4 The fuel providers in this country are pretty big 5 organizations. And if they're not involved and they're 6 not doing it, it's not going to work.

7 BOARD MEMBER DeSAULNIER: But the problem dealing 8 with fuel providers and the refinery industry that I deal 9 with because four of the 13 refineries in the State of 10 California are in Contra Costa County, is they tell me 11 they don't think there's a future in this.

12 So we get in this position where the fuel 13 providers aren't interested. And at least what we're 14 talking about is trying to do some clearly defined 15 demonstration projects, where you would get credit for 16 that. Is it just something that is culturally 17 unacceptable to Ford?

18 MR. BROWN: If we can get the NOx down, that's 19 probably something we might be interested. On that kind 20 of basis, but it would have be to small. It's not going 21 to be something big that's going to, you know, move the 22 needle a lot.

23 BOARD MEMBER DeSAULNIER: I just want say to say 24 that it's hard to go through a ZEV hearing without you and 25 Sam Leonard here together so we miss Sam.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 290 1 MR. BROWN: I heard from him last night by Email 2 and I'll send him and Email back.

3 CHAIRPERSON LLOYD: Ms. D'Adamo.

4 BOARD MEMBER D'ADAMO: Yeah, just a quick 5 question. What are you doing with the your EVs once the 6 leases are up.

7 MR BROWN: To go through the range, the Ranger 8 EVs with lead acid batteries, most, if not all  I'm not 9 positive of all them, there may have been some that we 10 took out of service. We upgraded a lot of those to Nickel 11 Metal Hydride batteries and put them back out.

12 Now, some of these are just starting to come up.

13 In fact, two days ago, I got asked one of the Parks wants 14 us to donate the vehicle to them, because their lease is 15 up, and they don't want to give it up. We're trying to 16 decide what to do with that. We may just end up giving it 17 to them.

18 On the Think neighborhood vehicles, those were 19 all sold units. So those people own them for  and 20 they'll probably be out there for a long time. The think 21 cities we're brought into this country under bond with 22 NHTSA, because they meet European safety requirements and 23 not U. S. And we have to get them out of the country after 24 three years or they come looking for me. They take the 25 bond and they take me if they find me. So we have to get PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 291 1 those out. We have no choice.

2 ANd they won't extend them because, you know,

3 you're a very positive agency, you wouldn't believe how 4 many other government agencies are anti ZEV. We ran into 5 it in our ZEV program in the State of California, in New 6 York, in Massachusetts. And they head of NHTSA, when we 7 had him out wouldn't even sit in any of our ZEVs. He 8 didn't like them. So for every proponent we have in 9 government, we've got a couple of very well placed 10 antagonists.

11 BOARD MEMBER RIORDAN: That's something, Mr.

12 Chairman we might

13 CHAIRPERSON LLOYD: Mrs. Riordan.

14 BOARD MEMBER RIORDAN: Well let's follow along on 15 that. That's something we might need to help you with.

16 MR. BROWN: Yeah, the staff in California, by the 17 way, we probably wouldn't have gotten through the 18 bureaucracy at DMV, if it wasn't for your staff. And also 19 in Massachusetts, there were very helpful. We had less 20 than stellar success in New York, my old home State of New 21 York.

22 BOARD MEMBER RIORDAN: I mean, I don't know if 23 there's a, you know, what the attitude is and why. But if 24 there is something that meets our needs, and I say that 25 because it's  we'd have to evaluate it. But if there is PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 292 1 something that's not working amongst other governmental 2 agencies for what we want to support, I think we ought to 3 be very helpful.

4 MR BROWN: Well, based on ZEVs and also natural 5 gas experience, I would suspect that we could use a lot of 6 help from this Board when we start placing hydrogen. I 7 suspect there's going to be no shortage of government 8 agencies that are going to try and put up road blocks.

9 We had a horrible time with CNG. And we even had 10 a horrible time with electric vehicles. If there's 11 anything different, there's bureaucracies that are against 12 them. We had the highest levels in some of the other 13 states, even governors involved, trying to help us.

14 CHAIRPERSON LLOYD: Well I know on that issue,

15 both at the California Fuel Cell Partnership level and at 16 the South Coast Air Quality management level, I think 17 we're trying to do everything we can to facilitate that,

18 because we recognize, Kelly, this is basically going to be 19 a.  teamwork is required, because if we're pushing you 20 to produce the vehicles, in turn we've got to help you 21 with the infrastructure.

22 So we really do take that seriously and we're 23 actively involved. And, of course, I say the partnership 24 is a great vehicle for doing that as well as the group 25 we're talking about statewide.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 293 1 Thank you.

2 With that, we're going to take a, this time, a 15 3 minute break till 20 of 5, for the court reporter, who's 4 dying.

5 Thank you.

6 ( Thereupon a recess was taken.)

7 CHAIRPERSON LLOYD: I'd like to start. And we're 8 going to start with Mr. Reagan Wilson from Stanislaus 9 County. He has a meeting later.

10 The plan here is to go till 7: 00 o'clock. And 11 then we'll have to take another break for the court 12 reporter, and probably the Board will take a break for 13 some refreshments, maybe for a half an hour, and then 14 reassemble after that time period.

15 Clearly, we've got still a lot of witnesses.

16 We've got approximately over 70 witnesses to go. So we 17 would really appreciate if you can keep to three minutes.

18 And for those of you who are, again, majority may be 19 opposing, if you can be as specific as possible in terms 20 of to what you object in the staff proposal, so we can 21 focus the comments. And as I said earlier, if there's a 22 duplication, if you can basically come up and just stress 23 that that's what you object to or you support, et cetera,

24 so that we can really move this along, but also capture 25 very explicitly, and provide us some advice of how we PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 294 1 might move ahead.

2 So I say we'll take, Mr. Reagan Wilson. Then we 3 will have Scott Briasco, Bill Warf, John Boesel.

4 MR. WILSON: Thank you, Mr. Chairman and members 5 of the Board. I appreciate your indulgence. My name is 6 Reagan Wilson. I'm the Chief Executive Officer of 7 Stanislaus County in the central valley of California.

8 ( Thereupon an overhead presentation was 9 Presented as follows.)

10 MR. WILSON: Modesto is the County seat. I'm 11 here today because the central valley has as a serious air 12 pollution control problem. And for those of you from the 13 bay area, you know how serious we are about it, when we 14 pushed the issue of Smog II not too long ago.

15 BOARD MEMBER DeSAULNIER: Yes, I'm familiar.

16 MR. WILSON: But that's just one tool that we 17 need in the valley to help deal with a problem that's very 18 serious un federal law right now. And today the central 19 valley, the San Joaquin Valley Air Pollution Control 20 District considered issues that relate to the farming 21 industry around diesel use and those kinds of things.

22 So the air pollution issues in the central valley 23 are affecting all of us and they're starting to affect us 24 in very serious ways.

25 This program that you're talking about today is PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 295 1 important to us. And this is certainly important to my 2 county, because we think it is an important tool, both as 3 a matter of public policy and as matter of real reductions 4 in air pollution emissions in an area that needs it 5 desperately.

6 In 1990, the California Air Resources Board did 7 adopt an ambitious program to dramatically reduce the 8 environmental impact of light duty vehicles through the 9 gradual introduction of zero emission vehicles into the 10 California fleet.

11 Your staff report says today the challenge facing 12 the Board is to determine how to achieve a sustainable 13 commercial market given the uncertainties in costs and the 14 pace of technological development. I'm not a scientist,

15 but as I've listened to the debate go on back and forth 16 today, it struck me the complexity of the issue is 17 probably perhaps more complex than a land use issue at a 18 local government level.

19 Nevertheless, I put on chart on the Board behind 20 you. And it's the only chart I have available. But I 21 think it illustrates a very important point, the green 22 chart, the bars at the back, was where your standards were 23 for zero emission vehicles in 1990.

24 The next chart, the blue one, is where you 25 revised those standards in 1996. The orange chart is PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 296 1 where you revised them again in 1998. The yellow bars is 2 where you went in 2001. And the orange and white bars,

3 which don't make any three dimensional impact on the 4 chart, is where the staff proposal has taken you, if you 5 should adopt it today.

6 I think the message is real clear that perhaps 7 this Board isn't as committed to zero emission vehicle 8 programs as they started out to be in 1990.

9 We know in the central valley, and in Stanislaus 10 County, I actually have a program prepared to go, which 11 would purchase 200 zero emission vehicles over the next 12 three years and another 100 hybrid vehicles. We already 13 have in our fleet about 100 CNG gasoline duel use 14 vehicles. Our board's going there for several reasons.

15 One, it makes a broad public policy statement.

16 Two, as we go to mandatory car pooling, if valley 17 goes to extreme designation, we will use those vehicles to 18 have employees carpool back and forth to home, which means 19 you get two benefits out of that.

20 Three, we've looked zero emission vehicles, and 21 found out that most of our transportation in and around 22 our valley, which covers 1,500 square miles by an employee 23 is less than 50 miles a day. And so when you start 24 looking at the operational aspects of zero emission 25 vehicles, in fact, they fit very nicely into that kind of PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 297 1 environment.

2 The next thing is

3 CHAIRPERSON LLOYD: Can you bring close here.

4 MR. WILSON: I'm working on that sir. The next 5 thing is that with things like OnStar, mobile sources can 6 now be tracked, mobile source data can now be accurately 7 identified. And when you can do that, you can start 8 really crunching down the amount of air pollution from 9 mobile sources, certainly in the central valley.

10 In the valley 65 percent of our pollution comes 11 from mobile sources, stationary sources are 35 percent.

12 This program is important. This program is one of many 13 tools we're going to need to become in compliance.

14 You have in front of you letters signed by more 15 than 60 city officials from all over the state of 16 California.

17 In addition to that, you have people like the 18 Building Industry Association of Central California, the 19 American Lung Association, the California League of 20 Conservation Voters, the Farm Bureau, Natural Resources 21 Defense Council, and others who are normally at odds on 22 public policy issues like this, who are all very much in 23 favor of preserving this ZEV Program that you adopted in 24 2001.

25 We would ask that you sustain the ZEV Program PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 298 1 that this Board set in 2001, it was not going to back off 2 of. If you can't go there, then what we would ask is that 3 you seriously consider some compromise proposals that have 4 been floated around that are in front of your staff, that 5 have been shared with people, because we truly believe 6 that the elimination of this program sends the wrong 7 message to everybody when it comes to fighting air 8 pollution.

9 Thank you.

10 CHAIRPERSON LLOYD: Thank you. One comment I 11 would make on the chart behind, you talk about a limited 12 number of vehicles. Of course, what we're trying to do is 13 eliminate pollution. And I don't think that's a 14 reflection of elimination of pollution. I think the staff 15 showed you in fact with one of the alternatives there was 16 actually greater air quality benefits than was proposed 17 the 1990.

18 MR. WILSON: Well, I've read the charts and I 19 read the numbers and I don't reach the same conclusion.

20 So I'll respectfully disagree.

21 CHAIRPERSON LLOYD: Well, I understand that.

22 I've been at this a long time so I know what I believe in.

23 Ms. D'Adamo.

24 BOARD MEMBER D'ADAMO: Yes. A question and then 25 a comment. Reagan, it's been awhile since we've talked,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 299 1 but I understand your enthusiasm and your commitment to 2 this program and that the vision is that it be much 3 greater than what you just described, and that perhaps it 4 would move on to other areas of the valley.

5 Where have you left off with those discussions,

6 for example, going to Fresno Bakersfield, et cetera?

7 MR. WILSON: Well, Fresno is seriously 8 considering the program as a city. In discussions in 9 local governments, just in Stanislaus county, we have nine 10 cities and 22 school districts. All of them recognize 11 that this is a good cost effective way to go.

12 The other thing we figured out in running the 13 numbers is that electric vehicles are just a heck of a lot 14 cheaper to operate as a fleet. Some of us recognize 15 there's a budget crisis in the State of California, so 16 this is a way to help address some of that issue as well.

17 The last thing is it really does help us manage 18 our fleets better, which just means moving people to where 19 they need to go and a more cost effective way works as 20 well. So there are huge benefits from this program beyond 21 just the reductions in air pollution.

22 BOARD MEMBER D'ADAMO: Okay. And then just for 23 the benefit of my colleagues. I can't impress upon you 24 all enough this is the third hearing that I've been at and 25 this is the closest that I have ever felt that this PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 300 1 program has a direct impact in my neighborhood.

2 And it's just really exciting to see someone's 3 commitment in the valley. We're just now starting to talk 4 much more seriously than we ever have in the past about 5 the impact of air quality. And to see someone as well 6 respected as this individual come up to the plate and say 7 he's going to put the county's money there because it's 8 important to make a statement for other residents of the 9 valley and for other communities.

10 And I would just like to impress upon you all and 11 to staff that we've got to find a good ratio so that 12 there's enough of an incentive for these battery electric 13 vehicles, so that we can actually get them in the valley 14 and hopefully other areas of the state as well.

15 MR. WILSON: I'd like to leave the Board with one 16 thought and it goes back to the health issues. We did a 17 quick survey of the school districts in Stanislaus County.

18 And there are more than 2,800 children K through 12 that 19 suffer from asthma, in Stanislaus County alone.

20 And that is in part because we have the Highway 21 99 and I 5 I corridors. And so there's intense 22 concentrations of pollution on the cities around those.

23 Again, these programs help, and zero emission, not partial 24 emissions has got to be a part of that solution.

25 Thank you.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 301 1 CHAIRPERSON LLOYD: And, as you know, we funded 2 the Fresno asthma study, so we're fully aware of that and 3 very supportive by the way of the community for helping us 4 on.

5 So thank you very much.

6 MR. WILSON: Thank you for your indulgence.

7 CHAIRPERSON LLOYD: Scott Briasco, Bill Warf,

8 John Boesel.

9 MR. BRIASCO: Good evening. My name is Scott 10 Briasco. I'm manage the Electric Transportation Program 11 at the Los Angeles Department of Water and Power. And I 12 appreciate the opportunity to address the Board at this 13 very important hearing.

14 The City of Los Angeles through the City Council 15 opposes the latest proposed revisions to the zero emission 16 vehicle program, and recommends that the Air Resources 17 Board take appropriate action to resolve serious problems 18 with the staff's proposal related to battery electric 19 vehicles.

20 In 1990, the Board took a look at California's 21 air quality future and took a dramatic step towards 22 cleaning air by establishing the ZEV requirements.

23 Tremendous progress has been made in EV technology as a 24 result of that action. The Board production requirements 25 have accelerated development of ZEV technologies. Quality PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 302 1 vehicles have been produced and demonstrated. EV 2 components have improved. Battery costs have been reduced 3 and will continue to drop.

4 The ZEV program has revolutionized the car market 5 by encouraging automakers and others to invest in the 6 research and development of zero emission technologies.

7 The electric and hybrid electric vehicles on the road 8 today owe their existence to the air Resources Board's ZEV 9 program.

10 Does anyone really believe progress will continue 11 at the same pace if the BEV requirements are essentially 12 eliminated, as proposed today?

13 Electric vehicles are essential to Los Angeles 14 and California because of the severe air quality problem 15 that we have here. The State has the resources and the 16 ability to lead the rest of the country and world in 17 transportation technology, which means not only cleaner 18 air but also a stronger economy with more and better jobs 19 for Californians.

20 A tremendous amount of planning and 21 implementation has been done since the inception of the 22 ZEV program to prepare the State of California for the 23 launch of the electric vehicle. This work is the 24 foundation which supports the commercialization of a 25 sustainable electric vehicle market.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 303 1 Government agencies, utilities and private 2 businesses have contributed substantial financial 3 resources to this effort, and have become partners with 4 the California Air Resources Board.

5 LADWP was the first utility in the nation to 6 offer an EV charging rate.

7 CHAIRPERSON LLOYD: But Scott how would you 8 specifically change the staff proposal? Give us some 9 help.

10 MR. BRIASCO: Okay. I guess what I'm proposing 11 is not a whole sale gutting of the battery electric 12 vehicle requirements. And I would encourage some kind of 13 a compromise to achieve that result. We have over 300 14 electric vehicles in our fleet of different types. The 15 vehicles work extremely well. It's been a positive 16 experience. It's not a test. We've logged over 2 million 17 miles on those vehicles.

18 The biggest problem we have is product 19 availability. We can't get the vehicles. And we have a 20 requirement under the Energy Policy Act, that 90 percent 21 of our vehicle purchases have to be alternatively fueled.

22 And we'd like to buy electric vehicles. It's our fuel.

23 And they're just not available.

24 There's been a substantial effort to put public 25 charging throughout California. Seven hundred and fifty PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 304 1 public charging stations have been installed at 450 2 different locations.

3 CHAIRPERSON LLOYD: So I think your part of the 4 compromise proposal put forward that we met with you the 5 other day, so you would support that?

6 MR. BRIASCO: I would definitely support that.

7 CHAIRPERSON LLOYD: Thank you.

8 MR. BRIASCO: Just I'll conclude. And the City 9 of Los Angeles appreciates the vision and record of 10 support for the ZEV technologies that have been 11 demonstrated by the Board over the past decade. We 12 understand that additional work needs to be done and some 13 adjustments may need to be made to the current regulation.

14 Unfortunately, the current proposed amendments 15 before you today do not sustain a ZEV program for the 16 future. So we would encourage some kind of a compromise 17 that would prevent a ZEV black out and to strengthen or 18 maintain the State's ZEV production requirements.

19 CHAIRPERSON LLOYD: Thank you very much.

20 Questions?

21 Yes, Dr. Burke.

22 BOARD MEMBER BURKE: Yeah, I really appreciate 23 you coming today. But what I would appreciate is as a 24 community member in Los Angeles is you not dismantling 25 DWP's green power program, which seems like what you're PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 305 1 dealing. And as a citizen who'd involved in the 2 environment, I would also suggest that the City Council 3 take a look at buying power for you from a coal fired 4 plant outside the State.

5 MR. BRIASCO: Okay.

6 CHAIRPERSON LLOYD: No compromise.

7 ( Laughter.)

8 CHAIRPERSON LLOYD: Thank you.

9 Any other questions?

10 Thanks.

11 Bill Warf, John Boesel, and I'm not sure whether 12 Ed is going to give his time to someone else?

13 Ed Kjaer and Dave Modisette.

14 ( Thereupon an overhead presentation was 15 Presented as follows.)

16 MR. WARF: Mr. Chairman and members of the Board 17 I'm Bill Warf. I work at SMUD. I'm a systems engineer 18 and a project manager for SMUD.

19  o0o

20 MR. WARF: The red button. Smud supports a 21 strong ZEV mandate.

22 BOARD MEMBER HUGH FRIEDMAN: Could you please 23 speak more closely to the microphone. So some of us who 24 have a little hearing impairment can hear you.

25 MR. WARF: I was still dancing and getting used PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 306 1 to the spot.

2 SMUD founded its electric transportation group in 3 1990. I'm going do this very quickly in light of time. I 4 have eight slides in three minutes.

5  o0o

6 MR. WARF: We've invested more than $ 21 million 7 to date related to EVs and EV research. And we've managed 8 an additional $ 20 million in research related to power 9 electronics batteries in vehicles to support electric 10 vehicle development and deployment.

11 We've installed over 1,000 EV chargers statewide 12 and invested about $ 10 million.

13  o0o

14 MR. WARF: Our research has included a number of 15 different battery types including advanced lead acid 16 nickle metal hydride, sodium nickel chloride. We've also 17 done a number of fuel cell projects. The integrated fluid 18 management technology fuel cell project was the forerunner 19 of the H Power stack. We worked and funded the fast track 20 fuel cell bus with Sunline and IFC Research and DOT. That 21 bus is in service now at Sunline.

22 We've done a fuel cell APU project in a 23 heavy duty truck where we showed performance of a OEM fuel 24 cell at minus 39 C on the truck.

25 Our experience shows that battery electrics along PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 307 1 with infrastructure are available now. Fuel cells are 2 promising but development and cost reduction are still 3 needed. They're still very expensive.

4  o0o

5 MR. WARF: Nickel Metal hydride  now I want to 6 talk a little bit about batteries. Battery advances since 7 2000 improved the battery electric vehicle business case.

8 Nickel Metal Hydride advances are still being 9 made. Previous speakers have talked about that, and I 10 won't go into it.

11 Lithium Ion batteries are now reaching market 12 viability. Staff in the last reported a 25 percent 13 improvement in energy capacity. They also now have 14 batteries with 150 watts per kilogram. That's double the 15 energy density of nickel metal hydride.

16 High energy versions appear very cost competitive 17 in lap tops. Enough work hasn't been done yet to make 18 cells for cars out in the marketplace, but they're very 19 close. A couple years behind nickel metal hydride.

20 Sodium Nickel chloride batteries are produced by 21 a company by the name of Mesdaya in Switzerland. They're 22 cost  we bought those batters for $ 655 a kilowatt hour 23 in 2002. They're available today for $ 400 a kilowatt hour 24 in hundred module quantities, that' hundred pack 25 quantities.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 308 1 And they're available for $ 220 a kilowatt hour in 2 30,000 unit per year quantities.

3 The energy storage capacity of those batteries 4 has improved 18 percent in the last three years to 118 5 watt hours per kilogram.

6  o0o

7 MR. WARF: Battery technology continues to 8 improve. What I did to make this chart was I took the 9 mass of an EV1 pack, about 400 kilograms, and I calculated 10 the range if you were to use the other technologies.

11 CHAIRPERSON LLOYD: Bill, can you summarize 12 quickly.

13 MR. WARF: I'm going as fast as I can. Let's 14 see. I think the point of this is that you can put an 15 awful lot of range in an EV if you use the advanced 16 technologies.

17 That has some benefits. One of the benefits of 18 that is you have less mileage between charges of the 19 vehicle or at least you could.

20 What I hear the battery experts telling you is 21 the lithium ion batteries have say 1,200, 1,500 cycle life 22 if you cycle them to 80 percent depth of discharge. But 23 people don't really drive that way. The way people really 24 drive, and what I've learned in the last 10 years, is they 25 drive 40 or 50 miles a day, and they might drive 20 miles PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 309 1 between charging.

2 If they do that, the data on this battery from 3 DOD tests an OEM information given to me showed that those 4 batteries could last, if you charged three times a day,

5 which would be 1,000 cycles a year, they'd like 20 years.

6  o0o

7 MR. WARF: Battery costs are reduced with volume,

8 process improvement and capital investment. It takes all 9 of those things to reduce the cost of batteries. I 10 reported on an earlier slide that the zebra battery had 11 seen a dramatic reduction in price in the last two years.

12 Well, Mesdaya invested $ 66 million in a new plant.

13 They've diversified in to other markets and are achieving 14 some volume.

15 CHAIRPERSON LLOYD: Bill, I've given you over a 16 minute.

17 MR. WARF: Conclusions, SMUD supports a strong 18 ZEV mandate with significant battery EVs and grid 19 connected hybrids, beneficial to near term air quality.

20 Battery technology is improving somewhat more than 21 reported in the staff report. The staff report is a 22 little narrow. It only talks about nickel metal hydride 23 in any depth.

24 The cost effectiveness of battery EVs improves as 25 technology gains are made, fuel cell vehicles show promise PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 310 1 for the long term.

2 I'd be happy to entertain questions.

3 CHAIRPERSON LLOYD: Thank you. Questions from 4 board members?

5 Again, thank you very much, Bill. But I stress 6 for witnesses again, I'm not  from the faced expression 7 I'm getting from some of you, it's not a desire here. We 8 are under time constraints. We have a long way to go.

9 We're trying to absorb all this information.

10 So if you flood us with a lot of stuff we have to 11 sort out, it makes it very difficult for us. So that's 12 where I'm coming from. I say we have 70 witnesses to go 13 and if it's repetitive, it gets very difficult.

14 MR. WARF: It would be easier to absorb if I 15 could speak a little more slowly and explain it. I think 16 that we've been a contributor to this marketplace too 17 and

18 CHAIRPERSON LLOYD: I agree. But remember there 19 are many of you we just we're giving more time to the auto 20 manufacturers. There are just a few of them talking 21 today.

22 The other part, Bill, I do appreciate you 23 providing this written stuff as well, so we do have this.

24 So, again let's get it clear. I'm not trying to show any 25 bias or anything here. It's a matter of my colleagues and PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 311 1 we're trying to go through  and it's very difficult. As 2 I said at the beginning, we don't have all the answers.

3 We need your help to craft this through.

4 Staff has spent hours and hours and hours on this 5 stuff. So please understand it doesn't  if I had all 6 day or we had two or three days, that would be optimum.

7 We done have it unfortunately.

8 Thanks, John.

9 MR. BOESEL: Mr. Chairman and members, my name is 10 John Boesel, the president of Calstart. We are 10 year 11 old nonprofit organization that works with companies and 12 governments to try to help develop an advanced 13 transportation technology industry, and in the process 14 trying to clean up the air, reduce our dependence on 15 foreign oil and slow global warming.

16 I want to just say  and all my comments will be 17 directly related to the staff proposal, is that going 18 through this review again is very difficult for a number 19 of our member companies who have invested in the 20 regulations, in the 2001 regulations, hope that they would 21 be coming to bear. And now to have this review come up 22 again is really very difficult for them. It creates a 23 very uncertain marketplace. And one in which it's very 24 difficult to attract investment.

25 We see the staff recommendation as effectively PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 312 1 eliminating the gold standard. Two hundred and fifty fuel 2 cell vehicles will not drive fuel cell vehicle technology.

3 Don't get me wrong, we are very supportive of fuel cell 4 technology. We're very supportive of hybrid technology.

5 We believe there are many paths to the future.

6 But 250 fuel cell vehicles are not going to drive 7 that industry forward. There are billions of dollars 8 being invested annually in fuel cell technology. The 9 Japanese plan to have five million fuel cell vehicles on 10 the road by the year 2020. There are similar large scale 11 programs planned for Hong Kong and Singapore.

12 So if we think about the CARB ZEV Program,

13 driving change, this  that's to that  if all that's 14 left is 250 fuel cell vehicles, it will not be driving 15 change.

16 Hybrid technology is very impressive. And I 17 think I really want too applaud Toyota and Honda's 18 leadership in this area. And I think they have shown the 19 rest of the market that there is a demand for those types 20 of vehicles. And I think we will see large numbers of 21 hybrid electric vehicles sold, whether there is a mandate 22 or not.

23 And I question whether or not the staff proposal 24 simply supports what will be occurring in the marketplace.

25 In terms of battery electric technology. Have we PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 313 1 really seen the end of battery technology development?

2 Are we at the pinnacle? Can anybody say that with 3 certainty?

4 We've actually seen a lot of progress in the last 5 2 to 3 years. Dr. Anderman had has view. I think we 6 could consult other people, experts who have opposing 7 views.

8 So I think that technology is evolving. And I 9 think what we need is a zero emission vehicle standard.

10 We do need to be driving toward that gold standard, but 11 why pick a winner. Why do we say fuel cells over ZEVs. I 12 don't know that it's critical that we make that 13 distinction at this point.

14 Now, I would also say I support Board Member 15 McKinnon in that I think there's a very important role for 16 plug in hybrids. And perhaps plug in hybrids could also 17 be part of that gold standard going forward.

18 I think the original 2001 proposal is a decent 19 proposal as it stands. It could be refined. There could 20 be some additional flexibility in there. I think it could 21 be a lot less complex. And I think creating the 22 complexity that it did all these different credits allowed 23 for a gaming of the system, giving away of advanced golf 24 cars. And I think we need to make things simpler and less 25 complex.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 314 1 That's the end of my testimony.

2 CHAIRPERSON LLOYD: Thank you.

3 ( Applause.)

4 CHAIRPERSON LLOYD: Any comments from the Board?

5 Okay.

6 Ed Kjaer.

7 MR. KJAER: Thank you, Chairman Lloyd,

8 distinguished members of the Board. SCE for obvious 9 reasons, I'm sure you can appreciate, with all due 10 respect, oppose the current staff proposal. We've been a 11 long time supporter of this regulation.

12 For over 10 years our shareholders have made a 13 significant investment in the regulations  because of 14 the regulations. We created a retail company called 15 Edison EV. At the time that the regulations were 16 retrenched in 1998, that company folded. That investment 17 was lost.

18 Unlike the OEMs, there was no learning or patents 19 or technology related to EVs that we could then pass on to 20 other Edison companies. It was lost.

21 In ' 95 we committed to meeting our energy policy 22 act E Pact requirements with electric drive vehicles. For 23 almost ten years we're been acquiring EVs exclusively to 24 meet the E Pact requirement. We're were one of the first 25 to buy EV prototypes, which I might add, were extremely PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 315 1 expensive.

2 Today SCE operates the largest and most 3 successful fleet of EVs. Working with the State we 4 developed fire and safety programs, electric vehicle,

5 implemented off peak rates and other efforts designed to 6 help CARB and the State achieve the goal of zero emission 7 vehicles.

8 We are in discussions with Toyota at the moment,

9 the only OEM prepared to provide released used vehicles to 10 you us in the next 2 or 3 years. We are hoping that we'll 11 be able to release these vehicles in enough quantity to 12 meet our E Pact requirements, at least bridging through 13 the ZEV blackout period, which we see 2003 to somewhere 14 between 2007 and 2009.

15 We ask you to encourage the OEMs to make these 16 used vehicles available to the users in the State and 17 certainly to help utilities meet their E Pact requirement.

18 As good as the hybrids are and I'm referring to 19 the engine hybrids we see today, they are not the best 20 they could be. They have no true ZEV mile capability and 21 they still rely on one fuel and that's petroleum.

22 With the EPRI battery report that we wanted to 23 present this morning, I believe that it clearly shows that 24 the next logical step with hybrids is adding a plug.

25 These are much better than the silver category PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 316 1 hybrids but aren't truly gold category like the battery EV 2 or the fuel cell EV. From SCE's perspective, plug in 3 products such as City EVs, full size EVs, plug in hybrids 4 and fuel cells all would be E Pact compliant, because they 5 rely on an alternative fuel.

6 We also see these plug ins as a bridging 7 technology. They're going to help make a business case 8 for battery EVs stronger and they're going to have a 9 positive impact to helping to lower technology costs for 10 fuel cells in the future.

11 From the air quality perspective, plug ins emit 12 50 percent less NOx and ROG than an engine hybrid. Up to 13 50 percent less CO2, and mid size SUV plug in hybrid with 14 60 mile ZEV range could save over 350 gallons of gasoline 15 annually when compared to engine hybrid. All this is in 16 the battery report and I do encourage the Board, if they 17 haven't had a chance to read the executive summary.

18 You are going to see a presentation following me 19 that is a compromise proposal. And I think that is the 20 spirit in what I am up here in front of the Board today.

21 We are trying to work with staff and with the Board to 22 reach the goals of clean air in California.

23 CHAIRPERSON LLOYD: Is it chose to the end?

24 MR. KJAER: Yes, it is.

25 I do encourage the Board and frankly all the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 317 1 stakeholders to continue the march toward ZEVs. We ask 2 CARB to address the ZEV blackout 2003/ 2010. We ask you to 3 consider how to incent and encourage OEMs to continue to 4 release existing ZEVs, even ZEVs that were originally 5 registered out of state, encourage them to come back into 6 the State.

7 Help us bridge this ' 03 to ' 07 blackout period,

8 and frankly reaffirm this regulation and help the 9 stakeholders such as the utilities to be reassured that 10 their past investments are secure and in our E Pact 11 compliance is viable with electric drive.

12 Thank you.

13 CHAIRPERSON LLOYD: Thanks, Ed.

14 Any questions?

15 Thank you.

16 Dave Modisette, Bonnie Holmes Gen, Roland Hwang.

17 ( Thereupon an overhead presentation was 18 Presented as follows.)

19 MR. MODISETTE: Thank you, Mr. Chairman and 20 Members of the Board. I'm Dave Modisette. I'm the 21 Director of the California Electric Transportation 22 Coalition. And there's actually quite a few things I'd 23 like to say to the Board today, but because of the time 24 constraints, I'm just going to jump right into a 25 compromise proposal.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 318 1 We did get the message last week loud and clear 2 that we needed to come forward with a very specific 3 proposal and one that tried to build off of the staff 4 proposal.

5  o0o

6 MR. MODISETTE: And so what we are going to 7 explain to you today is a compromise proposal. We feel 8 like it's a middle of the road proposal. It's not 9 everything that we want. It's not everything that other 10 stakeholders want. But we do think it's a proposal that 11 many of the stakeholder groups we believe would be able to 12 rally around and support. It has five parts.

13 The first part is to have modest but known ZEV 14 requirements in each and every year from 2005 through 15 2014. Within those requirements, we think that there 16 should be technology diversity and options, flexibility 17 for automakers to make choices within those options. We 18 think the near term ZEV numbers need to be increased. And 19 I'm going to show you the numbers in just a minute.

20 In 2015, we believe we should actually return to 21 the so called red line, that's the number of vehicles that 22 was defined in the 2001 regulation. This proposal also 23 allows flexibility, so that if you did want to establish a 24 minimum requirement for fuel cell vehicles, you know, that 25 is a part  or could be a part of this proposal.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 319 1  o0o

2 MR. MODISETTE: Mr. McKinnon asked for the 3 numbers. These are our numbers. You can see we actually 4 start with pretty modest numbers from 2005 through 2008.

5 There are vehicles there expressed. And it says instead 6 requirement or fuel cell vehicle equivalent there on the 7 left hand column. So that if an auto manufacturer 8 actually wanted to make all of their vehicles in fuel 9 cells, those would be the numbers that they would produce.

10 From 2005 through 2008, there are 500 fuel cell 11 equivalent vehicles there. So we have doubled the number 12 of fuel cell vehicles in the staff proposal.

13 However, what we would propose to do is to allow 14 other types of technologies to qualify. And so on the 15 right hand side there you see we have a scenario where an 16 auto manufacturer decides that they want to do 50 percent 17 of their requirement in fuel sell vehicles.

18 So you can see, let's just take the first year 19 2005 as an example. All of the automakers. This is for 20 all six automakers would do 25 fuel cell vehicles. Then 21 they would have a choice of either doing 500 Type 2 EVs.

22 Now, these are the full function EVs or they could do 23 1,000 Type 1 EVs, which are the City Cars.

24 Or in our proposal, we believe that plug in 25 hybrids should be another option available to automakers PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 320 1 under this pathway. And in this example, they could do 2 750 HEV 20s, that's a plug in hybrid with a 20 mile range.

3 After 2008 we do have ramp up. We believe it's a 4 very modest ramp up. It's, you know, much fewer number of 5 vehicles, you know, than others are asking for, but it 6 does ramp up to quite significant numbers by 2014. And 7 then, as I said, by 2015 we're actually back on the red 8 line requirements in the 2001 regulations.

9  o0o

10 MR. MODISETTE: The second part of the compromise 11 is that what's referred to in the staff report as the 2001 12 base requirements pathway, should reflect the actual 13 provisions of the 2001 adopted ZEV regulations, after 14 correcting for legal issues. I think one of the things 15 that's difficult to understand in the staff proposal is 16 that the staff proposal does not do this. They make it 17 sound like it does this. But there are 5 or 6 18 concessions, if you will, weakenings of the 2001 19 regulation in what's referred to as the base requirements.

20 And we believe that's a mistake. I mean, one of 21 the things, we're tying to do here is to give automakers a 22 choice where they can choose the base pathway or they can 23 go to the alternative compliance path.

24 And we want them to go to the alternative 25 compliance path, because that's the way we get rid of this PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 321 1 ZEV blackout problem. So the thing to do is to allow 2 automakers to pursue the 2001 base requirement pathway,

3 but don't make it so attractive to them, don't put so many 4 concessions in that that they will decide to do that 5 instead of doing the alternative compliance pathway.

6  o0o

7 MR. MODISETTE: Number three. Eventually we want 8 to get back to a full 2 percent pure ZEV requirement, a 9 gold requirement. Under the staff proposal there's 10 eligibility of so called silver vehicles into the gold 11 system for ever. So we believe that the staff proposal 12 does not get back to or provides no pathway to a full 2 13 percent gold requirement.

14 So the third part of our compromise is that there 15 should be some phase out of eligibility of silver vehicles 16 in the alternative compliance pathway to meet a 17 manufacturer's gold obligation.

18 And the way we would actually propose to do it is 19 to phase out by vehicle types so that you start in the 20 early years through 2008 with all the silver vehicles 21 eligible, even mild hybrid vehicles, which would normally 22 be PZEVs would be eligible in that category. That's fine.

23 We can accept that.

24 But then in the next category, we think, you 25 know, you should make that more strict and drop out some PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 322 1 of the weaker silver vehicles, all the way until the last 2 section, which would be 2012 through 2014. We believe 3 only the best of the best silver vehicles, which would 4 include plug in hybrid vehicles and some of the other 5 technologies, you know, the more exotic technologies. The 6 technologies that are actually giving you much better air 7 quality than just a standard AT PZEV. Those should be in.

8 And then eventually in 2015 all the silver 9 vehicles would be phased out, as I said, and we'd be back 10 to a red line requirement.

11 CHAIRPERSON LLOYD: Dave, are you coming to a 12 close?

13  o0o

14 MR. MODISETTE: Yes. Just two more points.

15 Fourth is to close the so called 16 placed in service loophole, which contains no minimum 17 requirement for a vehicle to be in California. We think 18 that that can be done with a relatively easy incentive 19 multiplier. And it goes directly to this issue that 20 you're talking about to provide incentives for 21 manufacturers to re lease vehicles or even to sell the 22 vehicles to people.

23 Those automakers that do that should get more 24 credit. And we have a specific proposal to give them more 25 credit if they do that.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 323 1  o0o

2 MR. MODISETTE: Last point. Technology Review 3 Panel. Under the staff proposal, it's proposed for 2005 4 or 6. We just don't think that that makes very much sense 5 with a program that's only going to begin in 2005. How 6 much data are you going to have to be able to evaluate the 7 technology. So we think it would be make sense to have 8 several years worth of experience with this program, these 9 are requirements in place, before you do that evaluation.

10 So it's our recommendation that you postpone that to 2009 11 or later.

12 As I said, this builds off the staff proposal. I 13 think it corrects its major flaws. It's a 14 middle of the road compromise and I believe that many of 15 the stakeholders could support this.

16 Thank you.

17 CHAIRPERSON LLOYD: Thank you very much, David.

18 A very constructive situation.

19 ( Applause.)

20 CHAIRPERSON LLOYD: Professor Friedman.

21 BOARD MEMBER HUGH FRIEDMAN: Okay. I had a 22 couple quick questions. First of all, you mentioned the 23 2001 base requirements pathway, and that the staff report 24 and recommendation is weakening in 4 or 5 or 6 respects.

25 Could you identify that for me?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 324 1 MR. MODISETTE: Yeah. And they're actually  if 2 you look at the hard copy that I passed out, there's a 3 more detailed explanation of the proposal and that's 4 actually

5 BOARD MEMBER HUGH FRIEDMAN: Well, I've got a 6 whole book here. And I'm sorry I just

7 MR. MODISETTE: It's not in the book. The book 8 is unrelated to that.

9 BOARD MEMBER HUGH FRIEDMAN: Okay.

10 MR. MODISETTE: This is what I tried to identify.

11 You know, I think that this is accurate. I hope this is 12 accurate. But one of the problems is that the regulations 13 are so complex that it's difficult even for a person 14 that's been working in this field for many many years as I 15 have.

16 Here's what they are.

17 BOARD MEMBER HUGH FRIEDMAN: I have it here now.

18 Thank you.

19 I can look at it quickly. I would like to ask, I 20 think, Dr. Bill as well, if the staff would respond, if 21 they have any comments on these proposals.

22 EXECUTIVE OFFICER WITHERSPOON: I'm going to give 23 a general response and ask to help me with the rationale 24 for each individual change.

25 In general, as we picked up the regulation from PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 325 1 2003 and moved it to 2005, we had to address what happened 2 in 3 and 4. And so some of the changes we're trying to 3 keep momentum going and reflect that when the reg took 4 effect again in ' 05.

5 And other things we did, for example, we had a 6 40 vehicle fuel cell  40 credits for fuel cell vehicles 7 that was to have expired this year.

8 And when we picked that up and moved it into ' 05,

9 we had to ratio all the other ZEV type credits to be, you 10 know, a fair ratio. So we had cascading effects.

11 Dave's proposal also talks about having change 12 the minimum performance requirements for hybrid electrics.

13 Well, in point of fact, we threw out the entire mechanism 14 we had before and created a new one. This was part of the 15 legal challenge.

16 And as we did that a three tier concept emerged,

17 which includes mild hybrids, stronger hybrids, the high 18 voltage, high powered, those different characteristics 19 staff talked to you about before. And so it wasn't so 20 much a weakening as a diversification of hybrid categories 21 as we learned more about them from the different 22 automakers.

23 Some of the other things that have been brought 24 to our attention is when you used a neighborhood electric 25 vehicle to meet a gold requirement, it counted as a real PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 326 1 vehicle in the baseline of what you sold, but it only 2 counted as 1.5 for credit. And so you were digging 3 yourself a hole because the next year you had to make more 4 electric vehicles and you had a greater obligation.

5 So we asked by auto manufacturers can they 6 subtract the pure electrics, or pure ZEVs they built in 7 any given year before we calculated their obligation for 8 the next year, so they weren't hurting themselves by 9 making ZEVs.

10 And then we also changed the battery warranty 11 requirements for hybrid vehicles that had been 15 years.

12 We Went to 10. We kept the same mileage of 150,000 miles.

13 And this was necessary given the technical data you saw 14 about battery life and the financial liability for having 15 to stand behind them and being told that hybrids simply 16 would not come to market with a 15 year warranty, and we 17 were working against ourselves in wanting to see more 18 silver vehicles on the road.

19 In none of those instances were we trying to 20 weaken the 2001 amendments, but just to make them coherent 21 and carry them forward and have every technology weigh 22 appropriately against the next.

23 MR. MODISETTE: And maybe just to clarify, I'm 24 not objecting to those changes in the alternative 25 compliance pathway. I think that those changes are PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 327 1 additional positive things that are going to draw 2 automakers to that pathway, which is what you want.

3 But if you make all those same changes in the 4 alternative compliance pathway in the base path, then 5 you're just encouraging automakers to go to the base path 6 and then we're going to have tremendous ZEV blackout.

7 CHAIRPERSON LLOYD: Dr. Friedman and Mr.

8 McKinnon.

9 BOARD MEMBER WILLIAM FRIEDMAN: I just wonder if 10 staff could also comment about the suggestion about the 11 tech review panel being put off.

12 EXECUTIVE OFFICER WITHERSPOON: In our staff 13 report we had suggested a date by which the independent 14 review panel would convene based on the customary three 15 model year's lead time that are given to automakers before 16 we impose any regulatory requirements.

17 It has been brought to our attention that they 18 might not need that much lead time depending on what the 19 target is. If, for example, in the next period of time 20 each manufacturer needed to build, let's say, 500 fuel 21 cell vehicles a piece, they could potentially do that in a 22 single year toward the end of the three year window, and 23 not have to go into production and not have to know three 24 years before 2009 what the requirement is going to be,

25 because they could build them all in 2011.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 328 1 But as you choose and whatever number you all 2 come up with, if, you in fact, put a number in today, the 3 higher it is, the sooner the panel would have to convene 4 and give them some guidance, because it works backwards in 5 terms of production line changes, versus hand built,

6 supply commitments, et cetera in order to know who they're 7 going to accomplish that goal.

8 CHAIRPERSON LLOYD: Yes, Mr. McKinnon.

9 BOARD MEMBER McKINNON: I, for one, am pleased to 10 see numbers. And I think there's a lot of logic to this.

11 Some of the reluctance to move very far is that there's 12 one in particular and marginally some other auto companies 13 that really went and did what  there's actually a 14 couple  that really kind Of went and did the job.

15 And so there's sort of, should we be penalizing 16 them or should we be making them do something early if 17 they did what they were supposed to do.

18 And I guess what I think the beauty of this 19 proposal is is that it's saying we had a 2001 rule. We 20 were serious as a heartache about the 2001 rule.

21 And so if folks were going down the line of 22 following that rule, understanding there was a lawsuit and 23 there are some things we had to correct and maybe double 24 counting of cars is something we shouldn't be doing in 25 terms of the requirement numbers.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 329 1 But essentially, you know, there's the 2001 rule.

2 Somebody is going down that path. Great. Perfect.

3 That's what we said we waned. Somebody did it. We should 4 be happy. You know, we should be happy about that.

5 To the extent a lawsuit caused there to be this 6 break that isn't a one year break, it really works out to 7 be more than that, because of how  you've laid out some 8 numbers that give an alternative way to get there.

9 And, you know, everybody I met with in the last 10 week, I've said put some numbers on the table. And you 11 did. Thank you. And I think they're worthy of serious 12 consideration.

13 CHAIRPERSON LLOYD: Thank you.

14 Ms. D'Adamo.

15 BOARD MEMBER D'ADAMO: Ditto. I appreciate you 16 doing this. I know I asked you the same question, and I 17 am hoping that, depending on if it looks like we may end 18 up going two days, would like to really encourage staff to 19 take a close look at this. Any future witnesses, it would 20 be helpful for us to hear what you have to say about this 21 proposal. I don't know if the future witnesses have had a 22 chance to digest it or not. And I would encourage the 23 automakers that are here to sit and chew on these numbers 24 as well.

25 Thank you.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 330 1 CHAIRPERSON LLOYD: Yes.

2 BOARD MEMBER HUGH FRIEDMAN: I just want to 3 clarify. You are both referring to this proposal as a 4 modification of the alternate pathway, correct?

5 BOARD MEMBER McKINNON: No, it's

6 BOARD MEMBER HUGH FRIEDMAN: You talked about 7 2001

8 BOARD MEMBER McKINNON: It's saying the 2001 rule 9 essentially  if you chose to go down that pathway, you 10 really ought to go down that pathway without us making a 11 bunch of changes.

12 BOARD MEMBER HUGH FRIEDMAN: I understand. But 13 that wasn't this.

14 BOARD MEMBER McKINNON: Yeah. No, it says that.

15 It says go down the 2001 pathway, the real one. The one 16 that we originally set out to do, or do this alternative.

17 BOARD MEMBER HUGH FRIEDMAN: This is the 18 alternative.

19 BOARD MEMBER McKINNON: Yes.

20 BOARD MEMBER HUGH FRIEDMAN: So we're saying the 21 same thing. I wanted to understand that. I was confused.

22 CHAIRPERSON LLOYD: This is a variation of the 23 staff today.

24 EXECUTIVE OFFICER WITHERSPOON: Just a 25 clarification to Mr. McKinnon. No one can do the 2001 reg PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 331 1 exactly the way it was done, so there do have to be some 2 changes as we reinitialize in 2005.

3 MR. MODISETTE: Just to explain, the binder you 4 received is a compilation of letters of resolutions from 5 local governments of letters from labor and business and 6 environmental organizations. You know, these are the ones 7 that we are aware of. And these are all letters of 8 opposition to the existing staff report.

9 Obviously, we have not, you know, been able to 10 get back to all these people and show them the compromise.

11 But I believe that many of these organizations would 12 support the compromise proposal.

13 CHAIRPERSON LLOYD: We have received those 14 letters too. We're aware of them, not in such a neat 15 form, but we're thank you.

16 MR. MODISETTE: Thank you.

17 CHAIRPERSON LLOYD: Thank you very much.

18 Bonnie Holmes Gen, Roland Hwang, Jason Mark.

19 MS. HOLMES GEN: Mr. Chairman and board members,

20 Bonnie Holmes Gen with the American Lung Association of 21 California. Get that name correct this time.

22 I'm here also on behalf of the California 23 Thoracic Society. I first of course want to thank you for 24 your strong record of support for the ZEV Program. It's 25 gratifying to hear that you're serious as a heartache.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 332 1 I'll tell you, it's very gratifying.

2 ( Laughter.)

3 BOARD MEMBER HUGH FRIEDMAN: Well, as a past 4 president of the American Heart Association, you could 5 have thought of a better analog.

6 ( Laughter.)

7 MS. HOLMES GEN: I am here to oppose the staff 8 proposal. As I believe you're aware from our letter from 9 the Lung Association and our allied groups that we have 10 very serious concerns about the staff report. We feel it 11 falls very short of achieving the objectives that we would 12 like to see it achieve.

13 Specifically, we're most concerned that it does 14 not continue to push zero emission vehicle advancement 15 with clear, enforceable and increasing regulatory goals 16 over the next decade and beyond. We believe this is 17 critical. And that basically means you need to set a 18 number, I guess, in the parlance you've been using today.

19 We believe that by proposing no zero emission 20 vehicle requirement in 2009 and after, the staff report 21 sends a very bad signal. It sends a signal that the car 22 companies may be let off the hook. I think that it 23 fosters a wait and see what happens mode rather than 24 purposeful forward movement on the part of the car 25 companies. And that's our great concern, and why we PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 333 1 believe you do need to set a number for 2009 and after.

2 CHAIRPERSON LLOYD: Bonnie, you've got some very 3 nice recommendations. Could you get to them.

4 MS. HOLMES GEN: But I do want to just remind you 5 that establishing technology forcing goals, I mean, that's 6 been the key aspect of the Board's legacy, and you need to 7 continue that legacy in air pollution control. And please 8 don't be afraid of setting goals in the future, even if 9 you have to come back and revisit them again, that's part 10 of being a visionary body, and we expect that of you.

11 So together with my colleagues from the Union of 12 Concerned Scientists, and the Natural Sources Defense 13 Council, we have forwarded some specific recommendations 14 to you.

15 The concepts are similar in many ways to what 16 you've heard from my colleague Dave Modisette. And the 17 specific action items that we are asking you to take are 18 number one to redesign the alternative compliance pathway 19 and the staff proposal to allow other ZEV technologies to 20 compete, but we want to meek sure that there is a fuel 21 cell floor in that number.

22 So you have a proposal in the staff report of 250 23 fuel cell vehicles by 2008. We think that's a very 24 extremely reasonable goal for fuel cell vehicles, but if 25 we're going to open up this pathway to diversity, we want PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 334 1 to see you add some additional vehicles to that number.

2 We're recommending a fuel cell vehicle equivalent number 3 of 500 for that first phase.

4 We believe that that number is very reasonable.

5 And my colleague Jason Mark will by explaining in more 6 detail why that number is very reasonable for that 7 timeframe. And it would also allow you to open the door 8 to battery technologies right away.

9 Second of all, we're asking you to establish a 10 minimum requirement for car companies to produce at least 11 5,000 new zero emission vehicles or fresh ZEVs, fuel cell 12 equivalent, that is cumulatively in the 2009 to 2011 13 period, and then restore the ramp to the 2001 program.

14 Again, we believe these are reasonable but 15 challenging numbers for the car companies. They're very 16 much in line with other projections that have been made 17 specifically by those in the fuel cell industry. And the 18 Board would not be picking a number out of the air if you 19 established this number. This is not about picking 20 numbers out of the air and just going on no rationale.

21 We're talking about going on solid rationale.

22 Car companies, as you know, have said they can make 23 commercially marketable fuel cell vehicles by the end of 24 this decade. And we know we already have the viable 25 alternative of batteries of various kinds also to fill in PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 335 1 on some of those numbers.

2 Definitely if you set a goal of 5,000 over that 3 people or higher, you would be setting a very reasonable 4 goal, but a technology forcing goal. We're asking you to 5 do that. Third, we ask you to move the expert review 6 panel to a post 2006 timeframe. I think my colleague 7 suggested 2009, but just any time in that latter half of 8 the decade is much more reasonable than the earlier time 9 period that's projected in the staff report.

10 We believe it's critical to ensure time for new 11 steps in technology advancement to occur to allow the 12 panel to get a better picture of the pace of technology 13 advancement. And we also want to make sure that when you 14 adopt your resolution that you clarify that the panel's 15 scope should be narrowly defined to focus on technology 16 review.

17 We don't want their to be any confusion that this 18 is a policy making body of some type that's going to 19 actually establish specific numbers of vehicles that the 20 Board should consider.

21 And fourth, we do strongly support the staff 22 proposed increased requirements for silver category AT 23 PZEVs. And my colleague Roland Hwang is going to go into 24 more detail about the importance of that piece of the 25 staff recommendation. And again we believe that it is PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 336 1 especially important to have these high numbers in the 2 silver category especially when the Board is providing 3 more flexibility, and really, you know, giving some 4 additional flexibility and assistance to the car companies 5 in meeting the gold category requirements.

6 And you know we believe that the silver category 7 AT PZEVs you know, are proven technology. Hybrid 8 passenger vehicles are here. There's a commercial case to 9 be made for them. Car companies are signing up to put new 10 models of hybrid electric vehicles out. So we think it's 11 very reasonable to stand by those increasing numbers over 12 the next decade that are in the staff report. We 13 appreciate your strong record of support.

14 And finally, I just want to remind you that this 15 decision is a historic decisions. And we'll establish a 16 legacy for the future. And we believe that it's important 17 for you to continue your historic role of leading the 18 country and the world in pushing vehicle technologies and 19 making the car companies meet new challenges, setting real 20 and continuing challenges before the car companies,

21 ignoring the nay sayers that say we can't do it, embracing 22 diverse zero emission technologies and staying at the 23 forefront of public health protection.

24 So we want to encourage you and challenge you to 25 move forward and set a strong number.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 337 1 Thank you.

2 CHAIRPERSON LLOYD: Thank you, Bonnie.

3 Jason and Roland switched. So Jason Mark, Roland 4 Hwang, Tom Gage.

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

7 MR. MARK: Thank you. If you're amenable to 8 switch, it will make things a little bit more efficient.

9 CHAIRPERSON LLOYD: By all means.

10 MR. MARK: I first want to thank you for your 11 endurance, not just for today, and I think this evening 12 and perhaps tomorrow, but also for your endurance in 13 maintaining the path to zero.

14 I want to talk about the needs to really maintain 15 that path to zero as we move forward. My name is Jason 16 Mark and I'm an engineer. So thank you for the earlier 17 comments about giving engineers a chance, and director of 18 the clean vehicles program at the Union of Concerned 19 Scientists, which is a nonprofit partnership between 20 citizens and scientists.

21 We've, I think, had over 2000 of our members 22 throughout California write to you directly in support of 23 strengthening this regulation in the proposal. In 24 particular UCS is concerned about the staff's proposal 25 that it could stall progress in the technology fuel cells PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 338 1 that the industry itself claims is the next generation of 2 vehicle technology.

3 And we believe that there is ample evidence to 4 justify much more concrete determination about fuel cell 5 vehicles in the future, and far more aggressive than even 6 the optional numbers that staff has discussed this 7 morning.

8  o0o

9 MR. MARK: So towards that end, let me just touch 10 first on automakers statements regarding fuel cells.

11 Nearly everyone in the automobile industry has dubbed fuel 12 cells as the technology of the future. And they have 13 actually been quite aggressive about how quickly they 14 think that technology can move to market.

15 I'm particularly taken by General Motors'

16 assertion that they think they'll have a compelling and 17 affordable car by 2010, which is in stark contrast to the 18 $ 100,000 vehicle premium incremental price that the staff 19 suggests in the initial statement of reasons.

20 So again, I think we have to at some point take 21 the automakers at their word and the tremendous amount of 22 press that they've been bringing to the issue of fuel cell 23 technology and really suggest that they can deliver on the 24 promise that they're articulating to us.

25 Second of all, let me talk very briefly about PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 339 1 targets that the fuel cell industry itself has 2 articulated. This is  you can see all of the groups 3 that have signed onto this document that talk about very 4 realistic targets for getting to zero. The path forward 5 is the name of this document. And this is both fuel cell 6 industry as well as potential fuel suppliers to the fuel 7 cell industry.

8  o0o

9 MR. MARK: They talk about 500 passenger vehicles 10 from the period 2004 through 2007 and 5,000 passenger 11 vehicles annually from ' 08 to ' 11. So in other words 12 there will be 20,000 vehicles over that four year period,

13 from 2008 to 2011. That's a real concrete target that the 14 fuel cell industry itself has set out.

15  o0o

16 MR. MARK: And finally this is the chart that 17 many of folks have already talked about from the 18 Department of Energy, which was actually created in 19 collaboration with several automakers over a year ago.

20 The Department of Energy's vision is to start building on 21 the 50 fuel cell vehicles that will be demonstrated in 22 California through the fuel cell partnership over the next 23 year or two, go to that next stage of a ten fold increase 24 to 500 and then finally 5,000 by a 2012.

25 My sincere hope is that the State of California PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 340 1 will be at least as aggressive in promoting fuel cell 2 vehicles as the Bush administration. And I note for 3 reference that in fact our colleagues across the seas have 4 already articulated far more aggressive goals.

5 The Japanese Ministry of Economy, Trade and 6 Industry has, for example, recently articulated a goal of 7 50,000 fuel cell vehicles by 2010, perhaps a bit more in 8 line with the sorts of public statements that we're 9 hearing from General Motors.

10  o0o

11 MR. MARK: To help put the staff's perspective in 12 perspective, I wanted to just share with you some of the 13 numbers that the bar on the left for each of the times 14 period either by 2008 or from 2009 through 2011 would be 15 the 2001 rule. So you could see that if automakers were 16 to meet those requirements through the fuel cell 17 technology, it would have required 6,500 by 2008 and 18 nearly 30,000 by over the time period 2009 through 2011 19 cumulatively.

20 Next, just two months ago staff was proposing 21 numbers more on the order of 1,000 by 2008 and 11,000 over 22 the next three year time period. The latest proposal in 23 front of you today is 250 by ' 08 and zero thereafter.

24 Then I put on the chart, the two sets of, sort of,

25 benchmarks that I just described, the Department of Energy PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 341 1 goals 500 by 2008 and 5,000, in this case their goal is by 2 2012, and I want to be clear about that. I've shown here 3 by 2011.

4 And second of all, the fuel cell industry which 5 was 500 by 2007 but an additional 5,000 per year 6 thereafter. So that's how those numbers work out.

7 And what really what I think we're asking you to 8 do today is not pick a number out of thin air, but in fact 9 pick a number in a range that is well established by both 10 the fuel sell industry the Department of Energy and their 11 research targets as well as some of the statements that 12 we've been hearing from the automakers themselves.

13 And we think that quite clearly, and I want to 14 crystal clear on this point, we believe that the numbers 15 in the 2009 time period are absolutely vital for three 16 reasons.

17 Number one, to maintain the flow of investment to 18 fuel cell technology. Number 2, to focus and foster 19 complementary policies that speed the fuel cell 20 transition.

21 And number three to ensure ultimately steady 22 progress to zero.

23  o0o

24 MR. MARK: And so here's my final  sorry,

25 nearly final slide. This is the proposal. This is the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 342 1 path to zero proposal that we're recommending to the Board 2 today, which would require by 2008 500 fuel cell vehicles.

3 Over the next three years, 5,000. Over the next three 4 years 30,000.

5 And the concept there is to build on going from 6 the 50 vehicles that we'll see by year's end in the fuel 7 cell partnership to 500, then to 5,000 and then ultimately 8 build a smooth ramp getting back to what was originally 9 called the red line or the original program by 2015, and 10 that's how we derived that 30,000 vehicle estimate.

11 OUr vision is to build on the same mechanism 12 proposed by staff in the alternative compliance path. So 13 these would be new vehicles. And moreover, though we 14 think that diversity is absolutely critical, and that this 15 shouldn't just be fuel sell vehicle numbers, but in fact 16 ZEV technology. We've expressed the numbers in terms of 17 fuel cell vehicle equivalents, if you will.

18 But we think that all technologies ought to play.

19 ANd we, in fact, support the option that staff has 20 proposed to also create hydrogen infrastructure credits 21 over the next three perhaps six months to develop a 22 concept for crediting hydrogen infrastructure.

23  o0o

24 MR. MARK: The last slide. To put this all in 25 perspective, one is to just sort of give you a sense for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 343 1 where we've been and how this path to zero might map out.

2 The red line on the top is our estimate of the fuel cell 3 requirements associated with the January 2001 rule. And 4 the green dash line is the number that we propose.

5 To be clear, we're not proposing annual 6 requirements. We're proposing the flexibility that you 7 gain by offering three year averages, essentially, or 8 cumulative requirements, to allow some of the industry 9 laggards to catch up and the accelerated folks to continue 10 to move forward.

11 We also think that the technology is, even though 12 we've shown just fuel cell vehicles should be ZEVs.

13  o0o

14 MR. MARK: So in sum, our proposal is 500 15 vehicles over the time period by 2008, 5,000 fuel cell 16 vehicles over the next three years, 30,000 and then return 17 to the rule by 2015. We urge you to send the strong 18 signal the automakers need to develop fuel cell 19 technologies on a timeframe that we believe is reasonable.

20 CHAIRPERSON LLOYD: Thank you Jason. One 21 question of clarification. I know the answer, but the 22 5,000 vehicles that DOE, of course that's a national 23 number that's not a California number.

24 MR. MARK: It is a national number. My view is 25 that we're not going to be seeing a lot fuel cell vehicles PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 344 1 in Louisiana, number 1. And number 2, more importantly,

2 your staff had proposed allowing these vehicles to qualify 3 for another LEV/ ZEV states. And under that schematic, of 4 course, I think you get the extremes of let's say whether 5 and temperature environments that you really want to test 6 the fuel cell technology.

7 So I think you'd capture I think a reasonable 8 timeframe. And remembering also the fuel cell industry is 9 talking about 15,000 vehicles in that same time frame.

10 CHAIRPERSON LLOYD: It's the fuel cell industry,

11 not the auto industry.

12 MR. MARK: Right.

13 CHAIRPERSON LLOYD: Professor Friedman.

14 BOARD MEMBER HUGH FRIEDMAN: Your numbers, have 15 you had a chance to compare your numbers with Mr.

16 Modisette's.

17 MR. MARK: I think the principle is very much the 18 right.

19 BOARD MEMBER HUGH FRIEDMAN: But the numbers are 20 quite different. And when you speak of equivalent BEV 21 requirement would be hire, what kind of ratio were you 22 thinking of.

23 MR. MARK: We have not, in fact, thought through 24 the types of credit scheme that would be needed, but I 25 think it stands to reason that battery electric vehicles PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 345 1 would garner fewer credits than fuel cells given where the 2 technology is.

3 CHAIRPERSON LLOYD: Mr. McKinnon.

4 BOARD MEMBER McKINNON: I just want to kind of 5 compare the two proposals as best as I get it here. In 6 the Modisette proposal, it's initially about 300, but it's 7 segmented annually. You know, there's like a 50 and 100 8 and 150.

9 Yours, you have three years that you're saying 10 five years, 500. So if you looked at three years in his,

11 it's 300. That's in terms of  so there's three years 12 sliding sort of gives companies sort of a running start.

13 Okay. And then the next period it's 5,000 versus 14 3,000. And then the next period it's the same, I believe,

15 30,000, 30,000. And the other differences is three year 16 sliding.

17 Great. Thank you for doing numbers and a basis 18 for them.

19 This is good stuff.

20 MR. MARK: Thank you.

21 CHAIRPERSON LLOYD: Roland Hwang, Tom Gage, Dana 22 Muscato.

23 MR. HWANG: Thank you, Mr. Chairman, Members of 24 the Board.

25 ( Thereupon an overhead presentation was PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 346 1 Presented as follows.)

2 MR. HWANG: I appreciate the opportunity to 3 present our perspective on this very important program.

4 My name is Roland Hwang. I'm a senior policy analyst with 5 the Natural Resources Defense Council.

6 And what I want to speak to you this evening 7 about is the role of the advanced technology partial ZEV 8 pathway, particularly the hyper electric vehicles in 9 getting us to zero. We view this as a critical pathway.

10  o0o

11 MR. HWANG: The role of the AT PZEV pathway, I 12 think, there's a broad consensus and you heard that today.

13 Dr. Anderman, I think you heard from Toyota. But there is 14 broad consensus. There should be no debate that hyper 15 electric vehicles are a stepping zone to fuel cell 16 vehicles and other pure zero emission vehicle 17 technologies.

18 That issue, I believe there is very little or 19 absolutely no debate about.

20 Second of all, which there is a little bit more 21 discussion here today, is the issue of volumes. I think 22 We've seen past history volumes do matter. Higher volumes 23 will bring down the cost of the electric drive components,

24 as well as AT PZEVs, also natural gas vehicles, for 25 example, the gaseous storage technologies, that will PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 347 1 enable fuel cell vehicles also. So volumes do through 2 matter.

3  o0o

4 MR. HWANG: Finally the degree of hybridization.

5 A hybrid with a bigger electric motor with more batteries 6 is going to have a large componentry link to a pure zero 7 emission vehicle.

8  o0o

9 MR. HWANG: When we're looking at getting to say 10 fuel cell vehicle commercialization or any kind of pure 11 ZEV commercialization, essentially we need  in this 12 case, my example will be on fuel cells, but the same 13 principles apply for battery electrics. We need to have 14 three pathways converge, three technology pathways 15 converge.

16 First, in terms of fuel cells, we need the fuel 17 cells stacks performance and cost to come down to a point 18 where we can have a competitive product.

19 Second, of course, we need hydrogen 20 infrastructure to be in place. And third, we need 21 electric drive components to come down in cost and 22 increase in performance to the level where, as a package,

23 the fuel cell infrastructure electric drive componentry 24 all can come together to deliver a commercializable 25 product, again where it's fuel cells or battery electric.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 348 1 In this case, the example is on fuel cells.

2 The zero emission program can address all three 3 critical paths. And I think it's very important to 4 understand that the zero emission vehicle program has 5 evolved quite a bit over time, and, in my mind, has 6 successfully evolved to meet some of the new challenges 7 that we have faced an what we have learned over time. On 8 the first pathway fuel cell stack and auxiliaries, clearly 9 pure gold requirement, we're asking the Board to restore 10 some level of pure gold requirement.

11 That will help us with the fuel cell stacks and 12 the auxiliaries that going along with the fuel cells.

13 Hydrogen infrastructure, we've heard discussions 14 today about infrastructure credits. We need those 15 infrastructure credits and more in order To get that 16 critical component in place.

17 And of course the electric drive components, what 18 I'm focusing on my presentation is incentivized through 19 the you AT PZEV pathway. Again, these are the three 20 critical pathways the program addressed in a coherent 21 manner.

22  o0o

23 MR. HWANG: Volumes, of course, do matter. And 24 this is the cost curve from one of my colleagues for BPM,

25 Brushes Permanent Matter electric motors, electric motors PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 349 1 for hybrid electric vehicles the same as for fuel cell or 2 battery electric.

3 As you can see in this cost curve, the numbers 4 for the cost keep coming down. This is obviously per 5 manufacturer keep coming down to the tune of 1,000 volume 6 level.

7  o0o

8 MR. HWANG: The AT PZEV volume I think we've 9 heard some discussion about whether those are achievable 10 or not. Just some quick numbers. And what I'm going to 11 compare them are to announced goals for production global 12 production numbers, I believe, they are. So you have to 13 divide your global production numbers by what's required 14 in California and the northeast. But you can see that 15 Toyota in 2005 would be required to build 17,000 vehicles,

16 if they did not use any of their gold credits. And that 17 would include California and the northeast.

18 And General Motors in 2007, would be 32,000. The 19 reason I show these years is that Toyota has announced a 20 global production goal of 300,000.

21  o0o

22 ( Thereupon the power for the overhead 23 presentation went out.)

24 MR. HWANG: And General Motors has announced a 25 global

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 350 1 CHAIRPERSON LLOYD: That's the new mechanism for 2 cutting you off.

3 ( Laughter.)

4 MR. HWANG: Yes. That's a very effective way.

5 The technology definitely works there.

6 I'm almost done. If I had maybe 30 more seconds 7 and indulgence I can complete it. I don't know if we can 8 get the over heads back up.

9 CHAIRPERSON LLOYD: We've got the copies here.

10 MR. HWANG: I guess, I'm flying a little blind 11 here. Let me see what do I have here.

12 The other point, of course, on the volumes that 13 being achievable, I've listed out a number of reasons why,

14 by the volumes, from the staff, a March proposal, are 15 likely on the high side.

16 But primarily I want to one focus the fact that 17 we are all absolutely hoping that you will restore the 18 zero emission vehicle pure gold requirements, and that 19 will also drive down the volumes of AT PZEVs. We do not 20 think the volumes of AT PZEVs are a problem in terms of 21 market achievability.

22 We think that there are clearly volume benefits 23 to the technology performance cost at the levels even in 24 the staff report. But I wanted to reinforce the concept 25 that the numbers are likely to be lower.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 351 1 Level of hybridization matters. Let me point out 2 that staff is proposing to allow some allowances for 3 what's called 42 volt stop start systems.

4  o0o

5 MR. HWANG: Clearly, there is a difference in 6 technology between a vehicle with a five kilowatt motor,

7 it runs on 42 volts, versus a fuel cell vehicle that would 8 run, say, on a much higher voltage say 600 volts and 9 electric motor size 80 kilowatts.

10  o0o

11 MR. HWANG: So in sum, the recommendations that 12 we have, of course, is to restore the gold ramp, as my 13 colleague Jason Mark spoke of.

14 Second of all, is to, as staff proposed, require 15 AT PZEVs to backfill any differences between the 2001 16 amendments and whatever transpires at the end of this 17 board meeting.

18 Finally, we recommend you adopt credit levels 19 future AT PZEV vehicles, because we do think the volumes 20 are achievable and we think that there are significant 21 economies of scale and innovation benefits going out to 22 those higher numbers.

23 And finally, we do oppose, from a technical 24 perspective, oppose the inclusion of the 42 volt, so 25 called, Level 1 vehicles. But at very minimum, we would PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 352 1 ask the Board to make sure they enforce the phase out of 2 that to be used on silver compliance by 2008.

3 Thank you for your attention.

4 CHAIRPERSON LLOYD: Thank you very much.

5 Any questions, comments?

6 Thank you very much Roland.

7 Tom Gage, Dana Muscato, Daniel Rivers.

8 MR. GAGE: Good evening, Chairman and Members of 9 the Board. I'm Tom Gage. I'm with AC Propulsion, a come 10 in Los Angeles that builds EVs one at a time. We would 11 like to build them by the hundreds or the thousands, and 12 for that reason, I oppose the production mandate.

13 I'd like to run through my presentation. I will 14 edit for brevity as I go. I hope I remain coherent.

15 Let me start. California needs electric vehicles 16 now more than ever. We need their environmental benefits,

17 and more important we need their fundamental energy 18 benefit. The efficient use not imported, not petroleum,

19 secure and renewable energy resources.

20 EV should be a major element of California 21 environmental policy. Do not shirk away from these 22 broader objectives using the excuse that it's not an air 23 quality issue. Energy consumption affects air quality.

24 As many of you know, energy consumption, green 25 house gas emissions and air quality are closely related.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 353 1 They cannot always be neatly partitioned according to 2 organizational boundaries of the State bureaucracy. You,

3 the Air Resources Board, have the EV bit. I urge you to 4 run with it.

5 The United States uses too much petroleum. We 6 use 45 percent of the worlds gasoline for five percent of 7 the world's people. Our per capita energy consumption of 8 petroleum for transportation is double or triple of 9 developed economies. It's order of magnitude is higher 10 than countries like China, Brazil and India, all of whom 11 are pursuing their legitimate aspirations to high levels 12 of automobility.

13 We need to reduce gasoline consumption by using 14 it more efficiently and substituting other energy sources 15 for it. Starting now, we need to substitute new sources 16 of energy from secure non petroleum and renewable 17 resources for gasoline. And we need to use that energy 18 efficiently.

19 EVs do this better than ULEVs, SULEV, PZEVs, AT 20 PZEVs, hybrids, fuel cell vehicles or any other type of 21 automobile.

22 This is why now, especially we must not turn away 23 from EV commercialization. The original ZEV mandate was a 24 bold and commendable to achieve EV commercialization.

25 Thirteen years later, it's obvious to me that the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 354 1 production mandates have not worked. I don't think they 2 ever will.

3 Under the staff proposal of March 5th, the 4 expected number of commercial zero emission vehicles is 5 zero. You can and should avoid this outcome.

6 At the end of my remarks, I will briefly describe 7 how you can shift the momentum you have created in a new 8 direction. You can work around the adversarial stale mate 9 that has developed between staff and automakers, and you 10 can foster continuing progress toward EV 11 commercialization.

12 The automakers say EV commercialization is doomed 13 to failure. I disagree, for at least five reasons. EV's 14 do have enough range for typical driving, because most 15 trips are short. Batteries are getting better, a lot 16 better, as we have heard. People like EVs. EVs have 17 virtues that offset their limitations.

18 A small electric car drives like a bigger more 19 luxurious car. Listen to EV driver testimonials. They 20 have a product they really like. They're not odd balls.

21 Do not underestimate or overlook your ability to 22 affect change in the market. And be certain that where 23 the market goes the automakers will follow. Okay could 24 you go to slide seven please.

25  o0o

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 355 1 MR. GAGE: Fuel cell vehicles use more energy 2 than EVs. A hydrogen cycle has too many steps with losses 3 at each step. So even at high cell efficiency, the 4 overall efficiency Of the fuel cell vehicle is low. This 5 chart compares a RAV4 electric to a Honda FCX. And you 6 can see that well to wheels in terms is mile per gallon,

7 EV, is better oh even a lot better than a fuel cell car.

8 This is an example of how air quality goals 9 cannot be separated entirely from energy considerations.

10 Next slide, please.

11  o0o

12 MR. GAGE: Fuel cell stocks are down, much more 13 than the Market as a whole. This may just mean that the 14 market view fuel cell commercialization as beyond its 15 investment horizon. But more important it reduces the 16 auto maker executives appetite for R& D and fuel cell 17 related acquisitions because it will no longer boost their 18 stock price.

19 Auto makers are reevaluating their fuel cell 20 programs. Many do not want even to commit to building a 21 few dozen fuel cell vehicles over the next five years.

22 Next slide.

23  o0o

24 MR. GAGE: Why not EVs?

25 The need is real and increasing. The technology PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 356 1 is ready and getting better. Compared to 1990 or even 2 1996, a market has been established. There are no 3 near term alternatives to the EV for the ZEV vehicle.

4 I decided to take a step back and get 5 perspective, and this is what I saw. In the big picture I 6 see a State and a nation that need the benefit EVs. I see 7 automakers so desperate to avoid any production mandate 8 that they spend millions of dollars on ZEV R& D but they 9 refuse to produce any.

10 I see dozens of fleets and thousands of 11 individuals who will buy EVs if they can. I see at least 12 five and maybe 10 small companies like mine here in 13 California, and many others throughout the world that want 14 to build and sell EVs and EV components, but who cannot 15 attract sufficient investment due to market uncertainty.

16 And finally, I see and agency of the state that 17 has regulatory authority over automakers and established 18 outreach programs to the EV market, and knowledge staffers 19 some whom are enthusiastic about EVs.

20 All these elements are in a log jam right now.

21 No one can move. I do not see why you, the Board, cannot 22 break up the log jam with revised regulations that incite 23 less automaker opposition to provide more certainty for 24 planning and foster a market environment where 25 entrepreneurs will have their best opportunity to sell,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 357 1 and consumers their best opportunity to buy electric 2 vehicles.

3 Here is what I propose.

4 Next slide.

5  o0o

6 CHAIRPERSON LLOYD: Can you bring it to a close,

7 Tom.

8 MR. GAGE: Yes, these are my five 9 recommendations.

10 Do not abandon EV commercialization. Do not 11 approve the March 5th proposed modifications. It is not 12 in California's best interests to abandon EV 13 commercialization.

14 Second, accept the fact that you cannot force the 15 can companies to build EVs. It seems that you have lost 16 that battle. But do not conceive the war because of it.

17 Work without the OEMs, but keep pushing for EVs.

18 Third, you have a mandate. Keep it, strengthen 19 it and enforce it. It is a credit mandate. Car companies 20 do not have to produce EVs. They just have to buy credits 21 from those who do.

22 Fourth, join forces with other State bodies 23 including the California Energy Commission, the PUC and 24 the Legislature. This is about energy and air quality.

25 Restore, strengthen and unify California's commitment to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 358 1 pioneer the transformation to electric transportation.

2 And fifth, remember the car buyers are the real 3 agents for change in vehicle technology. What people buy 4 determines what automakers build.

5 Last slide, please.

6  o0o

7 MR. GAGE: Regulations and policies that provide 8 incentives and encouragement to both supply side and the 9 demand side, and that avoid confrontation with the 10 automakers will give EV commercialization the best chance 11 for success. If it fails, it will have failed in the 12 marketplace not in back rooms and court rooms.

13 Next slide.

14  o0o

15 CHAIRPERSON LLOYD: Tom, come on.

16 MR. GAGE: If it succeeds, you can be sure that 17 auto companies will be paying attention and they will be 18 only too glad to join. As this slide shows, they can do 19 this so well, design, invest, manufacture and sell, if 20 they have reason to. And that's really what you've wanted 21 all along.

22 Thank you.

23 CHAIRPERSON LLOYD: Thank you.

24 Dana Muscato, Daniel Rivers, Dan Sturges.

25 MR. MUSCATO: Good evening, Dr. Lloyd, and PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 359 1 members of the Board. I'm Dana Muscato, chief Executive 2 Officer of Phoenix Motorcars, Ojai, California.

3 We build full function freeway speed, batter 4 electric vehicles for purchase. We appear today in 5 opposition, not so much to the 2003 proposed changes to 6 the rule, but to the supplemental changes proposed by the 7 staff early this month.

8 We believe that for the Board to take any action 9 at this time that reduces the requirements for 10 manufacturers to put zero emission vehicles on the road,

11 is tantamount to snatching defeat from the jaws of 12 victory.

13 It's essential to maintain a pure ZEV gold 14 standard. This, after all, is what has driven the 15 development of the various power, drive train and battery 16 technologies and has developed the infrastructure.

17 Phoenix motorcars currently has a fleet order for dozens 18 of vehicles and request for quotes on fleets equaling 19 hundreds of additional vehicles. You all know how much 20 demand government agencies alone have put out there.

21 We have participated in various CARB workshops,

22 manufacturers public comment forms, advisory committee 23 meetings on the matter. And to paraphrase the 24 overwhelming sentiment of all the participants that came 25 to those meetings, ZEVs on the road in California now.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 360 1 Whatever action this Board takes today, that's 2 should be the objective. The current staff proposal 3 eviscerates the zero emission vehicle program, and 4 guarantees that there will be no ZEVs placed in service in 5 California in this decade.

6 I've been hearing numbers today, dates 200 what,

7 2009, 2012, 2013. I think someone needs to say this is 8 2003. What are we doing today?

9 The technology is here now. The public 10 acceptance and interest are here now. Put ZEVs on 11 California's roads now.

12 Thank you.

13 CHAIRPERSON LLOYD: Thank you very much. Thank 14 you for keeping it concise. Daniel Rivers, Dan Sturges 15 Michael Coates.

16 DR. RIVERS: Mr. Chairman and Members of the 17 Board, thank you for giving me the opportunity to speak 18 here today. I'm Dr. Dan Rivers, president of Compact 19 Power, a small company making battery packs for hybrid 20 direct electric vehicles and related application.

21 I've labored in this impossible EV supplier 22 industry for about 13 years now, starting out with the 23 management of the EV1 GM's EV1 program. And now going on 24 to battery packs.

25 And no doubt your esteemed Board has been very PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 361 1 important inspiring technological improvement, but I'm a 2 little afraid that maybe you are not taking due cognizance 3 of how far you have spurred the industry and how far the 4 battery industry in particular has come.

5 I'm here to speak specifically about Lithium Ion 6 batteries and the promise they hold for the hybrids, for 7 the fuel cells for the pure electronics.

8 My company took the hard way, doing it right. We 9 make manganese based lithium ion. We can make cobalt 10 lithium ion you go down a blind path  a blind alley 11 because you can't, in the end, mass produce it.

12 By taking specific energy we get the safety and 13 the cost and environmental qualities that we want in a 14 battery. Belcorps pioneered this kind of technology in 15 1994 at the one hundred watt hours per kilogram.

16 And Dr. Lloyd, four years ago, I briefed you on 17 the program that I had. And I proudly told you that I had 18 achieved 123 watt hours per kilogram. Well, I guess, I'm 19 about the only one holding up hardware here, but here's a 20 cell we made more recently up, 164 watt hours per 21 kilogram.

22 Manganese. And we expect to optimize it 175. If 23 you put this in a EV1, battery pack for an EV 1, you could 24 drive it 300 miles and cut the weight by 450 pounds. And,

25 yes, I do have test data on this cell.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 362 1 We have made similar cells from hybrid electric 2 vehicle application, just the same size, just a little bit 3 thinner achieving 2000 watts per kilogram and yet getting 4 more energy per kilogram than nickel metal hydride 5 technology.

6 The cost is coming down. In 1994, lithium ion 7 technology sold for $ 3,000 per kilowatt hour. Today it's 8 $ 275 per kilowatt hour and that is for small individually 9 wrapped cells using lap tops.

10 R& D is continuing to improve. As we all know,

11 necessity is the mother of invention. And it's not just 12 the auto industry that's pushing this technology, but also 13 the military, and the space industries. We have contracts 14 both with the Air Force and with NASA. And so all of 15 those are combining to drive the technology forward.

16 My message today is very simple, I urge the Board 17 not just to look at where the technology has been or where 18 we think it may have been one or two years ago or is 19 today, but to try to project a little bit.

20 The fact is that this is not yet mature 21 technology, that lithium ion is advancing rapidly, and the 22 few problems that you may see with it today, will no doubt 23 be done away with in future years, just as happened with 24 nickel metal hydride.

25 So my point is simply look ahead and look ahead PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 363 1 to what lithium ion will be and not only what it is today,

2 which is quite remarkable compared to just a few years 3 ago.

4 Thank you.

5 CHAIRPERSON LLOYD: Thank you very much.

6 Just a question. Did you speak to Dr. Anderman 7 and the people who are surveying the batteries.

8 DR. RIVERS: Pardon me?

9 Yes, I've spoken to Dr. Anderman. And I respect 10 him highly. I just think that maybe there's a difference 11 between Him and your board and me, in that I'm not an 12 analyst I'm an evaluator. I have to actually produce the 13 hardware. And I think I kind of know where it is today 14 and what we're achieving today. And I think it's quite a 15 bit ahead of where it was two or three years ago.

16 And so I think that's the difference, but I do 17 have very high regard for Dr. Anderman. And by the way,

18 the cost numbers I cited, came out of his report in 2001.

19 And I agree with those numbers. And I believe they're 20 going to be even better with this technology here because 21 the materials are lower cost.

22 CHAIRPERSON LLOYD: Thank you very much.

23 Dan Sturges, Michael Coates, Tom Fulks.

24 MR. STURGES: Hi. My name is Dan Sturges. I'm 25 Executive Director of Mobility Lab, a nonprofit design PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 364 1 company working with communities and cities on sustainable 2 transportation systems.

3 I quit my job at General Motors designing cars 4 two years before you did your first regulation in 1990 to 5 pursue designing small vehicles and that work led to the 6 first NEV. And now in 1997 I started working with ITS 7 Davis on transportation systems that included small 8 vehicles with car sharing and with transit.

9 And most recently, I'm a subcontractor to 10 CALTrans me on the new car sharing statewide initiative.

11 Essentially I'm hear to talk about the NEV 12 essentially the way it's using losing credits into the 13 future here and that all means in terms of solving 14 comprehensive problems. I've been here all day. I've 15 heard all kinds of passionate arguments to create zero 16 emission transportation and to imagine the day that we all 17 have our fuel cell cars.

18 And so sometimes as a designer, I imagine that.

19 So if it's 2020, which it is like with us all having our 20 fuel cell cars. And if we're going to work in the morning 21 in San Francisco or down in Los Angeles on the 405, we'll 22 probably be stuck in traffic, in our $ 40,000 fuel cell 23 cars.

24 And so I'm not trying to solve air problems. I'm 25 really looking at air problems, but also congestion PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 365 1 problems, and also how to make transpiration less costly 2 for people. So there's a lot of opportunities now to look 3 at systems and what Mark talked about with the Smart 4 Mobility systems is really something that needs to take 5 place and needs to develop.

6 I see a real interest in a city electric vehicle 7 Board here today. And what a city electric vehicle is is 8 a great vehicle that's not commercially here yet, but I'm 9 sure not too far down the street. And that's a nice 10 vehicle to could be used to drive down the train station 11 or to the bus station as sort of a multi modal solution.

12 But that vehicle is a limited range vehicle with 13 a limited top speed. It's probably not for the freeway 14 like the Think City or the Ecom or the Hyper Mini.

15 They're really not freeway vehicles. They're local 16 vehicles. And that's essentially what a NEV is. A NEV is 17 also a local vehicle that just doesn't go as fast and it 18 doesn't go as far.

19 But essentially there's a price point to this.

20 If I'm going to go from San Francisco one day on BART down 21 to Fremont or out to Pleasant Hill, and I want to go just 22 two miles from the BART station, if there's a $ 20,000 City 23 Car there to be rented or a $ 5,000 NEV, which is going to 24 cost more for that hour?

25 And right now your proposed regulation is PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 366 1 essentially taking NEV off the table. And as the NEV goes 2 off the table, for example, the credit goes down to .625,

3 then it goes down to .15 in 2006. A City vehicle gets 4 like seven credits and the NEV gets .15 and if you put the 5 City Vehicle into the transportation system, like we're 6 talking about with SanDEG right now of NEVs driving down 7 to Vanpool.

8 Because let me backup for one second. If you're 9 in New York City and you take transit, you can get off the 10 train and get to where you need to go. But in low density 11 American, you can't and you need a vehicle that can go 12 either the last two miles, the last one mile or the last 13 five miles. And we need a toolbox of vehicles, a choice 14 of vehicles.

15 And right now as you take the NEV off the line,

16 basically what you get is, I mean, seven or eight credits 17 for the City Vehicle, .15 for the NEV. And then it says 18 in terms of the shared use intelligence, the ZEV, that 19 vehicle gets another six credits, and so the City Vehicle 20 is going through the roof, but the NEV, you say, oh the 21 NEV is not eligible to earn credit for a transportation 22 system.

23 So I have a real problem with that. So if I'm 24 down in San Diego trying to get somebody to get a NEV and 25 get down to Vanpooling, which takes a car off the road and PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 367 1 which cuts done congestion and Does exactly what you want 2 to do with reducing VMT, that's not getting anything

3 that's actually getting less credit than a PZEV that might 4 be a new General Motors Malibu with a gasoline car that 5 would go right onto freeway.

6 So I guess I think that's really your policy 7 starts conflicting with what we're trying to do in the 8 State on congestion.

9 Thank you for that time.

10 CHAIRPERSON LLOYD: Thank you very much. I'd 11 like on that particular one since Supervisor DeSaulnier 12 has been intimately involved with that, how do you 13 respond? I think you make a good point, but on the other 14 hand, I know that NEVs have also got a bad name. But 15 you're looking at

16 MR. STURGES: Well people attack them for not 17 being high technology, but neither is bicycles and neither 18 is walking. And we need to start finding solutions that 19 comprehensive and meaningful and make living in California 20 better and get past these terms that are being moved back 21 and forth.

22 CHAIRPERSON LLOYD: The point you make about the 23 PZEV getting more than the NEV, in that particular case 24 you raise and issue I think.

25 Maybe you're not ready?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 368 1 BOARD MEMBER DeSAULNIER: No, I'm ready. I'm 2 wide awake down here. I'm ready to go. Are you going to 3 cut me off though, if I go on to long.

4 ( Laughter.)

5 BOARD MEMBER DeSAULNIER: Please do. I think the 6 point is well taken, Dan. I think what Susan has learned 7 and Dan Spurling and you and your work together is a tool 8 box approach is a right approach to take. And I think 9 that's what we're going to try to do with looking at the 10 credits and the three months after we pass this.

11 MR. STURGES: Well to keep it at .625, even 12 though that's so much less than a City Vehicle, but just 13 to keep that, that would be enough to, you know, make 14 other manufacturers want to come into the area, just keep 15 the incentive alive for this vehicle, rather than pushing 16 it off the table when it really has a central role to 17 these new systems.

18 BOARD MEMBER DeSAULNIER: I think the question is 19 a toolbox to be honest, and Alan may be picking on me,

20 some of the discussions I've had with him and with Susan,

21 has been more focused on the City Car in terms of 22 something viable that we can get, the auto manufacturers 23 maybe interested in placing. And since you mentioned some 24 places in my county where suburban uses, were there aren't 25 any other options once you get off the BART station, that PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 369 1 people would be more likely to use the NEVs.

2 MR. STURGES: The parking is becoming a big 3 problem. And if I'm in Pleasant Hill and I'm two miles 4 from the station. If the $ 20,000 car is, you know, like 5 for Flex Car who's doing rental system, it's like $ 6 an 6 hour. So if I was going to leave BART for two miles and 7 pay $ 6 an hour. That's $ 20 for that trip versus a NEV 8 might be $ 2 an hour.

9 BOARD MEMBER DeSAULNIER: Well, I think the point 10 that I would say, and I appreciate Alan asking me this, is 11 I don't think I disagree with you. The question is can we 12 create a venue within the credit system, and we're really 13 going to look at that hard, in the next 3 months that we 14 can include those kind of incentives. So we're flexible 15 enough, but we can also bring the auto manufacturers to 16 the table to use in Station Car projects that are 17 different.

18 MR. STURGES: Well, sure and with NEVs we can get 19 started now showing how this multi modalism works and then 20 you can start building on it with City Vehicles as they 21 arrive.

22 BOARD MEMBER DeSAULNIER: Well, I think we look 23 forward to working with you particularly in the next three 24 months.

25 MR. STURGES: Thank you.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 370 1 CHAIRPERSON LLOYD: Supervisor Roberts, and Mr.

2 McKinnon.

3 Hold on.

4 BOARD MEMBER ROBERTS: Mr. Chairman, well, I 5 don't have a question, but I want to comment, is we went 6 through this discussion in San Diego just a couple weeks 7 ago and we decided to initiate a program. But unless I'm 8 wrong, it's based on City Vehicles not on NEVs.

9 And there was

10 MR. STURGES: Well, the SanDAG people we've been 11 working with have known about the idea of NEVs being 12 feeder vehicles to transit

13 BOARD MEMBER ROBERTS: I'm part of that. I was 14 part of that vote, part Of SanDAG. I'm not talking about 15 who I talked to I was there. And the concern was to have 16 vehicles that are going to give you a little greater 17 range, and are going to allow you to get out on the road 18 systems in a way that a NEV is. I don't think that we 19 are

20 MR. STURGES: No, it just depends on the 21 environment. Some communities and some

22 BOARD MEMBER ROBERTS: Okay. Since you mentioned 23 San Diego, I want to say that it doesn't make any 24 difference what credit you give in terms of what's driving 25 our program, and our concern is congestion although not PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 371 1 with this hat on here, it says a member of the 2 Transportation Board, SanDAG.

3 MR. STURGES: It's just if you have one solution 4 that's a getting a car off the road and you're not giving 5 it anymore incentive than a gasoline, you know, efficient 6 gasoline car that's going to go on the freeway, that's my 7 issue, I guess.

8 CHAIRPERSON LLOYD: Mr. McKinnon.

9 BOARD MEMBER McKINNON: Yeah. I want to comment 10 that that consideration is how NEVs got put in to the rule 11 last time.

12 And we still have this problem. And the problem 13 is is that there were very affordable ways of getting 14 credits built up. And so at least one automaker gave them 15 a way to make them. And what this ended up doing was 16 forcing out the City Car and some of the others. So I 17 think we have to be really careful.

18 It isn't that we don't recognize that they are a 19 tool that fits in the puzzle. But it is, unfortunately,

20 the way that their credit scheme was abused caused just 21 about, you know, in my mind, sort of a collapse of the 22 whole BEV piece of this. And so I think we have to be 23 really careful about how we do it.

24 MR. STURGES: Yeah. I just don't think whatever 25 someone did with putting those vehicles in a dumping PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 372 1 environment. I mean there's work to be done in the places 2 we talk about, in terms of the Pleasant Hill and BART.

3 BART right now, as you probably know, is running 4 out of parking space. And so they're charging people $ 63 5 a month to drive down there and park now which is actually 6 sending people away from transit.

7 And so we need some solutions. And I think that 8 you're right, that somehow there needs to be some safety 9 measures that it's not abused. But to push this thing off 10 the table and say we want to do transportation systems,

11 but every car in it has to be over $ 20,000, that's not 12 going to happen. I mean, it really needs

13 BOARD MEMBER McKINNON: I guess what I'm trying 14 to get to you is the risk is if we don't did it right, you 15 don't get the $ 20,000 cars, You don't get the NEVs. They 16 get given away, and you've got nothing.

17 And that's sort of the way this has worked out so 18 far. So we're going to have to craft it a lot more 19 carefully than we did last time.

20 MR. STURGES: But like I said, what would be the 21 ECom, the City Vehicle could get 7 credits, and the NEV 22 gets .625. I mean that's not like a huge give away there,

23 I mean, relative to all things considered.

24 I'm not asking for the NEV to be way up the list 25 or anything like that. I'm just saying once it gets down PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 373 1 to .15, it's just off the table.

2 CHAIRPERSON LLOYD: Thank you very much.

3 Michael Coates and Tom Fulks. Are you going to 4 change the way.

5 MR. FULKS: Yes. Thank you. Mr. Chairman, and 6 Board Members, my name is Tom Fulks. I'm here 7 representing an organization called Green Car Institute We 8 have provided testimony to you in the past on the electric 9 vehicle market in California. And I'm here today to give 10 you some data about a study we did at Otai Ranch down in 11 San Diego county.

12 I guess the conclusion of the study is I'm here 13 to argue in favor of the aluminum foil standard in 14 electric vehicles. That would be the NEV.

15 It's either that or the clay standard. I can't 16 figure out exactly which one it would be. But what I 17 would like to do is share with you some results of a study 18 that we did with the Mobility Lab, Dan Sturges, and the 19 automaker who didn't dump the NEV product.

20 We outfitted 28 families in the Otai Ranch, which 21 is a master planned community, what's considered by the 22 Urban Land Institute to be a Smart Growth Community, that 23 has multi modal nodes that has a road system designed 24 specifically to encourage transit, multi modalism,

25 bicycling, walking, it's got a trail system designed for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 374 1 all sorts of various mobility purposes.

2 We let the families use the NEVs for 60 days, and 3 then we had them keep a log of the use this vehicle every 4 day. And so what we found at the end of the study and 5 once we collected the data, was that nine out of ten trips 6 that these families took within the community of Otai 7 Ranch, was used in the NEV. When they had the choice 8 between using their internal combustion engine vehicle or 9 a NEV, they chose the NEV nine out of ten times.

10 Of those trips that were taken, two thirds of 11 them were considered trips of necessity, which would be to 12 the supermarket, to the school, to work, to do something 13 that they ordinarily would have had to do in their 14 internal combustion engine vehicle. So what we ended up 15 with was a dramatic reduction in cold start emissions from 16 internal combustion engines when people were given the 17 choice.

18 And interestingly, at the end of the study when 19 the vehicles were retrieved, we asked them in a focus 20 group setting, would you consider buying a NEV now that 21 you have been able to test one? Fifty percent of the 22 participants said yes, they would buy a NEV priced, at 23 that time at the higher price points, which of course have 24 come down since then.

25 I guess my point is if people are given a choice PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 375 1 of vehicles and we don't talk about the political 2 implications and we don't talk about the numerical 3 implications, what we talk about are the ultimate users 4 who actually use the products, they do use the products.

5 And so the point of our study was that the zero 6 emission mandate, even though it may not have ended up 7 with a product it wanted, it did create an electric 8 vehicle market. There are actually more than 10,000 of 9 these vehicles in California that have been purchased, not 10 necessarily have been received for free. And those 10,000 11 electric vehicles users actually have found quite a bit of 12 utility in these vehicles.

13 And the most important part, as far as you are 14 concerned, this Board should be concerned, is that the 15 number of cold starts eliminated have been significant.

16 And then the last point, the concept of VMT,

17 vehicle miles traveled, has never entered the calculus of 18 the decision to use the NEV for mobility purposes. It 19 wasn't the distance of the trip that mattered, it was the 20 purpose of the trip. And the NEV was used specifically to 21 replace trips taken in internal combustion engines.

22 Again, it's not the VMT it's the trips replaced.

23 So the staff report to eliminate the multiplier 24 credits, I agree with Dan Sturges, I think we ought to 25 stick to .62. It's not that big of a deal and it keeps PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 376 1 that little niche market alive in places like Otai Ranch 2 and other master planned communities throughout 3 California.

4 Last point, we also are now studying master 5 planned communities at Otai at D. C. Ranch in Arizona and 6 at Celebration in Florida to drill down and find out 7 specifically why are you so attracted to these vehicles,

8 people who live in these types of communities. And we 9 will be sharing that data with you when we're completed.

10 Thank you.

11 CHAIRPERSON LLOYD: Thank you. Thanks, Tom.

12 Michael Coates, Diego Miralles, Robert Kittell.

13 Hi, Mike.

14 MR. COATES: Hello Chairman and board members. I 15 really don't have a whole lot to add to Dan and Tom's 16 testimony, because

17 CHAIRPERSON LLOYD: Remember from two years ago 18 that's good. But you may have under estimated your time.

19 MR. COATES: Well, also they stole a few of my 20 lines there. But I have been working with Global Motor 21 cars and other NEV manufacturers for the last two years in 22 public relations and marketing work.

23 There are 10,000 NEVs in use in California right 24 now. Every day they're being used in reducing emissions.

25 They're a functional zero emission vehicle and they do PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 377 1 deserve a place at the table and in the toolbox as Dan was 2 talking about.

3 Thank you.

4 CHAIRPERSON LLOYD: Thank you very much. I'm 5 impressed, I didn't realize there were 10,000 out there.

6 That's excellent.

7 Thank you.

8 Diego Miralles, Robert Kittell, and Tom Addison.

9 MR. MIRALLES: Good evening. I'm a bit new at 10 this I apologize. My name is Diego Miralles. I am head 11 of a company called EV Works. And we represent the Arava 12 electric car company, and they're currently based in 13 India.

14 I guess I'll tell you a bit of a success story 15 about a ZEV. Not very long ago a group of people decided 16 that the car manufacturers think again about the 17 life changing effects of what they sell to the public.

18 And thus inspiring them to think of a few new ways of 19 getting people from here to there. While the big guys 20 were, in a few cases, with good intentions busy thinking 21 of new ZEV concepts that would satisfy new requirements, a 22 few of us were trying it our own way.

23 Over the last decade, we've sent a lot of ZEVs 24 come and go, some of which seem to have no practical place 25 in mass market, be it cost or liability issues.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 378 1 Mean while, in southern California, a small ZEV 2 is created About nine years ago, that would stand the test 3 of time and is now being produced in India for the last 4 two years now.

5 I speak of the Arava electric car. For those who 6 don't know what Arava is, it is a City Class EV, but with 7 a bit better performance envelope and will cost about half 8 as much as its competitors, that is if any City Class 9 competitors are left in the U. S.

10 It has air conditioning and heating and just 11 about any other feature that an economy car has. They're 12 currently being sold all over India, as well as being 13 introduced in Japan, China Norway, and as of the beginning 14 of this year, it is now being distributed in the UK.

15 One of which is being driven by a member of 16 parliament. It meets Emark and ISO 9000, which 17 incidentally is a bit of an issue here in the U. S. because 18 we've such a chasm between our slow speed vehicles and our 19 high speed vehicles. And it makes it very difficult for 20 City Class cars to really exist when we force them to go 21 so slow to the point where we just, you know, sell them as 22 golf carts.

23 EV Works has been getting a flood of interest 24 from both the consumer to the commercial sector,

25 government agencies. We've seen interest in station PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 379 1 commuter car and car sharing programs in southern 2 california far beyond our predictions.

3 CHAIRPERSON LLOYD: Diego, can you focus on the 4 staff proposal and what you'd like to see there.

5 MR. MIRALLES: Well, I guess, I went away from 6 that a little bit while I was sitting back there, because 7 I would have to concur with Dan Sturges' approach to this 8 being kind of in the same boat, except the real  I 9 guess, what I'm saying here is that we have a product now.

10 It's been in production. And we're trying to find out 11 what, you know, in doing market studies and business plans 12 how are we going to approach this problem, if a lot of bad 13 press is created, possibly by sort of this, you know,

14 stepping away from what I saw as a pure goal at least over 15 the last ten years.

16 And it's a bit of a problem for people like us 17 who have gone the distance. And I would encourage the 18 Board, I guess, just to wrap it up, just to stay the 19 course and allow these vehicles that have proven to be a 20 very practical mode to exist on the streets of the U. S.

21 And not just let the rest of the world reap the benefits.

22 CHAIRPERSON LLOYD: Thank you very much.

23 Rob Kittell, Tom Addison, Henry Hogo.

24 MR. KITTELL: Can you hear me now?

25 Okay. My name is Robert Kittell. I'm a licensed PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 380 1 professional engineer in the State of California. I'm am 2 the Chairman and Chief Executive of the Electricab 3 Corporation, whom I represent today.

4 Electricab is an emerging leader in the 5 development of zero emission transportation solutions,

6 range extender upgrade products and aggregate range 7 optimization for refueling constrained vehicle fleets 8 including battery electric vehicle and fuel cell vehicles.

9 I am here today to discuss the commercialization 10 of advanced battery technology and Battery electric 11 vehicles. Additionally, I will provide insight on staff's 12 economic analysis, comment on development and deployment 13 of pure ZEV technologies, and close with a series of 14 responses to various constituents of staff's latest 15 recommendations.

16 In its rationale for further modification to the 17 January 2003 regulatory proposal, staff has concluded that 18 cost and performance characteristics of advanced batteries 19 have not meaningfully changed since their battery 20 technologies advisory panel's findings delivered in 2000.

21 They cite severe cost challenges and base their 22 economic analysis on nickel metal hydride technology. The 23 implied message is no improvements have been realized in 24 nickel zinc, sodium nickel chloride or lithium based 25 batteries in recent years.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 381 1 The staff's report clearly fails to acknowledge 2 nickel zinc battery technology and the break through in 3 price and performance that it offers. Utilizing Evercel's 4 prior generation of nickel zinc batteries and PFC 50 5 charging Electricab has upgraded the performance of a 17 6 to 20 mile per charge Ford Think NEV to a 300 plus mile 7 per day commercially viable service vehicle.

8 Evercel's current generation, nickel foam product 9 is delivering, in excess, of 32 usable kilowatt hours in a 10 single 28 module string to power Phoenix Motor Car's first 11 production full function five passenger 100 plus electric 12 vehicle.

13 All of this capability is available today at a 14 price point of $ 300 per usable kilowatt hour. Again, this 15 is a product that is commercially available today. For 16 about $ 9,000, the cost of a nickel zinc battery pack is 17 far less than that of the AC drive system. Evercel's 18 products are rated at 500 cycles at 100 percent depth of 19 discharge, and have demonstrated in excess of 10,000 20 cycles at 10 percent discharge levels.

21 From both an initial  excuse me. I lost my 22 page here.

23 CHAIRPERSON LLOYD: I can tell you you've only 24 got about half a minute left.

25  o0o

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 382 1 MR. KITTELL: From both an initial and life cycle 2 cost perspective, this clearly represents improvements in 3 advanced battery price and performance.

4 Staff also represents these cost challenges 5 strictly from the manufacturer perspective and fails to 6 fully acknowledge the reduced cost of ownership from the 7 consumer perspective.

8 Further more, staff's proposal is inconsistent 9 with our goal of pure ZEV cost reduction through volume 10 manufacturing. Buy focusing on generic electric drive 11 componentry rather than pure ZEV drive chain subsystems,

12 the business world realities of volume discounts and 13 economies of scale will never apply to their fullest 14 extent under the current proposal.

15 While staff's January report projects a 99 16 percent decrease in the cost deltas for fuel cell vehicles 17 versus ICE's over the same time frame they project zero 18 cost change in Battery electric vehicles. This is an 19 unacceptably poor and lazy assumption and already shown to 20 be in an error.

21 CHAIRPERSON LLOYD: Can you please wrap up.

22 MR. KITTELL: Sir, I will wrap up with my 23 specific responses to selected staff rationale.

24 CHAIRPERSON LLOYD: Do you have a written 25 statement?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 383 1 MR. KITTELL: I can provide a written copy upon 2 completion of my presentation. In order for credits for 3 fuel cell vehicles placed in service in other Section 177 4 ZEV states to be allowed to count toward compliance in 5 California, they should be de rated by a factor inversely 6 proportional to the square of the distance between any 7 such State in our children's lungs.

8 The point is ZEVs operating outside the state of 9 California do nothing to improve air quality here.

10 CHAIRPERSON LLOYD: I think we've heard enough.

11 I don't know if this is very productive at all.

12 Do you have some significant addition to the 13 staff proposal, comments?

14 MR. KITTELL: Yes, sir, I do. Two hundred and 15 fifty fuel cell vehicles distributed throughout the United 16 States in the next five years will contribute essentially 17 zero toward cleaning the air in California, and will do 18 nothing toward reducing the costs of pure ZEV electric 19 drive train subsystems in pure ZEV vehicles.

20 CHAIRPERSON LLOYD: I think I must cut you off.

21 It's not adding. If you provide a written statement, we'd 22 be happy to take that into account. I'd like to move on 23 to the next speaker.

24 MR. KITTELL: One final comment, please.

25 CHAIRPERSON LLOYD: Tom Addison  but

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 384 1 MR. KITTELL: I think in total agreement with Tom 2 Gage from AC Propulsion. I believe the solution to 3 delivering near term zero emission battery electric 4 vehicles really lies with the small manufacturers, such as 5 AC Propulsion and Phoenix Motor Cars. And I encourage the 6 Board

7 CHAIRPERSON LLOYD: I think we heard that just 8 because we don't hear any of the major manufacturers 9 coming forward. So I think we've reached that conclusion.

10 We're trying to craft a way in which that might happen,

11 and give incentives to the large companies so that might 12 be supportive.

13 So I appreciate your sentiment there.

14 Thank you.

15 MR. KITTELL: And any means to make a liquid 16 tradable market for ZEV credits assigned to those 17 manufacturers, those small manufacturers, will go a long 18 way toward putting zero emission vehicles on the road 19 today.

20 CHAIRPERSON LLOYD: Thank you.

21 MR. KITTELL: Thank you very much.

22 CHAIRPERSON LLOYD: Tom Addison, Henry Hogo, Carl 23 Johnson.

24 MR. ADDISON: Good evening, Dr. Lloyd and 25 members. First of all, congratulations, not only making PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 385 1 it this far into the evening, but also on the last 12 2 years.

3 CHAIRPERSON LLOYD: We haven't finished yet.

4 MR. ADDISON: In deed. I'll be brief. I will 5 hope you in that respect, Dr. Lloyd.

6 But seriously, I mean the last 12 years really 7 have been, I would argue, a tremendous success. And 8 that's a result of the leadership of this board, of a lot 9 of hard work, a lot of long hours by staff as well as by 10 EV drivers, by car companies and others.

11 Having said that, the Bay Area Air District has 12 concerns with the staff proposal. Three primary concerns 13 with the proposal.

14 Here they are. You've heard these from other 15 people. Post 2009, by essentially From our perspective 16 what you're doing is you're asking the car companies to 17 come back and give you problems then.

18 Plug in hybrids. Plug in hybrids, we don't think 19 in the silver category are going to be produced. We see 20 plug in hybrids as the short term, hopefully a short term 21 solution for the next decade for the next maybe two 22 decades, cross our fingers, knock on wood, we'll see how 23 well fuel cells do.

24 But we don't think you're going to see plug in 25 hybrids being produced with the incentive structure that's PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 386 1 set out at this point.

2 Third concern, blackout, short term blackout,

3 bank credits essentially halting the industry.

4 You've heard a modest proposal. I think Jonathan 5 Smith had something to say about a modest proposal. A 6 modest proposal from Dave Modisette, we thought that made 7 a lot of sense. There's some numbers in there that seem 8 certainly reasonable, achievable modest. You know, that 9 seems from our perspective to be at least something that 10 you could move towards, hopefully beyond.

11 I would just emphasize plug in hybrids are 12 covered in that CalETC proposal. We'd urge you to look at 13 that and incorporate that. And we'd see that as being a 14 key part of that proposal.

15 I'm out of here.

16 Thanks.

17 CHAIRPERSON LLOYD: Thank you, Tom.