MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD BOARD HEARING ROOM 2020 L STREET SACRAMENTO, CALIFORNIA THURSDAY, DECEMBER 21, 1995 11:40 A.M. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT John D. Dunlap, III, Chairman Eugene Boston, M.D. Joseph C. Calhoun Lynne T. Edgerton M. Patricia Hilligoss John S. Lagarias Jack C. Parnell Ron Roberts Doug Vagim Staff: James Boyd Executive Officer Tom Cackette Chief Deputy Executive Officer Mike Scheible Deputy Executive Officer Mike Kenny Chief Counsel Bob Cross, Assistant Chief, Mobile Source Division Sue DeWitt, Project Leader, Technology Advance Section, MSD Kathleen Walsh, Staff Counsel, Office of Legal Affairs Ramona Masters, Acting Board Secretary Wendy Grandchamp, Secretary Bill Valdez, Administrative Services PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii I N D E X PAGE Proceedings 1 Call to Order 1 Pledge of Allegiance 1 Roll Call 1, 2 AGENDA ITEM: 95-13-4 Continued Public Meeting to update the Board on the zero-emission vehicle program Introductory Remarks by Chairman Dunlap 2 Staff Presentation: Jim Boyd Executive Officer 5 Sue DeWitt Project Leader Technology Advancement Section Mobile Source Division 7 PUBLIC COMMENTS: Bernie Richter Member California Assembly 12 Kelly M. Brown Ford Motor Company 20 Questions/Comments 23 Melissa Kasnitz CALPIRG 35 Questions/Comments 45 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX, continued. . . PAGE AGENDA ITEMS 95-13-4 Samuel A. Leonard General Motors 46 Questions/Comments 48 Dave Hermance Toyota 68 Questions/Comments 69 Tim Carmichael Coalition for Clean Air 70 Questions/Comments 77 John Schutz Nissan R & D 82 Questions/Comments 84 Eric Ridenour Chrysler 86 Questions/Comments 89 Tom Austin Sierra Research 92 Questions/Comments 98 Peter Welch CAMCDA 100 Ted Costa People's Advocate, Inc. 111 Questions/Comments 114 Chuck Olson Citizen 115 Bill O'Brien Hawker Energy Products, Inc. 119 Questions/Comments 127 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX, continued. . . PAGE AGENDA ITEMS 95-13-4 Arthur Cartwright SEVA 129 Stephen Heckeroth For Supervisor Peterson Mendocino County 131 Questions/Comments 137 Joe Caves Union of Concerned Scientists 138 Jamie Phillips Planning and Conservation League 143 Bonnie Holmes Sierra Club 146 Questions/Comments 151 Janet Hathaway NRDC 155 Michael Semmens Electrosource 160 Questions/Comments 164 Jerry Mader Advanced Battery Task Force 165 Questions/Comments 169 Paul Knepprath American Lung Assn of California 170 Bill Van Amburg CALSTART 172 David Modisette CETC 181 Questions/Comments 183 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX, continued. . . PAGE AGENDA ITEMS 95-13-4 Anita Mangels CAHT 184 Questions/Comments 192 Bill Wason BAT International 194 Clare Bell EAA 199 Lewis K. Uhler National Tax Limitation Committee 203 Ben Knight Honda R & D 205 Statement by Chairman Dunlap 207 Questions/Comments 209 Statement by Mr. Parnell 211 Statement by Mr. Lagarias 213 Statement by mr. Calhoun 216 Questions/Comments 217 Statement by Dr. Boston 221 Questions/Comments 222 Statement by Supervisor Vagim 222 Closing Statement by Chairman Dunlap 223 Adjournment 224 Certificate of Reporter 225 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 --o0o-- 3 CHAIRMAN DUNLAP: We will now come to order and 4 reconvene the second half of the December, 1995, Board 5 meeting of the California Air Resources Board. 6 Mr. Calhoun, could I get you to lead us in the 7 Pledge of Allegiance, please? 8 MR. CALHOUN: I'll be happy to, Mr. Chairman. 9 Please stand and face the flag. 10 (Thereupon, the Pledge of Allegiance 11 was recited by all in the Hearing Room.) 12 CHAIRMAN DUNLAP: Thank you, Mr. Calhoun. 13 Can I get the Board Secretary to please call the 14 roll? 15 MS. MASTERS: Boston? 16 Calhoun? 17 MR. CALHOUN: Here. 18 MS. MASTERS: Edgerton? 19 Hilligoss? 20 MAYOR HILLIGOSS: Here. 21 MS. MASTERS: Lagarias? 22 MR. LAGARIAS: Here. 23 MS. MASTERS: Parnell? 24 MR. PARNELL: Here. 25 MS. MASTERS: Riordan? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 Roberts? 2 SUPERVISOR ROBERTS: Here. 3 MS. MASTERS: Silva? 4 Vagim? 5 SUPERVISOR VAGIM: Here. 6 MS. MASTERS: Chairman Dunlap? 7 CHAIRMAN DUNLAP: Here. 8 There are a couple of our Board member colleagues 9 who'll be joining us shortly. They're stuck in the airport 10 or coming on their way in cars here. So, we should have, I 11 believe, nine today. 12 Good morning. I'd like to thank my Board members, 13 staff, media, and all concerned citizens for your efforts to 14 be here today. I know it was short notice, especially 15 during the holiday season, to extend this Board meeting 16 another week -- particularly during the holiday season -- 17 but it was clear from the staff's presentation last week 18 that more time was needed to evaluate the volumes of 19 material the Board received, and to assess the impact of 20 many of these innovative proposals and comments that were 21 received as well. 22 And in order for us to review our progress, I'd 23 like to quickly summarize the history of this item. 24 The zero-emission vehicle component of our clean 25 car program was enacted by the Air Resources Board, along PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 with low-emission vehicle standards, in 1990. We are, in 2 the normal course of our regulatory responsibilities, 3 conducting essentially a biennial review; except, this year, 4 I initiated an extensive review of all elements of the 5 program, as is warranted, to prepare for its launch, 6 successful launch. 7 The Board staff conducted some eight forums and 8 one workshop on this issue in which some 200 people 9 testified, offered opinions, perspectives, and data for our 10 edification. I have also spoken personally to hundreds of 11 stakeholders on this issue over the past year. 12 To augment that process, Governor Wilson directed 13 this Board to commission an independent panel of renowned 14 battery experts to investigate the status of what many 15 people feel is the essential issue for this program, and 16 that is the status of battery technology. 17 Last week, we heard from many stakeholders. I 18 believe Gary Patton, General Counsel for the Planning and 19 Conservation League summed it up best when he said -- he 20 lauded the panel, the battery panel, for its excellent work. 21 And certainly that is praise that is deserved. 22 I do not believe that this Board can ignore the 23 panel's findings, because the heart of the ZEV program is 24 its reliance on battery technology for the foreseeable 25 future. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 There is undoubtedly a market for electric 2 vehicles, but the range, the cost, the reliability, and the 3 durability of batteries will determine whether that market 4 is 200 or 20,000. 5 At our November 16th Board meeting, the Board 6 directed staff to prepare a recommendation that acknowledges 7 the battery panel's warning that battery technology, in 8 1998, may not meet consumer demands on these critical tests. 9 The fact that the ZEV program was the catalyst for 10 the considerable advances that we've seen, and the driving 11 force behind research into advanced batteries cannot be 12 overlooked, however. 13 What the Board proposed was the change that 14 provided more flexibility in the early years of the program 15 and a change that focused interested in advanced battery 16 development. 17 At the same time, the Board made it clear that, 18 for the sake of public health and to meet Federal Clean Air 19 Act requirements, we could not suffer the loss of even one 20 pound of emission reductions from any alternative. 21 We must ensure that, as we try to nurture battery 22 development for the future, we do not lose sight of the 23 reason for the program -- to realize clean air benefits. 24 At our December 14 Board meeting last week, we 25 heard testimony from all quarters -- I think some 45 people PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 testified -- on this issue. But it was clear from the 2 presentation that staff had not had an opportunity to 3 analyze and synthesize the vast amount of information it had 4 received in the week prior to the hearing. 5 During the last few weeks, staff received over 250 6 different letters from concerned parties. We granted the 7 staff request for more time because this is an issue of 8 great importance, and it deserves our considered attention. 9 That is, I believe, an accurate portrayal of how 10 we arrived at this point. Our commitment to clean air and 11 our recognition of the need for additional flexibility in 12 the early years of the program have not diminished with the 13 passage of this past week. 14 So, with that,, I'd like to ask staff to make its 15 presentation to the Board on this issue, and to offer any 16 recommendations it might have. 17 Mr. Boyd, will you please introduce this item. 18 MR. BOYD: Thank you, Mr. Chairman. Good morning 19 to the Board members and to the audience. And I'll take 20 this opportunity to wish everybody a happy holiday. 21 As the Chairman has indicated, this is a major 22 milestone along the course to fulfilling our commitment to 23 the public to achieve clean air in the State of California, 24 and to bring healthful air to our citizens. 25 But it's more than just the culmination of maybe PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 nine months of intense public review by the Board and the 2 staff. Some Board members sitting on this Board have been 3 here for the earlier biennial reviews, and some Board 4 members were there in 1990, and participated in enacting the 5 regulation, and even others were on the Board in the late 6 eighties when the concepts were initially conceived for the 7 low-emission vehicle/clean fuels/zero-emission vehicle 8 program. 9 That conception is a product of the realization of 10 the times then, that we had not achieved clean air, as 11 required by the federal law; that, in the face of the 12 incredible population growth in this State, there was a need 13 to do a lot more to provide to our citizens clean and 14 healthful air and the quality of life that they had been 15 used to. 16 Therefore, in recognition of the fact that motor 17 vehicles were then, and are today, responsible for greater 18 than 50 percent of the air quality problem in the State; 19 and, at that time, in recognition more than ever before of 20 the fact that it turns out to be that the Board's program, 21 particularly in the motor vehicle arena, was proving to be 22 the most effective program -- in fact, has to date and 23 continues to be the basis for more than 70 percent of the 24 progress that California has seen in achieving clean air, 25 again, in the face of this incredible population growth -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 that's, in effect, been the genesis of the program. 2 The Board and the staff have historically and 3 consistently cared about the quality of life in California 4 for its citizens, the health of the public, the quality of 5 the environment, and the health of the economy. 6 And the ARB has consistently enacted only those 7 programs that are technical feasible and that are cost- 8 effective, and have been always mindful of the fact that 9 technology changes, and have always been prepared to reflect 10 upon those changes before regulations are fully enacted. 11 Shortly, I will introduce Sue DeWitt of our Mobile 12 Source Division, whom you've become used to these past weeks 13 and months, who will give you the recommendations being 14 offered to you today. 15 The recommendations reflect the current and future 16 state of technology, particularly as it relates to battery 17 technology, and reflects heavily, completely upon the advice 18 and counsel of the Battery Panel. It reflects the current 19 climate in California as it relates to successful program 20 acceptability and successful market launch, and the program 21 meets the principles and guidance given the staff to date. 22 And with that, I'd call upon Ms. DeWitt to make 23 the presentation. 24 MS. DE WITT: Good morning. Thank you, Mr. 25 Chairman, members of the Board. And thank you, Mr. Boyd, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 for suggesting that anybody's ever been able to get used to 2 me. 3 I hope members of the public can see the slide. 4 I'll wait for it to come up. Great. 5 I hope members of the public can appreciate our 6 small attempt at holiday cheer. 7 As you directed staff on December 14th, we have 8 reviewed the many suggestions made by the public and are now 9 prepared to make a recommendation. 10 Briefly, we have received over 200 letters. In 11 reviewing them and reading each one, we found that most 12 simply suggest the Board stay the course. Some letters 13 provided guidelines or principles, but not specific 14 alternatives. 15 In terms of the suggestions, almost all 16 recommended providing some level of flexibility to the 17 program, especially in the early years, to help ensure a 18 successful market launch. 19 However, most also emphasize that a purely 20 voluntary program would be going too far, and that it's 21 important to have some way of ensuring commitments are kept. 22 They also suggested the importance of requiring equal or 23 greater emissions reductions from light-duty vehicles to 24 keep on track with reducing mobile source emissions. 25 Last by not least, people reiterated the need to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 acknowledge other advanced vehicles in any proposed 2 modifications. 3 This next slide is a repeat of one we showed you 4 last week, where we discussed the various advantages and 5 shortcomings of each of the concepts we presented at the 6 December 6th staff forum. 7 I won't go over it again, but rather tell you that 8 we used this as a guide toward a recommendation. 9 The staff proposal emphasizes these three 10 features: a market-based launch, a technology development 11 partnership between the Air Resources Board and automakers, 12 and a commitment for volume production beginning in 2003. 13 When staff says "market-based launch," we want to 14 be clear about what we mean, because this phrase could mean 15 different things to different people. 16 First, we suggest suspending the ZEV requirements 17 through 2002. Automakers could begin selling vehicles 18 tomorrow, if they so chose, or not. However, this would not 19 compromise reductions in emissions. Automakers would 20 instead be required to achieve emissions reductions through 21 the production of cleaner cars. 22 They would have to compensate for exhaust, 23 evaporative, and refueling emissions benefits associated 24 with zero-emission vehicles, plus a premium to compensate 25 for uncertainties. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 To keep attention focused on the advanced 2 batteries needed for market demands, staff's proposal would 3 capture elements of Concept B which provide for agreements 4 with the automakers to place over 3500 zero-emission 5 vehicles on the road in California between 1998 and 2000. 6 For those manufacturers who elect to produce 7 longer-range vehicles that use advanced batteries, for 8 example, ARB would grant extra credits. This would reduce 9 the total number of vehicles to around 2,000 if all credits 10 were taken advantage of. 11 We also propose continued biennial reviews -- in 12 1998, 2000, and 2002 -- to ensure that the program is moving 13 forward on track. 14 It's also critical to focus on how we will get the 15 volume production when the zero-emission vehicle requirement 16 would kick back in. We would expect to see manufacturers 17 ramping up in production of vehicles. And to help them ramp 18 up, staff's proposal includes extra credits for early, in 19 advance zero-emission vehicles to help soften the curve 20 toward full volume production. 21 At that point, in 2003, the mandate level of 10 22 percent would come back in. 23 Now, this package addresses the large volume 24 manufacturers really, because they were first to be subject 25 to the zero-emission vehicle program requirements beginning PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 in 1998. We would, for the sake of clarity, point out that 2 our proposal does not alter the requirements of the 3 intermediate volume manufacturers who were, in the current 4 regulation, subject to the 10 percent beginning also in 5 2003. 6 The intermediate volume manufacturers would also 7 be eligible to take advantage of the extra credits offered 8 in this proposal. 9 This is it. Last slide. 10 You've seen the staff proposal. With your 11 approval, we would prepare a regulatory package for your 12 consideration at the March Board meeting. We would also 13 proceed with the staff work on equivalent zero-emission 14 vehicles and hybrid vehicles, and would plan to bring that 15 back for your consideration in late 1996. 16 Last, we would like to acknowledge the many people 17 in today's audience who are spending their holiday with us 18 instead of their families, and thank them for their 19 suggestions and assessments of the zero-emission vehicle 20 program. 21 Thank you, Mr. Chairman. 22 CHAIRMAN DUNLAP: Okay. Mr. Boyd or Mr. Cackette, 23 do you have anything to add? 24 MR. BOYD: No, Mr. Chairman -- thank you -- other 25 than to express my appreciation to the staff for all their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 hard and fine work they've done under very difficult time 2 constraints the last several months. 3 So, I really appreciate and salute them for the 4 good work they've done. 5 CHAIRMAN DUNLAP: Okay. We have some 18 witnesses 6 signed up, so what I'd like to do, at this point, is to call 7 upon them to come forward, and we'll hold the Board member 8 discussion until we've had a chance to hear from them. 9 I'd like to start off this morning with 10 Assemblyman Richter, who joined us today, and invite him to 11 come forward. 12 Following Mr. Richter, Kelly Brown from Ford Motor 13 Company, and Melissa Kasnitz from CALPIRG. 14 Good morning, Assemblyman. 15 ASSEMBLYMAN RICHTER: Good morning. Let me get my 16 pages in order here. 17 What I wanted to talk to you about today is this 18 whole question of the original mandate. And, of course, 19 you've been discussing some alternatives, and the slide 20 presentation alluded to those. 21 But I'm focusing on the original mandate, and want 22 to make some points I have attempted to make in the future-- 23 or in the past here, I had some of my staff people appear 24 before this group and make some comments. 25 And I want to maybe reiterate some of those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 comments and make some new comments. And I guess the 2 question that I have to ask in regards to this mandate is, 3 why are seemingly intelligent and rational people 4 contemplating or were they contemplating of program of 5 mandating the production of electric vehicles in certain 6 quantities as the mandate provided, when, in fact, this 7 program won't work; when, in fact, it causes huge problems 8 and wastes resources; and when, in fact, it creates exactly 9 the opposite result of what the people who put it together 10 intended it to create -- to do. 11 And, you know, perhaps we can understand the 12 answer to this question by realizing that history -- and I 13 don't have to go back very far -- is replete with these 14 kinds of decisions that governments have made that were 15 based upon false assumptions, overwhelming ignorance, and 16 fanatical belief systems. 17 Two historical events come to my mind that remind 18 me of what's going on with this mandate. One of them -- and 19 I hate to go back this far, but it's true -- was the 1693 20 Salem witch trials in Salem, Massachusetts, where upwards of 21 30 people were hung for witchcraft. 22 And the other decision that is similar to this is 23 the decision made in 1917, at the culmination of the Russian 24 Revolution creating the Soviet State, and communizing, and 25 socializing the Russian economy. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 Now, it's extremely interesting that, at the time 2 of the Salem witch trials, the accusations and the evidence 3 taken for prosecuting the so-called witches came from the 4 dreams of witnesses; that is to say, witnesses testified as 5 to what they had dreamed. And this was used as evidence to 6 convict for the capital offense of witchcraft. 7 This was called "spectral evidence." 8 It's my belief that the evidence justifying and 9 warranting the ARB mandate is not nearly as good and as 10 valid as the evidence offered at the Salem witch trials from 11 the dreams of accusers. 12 In the case of the collectivization and 13 socialization and the takeover of the Russian economy by the 14 Russian State, ignorance and ideology were the driving 15 forces behind that action. Marx, Stalin, Trotsky, Lenin, 16 Kalinin, and all of their Bolshevik associates and comrades, 17 proposed to plan and operate the Russian economy serving 18 over 200 million people. 19 And yet none of these people had ever worked in a 20 factory, provided a service, engaged in trade, made any kind 21 of an investment, managed any kind of enterprise. And with 22 vast array of ignorance, they proposed to manage the economy 23 of the newly created Russian State. 24 Well, the results are in. After 70 years and 50 25 million murdered Russians, and that's their estimates today, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 we know that it didn't work. 2 And I'm not going to get into all of this, except 3 to say it shows the force of ideas; it shows how ideology 4 and beliefs -- how far they will carry people. 5 The bureaucrats who, in fact, propose to mandate 6 electric vehicles for California propose to tell 7 manufacturers -- and to mandate how manufacturers should 8 produce a highly sophisticated piece of machinery, which has 9 evolved over a hundred years. And they want them to 10 manufacture a type of vehicle that the manufacturers and the 11 people most knowledgeable about these questions know won't 12 work and won't be purchased by the consuming public. 13 Mandating the production of these vehicles simply 14 won't work. People won't buy electric vehicles in the 15 quantity proposed by the mandate, mainly because, and 16 foremost because people are not stupid. 17 Why would anybody buy a car costing significantly 18 more than an existing internal combustion engine car with an 19 approximate range of 80 miles at 35 miles per hour, without 20 air conditioning, without going up or down hills, without 21 stopping or starting along the way? 22 People won't buy a car that won't work. I would 23 think that if the Air Resources Board would mandate the 24 manufacture of these vehicles, that it would be perfectly 25 rational and consistent to mandate their purchases. If it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 is to force people to make them, it should be prepared to 2 force people to buy them. 3 I don't know how you go about forcing people to do 4 this, but surely the people who came up with the brilliant 5 idea of forcing the mandate can figure out a way to force 6 the consumers to buy them. 7 The point here is that if electric vehicles were 8 feasible, if, in fact, there was a market for them, then 9 there would be no need for the mandate. Competition would 10 require and cause them to be built. 11 The forces behind this mandate do not come from 12 the marketplace. They come from two sources. They come 13 from the ideologically driven fanatics who have in their 14 minds that, despite evidence to the contrary, that this will 15 help clean the environment and do away with air pollution on 16 the one hand. 17 And on the other hand, it's driven by the hundreds 18 of millions of dollars in government subsidies from 19 ratepayers and from taxpayers creating a huge trough of pork 20 that cause the people like CALSTART to feed at the trough 21 and to make continuing and repeated demands that this 22 wasteful trough of public money be augmented and continued 23 so they can ply their trade, which, for the most part, has 24 produced nothing but brochures, boasts, and predictions on 25 the ultimate success of their subsidized ventures. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 What I really want to say to you is that, I can't 2 think of many things that would be a greater disaster than 3 continuing the mandate and forcing vehicles to be produced 4 which will cause the price of existing vehicles to rise two, 5 three, or four thousand dollars a vehicle, which will, in 6 fact, cause the -- the number of old vehicles that we have 7 on the road, which are the main polluters -- you all have 8 the figures, something like 15 percent or 20 percent of the 9 vehicles creates something like 60 percent of the pollution. 10 I can't imagine that we would, in fact, cause 11 these old cars to remain on the road, which will mean more 12 pollution. 13 I can't imagine that we would introduce a mandate 14 that would cause a significant drop in sales of internal 15 combustion engine vehicles because of this increased price. 16 I can't imagine that we would tolerate the job 17 losses in distribution, and manufacturing, and sales that 18 would result. 19 I can't imagine that we would allow -- have a much 20 greater number of older, unsafe vehicles on the road, which 21 endanger people and which will create more accidents that 22 flow out of the fact that the cars are old and unsafe. 23 And I can't imagine that we would tolerate the 24 major environmental problems that will result from the 25 gigantic increase in lead-acid batteries having significant PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 impact on accidents and disposal. 2 I would hope that these would be reasons enough 3 for us to back off of this mandate and realize that this is 4 a serious mistake; that it would hurt California; that it 5 would the cleaning of the air; that it would hurt business. 6 The notion, for instance -- it's interesting that, 7 when I brought this up in 1993, and I was attacked for some 8 people for being -- speaking for the automobile 9 manufacturers, and being their agent, and not having a 10 viewpoint of my own -- let me tell you, if I have any 11 criticisms it is of the automobile manufacturers not willing 12 to say what they ought to say and say it much stronger than 13 they have been saying it in regards to what's being 14 suggested that they do here. 15 The pusillanimousness of people in all areas of 16 industry in dealing with this irrational and destructive 17 mandate is of great concern to me. And my attitudes about 18 this flow out of my knowledge of what I know of the 19 marketplace and of the automobile industry, and what I know 20 will occur when you require people to manufacture products 21 that people aren't going to buy and won't work. 22 Now, if we want to clean the air, we have all 23 kinds of ways to do it. And it really gets down to the 24 cost. And I did some estimates back in 1993, when I 25 introduced a bill to do away with this mandate, that showed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 the cost of the so-called -- assuming that electric cars 2 were zero-emission, which is an assumption that really isn't 3 accurate, but let's just assume it for a minute -- that the 4 cost of reducing pollution per ton is something like a half 5 a million dollars per ton with the electric mandate versus 6 something like $900 a ton, as Arco was able to reduce 7 pollution by taking old polluting vehicles off the road in 8 their experiment several years ago. 9 I would hope that we would move in the direction 10 of reducing air pollution. I would hope that we would do it 11 rationally and constructively, and that we would make the 12 air cleaner for all Californians. This mandate is a 13 disaster. It will not do that. It will create the exact 14 opposite, and it will create tremendous damage to the 15 California economy and to the taxpayers and the ratepayers 16 of California. 17 If you have any questions, I'd be glad to respond 18 to them. That concludes my comments. 19 CHAIRMAN DUNLAP: Thank you, Assemblyman. We're 20 well aware of your continued interest in this issue. And 21 we've also seen your representatives here in the last 22 several meetings. 23 Mr. Lagarias, do you have any questions? Okay. 24 All right. 25 Mr. Brown, Ford Motor Company, followed by Melissa PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 Kasnitz from CALPIRG, followed by Sam Leonard from General 2 Motors. 3 MR. BROWN: It'll just be a minute for the slides. 4 I'd like to present the key elements of a program 5 that the seven affected manufacturers for electric vehicles 6 have been able to come to a consensus on through no minor 7 miracles. 8 We offered a program that's in three phases. The 9 first phase, consisting of several elements, the first of 10 which -- the manufacturers would agree to meet the existing 11 NMOG curve, and this is no small task. I can't speak for 12 all the companies, but in our company, they have six major 13 new programs on top of all the programs that we have now at 14 about $350 million. 15 The AAMA member companies would commit to 16 continuing funding to U.S. ABC Phase II program, which is 17 about $120 million. 18 All affected manufacturers would commit to 19 continued individual electric R & D. 20 Selected manufacturers, based on their confidence 21 level, would commit to making EVs available for retail and 22 fleet sales starting in the 1998 model year with no volume 23 commitment. But we would have production capacity, 24 according to the figures that were given in confidence to 25 the Chairman, of about 15,000 units a year, most likely, but PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 not limited to, lead-acid vehicles. 2 Phase II of the program consists, again, of 3 several elements. The technology partnership program that 4 would be unique to California -- and this is key, because we 5 need a national program; we can't do this in every State 6 that chooses to be a part of this. It's just too elaborate. 7 The parts are too expensive, and it's too labor intensive. 8 It would start as early as 1998 model year. Our 9 proposal would be that it would be national in scope. We'd 10 select five to ten cities and 50 to 100 vehicles per city. 11 This would meet the stated demand or requirement of the 12 staff and some of the Board members that we continue to 13 develop advanced batteries and continue the interest in 14 electric vehicles. 15 The commitment by the seven manufacturers will be 16 divided based on their California market share. 17 The other elements of the program of Phase II -- 18 there would be flexibility for each manufacturer to 19 negotiate timing with CARB. This is key. While we've 20 agreed on these phases, we're still competitors, and we have 21 different programs and we have different timing needs. And 22 we can only justify those on an individual basis with CARB. 23 There would be an ongoing data sharing review 24 process to include battery technology, market acceptance, 25 infrastructure and incentives. It would be enforced by a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 memorandum of agreement between CARB and manufacturers and, 2 therefore, would be fully enforceable. 3 The third phase of the program is volume ramp-up. 4 The Battery Panel and most of the speakers who really 5 understand what's going on in this program, there needs to 6 be a ramp-up to high volume production. And we would commit 7 to this program if a study in the year 2000 confirms that, 8 in fact, the technology is on track and customer accepted 9 vehicles will be available. 10 The regulatory changes needed to support this are 11 suspension of the ZEV mandate during the period of the 12 partnership from 1998 to 2003; again, a commitment to meet 13 the current NMOG average. 14 The 10 percent mandate, the ZEV mandate would 15 remain in place for the 2004 model year, pending a review in 16 2000 -- the year 2000. And there would be no SIP 17 compromise. 18 The proposal we've made would be not only neutral 19 to the SIP but, if we are able to get all of the elements of 20 the program, we would be able to more than offset any 21 foregone calculated benefits that would have accrued if the 22 ZEV program had worked. 23 And, with that, I'd like to take any questions you 24 might have.e 25 CHAIRMAN DUNLAP: Supervisor Roberts, you have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 question? 2 SUPERVISOR ROBERTS: I do. If you could go back 3 to your second point? It was Phase II funding. 4 MR. BROWN: Yes. 5 SUPERVISOR ROBERTS: $120 million? 6 MR. BROWN: Yes. 7 CHAIRMAN DUNLAP: For U.S. ABC. 8 SUPERVISOR ROBERTS: For U.S. ABC. 9 MR. BROWN: Yes. 10 SUPERVISOR ROBERTS: Can you tell me a little bit, 11 how does that work? Is that part of an existing agreement 12 or is that a new agreement that you'd be entering into? 13 MR. BROWN: We have - no, it's an existing 14 agreement. The reason I highlighted it is there was some 15 concern with some of the people we talked to, with the 16 uncertainties of funding in Washington, as to whether or not 17 we would continue our commitment if DOE, who's a partner in 18 the program, were forced by Congress to withdraw their 19 funding. 20 And our commitment is to continue to -- 21 SUPERVISOR ROBERTS: Phase I was an equal 22 partnership between basically the Federal Government and the 23 manufacturers? 24 MR. BROWN: Yes, and the utility industry. 25 SUPERVISOR ROBERTS: And the utility industry? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 MR. BROWN: Yes, through our agreement. 2 SUPERVISOR ROBERTS: And the Phase II share for 3 the manufacturers was planned to be $120 million? 4 MR. BROWN: Yes. 5 SUPERVISOR ROBERTS: And even if the Federal 6 Government was not participating, then, you're saying that 7 those dollars would be there? 8 MR. BROWN: Yes, our share of the money would 9 continue to flow in. 10 SUPERVISOR ROBERTS: Is there any obligation for 11 that in the absence of Federal participation? 12 MR. BROWN: No. 13 SUPERVISOR ROBERTS: So, it's completely voluntary 14 that those dollars -- 15 MR. BROWN: Yes, sir. 16 SUPERVISOR ROBERTS: -- would be made available 17 per this agreement. 18 So, where does that money come from? Is that 19 coming from all of the manufacturers? 20 MR. BROWN: The three U.S. based companies -- 21 Ford, General Motors, and Chrysler. 22 SUPERVISOR ROBERTS: So, none of the foreign 23 companies are participating in -- 24 MR. BROWN: No. It's a U.S. venture. The U.S. 25 and U.S. ABC is United States. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 SUPERVISOR ROBERTS: And that's ready to bring 2 together the battery manufacturers for research without -- 3 without violating any of the antitrust laws; is that -- 4 MR. BROWN: Yes. And it also gives a common place 5 for the entrepreneurs that are always talked about here that 6 have a new battery, and they say they have a better battery, 7 and they're highly confident in the battery. Each of those 8 companies can come to U.S. ABC. If they supply test 9 batteries, we'll test them. We'll test them to common 10 standards so that all the batteries are rated on a common 11 scale. And there's the three major parties, so that the fox 12 isn't watching the hen house in any case. 13 You've got the U.S. DOE, the U.S. auto industry, 14 and also every -- keeping everybody on -- fortunately, the 15 experience has been that that hasn't been necessary. The 16 people who are involved are all professionals, and there 17 really hasn't been a need to chase each other around to make 18 sure you're doing your jobs. 19 SUPERVISOR ROBERTS: And the -- 20 CHAIRMAN DUNLAP: All I want to say is, Kelly, one 21 of my Board member colleagues to my left asked that the last 22 slide be put up again. I'm sorry to interrupt. 23 We didn't want to put you in the dark and surprise 24 you. 25 MR. BROWN: Yeah, I was a little confused on what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 else I might have had on that disk. I thought you might 2 have got my Christmas list, or Space Invaders, or something. 3 SUPERVISOR ROBERTS: That money, then, would be 4 available for research for the advanced batteries for 5 companies that qualify and are approved by that board? 6 MR. BROWN: Yes. And also one of the staff 7 members of the Air Resources Board serves on the Technical 8 Advisory Committee, Steve Albu from the El Monte staff. And 9 that money is available. And money has never been an object 10 and has never been a roadblock. 11 The critical path has always been getting enough 12 advanced batteries, even prototypes, to test. 13 SUPERVISOR ROBERTS: You mentioned that at least 14 Phase I was a three-part partnership? 15 MR. BROWN: Yes. 16 SUPERVISOR ROBERTS: And that, in Phase II at 17 least, there is some concern as to whether the Federal 18 Government will remain as a participant; but the third 19 partner, is there -- do you know whether you're going to be 20 there? 21 MR. BROWN: No. There's really -- on U.S. ABC, I 22 may have confused you with the three-pieces of our proposal 23 and the two phases of the U.S. ABC program. 24 Right now, Phase II is as far as the plan is to 25 go. There's nothing formal that I'm aware of that -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 SUPERVISOR ROBERTS: (Interjecting) Oh, that's. 2 No. I'm just talking about Phase II. 3 MR. BROWN: Okay. 4 SUPERVISOR ROBERTS: As I understand it right now, 5 part of your proposal is that as -- for Phase II, the 6 manufacturers will put up $120 million. 7 MR. BROWN: We would put up our share of the $120 8 million. 9 SUPERVISOR ROBERTS: Okay. That's what I'm trying 10 to pick out -- your share of the $120 million. 11 MR. BROWN: Yes. 12 SUPERVISOR ROBERTS: What is your share of the 13 $120 million? 14 MR. BROWN: I'm not sure I know that. Maybe I 15 could get back to you with it, or maybe one of the other -- 16 I don't see any volunteers to help me out here. 17 SUPERVISOR ROBERTS: I don't know if staff can 18 help us with this? We're talking about a proposal. I was 19 hoping somebody might understand what we're talking about 20 here. 21 Okay. Maybe we can come back to that later in the 22 meeting when that information is available. I'm interested 23 in what is available, what we know is going to be available 24 for continuing the research program, and it wasn't clear 25 from -- I had the impression your slide and from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 discussion that I've heard that we were talking about a 2 guarantee of $120 million. 3 That sounds like it's maybe significantly 4 different from that. 5 So, I'll come back to that later in the meeting. 6 Thank you. 7 CHAIRMAN DUNLAP: Kelly, if I may perhaps clarify 8 the point that the Phase II funding for U.S. ABC, does that 9 include -- the $120 million number, does that include the 10 match by DOE? 11 MR. BROWN: Yes. 12 CHAIRMAN DUNLAP: And do you know what that number 13 is? 14 MR. BROWN: It was the portion -- if I knew that, 15 I could supply that. 16 CHAIRMAN DUNLAP: Is it 50-50? What was Phase I? 17 Do you know what that was? 18 MR. BROWN: No. I could get back with you. 19 CHAIRMAN DUNLAP: Okay. Maybe we can get a note 20 sent up here or have them note it on the record. 21 Okay. Mr. Lagarias? 22 MR. LAGARIAS: Mr. Brown, since the regulation was 23 passed in 1990, there have been a number of review meetings. 24 But this is the first time that there's been a specific 25 proposal to -- as to how to approach the final numbers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 Can you give me a reason for the delay? 2 MR. BROWN: Delay on our part? 3 MR. LAGARIAS: In coming up with a specific 4 proposal. 5 MR. BROWN: It took a lot of people. First of 6 all, it's no small feat getting seven fiercely competitive 7 manufacturers to lay down their arms and agree on a 8 cooperative approach, especially when we didn't have a 9 common vision as to how that should be done. 10 Second, we spent a lot of time talking to battery 11 manufacturers, some of the Battery Panel, the California 12 Battery Panel, our U.S. ABC representatives, and the CARB 13 staff. 14 And the first thing we did was to listen to what 15 we heard from the Board and what we heard from the staff 16 were the key elements of what was necessary in order -- in 17 their view, in order to have a successful alternative. 18 And the only criticism we've gotten from outside 19 agencies is -- or other businesses as to what we have done 20 is they thought we went too far. They called it a 21 responsible proposal, but we actually offered too much. And 22 I feel very proud of the proposal we put together. 23 MR. LAGARIAS: Well, in addition to your 24 experience with battery operation, and considering my 25 experience this morning, I would hope you'd be looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 the tires as well. 2 (Laughter.) 3 CHAIRMAN DUNLAP: Mr. Lagarias had a flat tire. 4 MR. BROWN: It wasn't a problem with the tire. It 5 was whatever you ran over. 6 (Laughter.) 7 MR. LAGARIAS: It went out the side. 8 And do you anticipate the lead-acid battery to be 9 the battery that would go into production in quantities in 10 the years 2003 and beyond. 11 MR. BROWN: I hope not, because what we -- unless 12 they're vastly improved. What we see from lead-acid 13 batteries today, the performance isn't good enough to 14 support high volume production. 15 In fact, what we're telling you, and we have been 16 telling you, and the Battery Panel told you is they're not 17 good enough at this stage to support even a two percent 18 production in 1998. 19 MR. LAGARIAS: Thank you. 20 CHAIRMAN DUNLAP: Supervisor Vagim. 21 SUPERVISOR VAGIM: Thank you, Mr. Chairman. The 22 original mandate called it 2003 at 10 percent. Our 23 amendment stays the course on that. And I see you have 24 2004. 25 Can you reconcile your differences? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 MR. BROWN: Yes, sir. Again, our proposal is a 2 national proposal. And it comes into play in two places: 3 one, technology driven -- just looking at the Battery 4 Panel's report, if we want to have a shot at some of the 5 later arriving high-tech batteries, which are one or the 6 other, or both of the lithium batteries, the later you could 7 go the better. 8 Second, in order to offset the emissions, which we 9 don't agree with, but we've agreed to accept, for purposes 10 of this exercise, that we would offset those. It isn't our 11 fault that the batteries didn't come home. 12 That program -- the only way we'll be able to 13 conceive of doing what you ask in that regard is to support 14 it with a national program, which involves making available 15 the infamous 49-State car program that we tried desperately 16 and failed miserably in the Northeast to provide. 17 We can't provide the level of support that's in 18 this program that I just listed and do a program in many 19 other States across the country. And if this is available 20 to all the other States to be adopted -- I know it's 21 Christmas time, but we just can't afford to do that, either 22 with dollars or human resources -- the advanced technology 23 piece of this program in particular. 24 It will be tough enough to support the program 25 we've outlined in California. There's no technical need to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 do one in every other State that wants to be a part of it. 2 That's not necessary to advance the technology, and we just 3 can't support it. 4 SUPERVISOR VAGIM: So, you think one year makes 5 that much difference? 6 MR. BROWN: Yes. The program was carefully 7 crafted over years of work with the States, and EPA, and an 8 outside facilitator. And the timing comes around. And even 9 your own staff -- Mr. Cackette mentioned the last time, as 10 far as offsets, the period of time is keyed to EPA's 11 authority in 2004, when they regain authority to present new 12 standards. 13 If it's opened up before there -- one year sounds 14 petty; believe me, I'd rather be in Florida with my family 15 than be here. It's not petty. It's a difference. It's 16 close, but no cigars. It's like almost stepping on the bag. 17 You didn't step on the bag. 18 But having said all the pessimistic side, there 19 are a lot of common elements if you pay close attention to 20 our proposal and the staff proposal, and I think it would be 21 a shame to lose the rabbit over that one year. 22 And at a bare minimum, I would hope you would 23 direct the staff to work with us to try and work through 24 that one-year problem. I think it would be a shame, not 25 only for California, but for the other States who feel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 they're players in this, if we went back to the old ways of 2 the sixties over that one year. We're so close. And 3 there's hundreds of millions of dollars and the seven 4 largest manufacturers in the world hoping we can work with 5 you rather than "agin' ya." 6 And I would hope you put some value to that. 7 CHAIRMAN DUNLAP: Mr. Calhoun. 8 MR. CALHOUN: Kelly, you mentioned something about 9 the year 2004. What's the significance of that? 10 Is it EPA? What happens in the year 2004? 11 MR. BROWN: The key that set up the program 12 elements and what's called the 49-State program or the OTC 13 alternative, the time period over which we would have to 14 volunteer this program -- it's the time period in which EPA 15 is prohibited from setting tighter standards than what's on 16 the books today. And that's up through 2003. 17 And so, the whole economics, the whole workload 18 issue, and everything was structured around shifting from 19 multifaceted programs of a hodgepodge of doing California 20 here and sort of California there. The States in the 21 Northeast haven't adopted the right fuels, and doing 22 something in California, and replicating anything California 23 did in any State that wanted to do it, or negotiating 24 something different, we took that whole period of preemption 25 and crafted a program that's -- it's a house of cards -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 that fit inside that program that's something that we can 2 contain, and allows us to build a national car that doesn't 3 require, for example, California fuel. 4 So they, I think foolishly, have failed to follow 5 your lead on that point. So, we now have the California car 6 in the Northeast, and the Northeast and the Midwest are the 7 fuel areas that are least compatible with California cars. 8 So, if you break away from that whole time period, 9 you then start the patchwork of this car's a little 10 different from that car, this car's a little different from 11 that car, and then you've got a ZEV program here, and 12 somebody else says, "I have the authority for the ZEV 13 program, but I'll take an ethanol program." 14 It's trying to get back to a national program that 15 affords us the human and financial resources to work on 16 things that make sense rather than -- essentially, what it 17 does is it puts out a sign for free money. And we just 18 can't life with it. It's not a new issue. 19 And California has the opportunity now to take 20 back its leadership position that it used to have and get 21 the program back under a California program. 22 SUPERVISOR VAGIM: Thank you. 23 CHAIRMAN DUNLAP: Thank you, Mr. Brown. We'd like 24 to get copies of those slides, if that's okay -- I don't 25 know how we do that -- as quick as we can. If you have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 copies, Kelly, maybe leave them with the Board Secretary. 2 Melissa Kasnitz from CALPIRG, followed by Sam 3 Leonard, followed by Dave Hermance from Toyota. 4 Good morning. 5 MS. KASNITZ: Good morning, Mr. Chairman. I'd 6 like to thank you for your early recognition of me during 7 the course of this hearing. I hope that's -- 8 CHAIRMAN DUNLAP: You told everybody that I called 9 you up out of order. 10 (Laughter.) 11 MS. KASNITZ: I hope it's because you recognize 12 the importance of the position that I'm here to articulate 13 and the importance of the constituency that I represent. 14 CALPIRG has over 60,000 members statewide. It's 15 the oldest and largest environmental and consumer rights 16 organization in the State of California. And this is an 17 issue that's been of great concern to CALPIRG, because it 18 unites their various missions. 19 Number one, it deals with our environmental 20 concerns -- the rights that Californians have to breathe 21 clean air and purchase nonpolluting vehicles, and also the 22 consumers' rights that we care about. Because, while a lot 23 of this conversation has been phrased in terms of consumer 24 choice, we believe that abolishing the mandate would, in 25 fact, be devastating to the choices available to consumers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 in California. 2 Without an electric vehicle proposal that creates 3 a substantial number of cars with existing, enforceable 4 mechanisms to ensure their production, general consumers in 5 California won't have the opportunity to purchase 6 nonpolluting vehicles and breathe cleaner air, because 7 economies of scale will not have the opportunity to turn 8 prices down for consumers, and infrastructure to support 9 electric vehicles will not be created, and simply vehicles 10 themselves won't be available for purchase. 11 So, these are concerns that CALPIRG has, and I 12 hope that this is why you called me to testify early in the 13 hearing. 14 Of course, I hear it's because you wanted to get 15 my testimony over with quickly and get me out of the room. 16 (Laughter.) 17 MS. KASNITZ: I don't have a polished presentation 18 or slides to present, but I do have a response to various 19 concerns that have been laid out in front of me. And with 20 your patience, I'd like to go through them. 21 First of all, I'd like to start out by saying the 22 ZEV mandate that we're here to consider is not communism, 23 and it's not witchcraft. It is a technology -- 24 (Applause from a segment of the audience.) 25 MS. KASNITZ: -- forcing mechanism -- it's a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 technology forcing regulation that is having its intended 2 effect. Through the course of these hearings, it's been 3 clearly revealed that the advances that have been made in 4 battery technology would not have happened had this 5 regulation not been in place. And we are approaching the 6 stage of critical mass where the program will be 7 unstoppable. But if we pull back now, I'm afraid that that 8 critical mass will not be achieved. 9 We need to keep an enforceable mechanism on the 10 table and make sure that that production exists and the 11 consumer information is available to push us over the edge 12 and make sure that these nonpolluting cars come to bear. 13 So, while I think that this is not communism, I do 14 have to say that the process through which this proposal has 15 been put forward today has been a little less democratic 16 than I would normally like to see. Unfortunately, there has 17 been a bit of a problem in engaging the public in these 18 public hearings. I -- 19 CHAIRMAN DUNLAP: If I may? 20 MS. KASNITZ: Yes. 21 CHAIRMAN DUNLAP: The Board wouldn't take action 22 on any such proposal until the March time frame. 23 MS. KASNITZ: I certainly understand that. 24 CHAIRMAN DUNLAP: Okay. I just want you to 25 understand this isn't like a vote's going to happen today, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 and we're going to be on a course of action and, you know, 2 it's over with. I don't want -- 3 MS. KASNITZ: I certainly understand that -- 4 CHAIRMAN DUNLAP: -- to leave you -- 5 MS. KASNITZ: -- Mr. Chairman. 6 CHAIRMAN DUNLAP: Another point: I take very 7 seriously the whole public participation process. And 8 there's been an awful lot of process. If you heard my 9 opening comments, I mentioned forums and fact-finding 10 efforts that we've been engaged with. 11 So, you're on tender territory there with me. And 12 I just wanted to educate you on those points. 13 (Thereupon, Board member Lynne Edgerton 14 arrived to take her place with the Board.) 15 MS. KASNITZ: I will try. However, it is the case 16 that a lot of decisions, in particular the investment 17 decisions, by small businesses, the innovative businesses 18 that have been involved in the EV industry are going to be 19 less patient than you might hope in wanting to sort this all 20 out through the public process. 21 They're going to look at the proposal that's on 22 the table and make their decisions based on whether they 23 think it's an intelligent strategy to continue to stay 24 involved on whatever the final outcome may be. The 25 uncertainty that's been generated in the investment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 community already is a concern, and I think it will continue 2 to be a concern that, unfortunately, I don't believe today's 3 process will really alleviate. 4 As for the proposal itself, I understand that 5 there's an extended commentary period coming up; but, in 6 fact, I hadn't seen it until just before the hearing started 7 this morning. I didn't have the opportunity to go through 8 it in great detail, but I would like to raise several 9 questions that are visible from the face of the proposal 10 itself. 11 These are cursory comments, since you understand 12 that comments of greater depth will be submitted during the 13 course of the process. 14 But just looking at the proposal, as it exists 15 here, I have to ask, number one, what are the cleaner cars 16 that would bring the State into compliance with the 17 emissions reduction that's bandied about? 18 Does this mean that there's going too be increased 19 production of cars that meet the LEV/ULEV standards, or what 20 sort of cleaner cars are there that will make sure that 21 emissions reductions take place? 22 I appreciate the stated concern for making sure 23 that the SIP is enforced. But, unfortunately, I really just 24 don't see a mechanism articulated to ensure that that takes 25 place. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 I'd be happy to have one presented, but it just 2 wasn't included in the one-page summary. But at this point, 3 I don't see it. 4 Also, what's the enforcement? I understand that 5 there's a memorandum of understanding, but I actually don't 6 see again how that memorandum of understanding -- or 7 memorandum of agreement, excuse me -- would be enforced. 8 What's the trigger if there's no compliance? 9 Who decides to pull that trigger? When? How? Is 10 it public? Is it private? Does it take place in the 11 courts? 12 I hope that you have answers to these questions, 13 and I would appreciate it if you do, but they're not 14 apparent on the face of the proposal. 15 Also, what numbers are we talking? We have 16 uncertainty on the page, in that a production capacity is 17 stated, 5,000 EVs in '96, '97, and 14,000 in '98, and 18 subsequent years. But the actual volume that seems to have 19 a commitment is only 750 vehicles in 1998, and then 1500 in 20 subsequent years. 21 So, are the automakers, who are so concerned with 22 their profits and losses, saying that they want to create 23 enormous volumes of excess capacity that they're then not 24 going to use? 25 Maybe there's a good explanation. It's not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 clearly available. 2 Moving down the page, there's a point that says 3 that vehicles manufacturers supporting media, publicity, and 4 legislative initiatives against the program would be 5 converted into support for the program. I'm glad to see 6 acknowledgments of the concerted efforts that have been made 7 against the program by these industries. 8 As I'm sure you're aware, we tried to highlight 9 that in the report that CALPIRG released last week detailing 10 $24 million of documented spending by the industries trying 11 to subvert this mandate. 12 But, to be honest, I don't know how you could 13 genuinely ensure that it would be converted to support. Is 14 there going to be a committee that ensures that? I'd like 15 to sit on it, if a committee is created, to make sure that 16 that's how it's done. 17 And finally, the last obvious question that I see 18 is the ongoing review. There's going to be a committee for 19 ongoing review. Again, who's going to serve on that 20 committee? What enforcement powers will that committee 21 have? 22 I do hope all of these questions have answers. I 23 just know we raise the questions based on the material that 24 I have here today. 25 So, that is my immediate concerns (sic) about what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 we have on the table, and I'd like to make sure again that 2 what comes out of this picture is an enforceable agreement 3 that has a commitment to mass production; that consumers 4 have access to electric cars, not some test program with 5 very limited access -- State-purchased cars -- and that a 6 sudden jump up to 10 percent in 2003 or 2004, at which time 7 it seems quite plausible that the industries will come back 8 and say, "We can't jump from these test programs that we've 9 been producing so far to 10 percent all at once. You need 10 to slow it down yet again." 11 These are the concerns that I have and that the 12 constituency I represent share. And I understand, Mr. 13 Chairman, that you and the Board are under intensely 14 competing pressures at this time to try to do the right 15 thing, and make sure that the implementation plan is met, 16 and that Californians do get clean air to breathe. 17 I'm certain that you have the desire to maintain 18 the traditional independence of the Air Resources Board. 19 But every indication that I've also received is that you are 20 under pressure from the Governor's Office. I understand 21 that you're concerned about these statements that have been 22 around. But a lot of pressure has been out there, and the 23 Governor's Office appears to be the point where it's 24 originating. 25 And I do hope that you, in fact, sustain your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 independence and do not cave in to the whims of the 2 Governor's Office. But it is a concern that has been raised 3 in the community. 4 But I understand, of course, that there are 5 competing concerns that I'm trying to articulate now, and I 6 understand the volumes of letters and phone calls that have 7 flooded into your office and the Governor's Office stating 8 similar concerns to what I've raised -- that Californians 9 want clean air and electric cars. 10 So, the public seems to be lined up on the side of 11 clean air. Certainly there are many businesses that are 12 lined up on the side of both clean air and this EV mandate. 13 These are the most innovative, technologically advanced, 14 high-tech industries in California that this Administration, 15 and indeed any Administration, wants the most to support. 16 These are companies that have relied on the 17 regulatory bargain that was created by this mandate in 1990, 18 guaranteeing a market for their products if they make 19 components or if they make cars, and guaranteeing an 20 opportunity to break into a market that has very high entry 21 costs. It's very difficult for an independent 22 manufacturers, as everyone knows, too break into the 23 personal transportation industry. 24 Capital costs are high, consumer confidence needs 25 to be gained, and this mandate really provides a mechanism PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 to break through those entry hurdles for electric vehicles. 2 And a lot of the innovative businesses in California have 3 depended on it to make their decisions and to move forward 4 with this technology, and these are the companies that are 5 going to lose by backing down from an enforceable mechanism 6 for producing electric cars. 7 So, basically, what I'd like to make sure is that 8 everyone's intention, as they're considering these various 9 proposals, are the ideas of who wins and who loses. 10 The only clear winners from this proposal or any 11 proposal that backs away from the mandate that fails to 12 produce car considerable number of clean cars in California 13 are those with a vested interest who continue to produce the 14 automobiles that now create much of the pollution that we 15 breathe. 16 And that, of course, is the auto industry and the 17 oil companies that provide the fuel and stand to lose their 18 share of the market if electric cars indeed are successful. 19 These are the clear winners. The losers are 20 people who want to breathe clean air, the businesses that 21 want to rely on the regulatory bargain, and the small 22 businesses that want to enter this new field and provide the 23 future California technology. 24 I urge you to consider these factors, not to give 25 in to the pressure that's coming from the auto companies, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 from the oil companies, and from their allies -- the 2 Governor's Office -- and maintain your independence, and 3 maintain this organization's traditional support for 4 innovative means to help clear the air in California. 5 Thank you very much. I'll take any questions. 6 CHAIRMAN DUNLAP: Have you read the Battery 7 Panel's audit findings? 8 MS. KASNITZ: I'm familiar with them to some 9 extent. I don't have a strong technological background. 10 CHAIRMAN DUNLAP: There were certain findings that 11 they had relative to battery technology, for example, that 12 lend themselves to supporting a change in the mandate as 13 it's certainly structured. 14 Does CALPIRG support any change in the mandate at 15 all? 16 MS. KASNITZ: Certainly, we're willing to look at 17 changes, specifically in some numbers, according to what the 18 science dictates. 19 My understanding of the Battery Panel's conclusion 20 is that they, in fact, believe that viable technology does 21 exist today. 22 Again, my understanding is that lead-acid 23 technology would be sufficient to meet the majority of needs 24 of many Californians. 25 And that's what the Battery Panel concluded. It's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 only through the constant repetition by the oil companies 2 and the auto industries that this lie has come to be 3 believed as fact -- that lead-acid simply won't cut it. My 4 understanding of the Battery Panel's conclusion is that 5 lead-acid exists today and is viable, and that even better 6 batteries are around the corner. 7 And for those reasons, among others, CALPIRG 8 strongly supports keeping the form of the mandate in place, 9 even if some precise figures are adjusted. 10 CHAIRMAN DUNLAP: Any questions? Okay. Thank you 11 very much. 12 MS. KASNITZ: Thank you very much. 13 (Applause.) 14 CHAIRMAN DUNLAP: Sam Leonard, General Motors; 15 Dave Hermance, Toyota, and then Tom Carmichael of the 16 Coalition for Clean Air. 17 MR. LEONARD: Mr. Chairman, Board members, excuse 18 me if I stumble a little bit, because I do not have a 19 prepared text today. 20 My first question -- I reflect back on the 21 previous speaker, and I got to ask myself, does she think it 22 was communism if the State of California ordered her to sell 23 her house at half the cost? Because that's the effect of a 24 mandate with today's technology and today's cost process. 25 And speaking of process, as far as public process PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 goes, and how many public hearings and how much public input 2 there's been on this process, I'd be glad to give her my 3 airline bills for the past year for all the public hearings 4 I've attended. 5 Secondly, I'd like to endorse Kelly's 6 presentation. It was a very fair presentation of the auto 7 industry proposal. We worked hard to come together as a 8 group to put that proposal together. 9 Jack Lagarias, I think, asked why we didn't come 10 together earlier. Kelly gave a pretty good answer to that. 11 But the biggest problem getting together earlier was the 12 lack of perception that the Board was ready to change with 13 the mandate still years off. 14 It's only as the mandate approaches and the timing 15 gets close that changes get made. We know that from 16 history. You know that from being on the Board. And that's 17 why the effort necessary to get a counterproposal together 18 did not take place until now. 19 Finally, as -- not finally, but as I testified at 20 least twice in the last month, we support the concept of the 21 Proposal B as they presented last week. We support the 22 concept of the proposal presented by the staff today. We 23 continue to have concerns and differences with the staff, 24 primarily over the end model year of the suspension. 25 We would like the Board to direct the staff to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 continue to work with us and try to come to some reasonable 2 resolution of these issues. We think that's a possibility 3 that's very strong over the next three months, and we commit 4 to working with the staff and the Board to reach that 5 resolution of that issue and the MOA issues that are bound 6 to come forth. 7 We think, and General Motors specifically thinks, 8 that electric vehicle can be made a success with the right 9 launch, the right timing. The CARB mandate situation is not 10 that. We think the concept presented today as the auto 11 industry proposal presents the best chance of the success of 12 electric vehicles. And contrary to the previous speaker, we 13 think it is a win-win-win situation for the public, the 14 manufacturers, and society as a whole. 15 And finally, I would add at the end of my 16 presentation that I do have the figures and what I believe 17 are the figures on U.S. ABC Phase II funding. 18 My understanding is that the total funding for 19 U.S. ABC Phase II is $148 million, and the domestic auto 20 industry share of that is $35 million. 21 And I'll take any questions you may have. 22 MR. PARNELL: Yes. It's been asked of other 23 speakers, but I'd like to ask you as well. The proposal 24 that the staff made maintains the mandate in 2003, the 10 25 percent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 Your proposal suggests 2004. And I heard the 2 rhetoric, but I still am not able to cut to the bottom line. 3 It seems to me that we're very, very close. And my agenda 4 in all of this is to do the right thing. And I hear a lot 5 of speakers talk about a lot of things. 6 And our concern is air. And it seems to me that I 7 want to pursue whatever course of action is ultimately taken 8 with clean air in mind. 9 It seems to me that the staff's proposal is a very 10 reasonable one that maintains the mandate of 2003, 11 particularly when it says we're going to continue to do what 12 we've done historically and look at technology, make 13 decisions that are pertinent as information becomes 14 available. 15 And for some reason, I still am not clear as to 16 why your proposal insists on the moving of one year. It 17 seems to be a fine point to me. But to you, obviously, it's 18 larger than that. Help me. 19 MR. LEONARD: It's a very serious point to us, and 20 I understand your confusion. It is a difficult issue to 21 understand. 22 The first and most forcing function is the 23 rollback from 2000 to 2003 give us that much less confidence 24 that there's going to be a battery available in that model 25 year to meet the 10 percent mandate, to be able to put a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 vehicle on the market that we can meet a 10 percent mandate 2 in. 3 That's the first one. That's the overriding one. 4 MR. PARNELL: Okay. But let me just dialogue with 5 you as we go along -- 6 MR. LEONARD: Okay. 7 MR. PARNELL: -- if I can. It seems to me that if 8 we are committed to then a review in a timely way that 9 suggests the technology's not there, then that should 10 relieve you somewhat. 11 MR. LEONARD: Somewhat, but not totally, and I'll 12 tell you why. Because under the way things are set up 13 today, we have got to make a decision in order to make up 14 the emissions, as we promised under this program -- and our 15 proposal would make up the air emissions for a delay through 16 2003. So, it is not an air quality question at this time. 17 You do make up the emissions under our proposal. 18 But, in order to do that, we have to sign up for 19 what is called the 49-State program, which is to provide 20 cleaner cars across this country. And we have to sign up 21 for it under EPA rules somewhere in the February, March, 22 April, May time frame. We have to make that decision. 23 The thing that has held us up on that is the 24 insistence on New York and Massachusetts on retaining the 25 ZEV mandates in their States. The danger we risk with going PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 out and signing up for that 49-State program -- and the 2 duration of that program is through 2003, all the way 3 through -- is we would end with both that program and a ZEV 4 mandate in New York and Massachusetts in 2003. 5 And you say, that's not a danger, because 6 California's going to look at it and California, if the 7 mandate is not adequate and not achievable in 2003, we'll 8 move it to 2004 during the 2000 hearing. 9 Well, what is achievable as the 10 percent in 10 California -- on dry, flat ground with California climate -- 11 clearly needs more technology to reach that same degree of 12 sales appeal in New York and Massachusetts, where such a 13 vehicle has got to operate in cold, severe weather with snow 14 and slush on the ground, and regardless of what you do with 15 the battery -- and even if you have a battery that's immune 16 to the cold weather itself, the range of the vehicle is 17 significantly diminished by the operating conditions of the 18 climate. 19 So, even though a ten percent might be marginally 20 achievable in California in 2003, does not mean it's going 21 to be achievable in New York and Massachusetts in that same 22 time frame. 23 MR. PARNELL: Thank you very much. 24 CHAIRMAN DUNLAP: Supervisor Roberts. 25 SUPERVISOR ROBERTS: If I could just pursue that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 You know, what you seem to be telling us is that we need to 2 have some concern about New York and Massachusetts. I'm 3 having trouble keeping up with what's going on in 4 California, and I'm not sure that that's our concern. 5 MR. LEONARD: My greatest concern, Supervisor 6 Roberts, is it's the concern for New York and Massachusetts 7 that drove us back from the 2004 proposal, B, to the 2003 in 8 today's staff proposal. 9 SUPERVISOR ROBERTS: Say that again, because it's 10 not registering. 11 MR. LEONARD: I'm sorry. My biggest concern is 12 that it is -- the Administration's and staff's concern, and 13 the concerns expressed by Massachusetts and New York that 14 have moved us from the 2004 model year that was in Proposal 15 B to the 2003 model year that are in today's proposal (sic). 16 SUPERVISOR ROBERTS: Well, I understand that's 17 your concern, but -- 18 MR. LEONARD: To preserve their right. 19 SUPERVISOR ROBERTS: I'm not sure that 20 Massachusetts and New York rights are really important in 21 the discussion here. That's why I'm having trouble fitting 22 that in. 23 MR. LEONARD: I concur. They shouldn't be. 24 SUPERVISOR ROBERTS: That seems to be the basis 25 for your argument from going from 2003 to 2004. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 MR. LEONARD: The basis of my argument is you put 2 me in an untenable situation in New York and Massachusetts 3 when you tried to commit me from -- move me from 2004 model 4 year to the 2003 model year. And that has to be a concern. 5 SUPERVISOR ROBERTS: Today, as things exist, 6 you're at the 2003 model year. 7 CHAIRMAN DUNLAP: Current mandate. 8 MR. LEONARD: Yes. Or the 1998 model year today. 9 SUPERVISOR ROBERTS: It seems like your argument 10 should be with New York and Massachusetts because of the 11 different climatology and other -- 12 MR. LEONARD: Yes, and -- 13 SUPERVISOR ROBERTS: -- factors, and not with this 14 Board. 15 MR. LEONARD: -- and despite reports by State 16 agencies in both States that the -- the battery technology 17 is not there, those States, there has been no action to do 18 anything about the mandate in those States. No receptivity. 19 SUPERVISOR ROBERTS: But you're coming here and 20 you're saying, "You guys, we're uncomfortable with what 21 you're doing, because you know that New York and 22 Massachusetts are following your lead, and they shouldn't 23 be." 24 Your argument should be with New York and 25 Massachusetts, not with this Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 MR. LEONARD: I'm sorry. It's this Board that 2 puts me in that position. I have got to make a business 3 decision. I have got to make a business decision on what 4 risk I can accept. That's how I can get to a 2004 model 5 year package. 6 When I go below the 2004 model year package, the 7 overall business risk becomes too great to accept. 8 I'm sorry if California and New -- or excuse me -- 9 New York and Massachusetts are a part of that calculation, 10 but as a company that operates throughout the U.S., I have 11 to be recognizing of that. 12 CHAIRMAN DUNLAP: Mr. Lagarias. 13 MR. LAGARIAS: Mr. Leonard, the 98-99 time period 14 is primarily for demonstration purposes to see how the cars 15 operate, who uses them, how they will use them, and where 16 they will go. 17 The 2004 date calls for -- you recommend a 10 18 percent production level in 2004. 19 MR. LEONARD: We're willing to accept it. We 20 don't recommend it. 21 MR. LAGARIAS: What type of -- it's very difficult 22 to ramp up from a demonstration size to a 10 percent 23 production number without getting substantial cars on the 24 road. 25 Can you give me any idea of how many ZEVs might be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 produced in the year 2003 if a 10 percent quota was set for 2 2004? 3 MR. LEONARD: Mr. Lagarias, I cannot give you a 4 set number, because I don't know whether the battery 5 technology development curve -- and it takes invention of 6 battery (sic) -- is going to be a straight-line development 7 curve, i.e. a nice slope on it, whether it's going to start 8 low and go exponential into high at the end, or it's going 9 to start very high, get quick development, and flatten off. 10 Those three scenarios, which are all very 11 potential scenarios when you're talking invention, any one 12 of the three gives you totally different projections for 13 what your sales will be in the 2003 model year or the 2002 14 model year. 15 And I can't predict today which one of those three 16 scenarios the battery will be developed on, when the battery 17 breakthrough will come and when the cost reductions will 18 come to make it competitive. 19 MR. LAGARIAS: You're saying somewhere between 2 20 percent and 8 percent? 21 MR. LEONARD: I wouldn't -- if it's going to be -- 22 if the 10 percent mandate is going to be a success, yeah, 23 there should be something in excess of 2 percent sales out 24 there in that time frame. 25 But I can't -- I can't sit here today and sign up PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 for that, because I don't know how that battery technology 2 curve is going to work. 3 MR. LAGARIAS: Returning to Supervisor Robert's 4 inquiry, isn't the Northeast clean car program mandated by 5 the Federal Clean Air Act? 6 MR. LEONARD: The California program -- 7 MR. LAGARIAS: The Federal Clean Air Act says that 8 the Northeast States can opt into the California program. 9 MR. LEONARD: Yes, it does. 10 MR. LAGARIAS: Well, isn't that where you should 11 be addressing your issue, with them? 12 MR. LEONARD: We've been addressing them for the 13 last two years, sir. 14 MR. LAGARIAS: Have they been listening? 15 MR. LEONARD: The situation we have out there is 16 nine States voted against four others to force the 13, as a 17 group, to impose California standards across the 13 States. 18 We have proposed, and EPA's accepted. that the 19 49-State alternative that we've put together would provide 20 equivalent emission reductions in those States, including 21 States that would have otherwise adopted the ZEV mandates. 22 We are in a situation where two States -- New York 23 and Massachusetts -- refused -- excuse me. Let me back up 24 just a minute. 25 The way we'd be able to fund that 49-State program PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 and would be able to have the resources to apply for it does 2 not have to deal with 13 different jurisdictions with 3 different interpretations of the California standards, 4 different enforcement of the California standards, different 5 fuels than California for California vehicles, and instead 6 do a 49-State program. The EPA has found it equivalent. 7 The situation we have, in order to fund that, is 8 we can't afford to also do ZEVs in those areas, especially 9 in terms of the cold climate. 10 We have two States -- New York and Massachusetts - 11 who refuse to change the 49-State program for their ZEV 12 mandates in that time frame. That's the stalemate we're at. 13 And we've been at that stalemate for over a year. 14 MR. LAGARIAS: Thank you. 15 MR. LEONARD: And I'm sorry that those States do 16 not have the experience and the expertise that resides in 17 this Board and this staff to bring those negotiations to a 18 successful conclusion. 19 MR. LAGARIAS: Thank you. 20 CHAIRMAN DUNLAP: Ms. Edgerton, then Mr. Calhoun. 21 MS. EDGERTON: Mr. Leonard, I apologize -- and 22 note to the Board, I apologize for being late. My plane was 23 late. 24 If I understood correctly, 2004 is not on the 25 table anymore; it's 2003 anyway. Did I miss something? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 MR. LEONARD: 2004 is on the table as the industry 2 proposal. 3 MS. EDGERTON: As what? 4 MR. LEONARD: As the industry proposal, Ms. 5 Edgerton. 2003 is on the table as the staff proposal. I 6 didn't know that I was prohibited from speaking up for the 7 industry proposal and having some concerns about the staff 8 proposal. 9 MS. EDGERTON: Oh, of course, you're not. I'm 10 just trying to understand. I want to be sure that I 11 understand what we're discussing. So, you are saying, then, 12 that you still wish to see the staff's proposal -- you want 13 to see the 2003 moved to 2004. 14 MR. LEONARD: Clearly. 15 MS. EDGERTON: Well, my difficulty with that, sir, 16 is that I am not prepared to second guess Massachusetts and 17 New York, and say that they are -- and the whole Ozone 18 Transport Commission. 19 And you're asking us to say that they're all wrong 20 about what would work in their States with their 21 temperatures. And that's not our expertise. Our expertise 22 is California. 23 MR. LEONARD: No. I'm not asking you to second 24 guess New York and Massachusetts, and I'm not asking you to 25 second guess what the industry's going to accept as an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 acceptable business risk. 2 I'm just informing you what is an acceptable 3 business risk for the industry and what is not. And with 4 Massachusetts and New York retaining the current -- the ZEV 5 mandate, it comes very close to being an unacceptable 6 business risk to sign up for the 49-State program. And I 7 have not identified any other means by which I can make up 8 these emissions. 9 That's all I'm telling the Board. That's the 10 business situation that I am in. 11 MS. EDGERTON: Thank you. 12 CHAIRMAN DUNLAP: Mr. Calhoun. 13 MR. CALHOUN: Mr. Leonard, Mr. Parnell pointed out 14 that the major difference between the staff's proposal and 15 the industry's proposal is one year. 16 MR. LEONARD: To one year. 17 MR. CALHOUN: And a lot of work has been done in 18 the last few months, few weeks, few days, I guess, in order 19 to -- 20 MR. LEONARD: Well, over the last ten years, or 21 five years in order to arrive at that position. 22 MR. CALHOUN: Mr. Brown mentioned the fact that 23 this whole thing is sort of key to the year 2004, and 24 certain business decisions have to be made, and you sort off 25 reiterated the fact that these decisions have to be made. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 And I can appreciate that. 2 I guess my question to you is what impact would 3 having a review in the year 2000, or some subsequent review 4 that the staff would propose, what impact would that have on 5 the business decision that you have to make? 6 MR. LEONARD: The review in the year 2000 is a 7 benefit to us and reduces, to some extent, that risk. But 8 we still have the risk that what is feasible in California 9 in 2003 is not -- may not be feasible in the climates of New 10 York and Massachusetts in that same model year. 11 That is a risk that we have got to accept upfront. 12 We will have to evaluate that risk, and we will have to make 13 our decision based on that risk. 14 MR. CALHOUN: So, you don't know at this 15 particular time. It's a risk. 16 MR. LEONARD: It's a risk and it's got to be 17 evaluated and a judgment has to be made based on the total 18 package, when we get all the details filled in, and a better 19 assessment of that risk, we will have to make that decision. 20 MR. CALHOUN: Thank you. 21 CHAIRMAN DUNLAP: Supervisor Vagim. 22 SUPERVISOR VAGIM: thank you. It's all in the one 23 year? 24 MR. LEONARD: It's all in the one year. 25 SUPERVISOR VAGIM: The 2000 review being out PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 there, your issues are the environmental additional 2 restraints of New York and Massachusetts that you don't have 3 in California as far as the climate and that type of thing. 4 MR. LEONARD: Right. 5 SUPERVISOR VAGIM: If the demonstration project, 6 the way it's being proposed by staff, goes ahead in 7 California, won't you have more empirical knowledge that 8 Massachusetts and New York will be able to be -- or at least 9 enlightened, from your point of view, that maybe they have 10 some other issues? Wouldn't that be empirically there? 11 MR. LEONARD: Clearly the situation, Supervisor 12 Vagim, is the five year delay is a better situation than we 13 have today. The question has to be that, with us having to 14 make the business decision in the next first quarter of 15 1996, as to whether to sign up for the 49-State program, 16 whether those risks are low enough that we can do it. 17 And at this -- I am not prepared to say at this 18 time that we can do that. We've got to do a complete 19 analysis once we have the total detailed package, including 20 the details of the MOA, in front of us to make that 21 decision. 22 SUPERVISOR VAGIM: But you really don't know what 23 the 49-State car's going to look like; is that right? 24 MR. LEONARD: I'm fairly certain what the 49-State 25 car's going to look like. The notice of the proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 rulemaking is out. There's a few details to be ironed out. 2 We expect the final rule out of EPA within the next -- I 3 expected it by now as a matter of fact -- which describes 4 what the 49-State car's going to be. 5 SUPERVISOR VAGIM: Will that have its own NMOG 6 curve? 7 MR. LEONARD: It will basically be -- the 49-State 8 car will be an equivalent of a California LEV, with some 9 modifications that come from differences in the federal 10 rules and California rules, but essentially a .075 tailpipe. 11 SUPERVISOR VAGIM: And there's no discussion on 12 the zero-emission for the 49-State car program? 13 MR. LEONARD: Not in the 49-State program, no, 14 sir. 15 CHAIRMAN DUNLAP: Supervisor Roberts, then Ms. 16 Edgerton. 17 Doug, did I cut you off? 18 SUPERVISOR VAGIM: No, that's fine. 19 SUPERVISOR ROBERTS: Thank you, Mr. Chairman. I 20 don't want to -- I don't want to get wrapped up in this one 21 year, like that's a part of the program. And I want to 22 return to something that I had asked about earlier. 23 When Mr. Brown was up here, he spoke of a $120 24 million program. And when you started off, I think you -- 25 MR. LEONARD: (Interjecting) It's a hundred -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 the latest information I have is 148. 2 SUPERVISOR ROBERTS: Okay. So, it's maybe a $148 3 million program and not -- 4 MR. LEONARD: Right. 5 SUPERVISOR ROBERTS: -- 120 million, which is 6 what he showed us in the slides. 7 The existing Phase I program ran in excess $260 8 million. 9 MR. LEONARD: That sounds right, but I don't have 10 the figures. 11 SUPERVISOR ROBERTS: I understand the 12 manufacturers picked up somewhere between 20 and 25 percent 13 of that program. 14 MR. LEONARD: I believe that's correct. 15 SUPERVISOR ROBERTS: DOE was about 50 percent of 16 that. 17 MR. LEONARD: Sounds close. 18 SUPERVISOR ROBERTS: So, as part of your proposal, 19 you're saying there is no proposal as far as DOE is 20 concerned right now. 21 MR. LEONARD: There is a Phase II proposal out 22 there. The only question -- 23 SUPERVISOR ROBERTS: (Interjecting) DOE has no 24 Phase II proposal from the manufacturers at this point in 25 time? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 MR. LEONARD: There's going to be. 2 SUPERVISOR ROBERTS: Okay. 3 MR. LEONARD: It's part of the program that we're 4 committing here to. 5 SUPERVISOR ROBERTS: And you're saying, then, 6 there will be a commitment made; that commitment will be not 7 120 million, but will be something in the $148 million 8 (sic). And you're saying that manufacturers are going to 9 pick up a similar percent as they did in Phase I, which 10 equates to about somewhere between -- I think you used -- 11 MR. LEONARD: 35. 12 SUPERVISOR ROBERTS: -- $35 million. 13 MR. LEONARD: Right. Right. There's no 14 commitment to that today. That is what we would commit to 15 under the MOA. 16 SUPERVISOR ROBERTS: So, both with respect to the 17 total dollars in the program and the your share of it, those 18 are the numbers we could rely on then? 19 MR. LEONARD: Yes. 20 SUPERVISOR ROBERTS: Okay. And if DOE wasn't part 21 of that program? 22 MR. LEONARD: DOE is part of that program. Oh, if 23 they weren't? 24 SUPERVISOR ROBERTS: What if things at the federal 25 level, which we all know -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 MR. LEONARD: We would still commit to spend the 2 $35 million. 3 SUPERVISOR ROBERTS: Your percentage of that 4 proposal? 5 MR. LEONARD: Right, in Phase II program. It 6 would necessarily be a scaled down program without the DOE 7 funding, but we would attempt -- we would commit our 35 8 million and attempt to solicit partners amongst the battery 9 manufacturers and utilities and continue to fund as much of 10 that program as we could. 11 SUPERVISOR ROBERTS: Okay. thank you. 12 CHAIRMAN DUNLAP: Ms. Edgerton. 13 MS. EDGERTON: I don't know who on the staff has 14 been working most closely with U.S. ABC recently. 15 MR. CACKETTE: Steve Albu. 16 MS. EDGERTON: Mr. Cackette, are you the -- 17 MR. CACKETTE: Steve is. 18 MS. EDGERTON: Steve is. 19 MR. CACKETTE: Steve Albu, who's not here, is our 20 technical representative on the Technical Advisory Committee 21 of the ABC. 22 MS. EDGERTON: What I don't understand is whether 23 this proposal is -- to what degree is it an increase over 24 what was already in place over a number of years for the 25 ABC, because ABC already had a Phase I-Phase II. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 So, I'm trying to understand what we have gained. 2 MR. CACKETTE: I think ABC had a Phase I, and they 3 are now putting together Phase II, and the parties seem to 4 agree on what Phase II is, but there's not yet an 5 appropriation of the Federal Government to provide the DOE 6 50 percent match. That's going to take some time. 7 What I think we're concerned about in this 8 memorandum of understanding was to lock in the auto 9 manufacturers' share of Phase II, whether Phase II 10 ultimately comes to reality or not, so that there would be 11 some advance work on evaluating high-tech batteries at least 12 at the 25 or 30 percent share of the total planned ABC 13 package. 14 There's also still some money left over from Phase 15 I of ABC that has not been spent. So, there's some money 16 that's keeping it going in the interim. 17 MS. EDGERTON: How much is left? Do you know? 18 MR. LEONARD: I do not know. 19 MR. CACKETTE: It was something in the order -- 20 MS. EDGERTON: There's no double counting; it's 21 not rolled over? 22 MR. CACKETTE: Maybe 50 million or something in 23 that order the last time I heard. 24 MS. EDGERTON: And how long is Phase II? 25 MR. CACKETTE: '99. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 MR. LEONARD: '97 through '99. 2 MS. EDGERTON: So, that's about 10 million a year? 3 MR. LEONARD: Yes. 4 MS. EDGERTON: Does the proposed MOA -- do you 5 propose to support DOE appropriations? 6 MR. LEONARD: We've always supported DOE 7 appropriations on U.S. ABC funding. 8 MS. EDGERTON: Okay. That was not my question, 9 sir. 10 Are you committing, as part of this proposal, to 11 support the DOE funding? 12 MR. LEONARD: I have not asked that question of my 13 company, and I'm not authorized to answer it up here. I can 14 find that answer for you. 15 But all I can tell you is our past practice has 16 been to support DOE funding of U.S. ABC, yes. I do not 17 anticipate that practice changing. But can I stand here 18 today and commit to that? No, because I don't know. 19 MS. EDGERTON: I'd be really interested. 20 MR. LEONARD: We'll get back to you. 21 MS. EDGERTON: Thank you. 22 CHAIRMAN DUNLAP: Okay. 23 MR. LEONARD: And I certainly can't commit all 24 seven of us standing here today. 25 CHAIRMAN DUNLAP: Any other questions of Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 Leonard? Due to the interest in your remarks, sir, would 2 you remain close at hand if we have any further questions? 3 MR. LEONARD: Can I go out and have a cigarette 4 first? 5 CHAIRMAN DUNLAP: No. 6 (Laughter.) 7 CHAIRMAN DUNLAP: Thank you. 8 MR. LEONARD: Thank you. 9 CHAIRMAN DUNLAP: Mr. Hermance from Toyota, 10 followed by Tim Carmichael, followed by John Schutz from 11 Nissan. 12 Good afternoon. 13 MR. HERMANCE: You're right. It is afternoon. 14 Actually, I thought we were moving along faster. I thought 15 it was still morning. But good afternoon, Mr. Chairman and 16 members of the Board. 17 We have just seen this morning the revised staff 18 proposal, and I need to make some very brief comments with 19 regard to that. 20 Toyota will commit to work with staff to develop 21 and define the necessary detail to implement such a 22 proposal. 23 However, it is not clear that we will be 24 successful. The change in Proposal B from a six-year 25 suspension to a five-year suspension casts doubt on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 industry's ability to deliver NLEV and its significant air 2 benefits. Without NLEV, it is not clear that we can 3 generate the necessary air quality offsets to make this a 4 viable program. 5 Five years versus six is a minor -- provides a 6 minor air quality benefit to California in and of itself, 7 which we would offset. But it puts the overall program at 8 risk. 9 And I'll attempt to answer the same questions that 10 have been answered by the others. 11 CHAIRMAN DUNLAP: We can suspend those questions. 12 Thank you. 13 I guess one -- did you have anything to add as far 14 as what Mr. Leonard and Mr. Brown said relative to Toyota's 15 perspective on the five year versus six? You pretty much 16 said you're in concurrence; is that right? 17 MR. HERMANCE: Five years versus six won't make 18 any difference, given the successful development scenario, 19 won't make any difference in the timing with which we 20 introduce mass-produced vehicles. 21 CHAIRMAN DUNLAP: Okay. All right. Thank you. 22 MR. HERMANCE: But it will make a difference as to 23 whether we can do the NLEV. 24 CHAIRMAN DUNLAP: Okay. Mr. Carmichael, then Mr. 25 Schutz. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 I want to just to comment to the audience, we've 2 got a lot of people that want to testify. The reason I call 3 the names ahead of time is so you can queue up perhaps off 4 to the right so we can move through this quickly. 5 Okay. Mr. Carmichael, Mr. Schutz, and Mr. 6 Ridenour from Chrysler will be the next speakers. 7 Good afternoon, sir. 8 MR. CARMICHAEL: Good morning -- or good 9 afternoon. My name is Tim Carmichael. I'm the policy 10 director for the Coalition for Clean Air. 11 And I have a few brief comments. Like the 12 previous speakers have commented, we've only had a few 13 moments really to review what's before us, and anticipate 14 submitting written comments in the future. 15 But based on what we have seen, the Coalition for 16 Clean Air strongly opposes this proposal. And after some 17 comments on the process, I will identify some specifics. 18 Before you, which is being distributed right now, 19 is a draft document. It's about six weeks old. It's the 20 key program elements. It identifies virtually the same 21 program that you have before you today. It was a working 22 document, I believe, between the auto industry and the Air 23 Resources Board as it shows up at the top. 24 My point in distributing this and bringing it to 25 your attention is that its date is November 13th. Today, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 we're at December 21st. 2 In the interim, we have had a public workshop and 3 two Board hearings. At that public workshop and at the 4 Board hearings, we heard testimony from a number of people, 5 the vast majority of which supported a proposal very 6 different from this one. 7 There are no elements -- in the proposal that 8 staff brought to you today, there are no elements which 9 incorporate the recommendations of that majority from their 10 testimony at the workshop. 11 If you go through this proposal, you will see 12 they're virtual identical six weeks ago. And my point, and 13 I think it's a critical point, is that the public process 14 has been flawed. 15 The public was not listened to. Twenty-plus 16 speakers at the last workshop identified their support for 17 the existing mandate or some minor modifications similar to 18 Concept C. There's no adjustment in this proposal you see 19 before you that reflects a move towards Concept C or a 20 pulling back towards the existing mandate. 21 I think that is a huge problem, and our opinion, 22 based on that fact alone, we shouldn't proceed with this 23 proposal. We should go back and ask the staff to present 24 you with a proposal that reflects the public process, 25 reflects the testimony of the workshops, not a proposal that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 clearly -- or from my perspective, clearly ignores the 2 public process. 3 Given the fact that it is before you, on a quick 4 read, we can identify several specific problems. It was 5 said earlier that a mandate would not be required, and this 6 proposal moves away from a mandate, or suspends the mandate 7 until 2003. 8 If you -- excuse me, my notes are a little bit 9 jumbled. 10 If you look at this proposal and you look at the 11 data that was presented at the workshops, we have not seen 12 any testimony that suggests or warrants a six year or seven 13 year delay in the mandate. Not even the Battery Panel's 14 review suggests that length of delay is necessary. We would 15 ask the Board to ask staff to identify what scientific data, 16 what technological data they have that we haven't seen that 17 suggests that the six or seven year delay in the mandate is 18 necessary. 19 Now, the Board has been questioning the previous 20 speakers about, you know, 2003 versus 2004. What's wrong, 21 you know, with a -- we believe 1998 can be met. Why did we 22 jump to 2003? Why did we skip over 2000 or 2001? 23 You know, in private discussions with us, the auto 24 industry indicated that -- this is from this past summer -- 25 that they only needed a two-year suspension. Why, if the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 auto industry only needs a two-year suspension, why is CARB 2 giving them five or six? 3 And we're at a loss. We don't understand what 4 data has been presented that suggests this rollback is 5 necessary. 6 Looking at the proposal before you, what is good 7 about it for California? We can debate how severely this 8 proposal will negatively affect business in California, this 9 start-up transportation -- advanced transportation industry. 10 But there's no one arguing that this proposal is good for 11 California business. Not one person has testified to that 12 effect. 13 This proposal does not support the existing 14 industry -- the budding industry here in California. And, 15 as you've heard testimony, as we all have, over many months, 16 it's 150-plus companies and thousands of employees. 17 The second point relative to specific criticisms 18 is we are also very concerned about the enforceability of 19 this program and not clear, because there don't appear to be 20 many details on this page. Would this memorandum of 21 agreement be between CARB and a group of seven 22 manufacturers? Would there be seven memorandums of 23 agreement, one with each individual auto manufacturer? 24 Would these following volumes of 750, 1500 and 25 1500, would obviously -- they would not be evenly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 distributed between the seven or -- our perception is they 2 would not be evenly distributed between the seven auto 3 manufacturers. 4 Would each of the manufacturers know what the 5 competition is committing to? And we're skeptical of the 6 willingness of the auto industry to accept an uneven playing 7 field as far as their commitments to this program. 8 Again, our -- our strong support for the existing 9 mandate stems from the fact that it is a mandate, and the 10 fact that we're trying to regulate the auto and the oil 11 industry, the two sources of the majority of California's 12 air pollution. 13 If I could refer to a statement that Secretary 14 Strock delivered on November 14th, a few days before the 15 November Board hearing, he reminded us all why we should be 16 very wary of commitments from the auto industry when he 17 quoted Chrysler's Chairman, Robert Eden, who said, "Very 18 frankly, the auto industry would not have made all the 19 progress it has without being forced to do it." 20 In the same speech, Secretary Strock clearly 21 indicated the value of mandates when he cited recent 22 successes, including reformulated gasoline, unleaded 23 gasoline, catalytic converters, seat belts, air bags, and 24 child restraint car seats. 25 There's a paranoia about mandates. Mandates are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 required when we have two industries creating as much 2 pollution as they are creating in this State. 3 It was suggested by GM's spokesperson a few 4 moments ago that they have to evaluate what's an acceptable 5 business risk. I would submit to you that this Board needs 6 to evaluate what's an acceptable health risk. And look at 7 California and look at the impact of air pollution on 8 everyone in this State, and recognize that we need to take 9 strong steps to correct that, and not seven, or ten, or 10 fifteen years down the road. 11 The technology is there. And that is supported by 12 testimony that has come all year long. The technology is 13 there. And you know, whether it's 22,000 vehicles in 1998, 14 or some number close to that, we have not seen evidence at 15 any time that suggests that the seven auto manufacturers 16 cannot meet the existing mandate. 17 And if there is evidence presented that there 18 should be minor modifications, let's make a minor change. 19 Why leap to a suspension of this whole program till 2003, 20 and not have what we believe to be -- and have what we 21 believe to be a lack of enforceable commitments in the 22 interim. 23 A couple quick questions relative to some parts 24 that weren't clear to me on the proposal that we got. Under 25 "Features," the second point there says, "Annual production PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 capacity of 5,000 ZEVs in 96/97." 2 There's a slash between them. Does that mean the 3 auto manufacturers are going to bring 5,000 vehicles to 4 market in 1996 and 5,000 more in 1997? It's unclear, 5 because it says annual production. 6 So, if staff or someone can clarify that for us, I 7 would appreciate it. 8 I would also echo the comments of the CALPIRG 9 representative when she identified the problems with this 10 statement near the bottom. "All vehicle manufacturers 11 supporting media, publicity," -- and so on, how do we 12 require that. Are we going to ask the auto industry to 13 submit what they spent to try and undermine this program, 14 and then hold them to spend the same amount to market the 15 vehicles? 16 You know, how are we going to gauge that they've 17 been putting the same level of commitment to supporting the 18 program in the future that they put into undermining it in 19 the past? 20 Excuse me. In the interest of time, we'll submit 21 some more detailed comments in writing. 22 But for the record, clearly, the Coalition for 23 Clean Air -- and we believe from discussions earlier today 24 and in recent weeks, the majority of environmentalists in 25 this State do not understand why CARB feels the need to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 suspend this mandate for six or seven years. 2 We have been to all the workshops. We have been 3 to the Board hearings. We haven't seen scientific data or 4 technological data submitted that suggests that length of 5 delay is necessary. 6 Thank you very much. 7 CHAIRMAN DUNLAP: Thank you, Mr. Carmichael. Any 8 questions of the witness? 9 MS. EDGERTON: I'll make a comment. 10 Mr. Carmichael, I agree that the proposal does not 11 adequately protect California investments in new technology. 12 And that's a tremendous concern of mine. 13 I also might mention that I don't -- personally, I 14 would be surprised if there would be an interest in changing 15 the program in any way at all, as a regulatory matter, if we 16 did not already have an upfront agreement with all the 17 details really worked out. 18 So, this is very much still a fluid situation. 19 And finally, in response to some of the issues you 20 raised about the health of Californians, I'd say that what 21 this mandate is about -- and I've spent a lot of time on 22 this Board trying to call it a program and a rule, because I 23 think it is a rule. I think there are rules for living. I 24 think there are rules for behaving toward one another, rules 25 for operating in a civil society. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 And those rules have to change as there comes to 2 be more and more of us and there comes to be more and more 3 pollution from the activities that all of us engage in. 4 So, I think it's well to think that this is a 5 program or a mandate to one sector of our society, the 6 automobile manufacturers who are outstanding in their talent 7 and industry, to design and develop products which 8 adequately take into account our children -- the fact that 9 our children here in California are breathing air that is 10 polluted, and that we need their cooperation, and we need to 11 have those areas of our State clean up the air so that those 12 areas can prosper and our children can grow up to be strong 13 citizens. 14 We cannot, in my view, as a State, prosper without 15 significant reductions in automobile emissions. 16 Thank you. 17 MR. CARMICHAEL: If I could just respond very 18 briefly to two comments made, one relative to the fluidness 19 of this debate. I would suggest that we're very skeptical 20 of that. 21 As I pointed out at the beginning of my 22 presentation, you have before you today a proposal that was 23 drafted six or seven weeks ago. And there was a significant 24 public testimony in the interim, and none of that is 25 reflected in the proposal. None of those changes are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 reflected in the proposal that you have before you. 2 So, I question whether this is still a fluid 3 debate. 4 I also am very concerned about the fact that the 5 Board seems to have accepted the automakers' framing of this 6 debate. And it's indicated by your questions over whether 7 it should be 2003 or 2004. That means you've accepted that 8 2003 is where we're going. 9 I mean, we should be, you know, looking at 1998, 10 1999, and 2000. Why have we made this leap five to six 11 years into the future? 12 Here we are in 1995, with tremendous technology. 13 CHAIRMAN DUNLAP: Mr. Lagarias. 14 MR. LAGARIAS: The time period of 1998 to 2003 15 will be a period where substantial reductions in emissions 16 will occur from the LEV and the ULEV, from the 98 percent of 17 the clean car program that will be phasing in. 18 The ZEV program is a very minor player in that 19 time period. And the reductions that we will achieve from 20 that will be met one way or another. But most of the 21 cleaning will come from the LEVs and the ULEVs and all the 22 cars that are being phased out over that period. 23 So, you're really pounding out a very small part 24 of this overall program. And I don't know how you read the 25 battery technology assessment, but I cannot come anywhere PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 near the conclusion that you have that the batteries are 2 here now, other than the lead-acid battery. 3 MR. CARMICHAEL: Exactly. Other than the lead- 4 acid battery. Why is the Board or the staff determining 5 that lead-acid is not sufficient for a significant number? 6 The ITS study out of David determined that there-- 7 you know, on the order of -- I think it was 15 percent of 8 the market for your, quote/unquote, "families" that would 9 buy a zero-emission vehicle as their next car was there. 10 MR. LAGARIAS: And that's what we want to find out 11 by actually putting them on the road. Because when you 12 forecast what's going to happen in the future, you can come 13 up with any answer you're determined to get as evidenced by 14 the proponents and the opponents to this assessment of the 15 program. 16 CHAIRMAN DUNLAP: Thank you, Mr. Carmichael. 17 We're going to -- 18 MS. EDGERTON: Could I ask one question now? 19 CHAIRMAN DUNLAP: Sure. 20 MS. EDGERTON: Mr. Carmichael -- and this is in 21 response to Mr. Lagarias. I just want to have this straight 22 if you can clear this up. 23 If I understood you correctly, really, the main 24 thrust that I heard you saying is that you just don't think 25 it'll work, a huge ramp-up at the very last minute -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 MR. CARMICHAEL: There's no -- 2 MS. EDGERTON: -- 10 percent in -- 3 MR. CARMICHAEL: (Interjecting) There's no 4 indication on how CARB intends or the automakers intend to 5 go from 14,000 vehicles' commitment to production capacity 6 to a requirement to deliver a hundred thousand vehicles in 7 one year's time frame. 8 MS. EDGERTON: So, if I understand you right, your 9 concern is that you just don't think we're going to get it. 10 MR. CARMICHAEL: I don't think it can work. 11 MS. EDGERTON: And you'd like to see us take 12 little steps. I think Mr. Calhoun has been the advocate of 13 a stepped program, taking one step at a time. And I guess 14 your feeling is that -- if I understood you correctly, that 15 if we don't take one step at a time, then we're not going to 16 get across the river. 17 Thank you. 18 CHAIRMAN DUNLAP: Thanks, Mr. Carmichael. 19 Mr. Schutz, Mr. Ridenour. I have a note. Is Mr. 20 Patton here? Mr. Patton, I'm told, had to leave. He needed 21 to come up earlier. If Mr. Patton's here, he can be the 22 third speaker in the line. If not, Mr. Tom Austin of Sierra 23 Research. 24 Good afternoon, John. 25 MR. SCHUTZ: Good afternoon. Are we having fun? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 For the benefit of the court reporter, as it says 2 here, I'm John Schutz from Nissan R & D. 3 Nissan, in previous comments, has stated our 4 belief that in order for electric vehicles to succeed in the 5 market at anything greater than a token level, why, high 6 performance, long-life advanced batteries are required. 7 We concur with the Battery Tech Audit Panel that 8 the lithium-ion technology offers the best potential in the 9 next five to ten years. 10 Accordingly, Nissan is focusing our efforts on 11 developing those batteries for electric vehicle use. To 12 that end, Nissan has joined in preparing the proposal that 13 Kelly has described, the industry proposal. 14 With regard to that proposal, I want to stress the 15 importance of doing that as a development process and 16 dedicated to explore the full potential of the candidate 17 battery technologies for EV use. 18 That's really the mindset that we have to adopt; 19 in order to make EVs succeed, we've got to make sure we've 20 got batteries that work. 21 And so, this program has got to be treated not as 22 a numbers' game but as a development program. 23 Now, in the past weeks, a staff proposal has 24 emerged that includes many of the elements that are 25 supportive of and consistent with the development process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 thus, for the most part, Nissan can accept the elements of 2 the staff proposal. 3 However, on this critical issue of 2003 and 2004, 4 Nissan shares the concerns that have been expressed by my 5 colleagues and discussed, that that one year does make a big 6 difference, not only because of the issues of being able to 7 provide proper offsets but, from our point of view, 8 primarily from the standpoint of making sure that the 9 batteries have enough time to be developed. 10 We believe that at least three iterations of pilot 11 use of the batteries will be necessary. We're talking about 12 batteries that are going to have a thousand to 1200 cycles 13 life from 100 to 150 miles per cycle. So, these could be as 14 much as a hundred to a hundred and fifty thousand mile 15 batteries. 16 It takes a long time to run realistic tests on 17 those kind of batteries to make sure that what we're putting 18 out there for the customers is going to work and is going to 19 be satisfactory and is going to be reliable. 20 So, the testing here is no small part of the time 21 required. We are also talking about significant cost 22 reductions that need to be implemented in the batteries. 23 Those reductions are going to involve changes to the 24 batteries that are going to have to be tested adequately. 25 So, our concern, primarily, is adequate test time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 That's really the -- that's really the issue. We think the 2 batteries are good enough to please a lot of customers in 3 California, but we need time to make the batteries work. 4 So, we will continue to work closely with the 5 staff. We urge the Board to direct the staff to adjust the 6 timing as we've talked about. We think the 2003-2004 issue 7 should go with 2004. 8 We'll continue to work closely with staff on the 9 details, and I hope we can reach a satisfactory conclusion. 10 MR. LAGARIAS: Thank you, Mr. Schutz. 11 SUPERVISOR ROBERTS: Could I just ask a question? 12 It hasn't been clear to me what Nissan has done to 13 date with respect to testing. You said there's a lot of 14 time needed for testing. And we've evidence of some of the 15 other companies in their testing programs. 16 MR. SCHUTZ: Sure. 17 SUPERVISOR ROBERTS: Could you tell us a little 18 bit about what Nissan has done? 19 MR. SCHUTZ: Sure. Yeah, we've had -- well, to 20 start with, we've had about 30 years of experience with 21 lead-acid batteries. We've had programs going. We have 22 about 25 vehicles that we've sold in the past couple of 23 years to utility companies and the government in Japan, 24 which are operating on the street now with lead-acid 25 batteries. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 We've been working -- we have a couple of vehicles 2 in this country as well. We'll be delivering one to a 3 utility company next month in fact. I'm talking about lead- 4 acid. 5 SUPERVISOR ROBERTS: You're talking about two 6 cars? 7 MR. SCHUTZ: In the U.S, yes, in the U.S. 8 We have -- we have been working on the lithium-ion 9 program for three years with Sony. We have vehicles in test 10 with t hose batteries in Japan now. We have a couple of 11 vehicles actually in this country with lithium-ion batteries 12 in them that will be shown at the Los Angeles Motor Show in 13 January. 14 They will then go back to Japan for further 15 testing. But we are at the point now of having drivable 16 vehicles with full lithium-ion battery packs. 17 We expect to have another vehicle in this country 18 later this coming year, sometime midsummer, for hot weather 19 testing and cold weather testing with lithium-ion batteries. 20 That's in my project plan for this coming year. 21 We expect then to have five to ten -- or excuse 22 me, ten to twenty vehicles in 1998, in California as part of 23 its demonstration fleet with lithium-ion batteries. That's 24 our commitment for the initial year. 25 And, of course, we will proceed from there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 SUPERVISOR ROBERTS: And will our staff have 2 access to testing one of those vehicles? 3 MR. SCHUTZ: Oh, I'm sure we can work that out, 4 yes. 5 SUPERVISOR ROBERTS: Okay. 6 Mr. Boyd, did you note that? 7 MR. BOYD: So noted. 8 CHAIRMAN DUNLAP: Any other questions? Thank you. 9 Mr. Ridenour of Chrysler. then Mr. Austin. 10 MR. RIDENOUR: Good afternoon, Mr. Chairman, CARB 11 Board members. Name's Eric Ridenour. I'm the Director of 12 Environmental Energy Planning for Chrysler. This is my 13 first opportunity to present before the Board. And I want 14 to thank you for the time today. 15 I won't replicate all the points that have been 16 made earlier by my colleagues and my competitors, except for 17 just a few following brief comments. 18 The industry proposal that Kelly Brown showed you 19 before has several key elements that provides electric 20 vehicles as early as the '98 model year. It provides an 21 advanced technology partnership that gives electric vehicles 22 the very best chance for success. And because of a 23 serendipitous opportunity created by the national LEV 24 program, we will provide more clean air benefits than the 25 current program, and we think that's the win-win-win we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 talked about before. 2 The staff proposal that was presented is similar 3 to the auto industry proposal and represents what we think 4 is a solid basis to begin finalization toward an agreement. 5 However, we have one major issue with the 6 proposal, and I think you've heard it enough times that I 7 won't even go into it, but it's the 2004 versus 2003. 8 The two key repeated themes made in all the 9 workshops and all the discussions to date have focused on 10 protecting a successful EV launch and the preservation of 11 the SIP. 12 A seemingly simple adjustment made to the timing 13 for the 10 percent mandate that's been done since last 14 week's meeting places both of them at additional risk. 15 First, the key to stabilizing the SIP has been the 16 successful introduction of cleaner burning vehicles through 17 the nationwide LEV program. And to try and minimize the 18 amount of repetitive repetition (sic) here, the program's 19 now at risk. Pertaining to the availability of the ZEV 20 mandate within the period under discussion in the Northeast, 21 which the one year does, risks getting a final agreement. 22 And it's just a risk. It's not an absolute. 23 This places the success of obtaining the migration 24 benefits from the national LEV program, which are needed to 25 maintain the SIP, into the hands of States outside of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 California. And retaining the 2004 model year start for the 2 program would eliminate what we think it's a major obstacle. 3 As for the successful launch of an EV, we know 4 that advanced batteries are the key. We learned from the 5 battery audit team that those batteries may be coming, and 6 that they have a chance of making EVs a success. But no one 7 can predict with certainty when they will get here, and some 8 of the more promising technologies are further out on the 9 planning horizon. 10 John Schutz just talked about one of them. It's a 11 little bit behind some of your nickel metal hydrides. The 12 battery audit team has stated that they cannot say with 13 certainty that these advanced batteries will be there in 14 2003 or 2004, just too hard to pin down exactly when you're 15 going to have the breakthrough. What they have told us, 16 though, is that the one year will greatly increase the 17 chance of success for that program, especially not including 18 advanced technologies, which moving forward may do. 19 By moving the required start date forward, we may 20 preclude the fair chance of some of those advanced 21 technologies, which may have more promise, from getting into 22 fruition. 23 In summary, the benefits of the one year pull 24 ahead are far outweighed by the risk to the successful EV 25 launch and maintaining the stability of the SIP. We urge PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 the CARB Board to reconsider the reinstatement of the 2004 2 model year start date, which will guarantee the support of 3 the technology development partnership, the U.S. ABC Phase 4 II program, the public education. A lot of the items on the 5 list are things that we have tried to do in order to try and 6 make this program a success, and we'd like to be able to 7 continue that. 8 And, at a minimum, we'd like to make sure that 9 there's some flexibility to at least review that final date 10 before we get to the end point, which I guess now is in 11 March instead of February. 12 The current five-year suspension places the 13 national LEV program at risk and puts the success of this 14 program in California in the hands of States outside of 15 California. 16 We think you can control your own destiny on this 17 issue. We are prepared to work together in this 18 partnership. And let's the program its best chance of 19 success. 20 Thank you very much. I'll take any questions you 21 may have. 22 CHAIRMAN DUNLAP: Mr. Calhoun. 23 MR. CALHOUN: I guess I'd like to ask you the same 24 question I asked one of the other speakers. 25 MR. RIDENOUR: Uh-huh. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 MR. CALHOUN: And that is advantage, if any, of 2 reviewing this issue in the year 2000. The staff indicated 3 that they would have a subsequent review. 4 How would that impact the business decision that 5 Chrysler has to make? 6 MR. RIDENOUR: For the actual launch or just -- 7 MR. CALHOUN: The difference between 2003 and 8 2004, the going to the 10 percent. 9 MR. RIDENOUR: There's two items. One is the 10 direct business decision. Obviously, with the 2000 model 11 year review, 2003 is going to occur quicker. We're going to 12 be further down the pathway. If it's the wrong pathway and 13 it needs adjustment, there's risk to that. 14 Where we really think the biggest risk is 15 decisions are going to be made well before that to ensure 16 we're on the right track. For instance, if we are uncertain 17 because you have to wait for the review process to end to 18 know what kind of adjustments may be made or may not be 19 necessary at all. 20 You may have to make decisions ahead of time. For 21 instance, if lithium-ion that was mentioned before has some 22 hiccups, and it gets a little further delayed, which is a 23 very real possibility -- the Battery Audit Panel said from 24 2002 to 2006, is the likely time for that to come in -- and 25 you know you need to meet a program in 2003, you're going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 have to go with something else. You're going to have to 2 need the certainty. 3 That's how we got into the issue today with lead- 4 acid. We had to go with the technology we knew would be 5 there, would be cost-effective, and could be delivered. 6 So, it's the preclusion of technologies and the 7 preclusion of options we think the one year makes -- the 8 2000 review is -- is nice, because it allows you a chance to 9 make sure that we're on the right course, which you'll 10 already be on the road and will be on the direction you want 11 to be. 12 And so, I think the one year can have a very 13 serious impact, because technology -- we're waiting for a 14 breakthrough. And that breakthrough, we're going to know 15 with some amount of leadtime, but not with a lot. Because, 16 as you know, the durability and reliability data takes time 17 to develop, and failures happen. Things don't go just as 18 well as planned. 19 MR. CALHOUN: Thank you. 20 CHAIRMAN DUNLAP: Any other questions of Mr. 21 Ridenour? 22 Okay. Thank you. 23 MR. RIDENOUR: Thank you very much. 24 CHAIRMAN DUNLAP: What's the battery in that 25 computer, by the way? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 MR. RIDENOUR: I believe it's a nickel metal 2 hydride, and I've been sweating it the whole time that it's 3 go out. 4 CHAIRMAN DUNLAP: But it didn't, did it? 5 (Laughter.) 6 MR. RIDENOUR: No, there's two of them in here. 7 CHAIRMAN DUNLAP: Mr. Austin of Sierra Research, 8 followed by Peter Welch, followed by Ted Costa. 9 MR. AUSTIN: Thank you, Mr. Chairman. I've a very 10 brief statement this morning. 11 As you know, last week, I presented testimony on 12 several alternative control measures that our company had 13 developed in response to a request we got from Western 14 States Petroleum Association. 15 At the meeting last week and in subsequent 16 discussions, we've gotten several verbal comments on some of 17 these alternatives. 18 The alternatives included five different measures, 19 the two most significant of which were the 49-State low- 20 emission vehicle program that's been discussed earlier 21 today, and a change to the smog-check program that we were 22 advocating to look at underhood emissions. 23 All five measures together had a total of 79 tons 24 per day of smog precursor reductions, which contrasted with 25 the 14-ton per day estimate the staff has for the electric PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 vehicle program. 2 So, we thought they'd be an especially good deal, 3 because the cost-effectiveness ratio based on our 4 preliminary calculations is that it would be at least 90 5 percent more cost-effective, 90 percent lower cost per ton 6 removed. 7 Regarding the 49-State low-emission vehicle 8 alternative, all of the evidence we think suggests that 9 vehicles will perform -- these vehicles would perform well 10 in customer service; that the Board can be certain that 11 these would be real emission reductions. 12 The emission factors model that EPA uses to look 13 the performance of vehicles like the 49-State LEVs in 14 customer service would indicate that those vehicles would 15 end up having lower emissions if they were used in States 16 like Oregon, Arizona, and Washington, where the IM program 17 is such that -- is stringent enough that we'd actually 18 expect to see emissions in customer service being somewhat 19 lower from those vehicles than EPA would predict under the 20 current California smog-check program, or the new smog-check 21 program that's going to be implemented soon. 22 I'd also like to address my attention briefly to 23 an attachment to my written testimony. I have a one-page 24 attachment where I've extracted from the Clean Air Act 25 amendments of 1990, the actual language having to do with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 what EPA can and cannot do with the emission standards for 2 light-duty vehicles, passenger cars and light-duty trucks, 3 by 2003 or by 2004. 4 And I'm not going to read any of this language, 5 but I think, if you look at it closely, you'll have a better 6 perspective on what some of the auto companies are concerned 7 about, and you'll also have a better perspective on our view 8 as to why we think that there's less uncertainty associated 9 with this 49-State LEV program than you might have heard. 10 There is no certainty associated with EPA adopting 11 something akin to the California LEV program by 2004. They 12 have the latitude to do it under the Clean Air Act 13 amendments, as is shown here, but the past experience that 14 this Board has had with EPA helping out by cleaning up 49- 15 State cars has been less than a smashing success. 16 EPA has typically adopted less stringent standards 17 at the national than they could have, and it's not at all 18 clear to me that they are likely to adopt standards as 19 stringent as the staff is assuming for 2004. 20 I'd also like to make a very brief comment on the 21 New York and Massachusetts issue. I haven't been following 22 this issue very closely lately. But about a year ago, I was 23 involved in it. I spent several days sitting through public 24 forums of the type that the Air Resources Board has had on 25 the electric vehicle issue. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 And, quite frankly, I'm glad not to be involved in 2 it any longer. It was mind boggling what we had to listen 3 to. This is a highly political issue in the Northeast as it 4 is in California. As in California, the electric utility 5 industry is heavily involved in promoting electric vehicles. 6 What's amazing is that the power plants in the 7 Northeast are absolutely filthy compared to the California 8 power plants. I can understand California utilities saying 9 electric cars are a good idea; they operate very clean power 10 plants. While charging emissions are a factor, they're a 11 relatively small factor. 12 They're not a small factor in the Northeast. And 13 the car companies have tried to explain that to New York and 14 Massachusetts, and they don't want to hear it. The 15 symbolism associated with this issue in the Northeast is 16 incredible and even though a logical case has been made for 17 why the 49-State LEV program would be in the air quality 18 interest of the Eastern States, it's not being accepted. 19 The other big alternative that we recommended was 20 a change to the smog-check program. One objective to this 21 alternative is that it's not a program that could be 22 implemented by the auto manufacturers directly. But the 23 costs of any program that's used to offset any emissions 24 lost from suspension or rescission of the ZEV mandate are 25 going to be borne by Californians. We therefore think it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 would be in the best interest of Californians to have those 2 reductions achieved at the lowest possible cost. 3 And to the extent that less cost-effective 4 programs are imposed on the manufacturers of new vehicles, 5 Californians are not only going to pay more for the same 6 emission reductions, but the cost of new vehicles is going 7 to be further increased and fleet turnover is going to be 8 reduced, leaving older, higher-polluting cars on the road 9 for a longer period of time. And we don't think there's 10 really any equity in that. 11 We recognize that neither the 49-State vehicle 12 emissions nor underhood emissions are properly accounted for 13 in the current emissions inventory or in the SIP. That's 14 been another issue. 15 However, we think that it doesn't mean that the 16 benefits of controlling these emissions are uncertain. We 17 think it should be recognized that the SIP contains a number 18 of errors involving both underestimates and overestimates of 19 emissions occurring in various categories. 20 And the fact that we've identified some sources of 21 emissions not previously accounted for is a poor excuse for 22 discounting the benefits of controlling them. If anything, 23 these reductions are more certain than the reductions 24 estimated for EVs. The emission reductions your staff has 25 projected for EVs are not just uncertain; in our view, they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 are unrealistic. 2 The assumption that EVs sold under the mandate 3 will, on average, be used just like new gasoline-fueled 4 vehicles is something we think has clearly not been 5 demonstrated. 6 In summary, we believe there are more -- there's 7 more uncertainty associated with the emission reductions 8 assigned to the ZEV mandate than to the alternative control 9 measures we have suggested. 10 We also think it is clear that the alternatives 11 will be much less costly. 12 I'd like to make one other comment on previous -- 13 the previous discussion this morning. 14 I noted with interest the comments of Board member 15 Edgerton, who said, in addition to having more and more 16 people to deal with, we have more and more pollution to deal 17 with. 18 And if that's the perspective that some of the 19 Board members have, I can understand why there would be an 20 interest in trying to make some radical changes to the way 21 vehicles are manufactured. 22 But that's not the situation. We don't have more 23 and more pollution to deal with every year. We have less 24 and less. 25 This Board, under its current and past leadership, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 has been successful in making major progress in cleaning up 2 the air pollution problem in California. And a lot of that 3 comes from selling new cars and keeping the fleet turning 4 over, and I hope that you'll end up making a decision that 5 will continue that same progress. 6 Be happy to answer any questions. 7 CHAIRMAN DUNLAP: Thank you. Any questions? 8 Jack? I sensed a question to my left. 9 MR. LAGARIAS: Mr. Austin, when you were Chief 10 Executive Officer of this Air Resources Board, you prepared 11 estimates of emissions. How do you compare the estimates 12 that were prepared in your time compared to the emission 13 estimates that are prepared today? 14 MR. AUSTIN: How do we compare the accuracy or -- 15 MR. LAGARIAS: The accuracy. 16 MR. AUSTIN: -- the total amount? 17 Well, obviously, as time goes on, I think the 18 techniques we have for estimating emissions get better and 19 better. But when you take a look at what we thought the 20 emissions were going to be -- what we thought they were back 21 in the 1970s, and what we thought they would be in this time 22 frame, we were off by 50 percent or 100 percent, or 23 something like that. We've made a lot of progress in better 24 estimating emissions. 25 And quite often, we see we're missing emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 that are really out there. And I think we still have a lot 2 of that problem with the current emission inventory. We've 3 got better inventories now, and we still have room for 4 improvement. 5 MR. LAGARIAS: And the emission inventory model is 6 constantly being upgraded to reflect these changes. 7 MR. AUSTIN: Yes. It's been changing ever since 8 I've been involved with the program. And that goes back to 9 the early 1970s. 10 MR. LAGARIAS: Thank you. 11 CHAIRMAN DUNLAP: Mr. Calhoun. 12 MR. CALHOUN: I assume, Mr.Austin, from what you 13 said, that there's a tremendous benefit for having the 14 49-State program in the other States in terms of air quality 15 benefit. 16 MR. AUSTIN: In my view, and I have studied this 17 issue quite closely, there is a significant benefit to 18 California. There is an even larger benefit to the Eastern 19 States. 20 MR. CALHOUN: And I also heard you say that, as 21 far as the Northeast States are concerned, that the desire 22 for electric vehicles is more political than what it would 23 do for air quality, because it's fuel/oil No. 2, or whatever 24 it is, is going to be more polluting than the fuel that's 25 used here in this particular State. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 So, in terms of air quality, it isn't going to do 2 very much. 3 MR. AUSTIN: It's not just fuel/oil No. 2. In the 4 Northeast, there's a lot of coal, Northeast and the Midwest. 5 MR. CALHOUN: Which makes it even worse. 6 MR. AUSTIN: It makes it much worse. And you can 7 make a convincing case that unless there are radical changes 8 to the controls on power plants, the introduction of 9 electric vehicles, even if the public willingly buys them 10 and uses them as much as gasoline cars, will clearly cause 11 an increase in emissions. 12 MR. CALHOUN: Thank you. 13 CHAIRMAN DUNLAP: Anything else for Mr. Austin? 14 Thank you. 15 MR. AUSTIN: Thank you. 16 CHAIRMAN DUNLAP: Peter Welch, followed by Mr. 17 Costa, followed by Chuck Olson. 18 Good afternoon, Mr. Welch. 19 MR. WELCH: Mr. Chairman, members of the Board, 20 Peter Welch, with the California Motor Car Dealers 21 Association, a statewide trade association that represents 22 California's 1700 franchise new car dealers. 23 I thank you for the opportunity to be here today. 24 If I hear correctly, under your proposal, one way or 25 another, our dealer members will be selling electric cars in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 model year 1998. 2 As you may recall, we appeared before this Board 3 some two years ago. I believe it was March -- or May 13th, 4 1994, at your last biennial review. 5 At that time, we made a commitment to the Board on 6 behalf of the dealer members of our association that we 7 would be willing, more than willing to go forward and 8 market, and service, and sell electric vehicles in this 9 State. 10 However, we gave you the caveat that we couldn't 11 effectively do so without a competitive product, a 12 sustaining zero-emission vehicle infrastructure, and a 13 willing consumer market. 14 We made a determination before that last review at 15 our board of directors' level -- and, in fact, made a 16 paradigm shift in our policy on the electric vehicle 17 mandate. When it was adopted in 1990, the dealers in this 18 State were adamantly against it, primarily because they 19 thought it was an improper intrusion into their market 20 industry by a regulatory agency of the State. 21 There are a number of them that are still opposed 22 to that intrusion. However, our board has taken the 23 position that because of the bloated cost for new car 24 emission systems, which is a major contributing factor to 25 spiraling new car costs, and the fact that the long-term PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 viability of the personal transportation business -- which 2 is the business we are in -- is dependent on radical new 3 product improvements, that we were crazy to turn our back on 4 this promise of a new technology. 5 So, I was instructed to cautiously go forward and, 6 in fact, check out the market viability for electric cars 7 and prepare our dealer members for what we perceive as a 8 revolutionary change in our industry. 9 Now, during that time, I've spent a lot of time, 10 made a lot of trips. I know you all have. I've attended 11 eight out of the ten workshops. I've actually traveled 12 thousands of miles in the last year. I visited production 13 facilities, driven electric vehicles, interviewed mechanics, 14 went to EV races, talked to executives, interviewed sales 15 people about sales techniques, did a lot of things. 16 We also, as you will recall, for your March 17 marketability workshop, we commissioned J. David Power and 18 Associates to provide for us and to make an unbiased market 19 report on probabilities of the successful launch of electric 20 vehicles in model year 1998. 21 I provided copies of that report to all the Board 22 members. I hope you've had an opportunity to read it. I'm 23 sure you're inundated with all sorts of stuff to read. I 24 think it's a pretty darn good report, and I've had a large 25 number of car dealers review it. And I have interviewed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 them to see if they concur with it. And they concur a 2 hundred percent with it. 3 Now, I'm not going to go through the marketing 4 reasons why we think that saturating the market just two 5 model years from now with lead-acid electric vehicles is not 6 the way to usher in a relaunch of this electric vehicle 7 phenomenon. 8 And I use the word "relaunch" because in my -- I 9 thought I had seen just about everything after I got through 10 all the workshops, and we conduct field meetings throughout 11 the State on a year-to-year basis. And just last month, I 12 was up in Eureka, California, and to my amazement -- and 13 perhaps we could place it up on the screen -- I found that 14 one of my dealer members -- perhaps we can lower the lights 15 so you can look at this picture here. 16 One of our dealer members, Harvey Harper, Harper 17 Motors in Eureka, was standing next to his 1914 electric, 18 Detroit Electric five-passenger Brougham Model 52. Harvey 19 had been a car dealer for over 40 years. And like most car 20 dealers, he's a complete car nut. He has a collection of 55 21 classic and antique autos, but this is his favorite car, he 22 tells me, because he has memories of chasing it down the 23 road as a child, and late bought it from the original 24 owners, who were a couple of wealthy spinsters. 25 The Brougham Model 52 was one of the most popular PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 EVs of its day, because it featured five speeds, a top speed 2 of 24 miles, and a range of 50 to 85 miles per battery 3 charge. It also featured a clock, a flower vase. If you 4 look at it real close, you'll see Harvey put some cut roses 5 in the flower vase that made a nice touch in the picture. 6 It had windows that could be raised and lowered 7 with a cloth strap. The body parts and panels -- or, excuse 8 me -- the body panels and battery hoods, moldings, fenders, 9 window frames, and roof were all made of aluminum to lighten 10 its weight for increased range. 11 In 1915, the Brougham 52 retailed for $3,000 f.o.b 12 Detroit, including a guaranteed nonwash lead battery 13 containing 12 cells and 15 plates; or, for an additional 14 $880, the Brougham 52 could be shipped from Detroit with an 15 Edison battery, a 54 cell iron battery -- excuse me -- a 54 16 cell iron battery developed by Thomas Edison in 1910, which 17 gave the Brougham the 85 mile range instead of the 50 mile 18 range. 19 As I talked to the curator of Harvey's little 20 museum over there and started reading some of the 21 information he had on it, it turns out -- and my research 22 shows -- that in 1990 (sic), the year 1990, 38 percent of 23 the vehicles sold were EVs. Within a few years, they were 24 virtually extinct, because of improvements in the internal 25 combustion engine were taking place, so it made EVs PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 obsolete. 2 The cumbersome internal combustion engine crank, 3 which turned most of the women off, by the way, because it 4 was so hard to turn, was replaced with an electric starter, 5 and the rough drive of early gas-powered one cylinder cars 6 was smoothed out with the addition of more and larger 7 cylinders. 8 The Brougham pictured here again, which sold in 9 1914 for $3,000 without the super battery in it, could not 10 compete with the most popular car sold that year, which was 11 the Ford Motor Company Model T, which had a list price in 12 1914 of $490. 13 From that point until today, no EV has been able 14 to match the speed, the power, dependability, and cost- 15 effectiveness of the internal combustion engine. 16 However, spurred by this Board's ZEV regulation, 17 the odds of an EV comeback have been greatly increased. 18 However, the fact of the matter remains that -- in our 19 dealer members' opinion -- we're not yet ready for a 20 successful relaunch of the EV, primarily because of the 21 battery pack shortfalls. 22 I think that it's ironic that nearly 90 years -- 23 and this was a good reminder, as I went up there -- and I've 24 driven the Impact; I've driven five of the seven 25 manufacturers' cars now -- this car was not much unlike it, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 certainly on the range and what not. Very interesting 2 phenomenon. It was sort of like "Back to the Future." 3 Now, we concur that it is in the best interest of 4 a relaunch that we need to make radical changes to the 5 current regulation. 6 Although the current regulation has been a 7 successful driver of EV research and development, when 8 relaunch EV rubber hits the road, its success in the 9 marketplace will be determined by California consumers, not 10 State mandated production quotas. 11 For this reason, we believe and have always 12 believed that simply mandating the production of this car 13 is not going to guarantee its market success. I think you 14 know that. I think everybody in this room understands that. 15 The key to this regulation so far -- and I think 16 Board member Edgerton has properly identified it as a 17 regulation -- is it's been a driver effect. It's the 18 proverbial gun to the head. And it has worked very 19 successful so far. And only time will tell whether it will 20 be a continued successful driver of it. 21 The fact of the matter is, California's new car 22 dealers cannot guarantee a successful relaunch of EVs. 23 Likewise, the auto manufacturers cannot guarantee a 24 successful relaunch. 25 But more importantly, the automakers, because they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 are -- whether we like it or not -- in charge of the 2 production, the design, the chassis control, the drive 3 train, what battery supplier they're going to use, their 4 distribution of it, their marketing of it, their franchising 5 of it, their budgeting for it, and, yes, what price they set 6 for it. 7 They're in a position, whether you like it or not, 8 that perhaps doom a successful relaunch. I don't think that 9 they will intentionally do that. In fact, just as our board 10 of directors made a paradigm shift some two years ago, and 11 decided to back off and pave the way for hopefully a 12 successful relaunch, I have seen -- although it may not have 13 been detectable to some of the people in the room here -- a 14 paradigm shift in the manufacturers. 15 And that paradigm shift, I really think, has 16 really shone its light over the last several weeks, over the 17 last several months, and maybe the last year or two. They 18 have spent millions, hundreds of millions of dollars in 19 development of this product. And I know what they may not 20 admit publicly, that they have a sneaking suspicion that the 21 relaunch of this product may just, in fact, be successful. 22 And they are very concerned, as we are -- as our livelihoods 23 are tied up in it -- that it has to be done correctly. 24 Batteries are the name of the game. They always 25 have been; they always will. We're not going to have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 breakthrough, a marketing breakthrough otherwise until we 2 get something that's going to stimulate the consuming 3 public's desire. 4 Again, not to rehash all of the marketability 5 workshops -- from a simple marketing perspective on it, I 6 have come to learn that the range is perhaps not the biggest 7 problem. When we get a battery that reliably goes a hundred 8 miles or more, there is going to be a sustainable market for 9 it. It's all cost. 10 It's always been cost, and it always will be cost. 11 Just as Harvey's Brougham 52 cost 3,000 and the Model T was 12 $490, when you put that in front of consumers in the closing 13 room of a dealership, their decision is going to be real 14 simple, and I hate to reduce it down to that. I hate to 15 stand up here and say the "emperor doesn't have any 16 clothes," but that's really what it comes down to when 17 you're talking about selling electric cars. 18 Now, just as the car dealers -- and I think the 19 manufacturers -- have made a paradigm shift in their policy 20 and attitude towards this, let's face it; it's time that the 21 Board, and the Board staff, and the rest of the public make 22 a paradigm shift in their review of this. 23 And what we're going to suggest here is probably 24 just what your staff has proposed. It's time to forge 25 partnerships here. The odds of a successful EV relaunch PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 depends on the formation of partnerships between the major 2 stakeholders. Include in that the dealers, certainly the 3 manufacturers, certainly the utility companies, certainly 4 the infrastructure people. 5 Our members say they're willing to step up to the 6 plate. Now, I'm not talking about government subsidies 7 here. Our people carry their own weight. They're willing 8 to put infrastructure in their dealerships, willing to put 9 charger stations in the dealerships, and they're willing to 10 order and stock electric vehicles if they can make a profit 11 out of it. And they will have to do that, because they're 12 in the business to make a profit. Their employees depend on 13 it. The State sales tax revenue depends on it, et cetera, 14 et cetera, et cetera, et cetera. 15 Partnerships are forged through partnership 16 agreements, not administrative regulations and mandates. 17 The large volume auto manufacturers have reached out with a 18 responsible game plan to foster advanced battery development 19 to logically stimulate and nurture a hopefully successful EV 20 relaunch. 21 Signing an enforceable partnership agreement 22 instead of promulgating ream of regulations may seem alien 23 to you, but when it comes to actual manufacturing, selling, 24 and servicing electric vehicles, you can no longer simple 25 issue regulations and then sit back and watch the industry PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 and environmentalists duke it out. 2 You must assume a new role. You must assume a new 3 role as a partner/facilitator in addition to your role as 4 regulator, or the successful relaunch of EVs will be doomed 5 for failure. 6 Thank you. I'll take any questions. 7 CHAIRMAN DUNLAP: Thank you, Mr. Welch, for your 8 reasoned take on this issue. 9 Any questions of Mr. Welch? Very well. Thank 10 you. 11 Okay. Mr. Costa, Mr. Olson, Bill O'Brien of 12 Hawker Energy Products. 13 If I might, we're going to allow our court 14 reporter to take a break. Just a moment. 15 (Thereupon, there was a brief pause in the 16 proceedings while the court reporter replenished 17 her shorthand paper.) 18 CHAIRMAN DUNLAP: I'd like to remind the witnesses 19 that -- particularly those that have given us copies of 20 their comments -- don't feel compelled to read it. If you 21 just highlight it, and I'll assure you that I'll do 22 everything I can to encourage/make my Board member 23 colleagues read it before the day is out, and I will use 24 what influence I may have in that regard. 25 Okay. Please, sir. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 MR. COSTA: Thank you very much for the 2 opportunity to be here. My name is Ted Costa. I'm the CEO 3 of People's Advocate, Inc. 4 I do have a prepared statement, which I put in 5 your packets. I'm going to make some comments in 6 relationship to what I've heard here today. 7 People's Advocate, Inc. has about 320,000 8 households on its mailing list here in the State of 9 California. Of that, 171,000 of them have made 10 contributions to People's Advocate in the last two years. 11 The average contribution is about $15 or so. And 12 I can assure you what you heard from the other speakers is 13 just not true. And my briefcase isn't full of oil company 14 money, nor is automobile money, nor does Pete Wilson call me 15 up in the morning and give me instructions. 16 We are a grassroots organization. And from the 17 bottom of my heart, it's an outrageous allegation to infer 18 that because someone wants to come here and testify, that 19 they should be intimidated, that somehow they're on the 20 take. Our records are open to any of our members, to any 21 members of the Press that would like to come in and check 22 People's Advocate on that matter. And I just wanted that 23 noted here today. 24 Incidentally, the last time we had any dealings 25 with my Governor was that he was taking money out of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 PERS' account, and we got a million people to sign the 2 petition, and we stopped that. haven't heard from him 3 since. 4 Anyway, I'd like to get on with the subject at 5 hand here. I think this issue -- I can see a parallel 6 between the seventies, the eighties, and the synthetic fuel 7 program. I think if you look at the basic structure, if you 8 take it and just outline it, you will see well-meaning 9 people trying their damnedest to do something about it as a 10 tremendous problem. 11 In my opinion, the problem, it just won't work. I 12 know on our board of directors of People's Advocate, we have 13 two retired college professors, one a professor economics, 14 another one a professor of management. Both of them are 15 just adamant that this program just won't work. 16 In a free enterprise system, you just cannot 17 mandate that people do things. I mean, you might take 18 control of the factory, control of the production, but it 19 doesn't work that way in a free economy. 20 I mean, we cannot give up our freedom for a well- 21 meaning program. It won't work in my very humble opinion. 22 The program really -- it tells people what to make, tells 23 them how to make it, and that tells people what to buy. And 24 that is counter to -- to the free enterprise system, which 25 made this country great. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 It is -- the open market system just can't work in 2 that fashion. And basically, that's the crux of what I want 3 to tell you. 4 But I do see here, since I've been involved in 5 this thing, I know in the beginning, I was trying to whip up 6 a little support here, I called the Chamber of Commerce. 7 And they said, well, they didn't know whether they wanted to 8 get involved. 9 Now, I'm getting faxes from them. They want me to 10 help them publish a thing (sic). So, a coalition is coming 11 together now, folks, and I'll tell you from -- on behalf of 12 the board of directors of People's Advocate, if we have to 13 go to the people again, we're prepared to do so. We've 14 never taken on environmental issues, but we've seen what's 15 happened in Bakersfield with one of our members, one of 16 those 170,000 people down there. And maybe the people of 17 the State of California in about 1998, should -- if they see 18 freeways that go nowhere and see a program that goes 19 nowhere, maybe they would have something to say about that, 20 to set down some guidelines, guidelines that will work. 21 In leaving, I wish you would -- if you have any 22 friends that are professors of management, I doubt that you 23 will find any of them -- that's a pretty tough statement, 24 but I'll stand by it. I doubt you'll find any of them that 25 will tell you that the program will work. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 And with that, I will submit the written thing and 2 thank you very much for the opportunity to be here. 3 Any questions, I'd be happy to try and answer 4 them. 5 SUPERVISOR ROBERTS: Thank you, Mr. Costa. I 6 believe we have a comment. 7 MS. EDGERTON: Mr. Costa, when you refer to some 8 of the materials about State controlled and mandated 9 production in the Soviet Union, those weren't technology 10 forcing. 11 MR. COSTA: I don't think I -- okay, it's in there 12 briefly, yeah. The point is -- 13 MS. EDGERTON: I just think you ought to try to 14 get your -- some of your facts correct on that. 15 MR. COSTA: No, no, no, no. Top-down management 16 has been shown that it just doesn't work. I mean, how many 17 seven-year programs did they have in Russia? They were 18 probably very well-meaning programs. It didn't work. They 19 couldn't build enough houses. They couldn't build enough 20 cars. They couldn't do anything. They couldn't even grow 21 enough food to feed themselves with. 22 SUPERVISOR ROBERTS: I don't think -- if you guys 23 want to debate the Soviet Union, we can do that later. 24 Tony Cygon, followed by Chuck Olson. 25 UNIDENTIFIED SPEAKER IN AUDIENCE: Tony Cygon, he PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 had to leave. 2 SUPERVISOR ROBERTS: He's not here? 3 UNIDENTIFIED SPEAKER IN AUDIENCE: He had to 4 leave. 5 SUPERVISOR ROBERTS: Okay. Chuck Olson, then 6 followed by Bill O'Brien. 7 MR. OLSON: Good afternoon, Board and staff. 8 Thank you for letting me come here. I was here last week, 9 and I realized all the stuff that I forgot to say. So, I'll 10 try and say it this time. 11 I am an individual, but I am a member of the 12 Electric Auto Association. We've been in existence 23 13 years. We had the land speed record of 175 miles an hour 14 since 1974. And General Motors took it away from us a year 15 ago March. 16 SUPERVISOR ROBERTS: And somebody's taken it from 17 them I understand. 18 MR. OLSON: What's that? 19 SUPERVISOR ROBERTS: I understood somebody's taken 20 it from them. 21 MR. OLSON: Oh, is it beyond 183 now? 22 SUPERVISOR ROBERTS: So I'm told. 23 UNIDENTIFIED SPEAKER IN AUDIENCE: It is. 24 MR. OLSON: It is, all right. I need updating. 25 Okay. And then, also, in our membership, we had a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 fellow with lead-acid batteries, by recirculating the 2 electrolyte, going 230 miles on one charge. 3 I think, myself, the reason the gas companies 4 don't like electric cars is the components that's needed in 5 a gas car that's not needed in an electric car. An electric 6 car, all your maintenance is cleaning the terminals off and 7 putting water in the battery. And you don't have a whole -- 8 we had a whole long list of stuff that's not needed for an 9 electric car. And it was at our rally. 10 Speaking of the rally, in my car, I had four-year- 11 old batteries, and I went 70 miles. Okay. 12 Let's see. Oh, yeah. In our club, also, we went 13 from Stanford to L.A. We used silver zinc batteries. We 14 figure in a way that's cheating, because the batteries are 15 $20,000 apiece. 16 But I think the way to go is lead-acid batteries 17 that recirculate the electrolyte. 18 And then, one step further is to use a base of a 19 battery, and then just replace the single cells. 20 Essentially, you would have new batteries all the time. And 21 you could have a computer readout saying which cells to 22 change all the time. 23 Let's see. There was an electric car before a gas 24 car. That was even illustrated before. And one of the 25 engineers in the club, he said that, if you figure the units PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 in BTUs, the gas car would have to go 200 miles to the 2 gallon in order to equal electric cars. I don't know this, 3 but this engineer said it. 4 Oh, yes. The average distance that people go in 5 cars all over the whole United States is 25 miles a day at 6 the most. So, our cars -- this last rally, they've gone 98 7 miles, 102 miles last year. My car's gone earlier 119 miles 8 in one rally. 9 That's what they mean by lead-acid batteries that 10 work today for 90 percent of most people's driving. 11 You don't need the exotic batteries. You can get 12 by with less. Now, I have a tape t hat -- it's "After the 13 Warming," James Byrd. And this was done about 15 years ago. 14 And surprising as it seems, they predicted the Gulf War in 15 this, too. And it's a projection into the future. It's 16 where you go to 2050 and see how you got there by the air 17 quality and the greenhouse effect. 18 And it's very short, just done the last part of 19 it, and I'll finish with that. 20 And if there's any questions -- 21 SUPERVISOR ROBERTS: This is only a minute or so, 22 Mr. Olson? 23 MR. OLSON: Yeah, it's only about two or three 24 minutes I think. 25 SUPERVISOR ROBERTS: Well, wait a minute. Wait a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 minute. 2 MR. OLSON: But it's short. Actually, I'm having 3 those tapes delivered. It comes in two parts, and they were 4 supposed to be delivered this morning. And I'm going to 5 make copies of them and I'll see that the Board gets them 6 and the staff gets a copy of them. 7 SUPERVISOR ROBERTS: Okay. We'd appreciate that. 8 MR. OLSON: It's quite lengthy. That's why I just 9 picked a small piece of it. But I guess he might have a 10 little difficulty in getting it to -- 11 SUPERVISOR ROBERTS: If we're going to have the 12 unedited version of -- 13 MR. OLSON: Well, actually, it's just a small clip 14 that I thought the gist of the whole thing was. It was 15 rather interesting, and it puts your job into perspective. 16 You guys have got an awesome job. I wouldn't want 17 it. That air quality not only affects California; it 18 affects the whole world. 19 (Thereupon, the tape was played for a 20 short time.) 21 MR. OLSON: Really, it affects the ecology of the 22 world, the air, and you guys have got an awesome job. And I 23 want you to keep that in mind while making your decision, 24 because it -- I'd like to see the mandate in place. 25 SUPERVISOR ROBERTS: Okay. Thank you. Thank you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 for taking the time to join us, and we'll look forward to 2 seeing the unedited version of your film. 3 Mr. O'Brien, followed by Arthur Cartwright. 4 MR. O'BRIEN: I'm Bill O'Brien, and I work for 5 Hawker Energy Batteries. We are a manufacturer of lead-acid 6 batteries. We're part of a $15 billion organization. We 7 have factories in France and England and the United States. 8 In the United States, we employ about 50,000 people in 9 various industries. 10 What I'd like to talk very briefly today is about 11 the value of the lead-acid battery and of the testing we 12 have been doing in a program with the Department of Energy 13 and the utilities out in Phoenix. 14 The data which is up on the screen basically will 15 show you exactly what you can get from a lead-acid battery 16 in the real world, with real drivers, in hot climates. 17 Before we got involved in this program -- by the way, the 18 amount of business we would get from the electric vehicle 19 industry would represent probably less than one-twentieth of 20 one percent of our total sales. 21 So, right now, it's not a new business 22 proposition. However, we recognize that we have 23 technologies here that could support the EV industry, an EV 24 industry that is based on people who live in the L.A. Basin 25 and who do not drive more than say 40 miles a day. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 Now, the first slide basically is to do with the 2 vehicle emission requirements. We considered things like 3 mileage, the average mileage daily, the maximum mileage, 4 speed of the vehicle,, the payload of the vehicle, the 5 temperature, the ambient temperature. Remember, you hear a 6 lot about advanced exotic batteries. I would advise the 7 Board or anybody to question and nit-pick every single 8 statement made about any battery in terms of its future of 9 what it can and cannot do. If you do not, things sound very 10 rosy. 11 The actual lead-acid battery here is a sealed, 12 fairly advanced battery. It's the kind of battery that be 13 fast-charged in five minutes, five minutes in terms of 50 14 percent of its capacity returned; in eight minutes, 15 approximately 80 percent of its capacity returned. 16 Next slide, please. 17 The other things we looked at were the actual -- 18 this was a ZEV battery. First of all, first and foremost, 19 safety. The safety issue is of paramount concern to us as a 20 manufacturer. What do we mean by safety? We mean, by 21 safety, that in the event of a crash, these batteries do not 22 spew acid in the crash area. In fact, these batteries are 23 sealed, recombining the battery, so you cannot -- acid 24 cannot spill from the battery no matter what you do in a 25 crash. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 The only way you can get acid out of the battery 2 is you have to rip it apart, take the separators between the 3 plates, and squeeze it, and that's how you get acid out of 4 the battery. 5 The second thing is reliability. We cannot 6 emphasize the importance of reliability. You can get all 7 the most fanciest statements and figures you want from 8 laboratory testing. But when you put your battery out on 9 the road -- and you'll see a little later in this slides -- 10 and that battery's been driven by somebody who drives the 11 way they drive, it's on four wheels; it's subject to 12 environments of wind and rain, and rough conditions, 13 reliability really matters. 14 You can produce a battery and put it into an 15 electric vehicle. If that battery would not start for you 16 every day, every week, every month -- otherwise, it's not 17 reliable. 18 Now, a lot of things are said about the lead-acid 19 battery. If you really considered a lead-acid battery, if 20 you were to remove that battery from your car, or if you 21 were to remove the batteries from your planes, or from your 22 telephone systems, the whole place would shut down. 23 The lead-acid battery is a significant technology 24 and right now, it's technology which is labeled as something 25 that will deliver 60 miles between charges. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 The fact of the matter is that the theoretical 2 values of lead-acid battery technology have never been 3 achieved. Our company at the moment has been testing this 4 particular battery. And the battery we are testing will be 5 replaced next year with an improved design. Next slide, 6 please. 7 The battery range or the vehicle range depends on 8 the driving habits of the operator, the driving conditions, 9 the aerodynamic drag, the accessory use, the tire 10 resistance; in other words, you can lay all the problems on 11 the battery, but there are other issues associated with 12 batteries that affect the overall performance of the 13 vehicle. 14 I'll give you an example. Part of my job is to be 15 in the desert testing vehicles on test tracks near Phoenix, 16 where General Motors and Chrysler test their vehicles. On 17 one occasion, we were driving on the Interstate -- on 17 18 north of Phoenix. 19 We were following one of the trucks which we test. 20 It's a Chevy S10 pickup truck. The truck was traveling at 21 about 70 miles an hour, and suddenly he pulls off to the 22 side. 23 The reaction from the people in our follow van and 24 our follow along van was, what's wrong with the battery? 25 Well, we pulled the truck off -- when we got to the site, we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 pulled off, and we looked at the electric vehicle. We found 2 that there was nothing wrong with the battery. 3 What was wrong was that the temperature on that 4 day inside the hood had reached 140 degrees F., and one of 5 the switches in the control inverter had actually switched 6 off. And that's why the car stopped. 7 However, the immediate reaction was it's the 8 battery. 9 Next slide, please. 10 These are the trucks which are tested in this 11 program. There are approximately 300 of these trucks with 12 utilities right now. All these trucks carry the Hawker 13 battery. One of the things that happened was that the 14 battery will fit in these trucks, and the batteries were 15 never fully charged, and so the batteries degraded. And, as 16 a result, the reaction was the batteries weren't any good. 17 Next slide, please. 18 As you can see this slide, an example of the 19 battery. On the slide, you will see the figure 37. 37 is 20 the miles, is the range of the truck at about 2,500 miles. 21 When the truck was new, it was delivering 70 22 miles. By 2,500, it was delivering 37 miles. Again, what's 23 wrong with the battery? 24 What was wrong with the battery was that the 25 onboard charger was underpowered and the battery had cycled PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 down. 2 Hawker had been developing for about six months a 3 new charge algorithm, and then programmed that charge 4 algorithm into the charger. The charger's built by a 5 division of General Motors-Hughes. And on the first run, 6 the battery came back and delivered -- I can't see it from 7 here exactly. I think it's 95 miles. 8 The next slide, please. 9 By the way, these tests are done on a test track, 10 at the moment a Chrysler test track. And the vehicles are 11 driven everyday in the City of Phoenix, and then at the end 12 of the month, they are tested to see how the battery has 13 developed during that week. 14 This is the same battery. By the way, this is the 15 original battery in this particular truck. And I'm talking 16 about this one, because it is the truck with the most miles 17 on it. 18 On the next one, the battery was tested at 45 19 miles per hour constant speed, and it delivered just over 20 100 miles with the lead-acid battery. 21 Next slide, please. 22 This slide shows the same battery in the most 23 recent test, which is November. The battery now has just 24 under 14,000 thousand miles on it. And on the last test, 25 which was -- the test was last -- about three weeks ago, it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 had run for about 96 miles in that test. 2 Next slide, please. 3 And a part of this program is to actually look at 4 fast-charging the batteries. And this particular -- with 5 this particular battery, in five minutes, 50 percent of the 6 energy returned to the battery; in eight minutes, 80 7 percent; and in 30 minutes, the battery was 100 percent 8 charged. 9 These weren't done by Hawker. These were done by 10 independent people, the utilities. This particular test was 11 done by a company in Canada. All of this, of course, is 12 verifiable. 13 Next slide, please. 14 How does all this relate to the real world? Now, 15 I made the presentation one time at one of the working 16 meetings, and this slide -- we produced this slide just to 17 relate what we're talking about here, this battery and the 18 real world of this EV. 19 That is the Los Angeles Basin. And according to 20 the Department of Motor Vehicles, there are approximately 21 4.7 million people living in there, and they have over 2 22 million vehicles. And their average daily drive is less 23 than 44 miles per day. 24 Next slide, please. 25 The battery we've just discussed -- by the way, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 it's a production battery. It's not a special battery, and 2 it's being operated right now, in terms of its performance. 3 And the new upgraded version of that battery will be out of 4 our factory in January. In fact, we are already in the 5 process of testing that battery with the Department of 6 Energy in January. 7 These are circles drawn around the building in 8 L.A., which is the State Building, you know, where CARB held 9 their meeting. And they are circles of 15, 30, and 40 10 miles. The battery you just heard about in either of those 11 vehicles, a small sedan or pickup truck can reach any of 12 those areas one way from that building any day, seven days a 13 week. In other words, the battery is here now that can 14 actually support at least two million of these vehicles in 15 the air basin. 16 Next slide, please. The last slide here is 17 basically a slide which indicates the production facility of 18 this battery as of this summer. As of next year, those 19 figures increase by about 50 percent. 20 The figure for the -- our 15,000 that you see is a 21 figure which will be related to a sedan vehicle. It's a 16 22 kW battery. And the other figure is for a larger battery 23 which is used in a pickup truck. 24 Next slide, please. 25 This may not come out very well. That is just a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 picture of the truck that we have back in our factory. That 2 truck is driven by one of our employees from Warrensburg in 3 Missouri to Lee's Summit, which is 43 miles one way. He has 4 been driving that truck since we took delivery of it last 5 July. Never once has the truck failed him in his commute 6 from Lee's Summit. 7 When the truck arrives at the factory, it is 8 charged on an infrastructure charger at the factory. And, 9 again, what this is saying is that, for all the negatives 10 about lead-acid battery, it is by far the most robust. And 11 if you don't have a robust battery, you have nothing, 12 because when people have these electric vehicles, they'll 13 forget to charge them. They're going to leave them in the 14 parking lots. And if your battery cannot stand that type of 15 abuse, then it's not going to work. 16 And thank you for your time. 17 CHAIRMAN DUNLAP: Thank you. Supervisor Vagim. 18 SUPERVISOR VAGIM: Thank you. Two quick 19 questions. You mentioned about the temperature and the 20 shutdown. What was the outside temperature? 21 MR. O'BRIEN: The outside temperature at the time 22 was about approximately a hundred and -- I think it was 111, 23 112 degrees, 112 degrees. It was a very, very hot day. And 24 one of the intentions here was challenge the limit of the 25 battery in hot climates. Because, as you know, the hot PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 climates are terrible on batteries. 2 SUPERVISOR VAGIM: When does the hot climate 3 determine the -- 111, 98? 4 MR. O'BRIEN: No, no. It doesn't -- in terms of 5 natural temperature on that day, it is an accumulation of 6 the operation of the battery in the hot climate over its 7 cycle life. In other words, it will, in fact, shorten the 8 cycle life of the battery. 9 SUPERVISOR VAGIM: Is that 95 and over, or a 10 hundred and over? 11 MR. O'BRIEN: The optimum operating temperature 12 for this type of battery is about 60 degrees Fahrenheit. 13 So, already these batteries are operating in very elevated 14 temperatures. 15 SUPERVISOR VAGIM: And the recharge, 50 percent in 16 five minutes, what was the amp volts or kW? 17 MR. O'BRIEN: This basically -- this was a very 18 large power supply, 150 kW power supply. So, it would be 19 like an infrastructure you have standing in a corner like a 20 7 Eleven, if you have that kind of infrastructure in the 21 street. Some of you would come in, you would plug in, and 22 then it dumps a very high current of a very fast rate. 23 MR. O'BRIEN: And a three phase, a single phase. 24 MR. O'BRIEN: This is a three phase. 25 SUPERVISOR VAGIM: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 CHAIRMAN DUNLAP: Thank you. In deference to our 2 court reporter, we're going to take a ten-minute break, and 3 come back, and we'll call -- is Mr. Cartwright here? Okay. 4 You're next up, sir. Mr. Caves? Is he here? And Ms. 5 Holmes from the Sierra Club. 6 So, about ten minutes, we'll come back by quarter 7 till. 8 (Thereupon a recess was taken.) 9 CHAIRMAN DUNLAP: If I could get you to take your 10 seats, we'll continue through the witness list. 11 Arthur Cartwright, sir, please come forward. Go 12 ahead, I'll round up my colleagues. And, if you don't mind, 13 start right now. 14 MR. CARTWRIGHT: I'd like to first introduce 15 myself. I'm Arthur Cartwright. I'm a member of the Board 16 of Directors for the Sacramento Electric Vehicle 17 Association. And, more importantly, I'm the Chairman of the 18 Clean Air Awards Committee for SEVA. 19 I've come here today to tell you that EVs do work, 20 contrary to what we've heard from several other 21 presentations earlier. And there's a huge base of customers 22 who want electric vehicles. All we need to do is provide it 23 for them. 24 These people want electric vehicles so much that 25 they're building them themselves, or doing conversions, or t PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 they're purchasing or leasing vehicles from Europe. 2 And, as mentioned before, a large portion of the 3 commutes can be handled by the ranges of the batteries that 4 are available today, and that's not your advanced batteries. 5 That's your standard everyday, off-the-shelf batteries that 6 are sold by everyone from Die Hard to Trojan. 7 SEVA has started what's called the Clean Air 8 Awards. What they are designed to do is recognize and 9 encourage clean air commuters. It's only about a four-month 10 old program. But in that time, we have recognized a large 11 portion of our membership. We recognize them at what are 12 called milestones for literal reasons. If they commuted a 13 certain portion -- myself, I'm wearing a 5,000 mile award, 14 and I'm one of the smaller commuters in our organization. 15 We have over 100,000 miles driven electrically that have 16 been awarded. 17 And it's between two to three hundred thousand 18 that have actually been driven. They just have not been 19 presented with awards. 20 That is made up by only 41 vehicles out of our 21 association, and that is just the Sacramento area. So, what 22 I'm trying to say is that there are customers there. If we 23 get the vehicles out, the people buy. The mandate as it was 24 originally, if the cars are made available with lead-acid -- 25 and I don't want to discourage battery advancements -- but PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 lead-acid will take care of what everybody needs to do now. 2 And if -- or when the technology works its way to the point 3 where it will satisfy the larger base of people's needs, 4 then the upgrades can occur. 5 But right now, we, myself included, want to get 6 into an electric vehicle. We lease for the electric vehicle 7 that I've driven. It ended because of the mandate's 8 questions. They ended the leased because they weren't sure 9 that the mandate was going to go through. So, I lost my 10 electric vehicle. 11 I'm presently working on converting an electric 12 vehicle, converting an ICE to electric. 13 That, I think, is a large portion that should be 14 looked at, and it also, I believe, could be incorporated in 15 the mandate, that converters and powertrain sales should be 16 encouraged. 17 Are there any questions of me? 18 CHAIRMAN DUNLAP: Thank you. Any questions? 19 Okay. 20 MR. CARTWRIGHT: Thank you for your time. 21 CHAIRMAN DUNLAP: Okay. 22 (Applause.) 23 CHAIRMAN DUNLAP: Mr. Heckeroth, followed by Mr. 24 Caves, followed by Jamie Phillips, replacing Mr. Patton. 25 MR. HECKEROTH: Mr. Chairman and members of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 Board. I'm here representing the interests of my company 2 MendoMotive, which makes electric vehicles. And I'm also 3 here at the request of Charles Peterson, who's a member of 4 the Board of Supervisors of Mendocino County. 5 It was last spring that I got a call from Mr. 6 Peterson -- Supervisor Peterson. He said he'd been 7 receiving a lot of mail, and he was -- the main thing he was 8 annoyed with was that it was all on bright yellow paper. 9 And you guys are probably all familiar with the mass 10 mailing. It wasn't recyclable. 11 (Laughter.) 12 MR. HECKEROTH: When these packets continued on a 13 weekly basis over a number of months -- I'm his energy 14 advisor for Mendocino County -- we set down and drafted a 15 resolution, which was presented to you in August. And he 16 asked that I resubmit that resolution. It should be in 17 front of you now. 18 And I wanted to read a statement from him. 19 On Tuesday, August 15th, 1995, the Mendocino 20 County Board of Supervisors voted to adopt the enclosed 21 resolution regarding the California Air Resources Board 22 regulations relative to zero-emission vehicles. 23 We have been appalled by the gross misinformation 24 being distributed by the California Manufacturers 25 Association about electric vehicles and relevant issues. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 would like to encourage the California Air Resources Board 2 to stand by its two percent mandate in the time frame that 3 they've suggested. 4 It takes a lot of money to run for political 5 office. Supervisor Peterson is an old-fashioned kind of 6 politician, and he's never received any corporate 7 contributions. 8 So, he can be said to truly represent is 9 constituents. I think most of the politicians that come 10 before you wear their contributors' label on their lapel. 11 But I think it would be to your best interest to know 12 exactly which corporations they represent when they come to 13 you. 14 And I find it really threatening to know that most 15 of the politicians do represent corporations rather than 16 their constituents as it should be. 17 Last week, I came and presented, too. And I 18 realized that, as Mr. Richter pointed out this morning, 19 people were making life and death decisions based on their 20 dreams. 21 So, I would like to bring a bit of reality from my 22 corner of the world here today in the form of a slide 23 presentation. So, if I could have the lights. 24 I've been building and designing solar homes for 25 the last 25 years. And I'm showing these just four slides PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 of solar homes, so that you can get a feel for what can be 2 done to save energy, which also means saving the air. 3 This is an unfinished slide (sic) taken a couple 4 years ago of a house that I built for a single woman for 5 $25,000. The entire source of its energy is the sun; that 6 little panel unit on the roof, a roof-integrated panel, 7 heats water. And there's a photovoltaic pump that's 8 integrated into that roof unit also that pumps that heated 9 liquid through the floor to heat the mass of the building. 10 And it also goes through a heat exchanger that 11 heats the domestic hot water. There's also -- 12 CHAIRMAN DUNLAP: Mr. Heckeroth? 13 MR. HECKEROTH: Yeah. 14 CHAIRMAN DUNLAP: In the interest of time -- 15 MR. HECKEROTH: Okay. 16 CHAIRMAN DUNLAP: -- I need you to -- 17 MR. HECKEROTH: I'll move forward. 18 CHAIRMAN DUNLAP: I know solar energy's important 19 and relevant in a broader energy context, but, sir, I have a 20 lot of people I need to hear from. 21 MR. HECKEROTH: Okay. 22 CHAIRMAN DUNLAP: Okay? 23 MR. HECKEROTH: Like I said, I'm going to go 24 through this part of it real fast. This is a house that 25 uses less than 10 percent of the energy required by a normal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 house, which means that, in California, we could eliminate 2 the use of all fossil fuels and nuclear power plants if 3 houses were built this way. 4 Okay. That's the end of it. 5 This is my homestead. There's a three kilowatt 6 array on my barn roof, which I use to operate my whole 7 homestead, and also charge the batteries of my electric car. 8 This is my electric car charging. I've been 9 operating it with the same set of batteries for three years. 10 They're lead-acid batteries. We keep talking about the need 11 for a good lift-off for electric vehicles. This lift-off 12 was achieved three years ago in my family. 13 This is my shop at home. I've converted a 14 rototiller to electric power, and a Fiero, and several other 15 cars before I started MendoMotive. 16 This is the car that we have in current 17 production. It has a hundred mile range. It goes over a 18 hundred miles an hour. And we've done quite a few of them, 19 but each one is with a different technology in terms of the 20 controllers and chargers. 21 There's more to electric cars than just batteries, 22 and the mandate has fueled worldwide technological 23 developments in controllers, in battery chargers, and all 24 the other components that go into electric cars. 25 This is a car that won at Daytona Beach, Florida. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 The previous car has won every rally that it's been in. 2 These cars do what Detroit says can't be done. They're very 3 popular. And they're not that expensive. And building them 4 one at a time, I can still compete with cars that come out 5 of Detroit. 6 Another application for electrics is battery- 7 powered tractors, which make even more sense than cars, 8 because the battery weight is an added advantage with a 9 tractor. 10 They sell tractors with 600-pound wheel weight; 11 there are 600 pound weights on them and 150 wheel weights. 12 You take off the weights and add the batteries, and you've 13 got a perfect application. 14 There's a car and a tractor in front of my barn, 15 which is able to charge the cars from solar energy without 16 any use of fossil fuels. 17 There was one more slide, but it's not broken 18 down. It's a picture of a car made in Italy that went 120 19 miles in one hour. I don't know if you're familiar with 20 that one. But that's Italian technology. 21 I brought all the magazines that have come out as 22 a result of your mandate, which you are now, in effect, 23 putting off. These magazines have all come in the last few 24 years. This is one that I don't know if you're familiar 25 with. On the last page of the documents in front of you, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 xeroxed the battery page out of this. This is Japanese 2 technology. 3 There's two pages of batteries that are in 4 production right now that will all service the needs of 5 electric vehicles. So, batteries is not the holdup. 6 I'm not an environmentalist. I feel that the 7 environment will be around to heal itself about 5 billion 8 years after we're gone. I am a humanist, and I want us to 9 look at ourselves and see what incredible creatures we are 10 and value that. 11 And I think that fossil fuel use is like a gun to 12 the head of humanity, and everytime we get in our cars, 13 we're putting a little pressure on the trigger. 14 So, I hope that you'll be able to maintain the 15 mandate. I don't think that two percent in '98 is either 16 soon enough or enough, and I'd hate to see it pushed back 17 any further. 18 Thank you. 19 CHAIRMAN DUNLAP: Thank you. Ms. Edgerton. 20 MS. EDGERTON: Actually my question's for staff. 21 I wanted to ask Mr. Kenny. And one of the things that came 22 to my mind about these -- you may have covered it in your 23 presentation when I was at the airport. 24 But do -- does the Board have to get -- request a 25 modification of its waiver under Section 209 -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 CHAIRMAN DUNLAP: Lynne, I'd like to hold that, 2 and that can be the first question up, but let's get through 3 the testimony, and we'll cover all those -- 4 MS. EDGERTON: Oh, then come back -- 5 CHAIRMAN DUNLAP: Yes. 6 MS. EDGERTON: -- to cover those questions. 7 That's good anyway. You'll be prepared. 8 CHAIRMAN DUNLAP: Yes. 9 MS. EDGERTON: Thank you. 10 CHAIRMAN DUNLAP: I think they're prepared on that 11 question. 12 Mr. Caves, Ms. Phillips, Ms. Holmes. Hi, Joe. 13 MR. CAVES: Mr. Chairman, members of the Board, my 14 name is Joe Caves. I work for the Union of Concerned 15 Scientists. 16 I think all of us want to get to the same place 17 here, and all of us are struggling to find what's going to 18 work. UCS and NRDC have jointly submitted a proposal that 19 we think accomplishes that and meets the requirements that 20 the Chairman laid out and that this Board is facing. 21 But that proposal apparently is not what you're 22 considering today, and we're disappointed. But we also ask 23 for time to review the staff proposal, so we can provide you 24 with some serious and detailed criticism of it before you 25 send it out for notice and comment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 And I understand all the time pressures that you 2 have, but we really haven't had an opportunity to do that. 3 And I want to stress that, because I think we're at such a 4 critical point in time right now. This decision is going to 5 affect, obviously, billions of dollars in investment. It's 6 going to affect California's air quality future. So, I 7 really want to urge you to not rush this. Let's think about 8 it carefully as to what path we want to go down to make sure 9 it's getting us where we want to go. 10 I want to -- and I have to make -- I'll try to 11 make these brief. We've only taken a quick look at this 12 proposal, and evidently the car companies have spent a 13 considerable more time considering it. We really haven't 14 had that opportunity. But there is one obvious inadequacy 15 or incompleteness in this that I think is the most 16 disturbing to me. 17 And that is, and it's something that's been 18 alluded to before -- and that is, what happens in 2000 and 19 2003? What happens during that ramp-up period. One of the 20 things that Peter Welch, representing the auto dealers a 21 little while ago, was that the mandate's worked pretty well 22 so far. You've held the gun to the head of the car 23 companies and you've forced them to make this much progress. 24 And I think that's something we need to pay 25 attention to there. He also said that the car companies may PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 not be able to guarantee that it's a success, but they can 2 guarantee it's a failure. 3 I think it's important for us to put those two 4 observations together, because they say something profound 5 about what's missing in this proposal. 6 We've had a mandate and that's clearly pushed 7 development. And you've signaled that you want to be 8 flexible, and we appreciate that. But now you're giving 9 almost complete flexibility. You're giving up your 10 regulatory hold -- your gun at the head as it were -- until 11 2003. And I think all of us have to wonder, is that too 12 much? If it is in the power of the car companies to make 13 this a failure, are we creating incentives for success or 14 incentives for failure? 15 Are they going to want to succeed under this or 16 are there reasons that you built into this proposal that may 17 lead them -- not these gentlemen perhaps, maybe not even the 18 present leadership of those companies, but down the road, 19 are we going to lead those corporations into a position 20 where it is more in their economic advantage to drag their 21 feet, to not make the investments that the Battery Panel has 22 said must be made, to not make the commitments to 23 commercialization in a timely fashion? 24 Each of those was, if you'll recall from the 25 Battery Panel's report, a critical determinant of when we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 going to get advanced batteries. 2 And I would just ask you to keep this in mind and 3 consider it in your admonitions to the staff today about 4 what you want your proposal to sa y. 5 What happens in the year 2000, or 2001, or 2002 if 6 one or more, or perhaps all of the car companies have not 7 made the kind of good-faith effort, the kind of investments, 8 and the kind of commitment to commercialization of advanced 9 batteries that your staff or your technical advisors say was 10 possible? 11 What are you going to do? What are the 12 consequences when the key components to a regulatory program 13 is, there are penalties for failure? There are penalties 14 for noncompliance. 15 What you have done here is given those up. If, in 16 fact -- if a car company -- and I'm not talking about that 17 it wasn't technically possible or a difference of opinion -- 18 but if they really have not complied, if they've not made 19 those efforts if at that point this Board or your successor 20 Board decides to -- if at that point you're going to oppose 21 a statutory mandate, some sort of penalties, fairness 22 demands that you tell those car companies now, fairness 23 demands that you send that signal. You make it clear that 24 there are consequences for noncompliance, and you make it 25 clear what it is you expect them to do. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 If, on the other hand, there are no penalties for 2 noncompliance, if, on the other hand, what happens is -- if 3 the car companies do not make good faith efforts, if they 4 have not made the investments and the commitments to 5 commercialization, if there are no penalties to that, then I 6 think that fairness demands that you send that signal. 7 There are companies that are planning to invest a lot of 8 money. 9 Your air districts are planning on this working. 10 If there are no penalties, then you've created a system 11 where every incentive for the car companies is to fail, is 12 to drag their feet, is to not make this work. 13 And, again, I don't mean to impugn the motives of 14 the representatives that have come before you, but you all 15 understand how institutions work. You all understand how 16 investment decisions are made. They will do what they have 17 to do and not more. They will do what they regard in their 18 interest, not necessarily California, unless you create a 19 system where there are clear incentives to succeed and 20 penalties for failure. 21 And I would ask that that be a part of whatever 22 proposal you ask the staff to prepare; that that is clearly 23 spelled out -- what is expected of them and what the 24 consequences for failure are. 25 Thank you, Mr. Chairman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 CHAIRMAN DUNLAP: Thank you, Mr. Caves. I 2 appreciate that perspective and your counsel to us, and I 3 fully intend to expand upon that staff's presentation to the 4 Board in the discussion we'll have at the conclusion of the 5 witness' testimony. 6 Thank you. 7 Jamie Phillips, Bonnie Holmes, Janet Hathaway, 8 Jerry Mader. Again, I'd encourage -- I know there's a lot 9 of points that people want to make. I'd encourage you to not 10 go over old ground or turf. Just say, here's what we think 11 you ought to be aware of, and it's been said before. 12 MS. PHILLIPS: Mr. Chairman, members of the Board, 13 thank you for the opportunity to speak to you today. 14 I'm Jamie Phillips and I'm representing the 15 Planning and Conservation League and the Planning and 16 Conservation League Foundation. 17 We're a nonprofit alliance of environmental 18 organizations and individuals. And, as you know, I'm 19 speaking for Gary Patton who had to leave. I'm not quite as 20 capable of speaking so eloquently off the cuff as I know he 21 is; so, I'd like to try to touch on just a couple of the 22 points that I know he had hoped to make to you. 23 As a former Air Resources Board member himself, 24 Gary knows firsthand the volumes of technical information 25 that you must review. He knows the tremendous time PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 commitment that you make to assure implementation of the 2 environmental and health measures that are critical to 3 California's future. 4 And we applaud together your efforts on behalf of 5 all Californians. We're pleased that this proposal does not 6 completely eliminate the mandate. We're pleased that it, as 7 it looks right now, appears to maintain control in 2003. 8 But we do have some concerns, too. 9 I urge you to keep an open mind in the coming 10 months to the input that you're going to receive on this 11 proposed modification. And I urge that you consider not 12 just this modification but, as Joe mentioned before me, the 13 other proposals, the NRDC and UCS proposal, which the 14 Planning and Conservation League and Planning and 15 Conservation League Foundation have supported. 16 We never thought you needed to change the mandate 17 in the first place, and we were willing to consider some 18 flexible measures. And I think we all know that 19 Californians want zero-emission vehicles. 20 With respect to this proposal, we are concerned 21 that suspending the mandate until 2003, you're simply 22 opening yourselves up to this continued political battle 23 that was, up to now, made possible by the 24 million spent 24 to date by the oil and auto industry opposition. 25 Some other points quickly that I'd like to make: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 You know that an internal combustion engine, no matter how 2 clean it is when it comes off the lot, is never going to be 3 as clean as the zero-emission vehicle. 4 So, the effort to make up for the emissions 5 benefits through new unidentified clean car technologies 6 raises some real questions and some concerns. We've got an 7 identified technology. It's zero-emission vehicles. We 8 need to try to bring it to market sooner and not in the 9 small numbers that appear to be proposed at least in this 10 measure. 11 We are also concerned that this proposal doesn't 12 allow for an efficient and appropriate ramp-up to the 13 production levels in 2003. You know, it's a huge leap to 14 get from a couple thousand cars to a hundred thousand cars. 15 And it's a big leap of faith that we're being asked to put 16 in Detroit. 17 We do applaud your efforts to maintain the long- 18 term benefits of the original ZEV proposal, and we simply 19 ask that you not close your minds to those other ideas, 20 those other proposals that were there, and consider 21 everything that was put forth before you. 22 And thanks very much for the opportunity to speak 23 with you. 24 CHAIRMAN DUNLAP: Thank you. Give our regards to 25 Mr. Patton, please. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 MS. PHILLIPS: Thank you. 2 CHAIRMAN DUNLAP: Ms. Holmes. Janet Hathaway, 3 Jerry Mader, and Paul Knepprath. 4 MS. HOLMES: Good afternoon. I'm Bonnie Holmes 5 with Sierra Club California. I appreciate the opportunity 6 to speak to you. 7 I think that we all want a real and viable 8 electric vehicle program, and not just a paper plan. But 9 today, we are very concerned that this staff proposal is 10 fraught with problems and does not live up to the spirit or 11 the intent of the ZEV requirement notice that was set in 12 motion by the Board in 1990. 13 We have been involved in the public process, 14 attended all the workshops, hearings, and we submitted a 15 written set of principles that we believe are bottom line 16 principles that were needed to develop a flexible and 17 reasonable zero-emission vehicle program that would ensure 18 success. 19 And we are disappointed that none of those 20 principles have been met with the staff proposal. We ask 21 that you maintain a regulatory program for many of the 22 reasons that were just mentioned by Mr. Caves, maintain a 23 regulatory program that includes legally enforceable 24 commitments with automakers. And we stress over and over 25 that we believe these elements are crucial to keep the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 pressure on the car companies and to maintain a consistent 2 and reliable program that will continue to spur the 3 investments and technology that is needed. 4 We just don't understand how an MOU can compare, 5 in terms of the enforceability, with regulatory -- excuse 6 me. 7 How can an MOU compare with regulatory actions and 8 with third-party suits for not complying, the kind of 9 deterrent that you have with the regulation, with a 10 deterrent that's applied by the courts is much stronger, we 11 believe, than what can be included in an MOU. 12 Secondly, we ask for an air pollution premium. 13 And, as you mentioned, Mr. Strock had made that point, also. 14 And we want a premium that guarantees greater emissions 15 reductions in California, and that would make up the 16 difference for any earlier flexibility that will be 17 provided. 18 And we do not believe, at this point, that the 19 staff proposal provides this. We don't see it. We don't 20 believe that the 49-State car program can be relied on. We 21 don't believe there should be credits given for non-zero- 22 emission vehicle technology, period, because those other 23 vehicle technologies cannot meet the zero tailpipe standard 24 achievable with the electric vehicle. 25 We ask you to maintain the 5 to 10 percent goals. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 For us, the early years -- flexibility in the early years 2 mean '98 and '99 and not up to 2003. I think that point's 3 been mentioned by other environmental representatives, that 4 we don't want to see the mandate put off to 2003. It's too 5 long. 6 We ask for a substantial market launch in '98 and 7 a guaranteed ramp-up to the 5 or 10 percent level. And we 8 don't see this being provided also in the staff proposal. 9 If you don't hear anything else I say, I would 10 like to stress one major point that I think has been 11 overworked today. 12 The Battery Panel has been floated around in 13 discussions here. What are the recommendations of the 14 Panel? What did they say? 15 The Battery Panel stressed that we must have a 16 clear enough and definite enough program to keep heavy 17 investments flowing in battery technology. 18 When you look at recommendation seven of the 19 Battery Panel, they say that most battery developers stress 20 the importance of an orderly, stable program; that there is 21 a need for stable, continuing thrust behind the ZEV program 22 like the ZEV regulation, which has been the primary course. 23 That we need to encourage the next phase of 24 investments through this stable, reliable program. That 25 without continuing strong California commitment, it may be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 difficult for these battery manufacturers to recruit the 2 investments necessary for continuation of aggressive efforts 3 to develop advanced batteries, and that these investments 4 are crucial to the success of our zero-emission vehicle 5 program. 6 Well, my question is: Can you tell us now that 7 you have surveyed all the 12 major battery manufacturers and 8 found that the staff proposal that's on the table today will 9 keep their interest, will spur their investment, will be as 10 good as the current ZEV mandate? 11 If you haven't done that -- and I don't believe 12 you have -- then I think it's extremely premature to move 13 ahead with the staff proposal. I don't think that you can 14 claim that this will be a viable program without doing that 15 survey. 16 And I don't believe that the staff proposal 17 includes time lines and requirements t hat are reliable, 18 stable enough, and consistent enough to keep those battery 19 manufacturers interested. 20 There's been a lot of discussion about the U.S. 21 ABC, and the Department of Energy, and the continued 22 research efforts of those bodies. But we have to remember 23 that the independent battery manufacturers together have 24 contributed more combined than the U.S. ABC -- excuse me. 25 The battery manufacturers have contributed more than the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 U.S. ABC and the DOE combined. 2 So, these other independent battery manufacturers 3 are crucial to the program's success. And we need to know 4 what will this mean for their continued investment? 5 So, if you haven't, you know, asked specific 6 questions of these battery manufacturers, please do that. 7 Please get any additional information you need for the 8 Battery Panel of experts that you had produced their report 9 before you. 10 And consider the 12 major manufacturers that are 11 out there. I'm honestly extremely concerned that you are 12 frittering away time talking about vague proposals while the 13 battery manufacturers may be quietly walking away from the 14 program. 15 And finally, I'd just like to stress that, 16 unfortunately, we don't have a room packed full with all the 17 citizens in California who are extremely concerned about 18 this program. But there is an extreme level of interest, 19 concern about moving the zero-emission vehicle program 20 forward. You've seen a lot of Press lately. 21 The public wants to see this program succeed. And 22 the public is behind the mandate. And I just hope that you 23 keep that in mind that you're making decisions that -- 24 despite the fact that the testimony doesn't reflect the 25 broad sector of the public that's following this. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 pressure is on out there. And people want to see a program 2 that works, works and succeeds, and that fulfills the spirit 3 of the zero-emission vehicle program adopted in 1990. 4 CHAIRMAN DUNLAP: Thank you. Ms. Edgerton. 5 MS. EDGERTON: Ms. Holmes, thank you for your 6 remarks. I have wondered about the effect of the proposals, 7 and I've talked a little bit with the staff about it. 8 Would you be prepared to make any comments, just 9 as a preliminary basis about the -- some of the responses of 10 the advanced battery manufacturers to a program such as 11 you've proposed? 12 MR. CACKETTE: I can give you a little insight 13 from some of the battery manufacturers that we've talked to. 14 I think, largely, how a battery manufacturer is looking at 15 the implications on investment of our program has to do with 16 when they think the battery technology that they're 17 advancing will come into commercialization. 18 If they are a battery company that is on target 19 for, you know, 2001-2002 time frame to come to full 20 commercialization of an advanced battery, then this 2003 21 mandate satisfies their needs quite well. They wouldn't 22 have a commercial product much before that anyway. And they 23 can still justify the investment. 24 If they're a manufacturer of a battery that they 25 believe will come in well before that, then there's been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 some concern that the market that they had established their 2 commercialization plan upon will be smaller than anticipated 3 and may jeopardize their ability to bring it to 4 commercialization. 5 So, it kind of works that way. 6 MS. EDGERTON: I also appreciate that as a 7 preliminary response, so that Ms. Holmes will know that is 8 something of tremendous concern to this Board. 9 Also, another question that's been raised -- I'd 10 just like you to make a comment on from staff's point of 11 view. What about -- what are you expecting to happen 12 between 2000 and 2003 under the proposal that you've made 13 today. 14 MR. CACKETTE: Well, as with any new products or 15 even new emission control devices, there's some leadtime 16 required to bringing a product from the prototype stage to a 17 full commercial product. And typically with a car, that's 18 around three years at least. 19 Since the evaluation of the advanced batteries 20 will be occurring in the period of 1998 to 2000, with some 21 of those advanced batteries perhaps not available till 22 closer to the year 2000, we think that the period of 2001 to 23 3, that time frame, will have two things happening in it. 24 One is it will be the time in which the new products, the 25 new EVs, with advanced batteries will be being designed and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 ready for commercial introduction in 2003. 2 Also in that time frame for some of the battery 3 manufacturers, advanced battery manufacturers that have 4 product before 2001 time frame -- and there are several that 5 suggest that they'll be ready before -- we would expect that 6 their products will start entering into vehicles and be made 7 available, which will help expand the market in that 8 midyear, early 2000 time frame and, we think, provide part 9 of the ramp-up that we need to get towards 10 percent. 10 So, you have some level of lead-acid batteries 11 which are going to be making continued advancements, and 12 those advancements should help expand their market. And 13 then you'll have some phase of early, probably nickel metal 14 hydride, batteries coming into vehicles, which, because of 15 their longer range, will expand the market. And then you'll 16 have in the 2003 time frame, a wave of new vehicles with a 17 multitude of advanced battery technologies, at least two or 18 three, we would expect, available in those vehicles with a 19 150 mile range as we'd expect the 10 percent mandate to be 20 met. 21 MS. EDGERTON: That's very helpful. I just -- 22 CHAIRMAN DUNLAP: I've got ten more witnesses to 23 get. I've got themes to keep track of. We'll give you 24 plenty an opportunity to ask these questions. I want to get 25 through the witnesses. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 MS. EDGERTON: Okay. Well, thank you. It does 2 seem important to be sure that some of these assumptions are 3 addressed as we go along because they are such -- 4 CHAIRMAN DUNLAP: Sure. 5 MS. EDGERTON: -- of such great concern. 6 MR. CACKETTE: Yes. Sometime we would like to 7 comment on the enforceability aspect of the MOA that's been 8 brought up by a number of witnesses. 9 CHAIRMAN DUNLAP: Enforceability, waivers, and the 10 like. We'll all have a chance to cover them. 11 Thank you, Ms. Holmes. 12 MS. HOLMES: I just want to make one quick comment 13 that, summing up, that we think that enforceable regulatory 14 requirements are needed in order to keep the interest of 15 battery manufacturers to keep the money flowing in for 16 specific numbers of vehicles. 17 CHAIRMAN DUNLAP: Sure. The whole concept of 18 enforceability's particularly important, though some people 19 seem to miss the mark on what exactly that means relative to 20 the existing mandate, and what we can enforce and what we 21 cannot. We'll make sure we clarify that in our discussion 22 with staff. 23 Ms. Hathaway, followed by Mr. Mader, Paul 24 Knepprath, and Bill Van Amburg. I trust Mr. Van Amburg has 25 his slide show ready? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 MR. VAN AMBURG: At your request. 2 CHAIRMAN DUNLAP: Okay. 3 (Laughter.) 4 MS. HATHAWAY: Mr. Chairman and members of the 5 Board, I actually have a slide show, too, but I'm going to 6 spare you that. I know that time is of the essence. So, 7 let me try to keep it short. 8 I, too, am very, very much a supporter of what the 9 Board has been doing to try to get advanced transportation 10 on the road. But I do have to say that the staff proposal 11 is one that NRDC has a lot of concerns about. Of course, we 12 only have an outline. We don't understand a lot of the 13 nuances because they're not explained in this outline. 14 Many of the concerns we have are shared with a 15 number of other people that have spoken to you -- Tim 16 Carmichael, and Joe Caves, and Bonnie Holmes, and others. 17 But let me just go through a couple key points. 18 The biggest concern that we have is how do we get to the 19 year 2003 with a 10 percent market launch of vehicles? How 20 do we get there? 21 Definitely, the idea of having a partnership with 22 companies, where they're committing to trying out vehicles, 23 and testing them, and examining what works and what doesn't 24 is critical. But it, by itself, is just a part of the 25 puzzle. And we think there's too much reliance in this plan PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 on just that. 2 Another part that is very much a concern for us is 3 how these memorandums of agreement are structured, what the 4 consequences for failure would be. And I understand we'll 5 hear about that more. But we would certainly want to see 6 these enforceable by third parties, not just by the Air 7 Resources Board; have measurable commitments that outsiders 8 would be able to track whether, indeed, progress was being 9 made, because this is critical to the other investors who 10 are going to be key to your program working. 11 We're going to need to have people in many other 12 sectors also tracking what is happening with the car 13 companies to see if there's serious commitment occurring. 14 And if there's not, then you won't see the investment into 15 batteries. You won't see drive train availability in the 16 numbers that you're going to need for 10 percent. 17 So, that's why third-party enforceability is 18 critical. This is a program that's not just about car 19 companies themselves, but about all the component 20 manufacturers, battery makers, et cetera. 21 Another key issue is the emissions equivalents. I 22 made a presentation to you last week about the 49-State 23 vehicle and why we do not believe that is something you can 24 count on to get emissions reductions even in the interim. 25 And I realize that in the short time frame that we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 talking about in the very early years, ZEVs by themselves 2 are not producing a huge amount of emission benefit. 3 Nevertheless, 49-State car vehicles (sic) 4 deteriorate over time. They're in-use emissions are not in 5 fact tracked by their certification being lower. This is a 6 key issue. And I don't want to see that lost, because I 7 know you do believe and want to insist on exact equivalent; 8 that we're not losing emissions here. 9 But I believe that with the 49-State car, we need 10 a lot further discussion with you all to ensure that that 11 isn't considered as something, without evidence, that it 12 indeed will give us lower emissions over time. 13 We can't have that now, because there are no such 14 vehicles, and we certainly have not seen controls that 15 ensure the in-use emissions don't deteriorate rapidly on the 16 vehicles. 17 And then I guess, most particularly, your program 18 has been such a monumental success that we're only a few 19 years away from having batteries that will satisfy even the 20 very stringent demands of the car companies. But that is 21 precisely because you have had such clear signals about what 22 you want and when you want it. 23 I think that I would most seriously recommend to 24 you that you consider putting a benchmark for the year 2000 25 or 2001, a number, a percentage -- even if low -- that you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 use to measure whether there is indeed progress that will 2 get us to 2003. 3 I think Mr. Lagarias said earlier, you know, in 4 asking one of the car company representatives, "What do you 5 expect in the year 2001, 2002?" Surely, not zero. You 6 know, how do you get up to 10 percent? 7 Even if we go with a low number, something 8 measurable to keep them moving that way. Okay? 9 I know that you're all -- you have many, many 10 concerns here that need to get resolved. And while they're 11 being resolved, while further discussions go on with the car 12 companies who have expressed themselves not to be fully on 13 board -- they are on board in principle I guess -- please, 14 let's not lose the possibility of other options. 15 I don't want to act like it's pride of ownership 16 or anything, but Option C had a lot of similarity to a 17 proposal that NRDC and UCS made. We are open to discussing 18 with you, modifying with you, working with you elements of 19 that plan into this plan, elements that are not in either 20 plan. 21 We have not had any response to our proposal, 22 which we made in very good faith, and have reiterated, and 23 discussed, and explored, and we really would like to see 24 something that keeps this from being a program that is very 25 easy pickings, because it's so far out there. The 10 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 percent is so far out in the future that one of the car 2 company representatives last week referred to it as a 3 placeholder. And in speaking to car company people myself, 4 I've been told, "We're not worried about it, because it's so 5 far in the future. We don't think it really means 6 anything." 7 I think it should mean something, because if it 8 doesn't mean something to them, it won't mean something to 9 the people that have to invest to make this program work. 10 And it won't mean something to their boardrooms 11 who are going to be making the commitments about how much 12 ZEV technology is really encouraged in their companies. So, 13 even if you are tending towards the staff proposal at this 14 point, I urge you to give us some time to see more details 15 on the staff proposal, and to keep other options open. 16 Thank you very much. 17 CHAIRMAN DUNLAP: Thank you. 18 MS. HATHAWAY: And any questions, I'd be happy to 19 answer. 20 CHAIRMAN DUNLAP: Thank you, Ms. Hathaway. Mr. 21 Semmens. I know, Jerry, you're coming forward. Is Mr. 22 Semmens still here? 23 I'll ask, Mr. Mader, would you yield to this 24 gentleman who has to catch a plane? And I know, with that 25 time pressure, he's going to be very efficient in his PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 presentation. 2 (Laughter.) 3 MR. SEMMENS: Thank you, Mr. Chairman and members 4 of the Board. My name is Michael Semmens. I'm the CEO of 5 Electrosource, and I'm pleased to have the opportunity to 6 speak to you today. 7 I'd like to speak to you as a technologist, as a 8 battery developer, one of the bad guys apparently in the 9 study, and as a businessman, and share some of my thoughts. 10 And although I did not intend to speak today, I want to 11 share my thoughts and then provide additional detail. 12 There are three areas I would like to cover. 13 First is confusion, second is a plea for balance, and a 14 third is a plea for specific direction. 15 The confusion goes to the Battery Panel report. 16 As a battery developer, I'm referring to the results, and I 17 agree with them. The data is fairly technically accurate on 18 what is being done and what is promised to be done. But it 19 says nothing about changing direction. And specifically, 20 what I read in this report is a solution exists and better 21 solutions are on the way. 22 And I believe that's true. And I believe that's 23 in a holistic program. Now, I believe that a balance is 24 required between systems performance and battery 25 performance. You have to start somewhere, and you may pause PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 to think about why is everyone developing lead-acid when 2 there's so many other technologies available. And it has 3 something to do with the ability to manufacture them and to 4 have them perform safely. 5 And, as a developer of an advanced battery, which 6 happens to be lead-acid, we've had tremendous difficulty in 7 bringing this to a high quality manufacturing state. 8 To hang a program on the technology, which is a 9 good technology, that's never been manufactured before, to 10 handle 10 percent of the vehicle production in California is 11 a high-risk approach. 12 To defer or discourage the near-term batteries, I 13 think is also a high-risk approach. As a businessman, am I 14 going to defer part of my production line to a market which 15 is being effectively removed by agreement? And how will 16 that be viewed by my -- my investors? Clearly, I'm going to 17 delegate my production facilities to markets that I know 18 will be growing and prospering in the future, not those 19 markets which have been removed. 20 The second risk is if the mandates are moved up 21 after a great deal of investment has been brought forward in 22 the near term, and when reality hits and these new 23 technologies are coming into production, what's to prevent 24 those from being moved out again, again an element that 25 would discourage an investor from the outside. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 And I go to the battery report, and I only 2 received it today, and I'll study it closely. But the final 3 paragraph in the summary -- However battery develops caution 4 (sic) that the California program has been the main driving 5 force behind their development efforts for advanced 6 batteries, saying that successful recruitment of investment 7 for the upcoming pilot scale and subsequent phases of 8 batteries' development and commercialization will depend in 9 large part to the continuous and orderly California program. 10 And I believe, Mr. Chairman, I sent you a note 11 from a recent Bloomberg article, which Bloomberg is the news 12 agency of the financial community, indicating that the 13 program had been, quote, "gutted" in California. 14 I know that's not accurate, but that's what the 15 financial community is seeing. 16 These are areas of concern and difficulty. What I 17 am requesting is careful consideration to carefully 18 communicate the seriousness behind the ZEV and the 19 California ARB program, and make it clearer to the outside 20 world as well as the inside world. 21 Please also consider a progressive introduction of 22 new technologies where we can improve -- and I'd like to 23 point out that lead-acid batteries are not included in the 24 U.S. ABC. And so, funding for that technology has to come 25 from elsewhere. As I reported before, we have funded all of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 our own research. 2 What I am requesting is an orderly program; 3 certainly compromise is supportable. No one wants failed 4 introduction of a product. But we need a continuous and 5 firm commitment to the programs as we move to the future, 6 and a program that has enough specifics in it so people can 7 make their own evaluation of a business decision and what 8 risks they want to take and the amount of money they want to 9 put in the program. 10 As always, Mr. Chairman, you have the support of 11 Electrosource. We support the compromise program. We have 12 been supporting the program for a number of years, and tens 13 of millions of dollars. We feel we have an advanced battery 14 that can reach the hundred mile on a consistent basis 15 effectively today. 16 I think I've shared with you the story -- I asked 17 my staff -- on vehicle efficiency. How much energy do 18 vehicles use that have our batteries in them today? The 19 range was between a low 100 watt hours per mile to over 600 20 watt hours per mile. And these are small sedans, four-door 21 sedans to pick-up sized vehicles. 22 With that range in the system efficiency, you an 23 see that the balanced approach is clearly necessary. Good 24 battery development and consistent development is necessary 25 for a successful program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 So with that, sir, I will take any questions and 2 keep my comments brief. And thank you very much for your 3 time. 4 CHAIRMAN DUNLAP: Thank you. Yes, Ms. Edgerton. 5 MS. EDGERTON: Could you tell me more specifically 6 what you think such a balanced approach in the regulation 7 might look like? 8 MR. SEMMENS: I believe that some confidence -- I 9 won't say specific minimum sales levels, but some confidence 10 in the volume of business that's going to be required in the 11 near term as well as the long term/ I think it's important, 12 so that some estimate of return on investment could be 13 calculated based on the program. 14 So, as some of the confusion that I'm trying to 15 sort through in my mind, if you will, is how many vehicles 16 will be sold over the next five years or three years? And 17 if I'm unable to determine that or if the sales appear to be 18 in doubt, and the program does not seem to be of sufficient 19 substance, then it's a poor business risk. And I'm asking 20 for enough volume and enough specificity in that program to 21 be able to make a business decision. 22 CHAIRMAN DUNLAP: Okay. Thank you. 23 MR. SEMMENS: Thank you. 24 CHAIRMAN DUNLAP: Jerry Mader. Thank you for your 25 patience. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 MR. MADER: No problem. One thing I've learned in 2 the last several months in this process. It's been a good 3 learning experience. 4 Before I make my comments, I just want to say 5 that, overall, I want you to remember that I think anything 6 you do has to be -- and any specifics, you have to think of 7 this whole enforcement issue. 8 I have had good fortune, I guess you'd say, to be 9 in this industry since 1979. I've been through three auto 10 company program close downs. And I don't think the people 11 in the auto companies are necessarily -- are devious. I 12 just think they have -- the auto industry has shown a 13 history that they have short attention spans and what's 14 today is important to them because of what you've forced 15 them to do. 16 Two years from now, they may not think that it's 17 very important. So, consequences in some of the things 18 about consequences for failure, I really agree with those 19 comments. 20 Now, over the last year, I've been representing at 21 these meetings and these hearings six battery companies; all 22 of them are non-U.S. ABC companies. AEG, Silent Power, 23 Electric Fuels, Power Cell, Electrosource that you just 24 heard from, and RCI. 25 In this process, I want to commend the staff for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 their diligence and their hard work in trying to come up 2 with some solutions. And I think they've done a good job 3 here in the last several weeks of working through, I think, 4 a very tough scenario situation. 5 And I think what you have on the table today 6 definitely has merit. And I also want to commend Chairman 7 Dunlap on keeping this process open and working in an open 8 process. 9 I was reading the advanced battery -- the Battery 10 Panel's report, and I wanted just to make one quote from it. 11 They had a warning in the last page, and one quote from 12 there is that care should -- you should take care too avoid 13 sending signals that would slow investment in advanced 14 batteries. 15 You just heard from the gentleman before me about 16 wanting specificity around the program. And I think that, 17 in looking at what you have on the table today, one of the 18 things we definitely need is we need the 10 percent mandate 19 in 2003 rather than pushing it back a year. I think that 20 would send a wrong signal if you push it back to 2004. 21 We need electric vehicles to be introduced in 22 1998, in some numbers and as quantifiable as you can get. I 23 think the better off the investment community will be for 24 that. 25 And we need the market, obviously, to grow from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 '98 to 2003 in some fashion. And that's where I believe 2 that when you develop this MOU with the auto companies, that 3 some specific language on their market development programs, 4 some thinking that really puts in place the activities they 5 need to perform in order to help grow the market will be 6 important. 7 You know, the auto companies are marketeers and 8 manufacturers. And they do a tremendous job of marketing 9 products. They're really known for that. 10 So, you want to encourage them to do that 11 marketing. And there are all types of niche market 12 development efforts that can happen -- loaner vehicle 13 programs, ride and drives, various incentives, vehicle 14 demos. I think you want to get specific about that. 15 And kind of lastly, a little concern I have was, 16 when I heard the gentleman from Ford talking earlier today 17 about linking what you do in advanced batteries in the 18 future to the U.S. ABC program. I think that's a mistake. 19 I believe you could be set up on that. The U.S. 20 ABC Phase II program is very soft. We all know we don't 21 have a federal budget today. We have huge budget deficits. 22 Everything I've heard is the Department of Energy's not 23 going to have a lot of money for a program. 24 So, I wouldn't link what you're going to do to the 25 Federal Government program. I would really keep those two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 things separate, especially when you realize that most -- in 2 the Battery Panel's report, most of the companies weren't 3 U.S. ABC companies. And I think competition outside of U.S. 4 ABC is very healthy for battery development. 5 Also, you know, the money that even the auto 6 companies were talking about contributing, in advanced 7 battery development terms is a very small amount of money -- 8 25 million, in the order of $25 million. That comment 9 showed me they're really not that serious. 10 You know, one of my -- one of these member 11 companies, Silent Power, just -- who was dropping the 12 program, they spent upwards of 20 to 25 million a year over 13 the last five years since you've put the mandate in place. 14 And that's for only one type of technology. 15 And I would encourage you over the next -- it 16 won't happen before Christmas; it won't even happen probably 17 before you finally agree on this regulation, but I think 18 there's some work that needs to be done to look at creative 19 ways of getting more resources and investment dollars into 20 battery development. 21 And I think this State should be working on that, 22 and also to make sure that whatever you do, technologies 23 that are going to be developed in Europe for the European 24 market, that there's some prospect for bringing those 25 technologies here and demonstrating those technologies in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 addition to U.S. ABC technology. 2 Those are my remarks. And I'd like to wish 3 everybody a happy holiday season and a Merry Christmas. 4 CHAIRMAN DUNLAP: Thank you, Mr. Mader. 5 Ms. Edgerton. 6 MS. EDGERTON: Excuse me, did you say that Silent 7 Power -- what did you say about Silent Power dropping? 8 MR. MADER: Yeah. Their parent company, RWE, made 9 a decision of about three to four weeks ago to drop their 10 development. And I think the Battery Panel did a pretty 11 good job of identifying the reasons at the end of their 12 report. 13 And basically, it was because of this -- a big 14 contributor was the regulatory uncertainty. They saw the 15 market softening up and the fact that they wouldn't really 16 get into high volume production and get a return, as the way 17 they define, until about the year 2006, so they couldn't 18 continue to make -- they had to -- they were making a 19 decision now to put another $150 million into the battery 20 development, and they didn't think they could wait 12 years 21 to get a return on that. 22 MS. EDGERTON: So, if I understand you, the 23 uncertainty of the last few months has contributed to -- 24 MR. MADER: (Interjecting) Yeah. It's 25 contributed. And I think what the Battery Panel said, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 would agree with. Every -- what it did show is that every 2 company has its own financial strategies and its own 3 investment decision strategies. And what you're going to 4 see is you're going to affect it. And we've already seen 5 that by one company dropping out. 6 We've already heard, you know, from Electrosource 7 just a few minutes ago saying that if this doesn't look like 8 a pretty specific program, a pretty defined program, you'll 9 find other companies that drop out. 10 So, things have to start in 1998, and they have to 11 believe, based on what you write up, as an agreement and 12 regulation, that there's some teeth in it and that this 13 market's going to start in '98, and it's going to start to 14 grow to 10 percent in 2003. 15 If you can do that, I think the investment will 16 stay. But in the absence of that, I think you'll see other 17 casualties. 18 MS. EDGERTON: Thank you. 19 CHAIRMAN DUNLAP: Thank you, Mr. Mader. 20 Paul Knepprath, American Lung Association of 21 California, and Bill Van Amburg, David Modisette. 22 MR. KNEPPRATH: Good afternoon. Thanks for the 23 opportunity. My name's Paul Knepprath, representing the 24 American Lung Association of California. We have 18 local 25 organizations throughout the State of California that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 represent approximately a million and a half donors to the 2 American Lung Association in the State. 3 I will commit to providing you some written 4 comments on the proposal. Obviously, we haven't had much 5 time to take a look at it and have technical folks provide 6 us with some feedback on it. There are a few comments that 7 I would just raise just for the record, and some of them 8 have already been raised. But these are the kinds of things 9 that we'll be looking at in terms of this proposal. And 10 that is some of the uncertainty around how do we make up the 11 emission reductions that will be replacing those that the 12 mandate would have given us in those first years of the 13 requirement. 14 It says here in the summary that all the exhaust, 15 evaporative, and refueling emission reductions associated 16 with the existing mandate requirements, plus a premium, 17 would be made up by the manufacturers in production of 18 cleaner cars. 19 We'll be interested to hear from the staff and the 20 Board how that program will play out, and how many cars are 21 we talking about? What cars are we talking about? We've 22 heard about the 49-State car. Some people have raised 23 concerns about that. 24 So, that will be an issue that we'll be very 25 interested in seeing how you address that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 The other is, of course -- others have said this-- 2 how do we get to 10 percent in 2003 if we're not having any 3 kind of graduated step up to that if there are no 4 requirements along the way that are enforceable? How do we 5 make 2003 at 10 percent? 6 And I would again echo some of the comments made. 7 I think. I think we may be setting ourselves up for 8 delaying and setting us up for failure with this kind of an 9 approach, and we would raise a concern about that. 10 And, of course, what are the penalties for 11 nonperformance or noncompliance under this current staff 12 proposal? 13 We look forward to the continuing debate and 14 discussions around this. We'll come back to you with some 15 of our own written comments around this and, hopefully, this 16 process will remain open as it has thus far for public 17 comments and input, so that this may or may not be the 18 actual proposal that is adopted in March. 19 And we look forward to participating in that 20 process. Thank you. 21 CHAIRMAN DUNLAP: Thank you, Paul. Mr. Van 22 Amburg. I recall last week, you said you'd be working on 23 your slide show. 24 MR. VAN AMBURG: I promised slides, and I did not 25 repeal that promise. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 I have brought forward, however, a hard copy as 2 opposed to a computer generating copy, because the 3 technology can't work here. 4 I want to just thank you for the opportunity to 5 speak. We briefly looked over the proposal that's been put 6 out there today. I must say that we find -- and CALSTART 7 actually, interestingly, has never had a position on the 8 mandate. We're not an organization that takes positions on 9 that. 10 But we have said that we do believe that it has 11 been good for industry, and we have strongly said that we 12 think it has been a real driver for an industry moving 13 forward. Therefore, we have said we think it's a good thing 14 to keep doing for California business. 15 If we could show the next, please. 16 However, we do think that this has been an 17 unnecessary suspension of a program that was working, and 18 it's a suspension that we think was unwarranted by 19 technology or marketing realities that have come out over 20 the past year of workshops that we've all been through. 21 I think we saw this full page ad that was in the 22 paper yesterday, "California Has a Choice: A successful 23 electric vehicle launch or politics as usual." 24 And fortunately, I think we agree with the 25 automakers on that, on politics as usual. But the politics PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 as usual are kind of the same old thing we're seeing. They 2 have often said in the past that they cannot make these 3 things work, and they will push them -- they fight them at 4 any cost. 5 It's a high waged campaign and a high cost 6 campaign. 7 Next. 8 And I think that's gotten in the way. It's been a 9 real smoke screen to good talk. I'll just show this 10 quickly. There has been no debate about whether there was 11 some type of a marketplace for these vehicles. Even the 12 automakers have acknowledged that in various points, even in 13 confidential documents. 14 Next, please. 15 In fact, that used as a challenge, and the 16 objective was to try and create a climate in which the 17 State's mandate could be repealed. And that has been the 18 $24 million campaign by the oil and auto industry. And 19 you've seen the results. You've seen the attacks on safety 20 that have been dealt with very quickly and I think very 21 forthrightly by this Board. 22 But it's been a nonstop process of dealing with 23 it. I think it's an unfortunate smoke screen that's gotten 24 in the way of the reality of what you've been able to 25 accomplish on this. And I might mention a forestful of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 paper that's gotten mailed out. 2 What we'd like to talk about today, though, is 3 what we're faced with, and what we're faced with is a repeal 4 or the suspension of the mandate, however, the requirement 5 that the auto and oil industry has lobbied very extensively 6 for. We have talked about modifications over the last 7 several months. 8 The program's working. It's driven forward 9 investment. It's done an awful lot. Let's modify it. 10 Let's fix it, let's make it work even better. But I think 11 what we're seeing here is a complete proposal that's been 12 thrown out the window. 13 The question is, what does it do in terms of what 14 you want to see driven forward? Because that is the bottom 15 line, what is it accomplishing for what you want to see 16 happen in California? Is there consistency and continuity, 17 which is critical to investors -- pointed out by the Battery 18 Advisory Committee? No, I don't see that in there. 19 Does it keep in place those elements that keep 20 driving technology forward, such as significant volumes of 21 vehicles, which as I've testified to you before is a prime 22 driver of the small entrepreneur's medium size companies 23 involved in this. No. 24 Does it give automakers flexibility? Yes, it 25 does, which is good. But it does require very little to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 returned in that trade. 2 Now, I must say, we have been counseled by some to 3 stay out of this and not speak, because the decision's done. 4 But frankly, I have too much respect for the quality and the 5 independence of this Board to believe that is the case. I 6 think there was a proposal that's on the table, and I think 7 you are all looking at it very carefully. 8 I do believe you want flexibility. And, in fact, 9 I think there are very few people in this room that would 10 argue against that. I don't think you want finality, and I 11 think this current action ends your program in six years. 12 It ends significant progress, certainly the pace of progress 13 that you've seen for six years without the real 14 justification to do that. 15 Let me lay out what -- if I can, with this next 16 slide, kind of the picture -- if you're an investor standing 17 back and looking. This is what you said out. You had tough 18 goals. You set them out there. An investor looking that 19 said, well, that's a lot vehicles there. That justifies and 20 lowers the risk. The yellow color is basically your 21 requirement per year, and then the additional colors on top 22 are the cumulative totals of vehicles that are going to be 23 out there. 24 It made a real difference to people interested not 25 just in drive systems but also in support of such. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 But the next slide shows basically what you have 2 done then and what you are putting out with this current 3 proposal for investors and entrepreneurs. That's a flat 4 line. That doesn't get people very involved. 5 Now, the 2003 time frame helps. It is good to 6 have a tough target to aim towards. But the question is, 7 how do you get up to that point with the current program? 8 And we would be very concerned about the viability 9 of people staying that long in the program to develop the 10 technologies to meet that 10 percent goal. 11 If I could see the next? 12 We showed you in the past just a snapshot. This 13 was never meant to be all the investment that's gone on by 14 small companies in this State, but a snapshot of what 15 they've done a half a billion dollars to date. Those out- 16 year numbers were based on business plans, assuming that 17 there was a ramp-up of vehicles in 1998, '99, and 2000. 18 Without that, that is another billion dollars just 19 in this one snapshot of California investment that is 20 certainly at risk. And I think that's significant, and 21 that's something that needs to be seriously thought about. 22 Because one of the things you committed yourselves 23 to was protecting and recognizing the investment and the 24 efforts of California business. I don't think the current 25 plan is at all going to kill electric vehicles. I think it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 will hurt California business effort to make them move 2 forward, and I think it will sow down seriously the place of 3 investment in technology development. Because, frankly, a 4 lot of the technology development has come from smaller 5 companies outside of the traditional automotive industry. 6 It has not come from the U.S. ABC, where you're 7 seeing some of the best battery technologies come. But it's 8 coming from outside of that effort. And frankly, 9 competition is good for development and good for business in 10 the longer run. 11 Here's -- and one other point there that I'd like 12 to make is that I don't think this industry in California is 13 also going to go away. We won't fall into that rhetoric or 14 hyperbole. But I think there is going to be a number of 15 companies dropping out. And you've heard some of them on 16 the national scene where that's already happening. 17 These companies won't be able to last. The other 18 danger you, in essence have, if you'll excuse the analogy, 19 set up a technology olympics in 1990, and you set the bar 20 pretty high. 21 But you said that was a worthy goal; let's aim 22 towards it. And over the last five years, people have been 23 moving pretty much towards the goal and are very close to 24 reaching it. 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 They have invested a lot of money. They've 2 invested an awful lot of people time that they've committed 3 to doing this. But now, as we get close to it, and people 4 say, "Well, we're close. We can't quite get the bar; how 5 can you help us?" 6 The question, are we modifying that, are we 7 lowering the bar, are we finding ways to make it easier? 8 What we're seeing is we're canceling the olympics. 9 We're putting it off from 1998 until the year 2003. 10 Frankly, the people -- especially the medium-sized companies 11 working on technologies -- cannot stay in training that 12 long. They won't be around to make this happen. And that's 13 maybe not that big of a concern in Detroit, but it's a big 14 concern to you if you want to have the support industry to 15 be making drive trains, batteries, energy management 16 systems, and the like to support your ramp-up to 10 percent. 17 It is also a concern to California, because you 18 said something that I think is even a greater danger to 19 CARB. You have asked that people meeting a tough goal. You 20 have stayed on course for five years, and you now look like 21 you're going to not modify it, but back off of it. 22 It sends a signal that this Board has to seriously 23 consider I think. Will people take us seriously in the 24 future? What does that do to our ability to regulate 25 effectively? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 This has been, and I have great respect for CARB, 2 one of the most creative and successful regulatory bodies 3 because of its flexibility, its technical expertise, and the 4 like. But this sends a dangerous signal to your future 5 ability to continue to do that, not only for those you 6 regulate, but potentially for those you want to respond to 7 your regulation. 8 One final point, if I can, because this has been a 9 long day for everyone. I think the Battery Technology 10 Advisory Panel wrote an excellent report. And I see it 11 consistently being misquoted as saying things aren't 12 possible that, in fact, it does not say. It is very careful 13 about how it phrases things. In fact, it finds that a 14 hundred mile electric vehicle in the marketplace at a 15 legitimate cost is possible in the 1998 time frame with 16 batteries coming on line now. 17 It also says that you need a continuous and 18 orderly California program to get what you want, to get the 19 advanced batteries out there. I am troubled that the 20 program I see on your behalf does not do what I think you 21 want it to do, and you have to be concerned about that. 22 Thank you. 23 CHAIRMAN DUNLAP: Thank you, Mr. Van Amburg. 24 Dave Modisette, followed by Anita Mangels, 25 followed by Bill Wason. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 We have five speakers left. 2 MR. MODISETTE: Mr. Chairman, members of the 3 Board, I'm Dave Modisette. I'm Executive Director of the 4 California Electric Transportation Coalition. Our members 5 are the five largest electric utilities in California, both 6 investor owned and municipal utilities, Westinghouse 7 Corporation, and the Advanced Battery Task Force. 8 I first want to thank Chairman Dunlap and all the 9 members and the staff for the really extraordinary time and 10 effort that you've invested in this issue. We know the 11 Board is fully committed to the successful introduction of 12 zero-emission vehicles in California. 13 And you know that we have fully supported the 14 Board's actions on this issue; in particular, during the 15 1992 and the 1994 biennial review. 16 We believe that a cooperative, good-faith 17 relationship with automakers and all parties is essential 18 for a successful ZEV program. 19 The staff recommendation is a positive step 20 towards this cooperative relationship. Utilities are doing 21 their part. We are prepared to meet the infrastructure 22 needs of our customers, to provide reliable electrical 23 service at reasonable rates, to purchase significant numbers 24 of electric vehicles in the early years. One specific thing 25 we would ask is that the determination of the cities in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 technology development partnership include the flexibility 2 to consider placement of vehicles in not only the Los 3 Angeles and Sacramento areas, but also San Diego and the Bay 4 Area. 5 Our understanding of the staff proposal is that 6 smaller companies producing vehicles today and in the future 7 will remain eligible to generate and sell zero-emission 8 vehicle credits. 9 We understand that that's the intent of the staff 10 proposal. It's to foster the development of these companies 11 and their component suppliers. We would encourage you to 12 highlight this as the staff proposal evolves in the future. 13 Having already said that the staff recommendation 14 is a very positive step towards a cooperative relationship 15 which we need to build, I think it's important to say that 16 cooperation alone will not guarantee success. 17 We need an enforceable agreement with clearly 18 stated goals, measurable criteria against which -- against 19 which to evaluate progress. 20 The 10 percent requirement in 2003 provides the 21 underlying confidence that voluntary market efforts of the 22 auto industry will lead to a larger sustaining market. 23 It is also important, we think, to emphasize that 24 the staff proposal, as we understand it, would not abolish 25 the mandate in 1998 through the 2002 time period. It PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 suspends it. And that mandate, as we understand the staff 2 proposal, can be brought back and imposed on individual auto 3 manufacturers if sufficient progress is not being made. 4 We think that's an extremely important point of 5 the staff proposal. 6 Lastly, we're concerned that the criteria for 7 success in the 1998 and early 2002 time frame needs to be 8 more fully developed. We believe that this needs to be a 9 criteria that not only involves the battery technology and 10 battery cost, but the full range of efforts that automakers 11 must make to prove to us, to prove to the State of 12 California that they really are able to ramp-up to the 10 13 percent level in 2003. 14 Just in conclusion, we do want to work with the 15 staff and all parties over the next 45 days to add specifics 16 and detail to this criteria for success. 17 Thank you. 18 CHAIRMAN DUNLAP: Thank you, Mr. Modisette. I 19 appreciate your continued involvement and interest on behalf 20 of your companies. I want you to know you've warmed 21 Supervisor Roberts' heart when you mentioned San Diego. He 22 wants the vehicles there as well. 23 SUPERVISOR ROBERTS: I had to refrain from 24 clapping, because I didn't want to interrupt your comments. 25 But I had planned in my own comments to correct this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 oversight. And I hope that staff will note that. At some 2 point, I suspect they're going to want all of our support. 3 I want to see this. I think it's important to expand to 4 these other two very important markets for a number of 5 reasons to show the residents in those communities, to 6 expose them to these technologies, but also because I think 7 it's going to be -- I think this is going to be a successful 8 program. And I think that early introduction is going to 9 also drive the development of infrastructure in those 10 communities when this introduction is made. 11 So, I think it's very important that those two 12 areas that have been cited be included. I'm more partial to 13 the one in the south, but I can see a strong argument why 14 the San Francisco area should be, too. 15 CHAIRMAN DUNLAP: Mayor Hilligoss and I want to 16 see Petaluma and Rancho Cucamonga added. 17 (Laughter.) 18 CHAIRMAN DUNLAP: Thank you. 19 MR. MODISETTE: Thank you. 20 CHAIRMAN DUNLAP: Anita Mangels, Bill Wason, and 21 then Clare Bell. 22 MS. MANGELS: Thank you, Mr. Chairman, members of 23 the Board. Before I begin my remarks on behalf of 24 Californians Against Hidden Taxes, I'd like to let you know 25 that I have with me a statement from the Howard Jarvis PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 Taxpayers Association. They were unable to be here 2 personally today, but they do represent about 200,000 3 California taxpayers. They are opposed to the mandate. 4 They were in favor of the Chamber of Commerce alternative, 5 which was purely market-based, and they've asked me to 6 submit the statement on their behalf to that effect. 7 Additionally, I have a statement to be submitted 8 on behalf of the Reason Foundation. They, too, were unable 9 to be here personally, but I believe you are aware of their 10 opposition to the mandate for economic and free market 11 reasons. 12 I will also submit that at the conclusion of my 13 remarks. 14 As you know, my name is Anita Mangels. I'm 15 Executive Director of Californians Against Hidden Taxes. 16 We're a coalition representing the Howard Jarvis Taxpayers 17 Association, the National Federation of Independent 18 Business, the California Manufacturers Association, Western 19 States Petroleum Association, California Business Alliance, 20 Santa Clara Valley Manufacturing Group, Certified Grocers of 21 California, the National Tax Limitation Committee, 22 California League of Food Processors, the California State 23 Grange, and the California Farm Bureau Federation, among 24 dozens of other organizations, businesses, and public 25 officials throughout the State. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 Our opposition to the ZEV mandate is long- 2 standing, well-known, and well-documented. In brief, we 3 believe that the appropriate catalyst for the development of 4 electric vehicles is natural market demand, which should be 5 met by the private sector independent of intrusive 6 government mandates and quotas. 7 We strongly oppose any type of public financing of 8 the electric vehicle industry. Such direct and indirect 9 subsidization has been conservatively estimated at $20 10 billion to underwrite the forced introduction of EVs under 11 the existing mandate. 12 It defies reason that a regulatory agency charged 13 with improving air quality in our State would steadfastly 14 cling to an unfunded mandate which would, by CARB's own 15 admission, achieve less than one percent of the emissions 16 reductions required under CARB's own clean air plan, even 17 after full implementation under the existing mandate in the 18 year 2010. 19 For that reason alone, regardless of one's 20 personal philosophy on the role of government enforcing 21 technology, it should be clear that the mandate needs to be 22 repealed, not tinkered around the edges with, not modified, 23 not pushed back for a year, or two, or five. It should be 24 repealed. 25 The question then becomes, if you do repeal it, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 what new regulation, if any, should replace the mandate, and 2 through what process should such a replacement be 3 formulated? 4 We see many interesting proposals before this 5 Board, most of which would do nothing but rename or 6 reshuffle the narrow technological requirements, onerous 7 production quotas, and massive public subsidies associated 8 with the existing mandate. 9 The proposal recommended by staff today is no 10 exception. Now, I've noticed especially today that some EV 11 promoters have zeroed in on the catch phrase, market based. 12 And they submitted proposals which masquerade as voluntary, 13 business friendly, or flexible. 14 And the staff proposal also makes liberal use of 15 those words. However, the bottom line is that all of the 16 proposals still require the exclusive promotion of a single 17 technology, the electric vehicle, and stili include rigid 18 production quotas and stiff penalties for noncompliance. 19 Now, it doesn't matter if you call this a market 20 launch, or a public/private partnership, or 40 acres and a 21 mule. If it forces automakers to produce only one kind of 22 car and State dictated quantities by State dictated dates, 23 and if it relies on public subsidies, it's still a mandate. 24 And that is unacceptable. 25 In deliberating this matter over the coming PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 months, we hope that you will consider the following points: 2 In the face of the undisputed fact that emissions reductions 3 from the EV mandate, even if fully implemented, would be 4 pitifully low, EV promoters are now attempting to make an 5 economic argument for retention of the mandate. 6 They've been up here begging the State not to 7 abandon what they call fledgling EV related industries which 8 depend on the mandate for their survival. 9 First of all, many of these so-called 10 entrepreneurial businesses have been heavily subsidized by 11 tax dollars from the very beginning, and their backers have 12 virtually made a career of attending public meetings, such 13 as this one, to plead for continued subsidies so they can 14 carry on. 15 If, as they continually insist, there were indeed 16 a market for these folks' products, they would be spending 17 less time here begging for public handouts and more time out 18 on the street selling cars. 19 Why should the taxpayers continue to be unwilling 20 or unwitting investors in companies which must depend on 21 government mandates to ensure its success. 22 Corporate welfare of this nature should be 23 eliminated, not encouraged. I notice Mr. Van Amburg was 24 very quick to talk about how there's been a significant 25 amount of public -- or I should say private investment in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 California in the industry. He neglected to mention that 2 the, quote/unquote, "public/private partnership" of CALSTART 3 is heavily subsidized by tax dollars and public funding. 4 And many of these so-called start-up business which go 5 through CALSTART would not be there without the tax 6 subsidies or funding from special interests that stand to 7 make a lot of money if EVs indeed get onto the roads. 8 So, I think it's quite a misconception to sit here 9 and talk about the industries that may go under or die on 10 the vine because of this. Any industry that needs a 11 government mandate or taxpayer guarantees to ensure its 12 survival maybe should think twice about the business that 13 it's in. 14 If there were a market, they would not need a 15 mandate. 16 Another recurring theme that we've heard is that 17 electric cars must remain the driving force behind any clean 18 air plan. Yet this irrational devoting to electric cars, 19 regardless of what euphemism is applied to their mandated 20 introduction, appears to have no rational basis, scientific 21 or otherwise. 22 We've already seen studies by credible experts, 23 such as the Reason Foundation, Rand's, Sierra Research, J. 24 D. Power and Associates, MCubed, and others that EVs as a 25 solution to air pollution are environmentally ineffective PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 and prohibitively expensive. 2 Now, a new study by a group of scientists at the 3 Massachusetts Institute of Technology, published in the 4 January, 1996, issue of Technology Review, describes the 5 shortcomings in the justification for the existing or any 6 other mandate. 7 Of the genesis of the EV mandate, the MIT 8 scientists had this to say, quote, "One supposes that such a 9 mandate would have been preceded by a comprehensive 10 analysis, yet no investigation of the overall performance or 11 effectiveness of electric vehicles either by themselves or 12 compared with alternatives has been undertaken. Our 13 research group found that available material either deals 14 with just one element of the system, such as batteries, or 15 is obviously partisan coming from enthusiasts, such as 16 electric vehicle makers, battery suppliers, or electric 17 utilities with a stake in the outcome," close quote. 18 They went on to say, and I quote again, "The 19 electric vehicle policy defined by the California Air 20 Resources Board is neither cost-effective nor practical. 21 Electric vehicles will not contribute meaningfully to 22 cleaner air if they're introduced as now proposed. Over the 23 next decade, their affect will be imperceptible -- 24 imperceptible compared with other major improvements in 25 automotive and other combustion technologies," close quote. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 The scientists concluded by reiterating the 2 failure of EVs to meet the needs of a mass consumer market 3 and the enormous costs of implementation. 4 By way of an alternative to the EV mandate, the 5 study's authors urged the adoption of a flexible strategy 6 that permits us to choose the most effective options as they 7 develop. 8 The California Chamber of Commerce's proposal, 9 which was the only one advocating repeal of the mandate, 10 sought to do just that. It would have made maximum use of 11 competitive forces and market-based strategies to allow the 12 private sector flexibility in satisfying the emission 13 reduction requirements of the SIP. 14 If the true goal of this Board is cleaner air, why 15 should it matter how that goal is achieved? The same 16 question applies to the EV lobby, who are fond of wrapping 17 their technological ambitions in the sanctified cloak of 18 clean air. 19 The truth is that electric vehicles, by this 20 Board's own statements in their mandated volume, will 21 achieve fewer than one percent of the emissions reductions 22 required under the State's clean air plan. 23 This is not the idle speculation of mandate 24 opponents. It is a fact acknowledged by the Air Resources 25 Board and many in the EV lobby itself. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 Why then is the prospect of broadening the field 2 of clean air opportunities so threatening? We all want 3 cleaner air, but the EV mandate or any skillfully recast 4 version of it is the least cost-effective way to go about 5 it. 6 The staff proposal does nothing more than cloak 7 the bitter pill of the original mandate in multiple layers 8 of sugar designed to sweeten the blow. It's still a 9 mandate. It still discriminates in favor of one singular 10 technology. It will still cost billions of dollars in 11 public funds, and it will still provide virtually no clean 12 air benefits. 13 Let's cut our losses, repeal the mandate, and get 14 down to some meaningful solutions which rely on the free 15 market, not arbitrary government mandates and coerced 16 production quotas to get the job done. 17 Thank you very much for your time. 18 MR. LAGARIAS: Thank you. 19 MS. MANGELS: Questions? 20 MR. LAGARIAS: Any questions from the Board? Dr. 21 Boston. 22 DR. BOSTON: A few years ago, one of my brilliant 23 investments was in oil well exploration. And one of the 24 enticements at that time was a tremendous tax break one 25 would get for that kind of exploration. Doesn't that kind PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 of repulse you now to be representing the oil industry and 2 those hidden taxes that you're talking about? 3 MS. MANGELS: I suppose I could ask certain folks 4 in this room who have ties to CALSTART and Natural Resources 5 Defense Council, you know, if they feel that they have a 6 conflict of interest, but are still ruling on this matter. 7 I think what we need to do is take a look at what's on the 8 table, which today is subsidies and mandates for electric 9 vehicles which will not clean up the air. 10 You know, to go backward and look at anything 11 else, although if you like, I have training in accountancy, 12 I'd be happy to debate the point with you at some other 13 time. 14 But the issue today is whether or not we're going 15 to go forward and take $20 billion -- give or take a few 16 billion -- of taxpayer money and put some vehicles on the 17 street, for which there is no true consumer demand and which 18 will not improve our air quality any more than one percent 19 over the next 15 years. 20 And frankly, if you got yourself a tax break a few 21 years ago, more power to you. I certainly don't think the 22 rest of California would like to subsidize something that's 23 not going to help air quality. 24 DR. BOSTON: You seem to be asking for it now. 25 MS. MANGELS: I beg your pardon? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 DR. BOSTON: You seem to be asking for it now by 2 the people you represent. 3 MS. MANGELS: I represent people, including the 4 Howard Jarvis Taxpayers Association. As a matter of fact, 5 if you'd like, I'll read the endorsement list for you. 6 National Tax Limitation Committee, People's Advocate, 25 or 7 so California legislators, the -- gosh, I can go on and on 8 and on. Would you like the list again? 9 DR. BOSTON: No. I heard it the first time. 10 Thank you. 11 MS. MANGELS: Okay. 12 MR. LAGARIAS: Thank you. I get the impression 13 you're against the mandate; is that correct? 14 (Laughter.) 15 MS. MANGELS: Right. But I wouldn't presume to 16 tell you how I really feel, Mr. Lagarias. 17 Thank you very much. 18 CHAIRMAN DUNLAP: Thank you. Bill Wason, Clare 19 Bell, Lew Uhler. Is Mr. Uhler still here? Okay. And Ben 20 Knight. Those are the remaining speakers. If anyone wishes 21 to yield in the interest of time, I would be grateful and 22 would show my appreciation publicly. 23 MR. WASON: I won't yield. I'm Bill Wason with 24 BAT International. We're an electric vehicle manufacturer 25 in Burbank. I will yield to respond to every one of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 previous speaker's allegations. But there are a couple that 2 are probably worth noting. 3 BAT is using private investment dollars to build 4 cars. We are a public corporation, and we are using 5 investor dollars that are invested to do a lot of the 6 research work. And, in fact, the joint development project 7 that we have with Acme right now is with private dollars 8 right now, and a significant share of private dollars. And 9 there are not public funds involved. 10 I think the previous speaker's point that there 11 needs to be a lot of competition within both the electric 12 vehicle manufacturing market and the battery development 13 market is critical, because if these technologies are 14 carefully controlled by a few players, it leaves you a lot 15 less flexibility in actually coming up with your end result 16 of a 10 percent mandate. 17 And I think, in looking at the staff proposal, 18 that seems to be the key modification that's necessary. 19 It's how you come up with maintaining that market 20 competition in the early years that ensures that players 21 with good technology get into the marketplace regardless of 22 whether they have a direct alliance with a major auto 23 company. 24 I think that that becomes very important, because 25 some of the technologies that are not controlled by the auto PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 companies can, in fact, be very good solutions. I think 2 Acme's efforts are an example of that. They are not in full 3 production of a battery. This is not -- this is a 4 development project. This is not a battery that will get 5 tested in a car in three or four months, but it shows that 6 you can take an aerospace battery manufacturer, team them 7 together with an electric vehicle manufacturer, get a lot of 8 test data on batteries; the test data's very credible data, 9 and come up with some very exciting number relative to the 10 life cycle cost of electric vehicles. 11 I want to reiterate that, because I think it's a 12 critical element in your own look at whether there are near- 13 term batteries that could come into play in 98-99, that 14 would really have an affect on marketability of ZEVs. 15 I think the auto companies have said they need a 16 hundred mile car in order to be able to sell cars. If 17 that's the case, that should be a goal. And if there are 18 batteries out there that can meet that goal, there needs to 19 be a mechanism to get that battery to the market so it sets 20 a standard, so you don't step back from 10 percent in 2003, 21 so those batteries and cars get to the market, and it's an 22 open competition to sell those vehicles. 23 I think there's some room within the staff 24 proposal to do something to that effect. The more it's 25 concrete, the more there are real dollars attached to it, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 the more all players can get access to that type of pool, 2 the more likely it's going to succeed and maintain a 3 competitive market. 4 I think that consequences of that can be very 5 significant if you end u with a battery that lasts 10, 12 6 years, you can end up with a vehicle that lasts longer than 7 a gasoline vehicle from a realistic ownership standpoint, 8 because of a lower operation and maintenance cost because of 9 a consistent cost of ownership. And that will have a huge 10 impact on fleet markets. 11 Fleet markets are going to do a dollars and cents 12 equation on this on a per mile basis. If you change the 13 life of a vehicle three years -- Virginia Power did some 14 analysis on this at an EV conference -- you can take a 15 $26,000 Ford Ranger, electric Ford Ranger, which is our 16 current price for a Ford Ranger pickup, stack it up against 17 a $13,000 gasoline Ford Ranger. And if your life is 10 18 years as opposed to 7 years for your electric Ford Ranger, 19 your per mile cost and -- you per mile cost on the electric 20 and gasoline Ford Rangers -- even though they're 13,000 21 miles (sic) apart on the first cost -- is the same on a per 22 mile basis. 23 So, if you can extend that life two or three more 24 years and drop the price five or six thousand dollars, 25 you're talking about very competitive ZEVs in a fleet market PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 that doesn't care whether it has a 300 mile range. 2 The reality is, if it's cheaper on a per mile 3 basis, they will use it. 4 And there are very large EPACT (phonetic) 5 requirements that are going to come into play in '98, '99, 6 2000 in federal fleets, in utility fleets that are going to 7 drive a lot of fleet purchases. And California can benefit 8 from those national numbers if they have a California 9 industry that's being fostered. 10 And that's a lot of jobs at stake and it's a lot 11 of numbers as you get into those larger years. And if we 12 can keep the field open and the investment activity 13 occurring, I think that will occur. 14 The danger you have is if you set a goal of 2003, 15 and it's purely voluntary and it's purely Big 7 driven, then 16 the ability to get that to occur in the marketplace is going 17 to be much more difficult. 18 I would say that that's probably the gist of what 19 I had to say. I don't want to go on too long, because of 20 time constraints. 21 But if there are any questions, I'd be glad to 22 answer them. 23 CHAIRMAN DUNLAP: Thank you for your perspective 24 and your counsel. 25 Clare Bell. Ms. Bell, as I recall, last week, you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 acquainted us with your organization and your views. 2 Do you have anything new to add? 3 MS. BELL: Yes, I do. I've submitted written 4 testimony that basically describes some of my suggestions, 5 also some problems associated with the current version of 6 the plan. 7 I just would like to say a few short points. One 8 is, the Electric Auto Association supports the statements of 9 previous pro-ZEV speakers, including CALPIRG, NRDC, Sierra 10 Club, and UCS. 11 We believe in the credibility of those 12 organizations and the results of their information, 13 especially with regards to anti-ZEV spending and what are 14 called Astro Turf groups that mask established interests. 15 Okay. The next point is we have a very strong 16 concern about equivalent zero-emissions credits. 17 Interestingly enough, the MIT Tech Review in 1994, and I 18 think I spoke of this -- 19 CHAIRMAN DUNLAP: The hybrid issue? 20 MS. BELL: Not -- somewhat the hybrid issue. 21 Yeah. 22 CHAIRMAN DUNLAP: That's coming to our Board I 23 believe in January? 24 MR. CACKETTE: Late next year. 25 CHAIRMAN DUNLAP: Late next year, I'm sorry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 MS. BELL: Well, I just wanted to point out that 2 today's in-use emissions do not match the results of tests 3 now being done on cars. The test procedures don't match the 4 real world driving. If that's true with today's cars, 5 what's going to be like with cars that are like today's cars 6 but have more severe control on the exhaust? 7 In-use emissions is a big problem. It results in 8 emission levels that are five to ten times above the 9 predicted. 10 And that's according to the MIT review. And 11 that's one big reason that California does have an air 12 pollution problem. Another reason that California has an 13 air pollution problem is not the older cars on the roads. 14 It turns out to be the cars -- recent model cars that have 15 suffered malfunctions in their emission control equipment. 16 That is the largest source of pollution, not the older cars. 17 Okay. Let me go back to what I was saying, and 18 that is, what guarantees that the LEVs or ULEVs will do any 19 better? Today, Californians slip through an emission 20 control method whose testing does not reflect the true 21 levels of automotive pollution and would not achieve 22 emission lowering goals in the SIP. 23 We also have concerns about substituting a 24 memorandum of understanding for what is now essentially a 25 State law. The present EV program provides penalties in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 form of 5K fines per car not supplied. 2 What in the memorandum of understanding would be 3 equivalent to that kind of setup? How are you going to 4 enforce it? The most that could be done with a memorandum 5 of understanding, from my understanding, is that it can only 6 be enforced by a breach of contract, which is a civil suit, 7 not a criminal suit or the violation of a State law. 8 And it can drag on forever in the courts. So, 9 enforcement of the memorandum of understanding, as I 10 believe, is more difficult than a multistate mandate or law. 11 Okay. I'd like to say one other thing quickly. 12 I've noted that most of the emphasis on the Board seems to 13 be in the area of the large auto manufacturers; to some 14 extent, the midsize conversion companies that have been 15 incubated by CALSTART. 16 I would like to suggest that you not ignore a very 17 strong resource that could be used, and that is the small EV 18 converters and kit builders. 19 Of the two to three thousand cars on the road 20 presently, the cars that have been built by individuals from 21 kits or have built -- been built by individuals constitute 22 the majority of cars on the road right now, about seven to 23 eight hundred cars. 24 We are putting cars on the road every week. We 25 are doing it. We are using them, and we're finding it to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 successful. 2 If the Big 3 or the Big 7, or whoever, cannot fill 3 in that gap, I suggest that CARB turn to the people who are 4 willing and eager to do it. And that is the people who are 5 continuing to put cars on the road for ten years. They 6 continue to do in spite of a lot of opposition, despite 7 logistical problems, financial problems, and just general 8 problems of being a small business. 9 That's why they have not grown. It's not a matter 10 of the market. There are formidable obstacles for anybody 11 who wants to buy or to sell EVs in the State of California. 12 And I've documented those in a paper that I gave to the 13 Board. 14 If those obstacles were not there, we'd have a lot 15 more EVs on the road. 16 I can also say that the failure of EVs in the 17 early part of the century was not due to technology. It was 18 due to socioeconomic factors that resulted in the market, 19 but the people who wanted EVs didn't have a voice in what 20 was going on. 21 Okay. I'd like to close by saying the market is 22 clearly there for EVs, something the auto and oil companies 23 also believe. Why else would they spend $24 million to 24 destroy it? 25 Don't let them get away with it. Stick with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 mandate in its present form. I drive EVs everyday. I'm a 2 member of the Women's Electric Racing Team. I believe it's 3 going to work. Give them a chance. 4 MR. LAGARIAS: Thank you. Any questions? 5 MS. BELL: No questions? 6 MR. LAGARIAS: No. No questions. Thank you very 7 much. 8 Lewis Uhler? 9 MR. UHLER: Mr. Chairman, members of the Board, 10 I'm Lew Uhler, National Tax Limitation Committee. 11 I think I'm the last witness. It may be fitting, 12 because I've submitted a letter urging the Board to launch 13 formal rulemaking on the EV issue. 14 We've heard all kinds of claims and cross-claims, 15 and maybe it's time for the Board to go through the very 16 formal process. 17 I would call it a reality check. And it's only 18 with formal rulemaking hearings that you can be assured of 19 the propriety of your decision. 20 I think the Board's indecision, as evidenced by 21 the staff proposal with deferring of time frames, et cetera, 22 underscores the need for more clarity. 23 It's clear that we all want cleaner air. Not a 24 person in this room would suggest otherwise, but emotional 25 pleas for cleaner air simply don't cut it. We've got to get PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 at the facts. 2 From the evidence available to most of us, it 3 looks like EVs are terribly cost-ineffective in terms of 4 cleaner air. And you may create, if you don't hold such 5 formal hearings, a perverse result, and that is that you 6 delay the cleaning up of the air by the misdirection of 7 funds toward EVs, which are not going to result in as a 8 quick a cleanup of the air as other alternative methods may. 9 Now, the question I think you have to ask yourself 10 is, is the Board in the technology forcing business or the 11 cleaner air business? I think it has to go back to its 12 roots, its legislative authority, and test whether the EV 13 order can meet the statutory test of necessity, cost- 14 effectiveness, and technical feasibility. 15 And that's a clear challenge, I think, to all the 16 members to, in your own mind, have a clear direction in the 17 future by looking at the evidence in the only way that's 18 proper, and that is a formal hearing process. 19 I would add a footnote on the staff proposal. ONe 20 element there would, to me, be a direct frontal assault on 21 First Amendment rights, where there would be some 22 contractual obligation not to say bad things about the EVs 23 of the future, even if the evidence at that time dictated 24 that one ought to. 25 So, I would simply underscore that. I'd be happy PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 to respond to any questions. 2 CHAIRMAN DUNLAP: Thank you, Mr. Uhler. I 3 appreciate your interest and continued involvement with this 4 issue. 5 MR. UHLER: Thank you. 6 CHAIRMAN DUNLAP: Ben Knight from Honda R & D, 7 North America. 8 Mr. Knight, we are weary. 9 (Laughter.) 10 MR. KNIGHT: Well, I think I'm the last speaker. 11 CHAIRMAN DUNLAP: You are the last speaker. 12 MR. KNIGHT: And it's due to the shuffle of the 13 deck, but I'm glad to complete the deck here. 14 CHAIRMAN DUNLAP: Okay. 15 MR. KNIGHT: I'm Ben Knight, and I'm with Honda R 16 & D. I appreciate the opportunity to comment. I'd like to 17 endorse staff's proposal with modification, and summarize 18 briefly why we concluded it's the most constructive 19 direction. 20 We've been developing an entirely new purpose- 21 built electric vehicle incorporating many advanced 22 technology features to tail in to the '98 ZEV requirements. 23 Also, we've been pursuing and will continue to pursue 24 various types of demonstration programs. For example, in 25 the past one and a half years, we have ongoing programs with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 some utility companies. And in the Sacramento area, we 2 started a station car program with several EVs at the 3 Sacramento Airport. 4 Unfortunately, despite our R & D efforts, we're 5 forced to conclude that the performance of the '98 model EV 6 will fall far short of the minimum acceptable level as a 7 commercial product. 8 I testified at a previous workshop that our real 9 world range we're experiencing by real world usage is about 10 60 percent of the nominal or test mode range. 11 Battery technology is the limiting factor, and 12 there's many unresolved issues before EVs can be put into 13 the marketplace, particularly market acceptance issues as 14 well as infrastructure. 15 I believe the most constructive way, if not the 16 only way, to materialize the success of EVs is through 17 cooperative field trials incorporating advanced batteries in 18 real world conditions. This is suggested by the staff 19 proposal, and I would encourage CARB to take an active role 20 in oversight of such a program. 21 The cooperative program should be sized in 22 accordance with issues and objectives identified under the 23 scope of the program. I would stress quality versus 24 quantity and establish the net size. It's going to be 25 extremely important to have committed partners -- utilities, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 municipalities -- and have much support for the users 2 carrying through this program with a best test. 3 Also, we support the annual review of the program, 4 clear objectives, and we'd be interested in sharing those 5 results. 6 ZEV alternatives, such as EZEVs should be 7 encouraged as well as dedicated experimental offerings of 8 advanced vehicle designs. 9 We support the seven automakers' proposal to 10 suspend the ZEV mandate through 2003. Significant air 11 quality benefits to California come from the 49-State 12 program, six year mandate suspension keeps the viability, I 13 believe, and gives flexibility and a response to uncertain 14 battery situations and market acceptance issues. 15 In conclusion, we intend to participate in 16 developing this alternative. We'd like to work with CARB in 17 the most appropriate course of action to take, and to see a 18 limited number of high quality EVs in the marketplace for 19 measurable assessment is the most positive and sensible 20 approach toward successful EV commercialization. 21 Also, I'd like to express Honda's commitment and 22 sincere efforts to work on the most cost-effective, 23 practical emission control systems, including EV. 24 CHAIRMAN DUNLAP: Thank you, Mr. Knight. I 25 appreciate it. You're our concluding speaker. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 We appreciate Honda's commitment to this effort. 2 Okay. What I think we'll do, I'd like to make a 3 couple closing comments, then open it up for Board 4 discussion. 5 I'd ask staff to be on alert to be able to cover 6 some of the themes that were expressed today by the 7 witnesses. 8 I'd like to thank all of you that participated and 9 commented for your valued comments. We have taken 10 considerable care to ensure that interested parties have had 11 an opportunity to participate in this nine-month long review 12 process. We will continue to value your input as the 13 concepts discussed by the Board here today move through the 14 moore formal regulatory process during the next several 15 months. 16 Before I officially open it up for the Board 17 discussion, I'd like to bring to the Board members' 18 attention a letter in their package from Governor Wilson. 19 Based upon the seriousness of our action today and the 20 Governor's long-standing interest in air quality, I briefed 21 the Governor on our progress earlier this week. 22 I'm happy to report that the Governor agrees with 23 not only our critical goals of maintaining the momentum of 24 technology progress and ensuring the successful introduction 25 of ZEVs, but he is also keenly focused on our State's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 obligations under the Federal Clean Air Act. Since he 2 played a major role in passing the 1990 amendments to the 3 Act while serving in the U.S. Senate, Governor Wilson wants 4 to be sure any action we take to modify this regulation next 5 year conforms with both the short-term obligations under our 6 SIP and the long-term requirement to meet health-based 7 standards in the year 2010. 8 With that in mind, I'd like to open the discussion 9 to the Board members. 10 A couple things. I'll kick it off -- I don't see 11 anyone rushing to the mike -- and open it up for a few 12 themes I'd like for the staff to address or discuss. 13 We've heard much, particularly from the 14 environmental community today about the enforceability of 15 the staff proposal and what we might be bale to expect in 16 ensuring compliance with any sort of memorandum of agreement 17 or MOU. 18 So, I'd like -- I'm looking at you, Mr. Kenny, but 19 I'll defer to Mr. Boyd to see who starts this off. 20 But we need to talk about enforceability. 21 (Thereupon, there was a pause in the 22 proceedings to allow the reporter to 23 replenish her shorthand paper.) 24 CHAIRMAN DUNLAP: Mr. Boyd, enforceability. 25 MR. BOYD: We were understandably brief, but PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 perhaps too brief in our opening presentation today on the 2 issue of enforcement, particularly since we recognize how 3 important it is to so many people. We spent quite a bit of 4 time, frankly, of late assuring ourselves that the 5 enforcement issue is addressable and that there's the same 6 degree of protection to the public and the Board's position 7 of their MOUs as there would be under the regulatory 8 approach. 9 Mr. Kenny can address that. 10 Mr. Modisette, I noticed, having done his homework 11 quite well, picked out some of the points that are inherent 12 in our proposal; that is, individual MOUs with each of the 13 seven companies relative to early or advanced technology 14 introduction. 15 Quite frankly, the failure to comply with that 16 would, for instance, probably bring down the original 17 regulation upon the company in question. That's the power 18 the Board has. Upon a finding by the Board of 19 noncompliance, that could be the order of the day; in 20 addition, all the other financial and programmatic remedies 21 that are available to the Board under any regulation would 22 be available under an MOU. 23 But I'd ask Mr. Kenny to elaborate on that. 24 MR. KENNY: Thank you. What we have been thinking 25 about was a two-pronged enforcement aspect to the MOA. the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 first prong would be that for noncompliance with the MOAs, 2 there would be reinstatement of the regulation, essentially 3 in full effect. 4 However, there was some concerns about how that 5 would basically occur as a result of the fact that we would 6 need to come back to the Board. Time would be involved in 7 essentially reinstituting that regulation. 8 So the other prong of the enforcement aspect of 9 the MOAs would be that the MOAs themselves would have that 10 enforcement nature to them. What we thought we could do 11 there was to put a specific clause into the MOAs providing 12 for specified monetary penalties and specified pollution 13 offsets at a minimum. And those things would come into 14 effect immediately upon a determination of noncompliance. 15 So, the combination of both reinstatement of the 16 reg and the specified enforcement provisions of the MOA 17 should be sufficient to provide for a strong enforcement 18 approach. 19 CHAIRMAN DUNLAP: Okay. Any followup questions 20 relative to enforcement? 21 MR. PARNELL: No, not on that. 22 CHAIRMAN DUNLAP: Go ahead. I don't to 23 monopolize. I wanted to get to the ramp-up issues. 24 MR. PARNELL: I was just -- I wanted to comment 25 that certain people who testified were suggesting that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 automobile industry has had -- will have free ride here for 2 a period of time. And I would like to just refer to some of 3 the language, which basically says that from 1998 to 2002, 4 manufacturers would achieve a shortfall of exhaust -- would 5 have to achieve shortfall of exhaust, evaporative, and 6 refueling emission reductions associated with existing ZEV 7 requirements, plus a premium. 8 I don't know what "plus a premium" means, but I 9 assume that that's well intended and it stands on its own. 10 They will be required to make up the deficit plus 11 a premium. So, certainly, that is at a significant cost to 12 automobile manufacturers. And I would like to, for one, 13 commend the manufacturers for getting together and at least 14 come to the table and try to come to some reasonable 15 approach to the issue of this mandate that was put in place. 16 Mandating that they produce the cars is one thing. 17 We can't mandate the public buy them. 18 CHAIRMAN DUNLAP: That's right. 19 MR. PARNELL: And I think a lot of people miss 20 that point. And what we, as a Board -- or at least I, as a 21 member of this Board -- I'll not attempt to speak for all 22 members of the Board -- but I, as a member of this Board, am 23 absolutely dedicated to whatever we can do to effectively 24 clean up the air with cost-effective programs. 25 It seems to me that a well-intended pilot program PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 that will explore technology as it becomes available, 2 explore existing technology as it's placed in platforms and 3 is used on our highways in actual use, and given the time to 4 do those kinds of things will tell us a lot as we move 5 toward the 2003 mandate. 6 So, I support what the staff has done. I've 7 articulated the concerns that I have had relative to 2003 8 versus 2004 for a variety of reason. Staff believes that 9 it's done what is absolutely essential. 10 So, I not only commend the automobile 11 manufacturers for coming together, but also staff for having 12 prepared which, in my view, is kind of a no-win. And I've 13 been in the regulation business for a long, long time. And 14 when you tend to make dissatisfied both sides of an issue, 15 you seem to have done a reasonably good job. And what we 16 want to try to do is to do the reasonable thing that will 17 ultimately lead to the cleaning of our air in the State of 18 California. 19 I believe this takes us a step closer to doing 20 that. And I just wanted to articulate that. 21 CHAIRMAN DUNLAP: Thank you, Mr. Parnell. 22 Mr. Lagarias. 23 MR. LAGARIAS: Mr. Chairman, I've been listening 24 to the audience. I find that each person seems to bring out 25 a particular target, and either supports it or beats up on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 it. It doesn't make any difference whether it's the 2 mandate, the cost, the technology, the taxes, the time 3 schedule, or the market. And I'd just like to comment on a 4 few of these. 5 It seems to me we have not identified the market 6 in terms of people actually using the car, how they use it, 7 and what they need it for, what the cost and performance 8 data are. 9 And until we get a demonstration of vehicles in 10 the hands of enough people, we won't have that information. 11 Now, the Sierra Club, the National Environmental 12 Defense Fund, and the other environmental groups are very 13 enthusiastically supporting this. It might help, with all 14 their millions of members, if they'd poll their members and 15 find out how many of their members would commit to buying 16 electric vehicles. 17 And the first thing they're going to say is, "How 18 much is it going to cost? What does it do, and how do I use 19 it?" 20 And we're not going to get that information 21 without the demonstration program. 22 On the second point, we heard a lot about the 23 number of investors that have gone into this program because 24 of a mandate. Well, investors go into business because they 25 see an opportunity there. And many of them are going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 fail. We saw that in the automotive industry as 400 car 2 manufacturers ramped down to about five or six. And so, 3 they're always going to be at risk. There's no sure thing 4 for an investor. 5 And those that do well will do very well. But you 6 can't protect the weakest member. And the point of always 7 trying to protect the investor is not our objective, but to 8 identify the opportunity. 9 Now, regarding the technology, the Board and the 10 staff does not develop technology. It's in a position to 11 evaluate it, but it doesn't develop it. 12 And we have to depend on those people who are in 13 the market to develop the technology. 14 And the market schedule, we can only make our best 15 estimate as to when that technology can come about. So, 16 time, to my mind, should be a resource and not a constraint. 17 And the constraints we put up are target dates, but they 18 aren't necessarily fitting in with what the technology has. 19 So, I think we should be a little flexible in what 20 we can or cannot expect. 21 Now, with regard to the specific features of the 22 staff proposal, it suggests an annual production of 5,000 23 ZEVs in 96-97; 14,000 in 1998. Well, the production is one 24 thing. But what does that mean? 25 Are they going to build them or do they have the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 capacity to build them? And I'd like to see better numbers 2 than I'm capable of building 15,000 vehicles, but I'm only 3 going to sell ten. 4 We've got to have better numbers than that. 5 The statement that all vehicle manufacturers 6 support media publicity and legislative initiatives against 7 the ZEV program be converted to support of the ZEV program, 8 I agree, it's a violation of Fifth Amendment rights. 9 We should also say that all environmental groups 10 in support then direct their activities against it, so that 11 they'd even-handed. 12 (Laughter.) 13 MR. LAGARIAS: I think this point doesn't make 14 sense at all. 15 As for the 10 percent -- the requirement of 10 16 percent ZEVs at a given date, I'm supportive of that. But 17 I'd like to see a ramp-up, a better ramp-up of how we're 18 going to get there. We can't go from 14,000 vehicles per 19 year to a hundred thousand without better figures. 20 So, I'd like to see some numbers on that. 21 And that's all for now. 22 CHAIRMAN DUNLAP: Mr. Calhoun. 23 MR. CALHOUN: Mr. Chairman, members of the Board, 24 and members of the audience, I think what we've seen here 25 today is a recognition by the staff that the technology PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 needed to produce and market electric vehicles isn't there. 2 And I think the staff is in character. It is 3 being consistent with what it has done in the past. In the 4 past, those of you who followed the activities of this 5 Board, will remember that the staff has a tendency to push 6 technology forcing standards, and the staff is also sensible 7 enough to recognize that, when the drop-dead date so to 8 speak, and the technology isn't there, the staff would 9 always come back and recommend some changes. So, what you 10 see here today is nothing more than what the staff has done 11 in the past. 12 Now, I would like to commend the staff for that, 13 because I think it's nothing more than a continuation of 14 what they've done in the past. I'd also like to comment on 15 a couple of other things. There does not appear to be much 16 of a difference between what the staff is recommending and 17 the auto manufacturers have proposed. 18 I'm not sure that the auto manufacturers are 19 exactly happy with everything that they've proposed 20 themselves, but it's very difficult to -- and frankly, I've 21 been absolutely surprised and shocked that the seven of them 22 have been together on this particular issue. 23 My past experience suggested it's a very 24 competitive industry, and they would go all out to be beat 25 each other. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 I guess one of the things I'd like to see done 2 prior to the actual regulatory proposal being -- the actual 3 formal language, I'd like to see some effort on the part of 4 the staff and industry to get together to try to resolve 5 whatever differences there are concerning the one year, 2003 6 and 2004, to see if we can't come to some resolution of 7 that. 8 And we heard comments today from GM, Ford, and 9 Chrysler, and Nissan regarding that particualr issue, and 10 they all have significant opposition -- at least it seems to 11 me there seem to be significant reasons why they think we 12 should go to the year 2004. But I think we ought to be 13 looking at that and see whatever differences there are and 14 see if we can't resolve those. 15 And, you know, there's an old story, the devil's 16 in the detail. So, I'm anxiously waiting to see the details 17 of the regulatory proposal. I'm sure the other people in 18 the audience are also. Those conclude my comments. 19 MS. EDGERTON: Mr. Calhoun, I hope it's not the 20 devil that's in the details. I hope it's God is in the 21 details. 22 CHAIRMAN DUNLAP: The issue of the ramp-up came up 23 over and over again. I'd like to ask Mr. Cackette to talk 24 about that ramp-up issue, and what you think we could look 25 for there with the staff proposal, and what are you think -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 you called it them key elements of that item. 2 MR. CACKETTE: I think it was the one reoccurring 3 theme that I heard over and over today. It's been one that 4 the staff has been very worried about, and one that the 5 Board has expressed concern about both previously and today. 6 Rather than try to suggest -- we think there's 7 some ramp-up there already, as we've suggested using credit 8 programs which encourage early introduction or greater 9 introduction than would otherwise be perhaps a minimal 10 effort. 11 But I think we need to go back and look at it some 12 more and see if we can't figure out a way that we can assure 13 or have greater assurance that we have a reasonable ramp-up 14 between some -- whatever number of cars are being sold in 15 roughly the year 2000 and 2003 or '04 target. That is a 16 concern. We don't want to set up a situation where we come 17 back here and have the same discussion again over the 10 18 percent number. 19 We'd like to find something that we at least would 20 hope would provide a greater assurance of success in having 21 a market takeoff during that period. And we'll go back and 22 do that. 23 CHAIRMAN DUNLAP: What, Mr. Kenny, with the March 24 time frame, there's been some discussion about -- despite 25 the fact that there were some nine forums, workshops over PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 the last nine-month period, there was an expression of some 2 frustration about people not having a chance to sink their 3 teeth into this. 4 Talk to me a little bit about our options relative 5 to the process as a Board. 6 MR. KENNY: In terms of the process, for the Board 7 to hear this item in March, it would need to have a notice, 8 the staff report, and the actual regulatory language out on 9 the streets essentially on January 30th of 1996. 10 So, the time frame for us to get that together 11 would be short, but the requirements in our California law, 12 in terms of administrative procedures, are that the public 13 have at least 45 days to review the material that is going 14 to be brought before the Board. 15 CHAIRMAN DUNLAP: Okay. 16 And we would then have an open comment period, 17 culminating in a Board hearing where action would take 18 place. 19 MR. KENNY: That is correct. And if the Board 20 makes any modifications to the staff proposal, there's a 21 follow-up comment period that would occur following the 22 Board's decision at the March hearing. 23 CHAIRMAN DUNLAP: Okay. I want to ask Mr. Boyd an 24 important question about one of the primary premises and 25 counsel given us by the Governor and, of course, Secretary PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 Strock and my concern. 2 Under the staff proposal, Jim, would we surrender 3 even one pound of emissions reduction? 4 MR. BOYD: No, Mr. Chairman. And we are, as I 5 said in my opening remarks in a different way, working to 6 keep faith with the principles and directions given to this 7 Board and keep faith with the SIP that was passed by this 8 Board after significant investment of time and effort by the 9 Board and by the staff. 10 So, in our opinion, the approach we've taken and 11 the approach we intend would -- through some of the comments 12 made earlier -- produce -- and I think that Mr. Parnell 13 captured it quite well. We would capture, and we would hold 14 responsible the industry for all the emissions reductions 15 that this strategy called for, and contrary to the repeated 16 assertions that this is minuscule and this is small. I 17 think we know that 14 tons is quite large, and we are 18 dedicated to achieving those 14 tons. And to the extent, 19 not through electric vehicles, those 14 tons plus through 20 the, quote, "premium." And we think we have an absolutely 21 air-tight approach to assure that. 22 CHAIRMAN DUNLAP: Thank you. Very important 23 point. I appreciate your forthright answer. 24 Dr. Boston. 25 DR. BOSTON: Mr. Chairman, I think my other board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 members have said most of what I feel myself, particularly 2 the comments of Mr. Parnell. 3 But I would strongly endorse this proposal, give 4 it back to the staff to refine the detail and bring it back 5 to us for action. 6 I just have one other thought, though, for Mr. 7 Kenny, and that was, when we make a regulation, we have to 8 get an economic impact. And I'm wondering when we modify a 9 regulation like this, do we also have to present an economic 10 impact with it? 11 MR. KENNY: Yes. Generally what happens is, in 12 terms of the staff report and the notice, there are economic 13 impact assessments that are required to be done. 14 DR. BOSTON: So that would be with the final 15 proposal? 16 MR. KENNY: Yes. 17 DR. BOSTON: Thank you. 18 CHAIRMAN DUNLAP: All right. Supervisor Vagim or 19 Mayor Hilligoss? 20 SUPERVISOR VAGIM: Well, Mr. Chairman, I -- you 21 wanted us to be brief. I think it boils down for me, having 22 heard all the testimony and agreeing with my colleagues in 23 the main -- I agree with Mr. Calhoun, and I'm interested in 24 what the staff, through Mr. Cackette's statements, on the 25 2003-2004. It seems to be we have a linchpin between the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 East Coast and the West Coast between those two years. And 2 it'll be interesting to see the dissertation and dialogue on 3 that. So, I look forward to seeing that. 4 Thank you. 5 CHAIRMAN DUNLAP: Thank you. Mayor? 6 MAYOR HILLIGOSS: I'm in favor of everything that 7 has been said so far. And the only reason I would go along 8 with it is because there will be no loss of clean air. 9 CHAIRMAN DUNLAP: And I know -- certainly from 10 your perspective on the Bay Area's Board with the ozone 11 attainment issue there, the Federal standard -- that it's of 12 paramount importance to you and your colleagues on that 13 Board. 14 MAYOR HILLIGOSS: Right. 15 CHAIRMAN DUNLAP: Okay. With that, any other 16 comments? All right. 17 I appreciate the insightful discussion, and it 18 appears at this point that we have developed a consensus 19 around the staff report recommending specific changes to the 20 ZEV mandate, which is a more market-based approach in the 21 critical early years that does not compromise in any way our 22 clean air goals. 23 I believe that this approach is the right 24 approach, and personally endorse it and find favor with it. 25 The introduction of ZEVs in California is too important not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 to work. It has to work. And this concept I believe will 2 ensure that it will work. 3 Unless there is an objection, I would like to 4 direct the staff to develop the necessary regulatory package 5 which reflects the staff option, as described in the 6 overview we received, the consensus changes discussed here 7 today, and the general principles outlined in the letter the 8 Governor sent us today. 9 Mr. Boyd, I would like the staff to have this 10 package ready for regulatory release in a time frame that 11 provides for the March hearing as outlined by our counsel, 12 Mr. Kenny. 13 And I'd like to wish a happy holiday to all; and 14 to all, a good night. 15 Thank you very much. 16 The December meeting of the California Air 17 Resources Board is now adjourned. 18 (Thereupon, the meeting was adjourned at 19 5:05 p.m.) 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 CERTIFICATE OF SHORTHAND REPORTER I, Nadine J. Parks, a shorthand reporter of the State of California, do hereby certify that I am a disinterested person herein; that the foregoing meeting was reported by me in shorthand writing, and thereafter transcribed into typewriting. I further certify that I am not of counsel or attorney for any of the parties to said meeting, nor am I interested in the outcome of said meeting. In witness whereof, I have hereunto set my hand this 2nd day of January , 1996. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345