEELING OVER AND HAVING 15 NAUSEA. SO I GUESS OURS DOESN'T SMELL AS STRONG. I'D SAY 16 THAT WAS A PLUS. 17 MR. LAGARIAS: IT IS ONE OF THE CHARACTERISTICS OF 18 THE CLEANER BURNING GASOLINE. IT HAS A LOWER VAPOR 19 PRESSURE. AND YOU WOULD EXPECT THAT IT WOULD BE THAT WAY. 20 MS. SPEELMAN: YOU ARE RIGHT. 21 MR. DUNLAP: VERY GOOD. 22 THANK YOU FOR TESTIFYING. 23 MS. EDGERTON: I'M TRYING TO FIGURE OUT WHAT SOME 24 OF THESE LETTERS ARE. I'VE BEEN PRETTY CAREFUL IN READING 25 ALL THE LETTERS WE HAVE BEEN GETTING, PARTICULARLY THE 0152 01 ONES COMPLAINING ABOUT IT. 02 I WAS TRYING TO FIGURE OUT HOW SOME OF THE 03 INDIVIDUALS ARE GETTING THESE KINDS OF ANECDOTAL RESULTS. 04 AND ONE OF THE THINGS THAT I SEE IS MAYBE THEY ARE OUT ON 05 THE HIGHWAY MORE, BECAUSE WE WENT UP FROM 55 MILES AN HOUR 06 TO 65 MILES AN HOUR, AND THAT WOULD BE A TEN PERCENT DROP 07 RIGHT THERE. 08 BUT YOU ARE SAYING YOU DIDN'T FIND ANY. YOUR 09 FOLKS DIDN'T FIND ANY DIFFERENCE? 10 MS. SPEELMAN: NO. I FOUND NO DIFFERENCE IN GAS 11 MILEAGE THAT WAS NOT WITHIN THE RANGE THAT I EXPECTED. 12 THAT ONE TO THREE PERCENT IS ACCURATE. 13 AND, AGAIN, IT DEPENDED. I DID A COUPLE OF 14 MOUNTAIN TRIPS IN THE SIERRAS LAST OCTOBER, AND I JUST 15 WENT UP TO MAMMOTH AND SO ON AND DID A COMPARISON WITH 16 THAT TANK. AND THERE WAS I THINK IT WAS BETWEEN A TWO AND 17 THREE PERCENT DIFFERENCE IN LESS GAS MILEAGE. 18 MS. EDGERTON: I GUESS YOU ARE NOT GOING FASTER. 19 MS. SPEELMAN: YOU ARE RIGHT. 20 AND I HAVE HAD ONE PARTICULAR PERSON CALL WHO 21 HAD BEEN RELAYED TO ME FROM THE NORTHERN CALIFORNIA RADIO 22 STATION THAT HAS BEEN OBVIOUSLY ON THE AIR QUITE A BIT. I 23 ATTEMPTED TO CALL IN ON THAT STATION AT ONE POINT, DID NOT 24 GET THROUGH TO BE ON AIR TO DEBATE A COUPLE OF POINTS. 25 HOWEVER, I DID SAY, "WOULD YOU PLEASE PASS ALONG SOME OF 0153 01 THESE ANECDOTAL STORIES? PASS THEM ALONG TO ME. I'D LIKE 02 TO TALK TO THEM. I'D LIKE TO FIND OUT WHAT THE STORY 03 IS." 04 I ONLY GOT ONE CALL. IT WAS VERY 05 INTERESTING. IT WAS AN INDIVIDUAL WHO WENT FROM 06 SACRAMENTO TO TAHOE. "I JUST GOT ABSOLUTELY NO MILEAGE 07 WHATSOEVER. IT WAS HORRIBLE. MY GOD, I GOT TEN MILES AN 08 HOUR TO THE GALLON LESS. IT WAS HORRIBLE." AND I SAID, 09 "WELL, WHAT WERE YOU COMPARING IT WITH?" "WELL, MY 10 PREVIOUS GAS TANK FULL." "WELL, WHERE DID YOU TRAVEL WITH 11 THAT?" "WELL, IN SACRAMENTO TO AND FROM WORK." SO, YOU 12 KNOW, THERE YOU HAVE SOMEONE GOING UP THE HILL INTO HIGH 13 ALTITUDES VERSUS DRIVING ON THE FLAT TO AND FROM WORK. 14 YOU KNOW, JUST NO COMPARISON. 15 SO I THINK THE ANECDOTAL INFORMATION THAT WE 16 ARE GETTING, THAT SOME OF THAT IS JUST NOT VALID. IT'S 17 NOT PEOPLE THAT HAVE DONE STUDIES. YOU KNOW, IF YOU ARE 18 GOING TO LOOK FOR SOMETHING VALID, LOOK AT THE STUDIES. 19 MS. EDGERTON: THANK YOU. 20 MR. VAGIM: MR. CHAIRMAN, I DO HAVE A QUESTION. 21 DO YOU REPRESENT THE SO-CALLED UNBRANDED, 22 TOO? 23 MS. SPEELMAN: WHAT FEW ARE LEFT. I WISH I 24 REPRESENTED A LOT MORE. WE WOULDN'T HAVE HAD AS MANY 25 PRICE SPIKES. BUT YES, WE DO HAVE VERY FEW OF THEM. 0154 01 MR. VAGIM: THERE LIES AT LEAST ONE OF MY CONCERNS 02 AND WHY WE ASKED STAFF TO STAY ON THEIR TOES ON THIS ONE, 03 BECAUSE WHEN YOU LOOK AT THE PRICE DIFFERENTIAL ON THE 04 SPOT AND THE UNBRANDED STATIONS, THERE'S A REAL STORY 05 THERE. 06 AND AS A MATTER OF FACT, IN FRESNO, I CAN GO 07 GET FILLED UP FOR $1.38 A GALLON. OF COURSE YOU GET LEAD 08 POISONING FROM THE BULLETS FLYING AROUND, BUT YOU CAN FIND 09 IT. 10 BUT THERE'S A 20 PERCENT DIFFERENTIAL FROM 11 ONE SIDE OF TOWN TO ANOTHER SIDE OF TOWN. BUT MY FEAR IS 12 IF YOU DRIVE THOSE UNBRANDED STATIONS OUT OF THE 13 MARKETPLACE AND YOU HAVE NO OTHER INDEPENDENT COMPETITION 14 GOING ON WITH THE SPOT MARKET, YOU HAVE A REAL TENDANCY TO 15 GO BACK UP TO THAT LINE THAT WAS SHOWN AS THE SO-CALLED 16 BRANDED STATIONS. 17 AND MY FEAR IS: ARE WE TRYING TO DRIVE THESE 18 PEOPLE OUT OF THE MARKETPLACE? IT SEEMED ALMOST WHEN WE 19 HAD SOME TESTIMONY IN APRIL THERE WERE SOME INDEPENDENTS 20 THAT CAME FORWARD AND SAID I WAS APPROACHED BY SOME FOLKS 21 TO SAY YOU ARE PROBABLY NOT GOING TO GET GAS UNLESS YOU 22 JOIN US AND THAT KIND OF STUFF. 23 IS THAT STILL GOING ON? 24 MS. SPEELMAN: TO A CERTAIN EXTENT. IN THE LAST 25 TWO YEARS, MOST OF MY DEALERS CAN NAME TWO OR THREE 0155 01 INDEPENDENTS THAT WERE AROUND THEM THAT ARE NO LONGER IN 02 BUSINESS THAT BRANDED UP, IF YOU WILL. 03 AND THAT'S WHAT WE ARE TALKING ABOUT. THAT'S 04 ONE OF THE THINGS THAT WE NEED TO SOLVE THROUGH 05 LEGISLATION, WE BELIEVE. AND THAT'S CREATE AN ENVIRONMENT 06 AT THE RETAIL END THAT ENCOURAGES THE INDEPENDENTS TO BE 07 THERE. 08 I THINK THAT'S A SIGNIFICANT PART OF THE 09 MARKETPLACE THAT BEGINNING IN THE EARLY '80'S HAS BEEN 10 DIMINISHED TO THE POINT WHERE WE NOW BELIEVE IT'S LESS 11 THAN TEN PERCENT OF THE MARKETPLACE, WHICH IS NOT A 12 SIGNIFICANT NUMBER OF PEOPLE BUYING AT THAT UNBRANDED RACK 13 AND THAT LOW SPOT TO TRULY HAVE AN IMPACT ON THE OVERALL 14 MARKET. 15 MR. VAGIM: BUT WE STILL NEED THEM. 16 MS. SPEELMAN: WE NEED MORE OF THEM, AND WE NEED TO 17 CREATE THE ENVIRONMENT THAT ENCOURAGES SOME OF THE SMALL 18 REFINERS, AGAIN, THE INDEPENDENT REFINERS WHICH WE NO 19 LONGER HAVE. WE NEED ADDITIONAL COMPETITION IN THE 20 MARKETPLACE. AND THAT ON ITS OWN WOULD CAUSE THAT DEALER 21 TANK WAGON OR THAT UNBRANDED TO START TO COME CLOSER AND 22 BRING THAT D.T.W. DOWN. 23 OUR CONCERN RIGHT NOW, SINCE MOST OF OUR 24 MEMBERS ARE BRANDED DEALERS, IS THEIR TANK WAGONS HAVEN'T 25 DROPPED MORE THAN TWO, FOUR, FIVE CENTS MAXIMUM. AND NOW 0156 01 THEY ARE SITTING IN VERY UNCOMPETITIVE ENVIRONMENTS. THEY 02 ARE NOT GETTING A BREAK FROM THE VERY SAME OIL COMPANIES 03 THAT THEY FLY THE FLAG OF THAT THE UNBRANDED CAN TAKE 04 ADVANTAGE OF. 05 MR. VAGIM: HOPEFULLY THEY SURVIVE, BECAUSE THAT'S 06 THE ONLY WAY THE PRICES WILL STAY LOW, I THINK. 07 MS. SPEELMAN: AND WE NEED MORE OF THEM. THEY ARE 08 NOT A SUFFICIENT PART OF THE MARKETPLACE TO TRULY GIVE US 09 THE CONTROLS WE NEED. AND THAT'S WHAT WE HOPE TO HAVE. 10 MR. DUNLAP: THANK YOU VERY MUCH FOR YOUR 11 TESTIMONY. 12 THANK YOU FOR JOINING US HERE IN SAN DIEGO. 13 SUPERVISOR ROBERTS. 14 MR. ROBERTS: THANK YOU, MR. CHAIRMAN. 15 I JUST HAVE A FEW QUESTIONS. 16 I GUESS I'LL START BY SAYING IT SOUNDS LIKE 17 THERE ARE SOME THINGS GOING ON IN NORTHERN CALIFORNIA THAT 18 AREN'T HAPPENING IN SOUTHERN CALIFORNIA. I TRIED TO 19 CHECK. WE ARE NOT GETTING ANYWHERE NEAR THE NUMBER OF 20 COMPLAINTS. AND IN CHECKING THOSE OUT, I HAVEN'T FOUND 21 ANYTHING THAT'S FOUNDED ANY REAL CAUSES RELATED TO THE 22 FUELS. 23 I CONTINUE TO HEAR ABOUT SOME SLIGHT 24 DECREASES IN FUEL ECONOMY, BUT IT DOESN'T SEEM TO BE 25 TERRIBLY SIGNIFICANT. 0157 01 I GUESS ONE OF MY CONCERNS IS WE HAVE BEEN 02 TALKING A LOT ABOUT THE TESTING THAT WE HAVE BEEN DOING. 03 AND IT'S NOT CLEAR TO ME WHAT TESTING WE ARE DOING OR WHAT 04 TESTING WE WILL BE DOING TO ENSURE THAT THOSE FUEL 05 CONDITIONS REMAIN AND THAT WE ARE NOT GOING TO HAVE A 06 FALLOFF IN MILEAGE OR ANYTHING ELSE. 07 WHEN YOU TALKED THIS MORNING ABOUT THE 08 RETROFIT, WE TALKED ABOUT HOW IMPORTANT IT WAS AND SORT OF 09 THE REAL WORLD CONDITIONS. MAYBE SOMEBODY CAN COMMENT ON 10 THAT. THAT'S WHAT I WOULD LIKE TO SEE, IS DATA THAT'S 11 GOING TO COME OUT OF THE ACTUAL USE OF CARS ON THE ROADS 12 FROM HEREON OUT. 13 MR. SCHEIBLE: IN TERMS OF FUEL ECONOMY, WE ARE 14 SELECTING EXTENSIVE DATA ON FUEL PROPERTIES OF THE GASSES 15 BEING MADE AND HAVE CONFIRMED TO DATE AND WILL CONTINUE TO 16 CONFIRM THAT IT HAS THE ENERGY CONTENT THAT WE BELIEVE. 17 SINCE THE RELATIONSHIP BETWEEN THE FUEL 18 ECONOMY LOSS AND ENERGY CONTENT LOSS IS VERY STRONG, THAT 19 WILL PROVE THAT POINT. 20 IN TERMS OF EMISSION TESTING, WE DO HAVE SOME 21 STUDIES GOING ON THIS YEAR TO LOOK AT WHAT'S IN THE 22 ATMOSPHERE AND HOW THAT PROFILE HAS CHANGED AND RELATE 23 THAT BACK TO THE EXPECTED CHANGES. 24 ACTUALLY, MUCH OF THE CONFIRMATORY WORK THAT 25 ONE WOULD WANT TO DO IN TERMS OF THE ACTUAL SPECIFICATIONS 0158 01 OF THE CALIFORNIA FUEL AND HOW IT'S WORKING IN THE CURRENT 02 VEHICLES HAS BEEN DONE THROUGH A NUMBER OF THE STUDIES 03 THAT WE HAVE SEEN. WE ARE NOW GETTING THE VEHICLES IN FOR 04 A NEW TEST TO GO HAVE A NEW FUEL. WE WILL HAVE TO GO BACK 05 TO SEE IF THERE'S A WAY TO RELATE EMISSIONS WE ARE SEEING 06 TODAY FOR CARS THAT HAD COME IN WITH FUELS THAT COMPLY 07 WITH CLEANER BURNING GASOLINE VERSUS THE PAST CARS. BUT 08 THAT MAY BE A SOMEWHAT DIFFICULT STUDY TO DO. 09 MR. ROBERTS: SO WITH RESPECT TO THE MILEAGE, YOU 10 ARE BASICALLY GOING TO DO THAT BY TESTING THE ENERGY 11 CONTENT? 12 MR. SIMEROTH: MILEAGE IS TOTALLY RELATED TO THE 13 ENERGY CONTENT. IF YOU KNOW THE ENERGY CONTENT OF THE 14 FUEL AND IT COMES IN AT WHAT YOU BELIEVE IT IS SUPPOSED TO 15 BE -- 16 MR. ROBERTS: AND THE EMISSIONS, THERE'S A COUPLE 17 THINGS GOING ON? 18 MR. SIMEROTH: YES. MUCH OF THE WORK'S BEEN DONE, 19 INCLUDING THE OFF-SITE EMISSION STUDIES, BOTH OF WHICH 20 CONFIRM THAT THE BENEFITS ARE PRESERVES WHEN YOU HAVE 21 THOSE HIGH EMISSION MODES, EITHER OFF-CYCLE OPERATION OR 22 CARS THAT ARE INHERENTLY HIGH ADMITORS. 23 MR. VAGIM: WHAT DATE WILL WE GET DATA IN ON WHAT 24 YOU FIND AND MEASURE IN THE ATMOSPHERE, ENVIRONMENT IN 25 TERMS OF ANY CHANGES? PROBABLY SINCE MARCH 1ST WE HAVE 0159 01 HAD A LARGE SCALE USE OF THIS FUEL. 02 MR. SIMEROTH: YES, MARCH 1ST. ACTUALLY, LATE 03 MARCH HAS BEEN VERY LARGE SCALE USE OF THE FUEL. THE 04 QUESTION IS: WHEN WILL WE GET THE AIR QUALITY DATA TO 05 HELP US LOOK AT THIS? THAT STUDY IS BEING DONE THIS 06 SUMMER, AND SO WHATEVER TIME IT TAKES TO PRODUCE THE DATA 07 AND INTERPRET IT. 08 MR. ROBERTS: SO MAYBE LATE FALL? 09 MR. SIMEROTH: I WOULD NEED TO TALK TO OUR RESEARCH 10 DIVISION. 11 MR. DUNLAP: ON THAT POINT, MR. BOYD, WE'D LIKE TO 12 HAVE THAT DATA AS SOON AS POSSIBLE. SO LET'S DO WHAT WE 13 NEED TO DO TO INTERFACE WITH OUR RESEARCH DIVISION AND GET 14 THAT BACK. 15 MR. BOYD: CERTAINLY. 16 SOME DATA IS AVAILABLE TO US JUST AS A RESULT 17 OF THE VARIOUS TESTS WE ENGAGE IN, SUCH AS OUR LABORATORY 18 IN EL MONTE HAS BEEN CERTIFYING. BUT THE RESEARCH 19 PROJECT, YES, THIS FALL, WE WILL MAKE SURE WE GET THAT 20 INFORMATION. 21 AND ANY OTHER INFORMATION THAT COMES OUR WAY, 22 THAT UNDER THE CURRENT CIRCUMSTANCES, WE WILL GO OUT OF 23 OUR WAY AND WE WILL MAKE IT AVAILABLE TO ALL OF YOU SO YOU 24 HAVE THE INFORMATION. 25 MR. DUNLAP: WITHIN A WEEK YOU CAN PROVIDE US WITH 0160 01 THE TIME FRAME SO THE BOARD WILL KNOW. 02 MR. ROBERTS: NOW, THE ONE THING THAT HAS BEEN A 03 CONSISTENT CONCERN IN THIS AREA IS THE COST. ONE OF THOSE 04 CHARTS LOOKED LIKE A RELATIVELY HORIZONTAL LINE AND WAS 05 DESCRIBED AS A SLIGHT DECREASE. I ASSUME THAT'S TRUE. 06 WE HAVEN'T SEEN ANY DECREASES HERE, AND IT 07 REMAINS A GREAT DEAL OF CONCERN. I GUESS AFTER OUR LAST 08 MEETING, I WAS FIGURING WHEN THESE SHIPS CAME IN FROM THE 09 VIRGIN ISLANDS WE'D SEE SOME DIFFERENCES. I THINK THE 10 NUMBER THAT WAS GIVEN WAS FOUR MILLION BARRELS. 11 OVER WHAT PERIOD OF TIME WERE THOSE 12 ADDITIONAL FOUR MILLION BARRELS BROUGHT IN? 13 MR. SIMEROTH: FROM MARCH 1ST UNTIL PRESENT. 14 MR. ROBERTS: SO THAT REPRESENTS SOMETHING LESS 15 THAN FIVE PERCENT OF THE TOTAL SUPPLY DURING THAT PERIOD? 16 MR. SIMEROTH: IT WOULD BE EQUIVALENT TO ABOUT SIX 17 DAYS' SUPPLY OF THAT TIME PERIOD FOR THE ENTIRE STATE. 18 MR. BOYD: I THINK THE ISSUE THAT WE ARE TRYING TO 19 RAISE IS THAT THEY WERE OF ADEQUATE SUPPLY TO MEET DEMAND 20 ON A DAILY BASIS. AND I THINK, FROM THE DATA, YOU ARE 21 CORRECT, THAT WHAT WE'VE SEEN AS A WHOLESALE PRICE IS 22 DECLINING. WE HAVE SEEN CRUDE OIL PRICES DECLINING. WE 23 HAVE SEEN IT ESTABLISHED THAT CLEANER BURNING GASOLINE IS 24 NOT A SIGNIFICANT COST ELEMENT. WE HAVE ABOUT EXHAUSTED 25 WHAT IS WITHIN THE PURVIEW OF OUR AGENCY, UNFORTUNATELY, 0161 01 WITH REGARD TO INFLUENCING PRICE. 02 WE DID LEAVE A DILEMMA ON THE BOARD, AND YOU 03 ARE 100 PERCENT CORRECT, AND YOU ARE BEGINNING TO ASK ME 04 WHAT INFLUENCE THE STAFF CAN HAVE ON THE DILEMMA. WE ARE 05 SEEING SOME THINGS RETURN TO NORMAL, BUT PRICE ISN'T 06 FOLLOWING, AS YOU EXPECT. 07 MR. ROBERTS: WELL, THAT BOTHERS ME. AND I WILL 08 TAKE THE INFORMATION AND NOT DISPUTE THE FACT THAT WE ARE 09 NOT THE MAJOR PART OF THAT PRICE. BUT WE ARE SOME PART OF 10 THAT PRICE. AND THAT PRICE OVERALL CONCERNS ME. 11 AND I GUESS IT BOTHERS ME TO SOME EXTENT TO 12 SAY WE THROW UP OUR HANDS. WE CAN'T DO ANYTHING ABOUT 13 IT. WE'RE REALLY NOT THE PROBLEM. SOMEHOW I THINK THAT 14 PROBLEM IS A THREAT TO WHAT WE ARE TRYING TO ACHIEVE. AND 15 I THINK WE OUGHT TO BE MORE AGGRESSIVE IN TRYING TO 16 PERHAPS BE PART OF THAT SOLUTION. AND I GUESS THAT 17 CONCERNS ME. 18 WE HAVE SEEN CLEAR EVIDENCE OF WHOLESALE 19 PRICES COMING DOWN, CRUDE OIL PRICES COME DOWN. EVERY 20 REASON THAT WE WERE GIVEN FOR THE PRICES GOING UP, NOW WE 21 HAVE SEEN SOME SIGNIFICANT EVIDENCE THAT THOSE HAVE BEEN 22 COMING DOWN FOR QUITE AWHILE, AND WE ARE NOT GETTING ANY 23 CHANGE. 24 THE TWO GAS STATIONS OUT ON THE CORNER HERE, 25 THEY ARE AT AS HIGH AS THEY HAVE BEEN, PERIOD. I DON'T 0162 01 THINK THEY HAVE COME DOWN A PENNY. AND I THINK THAT'S 02 PRETTY TYPICAL IN WHAT I AM SEEING IN SAN DIEGO COUNTY. 03 I'M READING NATIONALLY THINGS ARE GOING TO 04 COME DOWN. AT THE LAST MEETING I HEARD WE WERE GOING TO 05 HAVE SOME SHIPS COME IN FROM THE VIRGIN ISLANDS. WHEN 06 THEY COME IN, WE CAN EXPECT SOME DECREASE IN PRICES. AND 07 THOSE SHIPS HAVE BEEN IN FOR QUITE A WHILE NOW, AND WE 08 HAVEN'T SEEN A DECREASE IN PRICES. 09 AND I AM JUST EXPRESSING TO YOU SOME 10 FRUSTRATION, BUT THAT FRUSTRATION CAN GROW TO BE A 11 POTENTIAL THREAT TO THE PROGRAM THAT WE THINK IS IMPORTANT 12 WE MAINTAIN IN PLACE. AND YOU DO IT AND SAY, "WELL, 13 SOMEBODY ELSE'S PROBLEM," I DON'T THINK IS GOING FAR 14 ENOUGH, AND I THINK WE OUGHT TO DO WHAT WE CAN AND TAKE 15 MAYBE A STRONGER POSITION IN PURSUING THE REASONS WHY 16 THOSE PRICES ARE REMAINING UP. 17 MR. BOYD: SUPERVISOR, I ASSURE YOU WE SHARE YOUR 18 CONCERN. AS I SAID IN MY SUMMARY OF REMARKS, ONE OF THE 19 ISSUES THAT STILL REMAINED THAT CONCERNED US WAS THE PRICE 20 ISSUE. AND I THINK I WAS EXHIBITING A LITTLE MORE OF MY 21 OWN FRUSTRATION. WE ARE CONTINUING TO WORK WITH THE 22 ENERGY COMMISSION. WE MET FACE TO FACE WITH EACH AND 23 EVERY OIL COMPANY, AND IN THOSE SESSIONS, WE EXPRESSED OUR 24 CONCERN. 25 MR. ROBERTS: IF ALL WE IMPORTED OVER THOSE 0163 01 120 DAYS WAS FOUR MILLION BARRELS, THAT'S NOT A VERY 02 SIGNIFICANT AMOUNT TO TRY TO AFFECT THE PRICE. WE WERE 03 TALKING ABOUT EMERGENCY POWERS, AND IF WE CAN'T GET FUEL 04 INTO CALIFORNIA, MAYBE IN SOME LIMITED WAY, WE HAVE GOT TO 05 TALK ABOUT BRINGING IN SOME NON-CALIFORNIA FUEL TO SHAKE 06 THIS THING UP, AT LEAST ON AN INTERIM BASIS, BECAUSE THAT 07 TO ME SEEMS TO BE A CENTRAL ISSUE. 08 AND IF WE CAN'T PROVIDE FUEL, AND IF THE 09 REFINERS HERE HAVE US OVER ENOUGH OF A BARREL THAT WE 10 CAN'T DO ANYTHING ABOUT IT AND THE SUPPLY IS RESTRICTED, 11 IT SEEMS TO ME WE OUGHT TO BE LOOKING AT WAYS THAT MAYBE 12 WE CAN INCREASE THAT SUPPLY, MAYBE ALLOW UNBRANDED FUELS 13 IN OR SOMETHING THAT WOULD WORK IN THE SUPPORT OF SOME OF 14 THE OTHER THINGS THAT WE HAVE HEARD CONCERNS EXPRESSED 15 OVER. 16 BUT IT BOTHERS ME TO THE POINT THAT I DON'T 17 FEEL COMFORTABLE JUST ACCEPTING THAT WE CAN'T DO ANYTHING 18 ABOUT IT. I'D LIKE TO START TO LOOK AT WHAT OPTIONS THERE 19 ARE. WE TALKED ABOUT HAVING AN EMERGENCY MEETING IF THE 20 PRICE DIDN'T COME DOWN. THE PRICE HAS NOT COME DOWN. 21 MR. DUNLAP: SUPPLY. 22 MR. ROBERTS: WE HAVE GOT TO AFFECT THE SUPPLY IN 23 SOME WAY, SHAPE OR FORM IF WE HAVE BEEN GUILTY OF CAUSING 24 A SITUATION THAT IS AT THE BASE OF WHY THERE'S A SMALLER 25 SUPPLY IN CALIFORNIA. 0164 01 MR. DUNLAP: MS. BROWN FROM THE ENERGY COMMISSION 02 IS HERE. I'D LIKE TO GIVE HER A MOMENT. 03 BUT I'D LIKE TO CLARIFY A POINT. I THINK 04 THAT THERE IS CERTAINLY A CERTAIN ROLE THAT WE PLAY 05 RELATIVE TO REQUIRING THE CLEANER FUEL, AND I APPRECIATED 06 THE FACT THAT WE AS A BOARD HAVE THE FIRST HEARING IN THE 07 NATION TO TRY TO GET TO THE BOTTOM OF WHAT'S GOING ON WITH 08 THE FUEL SUPPLY AND TO TRY TO UNDERSTAND THE PRICE ISSUE. 09 BUT I THINK WHAT WE'VE HEARD FROM EACH OTHER 10 AND THOSE THAT HAVE TESTIFIED IS WHAT PART OF THE PROBLEM 11 THAT WE ARE RESPONSIBLE FOR. IT'S FIVE TO EIGHT CENTS. 12 AND WE HAVE TAKEN RESPONSIBILITY FOR THAT. 13 AT THE SAME TIME, WHEN IT COMES TO AFFECTING OR 14 CONTROLLING A MARKET IN PRICING, WHILE WE ARE CONCERNED 15 AND WHILE WE ARE WORKING TO USE THE EMERGENCY POWERS OF 16 THE STATE THAT'S BEEN ENTRUSTED WITH THE ENERGY 17 COMMISSION, THERE HAS TO BE SOME MARKET RESPONSE THAT 18 REFLECTS WHAT'S GOING ON AT SOME POINT. 19 AND WE AS CONSUMERS, WE AS REGULATORS HAVE A 20 ROLE TO PLAY. AND ONE OF THE ROLES THAT I RELISH IS THAT 21 WE HAVE RESPONSIBILITY TO HELP PROTECT THE ENVIRONMENT, 22 NOT TO CONTROL THE MARKET AND NOT TO WILLY-NILLY, PULL A 23 PROGRAM BACK THAT HAS A PROFOUND ENVIRONMENTAL BENEFIT 24 SOLELY BECAUSE OF WHAT'S GOING ON IN THE MARKETPLACE. 25 SO IF I MIGHT PROVIDE YOU WITH SOME COMFORT, 0165 01 AT LEAST FROM MY PERSPECTIVE, WE ARE DOING, I THINK, WHAT 02 WE CAN AND WHAT'S RESPONSIBLE IN TRYING TO FIND FACTS. 03 I DON'T LIKE THE IDEA THAT THIS PROGRAM CAN 04 BE USED AS SOME SORT OF A LEVER OR A TRIGGER TO ADJUST 05 PRICE IN THE MARKETPLACE, BECAUSE WE HAVE HAD EXPERTS, 06 ECONOMISTS HAVE COME HERE AND TOLD US THAT WE'RE NOT 07 LIKELY TO SEE THAT DIRECT RELATIONSHIP. AND THAT HASN'T 08 BEEN ANSWERED TO MY SATISFACTION. 09 MS. BROWN, IF YOU COULD TAKE A WORD OR TWO 10 AND MAYBE COVER THAT POINT AND OTHERS THAT THE SUPERVISOR 11 MENTIONED? 12 MS. BROWN: SUPERVISOR ROBERTS, THE ENERGY 13 COMMISSION SHARES YOUR CONCERN ABOUT THE PRICES. THERE 14 HAS BEEN A SLIGHT DECREASE IN THE RETAIL PRICE OF BOTH 15 GASOLINE AND BOTH DIESEL IN THE LAST WEEK. 16 BUT I THINK WE HAVE TO REMEMBER THAT WE ARE 17 LOOKING NOT ONLY AT THE SUPPLY SIDE OF THE EQUATION, BUT 18 THE DEMAND SIDE OF THE EQUATION AS WELL. 19 WE ARE IN THE PEAK OF THE SUMMER DRIVING 20 SEASON. HISTORICALLY, PRICES ARE ALWAYS HIGH IN THE 21 SUMMER MONTHS. I DON'T EXPECT THIS YEAR TO BE ANY 22 DIFFERENT. 23 WE ARE ALSO JUST CLOSING OUT THE HIGH DEMAND 24 SEASON. AGAIN, THE DEMAND SIDE OF THE EQUATION HAS A 25 SIGNIFICANT IMPACT ON THE PRICE. THERE'S A DIRECT 0166 01 RELATIONSHIP. 02 SO I'M NOT TRYING TO DOWNPLAY YOUR CONCERNS, 03 ONLY TO SAY THAT SOME OF THE LOCAL MARKET CONDITIONS THAT 04 YOU ARE ESPECIALLY EXPERIENCING IN THE SAN DIEGO AREA ARE 05 TYPICAL OF WHAT'S HAPPENED IN THE PAST. SAN DIEGO PRICES 06 FOR GASOLINE DO TEND TO BE A LITTLE HIGHER, BECAUSE THE 07 SAN DIEGO AREA IS NOT AS CLOSE TO THE REFINING CENTERS AS, 08 SAY, LOS ANGELES. SO IT WOULDN'T SURPRISE ME, FOR 09 EXAMPLE, TO SEE SOME HIGHER PRICES IN SOME OF THE OUTER 10 LYING STATIONS HERE IN SAN DIEGO. 11 MR. ROBERTS: I GUESS WHAT'S BOTHERING ME IS THE 12 EXIST OF THE PRICES. THEY ARE NOT CHANGING. 13 MS. BROWN: THEY ARE NOT COMING DOWN AS RAPIDLY AS 14 THE RISE. 15 MR. ROBERTS: WE HAVE SENT OUT A TYPE OF FUEL THAT 16 WE KNOW ONLY ADDS A FEW PENNIES TO THE COST, BUT WHAT IT 17 DOES IS IT RESTRICTS THE OPTIONS. AND I THINK WE LARGELY 18 ARE AN ISLAND. FOUR MILLION BARRELS DOESN'T SOUND 19 TERRIBLY SIGNIFICANT TO ME WHEN YOU ARE USING 800,000 A 20 DAY. 21 WE LARGELY ARE AN ISLAND, AND WE KNOW THAT 22 ABOUT 20 PERCENT OF OUR PRODUCTION IS GOING TO NEIGHBORING 23 STATES. WHAT'S EVEN PRODUCED HERE, CAN'T BE USED HERE. 24 WHAT WOULD BE PRODUCED HERE, I GUARANTEE WOULD STAY HERE, 25 BECAUSE OF THE DISCREPANCY OF THE COST OF WHAT YOU ARE 0167 01 PAYING FOR FUEL IN THE NEIGHBORING STATES COMPARED TO 02 THIS. AND IT WOULD CREATE A GAS WAR OF PROBABLY HIGHER 03 PRICES THERE, BUT MAYBE IT WOULD BREAK DOWN THE COST OF 04 WHAT'S GOING ON HERE. 05 I'M HAVING TROUBLE. YOU KNOW, IT SEEMS LIKE 06 WE ARE COMING UP WITH ALL THE REASONS TO LET THE OIL 07 COMPANIES OFF THE HOOK. AND THERE'S SOMETHING THAT NOBODY 08 REALLY IS EXPLAINING VERY WELL. 09 MS. BROWN: WELL, A COUPLE OF THINGS. WE ARE NOT 10 LETTING THE OIL COMPANIES OFF THE HOOK. I THINK 11 CHAIRMAN IMBRECT IN HIS TESTIMONY BEFORE YOU ON THE 25TH 12 OF APRIL TRIED TO INDICATE THERE ARE MANY THINGS THAT THE 13 STATE DOESN'T HAVE THE AUTHORITY TO CONTROL. 14 SINCE THE LAST HEARING, TWO THINGS HAVE 15 ENSUED. THE ATTORNEY GENERALS OFFICE IS INVESTIGATING THE 16 UNDERLYING REASONS FOR THE PRICE INCREASES, AND CERTAINLY 17 WE HAVE BEEN ASKED TO PROVIDE DATA AND INFORMATION ON 18 THAT. THE U.S. DEPARTMENT OF JUSTICE IS ALSO 19 INVESTIGATING THE UNDERLYING REASONS FOR THE PRICE 20 INCREASES. THERE ARE JUST SOME THINGS THAT, AGAIN, WE 21 HAVE TO WAIT UNTIL THE OIL COMPANIES COULD EXPLAIN, 22 BECAUSE WE CANNOT. WE DON'T HAVE THE ACCESS TO THE 23 RECORDS OF THE COMPANIES. 24 MR. LAGARIAS: MR. CHAIRMAN, I AGREE WITH 25 SUPERVISOR ROBERTS ABOUT THE FACT THAT THERE'S SOMETHING 0168 01 THAT WE SHOULD BE DOING. BUT I DON'T THINK WE SHOULD TRY 02 TO SET AN ENERGY POLICY THROUGH OUR EFFORTS TO CLEAN THE 03 AIR. OF THAT 30 CENTS PER GALLON PRICE INCREASE, ROUGHLY 04 FIVE TO EIGHT CENTS WAS DUE TO ACTIONS THAT THIS BOARD 05 TOOK, AND FOR THAT WE GOT A BENEFIT. 06 AND THAT BENEFIT WAS IMPROVEMENT IN AIR 07 QUALITY. NOW, THE REMAINDER OF THE PRICE INCREASE IS DUE 08 TO, AS THE CHAIRMAN SAID, TO INTERNATIONAL CONCERNS AND 09 SUPPLY AND DEMAND. 10 I DON'T THINK WE CAN DO MUCH ABOUT THE 11 SUPPLY. WE MAY BE ABLE TO DO SOMETHING ABOUT DEMAND IN 12 OUR EDUCATIONAL PROGRAM AND IN NOT ONLY TELLING PEOPLE HOW 13 TO IMPROVE THEIR AIR QUALITY ACTIONS, BUT ALSO HOW TO 14 IMPROVE THE WAY THEY DRIVE MOTOR VEHICLES, AS YOU OUTLINED 15 EARLIER, TO REDUCE THE DEMAND. 16 IF WE EDUCATE PEOPLE TO REDUCE THE DEMAND, IT 17 HELPS US IN TWO WAYS, BOTH IN THE AMOUNT OF FUEL CONSUMED 18 AND THE POLLUTANTS GO DOWN. BUT TO TRY TO TAKE ANY ACTION 19 TO CONTROL THE MARKET IS NOT ONLY INAPPROPRIATE, BUT 20 INADEQUATE. 21 MR. DUNLAP: MS. EDGERTON? 22 MS. EDGERTON: IF I UNDERSTAND MR. ROBERTS' MAIN 23 THRUST, HOWEVER, IT IS THAT THE FAILURE OF THE PRICES TO 24 GO DOWN AS WE WERE TOLD THEY WOULD BASED ON A SERIES OF 25 EVENTS IS A THREAT TO OUR PROGRAM. 0169 01 AND I HAVE TO SAY THAT EVEN TODAY DISCUSSING 02 THE INCREASES IN PRICE COMBINED WITH PERFORMANCE AND ALL 03 THE CONCERNS THAT CALIFORNIANS ARE HAVING IS QUITE 04 CONSISTENT WITH WHAT YOU ARE SAYING. I AM QUITE 05 INTERESTED IN WHY THE PRICES HAVE NOT COME DOWN. 06 AND IF I UNDERSTOOD WHAT THE OIL COMPANIES 07 WERE SAYING, I WAS UNDER THE IMPRESSION THEY WERE 08 REPRESENTING THAT THEY WOULD WHEN THIS CAME IN. SO I'M 09 OPEN TO LISTENING TO WHAT YOU HAVE TO SAY ABOUT FINDING 10 OUT WHY THEY HAVEN'T. 11 MR. SCHEIBLE: CHAIRMAN DUNLAP, MEMBERS, BACK IN 12 APRIL, WE ANTICIPATED THAT THE RETURN OF THE SHELL 13 REFINERY, WHICH WOULD INCREASE STATE PRODUCTION, AND THE 14 ARRIVAL OF SHIPS WHICH WERE ON THE WAY WOULD DRIVE PRICES 15 DOWN. 16 THEY DID DRIVE PRICES DOWN. THEY DRIVE THE 17 PRICES DOWN AT THE SPOT PRICE, WHICH IS THE PRICE ONE 18 REFINER CHARGES ANOTHER OR ONE REFINER CHARGES A LARGE 19 TRADER. THAT DROPPED BY OVER 30 CENTS WITHIN THREE 20 WEEKS. THE SUPPLIES COMING IN BY IMPORTS AND SHELL 21 RETURNING TO A LARGE PORTION OF PRODUCTION, THAT IS THE 22 PART OF THE PRICE THAT THE SUPPLY OF BASICALLY CLEANER 23 BURNING GASOLINE CAN AFFECT. 24 WHAT WE HAVE NOW IS WHY DOES A 30 CENT 25 REDUCTION IN THE SPOT PRICE, THE SAME SPOT PRICE THAT 0170 01 DROVE THE MARKET UP AT RETAIL, NOT GET REFLECTED OVER A 02 FIVE OR SIX WEEK PERIOD IN THE RETAIL PRICES. 03 IT'S OUR ASSESSMENT THAT THE CHANGES OR 04 ALLOWING ADDITIONAL FUEL IN WILL NOT IMPACT THAT, BECAUSE 05 THE SPOT PRICE IS ALREADY DOWN, HAD THE REACTION THAT ONE 06 WOULD THINK. 07 WHAT WE HAVE IS SOMETHING IN THE MARKETPLACE, 08 EITHER DEMANDS OR A COMPETITIVE ISSUE. IT DOESN'T PASS 09 THROUGH THAT VERY REAL AND VERY LARGE PRICE DECREASE, 10 WHICH IN OUR ASSESSMENT, IS LARGELY BEYOND THE IMPACT OF 11 THIS REGULATION. IT'S NOT A CALIFORNIA PHENOMENA. IT IS 12 A WEST COAST PHENOMENA. 13 THE PRICES THAT YOU SAID BEFORE AND THE SPOT 14 PRICES, WE HAD A PERIOD WHERE IT WAS TEN CENTS MORE TO BUY 15 FUEL IN THE PACIFIC NORTHWEST CONVENTIONAL FUEL THAN IT 16 WAS IN THE SPOT MARKET IN CALIFORNIA. THERE WAS A WEEK 17 PERIOD OF TIME WHEN THE PHOENIX SPOT PRICE FOR 18 CONVENTIONAL GASOLINE WAS THE SAME AS THE CALIFORNIA SPOT 19 PRICE. THOSE ARE THINGS THAT ARE INHERENT IN THE MARKET 20 AND THE COMPETITIVENESS IN THE MARKET AND NOT WITH OUR 21 REGULATORY AUTHORITY. 22 MR. DUNLAP: MR. BOSTON? 23 DR. BOSTON: I'D LIKE TO JOIN IN AND SUPPORT 24 SUPERVISOR ROBERTS' CONCERNS. 25 AND JUST THINKING OUT LOUD, WHAT WOULD HAPPEN 0171 01 IF WE SUSPENDED OUR REGULATIONS FOR SIX MONTHS TO OPEN OUR 02 MARKETPLACE TO OUTSIDE GASOLINE, WHICH WOULD THEN CAUSE 03 THE OIL COMPANY TO SEE A THREAT TO THE RETURN OF THEIR 04 FOUR BILLION DOLLAR PROFIT INVESTMENT? 05 WOULDN'T THAT BE KIND OF AN INCENTIVE FOR 06 THEM TO LOWER THE PRICES SO THEY WOULDN'T LOSE THAT? 07 MR. SIMEROTH: THE SUPPLY PROBABLY WOULDN'T BE 08 AFFECTED BY DOING THAT. AND WHILE IT WOULD BE AN 09 INCENTIVE TO THEM TO PROTECT THEIR INVESTMENT, I'M NOT 10 SURE, BECAUSE THE SUPPLY DOESN'T CHANGE AND THE SPOT PRICE 11 IS ALREADY DOWN AND THE DEALER TANK WAGON AND THE BRANDED, 12 WHICH IS WHERE 80 PERCENT OF THE GASOLINE IS MARKETED 13 THROUGH, IS STAYING HORIZONTAL EVEN WITH THE SPOT PRICE 14 30 CENTS BELOW IT. I'M NOT SURE IF WE'D SEE A CHANGE BY 15 DOING THAT. 16 MR. BOSTON: I THINK IT WOULD CERTAINLY BE A BIG 17 THREAT TO THEM IF THEY WERE GOING TO LOSE THAT FOUR 18 BILLION DOLLAR INVESTMENT THAT THEY ARE TRYING TO 19 RECOVER. 20 MS. BROWN: MAY I SPEAK TO THAT AS WELL? 21 I WOULD SAY THAT, UNFORTUNATELY, THE THREAT 22 OF THE SUSPENSION OF THE RULE WOULD ACTUALLY HAVE A 23 COUNTERPRODUCTIVE EFFECT IN THAT IT WOULD CREATE A GREAT 24 DEAL OF REGULATORY MARKET UNCERTAINTY, WHICH IS NOT LIKELY 25 TO DRAW SUPPLIES HERE. 0172 01 IN ORDER FOR SUPPLIES TO COME FROM 02 OUT-OF-STATE MARKETS INTO CALIFORNIA, THERE HAS TO BE A 03 PRICE INCENTIVE, A HIGHER PRICE INCENTIVE. AND THAT HAS 04 TO BE SUSTAINED FOR A CERTAIN PERIOD OF TIME OR A REFINER, 05 AS WE HAVE SEEN IN THE LAST SIX WEEKS, WOULD NOT PUT ITS 06 MONEY ON THE LINE TO BUY A BARREL OF GASOLINE OR OIL AND 07 SHIP IT HERE. 08 SO, AGAIN, I JUST WANT TO CAUTION THE BOARD 09 TO NOT TAKE ANY ACTION WITHOUT CAREFULLY CONSIDERING THESE 10 FACTORS. 11 MR. DUNLAP: SUPERVISOR RIORDAN? 12 MS. RIORDAN: THANK YOU, MR. CHAIRMAN. 13 JUST A COMMENT: AT LEAST IN SAN BERNARDINO 14 COUNTY WE ARE BEGINNING TO SEE THOSE PRICES DROP. AND 15 ARCO IS THE BELLWETHER OF THAT. 16 AND WHAT I FIND FASCINATING IS THAT THE ARCO 17 STATIONS BASICALLY ARE HOVERING AROUND -- WELL, I GUESS 18 THERE'S ONE IN THE WEST PART OF MY COUNTY THAT'S ABOUT 19 $1.41. I SEE ABOUT 1.43. AND IT WILL MOVE JUST A LITTLE 20 BIT. 21 BUT WHAT'S FASCINATING TO ME IS THAT PEOPLE 22 ARE STILL DRIVING UP TO SOME OF THE OTHER STATIONS WITH 23 ARCOS IN A RELATIVE CLOSE PROXIMITY. I'M TALKING ABOUT A 24 MILE. AND THEY ARE STILL BUYING GASOLINE AT THESE VERY 25 HIGH PRICES. 0173 01 AND IT REALLY TAKES, IN MY OPINION, SOMEBODY 02 TO BEGIN TO SHOP THOSE PRICES TO DRIVE SOME OF THAT 03 PRICING DOWN. AND WHEN THEY BEGIN TO DO THAT, I THINK WE 04 WILL SEE SOME PRICES COMING DOWN. 05 BUT I CAN SHOW YOU WHERE THEY ARE STILL 06 DRIVING INTO THOSE VERY HIGH-PRICE STATIONS AND BUYING 07 THEIR GASOLINE AND NOT LOOKING TO SOME OF THESE OTHER 08 LOCALS. BUT WE ARE BEGINNING TO SEE IT DROP. 09 DR. BOSTON: THEY HAVE CREDIT CARDS AT THE OTHER 10 STATIONS, AND ARCO DOESN'T TAKE THEM. 11 MR. VAGIM: MR. CHAIRMAN, THANK YOU. I THINK 12 EARLIER MR. SIMEROTH BASICALLY CONFIRMED SOMETHING FOR ME 13 AND ALSO CONFIRMING ON THE GRAPH WE HAD UP THERE THE 14 DEALER TANK WAGON VERSES THE SPOT MARKET AND UNBRANDED. 15 WE DON'T HAVE A SUPPLY PROBLEM HERE ANY MORE AS MUCH AS WE 16 HAVE A DISTRIBUTION PROBLEM. 17 WE'RE ELIMINATING THE COMPETITION. AND IT'S 18 INTERESTING TO FIND THAT ARCO BEING THE BRAND TREND SETTER 19 IN PRICING AND EVERYONE ELSE SERIALLY FALLING THEREAFTER, 20 THERE SEEMS TO BE A PATTERN BEING SET HERE. I DON'T WANT 21 TO CALL IT COLLUSION. WE WILL JUST CALL IT A SERIAL PRICE 22 FALLING EACH OTHER. 23 BUT, YET, WE HAVE THESE INDEPENDENTS SITTING 24 OUT THERE BUYING OFF THE SPOT MARKET FROM A LARGE 25 SUPPLIER, BUT YET WE'RE ELIMINATING THESE FOLKS. 0174 01 IT SEEMS WE SHOULD HAVE THE DEPARTMENT OF 02 COMMERCE IN HERE FIGURING OUT HOW TO INTRODUCE THESE 03 INDEPENDENT UNBRANDED FOLKS OUT THERE TO MAKE SURE WE HAVE 04 A COMPETITION OUT THERE. 05 IF ONE DAY WE GET RID OF UNBRANDED STATIONS 06 AND THERE'S NO SUCH THING, BECAUSE WE MADE IT SO 07 ENVIRONMENTALLY IMPOSSIBLE FOR THE INDEPENDENT GUY SELLING 08 JUST THE GASOLINE, BECAUSE THE SUPPLY PROBLEM IS NOW ONE 09 OF SUCH CONTROL, THAT THERE IS NOT ENOUGH MARGIN THERE 10 ANYWAY TO DO IT. 11 IF INDEED WE GOT RID OF ALL OF THOSE, WHERE 12 WOULD BE THE PRESSURE TO DRIVE THE PRICE DOWN? IT DOESN'T 13 SEEM THEY ARE REALLY COMPETING WITH EACH OTHER THAT MUCH. 14 THEY ARE ALWAYS WITHIN THIS COMFORTABLE RANGE OF WHEREVER 15 THEY ARE. AND THEY SEEM TO BE GEOGRAPHICALLY LOCATING 16 THEMSELVES AROUND CLUSTERS OF HIGH PRICES. 17 THERE'S A PATTERN BEING SET HERE. I THINK 18 SUPERVISOR ROBERTS IS HITTING THE NAIL ON THE HEAD. AND 19 THANK GOODNESS FOR THESE NONBRANDED STATIONS. 20 AND, INDEED, IF WE ALL STARTED PULLING INTO 21 THOSE FOLKS, I GUARANTEE YOU YOU'D SEE THE PRICES DROPPING 22 IN THE MARKETPLACE WITH THE BRANDED. BUT THAT'S NOT 23 HAPPENING. AND THEY ARE BEING ALLOWED TO SURVIVE IN AREAS 24 THAT MOST PEOPLE DON'T WANT TO DRIVE IN. I'LL DRIVE 25 THERE, BUT A LOT OF PEOPLE DON'T. MAYBE THAT'S THE 0175 01 SECRET, DRIVE IN AN AREA YOU NEVER WANT TO GO TO. 02 AND, MR. CHAIRMAN, LET ME QUICKLY STEP BACK 03 A MINUTE. WE TALKED ABOUT THE OVERALL DISCUSSION. WE ARE 04 ALL HERE LISTENING TO YOU TODAY. AND IF YOU REMEMBER A 05 YEAR AGO, I WAS KIND OF LIKE THE BOARD'S SQUEAKY WHEEL FOR 06 THIS WHOLE R.F.G. I PUT MY OWN CAR UP FOR A PILOT TYPE OF 07 A PROGRAM AND WENT TO THE FRESNO STATE FUELING SITE, WENT 08 TO SACRAMENTO AT THE PAC BELL SITE, FUELED UP BACK AND 09 FORTH. 10 AND I DID HAVE SOME QUESTIONS. I DID FEEL 11 THAT I HAD SOME SERIOUS LOSSES OF FUEL ECONOMY. BUT EVERY 12 ONE OF THE THINGS THAT I RAISED AS A POINT OF CONCERN HAVE 13 NOW TO DATE BEEN ANSWERED. 14 I HAVEN'T GOT THE SPECIFIC ANSWER ON THINGS 15 LIKE, WAS THE TEST FUEL THAT I USED THE ONE THAT WAS THE 16 FIRST TEST FUEL THAT HAD THE REAL HIGH R.V.P.? AND I 17 UNDERSTAND THERE WAS SOME STUFF THAT HAD THAT OUT THERE ON 18 THE FIRST TEST FUEL AND ALSO HAD A VERY LOW ENERGY 19 CONTENT. SO IF YOU TAKE THE HIGH READ PRESSURE -- AND 20 THIS TIME LAST YEAR, THE TEMPERATURES IN FRESNO, WE HAD A 21 REAL HEAT STREAK OF ABOUT 105 TO 108. I FILLED UP WITH 22 THIS STUFF WITH HIGH R.V.P., AND SITTING EIGHT TO TEN DAYS 23 IN MY TANK, A LOT OF IT WENT UP IN THE AIR. 24 NOW YOU'VE BROUGHT IT DOWN TO EVEN LOWER THAN 25 WHAT I WAS BUYING IN NORMAL CONVENTIONAL GASOLINE. AND I 0176 01 HAVE NOTICED THAT DIFFERENCE. THE ENERGY CONTENT IS BACK 02 UP FOR STUFF YOU BUY IN THE MARKETPLACE, AND I CAN SEE 03 THAT DIFFERENCE. 04 SO BASICALLY, I FIGURE WHAT I MUST DO -- AND 05 I DON'T THINK THIS IS ANY DIFFERENT THAN WHAT WE ALL FACE 06 WHEN THE DISTILLERS OF SPIRITS DECIDED TO LOWER THEIR 07 PROOF AND BOTTLE SIZE AND UP THEIR PRICE, EXCEPT BY THE 08 TIME YOU GOT HALFWAY THROUGH THE BOTTLE, YOU DIDN'T CARE 09 ANY MORE WHAT YOU BUY. BUT IN THIS CASE, YOU DO, BECAUSE 10 YOU ARE STILL SEEING THAT GAS TANK GO DOWN. 11 WHAT I DECIDED TO DO IS I WASN'T GOING TO 12 LOOK AT MY SPOT DRIVING. I WAS GOING TO AVERAGE THE WHOLE 13 THING. SO IF YOU TAKE THE TOTAL GALLONS THAT YOU USE AND 14 YOU KEEP TRACK OF THEM TO DATE AND YOU AVERAGE THE NUMBER 15 OF MILES YOU'VE DRIVEN IN THERE, YOU COME IN RIGHT IN THE 16 MIDDLE OF WHAT THAT STICKER SAYS ON YOUR WINDOW. YOU 17 CAN'T TAKE A TRIP OR A DAY OR A PARTICULAR EVENT AND SAY, 18 HEY, I GOT REAL GOOD GAS MILEAGE TODAY. I THINK YOU GOT 19 AVERAGE OVER A REAL LONG HALL TO MAKE THIS THING COME OUT 20 TO WHAT'S REALLY HAPPENING. AND I DID THAT. AND FRANKLY, 21 I'M VERY SATISFIED WITH IT. 22 BUT I DID GET MY ANSWERS TO MY QUESTIONS. WE 23 HAD SOME ANOMALIES IN THE TEST FUEL. AND THAT PLAYED 24 OUT. 25 SO, MR. CHAIRMAN, I DON'T EVEN KNOW IF YOU 0177 01 REMEMBER, BUT I WAS ONE OF THE ONES THAT WAS SPEAKING 02 PRETTY HIGH FROM A PLATFORM. AND FRANKLY, I'M SATISFIED 03 NOW THAT WE HAVE A GOOD FUEL IN THE MARKETPLACE. 04 AND ONE THING WE CAN ALL BE HAPPY ABOUT IS WE 05 ARE NOT SITTING HERE TALKING ABOUT HOSES BEING EATEN UP OR 06 ANY OF THE FUEL SUPPLY PART OF OUR ENGINE. SO I THINK 07 THAT'S A REAL POSITIVE THING. 08 MR. DUNLAP: THANK YOU. 09 JUST IF I MIGHT, IN ATTEMPT TO WRAP UP SOME 10 OF THESE ISSUES, THE OIL COMPANIES IN MY VIEW HAVE SOME 11 EXPLAINING TO DO. THEY CAME HERE TWO MONTHS AGO. THEY 12 TOLD THIS BOARD WHAT THE REASONS WERE FOR THE PRICE 13 INCREASES, TALKED ABOUT SUPPLY. AND I FEEL THAT OUR ANGER 14 NEEDS TO BE SUPPLIED, MAKING SURE THAT WE HAVE A PRODUCT 15 THAT WORKS, PRODUCT THAT ISN'T GOING TO DAMAGE ENGINES. 16 IF THERE ARE DRAWBACKS WITH IT, SUCH AS FUEL 17 ECONOMY, THAT WE NEED TO TELL THE PUBLIC ABOUT. I BELIEVE 18 WE HAVE DONE THAT. WE HAVE BEEN ABLE TO DETERMINE WHAT 19 THE COST IS. 20 MR. BOYD ALONG WITH THE EXECUTIVE OFFICER OF 21 THE ENERGY COMMISSION INTERVIEWED THESE OIL COMPANIES AND 22 ASKED ISSUES ON SUPPLY. AND I AM MORE COMFORTABLE WITH 23 WHAT I HAVE HEARD. IN FACT, I'M COMPLETELY SATISFIED. 24 I SHARE SUPERVISOR ROBERTS' CONCERN AND THE 25 OTHERS ON THIS BOARD ABOUT PRICE. WE ARE TOLD THE REASONS 0178 01 THAT THE FUEL WENT UP. THOSE ISSUES HAVE BEEN SEEMINGLY 02 TURNED AROUND DIRECTIONALLY, AND THERE SHOULD BE A PRICE 03 DECREASE REFLECTED AT THE PUMP THAT CONSUMERS CAN THEN 04 ENJOY. THAT HASN'T HAPPENED AS QUICKLY. 05 AND JIM SAID IT QUITE WELL THAT IT GOES UP 06 LIKE A ROCKET, COMES DOWN LIKE A PARACHUTE. I THINK 07 THAT'S WHAT'S GOING ON HERE. 08 HOWEVER, I WANT PEOPLE TO UNDERSTAND CLEARLY, 09 OUR ROLE ISN'T TO CONTROL MARKETS. OUR ROLE ISN'T TO BE A 10 SHIELD FOR ANYONE WHO'S ABSORBING PROFITS. AND I THINK WE 11 HAVE BEEN ABLE TO HAVE PEOPLE LOOK BEHIND THE CURTAIN AS 12 RELATES TO US BEING POINTED TO AS THE CAUSE OF THOSE FUEL 13 INCREASES REFLECTED AT THE PUMP. 14 BUT MAKE NO MISTAKE ABOUT IT, WE ARE 15 FRUSTRATED LIKE MANY CONSUMERS IN THE STATE. OIL 16 COMPANIES HAVE SOME EXPLAINING TO DO, AND WE ARE GOING TO 17 BE VIGILANT IN ASSESSING WHAT'S GOING ON. 18 MR. BOYD, YOU HAVE AN ONGOING CHARGE. IF YOU 19 THINK YOU DON'T HAVE IT, WE WILL GIVE IT TO YOU AGAIN, TO 20 WORK WITH COLLEAGUES AT THE ENERGY COMMISSION TO GET FACTS 21 BACK TO THIS BOARD. AND IT'S MY HOPE THAT ONE MONTH FROM 22 NOW WHEN THIS BOARD CONVENES THAT WE WILL SEE THOSE ISSUES 23 SATISFIED RELATIVE TO PRICE, BECAUSE IF THEY ARE NOT, 24 THERE WILL LIKELY BE MORE QUESTIONS, NOT JUST BY THIS 25 BOARD, BUT BY OUR FRIENDS IN THE LEGISLATURE AND OTHERS 0179 01 THAT HAVE ASKED QUESTIONS. 02 AND THIS HAS BEEN THE TOPIC OF DISCUSSION, A 03 HIGH PRIORITY TOPIC AT THE FEDERAL LEVEL AND THE CONGRESS 04 AND THE STATE LEGISLATURE AS WELL. I KNOW I'VE PERSONALLY 05 GONE OVER AND MET WITH MANY OF THE MEN AND WOMEN IN THE 06 STATE LEGISLATURE TO TRY TO ANSWER THOSE QUESTIONS. 07 SO WE ARE NOT ABOUT CONTROLLING MARKETS, BUT 08 WE ARE ABOUT GETTING ANSWERS, AND WE ARE ABOUT TAKING 09 RESPONSIBILITY FOR OUR IMPACT IN THIS NEW FUELS 10 INTRODUCTION AND ITS IMPACT ON PRICE. 11 SO IF THAT IS DONE AND IF I HAVE BEEN FAIR IN 12 REPRESENTING CONCERNS, I'D LIKE TO MOVE ON THIS ITEM. 13 BUT IF THERE ARE BURNING ISSUES THAT MY 14 COLLEAGUES ON THE BOARD WOULD LIKE TO COVER, I'D BE HAPPY 15 TO TAKE A LITTLE BIT MORE TIME. 16 MR. VAGIM: MR. CHAIRMAN, I'D LIKE TO ASK STAFF IF 17 THEY WOULD CONTINUE TO GIVE US INFORMATION ON THE PRICING 18 AND SUPPLY ISSUES. I THINK IT'S VERY IMPORTANT. 19 MR. BOYD: MR. CHAIRMAN, IF I MIGHT, WE WILL 20 CONTINUE TO PROVIDE YOU DATA ON A REAL TIME BASIS. WE, AS 21 I INDICATED IN THE OPENING OF THIS ITEM, CONTINUE TO WORK 22 WITH THE ENERGY COMMISSION TO FOLLOW THIS ITEM. 23 AND I WANT TO ASSURE SUPERVISOR ROBERTS THAT 24 I SHARE HIS FRUSTRATION THAT I, AS MUCH AS HE, IF NOT 25 MORE, AM WORRIED ABOUT IMPACTS ON THE PROGRAM AND THE 0180 01 VIABILITY OF THE PROGRAM. AND THAT'S MY NUMBER ONE 02 PRIORITY. AND THEREFORE, I AM CONCERNED THAT THE 03 FRUSTRATIONS OF THE PUBLIC RELATIVE TO PRICE GET 04 TRANSFERRED TO THIS PROGRAM. 05 I THINK WHAT WE TRIED TO POINT OUT AND MAYBE 06 TOO SUBTLY WAS WE ARE STRUGGLING TO EXPLAIN THE POINTS 07 THAT WERE MADE ABOUT PRICE STAYING UP AT THE RETAIL LEVEL 08 EVEN THOUGH THE HISTORICAL FACTORS HAVE GONE DOWN. 09 I DON'T WANT TO MAKE EXCUSES FOR ANY 10 COMPONENT OF THE SYSTEM. YOU REMEMBER IN APRIL WE SHOWED 11 DEALERS WHO WERE TAKING IT IN THE NECK; THERE WAS A 12 NEGATIVE MARKET ON DEALERS. AND I IMAGINE A FEW OF THEM 13 ARE TRYING TO MAKE THAT UP RIGHT NOW DURING THIS TIME. 14 BUT IT DOESN'T HELP ADMITTEDLY WHEN THE OIL 15 COMPANIES ANNOUNCE IN THE PAPER THAT THEY MADE MORE MONEY 16 IN THE FIRST QUARTER OF THIS YEAR THAN THEY DID ALL OF 17 LAST YEAR. 18 SO THERE'S ALL SORTS OF TUGGING AND HAULING 19 HERE, AND WE WILL CONTINUE TO DELVE INTO THIS. 20 MR. DUNLAP: DO THAT. AND MAKE SURE AS YOU LEARN 21 NEW THINGS THAT YOU GET SOME MEMOS BACK TO THE BOARD 22 ADVISING THEM. 23 ALSO, MR. KENNY, I KNOW IT'S DIFFICULT TO 24 TALK ABOUT LEGAL MATTERS, BUT I WOULD ASK THAT YOU KEEP 25 THIS BOARD INFORMED RELATIVE TO WHAT'S GOING ON WITH THE 0181 01 ATTORNEY GENERAL'S REVIEW SO THAT WE CAN BE CURRENT IN 02 THAT REGARD. 03 BUT, MR. BOYD, I GUESS TWO FINAL THOUGHTS. I 04 GUESS IN RESPONSE TO WHAT YOU SAID, NUMBER ONE BEING MAKE 05 NO MISTAKE ABOUT IT, THERE ARE ELECTED OFFICIALS AND 06 APPOINTED OFFICIALS ON THIS BOARD WHO HAVE THE 07 RESPONSIBILITY TO TELL THEM WHAT'S GOING ON. AND SO I AM 08 SYMPATHETIC, PARTICULARLY TO THOSE ELECTED TO COUNTY 09 BOARDS AND CITY COUNSELS TO SERVE ON THIS BOARD TO HAVE 10 THE FACTS SO THEY CAN REPORT TO THEIR CONSTITUENTS. 11 ALSO, FOR THOSE IN THE MEDIA THAT ARE HERE, 12 WE WANT TO PLEDGE THAT WE'LL CONTINUE TO HAVE AN OPEN-DOOR 13 POLICY AS MR. BOYD OUTLINED ON THE OUTSET OF THIS ISSUE TO 14 GET YOU THE FACTS SO YOU MIGHT ACCURATELY PORTRAY THESE 15 ISSUES. 16 I DON'T WANT TO HAVE YOU LEAVE WITH THE 17 IMPRESSION THAT WE DON'T WANT YOU TO HAVE THE FACTS. WE 18 DO. YOU ARE A KEY PARTNER IN GETTING THE WORD OUT ABOUT 19 THIS PROGRAM, BOTH GOOD AND IT'S WARRANTED WHEN THERE ARE 20 PROBLEMS. AND WE RESPECT THAT. 21 BUT WE DO NEED YOU AS A PARTNER, BECAUSE WE 22 CAN'T EDUCATE THE PUBLIC FROM THIS LITTLE BOARD, HUMBLE 23 BOARD OURSELVES. WE NEED YOUR HELP AND YOUR ASSISTANCE. 24 WITH THAT, I'D LIKE TO MOVE ON THIS ITEM. 25 WE'VE COVERED IT FAIRLY COMPLETELY. 0182 01 IS THERE A CONSENSUS FROM THE BOARD TO MOVE 02 ON? 03 OKAY. ONE ITEM REMAINING, THE FIFTH ITEM, 04 95-5-5, WHICH IS A RESEARCH PROPOSAL. 05 IF I MIGHT ATTEMPT TO RECAP A BIT, THERE'S 06 SOME CONCERN EXPRESSED BY SEVERAL OF MY COLLEAGUES ON THE 07 BOARD LAST MONTH ABOUT SOME OF THE TECHNICAL DETAILS 08 SURROUNDING THIS RESEARCH PROJECT. 09 MY UNDERSTANDING IS YOU HAVE A VERY BRIEF 10 COMMENTARY RELATIVE TO WHAT THE DISPOSITION OF THIS ITEM 11 MIGHT BE DOWN THE ROAD. 12 I'LL GIVE YOU THE TIME NOW TO COVER THAT, IF 13 YOU WOULD? 14 MR. BOYD: MR. CHAIRMAN, LAST MONTH THE BOARD DID 15 HAVE EXTENDED DISCUSSION ON THIS RESEARCH PROJECT, AND WE 16 CONTINUED IT TO THIS MONTH WHILE WE CONTINUE TO DISCUSS 17 THE ITEM WITH VARIOUS BOARD MEMBERS WHO HAD QUESTIONS. IT 18 WAS AUTOMATICALLY CONTINUED TO THIS MONTH. 19 I WOULD REPORT TO YOU THAT, IN MY OPINION, WE 20 HAVE NOT EXHAUSTED THE OPPORTUNITIES WE HAVE HAD TO 21 DISCUSS THE ISSUE WITH SEVERAL BOARD MEMBERS. THERE ARE 22 STILL A HOST OF QUESTIONS THAT REMAIN UNANSWERED. 23 THE LONG AND SHORT OF IT IS, WE HAVEN'T 24 FINISHED DISCUSSING THIS ITEM WITH THE BOARD MEMBERS, AND 25 I WOULD REQUEST THAT WE JUST CONTINUE THIS ITEM UNTIL NEXT 0183 01 MONTH'S AGENDA. BUT WE CAN FINISH WITH THE DIALOGUE WITH 02 THE VARIOUS BOARD MEMBERS AND GET THE ANSWERS TO THE 03 REMAINING QUESTIONS THEY HAVE. 04 MR. DUNLAP: THAT WOULD BE FINE. 05 THANK YOU, MR. BOYD. 06 I WOULD ASK ONE THING, THOUGH: IF YOU COULD, 07 MR. BOYD, CONVENE A MEETING WITH A COUPLE OF THE BOARD 08 MEMBERS THAT HAVE HAD ISSUES ON THIS ISSUE, PERHAPS WITH 09 SOME FROM INDUSTRY AND OTHER INFORMED PARTIES, SO THERE 10 MIGHT BE A BIT OF DIALOGUE THAT HAPPENS PRIOR TO US 11 EMBARKING ON THIS RESEARCH POLICY. 12 MR. BOYD: I'D BE GLAD TO DO THAT, MR. CHAIRMAN. 13 MR. DUNLAP: WITH THAT, ARE THERE ANY OTHER ITEMS 14 THAT NEED TO GO BEFORE THE AIR RESOURCES BOARD? 15 MR. BOYD: NO FURTHER BUSINESS FROM THE STAFF, 16 MR. CHAIRMAN. 17 MR. DUNLAP: DO MY COLLEAGUES HAVE ANY ISSUES? 18 ALL RIGHT. THANK YOU. 19 WITH THAT, WE WILL ADJOURN THE JUNE MEETING 20 OF THE CALIFORNIA AIR RESOURCES BOARD. 21 (MEETING ADJOURNED AT 1:00 P.M.) 22 23 24 25