BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA, JR. BUILDING CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY CENTRAL VALLEY AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA THURSDAY, MARCH 27, 2003 9: 00 A. M.

JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 ii APPEARANCES BOARD MEMBERS Dr. Alan Lloyd, Chairperson Dr. William Burke Mr. Joseph Calhoun Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Professor Hugh Friedman Dr. William Friedman Mr. Matthew McKinnon Mrs. Barbara Riordan Supervisor Ron Roberts STAFF Ms. Catherine Witherspoon, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Mike Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Walsh, General Counsel Dr. Alberto Ayala, Manager, Alternative Strategies Section, MSCD Ms. Analisa Bevan, Manager, ZEV Implementation Section, MSCD Mr. Richard Bode, Chief, Health and Exposure Assessment Branch, Research Division PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 iii APPEARANCES CONTINUED STAFF Mr. Craig Childers Mr. Bart Croes, P. E., Chief, Research Division Mr. Bob Cross, Chief, MSCD Ms. Krista Fregoso, Air Pollution Specialist, Planning and Regulatory Development Section, MSCD Mr. Tom Jennings, Senior Staff Counsel Ms. Diane Johnston, Senior Staff Counsel Dr. Norman Kado, Air Pollution Specialist Ms. Renee Kemena, Manager, Planning and Regulatory Development Section, MSCD Mr. Jack Kitowski, Chief, On Road Controls Branch, MSCD Mr. Bob Nguyen, Air Resources Engineer, Alternative Strategies Section, MSCD Mr. Chuck Shulock, Vehicle Program Specialist, MSCD Dr. Barbara Weller, Manager, Population Studies Section, Research Division ALSO PRESENT Mr. Tom Addison, Bay Area Air Quality Management District Dr. Menahem Anderman, Consultant Ms. Marilyn Bardet Ms. Clare Bell, E Vet Mr. John Boesel, Calstart/ Westart Mr. Thomas Bradley, Self Mr. Scott Briasco, Los Angeles Department of Water and Power PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Kelly Brown, Ford Motor Company Dr. Louis Browning, ICF Consulting Dr. Nicholas Carter Mr. Steve Casner, Self Mr. Michael Coates, Green Car Group Mr. Michael Conlon, Automotive Engine Rebuilders Mr. Steven Dibner Mr. Armando Flores, Latino PAC, Stansilaus County Hispanic Chamber of Commerce Mr. Tom Fulks, Green Car Marketing & Communications Mr. Andrew Frank, U. C. Davis Mr. S. David Freeman Mr. Tom Gage, AC Propulsion Mr. Marc Geller Mr. Robert Gibney, Avestor Mr. Tim Hastrup Mr. Steve Heckeroth, 02 Mr. David Hermance, Toyota Mr. Henry Hogo, SCAQMD Mr. Steve HOEK, Automotive Engine Rebuilders Ms. Bonnie Homes Gen, American Lung Association Mr. Steve Hurd, Caterpillar Mr. Rolad Hwang, NRDC PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. Carl Johnson, NYS Department of Environmental Conservcation Mr. Mike Kane, Self Dr. Douglas Kerr, Self Ms. Christine Kirby, Massachusetts Department of Environmental Protection Mr. Robert P. Kittell, Electricab Energy Mr. Ed Kjaer, SCE Mr. Ben Knight, American Honda Ms. Gretchen Knudsen, International Truck and Engine Corporation Ms. Patricia Lakinsmith, Monterey Technologies Ms. Elaine Lissner, EV Driver Mr. Jason Mark, UCS Mr. Daniel McCarthy, Evercel Inc.

Mr. Rick McCourt, Company Construction Ms. Amanda Miller, EPRI Mr. Clayton Miller, Construction Industry Air Quality Coalition Mr. Diego Miralles, EV Works Mr. Bill Mirth, Federal Mogul Mr. David Modisette, California Electric Transportation Coalition Mr. Dana Muscato, Phoenix Motor Cars Ms. Mary Nickerson, Toyota Mr. Mark Nordheim, WSPA PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 vi APPEARANCES CONTINUED ALSO PRESENT Councilman Henery Perea, City of Fresno Ms. Kimberly Rogers Mr. Serge Roy, Capitech Ms. Bev Sanders Mr. Paul Scott, PEVDC Ms. Zan Dubin Scott, Self Mr. Bill Smith, Virtual Agile Manufacturing Ms. Sandray Spelliscy, PCL Mr. Dan Sturges, Mobility Lab Mr. Dean Taylor, SoCal Edison Mr. Mike Thompson, Self/ Air Breather Mr. Edward Thorpe, PEVDC Mr. Joe Tomita, Toyota Mr. Jay Wagner, Dana Corporation Mr. Bill Warf, SMUD Mr. Reagan Wilson, Stanislaus County PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 vii INDEX PAGE Pledge of Allegiance 1 Roll Call 1 Item 03 2 1 5 Chairperson Lloyd 5 Executive Officer Witherspoon 5 Staff Presentation 6 Q& A 10 Item 03 2 2 18 Item 03 2 3 18 Chairperson Lloyd 18 Executive Officer Witherspoon 20 Staff Presentation 21 Q& A 36 Mr. Michael Conlon 43 Mr. Steve HOEK 52 Mr. Bill Mirth 54 Mr. Jay Wagner 55 Mt. Steve Hurd 56 Mr. Clayton Miller 58 Mr. Rick McCourt 60 Ms. Gretchen Knudsen 62 Ms. Sandra Spelliscy 63 Ms. Bonnie Holmes Gen 64 Mr. Mark Nordheim 65 Mr. Dean Taylor 70 Mr. Tom Addison 72 Mr. Henry Hogo 88 Motion 99 Vote 101 Item 03 2 4 101 Chairperson Lloyd 101 Executive Officer Witherspoon 108 Staff Presentation 110 Mr. S. David Freeman 161 Ombudsman Tschogl 168 Q& A 170 Dr. Menahem Anderman 195 Councilman Henry Perea 212 Dr. Andrew Frank 214 Dr. Louis Browning 220 Ms. Amanda Miller 224 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 viii INDEX CONTINUED PAGE Mr. Joe Tomita 226 Ms. Mary Nickerson 229 Mr. David Hermance 235 Mr. Ben Knight 250 Mr. Kelly Brown 266 Mr. Reagan Wilson 294 Mr. Scott Briasco 301 Mr. Bill Warf 305 Mr. John Boesel 311 Mr. Ed Kjaer 314 Mr. David Modissette 317 Ms. Bonnie Holmes Gen 331 Mr. Jason Mark 337 Mr. Roland Hwang 345 Mr. Tom Gage 352 Mr. Dana Muscato 358 Mr. Dan Sturges 363 Mr. Tom Fulks 373 Mr. Michael Coates 376 Mr. Diego Miralles 377 Mr. Robert P. Kittell 379 Mr. Tom Addison 384 Mr. Henry Hogo 387 Mr. Carl Johnson 391 Mr. Paul Scott 394 Ms. Zan Dubin Scott 395 Mr. Mike Kane 397 Ms. Christine Kirby 402 Mr. Armando Flores 404 Mr. Tim Hastrup 406 Mr. Robert Gibney 408 Mr. Daniel McCarthy 411 Mr. Serge Roy 413 Mr. Mike Thompson 415 Ms. Marilyn Bardet 420 Ms. Bev Sanders 425 Ms. Clare Bell 429 Ms. Elaine Lissner 431 Ms. Kimberly Rogers 435 Ms. Patricia Lakinsmith 438 Mr. Edward Thorpe 444 Mr. Steve Heckeroth 446 Mr. Thomas Bradley 450 Mr. Stephen Casner 453 Dr. Douglas Kerr 454 Dr. Nicholas Carter 459 Mr. Marc Geller 464 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 ix INDEX CONTINUED PAGE Mr. Bill Smith 469 Recess 473 Reporter's Certificate 474 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. The March 3 27th, 2003 public meeting of the Air Resources Board will 4 now come to order.

5 Mr. Calhoun, would please lead the Board in the 6 Pledge of Allegiance.

7 ( Thereupon the Pledge of Allegiance was 8 Recited in unison.)

9 CHAIRPERSON LLOYD: Thank you.

10 Will the clerk of the Board please call the roll.

11 BOARD CLERK DORAIS: Dr. Burke?

12 BOARD MEMBER BURKE: Present.

13 BOARD CLERK DORAIS: Mr. Calhoun?

14 BOARD MEMBER CALHOUN: Here.

15 BOARD CLERK DORAIS: Ms. D'Adamo?

16 BOARD MEMBER D'ADAMO: Here.

17 BOARD CLERK DORAIS: Supervisor DeSaulnier?

18 BOARD MEMBER DeSAULNIER: Here.

19 BOARD CLERK DORAIS: Professor Friedman?

20 BOARD MEMBER HUGH FRIEDMAN: Here.

21 BOARD CLERK DORAIS: Dr. Friedman?

22 BOARD MEMBER WILLIAM FRIEDMAN: Here.

23 BOARD CLERK DORAIS: Mr. McKinnon?

24 BOARD MEMBER McKINNON: Here.

25 BOARD CLERK DORAIS: Supervisor Patrick?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 2 1 Mrs. Riordan?

2 BOARD MEMBER RIORDAN: Here.

3 BOARD CLERK DORAIS: Supervisor Roberts?

4 BOARD MEMBER ROBERTS: Here.

5 BOARD CLERK DORAIS: Chairman Lloyd?

6 CHAIRPERSON LLOYD: Here.

7 Thank you.

8 Good morning again.

9 First of all I would like to welcome our new 10 Executive Officer, Catherine Witherspoon. It's her first 11 Board meeting.

12 So we're delighted to have you here, Catherine,

13 and we're delighted to be working with you. It's a tough 14 start to a career in this job, but I know you can handle 15 it.

16 EXECUTIVE OFFICER WITHERSPOON: Thank you.

17 CHAIRPERSON LLOYD: Before we get started, just 18 note about today's proceedings.

19 We are postponing Agenda Item 03 2 2 until next 20 month regarding appointments to the Research Screening 21 Committee, to give staff a little more time to talk to 22 potential candidates.

23 So after our regular health update we'll go 24 directly to Agenda Item Number 3, the Carl Moyer, school 25 bus Item. We're expecting that discussion to take about PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 3 1 an hour, as we're hoping. So if you're here for the Zero 2 Emission Vehicle Regulation, which obviously is the 3 highlight of the day for many of us, you have a bit of 4 time to get some coffee, work on testimony, talk to staff,

5 et cetera.

6 Then once we get started with ZEV, we proceed 7 straight through the rest of the day, only taking short 8 breaks for the court reporter every two hours.

9 That's to accommodate the large list of witnesses 10 we're expecting today. We don't have an idea of the 11 number of witnesses at this time, but obviously in the 12 next few hours we'll have a pretty good idea.

13 If need be we'll extend the hearing to tomorrow.

14 But my colleagues now will have to gauge that to see how 15 long and how fast we can get along. And clearly, in that 16 context, I'm already under significant pressure by my 17 colleagues here to limit the testimony, given that we may 18 have a large number of people. And so, as you can see the 19 pincer movement here, it's likely that I will have to 20 exert three minutes or so if we have a large number of 21 witnesses. But we won't know that, and I've give the 22 witnesses plenty of time. Clearly, the testimony up front 23 from the major stakeholders, that will not be impacted by 24 the three minutes because these are some critical issues,

25 and we'll need adequate response to the staff presentation PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 4 1 as well.

2 I'd also like to ask anyone in the audience who 3 wishes to testify today, as I indicated, keep comments as 4 brief as possible. The other part of it I think, and 5 consistent with this, you know, we've had hundreds of 6 letters, many of which repeat the same message. So people 7 who are testifying who all have the same message, it would 8 be helpful, in fact, if you just highlight any 9 differences. Believe me, as I've indicated when I was 10 flooded the last time with E mails, it's like a dessert.

11 You know, the first few teaspoons or tablespoons are 12 excellent. But after, you know, a truckload of that, it 13 doesn't have the same impact.

14 So I think it's important that we focus some of 15 those so we add on. And the Board again has read a lot of 16 the material here, and I think we're smart enough to be 17 able to digest the key parts.

18 But as I indicated, until we know the number of 19 people signed, we will not have a good idea of where we 20 are.

21 So with that I guess we will proceed to the first 22 agenda item today. Reminding anybody who wishes to sign 23 up, please see the attendant outside. And if you have 24 copies of the written statements, provide 30 copies if you 25 can.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 5 1 The item here is the recent health research 2 conducted in the Netherlands regarding the association 3 between traffic related air pollution and mortality in an 4 elderly population.

5 At this point I'd like to turn it Ms. Witherspoon 6 to introduce the item and begin staff's presentation.

7 EXECUTIVE OFFICER WITHERSPOON: You're going to 8 have to get used to saying that. It's a longer name.

9 Good morning, Dr. Lloyd and members of the Board.

10 This a particularly interesting health study 11 because it adds to our understanding of particulate matter 12 and its effect on the elderly. Over the past few years we 13 have talked to you many times about children's unique 14 vulnerability to air pollution. This study reminds us 15 that there are other sensitive populations at risk.

16 This study also has an environmental justice 17 angle because it involves near roadway and near highway 18 exposures, something that many California communities are 19 concerned about.

20 We talked about some of these issues at the 21 January meeting, and we will be addressing the subject of 22 environmental justice research and data needs again in 23 April.

24 Dr. Norman Kado will make the staff presentation 25 this morning.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 6 1 Dr. Kado?

2 DR. KADO: Thank you very much, Ms. Witherspoon.

3 Good morning, Chairman Lloyd and members of the 4 Board.

5 ( Thereupon an overhead presentation was 6 Presented as follows.)

7 DR. KADO: Investigators have previously reported 8 associations between long term exposure to particulate 9 matter, air pollution and mortality. The Air Resources 10 Board has recently adopted new annual PM10 and PM2.5 11 standards and continues to review the latest information 12 to protect the most sensitive members of the public from 13 chronic and cute health effects related to particulate air 14 pollution.

15 The presentation this morning is a discussion of 16 a study evaluating the association between long term 17 exposure to traffic related pollutants and cardiopulmonary 18 mortality in a cohort of individuals, age 55 to 69.

19  o0o

20 DR. KADO: Results of three previous studies 21 presented in an earlier health update have suggested that 22 long term exposure to particulate matter air pollution is 23 associated with increased mortality from respiratory and 24 cardiovascular disease and from lung cancer.

25 For estimating exposure to air pollutants in PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 7 1 these studies, investigators compared several large,

2 usually metropolitan regions with different ambient air 3 pollution concentrations, with the assumption that 4 exposure is uniform within each region. This assumption,

5 however, may not accurately reflect exposure, especially 6 for pollutants with important local sources.

7 Investigators in Europe reported that 8 concentrations of nitrogen dioxide, an important 9 traffic related pollutant, for example, varied between 10 small regions within cities. They indicated that traffic 11 intensity and distance to major roadways are important in 12 assessing long term exposure to this pollutant.

13 Investigators have further reported that chronic 14 respiratory disease in children is associated with living 15 near major roadways.

16  o0o

17 DR. KADO: The focus of today's health update is 18 a study recently published by Hoek and Colleagues in the 19 medical journal Lancet. In the article they reported an 20 association between mortality and indicators of 21 traffic related air pollution in the Netherlands.

22 The subject for the study  the subjects for the 23 study consisted of 4500 residents randomly selected as a 24 subset from the Netherlands cohort study on diet and 25 cancer, which is an ongoing study started in 1986 on over PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 8 1 120,000 residents.

2 The investigators specifically evaluated 3 cardiopulmonary mortality and its association with 4 traffic related air pollution.

5 The pollutants of interest in this study were 6 black smoke and nitrogen dioxide. These pollutants were 7 used as indicators of exposure to traffic pollutants.

8 The investigators determined background levels 9 for the entire region and for their urban environment.

10 Further, the investigators used living near major roadways 11 as an index for exposure to local traffic generated 12 pollutants. This was defined as living within 100 meters 13 of a freeway or within 50 meters of a major street in 14 their evaluation.

15  o0o

16 DR. KADO: Over the course of this study there 17 were 185 cardiopulmonary deaths. After adjusting for 18 confounding factors, such as smoking and background 19 exposure to black smoke and nitrogen dioxide, those living 20 near a major roadway or a freeway had higher relative risk 21 for cardiopulmonary mortality. This corresponded to 22 approximately twenty cardiopulmonary deaths for 23 individuals living near major roadways in this study.

24 Interestingly, when the population was limited to 25 those who lived in the same location for ten years or PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 9 1 more, the risk for cardiopulmonary mortality increased for 2 those living near a major roadway. This implies that 3 longer periods of exposure to traffic related pollutants 4 may increase the risk to cardiopulmonary deaths.

5  o0o

6 DR. KADO: This study agrees with findings from 7 three previous cohort studies conducted in the United 8 States, demonstrating an association between exposure to 9 air pollution and cardiopulmonary mortality. The 10 consistency of the association across different countries 11 gives credence to the idea that air pollution is 12 associated with mortality in both the United States and 13 Europe.

14 The results from this study indicate that there 15 is a consistent association between cardiopulmonary 16 mortality and living near a major roadway, and further 17 indicates the importance of assessing exposure at a finer 18 scale especially with regards to a local source pollution 19 such as vehicular traffic.

20 The finding of increased risk for those living 21 near roadways is important to the State of California 22 where many of our citizens live in close proximity to 23 major roads and freeways. Motorized traffic emissions 24 result in small scale spatial variations with high 25 concentrations at short distances from major roads. This PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 10 1 exposure could result in adverse health effects.

2 Although black smoke and nitrogen dioxide were 3 used as indicators for traffic related air pollution,

4 these components may not be directly responsible for the 5 observed mortality. It is possible that some other 6 traffic related pollutants such as ultrafine particles or 7 diesel particulate matter, for example, is responsible for 8 the health effect  of the effect observed in this study.

9 This concludes the health update. And we would 10 be happy to answer any questions.

11 Thank you very much.

12 CHAIRPERSON LLOYD: Thank you.

13 I think that's an excellent background setting 14 and rationale for the subsequent items today.

15 Questions from the Board?

16 Dr. Friedman.

17 BOARD MEMBER WILLIAM FRIEDMAN: Well, just a 18 comment.

19 This is one of a growing number of reports on the 20 same subject that  in which this association exists.

21 And it places a premium on two things: First, the efforts 22 that we're trying to make with respect to environmental 23 justice. And, second, on trying to identify or getting 24 the research done to identify the constituent parts of 25 particles that may be responsible in an ultimate sense for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 11 1 the causation. We're still pretty far from that, but 2 there clearly is a direction that we must traverse to get 3 the answer to that. There's no question that there is a 4 relationship between mortality and what it is we're 5 breathing. We need to find out exactly what component 6 part is the culprit.

7 CHAIRPERSON LLOYD: Dr. Burke.

8 BOARD MEMBER BURKE: I agree with Dr. Friedman in 9 part of his statement and disagree with him in another 10 part.

11 At South Coast we're obviously concerned about 12 the causal relationship to illness. And, therefore, we 13 are undertaking some studies in groundbreaking areas,

14 including the cause of brain cancer from air pollution, as 15 well as some of our asthma problems.

16 But, you know, environmental justice is a very 17 precious term to me. And you know, having a study like 18 this and saying it has impact on environmental justice 19 doesn't  isn't relevant to me, because saying the 20 freeway runs by it, I mean a freeway runs by  through 21 west L. A., and we know they're not environmentally 22 challenged. Runs through Encino, and we know they're not 23 environmentally challenged. So having a freeway run 24 through your neighborhood does not necessarily mean you're 25 economically or environmentally looking for environmental PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 12 1 justice.

2 And to slap that label on a study like that to 3 people of color I think is offensive. Just one personal 4 opinion.

5 EXECUTIVE OFFICER WITHERSPOON: If I might 6 respond since I'm the one who brought the issue up.

7 The exposures that we're talking about are very 8 proximate to the freeway, in very close distance. And so 9 even when the freeways are running through more wealthy 10 communities, the land uses immediately adjacent to the 11 freeway tend to be industrial, mixed use, lower income.

12 And so I don't think we've violated the principle of 13 environmental justice, because lower income people do tend 14 to end up in housing that might be immediately adjacent to 15 freeways and roadways.

16 BOARD MEMBER BURKE: Well, you know Sunset 17 Boulevard? Are you familiar with Sunset Boulevard in 18 Beverly Hills? Do you think they're economically 19 challenged?

20 BOARD MEMBER WILLIAM FRIEDMAN: I haven't seen a 21 diesel truck on Sunset Boulevard since I've lived there.

22 And I lived on Sunset Boulevard

23 BOARD MEMBER BURKE: Have you seen any on the 24 405?

25 CHAIRPERSON LLOYD: Please. I think that

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 13 1 BOARD MEMBER WILLIAM FRIEDMAN: Yeah. But

2 BOARD MEMBER BURKE: Well, we're talking about 3 freeways here. We're not talking about surface streets.

4 Sunset Boulevard and the 405 is the most highly congested 5 freeway in the State of California with 435,000 cars and 6 trucks a day. So I mean

7 BOARD MEMBER WILLIAM FRIEDMAN: Billy, I live 400 8 yards from there, not 200 feet from diesel, which is what 9 these studies are talking about.

10 And, believe me, there's no  my comments had no 11 intent to offend any specific group of individuals. I 12 think  what I said was there's an implication. And 13 there is an implication, and it needs to be studied 14 further. That's what these studies mean to me, that there 15 is  there's a fruitful area for further inquiry.

16 BOARD MEMBER BURKE: Well, I happen to live less 17 than  have for the past twenty years, probably eight 18 blocks from there. And if  you know where Arrow Street 19 is?

20 BOARD MEMBER WILLIAM FRIEDMAN: Yes, I do.

21 BOARD MEMBER BURKE: That's the street after the 22 405 on the east side?

23 The houses in that area have been diminished in 24 value because of the proximity to the 405. Now only 25 because of sound pollution. Because of the pollution from PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 14 1 the trucks and the cars going by.

2 I just  you know, environmental justice to me 3 means people who don't have a voice. Just because a 4 freeway runs by your place I don't think means that you 5 don't have a voice.

6 That's, you know  I didn't mean your comment 7 was offensive, Doc, you know. But I just  all my life 8 people have been slapping labels on things for people who 9 are environmentally or economically challenged and calling 10 them, you know, things that we need study for those 11 people.

12 Well, this is not a key element. Maybe an 13 element, but not a key element in what you need to study 14 for poor and environmentally challenged people as far as 15 I'm concerned. And maybe it's just a difference of 16 opinion.

17 EXECUTIVE OFFICER WITHERSPOON: Staff would agree 18 with that assessment. It's just one element. And I 19 didn't mean to imply that this was the entire 20 environmental justice story. It's just one piece.

21 CHAIRPERSON LLOYD: Mr. McKinnon.

22 BOARD MEMBER McKINNON: Yeah, I think there's 23 probably less contradictions between what folks said to 24 each other. I think both are sort of important 25 perspectives, as kind of working through what we're seeing PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 15 1 in and discussing in the environmental justice area.

2 It is true that it's more than freeways and 3 trucks, because there's lots of stationary source 4 problems. There are retail commercial problems like gas 5 stations and laundries and laundromats. There are some 6 small things like Barrio Logan situation where we're 7 looking at plating.

8 And in some EJ communities there is heavy truck 9 traffic, not only on freeways, but also on surface 10 streets. I think of the Alameda corridor. On freeways I 11 think of Boyle Heights where there's a bunch of freeways 12 that sort of come together in interchanges sort of with a 13 neighborhood.

14 And I guess it seems to me that if we're going to 15 do what's right for Californians in all communities, one 16 of the things we're going to have to do is get better at 17 measuring how all those impacts come together. And I 18 think that what we're going to find, and I think there's 19 sufficient evidence actually at this point, that a lot of 20 the stationary source, commercial source, and even freeway 21 location impacts neighborhoods of color.

22 And I think we have to get better at measuring 23 those impacts so that we can have a discussion about what 24 we're going to do about it and what measures will begin to 25 correct the problem. If we don't measure it, we won't be PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 16 1 able to correct the problem. We may do a lot of things 2 that work and we may do things that don't work.

3 Finally, I'm real concerned  and one of the 4 things that seems to happen is school districts tend to 5 buy land where it is cheapest. And one of the places 6 where land is the cheapest is next to freeways. And that 7 seems to be a reoccurring pattern. I'm not sure how we're 8 going to get at that, but we certainly need to figure out 9 a way, because it isn't a good way of siting a school.

10 And I think that is beyond EJ. I think that 11 happens in all communities. I think it's just really a 12 common occurrence because that's where the land is least 13 valuable.

14 Thanks.

15 CHAIRPERSON LLOYD: Thank you.

16 Supervisor Roberts.

17 BOARD MEMBER ROBERTS: I don't want to interrupt 18 any of this, but I'd like to ask a question about the 19 presentation.

20 CHAIRPERSON LLOYD: Please do.

21 BOARD MEMBER ROBERTS: You made reference to 22 major roads and freeways without giving us any definition 23 as to what that means in levels of traffic. What's a 24 major road, to begin with, as per this study? I'd like to 25 get some perspective in this. Because, believe it or not,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 17 1 we're building some of most expensive housing in our 2 community right next to major roads and freeways. I'd 3 just like to have some understanding of this because I 4 think it's bigger than any one community. It transcends 5 all of that.

6 And I thought this Board was about cleaning up 7 the air, period. Okay?

8 Could you help me? What's a major road?

9 Everybody up here knows except for me, so please help me.

10 DR. KADO: It was defined in a number of  there 11 are companion papers in this  related to this study.

12 And freeways, they had specific number in the thousands.

13 I don't remember the exact number. Major roads were a 14 little bit less than that. I can't give you the exact 15 number.

16 BOARD MEMBER ROBERTS: Would you for me 17 personally get that information, because I'd like some 18 perspective. Because a major road get involved a little 19 bit with transportation planning, and that has no meaning 20 whatsoever. And we've got a lot of things I would 21 describe as major roads. And I'm not going to tell you 22 how close I live to one, but it's very close  or how 23 close I live to a freeway.

24 But I think beyond that  I think the 25 implications here is that, you know, there's something to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 18 1 be concerned with and there's some additional studies that 2 probably we're going to have to do. And I don't think it 3 does any  if it comes as a surprise to anybody, I'll be 4 surprised over that.

5 But I'd like to have some perspective in terms of 6 what they found, what this environment really looked like 7 that they were studying.

8 CHAIRPERSON LLOYD: You might have to pay a site 9 visit to answer that question comprehensively.

10 BOARD MEMBER ROBERTS: I'll be available in June,

11 if that's an option.

12 CHAIRPERSON LLOYD: Thank you very much. Thank 13 you.

14 Seeing no further comments or questions, we'll 15 bring that item to a close and thank the staff. Thank you 16 very much.

17 And I guess we look forward next month to the 18 discussions on the new RSE members.

19 Thank you.

20 CHAIRPERSON LLOYD: So with that we'll move on to 21 the next agenda item. I'll just speak as staff turns 22 over. And this one is Agenda Item 03 2 3, public meeting 23 to consider Prop 40 and related amendments to the Carl 24 Moyer Program and the School Bus Program guidelines.

25 Again, thanks for everybody passing off on  the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 19 1 public passing off on Prop 40. We have some funds 2 actually for this very important program.

3 I had the pleasure of knowing Dr. Carl Moyer 4 personally. And he truly was a visionary ahead of his 5 time, who recognized the prolonged life of diesel engine 6 meant that old high polluting vehicles and equipment were 7 going to be around for a very long time and would present 8 an air quality challenge. This foresight in fact was the 9 genesis of the Moyer Program, which is passed by the 10 Legislature.

11 Carl believed that a collaborative effort between 12 private entities and government could promote cleaner 13 engines and have a significant positive impact on air 14 quality. And clearly that vision has proven to be true.

15 The continuing success of his program demonstrates again 16 how right he was. And now we have a parallel program for 17 lower emission school buses that applies the same 18 philosophy to those vehicles.

19 Something that Dr. Moyer may not have anticipated 20 is how environment justice would come to be part of his 21 effort. We now have laws that direct 50 percent of all 22 Carl Moyer and school bus monies to the areas that are 23 heavily impacted by air pollution.

24 The other thing that's changed is our options for 25 cleaning up diesel engines. When the Carl Moyer Program PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 20 1 began, replacement, rebuilds, and alternative fuel 2 subsidies were the only options. Now we have 3 after treatment possibilities as well, and have learned a 4 lot more about the relative benefits of all the different 5 strategies.

6 Ms. Witherspoon, are you ready to begin staff's 7 presentation?

8 EXECUTIVE OFFICER WITHERSPOON: Yes. Thank you,

9 Dr. Lloyd.

10 Last year California voters approved Proposition 11 40, the California Clean Water, Clean Air, Safe 12 Neighborhood Parks and Coastal Protection Act, thus 13 providing the funds for the Carl Moyer and Lower Emission 14 School Bus Programs to continue for two more years.

15 Under the Carl Moyer Program, truck drivers,

16 forklift operators, farmers, commercial fishermen, and 17 many other hard working Californians have gotten the 18 financial assistance to replace older, higher emitting 19 diesel equipment with newer and cleaner technologies.

20 All Californians have benefited from the 21 cumulative air quality improvements of these projects.

22 During the first three years of the Carl Moyer Program 23 smog forming NOx emissions have been reduced statewide by 24 over 11 tons per day.

25 The Lower Emission School Bus Program provides PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 21 1 similar benefits. Through this program, California school 2 districts are providing direct public health benefits to 3 their students by reducing NOx and diesel PM from the 4 vehicles that bring the children to school. In addition,

5 thousands of school children are now being transported in 6 new buses meeting the most current safety standards.

7 Over the past two years more than 500 old,

8 high emitting school buses have been removed from service 9 and replaced with new, cleaner models. In addition, about 10 1500 buses have been equipped with retrofit devices to 11 date and more than 3,000 will have such aftertreatment 12 when the retrofit component of the existing program is 13 completed this fall.

14 The guideline revisions staff are proposing today 15 will update these programs and allow us to continue 16 achieving real and quantifiable reductions of NOx PM.

17 With that, I'll now ask Dr. Alberto Ayala and Ms.

18 Krista Fregoso to proceed with the staff presentation.

19 ( Thereupon an overhead presentation was 20 Presented as follows.)

21 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

22 Thank you, Ms. Witherspoon.

23 And thank you, Dr. Lloyd and members of the 24 Board.

25 Staff are here today to propose to you revisions PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 22 1 to the existing guidelines for two clean air incentive 2 programs in California, the Carl Moyer Program and the 3 Lower Emission School Bus Program.

4 These revisions we believe improve on the past 5 success of these programs and allow us to move forward 6 with the funding made available by proposition 40.

7  o0o

8 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA: I 9 will briefly discuss Proposition 40 and the funding made 10 available to the Carl Moyer and the School Bus programs.

11 Then I will present an overview of the changes made to the 12 existing guidelines for the Carl Moyer Program, which you 13 approved on November 16th, 2000.

14 I will then turn it over to Ms. Krista Fregoso,

15 who will discuss for you the proposed revisions to the 16 Lower Emissions School Bus Program.

17 These are separate incentive programs with their 18 own distinct guidelines, but they come together under the 19 funding umbrella of the voter approved Proposition 40.

20 Finally, since release of the documents for 21 public comment, the staff have identified some corrections 22 and clarifying changes to both sets of guidelines. We 23 will describe these further changes and ask for your 24 consideration and approval.

25  o0o

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 23 1 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

2 Proposition 40 is a California Clean Water, Clean 3 Air, Safe Neighborhood Parks and Coastal Protection Act 4 approved by California voters in March 2002. It provides 5 the only current source of funding for the Carl Moyer and 6 School Bus Programs.

7 This proposition provides funding for eligible 8 projects that affect air quality in the state and local 9 parks and recreation areas.

10 ARB has been allocated $ 25 million for the 11 current fiscal year, and a similar amount of funding is 12 expected for Fiscal Year 2003 2004.

13 Of this, Assembly Bill 425 directs that 20 14 percent be allocated for the purchase of new, clean, safe 15 school buses. Funding must be allocated to eligible 16 projects that meet the approved program guidelines,

17 including environmental justice requirements.

18  o0o

19 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA: In 20 the four years that the Carl Moyer Program has been in 21 existence, approximately $ 114 million have been allocated 22 for projects. We are currently nearing the end of the 23 reporting cycle for year four, and districts tell us that 24 all funds have been allocated to eligible projects.

25 The Carl Moyer Program has been widely successful PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 24 1 in its goal to deploy cleaner than required engine 2 technology and has resulted in significant near term 3 reductions of emissions of nitrogen oxides and particulate 4 matter.

5 The program has been over subscribed with 6 significantly more eligible projects than there is funding 7 for. The success of the Moyer Program is illustrated by 8 the statistics for the first three years. Results for the 9 fourth are still coming in from the districts, and the 10 Board will hear a status report on these results in the 11 fall.

12 The program has resulted in average reductions of 13 11 tons of NOx emissions per day, at an average cost 14 effectiveness of $ 4,000 per ton of NOx reduced. This 15 compares very favorably to the current cost effectiveness 16 limit of $ 13,000 per ton.

17 The program has funded more than 4300 engines,

18 with a fairly even split between diesel and alternative 19 fuel.

20  o0o

21 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

22 The new finding made available by Proposition 40 23 and a number of recent developments prompted staff to 24 revise the existing guidelines. The revisions to the 25 Moyer guidelines include the following:

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 25 1 First, we're proposing new district requirements 2 for matching funding allocations. The staff is also 3 proposing a new provision which allows districts to fund 4 projects that reduce PM emissions only as long as it is 5 with district match funds.

6 These first two revisions will be discussed in 7 more detail with the next few slides.

8 Other changes to the Moyer guidelines include an 9 increase in the maximum cost effectiveness from 13,000 to 10 13,600 per ton of NOx reduced. This is done to account 11 for cost of living increases relative to the last update 12 of the guidelines in November of 2000.

13 Although environmental justice requirements with 14 part of the funds allocated last year, they were not 15 formally spelled out in the current guidelines, which were 16 approved in 2000. We have added this language to the 17 proposed revisions. We have formalized the reporting 18 requirements for the districts. This is important since 19 we have already been informed that the Department of 20 Finance will formally audit both the ARB and the districts 21 in the implementation of these Proposition 40 funds.

22 And, finally, the majority of the changes to the 23 guidelines are technical updates related to new emission 24 factors and inventories as well as new emission standards 25 that recently came into effect. ARB and district staff PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 26 1 have also worked closely and consider the lessons learned 2 in the four years of the Carl Moyer Program 3 implementation.

4 This experience is reflected in a number of 5 clarifying statements throughout the document. One of the 6 proposed technical updates relates to a specific guidance 7 for projects that involve engine repowers. In The public 8 document staff proposes that only rebuilt engines and 9 parts offered by the original equipment manufacturer shall 10 be eligible for Moyer funding.

11 We will present to you a proposal to include more 12 flexibility and allow for a wider variety of rebuilt 13 engines to qualify for participation so long as they 14 result in real, quantifiable and enforceable remission 15 reductions 16  o0o

17 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

18 Per Proposition 40 language, each district is 19 eligible to receive no less than $ 100,000 a year. The 20 staff proposes that smaller districts which based on 21 population only qualify for this minimum disbursement may 22 request a waiver of the matching requirement so long as 23 sufficient district resources are committed to 24 administration of the program.

25 In addition, new participating districts must PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 27 1 receive appropriate training from ARB for program 2 implementation before receiving their allocation.

3 For the larger districts the matching requirement 4 is the same as in the past. For every $ 2 from proposition 5 40, they must commit $ 1 from funds under their authority.

6 Up to 15 percent of this match requirement can be made by 7 a district's in kind administrative costs.

8  o0o

9 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA: In 10 the current fiscal year Proposition 40 has made available 11 a total of $ 19.5 million for projects. Each California 12 air district is eligible for a minimum allocation of 13 $ 100,000. Districts with either populations of 14 approximately 330,000 or more or a nonattainment of 15 federal lows in the standards are eligible for additional 16 funding determined based on equal weight for each of these 17 factors.

18  o0o

19 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

20 The program will continue the goals and 21 requirements for reduction of PM emissions recommended by 22 the Carl Moyer Advisory Board. Areas in nonattainment of 23 the federal PM standards must fund projects that result in 24 a minimum overall PM emission reduction of 25 percent.

25 Currently the San Joaquin Valley and South Coast PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 28 1 Districts have this requirement. The rest of the 2 districts must attempt to meet this goal.

3 The staff proposed additional flexibility be 4 added to the program. Districts may use matching funds 5 for projects that result in PM emission reductions only.

6 This could be projects like diesel particulate filters or 7 oxidation catalysts. Although these projects do not offer 8 NOx reductions consistent with the original focus of the 9 Carl Moyer program, reductions of toxic PM emissions are 10 critical and the staff believe offering this flexibility 11 to districts to fund these projects is important.

12  o0o

13 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

14 The final slide in the staff presentation of the 15 Moyer Program provisions is a summary of further proposed 16 modifications. Since the release of the guideline 17 document for public comment on the 27th of last month, a 18 number of minor points requiring further clarification and 19 correction have been identified. The staff will submit an 20 amended document to the executive officer for final 21 resolution and approval.

22 Lastly, in an effort to ensure real emission 23 reductions over the useful life of an engine, the staff's 24 original proposal codify an existing policy requiring the 25 use of OEM engines and parts. We are now proposing to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 29 1 allow the use of non OEM rebuilt engines and parts as long 2 as they can be demonstrated to ARB to be functionally 3 equivalent from an emissions and durability standpoint to 4 the OEM engines and components being replaced.

5 Staff has worked with the independent rebuilder 6 stakeholders who concur with the proposed language and 7 approach. The staff will also continue to work with all 8 other stakeholders to determine the specific aspects of 9 this demonstration.

10 I will now turn it over to Ms. Fregoso, who will 11 present the revisions for the Lower Emission School Bus 12 Program and conclude the staff presentation.

13 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 14 SPECIALIST FREGOSO: Thank you, Dr. Ayala.

15 I will now present the staff's proposal for 16 revisions to the Lower Emission School Bus Program.

17  o0o

18 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 19 SPECIALIST FREGOSO: The purpose of this incentive program 20 is to reduce school children's exposure to toxic PM 21 emissions and smog forming NOx emissions.

22  o0o

23 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 24 SPECIALIST FREGOSO: First, let me begin with a brief 25 status summary of the existing Lower Emission School Bus PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 30 1 Program.

2 In December 2000, the Board adopted the original 3 guidance document for use by the California Energy 4 Commission and the local air districts in implement the 5 program. The program has been a success since its 6 inception two years ago. A total of $ 49.5 million has 7 been used to purchase new lower emitting school buses 8 meeting the latest federal motor vehicle safety standards.

9 An additional $ 16.5 million in funding is being 10 used to equip in use diesel buses with retrofit devices 11 that reduce cancer causing PM emissions. With this 12 funding over 500 old, high polluting buses have been 13 removed from service and replaced with new, safe,

14 lower emitting models. The retrofit component is ongoing 15 and is scheduled for completion in the fall of 2003. At 16 that time we expect that about 3,000 in use diesel school 17 buses will be equipped with ARB verified retrofit devises 18 that significantly reduces PM emissions.

19  o0o

20 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 21 SPECIALIST FREGOSO: Dr. Ayala has already discussed that 22 Proposition 40 is the only current funding source for the 23 Carl Moyer Program and the Lower Emission School Bus 24 Program.

25 Assembly Bill 425 directs that 20 percent of the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 31 1 Proposition 40 funds available to the ARB be used to 2 purchase new school buses. For this fiscal year a funding 3 allocation of $ 4,920,000 is available to continue the 4 Lower Emission School Bus Program. This means we will be 5 able to replace at least 45 old school buses throughout 6 California with new lower emitting models.

7 In the next fiscal year a similar amount is 8 expected to be available. Neither Proposition 40 nor 9 Assembly Bill 425 provided funding to continue the 10 retrofit component of the program.

11  o0o

12 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 13 SPECIALIST FREGOSO: Now I will discuss the staff's 14 proposed revisions to the program, most of which are 15 administrative revisions.

16 First, we are updating the funding allocations 17 for regions throughout California. Seven of the largest 18 air districts will receive distinct funding allocations.

19 The remaining funds will be pooled for distribution to 20 school districts in the rest of the State.

21 As done in the previous two years of the program,

22 the funding allocations are based on population.

23 Next we are updating the program timetable, which 24 with include an enforceable delivery deadline with a 25 penalty provision for the late delivery of school buses.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 32 1 I'll discuss this penalty provision in just a few minutes.

2 We are also proposing that fewer air districts 3 self administer the program this year. Instead we are 4 focusing more program administration at the California 5 Energy Commission, which has extensive experience in 6 implementing the program. The three air districts that 7 have requested to continue to self administer the program 8 may do so under our proposal.

9 The staff believes this proposed revision is 10 appropriate due to the smaller pot of funding available 11 and the increased auditing requirements associated with 12 Proposition 40.

13 And, finally, our proposal reduces the match 14 funding contribution for school districts severely 15 impacted by transportation service costs. In the previous 16 two years of the program school districts with bus fleets 17 comprised with at least 20 percent pre 1977 model year 18 in use buses could qualify for a reduced match funding 19 amount capped as $ 15,000. Our proposal now caps this 20 reduced match funding amount at $ 10,000 and is applicable 21 to any qualified new bus purchase that replaces an in use 22 pre 1977 model year bus.

23  o0o

24 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 25 SPECIALIST FREGOSO: In addition to the administrative PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 33 1 revisions I just discussed, we are proposing two 2 significant changes to the current program guidelines.

3 First, our proposal includes updated eligibility 4 criteria for funding new school buses with 2003 model year 5 engines.

6 Next, our proposal includes a mechanism for 7 assessing a monetary penalty on the business entity 8 responsible for a delay that results in school buses being 9 delivered late to school districts.

10 I'll now discuss each of these revisions in more 11 detail.

12  o0o

13 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 14 SPECIALIST FREGOSO: We are updating the eligibility 15 criteria for funding new school buses to account for more 16 stringent NOx emissions requirements that took effect on 17 October 1st, 2002. Because of these more stringent 18 requirements, the Lower Emission School Bus Program is in 19 a transitional period for 2003 model year.

20 Our proposed eligibility criteria reflect this 21 transitional period for NOx requirements and also require 22 that engines in funded school buses provide reductions in 23 toxic PM emissions.

24 There is one thing we want to clarify for the 25 Board based on recent information. There are two engine PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 34 1 manufacturers that supply engines for natural gas school 2 buses. Cummins currently has an oxidation catalyst. And 3 John Deere will be certifying with an oxidation catalyst 4 by this July.

5 Our proposal will not provide any funding for 6 school buses equipped with engines that are subject to the 7 October 2002 requirements and that require the payment of 8 a nonconformance penalty.

9 Our proposal maintains the program's funding 10 split of two thirds of the funding for new alternative 11 fuel purchases and one third of the funding for new diesel 12 purchases as a statewide goal.

13 And, finally, this proposal is only applicable to 14 2003 model year engines. We will again consider guideline 15 revisions when the 2004 standards become effective for all 16 engine manufacturers. At that time, we will be looking to 17 reinstate the program's requirement for NOx reductions.

18  o0o

19 PLANNING AND REGULATORY DEVELOPMENT SECTION AP 20 SPECIALIST FREGOSO: The final significant revision to the 21 Lower Emissions School Bus Program is the staff's proposal 22 to add a mechanism for assessing a monetary penalty on the 23 business entity responsible for the failure to deliver 24 school buses to school districts by the September 1st,

25 2004 deadline. This mechanism will level the playing PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 35 1 field for business entities such as school bus 2 distributors that stand to profit from the Lower Emission 3 School Bus Program. The previous program guidelines did 4 not include any mechanism to mitigate situations in which 5 school buses were delivered to school districts after the 6 program's delivery deadline.

7 In the staff's proposal released for public 8 comment on February 27th, we originally proposed that 9 either the California Energy Commission or the air 10 districts that self administer the program be the agencies 11 to enforce the penalty provision. These are the agencies 12 signing the funding contracts with school districts.

13 However, based on public comment we are now modifying the 14 proposal to place the responsibility for enforcing this 15 provision on the ARB rather than on the Energy Commission 16 or the air districts. The staff will submit this modified 17 revision to the executive officer for final approval once 18 the public record for this item is closed.

19 This slide concludes the staff presentation. We 20 have provided for you an overview of staff's proposed 21 revisions to the guidelines of two important incentive 22 programs. The funding made available by Proposition 40 23 precipitated these changes which have built on these 24 programs' previous successes. The proposed revisions 25 offer the necessary tools for deployment of projects at PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 36 1 the local district level based on the latest information.

2 Staff believes the revisions and further 3 modifications will result in significant improvements to 4 the guidelines governing the Carl Moyer and the 5 Lower Emission School Bus Programs. Thus, we recommend 6 approval.

7 Thank you. And the concludes our presentation.

8 CHAIRPERSON LLOYD: Thank you very much.

9 Comments, questions for the staff?

10 Mr. Calhoun.

11 BOARD MEMBER CALHOUN: I have two questions, one 12 of which I will hold off on until we get some testimony.

13 But have we ever denied funding to a local 14 district because of its inability to match the required 15 funds?

16 Don't all of you speak at once now.

17 PLANNING AND REGULATORY DEVELOPMENT MANAGER 18 KEMENA: This is Renee Kemena with the Mobile Source 19 Control Division.

20 Are you speaking in relation to the Moyer Program 21 or the School Bus Program?

22 BOARD MEMBER CALHOUN: Both.

23 CHAIRPERSON LLOYD: Simple question. Is there 24 any where we denied any application because the district 25 had not local matching funds, that we know of?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 37 1 PLANNING AND REGULATORY DEVELOPMENT MANAGER 2 KEMENA: The match fund on the School Bus Program was a 3 requirement of the program, and they were all able to come 4 in with match funding.

5 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

6 That is the experience that we've had with the 7 Moyer Program as well.

8 CHAIRPERSON LLOYD: So the answer is no?

9 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

10 Correct.

11 BOARD MEMBER CALHOUN: The second question, I'll 12 wait until we hear some testimony.

13 CHAIRPERSON LLOYD: Are you sure?

14 Then Professor Friedman.

15 BOARD MEMBER HUGH FRIEDMAN: I have a couple of 16 quick questions too.

17 CAPCOA's concerned  wrote about their concern 18 for the matching fund requirement for the smaller 19 districts receiving the minimum 100,000. And the proposal 20 would revise the guidelines for a one year waiver. But 21 what happens after that one year?

22 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA: I 23 think initially the staff recommends that we look at 24 implementation of the program over the first year and 25 consider either extending or modifying the proposal based PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 38 1 on the one year experience.

2 BOARD MEMBER HUGH FRIEDMAN: There's also, I 3 guess  what, a 15 percent credit for administrative

4 absorption of administrative

5 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

6 That's correct. Which is currently in the existing 7 guidelines, and we're not changing that requirement,

8 that's correct.

9 BOARD MEMBER HUGH FRIEDMAN: Okay. And as I 10 heard the revisions, the Errata, those appear to me

11 although I'm not technically adroit  but it seems to me 12 that that pretty much responds and takes care of the 13 concern expressed by the automotive engineer rebuilders,

14 by recognizing and allowing in the standards non OEM that 15 are equivalent. Is that what the intent is?

16 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA:

17 That's correct. As we stated in the staff 18 presentation, we are at a point where we are ready to move 19 forward and work with all of the stakeholders to determine 20 how we're going to proceed. But essentially allows both 21 the OEM and the non OEM manufacturers to potentially 22 participate in the program, yes.

23 BOARD MEMBER HUGH FRIEDMAN: Thank you.

24 CHAIRPERSON LLOYD: Supervisor DeSaulnier.

25 BOARD MEMBER DeSAULNIER: Thank you, Mr.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 39 1 Chairman.

2 I don't like to sound parochial, and I've always 3 tried to be collegial particularly in regards to our 4 downwind neighbors from the Bay Area, but I'd like to hear 5 staff's rationale in terms of the Moyer Program and the 6 shift from more of a population driven formula; and in 7 relation to the letter from ARAPCO, I'd like some 8 comments.

9 Don't all jump in at once.

10 EXECUTIVE OFFICER WITHERSPOON: The original 11 allocation was defined by statute that both population and 12 the need for the district to receive emission reductions 13 under the M4 measure of the 1994 SIP, which is really a 14 code for being a long term ozone nonattainment area. And 15 so we have an nonattainment status plus population in the 16 formula that we have been implementing for several years 17 now.

18 There is a lot of discussion going on about 19 whether that should be revisited. And there are bills in 20 the Legislature this year, I think more than one, that may 21 address future Carl Moyer criteria, because a lot of this 22 is driven by statute, be it the cost effective threshold 23 or funding allocations.

24 And, also, the program has always been about NOx.

25 And many people believe now that it should embrace PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 40 1 particulate matter as well. And when you start looking at 2 particulate matter and ozone, your view about 3 nonattainment areas shifts; where for particulate matter,

4 urban density, roadways, that sort of thing, comes back 5 into higher prominence than regional wide scale ozone 6 types of considerations.

7 So I think that the Legislature will be taking 8 that up. And we're certainly open to a change in the 9 criteria. It's necessary to look at it. But for the time 10 being for prop 40, we continued with the status quo until 11 there is a change in statute.

12 BOARD MEMBER DeSAULNIER: Catherine, I don't mean 13 to be a pest, but I will be for this instance.

14 When we went through smog check, I was reminded 15 by the Chairman several times to be agnostic when it comes 16 to which kind of public health issue we were dealing with.

17 And this is a problem for us obviously in the Bay Area.

18 So the question is: How much flexibility do we have as a 19 Board regarding the statute? And what can we do to 20 rectify what at least I perceive to be an inequity and 21 creates problems as I've mentioned to you in other 22 relationships that we have with our downwind neighbors?

23 EXECUTIVE OFFICER WITHERSPOON: Well, the Bay 24 Area believes that we do have discretion to interpret how 25 M4 is read and to put more or less emphasis on it.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 41 1 But, again, we're operating from the precedent 2 that's been in place for several years now, mindful that 3 big changes could be coming in how Carl Moyer is 4 administered in the future. But not wanting to step out 5 ahead of the entire debate in the Legislature because 6 there are settled expectations now over years of time that 7 this is how the formula will play out. And any time 8 dollars come in, they flow back out in this way.

9 BOARD MEMBER DeSAULNIER: Well, does that formula 10 contradict in the statute the drive toward consideration 11 of EJ and in terms of the total cost effectiveness in the 12 25 percent goal? There seems to be some contradictions.

13 And whether that was in the statute that needs to be fixed 14 or whether administratively or by legislative action of 15 this Board, we can at least move  is my question then 16 secondarily: How does this Board engage with the 17 Legislature, if necessary, to correct the problem?

18 EXECUTIVE OFFICER WITHERSPOON: We're 19 recommending as a staff that you don't move today. But 20 we've already begun those discussions with numbers of 21 stakeholders to find out where they all are on the issue 22 of NOx versus particulate matter, on cost effectiveness 23 ceilings. And we'll engage them as well on allocation 24 criteria for the future. And so we're very happy to do 25 that.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 42 1 And I'd be happy to keep you apprised of every 2 discussion that's going on in that regard and the status 3 of the bills.

4 BOARD MEMBER DeSAULNIER: So is that a, yes,

5 there are contradictions between the goals stated in the 6 statute?

7 EXECUTIVE OFFICER WITHERSPOON: I don't think 8 there are contradictions in the statute. I think the 9 statute's out of step with where we are now, shifting from 10 a pure ozone emphasis to more emphasis on particulates.

11 So it's out of step with reality and real life of both 12 pollutants matter a great deal and the money matters for 13 cleaning up particulates as well as NOx. But the statute 14 was about ozone and it was about NOx.

15 CHAIRPERSON LLOYD: Can I ask, now that we only 16 have one lawyer on the front row, can we have our legal 17 counsel. Because the way I heard the question was that 18 there was the Bay Area's interpretation, presumably based 19 on their legal counsel.

20 Ms. Walsh, how do you  I presume you concur 21 with the EO?

22 GENERAL COUNSEL WALSH: Right. This Board has 23 the authority to balance the various factors that the 24 statute directs you to consider in determining how the 25 money will be passed out.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 43 1 And there are some, not inconsistencies, but some 2 of those factors are looking at the issues from different 3 points of view. And so this Board has the responsibility,

4 and staff has presented you with a proposal that exercises 5 that responsibility to balance those factors.

6 BOARD MEMBER DeSAULNIER: I'm done for now, Mr.

7 Chairman. I appreciate the staff's response, although I 8 don't necessarily agree.

9 CHAIRPERSON LLOYD: Okay. So do you need a later 10 response from the staff following up the meeting or are 11 you satisfied

12 BOARD MEMBER DeSAULNIER: No, I was going to 13 wait  we do have some public comment, I take it, and 14 we've got discussion on other issues from what I 15 understand. So

16 CHAIRPERSON LLOYD: Okay. Thank you.

17 Any other questions?

18 With that, thank you.

19 I'd like to now call up the first three witnesses 20 who are signed up to speak on this item. And they're 21 Michael Conlon, Steve HOEK, and Bill Mirth.

22 MR. CONLON: Good morning. You all hear me?

23 CHAIRPERSON LLOYD: Yes.

24 MR. CONLON: My name is Michael Conlon. I am the 25 legal counsel for the Automotive Engine Rebuilders PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 44 1 Association. I'm here representing them and also six 2 other associations in the heavy duty engine field,

3 including the National Engine Parts Manufacturers 4 Association and the Association of Diesel Specialists.

5 We're here on one issue only this morning related 6 to the Carl Moyer guidelines, and that's the addition of 7 restrictions on what parts in engines can be used under 8 the Carl Moyer Program. We are here to offer our support 9 for the revised language regarding the repowering that 10 staff presented this morning.

11 Originally we filed extensive comments with 12 respect to the original language, which would have granted 13 a monopoly on repowering projects to engines and parts 14 produced by the original equipment manufacturers. That 15 original proposal had no technical, environmental, or 16 financial justification.

17 As a fact, emissions problems are not caused by 18 rebuilding, and there's a 1987 ARB study that indicates 19 that.

20 It says that heavy duty engine rebuilding 21 practices do not significantly impact engine emissions.

22 And it also says that there is no evidence that the use of 23 aftermarket parts increases emissions.

24 CHAIRPERSON LLOYD: I think you've been heard,

25 your support, and the staff has agreed with you. The only PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 45 1 thing you can do now is alienate the Board.

2 So I think, you know, you've made your point.

3 MR. CONLON: All right. The only thing that

4 well, first of all I would like to praise the staff, if I 5 could, because this issue came up very quickly. They met 6 with us. We went very quickly and resolved this problem.

7 And there is one concern that we had, and that is 8 testing. As independent rebuilders, we do not build and 9 rebuild the number of engines that the OE's do. We do 10 rebuild them to the exact same specifications and we do 11 use direct replacement parts. In those circumstances we 12 don't think that testing should be required. And if it 13 was required, it would amount to a prohibition on our 14 being able to do it.

15 In discussions with the staff, we understand that 16 this Board has a right to require testing at any time in 17 order to ensure clean air, and we don't fight that. But 18 we have asked, and it is our understanding that staff is 19 not going to be looking towards testing as the primary or 20 maybe even the secondary way for us to demonstrate 21 compliance, but will only use testing if and when we can't 22 show in any other way that this is emissions equivalent.

23 And I was just wondering if the staff would comment on 24 that.

25 BOARD MEMBER CALHOUN: Before the staff comment PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 46 1 let me ask you a question, Mr. Conlon.

2 MR. CONLON: Yes, sir.

3 BOARD MEMBER CALHOUN: How would you propose to 4 convince the staff that it is functionally equivalent to 5 an OEM part?

6 MR. CONLON: There are  all of the replacement 7 parts that are used are designed to the exact 8 specifications of the OE parts. And those are the parts 9 that are used. Also the rebuilding will be done to exact 10 OE specifications. If those two things are complied with,

11 then we believe that the emissions will be exactly the 12 same.

13 BOARD MEMBER CALHOUN: Is that true for all of 14 the parts that you're talking about?

15 MR. CONLON: We believe so, yes, sir. And I have 16 people here from the parts companies who can speak to that 17 more directly.

18 BOARD MEMBER CALHOUN: Bob.

19 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: Bob 20 Cross with the staff.

21 I think that the problem which has kind of 22 stirred this up in the first place and caused the 23 negotiations to be so extended is that the parts industry 24 typically does what's called consolidating parts. And so 25 that they'll in many cases have, you know, one part which PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 47 1 would fit where maybe three or four different ones from 2 the original engine manufacturer would. And there's 3 probably been a 30 year argument about whether or not 4 those parts are in fact equivalent. And the staff has 5 always sort of felt, " Well, gosh, if the engine 6 manufacturer chose to make three different ones, they must 7 have had a reason for it." And then the consolidation 8 folks have usually said, Well, yeah. But maybe we know 9 how to make the parts functionally identical. And,

10 therefore, we can save the owner or rebuilder some money 11 by doing a parts consolidation."

12 And I think that both sides have merit. I think 13 our concern as the staff is that the practice of parts 14 consolidation can get carried away to the point where it 15 does start to have a very significant impact.

16 For example, if you had turbochargers that were 17 consolidated  or maybe injectors that were consolidated,

18 you would be emissions concerned. And I think that what 19 the staff wants to do with the language here is ensure 20 that if we have that concern of a specific rebuilder's 21 application, we'd like to be able to have the rebuilder 22 have to prove basically that the engine's emissions 23 equivalent.

24 And clearly if the engine is rebuilt with OE 25 parts, there isn't going to be a problem. If they can PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 48 1 demonstrate clearly that the parts consolidations that 2 they've done are functionally identical, I think we don't 3 have a problem. But we don't want to have a situation 4 where our hands are tied if we have the engineering 5 concern I just mentioned.

6 MR. CONLON: And I think we would agree with 7 that.

8 I think consolidating can describe two different 9 situations. One is where you do take parts that are 10 different and they  and there is a part that's combined 11 to function the same as both of them. But sometimes a 12 manufacturer will give the same part two or three 13 different part numbers for use in different applications.

14 And one part is put out by the aftermarket to cover what 15 is exactly the same part, but just different part numbers.

16 So in a latter case we couldn't think there's any 17 difference. But in the former case I would agree with Mr.

18 Cross, that there does have to be some proof that that 19 consolidation has not done anything to change the 20 emissions effect of that part.

21 BOARD MEMBER CALHOUN: I don't think the reg 22 requires that the part be identical. I think it states 23 that it must be equivalent from an emissions and 24 durability standpoint. And I certainly see the staff 25 maybe in some cases may want to ask the manufacturer of PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 49 1 that part to demonstrate that that is in fact the case.

2 CHAIRPERSON LLOYD: Mr. McKinnon.

3 BOARD MEMBER McKINNON: Yeah, we're talking about 4 using taxpayer money to subsidize cleaning up engines 5 here. And I think it is important that we have some 6 bottom line way of measuring whether or not the rebuilds 7 work.

8 But the thing I'm not very clear on is, what does 9 that mean? Does that mean that we certify each rebuilder 10 on each kind of engine they rebuild, or does that mean we 11 do some sampling method?

12 Can you map out for me what it looks like and 13 what it costs?

14 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS:

15 Well, basically we already have an existing 16 process that we use to look at aftermarket parts. And 17 typically the process looks at speed equipment or 18 non OEM type parts. But it's a process that can also be 19 applied to this use.

20 And in the light  well, let's see. I won't go 21 there.

22 The concern that I guess we would have is that

23 or the way we would do this is that the rebuilder, if they 24 use the exact part that the engine manufacturer specifies,

25 we would presume that they're doing it correctly.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 50 1 If they have a an engineering basis for what the 2 gentleman here has explained, that there is  you know,

3 that they've got a Cummins drawing, for example of a 4 piston that's got five part numbers on it that apply to 5 that piston. Then clearly you would be able to say by 6 looking at the Cummins drawing, " Yeah. That's okay."

7 I think when we get into the injectors and 8 turbos, we're going to look more closely.

9 So let me backup.

10 So for the short block stuff I think we would 11 work with them to try and buy off on an engineering basis 12 that they're using the right parts. And we'd probably do 13 it through spot checking, if you will. I don't think 14 that  the staff doesn't have the wherewithal to try and 15 tear  you know, mentally tear apart every engine that 16 they rebuild. I think we just need to look at their 17 practices and say, okay, do they typically use the right 18 parts?

19 I think when we get into emissions parts and 20 parts that are not exact replacement for the OEM, then we 21 start having to look more closely. And as the engine gets 22 further and further from an exact OEM rebuilt engine, our 23 concern gets greater. At some point we're going to say,

24 " You know, that doesn't really look like an OEM engine,

25 and we want you to test it and so we really  and that PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 51 1 discretion is already exercised for speed equipment now.

2 I mean basically  an intake manifold that basically 3 works the same as a factory manifold, they say, " Fine,

4 it's a replacement part." You know, if it's a whole new 5 fuel injection system, they say, " Yeah, better test that."

6 So I think we would just use that same process for this 7 application.

8 BOARD MEMBER McKINNON: Thank you.

9 CHAIRPERSON LLOYD: Thank you very much indeed.

10 Thank you.

11 MR. CONLON: We did have originally six people 12 who were going to testify this morning. But in keeping,

13 Mr. Chairman, with your remarks, I've asked two of them 14 not to. But I would like to just at least identify them.

15 Mr. Mike Jeffries of Lane Parts, who is a rebuilder, who 16 would like to participate in the Carl Moyer Program; and 17 also Mr. Bob Rasmussen, who is the Chairman and Founder of 18 IPD Parts of Torrance, California, who is one of the three 19 major parts suppliers in the heavy duty aftermarket.

20 And the other three I've asked to be very, very 21 brief.

22 Thank you very much for your time.

23 CHAIRPERSON LLOYD: Thank you very much indeed.

24 I would ask if you could keep your comments to 25 three minutes. And I guess I will enforce that. If we PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 52 1 have questions, obviously that's added on. But,

2 particularly, when again you're speaking in favor of the 3 staff proposal.

4 Thank you.

5 MR. HOEK: Good morning. My name's Steve Hoek.

6 I'm the Vice President of North State Truck Equipment up 7 in Redding, California. We've been in business since 8 1978. And we're a rebuilder engines, transmissions, and 9 rear ends for the heavy duty truck market.

10 Being an independent rebuilder, we build all 11 different makes and all different brands. We've supplied 12 about 20 engines to the Carl Moyer Program since the year 13 2000. I just wanted to give you some background on how we 14 build engines.

15 We build engines back to the OE specs. We 16 actually have a dyno facility and a test cell where we 17 check all the parameters. Our engines carry the same, if 18 not better, warranties as the OEM's.

19 But the cost savings on engines that come from us 20 versus the OE dealers up in our area is quite a bit 21 difference in price. The average price on a Cummins 22 repower from our company is approximately $ 19,000 versus 23 24,000 by the OEM truck dealers. And on a Cat engine 24 repower our company's price is approximately $ 21,000 25 compared to $ 28,000 by the same OE truck dealer. And PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 53 1 these prices were verified by the Shasta County Air 2 District. So our numbers are correct.

3 I'd also like to let you know what our company is 4 doing even though we are an independent rebuilder. We're 5 in the process of right now of upgrading our dyno to 6 sample oxides of nitrogen, hydrocarbons, carbon dioxide.

7 We've been doing PM for a long time.

8 CHAIRPERSON LLOYD: This is really an 9 advertisement for your company, and I appreciate that.

10 But I think again keeping what we're trying to address 11 here, if you could just be specific in terms of addressing 12 the staff proposal.

13 MR. HOEK: As a non OE we have supplied quite a 14 few engines for you. And what brought us to here is 15 hearing the wording that we were going to get cut out of 16 the loop.

17 CHAIRPERSON LLOYD: Staff was heard you, and 18 we're very pleased that they did.

19 Thank you.

20 Mr. McKinnon.

21 BOARD MEMBER McKINNON: Do you use the OEM's 22 parts when you do your rebuilds or do you manufacture and 23 machine

24 MR. HOEK: I don't manufacture. I am a 25 rebuilder.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 54 1 I have been  we have been a Cummins dealer 2 since 1979, until January. We were let go as a Cummins 3 dealer because we deal in the aftermarket parts industry.

4 We have been with Federal Mogul since 1989. We 5 have approximately  I would say we've sold over 4,000 6 engine kits with their product. Very good product.

7 BOARD MEMBER McKINNON: So you use an aftermarket 8 supplier that supplies to lots of folks. So

9 MR. HOEK: Absolutely.

10 BOARD MEMBER McKINNON: Okay. You don't 11 manufacture your own parts?

12 MR. HOEK: No. No, we assemble, we assemble.

13 BOARD MEMBER McKINNON: Great. Thanks.

14 CHAIRPERSON LLOYD: Thank you very much.

15 So we've got Bill Mirth, Jay Wagner, Steve Hurd.

16 MR. MIRTH: Thank you.

17 My names is Bill Mirth. I'm the National Sales 18 Manager for the FP Diesel brand of parts offered by 19 Federal Mogul.

20 Federal Mogul is a global supplier of engine 21 components and subsystems. We serve the world's OE and 22 aftermarket markets. We employ 49,000 people worldwide.

23 And we're close to a $ 6 billion corporation.

24 We have a unique mix of 53 percent of our 25 products go to our OE customers, while 47 percent go to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 55 1 our aftermarket customers.

2 And we also have over 200 manufacturing 3 facilities worldwide. We do produce the liners and the 4 pistons and the valves and gaskets and so forth.

5 And FP Diesel is our brand offering, and our 6 headquarters is in Westminster, California, where we 7 employ close to 100 people.

8 We support and we thank the Board for considering 9 our proposal of changing the wording, because we provide 10 equal specifications in qualities for our OE and 11 aftermarket customers alike. And since aftermarket 12 components are less expensive than OE, the Carl Moyer 13 Program can go farther in supplying product for engines.

14 CHAIRPERSON LLOYD: Thank you very much. I thank 15 you for keeping the time.

16 Jay Wagner, Steve Hurd, Clayton Miller.

17 MR. WAGNER: Good morning.

18 I'm Jay Wagner, and I'm here representing Dana 19 Corporation.

20 Dana Corporation is based in Toledo, Ohio. And 21 we're operating and reproducing automotive parts for both 22 the original equipment manufacturers and the aftermarket 23 for nearly 100 years.

24 In 2002 Dana reported sales of $ 10 billion in 25 sales and employs over 60,000 people throughout the world.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 56 1 Our goal is to generate sales for about 50 2 percent of the aftermarket and 50 percent of the OE.

3 Currently we produce axles, brake systems,

4 chassis, bearings, liners, filtration systems, camshafts,

5 for both the aftermarket and the OE.

6 The list of people that we are currently 7 producing  and I'll try to keep this very short  are 8 John Deere, Ford Motor Company, Caterpillar, Cummins,

9 Daimler Chysler, Detroit Diesel, Fiat, General Motors,

10 Honda, Mack, Navistar, Nissan, Toyota, Wakishaw. The same 11 technology that we place into the OE product is placed 12 into our aftermarket product.

13 Dana became involved when we had heard that there 14 was a change in the way the wording was on the Carl Moyer 15 Program. And we feel though we've been working very 16 closely with the staff to change that wording so that we 17 will have a level playing field.

18 We support the new wording. And we want to thank 19 you for the time. Thank you.

20 CHAIRPERSON LLOYD: Thank you very much indeed.

21 Next, Steve Hurd.

22 MR. HURD: Good morning. I'm Steve Hurd from 23 Caterpillar in Peoria, Illinois.

24 Caterpillar has been actively participating in 25 the Carl Moyer Program now for a few years and we are PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 57 1 committed to this success of this program. And really I'm 2 here to support these changes. Most of them are going to 3 improve the program. I just realized this morning though 4 about this OEM only wording. And I guess  I don't want 5 to belabor the point or argue here in front of the Board.

6 I think  we have not yet met with the staff. I don't 7 represent our reman program. But we will meet with the 8 staff in the near future on this issue of OEM only 9 remanufactured engines.

10 I guess I could make a few comments.

11 The way it was written where the parts must be 12 procured from the OEM, you know, this will help assure 13 that the expected emissions reductions do occur, without a 14 lot of excess effort. Basically, only Caterpillar knows 15 Caterpillar specifications. All the recent engineering 16 upgrades are going to be included in our remanufactured 17 engines as well.

18 We're prepared to run a complete eight mode 19 emissions test in an EPA certified lab for our Cat reman 20 emissions repower engine arrangements. And I guess 21 basically  we're prepared next month to meet and discuss 22 this issue with the ARB staff.

23 Thank you.

24 CHAIRPERSON LLOYD: Thank you. And I encourage 25 you to do so there.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 58 1 Thank you.

2 Next we have Clayton Miller, Rick McCourt,

3 Gretchen Knudsen.

4 MR. MILLER: Good morning, Chairman Lloyd and 5 members of the Board. My name is Clayton Miller. And I 6 am representing the Construction Industry Air Quality 7 Coalition.

8 CIAQC is comprised of the four major construction 9 and home building industries in southern California, which 10 include the Associated General Contractors of California,

11 Building Industry Association of Southern California,

12 Engineering Contractors Association of Southern 13 California, Contractors Association, representing 14 approximately 3300 member companies.

15 I am here this morning to express CIAQC's support 16 for the proposed revisions to the Carl Moyer Program 17 guidelines. CIAQC believes that this is a very important 18 program that provides meaningful incentives for projects 19 that result in real quantifiable and cost effective 20 emission reductions.

21 Many CIAQC member companies recognize the value 22 of this program and other incentive based programs 23 operating in the South Coast AQMD. To date grants to 24 CIAQC member companies have resulted in repowering of over 25 270 off road diesel powered engines since mid 2001, with PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 59 1 resulting NOx emission reductions of about 1.9 tons per 2 day.

3 With me this morning is Rick McCourt with Sukut 4 Construction, a company that has shown tremendous 5 initiative and has repowered 57 heavy duty off road 6 engines.

7 CIAQC supports staff's recommendations for 8 technical revisions, including calculation method 9 revisions, emission factor adjustments for older engines,

10 and allowing local air districts to consider the 11 cost effectiveness of reducing PM when selecting 12 proposals.

13 CIAQC also supports what we believe to be as 14 staff's recommendation that engine repowers do not 15 necessarily need to be performed only by an OEM dealership 16 or distributor.

17 Several CIAQC member companies have repowered 18 their equipment in house or in the field, such as Sukut 19 Construction. We do not believe emission reductions will 20 only be achieved if OEM dealerships or distributors 21 perform the project installations.

22 What I'm here this morning to ask for is we are 23 asking for further clarification of the guidelines that 24 expressly make this point.

25 Without the opportunity for companies to select PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 60 1 between 0EM dealerships or distributors or utilizing their 2 own in house capacities to repower approved projects, many 3 companies simply will not be able to participate in the 4 program.

5 We believe Carl Moyer is a very cost effective 6 program, and the recommended revisions to the guidelines 7 will further enhance this important incentive based 8 program.

9 Thank you.

10 CHAIRPERSON LLOYD: Thank you very much.

11 Rick McCourt, Gretchen Knudsen, and Sandra 12 Spelliscy.

13 MR. McCOURT: Good morning, ladies and gentlemen.

14 My name is Rick McCourt with Sukut Construction.

15 Our company is a general engineering contractor with 16 operations in southern California. Our core business is 17 earth moving. So we use a fleet of heavy off road 18 construction pieces of equipment numbering over 130.

19 Our company's been proud to participate in engine 20 replacement programs with not only Carl Moyer, ARB, and 21 MSRC. And our accomplishments, Clayton mentioned we've 22 repowered 57 units right now. Forty of those have been 23 done by our staff in the field.

24 We've sourced 17 of those conversions through the 25 dealer network primarily based on the time and production PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 61 1 constraints.

2 We've sent 23 of our in house mechanics through 3 dealer technical courses to understand the complexity of 4 the electronic controlled engine systems. With that we've 5 purchased and installed laptop computer systems with the 6 diagnostic software in the field to ensure we got the 7 proper emissions in optimum performance parameters.

8 We have found OEM warranties have been valid with 9 our field installations. There's no cut in the warranty 10 program, whether our people do it or whether the dealers 11 do it.

12 We strongly support the staff to allow the 13 contractor to do the conversions, engine replacements in 14 the field, as we've shown significant success in doing 15 today.

16 And my final comment would be, we're proud to 17 partner in these programs with ARB, South Coast, and the 18 other air districts that we work in, and hope to do more 19 in the future.

20 Thank you.

21 CHAIRPERSON LLOYD: Thank you very much.

22 Yes, Mr. McKinnon has got a question for you, Mr.

23 McCourt.

24 BOARD MEMBER McKINNON: Are your in house 25 mechanics apprenticed or otherwise trained?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 62 1 No, all of our mechanics are members of the 2 Operating Engineers Local 12 Union. Most are journeyman 3 mechanics. We have some apprentice mechanics that are 4 supervised by journeymen.

5 BOARD MEMBER McKINNON: But the journeymen have 6 been through an apprenticeship, is that  somewhere along 7 the line?

8 MR. McCOURT: Yes. That's the normal progression 9 through the union ranks.

10 BOARD MEMBER McKINNON: Great. Thanks.

11 CHAIRPERSON LLOYD: Thank you.

12 Gretchen Knudsen, Sandra Spelliscy, Bonnie 13 Holmes Gen.

14 MS. KNUDSEN: Good morning. My names is Gretchen 15 Knudsen. I'm here today representing International Truck 16 and Engine corporation.

17 We stand in support of the guidelines. I'm not 18 going to comment specifically on the repower issue at this 19 time. But I did want to speak directly on the 20 Lower Emission School Bus Program. We really appreciate 21 the work that staff has taken in their careful 22 consideration of the program, of the implementation 23 guidelines. And we wanted to voice our support.

24 I also wanted to just thank and remind the Board 25 again that California is the first state in the country PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 63 1 that has low emitting diesel technology school buses in 2 use throughout the state. And you're really setting an 3 example for a lot of the other states as far as 4 implementing this technology. We were pleased that there 5 was the ability of the state to continue this program.

6 Thank you.

7 CHAIRPERSON LLOYD: Again, Thank your company for 8 this leadership on this issue, combined with getting the 9 low sulphur diesel to do that. Thank you.

10 Next we Sandra Spelliscy, Bonnie Holmes Gen, and 11 Mark Nordheim.

12 MS. SPELLISCY: Sandra Spelliscy with the 13 Planning and Conservation League.

14 I just want to say briefly we're also in support 15 of the changes recommended by the staff today.

16 Particularly like the fact that we continue to drive 17 improvements and technology by supporting equipment that 18 meets lower standards. So we're happy to see that 19 recommendation today.

20 And I just want to add that the single greatest 21 challenge that we face in both of these programs is that 22 we simply don't have enough money to do what we need to 23 do. And we are looking forward to working with all of 24 you, and urge you to bring any influence you have to bear 25 on the administration, on the Legislature to work to get PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 64 1 some permanent funding for these programs, because they're 2 vital and we just don't have the money today to do what we 3 need.

4 Thank you.

5 CHAIRPERSON LLOYD: Thank you, Sandy. I agree 6 with you completely.

7 Bonnie Holmes Gen, Mark Nordheim, Dean Taylor.

8 MS. HOLMES GEN: I'm Bonnie Holmes Gen with the 9 American Lung Association of California.

10 I just wanted to join the comments of my 11 colleague, Sandra Spelliscy, that we too are strong 12 supporters of these programs. We definitely need to get a 13 stable, long term source of funding for these programs.

14 And that's really the next big task that we all need to 15 work on together and that we are working on in the 16 Legislature.

17 We believe these proposed program changes are 18 enhancements to the program. They're positive and we 19 support them, especially adding flexibility with regard to 20 PM only projects. That's a big concern of ours, because 21 we do need to do as much as possible to reduce diesel 22 particulates. So we ask your support for these changes.

23 CHAIRPERSON LLOYD: Thank you.

24 BOARD MEMBER BURKE: Mr. Chair.

25 CHAIRPERSON LLOYD: Yes, Dr. Burke.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 65 1 BOARD MEMBER BURKE: We at this end of the podium 2 were particularly waiting for her testimony, because on 3 our sheet here it says that she's with the American Lunch 4 Association.

5 And so I told the fellow members I was really 6 going to support whatever she wanted.

7 ( Laughter.)

8 CHAIRPERSON LLOYD: I think that must be a 9 subsidiary to the California Restaurant Association.

10 Thank you.

11 Mark Nordheim, Dean Taylor, Tom Addison.

12 MR. NORDHEIM: Mr. Chairman and Board members, my 13 name is Mark Nordheim. I'm with the Chevron Texaco 14 Corporation. But I'm here today representing the Western 15 States Petroleum Association.

16 And I want to start my presentation with a wee 17 apology to the staff and the Board for our sort of late 18 reentry into this issue. But there are a number of 19 current events that have significantly renewed our 20 interest in these programs, the first of which is sort of 21 the massive state budget crisis that we're facing and the 22 generally poor economic situation that exists in the 23 state. In our view, that drives us to search as hard as 24 we possibly can in search of the most cost effective 25 utilization of the money that's currently available to us PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 66 1 in the system.

2 We're facing  this program was designed  and 3 I'm talking about both the Moyer Program and the School 4 Bus Program  to try and get at those source categories 5 that were either hard to regulate or there are economic 6 hardships associated with those regulations. That 7 includes things as far and wide as was talked about in the 8 staff report earlier. But that's the ports of L. A.  los 9 Angeles, the ports of Oakland, all the federal sources

10 planes, boats, and trains that we've all been chasing the 11 feds to try and get a handle on. It includes agricultural 12 engines in the Sacramento and San Joaquin Valleys. It 13 certainly includes the school buses and many, many other 14 types of programs. So we think it's absolutely imperative 15 that we do everything we can to focus the maximum value of 16 the limited resources.

17 CHAIRPERSON LLOYD: You've got about a minute,

18 Mark.

19 MR. NORDHEIM: You mean all 42 of those got three 20 and there's one guy on this side gets  I'll be

21 CHAIRPERSON LLOYD: No, no, no, no, unless we 22 bank some of the credits from a couple of the previous 23 speakers, which I'll do. But I'll give you two at most.

24 MR. NORDHEIM: Okay. A) We want to  we're 25 very much supportive of the staff recommendation and PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 67 1 create  what we think is a very creative way to bring 2 some PM control into the program. Remember that because 3 I'm going to loop back to it in the School Bus Program.

4 We really want to encourage the staff and the 5 Board to scrub the guidelines on both ends to make sure 6 that we're really focusing monies on non mandated 7 programs.

8 The school  let me jump to the School Bus 9 Program. We really have two serious recommendations. And 10 we're concerned by the fact that the retrofit money for 11 diesel technology has dropped out, and that the funding 12 for future new vehicle purchases is biased two thirds to 13 alternative fuels and one third to diesel. If you look at 14 the cost benefit numbers that were talked about by the 15 staff today, 75 percent of the emission reductions that 16 will have occurred by the end of 2003 will come from the 17 retrofit program. If you look at the cost of these new 18 buses using the math in this staff's report, the new 19 vehicles come out at $ 307,000 a ton for combined NOx and 20 PM.

21 That emphasizes the importance from trying to do 22 whatever we can to trying and keep as much of the retrofit 23 programs on the diesel side in play.

24 The language  the controlling language in AB 25 425 talks about the acquisition or the  it doesn't talk PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 68 1 about the purchase. It doesn't talk about new. And so we 2 think there's flexibility in there to deal with the issue.

3 We think it gives you the flexibility to stick to your 4 original policy decisions and invest half the money on 5 diesel, half of the money on alternative fuels, and then 6 split the diesel 50/ 50 between new and old.

7 As a minimum we would strongly encourage you to 8 look at what you're doing with the PM program in the Moyer 9 Program. There's a tremendous opportunity to use matching 10 money to get into the retrofit arena. We can't let the 11 retrofit program go or you lose 75 percent of the benefit 12 of the investment.

13 Jumping quickly to the distribution between 14 alternative fuels and diesel. If you look at the original 15 recommendation from the Board to the staff, it talked 16 about distributing the money 50 percent to alternative 17 fuels and 50 percent to diesel technology. It didn't say 18 50 percent for new CNG, 50 percent for new diesel. We 19 think that if you can't find a way to keep the retrofit 20 programs in, you ought to be at least keeping the 21 technology on an even playing field, particularly since 22 the diesel technology incrementally is cheaper than the 23 alternative fuel technology.

24 I heard reference to some of the new CNG buses 25 coming on line with particulate traps. We were a little PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 69 1 bit puzzled that this proposal doesn't require the use of 2 oxidation catalysts on CNG purchased buses by virtual of 3 the data that's come to light through your research.

4 We think that the funding mechanism in this is 5 bias towards alternative fuels to the 6 counterproductiveness of achieving the greatest emission 7 reductions for the greatest investment in the taxpayer's 8 money.

9 We think there's some critical things. We think 10 that there's ways to improve this. We'd like to suggest 11 that the Board direct the staff to seriously consider 12 those kinds of things. If you'd like to make those 13 recommendations today, fine. But we think they're 14 important enough that they need to be vetted. And if 15 you're not ready and prepared to act today, then we'd like 16 to see this proposal back in front of the Board before you 17 take final action.

18 Thank you.

19 CHAIRPERSON LLOYD: Thank you, Mark.

20 Any questions?

21 Thank you.

22 I guess we'll come back and  I'd like some 23 staff comments on those issues raised by Mark there.

24 We'll come back on that, Mark.

25 MR. NORDHEIM: I'll be here if you'd like to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 70 1 chat.

2 CHAIRPERSON LLOYD: Thank you.

3 Dean Taylor, Tom Addison, Henry Hogo.

4 MR. TAYLOR: Good morning. My name is Dean 5 Taylor. I work for an electric utility. But I'm here 6 representing the California Electric Transportation 7 Coalition, which is the four large electric utilities in 8 the State of California as well as a number of component 9 suppliers for electric drive vehicles.

10 And we want to apologize for being maybe late 11 commenters on this. But we have a long history with the 12 Moyer Program. In fact Dave Modisette and myself and 13 others worked with Carl Moyer getting this through the 14 Legislature and have been long time supporter of this, for 15 a very long time. But you might say our industry's been a 16 bit distracted recently, so we haven't paid very close 17 attention.

18 But I think we have enormous enthusiasm for the 19 non road side. We worked hard on the original program to 20 have non road vehicles, you know, be eligible. And would 21 suggest that we would like to work, you know, in the next 22 round with the Board and staff for improvements in this 23 program. They're particularly cost effective programs,

24 the non road. In fact the forklifts in the current 25 regulations are I think the only one that has to meet a PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 71 1 $ 3000 per ton cap. Everything else is much higher, as 2 high as 13,000 per ton.

3 We have three specific maybe suggestions just to 4 call out some interesting possibilities for the future.

5 One is truck refrigeration units have huge NOx 6 reduction potential. I mean it's just amazing. We're 7 doing a project out in the Riverside area, it's probably 8 in the $ 1,000 to $ 2,000 per ton range. There may need to 9 be some clarification or, maybe even better, specific set 10 of rules just for that technology as the emission 11 reduction potential is so large.

12 Three is the issue  I mean second is the issue 13 on forklifts. There is a proposed upcoming regulation 14 that would do a command control regulation for forklifts.

15 And that probably isn't a wonderful thing. But prior to 16 that we would suggest that those forklifts that are 17 converted under the Moyer Program to electric very 18 cost effectively get emission credit for their full life.

19 Right now, if I'm correct, the staff is saying 20 that they would just get two years of emission reduction.

21 Say you buy it in 2003; this new tailpipe emission 22 standard comes in 2005; you would just get two years of 23 emission reductions. We think that should be the full 24 life of that electric forklift. So let's say it's,

25 whatever, ten years. That would make it very cost PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 72 1 effective.

2 And that's my understanding is the traditional 3 way its been done, you know, with other business 4 organizations in the state. If you beat  you know, if 5 you're earlier than the adoption of a new proposed SIP 6 measure, then you get full credit.

7 And then, lastly, maybe other areas of the state 8 need to have a higher cap than this $ 3,000 per ton. Would 9 suggest maybe the Board would consider or the staff would 10 consider having it up at a higher number, let's say,

11 12,000, so that that would allow areas such as Sacramento 12 or the Central Valley that have early attainment dates to 13 take advantage of this, rather than, you know, having to 14 meet this very tough requirement of 3,000. Some electric 15 forklifts obviously can, but I'm saying not all of them 16 can.

17 And, lastly, just to end, let's work together to 18 find ways to capture the electric utilities' enthusiasm.

19 We obviously get a lot of requests from our customers all 20 over the state, in interest, be it a bag tug or a forklift 21 or a truck refrigeration unit to electrify.

22 CHAIRPERSON LLOYD: Thank you.

23 Tom Addison and Henry Hogo.

24 MR. ADDISON: Good morning, Dr. Lloyd, Board 25 members. My name's Tom Addison. I'm with the Bay Area PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 73 1 Air District. I'm not here today to talk about OEM or 2 aftermarket parts. I'll also try to be brief.

3 I'm actually here today to speak against the 4 proposed staff distribution of the Prop 40 Moyer funding.

5 But before I do that, I'd like to say a couple of things 6 about, from our perspective for the Bay Area Air District,

7 what a well run and well managed program we think this is.

8 We actually think this is an example of how local 9 districts and ARB are working successfully together in a 10 way that really is exemplary to cut diesel exhaust and to 11 reduce public exposure to it. And that's very much a good 12 thing.

13 I'd also like to let you know that while we've 14 been making the comments that I'm going to make today for 15 roughly the last four years, we've had  and we 16 appreciate the opportunity to talk with your staff about 17 it. And we very much appreciate their receptiveness to 18 hearing us out on it. And so I wanted to make sure that 19 the Board did as well.

20 So essentially what we're proposing is that the 21 staff distribution is flawed because it doesn't make sense 22 for a variety of reasons. Most significantly for public 23 health reasons. We think the distribution should be based 24 solely on population.

25 Right now the distribution includes a 1994 SIP PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 74 1 control measure, Control Measure M4. And that control 2 measure has officially expired. It expired last year.

3 And we don't think that using that distribution today in 4 2003 makes much sense.

5 The reason that we don't think it makes sense is 6 that we think the biggest public health benefits to the 7 Carl Moyer Program come from reducing public exposure to 8 diesel particulate. That's where the real public health 9 benefits of the program are. And the way that you 10 maximize reduction of exposure to diesel particulate is 11 you give out the funding based on population density.

12 Why is that?

13 Because unfortunately diesel exhaust is 14 everywhere. It's ubiquitous in our society.

15 So to maximize the public health benefit, to 16 minimize the exposure to diesel particulate, we think the 17 right strategy is to give out the money based on 18 population density.

19 Now, population density is hard to figure out.

20 Population is a good surrogate for population density. We 21 think population is the right thing to use from a 22 practical point of view because population density is hard 23 to get a handle on.

24 So we would say that public health, population is 25 the right way to go.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 75 1 What about equity?

2 CHAIRPERSON LLOYD: Can you

3 MR. ADDISON: I'll be brief. I'm almost done.

4 From an equity perspective, this a bond measure.

5 Everybody contributes in the State of California equally 6 to bond funding. Currently we would argue the benefits

7 the public health benefits are not being distributed 8 equitably.

9 We think there are some political arguments as 10 well for looking at the distribution.

11 Fundamentally I think Ms. Witherspoon got it 12 right. Ms. Witherspoon said to you the statute is out of 13 step with where we are now. And that's I think a 14 reflection of the shift in our understanding of the 15 epidemiology and the relative importance of PM reductions 16 versus ozone reductions.

17 Our legal counsel feels that you certainly have 18 the ability as an agency administratively under the 19 current statute to change the distribution to one based on 20 population.

21 Sorry to be a little longer.

22 CHAIRPERSON LLOYD: So your legal counsel's 23 agreeing with the letter we got from the Legislature that 24 we have the administrative authority?

25 MR. ADDISON: Indeed. We would argue that you've PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 76 1 got the authority today to change it to population. We 2 also think that it makes sense as well, aside from the 3 legal issue of whether or not it's feasible.

4 CHAIRPERSON LLOYD: Thank you.

5 Any questions?

6 Dr. Burke.

7 BOARD MEMBER BURKE: I'm confused on how much 8 money we're talking about here. Can you give me a 9 ballpark number?

10 MR. ADDISON: Sure. Roughly  I mean staff is 11 probably better at doing this. But I'd say  we're 12 talking about $ 19 million here at Prop 40 funding. You 13 know, if we throw some numbers for different districts,

14 the Bay Area's got roughly 20 percent of the state's 15 population. The Bay Area is currently getting about nine 16 percent of the funding.

17 Contrast that with another district, Sac Metro 18 has got

19 BOARD MEMBER BURKE: I was just looking for the 20 difference between what you're getting and what you would 21 get.

22 MR. ADDISON: Oh, sure. That's about 1.8 23 million, roughly.

24 CHAIRPERSON LLOYD: And where would that come 25 from? Maybe staff can answer

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 77 1 MR. ADDISON: There are two

2 CHAIRPERSON LLOYD: No  obviously it's a fixed 3 sum. So if you gain, somebody else loses.

4 BOARD MEMBER DeSAULNIER: That's a question for 5 the CARB staff, Tom, not for

6 MR. ADDISON: Yes. Although I would be happy to 7 answer, if you'd like.

8 EXECUTIVE OFFICER WITHERSPOON: The districts 9 which receive a higher proportion of funds based on having 10 the M4 measure in their state implementation plans are 11 Sacramento Metropolitan, San Joaquin Valley, Southeast 12 Desert Air Basin, South Coast Air District, and Ventura.

13 So if we moved to a population only driven formula, money 14 would shift from these areas toward the Bay Area and San 15 Diego. It would shift to, more or less  the degree

16 South Coast would probably lose less because their 17 population base is still high. The Valley perhaps stands 18 to lose the most  San Joaquin valley, because of their 19 lower population threshold.

20 And so it is an issue of winners and losers, but 21 also one of policy on how you think the actual allocation 22 should be performed.

23 And I do want to clarify, that the Board has the 24 authority today, should you choose, to amend the way we've 25 been doing it for the last ten years. But just to make a PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 78 1 correction  the letter from the Legislature talks about 2 the M4 measure being expired. It is not. It is part of 3 our legally approved State Implementation Plan. And we 4 are under active court orders for failure to implement 5 other aspects of that plan. And so  M4 was a measure 6 that said we would develop an incentive program for 7 cleaning up diesels. It was sort of an early day,

8 black box kind of a measure, but it's in there and not 9 gone away.

10 CHAIRPERSON LLOYD: Thank you.

11 Supervisor DeSaulnier.

12 BOARD MEMBER DeSAULNIER: Catherine, is there an 13 ability for staff to split the baby? Do we have to go all 14 population based or is  because as I read it, we have 15 some discretion.

16 EXECUTIVE OFFICER WITHERSPOON: We do have 17 discretion. And we could try and figure out various 18 versions of that. We'd need a little time to work on 19 that.

20 BOARD MEMBER DeSAULNIER: Well, it's just  and 21 I'm not speaking  Tom, this is just from my perspective,

22 representing the Bay Area. It's just the amount of 23 difference. It's double the amount of money that would be 24 used by population, which seems fairly extreme. And it's 25 very hard for me to look at this program in isolation,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 79 1 because we've got all these other moving parts with  our 2 relationship with our downwind neighbors. And I don't 3 want to keep bringing up smog check, but I was reminded 4 constantly by certain people that I should look at it as a 5 public health issue and not specific to the emissions that 6 we were directed at. So that's the problem I'm having 7 with this.

8 CHAIRPERSON LLOYD: So one of the downwind areas.

9 Ms. D'Adamo.

10 BOARD MEMBER D'ADAMO: Well, I'm obviously 11 uncomfortable with what we have right now, but  I 12 appreciate what Supervisor DeSaulnier has done in the past 13 to open up the dialogue with the Bay Area so that we can 14 talk in a more meaningful way about transport issues.

15 If we look at other surrogates though, there are 16 a few issues  well, first of all, I think that what we 17 have right now is fine. But if we have to make some 18 changes, it's crucial that we consider other issues and 19 not just population. For example, transport issues. That 20 plays in quite a bit to the equity issue. And public 21 health.

22 We have, as staff has repeatedly reported, some 23 of the highest asthma rates in the valley in the nation.

24 And that's due in no small part to the emissions that are 25 generated in the valley. But in addition, we have a PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 80 1 transported air pollution problem. And we've got the I 5 2 and I 99 corridor running right smack dab through the 3 valley, with transportation going from northern to 4 southern California.

5 So there's a number  it seems to me that it 6 would be pretty complex. I'm willing to engage in the 7 discussion. But I would be very uncomfortable with it 8 just being based upon population.

9 CHAIRPERSON LLOYD: Supervisor Roberts.

10 BOARD MEMBER ROBERTS: Yeah, Mr. Chairman. Last 11 time I looked we weren't transporting anywhere. And the 12 only thing we're transporting is dollars elsewhere. And 13 we shouldn't be part of this. And we should be treated in 14 a more equitable way in San Diego. And I think we've got 15 to change this formula. And whatever agreement there is,

16 you know, between those two areas is interesting, but we 17 shouldn't be contributing to that.

18 You know, if anything, maybe some of those South 19 Coast management dollars should be coming because that's 20 where the air's ending up. So  if you're talking about 21 transport. But there isn't any justification for us being 22 at the level that we are in this, and these numbers ought 23 to be changed.

24 CHAIRPERSON LLOYD: Dr. Burke.

25 BOARD MEMBER BURKE: I am not opposed to money PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 81 1 going to any district which needs it, you know. We at 2 South Coast, you know, like to feel that we are all in 3 this together. And this is a statewide issue and

4 CHAIRPERSON LLOYD: Bill, can you speak into the 5 microphone?

6 Thanks.

7 BOARD MEMBER BURKE: What I was saying was that 8 South Coast, we believe this is a statewide issue and is 9 transportation. And I don't claim to know about the 10 issues in northern California as well as southern 11 California. But I would not be opposed to modifying this 12 formula even if it costs South Coast some money. I'm not 13 opposed to that, if it was fair and equitable.

14 CHAIRPERSON LLOYD: Mrs. Riordan.

15 BOARD MEMBER RIORDAN: Just a thought. Today I 16 don't know that we want to make this division in terms of 17 money. And I would caution the Board members to perhaps,

18 if it's possible and if staff would agree, to move forward 19 with the other parts of it. And always the division of 20 money is a difficult one and one that I don't think we 21 want to do without some thought process.

22 And is that possible, staff? I really have some 23 trouble making any decision on money today.

24 EXECUTIVE OFFICER WITHERSPOON: Well, there are 25 two options here. One is to delay and evaluate different PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 82 1 allocation criteria. We can't move any money without 2 knowing the primary allocation criteria.

3 The second option would be, since this is a 4 two year program, to apply the allocation criteria we have 5 today to the first year and bring you a recommendation for 6 the second year that has a different formula with lots of 7 time to think about it in the meanwhile. And that's how 8 we propose to handle this match question for rural areas.

9 I don't know if Board members are comfortable 10 having any money get out the door without looking at the 11 criteria.

12 So those are the two

13 CHAIRPERSON LLOYD: Well, one suggestion might be 14 that you look at again the Delta and some of these areas,

15 and then sort of put that part aside. And then distribute 16 those dollars out the door, that people will  make sure 17 that everybody gets the floor.

18 Is that possible, so that  because I am 19 sensitive to the point that staff made that with these 20 funds here people want to be able to get the dollars out 21 the door so we can begin cleaning up the air as soon as 22 possible.

23 EXECUTIVE OFFICER WITHERSPOON: We're wrestling 24 with whether that's possible or not. We certainly could 25 do the floor of 100,000. But that's trivial.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 83 1 CHAIRPERSON LLOYD: No, no. I know

2 EXECUTIVE OFFICER WITHERSPOON: And we do have a 3 time constraint here to get it to the districts in time 4 for them to run their own contracting processes and move 5 it

6 CHAIRPERSON LLOYD: But there must be  the 7 point is  take South Coast for an example. The weight 8 is now  or if you went into population weighted, and 9 some of the other districts, and then presumably you could 10 look at what it would be for some of those districts that 11 may be affected, and get those dollars out for door. And 12 if they get additional dollars or if they're taken away,

13 we'd pick a number there, which we can then use that slot 14 if you like, and hold on to those dollars and allocate 15 them depending on what we decide in the end.

16 Yes, Dr. Friedman or Ms. D'Adamo.

17 BOARD MEMBER WILLIAM FRIEDMAN: Well, I was just 18 going to suggest that clearly there are likely to be a 19 number of options here that require some more 20 thoughtfulness and study and to be brought back to us so 21 we can make a determination, rather than at this 22 particular meeting  I agree with Barbara. I'm not 23 prepared to make a specific decision vis a vis dollar 24 distribution at this moment.

25 CHAIRPERSON LLOYD: My only question there  I'd PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 84 1 like to hear from staff. You know, if we lose a month 2 here, is that critical to getting these dollars out the 3 door? That was my only comment.

4 EXECUTIVE OFFICER WITHERSPOON: I think we can 5 manage one month.

6 ALTERNATIVE STRATEGIES SECTION MANAGER AYALA: We 7 believe that it is critical from the standpoint that these 8 are current fiscal year funds and the districts are 9 essentially on a standby to deploy the projects. And we 10 basically committed to bringing guidelines before you at 11 this time, which is essentially the last opportunity

12 CHAIRPERSON LLOYD: Well, let me make a 13 suggestion. Maybe my colleagues as well  well, Ms.

14 D'Adamo.

15 BOARD MEMBER D'ADAMO: Well, what I was going to 16 say is I know that there is a backlog of projects that are 17 needed throughout the state. I know in particular in the 18 valley  and we have this Title 5 issue with EPA and a 19 tremendous need and desire on the part of many to convert 20 their engines over. This is a program that's worked just 21 fine in the past. And I would just suggest that perhaps 22 we consider adopting it as is and coming back as soon as 23 possible, whether that's a month or two or six, with 24 recommendations, rather than holding up the whole program.

25 CHAIRPERSON LLOYD: Yeah, but I can understand PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 85 1 from your viewpoint that that would be the case.

2 Let me make a  just let me make one suggestion 3 maybe, that we take the last witness and then  we're due 4 for a break for the court reporter. Give staff a chance,

5 maybe ten minutes to think about this. We can come back 6 and discuss the issue and see if staff has some additional 7 insights of how this may be handled.

8 BOARD MEMBER McKINNON: I have question before 9 staff breaks.

10 CHAIRPERSON LLOYD: Mr. McKinnon, yes.

11 BOARD MEMBER McKINNON: And my question can be 12 answered after the staff's break. But here's my question.

13 Is it possible to segment some of the money for 14 population based and some of the money for air districts 15 that need it the worst?

16 EXECUTIVE OFFICER WITHERSPOON: Yes, I think it 17 is.

18 And in response to the Chairman's prior 19 suggestion, I think that's possible too. We're just

20 you know, we're sitting here trying to figure out quickly 21 whether we could do it today or not.

22 Although Mr. Ayala talked about the desire to

23 what?

24 CHAIRPERSON LLOYD: Thank goodness Ms.

25 Witherspoon is starting off with an easy one.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 86 1 ( Laughter.)

2 BOARD MEMBER DeSAULNIER: Mr. Chairman. Or 3 should I call you referee in World Wrestling Federation?

4 ( Laughter.)

5 EXECUTIVE OFFICER WITHERSPOON: No, we have a 6 little more detail about the timing considerations here.

7 The state only needs to commit dollars by the end 8 of this fiscal year. However, there is a  we have to 9 actually allocate them, which takes  there's a 10 mechanical process inside that takes some time. And then 11 districts have to hold hearings in order to receive them 12 and commit their share of matching funds.

13 And so I believe one month would not be an 14 unreasonable delay, but we can't go any later than that.

15 So if we are to delay, we'd have to be back here in April 16 with recommendations for you.

17 Is there another question or

18 BOARD MEMBER RIORDAN: I think one month sounds 19 reasonable, Mr. Chairman.

20 CHAIRPERSON LLOYD: Okay. Supervisor DeSaulnier 21 and then Professor Friedman.

22 BOARD MEMBER DeSAULNIER: Do you want to continue 23 with WWF? I just

24 BOARD MEMBER HUGH FRIEDMAN: Could you talk just 25 a little louder, Mark? I'm having trouble hearing you.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 87 1 BOARD MEMBER DeSAULNIER: Yeah. I would just

2 hopefully we can go with the one month. I think it would 3 do a disservice to the people who've signed this from the 4 Bay Area legislative delegation. I assume Ron would have 5 sort of the similar problem down there. And at least in 6 regards to our relationship between the valley, a month 7 would be well served to try to iron something out.

8 Representing the Bay Area, we're not looking for 9 the full two million and switch it to population. There's 10 good arguments for what staff's doing in terms of 11 direction, but it's just too much. So if we can get that 12 at a month, it would be worth it.

13 CHAIRPERSON LLOYD: So what I'm hearing from 14 staff is that a month is okay?

15 EXECUTIVE OFFICER WITHERSPOON: It's making 16 everyone uncomfortable, but I believe yes. You know,

17 we'll just have to work very hard after that to get the 18 money out.

19 EXECUTIVE OFFICER WITHERSPOON: I would like to 20 go back  take the last witness. I would like then to 21 take a break. And then I would like a definitive answer 22 to staff whether in fact we can accept that month. I'm 23 sensing my colleagues here, that they're uncomfortable 24 coming to a vote today without some additional input.

25 So Mr. Hogo.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 88 1 MR. HOGO: Good morning, Chairman Lloyd, members 2 of the Board. For the record, my name is Henry Hogo. I'm 3 the Assistant Deputy Executive Officer at the South Coast 4 Air Quality Management District.

5 I would like to take this opportunity to say a 6 few words about both the Carl Moyer Program and the School 7 Bus Program.

8 The AQMD staff is in support of the staff 9 proposal in the guidelines in general. We do have three 10 minor concerns relative to the Carl Moyer Program.

11 The first is  and I actually didn't want to 12 talk about allocation in the sense that the Bay Area did.

13 But the allocation of the funds to the districts  in the 14 past we have received our funds up front, the full 15 allocation. And the staff is proposing at this time to 16 allocate only ten percent of the funds up front and then 17 do the additional allocations on an as needed basis.

18 I think relative to the discussion that you have 19 been going through on overall allocation, we need to look 20 at the timing on doing this ten percent allocation versus 21 an up front allocation, because our process would be to do 22 a solicitation and then work on contracts. That usually 23 takes maybe three to four months. And then to get the 24 contracts negotiated, maybe another 30 or 60 days. So 25 we're looking at a fairly lengthy period of time to do PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 89 1 this. And we would like to see at least the allocation of 2 funds be up front.

3 We're in a unique position because we're not only 4 impacted by air pollution ourselves; we are a transporter,

5 and we have 40 percent of the state population. So I 6 think we're in a unique position that perhaps the funding 7 should stay where it is relative to the South Coast.

8 As Dr. Burke has indicated, we're looking at 9 reducing air pollution everywhere throughout California.

10 The second concern that we have is relative to 11 the alternative diesel fuel proposal. CARB staff 12 indicated that the decision on projects would be done on a 13 case by case basis by the ARB. We would prefer to do that 14 at the local level. If we can't do that on a local level,

15 at a minimum we would prefer to work with CARB staff in 16 consultation to identify those projects specific to our 17 area.

18 The third point I wanted to make is relative to 19 the marine vessels. CARB staff is proposing to put a 20 20 gram per brake horsepower limit on the maximum emissions.

21 We believe that for those engines that do have valid 22 emission source test data, that we should be able to use 23 that data in lieu of the 20 gram limit. And we recognize 24 that that valid emission source test data needs to be for 25 engines that are working properly.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 90 1 I just want to make one comment relative to the 2 School Bus Program. And, that is, we support the staff 3 proposal relative to the guidelines and also with the 4 allocation of the two thirds/ one third formula.

5 We know that when we compare the emissions of a 6 natural gas school bus relative to a diesel school bus, on 7 a bus by bus basis, it's actually almost at 2 to 1 benefit 8 relative to NOx. So we see that as a big point to make.

9 And when you think about the technologies  in 10 the South Coast there's need for additional NOx reduction 11 as early as possible. When you go towards what may be a 12 cleaner diesel engine today, that engine a few years from 13 now will actually be considered a dirtier engine. And so 14 we want to get the cleanest technologies in place as early 15 as possible.

16 With that, we will continue to work with your 17 staff on the guidelines.

18 And I'll be happy to answer any questions you may 19 have.

20 CHAIRPERSON LLOYD: Mr. McKinnon.

21 BOARD MEMBER McKINNON: I think you just pushed 22 your luck. But let me go about this carefully here.

23 South Coast has a rule that tends to favor CNG,

24 and you just laid out the basis for that.

25 I am concerned that recently we became aware that PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 91 1 there are some toxics problems with CNG that sort of 2 mitigate your argument somewhat.

3 Now, I think an earlier speaker raised that 4 question and raised sort of the fuel diversity question.

5 And I am sort of going along with the assumption that we 6 do lots of things to give diesel time to clean up, and we 7 probably need to act the same way with respect to CNG.

8 And in the limited period of time of two years, I'm not so 9 inclined to take CNG out of consideration, because what 10 that essentially will do is take school buses away from 11 kids in the South Coast. That's how that will work.

12 But I am concerned that we sort of are continuing 13 on with a set of assumptions about CNG that don't include 14 the toxics question. And I guess what I'm interested in 15 is if South Coast has plans or is under way or is in the 16 near future, in that you're out sort of ahead or on your 17 own on the CNG question, do you have plans to do particle 18 trapping and deal with the toxics question with CNG?

19 MR. HOGO: The answer is yes. We would support 20 having language that says that for CNG bus awards, that if 21 oxidation catalysts were deployed with those buses, that 22 is where you'll get the reduction in the toxics from the 23 natural gas engine.

24 We are in discussions with John Deere about 25 retrofiting existing natural gas school buses that do not PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 92 1 have oxidation catalyst technology. And they indicated 2 that that can be done fairly easily. They have certified 3 their engines with oxidation catalysts  or they're 4 planning to do that.

5 It turns out that if  in a specification on the 6 bus, if there's no specification for an oxidation 7 catalyst, the OEM actually would not necessarily go 8 through the process of putting it on. But if we specify 9 that as a condition of the award, then that oxidation 10 catalyst will be placed on that natural gas bus.

11 Now, relative to particulate traps, we are in 12 discussion with the particulate trap manufacturers as to 13 whether a particulate trap can be developed that can be 14 applied to a natural gas engine. So we're looking at both 15 technologies at this time.

16 BOARD MEMBER McKINNON: What does your timetable 17 look like? We're talking about two years here. Are we 18 going to be there in two years?

19 MR. HOGO: Yes, I believe we will. The oxidation 20 catalyst is actually available today. And it's a matter 21 of determining whether  how many of the older buses can 22 be retrofitted. It turns out that most of the buses most 23 likely will be readily retrofitted with oxidation 24 catalysts. And we need to look at how best to do that 25 over this time period.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 93 1 But the requirements for new buses, we will have 2 oxidation catalysts already available.

3 BOARD MEMBER McKINNON: Thank you for your 4 answer. And I just  I sort of want to reinforce  I 5 don't know if I'll be on this Board two years from now.

6 But I know that if we go through this again and we don't 7 have at least some discussion of toxics in CNG and 8 consideration of what's being done about that  I have a 9 hard time having such a large allocation go to CNG when we 10 know there's at least some problems that need to be 11 discussed there. And certainly I'm not willing to sort of 12 backlash on that now over this next two years. I think it 13 would take away school buses from kids in the South Coast.

14 And I also just think it's patently unfair. We 15 give diesel time to clean up. We do step by step over 16 years and years and years. We now realize there's 17 something we need to do with CNG. I don't think we do 18 that in one ruling here. I think it's something we do 19 over time.

20 CHAIRPERSON LLOYD: Thank you.

21 Dr. Burke.

22 BOARD MEMBER BURKE: Mr. McKinnon and I have 23 discussed this matter at length, and we're both on the 24 same page at the same time with this issue.

25 But, Mr. Hogo, I wanted to know if we continued PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 94 1 this item for a month, would that affect our ability to 2 perform at South Coast?