MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD AIR RESOURCES BOARD 2020 L STREET BOARD ROOM SACRAMENTO, CALIFORNIA THURSDAY, NOVEMBER 16, 2000 9:30 A.M. JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES COMMISSIONERS Dr. Allan C. Lloyd, Chairperson Dr. William Burke Mr. Joseph C. Calhoun Ms. Dorene D'Adamo Mr. Mark J. DeSaulnier Mr. C. Hugh Friedman Dr. William F. Friedman Mr. Mathew McKinnon Ms. Barbara Patrick Mrs. Barbara Riordan STAFF Mr. Mike Kenny, Executive Officer Mr. Tom Cackette, Deputy Executive Officer Mr. Mike Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathy Walsh, General Counsel Mr. Steve Brisby Mr. Judson Cohan Mr. Bart Croes Mr. Bob Cross Mr. Bob Flethcer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF CONTINUED Ms. Annette Hebert Mr. Tom Jennings Mr. Jack Kitowski Ms. Leslie Krinsk Mr. Bob Luscutoff Mr. Henry Mano Ms. Lucina Negrete Ms. Debora Popejoy Mr. George Poppic Mr. Dean Simeroth Ms. Cindy Sullivan Mr. Peter Venturnin Dr. Barbara Weller Mr. Jeff Wright PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX PAGE Call to Order 1 Roll Call 1 Opening Remarks by Chairperson Lloyd 2 Item 00-11-1 3 Staff Presentation - Dr. Weller 3 Vote 8 Item 00-11-3 9 Remarks by Chairperson Lloyd 9 Remarks by Executive Officer Kenny 10 Staff Presentation - Lucina Negrete 12 Witnesses: Kent Stoddard 44 Dave Smith 53 Peter Rooney 99 Becky Wood 113 Chris Weaver 113 Afternoon Session 116 Board Discussion 116 Vote 121 Item 00-11-4 121 Remarks by Executive Officer Kenny 122 Staff Presentation - Steve Brisby 124 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX CONTINUED PAGE Witnesses: John Freel 138 Tom Eveland 141 Neil Koehler 145 Calvin Hodge 150 Dr. Loren Beard 156 Jay McKeeman 165 Scott Kuhn 172 John Wright 190 Jocelyn Thompson 199 Robert Mindess 207 Board Discussion 209 Vote 214 Item 00-11-5 214 Remarks by Chairperson Lloyd 214 Remarks by Executive Officer Kenny 214 Staff Presentation: Judson Cohan 214 Board Discussion 225 Witnesses: Don Crider 228 Vote 231 Item 00-11-6 231 Remarks by Chairperson Lloyd 231 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX CONTINUED PAGE Remarks by Executive Officer Kenny 213 Staff Presentation - Jeff Wright 232 Board Discussion 238 Witnesses: Kevin Tokunaga 244 Vote 250 Adjournment 251 Reporter's Certificate 252 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. The November 3 16th 2000 board meeting will now come to order. 4 Dr. Burke, would you please lead us in the Pledge 5 of Allegiance. 6 (Thereupon the Pledge of Allegiance was 7 said in unison.) 8 CHAIRPERSON LLOYD: Thank you. Clerk of the 9 Board, please call the roll. 10 SECRETARY KAVAN: Dr. Burke? 11 BOARD MEMBER BURKE: Here. 12 SECRETARY KAVAN: Calhoun? 13 BOARD MEMBER CALHOUN: Here. 14 SECRETARY KAVAN: D'Adamo? 15 BOARD MEMBER D'ADAMO: Here. 16 SECRETARY KAVAN: Supervisor DeSaulnier? 17 BOARD MEMBER DeSAULNIER: Here. 18 SECRETARY KAVAN: Professor Friedman? 19 BOARD MEMBER HUGH FRIEDMAN: Here. 20 SECRETARY KAVAN: Dr. Friedman? 21 McKinnon? 22 BOARD MEMBER McKINNON: Here. 23 SECRETARY KAVAN: Supervisor Patrick? 24 BOARD MEMBER PATRICK: Here. 25 SECRETARY KAVAN: Riordan? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD MEMBER RIORDAN: Here. 2 SECRETARY KAVAN: Supervisor Roberts? 3 Chairman Lloyd? 4 CHAIRPERSON LLOYD: Here. 5 I think Dr. Friedman is on his way. His plane 6 was diverted from Sacramento to Oakland, so he's driving 7 over from there. So he'll be here when we see him, I 8 guess. 9 Just a couple of things. First of all, by the 10 way, the item on the agenda labeled as our Grant Program 11 has been delayed, and that will be taken up at the 12 December meeting. So that will not be discussed today. 13 A couple of other comments. You will have 14 noticed that outside there is a truck there showing some 15 of the examples of the progress being made in reducing 16 diesel exposure. This one basically has an APU there, a 17 small engine running some of the auxiliary power. That's 18 just one of the many examples that we're seeing now being 19 created by the private sector in response to our concern 20 for the public in reducing diesel exposure. 21 The other one, I would like to welcome, that we 22 have two international visitors from China in the audience 23 today. They are visiting us from China and working with 24 our staff in the modeling and forecasting. They have been 25 with us for a couple of weeks now and they are Mrs. Yang PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 ShuPin and Mr. Zhang Chaoneng from the air quality agency 2 in the City of Ku Ming within the Hunang Province. So 3 we're delighted to have them here. This is an example, I 4 think, of where we are trying to work with China and other 5 countries so that the expertise that we're developing can 6 actively be put to good use in these countries. So 7 welcome very much and also thank you Dr. Yang also for 8 escorting them. We're really delighted to have you. 9 The first agenda item today is the research 10 proposal. I'd just like to remind anybody in the audience 11 who wishes to testify on today's agenda to please sign up 12 with the clerk of the Board. Also, if you have a written 13 statement, if you could provide 30 copies of those to the 14 Board clerk. 15 As I mentioned, the first item is 00-11-1, a 16 research proposal. Mr. Croes, does the research division 17 staff have anything they wish to say about the proposal. 18 RESEARCH DIVISION CHIEF CROES: Yes. Dr. Barbara 19 Weller will make a brief presentation. 20 AIR POLLUTION SPECIALIST WELLER: Good morning, 21 Chairman Lloyd and members of the Board. There is 22 substantial evidence to indicate that exposure to 23 particulate matter in ambient California air causes 24 detrimental health defects. While the risk to public 25 health from PM exposure is well documented, many questions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 remain regarding the role and mechanisms of PM effects. 2 The use of the concentrator technology and its application 3 in many parts of the world has provided the opportunity to 4 study PM in all its complexity. 5 (Thereupon an overhead presentation was 6 presented as follows.) 7 AIR POLLUTION SPECIALIST WELLER: During the 8 first year of this five-year program, the investigators 9 designed, assembled, and characterized the performances of 10 PM concentrators. This proposal is for year two. And 11 it's designed to develop and to put into operation a fully 12 transportable exposure facility, capable of providing 13 concentrated coarse, fine, and ultra fine ambient 14 particles from different sites in the Los Angeles area 15 basin. 16 --o0o-- 17 AIR POLLUTION SPECIALIST WELLER: The specific 18 activities for year two include freeway emission studies 19 using an animal asthma model. Additional investigations 20 will be performed at Mira Loma, a site from the Children's 21 Health Study. These studies will include the affects of 22 changes in photochemical activity and concentrated 23 particles in animal models and cellular studies using 24 concentrated coarse, fine and ultrafine particles. 25 Precise characterization of PM will be performed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 through the $12.2 million US Environmental Protection 2 Agency funded, Southern California Particle Center and 3 Super Site Program resulting in considerable cost savings 4 to ARB for these projects. The program is devised as a 5 multicampus effort with the principal investigator, Dr. 6 John Feins from the University of California, Los Angeles, 7 and coinvestigators from the University of Southern 8 California and the University of California, Irvine. 9 The investigations in the second year of this 10 program will result in new and vital information on 11 particulate toxicity. In addition, this proposal will 12 result in information that will complement the Children's 13 Health Study, one of ARB's ongoing projects. The 14 information provided by this program is of vital 15 importance in directing future research and regulation to 16 protect the public health from PM pollutants. 17 We recommend that the Board approve the funding 18 of this proposal for $539,229. 19 Thank you for your attention and I will be glad 20 to answer any questions. 21 CHAIRPERSON LLOYD: Thank you, Dr. Weller. One 22 question, does this address, I know there's increasing 23 concern about the, you know, the sub 2.5 impact that the 24 .1 micron particulates. 25 AIR POLLUTION SPECIALIST WELLER: Yes. They will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 be looking at coarse, fine and ultrafine particles within 2 this study. So they will be able to separate the effects 3 from the different size components of the particulates. 4 CHAIRPERSON LLOYD: When do we expect results to 5 be coming in? 6 AIR POLLUTION SPECIALIST WELLER: This year they 7 will be looking at the fine and ultrafine, so we should be 8 receiving information from those components at the end of 9 this year. 10 CHAIRPERSON LLOYD: You mean, not the end of this 11 calendar year, next calendar year? 12 AIR POLLUTION SPECIALIST WELLER: The end of the 13 second year of this proposal, yes. 14 CHAIRPERSON LLOYD: Great. Thank you. 15 Any comments or questions from the Board? 16 Mr. Calhoun? 17 BOARD MEMBER CALHOUN: How much money is 18 allocated during the first year? 19 AIR POLLUTION SPECIALIST WELLER: I'm sorry? 20 BOARD MEMBER CALHOUN: How much money was 21 allocated for the first year? 22 AIR POLLUTION SPECIALIST WELLER: It was 23 $500,000. 24 BOARD MEMBER CALHOUN: So we have another three 25 or four years to go with this particular project. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 AIR POLLUTION SPECIALIST WELLER: This proposal 2 covers the second year of this project only. So it's the 3 third and fourth year would be to be decided by the Board 4 at a future date. 5 BOARD MEMBER CALHOUN: Thank you. 6 CHAIRPERSON LLOYD: Dr. Burke. 7 BOARD MEMBER BURKE: Does this study coincide 8 with any of the EPA studies on particulate matter? 9 AIR POLLUTION SPECIALIST WELLER: Yes. This 10 study is very well coordinated with the EPA studies. In 11 fact, all of the chemical characterization for this study 12 will be provided by the Super Site program. And that will 13 not be funded by ARB. That will be funded with the Super 14 Site, so that's a great cost savings. 15 And one of the studies, which is a freeway 16 emissions study, is coordinated with a program of the EPA, 17 so there's a great deal of cross-coordination between this 18 study and EPA programs, as well as the Children's Health 19 Study. Because one of the sites used on this study is 20 going to be one of the Children's Health Study sites. And 21 that will continue in the future of the study as well. 22 CHAIRPERSON LLOYD: Pretty exciting to have that 23 study. I guess we've got two Super Sites studies in 24 California. It's pretty exciting. I agree it seems as 25 though the coordination amongst all the groups is first PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 rate there. 2 AIR POLLUTION SPECIALIST WELLER: I think that's 3 one of the strengths of this program. 4 CHAIRPERSON LLOYD: Any other comments, questions 5 from the Board? 6 BOARD MEMBER HUGH FRIEDMAN: I missed my 7 colleague on the right. I would assume he would have 8 something to say about this. I assume it would be very 9 positive. 10 CHAIRPERSON LLOYD: I can hardly imagine that he 11 would not like additional funds coming to UCLA. 12 (Laughter.) 13 CHAIRPERSON LLOYD: But my understanding, do you 14 have any comment -- obviously, Dr. Friedman has been 15 briefed, so I presume he's fully supportive. 16 RESEARCH DIVISION CHIEF CROES: We didn't brief 17 him directly, but he did receive a copy of the proposal. 18 And he's certainly aware of the project. 19 CHAIRPERSON LLOYD: I think I'll pass discussions 20 I have had with I'm sure he's very supportive of this type 21 of work. 22 Do we have a motion? 23 BOARD MEMBER HUGH FRIEDMAN: So move. 24 BOARD MEMBER PATRICK: Second. 25 CHAIRPERSON LLOYD: All in favor say aye? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 (Ayes.) 2 CHAIRPERSON LLOYD: Unanimous. We move on. 3 Thank you very much, since we don't have anyone on this. 4 Thank you very much, Dr. Weller and thank you Mr. 5 Croes. 6 Just take a minute while we change staff and move 7 ahead to the next agenda item the 00-11-3 proposed 8 revisions to the Carl Moyer program guidelines. 9 CHAIRPERSON LLOYD: Is there a problem? 10 Mr. Kenny, is there a problem? 11 EXECUTIVE OFFICER KENNY: No. 12 CHAIRPERSON LLOYD: I'd like to relay back, the 13 first item I presided over as Chairman of this Board last 14 February was the original Carl Moyer program guidelines. 15 Since then the program has become an unqualified success. 16 The Carl Moyer program is popular with both recipients and 17 funding authorities. 18 Governor Davis and the State Legislature both 19 have endorsed the program and it has received continuing 20 funding year after year. The first year of funds were 21 oversubscribed by a factor of at least three. The second 22 year funds are 50 percent obligated with many more 23 projects in the queue. And we've just received an 24 additional 50 million for the third year funding, bringing 25 the total program to $98 million. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 The Carl Moyer program was also highly effective 2 at reducing diesel NOx emissions. The projects 3 implemented to date have cut statewide NOx emissions by 4 four tons per day. That number will, of course, grow as 5 we spend down the second and third year appropriations. 6 In fact, I think it's a wonderful testament to 7 the work of Dr. Moyer whose personal leadership and vision 8 is bringing cleaner air to all Californians. Carl left us 9 much too soon, but as you can see his legacy lives on. 10 And we've celebrated just the last few weeks here with 11 additional dollars going into Sacramento. And I know that 12 Dr. Moyer spent many years working with the staff here, 13 with CEC and the local districts to actually craft ways of 14 accurately getting a public/private partnership way to 15 reduce NOx emissions. So it's a delight for me to see the 16 success of this program. At this point, I would like to 17 ask Mr. Kenny to introduce the item and begin the staff 18 presentation. 19 EXECUTIVE OFFICER KENNY: Thank you, Mr. Chairman 20 and members of the Board. Today staff is proposing 21 revisions to the guidelines for the Carl Moyer Memorial 22 Air Quality Standards Attainment Program, which were 23 approved in February of 1999. 24 The Carl Moyer program provides grants for the 25 incremental costs of cleaner, heavy duty engines. It PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 achieves real, quantifiable enforceable reductions of 2 emissions of oxides of nitrogen and diesel particulate 3 matter. 4 This program is a $98 million grant program, the 5 largest administered by the ARB, and serves as the model 6 which subsequent mobile source grant programs have 7 emulated. The guidelines establish the basic structure of 8 the Carl Moyer program by specifying how air pollution 9 control districts are to administer the program on the 10 local level. 11 The guidelines also set detailed criteria for a 12 variety of projects in several source categories, 13 including on-road heavy duty vehicles, off-road equipment, 14 marine vessels, locomotives, stationary agricultural 15 irrigation pump engines, forklifts and airport ground 16 support equipment. 17 The guidelines also contain the tentative funding 18 allocation among districts expected to participate in the 19 third year of the program. In October of 1999 Assembly 20 Bill 1571 was signed codifying the Carl Moyer program into 21 the Health and Safety Code and creating the Carl Moyer 22 Advisory Board. 23 This group had the responsibility for making 24 recommendations on the advisability of continuing the Carl 25 Moyer program, the amount and source of necessary funding PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 for a continuing program and program modifications if 2 necessary. 3 The advisory board recommended that the program 4 continue, that PM reductions be accounted for, that 5 incremental fuel costs be considered, and that the 6 district matching fund requirements be revised. The 7 proposed revisions address these recommendations and 8 contain technical modifications based on program 9 implementation experience at the State and local levels. 10 The emission inventory adjustments based on 11 approved on-road and off-road models and the current and 12 anticipated status of heavy duty engine control 13 technologies, the proposed revisions that staff is 14 presenting today, would affect projects funded in the 15 third year and beyond. 16 It is important that future projects continue to 17 result in real, quantifiable, cost-effective and 18 enforceable emission reductions. 19 And with that I'd like to turn it over to Lucina 20 Negrete who will make the staff presentation. 21 (Thereupon an overhead presentation was 22 presented as follows.) 23 MS. NEGRETE: Thank you, Mr. Kenny. 24 Good morning, Chairman Lloyd and members of the 25 Board. This is the third time we come before you to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 present recommendations for the Carl Moyer Air Quality 2 Standards Attainment Program, or what we call the Carl 3 Moyer program. 4 This program is moving rapidly and operating 5 smoothly, but there are some areas that need improvement. 6 The changes staff is proposing are positive. Some project 7 areas are expanding to provide districts with additional 8 flexibility. 9 --o0o-- 10 MS. NEGRETE: I will begin my presentation with a 11 brief history describing how the Carl Moyer program got 12 started, where the program has been and where the program 13 is headed. 14 The heart of my presentation will be a discussion 15 on the purpose for the proposed revisions followed by a 16 brief description of the most significant revisions to the 17 Carl Moyer program guidelines. These revisions would 18 affect projects funded in the third year. I will continue 19 my presentation with a discussion of some of the issues 20 pertaining to the proposed revisions and conclude with our 21 recommendations. 22 --o0o-- 23 MS. NEGRETE: First, I will provide you with some 24 slides on the history of this program. The Carl Moyer 25 program, as approved by this board in February of 1999 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 buys clean air by paying for the incremental cost for 2 using cleaner than required heavy-duty vehicles and 3 equipment. The program is designed to reduce NOx 4 emissions. It also reduces PM. 5 The program helps California meet its 1994 ozone 6 State Implementation Plan, or what we call SIP, and 7 particularly the local source commitments in SIP measure 8 M4. This program also helps local districts to meet local 9 conformity plans which are very important in preventing 10 loss of federal highway dollars to local areas throughout 11 California. 12 --o0o-- 13 MS. NEGRETE: In October, 1999 the Carl Moyer 14 program was enacted through Section 44275 of the Health 15 and Safety Code. The Health and Safety Code grants some 16 of the following responsibilities, ARB and California 17 Energy Commission develop and modify guidelines for the 18 statewide program; ARB administers the heavy-duty engine 19 portion; and CEC administers the infrastructure and 20 advanced technology portion of the program. 21 ARB distributes funds to local air districts to 22 implement the program and select heavy-duty engine 23 projects. The Carl Moyer program advisory board, chaired 24 by ARB's executive officer, was a 13 member board of 25 industry, environmental and public representatives PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 appointed by Secretary Hickox. The advisory board made 2 recommendations to the Governor and the Legislature for 3 continuing the program. These recommendations are also 4 incorporated as part of staff's proposed revisions. 5 --o0o-- 6 MS. NEGRETE: The program has been a huge success 7 and received a total of $98 million in funding for three 8 years, fiscal years '98, '99 and 2000. 9 In the first year, 25 million went to ARB for 10 heavy-duty engine projects. In the second year ARB and 11 CEC received funds, 19 million went to ARB and the 12 remaining 4 million went to CEC. In the third year ARB 13 received 45 of the 50 million to fund heavy-duty engine 14 projects. Again, projects paid for with the third year, 15 with the 45 million, would need to meet the revised 16 guidelines that are being proposed today. 17 --o0o-- 18 MS. NEGRETE: Both ARB and the local air 19 districts have worked hard and closely together to select 20 and fund very cost effective projects. Projects funded in 21 the first year reduce NOx emissions by about four tons per 22 day and particulate matter by about 100 pounds per day for 23 an average cost of about $3,000 per ton, which compares 24 favorably to the cost effectiveness of stationary source 25 control measures at 10,000 per ton. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 In the second year, 70 percent of the $23 million 2 dollars has already been obligated to projects. We expect 3 to have third-year funds distributed to districts by 4 February 2001. For the three years, if projects continue 5 to be as cost effective as in the first year, we expect 6 the total program to reduce NOx emissions by about 14 tons 7 per day. 8 --o0o-- 9 MS. NEGRETE: This slide shows how we expect to 10 distribute third year funds to participating districts. 11 The districts listed contribute to at least one percent of 12 the population and have been given specific allocations of 13 funding. 14 The remaining funds would be set aside for the 15 other districts that contribute to less than one percent 16 of the population. All funds would still be allocated 17 based on a district's population and SIP measure M4 18 commitment. 19 --o0o-- 20 MS. NEGRETE: The schedule for distributing, 21 obligating and expending funds for the third year remains 22 the same as the first two years. After approval of the 23 these proposed revisions we will begin receiving program 24 applications from local air districts in December 2000. 25 We will begin distributing third-year funds to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 districts as early as February 2001. Any third-year funds 2 not obligated by July 2002 may be reallocated. All 3 third-year funds must be expended by June 2003. 4 --o0o-- 5 MS. NEGRETE: Now, I will provide you with the 6 reasons for our proposed revisions. We are proposing 7 revisions to the guidelines for four reasons: To address 8 advisory board recommendations that were made to the 9 Governor and the Legislature, specifically a cap on the 10 district's matching fund requirement, as well as 11 establishing requirements and goals for PM reductions from 12 the program; to address provisions in the Health and 13 Safety code to require ARB to consider incremental fuel 14 costs into the program; to provide districts with 15 additional flexibility in their programs by increasing the 16 cost effectiveness requirement, decreasing some emission 17 reduction requirements and removing the off-road repower 18 funding caps; and finally to ensure that emission 19 reductions remain real, quantifiable and enforceable. 20 This is important when claiming reductions in our SIP. 21 --o0o-- 22 MS. NEGRETE: The next section of my presentation 23 will briefly explain the most significant revisions to the 24 Carl Moyer program guidelines that we are proposing for 25 your approval today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 I want to emphasize again that these proposed 2 revisions, if approved, will affect projects funded in the 3 third year. 4 --O0o-- 5 MS. NEGRETE: The first major proposed revision 6 is the district matching fund requirement. Right now 7 districts participating in the program provide $1 in 8 matching funds for every $2 that's received from the ARB. 9 Staff has built flexibility into the program wherever 10 possible to make it easier for districts to implement a 11 local program. 12 Matching funds include district funds for 13 projects, funds used for infrastructure and up to 15 14 percent in-kind administration. Since funds for the third 15 year of the program double from the first year's funding 16 level, it will be a challenge for districts to meet the 2 17 to 1 funding ratio -- match funding ratio. 18 --o0o-- 19 MS. NEGRETE: In September 2000 legislation was 20 signed amending the Health and Safety Code to provide ARB 21 with the authority to adjust the ratio of matching funds 22 if necessary. Taking into consideration the financial 23 challenges each district is faced with in meeting the 2 to 24 1 matching fund requirement at $45 million, staff proposes 25 that the matching fund requirement reflect the advisory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 board's recommendation to the Governor and the 2 Legislature. 3 When program funding is $25 million or less, the 4 2 to 1 ratio would remain in effect. Whenever program 5 funding is above $25 million dollars, program match for 6 all districts collectively would be capped at $12 million. 7 --o0o-- 8 MS. NEGRETE: Another major revision includes 9 considering particulate reductions from the program. The 10 proposed revisions to include PM are based on the advisory 11 board's recommendations made to the Governor and the 12 Legislature in March 2000. 13 As recommended by the advisory board, staff 14 proposes that the program set a 25 percent PM emission 15 reduction goal for the statewide Carl Moyer program and a 16 25 percent requirement for districts that are designated 17 as serious nonattainment for PM. Both the South Coast Air 18 Quality Management and San Joaquin Valley Air Pollution 19 Control districts would be affected by the program 20 requirement. 21 If the program falls short, staff will propose 22 modifications to the program to achieve necessary 23 requirement. 24 --o0o-- 25 MS. NEGRETE: Staff is also proposing to modify PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 the $12,000 per ton cost effectiveness requirement. The 2 Health and Safety Code grants ARB the authority to adjust 3 the cost effectiveness requirement to account for cost of 4 living adjustments. Staff is proposing to increase the 5 cost effectiveness limit to $13,000 per ton of NOx 6 reduced. 7 The increase of $1,000 is based on the Consumer 8 Price Index for the last three years, 1998, '99 and 2000. 9 --o0o-- 10 MS. NEGRETE: We are also proposing revisions to 11 add new project categories and expand existing categories. 12 Aside from paying for heavy-duty engine projects, the 13 Health and Safety Code allows districts with the option to 14 pay for the incremental costs of liquid or gaseous fuels. 15 This would be the increased cost of fuels, such 16 as natural gas or alternative diesel fuels over diesel. 17 Funds used to pay for the incremental fuel costs must come 18 from the district and those funds must pay for an 19 alternative fuel or alternative diesel fuel that is used 20 in an engine qualified as a project under the Carl Moyer 21 program. The districts may count funds used to pay for 22 incremental costs fuel costs as match funds. 23 --o0o-- 24 MS. NEGRETE: For third year projects and beyond, 25 staff is proposing to evaluate projects for incremental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 fuel costs on a case-by-case basis. Test procedures for 2 alternative diesel fuels need to be finalized and some 3 alternative fuels may not have an actual incremental cost, 4 so evaluations on these types of projects need to be 5 conducted on a individual case-by-case basis. 6 --o0o-- 7 MS. NEGRETE: Another new opportunity for 8 reducing emissions from diesel engines would be to use 9 auxiliary power units on heavy-duty trucks to reduce idle 10 emissions. Heavy-duty trucks produce a significant amount 11 of emissions during idle to keep the engine warm or 12 provide heating and cooling to the cab. 13 The APU, like the one on this picture, will be 14 used for the same purposes, providing fuel savings and 15 reducing emissions. 16 --o0o-- 17 MS. NEGRETE: Staff proposes to allow funding to 18 pay for the installation costs of APU's used in heavy-duty 19 vehicles. Maximum installation funds would be $1,500 per 20 diesel unit installed, and a maximum of $3,000 for 21 alternative fuel engines, fuel cells or electric motors. 22 --o0o-- 23 MS. NEGRETE: Staff is also proposing criteria to 24 provide additional flexibility for the types of repower 25 projects that would be allowed in the program. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 criteria for repower projects would be expanded for 2 heavy-duty engines with mechanically controlled fuel 3 injection systems. And a controlled mechanical may be 4 repowered with a certified, mechanically controlled 5 engine. 6 For electronically controlled systems, repowers 7 would also be allowed only with an October 2002 engine. 8 Mechanical to electronic engine repowers would also be 9 allowed. However, only on a case-by-case evaluation. 10 This provides ARB staff with the ability to conduct a 11 closer evaluation of actual emission benefits and costs 12 associated with these types of repowers. 13 Diesel electric hybrids will also be allowed and 14 evaluated on a case-by-case basis. The hybrid electric 15 engine is a promising new heavy-duty engine technology 16 being demonstrated. But until test procedures become 17 available to adequately represent the emission benefits 18 associated with this technology, ARB would conduct a 19 case-by-case evaluation of these projects. 20 Staff is also proposing one additional change, to 21 allow districts to fund new transit and school buses and 22 repowers of these vehicles that meet the optional low NOx 23 standards regardless of fuel type. 24 --o0o-- 25 MS. NEGRETE: The most significant proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 technical revision to the guidelines is to the 2 calculations for determining emission benefits. Staff is 3 proposing to modify calculations to incorporate new 4 emission factors for every project category except marine 5 vessels and locomotives. 6 The new emission factors reflect new inventory 7 data approved by the Board last year. The calculations 8 also account for an increase or a decrease in activity 9 levels between the old and the new engine. 10 For marine vessels only emissions in districts' 11 statewide inventory boundary would be used to calculate 12 emission benefits. For off-road equipment, like yard 13 haulers, that typically use on-road engines, emission 14 benefits would be calculated using on-road emission 15 factors. 16 --o0o-- 17 MS. NEGRETE: A second technical revision 18 pertains to dual fuel engines used in stop and go 19 applications, like urban transit buses and neighborhood 20 refuse haulers. During the first year of the program, 21 staff reviewed data for dual fuel engines used in stop and 22 go applications, and that data indicated that the amount 23 of alternative fuel used during actual real world driving 24 is less than what is used during laboratory certification. 25 Benefits from these engines are less than PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 expected. Staff has been working closely with one 2 manufacturer to determine actual emissions, but the data 3 still indicates benefits are less and a discount on 4 emission benefits may be necessary. 5 Staff proposes to require that manufacture -- 6 require the manufacturer to demonstrate to the executive 7 officer that on-road emissions are equivalent to the 8 certified benefits. The executive officer would determine 9 the appropriate discount on emission benefits if 10 necessary. 11 --o0o-- 12 MS. NEGRETE: In order to normalize the project 13 life that an applicant would select for a project, staff 14 is also proposing to establish a default and allow 15 flexibility for applicants to select a longer project 16 life, only if they provide documentation to the district 17 demonstrating that the selection is appropriate. 18 Staff is also proposing to decrease the emission 19 reduction requirement from 25 percent to 15 percent for 20 repower and retrofit projects. The new emission factors 21 may prevent some cost-effective projects from meeting the 22 current 25 percent emission reduction requirement. And 23 the Health and Safety Code allows ARB the authority to 24 modify the emission reduction requirements if necessary. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 MS. NEGRETE: Staff is proposing to provide 2 districts with the option to remove funding caps for 3 off-road engine repowers. Removing the funding caps 4 allows districts with additional flexibility and the 5 ability to encourage participation from the construction, 6 above-ground mining and agricultural industry where 7 larger, more costly diesel engines are widely used. 8 For forklifts staff is proposing to allow 3,000 9 pound to 6,000 pound lift capacity forklifts into the 10 general statewide program, with a $3,000 per ton cost 11 effectiveness limit and its own criteria. 12 --o0o-- 13 MS. NEGRETE: Agricultural irrigation pumps 14 repowered with electric motors, staff is proposing that 15 the project costs include the cost of the motor as well as 16 the cost of the line set up, and any peripheral equipment. 17 Staff also proposes to allow new agricultural 18 irrigation pumps where a new well is installed into the 19 program if the pump is equipped with an electric motor. 20 --o0o-- 21 MS. NEGRETE: Through The process of developing 22 these revisions, we have been working very closely with 23 districts participating in this program through our 24 incentive program implementation working group. We have 25 also been taking comments from various industries, since PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 we provided the draft proposal in July 2000 that was 2 accompanied by three public workshops. Still we have some 3 issues that have come up that I will be discussing in the 4 next few slides. 5 --o0o-- 6 MS. NEGRETE: The first issue pertains to the new 7 emission factors. The proposed emission factors are lower 8 than the factors used in the first two years, but reflect 9 new inventory data and are based on actual duty cycles. 10 Some believe that the proposed emission factors for some 11 projects may affect the amount of funding a project 12 applicant would be eligible to receive and eliminate some 13 cost effective projects from being funded in the third 14 year. 15 To address this issue staff revised the proposal 16 to allow flexibility to some project applicants, such as 17 applicants for neighborhood refuse haulers to provide ARB 18 with drive cycle documentation that justifies using an 19 uncontrolled emission factor that would reflect the real 20 world drive cycle. 21 For others, such as agricultural irrigation 22 pumps, an applicant may test the uncontrolled engine to 23 establish a better emission factor. ARB revised its 24 proposal to decrease the emission reduction requirement 25 for repowers and retrofit projects, so that the projects PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 affected by the new emission factors may still receive 2 funding. 3 --o0o-- 4 MS. NEGRETE: The second issue pertains to dual 5 fuel engines used in neighborhood refuse collection. To 6 date, the data indicates that alternative fuel used on 7 road is less than what is used during laboratory 8 certification. So in purchasing a dual fuel engine for a 9 neighborhood refuse hauler, emission benefits may be less 10 than expected. ARB proposed applying a discount on 11 emission benefits, but that discount would affect cost 12 effectiveness and the amount of funds that a dual fuel 13 project for neighborhood refuse hauler would be eligible 14 to receive. 15 To address this issue, ARB would continue to work 16 closely with the manufacturer. The manufacturer would be 17 responsible for providing proper documentation to ARB on 18 the actual fuel substitution rate to determine if a 19 discount on the benefits are necessary. 20 --o0o-- 21 MS. NEGRETE: This brings us to the summary and 22 staff's recommendations. 23 --o0o-- 24 MS. NEGRETE: In general, the program would still 25 be implemented and operated as intended in the initial PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 program. The modifications are reasonable and designed to 2 provide additional flexibility for districts to select 3 projects. The proposed revisions expand the program to 4 encourage PM reductions and participation from the 5 industry that have not participated in the past. 6 Most importantly, the proposed revisions would 7 continue to make this program a success with benefits that 8 are real, quantifiable and enforceable. 9 --o0o-- 10 MS. NEGRETE: Staff recommends that the Board 11 approve the PM requirements, goals and baselines, the cap 12 on districts matching fund requirement, the third year 13 funding allocation, new and expanded project categories 14 and criteria, and the technical revisions. 15 --o0o-- 16 MS. NEGRETE: Staff also recommends that the 17 Board grant the executive officer with the authority to 18 evaluate emissions from dual fuel engines in stop and go 19 applications to determine an appropriate emission discount 20 if necessary. 21 And finally, staff recommends that the Board 22 continue to support any efforts to identify additional 23 program funding to continue this worthwhile program beyond 24 the third year. This concludes my presentation. 25 CHAIRPERSON LLOYD: Thank you very much. Any PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 questions or comments from the Board? 2 Mr. Calhoun. 3 BOARD MEMBER CALHOUN: Yes. On the last point 4 you made about the executive officer -- asking that the 5 executive officer be granted authority to determine the 6 actual use of the different fuels or dual fuels, how do 7 you propose to do that? 8 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 9 Well, we are still waiting for data from the engine 10 manufacturers that will document the actual fuel usage and 11 their different applications. When we receive that data 12 we will be able to give it to the executive officer and 13 make a recommendation to him for a discount factor if 14 that's appropriate. 15 The one manufacturer that we've been working most 16 closely with is currently going through some testing at 17 Southwest Research with a new electronic chip design for 18 their engine which may eliminate this concern. 19 BOARD MEMBER CALHOUN: Would you then publish 20 this data so that others would know? 21 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 22 Yes, we would put it on the web site and we would 23 distribute it to the air districts. We have a regular 24 working group of the air districts and the Energy 25 Commission and we would distribute it through that avenue PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 also. 2 BOARD MEMBER CALHOUN: The next question I have 3 is one of process. These projects are administered by the 4 local districts, are they not? 5 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 6 Yes. 7 BOARD MEMBER CALHOUN: So what's the interaction 8 -- kind of refresh my memory as to how the ARB gets 9 involved in the process? 10 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 11 Well, again, we have a working group which includes all of 12 the districts that meets on a regular basis and we go over 13 any changes in the program and any issues that may have 14 come up while they're trying to administer the program. 15 They also are welcome to come to ARB staff if 16 they're having difficulty in evaluating any project and 17 seek advice. And they also report to the ARB on a regular 18 basis. 19 CHAIRPERSON LLOYD: Maybe I can take advantage, 20 Ms. Sullivan, here of your recent joining of the staff 21 having spent some years at South Coast, very successfully, 22 before that CEC. 23 From your perspective, how do you see the program 24 working with ARB and the districts, is it working well? 25 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 It's working very well. The working group provides the 2 opportunity for the districts to discuss amongst 3 themselves how the program is going. They can share their 4 experiences and learn from them. And the ARB staff has 5 always been very open in allowing the districts to ask 6 questions and helping them. 7 CHAIRPERSON LLOYD: Is there good communication 8 among all the districts in the State so that, for example, 9 if one district is doing a certain technology and another 10 part of the state is doing something else, is there good 11 sharing of that information so that gets distributed 12 amongst the districts? 13 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 14 Well, they do share as far as our working group meetings 15 go, and they do talk amongst themselves. I think we would 16 improve that somewhat. And we'll try to do that. 17 CHAIRPERSON LLOYD: Maybe somebody -- I had a few 18 other questions. 19 I had another question, I think in the new 20 guidelines it was proposing that there's a cap on the $12 21 million total. If some districts want to -- I got the 22 impression that wasn't limited to a particular district, 23 but that $12 million has to be throughout the State. So 24 if one district, in fact, had more that could match more 25 of that than another district who couldn't, they could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 actually have an agreement where one could put in more and 2 the other put in less as long as Statewide it's no more 3 than 12 million. 4 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 5 The guidelines would allow that, yes. 6 CHAIRPERSON LLOYD: Another question there. It 7 talks about the test procedure for alternative diesel 8 fuels need to be finalized. When is that likely to 9 happen? 10 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 11 The fuel staff has published their interim guidelines, and 12 one manufacturer is using those right now to do their 13 testing. I think once those are finalized they will do 14 the final guidelines. 15 CHAIRPERSON LLOYD: The one on the proposed 16 technical changes on the projects that mentioned the 17 school buses, I think, although I didn't see anything on 18 the slide there. Could you amplify on that on a little 19 bit. I know that's interesting. 20 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 21 Well, we have received some very recent comments. 22 Originally, the school buses and transit buses were 23 limited to alternative fuels only. And we've received 24 some recent comments and a request to make it more fuel 25 neutral and make the requirements just to meet the option PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 low NOx standards and so we are recommending that change. 2 CHAIRPERSON LLOYD: So that's in order. The 3 other one we talked about, lowering the emission reduction 4 criteria from 25 percent to 15. I think I've asked this 5 before, but maybe refresh me. Again, what's magical about 6 dropping down to 15, why not 20 given the fact that we're, 7 I guess, oversubscribed, why are we going down to 15? Is 8 there something magical there? 9 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 10 I don't think it's magic, but I think we're trying to 11 allow the opportunity for some of the new retrofit devices 12 that may be coming on the market that were, at this point, 13 uncertain of what the exact emissions reductions would be, 14 although they would be significant. And we want to allow 15 the possibility of those being able to participate in the 16 program in addition to the alternative diesel fuels. 17 CHAIRPERSON LLOYD: So this is then coming maybe 18 at the -- more at the request then of some of the 19 districts to give that flexibility there. 20 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 21 I'm sorry. 22 CHAIRPERSON LLOYD: Is that coming at the request 23 of the districts to give them more flexibility? 24 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 25 Yes, it is. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 CHAIRPERSON LLOYD: Okay. Those are the 2 questions I have. I know I have a few more questions, but 3 I know from some of the comment letters they'll be covered 4 there. 5 Ms. D'Adamo. 6 BOARD MEMBER D'ADAMO: Yes. I have a couple of 7 questions regarding the high demand of the program. The 8 staff report indicates that the demand for project funds 9 exceeds three times the amount of funds available. Is 10 that based upon -- well, let me just ask you, what is that 11 information based upon and how does that compare with the 12 report to the Legislature, because I believe that the 13 estimate of the demand is quite a bit higher than three 14 times the amount in the report to the Legislature? 15 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: That 16 was based on first year -- our experience with the first 17 year, which is the only year that is completely finished 18 where we had approximately $25 million and the 19 applications that were available were over $75 million. 20 What the advisory board took a look at was the 21 concept that there are a lot of fleets out there who 22 didn't get in in just the first year, didn't know about 23 it, weren't ready, weren't prepared to make a shift 24 towards cleaner fuels or cleaner technologies, and 25 therefore, I think there was an anticipation that there PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 would be additional fleets once we, you know, do an even 2 better job of communicating the program, that it would 3 rise to the $100 million level, so that's why the 4 discrepancy. 5 BOARD MEMBER D'ADAMO: And what was the advisory 6 board's figure, was it three times the amount? 7 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: The 8 advisory board recommended funding at the $100 million 9 level. That's the level they thought was about 10 appropriate. 11 BOARD MEMBER D'ADAMO: Did you have something to 12 add, Mr. Kenny? 13 EXECUTIVE OFFICER KENNY: The only thing I was 14 going to add is essentially one of the advisory board 15 recommendations is that the funding should be at the $100 16 million level as Mr. Kitowski was referencing, but that it 17 should be an ongoing funding. And the benefit of that was 18 that there would be more predictability and consistency 19 through the program, and that would therefore generate 20 probably greater applications in the program. 21 BOARD MEMBER D'ADAMO: Right. I actually agree 22 with that approach, and I'm wondering if -- and I realize 23 that that process is separated apart from what we're doing 24 here today and it has to go through the Legislature, et 25 cetera, but I'm wondering if this would be an appropriate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 opportunity for, in our resolution, to include some of 2 that information, that demand outweighs the available 3 funds and that it's not currently a permanent program and 4 that it's expected if it were a permanent program the 5 demand would be even greater. 6 EXECUTIVE OFFICER KENNY: I would agree. 7 BOARD MEMBER D'ADAMO: I'd make that suggestion 8 then that we include that in the resolution. 9 CHAIRPERSON LLOYD: Good idea. We should add 10 that in. That's an excellent idea. 11 Dr. Burke and then Mr. Calhoun, I'm not sure you 12 finished. I'll let Mr. Calhoun finish. I'm sorry. I 13 didn't intend to do that Mr. Calhoun. 14 BOARD MEMBER CALHOUN: Maybe I should wait until 15 Mr. Rooney comes up. 16 BOARD MEMBER BURKE: I want to wait till Mr. 17 Rooney comes up. Welcome to the ARB. And it is really 18 strange to see you sitting up here instead of South Coast. 19 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 20 Thank you, Dr. Burke. 21 BOARD MEMBER BURKE: But if we keep infiltrating 22 them, we'll take over. 23 (Laughter.) 24 BOARD MEMBER BURKE: That's the plan. My 25 question is a very brief question. And is that in your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 tenure at South Coast, did you conclude that the microchip 2 that you were talking about, which is currently under 3 test, that technology can document the fuel substitution 4 rate? 5 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 6 Well, I think we're uncertain right now of where that is 7 and that's why they're going through the testing. And 8 they need to go to the certification folks and get that 9 certified. 10 BOARD MEMBER BURKE: How long does that whole 11 process take? 12 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 13 I talked to the manufacturer yesterday. They've just 14 completed their testing and they'll meet with the ARB 15 staff in the next couple of weeks. And they hope to have 16 this finalized by the first of the year. 17 BOARD MEMBER BURKE: If this is, in fact, 18 effective, then doesn't that negate the necessity for 19 giving the executive director a necessity to be able to 20 ameliorate cases? 21 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 22 We don't have the results yet, so we didn't want to -- 23 BOARD MEMBER BURKE: If we had the results today 24 and they were positive -- what I'm driving at is maybe 25 we're taking this up -- this portion of it up a month or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 so too early, because if we have the results next month 2 and they're positive, quite frankly, our people at South 3 Coast have examined this extensively, and think that it's 4 going to check out all right by South Coast. But, you 5 know, I'm not opposed to it. I'm for it, but I just -- 6 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 7 Well, Dr. Burke, there could be -- this is just one 8 manufacturer that we're working with right now, and 9 there's at least one other manufacturer who may have a 10 product in the near future but has not started the 11 certification process, so we need to leave it open for 12 those other manufacturers to come in also. 13 BOARD MEMBER BURKE: I'm fine with this. 14 CHAIRPERSON LLOYD: Thank you. 15 Yes, Supervisor Patrick. 16 BOARD MEMBER PATRICK: Thank you, Mr. Chairman. 17 I have a question about the urban transit buses and the 18 school buses, because in our staff report it says that 19 it's alternative fuel only, and then apparently there's 20 been a change that's made apparently due to some industry 21 representation or something. 22 And so my question is, is the transit industry in 23 agreement -- or maybe my question should be reversed, is 24 the school bus industry in agreement with this as well as 25 the transit bus industry? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 EXECUTIVE OFFICER KENNY: We actually haven't 2 talked with the school bus industry or the transit 3 industry directly about this. It was more the concept 4 that we were proposing. Right now, what we actually had 5 was inability for a low NOx optionally certified bus to be 6 funded under the Carl Moyer program. And to the extent 7 that such a bus could be incentivized or could be made 8 available, we thought it actually did make sense to have a 9 fuel neutral kind of emissions biased approach. 10 And so what we were trying to do is really sort 11 of take out the impediment that currently exists and 12 simply make it more fuel neutral. But we think that, in 13 fact, from a school district or from the transit bus 14 standpoint, they would not have any problems with this. 15 BOARD MEMBER PATRICK: Well, interestingly enough 16 I'm meeting with a bunch of people tomorrow in my office 17 in Bakersfield who feel that it should be all alt fuel for 18 school buses, not only this money but the money that's 19 coming down that's specific to school buses. 20 And so that's why I'm surprised to hear that 21 there's a change. I haven't actually had the opportunity 22 to sit down with these folks yet, but it was my 23 understanding that there was some industrywide interest in 24 keeping it to be the alternative only. And so that may 25 not be the case, and I haven't actually, you know, sat PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 down and this discussion yet, but I just thought the 2 timing is incredible on this. 3 EXECUTIVE OFFICER KENNY: They would have a 4 chance, essentially to go with alternative fuels 5 completely if they chose to do so. My guess would be 6 that, in fact, they're probably focused to a great extent 7 more on the school bus monies, which we will bring to you 8 in the near term. 9 And the school bus monies are essentially -- 10 there's an additional $50 million there that needs to be 11 distributed for school bus purchases or retrofits 12 throughout the State, and we are seeing a fair amount of 13 interest in how that money be distributed and spent. 14 BOARD MEMBER PATRICK: I think this meeting 15 tomorrow is sort of the precursor to, you know, how this 16 money is going to be spent, but I think that it's 17 important there be a lot of communication with industry 18 representatives. Certainly, they have, you know, groups 19 of folks that get together on a statewide basis that are 20 interested in this and try to get a feel for what the 21 interest of the industry statewide is. 22 EXECUTIVE OFFICER KENNY: The one thing I'd like 23 to add, and Mr. Cackette reminded me of it, is essentially 24 when we talk about essentially eliminating the impediment 25 and then going with kind of the ability to fund optional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 levels of either diesel or CNG or some other fuel that can 2 make that, the reality right now is that there are no 2.5 3 gram NOx diesel engines out there. 4 The closest we are seeing is at least one engine 5 that basically is certifying at roughly the 3 gram level. 6 If, in fact, that provides some level of incentive to 7 bring cleaner Diesel engines in, it's obviously a benefit. 8 If it's doesn't, though, we wouldn't expect it to be 9 utilized. 10 BOARD MEMBER PATRICK: Thank you very much for 11 helping me clarify that. 12 CHAIRPERSON LLOYD: Point of clarification, Mr. 13 Kenny, how are you defining near term? I thought it was 14 December. Did you bring something else into that? 15 EXECUTIVE OFFICER KENNY: No. I was looking at 16 the near term in the context of the time frame associated 17 with the expenditure of this money. And so what we were 18 looking at is we will not see, you know, two gram NOx 19 diesel engines until roughly October 2002 is when we 20 expect to see kind of the -- at least the settlement 21 agreement requirements go into plan. 22 CHAIRPERSON LLOYD: But that item will come 23 before the Board next month? 24 EXECUTIVE OFFICER KENNY: The school bus item? 25 CHAIRPERSON LLOYD: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 EXECUTIVE OFFICER KENNY: Yes. 2 CHAIRPERSON LLOYD: Professor Friedman. 3 BOARD MEMBER HUGH FRIEDMAN: Could you clarify 4 for me the discount factor for the marine vessels item as 5 to which we have a communication from, specifically I'd 6 appreciate your explaining to me how you arrived at the 10 7 mile off-shore default value, and does that take into 8 account the point made in the correspondence? 9 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 10 Yes. 11 BOARD MEMBER HUGH FRIEDMAN: That is apparently 12 that NOx has a half life. 13 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 14 What our requirements are is that the use of the vessels 15 only be considered within whatever the district's boundary 16 is, whether that be three miles or 26 miles, so it's not 17 350 miles as described in the correspondence. 18 The previous guidelines allowed the use of 19 vessels throughout the off-shore of California with no 20 boundaries. So now we're saying that districts wanting to 21 fund marine vessels must consider the emission reductions 22 only within the boundaries of their district. 23 So I think it was a good point that was brought 24 up in that correspondence. This is a global problem, but 25 we're trying to address it on the more local level. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 BOARD MEMBER HUGH FRIEDMAN: But is it conceded 2 that the vessels that are outside of the ten miles that 3 are polluting, the pollution will within, up to 35 hours, 4 at least half of it will get to land? I don't know the 5 answer to that. I don't know the half life of it. 6 You haven't verified that? 7 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 8 No. 9 BOARD MEMBER HUGH FRIEDMAN: Okay, thank you. 10 CHAIRPERSON LLOYD: Well, I think in this 11 particular case, Professor Friedman too, it will really 12 depend on what the trajectory is. It may not be going 13 straight on land or where it goes, so I think they made 14 one modeling case here. I'm not sure. I don't doubt that 15 this may be okay, but I think there will be other cases 16 where you get stagnation, also depending on the elevation 17 of plume and a lot of things in there. 18 But as I understand you're talking about you can 19 go as far as 26 miles off shore to take that into account? 20 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 21 Well, I was giving the example of the South Coast, which 22 does monitor out to Catalina, which is 26 miles. 23 CHAIRPERSON LLOYD: So that can be taken into 24 account, yes. 25 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 Yes. 2 CHAIRPERSON LLOYD: Okay. 3 Any other questions, comments from the Board? 4 With that then we have three witnesses signed up 5 to provide written statement, both written and oral 6 comments. Just a reminder to the witnesses, if they 7 would, just identify their names and if they've got any 8 written comments give it to the clerk of the Board. 9 So we have three, Kent Stoddard from Waste 10 Management, Dave Smith from BP/Arco and Peter Rooney from 11 Pony Pack. 12 MR. STODDARD: Good morning, Mr. Chairman and 13 members of the Board. My name is Kent Stoddard 14 representing Waste Management. We appreciate the 15 opportunity to provide comments this morning, and we did 16 provide written comments, and I'm just going to summarize 17 a couple of points that are in those comments. I did want 18 to say one thing by way of background. 19 Four years ago we placed our first natural gas 20 refuse truck into service in Palm Desert, California with 21 grant assistance from the South Coast Air District. Today 22 we have 50 natural gas refuse trucks. Within the next two 23 years, we'll deploy an additional 400 trucks. 24 And one of the principal funding sources that has 25 made that possible has been the Carl Moyer program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 Roughly a third of those 400 trucks that will be deployed 2 have been with the commitment of grant assistance from the 3 Moyer program. So we view this as the most important 4 financial incentive program for air quality in the entire 5 country, and we appreciate the incredible support that is 6 received from this board and from the administration. We 7 are very supportive of the revisions of the guidelines. I 8 think, for the most part, they improve the program 9 significantly. 10 We have two concerns. And one of those deals 11 with the baseline NOx emission factor for refuse trucks. 12 The adjustments have been made within the guidelines so 13 that the baseline factor -- there's two baseline factors 14 now for heavy-duty trucks, one for refuse trucks, which is 15 a lower amount, and one for all other heavy-duty trucks 16 and we think that distinction is actually inappropriate. 17 It underestimates the air quality benefits that are 18 associated with converting diesel refuse trucks into 19 natural gas. 20 And what we think was overlooked was the unique 21 duty cycle of a garbage truck. It does not operate -- the 22 staff assumed that because it does not operate at highway 23 speeds that some of the default problems that resulted 24 from the engine manufacturers putting defeat devices -- or 25 allegedly putting defeat devices on their trucks would not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 impact garbage trucks, because they don't spend a lot of 2 time on the highway. It's a start and stop operation 3 primarily in commercial and residential areas. 4 But what we think got overlooked in that analysis 5 was that the refuse truck, the operating conditions are 6 brutal, high temperatures, long idle times and power 7 takeoff equipment, which is a very extensive part of the 8 garbage truck, it's what does the work, it's a massive 9 hydraulic system that does all of the lifting, and every 10 time that hydraulic system is put into place you've got to 11 rev up the engine. 12 So in the case of a commercial garbage truck, 13 that's 400 or 500 lifts per day. A fully automated 14 residential refuse truck will make on average 1,200 lifts 15 per day. So we believe the emissions from a refuse truck 16 are certainly not less than an on-line truck and that are 17 quite conceivably even higher. 18 So we would suggest that a modification be made 19 to the guidelines so that that penalty, if you will, for 20 refuse trucks is eliminated and the same emission factor 21 is used for all heavy-duty trucks. 22 The second issue that we had was the guidelines 23 do establish a PM factor for natural gas buses, but they 24 don't for natural gas heavy-duty trucks. And our 25 experience has been the reductions in particulate when we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 switched from diesel to natural gas are enormous, and we 2 are very supportive of this increased emphasis on PM 3 reductions as part of the Moyer program. 4 We think there's tremendous synergy there to 5 achieve two air quality objectives. But we think it would 6 be better and more helpful if there was also a factor in 7 the guidelines for wanting -- to assist in the calculation 8 of what those benefits are for natural gas heavy-duty 9 trucks. 10 I'd be glad to answer your questions. 11 CHAIRPERSON LLOYD: Since they operate in 12 residential communities. They're obviously reducing it. 13 Maybe, if I could ask staff to comment on both of those 14 issues. 15 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: Let me 16 just start with the first one. What Kent talked about was 17 the change in emission factors, and we presented this as 18 one of our issues. When we changed our emission factors 19 in some cases they switched around certain categories 20 which are harder qualifying, and quite honestly trash 21 trucks are one of them. As Kent said, his industry -- him 22 personally and his industry have been very supportive of 23 the Carl Moyer program and have utilized it very 24 effectively. They've been one of the, sort of, the 25 shining stars of the Carl Moyer program in that industry PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 that is working very effectively to move to cleaner fuels. 2 So, obviously, anything that impacts this a 3 little bit is of critical concern. Especially when 4 they've got long-term plans to purchase more and more, 5 they want to make sure that, to the extent possible, that 6 funding is available. And we appreciate that and we want 7 to work with them on that. 8 What we did was some -- there was some discussion 9 about not considering the unique duty cycle of trash 10 trucks. Unfortunately, you know, actually, we did 11 consider the unique duty cycle of trash trucks. They are 12 a little different inherently. And we can all envision 13 trash trucks, those very short-run, stop, power takeoff, 14 you know, very short runs and stop, and we have limited 15 data. Obviously, we would like more data on everything. 16 But what data we do have available right now is 17 from one manufacturer. It indicates that off-cycle 18 conditions happen in trash truck operations about 20 19 percent of the time. We used that information when we 20 were looking at emission credits and setting standards for 21 emission credits. We tried to come up with more refined 22 data. And currently that is the best data we have that 23 it's about 20 percent of the time that they're in 24 off-cycle mode. 25 So we took the baseline emission numbers for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 basically no off-cycle conditions and then we added an 2 increment to allow for 20 percent off cycle. It is not as 3 high as long haul trucks. We do not believe they are in 4 off-cycle emissions as much as long haul trucks. 5 But we do allow a couple of other things that 6 hopefully will mitigate this. Hopefully, we believe we're 7 pretty -- will not limit the amount of incremental costs 8 that they can get. I mean, one, we do allow trash trucks 9 to look at their fuel usage if they want instead of 10 strictly their mileage, so if there is significant fuel 11 usage from power takeoffs and other conditions, that can 12 be utilized. 13 Also, we've made some sort of last minute -- not 14 last minute, but we made some changes toward the end that 15 should make it a little easier, such as the Consumer Price 16 Index came into consideration. So instead of $12,000 a 17 ton it's $13,000 a ton. 18 When we've looked at a lot of the trash truck 19 projects that were funded over the next year, with the 20 flexibility we have, we believe that they will continue to 21 get the full incremental cost funding. There may be 22 isolated cases where they don't get the full incremental 23 cost, but, you know, we really do believe that they will 24 be able to get that funding, and we're willing to work 25 them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 We've allowed some flexibility for them to come 2 back to us if they think that their particular application 3 has more than 20 percent on an off-cycle, so they can come 4 back to us and get a case-by-case reading. 5 BOARD MEMBER BURKE: Can I ask one question 6 quick? 7 CHAIRMAN LLOYD: Yes, Dr. Burke. 8 BOARD MEMBER BURKE: What percentage of your Carl 9 Moyer funds that you have received are outside the South 10 Coast District? 11 MR. STODDARD: I would say only about 15 percent 12 or 20 percent. 13 BOARD MEMBER BURKE: So we're at 85 percent of -- 14 MR. STODDARD: Yes. 15 BOARD MEMBER BURKE: I would encourage other air 16 districts to look into this. These guys really do a good 17 job, really do a good job. 18 MR. STODDARD: Mr. Chairman, if I could make two 19 comments. One is that we would encourage the Board not to 20 look to the engine manufacturers as a source of off-cycle 21 high NOx emissions. And without slandering any of the 22 manufacturers, it's not in their interests to provide high 23 estimates of what those off-cycle emissions are, so we 24 would really like to work with the staff, and, if 25 necessary, try to set up some kind of in-use testing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 program that provides, you know, a more accurate 2 assessment of what the true in-use emissions from refuse 3 trucks really are. 4 CHAIRPERSON LLOYD: Sounds like a good idea. I 5 don't know whether that that's possible. Your point is 6 well taken. 7 Maybe Mr. McKinnon has a question, but I think 8 Jack you were going to answer the second question. 9 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: The 10 second question was related to the PM -- I'm sorry, it was 11 related to the PM emission factors. 12 MR. STODDARD: Yeah. The PM factors one 13 established for the buses but not for the trucks. We 14 think there's a real parallel there and we'd like to see 15 the addition of a PM factor for the natural gas truck as 16 well. 17 ON-ROADS CONTROLS BRANCH CHIEF KITOWSKI: Yeah, I 18 think we would -- there was a considerable amount of data 19 available on natural gas transit buses, and that was a 20 little easier for us to do, but we would be very happy to 21 work with you in trying to quantify that number for trash 22 trucks. 23 CHAIRPERSON LLOYD: Mr. McKinnon. 24 BOARD MEMBER McKINNON: Yeah, I was sort of going 25 to ditto that we ought to be the ones studying what that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 number looks like. I mean, the engine manufacturers don't 2 make the hydraulics, they don't make the whole package. 3 And I would think the operation running as it runs in the 4 real world might be different and maybe be configured 5 differently with different trucks and that kind of thing. 6 So I think it's something we ought to look at ourselves. 7 EXECUTIVE OFFICER KENNY: I was just going to say 8 I think the solution probably does lie in essentially 9 having us work with Mr. Stoddard and basically looking at 10 the date in trying to make sure we both fully understand 11 it, and we're happy to do that. 12 BOARD MEMBER BURKE: We've been trying to run 13 some tests as a comparative. And let me tell you, if -- 14 the City of Los Angeles just hates these guys, because 15 they want to stick with their diesel trucks that they have 16 and not upgrade, so they designed a test which was skewed 17 to make Waste Management just look absolutely terrible. 18 Waste Management went up there, zipped up those hills 19 right past them. 20 And after that, the City, now this is the City of 21 Los Angeles, claimed that the Waste Management trucks 22 weren't full of trash when they went up the hill. So, you 23 know, I think an impartial group, I would agree with Mr. 24 McKinnon, that an impartial group needs to look at this, 25 because if you go to the individual governmental agencies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 that govern this, you're not going to get an adequate 2 equal test. 3 CHAIRPERSON LLOYD: Of course, I'm not in the 4 area where -- we should be working with your staff, Dr. 5 Burke on that. 6 BOARD MEMBER BURKE: The key thing is the hills. 7 Everybody says that they work fine as long as it's flat. 8 And you know everybody thinks Los Angeles is flat, but 9 it's not flat. And so that's where the problem was. But 10 these vehicles, if you wanted to verify that, ran up those 11 hills full of trash just as fast as the other vehicles. 12 MR. STODDARD: I will plug the engine 13 manufacturers. We're getting good support from some of 14 those manufacturers to produce good horsepower, high 15 torque engines that are capable of hitting some pretty 16 tough working conditions on some very steep hills. 17 CHAIRPERSON LLOYD: After dinging them earlier, 18 you decide you better make up for it. 19 MR. STODDARD: Balance that out. 20 (Laughter.) 21 BOARD MEMBER BURKE: But on the other side of the 22 issue, she told me that you were outside -- your guys were 23 outside our offices at 6:30 in the morning making sure you 24 were number one in line for the -- was that true? 25 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 Yes. 2 (Laughter.) 3 CHAIRPERSON LLOYD: Thank you very much. 4 Next we have Dave Smith from BP/Arco, and then 5 Peter Rooney. 6 MR. SMITH: Thank you, Mr. Chairman, board 7 members. I hope you appreciate my high tech slides. 8 (Laughter.) 9 (Thereupon an overhead presentation was 10 presented as follows.) 11 MR. SMITH: And I appreciate the help of your 12 staff. 13 CHAIRPERSON LLOYD: I thought this was now beyond 14 petroleum for BP. 15 MR. SMITH: We're into artwork now. 16 (Laughter.) 17 MR. SMITH: Well, this is a -- first off, I'd 18 like just to tell you that BP, and previously ARCO, has 19 been very supportive of the Carl Moyer program. We've 20 been supportive of getting funds in the school -- in the 21 Governor's budget for school buses. We've assisted with 22 San Joaquin and Sacramento getting funds to help with 23 their situations that were based considerably on the 24 issue -- or the procedures through the Carl Moyer program 25 and would like to continue in that role, because we think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 this is a very good program. 2 And this situation here on this slide 3 demonstrates where there are -- where you don't have any 4 air districts or public cities or what have you mandating 5 a particular fuel technology, whatever, the owner operator 6 has a choice of buying CNG and diesel, and then hopefully 7 in the near future some low-emission Diesels. 8 But currently when you look at that choice, and 9 there's no mandate, the differential costs between a CNG 10 vehicle and a diesel vehicle, you know, is somewhere in 11 the $30 to $40 range. And we think that that's very 12 appropriate for those folks to come in and apply for that 13 kind of funding for those CNG vehicles if they choose to 14 buy it where there isn't a todate. 15 --o0o-- 16 MR. STODDARD: Unfortunately, what's been 17 happening is that in certain jurisdictions they have been 18 mandating, by local rules or memorandums or what have you, 19 that they will only allow a specific fuel mostly being an 20 alternative fuel such as CNG. In that case, diesel 21 vehicles, whether they're low-emitting diesel or not, are 22 not allowed under the Carl Moyer program. You just can't 23 buy them in those jurisdictions. The only vehicles or 24 engines you can buy are the CNG. 25 And so the question then is what amount of Carl PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 Moyer funding should those vehicles get as compared to the 2 other situation where there isn't a todate? 3 Now, within the CNG vehicles and engines some of 4 the vehicles are actually certified below two and a half 5 gram NOx standard. Some, in fact, are certified above the 6 two and half gram NOx engine. So the question is what's 7 the incremental cost between a vehicle that meets the Carl 8 Moyer criteria of low NOx emissions and ones that don't. 9 And we've talked to the engine manufacturers and 10 they say that number is very small. In some cases, those 11 engines just naturally meet it. They don't have to do 12 anything. They don't charge any more for a vehicle that 13 meets the low NOx standard versus one that doesn't. So in 14 those situations we think that the alternative fuel 15 vehicle should only receive that amount of incremental 16 funds that the manufacturer associates with producing a 17 vehicle that meets a low NOx standard, where, in fact, in 18 the guidelines this topic is not specifically addressed, 19 but there have been letters to the air districts on this 20 subject, and the ARB allowing them to claim the full 21 $30,000 to $40,000 in the incremental costs, even though 22 the diesel vehicles are mandated out of the program. 23 We think this is in clear violation of 1571. 24 This is a very important issue to us, and we would ask 25 that you direct staff to address this issue in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 guidelines and make it clear that CNG vehicles, when those 2 are the only vehicles allowed, are not allowed to claim 3 the whole $30,000 or $40,000 under the Carl Moyer program. 4 CHAIRPERSON LLOYD: Can I just ask you a question 5 on that line. Is that line of argument supported by your 6 colleagues in the industry? 7 MR. SMITH: Yes. 8 CHAIRPERSON LLOYD: So while it's BP, you're 9 really speaking on behalf of more than one group? 10 MR. SMITH: I do chair the WSPA diesel taskforce 11 I work with school districts. I work with other folks. I 12 work closely with engine manufacturers. And this is BP's 13 position, but I think that there were many other people 14 who would be willing to support that. 15 --o0o-- 16 MR. SMITH: The next slide, I think this was an 17 issue that we just recently resolved with the staff where 18 they are making a fuel neutral for school buses and 19 transit buses, so we're very appreciate of those changes, 20 so we can go right on. 21 --o0o-- 22 MR. SMITH: The next high-tech slide is 23 concerning infrastructure. And currently under the 24 guidelines districts can use their money to fund 25 infrastructure costs, and they are allowed to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 considered as matching funds. It's interesting, though, 2 that within the guidelines those district monies are not 3 included in the cost-effectiveness calculations. 4 And 1571 is pretty clear that any State or public 5 or local funds that are applied for these kind of fleets 6 should be included in the cost effectiveness. So, again, 7 we believe the guidelines are inconsistent with the 8 enabling legislation. Plus, 1571 actually established an 9 infrastructure demonstration program because when that 10 bill was going through, there was a lot of disagreement 11 about whether infrastructure costs should even be included 12 in the program. 13 And so that is supposed to be going on. It's 14 being handled by CEC in consultation with your staff, and 15 there's supposed to be a report out on March 1st. And 16 certainly there are a lot of issues around the cost 17 effectiveness and policy issues about including 18 infrastructure costs in the Carl Moyer program. And so we 19 believe it's premature to include these infrastructure 20 costs at this time. But if they are to be included, they 21 certainly should be included in the cost effectiveness 22 calculations. 23 CHAIRPERSON LLOYD: Dr. Burke. 24 BOARD MEMBER BURKE: Does that include electric 25 vehicles? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 MR. SMITH: Yes, it does. 2 --o0o-- 3 MR. SMITH: Now, other issues, and we would just 4 ask that we'd like to work with your staff over the next 5 few months about an issue that has come recently, that as 6 Carl Moyer funds are spent, one of the things that have 7 come to our attention, that in some cases depending on the 8 vehicle, the source, that other types of pollutants will 9 be increased. And I don't think it's in the ARB's best 10 policy to be spending money for technology that would, in 11 fact, increase in some cases other pollutants. 12 These are pollutants, in one case, CO for 13 example, there is at least one air district that is still 14 in nonattainment for CO. And the funds that could be 15 spent under Carl Moyer could actually increase CO 16 emissions, that would make it more difficult for them to 17 comply with their requirements. 18 In other cases, well, we really don't know in 19 other cases, but I think this is a kind of a policy issue 20 that certainly we believe that ARB does not want to be 21 spending money to control one type of pollution but at the 22 same time increasing pollution of another sort. 23 So in summary -- 24 CHAIRPERSON LLOYD: On the CO issue, Dave, can 25 you be a bit more specific there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 MR. SMITH: Well, with CO, the CNG alternative 2 fuel vehicles customarily have CO emissions that are five 3 to six times higher than a diesel vehicle, just normal 4 operations, is part of the -- just part of the way they do 5 it. 6 Now, their emissions -- their CO emissions could 7 be reduced by putting add-on controls to the vehicles, but 8 as of right now they're not required to do that. So they 9 also -- CNG vehicles customarily, not always, have higher 10 non-methane hydrocarbon emissions than diesel vehicles. 11 And this is somewhat fundamental to the combustion of what 12 goes on with these two vehicles, the two types of 13 combustion types. 14 So that's where we mean that we really need to 15 kind of look at this. I just think it's a policy issue. 16 It's complicated, but I think it's something that we all 17 should be looking at to make sure we're not doing 18 something with, you know, unknown consequences. 19 CHAIRPERSON LLOYD: But these vehicles are 20 meeting the emission standards? 21 MR. SMITH: Yes, they are all meeting the 22 emission standards, but in some cases they are 23 considerably higher, some times five times. I've seen 24 emission data where they're even 10 to 20 times higher 25 than CO emissions. These are not insignificant emissions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 They could add up to hundreds of tons of CO every year or 2 every day. 3 --o0o-- 4 MR. SMITH: In summary, we really think it's 5 important that where jurisdictions are mandating 6 alternative fuels, that they are mandating alternative 7 specific fuels or electrical engines, that they not be 8 allowed to obtain the same level of Carl Moyer funding as 9 if there was no todate in place. 10 We're glad to see that the staff is recommending 11 changes that we think will make the school and transit bus 12 guideline fuel neutral. We think the infrastructure 13 issues that are in the rule are premature and certainly 14 the cost effectiveness issue is very onerous to us. And 15 this increased emission is something that I believe that 16 you should be looking at in the future. 17 Thank you very much. 18 CHAIRPERSON LLOYD: Maybe I could ask staff to 19 respond before we ask board members questions. 20 EXECUTIVE OFFICER KENNY: I could take a shot at 21 it at least initially and then I'll ask staff for some 22 additional help. 23 With regard to the first issue that Mr. Smith 24 raised, the funding. That is currently allowed under the 25 Carl Moyer program for the CNG busses. What we have done PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 here is we basically recognize that there are certain 2 jurisdictions throughout the State that do have the 3 ability to go with alt fuel approaches if they choose to 4 do so and some jurisdictions, for example the South Coast, 5 have done that. 6 We do basically continue to support funding for 7 optional low NOx standard buses that are certified to 8 those low optional standards. The rationale that we have 9 for that is that right now the existing standard is a 4 10 gram standard. And so therefore, if, in fact, a bus 11 manufacturer is certifying a bus to a 2.5 gram standard, 12 it is an optional low NOx standard that essentially is 13 substantially better than the required standard of 4 14 grams. 15 We would not fund, for example as Mr. Smith says, 16 a CNG bus which is certified to higher than 2.5 grams of 17 NOx. But if it is certified to 2.5 grams or lower, we do 18 think, in fact, that there is a reason to continue to fund 19 that. 20 With regard to the infrastructure allowance for a 21 match, but not basically in the cost effectiveness, it's 22 very hard to basically take one particular piece of 23 infrastructure and allocate the entire cost of that 24 infrastructure to one particular project. I mean, the 25 reality is is that infrastructure is being utilized PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 essentially for the future. It is being utilized for 2 multiple projects. It is being spread across the board. 3 And so therefore, we think it is reasonable to essentially 4 allow the districts to take the cost of that 5 infrastructure, crown it as a match toward the Carl Moyer 6 program funding but not really simply calculate it in as 7 essentially for cost effectiveness, because it probably is 8 not an accurate cost effectiveness calculation. 9 The last one with regard to pollutants. The Carl 10 Moyer program is primarily a NOx program. It now has also 11 a PM emphasis. And so what we are looking for are NOx and 12 PM reductions. And that has been the emphasis of the 13 program from its inception. There may be some additional 14 CO increases. However, the CO increases are not of 15 substantial concern at this point in time when you look at 16 where we are with regard to attainment of CO throughout 17 the State of California, and when you look at also what 18 the precursor consequence of CO is to ozone violations. 19 It is not the more significant pollutant as a NOx or 20 hydrocarbons or PM would be. 21 With regard to some of the other pollutants that 22 Mr. Smith talked about, again, we have the same kind of 23 thought is we are not looking primarily at consequences to 24 ozone in the way that we would see from NOx and 25 hydrocarbons or PM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 MR. SMITH: Chairman Lloyd? 2 CHAIRPERSON LLOYD: Yes. 3 MR. SMITH: Well, at least with the last issue, 4 the non-methane hydrocarbons do include many of the toxics 5 in the emissions. And so although it may not have a 6 significant effect on the ozone, it may have a significant 7 effect on the toxicity of the result in emissions. 8 EXECUTIVE OFFICER KENNY: Even if we were to look 9 at a toxicity, I mean we basically have universal numbers 10 that are associated with diesel emissions and we are 11 trying to reduce diesel emissions in order to reduce 12 diesel particulate and thereby reducing toxicity. 13 I mean we have looked at essentially diesel 14 particulate emission reductions as a surrogate for 15 toxicity reductions. We, at least at this point in time, 16 do not have hard and fast data with regard to the CNG and 17 the toxicity associated with that. 18 We are working on that. But our suspicion is, at 19 least, that the toxicity there is lower than we see with 20 the diesel particulate, at least in terms of just the 21 particulate numbers and how they would measure up with 22 toxicity. 23 MR. SMITH: One last comment, if I might. We are 24 not disagreeing that under a mandated situation, if a 25 district or a jurisdiction wants to todate alternative PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 fuels, they should be allowed to qualify or to request a 2 certain amount of Carl Moyer funding. 3 The question is what is the baseline that you 4 compare it with. The way the staff has allowed districts 5 to move forward is to assume, for some reason or another, 6 that those diesel vehicles are still able to be purchased, 7 where, in fact, they're not. And so certainly in talking 8 to the engine manufacturers, it costs very little money 9 for them to make it incremental between a 3.2 CNG bus 10 versus a two and a half gram CNG bus. 11 I mean the one conversation I've had with them 12 they said it's probably less than $1,000. That's what it 13 is. So if you're mandated to buy a CNG bus, the public 14 jurisdiction that made that decision was saying we're 15 accepting the idea that you're going to have to pay that 16 extra money for that CNG bus. And if the ARB then wants 17 to come in and say well, we want to make sure the CNG bus 18 that you buy is the lowest emitting CNG bus, then fine, 19 we'll pay them that incremental funds to get that CNG. 20 But don't give them the whole incremental difference 21 between a diesel bus and a CNG bus, when the diesel bus 22 isn't even allowed to be purchased. 23 CHAIRPERSON LLOYD: Mr. Kenny. 24 EXECUTIVE OFFICER KENNY: If I could respond. 25 Basically, the standard that we are measuring things PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 against is the standard that is appropriate to the 2 heavy-duty engines and that is a four gram standard at 3 this point. 4 If we were to essentially establish a new 5 baseline essentially that created, for example, a three 6 gram level for CNG and we maintain the four gram level for 7 diesel, I mean, there's a disparity that's occurring there 8 that essentially is a bias against one fuel also. What 9 we're trying to do is simply recognize what our existing 10 standards are, both at the required level and at the 11 optional level, and then providing funding for those that 12 are down at the optional levels. 13 BOARD MEMBER BURKE: Mr. Smith was being really 14 kind to me, because I know I'm the bottom of his problem 15 here for most of it. And quite honestly when we were 16 involved in the 1190 series, we were moving ahead at what 17 I thought was a judicious rate. I think it might have 18 been more aggressive and necessary. And I'm kind of glad 19 Mr. Kenny provided me with some information that made me 20 look at certain areas of it. 21 And because of that, tomorrow we have on our 22 agenda at the South Coast some language as it relates to 23 the modeling of the evaluation of some of these things, 24 because it is -- it's way complex -- beyond my ability, my 25 scientific ability to understand this complexity. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 what I've asked the staff to do is pull that off tomorrow 2 and to be in touch with Mr. Kenny and members of the 3 industry to sit down and take two or three or four months, 4 however long it takes to come up with a model which is 5 real, you know, not one that looks good in the press, but 6 one that really does the job for both the people of the 7 South Coast District and the industry itself. 8 But I have to say, I appreciate very much Mr. 9 Kenny's help in this issue and Mr. Smith, who has -- I'm 10 sure I have tried his patience beyond human limits, but it 11 was in the interests of good government trust me. 12 CHAIRPERSON LLOYD: Thank you, Dr. Burke. 13 Mr. McKinnon. 14 BOARD MEMBER McKINNON: I think I'm going to end 15 up supporting the changes, but I want to comment on 16 something that I see happening. And I heard it this 17 morning, that a program that we're trying to move 18 something forward isn't really moving something forward, 19 it's just paying for someone to meet a todate. 20 And that worries me. I understand that we have 21 to have a consistent -- some consistent setting throughout 22 the State. And what really brought this to my attention 23 is next month we'll be dealing with the school buses. And 24 I think it's real, real important to move repair -- move 25 the school bus issue so that we affect the most children PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 as possible, and we do something to move technology 2 forward. 3 But, you know, I got a letter where somebody 4 wants us to pay for new school buses because the school 5 district needs to buy new school buses. We're not the 6 school. We're not the Board of Education. We're not the 7 school bus purchasing agency. And to the extent that 8 people use our agency or our funding that we're developing 9 to try to make things better, to fund shortfalls in 10 funding transit or school buses, I think there's a 11 slippery slope there, both in terms of kind of credibility 12 of what we're trying to accomplish and actually whether or 13 not we accomplish. I think it could limit whether or not 14 we accomplish things. 15 If what we want to do, in part, is clean up 16 diesel, and we have pushed hard that people take the 17 sulfur out of the diesel so we can do retrofits in 18 trucking and other things, I think it's significant that 19 we pay careful attention that we're not taking money that 20 helps move progress. And I'm sure there's progress in our 21 alternative fuels also, but I don't think it's our -- I 22 don't think it's necessary for us to pay for something 23 that somebody has to buy anyway just because it's under a 24 limit. That worries me. 25 I think -- you know, I'm going to stand with this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 resolution. I understand that you have to have a standard 2 statewide, but long term we've got to look at this. I 3 think he raises a real valid point. 4 BOARD MEMBER BURKE: Mr. McKinnon, I wish I had 5 only gotten one letter, you know, because if you are in 6 South Coast and you represent, you know, Los Angeles, San 7 Bernardino, Riverside and Orange County, none of those 8 school districts -- 9 BOARD MEMBER McKINNON: Mr. Burke, I do represent 10 those counties on this board. 11 BOARD MEMBER BURKE: Oh, good. Yeah, right. As 12 a state, but they look for the local guy. They don't 13 expect you to come over and fix their potholes. See, 14 you're up the road. 15 But the problem is not the purchase of new school 16 buses necessarily and then wanting us to pay for that, 17 it's the other school districts who are second and third 18 degree more poor. And they buy the used school buses from 19 the wealthy districts and then they keep them for awhile, 20 run them downhill and then they sell them to the poorest 21 school districts and then they sell them to a foreign 22 country. 23 And the preliminary results from the study that I 24 mentioned a couple months ago on the interior of school 25 buses came back to me last week, and it says that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 pollution inside the school buses, diesel school buses, is 2 ten times what it is at the tailpipe. 3 So, you know, I don't know how we use our 4 resources, but when you talk about our children, you know, 5 it's going to be a very tough decision down the road of 6 what we do with this. 7 CHAIRPERSON LLOYD: Yes, Mr. Calhoun. 8 BOARD MEMBER CALHOUN: I'd like to go back to one 9 question Mr. Smith raised and that is about allowing an 10 increase in the criteria pollutant. I think the point Mr. 11 Smith made is we are funding equipment that controls one 12 or two pollutants, but yet we are allowing an increase in 13 another pollutant. This seemed to be contrary to what 14 past policy is, it has to be? 15 EXECUTIVE OFFICER KENNY: We did not want to see 16 increases in any pollutants. The difficulty here is that 17 there may be some increases in CO, there may be increases 18 in CO2, there may be increases in non-methane 19 hydrocarbons, but we are getting substantial reductions 20 both in the NOx and the PM. And the primary purpose of 21 the program was to recognize those two pollutants as 22 precursors toward ozone, and to achieve the benefits from 23 that. 24 We are in a pretty good position with regard to 25 CO attainment status throughout the state, which I think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 is the primary thrust in Mr. Smith's argument. And 2 although we do have, at least, one portion in the Los 3 Angeles basin, which is still nonattainment, everywhere 4 else in the state we're in attainment on CO. 5 And so, if anything, we probably could afford 6 some increased CO without a health consequence as opposed 7 to the increased NOx or the increased PM that would be 8 associated with not doing this program, where we clearly 9 are not even in attainment of the health standards at this 10 point. 11 BOARD MEMBER CALHOUN: How do you propose to 12 enforce this standard? Say that you have a CO problem in 13 one particular air quality management district, which is 14 very close and someone wants to install equipment in that 15 area, how would you or the Board know about that, how do 16 you control that? 17 EXECUTIVE OFFICER KENNY: Well, I think basically 18 what we look at, for example, is on CO, where do we get 19 the biggest bang for the buck. And where that comes from 20 essentially is from the turnover in the light duty fleets 21 and from the fuels that we basically are using for those 22 fleets. 23 I don't think we're going the see, essentially, a 24 CO attainment consequence from some buses or some trucks 25 that are out there, essentially, that have maybe PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 marginally higher CO levels. I mean, I think, basically, 2 what's happening is that we're getting the vast majority 3 of our CO reductions from that light-duty fleet and light 4 duty vehicles. 5 BOARD MEMBER CALHOUN: I have another question 6 that I want to ask to staff, but I'd prefer to wait until 7 Mr. Rooney comes up. 8 CHAIRPERSON LLOYD: Professor Friedman. 9 BOARD MEMBER HUGH FRIEDMAN: Waiting for Mr. 10 Rooney. 11 (Laughter.) 12 BOARD MEMBER HUGH FRIEDMAN: I have a question, 13 if I may, I'd like to address it to Ms. Walsh our counsel. 14 To what extent is the procedure we're following consistent 15 with the statute, the statutory authority, to make Carl 16 Moyer funds available? But apparently that's prohibited 17 if it's for equipment or for uses that are mandated or 18 required by any local, State or federal rule, regulation, 19 et cetera, et cetera? 20 GENERAL COUNSEL WALSH: Right, that's correct. 21 The statute does prohibit use of the funds where the 22 equipment is mandated. As Mr. Kenny indicated, in this 23 case, we have concluded that the CNG buses are not 24 required under -- that the CNG buses that would be funded 25 under the program are not required under the South Coast PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 rule, in the sense that the statute reflects. 2 That is that although the South Coast rule 3 requires alt fueled vehicles, they do not require vehicles 4 that meet the low NOx standard, and the vehicles that will 5 be funded under the program actually meet that optional 6 low NOx standard. And so there is a matter of choice 7 being exercised by the procurer of the equipment that 8 takes it out of that exclusion in the statute. 9 BOARD MEMBER HUGH FRIEDMAN: Are you saying that 10 purchasers within the South Coast District have an option? 11 GENERAL COUNSEL WALSH: They have to buy alt 12 fueled vehicles as long as they're available. If 13 they're -- 14 BOARD MEMBER HUGH FRIEDMAN: They have to buy? 15 GENERAL COUNSEL WALSH: Excuse me, they have to 16 purchase alt fuel buses if they're available. 17 BOARD MEMBER HUGH FRIEDMAN: Alt fuel? 18 GENERAL COUNSEL WALSH: Alt. Alternative Fuel. 19 I'm sorry. CNG buses. 20 BOARD MEMBER HUGH FRIEDMAN: CARB speak. 21 (Laughter.) 22 GENERAL COUNSEL WALSH: Yes, absolutely. Fifteen 23 years ago I swore I'd never do that, but it's crept upon 24 me over time. 25 But they're not required, under the South Coast PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 rule, to purchase buses that meet that optional standard 2 that those CNG buses will meet. So the decision -- 3 BOARD MEMBER HUGH FRIEDMAN: As a practical 4 matter, do they have any choice but to buy CNG buses? 5 GENERAL COUNSEL WALSH: No, they will be buying 6 CNG buses. 7 BOARD MEMBER HUGH FRIEDMAN: So the effect of the 8 requirement laid down by the South Coast District is that 9 purchasers of buses within that district have only one 10 choice? 11 GENERAL COUNSEL WALSH: Alt fuel buses, CNG 12 buses, but not CNG buses that meet the low NOx standard, 13 which is the option that's being exercised that we feel 14 allows these purchases to be covered under the Carl Moyer 15 program. 16 BOARD MEMBER HUGH FRIEDMAN: And as I understand 17 it, we're only allowing the supplement to the funding for 18 those that do meet -- 19 GENERAL COUNSEL WALSH: That's correct. 20 BOARD MEMBER HUGH FRIEDMAN: -- the lower 21 standard. So not all buses, potentially -- not all CNG or 22 alt fuel buses that are purchased in the South Coast, to 23 the extent they do not meet this lower standard would be 24 eligible for funding? 25 GENERAL COUNSEL WALSH: That's correct. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 MR. SMITH: Well over 90 percent of them will, 2 though. I mean, if you were a transit bus or a school bus 3 operator and, you know, it's very much in your favor to 4 make sure that it qualifies for that two and a half gram 5 NOx standard, because as of right now that means a $30,000 6 to $40,000 check that comes to you from the Carl Moyer 7 program. 8 And what you were kind of leading up to, the 9 follow-up question that I would hope you will ask is, is 10 what is the cost differential between buying a CNG bus 11 that doesn't meet that two and a half gram standard and 12 one that does? And that answer is very little. 13 GENERAL COUNSEL WALSH: Certainly, the issue that 14 Mr. Smith raises, and as Mr. McKinnon discussed, is an 15 important policy matter for this board to take up. But 16 what I want to clarify for you is that as a matter of law 17 we do not see the requirement that the funds not be used 18 for mandated or requirements under district rules, state 19 rules as an impediment to moving forward, from a legal 20 problem here. 21 BOARD MEMBER BURKE: If I'm correct in my 22 understanding, when we come out with the new model, it 23 will be such that clean diesel, according to those who say 24 what it can do, will meet the same standards as the CNG 25 buses, and therefore, then, under my understanding, be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 eligible for Carl Moyer funds anyway. So it is not CNG 2 alone, it is also driving the technology on clean diesel. 3 BOARD MEMBER HUGH FRIEDMAN: Is that correct, is 4 that understood. 5 BOARD MEMBER BURKE: I got two head shakes. I'm 6 waiting for number three over here. I got two out of 7 three so far. 8 MR. SMITH: Well, there's a really interesting 9 aspect to that. And if you'd just bear with me for a 10 second. By July or June -- I'm sorry January 31st of next 11 year all transit bus associations have to tell you whether 12 or not they're going to go CNG or diesel path bus. That 13 is a very big decision for them. And right now in the 14 South Coast, the only decision that they could make is the 15 CNG path. 16 And so once they make that, they are committed to 17 buying CNG vehicles. They are mandated. And you will 18 guarantee that if you make -- if you don't address this 19 issue now, you will have transit buses, a lot of transit 20 agencies, coming in and asking for you to help them pay 21 for their mandated CNG buses. That will very -- 22 BOARD MEMBER BURKE: How long have you known 23 this? 24 MR. SMITH: Pardon? 25 BOARD MEMBER BURKE: How long have you know this? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 MR. SMITH: A long time we have. 2 BOARD MEMBER BURKE: Well, then why when you were 3 in my office last Monday and asking for a continuance on 4 the modeling process didn't you mention it? You were 5 asking for a longer, if this was a big consideration for 6 you, why were you asking for a longer time? 7 MR. SMITH: Because at that time, sir, the staff 8 proposal would effectively ban diesel anyway in your 9 district. 10 BOARD MEMBER BURKE: But you didn't mention this 11 as a consideration, did you? 12 MR. SMITH: No, I did not mention that, but I 13 have mentioned it to your staff, sir. And if I mislead 14 you, I am sorry. 15 CHAIRPERSON LLOYD: Ms. D'Adamo. 16 BOARD MEMBER HUGH FRIEDMAN: Could I just finish. 17 My colleague jumped in, and that was fine. 18 BOARD MEMBER BURKE: I'm sorry. 19 BOARD MEMBER HUGH FRIEDMAN: It was on point. 20 But I'd just like to finish up. 21 CHAIRPERSON LLOYD: Yes. 22 BOARD MEMBER HUGH FRIEDMAN: So I think I'm 23 catching up with Mr. McKinnon. What we've got is a policy 24 that you're interpreting under the law as statutory, which 25 authorizes purchases of equipment that is viewed as quote PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 "alternative or optional" even though, in fact, as a 2 practical matter it is mandated by a local authority. 3 GENERAL COUNSEL WALSH: Right. The local 4 authority, in this case the South Coast, requires the 5 purchase of alternatively fueled vehicles, CNG buses. But 6 they don't establish a standard that those buses have to 7 meet. At the State level, there is a four gram standard 8 that's in place. 9 So a CNG bus that met the four gram standard 10 would be legal in the South Coast. We have an optional 11 2.5 gram standard and what we are providing in the 12 guidelines is that buses, the CNG buses, that have to be 13 sold in the South Coast, that meet that optional standard, 14 can get Carl Moyer funding, because they're not required 15 to meet that optional standard, so they're not mandated in 16 total, the buses that meet the optional standard. 17 BOARD MEMBER HUGH FRIEDMAN: But the cost 18 differential, if it's true and that it's de minimis, we're 19 really funding something that the manufacturers can make 20 without any additional -- real additional cost? 21 GENERAL COUNSEL WALSH: Right. And that is, from 22 my perspective, an important policy issue for the Board to 23 address. It's not a legal issue. I'm trying to sort of 24 separate out what it is that's considered. 25 BOARD MEMBER HUGH FRIEDMAN: I understand. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 when would it be appropriate, Mr. Kenny, for us to 2 consider this? 3 EXECUTIVE OFFICER KENNY: I think it's actually 4 before you right now. I think your characterization of 5 the issue is actually a very accurate one. What is 6 essentially happening is that we are providing Carl Moyer 7 funding for alternative fuel buses in the South Coast, 8 when the practical effect is that the vast majority of 9 buses that are being used in the South Coast are going to 10 meet those optional standards. 11 BOARD MEMBER HUGH FRIEDMAN: And what are we 12 doing to the policy that I thought was reflected 13 consciously and deliberately chosen when we picked the 14 alternative fuel paths and decided that we did not want to 15 bring a deathknell for diesel altogether, but wanted to 16 provide incentives and encourage a cleaner diesel fuel. 17 EXECUTIVE OFFICER KENNY: We do wish to do that. 18 And, in fact, that is currently what we are trying to do 19 as a staff. And that is also one of the reasons that, in 20 talking with Mr. Smith before the Board meeting today, we 21 talked about eliminating one of the impediments that was 22 there, and so that, in fact, if diesel or CNG meet 23 alternative fuel, that both be eligible for funding, so we 24 are trying to provide that. 25 At the same time, what we trying to do is provide PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 kind of a statewide policy. And what we see here is kind 2 of the interaction between a statewide and a local policy 3 that have this consequence. 4 BOARD MEMBER HUGH FRIEDMAN: But by also refusing 5 to exercise whatever authority we may or may not, kind of, 6 had, as I recall previously, to lock in other districts 7 other than South Coast, which currently has a separate 8 status, on one track or another. As I recall, we, again, 9 that was part of our, what I understood, to be our policy 10 to keep the flexibility and keep the option. 11 What are we doing if we're -- the scales are 12 being tipped it seems to me, at least that's my concern, 13 and I'm thinking out loud. I'm beginning to appreciate 14 this more. 15 CHAIRPERSON LLOYD: Just a suggestion, Professor 16 Friedman, because I'm also getting confused. I understand 17 what Ms. Walsh says that legally we may be okay, but in 18 the general term, I'm still very confused and concerned 19 and there seems to be a lot of open ends here. 20 Is there any way in which we could take this -- 21 separate this particular aspect out and hold it over for a 22 month while we get some more data and some more discussion 23 on that item? Would that be a practical way? 24 EXECUTIVE OFFICER KENNY: We can do that, and we 25 can basically present that to the Board. But, I guess, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 going back to the initial question, we are basically 2 pursuing a dual path. That is the objective that we -- 3 BOARD MEMBER HUGH FRIEDMAN: And other districts, 4 given a choice, if Carl Moyer funds were available for 5 this and they're not for the other, that's skewing the 6 choice, it seems to me. And while I'm all for cleaner air 7 and CNG is cleaner, that may justify it. I don't know. 8 But I don't think we've really thought this through, and 9 if there is some way to do it, and it seems like it's a 10 significant policy call that we're implicitly making or 11 inevitably making here, and I'm concerned that it needs 12 more thought. 13 CHAIRPERSON LLOYD: Yes. Dr. Friedman. 14 BOARD MEMBER WILLIAM FRIEDMAN: It just appears 15 to me that, I mean, we may, in fact, need some more time 16 to -- in a very simple way, it seems to me that I know 17 what's legal, I'm not sure what's right yet. And what 18 we're really grappling with is a policy issue, not one 19 that won't be data driven. So I'm not sure that a month's 20 delay is going -- I wouldn't know what to ask for. 21 I mean, I really think that what's needed is more 22 reflection with respect to policy rather than specific 23 facts or data. I think we have the parameters. Now, we 24 just have to be more thoughtful and talk amongst ourselves 25 about what the right thing to do is. And it may take us a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 little more than just today to come to a conclusion. 2 MR. SMITH: Let me just comment that from our 3 lawyer's perspective this is a legal issue. And we're 4 hoping that we can resolve this here, but we believe that 5 you are not complying with 1571. 6 CHAIRPERSON LLOYD: Ms. D'Adamo, you had a 7 question. 8 BOARD MEMBER D'ADAMO: Well, if we are going to 9 put this aspect of it over, I would appreciate if you 10 could provide us with a legal analysis on this point. 11 Just a couple of questions. It's been a while 12 since the mass transit or the transit bus issue was before 13 us. But as I recall, South Coast has this authority that 14 no other district does. 15 EXECUTIVE OFFICER KENNY: I think San Joaquin 16 also had the same authority or something relatively 17 similar. 18 BOARD MEMBER D'ADAMO: And would they have -- 19 would local districts have the authority, not relative to 20 transit buses but special districts, would they have the 21 authority to mandate CNG? 22 EXECUTIVE OFFICER KENNY: I think, as I recall, 23 and legal could probably help, my recollection is 24 essentially that the South Coast had very specific fleet 25 authority. The other districts have less specific PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 authority, but it was also related to the fleets. 2 GENERAL COUNSEL WALSH: That's correct. The 3 South Coast has specific authority. Other districts that 4 are classified as serious or severe nonattainment areas 5 under the state standards also have fleet authority in the 6 context of establishing their plans for meeting the State 7 standards. 8 BOARD MEMBER D'ADAMO: But what about, say a 9 local garbage district, they would also have the authority 10 on their own to just decide to -- 11 GENERAL COUNSEL WALSH: To purchase these? 12 BOARD MEMBER D'ADAMO: -- to impose a rule upon 13 themselves that -- 14 GENERAL COUNSEL WALSH: Yeah, as an exercise of 15 their contracting or purchasing powers. 16 BOARD MEMBER D'ADAMO: What I'm kind of 17 wondering, and this is an intriguing issue and never even 18 dawned on me, that I think Mr. McKinnon and Mr. Smith have 19 raised an important issue. I'm just wondering, though, 20 about the disincentive that we may be applying to local 21 districts and local agencies that on their own want to go 22 further. 23 And what I would be curious would be for staff to 24 report back on some of the issues that are typically 25 considered. Is this something that when the decisions get PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 made locally is the Carl Moyer program something that 2 helps them get to the point where they would even make a 3 decision to todate, or even if it's not a mandate, to 4 decide on their own to, well, impose a mandate upon 5 themselves? 6 And if that's the case, then I'd be concerned 7 about a disincentive that we would be providing to the 8 local agencies. 9 BOARD MEMBER BURKE: Mr. Chairman? 10 CHAIRPERSON LLOYD: Yes, Dr. Burke. 11 BOARD MEMBER BURKE: In keeping with Dr. 12 Friedman's request for data, I think probably what I 13 should do is not take the item off the agenda for the 14 South Coast District tomorrow and see what my colleagues 15 there see as to what is the most expeditious manner by 16 which we might be able to provide this body with some 17 data. 18 MR. SMITH: Dr. Burke, let me just say there are 19 some ways to address this issue within the South Coast. 20 We've had discussions with your staff and ARB staff that 21 transit associations within your district could, in fact, 22 choose to go the diesel path, but agree to purchase CNG, 23 at least into the interim time until you develop 24 alternative procedures that allow diesel vehicles to be 25 purchased. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 The other option, which I might just bring up to 2 this board, is that given that the South Coast is still in 3 consideration of how to possibly provide the diesel 4 pathway, that this board could take some action here in 5 the next month or two that would allow the South Coast 6 Transit Association some additional time for them to 7 notify you as to which pathway they plan to make. 8 BOARD MEMBER BURKE: I think that probably would 9 be the easiest way to do that. But you see what is now, I 10 think, a policy decision is, do we, as Mr. D'Adamo said, 11 disincentivize the school districts from going ahead and 12 getting these CNG buses, because we're going to continue 13 to go forward in the South Coast, unless the courts and 14 lawyers prevail and say that we're legally wrong, whether 15 there's Carl Moyer funds or not. 16 What you're doing is penalizing some other 17 county. You're not penalizing us, because we're going 18 forward now. And, quite frankly, I feel like my 19 conversations with you and your company have not been 20 truthful. And I, quite frankly, find it -- I have to go 21 back to staff recommendations now. 22 MR. SMITH: Well, certainly, sir, I apologize if 23 you think we were untruthful. I think everything I told 24 you was true. 25 BOARD MEMBER BURKE: It was probably true. What PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 you didn't tell me was enough. 2 MR. SMITH: Well, I did tell your staff. I have 3 told your staff. 4 BOARD MEMBER BURKE: You didn't ask my staff to 5 the extent you asked me for, so what you told them and 6 what you told me was not consistent. So we don't need to 7 debate this here. 8 CHAIRPERSON LLOYD: I think Mr. McKinnon and then 9 Professor Friedman. 10 BOARD MEMBER McKINNON: Yeah. Clearly, I 11 don't -- alternative fuel, CNG, diesel, it doesn't matter 12 to me, whatever we can get that provides the cleanest air. 13 And that isn't always the only limiting factor. 14 Ultimately, the limiting factor in making change is 15 resources to make the change. And if it costs a lot more 16 money to do CNG, and maybe I'm wrong about that, you don't 17 get as many, say, school buses fixed, so less kids have 18 their lives improved. 19 So there's mixes that have to do with resources 20 as well. So when we do things that fiddle with the mix of 21 resources to make change, we have to think about are we 22 doing long-range change like zero emissions, like fuel 23 cell cars, that kind of thing, where we're pushing a 24 narrow pocket to really look out at the future a long 25 ways, or are we trying to make change that's going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 affect hundreds of thousands of school kids? And how do 2 we get to the hundreds of thousands rather than tens of 3 thousands, so we don't end up in a situation where we're 4 saying well, we're sorry. We've done really clean buses 5 for the kids in this neighborhood, but we ran out of money 6 and the kids in this neighborhood are going to have to put 7 up with ten times as much particulate in their bus. 8 So I think what we're doing here is we're 9 fiddling with those balances and there's nothing wrong 10 with that. That's what this board ought to do, but I 11 think we need to really think through how we do that. 12 And I guess I have one question, and I've heard 13 it kind of represented different ways. Is there a diesel 14 path possible in South Coast? If they wanted to fix 15 school buses for hundreds of thousands of kids with the 16 resources that are available right now, is that a 17 possibility. 18 EXECUTIVE OFFICER KENNY: It's a difficult 19 question to answer, Mr. McKinnon. And the reason is is 20 that if you look at the strict language of that South 21 Coast resolution, it talks about providing a diesel path 22 so long as there is equivalent or better emission levels 23 on PM, on NOx and on toxicity. 24 The third criteria, the toxicity criteria, is one 25 that has not yet been defined. And so until such time as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 it has been defined, I think the answer is probably that 2 there is no such path at the moment. If that particular 3 criteria is defined, then we could probably determine 4 whether or not there is a path. 5 But the toxicity path is a very difficult one for 6 us to understand for a whole bunch of reasons. And I'm 7 not sure we're going to be able to define that toxicity 8 path at any near-term time frame. 9 CHAIRPERSON LLOYD: I'd just like to remind the 10 Board, also, I'm sure this topic is going to come up in 11 great length in December when we address the school bus 12 issue. So I think it's good to address it now, but I 13 think we'll have it -- I think staff is also on notice 14 here that this is going to be a topic of discussion at the 15 December meeting. 16 EXECUTIVE OFFICER KENNY: Mr. Chairman, if I 17 might add one more thing. I mean part of what we're 18 trying to do is also reflect the difference in cost 19 between essentially a diesel bus and a CNG bus. And we do 20 know that, for example, that the incremental costs, for 21 example, from a low NOx optional standard bus of 2.5 and a 22 little bit higher nonoptional standard bus of say like 23 three grams is probably, as Mr. Smith says, very, very 24 small. 25 However, you know, the fact is also that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 difference between that 2.5 gram NOx bus and that four 2 gram NOx bus is very, very large. And we do get an air 3 quality benefit from the introduction of those 2.5 gram 4 NOx buses into the environment right now, because of where 5 the technologies are different. 6 As we look at where the technologies are going on 7 the diesel side, over the next couple of years, we are 8 going to see that gap disappear, and we will see very 9 clean diesel buses at which point they would also be able 10 to meet potentially optional standards. You know, it will 11 be new optional standards, lower than the 2.5 level, and 12 CNG would also be in that same situation, which they would 13 have to meet new optional standards, if they wanted to 14 receive funding. 15 And so, I mean, we are in a little bit of a limbo 16 situation right now, because of the fact that CNG, on a 17 NOx level, cleaner today than diesel. A year from now or 18 a year and a half from now, that probably will not be 19 true. 20 CHAIRPERSON LLOYD: Professor Friedman. 21 BOARD MEMBER HUGH FRIEDMAN: I'll still, I 22 guess -- I don't want to prolong this, but I'm wondering 23 why anybody who builds CNG buses would build them to the 24 four, when they can build them to the two and a half. 25 EXECUTIVE OFFICER KENNY: They won't. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 BOARD MEMBER HUGH FRIEDMAN: And if that's true, 2 then effectively that's what we're subsidizing. 3 EXECUTIVE OFFICER KENNY: That's correct. 4 BOARD MEMBER HUGH FRIEDMAN: We're not 5 incentivizing. We did it. It worked. And I'm concerned 6 about the whole state. I don't want to do anything to 7 impede South Coast, which has its special status and its 8 special problems. But as Mr. McKinnon mentioned and as 9 Ms. D'Adamo mentioned, I want to be sure that this is laid 10 out across the State, because it's an entire state 11 problem. It's not just a particular county. 12 EXECUTIVE OFFICER KENNY: I don't think we're 13 seeing this as a state issue in the context of what's 14 happening throughout the entire state. I think it really 15 is an issue that rises, because of the, sort of, 16 interaction between what we did as a state agency for the 17 entire state and in the South Coast rules and how the two 18 are inter-playing with one another. 19 And what we've tried not to do is essentially 20 modify our rules to essentially impact any particular 21 local jurisdiction that chooses a different approach. So 22 our statewide approach seems to be working fairly well, 23 but this particular conjunction of State and local seems 24 to be having some difficulties. 25 CHAIRPERSON LLOYD: Supervisor Patrick. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 BOARD MEMBER PATRICK: Thank you, Mr. Chairman. 2 I did have a couple of questions and comments. 3 I think it's absolutely essential that we look at 4 this as a statewide area. I'd love to have a little chit 5 list for how many times we've mentioned South Coast today. 6 That's a unique situation. I think what we need to look 7 at is how does this affect people statewide. And I think 8 that, from my perspective, I haven't heard -- I don't see 9 anybody here from any transit agency or any school bus 10 group who's objecting to this in any way. 11 I think one of the things that we need to look at 12 is to what extent these kinds of monies incentivize people 13 changing a bus that they don't have to change. They don't 14 have any obligation in any way to buy a new bus, you know. 15 And so I think it's really important that we have that 16 kind of input into this. 17 Now, this gentleman has brought up a lot of good 18 points and I think that we've had a very important 19 discussion. But I think we need to focus -- if South 20 Coast is a unique area and has some unique -- we know they 21 have unique challenges but has some unique things on the 22 table that don't fit the rest of us, let's make certain 23 that we have a clear understanding of what the obligation 24 is of fleet bus folks in South Coast versus the rest of 25 the State. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 And, you know, I think it's very important that 2 we look at these monies and say if this is going to get 3 people to make changes that they weren't going to make 4 before, we're really helping out those kids that we're 5 talking about. And I certainly am not qualified to say 6 that, you know, to what extent this becomes a real 7 incentive. 8 And the question that I have is with this Carl 9 Moyer program and the statewide guidelines, when actually 10 the money gets filtered out to the districts, do the 11 district governing boards have any impact at all on those 12 guidelines? In other words, if someone made the decision 13 we'll fund everything except for the school bus component 14 or the transit bus component or whatever, is it possible 15 to extract those or do you accept the program statewide as 16 this board decides? 17 CHAIRPERSON LLOYD: I think Ms. Sullivan. 18 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 19 The districts do have flexibility in how they administer 20 the program on the local level. And they can decide to 21 only fund certain portions of it. They can decide to do 22 the whole of it. They can decide to only do alternative 23 fuels. They have all that flexibility. 24 BOARD MEMBER PATRICK: Okay. And the reason I 25 ask the question is -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 ALTERNATIVE STRATEGIES SECTION MANAGER SULLIVAN: 2 Consistent with the guidelines, of course, yes. 3 BOARD MEMBER PATRICK: Oh, certainly. But the 4 reason that I asked the question is if everybody feels 5 that they have mandated that this happen in South Coast, 6 and that this then is not a reasonable expenditure of 7 dollars in that area, they have the ability to say, you 8 know, we've already mandated it. You folks are going to 9 have to make this guideline, so for South Coast, we are 10 not going to fund transit buses and school buses. But 11 perhaps for other areas, this is a much bigger challenge. 12 Now, someone who comes from the San Joaquin 13 Valley, we have many, many small little school districts, 14 and it may not even be beneficial for them to put 15 infrastructure in for CNG and that kind of thing. So I 16 can agree that we need some flexibility, but I also think 17 we need to keep our eye on the ball and make sure that 18 we're cleaning up the air. 19 And I think -- I really feel that we've really 20 gotten far afield from, you know -- we have a person here 21 who sells diesel fuel. He doesn't want us to go CNG, do 22 you? 23 MR. SMITH: We don't want it to be mandated. We 24 may call -- 25 BOARD MEMBER PATRICK: That isn't the question I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 asked. 2 MR. SMITH: No, we don't want it CNG. 3 BOARD MEMBER PATRICK: So like a gas coming up 4 and saying, you know, don't go the diesel path. 5 MR. SMITH: We are certainly -- we have taken 6 positions routinely where we support fuel choice for all 7 these operators. 8 BOARD MEMBER BURKE: Supervisor Patrick brought 9 up a point, which maybe I'm confused on. It's my 10 understanding that Carl Moyer funds would only be used to 11 pay the difference between, is that true? So somebody 12 would not go out and buy a school bus that doesn't need a 13 school bus just to get a CNG school bus. You know, I 14 don't -- 15 CHAIRPERSON LLOYD: Yes, Mr. McKinnon. 16 BOARD MEMBER McKINNON: I think that's not the 17 difference that comes up in the policy matter. If you're 18 mandating alternative fuel buses, okay, then the base line 19 is the dirtier of the two alternative fuel buses. The 20 differences in cost between a dirty -- the dirtiest of the 21 CNG buses and the cleanest, that's the cost difference 22 that you're incentivizing. 23 And I think what we're doing right now is we're 24 paying the difference between a diesel bus and the 25 cleanest CNG, isn't that the point that you raised? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 MR. SMITH: Yes. 2 BOARD MEMBER McKINNON: And I guess where my 3 question came is if you're mandating CNG, isn't what we 4 ought to be incentivizing is from CNG dirtiest to buying 5 the cleanest? Not from diesel -- if diesel is not allowed 6 and is not possible -- 7 BOARD MEMBER BURKE: I understand exactly what 8 you're saying. But you see, here is where I get confused 9 again. Tomorrow we were supposed to go back in and 10 revisit the modeling of which that evaluation would be 11 made, so that you would be comparing apples to apples 12 instead of apples to oranges. 13 And that's what I thought that they had agreed 14 to, but I didn't -- they hadn't told me at this time that 15 there was a transportation statement that needed to be 16 made to the ARB which would preclude them from 17 participating in the process in a meaningful way. 18 MR. SMITH: Well, as I said, Dr. Burke, there are 19 ways to get around that, and I do think it would be during 20 the -- you know, we had been talking about a delay of a 21 few months to try to see if we could find an equivalent 22 diesel pathway. During that same period of time, this 23 board could make that amount of time to try to deal with 24 this policy decision with regards to funding CNG's. 25 And beyond that, the March 1st date is when the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 infrastructure report is due from 1571. 2 BOARD MEMBER BURKE: Mr. Kenny says that that's 3 not likely. 4 MR. SMITH: The March report isn't likely? 5 BOARD MEMBER BURKE: That finding a common ground 6 on toxicity to bring you in line with CNG if ARB's 7 involved in this process is, if I understood you 8 correctly. 9 EXECUTIVE OFFICER KENNY: Actually, what I was 10 saying is, I think, basically defining toxicity criteria 11 is not going to happen in three or four months. That is 12 my estimate. 13 But what I was also going to, at least, suggest 14 is that I do not think it would be a good move for this 15 Board to essentially delay the determination process by 16 transit districts with regard to their elections of CNG or 17 diesel. I mean, what we are really confronting today is 18 essentially the issues of the South Coast in terms of the 19 fleet rules. And this board is being, essentially, thrust 20 into the middle of the fleet rule debate that is occurring 21 in the South Coast. 22 And I think, essentially, to delay the transit 23 districts' determinations with regard to what they're 24 going to do until the fleet rule determinations are 25 decided will put us in a situation which we may not know PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 the answers to what the districts are doing -- the transit 2 districts are doing for quite some time. 3 I mean, I do think that, essentially, one of the 4 things we need to look at is that we have tried to 5 structure the Carl Moyer program as a statewide program, 6 recognizing that there are benefits right now to CNG 7 engines because of the fact that they are certifying at 8 2.5 grams NOx and diesels are not certifying at that 9 level. 10 I think you are being confronted with a 11 combination of a very short-term issue that will probably 12 disappear within the next year to year and a half, because 13 diesels will be down at the same low levels as CNG or 14 potentially lower. And then, at the same time, you are 15 also being confronted with the South Coast fleet rule and 16 the debate that is surrounding those rules in the South 17 Coast, and primarily because of the fact that there are 18 some very polarized sides that are trying to decide those 19 particular issues. 20 CHAIRPERSON LLOYD: Yes. Professor Friedman. 21 BOARD MEMBER HUGH FRIEDMAN: I don't want -- I'm 22 going to be dragged kicking and screaming into the South 23 Coast fleet rule issue as such. But I'm trying to 24 understand, not only the consequences and actually this is 25 what's given rise to the dilemma, their fleet rule as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 we've heard it, but I'm concerned about the impact 2 statewide. And I want to avoid unintended adverse 3 consequences, either to South Coast or to anywhere else in 4 the state of policies that I think we've already slugged 5 out. 6 They've had the crucible of public hearings, 7 policies relating to our fuels, the fuel path and what 8 we're facing coming up with school buses. And in that 9 context it seems to me that I'm still -- I, for one, am 10 still not absolutely clear on what the consequences are 11 thought through, all the way to Z of our not taking the 12 policy view, assuming that legally we're in a position to 13 do so, that would continue to make Moyer funds available 14 for alternative fuels, in this case, CNG, as I understand 15 it, that are being mandated in one or more places. 16 Because they're really not alternative, once 17 somebody has decided -- now, if that's going to be the 18 consequence of somebody choosing one path or another, 19 under our prior options, I'd like to know that, too. 20 EXECUTIVE OFFICER KENNY: If I could try to help 21 maybe a little bit. And it does break down into, 22 essentially, all of the State and then it breaks down to 23 the South Coast. If you look at it from the rest of the 24 state, outside the South Coast, we are not seeing other 25 air districts copying the South Coast type of fleet rules. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 And so we are not seeing this same issue rise in any other 2 part of the state, only in the South Coast. 3 However, if you look at it from the South Coast, 4 from a South Coast perspective, what we are talking about 5 is funding CNG buses that are, essentially, required in 6 the South Coast, I mean, from a practical standpoint. I 7 mean, there is a legal distinction here, but from a 8 practical standpoint we are talking about funding CNG 9 buses in the South Coast. And we are talking about 10 probably a funding time frame that is right now before us. 11 I mean the money that we're talking about today, 12 the $50 million, which $19 million goes to the South 13 Coast, that money would be used to purchase CNG buses, at 14 least at some level, that are otherwise essentially 15 required by the South Coast. That may change in the 16 future if, in fact, that toxicity criteria is defined in 17 such a way that diesel has the ability to compete. 18 But at least as of the moment, it is pretty much 19 funding CNG in the South Coast. 20 CHAIRPERSON LLOYD: I think I would like to 21 exercise the Chair's prerogative to move on. I think 22 we'll come back before we decide on this, but we have now 23 three more witnesses, thanks to Mr. Smith's comments here, 24 but thank you very much. If we can move ahead, thank you, 25 I think you've brought some important items to our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 attention here. 2 So now we have Peter Rooney, and Mr. Calhoun can 3 get in his question, and Becky Wood from Teichert and 4 Chris Weaver. 5 MR. ROONEY: Good morning. My name is Peter 6 Rooney. I'm representing Pony Pack Incorporated out of 7 Albuquerque, New Mexico this morning. Chairman, members 8 of the Board nice to see you again. I thought, perhaps, 9 this time we'd be in the board room, but I'm back before 10 that came available. 11 Mr. Chairman, I really did appreciate your 12 opening remarks. I think setting this tone for how 13 successful the Carl Moyer program has been in such a short 14 time, I mean, when it was first thought of and first 15 funded in the latter part of the Wilson administration, we 16 had hoped that it would carry on. And certainly your 17 administration has done that in a marvellous way. 18 Also, I was very interested that I am -- I think 19 it's very important that you point out that outside today, 20 we do have a truck with an auxiliary power unit made by a 21 different manufacturer than Pony Pack. It's made by the 22 Willis Services Group. He is here. The manufacturer is 23 here today, also to speak to you if you need to have some 24 technical questions asked, I'm sure. 25 But I think it points out the important thing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 that, when we move towards public policy, you're not 2 focused on one vendor, but here we have an example that 3 there are multiple vendors, and that those multiple 4 vendors will start competing with each other on the 5 technological advantages of their unit versus another. 6 So I think your stimulus through the Carl Moyer 7 program competitive system of trying to reach the 8 marketplace worked very well in tandem and I think this is 9 a good example of it. 10 I do have some particular problems with the 11 guidance as it is drafted. We've been working with staff 12 very well and I think we're very close to where there are 13 no problems, but unfortunately there still may be some and 14 perhaps it could be resolved today. And I was expressly 15 intrigued by Calhoun's line of discussions as he was 16 going, because in my written comments that I submitted to 17 you, I, too, see a problem in that particular area. 18 On the specific problems that I see is it's on 19 page 126 there's a criteria that 75 percent of the use has 20 to be in the State. I think the better criteria is 21 demonstrated by the Title 10 discussion that points out 22 the cost effectiveness of use in the State. 23 Let me remind you that the devices are on trucks 24 that are basically trucks that are coming over long 25 distances and where a driver will arrive at his PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 destination and will idle the truck either to get rest or 2 waiting to unloaded and then he'll leave. He's not at his 3 home where he turns the truck off and goes to bed. He has 4 to sleep in the cab et cetera. So the universe of trucks 5 we're looking at are ones that are coming from someplace 6 else. 7 Now, it seems that breaks down several ways. It 8 could be they're coming from northern California to 9 southern California and that, again, would get into Mr. 10 Calhoun's question of which district is proper, but at 11 least there all the idling is going to be in California so 12 the 75 percent rule is not a problem. 13 The next situation is where the truck comes to a 14 specific California destination and then back out again, a 15 milk run, if you will. And in those cases conceivably the 16 75 percent of the idling will be in California. Within 17 the latter cost, which I think is probably a more general 18 case, you're going to have trucks that call on various 19 districts that come to California, but they also go other 20 places. And so the question is why should California pay 21 any money for these kind of trucks. 22 Well, I think the answer is obvious, that if we 23 have a problem, we know that idling of trucks represents 24 something like three percent of the NOx emissions in the 25 state and we want to reduce that, both you do, and my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 client certainly does. So the question becomes what would 2 be justified -- what would justify Californians for paying 3 some money to induce a truck owner to put one of these 4 devices on his truck? And there's where the cost benefit 5 analysis works and can be the test. 6 It was clear that in the example used in the 7 document that if a truck was here and idled for 1,000 8 hours per year in this State, the qualification was met 9 ten fold. So if you could go to a 100-hour test, you 10 would still be within the qualifications. We would be 11 getting our money's worth. So anything beyond 100 hours 12 is a pure breather's dividend. We've paid for what we 13 expected at 100 hours. If the truck's here 500 hours, so 14 much the better. Why do we care if that truck is also 500 15 hours in Houston and doing the same thing, we have gotten 16 our benefit. 17 So I think a simple test that would say you 18 operate within our cost effectiveness guidelines, you're 19 qualified. And then that you certify and attest to that 20 fact. I think also that remember the practicality of 21 this, what you're offering is $1,500. It's a modest sum, 22 but a right sum, because it does signal California's 23 willingness to put their money where their mouth is and to 24 move forward. 25 So I think it's good, but still you can't expect PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 too much for $1,500 over five years. And so I think the 2 record keeping has to be simple, the attestation has to be 3 a simple form, and I think in speaking with the staff, I 4 think we can come to those conclusions. 5 I would like to up Mr. Calhoun's question, but 6 maybe he should ask the question of me first, but -- 7 BOARD MEMBER CALHOUN: I've added a couple to 8 that. 9 (Laughter.) 10 MR. ROONEY: I do really see an intrinsic problem 11 when you have a very mobile source and a very fixed 12 program. I don't know if the gentleman from CAPCOA is 13 here today, perhaps he could speak to it better than I. 14 But in preparing for this meeting, I spent some time with 15 the Sacramento Air Pollution Control people, Mr. Covell 16 and Mr. Taylor, and they brought to me a fresh realization 17 of how they see the program working for them. 18 After all, as was pointed out here a minute ago, 19 they're going to have to do a decision -- make a decision 20 whether or not they're going to spend local monies to make 21 the cost, the participation portion. And they have to 22 decide how well do we know that that truck is going to be 23 in our district? How can we justify spending Sacramento's 24 money when that truck may call on multiple districts? So 25 it's a tension for them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 On the other hand, they want to say well, we are 2 doing this and so therefore we are progressing towards 3 meeting our requirements under SIP. So for them there's 4 an advantage, if they can have some assurance that they 5 get credit for money they spend. So as a practical 6 solution that I would suggest that you look at working 7 with CAPCOA to determine a way in which multiple districts 8 can get credit for the program or whether you, and I know 9 it's because I've been on your side of the chair for a 10 number of years, I know the dynamics of having local 11 districts and a statewide program. 12 We saw it here earlier, I think, in the very 13 interesting discussion that preceded my appearance at the 14 podium. But somehow that has to be worked out, but the 15 owner operator who's going to buy this device and who 16 applied to be in the program, that has to be transparent 17 to him. He can't spend a lot of time finding out where he 18 is supposed to go down and file this application. 19 Now, the manufacturer is in a little better 20 position, and I think the manufacturer in reality would 21 probably direct the purchaser of where to file, but still 22 that has to be worked out and it has to be worked out in a 23 reasonable method that's simple, I think, to understand. 24 And so that's the background. 25 CHAIRPERSON LLOYD: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 MR. ROONEY: I'd like to try to answer Mr. 2 Calhoun's questions. 3 BOARD MEMBER CALHOUN: I will keep it short. I 4 have a couple I want to ask you. 5 What incentive would an owner/operator that lives 6 outside of the state of California have to buy an 7 auxiliary power unit for a truck. 8 MR. ROONEY: Well, there's two incentives. The 9 first is when he's running this device as opposed to 10 running the big engine, he's not burning as much diesel to 11 accomplish the same goal, so he does have a financial 12 reason to want to do this. 13 The second, and it's more than just the fuel, 14 it's also wear and tear on the big engine, it's a period 15 of oil change because his real business is moving freight 16 down the road. And when it's parked and the engine is 17 running and the oil is being contaminated in that engine 18 for no good purpose, so it's not making him any money. So 19 he's got several incentives for him to want to do it. 20 Now, on the other hand, at some point, he says 21 wait a minute, I'm not required to do this, at least not 22 yet, but if it can be shown to me to be a reasonable 23 business proposition, maybe I'll go into it and maybe I'll 24 buy it. So that's where, I think, you come into it, but 25 you do a lot more by being in this program. You signal to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 that truck driver that if the time ever gets to be where 2 we're going to start limiting the number of hours or 3 number of minutes, as we have in the grocery -- 4 Proposition 65 grocery case, down to three minutes of 5 idling, well, then this trucker, if he has one of these 6 devices, will know that he will be welcomed in California 7 and that we will be able to apply his business, which is 8 moving freight. 9 BOARD MEMBER CALHOUN: In your written submission 10 you really raised questions that's larger than the one I 11 just mentioned to you, and that is the interaction between 12 the State and the local districts, and you just alluded to 13 that a few moments ago, and where is the clearing house 14 for this technology, does the -- 15 CHAIRPERSON LLOYD: I presume it's the Board. 16 Board staff decides what's appropriate what the technology 17 is, or is that not the case? Well, the question that I -- 18 you ask the question. 19 BOARD MEMBER CALHOUN: You know, we've heard a 20 lot of discussions today about the various types of 21 technology. And the concern is, at least I had, that 22 where is the clearing house for this technology? Are the 23 local districts deciding the technical competency of a 24 given system or what's the interaction here? 25 DEPUTY EXECUTIVE OFFICER CACKETTE: There's two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 different possible outcomes here. One is the guidelines 2 attempt to take technologies that we thoroughly understand 3 and provide guidelines of what the funding mechanism would 4 be and how to calculate the benefits. And when that 5 happens, you remove a whole bunch of uncertainty if people 6 can -- if applicants can say, okay, I can see exactly what 7 I'm going to get, exactly what the costs are, and I want 8 to go do this with use of Carl Moyer monies. 9 So we're attempting to bring into the guidelines 10 as many kinds of standardized technologies and 11 applications as we can and define exactly how the benefits 12 are calculated and make it easy on the applicant. 13 The other option is if it's not in the 14 guidelines, something new comes along, we handle that on a 15 case-by-case basis and the State Board makes those 16 decisions, the districts don't. So if somebody came along 17 with, you know, another widget that we hadn't thought 18 about before, then they have the burden of proof of 19 showing us that there's emission benefits, what the costs 20 are, how we would calculate the benefits and we do that on 21 a case-by-case. 22 So when this case -- in this case when this Pony 23 Pack idea came along, you know, we looked at it, does it 24 make sense, can we figure out what the emissions are, do 25 we know what the costs -- what's a fair Carl Moyer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 allocation for it, and then brought that to you, so that 2 it's clearly understood by anybody who wants to buy one of 3 these things what the game rules are for getting the Carl 4 Moyer monies. 5 BOARD MEMBER CALHOUN: Does an applicant who 6 wishes to sell -- who wanted to sell, shall we say, 7 certain technology in the South Coast District, does he 8 apply to the South Coast District or does he come to the 9 ARB, how does that work. 10 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, in 11 those cases to get approved funding, I think, they go 12 through the South Coast, right, but the final approval 13 rests with the staff of the ARB. And then if we see that 14 one looks good, then we would bring it in the next 15 guideline update, so it could be put into the overall 16 package, and then it could be administered at the local 17 level, and there's no uncertainty about it. 18 BOARD MEMBER CALHOUN: Mr. Rooney, do you have 19 any additional comments you want to make? 20 MR. ROONEY: Yeah. It's one of the questions 21 that does give me a little bit of concern for how 22 prospective purchasers of these devices are going to 23 interact, whether they're going to, you know -- to the 24 extent that they have a relationship with one district, 25 they no doubt will work that district. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 When they're global, if you will, calling all 2 parts of California, it's going to be more difficult for 3 them to do that, focusing in on where they should be 4 applying. Given the fact that ARB has already spelled 5 out, as Tom just said, spelled out the parameters for 6 qualifications, it, hopefully, will work out. But it 7 confuses the issue, I think, and will tend to chill people 8 from getting involved. 9 Now, if it's a fleet buyer, that's one thing, but 10 to the extent that it's a more independent owner/operator, 11 I think, it's going to be more difficult. That's where I 12 would urge you to develop a simple program with a simple 13 point of contact. And whether you -- CAPCOA comes up to 14 concept -- where they say let's let South Coast run all of 15 this, we'll take our share of the SIP credits, we'll put 16 in our share of the local costs and use up part of our 17 allocation, because after all there's another issue here, 18 too, that you've got in South Coast 19 million, but in 19 Sacramento or whatever it was 1.7 million and so they're 20 going to have to be budgeting their dollars as well. 21 That's why you've got a global problem 22 administered by fixed local district and it, I think, is 23 going to be complicated. 24 In talking to Sacramento they explained to me a 25 few years ago that they tried to work with a particular PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 applicant in another portion of the program. And this 2 particular applicant had a starting point in Sacramento 3 and an ending point in San Francisco or vice versa and 4 that they thought they could work with the Bay Area 5 district to develop a reciprocal arrangement to sort out 6 who would be involved. And they had another -- the same 7 client had another potential contract, this was a mail 8 carrier, with San Joaquin, Sacramento and the Bay Area. 9 It got so complicated that the applicant walked 10 away before the process, so that they haven't identified 11 or put in place one of these joint ventures yet amongst 12 themselves. 13 So something has to be there or it just isn't 14 going to be practical. Your intentions are well meant to 15 get people buying these devices, but if it becomes so 16 impractical for the amount of reward that's involved, 17 people, in effect, won't use it. 18 CHAIRPERSON LLOYD: Yeah, I think we hear the 19 message. 20 DEPUTY EXECUTIVE OFFICER CACKETTE: I think we 21 are aware of it, and Cindy tells me that we are arranging 22 a meeting with the districts to try to figure out how do 23 you do this when the vehicle is kind of one that could be 24 anywhere in the state. Right now, most of the projects 25 are either based in a district or it's a fleet that's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 located in that district, but for someone who is, you 2 know, Joe's trucking, I guess, that goes all over the 3 place, it would -- maybe, it isn't clear where to try to 4 get the money. And there could be resistance from 5 individual districts saying this is not going -- the 6 benefit is not going to accrue into my area, so why should 7 I pay everything. So it's a real problem that we probably 8 will get on top of it. 9 CHAIRPERSON LLOYD: Dr. Burke, I'd like to 10 interject my Chairman's prerogative. We need to have 11 board members identify themselves. 12 Mr. Calhoun has not finished yet. 13 BOARD MEMBER CALHOUN: One last comment, I don't 14 have another question. I wanted to mention to -- one 15 additional comment was to sum and to something that 16 Professor Friedman said, the Board has had a policy in the 17 past of remaining fuel neutral. So rather than lock it in 18 a specific technology, I just wanted to remind the Board 19 of that. 20 CHAIRPERSON LLOYD: Dr. Burke. 21 BOARD MEMBER BURKE: We at South Coast think we 22 are fuel neutral. We think we are fuel neutral. And our 23 rule only applies to governmental vehicles at this point. 24 So geographic location problems I think are minimized if 25 existent at all with the South Coast. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 CHAIRPERSON LLOYD: Thank you, Mr. Rooney. 2 Just to clarify here, we've got two additional 3 people to testify, Becky Wood and Chris Weaver. I would 4 appreciate if both of these could keep their comments to a 5 minimum. I will then take a half an hour break for lunch 6 so the court reporter, who has gone ahead here, and then 7 we will resume on this item. 8 MS. WOOD: Three quick points and completely non 9 controversial, I promise. Becky Wood, I'm with Teichert 10 Aggregates. I had the pleasure of serving with Mr. Kenny 11 on the Carl Moyer advisory board in the spring. 12 We did struggle with the PM component of this, 13 but I think it's good that we added it to it. I know in 14 Sacramento we were concerned about the new emission 15 factors that are going to be used, but with the lowering 16 of the thresholds and the 15 percent reduction, that 17 alleviated some of those concerns, so I wanted to thank 18 staff for that. 19 The construction and mining industry, I think, 20 will think much greater of this program now that the cap 21 has been removed. I think that's also a great step 22 forward. And I want to thank staff for their hard work on 23 updating these guidelines. I was also very heartened to 24 hear that you want to add to your resolution the fact that 25 there should be multi-year funding for this. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 And that was it. 2 Thank you. 3 CHAIRPERSON LLOYD: Thank you very much. 4 Chris Weaver. 5 MR. WEAVER: I'll also be brief, though, I'm 6 afraid I can't be uncontroversial. I'm going to speak to 7 the proposal to allow Moyer funding for diesel buses and 8 school buses and certified to the 2.5 gram NOx. 9 While this is certainly theoretically a 10 reasonable proposal, I would like to strongly recommend 11 that you adopt a policy of providing such funding only if 12 the buses are also provided with diesel particulate 13 filters. The reality is that in-use diesel bus emissions, 14 even from well maintained fleets, are triple the 15 applicable emission standard. In-use particulate 16 emissions from the trucks are double the applicable 17 standard. 18 And to achieve the 2.5 gram NOx standard will 19 require the use of exhaust gas recirculation, which 20 certainly will result in some increase in PM. It has the 21 potential to result in huge increases in in-use PM and 22 also raises important issues of tampering and durability. 23 In order to avoid the potential for the Moyer 24 program to be funding buses that, in fact, would result in 25 large increases in PM emissions and PM exposure by bus PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 passengers and school children, the appointment for 2 particulate filters, in my view, is essential. 3 And that's all I have to say. 4 CHAIRPERSON LLOYD: Thank you very much. 5 Any comments? 6 With That I would like to -- thank you very much, 7 Chris. With that I would like to take a half hour break 8 until 20 of one for lunch here and then we'll take up this 9 item after lunch. 10 (Thereupon a lunch recess was taken.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 AFTERNOON SESSION 2 CHAIRPERSON LLOYD: I'd like to continue on this 3 item. Mr. Kenny, does the staff have anymore comments? 4 EXECUTIVE OFFICER KENNY: No more comments. 5 CHAIRPERSON LLOYD: Again, I guess this is not a 6 regulatory item. It's not necessary to officially close 7 the record. I would like to make a couple of points here 8 and I think that it -- I think, as a number of people 9 stated, it's wonderful to see the Governor and the 10 Legislature directing these dollars here. 11 The other one, I'd like to compliment Mr. Kenny 12 for doing an excellent job with the advisory committee 13 there and putting together that group and coming to a 14 conclusion. 15 I think we do have a resolution before us. I 16 recognize that I think we had Ms. D'Adamo who was going to 17 add one issue to that. 18 BOARD MEMBER RIORDAN: I think we remember the 19 gist of it, if the staff -- 20 CHAIRPERSON LLOYD: Yes, I understand, Ms. 21 D'Adamo, she wanted to highlight that the program is 22 oversubscribed. And because of that, we should hope that 23 we get permanent funding. 24 GENERAL COUNSEL WALSH: Dr. Lloyd, we had 25 developed some language to reflect Ms. D'Adamo's concerns. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 If you'd like, we can read that into the record. 2 CHAIRPERSON LLOYD: That would be good. 3 GENERAL COUNSEL WALSH: Ms. D'Adamo, this is some 4 language that we had developed to add into the resolution 5 as proposed by staff to address the concerns that you had 6 raised. 7 And this is on the bottom of page three, the 8 resolution is 00-39. And what we were going to do is add 9 at the top of the whereas clauses there just before the 10 indented portion, "Whereas the Board also finds that the 11 demand for funding for viable and beneficial projects 12 outweighs the availability of funds and that additional 13 dependable funding would enhance the efficiency of the 14 process and the benefits of the program." 15 CHAIRPERSON LLOYD: Efficiency or effectiveness? 16 GENERAL COUNSEL WALSH: Pardon? 17 CHAIRPERSON LLOYD: Efficiency or effectiveness? 18 GENERAL COUNSEL WALSH: Effectiveness. 19 BOARD MEMBER WILLIAM FRIEDMAN: Could you stick a 20 "far" before "outweighs"? 21 (Laughter.) 22 GENERAL COUNSEL WALSH: Yeah, we can do that. 23 And then in the last, be it further resolved on that page, 24 we say, "Be it further resolved that the Board directs the 25 Executive Officer to pursue continued funding..." And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 we're going to suggest changing that to, "pursuing 2 substantial and ongoing funding for the Carl Moyer 3 program." 4 BOARD MEMBER D'ADAMO: Thank you. 5 CHAIRPERSON LLOYD: Sounds good. I would also 6 like -- we had some additional discussion early on about 7 staff coming back in a month. I think we've had some more 8 discussion on that and figure that we need to, in fact, 9 move on these guidelines so that they can be put in motion 10 and that we would be depriving the districts of that 11 option of moving ahead. 12 So we felt that the best thing here would be to 13 ask staff, given the nature of the discussions we had, to 14 work very closely there and to look at those particular 15 aspects and make sure they don't become problems. 16 Any other comments from the board members? 17 BOARD MEMBER PATRICK: Mr. Chairman, I would just 18 like to move the resolution, and with this comment. If we 19 were way off track in this, we would have a room full of 20 people here that would be upset with the direction that 21 we're going. I think that the addition of the more fuel 22 neutral policy on transit buses and school buses certainly 23 addresses concerns that are out there. 24 These monies are going to be spent, hopefully, 25 within a year, and it's my understanding the next year, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 and hopefully we'll get a whole lot of money the year 2 after that as well, that perhaps there will be a better 3 shot that the diesel will meet the standard. And what 4 we've talked about on this board, since I've been on it, 5 is we're going to establish a standard, and whoever can 6 meet it is the one who's the winner. And so I think that 7 that's an appropriate way to go here. 8 Thank you. 9 CHAIRPERSON LLOYD: Do you have a seconder? 10 BOARD MEMBER RIORDAN: I'll second it. 11 CHAIRPERSON LLOYD: All in favor say aye? 12 Oh, sorry, Mr. McKinnon. 13 BOARD MEMBER McKINNON: I have had quite a few 14 concerns about the difference between incentivizing and 15 subsidizing. But there's something Supervisor Patrick 16 said earlier, and that is that this is something that it's 17 a program that ultimately gets dealt with locally. And 18 just as we were dealing with burning having different 19 ramifications in different parts of the state, I think 20 your point is real, real important. And that is that 21 local folks do make the decisions about how this money is 22 spent in many ways. 23 And with that, I'm going to ease up a little bit, 24 but I am concerned about that difference between 25 incentivizing and subsidizing. And I kind of want to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 state for the record that that's something I'm going to be 2 paying attention to as we look at this year in and year 3 out in the future. 4 I think that transit buses are already heavily 5 subsidized by the federal government and then this adds a 6 layer to that, so if there are ways that people can reduce 7 that gap between $1,000 kind of improvement to two 8 different types of CNG's, versus a $30,000 difference 9 between going from diesel to CNG, there ought to be some 10 way of looking at that. And it seems to me we can stretch 11 the money further, put it into other uses that move diesel 12 and alternative fuel development towards the future. 13 So I'm going to ease up. I'm going to support 14 the motion on the basis of we entrust local control to a 15 certain extent in this. And I'm willing to do that, but 16 I'm certainly going to be mindful in the future when we 17 look at this kind of thing, if we're really just providing 18 subsidies. 19 BOARD MEMBER BURKE: Mr. Chairman. 20 CHAIRPERSON LLOYD: Yes, Dr. Burke. 21 BOARD MEMBER BURKE: In keeping with Mr. 22 McKinnon's concern, I would like to ask if it would be 23 possible, because I think the toxicity issue in the South 24 Coast rule is probably the burr under the blanket here, 25 and if I could ask Mr. Kenny to work with the South Coast PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 staff, what I would do is, again, pull it off tomorrow so 2 that we can get something, so that it really is, as Mr. 3 McKinnon says, we should have a dual path and see if we 4 can't come up with something that really legitimately 5 makes it a dual path. 6 CHAIRPERSON LLOYD: That's a very positive 7 statement, Dr. Burke. I think that's good. I'm sure Mr. 8 Kenny and staff will be happy to do that. 9 EXECUTIVE OFFICER KENNY: We'd be happy to work 10 with them. 11 CHAIRPERSON LLOYD: So I guess I jumped ahead 12 there. If we have no more comments from the Board, we 13 have a motion ahead of us. 14 All in favor say aye? 15 (Ayes.) 16 CHAIRPERSON LLOYD: Nobody against there. 17 So thank you staff and we'll move ahead to the 18 next item. 19 Just a reminder, the next item is 00-11-4, 20 Proposed Amendment to the California Phase 3 Reformulated 21 Gasoline Regulations. 22 You'll recollect that when this Board approved 23 the Phase 3 gas regulations last December, a number of 24 items could not be fully addressed at that time and were 25 deferred until today, specifically, provisions for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 blending ethanol into California gasoline, and small 2 refiner requirements. Today, we are completing last 3 year's actions. 4 The Board also had concerns about the potential 5 permeation effects from higher volatility fuels. We will 6 be addressing that issue next month when our contract's 7 study is complete. 8 The amendments the Board is about to consider do 9 not change the schedule for phasing out MTBE, nor do they 10 affect the emissions performance of the rule. They will, 11 however, greatly assist in implementing the program. 12 I understand that staff has been working closely 13 with all the key stakeholders since the release of the 14 staff report and will be presenting some modifications to 15 the staff's original proposal for our consideration. 16 At this point, I would like to ask Mr. Kenny to 17 introduce the item and begin staff presentation. 18 EXECUTIVE OFFICER KENNY: Thank you, Mr. Chairman 19 and members of the Board. As you stated, Mr. Chairman, 20 staff's objective in developing the proposed follow-up 21 amendments to the Phase 3 Regulations is to complement the 22 existing Phase 3 regulations to provide flexibility for 23 refiners to produce or import gasoline without MTBE. 24 While providing this flexibility to refiners, staff was 25 cognizant of the need to preserve the significant PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 emissions benefits realized from the current CaRFG2 2 Regulation. 3 The primary items that staff is proposing to the 4 Board today include specifications for fuel grade 5 denatured ethanol, provisions for a model to certify 6 gasoline prior to the addition of ethanol, requirements 7 for how gasoline storage tanks may be transitioned from a 8 fuel designed for one level of ethanol to a fuel designed 9 for different levels of ethanol, and some minor technical 10 and cleanup changes to the regulations. 11 Staff is also proposing changes to California's 12 diesel fuel regulations to provide a mechanism for small 13 refiners to fully mitigate any increase in emissions 14 associated with the small refiner provisions in the Phase 15 3 regulations. 16 As part of staff's presentation, we will also 17 provide the Board with a status report on the efforts to 18 implement the Phase 3 regulations. In particular, this 19 Board directed staff to report back to the Board on 20 refiners' progress towards compliance with the Phase 3 21 regulations. Staff will provide the Board with an initial 22 analysis of refiners' progress to comply based on the 23 first set of compliance plans refiners submitted to the 24 ARB last month. 25 At this time, I'd like to ask Mr. Steve Brisby to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 make the presentation. 2 Steve. 3 FUELS SECTION MANAGER BRISBY: Thank you, Mr. 4 Kenny. Good afternoon, Mr. Chairman and members of the 5 Board. 6 (Thereupon an overhead presentation was 7 presented as follows.) 8 FUELS SECTION MANAGER BRISBY: Today's 9 presentation will be given in two parts. 10 --o0o-- 11 FUELS SECTION MANAGER BRISBY: First, I will 12 provide you with an update on the California Reformulated 13 Gasoline Program, and then second, I will present the 14 staff's proposal for follow-up amendments on the 15 California Phase 3 Gasoline Regulations. 16 --o0o-- 17 FUELS SECTION MANAGER BRISBY: First, I will 18 provide you with an update and the progress made towards 19 the implementation of the California Phase 3 Reformulated 20 Gasoline Regulations, and then I will briefly touch upon 21 the price and supply situation in California. 22 --o0o-- 23 FUELS SECTION MANAGER BRISBY: The Phase 3 24 Reformulated Gasoline Regulations were approved on 25 December 9, 1999 and are responsive to the Governor's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 Executive Order and meet the requirements of both the Sher 2 Bill and the Bowen Bill. These two bills require that the 3 benefits of the Phase 2 RFG Program be preserved by the 4 Phase 3 RFG Program. 5 The regulations prohibit the addition of MTBE to 6 California gasoline after 2002 and preserve and enhance 7 the emission benefits of the reformulated gasoline 8 program. The Phase 3 regulations provides flexibility to 9 refiners and offsets losses and gasoline production 10 associated with the removal of MTBE. 11 At the December '99 hearing, there were several 12 items that could not be addressed and required follow up. 13 At that hearing, staff was directed to return every six 14 months the provide the Board with a status report on the 15 Phase 3 Reformulated Gasoline Program. This is the first 16 of those status reports. 17 --o0o-- 18 FUELS SECTION MANAGER BRISBY: To date, a number 19 of the follow-up activities have been completed. On 20 January 18th, 2000, the Phase 3 Regulations were approved 21 by the California Environmental Policy Council. Staff has 22 submitted additional information to the US EPA in support 23 of a waiver from the federal oxygen mandate. 24 We are following this very closely and have acted 25 numerous times to supply supplemental information to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 US EPA. After the federal submittal, we subsequently 2 received a letter confirming our application was complete, 3 and are awaiting a decision from the US EPA. 4 As directed, staff transmitted a letter to the US 5 EPA recommending that a nationwide drivability index be 6 adopted to assure that high quality gasolines are 7 available nationwide. 8 --o0o-- 9 FUELS SECTION MANAGER BRISBY: The follow-up 10 topics from the December 1999 hearing include amendments 11 to facilitate the downstream blending of ethanol, 12 denatured ethanol specifications, small refiners, 13 commingling of ethanol blends and nonethanol blends, 14 permeation emissions, drivability index and sulfur levels 15 in Phase 3 gasoline. 16 --o0o-- 17 FUELS SECTION MANAGER BRISBY: To evaluate 18 permeation losses, a contract has been awarded to 19 investigate the permeation emissions associated with the 20 use of ethanol in gasoline. The literature search portion 21 of the work has been completed. The information collected 22 confirms that ethanol and gasoline leads to an increase in 23 emissions through permeation losses. Some of the 24 literature suggests that the permeation is significant 25 even in late modeled vehicles. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 Currently, the contractor is gathering 2 information on permeable fuel system materials in the 3 vehicle fleet to estimate statewide permeation emissions. 4 Finally, the contractor will use the information 5 collected to design a confirmatory test program. Staff 6 expects this portion of the plan to be completed next year 7 and the test to be completed by the end of that year. 8 --o0o-- 9 FUELS SECTION MANAGER BRISBY: By December 2001 10 we will quantify the effect on emissions from commingling 11 ethanol blends with nonethanol blends in a vehicle fuel 12 tank. We will also quantify the impact on evaporative 13 emissions from the permeation of ethanol through the soft 14 fuel system components and report to the Board on the 15 findings, along with any appropriate recommendations. 16 By July 2002, staff will evaluate with the 17 California Energy Commission the expected impacts of near 18 zero sulfur levels on supply and price. We will determine 19 the expected sulfur levels of Phase 3 reformulated 20 gasoline, and we will also reevaluate the interim 21 allowable residual levels of MTBE in gasoline. 22 By December 31st 2002, MTBE will be phased out 23 from California gasoline. By the end of 2004 staff will 24 verify that the benefits of the Phase 2 Reformulated 25 Gasoline Program are being preserved. We will also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 evaluate that the drivability performance of reformulated 2 gasoline is being maintained. 3 Staff will continue to provide permitting and 4 CEQA assistance as required and track the refining 5 industry's progress in removing MTBE and implementing the 6 Phase 3 reformulated gasoline program. Staff will 7 continue to coordinate activities with the California 8 Energy Commission. We will update the Board on these 9 issues every six months and will recommend appropriate 10 adjustments if needed. 11 --o0o-- 12 FUELS SECTION MANAGER BRISBY: Compliance plans. 13 So far California refiners and pipeline operators have 14 responded by submitting their initial sets of compliance 15 plans. The proposed schedules submitted as part of the 16 compliance plans show that California refiners are on 17 track to meet the December 31st 2002 date for the phaseout 18 of MTBE from California gasoline. 19 The southern California refiners have started the 20 CEQA process. The San Joaquin Valley and Bay Area 21 refiners are on track to start the CEQA process this 22 quarter. 23 --o0o-- 24 FUELS SECTION MANAGER BRISBY: I will now present 25 information on gasoline supply and prices. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 --o0o-- 2 FUELS SECTION MANAGER BRISBY: This figure 3 presents the trend in monthly gasoline consumption across 4 the year. This graph compares the monthly consumption for 5 2000 and 1999 versus the average for 1990 through 1998. 6 As you can see, consumption has steadily increased over 7 the last couple of years. Consumption for the first eight 8 months of this year is approximately three percent higher 9 than that for the same time last year. It is important to 10 note that the short-term maximum statewide production is 11 about one million barrels per day. That number was 12 exceeded in both August of this year and last. 13 --o0o-- 14 FUELS SECTION MANAGER BRISBY: This chart shows 15 the factors that affect gasoline prices. The most 16 significant factor associated with the recent increases in 17 gasoline prices has been the price of crude oil. You 18 should note that since the beginning of 1999 the price of 19 crude has doubled. You may also note that for a short 20 time dealer margins were very tight. It now appears that 21 they have returned to historical rates or higher. 22 --o0o-- 23 FUELS SECTION MANAGER BRISBY: This concludes 24 this part of my presentation. 25 The next update is scheduled for July and will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 continue every six months until the end of 2004. The 2 staff will continue to work with all stakeholders to track 3 the refining industry's progress towards the December 31, 4 2002 phaseout of MTBE. 5 --o0o-- 6 FUELS SECTION MANAGER BRISBY: Now, I will 7 present to you the staff's recommendations on the proposed 8 follow-up amendments to the California Phase 3 9 reformulated gasoline regulations. 10 --o0o-- 11 FUELS SECTION MANAGER BRISBY: This presentation 12 will proceed with an introduction, then the staff 13 proposal, including proposed revisions to the staff's 14 original proposal. 15 --o0o-- 16 FUELS SECTION MANAGER BRISBY: The staff proposes 17 to amend the California Phase 3 Reformulated Gasoline 18 Regulations, to include specifications for denatured 19 ethanol, amendments to facilitate the practical downstream 20 blending of ethanol, amendments to the California diesel 21 regulations for smaller refiners to mitigate any increase 22 in emissions associated with the California Phase 3 23 reformulated Gasoline Regulations, and other technical 24 changes and clean up. 25 These proposed changes are designed to increase PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 the flexibility for refiners to produce Phase 3 gasoline 2 and to facilitate the phaseout of MTBE from California 3 gasoline. 4 --o0o-- 5 FUELS SECTION MANAGER BRISBY: This table 6 presents the proposed specifications for denatured ethanol 7 and denaturants. The specifications for denatured ethanol 8 are to accommodate Phase 3 gasoline as the denaturant. 9 The specifications for the denaturant are set at the Phase 10 3 reformulated cap limits. Ethanol is denatured because 11 the Bureau of Alcohol, Tobacco and Firearms requires that 12 ethanol intended for fuel must be denatured with a 13 compound like gasoline to prevent it from being consumed 14 as spirits. 15 --o0o-- 16 FUELS SECTION MANAGER BRISBY: The staff proposes 17 amendments to California Phase 3 RFG regulations to 18 facilitate the practical blending of ethanol downstream of 19 a refinery and to facilitate the importation of gasoline. 20 The proposed changes would include provisions for the use 21 of a model to certify ethanol blends at the refinery prior 22 to the addition of the ethanol. 23 These proposed amendments would also define the 24 conditions under which transitions from one level of 25 ethanol to another level of ethanol could occur at a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 storage terminal. Specifically, this relates to instances 2 when it's necessary to change between fuels requiring 3 different levels of ethanol. 4 --o0o-- 5 FUELS SECTION MANAGER BRISBY: The staff proposal 6 includes provisions for a model so gasoline producers can 7 certify ethanol blends prior to the addition of ethanol. 8 This would increase the flexibility for refiners to 9 produce California RFG without ethanol. 10 This model was developed through cooperative 11 efforts between the industry and staff. The industry 12 representatives collected data on over 200 fuels from many 13 different refineries regarding the impacts of adding 14 ethanol in gasoline. This model will allow a refiner to 15 determine the resulting properties of the fuel after the 16 ethanol has been blended without having to sample every 17 batch, hand blend ethanol into the sample and then send 18 the sample to the lab to be analyzed. 19 The model will increase the flexibility for 20 refiners by allowing a refiner to use the predictive model 21 without having to wait for the results of a laboratory 22 analysis each time a batch of gasoline is produced. 23 --o0o-- 24 FUELS SECTION MANAGER BRISBY: The staff proposes 25 to increase the flexibility for refiners and distribution PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 system operators by allowing, under certain conditions, 2 changes from one ethanol content to another without a 3 protocol. These conditions are that the heel, the amount 4 remaining in the bottom of the storage tank, must be 5 restricted to less than ten percent of the volume in the 6 storage tank; the sulfur content of the gasoline added is 7 limited to 12 ppm or less; and that the change in ethanol 8 content is limited to three percent by volume or less. 9 --o0o-- 10 FUELS SECTION MANAGER BRISBY: Staff also 11 proposes to increase the flexibility for refiners and 12 distribution system operators by allowing changes, under 13 certain conditions, from a complying RFG without ethanol 14 to an RFG intended to be blended with ethanol without a 15 protocol. 16 Those conditions are the transition must be made 17 during winter, non-RVP control season; and that the heel, 18 the amount remaining in the bottom of a storage tank, must 19 be restricted to less than ten percent of the volume in 20 the storage tank. 21 If the conditions on both this slide and the 22 previous one are met, then a protocol with the executive 23 officer is not necessary. If those conditions cannot be 24 met, then the use of a protocol would still be available. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 FUELS SECTION MANAGER BRISBY: At the December 2 9th, 1999 hearing, the Board approved provisions providing 3 for specifications that would apply for small refiners. 4 The small refiner provisions apply to refiners that 5 produced California Phase 2 RFG in 1998 and 1999. Those 6 provisions include a production volume cap and require 7 that excess emissions be mitigated through the marketing 8 of a cleaner diesel fuel. 9 --o0o-- 10 FUELS SECTION MANAGER BRISBY: The staff now 11 proposes to amend the ARB diesel regulations to ensure 12 that the use of the small refiner California RFG3 13 provisions will not lead to a loss of benefits. 14 The qualifying small refiner would have three 15 options. First, produce less small refiner diesel. 16 Second, continue current small refiner diesel production 17 levels, but produce a cleaner small refiner diesel fuel. 18 Third, increase production levels and produce an even 19 cleaner small refiner diesel fuel. Any of these options 20 would mitigate the excess emissions. 21 --o0o-- 22 FUELS SECTION MANAGER BRISBY: Other proposed 23 changes as part of the follow-up amendments include 24 tightening the reproducibility limits of the RVP test 25 method to reflect the automated instruments currently PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 being used; amending the existing provisions to reflect 2 the Health and Safety Code's exemption for gasoline used 3 in racing vehicles; amending the wintertime oxygenates 4 requirements for low-throughput stations; updating the 5 test methods for oxygen, ethanol and MTBE in gasoline; 6 providing additional averaging flexibility for refiners; 7 and modifications to the gasoline sampling procedures. 8 --o0o-- 9 FUELS SECTION MANAGER BRISBY: The staff proposes 10 to make several revisions to the original proposal. I 11 will now summarize the staff's revisions to the original 12 proposal. Copies of the proposed revisions in strikeout 13 and underline form are available in your packet. Copies 14 for the public are available on the table outside. 15 The staff's proposed revisions include modifying 16 the denaturant specifications to increase the flexibility 17 to blend different amounts of denaturant into the ethanol; 18 providing additional clarification for a refiner who 19 wishes to use averaging in the new blending model; 20 modifying the cap limits to allow more flexibility in the 21 production of Phase 3 RFG ethanol blend stock components; 22 providing increased flexibility for tank transitions at 23 storage terminals. This flexibility would increase the 24 allowable tank heel from ten percent to 20 percent. And 25 modifications to facilitate transitions for the winter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 time non-RVP control season. 2 --o0o-- 3 FUELS SECTION MANAGER BRISBY: Additionally, the 4 staff's proposed revisions include simplifying the testing 5 requirements for ethanol blend stocks, typically known as 6 CARBOB; adding small refiner provisions for the CENCO 7 Refinery. These revisions include requirements that CENCO 8 meet California Phase 2 specifications and offset excess 9 emissions as compared to California Phase 3 RFG. These 10 offsets would be provided by CENCO through the marketing 11 of a cleaner diesel fuel. 12 Small refinery provisions for CENCO would sunset 13 within two years after the refinery started production. 14 The staff's proposed revisions also include an update to 15 the vehicle testing option for certifying alternative 16 formulations of California RFG to reflect Phase 3 gasoline 17 and other technical changes. 18 --o0o-- 19 FUELS SECTION MANAGER BRISBY: The current 20 proposal is designed to provide clarity and enhance the 21 flexibility of the Phase 3 Reformulated Gasoline 22 Regulations to facilitate the production of Phase 3 23 gasoline and the removal of MTBE. And, as such, no 24 identified adverse economic effects have been identified 25 by the staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 --o0o-- 2 FUELS SECTION MANAGER BRISBY: The current staff 3 proposal does not change either the Phase 2 or Phase 3 4 Reformulated Gasoline properties or the associated mission 5 benefits. No adverse environmental impacts have been 6 identified. 7 --o0o-- 8 FUELS SECTION MANAGER BRISBY: In summary, the 9 staff proposes specifications for denatured ethanol, 10 amendments to facilitate the downstream blending of 11 ethanol and small refiner provisions. The proposal would 12 increase the flexibility to comply with the California 13 Phase 3 Reformulated gasoline regulations while ensuring 14 that there will be no loss in benefits. 15 --o0o-- 16 FUELS SECTION MANAGER BRISBY: We recommend that 17 the Board adopt the staff's proposal as modified today to 18 provide refiners with additional production flexibility 19 while maintaining the emissions benefits of the existing 20 reformulated gasoline program. 21 This concludes my presentation. 22 CHAIRPERSON LLOYD: Thank you very much. Madam 23 Ombudsman, would you please describe the public 24 participation process that occurred while this item was 25 being developed and share any concerns or other comments PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 you may have with the Board at this time. 2 OMBUDSMAN TSHOGL: Mr. Chairman and members of 3 the Board, over the past year of development, staff 4 conducted seven public workshops to get input from 5 affected stakeholders. The first workshop was held in El 6 Monte on March 21st of this year. Then, beginning in May, 7 staff conducted one workshop a month in either Sacramento 8 or El Monte. Workshop notices were mailed to about 500 9 people, E-mailed to an additional 500 people and published 10 on the web. 11 The people on these lists represent the 12 petroleum, oxygenate and automobile industries, 13 environmental groups, private consultants and governmental 14 agencies. During the final weeks of the regulatory 15 development period, ARB staff made representatives from 16 the communities for a better environment aware of the 17 negotiations under way with CENCO. They shared all 18 nonconfidential communications between ARB and CENCO. 19 As a final note, I want to remind you that there 20 will be a formal 15-day comment period for any changes 21 that you might make to the proposed regulation today. 22 Thank you. 23 CHAIRPERSON LLOYD: Thank you very much. Do the 24 Board members have any questions or comments at this time? 25 Seeing none, I would like to call up the first PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 witness. We have a number of witnesses signed up. I'd 2 like to, if they could, limit their testimony to five 3 minutes apiece. The first three we've got John Freel, Tom 4 Eveland and Neil Koehler. 5 MR. FREEL: Mr. Chairman, board members, my name 6 is John Freel, I work for Chevron, but my remarks today 7 are on behalf of the Western States Petroleum Association, 8 or WSPA. WSPA, as I think all of you know, is a trade 9 association who's membership refines and distributes and 10 markets most of the petroleum products sold in California, 11 so this regulation and these amendments are of vital 12 importance to the Western States Petroleum Association. 13 We have worked with CARB staff and other 14 stakeholders since you approved the original regulation in 15 December of last year, in order to try to make sure that 16 the nitty-gritty of how the regulation will actually work 17 in practice would both make sure that this fuel was 18 producible and that it would provide the air quality 19 benefits advertised. 20 Why did it take so long and why is the outcome so 21 complicated? In two words, ethanol blending. Putting 22 ethanol into California Phase 3 gasoline is not a simple 23 exercise that it might seem. In point of fact, both the 24 manufacturer and the distribution of this new fuel 25 containing ethanol will change many things that have been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 standard practice within our industry for years and years. 2 And we would like to congratulate CARB staff for 3 their commitment to making this work, because we support 4 the proposed amendments almost in their entirety. Staff 5 has worked very hard to understand our business, my 6 business. They have a great grasp of the new issues 7 associated with blending ethanol into the fuel and they 8 have burned the midnight oil literally in many cases to 9 try to make sure that they are able to produce the fuel 10 and that it is not done at the sacrifice of the emissions 11 benefits. So we thank staff for that. 12 Did we agree on everything? Of course not. In 13 fact, the Association has provided written comments which 14 point out some of our areas of disagreement. Most 15 pointedly, I think, we disagree on some matters of 16 enforcement, particularly the way enforcement is carried 17 out in the refinery and at the terminal. But we do 18 support the amendments. 19 But I would like to leave you with two additional 20 thoughts. One is that this burning of the midnight oil by 21 staff has resulted in changes in the documentation and 22 changes in the proposed amendments that occurred as late 23 at yesterday afternoon. So the Association simply has not 24 had time to give adequate attention to the most recent 25 changes and we're assuming that we will have a 15-day PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 comment period to make sure that that occurs. 2 More importantly, in the longer range, we can't 3 emphasize enough the risks that we see associated with 4 making Phase 3 gasoline with ethanol, because it is a 5 radical change in how our whole industry does business in 6 the State. It's entirely possible that as we get closer 7 to the reality of that blending, because now we're really 8 dealing with theory, it's entirely possible that as we 9 move towards the reality there will be additional changes 10 which occur to both the agency and the industry, so we may 11 be coming back. 12 Thank you. 13 CHAIRPERSON LLOYD: Thank you. Any questions of 14 board members? 15 Thank you very much. 16 By the way, staff, I need to have a private word 17 with you about this oil you're burning at midnight. 18 (Laughter.) 19 CHAIRPERSON LLOYD: Tom Eveland, Neil Koehler and 20 Calvin Hodge. 21 MR. EVELAND: Mr. Chairman, members of the Board, 22 I'm Tom Eveland. I'm representing Kern Oil and Refining 23 company, and I want to thank you for the opportunity to 24 make comments on the follow-up on the Phase 3 Reformulated 25 Gasoline. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 My remarks relate to the small refiner emissions 2 mitigation provisions. And Kern acknowledges the 3 considerable effort put forth by staff to complete these 4 amendments in the appropriate time frame. Although we did 5 not always agree with staff, at all times they responded 6 promptly to our concerns and have made themselves 7 accessible for discussion on numerous occasions with a 8 capital N on numerous. 9 On December 9th, 1999, the Board unanimously 10 approved certain provisions allowing small refiners Phase 11 3 Reformulated Gasoline flexibility. This action further 12 included a directive to fully mitigate any increased 13 emissions by marketing a cleaner diesel fuel. Among the 14 amendments for consideration today are finishing up 15 certain items from the larger December 9th, 1999 action as 16 related to providing the flexibility for Kern stipulated 17 in the Board's Resolution 99-39 of December 9. 18 The proposed amendments providing this 19 flexibility remain critical to Kern's continued operation. 20 This is due to the conditional relationship between phase 21 3 gasoline flexibility and diesel mitigation. Kern 22 supports the staff proposal being considered today. This 23 proposal complies with the Board's December 9th, 1999 24 resolution by establishing a diesel mitigation format that 25 fully preserves the environmental benefits, requires full PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 offsetting of the flexibility permitted, plus, as an 2 additional benefit, it requires ultra low sulfur diesel 3 production and elimination of high sulfur diesel 4 production for stationary sources. 5 Even though costly to Kern, this proposal allows 6 Kern to continue in the refining business producing clean, 7 high-quality gasoline and diesel fuel. Again, Kern 8 supports the staff proposal before you today. We've 9 discussed with staff a few minor typos that they assure us 10 will be corrected. It's imperative that this rule, it's 11 the diesel rule Section 2282(e)(5), small refiner diesel 12 provisions, be adopted as is except for the aforementioned 13 typos, and that no last minute amendments be considered 14 that would in any way inhibit or delay this rule as it 15 relates to all refiners and specifically Kern. 16 We need closure today in order to meet the 17 requirements of Governor Davis' Executive Order to 18 eliminate MTBE at the earliest possible date, but no later 19 than December 31, 2002. We are already moving forward 20 with scenarios toward Phase 3 reformulated gasoline 21 compliance. 22 A little background on Kern. Kern is a small 23 independent refiner. We're located in Bakersfield, 24 California, employ just over 100 people and have supplied 25 motor fuels for over 65 years. And after committing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 millions of dollars to make the reformulated diesel and 2 millions more to upgrade the gasoline to the Phase 2 3 standard, Kern is the only small independent refiner 4 that's been producing California Phase 2 reformulated 5 gasoline since it's been mandated in 1996. 6 It's important to note that Kern markets this 7 gasoline in diesel to independent as well as branded 8 markets in the San Joaquin valley, the high desert and the 9 central coast. The competitive market impacts are clear. 10 Kern oil plays a substantial role in both gasoline and 11 diesel supplies, particularly in the central valley. 12 Phase 3 flexibility is an absolute 13 stay-in-business necessity for Kern. As I stated earlier, 14 the existing regulations, as they relate to small refiner 15 Phase 3 flexibility, are contingent on certain diesel fuel 16 mitigation for consideration today. Therefore today's 17 decision remains just as vital for Kern as the December 18 9th, 1999 action. 19 Just in closing, again, Kern supports the 20 recommendations and conclusions in the staff report. I 21 have the following remarks. California's economy is 22 dependent upon the element of competition that Kern 23 provides. California can't afford to lose any more of its 24 independent sources of gasoline and diesel production. 25 There are no feasible solutions for Kern to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 continue producing California reformulated gasoline and 2 diesel without these diesel mitigation mechanisms that are 3 under consideration today. Kern's small refiner gasoline 4 and diesel production will be capped. In other words, 5 there's a specific limit written in the regulation, 6 providing full environmental mitigation, and Kern will not 7 have any unfair business advantage. And without the 8 critical small refiner diesel mitigation mechanism, 9 frankly, Kern's refinery would have to close. 10 Thank you. 11 CHAIRPERSON LLOYD: Thank you. Any questions 12 from the members? 13 Thank you. And, again, I would like to 14 compliment you and the staff, because I know not long 15 after I came on board, we met with you and Kern and the 16 staff and things looked much bleaker then than apparently 17 they do now. So I'd like to congratulate staff and you 18 for all the effort you've put to make this a viable 19 refinery. 20 MR. EVELAND: Thank you. And I would also like 21 to thank the staff again. 22 CHAIRPERSON LLOYD: Next we have Neil Koehler 23 then Calvin Hodge and Loren Beard. 24 MR. KOEHLER: Mr. Chairman, other members of the 25 board. Thank you for the opportunity to present my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 comments today. 2 My name is Neil Koehler. I'm here today 3 representing the Renewable Fuels Association, which is the 4 trade group for the ethanol producers in the United 5 States. 6 I'd like to first follow up with a comment on the 7 midnight oil and offer some free clean burning ethanol 8 lamps for future late night activities. 9 (Laughter.) 10 CHAIRPERSON LLOYD: If you could assure they 11 burned it. 12 BOARD MEMBER DeSAULNIER: As long as he can't 13 drink it. 14 (Laughter.) 15 MR. KOEHLER: Actually, one of the products we 16 make with the ethanol we produce is a gel that you turn 17 into -- which you burn and does produce a flame. It's an 18 interesting little product but that's another story. 19 I would like to start by complimenting staff as 20 John Freel and others have mentioned, this was not an easy 21 task and there were a lot of serious technical issues that 22 had to be worked through. 23 I think that this process was a very open, a very 24 professional one and I appreciated the efforts on the part 25 of all the stakeholders and the staff, to work through PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 these difficult issues and come up with a package that, I 2 think, truly is workable. And we are fully in support of 3 the proposals as brought to you today. 4 A couple comments I would like to make about 5 that. And we, as an industry, had to kind of come along 6 with some of the specs that were being asked of us as it 7 relates to sulfur and other specifications of the 8 denatured ethanol. And that is because the ethanol, in 9 this program by supporting this program and you're 10 accepting these proposals today, we are holding ethanol to 11 a very high standard indeed, that ethanol is going to have 12 a specification that is significantly cleaner than the 13 gasoline to which it is being added. And while we had to 14 work through how we got there, we have worked very 15 collectively as an industry to understand as it relates to 16 sulfur and other issues how to get to where we need to be 17 so that we can be a very positive contributor to being 18 able to ensure the clean-burning aspects of this program. 19 For instance on sulfur, the cap limit for ethanol 20 is ten, starting 2003. While it will be 60, at that time, 21 for gasoline moving down to 30 in 2005. So even then the 22 ethanol spec on sulfur will be three times cleaner than 23 gasoline. So we're proud of that fact. We're proud that 24 we offer a blending component that can dilute some of the 25 less desirable aspects of gasoline, that we can help to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 contribute to NOx reductions by such a low sulfur level 2 and we stand ready to do that. 3 But I certainly don't want that fact lost on the 4 Board that, you know, there were some issues. There is 5 going to be some investment required in existing ethanol 6 plants to make sure that these specs are met, but that we 7 are trying to do our part to make this program a success. 8 Also, I'd like to mention that it was with these 9 clean air benefits in mind that Congress did include the 10 oxygen requirement in the Clean Air Act amendments of 11 1990. That's an issue that certainly is of significant 12 discussion at the federal level and I won't go there 13 today. 14 But we certainly, as an industry, stand behind 15 the cleaner burning aspects of ethanol. And if it's not 16 an oxygen requirement, renewable requirement, whatever it 17 is, we do feel that it's important to continue to ensure 18 that the clean burning aspects of ethanol are incorporated 19 in programs here in California and nationally. 20 I'd like to say that the flexibility issue, I 21 think, is a significant one. And staff was very 22 responsive to both our input and the input of the refiners 23 to make sure that, in the choice of denaturants that were 24 used and the amount of denaturant that was used and in the 25 blending practices that there was flexibility that was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 built into the program that in no way compromises the air 2 quality benefits. 3 And I think that what you have before you is a 4 maximum amount of flexibility that is possible in that 5 regard. And that relates to both the specs and it relates 6 to the downstream blending and the CARBOB aspects of the 7 proposal. 8 I'd, in closing, just like to say that our 9 industry, the ethanol industry, stands ready to partner 10 with regulators, the oil industry and other interested 11 stakeholders in working over these next two years to 12 expeditiously meet the Governor's requirement that MTBE be 13 phased out of gasoline. And that in that regard, what 14 we're taking very seriously as an industry is that we not 15 only have this clean component to bring to the blending of 16 the gasoline, but that we expand the capacity of ethanol 17 required to meet the requirements here in California and 18 elsewhere, as MTBE, we think, will most certainly be 19 phased out of other parts of the country. 20 Specifically, in California the Renewable Fuels 21 Association, and I can say this sincerely as a California 22 ethanol producer, is very seriously engaged in the efforts 23 in offering services to California agriculture and other 24 folks in California that want to build plants in the 25 state. And I think that's how we can make this program a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 true win for not only the environment but the economy is 2 to build ethanol plants here in the State from rice straw, 3 other various waste products and other primary crops in 4 the future and provide some serious economic development 5 benefits in rural California as well. 6 Thank you very much. 7 CHAIRPERSON LLOYD: Any comments or questions? 8 Again, Neil, I'd like to thank you again and the 9 staff here also for I see a much better spirit of 10 engagement and cooperation. So I'd like to thank you 11 personally for that and the staff. 12 Thank you. 13 Calvin Hodge, Dr. Loren Beard, and then Jay 14 McKeeman. 15 (Thereupopn an overhead presentation was 16 presented as follows.) 17 MR. HODGE: Are we ready to go? First off, Mr. 18 Chairman, board Members, interested parties, I thank you 19 for giving me these few moments to speak with you today. 20 --o0o-- 21 MR. HODGE: Dr. Lloyd, when you were in Houston 22 about a month ago, you mentioned that headline. I think 23 it bothered you a little bit. And you have the right to 24 be bothered. We look at some DOE information there on 25 Price Demand Elasticity Factors, if you had as little as a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 three percent supply shortfall, you could see double your 2 gasoline prices. That's something to be worried about. 3 Well, I'm here to help today. 4 (Laughter.) 5 MR. HODGE: And I hope that it works out that 6 way. And it's not trying to make them double. It's 7 trying to make the supply bigger, okay. 8 (Laughter.) 9 --o0o-- 10 MR. HODGE: You've all seen this chart. The 11 Energy Commission pulled this together. Basically, it 12 shows that in order to make your requirement, you're going 13 to need a significant volume of ethanol, CARBOB, or C7 14 alkylate. And it's the C7 alkylate that concerns me and 15 has brought me here today. 16 --o0o-- 17 MR. HODGE: And the reason is because it shows it 18 to be 7 to 11 percent of your supply and it's imported. 19 That leaves you vulnerable to supply problems elsewhere in 20 the world and in the country. The problem with that is 21 that that market is not likely to develop. 22 But the C8 alkylate market is developing right 23 now and the isooctane market is very likely to develop as 24 MTBE producers shut down their facilities and convert to 25 make this other cleaner burning product. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 However, we're going to need your help. You're 2 going to need to adjust the T50 limits a little bit. And 3 staff has done a great job, but they have not adjusted 4 those at this stage. So I want to tell you why I think we 5 should do that. 6 --o0o-- 7 MR. HODGE: First off, propylene is a chemical. 8 It's part of the C7 alkylate, but it's going from fuels to 9 chemicals today. On the other side, butylenes are moving 10 from chemicals to fuel. Since 1990, 100,000 barrels per 11 day of propylene or 175,000 barrels per day of C7 alkylate 12 has disappeared from the fuel side and went to the 13 chemical side, because polypropylene is just a wonderful 14 product, and it sells by the pound. 15 --o0o-- 16 MR. HODGE: Here's what it would cost you to make 17 C7 alkylate out of propylene that you had to buy back from 18 the chemical sector. It's a good 30 cents a gallon more 19 than the butylene alkylate. Bear in mind, this butylene, 20 because it's in surplus, it's valued at butane or less -- 21 actually, it's actually, less because of the olefin 22 content, and so this is an opportunity to cut the cost of 23 your imports if you make this one small adjustment. 24 --o0o-- 25 MR. HODGE: There's good news. You can use the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 available alkylate without hurting the air quality because 2 you have the predictive model. The guys have done a great 3 job putting together this model. And if you give the 4 refiners flexibility, it will work. 5 --o0o-- 6 MR. HODGE: For example, in this chart, what I've 7 done is I've added 10 percent of C7 alkylate, C8 alkylate 8 and isooctane to your flat California specifications. And 9 you can see why you chose the C7 alkylate, it's good 10 stuff. However, it's not really available to you. And if 11 you add the C8 alkylate or the isooctane, you'll make 12 gasoline that's better than what you have on your flat 13 limit. 14 You do have a little increase in exhaust 15 hydrocarbons, but your total hydrocarbons are down and the 16 gasoline passes. 17 --o0o-- 18 MR. HODGE: If we do what refineries normally do 19 namely balance the vapor pressure, say by adding 20 Isomerate, you see everything is winning. You're making a 21 cleaner fuel. 22 --o0o-- 23 MR. HODGE: So in summary and keeping to my five, 24 I hope, the cost of C7 alkylate is up, and the supply is 25 unreliable. The C8 alkylate and or isooctane can fill the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 hole, if you adjust the T50 upward. 2 Therefore, I'm recommending that you consider 3 raising the T50 cap to the ASTM standard and rely upon the 4 predictive model to bring you back into control. I think 5 you should also develop a contingency plan in case you 6 have a supply shortage to see if you can adjust these T50 7 limits. 8 Predictive model preserves your air quality, rely 9 on it. And there's an added bonus here. When you raise 10 that 50 percent point, there is a patent out there that 11 has some claims about 50 percent point. And this will 12 give the refiners some flexibility of making gasoline 13 that's above that, but yet still clean enough to meet 14 California standards. 15 With that, I'll take questions. 16 CHAIRPERSON LLOYD: Ms. D'Adamo. 17 BOARD MEMBER D'ADAMO: I'd just like to know a 18 little more about your organization and who's on your 19 board. 20 MR. HODGE: Okay, A 2nd Opinion is the name of my 21 company. I'm representing three potential alkylate 22 producers that produce C8 alkylate and their potential 23 isooctane producers. And that's who I'm representing 24 today. And they would like to see a little more 25 flexibility. Plus, I also think most of these refiners PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 out here would like to see a little more flexibility, but 2 they've been so close to this thing that they're a little 3 hesitant to ask for this. And since I'm kind of an 4 outsider looking in, and I say gee, fellas, this would 5 help you, why not tell you about it. 6 CHAIRPERSON LLOYD: Is this the transit authority 7 or why is it not that butylene is being more readily 8 available coming from the chemicals for the petroleum? Is 9 it going to be true in a year's time, two year's time, 10 three year's time? 11 MR. HODGE: Right now, there are -- there are not 12 a lot of petrol chemicals that butylenes are going into. 13 But there's a significant number of petrol chemicals that 14 propylene is going into. When you build additional olefin 15 cracking capacity, their tendency is to move to a heavier 16 feed stock like the low octane naphtha that will no longer 17 fit in gasoline. And those produce a lot of butylenes and 18 so that's why that trend is going that way. 19 CHAIRPERSON LLOYD: Did they use any of the 20 butylenes in the MTBE cycle or not? 21 MR. HODGE: Yes, they used butylenes in the MTBE. 22 That is another source of butylene and that is why it is 23 undervalued. There are several ways you do that. You 24 have the refinery MTBE plants where the isobutylene is a 25 byproduct of the olefin cracking process. And then you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 have the on purpose MTBE plants where you actually make 2 isobutylene in order to convert it to MTBE. 3 CHAIRPERSON LLOYD: Does staff have any comments 4 on this? I presume you looked up this issue? 5 MR. VENTURINI: Just a brief comment. Basically, 6 we'd be more than happy with Mr. Hodge and both the oil 7 and the auto industry, because they have some concerns 8 about T50 as well, and to explore this further to see if 9 this does make sense, and if so we can bring it back to 10 you. 11 CHAIRPERSON LLOYD: Yeah. That seems good. I 12 appreciate you pointing that out. And I say I think it 13 makes sense. The concern I would have is are we trying to 14 fix the problem and then the prices change tomorrow or 15 something? But it sounds as though staff has got an 16 excellent suggestion of working here together and see what 17 we can do. 18 MR. HODGE: Thank you, Dr. Lloyd. 19 CHAIRPERSON LLOYD: Than you very much. And 20 certainly we want anything we can to avoid shortages as we 21 move ahead. 22 MR. HODGE: I thought that second slide would get 23 your attention, sir. 24 CHAIRPERSON LLOYD: Yes. 25 MR. HODGE: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 CHAIRPERSON LLOYD: Now, I have Dr. Beard. And 2 I'm sure he might be able to address the T50. Then Jay 3 McKeeman and Scott Kuhn. 4 DR. BEARD: Good afternoon, Dr. Lloyd and members 5 of the Board. Thank you for giving me the opportunity to 6 address you today. 7 (Thereupon an overhead presentation was 8 presented as follows.) 9 DR. BEARD: I think you can simply look at the 10 title of our slide and realize that we are not in support 11 of some of the amendments that have been discussed today. 12 The first thing is that we think that the Phase 3 RFG 13 compromises the air quality and we'll show you just a 14 couple of slides and then we'll have to brief -- cut down 15 what I've got here. 16 CHAIRPERSON LLOYD: Yeah, Dr. Beard, we did see 17 the size of your package and realize it wouldn't fit into 18 five minutes. 19 DR. BEARD: And I'll ask staff to put that on the 20 web site so that people can access it, but I'll give the 21 high points today. Also, that we think it decouples the 22 fuel technology from fuel quality -- vehicle technology 23 from fuel quality. 24 Next one. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 DR. BEARD: And just very briefly, we always like 2 to bring this to the Board's attention that the Board is 3 on record as saying no single measure in the history of 4 the air pollution controller in California has been as 5 effective as the California RFG Phase 2. 6 Next slide. 7 --o0o-- 8 DR. BEARD: Unfortunately, the Phase 3 proposal 9 that comes from staff proposes to relax five 10 specifications from Phase 2, or tighten two, but really 11 one of those is really a codification of a current 12 situation, which is that the sulfur levels they're talking 13 about are already the existing sulfur levels in 14 California. 15 Another point that seems to always kind of fall 16 through the cracks is that the Governor's edict didn't 17 just say to get rid of MTBE, it also said that there 18 should be additional emissions reductions not just to 19 maintain the status quo, but additional emission 20 reductions where they're effective, cost effective. 21 --o0o-- 22 DR. BEARD: And I think just the point here is -- 23 just the last two points here is that we understand that 24 California is in a bit of a bind over MTBE and we 25 understand that some flexibility is necessary. But we've PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 talked and we thought we had an understanding that a 2 sunsetting was going to take place on some of these 3 flexibilities and yet all of the proposals that we heard 4 from Steve this afternoon were all additional 5 flexibilities for the future, just more flexibility, more 6 flexibility. No more talk about improved air quality 7 coming from the fuel side. 8 --o0o-- 9 DR. BEARD: Just briefly, when we talked about 10 LEV II, we looked at every aspect of vehicle emissions. 11 And every aspect of vehicle emissions were brought down to 12 the tune of an estimate of something like 57 tons per day 13 reduction in the South Coast. 14 When we look at the Phase 3 gasoline, according 15 to the predictive model it's 19 tons per day and that does 16 not consider the commingling effects. 17 --o0o-- 18 DR. BEARD: In fact, you can skip the next one. 19 The Alliance still favors five parts per million 20 sulfur. We think that there are very, very important 21 diesel NOx reduction technologies that are right around 22 the corner, but they are going to need extremely low 23 sulfur. California is already in the sub 20 average and 24 we think that the cap ought to be moved down to the five 25 and lower range. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 --o0o-- 2 DR. BEARD: This gets a little bit to what Cal 3 said, raising T50 in terms of emissions is the wrong way 4 to go. In terms of vehicle performance, it's the wrong 5 way to go. In terms of customer satisfaction, it's going 6 to create a lot of problems for California customers. 7 We've seen it in other states in the country where they're 8 going to very low RVPs and dependent on ASTM T50 to 9 protect the customer. We've had customer complaints all 10 over the place. We can cite you examples from Atlanta, 11 New Orleans, St. Louis where they took that approach and 12 it simply doesn't work. 13 --o0o-- 14 DR. BEARD: Ethanol issues. We've seen lots of 15 problems with ethanol blending into fuels in states that 16 happen to have moderate to high temperatures in the 17 summertime and steep mountains, states not unlike 18 California as it happens. 19 --o0o-- 20 DR. BEARD: Ethanol fixes. We think that -- we 21 understand that if there's no waiver granted, ethanol is 22 going to have to be blended into California gasoline. We 23 think that the State needs to very vigorously enforce the 24 TV over L or the vapor specification. 25 The minimum T50, we think that raising RVP, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 again, is going to lead to increased evaporative 2 emissions, permeation emissions that hasn't been studied 3 yet. Nobody knows the answer, but there are preliminary 4 answers coming out. 5 The DI equation that staff has written a letter 6 to EPA includes a term for ethanol and that needs to be 7 included and, again, gets back to the T50 issue. 8 --o0o-- 9 DR. BEARD: The problem we think with the staff's 10 ethanol analysis is that it's kind of like an onion and 11 they peel back the first couple skins of the onion and 12 look at blending CARBOBs and that kind of stuff in tanks. 13 But you haven't really looked at what happens when 14 consumers start to blend ethanol fuels in the tanks of 15 their cars. 16 And we have a study from a consultant called Air 17 Resources Incorporated -- or Air Resources Research that 18 shows that there could be very significant increases in 19 hydrocarbon evaporative emissions from the commingling 20 effect. 21 --o0o-- 22 DR. BEARD: This is that study in fact. You can 23 see in the lower right-hand corner that their prediction 24 is that it could be as much as 3.9 tons per day increase 25 from the Board proposal. Whereas, the Alliance proposal, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 which we have presented to the Board on numerous 2 occasions, would, even with commingling, result in a 25.4 3 ton per day reduction in emissions. 4 --o0o-- 5 DR. BEARD: The sulfur issue just very briefly. 6 Especially, the Seattle -- you can't really see it very 7 well from here, but the Seattle refining basin up there, 8 the average numbers of sulfur from the Alliance 2000 9 Summer Gasoline Survey shows that sulfur levels are 10 already 30 or 40 percent down from where they were in 11 1999. By 2004 they're going to have to be down below 30. 12 What that means is there are going to be a lot of 13 very low sulfur blending stocks available that can be 14 transferred into California in the event of these 15 temporary outages that you experienced last summer. 16 Next. 17 --o0o-- 18 DR. BEARD: This is too small to read, but I just 19 want to make the last point is that gasoline 20 specifications are far from the biggest driver of the 21 ultimate price. I would point out that this past June all 22 through Michigan, where we live, in areas where there are 23 no requirements other than ASTM, we were paying 60 cents a 24 gallon more than California for gasoline because of a 25 pipeline breakage, a refinery outage, those kinds of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 things. 2 It has nothing to do whatsoever with the 3 specification. It has to do with the availability of 4 people to get fuel to you. And when those things happen, 5 prices will go up. And that's a simple matter of supply 6 and demand. 7 Our specification for sulfur in gasoline in 8 Michigan is 1,000. 9 --O0o-- 10 DR. BEARD: Just a couple of words about diesel 11 fuel quality. We would like to congratulate the Board on 12 being the only State in the US that recognizes the value 13 of Cetane, low aromatics and low sulfur in gasoline in 14 leading the country. Unfortunately, California is in 15 danger of falling behind Europe and Japan. 16 We think that the Board should consider 17 keeping -- or having a 55 minimum of Cetane, lowering 18 aromatics and 5 ppm max sulfur, again, to enable NOx 19 reduction things that lead back to the discussions we had 20 this morning about the viability of diesel buses and 21 trucks. 22 --o0o-- 23 DR. BEARD: And the summary, I think, we can just 24 bypass it except for the last statement that a failure to 25 sunset the relaxed standards from California RFG 2 to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 California RFG 3 really relates to a permanent detriment 2 to California air quality in our opinion. 3 Thank you. 4 Did I meet my five minutes? 5 CHAIRPERSON LLOYD: No, I think you did pretty 6 well. 7 Comments or questions from the Board? 8 In fact, given this, I really didn't realize you 9 had so many problems with gasoline, so I look forward to 10 you coming back in January to the Board saying how 11 delighted you are to support our ZEV mandate. It's clear 12 you won't have any problems with this one. 13 (Laughter.) 14 DR. BEARD: I had questions about talking about 15 the tons per day of the ZEV mandate with respect to the 16 tons per day that we project for our fuel proposal, which 17 we think is cost effective and doable on off-the-shelf 18 technology at 54 tons per day. And the last staff 19 report -- I understand that there's a new staff report 20 coming, but the last staff report I saw on the ZEV mandate 21 was on the order of 1 to 2 tons per day at costs far, far 22 higher. 23 CHAIRPERSON LLOYD: That's just part of the air 24 quality. It's the total environmental stuff that we're 25 looking at, but I, again, -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 DR. BEARD: I'm not a ZEV expert, so I didn't 2 want to get too deep into it. 3 CHAIRPERSON LLOYD: No. But, again, I was 4 interested to see all the problems you have. So we can 5 use this information. 6 Thank you very much. 7 DR. BEARD: My colleagues don't like the ZEV for 8 one reason, I don't like it because I'm the company's 9 fuels expert, so I just want to keep that down. 10 (Laughter.) 11 CHAIRPERSON LLOYD: Thank you very much. 12 Jay McKeeman and then Scott Kuhn and John Wright. 13 Jay, you're going to be the first one to oppose 14 us today. 15 MR. McKEEMAN: Well, it's not a new position. 16 (Laughter.) 17 MR. McKEEMAN: Actually, the issue of opposing 18 these particular regulations is not the issue. The issue 19 of adequate economic analysis of these regulations is 20 really our issue. We were in front of the Board when 21 Phase 3 was originally discussed and expressed, at that 22 time, significant concerns about the transition from MTBE 23 containing fuels to ethanol fuels. 24 And we still have those concerns. And all those 25 concerns relate to the economically prudent movement from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 a fungible fuel system to, what we perceive is going to 2 be, a nonfungible fuel system. And the issue there very 3 succinctly is that we are seeing already refiners 4 practicing the flexibility that's provided in these 5 regulations -- well, actually it's not in these. In the 6 existing regulations to produce there are, basically, two 7 flavors of fuel for California, oxygenated and 8 nonoxygenated. 9 Right now, fuel is fungible within the pipeline 10 system. It is fungible within the delivery -- our 11 delivery system and is pretty much fungible in the retail 12 system. What we see coming down the pipe, and we're very 13 very concerned about, is the possibility of two flavors of 14 fuel. 15 Now, what that means to us in the first instance 16 is an immediate capital cost of basically doubling the 17 storage capacity that we have that our members have at 18 their facilities because oxygenated and nonoxygenated 19 fuels will not be able to be mixed. I think there are 20 also issues related to the transportation of various types 21 of CARBOB through the pipeline system, although I'm sure 22 Kendra Morgans is busy figuring out the logistical issues. 23 But I guess the point that I'm trying to make is 24 that right now our delivery system is extremely sensitive 25 to any minor malfunctions. Recently, we've just seen a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 major problem in northern California where a testing 2 device got stuck in a pipeline that was delivering to an 3 air force base. And that has created resonance in terms 4 of diesel delivery that continues to this day for us. And 5 that problem was resolved three or four weeks ago. And 6 it's still creating problems in the delivery of fuels. 7 Now, if we start putting variables into the 8 delivery system where different types of fuels need to be 9 delivered to specific locations at different times of the 10 year, we've just added a whole new dimension of complexity 11 into the delivery system. So at the first instance we're 12 very concerned about the availability of supply at the 13 rack where we pick these up, because of the additional 14 complexity that may be introduced into the delivery 15 system. 16 Secondly, we're concerned about the amount of 17 economic -- or capital investment our members are going to 18 have to make to deal with a two-flavor fuel system. 19 And third, there's another aspect of this 20 proposal or this scenario and that's the potential of 21 losing market share. It is very easy for us to conclude 22 that the refiners, because of the logistical and economic 23 problems that will be inherent in moving two flavors of 24 fuel, will go to a direct delivery system. And when they 25 go to a direct delivery, that puts us out of the market or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 removes market share from us. 2 We have consistently expressed these concerns to 3 staff. And to date, we do not see any indication in the 4 staff report or from CEC that addresses these issues. And 5 they're fundamental issues to our market, to the 6 survivability of the independent oil marketer in the 7 State. 8 And we're very concerned that the train keeps 9 moving, but there isn't the information there for us or 10 for you to really know what the impacts of these decisions 11 are. So that's where I come back to is I don't know that 12 I'm really opposed to the regulations today, but I am 13 certainly concerned that there isn't adequate information 14 on the impacts, the significant impacts, to our members. 15 And we continue to urge the Board. I met with 16 staff members last week and there is room for further 17 discussion on this issue. We appreciate that. However, 18 until we see pen put to paper and we see some estimates on 19 what these regulations and what this move to Phase 3 is 20 going to mean for the independent oil marketer community, 21 we're going to be here on a regular basis asking the 22 questions. And they're important questions to us and I 23 think to you as decision makers. 24 CHAIRPERSON LLOYD: Well, I guess I would share 25 your disappointment in the lack of progress. I know that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 staff has made a concerted effort. On the other hand, I 2 was optimistic to hear, Jay, that maybe there is room for 3 additional work there. 4 Before I ask my colleagues if they have any 5 comments, I would certainly suggest you continue to work 6 with staff to address those, because I understand where 7 you're coming from. There's clearly a concern with the 8 independents that it's something we need to preserve. But 9 it seems as though it's a very tough issue that otherwise 10 there would have been something coming forward there. 11 MR. McKEEMAN: It is a tough issue. And I'm not 12 suggesting that there's an easy fix, but I am suggesting 13 that there is the need to look at the implications, and 14 that's really where our concern lies. With the way the 15 scenario is unfolding, we were concerned initially in the 16 initial passage of the regulations. As we dig deeper into 17 the regulations, we find that there are more concerns 18 rather than less concerns. 19 And, I mean, I will quote the staff report. 20 "These regulations should not have a negative economic 21 impact on small businesses." 22 That's wrong. It's not correct. And we need to 23 get that corrected. 24 CHAIRPERSON LLOYD: I would like to -- in fact, 25 I'd like to ask Kathleen Tshogl if, in fact, she would, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 you know, make this a priority to look at with the staff. 2 OMBUDSMAN TSHOGL: I will. 3 MR. McKEEMAN: We appreciate that. 4 CHAIRPERSON LLOYD: Any other comments from the 5 Board? 6 Thank you very much. 7 Professor Friedman. 8 BOARD MEMBER HUGH FRIEDMAN: I just want to pick 9 up on the two flavor concept. That not only affects you 10 folks, but I assume it would affect the consumer. I have 11 a half a tank. I want to fill up and can I blend, is it 12 safe with the two flavors? And we're satisfied that we're 13 not going to cause a problem with the public? 14 CHAIRPERSON LLOYD: Dean, could you identify. 15 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: I 16 apologize, Mr. Chairman. My name is Dean Simeroth. I'm 17 in the Stationary Source Division. Professor Friedman, in 18 terms of the consumer, they will not notice a difference 19 in the performance of their car. 20 The concern that we have is the commingling of 21 the two fuels in the vehicle tank and the potential for 22 increase in evaporative emissions. That's our priority 23 for trying to actually quantify that potential this coming 24 year once we know how much potential there is for the 25 commingling. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 Part of the concern on the independents, we're 2 not sure yet there really is going to be the two flavors 3 at least beyond geographical areas that will be relatively 4 broad. If we do not receive the waiver, 80 percent of the 5 state's gasoline is going to be with ethanol. And that 6 will be exactly the same situation that exists today with 7 MTBE and nonMTBE in the Bay Area. 8 If we do get the waiver, what will happen is 9 companies will make a decision on their marketing 10 practices. Some companies will probably go a hundred 11 percent ethanol year round. Others won't. 12 That means that service stations are going to 13 have to make a choice of what type of gasoline that 14 they're going to have at their service station. So it's 15 not only the independent marketers that have to make these 16 choices, it's down to the retail level. And once these 17 are made, they're very difficult to change and that's the 18 reason we spent so much time this year coming up with how 19 we can affect those changes, once you go to a particular 20 type of gasoline. 21 The flexibility we've built in today applies to 22 the independent marketer as to the terminal and the major 23 oil companies. Whether that's satisfactory or not for the 24 owner/operator, we're trying to sort that out. The 25 flexibility applies to everyone. It wasn't designed for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 any particular -- and we're still working with this. The 2 Energy Commission has another contract out to further 3 evaluate the situation. We're working with them on this. 4 We've already, as you've heard, agreed to further 5 investigate this with the independent oil marketers. 6 CHAIRPERSON LLOYD: Thank you. 7 Mr. Calhoun. 8 BOARD MEMBER CALHOUN: Dean Simeroth is being 9 pragmatic, but I think he hasn't told you that we've 10 solved the MTBE problem, but we're creating another one. 11 And the problem is fairly well known and Dr. Beard alluded 12 to the problem. And we don't know the extent of the 13 magnitude of the problem, because it's a known fact that 14 adding methanol -- not methanol, ethanol to gasoline 15 impacts the grade precision of the fuel, and it also 16 permeates the tubing, the rubber tubing that's on these 17 vehicles. 18 And that's something that we're going to have to 19 watch very closely and determine what impact it's really 20 going to have on the emissions in the future. 21 CHAIRPERSON LLOYD: I think staff did say there's 22 a contractor report coming in on this very issue. 23 STATIONARY SOURCE DIVISION CHIEF VENTURINI: Yes, 24 Dr. Lloyd. Mr. Calhoun is absolutely correct. In fact, 25 one of the directives the Board gave us when the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 adopted the regulations last year was to evaluate this 2 commingling effect and to evaluate this permeation which 3 we are doing. And our hope is to report back to you at 4 the end of next year with our findings and any potential 5 changes needed to the regulations to ensure that the 6 benefits of the current program are preserved. 7 CHAIRPERSON LLOYD: Thank you very much. 8 Next is Scott Kuhn and John Wright and then 9 Jocelyn Thompson. 10 MR. KUHN: Good afternoon, Chairman Lloyd and 11 members of the Board. My name is Scott Kuhn. I'm a staff 12 attorney with Communities for a Better Environment, CBE. 13 And we are here to talk specifically about the 14 small refiner exemption and possible changes to that. As 15 this board probably remembers, CBE has long time been a 16 critic of MTBE and actually supported a lot of the things 17 that the Board did in 1999 as implementing the Phase 3 18 regulations, so we do support that and we support the 19 spirit of those. 20 The problem we have today is with the proposal, 21 which was actually just released publicly on the 14th of 22 November, so less than 48 hours ago, for the first time 23 was released publicly. And CBE first learned about it by 24 visiting the web site late in the afternoon of the 14th. 25 And so it raises a process problem. So that's the first PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 question is a process problem. 2 And the proposed statutory language has not even 3 been drafted. It's really just an idea. It's just a 4 concept. So there's been no study of this. There's been 5 no adequate public notice or public comment. There was 6 talk about seven workshops that were had. This proposal 7 wasn't even on the table until two days ago, so none of 8 the public -- no members of the public have had a chance 9 to review this. 10 Indeed, the staff hasn't had a chance to prepare 11 the economic analysis, consider alternatives or consider 12 environmental impacts of it. So, yesterday, CBE submitted 13 a request to continue this particular issue until such 14 time as there could be adequate public notice, there could 15 be adequate study, and just simply there could be adequate 16 language drafted. 17 It's not even a proposal right now. It's just an 18 idea. And, again, the public notice that was done 45 days 19 ago, specifically said that Kern Refinery in Bakersfield 20 was the only refinery that was part of the small refiner 21 exemption. And now, again, 48 hours before this board's 22 meeting, there's been a last minute, an 11th hour, switch. 23 Perhaps, this was going on when the midnight oil was being 24 burned, this proposal was being developed. 25 But, you know, that is not adequate public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 participation. That's not adequate notice and opportunity 2 to comment. So I have submitted on behalf of CBE today 3 two letters with the Board earlier today. I think I saw 4 copies being distributed around, so I trust you do have 5 those. And we think, if the Board was to approve this 6 proposed idea, basically, because I can hardly call it a 7 regulation, since it's not even reduced to language, to 8 vote on, we think, CBE thinks, that the Board would be 9 violating numerous provisions of State law, including the 10 State Administrative Procedures Act, Government Code 11346 11 and continuing. 12 We think it would be violating its own 13 obligations as far as public notice and public opportunity 14 to comment. It could be violating CEQA, the California 15 Environmental Quality Act. And we think it would be 16 violating the spirit, if not the letter, of the rules that 17 have been passed, SB 529 and 989 as to requiring a study 18 of proposed changes to Phase 3 regulations by the 19 California Environmental Policy Commission. 20 So we think all of those issues are very 21 important. And from a process perspective, it's just 22 really not to the stage where the Board should even be 23 considering it. It shouldn't even come to the Board at 24 this date. 25 And I do have a few other comments regarding the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 process. CENCO was here in December of 1999 and made a 2 quick presentation, I believe it was Mr. Wright who's 3 going to follow me, the CENCO vice president. And, at 4 that time, Chairman Lloyd, there was a directive from you 5 to have the staff go back, meet with CENCO and come back 6 to the Board with a proposal. 7 And I'm quoting from a letter here that, "They 8 were to return to the Board with all the parameters." 9 That was a quote from you, and it was a quote that was 10 sent to me in a letter from Mr. Kenny in August when I 11 submitted comments on behalf of CBE about any proposed 12 changes. Again, there was none processed. Again, just 13 the idea and I asked to be put on a notice list and things 14 like that. 15 And so we're not here with all the parameters. 16 Indeed, there's just the idea. We're much in the same 17 place where we were back in December of 1999 where CENCO 18 was coming before you with, basically, just an oral 19 request to extend time. There's been no time for the 20 Board to do studies. There's been no time for the Board 21 to consider alternatives. 22 And I also learned just yesterday afternoon that 23 Paramount Petroleum has now filed a request, I guess I'll 24 call it, to have the language changed to benefit them as 25 well. So, you know, these last minute changes to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 agenda, you know, I really think they violated the letter 2 and the spirit of public participation. And, again, not 3 even getting to the substance, I think the process is 4 flawed. 5 I do have a number of substantive comments, but I 6 think, at this point, I'd rather refrain just to deal with 7 the process. I have submitted some comments. And if 8 there is going to be a substantive continuation of this 9 matter today, I would like a few more minutes to address 10 the substantive issues. 11 CHAIRPERSON LLOYD: I'd like to ask staff maybe 12 to comment on it. 13 GENERAL COUNSEL WALSH: If I may, with respect to 14 the process issues, the revisions or amendments that have 15 been proposed by staff as 15-day changes will go through 16 the normal regulatory process that's spelled out in the 17 Administrative Procedure Act. The language of the 18 regulatory proposal related to CENCO would be reduced to 19 specific regulatory language. That would go out with 20 public notice and be available for comment. Those 21 comments will be considered. 22 During that process we will, of course, comply 23 with all of the other requirements under our regulations 24 and CEQA in terms of those modifications. This is a 25 standard process. Clearly, the kinds of changes that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 we're talking about here are within the scope of the 2 notice that was published 45 days ago. Although, the 3 specific language is, indeed, not available at this time, 4 but there will be ample opportunity for public review and 5 comment before this process is completed. 6 BOARD MEMBER RIORDAN: Mr. Chairman, may I just 7 ask a question of Ms. Walsh. Do you have a copy of their 8 letter? 9 GENERAL COUNSEL WALSH: Yes. 10 BOARD MEMBER RIORDAN: And have you had an 11 opportunity to review it? 12 GENERAL COUNSEL WALSH: We've had an opportunity 13 to review it. And my responses would be the same based on 14 the more specific comments that are spelled out in the 15 letter. 16 BOARD MEMBER RIORDAN: Thank you. I just wanted 17 to be sure you'd had an opportunity to see this, because I 18 think it was hand delivered today. 19 CHAIRPERSON LLOYD: Although, it does seem a 20 little bit disturbing in terms of, maybe not the reality, 21 but the perception that this is coming in real late. 22 Ms. D'Adamo. 23 BOARD MEMBER D'ADAMO: Well, I've got so many 24 pieces of paper before me, I'm a little frustrated right 25 now, because I'm not able to find it. I thought that you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 had sent in a letter quite some time ago asking to be 2 notified. And I'm looking for that letter. I'm not able 3 to find it just now. What is the date of that? 4 MR. KUHN: That was July 6th, I believe. It was 5 a letter to Chairman Lloyd and to Mr. Kenny. And there 6 was a response from Mr. Kenny on behalf of Mr. Lloyd as 7 well. I believe it was dated August 1st. That, I think, 8 is an attachment to the letter, in which we did ask for 9 notice an opportunity to comment. 10 BOARD MEMBER D'ADAMO: I don't know a thing about 11 this issue, but just processwise, Ms. Walsh may be 12 correct, but I am a bit concerned in light of the fact 13 that you took the time to flag this issue. I know a lot 14 of times things have to be done sort of at the last 15 minute, but it would have been better, I think, had you 16 had an opportunity to be involved in some of those last 17 minute negotiations and perhaps if staff could respond to 18 that. 19 STATIONARY SOURCE DIVISION CHIEF VENTURINI: I'd 20 just like to make a couple comments regarding the process. 21 We did when we issued that staff report. At that time, we 22 hadn't received all the information we had requested from 23 CENCO to allow us to do an evaluation. And we did 24 indicate in the staff report that we would be continuing 25 to work with CENCO refinery and would possibly have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 proposal to bring to the Board. 2 I believe that this was discussed at our 10/25 3 workshop that was at -- I don't know if Mr. Kuhn or a 4 representative of CBE was at that workshop, but it was 5 discussed there. And then we took great pains, as soon as 6 we received any letters from CENCO, to provide those to 7 Mr. Kuhn as he had requested. 8 I know my staff telephoned Mr. Kuhn, I believe it 9 was, last week and left a message that we were considering 10 some changes that we'd be posing to the Board this week. 11 So we did try to take every effort as we were developing 12 things to keep them fully in the loop on this. 13 BOARD MEMBER D'ADAMO: If I could also ask, Ms. 14 Walsh, can you explain what the process is once that 15 language becomes available? Assuming that we do adopt a 16 resolution, how would the public actually receive and 17 comment and then what would be the process if Communities 18 For a Better Environment and others raise issues after 19 they do have an opportunity to actually review the actual 20 language? How would we, as a board, have an opportunity 21 to come back and make revisions? 22 GENERAL COUNSEL WALSH: The regulatory language 23 with the revisions identified would be made available with 24 a notice that gets mailed out to everyone who commented on 25 the regulations, everybody who came to the hearing, that's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 the legal requirement. We also, typically, will mail it 2 out to folks on the broader mailing list as well. It will 3 be posted on ARB's web site. 4 Legally, we're required to make that language 5 available for 15 days for public comment. We're not 6 limited to 15 days, so one option available here would be 7 to extend that period from 15 days to 30 or perhaps more 8 if that seems appropriate. 9 Once comments come in on the modifications that 10 are made available for comment, they'd be considered at 11 the staff level. Typically, in the resolutions for 15-day 12 comments, the Board will delegate to the executive officer 13 the ability to make a final decision consistent with the 14 direction of the Board at this meeting. 15 There is, however, a specific provision in there 16 that indicates that if it is warranted, the matter would 17 be brought back to the Board, so that if there were 18 significant issues that were raised during that, I'm going 19 to use the 15-day comment period as a shorthand, because 20 that's what we use, and significant issues were raised, 21 that would then come back to the Board for final decision. 22 In that period of time, we would produce both a 23 final statement of reasons, which includes a response to 24 all of the comments that have come in from the public from 25 the beginning of the notice period, and we would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 specifically address all of the issues related to 2 environmental impacts, as well as the other types of 3 impacts that you've been hearing about today. 4 BOARD MEMBER D'ADAMO: I'll hold off for now. 5 Maybe there's more discussion on this. 6 CHAIRPERSON LLOYD: My understanding, by the way, 7 is that the single refinery is expected to meet all the 8 air quality requirements of the South Coast AQMD for 9 which, obviously, they have jurisdiction there. Am I 10 missing something there? 11 MR KUHN: Yeah, you are actually. And just for 12 the Board's knowledge, as well, the US EPA has issued a 13 notice of violation to CENCO that indicates CENCO has 14 violated the Clean Air Act, numerous revisions of the SIP. 15 And, indeed, there's litigation that CBE is involved with 16 involving both the South Coast and CENCO regarding the 17 nature of that notice of violation and nature of other 18 violations of the Clean Air Act. 19 So that is definitely not the case. I assume 20 that the next speaker from CENCO will say that, but it is 21 not the case, nor is it the case that they have all the 22 permits they need. They don't even have the permits to 23 construct the equipment necessary to comply with Phase 2, 24 so they're really at the Phase 1 stage as to regulations. 25 They haven't even built the equipment to do Phase 2. They PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 don't even have all the legal requirements. 2 And the EPA has said that they're violating the 3 federal Clean Air Act, so that's more of a substantive 4 issue. But as far as process and having all the facts 5 before the Board, I think that's very important. I did 6 include that in the July 6th submittal as well. 7 CHAIRPERSON LLOYD: Mr. Kenny, do you have any 8 comments? 9 EXECUTIVE OFFICER KENNY: I think, basically, at 10 this point, the only comment I would make is that Mr. Kuhn 11 does have some legitimate concerns with regard to the 12 process. I mean it was an expedited process, but I do 13 think that it would probably be of some assistance to the 14 Board to hear both Mr. Kuhn's and the witnesses from CENCO 15 and then to look at, sort of, all the issues surrounding 16 it. 17 CHAIRPERSON LLOYD: Okay. 18 MR. KUHN: So I'll go ahead and yield, but if I 19 could have maybe two minutes at the end, just to address 20 some of the substantive stuff that may come up, I'd 21 appreciate it. 22 CHAIRPERSON LLOYD: Okay, that's fine. 23 Mr. McKinnon. 24 BOARD MEMBER McKINNON: Mr. Chairman, I mean, we 25 just had a whole conversation about process. If there's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 substance, let's hear it. 2 CHAIRPERSON LLOYD: Yeah. 3 MR. KUHN: Okay, great, thank you. Part of the 4 problem is I don't really know what the proposal is, 5 because all I have is this one paragraph. 6 This is the proposal. I mean, I don't know if 7 everyone has seen it. This is the proposal. It's four 8 sentences, so you know what I mean. That's part of the 9 problem is that that's the proposal. There is no 10 statutory language that's been proposed or anything like 11 that. So all I have is this one paragraph. 12 SENIOR STAFF COUNSEL JENNINGS: We have had at 13 the back table since about 10:00 o'clock, a document 14 called Staff Suggested Modifications to the Phase 3 15 Gasoline Follow-up Amendments. I think it's been 16 distributed to you highlighted. And on pages three to 17 four we spell out a number of conditions that we're 18 proposing for the language that would apply to CENCO. And 19 it's in certainly as much specificity as the proposal we 20 did for Kern last December. 21 MR. KUHN: I didn't want to interrupt you, I 22 thought you were pushing your button to speak. 23 BOARD MEMBER McKINNON: I really am bothered by a 24 discussion about process without substance. And I'm sure 25 you came prepared today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 MR. KUHN: I did. As prepared as I could when 2 the proposal was made less than 48 hours ago. 3 BOARD MEMBER McKINNON: Okay. 4 MR. KUHN: I mean with that caveat. Obviously, 5 you know, 48 hours is not a lot of time to research all 6 the substantive -- 7 BOARD MEMBER HUGH FRIEDMAN: Mr. Chairman, I, 8 too, would very much like to hear whatever else this 9 gentleman has to say, he came prepared to say, and then 10 I'd like to hear from the other side. 11 CHAIRPERSON LLOYD: Proceed. 12 MR. KUHN: Thank you very much. 13 The first issue is CBE believes that CARB has 14 failed to study the environmental impacts of the proposed 15 CENCO exemptions. As outlined on page two of our 16 opposition letter, specifically we think that these 17 changes are significant enough to warrant the 18 consideration by the California Environmental Policy 19 Commission of these changes. 20 Again, in 1999 when the CARB Phase 3 regulations 21 were adopted, the only small refiner included was Kern 22 Oil. And through the whole time, this whole process, the 23 staff report et cetera, it all talks about Kern Oil as 24 being the only refiner. So this is not just a small 25 change in the regulation, changing the word, changing the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 definition. What this means is this basically doubles the 2 number of small refiners who are eligible for the small 3 refiner exemptions. 4 So we think it does raise environmental issues. 5 We think it needs to go back to that Commission, back 6 through that process. 7 Additionally, we don't think there's been 8 consideration of alternatives. What are other ways that 9 the CENCO could possibly meet this? What are other ways 10 that other small refiners could meet this? What are the 11 economic impacts of this? What are the analyses of 12 alternatives? 13 Again, as I mentioned, Paramount Petroleum has 14 requested an extension or a change in the regulations that 15 would apply just to them. And so, you know, that seems to 16 be an alternative that should be considered and it should 17 be considered in a public way. 18 Again, if CENCO is to produce more diesel at the 19 refinery, it changes the way they're going to operate the 20 refinery. That has impacts. All along the environmental 21 review process has been going forward at South Coast, as 22 you mentioned, Chairman, to consider the refiner using 23 MTBE. Despite CBE's position that, you know, there's no 24 way they're going to be able to use MTBE, they're going to 25 have to use ethanol, there was no study of that. There's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 been no study of the impacts of that switch to using 2 ethanol. We think that should be studied here. 3 And what's the reason for changing the small 4 refiner exemption? Basically, it's to provide economic 5 benefit to CENCO. CENCO has represented that without 6 these changes in the policy, is they would not be able to 7 economically afford to operate. So in CBE's position, the 8 decision you're making is not just a minor change to the 9 regulation, but the change you're making is enabling CENCO 10 to operate, enabling them to bring the refinery back on 11 line and operate. So that is a much different decision 12 than merely just changing the regulations. 13 And we think, again, it's CENCO that has made the 14 representation that without this they could not operate. 15 So it's our position that that is a project that needs to 16 be studied under CEQA that this Board would be helping 17 them operate, not just make, you know, Phase 2/3 in a 18 modified format with some offsets, but would actually 19 enable them to operate, because they've represented, CENCO 20 has represented, without that they could not operate. 21 Again, as I mentioned, the US EPA has issued a 22 notice of violation of the Clean Air Act to this refinery. 23 The DTSC and the City of Santa Fe Springs are in active 24 litigation with this refinery about hazardous waste 25 issues. South Coast has found this refinery in violation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 of some of its rules and the LA County Sanitation District 2 has found this refinery in violation of its rules as well. 3 So this refinery has demonstrated an inability to 4 comply with all applicable regulations and rules and laws 5 State, federal and local. Why should that behavior be 6 rewarded? 7 CENCO should be treated just like all the other 8 refineries. They should have to comply with the law. And 9 if they can't do that, then they can't operate. They 10 shouldn't be able to change the rules when they can't meet 11 them or modify them when they can meet them. They should 12 stick with the rules and go forward. 13 And as far as the last minute timing as to the 14 process, again, CENCO was here in December of 1999. The 15 first actual proposal of any kind that went to the Board 16 was October 25th of 2000. And, again, that was reduced to 17 the proposal before this board on November 14th. So if 18 there's any last minute things that are happening, it's of 19 CENCO's own fault. 20 They were here in December. They could have met 21 with the staff earlier. They could have done all these 22 things, so it really shouldn't be on the public to lose 23 out of this process in the public participation way. 24 And the last thing, I'll close on this, is that, 25 you know, CBE is not the only member of the public or the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 only representative of the public that's involved here. 2 So, while I do appreciate and want to acknowledge the 3 staff did have some conversations with me and did provide 4 me with some, not all, of the correspondence between them 5 and CENCO. There's other people on the list, as Ms. Walsh 6 mentioned, who deserve to be involved in that process. 7 Not just after the fact, when the Board has basically 8 approved it and it's in the special 15-day process, but 9 upfront, so that they can be involved in this workshop 10 level and things like that. 11 So those are my comments. And, finally, I do 12 think that this refinery raises seriously environmental 13 justice issues. The community surrounding the refinery is 14 predominantly low income, community of color. There is an 15 elementary school within blocks of this facility, a State 16 hospital, senior living center. There's a lot of 17 environmental impacts down there, so this is not just a 18 simple change of regulations. This has a major impact on 19 people's lives and there's literally hundreds of folks who 20 have written letters and submitted comments and testified 21 at public hearings about this refinery. 22 So I hope that you will keep their consideration 23 in mind. And, you know, I don't see what the problem is 24 in delaying this to the next meeting or until such time as 25 the staff can look into this, develop the language, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 put it out for public comment. It seems the Board could 2 just as well do that rather than basically approve it now 3 and then put it out for some kind of token public comment, 4 when they've already made up their minds. 5 So I would urge the Board to continue the matter 6 until they can do the actual public notice, public comment 7 and study this matter. 8 Thank you. 9 CHAIRPERSON LLOYD: Thank you. And I think it 10 would be appropriate if Mr. Wright can address the 11 question of if we delay, the implications for him on that. 12 Thank you very much. 13 Now, we have Mr. Wright from CENCO, Jocelyn 14 Thompson And Robert Mindess. 15 MR. WRIGHT: Ladies and gentlemen, members of the 16 Board, my name is John Wright. I am Executive Vice 17 President for Corporate Development Planning for CENCO 18 Refining Company. 19 CENCO appreciates the chance to make our request 20 for the program that we're going to talk about in a minute 21 here. 22 (Thereupon an overhead presentation was 23 presented as follows.) 24 MR. WRIGHT: We have a very specific request to 25 make of you, that we be allowed to produce gasoline PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 superior in quality to RFG phase 2, but not meeting the 2 phase 3 specifications as proposed. We would blend 3 ethanol not MTBE. The time period we would be given is 4 two years from the scheduled date of compliance, after 5 which time we would have to comply fully with all the 6 rules and regulations, the same as any other refiner. 7 Our operations would be environmentally neutral, 8 actually beneficial, of course, because we're talking 9 about offsetting 150 percent of the emissions increase 10 from relaxation of the Phase 3 specifications by improving 11 diesel fuel quality. 12 Next slide, please. 13 --o0o-- 14 MR. WRIGHT: We need the relief for two specific 15 reasons. The regulations come into effect in about a 16 year, and after we believe we can startup our refinery's 17 operations. We hope to conclude our financing at the end 18 of this year. It will take about a year to do the various 19 projects required to upgrade the refinery and put it in 20 shape to operate. 21 We would then have about a year before we were 22 required to conform to the new specifications. It's very 23 difficult to design something when you don't have a basis 24 to design from. I'll talk about that in a little bit more 25 detail. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 Technical uncertainties. 2 CHAIRPERSON LLOYD: Just a reminder, we are 3 trying to limit to five minutes here. 4 MR. WRIGHT: Eight slides, Dr. Lloyd. Even if 5 the technical information were available from an operating 6 plant, it takes more than a year to design it, engineer it 7 and build it. 8 Next slide. 9 --o0o-- 10 MR. WRIGHT: I've covered those points. 11 Next slide, please. 12 --o0o-- 13 MR. WRIGHT: It takes most companies two to three 14 years to do what we're talking about doing. And we, as I 15 said, only have about a year, so we need that extra time 16 just to do the engineering and testing work on the 17 gasoline blend stocks that are available. 18 Next. 19 --o0o-- 20 MR. WRIGHT: We've done some simulation work. As 21 best we can, from the information we have, our gasoline 22 blending calculations indicate that our quality will be 23 close to California Phase 3 specifications, but probably 24 will fail the predictive model criteria for toxics and 25 NOx. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 We worked with the CARB staff. And as the other 2 people have commented, there was lots of midnight oil. 3 They worked very hard. We were held to some tough 4 standards we think, but nevertheless the staff worked hard 5 with us on a program. And we were able to identify this 6 proposal to offset the gasoline increased emissions by 150 7 percent by improving gasoline -- excuse me, of improving 8 diesel quality. 9 Next. 10 --o0o-- 11 MR. WRIGHT: The environment, as you can see, 12 will not be penalized in anyway by granting our request. 13 In addition to the 150 percent offsets, whatever changes 14 to the plant that are required for phase 3 reduction will 15 be deferred which would involve emissions increases as 16 well. So the environment is not in any way penalized by 17 this proposal. 18 CENCO's only benefit will be the deferral of 19 capital spending for two years. We're not receiving any 20 economic benefit quite to the contrary. There will be 21 increased costs of operations to produce the improved 22 diesel fuel quality. And it's a technical matter, but 23 certain gasoline blend stocks will not qualify for 24 gasoline anymore and have to be put in other products that 25 are less valuable. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 So I respectfully disagree with Mr. Kuhn's 2 comments regarding that. There is no economic benefit to 3 CENCO. 4 Next, please. 5 --o0o-- 6 MR. WRIGHT: We agree with the October 15th Los 7 Angeles Times' article that someone else cited that our 8 refinery does offer the California consumer the best 9 chance of significant new supplies. And I'd like to 10 emphasize this last point very, very strongly. 11 We're attempting to complete our financing in the 12 next month. We've worked on this for two and a half 13 years. We've gotten all of the permits, save the permits 14 to construct, and we're very, very hopeful that those 15 we'll issue today. If not today, then hopefully tomorrow, 16 because we agreed on the last language modifications 17 yesterday. 18 So what we need to complete our financing is 19 certainty. We can't live with the uncertainties as to 20 what our capital needs will be. And this will -- the 21 action that we're asking of the Board today will be very, 22 very helpful in completing. In fact, it will complete the 23 definition of the things we need to do. 24 Our legal counsel -- I'm sorry, Dr. Lloyd, just 25 one -- a couple more sentences. Our legal counsel will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 address some of Mr. Kuhn's legal comments. But I should 2 say that in terms of the NOV, we don't believe we violated 3 anything, and we believe that we were very, very close to 4 resolving the matter with the EPA in a matter satisfactory 5 to them and to us. 6 Thank you very much for your time. 7 CHAIRPERSON LLOYD: Thank you very much. Any 8 questions, Dr. Friedman? 9 BOARD MEMBER WILLIAM FRIEDMAN: Do you have any 10 kind of a quantitative estimate of how far off your 11 formulation will be with respect to NOx and toxics? 12 MR. WRIGHT: We've made it. It's pretty 13 judgmental, because as is said, we don't have those phase 14 2 blend stocks in an operating refinery to measure them. 15 We've had to estimate them. It's not very far and we've 16 submitted that data to staff. 17 BOARD MEMBER WILLIAM FRIEDMAN: All right. Fine. 18 CHAIRPERSON LLOYD: Yes, Ms. D'Adamo, and then 19 Ms. Riordan. 20 BOARD MEMBER D'ADAMO: Question of staff. I'm 21 not familiar with the operation, so if staff could explain 22 how CENCO compares to Kern and is it just that the 23 facility was not operational with regard to the date that 24 kicks in for Kern? 25 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: One PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 of the big differences is that CENCO, which formally was 2 the Powerene facility, closed down in about 1995 and has 3 hot been operating. The CENCO refinery in the South Coast 4 is actually a more complex, more sophisticated refinery 5 than the Kern refinery. That is why we're proposing only 6 a two-year with a sunset. 7 Whereas, with Kern, it's permanent. They're 8 actually going to be to a different set of specifications 9 ongoing, and also their diesel would be to a different set 10 of specifications ongoing. 11 Does that get to where you want to go with this? 12 BOARD MEMBER D'ADAMO: Yes, thank you. 13 CHAIRPERSON LLOYD: Ms. Riordan. 14 BOARD MEMBER RIORDAN: Thank you, Mr. Chairman. 15 It is not necessarily germane to the issue that's directly 16 before us, but because of some issues raised in the prior 17 speaker, I just want -- or by the prior speaker, I just 18 wanted to ask you in the process of getting the permits, I 19 am going to assume from either one of two agencies there 20 probably was environmental review done, but could you 21 confirm that or comment on that? 22 MR. WRIGHT: Extensive environmental -- I'd like 23 to let our attorney address that if I may. 24 BOARD MEMBER RIORDAN: Is that a better question 25 for your attorney then? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 MR. WRIGHT: May I show you one more slide 2 please. Can you read that? Can we turn the lights down, 3 please, so that the Board Members can see that. 4 In terms of health and safety and environmental 5 related investment in our plant, there's over a $100 6 million. A couple of these things I'd like to emphasize. 7 There's almost $35 million worth of maintenance to make 8 sure that this place is put in first class operating 9 condition. It will be a reliable plant. 10 I've been an operator and consultant for 11 operators for 40 years. And I will tell you that a 12 reliable plant is one that will be safer and it will be 13 more environmentally compliant. You'll see an item there 14 for a million dollars for a fence line and point-source 15 monitoring, so that we can keep the community informed of 16 exactly what's going on in our plant. And we welcome the 17 oversight. We have alkylation safety equipment of almost 18 $10 million. A lot of other things, including complete 19 instrumentation upgrade of the plant. We're doubling the 20 sulfur recover capacity. We are very, very serious about 21 health, safety and environmental matters and we're putting 22 $100 million into those words, so I'd like to leave you 23 with that. 24 BOARD MEMBER RIORDAN: Thank you, Mr. Wright, but 25 I maybe would leave the question though still open to your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 attorney. I mean, that tells me what you're doing, but 2 there had to be environmental review to get to that point 3 and I'd just like a comment on that, but maybe made better 4 by her. 5 MR. WRIGHT: I'm not in anyway trying to duck the 6 question. It's just that Jocelyn can do it so much better 7 than I. 8 BOARD MEMBER RIORDAN: That's fine. 9 CHAIRPERSON LLOYD: Professor Friedman. 10 BOARD MEMBER HUGH FRIEDMAN: Before we bounce 11 back and forth, let me just finish. My understanding of 12 what we're doing here is if, or at least what the staff is 13 proposing, is that we would carve out an exception, a 14 temporary exception, a transitional exception in this 15 case? 16 MR. WRIGHT: That's right, two years. 17 BOARD MEMBER HUGH FRIEDMAN: So you could do 18 Phase 2 and then Phase 3. And in doing so, presumably we 19 want to encourage additional supplies, fuel supplies, and 20 we want to make sure that when we do it, that there will 21 be no adverse effect on the air. When you speak of 22 environment, I understand there's different meanings to 23 environment, but we're talking about air quality 24 emissions. 25 And my understanding is in our goal, our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 responsibility is making sure the air is clean, from any 2 operations you're able eventually to start up. We're not 3 deciding that there should be a plant there to begin with. 4 We're not deciding what the safety requirements would be 5 for that plant, the health and safety requirements. We're 6 not permitting it in any respect. And we're not the OSHA. 7 We're not CEQA. We're not here to discuss the 8 environmental impact. 9 And I assume that others will have the 10 responsibility to do that in terms of the location near 11 residences, near schools and the potential impact on all 12 of that. 13 I understand we're a piece of it and I suppose 14 you couldn't get financing if you couldn't see the light 15 at the end of the tunnel and have an opportunity to 16 produce something that would qualify, so you could sell 17 it, but that's the only piece I understand that we have in 18 this. And as sympathetic as I am with the community, that 19 is not the forum, it seems to me, for us to be dealing 20 with that. 21 My question of you is, in terms of something I 22 think is relevant, what kind of an employment will this 23 facility provide if it's -- 24 MR. WRIGHT: Three hundred and fifty people. I 25 emphatically agree with your comments regarding what is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 before you. 2 BOARD MEMBER HUGH FRIEDMAN: That's when that's 3 fully on line, 350 employees? 4 MR. WRIGHT: That's correct. And as far as the 5 specific thing that the Board could and should address 6 here, we're going to offset any quality effects by 150 7 percent, so there is no negative air impact by the request 8 we're making, if it's granted. 9 CHAIRPERSON LLOYD: Thank you very much. 10 Next, we have Jocelyn Thompson, I guess, to 11 address some of these issues and Robert Mindess. 12 MS. THOMPSON: Yes, good afternoon. Jocelyn 13 Thompson of CENCO. Let me start by saying, I think 14 Professor Friedman has the context exactly accurate, and 15 I'm going to take my comments some what out of order to 16 address Ms. Riordan's question. This facility was 17 originally constructed in the 1930s which predates our 18 modern environmental review laws. However, in 1980 it 19 went through a major expansion and renovation upgrade and 20 did go through environmental review at that point in time. 21 In addition, there was an Environmental Impact 22 Report prepared in 1994 and an addendum to that in 1995 in 23 conjunction with the major revisions that were taking 24 place to meet federal reformulated gasoline as well as the 25 State Phase 2 requirements. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 There were additional requirements added by the 2 City of Santa Fe Springs in 1998 that were adopted in 3 conjunction with the categorical exemption from CEQA 4 because those changes were considered improvements, 5 health, safety and environmental improvements to an 6 existing facility, for which there is an exemption under 7 CEQA. 8 And then the final step of the environmental 9 review is that the facility just did have a new 10 Environmental Impact Report certified, I believe it was 11 April of this year, for the changes, further changes that 12 CENCO wants to make to further improve environmental 13 issues as well as operational efficiencies, including 14 things like additional low NOx burners added to some of 15 the fired sources of the facility, a number of things that 16 will improve reliability and thereby reduce the potential 17 for nuisance and impacts to the community, a whole panoply 18 of things to improve the operations. So we've gone 19 through quite a bit of environmental review over the 20 years. 21 BOARD MEMBER RIORDAN: Thank you. 22 MS. THOMPSON: Now, if I could go back to the 23 order I plan to take things in, because I think the 24 context is important. Perhaps this is the first time that 25 CBE has been before you to speak about CENCO, but for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 CENCO it's probably -- we've had probably dozens of 2 hearings before administrative agencies including the 3 AQMD, the City of Santa Fe Springs, general public 4 outreach, workshops in the community, hearing board 5 proceedings of the South Coast as well as governing board 6 proceedings there. 7 And I've grown to respect Mr. Kuhn over the years 8 that we've been dealing on this, but he does tend to mush 9 things together. So part of my job today is to take them 10 apart so we understand really what's going on. 11 What is not before you is the issue of resumption 12 of refining at the facility, and CBE has made this claim 13 again and again that everybody under the sun has to 14 evaluate the environmental effects of operating this 15 existing facility. They have previously made that claim 16 in the course of litigation challenging the 1998 decision 17 of the City of Santa Fe Springs that I mentioned to you, 18 and they lost. 19 We had four hearings before the trial court and 20 they lost each of those days. They appealed it to the 21 Court of Appeals and they lost at the Court of Appeals. 22 The Court of Appeals confirmed we are an existing facility 23 that was entitled to an exemption under CEQA for health 24 and safety improvements to an existing facility. 25 The bottom line was there was no obligation on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 the part of the city to examine the effects of operating 2 this existing refinery. Now, bear with me, I have to be a 3 little bit legalistic just to make sure the record is 4 clear. 5 The Court of Appeals wasn't -- they were looking 6 at a categorical exemption. And obviously that's not 7 what's before you today. And if the CEQA issue is raised 8 before you today, it's a little bit different, but the 9 cases the court relied on are the ones that you and your 10 staff would rely on in order to reach the same conclusion 11 that we don't have to re-examine the impacts of an 12 existing facility. 13 And those cases have to do with what's called the 14 CEQA base line. I'm sure you're familiar that CEQA 15 requires when you're going through an environmental 16 analysis you have to look at the before-project and the 17 after-project and examine the impacts of the change 18 between those two things. The before is considered the 19 base line and the cases that the court relied on said that 20 when you're looking at or you're determining what is the 21 base line or the starting point for CEQA analysis, you 22 look at the maximum allowable operations, even if the 23 facility is not currently operating at that level. 24 And CENCO is not coming before you asking for any 25 permission to increase its operations. So for our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 discussion purposes here, the before and the after is 2 going to be the same. We're talking about the same level 3 of operations as we have historically had. 4 So there would be nothing to review under CEQA, 5 even if we were to go down that path. Since the before 6 and after are the same, there's no potential environmental 7 impacts, there's no obligation to prepare any 8 environmental review document for the refinery itself. 9 Now, we've also had some discussion about the impacts from 10 the vehicle's use of the CARB phase 2 gasoline that CENCO 11 would produce during this extended period of time. But 12 once again, I don't think we have any need to go further 13 in environmental review. 14 The proposal that's before you includes 15 offsetting at 1.5 to one. So that's an environmental 16 benefit not an environmental detriment. You don't have to 17 prepare an Environmental Impact Report or other 18 environmental document to look at environmental benefits. 19 You're only obligated to prepare those documents to review 20 the adverse, potential adverse, environmental 21 consequences. 22 Now, Mr.Kuhn has claimed that somehow there must 23 be negatives because we're going to double the number of 24 refiners qualifying for the small refiner exemption. And 25 I'd just say well, if you have a program that requires PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 offsetting at 1.5 to one, it's kind of like the more 2 people on board, the cleaner things are going to be not 3 the dirtier, and numbers aren't really going to determine 4 the impacts here. 5 I want to touch just very briefly on the issue of 6 environmental injustice, because it is of concern to many 7 of us. CBE complains that the community adjacent to the 8 refinery is predominantly minority or disadvantaged. But 9 again, you're not deciding what happens at the refinery in 10 terms of resuming operations. We're talking about what is 11 the potential impact of the proposal to delay the phase 3 12 deadlines with offsetting in the meantime. 13 The additional emissions from the delay are going 14 to be distributed, best analysis, is throughout southern 15 California, not in the neighborhood of the refinery, but 16 distributed throughout. And I would say that the benefits 17 of the cleaner diesel are also going to be distributed 18 through that same area. And the benefits are greater 19 quantity than the negatives. 20 We also have health studies, that I'm sure Dr. 21 Burke would be familiar with if he were still with us, 22 indicating that we do have elevated health concerns in the 23 communities that parallel the freeways in southern 24 California because of the use of diesel. So hopefully 25 we'll be improving the situation by having cleaner diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 going through those thoroughfares. So I don't think we 2 have any arguments about disproportionate impact to 3 minorities or disadvantaged communities. 4 And then I want to touch on the notice issue. We 5 disagree with CBE on their claim of inadequate notice. As 6 the Board is aware, this was discussed in December of 7 1999. And the Board directed staff to come back, I 8 believe, this month. We made CBE aware of that in 9 approximately the first quarter of this year either in the 10 context of the litigation I already mentioned or the 11 development of the Environmental Impact Report. I'm 12 trying to remember which of those two proceedings it was 13 in, but we did make them aware of the December 1999 14 discussion, and the request by CENCO to extend the 15 deadlines. 16 And they have been involved ever since then 17 tracking the issue, making comments as early as July, 18 though we didn't receive that letter until just recently, 19 but they certainly have been involved in the process. 20 And what we're talking about the Board adopting 21 today is the structure. And as Ms. Walsh has described, 22 the language will be something that CBE will still have an 23 opportunity to comment on. So I don't think there's any 24 notice or process issue. We do support the process 25 described by Ms. Walsh, so that should alleviate any PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 concern. 2 And then, finally, Mr. Kuhn mentioned the notice 3 of violation from EPA. This is something that should 4 truly trouble us all. The crux of the EPA violation, 5 notice of violation, is that CENCO violated the federal 6 Clean Air Act because they are going to resume operations 7 without putting the entire facility through new source 8 review. 9 Now, there is nothing in the federal Clean Air 10 Act that says that and nothing in EPA's regulations, and 11 there is not even an adopted policy that says that. And 12 so for that reason, CENCO has challenged EPA's action in a 13 petition for review in the D.C. Circuit Court of Appeals 14 in Washington as an unlawful rule making. 15 As Mr. Wright described, we're hoping to reach a 16 conclusion that both EPA and CENCO are happy with and not 17 have to go forward litigating that, but we do clearly see 18 it as an unlawful rule making, where a facility that has a 19 valid permit is told that the permit that appears valid on 20 its face is truly worthless in EPA's eyes. 21 CHAIRPERSON LLOYD: Thank you very much. 22 MS. THOMPSON: Thank you. 23 CHAIRPERSON LLOYD: The last person testifying is 24 Robert Mindess from Paramount Petroleum Corporation. 25 MR. MINDESS: Good afternoon, Chairman Lloyd, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 members of the Board, ARB staff. My name is Robert 2 Mindess and I'm counsel for Paramount Petroleum 3 Corporation. We're a small refinery located near Los 4 Angeles. Thank you very much for allowing me to speak to 5 you today. 6 I'd like to first state that Paramount is in 7 support of all the regulations. I'd also like to 8 apologize to this board, as well as to the ARB staff, for 9 our company's late involvement in all of these matters. 10 I'm aware that ARB staff has been working diligently for 11 quite some time with other small refiners, namely CENCO 12 refining company and Kern Oil Refining Company on the 13 inclusion of specific provisions within the Phase 3 14 gasoline regulations that are applicable to each of their 15 specific situations. 16 I would like to stress that Paramount's presence 17 today is not an attempt to delay or postpone the specific 18 provisions sought by any other small refiners. 19 Paramount's position is unique from these other small 20 refiners that are here today. Due to recent serious 21 developments affecting our company, Paramount met with ARB 22 staff just last month, informed them of our plight as well 23 as our desire to seek of a specific provision, which takes 24 into account our situation, and the goals of these 25 regulations and how we can somehow take part. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 It was suggested during those discussions that 2 ARB staff would be willing to work with Paramount on 3 possibly creating an appropriate provision for 4 our company. Paramount has always been mindful of CARB's 5 position that the small refiners in California are an 6 important component of the overall gasoline market in the 7 state. 8 CARB has always seen that the impact of small 9 refiners are greater than their mere size. From a reading 10 of the regulations before the Board today, it's clear that 11 much thought was put in to these regulations as they 12 relate to small refiners and the small refiner's need for 13 flexibility to compete in today's landscape, where the 14 major refiners are compressing the amount of competition 15 in the gasoline market. That's a serious danger to the 16 consumers of the State. 17 Now, Paramount is here today asking the Board to 18 direct ARB staff to work with Paramount to grant our 19 company additional time and flexibility necessary to 20 create a specific provision in the same vein as that has 21 been created for CENCO or Kern oil. Again, we're not here 22 to delay. 23 CHAIRPERSON LLOYD: Just a clarification. Has 24 the staff already agreed to do this? 25 STATIONARY SOURCE DIVISION CHIEF VENTURINI: Yes, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 Mr. Chairman, we have spoken with Paramount and even prior 2 to today and we indicated a willingness to talk to them in 3 order to understand their situation in much more detail. 4 And if we felt there was a need to provide some special 5 provisions for them that may be unique from what we've 6 done with Kern and Cenco, that we'd consider that and 7 bring that back to you at a later time. 8 CHAIRPERSON LLOYD: It sounds as though your 9 request is already done. 10 MR. MINDESS: I'd just like to be on record to 11 state that. Thank you all very much for your time and we 12 appreciate it. 13 CHAIRPERSON LLOYD: Thank you very much. 14 Yes, Professor Friedman. 15 BOARD MEMBER HUGH FRIEDMAN: Could I just hear 16 from staff, maybe Mr. Kenny, could just restate very 17 crisply what the thinking of the staff has been in trying 18 to create these limited exceptions, the small refiner 19 exceptions. 20 EXECUTIVE OFFICER KENNY: Yes. I am going to 21 repeat a lot of what you yourself said a few moments ago, 22 because I thought you crystallized it actually very 23 accurately. 24 What we were trying to do here was recognize that 25 we do have fuel shortages in the state as a result of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 essentially growth in the state and then lack of refinery 2 capacity over the last number of years. At the same time, 3 because we recognized the need to get additional supply in 4 the State, we also wanted to ensure that, as that new 5 supply comes into the state, that it is clean. 6 We also have the desire to have independent 7 refineries in the state, so that, in fact, we are not 8 solely dependent upon the large refineries that exist out 9 there. If you look back, for example, a dozen years, we 10 had quite a number of independent refineries and small 11 refineries in the state, and today we have, essentially, 12 one in operation with the possibility of going to two, so 13 we were trying to take advantage of that. 14 Looking at those particular circumstances and 15 looking at the benefit that CENCO was offering by going to 16 phase 3 gasoline only two years after the time frame that 17 is established for the major refineries in the State and 18 their willingness to offset that by a 1.5 to one ratio 19 seemed very attractive to us. It gave us additional 20 volume and it gave us clean fuel. 21 The one final comment I would make is that I 22 thought you were actually very accurate in your assessment 23 of this that the board is not deciding today whether or 24 not the refinery should operate. That decision will be 25 made at the local level through the local permitting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 process. What the Board is deciding today is whether or 2 not the concept of allowing additional fuel to come into 3 the state that is clean is an acceptable one. 4 CHAIRPERSON LLOYD: Yeah. Personally, obviously, 5 these issues are very important the ones that were 6 addressed by CBE, but as Professor Friedman pointed out, 7 and I'm never ceased to be amazed at the relationship here 8 between the professor and the student, that crystallized 9 that. 10 So while we may be sympathetic, that should be 11 heard and will be heard at the local level. 12 BOARD MEMBER HUGH FRIEDMAN: I can't resist 13 responding. I want you to know that I am learning so much 14 from Mr. Kenny, so the tables have turned. And to 15 clarify, he, once upon a time, was a student, a law 16 student of mine. 17 EXECUTIVE OFFICER KENNY: Thank you. 18 CHAIRPERSON LLOYD: Ms. D'Adamo. 19 BOARD MEMBER D'ADAMO: Yes. I would agree with 20 the way that the issue has been characterized by Professor 21 Friedman. However, I do think that it's unfortunate that 22 CBE did take the time to write that letter in July. And I 23 know it goes without saying, but during the 15-day public 24 comment period, I would hope that staff would work with 25 CBE on the limited issue of the small refiner exception. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 CHAIRPERSON LLOYD: Any other discussion from the 2 Board here? 3 Mr. McKinnon. 4 BOARD MEMBER McKINNON: I'd like to move the 5 resolution. 6 CHAIRPERSON LLOYD: I just have a couple more 7 formalities. 8 (Laughter.) 9 CHAIRPERSON LLOYD: Since all the testimony, 10 written submissions, and the staff comments for this item 11 have been entered into the record, and the Board has not 12 granted an extension on the comment period, I'm officially 13 closing the record on this portion of the agenda item 14 number 00-11-4. 15 Written or oral comments received after the 16 comment period has been closed will not be accepted as 17 part of the official record on this agenda item. And then 18 just a reminder to board members on the ex parte 19 communication policy at this time on this item. 20 BOARD MEMBER PATRICK: Yes, Mr. Chairman. I met 21 with Jake Beland, Jr. of Kern Oil and Refining, and it was 22 a very positive meeting. He was delighted with the way 23 staff worked and worked and worked and worked with him. 24 And I know it was, speaking of a lot of midnight oil, I 25 know that you both -- that both parties worked very PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 closely together to make sure that it was something that 2 worked for Kern Oil and something that worked for clean 3 air as well, so I appreciate that. 4 And then I also explained the three different 5 options that were available to his company and the one 6 that was most likely to be the one that was chosen for his 7 company. 8 CHAIRPERSON LLOYD: Thank you. 9 Yes, now I guess -- 10 BOARD MEMBER McKINNON: I'd like to move 11 resolution 00-11-4. 12 BOARD MEMBER PATRICK: Second. 13 CHAIRPERSON LLOYD: Yes. I would obviously agree 14 with that. I would like to specifically ask, and I know 15 that I've asked Kathleen Tshogl to look at this, to 16 continue to ask staff to continue working with CBE and try 17 to work that out. I'd like that to be reflected there. 18 So all in favor say aye? 19 (Ayes.) 20 CHAIRPERSON LLOYD: Thank you very much. And 21 thank you, staff. 22 Do we have the same staff for the next item here? 23 Should we take a five minute break? 24 Five minute break. 25 (Thereupon a short recess was taken.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 CHAIRPERSON LLOYD: The next item on the agenda 2 is 00-11-5, test method to determine the olefin content 3 and distillation temperatures of gasoline. These test 4 methods are used to determine whether parties selling 5 gasoline in California comply with State regulations. 6 I will now ask Mr. Kenny to introduce the item 7 and begin the staff's presentation, which I'm sure is 8 going to enthrall us all. 9 (Laughter.) 10 EXECUTIVE OFFICER KENNY: I think then in order 11 to avoid some of the enthrallment I'm just going to turn 12 it over to the staff right now. 13 STAFF AIR POLLUTION SPECIALIST COHAN: Thank you, 14 Mr. Kenny and Dr. Lloyd. 15 As was stated earlier, we're here to consider 16 amending the test methods for determining the olefin 17 content and distillation temperatures of California 18 reformulated gasoline. These methods would apply to both 19 Phase 2 and Phase 3 gasolines. 20 Our proposed test methods were developed in 21 cooperation with the Western States Petroleum Association, 22 or WSPA, and the American Society for Testing and 23 Materials or ASTM. 24 --o0o-- 25 STAFF AIR POLLUTION SPECIALIST COHAN: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 California's reformulated gasoline regulations denote 2 eight physical and chemical properties which are regulated 3 in order to reduce motor vehicle emissions. Suppliers 4 have various compliance options available, including 5 meeting the flat limits, using averaging and using the 6 predictive model to set their own limits. Under no 7 circumstance may the cap limits be exceeded. 8 --o0o-- 9 STAFF AIR POLLUTION SPECIALIST COHAN: Each of 10 the specifications consists of a numerical limit and a 11 test method by which the property is measured. Adopting 12 the most accurate and precise test methods ensures that 13 both the ARB and the refiners get the same results and 14 improves the ability of ARB to enforce its fuel 15 regulations. Both the ARB and the petroleum industry 16 benefit from using the best available test methods. 17 Note that refiners are only required to use the 18 adopted test methods when they are using the averaging 19 option. If they are using flat limits, they are free to 20 use any test method or none at all. 21 The test methods amendments we are proposing are 22 used to measure olefins T50 and T90. 23 --o0o-- 24 STAFF AIR POLLUTION SPECIALIST COHAN: We will 25 begin the discussion with the proposed olefin test method PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 and the limits on olefin content in gasoline vary 2 depending on the compliance option chosen by the producer. 3 The flat limit is six percent by volume, while the 4 averaging limit is four percent by volume. If the 5 producer chooses to use the predictive model, any limit 6 may be set up to a cap of ten percent by volume. 7 --o0o-- 8 STAFF AIR POLLUTION SPECIALIST COHAN: The 9 current designated method for the measurement of olefins 10 in gasoline is ASTM D1319-95a based on fluorescent 11 indicator absorption or FIA. We're proposing to replace 12 this method with a modified version of ASTM D6550-00, 13 which is based on supercritical fluid chromatography or 14 SFC. The last two digits of an ASTM test method represent 15 the year of the method's last approval. 16 --o0o-- 17 STAFF AIR POLLUTION SPECIALIST COHAN: FIA is a 18 technique dating back to 1954. A small sample of the 19 gasoline being analyzed is placed at the top of one of the 20 tall columns shown here. As the fuel moves down the 21 column, it separates into three groups of compounds, one 22 of them being olefins. 23 Under ultraviolet light each of these groups 24 glows a different color. The operator measures the length 25 of each glowing band using a ruler. The length of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 olefin band is converted into the olefin concentration. 2 As you might imagine, FIA is not a very precise method. 3 Until recently, there have been no practical alternatives 4 to FIA for olefin analysis. 5 --o0o-- 6 STAFF AIR POLLUTION SPECIALIST COHAN: In SFC, a 7 much more modern technique, gasoline is injected into an 8 instrument called a chromatograph by an automated sampler. 9 The chromatograph separates the olefins from the other 10 groups in the gasoline and sends them to a detector. 11 The signal from the detector is added up by 12 computer giving an olefin concentration. A routine 13 analysis takes approximately 20 minutes. 14 --o0o-- 15 STAFF AIR POLLUTION SPECIALIST COHAN: As I 16 mentioned earlier, we're proposing a modified version of 17 the SFC method D6550. The three modifications are the 18 addition of an equation that converts from weight to 19 volume percent, a change to the applicable range or scope 20 and a change to the precision statement. I'll discuss 21 each of these modifications individually. 22 --o0o-- 23 STAFF AIR POLLUTION SPECIALIST COHAN: The SFC 24 method gives results in weight percent olefins. However, 25 the gasoline regulations specify limits in volume percent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 As a result, ARB and WSPA conducted a joint study to 2 determine a correlation equation which allows the SFC 3 weight percent results to be converted to volume percent, 4 the equation is shown here. 5 --o0o-- 6 STAFF AIR POLLUTION SPECIALIST COHAN: ASTM 7 D6550's scope statement lists an applicable olefin range 8 of 1 to 25 weight percent. This range is based on the 9 gasoline samples used in the ASTM round robin study and it 10 signifies that this method, as tested, is only proven to 11 work within that range of olefin concentrations. 12 Some California refiners routinely produce 13 gasoline with olefin concentrations well below one 14 percent. There does not appear to be any scientific 15 reason that the SFC method can't measure olefin levels 16 below one percent. There simply were no samples at these 17 lower levels in previous studies to confirm the 18 instrument's ability. 19 ARB and WSPA intend to conduct a special study to 20 determine the lowest limit that the SFC can measure 21 accurately. In the interim, we propose a lower limit of 22 0.3 weight percent, a level equivalent to that of the FIA 23 method. 24 --o0o-- 25 STAFF AIR POLLUTION SPECIALIST COHAN: The final PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 modification proposed is to the precision statement. 2 Precision is an indication of how likely different 3 laboratories are to find the same result when they analyze 4 the same sample. 5 After the publication of D6550-00, problems were 6 discovered in its round robin study. Certain participants 7 failed to use pure calibration materials as was specified 8 in the instructions. There were also no quality control 9 checks in the study to make sure that each instrument was 10 functioning properly. The results were not as good as 11 expected. 12 In response ARB and WSPA conducted a new round 13 robin study earlier this year. In this new study pure 14 calibration materials were used and proper instrument 15 performance was checked. A new precision statement was 16 generated. 17 --o0o-- 18 STAFF AIR POLLUTION SPECIALIST COHAN: This slide 19 shows a comparison of three reproducibilities as functions 20 of olefin concentration. Reproducibility, or R, is a 21 quantitative measure of a method's precision. It gives 22 the maximum expected difference in results between two 23 different laboratories analyzing identical samples. The 24 lower the R value the better. 25 The purple line is the reproducibility of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 current method FIA. Note that FIA has the worst 2 precision. 3 The Green line is the reproducibility of the SFC 4 method as published by ASTM. Its precision is somewhat 5 better than FIA. 6 The blue line is the reproducibility of the SFC 7 methods as determined by the ARB/WSPA study. It is far 8 better than the published ASTM precision. 9 --o0o-- 10 STAFF AIR POLLUTION SPECIALIST COHAN: The 11 proposed method has several advantages. The most 12 important is that it is far more precise than FIA as 13 previously shown. A highly precise method helps ensure 14 that ARB and fuel producers obtain the same result when 15 analyzing samples. 16 Good precision also benefits the ARB's 17 enforcement program. It's also a highly automated 18 technique and requires less labor than FIA. 19 Finally, petroleum refiners are currently using 20 an SFC method for the analysis of aromatics in diesel 21 fuel. Consequently, producers are already familiar with 22 the technology being proposed. With minor modifications 23 the same instrument can often be used for both analyses. 24 --o0o-- 25 STAFF AIR POLLUTION SPECIALIST COHAN: Two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 alternative methods were also evaluated by ARB staff. 2 They are both based on gas chromatography, or GC. Several 3 different columns are used to strip away various compounds 4 from the gasoline leaving the olefins to be measured. 5 These alternatives have precision similar to that 6 of SFC. We did not select these methods for several 7 reasons. They are more complex than SFC. One of the 8 methods, D6293, takes over two hours per sample. Method 9 D6296 has a high bias compared with the other methods. 10 Both of the alternatives are currently available 11 only from a single vendor. The SFC method is available 12 from at least two vendors. Finally, the refining 13 community does not have the experience with these two GC 14 techniques that it has with SFC. 15 --o0o-- 16 STAFF AIR POLLUTION SPECIALIST COHAN: The 17 estimated cost of the SFC method varies over a wide range 18 due to the options available to gasoline refiners. An 19 existing instrument used for diesel analysis can be 20 converted to allow the determination of olefins in 21 gasoline as well. 22 This conversion costs about $10,000. Refiners 23 may wish to purchase an additional instrument instead. A 24 new SFC equipped to measure olefins costs about $65,000. 25 The additional maintenance cost is estimated to be zero in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 the case of a converted instrument or $6,500 in the case 2 of a new instrument. 3 The cost of consumable materials is estimated to 4 be similar for SFC and FIA resulting in no additional 5 expense. The total five-year cost of the proposed olefin 6 test method for all 13 refineries ranges from $130,000 to 7 $1.2 million depending on the options chosen. 8 Based on the number of gallons of gasoline 9 produced, the increased cost is estimated at 0.002 cents 10 per gallon. 11 --o0o-- 12 STAFF AIR POLLUTION SPECIALIST COHAN: Staff is 13 also proposing an update to the test method used for 14 measuring the distillation temperatures of gasoline. The 15 regulated properties are the temperatures at which 50 16 percent and 90 percent of the gasoline has boiled off, 17 known respectively as T50, T90. Specifically, we're 18 proposing to replace ASTM D86-90 with D86-99a epsilon 1. 19 The new version of the method corrects equations 20 which had errors in the earlier version. It also widens 21 the allowable time windows at the beginning and end of the 22 distillation process. Studies by ASTM have demonstrated 23 that widening these windows does not adversely affect the 24 quality of the results. The relaxed time requirements 25 make the analysis easier to perform. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 Since the new version of D86 uses the same 2 instrumentation and requires no additional training, there 3 is no cost associated with its adoption. In fact, D86-99a 4 epsilon 1 has already been approved as an equivalent test 5 method to D86-90 and maybe being currently used by some 6 laboratories. 7 --o0o-- 8 STAFF AIR POLLUTION SPECIALIST COHAN: The 9 proposed test methods will have no measurable impact on 10 air quality, nor will there be any other environmental 11 impacts. However, as stated earlier, the determination of 12 compliance with the regulations would be enhanced. The 13 economic impact of the proposed changes is expected to be 14 minor. 15 --o0o-- 16 STAFF AIR POLLUTION SPECIALIST COHAN: To 17 summarize, staff recommends replacing the current test 18 method for measuring olefins in gasoline with a modified 19 version of ASTM D6550-00. Due to the time required to set 20 up this new method, we're proposing an effective date of 21 January 1st, 2002. Staff is also recommending the 22 adoption of ASTM D86-99 epsilon 1 for measuring the 23 distillation temperatures of gasoline. The use of this 24 method has already been allowed by ARB through its 25 equivalent method process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 Once, again, I'd like to emphasize that adopting 2 the most accurate and precise testament ensures that both 3 the ARB and refiners get the same test results and 4 improves the ability of ARB to enforce its fuel 5 regulations. 6 --o0o-- 7 STAFF AIR POLLUTION SPECIALIST COHAN: WSPA 8 members have expressed concerns about the limited data 9 used to generate the volume percent conversion equation 10 and the modified precision statement. Staff has agreed to 11 consider new data relevant to these concerns as it becomes 12 available. Staff has also agreed to work with industry to 13 determine an appropriate lower limit for the modified 14 scope statement. 15 Finally, staff intends to work with industry to 16 determine whether any of these three quantitative issues 17 will be affected by the transition to Phase 3 reformulated 18 gasoline. 19 To facilitate these potential minor changes, 20 staff requests that the Board delegate authority to adopt 21 amendments to the precision statement, correlation 22 equation and scope statement to the executive officer. 23 --o0o-- 24 STAFF AIR POLLUTION SPECIALIST COHAN: One 25 important item was inadvertently omitted from the proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 regulation order as was mentioned to us by the California 2 Trade and Commerce Agency as well as other individuals. 3 To ensure that refiners have sufficient time to switch to 4 D6550, the SFC method will not be required until January 5 1st, 2002. 6 This ends our formal presentation. 7 CHAIRPERSON LLOYD: Thank you, Dr. Cohan. 8 Any questions from the Board? 9 Yes, Dr. Friedman. 10 BOARD MEMBER WILLIAM FRIEDMAN: I was just 11 thinking it was 1955 when I last took organic chemistry. 12 (Laughter.) 13 BOARD MEMBER WILLIAM FRIEDMAN: But my 14 recollection, these are relatively simple unsaturated 15 hydrocarbons, correct? 16 STAFF AIR POLLUTION SPECIALIST COHAN: That's 17 correct. 18 BOARD MEMBER WILLIAM FRIEDMAN: What is there -- 19 I know there are problems with however you want to test 20 it. In the old days these tests didn't exist. But what 21 is their contribution to the pollution load? 22 STAFF AIR POLLUTION SPECIALIST COHAN: I don't 23 know a specific number. The reason that they're important 24 is that the double bond in the compound is very photo 25 reactive and so the reactivity factor is very high PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 compared with other compounds. 2 BOARD MEMBER CALHOUN: More double bonds the more 3 reactive? 4 BOARD MEMBER WILLIAM FRIEDMAN: No, it can't have 5 too many double bonds because it's not an olefin, it's an 6 aromatic. 7 STAFF AIR POLLUTION SPECIALIST COHAN: It will 8 become an aromatic. 9 BOARD MEMBER WILLIAM FRIEDMAN: You see that, I 10 remember. 11 (Laughter.) 12 CHAIRPERSON LLOYD: I think there's two points 13 there. If they get out without being reactive, they're 14 highly reactive. That's the bad news. The good news is 15 though, they get quickly destroyed by catalysts if they 16 get in the exhaust, too. 17 Dr. Friedman, I'm impressed. 18 (Laughter.) 19 BOARD MEMBER WILLIAM FRIEDMAN: I can't wait to 20 go home and tell my wife. 21 (Laughter.) 22 CHAIRPERSON LLOYD: I had a question here. How 23 many of these tests do you use in this method? How 24 many -- what's the throughput on the method compared with 25 the old one? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 How many can you do in an hour? 2 STAFF AIR POLLUTION SPECIALIST COHAN: The FIA 3 method takes about 45 minutes per sample. However, as you 4 saw from the picture, it's possible to have several 5 columns all next to each other. The SFC method is 20 6 minutes per sample per instrument. 7 CHAIRPERSON LLOYD: Okay, so not a great savings 8 in time but more on quality. 9 STAFF AIR POLLUTION SPECIALIST COHAN: No, but 10 one of the advantages of the SFC method is that it's an 11 automated method. You can put a hundred samples into 12 vials and run continuously. 13 CHAIRPERSON LLOYD: Work all on the top. Any 14 comments from the Board? 15 BOARD MEMBER CALHOUN: One additional question. 16 How often do you do these round robins? 17 STAFF AIR POLLUTION SPECIALIST COHAN: There are 18 actually a number of different ones. This CARB/WSPA round 19 robin that generated the new precision statement was done 20 specifically at WSPA's request to help in the adoption of 21 this board item. There is a monthly program where fuel 22 samples are sent to over 100 different labs. This is by 23 ASTM. And the date is compared and goes out every single 24 month to all of the participating laboratories. 25 In terms of doing a formal ASTM round robin that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 will result in the updating of the method, that happens 2 with different frequencies depending on the method, in 3 particular, for distillation that hasn't been done in the 4 1990s at least. On the other hand, for some other 5 methods, it actually gets done every few years. It's 6 really at the discretion of the community of owners of 7 those instruments. 8 CHAIRPERSON LLOYD: I think we have one witness 9 I'd like to call to the stand, Don Crider from Analytical 10 Controls. 11 If you make the instrument, let us know? 12 MR. CRIDER: I do. 13 CHAIRPERSON LLOYD: Okay. And you're supporting? 14 MR. CRIDER: Well, actually, we make all three. 15 CHAIRPERSON LLOYD: Surprise. 16 (Laughter.) 17 MR. CRIDER: We make all three of the instruments 18 looked at, but we are the single supplier of the two that 19 they did not choose. 20 CHAIRPERSON LLOYD: Okay. 21 MR. CRIDER: But nevertheless, we wanted to 22 support their finding, but also we wanted to try to 23 alleviate anybody's concerns about the ability to provide 24 the instruments to support them and support the method, in 25 other words, to be sure the data is good, if they break PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 down, to have someone in the refinery in a timely fashion 2 to repair them. 3 CHAIRPERSON LLOYD: Who do you see the market for 4 these? How many do you expect the industry to buy? 5 MR. CRIDER: I believe there's about 30 currently 6 in the state for aromatics and diesel. And we estimate 7 about half of those people will just modify the existing 8 instrument, and the other half will buy a new instrument, 9 which isn't a tremendous volume, but we do support the 10 instrument on a worldwide basis. We're a Dutch based 11 company. And as I travel to other countries, they often 12 ask me what do they do in California, so you guys are 13 being watched. 14 But it is the best compromise to do a difficult 15 test, us and the other supplier to together, and can 16 provide the instruments needed and the support, spare 17 parts and all of that. 18 CHAIRPERSON LLOYD: All right, Ms. D'Adamo. 19 BOARD MEMBER D'ADAMO: I found the answer. 20 CHAIRPERSON LLOYD: You found the answer. 21 Where are you based? 22 Our corporate office is in Rodderdam. Our US 23 headquarters is in Philadelphia, and I live in southern 24 California, and we have a service engineer in the bay 25 area. So we have the two areas where the most refineries PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 are covered with people. 2 CHAIRPERSON LLOYD: Thank you very much. 3 I guess any another comments, Mr. Kenny? 4 EXECUTIVE OFFICER KENNY: No. 5 CHAIRPERSON LLOYD: I will now close the record 6 on this agenda item. However, the record will be reopened 7 when the 15-day notice of public availability is issued. 8 Written or oral comments received after this hearing date 9 but before the 15-day notice is issued will not be 10 accepted as part of the official record on this agenda 11 item. 12 When the record is reopened for a 15-day comment 13 period, the public may submit written comments on the 14 proposed changes, which will be considered and responded 15 to in the final statement of reasons for the regulation. 16 Since this is a regulatory item, did anybody have 17 any ex parte communications? 18 BOARD MEMBER DeSAULNIER: No one has talked to me 19 about olefins. 20 (Laughter.) 21 BOARD MEMBER DeSAULNIER: I thought it was a 22 political cartoon. 23 BOARD MEMBER HUGH FRIEDMAN: You mean the 24 oly-fins. 25 (Laughter.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 CHAIRPERSON LLOYD: We do have a resolution 2 before us. Do I have a motion? 3 BOARD MEMBER PATRICK: So move. 4 BOARD MEMBER D'ADAMO: Second. 5 CHAIRPERSON LLOYD: All in favor say aye? 6 (Ayes.) 7 CHAIRPERSON LLOYD: It's unanimous. 8 Thank you very much. Thank you, staff. 9 One last item is the -- the final item on the 10 agenda today is 00-11-6, amendments to the area 11 designations for state ambient air quality standards. 12 Take a moment while we change staff. 13 Mr. Kenny, are you ready to introduce the item 14 and begin staff presentation? I would mention to you that 15 we had a quickie meeting here and the staff really likes 16 the last slide. 17 EXECUTIVE OFFICER KENNY: I'm going to turn this 18 over to Mr. Jeff Wright. 19 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 20 FLETCHER: Thank you, Mr. Kenny. 21 Good afternoon, Chairman Lloyd and Members of the 22 Board. 23 (Thereupon an overhead presentation was 24 presented as follows.) 25 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 FLETCHER: Today I'll be talking about the proposed 2 amendments to the ozone designations with respect to the 3 State standards. 4 --o0o-- 5 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 6 FLETCHER: I'll start the presentation with a brief 7 introduction. Then I'll discuss the staff's proposed 8 amendments to the area designations and the rationale 9 behind them. I will finish the presentation with a 10 summary of staff's recommendations. 11 --o0o-- 12 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 13 FLETCHER: First, quick introductions. 14 State law requires the Board to establish and 15 annually review area designations for California. Areas 16 are designated attainment, nonattainment, nonattainment 17 transitional or unintended for all pollutants with the 18 within standards. 19 Districts that are designated nonattainment for 20 either ozone, carbon monoxide, nitrogen dioxide or sulfur 21 dioxide must develop and implement plans for attaining the 22 State standard. Staff has reviewed data for all 23 pollutants with the state standards and the amendments 24 that we are proposing as a result of this year's review 25 for ozone only relate to nonattainment transitional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 category and occur by operation of law. 2 The nonattainment transitional designation is a 3 subcategory of nonattainment that was added into State law 4 in 1992. It signals that an area is making progress, has 5 only a few high values and is getting close to attainment. 6 This designation formally recognizes the progress a 7 district has made toward attaining the State standard. 8 Districts that move from nonattainment to 9 nonattainment transitional, must still attain a state 10 standard as quickly as possible. However, the 11 transitional designation allows a district to either have 12 some stationary source control measures or ship them in 13 the rule making calendar to the continuancy category if it 14 finds that these measures are no longer needed to 15 expeditiously attain the State standard. 16 This has not actually occurred since the affected 17 districts have already adopted or planned to adopt the 18 remaining measures in their California Clean Air plans. 19 We are proposing to amend ARB's ozone designation 20 regulation to reflect the fact that three districts no 21 longer qualify from the nonattainment transitional 22 category and have reverted back to simply nonattainment. 23 --o0o-- 24 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 25 FLETCHER: Before I discuss the nonattainment transitional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 category in more detail, I'd like to explain a couple of 2 important terms. 3 Exceedances in violations. An exceedance is any 4 value or concentration that is higher than the level of a 5 State standard. State law requires the Board to exclude 6 highly irregular or infrequent concentrations in making 7 area designations. After a careful review of all 8 exceedances, those concentrations that cannot be excluded 9 as highly irregular or infrequent concentrations per our 10 designation criteria are termed violations. So an area 11 may have a certain number of exceedances but have fewer or 12 even no violations. 13 Typically, we look at violations in determining 14 the designation status for an area. An area is an 15 attainment or no violations and nonattainment if there are 16 one or more violations. A nonattainment transitional 17 category for ozone is the only designation that is based 18 on exceedances rather than violations. 19 --o0o-- 20 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 21 FLETCHER: In order for an area to qualify as 22 nonattainment transitional for ozone, all the sites in the 23 area must have three or fewer exceedances of the state 24 standard during the most recent calendar year for which 25 complete, quality-assured data exists, in this case 1999. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 Because the nonattainment transitional category 2 is based on only one year of data, this designation tends 3 to reflect the year-to-year variations in meteorology and 4 events such as wildfires. 5 --o0o-- 6 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 7 FLETCHER: Now, our proposed amendments to the ozone 8 designation regulation. 9 --o0o-- 10 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 11 FLETCHER: These are the three areas for which we are 12 proposing ozone area designation changes. 13 Specifically, we are proposing that Butte, Glenn 14 and Mono Counties be redesignated from nonattainment 15 transitional to nonattainment, all which occur by 16 operation of law. 17 --o0o-- 18 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 19 FLETCHER: Each of the counties has been close to 20 attainment for a number of years. During the 1990s each 21 county has averaged less than three exceedances of the 22 State ozone standard per year, and the exceedances that 23 have occurred are likely to result of transport from 24 upwind areas. 25 In the next three slides, I will discuss the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 basis for the redesignation of each of these counties. 2 --o0o-- 3 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 4 FLETCHER: Butte county is located in the Sacramento 5 valley air basin. The basin is currently designated as 6 nonattainment for the State ozone standard. Butte County 7 qualified as nonattainment transitional in 1997, because 8 in 1996 the Chico Manzanita site had only two exceedances. 9 In 1999, however, this site had seven 10 exceedances, which causes the county to lose its 11 transitional status. Therefore, the county reverts back 12 to nonattainment by operation of law. 13 As a practical matter, Butte County is part of 14 the Upper Sacramento Valley Planning Region, where control 15 measures have been and continue to be adopted and 16 implemented to attain the standard. No new control 17 measures are expected as a result of this designation 18 change. 19 --o0o-- 20 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 21 FLETCHER: Glenn county is also located in the Sacramento 22 valley air basin. Glenn county qualified as nonattainment 23 transitional in 1997, because in 1996 their ozone 24 monitoring site at East Laurel had only one exceedance. 25 In 1999, however, this site had four exceedances PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 and so the county reverts back to nonattainment by 2 operation of law. Like Butte County, Glenn County is part 3 of the Upper Sacramento Valley Planning Region and no new 4 control measures are anticipated as a result of this 5 action. 6 --o0o-- 7 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 8 FLETCHER: Finally, Mono county is located in the Great 9 Basin Valley's Air Basin. Mono County is currently 10 designated as nonattainment transitional for ozone. In 11 1994 Mono County qualified as nonattainment transitional 12 because their ozone monitoring site at Mammoth Lakes did 13 not have any exceedances of the state standard in 1993. 14 Mono County has been nonattainment transitional 15 since 1994. The Mammoth Lake site operated by the Great 16 Basin Unified Air Pollution Control District was shut down 17 in 1998 for logistical reasons, and will be resited at a 18 later time. Since the nonattainment transitional 19 designation can no longer be documented, Mono County 20 reverts back to nonattainment for ozone by operation of 21 law. 22 In the early 1990s staff determined that all 23 exceedances in Mono County were the result of overwhelming 24 transport from the San Joaquin Valley. Therefore, Mono 25 County was not required to submit an Air Quality PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 Attainment Plan for ozone. This designation change does 2 not affect this finding. And consequently, no planning 3 implications for Mono County are expected to result in 4 this modification. 5 --o0o-- 6 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 7 FLETCHER: Now, I'd like to briefly summarize the staff's 8 recommendations. 9 --o0o-- 10 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 11 FLETCHER: We recommend the Board confirm the proposed 12 changes to the area designations. These designations 13 would remove the transitional label from the ozone 14 nonattainment designation for Butte, Glenn and Mono 15 counties for the State ozone standard. 16 This ends the staff's presentation. We would be 17 happy to answer any questions that you may have. 18 CHAIRPERSON LLOYD: Yes, Professor Friedman. 19 BOARD MEMBER HUGH FRIEDMAN: With respect to Mono 20 County, is there any follow-up then that Mono County will 21 be obliged to do? They'll be nonattainment, but they 22 don't have to submit a plan and there's no time commitment 23 for reinstalling some kind of a monitoring station. 24 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: I'm 25 Debora Popejoy. I'm the manager of the Air Quality PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 Analysis Section. Mono County had to shut down the 2 monitoring site at Mammoth because they had to lease -- 3 they lost the lease on the building, and the building was 4 going through modifications. 5 They also have a resource problem and next year 6 they intend to relocate the monitoring with the help of 7 ARB funding and staffing and so we should have continued 8 monitoring both ozone and PM 10 at Mammoth Lakes within 9 the next year. 10 CHAIRPERSON LLOYD: So they are not upset with 11 this change? 12 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: No. 13 They were aware of it when they told us they were going to 14 have to shut down the monitor and we explained to them 15 this is going to be a result of that. But since they 16 haven't been found to be overwhelmed by transport from San 17 Joaquin, they were not in the planning process for ozone, 18 and this doesn't initiate that either. 19 BOARD MEMBER HUGH FRIEDMAN: Is the designation 20 nonattainment transitional, is that now becoming 21 predictive? I mean, does transitional mean we're 22 transitioning back to nonattainment? Are there other 23 areas that are transitional that are not reverting or are 24 not -- 25 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 Right. Colusa County, in fact, if they were an air basin 2 unto themselves, they would qualify for attainment, but 3 since Colusa is part of the Upper Sac Valley and the whole 4 valley is considered nonattainment, they will continue to 5 be nonattainment transitional till the valley becomes 6 attainment. 7 I don't think we have anybody else who's 8 nonattainment transitional right now. 9 BOARD MEMBER HUGH FRIEDMAN: That's not the kiss 10 of death then, the nonattainment transitional? 11 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: 12 No, because it is based -- the Legislature decided to base 13 it only on one year of no data. It is very tenuous, 14 because you can have meteorology. In the case of Butte 15 and Glenn County, 1999 we had a lot of fires, and there is 16 evidence that fires can cause higher ozone. We're not 17 really sure if it's ozone in the plume or if it's 18 something that interferes with the monitor, but they could 19 be excluded as extreme or exceptional events and they 20 would be not considered violations, but because the 21 criteria says it has to be exceedances and this was also 22 in Legislation not violations, we cannot exclude those 23 values that were caused by the wildfires. And that's why 24 we had the bomber on this last slide. 25 BOARD MEMBER HUGH FRIEDMAN: Thank you for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 continuing my education. 2 CHAIRPERSON LLOYD: Ms. D'Adamo. 3 BOARD MEMBER D'ADAMO: Yeah, I had a question 4 about the nonattainment or transitional. Is it that any 5 area that has that designation would not be required to 6 impose any additional control measures or is it because of 7 the transport issue. 8 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: 9 The nonattainment transitional category, if you've been 10 nonattainment and you become nonattainment transitional, 11 as Jeff said, it signals that you're getting close. And 12 the Legislature had intended to allow districts to 13 reevaluate their plans if they got that close to the 14 standard, if they only had three exceedances, and so they 15 could take control measures that were on the rule making 16 calendar and either delay them or move them to 17 contingency. 18 Under the designations transport, it is not 19 considered in an attainment or nonattainment designation. 20 An area that has violations, not exceedances, but 21 violations, due to transport, is still considered 22 nonattainment, but there is planning relief for those 23 areas that they don't have to adopt measures, if the 24 violations are caused by transport. 25 BOARD MEMBER D'ADAMO: Just a comment, because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 I'm looking here. I just happen to have the future agenda 2 items, and I see that ozone transport assessment is 3 coming, I guess, next year some time. 4 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: 5 Sometime in the spring. 6 BOARD MEMBER D'ADAMO: Ms. Terry, do you have any 7 information on that? 8 DEPUTY EXECUTIVE OFFICER TERRY: Yes. That is 9 our triennial review of the transport assessments that we 10 looked at the relationships upwind and downwind, so we 11 will do our triennial update there. And this year we're 12 trying to make a little bit more user friendly document 13 that really focuses on the relative responsibility in 14 terms of planning requirements. 15 So the bottom line is we pretty much established 16 the fundamental transport relationships, but we want to 17 make sure we have a document that is out there and usable 18 as districts update their clean air plans. 19 BOARD MEMBER D'ADAMO: I'm really looking forward 20 to that as an opportunity to tie it back into issues that 21 have come before us in the past, such as today. And I 22 know periodically they come before us in terms of making 23 mitigation on the part of the upwind contributors more 24 real, because I see we're just piggy-backing. 25 BOARD MEMBER HUGH FRIEDMAN: Any place in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 particular? 2 (Laughter.) 3 BOARD MEMBER D'ADAMO: You've got Sacramento and 4 San Joaquin that are being blamed partially for the 5 circumstances regarding the districts that are before us 6 today. But if San Joaquin were here and Sacramento, 7 they'd be blaming the Bay Area. So I think we need to get 8 a little more serious about somehow assigning 9 responsibility and control measures to the upwind 10 districts. 11 CHAIRPERSON LLOYD: Professor Friedman. 12 BOARD MEMBER HUGH FRIEDMAN: Are you going to now 13 take into account China in your equation? 14 I heard from Dr. Burke, at our last meeting, that 15 he'd come back from a German forum or conference and we're 16 up -- I guess, China is upwind from us. 17 DEPUTY EXECUTIVE OFFICER TERRY: Actually, I was 18 at a Western States meeting the last couple of days and 19 the representative from Alaska was talking quite seriously 20 about the -- yeah, the transport and from a regional 21 standpoint because of our federal programs that are coming 22 on line. 23 CHAIRPERSON LLOYD: Any other comments from the 24 Board? 25 I do have -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 BOARD MEMBER DeSAULNIER: Does that mean it may 2 not be the Bay Area's fault after all? 3 (Laughter.) 4 BOARD MEMBER HUGH FRIEDMAN: Trying to get you 5 off the hook. 6 BOARD MEMBER DeSAULNIER: In my experience all of 7 our transport issues begin at City Hall in San Francisco. 8 BOARD MEMBER HUGH FRIEDMAN: Not Hawaii? 9 CHAIRPERSON LLOYD: We do have one witness signed 10 up who can maybe address this from the County's 11 perspective. Kevin Tokunaga from Glenn County's APCD. So 12 maybe you can act as a surrogate for the other counties in 13 addressing them. 14 MR. TOKUNAGA: I don't think I'd ever pretend to 15 speak for the other counties to tell you the truth. I 16 have enough trouble speaking for my own. For what it's 17 worth, and I'll go over it again, we're 90 miles north of 18 here for those of you that don't know where Glenn County 19 is. The population is about 25,000. We've got about 20 1,300 square miles of area. We have one Title 5 source. 21 And through CARB staff's meteorology, discussions 22 with them when we're having the first in Plumas County 23 that caused exceedances in our Laurel Street station, 24 there's no doubt that those were exceedances. You know, 25 we can't do anything about that, but this ratcheting from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 transitional to straight nonattainment it just has an 2 impact on businesses that would like to relocate and move 3 to Glenn County. 4 When they see nonattainment, it looks the same as 5 nonattainment for Placer County or for the Bay Area or for 6 anywhere else. But when you're transitional, it makes it 7 look that much better, that much closer to having the 8 cleaner air that they would like to situate and like to be 9 associated with. 10 So I just don't know how to ask the Board for 11 reconsideration, but that straight nonattainment label 12 really does damage a lot of the counties that are so close 13 to reaching that attainment level. We have year-round 14 double digit unemployment, by the way, too, and that 15 further impacts the county. 16 That's all I have to say. 17 Thank you. 18 CHAIRPERSON LLOYD: You've just got one 19 exceedance over the three allowed, I guess, four? 20 MR. TOKUNAGA: That's correct. And those were 21 all during the fire days. 22 CHAIRPERSON LLOYD: Yes. 23 BOARD MEMBER HUGH FRIEDMAN: Is that statutory 24 did I hear you say? 25 DEPUTY EXECUTIVE OFFICER TERRY: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 BOARD MEMBER HUGH FRIEDMAN: So we need a 2 legislative fix? 3 EXECUTIVE OFFICER KENNY: Yes. 4 BOARD MEMBER HUGH FRIEDMAN: Nonattainment, 5 preventable, nonattainment acts of God. 6 (Laughter.) 7 MR. TOKUNAGA: Nonattainment not our fault. 8 BOARD MEMBER RIORDAN: Mr. Chairman, it does seem 9 though that, at some point in time, it would be nice if 10 you could have a legislative fix to indicate those things 11 caused by something beyond the control of the district, 12 either mother nature or whatever. I mean, because there 13 are some things -- I mean, you can't control the fact that 14 there's a fire near you or maybe a terrible wind storm 15 that creates difficulties. 16 And, you know, I know it's splitting hairs, but I 17 understand what you're saying. It's just too bad we can't 18 say something that would indicate to somebody looking at 19 that residence as well, not only people who are looking at 20 a move, but also the residents to know that, yes, your 21 district is doing a good job, but there are things that 22 you just can't avoid, like forest fires. 23 CHAIRPERSON LLOYD: Ms. D'Adamo. 24 BOARD MEMBER D'ADAMO: How many forest fires did 25 you have, though, you didn't have four -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 MR. TOKUNAGA: Well, those were four separate 2 days of exceedances. 3 BOARD MEMBER D'ADAMO: All related to the one? 4 MR. TOKUNAGA: Well, I believe three of them were 5 related to one and one was related to one in Tehama or 6 Shasta County or Trinity County. 7 BOARD MEMBER D'ADAMO: I was going to get on my 8 soap box again about transport and say it was somebody 9 else's fault. 10 CHAIRPERSON LLOYD: Professor Friedman. 11 BOARD MEMBER HUGH FRIEDMAN: There must be 12 someway though that -- I'm not sure when a business is 13 thinking of relocating how much investigation they do. 14 But there must be someway that when they make an inquiry 15 about the status or that you could in your literature 16 indicate acts of God or something, if it's the truth. 17 MR. TOKUNAGA: Well, if they just ask you 18 straight out, what's your attainment status and you say 19 well, nonattainment for ozone. 20 BOARD MEMBER HUGH FRIEDMAN: I mean, anybody 21 trying to market or wanting to recruit or welcome people 22 in would say well, unfortunately we had four forest fires 23 that started somewhere else. And for four days we had 24 smoke and we were therefore nonattainment, but those are 25 not preventible. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 MR. TOKUNAGA: I could always do that, but when 2 they look at that beautiful map that CARB provides and it 3 has the cross hatchmarks and things like that, when you're 4 nonattainment, you're nonattainment. It's kind of a kiss 5 of death. 6 BOARD MEMBER PATRICK: Mr. Chairman, who could 7 this gentleman go to for legislative relief? 8 CHAIRPERSON LLOYD: Mr. Kenny, do you want to say 9 something there? 10 BOARD MEMBER HUGH FRIEDMAN: Senators in the 11 district. 12 EXECUTIVE OFFICER KENNY: I was going to suggest 13 two things on that. One was essentially that we do do 14 these designations on an annual basis, and so we will be 15 back next year. Presumably, what will happen is that the 16 air quality will be good. There will not be any 17 exceptional event of some kind, we will not see the 18 exceedances, at which point we can return to nonattainment 19 transitional. 20 The other thing is that this board's regulations 21 do recognize exceptional events. And what ends up 22 happening is that we do make a distinction between 23 exceedances and violations, although, the State statute 24 does not. And it is something that we can look at and 25 then try to essentially work with different legislative PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 authors. 2 CHAIRPERSON LLOYD: Okay. Good. 3 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: 4 Chairman Lloyd? 5 CHAIRPERSON LLOYD: Yes. 6 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: IN 7 fact, we have looked at the air quality data from Glenn 8 County for 2000. And although it's still preliminary, we 9 have no exceedances in the summer of 2000. 10 CHAIRPERSON LLOYD: Very good. 11 AIR QUALITY ANALYSIS SECTION MANAGER POPEJOY: And 12 also to respond to Mrs. Riordan, the Board had adopted 13 when they adopted the criterion for the designations, 14 nonattainment transitional for the other pollutants other 15 than ozone, and we allow two violations to become 16 transitional for the other pollutants, but the Legislature 17 has had three exceedances. 18 So if we were to go for a fix, I would recommend 19 two violations rather than three violations and that way 20 you would throw out exceptional and highly irregular 21 events. 22 BOARD MEMBER RIORDAN: That would be a good way 23 to do it. 24 CHAIRPERSON LLOYD: Thank you. 25 I guess since all testimony and written PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 submission, staff comments for this item have been entered 2 in the record, the Board does not plan an extension of the 3 comment period, I'm officially closing the record on this 4 portion of the agenda Item 00-42. Written or oral 5 comments received, after the comment period has been 6 closed, we'll not be accepted as part of the official 7 record on this agenda item. 8 Do board members have any ex parte communications 9 on this one? 10 So with that, I guess we've got a resolution 11 before us. 12 BOARD MEMBER D'ADAMO: So move. 13 BOARD MEMBER RIORDAN: Second. 14 CHAIRPERSON LLOYD: All in favor say aye? 15 (Ayes.) 16 CHAIRPERSON LLOYD: Unanimous. 17 So if there's no other business items here, the 18 November meeting of the California Air Resources Board 19 will now adjourn. 20 Thank you all. 21 (Thereupon the Air Resources Board meeting 22 adjourned at 3:30 p.m.) 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 CERTIFICATE OF REPORTER 2 I, JAMES F. PETERS, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing California Air Resources Board meeting was 7 reported in shorthand by me, James F. Peters, a Certified 8 Shorthand Reporter of the State of California, and 9 thereafter transcribed into typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said meeting nor in any 12 way interested in the outcome of said meeting. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 28th day of November, 2000. 15 16 17 18 19 20 21 22 23 JAMES F. PETERS, CSR, RPR 24 Certified Shorthand Reporter 25 License No. 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345