EXECUTIVE OFFICER'S MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA, JR., BUILDING CAL/EPA HEADQUARTERS 1001 I STREET COASTAL HEARING ROOM SACRAMENTO, CALIFORNIA THURSDAY, SEPTEMBER 8, 2005 9:00 A.M. JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES STAFF Mr. Michael Scheible, Deputy Executive Officer Mr. Tom Jennings, Acting General Counsel Mr. Steve Brisby, Manager, Fuel Section Mr. Bob Fletcher, Chief, Planning and Technical Support Division Ms. Diane Kiyota, Staff Counsel Mr. Win Setiawan Mr. Dean Simeroth, Chief, Criteria Pollutants Branch ALSO PRESENT Mr. John Dunlap Ms. Staci Heaton, California Trucking Association Mr. Al Jessel, Chevron Mr. Russell Kinzig, Kinder-Morgan Energy Partners Mr. Tom Koehlor, California Renewable Fuels Partnership Ms. Karen Lange, Assembly Republican Caucus Mr. Jay McKeeman, California Independent Oil Marketers Association Mr. Gordon Schremp, California Energy Commission Ms. Teri Shore, Bluewater Network Mr. Dave Smith, BP Mr. Joe Sparano, Western States Petroleum Association PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED ALSO PRESENT Mr. John White, Center for Energy Efficiency and Renewable Technologies, Natural Resources Defense Council, American Lung Association of California, The Coalition for Clean Air Dr. Gary Whitten, Smog Reyes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX PAGE Item 05-1-1 Opening remarks by Deputy Executive Officer Scheible 1 Staff Presentation 3 Gordon Schremp 10 Karen Lange 15 Joe Sparano 19 Teri Shore 25 Dave Smith 31 Jay McKeeman 33 Staci Heaton 38 Tom Koehlor 40 John White 42 Al Jessel 48 Gary Whitten 52 John Dunlap 54 Ross Kinzig 58 Closing remarks by Deputy Executive Officer Scheible 60 Adjournment 61 Reporter's Certificate 62 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Good morning. 3 I would like to begin the September 8th public hearing of 4 the Air Resources Board Executive Officer. 5 My name is Mike Scheible. I am the Deputy 6 Executive Officer of the Board. Our Executive Officer, 7 Ms. Catherine Witherspoon, has delegated the authority to 8 conduct this public hearing to me. 9 The purpose of the hearing is to receive 10 testimony on the staff's proposal to take emergency 11 regulatory actions to temporarily modify a portion of 12 California's gasoline specification. 13 We are proposing these actions because Hurricane 14 Katrina, which hit the Gulf Coast on August 29th, has 15 significantly impacted the nation's oil production and 16 refining industries. Since the storm hit, supplies of 17 transportation fuels have been strained in the southeast, 18 midwest and Atlantic states. The events from the storm 19 will soon begin to affect California gasoline production 20 capability. 21 On August 31st, the U.S. Environmental Protection 22 Agency waived the federal vapor pressure limits for 23 gasoline to allow greater production. The Agency also 24 waived a provision of the federal diesel fuel regulations 25 to permit more flexible use of high sulfur off-road diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 in the affected areas. 2 These U.S. EPA actions did not modify the State 3 regulations in effect in California. Therefore, we are 4 considering doing that. 5 The proposed emergency action is to consider the 6 modification of our Reid Vapor Pressure limits for 7 gasoline so as to enable production of additional volumes. 8 Increasing the vapor pressure of gasoline will enable 9 refiners to expand fuel production by retaining higher 10 volatile components into gasoline that normally would not 11 be allowed in gasoline until the end of October. 12 While this would increase supply, it would also 13 increase emissions for an approximate 6-week period. The 14 ARB recognizes the significance of the proposed action, 15 both on energy supplies and on pollution levels this fall. 16 Therefore, we are holding this hearing to explain the 17 basis for the proposed action and to obtain public 18 comment. 19 If you would like to provide oral comments, 20 please complete one of the cards that are out in front and 21 provide it to the clerk of the Board. Also, I need to 22 note that we're having technical difficulties with our 23 phone end. For those of you that are watching on the 24 Internet and want to use the phone, we're trying to get 25 that fixed, so it will be available later in the day. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 I would like now to call on Mr. Dean Simeroth, 2 Chief of the Criteria Pollutants Branch to present the 3 staff's assessment. 4 Thank you. 5 (Thereupon an overhead presentation was 6 Presented as follows.) 7 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Thank 8 you, Mr. Scheible. 9 I'd first like to note that anybody who's 10 watching via webcast, comments may be submitted by sending 11 them to the E-mail address shown here. It's slightly 12 different than our one we normally have. 13 It's asiete@arb.ca.gov. 14 Thank you. 15 Go to the next slide. 16 --o0o-- 17 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: And 18 there you go. Today I'll give background information, a 19 brief summary of the staff's proposal, a review of the 20 impacts and the staff recommendations. 21 --o0o-- 22 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 23 California reformulated gasoline was originally adopted in 24 1992. The hearing was in late 1991. The program has been 25 very successful in significantly reducing emissions from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 motor vehicles both on- and off-road of criteria 2 pollutants, both volatile organic compounds and oxides of 3 nitrogen and toxics. 4 Today, California imports about 10 percent of its 5 fuel supply from the U.S. Gulf Coast, Canada, Europe and 6 other regions. That fuel supply comes in the form of both 7 finished products and blend stocks 8 --o0o-- 9 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Terms 10 of the impact of Hurricane Katrina. It landed on the Gulf 11 Coast August 28th, 9 major oil refineries in Louisiana and 12 Mississippi were lost, temporarily, and -- or at least 13 hopefully temporarily. This was about 1 million barrels 14 per day of gasoline or about 10 percent of the nation's 15 consumption. 16 It also severely impacted major oil distribution 17 systems, including product pipelines and crude oil 18 pipelines, including the one shown here. 19 --o0o-- 20 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 21 Today, the product pipelines are back in operation. The 22 crude pipelines are in limited operation. Some refineries 23 are back in operations, although some with limited 24 capacity. Fuel production is still significantly reduced 25 even with that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 Nationally, fuel inventories have been reduced, 2 especially the gasoline inventories. Going into the 3 crisis, fortunately the distillate and diesel inventories 4 were in better shape than the gasoline inventories. 5 --o0o-- 6 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: The 7 terms of impacts on California fuel supply: A number of 8 the imports that were scheduled to come to California were 9 diverted to the U.S. eastern and midwest regions. This 10 will severely reduce our imports in the next week or so. 11 As a result, gasoline supply could be short 5 to 10 12 percent if action is not taken. 13 --o0o-- 14 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: This 15 slide here showed some of the price increase at the 16 wholesale level. And this is a pattern typically seen 17 when there is supply problems. A sharp increases at the 18 far right. 19 --o0o-- 20 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Terms 21 of the U.S. EPA response. The U.S. EPA administrator 22 determined that Katrina created an, "...extreme and 23 unusual fuel supply circumstances". 24 On August 31st, 2005, the U.S. EPA granted fuel 25 waiver to all 50 states U.S. territories and the District PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 of Columbia until September 15th, that's when the U.S. EPA 2 winter-time program begins. 3 They allowed gasoline to have a higher RVP, 4 basically, the winter-time RVP standard. And they allowed 5 diesel fuel to have a higher sulfur standard than is 6 currently allowed, the 500 parts per million. This meant 7 that diesel fuel for off-road vehicles, which normally 8 could not be used in on-road vehicles would be allowed to 9 be used nationally. 10 This is more of a national issue than for 11 California, since 1993 in California both on- and off-road 12 diesel fuel has been subject to the same sulfur standard. 13 --o0o-- 14 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: The 15 Air Resources Board is authorized to amend a regulation on 16 an emergency basis upon finding that, "Amendment is 17 necessary for the immediate preservation of the public 18 health and safety or general welfare." 19 --o0o-- 20 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Keep 21 going. 22 The staff proposal is to temporarily relax the 23 CaRFG3, Reid Vapor Pressure Standards, for the remainder 24 of the 2005 control season. In most urban areas of the 25 state that will be October 31st, 2005. For the other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 remaining areas, it will be September 30th, 2005, when 2 those areas then go to the winter-time program and will 3 allow RVP up to the proposed limit or higher. 4 Our proposal is to relax the RVP limit from 7 psi 5 to 9 psi. We also need to make other amendments to the 6 RVP standard within the regulation primarily to the CARBOB 7 provisions. These are the -- this is the fuel that is 8 blended to accept ethanol and has a separate provision 9 within the regulations. Those also need to be adjusted. 10 Propose the amendments will end October 31st, 11 2005 when our program for Reid Vapor Pressure control ends 12 and we go into the winter-time program. At that time, the 13 standards are subject to the Division of Measurement 14 Standards' requirements who have adopted the ASTM 15 requirements into the State Code of Regulations. 16 We're not proposing any changes to the California 17 diesel regulations as the relief that U.S. EPA provided in 18 terms of the sulfur for the off-road -- in California the 19 off-road is already the same sulfur limit as the on-road. 20 We'll be continuing to monitor that situation in the 21 future. 22 --o0o-- 23 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Terms 24 of the impacts. The increase of approximately 2 psi in 25 the Reid Vapor Pressure Standard will result in Volatile PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 Organic Compound emissions increasing by about 75 tons per 2 day -- this is from all gasoline sources -- or about 2 3 percent, the 2005 statewide total VOC emissions. 4 The VOC emission increase represents 5 approximately 1 percent of the total statewide ozone 6 precursors that is both VOC and NOx emissions. 7 The impacts is temporary and limited to the 8 remainder the 2005 RVP control season or until October 9 31st, 2005. 10 --o0o-- 11 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: The 12 other impact is that it will allow increase in gasoline 13 supply up to 10 percent. And this will vary by refinery. 14 Without the RVP waiver, California could face a gasoline 15 supply shortage of about 5 to 10 percent. This shortage 16 would put a significant upward pressure on gasoline 17 prices, as you might expect. 18 --o0o-- 19 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Staff 20 is recommending that the finding of emergency be made 21 based upon the potential of gasoline supply disruption and 22 price hike, if RFG3 Reid Vapor Pressure Standards are left 23 unchanged. 24 Also, recommending to approve the proposed 25 temporary revision of the RVP limits and our gasoline PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 regulations until October 31st, 2005. And that staff 2 continue to monitor this situation, and if warranted, 3 return with additional recommendations, especially as 4 regard to diesel and the use of ethanol in gasoline. 5 With that, that concludes. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 7 Dean. 8 And just to clarify for everyone in the audience 9 what my role is. I'm the Hearing Officer. I do not 10 render the decision. I consider the testimony and the 11 staff recommendations, all that I learn today and then we 12 will be making our assessment of that and making 13 recommendations to our executive officer on what action is 14 called for, given the facts and what additional things we 15 may be doing into the future to follow the situation and 16 assess if additional actions are needed. 17 At this time, I'd like to begin the testimony 18 from those members of the public who have signed with the 19 clerk and wish to testify. 20 First, to start out, we'd like to get the 21 testimony from Gordon Schremp, representative of the 22 California Energy Commission. 23 Gordon. 24 MR. SCHREMP: Thank you, Mr. Scheible. 25 Before I begin, I just want to mention that I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 have written copies of my presentation and testimony are 2 on the left side of the room at that table. 3 Good morning. My name is Gordon Schremp. I've 4 been a member of the technical staff of the California 5 Energy Commission since 1990. My duties, as Senior Fuels 6 Specialist, include analyses of petroleum supply 7 disruptions. The testimony I'm providing this morning has 8 been approved by the California Energy Commission. 9 The Energy Commission is responsible for the 10 collection and analyses of information related to supply 11 and price of transportation of fuels in the state. During 12 periods of temporary fuel supply problems that occur on 13 the local, regional or national scope, the Energy 14 Commission routinely investigates the nature and extent of 15 these transportation fuel supply problems to determine if 16 any action could be taken by various State agencies that 17 would provide temporary relief to augment supply. 18 Today, my comments are focused on the supply 19 impacts associated with the passage of Hurricane Katrina 20 through the southeastern region of the United States and 21 on the staff proposal by the Air Resources Board for a 22 temporary adjustment to the Reid Vapor Pressure limits 23 referred to in my testimony as an early transition to 24 winter gasoline blending. 25 The damage from Hurricane Katrina reduced the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 production of crude oil and the output of finished product 2 from several refineries along the Gulf Coast. These 3 refineries supply transportation of fuels to local markets 4 as well as customers in the upper midwest, Atlantic states 5 and the northeast. 6 At the peak of the refinery outages, the loss of 7 production amounted to between 10 and 12 percent of the 8 total supply of transportation of fuels for the United 9 States, roughly equivalent to the entire output of all 10 California refineries. A number of these refineries have 11 returned to normal operation. But nearly half of the 12 production capacity may not resume normal operations for 13 several weeks. 14 Refiners in California depend on imports of 15 gasoline and blending components from a variety of 16 domestic and foreign sources in order to produce adequate 17 supplies of transportation of fuels to meet local demand. 18 These imports normally represent between 10 and 15 percent 19 of our total gasoline supply. The temporarily loss of 20 refinery capacity in the Gulf Coast has reduced 21 availability of gasoline supplies that could be shipped to 22 California from that region. 23 In addition, some cargoes of gasoline that would 24 normally be available for use in California have been 25 diverted to other destinations in the east and southeast PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 United States that have experienced the severest shortage 2 of gasoline. 3 Since marine tankers require a couple of weeks or 4 more to transit from their point of origin to California, 5 the full impacts resulting from decreased availability of 6 gasoline imports will probably not be felt here for 7 another week or two. However, there is an alternative 8 supply option that could be implemented quickly avoiding 9 this pending California supply problem. 10 The Energy Commission believes that the ARB staff 11 proposal will provide immediate supply relief. If 12 California refiners are permitted to transition to winter 13 gasoline earlier than normal, the need to replace these 14 reduced gas imports will be greatly reduced. The 15 dependence on imports can be eased because the transition 16 to winter gasoline will enable California refiners to 17 increase their gasoline -- their production of gasoline by 18 4 to 10 percent by volume by using winter gasoline 19 components held in storage. 20 This relief would be especially beneficial in 21 light of the most recent California refinery production 22 data for the week ending last Friday, September 2nd. 23 Production of California gasoline declined nearly 15 24 percent from the previous week and was 16 percent lower 25 than the same time last year. Inventory of California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 gasoline declined by 5 percent from the previous week and 2 was nearly 18 percent lower than the same time last year. 3 With regard to diesel fuel, both production and 4 inventory levels increased from the previous week by 9 and 5 12 percent respectively. The Energy Commission agrees 6 with the ARB staff proposal that the volatility relief be 7 granted through October 31 of this year. If the relief 8 were shorter in duration, refiners and other marketers 9 would not have adequate time to transition back to summer 10 gasoline blending. 11 Transition time from winter to summer gasoline 12 blending in California normally requires between 3 and 6 13 weeks. In addition, a transition back to summer gasoline 14 blending would reduce gasoline production at California 15 refiners by over 4 to 10 percent, thus more than 16 offsetting any supply relief that would result from the 17 ARB staff proposal. 18 Regarding increased use of ethanol, the Energy 19 Commission does not believe that refiners will appreciably 20 increase their use of ethanol if the ARB staff proposal is 21 approved. Based on a survey of California refiners 22 completed over the last 2 days, none of the companies 23 indicated that they would increase ethanol use. 24 The main reasons are storage tank segregation 25 limitations throughout the distribution infrastructure and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 increased difficulty refiners have of blending greater 2 quantities or volumes of ethanol. 3 Finally, the Energy Commission has determined 4 that the U.S. Environmental Production Agency proposed 5 relief of higher sulfur content in diesel fuel will not 6 appreciably increase production of diesel fuel at 7 California refineries. 8 I thank Mr. Scheible, the Hearing Officer, for 9 this opportunity to present our comments for the record 10 and would be happy to respond to any questions. 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you 12 very much Gordon. One point I want to investigate, and I 13 think your testimony makes it clear, that if we don't act 14 we'll likely face a significant shortage in production 15 capacity, and that will obviously hit on price and other 16 issues. 17 In the Commission's view, what's your opinion on 18 how quickly we should act? Should we act as soon as we 19 possibly can or is there some slack time before these 20 problems occur? 21 MR. SCHREMP: Yes, I think the action should be 22 taken as soon as possible. We've already seen a slight 23 decrease at a couple of refineries in their production. 24 So the sooner this action can be taken, the sooner supply 25 can be increased locally. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you. 2 That's the only question I have. Staff do you have any 3 questions for the witness? 4 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: No, 5 Mr. Scheible. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. Thank 7 you very much. And I presume you're going to hang around, 8 so if we have further questions we can draw upon your 9 expertise. 10 MR. SCHREMP: Be happy to do that. 11 Thank you. 12 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Next, I would 13 like to call on Karen Lange who is representing the 14 Assembly Republican Caucus. 15 MS. LANGE: Good morning. My name is Karen 16 Lange. I work for Assemblymen Bill Maze. And I wanted to 17 read into the record a letter that they wanted read today 18 as they're in session and can't be here. 19 "Dear Board Members, as the nation 20 works feverishly to help the victims of 21 Hurricane Katrina, it has become obvious 22 that the impact of that deadly storm has 23 spread throughout the nation. A 24 significant percentage of the country's 25 oil production, refining and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 transportation systems have been 2 severely affected, causing gasoline 3 prices to surge far past their already 4 record-setting levels. 5 "As many of us can attest, it is 6 difficult to find any gas station in 7 California where unleaded gasoline is 8 selling for less than $3 a gallon. 9 "The California Air Resources Board 10 is proposing to relax the Reid Vapor 11 Pressure Standard in order to allow 12 gasoline refiners the flexibility to 13 make more gasoline available over the 14 next few weeks. 15 "The CARB Staff Report suggests that 16 gasoline production will decline between 17 5 percent and 10 percent unless the RVP 18 standard is relaxed. Such a decline 19 would likely raise gas prices even 20 further compounding the negative impact 21 on our State's economy. 22 "One of the alternative options, 23 listed in the CARB staff report, is to 24 facilitate an increase of ethanol in 25 gasoline to 10 percent. Beyond PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 extending existing gasoline stocks, 2 there are some significant benefits that 3 increased ethanol content can bring to 4 California gasoline, including the 5 following: 6 "Decreased VOC emissions, decreased 7 toxic emissions, a significant decrease 8 in greenhouse gas emissions, reduced 9 carbon monoxide emissions. 10 "We urge the Board to approve use of 11 ethanol at up to 10 percent. This 12 emergency regulation should be crafted 13 so that refiners have the ability to use 14 the best alternatives available to them. 15 CARB should not prejudge the 16 availability of ethanol. New sources of 17 ethanol are coming on line and might be 18 able to provide the help California 19 needs to increase our fuel supplies. 20 "Just a few weeks ago a 25 million 21 gallon per year ethanol plant open in 22 Goshen, California and is now producing 23 ethanol and creating jobs for local 24 workers in the San Joaquin Valley. 25 "By adding ethanol to the list of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 options for refiners, you will help 2 solve our short-term problem of 3 sky-rocketing gasoline prices and you 4 will send an important message for the 5 future. California needs to diversify 6 our energy and fuel supply so we can 7 avoid supply volatility, price spikes 8 and the associated economic 9 dislocations. Ethanol can be a 10 significant part of that effort. 11 "If the goal of this proposed action 12 by CARB is to stabilize or lower 13 gasoline prices in California, it would 14 seem prudent to allow the refiners to 15 pick the best tools for the job, as long 16 as they stay within the parameters set 17 by CARB for air quality. 18 "For the sake of our economic 19 well-being, we urge the Board to act 20 swiftly to deal with this issue, but to 21 do so in a way that will provide the 22 best chance of success. 23 "Sincerely, the 32 members of the 24 Assembly Republican Caucus." 25 I provided copies of that letter to the clerk and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 there's actually also another letter signed by 5 members 2 of the Democratic Caucus. 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. Thank 4 very much for your testimony. 5 Any questions from staff? 6 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: No. 7 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Joe Sparano, 8 WSPA. 9 MR. SPARANO: Good morning, Mr. Scheible and 10 members of the staff. Thank you for giving me this 11 opportunity to speak. My name is Joe Sparano. I'm 12 president of the Western States Petroleum Association. We 13 are a nonprofit association representing petroleum 14 companies that explore for, produce, refine transport and 15 market petroleum and petroleum products here in California 16 and in the states of Nevada, Arizona, Oregon, Washington 17 and Hawaii. 18 On behalf of our members, WSPA strongly supports 19 the Air Resources Board staff's recommendation for 20 emergency amendments to the California Phase 3 21 Reformulated Gasoline Regulations to relax Reid Vapor 22 Pressure or RVP standards. 23 The staff report indicates that this temporary 24 relief will enable increased in-state gasoline production 25 during this time of national crisis. We also join the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 State in urging consumers to use energy wisely and to 2 conserve fuel. 3 Our industry recognizes the great tragedy caused 4 by Hurricane Katrina and is sensitive to the extreme 5 hardships that are being experienced by the people who are 6 in the hurricane's path, including industry employees and 7 their families. Many of our companies have donated 8 financial and human resources to aid all those whose lives 9 have been altered by this incredible event. And WSPA 10 members are working nationwide to deliver fuel supplies 11 where they are needed, cooperating closely with local and 12 state governments and emergency responders. 13 This recommended amendment to the CARB 3 gasoline 14 regulations would give California refiners greater 15 flexibility to increase gasoline supplies. Increased 16 supplies will help consumers meet their energy needs in 17 the aftermath of the hurricane as many of the effects are 18 being felt well beyond the states that have been directly 19 impacted. 20 Understanding the hurricane's effects is 21 important. U.S. production of crude oil was reduced by 22 about 25 percent and natural gas production dropped by 23 over 15 percent. Only part of that production has been 24 restored. Over 10 percent of the total U.S. refining 25 capacity, about 2 million barrels a day, was shut down PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 with some refineries still out of service. Production 2 facilities, pipelines and refineries sustained damage that 3 may take some time to repair. 4 Some petroleum products, such as gasoline and 5 gasoline blending components manufactured in the Gulf 6 Coast area affected by the hurricane are normally imported 7 to augment California's daily gasoline supply. 8 The staff report indicates that some of these 9 products may not reach California for some time, as the 10 entire U.S. energy infrastructure recovers from the 11 damages inflicted by the hurricane. 12 According to CARB and the Energy Commission, this 13 would mean a drop in California gasoline supplies. This 14 action proposed by CARB would allow refiners to make 15 higher vapor pressure winter gasoline in September and 16 through October 31, 2005 when this 2005 RVP control period 17 ends, resulting in an offsetting increase in gasoline 18 supplies. 19 The proposed CARB action is also consistent with 20 actions taken by the U.S. Environmental Protection Agency, 21 or EPA, to waive federal vapor pressure limits for 22 gasoline to provide the needed flexibility to help ensure 23 an uninterrupted flow of transportation fuels across the 24 country. 25 However, it may be necessary for CARB to work PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 with U.S. EPA to extend the EPA's September 15th, deadline 2 for those states like California whose 2005 RVP control 3 period extends beyond that date. 4 It is my understanding that supporting action is 5 also required from the California Department of 6 Measurement Standards, or DMS, for CARB's temporary 7 relaxation of the RVP standard to be fully utilized. DMS 8 requires gasoline to meet ASTM specifications. The 9 specification at issue is a function of RVP and 10 distillation properties and helps to prevent vapor lock in 11 hot weather. 12 Some type of relaxation in that ASTM standard 13 will be needed before the full benefits of reaching a 14 higher RVP limit can be achieved. This issue should be 15 addressed in today's hearing. 16 WSPA also encourages the State to expedite Office 17 of Administrative Law review and approval of the emergency 18 proposal, shortening the 10-day approval period to 24 19 hours. 20 In conclusion, WSPA strongly supports CARB's 21 proposed emergency regulation to temporarily relax the 22 State's gasoline RVP standard creating the opportunity for 23 more in-state gasoline production in this time of crisis. 24 Our companies stand ready to work cooperatively with State 25 agencies to bring additional needed supplies to market. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 It is important for the State of California to 2 take this action, as it is in the best interests of 3 consumers and will serve the greater public good. 4 I thank you for the time, and if there are any 5 questions from the Hearing Board Chairman or the staff 6 I'll be happy to answer them. 7 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 8 Joe. I have one comment and then at least one question. 9 We are working with Office of Administrative Law and the 10 Division of Measurement Standards and the U.S. EPA to make 11 sure that any action that we take is compatible with their 12 activities, and we recognize that until these other 13 agencies, at least at the State level, act that our action 14 would not take full effect. 15 The question is in your testimony I think you've 16 agreed that these supplies that would have come from the 17 Gulf Coast are not going to come in their normal amounts 18 and that that will cause a problem. Can you comment on if 19 we were not to grant a relief and the industry had to seek 20 alternative supplies from other sources in the Pacific or 21 on the Asian coast, is that a feasible alternative or not? 22 MR. SPARANO: I guess -- I'm not saying we 23 wouldn't get supplies, but the facts are that some of 24 those refineries in the Gulf Coast that were impacted by 25 the hurricane make the high octane components that allow PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 California refiners to make CARB gasoline, and to do it 2 every day. And without the 10 percent imports we get 3 every day, we would not be able to meet the demand of 45 4 million gallons a day or so that is necessary to meet 5 California consumer needs, as well as 70 percent of 6 Arizona, 100 percent of Nevada and up to 30 percent of 7 Oregon's gasoline requirements. 8 So if there was no relief granted and no blend 9 stocks came from the Gulf Coast, refiners would be forced 10 to look overseas. And there are places that are anywhere 11 from 2 weeks to 6 weeks away in terms of the ability to 12 make and load and ship the type of materials we need. And 13 the other factor is worldwide, while our refiners spent $7 14 billion adjusting and upgrading their refineries to make 15 CARB gasoline, there are only a few refineries around the 16 world who did the same thing. And that's why we have a 17 pretty usual set of refineries that supplies us that 10 18 percent that we get every day to augment our in-state 19 production. 20 So it's questionable whether any or all of them 21 would even be in a position or have any interest in 22 supplying that. 23 The third issue is that if we were to be net 24 buyers on the world market, with the actions in the Gulf 25 Coast and the severe impact that the hurricane had on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 pipelines that deliver Gulf Coast material to the midwest, 2 the southeast and the northeast, there is a question of 3 whether or not the prices in those areas, which have been 4 considerably higher than here, would attract and take away 5 any cargoes we might try to import here. So I hope that's 6 a complete answer to your question. 7 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you. 8 Staff, do you have any questions? 9 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Not 10 at this time. 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you for 12 your testimony. 13 MR. SPARANO: Thank you. 14 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Next, I'd 15 lick to call on Teri Shore of Bluewater Network. 16 MS. SHORE: Good morning, Hearing Officer 17 Scheible and ARB staff. My name is Teri Shore and I 18 represent Bluewater Network, a division of Friends of the 19 Earth. 20 Bluewater opposes the relaxation of the RVP 21 standard for California's reformulated gasoline for 3 22 reasons. 23 First, there's no emergency in California 24 justifying the weakening of our air quality laws. 25 Second, there's no assurance that any increases PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 in production achieved by the emergency relaxation in air 2 quality standards will result in price decreases. 3 Finally, and most importantly, the impacts of 4 loosening health-based protections far outweigh the 5 increases in price that have occurred recently. 6 So I'd just like to elaborate on these 3 points 7 if I may. Again, we do not believe that there is an 8 emergency in California. One of the bases for declaring 9 the emergency here is that the price increases have 10 occurred as a result of Hurricane Katrina. 11 On Tuesday, however, crude oil prices are 12 reported to have fallen below pre-Katrina levels and 13 wholesale gasoline prices also fell as Gulf Coast supplies 14 came back on line. 15 A second justification for the emergency 16 relaxation is the potential for reductions in oil supplies 17 to California due to the storm's disruption of Gulf 18 production capacity. 19 While, of course, Hurricane Katrina did 20 significantly disrupt oil production facilities, federal 21 officials have reported that the damage was less than 22 feared and recovery is expected to be quicker than many 23 had expected. The head of the Federal Energy Information 24 Administration reported in congressional hearings just 25 recently that the storm knocked out approximately 1.8 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 million barrels of Gulf refinery capacity. But half of 2 that amount is already back on line. 3 The Assistant Secretary of the Interior 4 Department reported that about 90 percent of the Gulf's 5 oil production capacity survived the hurricane and could 6 return to market in about 1 month, if on-shore 7 infrastructure is running properly. 8 We also know that President Bush has already 9 released 39 million barrels of oil from the nation's 10 strategic oil reserves has made it easier to import 11 gasoline and has waived environmental rules to allow 12 refiners to start using winter formulations earlier in 13 much of the nation. 14 In addition, the 26 nation international energy 15 agency agreed to sell 60 million barrels of oil and 16 gasoline to the U.S. market over the next month to help 17 cover shortages from the Gulf. 18 Finally, as outlined in the Initial Statement of 19 Reasons for this proposal, 6 other states have already 20 taken actions that will increase the input -- the output 21 of gasoline. So these actions cumulatively more than make 22 up for current reductions from the Gulf region. 23 We also feel strongly that while gas prices are 24 predicted to remain high, the prices really reflect 25 long-term structural problems associated with increasing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 world demand for gasoline, not an emergency situation to 2 be addressed by relaxing health-based, environmental, air 3 quality standards in California. 4 I'd like to make a couple more comments on the 5 gas price issue and health impacts and on the ethanol 6 component. 7 Again, there's no assurance that any increases in 8 output from the proposed relaxation will actually be 9 reflected in gasoline prices to consumers. There are no 10 legal mechanisms to ensure that prices are adjusted. 11 Senator Feinstein is currently looking into what she 12 believes may be price gouging on the part of oil 13 companies, and congressional hearings are being proposed 14 to determine whether Hurricane Katrina was an excuse for 15 jacking up gasoline prices in California and Oregon. 16 Regarding health impacts, we again believe that 17 the health impacts associated with the relaxation air 18 quality standards outweigh the benefits of potentially 19 slightly lower prices at the pumps. 20 As we all know, California has some of the worst 21 air pollution in the U.S. with many areas failing to meet 22 federal and state ambient air quality standards. The RVP 23 standards were put in place to protect the health of 24 California citizens. Air pollution causes serious health 25 problems for asthma to heart attacks. Even if the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 proposed relaxation is temporary, the health harms 2 associated with the relaxation are real and are not 3 justified by potential savings at the pump. 4 Lastly, regarding alternative fuels, we support 5 the position of the Republican Caucus. If the Board 6 disregards the above issues and decides to relax air 7 quality standards anyway, Bluewater requests that it 8 reconsider its decision not to facilitate the use of 10 9 percent ethanol. 10 Increasing the use of ethanol would not only 11 extend fuel supplies by approximately 4 percent, it will 12 offset some of the increased VOC emissions and will help 13 the State transition to a more renewable fuel supply. 14 The Board posits that supplies are insufficient 15 to make this a valid option, but additional ethanol 16 supplies continue to increase weekly across the nation. 17 International supplies are also available. 18 Allowing the option of increased ethanol use will 19 promote the production of ethanol, a renewable fuel, that 20 will help reduce our dependence on oil. So thank you very 21 much. We appreciate your consideration of these comments 22 and I do have written comments for the secretary. 23 Thank you. 24 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And you're 25 providing them to the clerk for our consideration also. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 MS. SHORE: Yes. 2 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Teri, before 3 you go, just ac couple of responses and you can respond of 4 course. 5 We share greatly your concern and agonized over 6 the weekend and since this came up what is the right 7 balance between taking action that would have, we 8 consider, a significant adverse impact on emissions, that 9 if we have hot days in the fall, we will see higher ozone 10 levels than otherwise would have occurred. And it weighs 11 heavily upon us. 12 On the other side we view our action, if we take 13 it, not as one that would be aimed at current prices, but 14 is aimed at really trying to prevent a significant supply 15 situation that would be much worse than what we're seeing 16 now. 17 On the side of ethanol, we are very open to 18 continuing to look at that situation. Whatever action we 19 take this time, we're going to follow closely both the 20 industry's response and the supply situation. And if we 21 get facts that help us sustain that additional actions are 22 needed and helpful and warranted, we will consider those 23 as the facts arrive. 24 So thank you again four your testimony. And any 25 further comments, you're welcome to make. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 MS. SHORE: Thank you. No. We appreciate it. 2 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Next, I'd 3 like to call on Dave Smith of BP 4 MR. SMITH: Thank you, Mr. Scheible. I'm Dave 5 Smith. I work for BP as the Director of Regulator Affairs 6 on Fuels on the west coast. BP, here as a member of WSPA, 7 supports the WSPA testimony. But BP, as an individual 8 company, supports it as well. 9 I did have a couple of issues that I'd like to 10 share with you to ensure that there is the full effect of 11 the proposal is implemented promptly. And I think 12 certainly I believe your staff is aware of these issues 13 and some of these you've already talked about. 14 I think the one perspective though is that if 15 some of these issues I'll be mentioning are quickly 16 addressed, it will add greater certainty for our industry 17 so that we can proceed with planning and quickly implement 18 the changes and hopefully provide additional supplies to 19 our customers. 20 WSPA's already mentioned about the measurement 21 standard issues around the V over L limit. And that also 22 refiners look to increase RVP, they may run into 23 limitations on the V over L ASTM standard. And so that's 24 something that I understand the staff is working on with 25 Weights and Measures and certainly the quicker that can be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 resolved, the better it is. 2 Similarly, the issue of EPA's waiver, which, as I 3 understand it, expires on September 15th, would seem to be 4 an issue that ARB would need to resolve fairly quickly as 5 well. Without that, our industry, and especially my 6 company, would be uncertain as to the legal authority for 7 you to proceed with this. 8 Beyond that, there are 2 other issues that I 9 believe your staff, the Stationary Division, are aware of. 10 One is that obviously the pipeline system will have to 11 make the appropriate changes in their pipeline specs to 12 allow us to take advantage of these. 13 And the last one, probably the minor point, is 14 that currently the CARB model that we use to calculate and 15 submit our notifications to ARB is we can't make changes 16 to that model as appropriate. And so for us to take full 17 advantage of what is being proposed, in certain cases, we 18 believe ARB would have to update that model, provide us a 19 new model to reflect this current change in RVP limits. 20 So those are the things that we would hope would 21 be either addressed at this hearing or addressed in the 22 potential Executive Order, whatever, that comes out of 23 this, so that we can move forward quickly. 24 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 25 Dave. I have a question of staff. I'm familiar with all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 the points but the last one. Can you enlighten me, 2 please. 3 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: The 4 model has a 7.0 RVP limit developed into it. And it would 5 need to reflect the 9 RVP provision. We think the changes 6 that we've made to the regulations allows that to happen. 7 Our concept was we would send out from our enforcement 8 division instructions on how this would be accomplished, 9 and so they could have full access to the model as the 10 regulation is amended. 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you. 12 MR. SMITH: Thank you. 13 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you. 14 Next I'd like to call on Jay McKeeman of CIOMA 15 MR. McKEEMAN: Good morning. And before I jump 16 into my statements, I would like to commend the Air 17 Resources Board staff for very quick action on this. I've 18 been pestering Dean and Steve for a week now asking for 19 their interpretation of how the federal exemptions or the 20 federal waivers have addressed -- I mean, have affected 21 the Air Resources Board regulations. And I appreciate the 22 fact that they have been through very significant 23 consideration of the problems and the issues involved and 24 do really appreciate their hard work and certainly the Air 25 Board's ability to take quick action on this issue. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 we urge quick action. 2 I represent the California Independent Oil 3 Marketers Association. We represent the small businesses 4 that distribute petroleum products to customers in this 5 state. We have about 220 members that are directly 6 involved in the distribution of petroleum products and in 7 the marketing of petroleum products in the state. Again, 8 we are small businesses and we are uniquely affected by 9 conditions that currently operate in the market. 10 We totally agree with the Air Resources Board and 11 the Energy Commission that there is a crisis pending. 12 There's really no other way to look at it. In our review 13 of the national information, in our discussions with our 14 counterparts in other states, in our discussions with 15 energy experts and people on the scene and especially in 16 the state of emergency, a state of disaster area, there 17 are serious, serious fuel supply and production problems. 18 And we cannot ignore that those problems will not have an 19 effect in California. 20 So we strongly agree with CARB and the Energy 21 Commission that there is a problem pending and that 22 immediate action needs to be taken. 23 Let me explain a particular issue that faces the 24 independent oil marketer in the distribution and marketing 25 of especially gasoline in this state. Our members PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 basically operate in the unbranded market in the state. 2 And in the unbranded market there are particular 3 conditions that make our life more difficult. 4 The first part is that unbranded price is 5 typically a benchmark off of spot price of fuels. And 6 spot price is the most volatile and it is the one that 7 typically peaks out at the highest point. So unbranded 8 fuels are, in fact -- become very, very expensive or more 9 expensive than branded fuels when there are supply 10 shortages. And this is currently happening back east in a 11 number of locations and is happening here in California, 12 when you see Safeway is 10 cents more than a branded 13 station across the street. That's a flip in the normal 14 expectation of how prices operate in the state, and that's 15 because unbranded fuel is seeing significant price 16 increases right now. 17 What that means to our members and their 18 customers, which are typically small mom-and-pop operators 19 or small chain operators, is that they are forced either 20 to sell at a loss or to put their dispensers out of 21 operation. There's just really no way. Their wholesale 22 prices are above what's being charged by branded stations 23 on the street. So they are constrained and are impacted 24 significantly by these situations. 25 They are also small businesses and they don't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 have a lot of economic resources to withstand these kinds 2 of situations. So their business is very threatened by 3 this kind of situation. 4 Further, if the condition gets any worse, 5 unbranded fuels are the first fuels to disappear from the 6 market, because the branded -- the major oil companies 7 supply -- I mean, reserve supplies for their branded 8 customers and their contractor customers. So literally 9 unbranded fuels disappear from the market when the 10 shortages get severe enough. 11 So our members stand a lot to lose if immediate 12 action isn't taken, possibly business-threatening 13 situations. 14 So we think that immediate action is warranted, 15 the evidence is clear, that there is a pending significant 16 problem with fuel supply in the state. And we also urge 17 the Board to consider, as others have, the 10 percent 18 ethanol allowance. We need buffers right now in our fuel 19 supply. Conditions are very uncertain, and we think that 20 it is wise for the Air Board to provide as many tools as 21 it can have immediately available if conditions don't pan 22 out the way that people expect them to. So we would urge 23 the Board to consider the 10 percent ethanol allowance at 24 this point in time. 25 Finally, we believe that there is another health PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 benefit tradeoff that occurs in these situations. If our 2 members businesses are threatened by fuel supply 3 constraints and shortages, that means that they have to 4 layoff employees, that means that they have to curtail 5 benefits, health benefits specifically, and they do not 6 have the opportunity to grow their businesses and provide 7 additional employment and benefit. 8 So there is definitely a health impact that will 9 occur if the State doesn't take immediate action, in the 10 fact that our members' businesses will be impacted and 11 their ability to provide employees with the benefits that 12 they need will be impacted as well. 13 Finally, we believe that the mere fact of 14 attempting to do something will help cure stress in the 15 motorists and consumers in this state. And we believe 16 that that has a positive health impact as well. 17 I appreciate your rapid consideration and would 18 ask for a very quick decision on this. 19 Thank you. 20 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you 21 very much, Mr. McKeeman. 22 Any questions from staff? 23 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: No. 24 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Before 25 proceeding to the next witness, I'd like to recognize PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 Secretary Alan Lloyd has joined us and is in the back of 2 the room showing his level of concern about this issue. 3 So, welcome. 4 Next I'd like to call on Staci Heaton of the 5 California Trucking Association. 6 MS. HEATON: Good morning. I'm Staci Heaton, 7 CTA's Director of Environmental Affairs. And I've come 8 before you this morning, we are in support of this 9 regulation. You know, it doesn't affect our members a 10 whole lot, but we do see the need for it. 11 The main reason I'm here this morning is because 12 my members asked me to come before you today because 13 they're very upset that something similar is not being 14 done in the case of diesel fuel. I have distributed for 15 you a letter that we wrote to the Governor, and we sent 16 out on Tuesday, and we did also CC Dr. Lloyd on this 17 letter as well, asking for a variance on the aromatic 18 standard temporarily, so that we can import diesel fuel 19 into California for our use. 20 CTA members in the California trucking industry, 21 we -- diesel prices are our biggest complaint, and you 22 know that. And we come before you with that just about 23 every time we testify on any issue, whether it has to do 24 with diesel prices or not. 25 I have handed out to you as an attachment to this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 letter the diesel prices across the nation as of Tuesday, 2 September 6th. And you will see, if you look, that our 3 diesel prices are $.40 to $.50 higher a gallon than even 4 the Gulf Coast states right now. We're higher than 5 gasoline, which is unprecedented. We're seeing 6 unprecedented diesel prices in California. 7 We're being asked by the public to transport both 8 fuel and goods to support the relief effort in the Gulf 9 Coast states, but we can't afford the diesel prices in 10 California in order to help out like we want to. 11 We can truck fuel out, but we can't truck diesel 12 in, because of California's standards. And therefore, 13 EPA's variance doesn't help us at all on the sulfur side. 14 So we would ask that this agency consider a variance as 15 well for on-road diesel in light of this emergency 16 situation. 17 And I thank you for the opportunity to come 18 before you today. 19 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 20 Staci. We recognize the terrible burden that the 21 increased fuel prices places upon the trucking industry in 22 particular. Our assessment to date is that we haven't 23 found how a modification to our rules would add to a 24 significant increases in supply would change the price. 25 We're open to further assessing that and working with you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 to see whether or not there are some things that might be 2 done. And then we could weigh the benefits versus 3 whatever environmental impacts there are. 4 MS. HEATON: And we're available to talk any time 5 about this issue. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. Thank 7 you very much for your testimony. 8 Next, I'd like to call on Tom Koehlor. 9 MR. KOEHLOR: Thank you. Tom Koehlor, California 10 Renewable Fuels Partnership. 11 I, too, would like to commend the staff on their 12 report. And we are supportive of the proposal with a 13 plus, an addition. And to use a phrase that has been used 14 by WSPA, it seems like this crisis deserves a petroleum 15 plus solution. And so in that spirit we would propose the 16 current RVP proposal with a fully fungible, flexible E-10 17 solution or up to E-10, so refiners and marketers, as Jay 18 was just saying, independent marketers could use any 19 amount of ethanol between 5, 7 and 10 percent given the 20 market and the supply. 21 While I thought that the staff proposal was 22 generally very good, the analysis on the supply, I think, 23 could use a little more fleshing out. And it's our belief 24 that the supply issue for ethanol is actually growing on a 25 daily basis. This year alone there's going to be a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 billion new gallons. Yesterday, a 110-million gallon 2 plant opened up. And there's literally plants opening up 3 throughout the country every other week. As well as 4 Brazil recently made an announcement that they are ready 5 to provide more fuel to California and other parts of the 6 country on an as-needed basis. 7 So while I appreciate the thought that you could 8 take another look at this issue in the end of October, I 9 would suggest that combining the 2 now would be the most 10 efficient from a time basis, the most effective from a 11 supply basis, and actually provide a better environmental 12 profile as the addition of ethanol would help reduce some 13 of the VOC increases that would occur with the RVP. 14 So we strongly propose a petroleum plus solution 15 with a -- combining the RVP with full fungible, flexible 16 ethanol use, and with an emergency regulation that would 17 sunset after 120 days or sooner and be replaced, give the 18 staff the time then to actually, in the interim, replace 19 it with a full permanent regulation that is 20 environmentally appropriate, helps on the air quality and 21 increases the fungibility and flexibility of alt fuels. 22 The results of this would be an immediate 23 increase in fuel supply, better overall environmental 24 profile, better for the consumer and better for the 25 economy. And we would be happy to work with you in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 next few hours or however long you need to help you with 2 any other facts that you might need. 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. 4 Thank you. 5 MR. KOEHLOR: I appreciate it. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I'd next like 7 to call on John White. 8 This is quite different, John, I'm up here and 9 you're down there. 10 MR. WHITE: Pardon me? 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: It's a 12 different situation. 13 MR. WHITE: Yes. Thank you, Mr. Scheible. My 14 name is John White. I'm here today representing the 15 Center for Energy Efficiency and Renewable Technologies, 16 the Natural Resources Defense Council, the American Lung 17 Association of California and the Coalition for Clean Air. 18 We appreciate your timely notice for us to have the 19 ability to participate in this hearing. And we have 20 written comments that I can leave with you. I'd like to 21 try to summarize them. 22 We recognize and appreciate the unprecedented 23 damage and devastation of Hurricane Katrina, and its 24 impact on fuel supplies throughout the nation. We also 25 share the concern, and I think have a -- particularly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 knowing what the weather is like in September and October, 2 this couldn't come at a worse time. 3 We're looking at an increase on a hot day of 4 somewhere between 30 and 50 tons per day, right when we 5 don't need it, right at the close of the smog season. So 6 we can look at aggravated health effects on asthma and so 7 forth and so on throughout the state, but particularly in 8 the central valley and southern California. 9 Unfortunately this is not an isolated event. 10 Future weather events, terrorism, accidents, all taken in 11 place within the context of surging global demand are 12 likely to precipitate regular shortfalls, maybe not every 13 year, maybe so, we don't know. We're sort of in a new 14 territory, globally and in the state. 15 And I think the analogy that we'd like to suggest 16 is to the electricity crisis. And what you're getting 17 ready to do now is to run the diesels like we have had to 18 do on electricity. So public health is being sacrificed 19 to keep us on the road instead of keeping the lights on. 20 And what's missing here in the midst of all of this is any 21 kind of recognition or appreciation, other than I think I 22 heard WSPA say something about wisely use. I don't think 23 I really heard demand reduction. Because, in fact, this 24 is a structural problem that the State faces and the lack 25 of a demand reduction program on an equivalent basis to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 what we had in electricity with Flex Your Power. 2 We had a little arm waiving by the Governor at 3 the gas pump a few months ago, but we haven't had any 4 sustained leadership or effort in regard to conservation. 5 We have had outright hostility from the oil industry to 6 the establishment of State policies to reduce demand, 7 saying that that would impede investment. Well, it seems 8 to me investment has been impeded already, despite 9 significant profits that we have. 10 So I think what we really believe this Board 11 needs to do, regardless of your decision today, which we 12 anticipate will be to adopt the emergency regulation and 13 increase air pollution in order to make supply more 14 available, we believe that you better get to work on 15 demand reduction and petroleum dependence reduction, and 16 recognize that the air quality is fragile apart of this 17 balance. 18 The RVP standard is a cornerstone of clean 19 gasoline regulations. It's a straight linear relationship 20 ten RVP and evaporative emissions. So this is a very 21 serious and consequential step. And the fact that it's 22 being taken with the hope of inducing 10 percent or so 23 increases in supply underscores what we're missing in the 24 State's portfolio of responses. Because 10 percent demand 25 reduction ought to be achievable if we tried, if we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 considered it urgent, if we educated the public about the 2 relationship between demand and price. 3 The other thing is I think that the obligation to 4 mitigate this harm needs to be analyzed and explored. At 5 the moment we have had, approximately, a 25 percent 6 increase in the pump price without a comparable increase 7 in refining costs. That's the global world marketplace 8 talking. But that profit surge, that accompanies that 9 price surge isn't getting put back into mitigating the 10 harm that's caused by this step that you're going take. 11 The oil companies are making some voluntary 12 contributions to Katrina. And, you know, that's terrific 13 for everybody in our country to do. The nonprofit 14 community has also stepped up around the country. But the 15 air quality needs to be protected and we need to make up 16 those tons somehow. 17 We have an opportunity for ethanol. We have a 18 bunch of E-85 cars floating around. You know, why not put 19 the ethanol to work in those cars. I know that this is 20 not today's subject. But the lack of the other items on 21 the agenda being before you today is a suggestion that we 22 have of vacuum on policy, that the only thing we now have 23 is to sacrifice the health of our citizens as a response, 24 because we don't have any other programs that we 25 developed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 So we urge you to figure out a way to mitigate 2 this harm. We'd also urge you to work with the Energy 3 Commission to carefully monitor the inventories, if we 4 don't have reserves. The Europeans, I understand, have a 5 refinery reserve program. I think that one of the things 6 here is that we've got to, you know, the just-in-time 7 inventory and all that kind of stuff. We don't have 8 reserves, because reserves cost money. Just like in 9 electricity, they cost money. So we have no reserves, 10 because everybody is too busy just passing it through and 11 raising the price. We have no demand response equivalent. 12 We have no expressions other than casual ones about the 13 importance of reducing consumption. 14 And so if you take this step today, we urge you 15 to come back quickly and use the time that we have already 16 laid out by the Governor in his integrated energy policy 17 report for an action plan that the Energy Commission is 18 supposed to be developing. But this time let's have a 19 sense of urgency. Let's recognize that the interaction 20 between the gasoline market, the diesel market, public 21 health and consumption and alternative fuels all need to 22 be part of our response. 23 Because as our organization has pointed out in 24 our report, The Risky Diet, which is on our website at 25 www.ceert.org, this is our future. We are headed into a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 time of growing stress on the world oil markets and on our 2 gasoline markets. And the fact that the first step we 3 take isn't a call for conservation, but rather the 4 relaxation of the air quality regulations suggests that 5 that we need to put some time and energy into really 6 responding to this problem that we face in a thoughtful 7 and comprehensive fashion. 8 Thank you. 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 10 John for your thoughtful comments. I think we are here 11 today in, at least large part, because we could not 12 identify other alternatives and a viable conservation 13 effort. I do think that there are strides being made, and 14 clearly the Governor is urging the public to conserve and 15 hopefully we'll see some of that. It just doesn't appear 16 that we can rely upon that effort to succeed to the extent 17 that we need to replace the, at least a temporary, loss in 18 supply. And we need more options clearly. 19 MR. WHITE: Well, again, if we go back to the 20 electricity crisis and look what the citizens of this 21 state were able to accomplish when asked and when 22 motivated and when encouraged. I think we shouldn't under 23 estimate the potential, but it takes more than casual 24 observation. 25 DEPUTY EXECUTIVE OFFICER SCHEIBLE: That's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 correct. 2 Thank you. 3 Next, I'd like to call on Al Jessel from Chevron. 4 MR. JESSEL: Thanks very much, Mr. Scheible. And 5 I appreciate the opportunity to speak here. I'll try to 6 keep my comments short. 7 I wanted to bring up a couple of points that 8 might help the Hearing Officer and whoever makes the 9 decision here gain a little perspective into what's 10 happening right now. As a refiner with a major refinery 11 that is down in Pascagoula, Mississippi that we used 12 occasionally the supply components of the California 13 gasoline pool for our own customers. We recognize the 14 issue that is facing the Board today. 15 But we also want to make it clear that what we're 16 dealing with is a national issue. And I think the ARB 17 staff and the Board probably recognize that the fuel 18 supply system in this country is a big, big 19 inter-connected national system, and that when something 20 seriously goes wrong in one part of that system that 21 reverberations will be felt in other parts of the system. 22 The way we look at this is that in order to gain 23 actual volume in the national fuel supply that components 24 that are not now in fuels in that supply need to be found 25 to be brought into the supply. And we think that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 staff has made the proper recommendation here, because in 2 the case of gasoline, in particular, there are other 3 components that can be brought into the supply fairly 4 quickly. 5 Unfortunately, this doesn't apply the same way to 6 diesel fuel, as has been suggested, and it doesn't, in our 7 experience anyway, apply to ethanol at this point. 8 The components that are available for California 9 and ultimately through the inter-connectedness of the 10 system to the rest of the country are the butanes, 11 pentanes and LPG that are normally removed from gasoline 12 in the summertime in California especially, and stored 13 sometimes out of state and sometimes on refinery sites and 14 sometimes blended into other gasoline, but to a very 15 limited extent. 16 Those components sit now in storage out of state 17 and in many of the refineries here in California, 18 certainly true for Chevron refineries. Those components 19 can be brought into the supply very, very quickly once RVP 20 regulations permit that. And that is what the staff has 21 proposed. And we're supportive of it, in that, it is a 22 very, very limited response to the situation. We're very, 23 very concerned that this kind of response does not become 24 a routine action on the part of the ARB to respond to 25 market conditions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 We think that the market is ultimately the best 2 way to solve this problem and I know the market is now 3 responding. And so it's disturbing to look into the 4 future and think that this might become a routine. But in 5 this particular case we are supportive because of the 6 national implications here and the extent of disaster, 7 which has occurred on the Gulf Coast. 8 Again, I want to reiterate that the components 9 that come into gasoline has been recognized countrywide 10 with EPA's waiver of the RVP specifications into 11 wintertime. And a numbers of states have already followed 12 suit relaxing their regulations that would get in the way 13 of implementation of what the EPA's intent was. I think 14 we're up over 30 states at this point. We hope California 15 will join that at this point. 16 But when it comes to diesel fuel, anything that 17 you add to the diesel fuel supply here in California is 18 going to come out of diesel fuel somewhere else or some 19 other products, such as jet fuel. And I don't think that 20 the national purpose is particularly served by shorting 21 one fuel to boost another. 22 If our experience in procuring extra ethanol 23 supplies over the past few weeks is like everybody else's, 24 then we suggest that there is not a whole lot of ethanol 25 to help solve the supply, even if the Board did find a way PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 to allow 10 percent into the fuel. And that is not a 2 simple proposition in itself, because simply allowing 10 3 percent ethanol into the fuel would mean some major 4 changes to the way we certify fuel, in particular changes 5 to the predictive model, which I don't think we could make 6 with very much intelligence over the next few hours. 7 So it's our feeling that the RVP relaxation that 8 you're proposing here is the right limited response. 9 We're not suggesting any other kind of response. And that 10 is -- that's really in recognition that California's rules 11 are very important to California to those of us that 12 invested in them and to the environment. 13 And the last thing I just want to reiterate the 14 points been made a couple times before, that before the 15 impact of this action can be felt, we do need to have 16 action from the Division of Measurement Standards to relax 17 the RVP regulations that are en force as part of the ASTM 18 standard which the Department of Measurement Standards is 19 in charge of enforcing. That's the extent of my comments. 20 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 21 Mr. Jessel. I don't have any questions. 22 Staff? 23 Next, I'd like to call on Gary Whitten. 24 DR. WHITTEN: Good morning, Chairman Scheible. 25 I'm here to encourage that 10 percent ethanol be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 facilitated as part of this relaxation of the Reid Vapor 2 Pressure. I think that it's my sincere understanding that 3 the most credible scientific evidence available shows that 4 the best option to mitigate this relaxation of RVP would 5 be to facilitate the use of 10 percent ethanol blends. 6 (Thereupon an overhead presentation was 7 Presented as follows.) 8 DR. WHITTEN: Between the current E-5, E-7, E-6 9 and E-10, there is no increase in the volatility issues 10 with ethanol, and apparently the permeability. There are 11 significant reductions available from hydrocarbons, carbon 12 monoxide and fine particulate emissions. The current 13 predictive model, as it stands, shows a 3 percent less 14 exhaust emissions going from E-6 to E-10. But also if you 15 take into account higher emitters, that could be as much 16 as 5 percent less. 17 Nonroad engines show significant reductions in 18 carbon monoxide and hydrocarbons. Four-cycle engines 19 could be reduced in emissions as much as 5 percent or 10 20 percent going from -- excuse me 5 percent for 4-cycle 21 engines and the carbon monoxide could be reduced an 22 additional 10 percent. There's no other fuel components 23 which would affect off-road engines other than the fuel 24 oxygen. 25 Finally, I'd like to make a couple of comments on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 particulate emissions. There are studies in Colorado and 2 the United Kingdom, which show that E-10 can reduce fine 3 particulate emissions by as much as 50 percent. I believe 4 that the fine particulate PM issue is under-recognized in 5 the United States and in California, and it's a very 6 serious problem. 7 In Australia, for instance, the fine particulates 8 coming from gasoline engines are believed to kill more 9 people than the collisions on their highways there. 10 Certainly, that's a much higher recognition than in this 11 country. I'm not saying that that's a true fact. That's 12 just what they believe over there. 13 Again, my brief comments here this morning are to 14 encourage the -- or facilitate the use of E-10. 15 Thank you. 16 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 17 Gary. 18 Any questions from staff? 19 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Maybe 20 just a brief comment that while the exhaust emissions do 21 go down for VOCs your total hydrocarbons, the oxides of 22 nitrogen emissions go up. And that 3 percent reduction is 23 not enough to offset the RVP, so we still have the same 24 increase basically in emissions. 25 Going to 10 percent and incurring the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 environmental impacts of that, would mean we'd have to 2 double approximately our imports of ethanol into the 3 state, if they're coming from the midwest. And if you 4 look at what's happened, the spot price of ethanol that 5 fuel in the midwest is being used to extend supplies 6 throughout the country. And that's our concern. It's 7 ethanol -- 10 percent ethanol in and of -- by itself is no 8 where near enough to supply the relief we need. We'd 9 still have to do the RVP relief to have enough. 10 And generally we're relooking the whole issue of 11 the predictive model and its response to ethanol as part 12 of our normal. And this is a much longer term issue than 13 an emergency relief. 14 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. Thank 15 you, Dean. 16 Thank you, Gary. 17 Our last witness is John Dunlap, former chair of 18 the Air Resources Board. 19 MR. DUNLAP: Mr. Scheible, good to see you this 20 morning. It's A bit unusual for me to be standing back 21 here. I'm not accustomed to this. 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: It's more 23 unusual for me to be up here. 24 MR. DUNLAP: It is. And I see you drew the short 25 straw on this, Mike. I appreciate you -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think it's 2 part of the job title. 3 MR. DUNLAP: Well, good morning. I come to you 4 before you today on a couple points or a couple reasons. 5 I wanted to talk a bit about, for some of the folks that 6 have been critical of this process about how difficult it 7 is at the Air Board when there are crises involving oil 8 supply, refining issues, et cetera, and how gut-wrenching 9 it is for the Air Resources Board, the Board itself, and 10 the staff to deal with these issues. 11 I remember working with you and Dean and others 12 oh, not quite 10 years ago when we had some issues 13 involving price. And there was a call for us to make 14 changes to our fuel regs, and what public opinion was at 15 that time, and political pressure was brought to bear. 16 And I just remember us striving to have a steady hand to 17 make sure that we didn't do anything precipitous, that we 18 didn't send mixed signals, et cetera. 19 But I come here today also to support the 20 emergency regulatory amendments relaxing the RVP standard. 21 I believe its an extraordinary time, it's extraordinary 22 circumstances, and I believe it is called for. 23 I'm here to support these efforts and want to 24 encourage you to consider expanding the flexibility for 25 refiners. I have seen -- toured many of these refineries PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 in past jobs that I've had, seen what they're capable of 2 doing, seen their commitment to achieving clean air goals 3 and objectives. And they have a truly difficult challenge 4 before them. There's been a lot of -- but I have 5 confidence in their ability to meet the test and to 6 achieve what's necessary. 7 I wanted to comment a bit about giving them as 8 much flexibility as possible during this time, and also 9 circle back to a theme that you've heard quite a bit of 10 today, and that's people talking about expanding 11 flexibility for refiners to be able to use E-10, and not 12 withstanding Mr. Simeroth's comments a moment ago. 13 Such a move would clearly allow for the supply to 14 be expanded with minimal air quality impact versus no air 15 quality impact. A 10 percent ethanol option adds an 16 immediate 4 percent to the supply and helps reduce the VOC 17 emission increases that the RVP option produces. The 18 current predictive model as we read it and as we've shown 19 a moment ago on the screen shows about a 3 percent 20 decrease in VOC emissions when E-10 is added. 21 Again, not withstanding the concern about supply 22 and what's going on elsewhere in the country, I, for one, 23 am supportive of them having that option. And I know that 24 isn't on the table before you today in the package you're 25 considering, but I want to encourage you to look seriously PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 at that option. 2 I think in the staff report there wasn't as much 3 examination perhaps, there wasn't as deep of an analysis, 4 probably that's because of the time -- the short timeframe 5 you were on. But I, for one, want to lend my voice to 6 giving refiners as much flexibility as possible. It's not 7 a mandates. It's not a requirement. It's just the option 8 for them. 9 So with that, I want to thank you, Mr. Scheible 10 for you and your team working with the administration, and 11 appreciate the Governor exercising some leadership in 12 trying to deal with this issue. And I can only imagine 13 the pressure that's being brought to bear for you -- to 14 you, Mike and your team, here at the Board and the Energy 15 Commission. 16 And I want to encourage you to weather this as 17 best you can. So with that, I'll conclude. I encourage 18 you to look at expanding that E-10 option to give the 19 refiners that flexibility. 20 And thank you very much. 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Thank you, 22 John. I appreciate your testimony and the kind words. 23 I referenced that Mr. Dunlap was the last 24 witness. He's the last witness signed up to testify in 25 person. We did indicate that we would accept testimony PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 from telephone. And so, at this time, if there is anyone 2 on the telephone line that wishes to make comments we'd 3 ask you to identify yourself and your affiliation and then 4 to provide us with your comments. 5 Is there anyone there? 6 MR. KINZIG: This is Russ Kinzig, Kinder-Morgan. 7 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yes, can you 8 say the name again please, Russ? 9 MS. KINZIG: Russ Kinzig from Kinder-Morgan 10 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. And 11 you'd like to provide some comments? 12 MR. KINZIG: Yes, I would. 13 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay, Please 14 go ahead. 15 MR. KINZIG: I would like to thank Mr. Smith and 16 Mr. Jessel for pointing out that in the absence of a CARB 17 RVP requirement that the specifications for the State 18 falls right down to DMS, and they're in position of the 19 ASTM 4814. Certainly, we would need the cooperation of 20 DMS in that regard. 21 Also, I would like to see that if this RVP 22 increase were to go through, that the CARBOB table found 23 in Section 2266.5 also be amended for this particular time 24 period. We currently show a 5.99 RVP for CARBOB. We're 25 generally one pound less than the street value of the CARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 gasoline. 2 With regards to ethanol and 10 percent ethanol, 3 the comments that I've heard, we should keep in mind that 4 the infrastructure to get ethanol to the terminal is by 5 truck. Currently, if we were going to a 10 percent 6 ethanol -- Kinder-Morgan also operates 10 terminals within 7 the state of California. If we were to go to 10 percent 8 ethanol today, with the scheduled deliveries that we have, 9 I would run out of ethanol at 8 out of my 10 terminals 10 before the end of this month. 11 Certainly I recognize that additional ethanol 12 inventories would have to be scheduled in. However, we 13 begin to start bumping up against a maximum capacity of 14 what we can receive by truck at our terminals. And I am 15 not the only terminal operator in the state that brings 16 ethanol by truck. 17 With regards to higher RVP at terminals, there 18 would be emissions inventory that we would be up against 19 cap limits. I'm sorry -- 20 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: We're 21 okay. 22 MR. KINZIG: Okay. With regards to emissions 23 inventories in the various air districts, we could be 24 bumping up against some max limits that may carry some 25 financial impositions for us and relief in that area would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 be -- we would like to see some relief in that area. 2 And those are my comments, unless you have any 3 questions. 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. Staff, 5 do you have any response to a couple of those issues? 6 ACTING GENERAL COUNSEL JENNINGS: Tom Jennings, 7 Acting General Counsel. 8 First, I'd like Mr. Kinzig to repeat the name of 9 the company he's representing and their business in 10 California. 11 MR. KINZIG: Kinder-Morgan Energy Partners. We 12 operate a series of pipelines, as well as 10 terminals in 13 the state of California. 14 ACTING GENERAL COUNSEL JENNINGS: Thank you. 15 In terms of the recommendation on raising the 16 CARBOB cap limit for RVP, that has been added to a 17 modified proposed regulation order that was presented at 18 the hearing. And we apologize that it wasn't mentioned 19 for people hooked up by phone. 20 MR. KINZIG: Thank you. 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. Are 22 there other parties on the telephone that would like to 23 testify? 24 Hearing none, I'm going to close the record on 25 this item. We will consider all the comments made today PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 and all of the comments submitted today. I would like to 2 thank all of you for coming on such short notice and beg 3 your indulgence. We tried to get as much notice in the 4 process as we could do under the circumstances, and we 5 appreciate greatly your rapid response. 6 I greatly appreciate the efforts of the staff. 7 They truly labored over the Labor Day Weekend to produce 8 the materials and to bring these forward. And just for 9 those that may not have been here earlier, we will 10 carefully and very quickly assess the input we received 11 today, and what we have in terms of our proposal and be 12 making a recommendation very soon to our Executive Officer 13 on what action should be taken. 14 Thank you again. And if you have further 15 questions, feel free to contact staff. 16 (Thereupon the California Air Resources Board 17 Executive Officer's meeting adjourned at 18 10:35 a.m.) 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 CERTIFICATE OF REPORTER 2 I, JAMES F. PETERS, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing California Air Resources Board, Executive 7 Officer's meeting was reported in shorthand by me, James 8 F. Peters, a Certified Shorthand Reporter of the State of 9 California, and thereafter transcribed into typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said meeting nor in any 12 way interested in the outcome of said meeting. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 8th day of September, 2005. 15 16 17 18 19 20 21 22 JAMES F. PETERS, CSR, RPR 23 Certified Shorthand Reporter 24 License No. 10063 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345