MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD BOARD HEARING ROOM 2020 L STREET SACRAMENTO, CALIFORNIA FRIDAY, DECEMBER 11, 1998 8: 30 A. M.

Vicki L. Ogelvie, C. S. R. License No. 7871 Janet Nicol, C. S. R. License No. 9764 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 ii MEMBERS PRESENT Barbara Riordan, Chairperson Joseph C. Calhoun Mark DeSaulnier John D. Dunlap, III Dr. William Friedman Lynne T. Edgerton Jack C. Parnell Barbara Patrick Sally Rakow Ron Roberts Staff:

Michael Kenny, Executive Director Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Kathleen Walsh, General Counsel Jim Schoning, Ombudsman PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 iii I N D E X  o0o

Page Proceedings 1 Call to Order 1 Opening remarks by Chairperson Riordan 1 AGENDA ITEMS:

98 14 5 Public Meeting to Consider Research Proposals Introductory remarks by Chairperson Riordan 1 Staff Presentation:

John Holmes, Ph. D. 1 98 14 7 Public Meeting to Consider an Augmentation of an ICAT contract titled, " Dynamically Optimized Recirculation Coupled with Fluidized Bed Adsorption to Cost Effectively Control Emissions from Industrial and Solvent Operations Introductory remarks by Chairperson Riordan 3 Staff Presentation:

John Holmes, Ph. D. 3 98 15 1 Public Hearing to Consider the Adoption of Proposed Revisions to the Regulation for Statewide Portable Equipment Registration Program Introductory remarks by Chairperson Riordan 5 Staff Presentation:

Mike Kenny 5 Mike Tollstrup 7 Bruce Oulrey 12 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 iv I N D E X ( Continued)  o0o

Page Public Comment:

Larry Bowen 16 Jeb Stuart 21 Paul Buchanan 22 Terry Ellis 27 95 15 2 Public Meeting to Consider Request for Public Hearing to Review the Decision of the Executive Officer to Order the Recall of Motor Vehicles Introductory remarks by Chairperson Riordan 33 Staff Presentation:

Robert Jenne 34 Kirk Oliver 37 Toyota:

Ned Isokawa 38 Charles Lockwood 40 98 15 3 Public Meeting to Consider a Proposed Determination Pursuant to Health and Safety Code Section 43830( g) of the Comparative Ozone Forming Potential of Elevated RVP Gasoline Containing 10 Volume Percent Ethanol Introductory remarks by Chairperson Riordan 49 Staff Presentation:

Mike Kenny 50 Jose Gomez 53 Kathleen Mead 74 Public Presentation:

Don Lucas 78 Bob Dinneen 83 Gary Whitten 89 Bob Heckert 94 Al Jessel 96 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 v I N D E X ( Continued)  o0o

Page Public Comment:

Paul Donahue 98 Megan Smith 100 Dawn Forsythe 106 V. John White 108 Necy Sumait 113 Thomas Toy 118 Paul Knepprath 122 Neil Koehler 125 Lloyd Forest 131 98 9 2 Continuation of Public Hearing to Consider an Amendment to the California Cleaner Burning Gasoline Regulations Increasing the CAP Limit for Oxygen from 2.7 to 3.5 percent by Weight Introductory remarks by Chairperson Riordan 149 Staff Presentation:

Mike Kenny 149 Dean Simeroth 150 Richard Vincent 150 Public Comment:

Neil Cuelior 153 98 15 4 Public Hearing to Consider an Amendment to the Specifications for Liquefied Petroleum Gas Intended for Use in Motor Vehicles Introductory remarks by Chairperson Riordan 154 Staff Presentation:

Mike Kenny 157 Tony Brasil 159 Kathleen Mead 165 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 vi I N D E X ( Continued)  o0o

Page Public Comment:

Kate Drakos 167 Bruce Irion 171 Baron Glassgow 174 Alina Kulikowski Tan 177 William Platz 180 98 6 1 Continuation of a Public Hearing to Consider the Appeals of the City of Los Angeles from Order Nos. 070297 04 and 040198 02 of the Great Basin Unified Air Pollution Control District Introductory remarks by Chairperson Riordan 199 Public Comment:

Brian Lamb 200 David Hotchkiss 201 Andrea Lawrence 201 Open Session to Provide an Opportunity for Members of the Public to Address the Board on Subject Matters within the Jurisdiction of the Board 205 Adjournment 206 Certificate of Reporter 207 Certificate of Reporter 208  o0o

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 1 1 P R O C E E D I N G S 2  o0o

3 CHAIRPERSON RIORDAN: Ladies and Gentlemen, I would 4 like to reconvene the meeting on the second day of the State 5 Air Resources Board.

6 It is now in session, and it is a continuation for 7 two items that we are going to carry over from yesterday.

8 These are items that we could not get to last 9 night, but we are going to get to today in short order.

10 The first one is categorized as our Research 11 Proposals, 98 14 6. There are eight proposals, and I think 12 what I might do is just shortcut Dr. Holmes just slightly, if 13 I might, if that is agreeable, Dr. Holmes, and ask if all the 14 Members have had the opportunity to read those proposals and 15 then open it up for questions of staff as opposed to 16 introduction of the Item.

17 Are there some questions?

18 Supervisor Patrick, do you have a question?

19 BOARD MEMBER PATRICK: You can tell I am shifting 20 around in my seat, so I do have a question.

21 It is about your Spare the Air Study that you are 22 going to do, and I notice you did not choose the San Joaquin 23 Valley as part of your research proposal, and I am wondering 24 if the information that you get about the other Spare the Air 25 Programs in the Sacramento and the Bay Area will be able to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 2 1 be used for our Spare the Air Program in the San Joaquin 2 Valley?

3 DR. HOLMES: The idea here is to develop a generic 4 methodology for calculating the benefits of such programs 5 that can be used in not only Sacramento and Bay Area but also 6 the Valley and in Los Angeles, all.

7 Many of these districts have these programs. EPA 8 now will allow us to take credit for the air quality benefits 9 in these programs in our State Implementation Plan.

10 So, this would be of value to all districts to have 11 such programs.

12 BOARD MEMBER PATRICK: I think this is a marvelous 13 idea, and I am really looking forward to finding out what the 14 results of it are.

15 These things are a little bit hard to quantify, and 16 so the purpose of this is to give you ability and the 17 districts the ability to quantify the emissions reductions 18 from the Spare the Air; is that correct?

19 DR. HOLMES: Exactly.

20 BOARD MEMBER PATRICK: Thank you.

21 CHAIRPERSON RIORDAN: Okay. Any other questions 22 that Board Members have?

23 Then the Chair would entertain a motion.

24 DR. HOLMES: Madam Chairman, we do have eight 25 research proposals, but we also have one contract PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 3 1 augmentation for one of the ICAT projects.

2 CHAIRPERSON RIORDAN: What I was going to do, Dr.

3 Holmes, is deal with the Research Proposals first, and then I 4 am going to come to ICAT.

5 DR. HOLMES: Oh, I beg your pardon.

6 CHAIRPERSON RIORDAN: No problem.

7 You are faster than I am. Actually, it is all 8 right, Dr. Holmes.

9 I do have a motion from Ms. Edgerton for approval 10 of the Item on Research Proposals.

11 Mr. Parnell seconds the motion. Is there any 12 further discussion?

13 All those in favor of the Item, signify by saying 14 aye.

15 Opposed, no.

16 The motion carries.

17 Now, let me do the ICAT augmentation. This next 18 Item on the Agenda is 98 14 7. This is to increase funding,

19 Dr. Holmes, just a brief mention of what this is, and I would 20 appreciate that.

21 DR. HOLMES: This is a project that we have 22 co sponsored with the South Coast and others to develop 23 solvent recovery systems for large painting operations and 24 other kinds of facilities.

25 The South Coast has become so interested in this PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 4 1 that they want to expand it beyond the original intent of 2 what we were going to do, so they are giving the Air 3 Resources Board $ 50,000, and for administrative simplicity is 4 simply just to augment our contract rather than for them to 5 establish a separate contract with the folks who are doing 6 this at Steel Case.

7 CHAIRPERSON RIORDAN: Okay. Are there any 8 questions for the staff or Board Members?

9 BOARD MEMBER PATRICK: Motion to approve.

10 BOARD MEMBER DUNLAP: Second.

11 CHAIRPERSON RIORDAN: Motion by Supervisor Patrick 12 and second by Mr. Dunlap.

13 Any discussion on the motion?

14 All those in favor of the motion, signify by 15 saying aye.

16 Opposed, no.

17 The motion carries.

18 DR. HOLMES: Thank you very much.

19 CHAIRPERSON RIORDAN: Thank you and thank the 20 Research staff very much.

21 Wait for just a moment while we change staff.

22 You know, I actually think in reality these chairs 23 are still warm from our presence yesterday for so many hours.

24 While people are taking their seats, let me just 25 deal with a procedural question here, and that is before we PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 5 1 begin this item, and it will apply to all further Agenda 2 Items, I would like to let you know that we are changing a 3 little bit the request for testimony.

4 Instead of our Clerk to the Board handling it here 5 in the room, outside, just outside the room, assembly hall 6 here, are tables and sign up forms for you to indicate your 7 interest in testifying before this Board and on what 8 particular item you would like to testify.

9 Those tables are and the people there will take 10 your requests and manage to organize them, and then I will 11 call on you at the appropriate time. If you have written 12 testimony, I would just like to remind you that or a written 13 statement, please give the staff 20 copies for that.

14 I would be greatly appreciative of that and so 15 would they.

16 The first Item on the regular Agenda beginning 17 today is 98 15 1. This is a public hearing to consider the 18 adoption of proposed revisions to the regulation for 19 Statewide Portable Equipment and Registration Programs.

20 At this point I would like to ask Mr. Kenny to 21 introduce this item and begin the staff's presentation.

22 MR. KENNY: Thank you, Madam Chairman and Members 23 of the Board.

24 In 1995, legislation was enacted requiring the Air 25 Resources Board to develop and implement a uniform system for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 6 1 Statewide registration and regulation for portable equipment.

2 In response, the Board adopted regulations for the 3 Statewide Registration Program on March 27, 1997.

4 In adopting the regulation, the Board directed 5 staff in consultation with local air districts, affected 6 industry and the United States Environmental Protection 7 Agency to evaluate the applicability of the Statewide 8 Registration Program to portable equipment operating in 9 California coastal waters and to address any implementation 10 issues and other potential issues.

11 The Board instructed staff to report back within 12 one year of implementation of the regulations with any 13 recommended amendments.

14 Over the last year, staff has worked with the 15 various parties. Based on our discussions and the experience 16 gained over the last year, we are proposing several 17 amendments to the regulations.

18 These amendments eliminate the need for duplicative 19 permits, allow increased flexibility and reduce the cost of 20 operation.

21 The amendments also provide for registration of 22 portable equipment when operating in California territorial 23 waters. The proposed amendments to the regulations will have 24 an overall positive environmental impact and will not 25 interfere with the attainment or maintenance of State or PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 7 1 Federal air quality standards.

2 Since February of 1998, staff has worked closely 3 with industry and the local air districts to develop the 4 regulatory amendments. These amendments are needed to 5 address issues discovered during the first year of 6 implementation.

7 During that time, staff faced the task of 8 developing amendments that satisfy the concerns of affected 9 parties but also remain consistent with the intent of the law 10 without compromising air quality.

11 The amended regulations before you for 12 consideration today represent the product of that effort. As 13 proposed, the amendments to the regulations are expected to 14 continue to provide a smooth transition from district permits 15 to Statewide Registration and provide expedited replacement 16 of older equipment with lower emitting technologies.

17 Now, Mr. Mike Tollstrup, of the Stationary Source 18 Division, will explain our proposal to you.

19 MR. TOLLSTRUP: Good morning, Madam Chairman and 20 Members of the Board.

21 For this Agenda Item, staff will present proposed 22 amendments to the regulations for the Statewide program to 23 register and regulate portable engines and their associated 24 equipment.

25 The proposed amendments to the regulation are in PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 8 1 response to the Board's directions to evaluate the 2 applicability of the Statewide Registration Program to 3 portable engines operating in California coastal waters and 4 to address the other aspects of the program learned from 5 implementation during the past year.

6 In the interest of time, staff will present a 7 shortened version of the presentation package. Copies of the 8 slide presentation are available at the back of the room.

9 From September 1998 to the present, over 750 10 applications have been received. This represents over 10,000 11 portable engines and associated equipment.

12 Staff has completed processing of over 500 of these 13 applications. This represents over 9,000 engines and 14 associated equipment.

15 Staff is currently evaluating the remaining 250 16 applications. The average processing time for issuing 17 registrations has been about 60 days, which includes the 18 determination of completeness review.

19 Once an application is complete, it takes about 30 20 days for staff to process an application.

21 The following slides will summarize staff's 22 proposed amendments. The current regulation prohibits 23 Statewide registration of equipment operated offshore and 24 equipment subject to Federal regulations such as a new source 25 performance standard.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 9 1 Staff is proposing to amend the regulations to 2 allow Statewide registration of portable equipment operating 3 within State territorial waters and rock crushing operations 4 subject to new source performance standards, sub part 000.

5 Portable equipment subject to other Federal 6 regulations will remain ineligible for registration.

7 In addition, staff recommends removing the existing 8 selected catalytic reduction requirement for continuance 9 operating dredges because of technological feasibility 10 problems we have encountered.

11 To assure there is no air quality impact from this 12 amendment, staff recommends requiring all State registered 13 dredges be retrofitted with certified engines by the year 14 2005 and be subject to onshore district offset requirements.

15 It has become clear through implementation of the 16 regulation that the operation of the associated equipment at 17 some locations may be better suited for district permit 18 programs where site specific analysis to determine potential 19 impacts can be performed.

20 An example of the type of operation staff is 21 concerned about would be a rock crushing operation operating 22 in serpentine quarry.

23 Staff proposes to amend the regulation to make 24 Statewide registration of the associated equipment invalid at 25 locations where the nature of the activity performed may PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 10 1 result in hazardous pollutant emissions.

2 This determination will be made on a case by case 3 basis.

4 Other proposed amendments include, we have added 5 additional incentive to promote the use of cleaner technology 6 and encourage expedited conversion of large engine fleets to 7 cleaner engines.

8 For example, incentives can include a significant 9 reduction in record keeping and reporting requirement for 10 cleaner engines.

11 Staff proposes revising requirements for 12 spark ignition engines and associated equipment. In 13 addition, because the proposed amendments would allow a 14 number of new categories to apply for Statewide registration,

15 staff is proposing to provide additional time for the 16 registration of resident engines and equipment to July 1,

17 2000.

18 Finally, staff is proposing additional amendments 19 that are non substantive, being either clarification or minor 20 technical revisions.

21 Staff believes that the proposed amendments will 22 not result in any adverse environmental impact. Staff's 23 conclusions are based on the following.

24 The proposed revisions for State territorial waters 25 are consistent with existing district offset requirements.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 11 1 In addition, the regulation provides a number of incentives 2 which will encourage the rapid replacement of retrofit of 3 many of the higher emitting engines with cleaner 4 technologies.

5 The proposed amendments are not expected to have 6 any major cost impacts to assure that districts have adequate 7 resources to enforce the requirements of the new source 8 performance standards, sub part 000 sources.

9 Staff is proposing to amend the regulation to allow 10 districts the ability to charge for the actual cost of 11 enforcement.

12 With regard to business impacts, many businesses 13 would potentially benefit from the proposed amendments.

14 Benefits include eliminating the need for duplicative 15 permits, increase flexibility and reduce cost of permitting.

16 Also, since this is a voluntary program, businesses 17 will elect to seek State registration if it is financially 18 advantageous and administratively convenient.

19 In addition to staff's proposed amendments 20 highlighted in earlier slides, staff is proposing an 21 additional amendment which would be subject to a 15 day 22 comment period, and the Board's approval, the Board Members 23 have a copy of the 15 day amendments as attachment B of the 24 proposed Resolution.

25 Staff is proposing to add a provision that requires PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 12 1 the Air Resources Board in consultation with the Secretary 2 for Environmental Protection to determine if the regulation 3 should be retained, revised or repealed within five years of 4 the effective date of implementing the proposed amendments.

5 In addition, for a major project that operates 6 within State territorial waters, staff is proposing to adding 7 provisions allowing districts the ability to review projects 8 potential air quality impact prior to commencement of the 9 project.

10 Finally, staff is proposing to add emission limits 11 for spark ignition engines of 15 pounds per day for NOx and 12 25 pounds per day for VOC. This applies for spark ignition 13 engines.

14 The proposed amendments are available to the public 15 in the back of the room.

16 In conclusion, ARB staff recommends that the Board 17 adopt the proposed amendments with staff's proposed 18 modifications.

19 I thank the Board for the time to hear this 20 presentation. I would be glad to respond to any questions 21 that you might have.

22 CHAIRPERSON RIORDAN: Staff or Ombudsman Office,

23 would you comment on the process, please?

24 MR. OULREY: Madam Chairman, Members of the Board,

25 this Board adopted the original portable equipment regulation PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 13 1 in March of 1997 for the mandate established by Assembly Bill 2 531, signed in to law by Governor Wilson in October 1995.

3 The regulation amendments that are before you today 4 were developed between February 4, 1998 and the present. The 5 amendments were developed with assistance of the portable 6 equipment program work group.

7 The work group consists of about 25 individuals 8 from local, state and federal air quality agencies, as well 9 as from effected industries such as oil services, well 10 drilling sand and gravel operation, construction, sanitation,

11 rental and manufacturing.

12 Many members of the work group were part of the 13 original group that helped develop the 1997 portable 14 equipment regulation. During the current round of revisions 15 to the regulations in 1998 ARB staff met with the work group 16 four times, once each on February 4, February 24, March 4 and 17 May 13 to identify issues and develop the regulatory 18 amendments.

19 Staff also held at least six individual meetings 20 between April 16 and September 30, 1998 with effected 21 industries and associations. The individual meetings 22 included representatives primarily from the dredging 23 industry.

24 Staff held the meetings to work out agreeable 25 requirements for portable equipment operating and State PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 14 1 territorial waters.

2 Staff met with 18 air districts from around the 3 state, some on numerous occasions between February 27 and 4 November 19, 1998.

5 Additionally, ARB staff made a presentation to the 6 California Air Pollution Control Officers Association on its 7 proposed regulation on October 8, 1998.

8 The Item was workshopped three times in 1998, once 9 in Sacramento, on August 18, once in Bakersfield, on August 10 20, and once in Diamond Bar, on August 21.

11 Over 700 individuals including parties from 12 industry, trade associations and government agencies who are 13 typically interested in regulatory activities affecting 14 portable equipment were invited to participate in each of the 15 public workshops.

16 Additionally, all of individuals that are currently 17 operating under the State Portable Equipment Registration 18 Program were invited to participate in the workshops.

19 ARB staff provided opportunity for public input 20 into the regulation during each of these times. In total,

21 ARB staff held about 500 telephone conversations,

22 teleconferences and meetings with effected parties,

23 industries, trade associations and government agencies during 24 the development of the proposed regulation.

25 On October 23, 1998, staff mailed out copies of the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 15 1 staff report to over 700 individuals, representing the 2 public, government agencies and industry.

3 The staff report was made available on the Web on 4 October 23, 1998.

5 Finally, notices of this hearing were sent to 6 approximately 1500 individuals, including environmental 7 groups, industry and government agencies on October 23, 1998.

8 Subsequent to the release of the staff report in 9 October, staff revised the report in response to comments 10 from the San Diego Air District.

11 Other than representatives of the Portable 12 Equipment Work Group, stakeholders outside the San Diego Air 13 District have not had an opportunity to review and comment on 14 these changes.

15 If the Board approves the report, because of the 16 recent changes referred to, there will be a legally required 17 15 day extension for public notification and comment. We 18 recommend that the 1500 person mailing list referred to above 19 be used for purposes of this notification.

20 As you can see, to this point in time the staff has 21 done a good job reaching out to all the appropriate 22 stakeholders and effected parties and involving them in an 23 exclusive, deliberative and meaningful public process.

24 CHAIRPERSON RIORDAN: Bruce, would you, please 25 identify yourself?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 16 1 MR. OULREY: Sure. My name is Bruce Oulrey.

2 I am Deputy Ombudsman for the Air Resources Board.

3 CHAIRPERSON RIORDAN: Thank you very much.

4 Mr. Kenny, are there any other comments that you 5 have?

6 Board Members, do you have any questions for staff 7 on this Item at this time?

8 All right. We will move right into our witnesses.

9 Mr. Larry Bowen, from South Coast Air Quality 10 Management District, followed by Jeb Stuart from the 11 Construction Industry Air Quality Coalition.

12 MR. BOWEN: Madam Chairman, and Members of the 13 Board, I am Larry Bowen, I am a Senior Manager with the South 14 Coast Air Quality Management District.

15 This morning to your Clerk I presented, submitted a 16 letter from Dr. Barry Waterstein, Senior Executive Officer,

17 and he has asked me today to present verbally a summary of 18 those comments.

19 I want to say the South Coast Air Quality 20 Management District generally supports the proposal by your 21 staff today and would recommend this adoption.

22 I do, however, want to touch on a couple of issues,

23 one of which we will request consideration of amendment to 24 portion of that proposal.

25 The other two items I just nearly want to clarify PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 17 1 for the record what the intention of this very complex issue 2 is, two, the information has been distributed to your clerk 3 and I also believe that the copies have been provided.

4 We do have language, I do not know whether you want 5 to project it for the public, also, I will touch the issue 6 more.

7 The more important issue of that area in which we 8 wish to consider, you consider, amendment to the proposal 9 deals with the issue spark ignition resident engines in the 10 staff proposal for alternative mass cap emission limits for 11 those, in lieu of the concentration emissions elements for 12 the technology requirements, and if you look at table 2 is an 13 area that is of discussion, is that in your current proposal,

14 this is subject, does not include the amendment that was 15 proposed earlier this morning.

16 We looked at this, as you can see in table 2, in 17 each of the columns there was a very large emission cap rate 18 that was authorized for those engines.

19 In the South Coast District, we have required the 20 technology requirement for the concentration emission limits 21 since 1983 as our VOC requirement. We do have a rule on our 22 books regulating control of internal combustion engines that 23 require the emission limitation requirements that are 24 proposed there, and therefore, we believe in the South Coast 25 District that the alternative for mass emission cap is not PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 18 1 allowable.

2 Therefore, we recommend for consideration that this 3 mass emission cap can be excluded for applicability in the 4 South Coast Air Quality Management District.

5 Now, I did receive this morning and have not had an 6 opportunity to look at the staff's amendment proposal which 7 reduces those amounts, and that is by far a better approach.

8 We would, however, recommend that you also consider 9 our proposal to exclude the South Coast District for this 10 section of the rule.

11 We believe that the technology requirement or the 12 concentration limits are far better means to enforce the 13 requirements of the rule.

14 The two other items that I will just briefly 15 mention included in the text of Dr. Watersteins's letter, it 16 said first of all we want to make it very clear that we 17 understand the requirements that are proposed for the 18 dredging operations and for the operation in the State 19 territorial waters, regardless of the technology requirements 20 that the emission limitations emission caps and the 21 Department of Air Resources review do protect the air quality 22 in our district, and then we can support those amendments 23 provided those caps for retaining are in there.

24 The second item has to do with the alternative 25 record keeping requirements. We do support those.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 19 1 However, we want to make it very clear for the 2 record that we believe that it is the responsibility for the 3 source operator to assure that adequate records are kept and 4 accurately kept and remain readily available to the districts 5 to make sure they are operating in compliance.

6 That concludes my comments. I would be glad to 7 answer any questions.

8 CHAIRPERSON RIORDAN: Mr. Bowen, before we have 9 questions, let me just ask staff to respond to particularly 10 the first issue that you raised.

11 MR. VENTURINI: Glad to, Madam Chairman.

12 I will ask Mr. Tollstrup to provide our response on 13 that.

14 MR. TOLLSTRUP: As Mr. Bowen mentioned, we did 15 speak to before the meeting this morning.

16 Staff's proposed amendment is on a 15 day change to 17 lower the limits from 100 pounds per day to 15 pounds and 25 18 pounds respectively to NOx and VOC.

19 We believe the limits represent a good compromise 20 on the existing PPM we have in the regulation. The 21 regulation as currently drafted does require back for the non 22 resident engines that the requirements that Mr. Bowen is 23 talking about apply to resident engines only, which there is 24 a limited number.

25 The South Coast backup requirements, we might PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 20 1 mention, do not apply to grandfathered and non road engines.

2 Our requirements would actually apply to non road engines 3 once we receive approval from U. S. EPA.

4 So, the staff is proposing to lower the limits.

5 Like I mentioned, we believe that it is a compromise that it 6 allows a number of engines that we run across that have a 7 history of operating within the State, they do not have the 8 ability to purchase after market controls, it is not 9 available for the engines, and it provides them the 10 opportunity to get into the program.

11 MR. VENTURINI: I am sorry. Peter Venturini,

12 Chief, Stationary Source Division.

13 When we made the adjustment to the cap to reduce 14 the NOx and VOC cap from 115 and 25 respectively, what 15 basically we did was took those concentration limits that are 16 in the regulation and converted to an equivalent daily limit.

17 So, what you come down to in the discussion with 18 Larry is with our daily cap, base would be limited to about 19 12 hours of operation.

20 With a concentration limit as Mr. Bowen is 21 referring, an engine would operate sufficiently longer, but I 22 think talking to Mr. Bowen they have a compliance preference 23 for the concentration limit.

24 It is kind of like six of one, half dozen of 25 another. So, I think from my perspective I would not have an PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 21 1 objection to adding his language except in the South Coast 2 they prefer the concentration of it, but it is really six of 3 one, half dozen of another.

4 CHAIRPERSON RIORDAN: Okay. We will note that.

5 Thank you, Mr. Venturini.

6 Mr. Stuart, come forward. It is very nice to see 7 you.

8 I have to tell my colleagues that this is the first 9 air quality official that I ever met as an elected official,

10 and Jeb, it is very nice to see you.

11 He was formerly the head of the South Coast Air 12 Quality District. It is nice to see you, and welcome, and 13 please introduce yourself and your new role in representing 14 the industry.

15 MR. STUART: Madam Chairman and Members of the 16 Board, my name is Jeb Stuart, and I am representing the 17 Construction Industry Air Quality Coalition, which are 18 practically all of the contractors in the South Coast Air 19 Basin.

20 My organization first of all would like to express 21 its appreciation to the CARB staff and particularly Peter 22 Venturini, Ray Menabroker, Mike Tollstrup and his staff for 23 developing certainly the most, very flexible regulation, one 24 that is very cost effective and one that costs about 25 one tenth of the fees that most of the county districts PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 22 1 charge.

2 Also, they have been able to turn around 3 applications in weeks instead of months, which is certainly a 4 wonderful thing for people that have to have registration.

5 Also, I do not know how to say this, but there are 6 probably three or four thousand engines in the State or maybe 7 more that never got permitted by any district.

8 I am convinced that with this program with its 9 general structure that we can get a lot of those four or five 10 thousand owners to get their engines registered.

11 It will be a real improvement for air quality that 12 I think your program will give you, and I might also mention 13 that the regulation is just as stringent as any district 14 regulation or rules.

15 So, not too many disbenefits of air quality, and I 16 thank you.

17 CHAIRPERSON RIORDAN: Thank you.

18 Nice to see you.

19 Let me call Mr. Paul Buchanan up and Mr. Terry 20 Ellis, you are next on our witness list.

21 MR. BUCHANAN: Good morning, Madam Chair and 22 Members of the Board and staff.

23 My name is Paul Buchanan. I am Regional Manager,

24 and I represent Prime Equipment.

25 We are in the business of renting and selling a PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 23 1 number of product lines that involve engines. I would like 2 to, I am commenting on a couple of items that were included 3 in a written testimony that was submitted.

4 The first would be extension of the registration 5 deadline. We strongly support the extension, and we feel 6 that the initial nine month period was not sufficient to get 7 all the engines registered.

8 We want to be sure that the amendments will allow 9 registration and grandfathering of the non resident 10 equipment. If not, we feel that the Board should allow this 11 equipment to be registered and grandfathered on the condition 12 it is included in the compliance plan to either upgrade or 13 replace.

14 The second item would be the expansion of 15 compliance plan provisions. This is listed in Section 3 of 16 our written testimony. It supports the expansion of the 17 compliance plan opportunities.

18 We would like to suggest that the Board direct the 19 staff to find ways to expand it even further, such as 20 allowing equipment that does not meet the emissions standards 21 to be registered if included again in that compliance plan.

22 We feel that it would also benefit air quality by 23 encouraging the rapid turnover of some of the older equipment 24 that is out in the field running.

25 Probably the most important, we have an item of PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 24 1 concern in the fast track registrations for the rental 2 equipment industry. While we feel that the staff has done a 3 marvelous job in reducing that time frame down to a 60 day 4 period, in our business it is very difficult when we have a 5 demand or a need that has to happen tomorrow, and we as a 6 representative of some new product lines, we stock a lot of 7 these engines in inventory that would retail to end users.

8 If we have a need come up for rental, we would like 9 to have the ability to utilize for larger orders some of that 10 equipment and the processing time of 60 days is not 11 sufficient for us to be able to take advantage of that 12 business.

13 We believe it is a forgone conclusion that if these 14 are certified engines in the first place that they would be 15 registered, and so it is probably a time issue and not an air 16 quality issue.

17 That pretty well concludes. I would just like to 18 urge the Board to direct the staff to work with the rental 19 industry to develop a fast track program to turn around the 20 registration process even more quickly than it has been done,

21 and I would like to thank you for your time and consideration 22 where Prime Equipment is concerned.

23 CHAIRPERSON RIORDAN: Thank you, Mr. Buchanan.

24 Let's see, staff do you have any comments or 25 concerns?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 25 1 MR. TOLLSTRUP: Yes, in response.

2 I understand there are three issues here. The 3 first dealt with resident versus non resident. The way that 4 the reg is currently structured, to qualify for residency it 5 requires they either have a district permit now or they have 6 some history of operating in the State.

7 I am not sure whether the proposed amendments we 8 are opening up that period of time once again to register the 9 engines would cover Mr. Buchanan's concerns, but that goes 10 beyond that, where the district does not require a permit,

11 all you need to do is show us that you have some history of 12 operating in the State and that qualifies you for residency 13 in the program.

14 So, that should cover a number of the engines that 15 you had some concerns over.

16 As far as relief from the compliance plan, we have 17 provisions in the regulation right now that basically allow 18 an owner operator of a fleet of engines to enter into an 19 agreement with us to convert those engines over to cleaner 20 engines within a specified time period, and right now 21 depending on the number of engines, it is either 18, 24 or 36 22 months, in the interim they do have some minimum control 23 requirements that they do have to meet.

24 What we relieve them from in the time period that 25 we granted during the compliance plan are the record keeping PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 26 1 and reporting requirements on some of the emission limits.

2 Staff would not recommend giving up, as I understand Mr.

3 Buchanan's comment, he is asking that we give up the minimum 4 control requirement to let some of these engines in under a 5 compliance plan, and we think a lot of the control 6 requirements that we have are minimum.

7 They are fairly easy for the engines to meet, and 8 we recommend keeping those emission limits in place in the 9 regulation and keeps the dirtier engines out.

10 As to the fast track permitting system, staff is 11 always looking for ways to expedite the registration process.

12 We do not believe that there is anything in the regulation 13 that precludes Mr. Buchanan from pre registering groups of 14 engines to meet customer demands, and we think there are a 15 number of options in the program, and we would be more than 16 happy to work with Mr. Buchanan to see if there was something 17 we could do with compliance and regulations to fast track his 18 concerns.

19 CHAIRPERSON RIORDAN: Okay. Let's see, Mr.

20 Buchanan, if I have a business card, I do.

21 We will try to work with you, and staff can get in 22 touch with you and work with you on the permitting in terms 23 of how fast we can do this. We want to help you, obviously.

24 Thank you very much.

25 Mr. Terry Ellis.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 27 1 MR. ELLIS: Good morning, Madam Chairman and Board 2 Members and staff.

3 Short and sweet. That is what I was told this 4 morning, and that is what I am going to do.

5 CHAIRPERSON RIORDAN: Identify yourself for the 6 record and who you represent.

7 MR. ELLIS: I just want to let you know I am going 8 to be short and sweet first.

9 CHAIRPERSON RIORDAN: Well, that is important, too.

10 MR. ELLIS: Those that know me, know that is not 11 possible.

12 Terry Ellis, Regulatory Affairs Manager, for Gary 13 Drilling and Portable Equipment, owner. I am also the 14 Executive Director of the Coalition of Petroleum Services,

15 better known as COPS, which is the major category of 16 registered units within the portable equipment program 17 representing the petroleum industry and services of portable 18 equipment to it.

19 My comments, again, like I say, will be brief.

20 We have been a part, I have been a part of the 21 portable equipment program since the inception. We birthed 22 it in the local districts and brought it before  and we 23 are basically directed or forced to take it to a legislative 24 route and ended up here in 1995 and began a working 25 relationship.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 28 1 Therefore, I have never in my regulatory life,

2 which spans 20 years, had such a cooperative effort from such 3 a carefully listening staff taking a very difficult issue 4 that EPA and CARB years ago said could not be done and bring 5 it to this point.

6 So, my comments are for the complicated issue and 7 so many interests at stake that this regulation and its 8 proposed amendments are fully supported by myself and the 9 industry as the most flexible way to deal with portable 10 equipment and its needs, and also address the air quality 11 issues.

12 Because, as of this morning I am also here to pick 13 up four more certifications for diesel engines to move 40 or 14 50 year old diesel engines into new engine standards, not 15 only for today but beyond 2001 and into the future, and this 16 program was the birthplace for that, so this program does 17 work, and it does give us the flexibility and does provide 18 incentives.

19 Turn now, as of Monday night, a meeting with 20 Detroit Diesel, an international product to be distributed 21 worldwide and certified here by CARB, so I thank the staff,

22 and I thank the Board for their time.

23 CHAIRPERSON RIORDAN: Well, thank you.

24 Very good words and good message and brief and to 25 the point.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 29 1 Thank you very much.

2 That completes the list of persons that have signed 3 up to testify.

4 Let me ask if there are any written submissions to 5 put into the record before we move on to a discussion of the 6 Item by the Board Members.

7 MR. VENTURINI: Yes, there are, Madam Chairman.

8 Mr. Tollstrup will summarize those briefly.

9 MR. TOLLSTRUP: The staff has received a total of 10 five comment letters, which I will briefly go over.

11 The North Coast Air Quality Management District and 12 Lake County QMAD shared similar concerns in common letters.

13 Both districts are opposed to staff's inclusion of the rock 14 crushing operation, subject to the new source performance sub 15 part 000, the staff response basically because of the 16 stringent daily and annual emission limits and the inclusion 17 of the sub part 000 sources into the Statewide program will 18 only be limited to the smaller operations, we have stringent 19 limits that will keep only the smaller one's in.

20 Under the Statewide program, there will be no 21 change in enforcement authority. Districts delegated 22 authority through the U. S. EPA authority will continue to 23 enforce the sub part 000 requirements.

24 The U. S. EPA will continue to enforce where 25 deligation has not yet been granted to a district. A PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 30 1 Statewide registration only replaces district permits. There 2 is nothing in our program that would preclude local 3 jurisdictions from land use decisions, CEQA requirements or 4 other programs outside of the air district programs that are 5 protective of specific sites from undesirable impacts.

6 With regards to operations at locations where 7 process of materials may result in the emission of hazardous 8 air pollutants, the State registration program is not valid 9 at those locations. Instead the districts would be able to 10 require permits for operation at those sites.

11 In addition Lake County requested that Statewide 12 registrations be posted with specific operating conditions at 13 each site, and State's staff response is that is an existing 14 requirement that the registration and specific conditions 15 must be posted at all times.

16 The other comment letter we received was from SMUD.

17 SMUD is requesting that the residency requirements be 18 extended to cover engines purchased by SMUD between 1996 and 19 1998.

20 As it stands now, they would not apply for our 21 program. Staff is opposed to SMUD's request.

22 One of the primary goals of the Statewide 23 regulation was to preclude dirty engines from coming in to 24 the program. The regulation was designed to place tightened 25 constraints on the criteria for establishing residency, and PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 31 1 opening up that residency criteria could result in a large 2 number of the higher emitting engines coming into our 3 program.

4 In addition to the comment letters, we received two 5 letters of support. One was from the Santa Barbara Air 6 Pollution Control District. The other was from the Rain for 7 Rent Company.

8 Thank You.

9 CHAIRPERSON RIORDAN: Thank you.

10 Before I officially close the record, let me ask if 11 any of the Board Members have questions of the staff.

12 Seeing none, then I will officially close the 13 record now on this Agenda Item. However, the record will be 14 reopened within the 15 day notice of public availability when 15 the 15 day public notice is issued.

16 Written or oral comments received after this 17 hearing date but before the 15 day notice is issued will not 18 be accepted as part of the official record on this Agenda 19 Item. When the record is reopened for the 15 day comment 20 period, the public may submit written comments and proposed 21 changes which will be considered and responded to in the 22 Final Statement of Reasons for the regulation.

23 This item does have an ex parte requirement. Are 24 there any communications that need to be disclosed on the 25 record now?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 32 1 Okay. You have a Resolution before you. It is 2 98 77.

3 The Board has had a chance to go over it.

4 Mr. Dunlap.

5 BOARD MEMBER DUNLAP: Yes, Madam Chairman, I would 6 like to talk about for a moment the South Coast amendment 7 that has been proposed and ask Mr. Kenny a question, if that 8 is okay, or Mr. Venturini.

9 South coast amendment, Mr. Kenny, is that 10 acceptable?

11 MR. KENNY: Yes, it is, Mr. Chair  Mr. Dunlap.

12 CHAIRPERSON RIORDAN: See, they have not forgotten 13 you.

14 BOARD MEMBER DUNLAP: I have been trying to change 15 my ways.

16 MR. KENNY: I was going to say, your Honor.

17 BOARD MEMBER DUNLAP: Okay. I think if the South 18 Coast amendment seems okay, those witnesses that testified,

19 anybody of the four that would have had a problem with us,

20 making that move, that would have a problem with us, okay,

21 then I propose that we adopt the Resolution that staff has 22 proposed, but include the South Coast amendment, which deals 23 with spark ignition engines, and it is found in table 2, help 24 me out, Kathleen.

25 MR. KENNY: Actually, I think the easiest way to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 33 1 probably do it is on various letters there is an attachment 2 to it, and that table on the bottom there is the provision 3 across the table, it shows except in the South Coast, has a 4 parenthetical for all three boxes.

5 BOARD MEMBER DUNLAP: So, that is what we will do.

6 So, that would be my motion.

7 CHAIRPERSON RIORDAN: Is there a second?

8 BOARD MEMBER ROBERTS: Second.

9 CHAIRPERSON RIORDAN: Supervisor Roberts.

10 Any further discussion?

11 Let me take a voice vote.

12 All those in favor of the motion, signify by saying 13 aye.

14 Opposed, no.

15 The motion is carried.

16 Thank you very much. Thank you to those that 17 testified, again, a very positive note for the staff, and I 18 do appreciate all the outreach that you obviously did for a 19 number of months with an incredible number of people. Thank 20 you.

21 All right. We will take just a brief moment while 22 staff changes, and we will go on to the next item on our 23 Agenda. This is Item 98 15 2.

24 Let me invite my colleagues back to the dias and 25 move on to this Agenda Item, which is Agenda Item 98 15 2.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 34 1 For those of you in the room who are interested in 2 the Item, if you would come to the front, and we will move 3 on.

4 If there is anyone wishing to provide testimony 5 today, again, I remind you of the tables outside the assembly 6 room to sign up. If you have a written statement be sure to 7 give 20 copies to the staff at that table.

8 This is a public meeting, number 98 15 2, to 9 consider a request for a public hearing to review the 10 decision of the Executive Officer to Order the Recall of 11 Motor Vehicles.

12 At this point I would like the Senior Staff 13 Counsel, Robert Jenne, to introduce the item, after which we 14 will first hear from staff and then Toyota.

15 MR. JENNE: Thank you.

16 As Chairman Riordan just indicated, I am a lawyer 17 in the ARB, Office of Legal Affairs, and I am introducing 18 this item today because General Counsel, Kathleen Walsh, has 19 asked to me to act as a legal advisor to the Board for this 20 Item since this is a contested matter in which the General 21 Counsel is representing the ARB staff.

22 The matter involves a motor vehicle recall order 23 issued by Executive Officer Michael Kenny on September 2,

24 1998. The recall order directs Toyota Motor Corporation to 25 develop a recall plan for a number of engine families PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 35 1 certified by Toyota for California sale.

2 Under ARB regulations, a manufacturer subject to a 3 recall order may request a hearing to contest the Executive 4 Officer's decision to issue the order. Toyota has filed a 5 petition requesting such a hearing.

6 Now, under the Board's judicatory regulation,

7 Toyota is entitled to receive a hearing, and the Board has 8 three options for how the hearing will be conducted.

9 What the Board will consider today is which of 10 these three options will be used to conduct the hearing.

11 It is my understanding, before I go any farther,

12 just to let you know, is that during the last several days 13 Toyota and ARB staff had a number of discussions about the 14 hearing procedures and have reached an agreement on the basic 15 outline on the procedures that they are recommending for the 16 Board's approval today, and that agreement is embodied in the 17 Resolution Number 98 81, which should be included in the 18 packet that you have in front of you.

19 So, to go over the three options that the Board 20 has, the hearing to be conducted as the first option is that 21 the full Board may decide to hear the matter itself.

22 The second option is for the Board to appoint a 23 committee no fewer than two Board Members to hear the matter,

24 and the third option is for the hearing to be conducted by an 25 Administrative Law Judge, or ALJ, from the Office of PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 36 1 Administrative Hearings, in the Department of General 2 Services.

3 If a Committee of the Board or an ALJ conducts the 4 hearing, the Committee or ALJ would prepare a recommended 5 decision for consideration by the full Board. The full Board 6 would not be bound to accept the recommended decision and 7 would retain the final authority to make whatever decision 8 the Board believes is appropriate.

9 I would also like to mention that under ARB 10 regulations, the hearing must be initiated on or before 11 December 16, 1998, but the Board is empowered to delay the 12 hearing date if necessary to obtain the services of an ALJ.

13 My understanding is that both Toyota and ARB staff 14 believe that an extension is appropriate in this case.

15 So, with that short introduction, ARB staff and 16 Toyota would now like to address the Board and explain their 17 recommendations.

18 ARB staff's position will be presented by Mr. Kirk 19 Oliver, Senior Staff Counsel, from the ARB legal office.

20 CHAIRPERSON RIORDAN: Okay. Let me give some 21 guidelines to both staff and to Toyota, if I might.

22 In thinking about what was a reasonable time to 23 make your case, and I think I am going to ask staff to stay 24 within about a 10 minute presentation, please. I hope you 25 can do that, and Toyota a 20 minute presentation and stay PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 37 1 within those guidelines, because we could probably discuss it 2 for the rest of the day, and unfortunately, we just cannot,

3 because we have a big Agenda to follow.

4 So, let us try to stay in those guidelines, and I 5 will kind of watch the time for you.

6 Thank you.

7 MR. OLIVER: Thank you, Chairman Riordan, and I can 8 be even briefer than that.

9 CHAIRPERSON RIORDAN: Well, that will be all in 10 your favor.

11 MR. OLIVER: The way this case got here was through 12 an ordered recall that was issued in September to Toyota.

13 Toyota filed a petition that would stay the recall,

14 and we responded to that petition. Now the time has come to 15 decide who will hear the case.

16 We, in discussions with Toyota, have reached an 17 agreement that is embodied in the Resolution that is there 18 before you that the most efficient way to hear the case would 19 be to refer it to an Administrative Law Judge in the Office 20 of Administrative Hearings.

21 That Resolution that you have before you would 22 accomplish that referral. It would also make the finding 23 that is necessary under the regulations to delay the hearing 24 date, and we encourage you to adopt that Resolution.

25 We are available to answer any other questions that PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 38 1 you might have, but again, that Resolution is something that 2 we have reached in discussions and through compromise and 3 agreement with counsel from Toyota.

4 We and Toyota believe that it represents the best 5 way to go to handle this matter.

6 Thank you.

7 CHAIRPERSON RIORDAN: Thank you.

8 I will now call on representatives from Toyota.

9 Would you come forward, please, and give us your name for the 10 record and your representation, whether you are the attorney 11 or Toyota or whomever you are.

12 BOARD MEMBER EDGERTON: Madam Chairman, just a 13 point of information, because I was not aware of what you all 14 agreed on yesterday, is it correct then that Toyota is 15 withdrawing its request to us to order the Executive Officer,

16 or direct the Executive Officer to withdraw the Recall Order?

17 MR. ISOKAWA: Yes.

18 CHAIRPERSON RIORDAN: Thank you.

19 If you would like to begin.

20 MR. ISOKAWA: Good morning, Madam Chair and Members 21 of the Board. My name is Ned Isokawa, one of the lawyers 22 representing Toyota.

23 It is my pleasure to appear before you today. I 24 will get right to it.

25 I urge the Board to adopt the Resolution that is PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 39 1 before you. We have worked it out in a series of meetings 2 with Ms. Walsh and Mr. Oliver, and it represents the views of 3 Toyota and staff in how best to accomplish the hearing that 4 needs to be held in this matter.

5 I want to make a few comments that will last a 6 couple of minutes, and then I will get out of the way and be 7 responsive to any questions.

8 This is my first time before the Air Board, and one 9 of the things that I always do if I have the time is to 10 appear in front of the tribunal to get a feel for what is 11 going on.

12 So, I was here yesterday, and I suspect yesterday 13 was a rather unusual day, but it struck me when I listened to 14 those standing where I am standing stating views about 15 perspective on the process that was just ending, and some 16 dissatisfaction that he or his clients may or may not have 17 had with it.

18 Toyota and I do not want to be in that position. I 19 do not want to be in front of you ever with that kind of 20 message to you. I am pledging to you on behalf of my client 21 and my own personal behalf that I will work with staff in a 22 way to achieve a compromise here on any kind of procedural 23 matters, on process questions so that we get what we all want 24 here, which is a fair and impartial hearing and a just one 25 with a just result.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 40 1 With that, I wanted you to hear that from me 2 because I do not want to have to make the speech like was 3 made here yesterday. I have no expectation I am going to 4 have to do that, but I want you to have my assurance, and 5 that is our view point that we are approaching this process 6 which, after all, is just starting, and we have the ability 7 to control it and do it right.

8 That is what we want to do.

9 Now, before I step aside here, I would like to 10 introduce Mr. Charles Lockwood, who is from the association 11 of International Automobile Manufacturers, and after he has a 12 few words, I have one following brief comment that takes 13 about 10 seconds, and I am also available to answer and 14 respond to any inquiries from the Board.

15 CHAIRPERSON RIORDAN: Thank you very much.

16 We will hold then any inquiry until after Mr.

17 Lockwood speaks.

18 Mr. Lockwood, would you identify yourself for the 19 record, please.

20 MR. LOCKWOOD: Good morning. My name is Charles 21 Lockwood.

22 I am the Vice President, General Counsel, of the 23 Association of International Automobile Manufacturers, and as 24 an aside, I might tell you that the first time I appeared 25 before this Board, Dr. Hockenschmidt was the Chair.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 41 1 CHAIRPERSON RIORDAN: That was sometime back,

2 right, how many years ago?

3 MR. LOCKWOOD: That was more than 25. That is all 4 I will say.

5 AIAM, of course, supports the Resolution before 6 you. We have filed this morning with staff the notice of the 7 intent of the Association to participate in the hearing.

8 We find that there are a couple of issues that may 9 have potential implications for all of the automobile 10 industry that were raised in the recall notice, particularly 11 issues about the notice of the test procedures involved and 12 secondly regarding the meaning of the term defeat device.

13 We plan to cooperate fully with the staff in the 14 development and process of the hearing and, of course, will 15 answer any questions that you may have.

16 Thank you.

17 CHAIRPERSON RIORDAN: Thank you.

18 Are there any questions for Mr. Lockwood?

19 Seeing none, then please come back and make your 20 final statement.

21 MR. ISOKAWA: Thank you, Madam Chair.

22 I just wanted to inform the Board that I learned 23 yesterday that today the Board will receive a notice of 24 intent to participate in the public hearing from General 25 Motors Corporation and Daimler Chrysler Corporation, and I PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 42 1 believe that their grounds for being interested in 2 participating are parallel to those just expressed to you by 3 Mr. Lockwood, and that is end of what I wanted to say, Madam 4 Chair.

5 CHAIRPERSON RIORDAN: Fine. I appreciate the 6 brevity.

7 Let me ask if there are any questions of the Board 8 for the speaker?

9 Yes, Ms. Edgerton.

10 BOARD MEMBER EDGERTON: Are you saying then that 11 you agree to the participation of General Motors and Daimler 12 Chrysler?

13 MR. KENNY: Yes, we do.

14 I think that is an issue that we basically want to 15 raise in the context of the Administrative Law tribunal, and 16 essentially look at all the issues that are surrounding them.

17 We are not prepared, I think, today to respond to 18 them.

19 CHAIRPERSON RIORDAN: Thank you.

20 Mr. Dunlap.

21 BOARD MEMBER DUNLAP: I know this is a different 22 kind of discussion here, but from where I sit, it seems to me 23 I would want to limit the discussion so we could do an 24 effective job on the facts rather than bringing in a lot of 25 other parties. It seems to me just, that is my gut instinct,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 43 1 so I appreciate you kind of asking that, but I did not come 2 away with any kind of a feeling or answer, not having gone 3 through this process, I do not think I would be willing to 4 bring other people into this.

5 If it is appropriate, I will ask you, sir, why 6 would we want to have other automobile companies sitting in 7 on this process as it involves you pretty much exclusively?

8 MR. ISOKAWA: It is our view, and I think the view 9 of the other manufacturers who want to intervene, under the 10 regulations that prevent such intervention or participation 11 in the hearing that the issues as we see them framed right 12 now.

13 BOARD MEMBER DUNLAP: Are broader industry 14 implications?

15 MR. ISOKAWA: Yes.

16 BOARD MEMBER DUNLAP: Okay.

17 But wouldn't it have the ability to lengthen the 18 discussion and make it perhaps a little bit more involved 19 than it might need to be?

20 Plus, you guys, I know are very competitive people,

21 generally right? You do not like people looking into your 22 business.

23 I am a simple man here. Maybe I am missing 24 something. But if you would illuminate that, I would be 25 grateful.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 44 1 MR. ISOKAWA: We are competitive and we do have 2 some similar interests, though in the issues that are framed 3 by this recall order, and you are obviously right, it does 4 have the potential to lengthen the process out and make it 5 more cumbersome and cumulative, but that is one of the 6 reasons why we want to make sure to work with staff and with 7 the ALJ, or should you decide to adopt the Resolution to make 8 sure that we are not reinventing the wheel time and time 9 again.

10 You have our assurance that we will be working 11 towards that, so there is not any kind of cumulative kind of 12 effort made that lengthens up the process unnecessarily.

13 BOARD MEMBER DUNLAP: Well, one of the ways to do 14 that would be to hire very expensive outside counsel so that 15 the meter is running, and the longer it goes it is really 16 painful for you, that is the way to keep everybody on point,

17 I guess.

18 Okay. I at least have a better understanding.

19 Thank you.

20 CHAIRPERSON RIORDAN: Ms. Edgerton.

21 BOARD MEMBER EDGERTON: I think this is my last 22 comment.

23 I am comfortable with the Resolution, and I 24 appreciate very much your working hard on it and coming to a 25 agreement on that.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 45 1 I think it was wise. It was unlikely that we have 2 altered in any way the action of the Executive Officer. I 3 have reviewed it carefully, the direction is very clear and I 4 am convinced that the authority is there for the recall, and 5 my comment would be merely that is probably, Mr. Dunlap, what 6 everyone will be discussing, whether the authority exists in 7 the ARB to recall.

8 I would say that what I have seen as a matter of 9 fact is that there has perhaps been assumption that civil 10 penalties were all that was at risk for some of the car 11 companies, and most certainly the diesel settlement that we 12 saw at the national level did not include a recall.

13 So, I can see why there is consternation in the 14 industry. However, in the standpoint of air agencies charged 15 with the responsibility of implementing the Clean Air Act at 16 some point, the point has to strengthen, and it does have to 17 be clear that there is going to be recall in important cases.

18 Now, if the recall is for some reason the court 19 does not agree that we have the authority to recall, I would 20 caution you all that it is quite likely in California that 21 would be corrected in legislation subsequent thereto.

22 So, I make these comments because I am impressed 23 with your collaborative effort and spirit and long range 24 trying to make sure everything works, and you may want to 25 take that into account.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 46 1 Thank you.

2 CHAIRPERSON RIORDAN: Thank you, Ms. Edgerton.

3 Any other questions?

4 Ms. Rakow.

5 BOARD MEMBER RAKOW: Just a quick question for our 6 legal advisor.

7 Could you just explain to me the role of 8 interveners? Is it allowed under the law that anyone can 9 intervene in the case of the agency?

10 MR. JENNE: I am glad that you asked that. I was 11 just going to comment on that.

12 We have specific regulations that say how the 13 process is supposed to go, and there is a particular 14 provision that allows interested parties if they choose to 15 participate in the hearing and what they think is 16 appropriate, it is also to make sure that the process does 17 not get out of hand.

18 It allows the ALJ or whoever would be hearing the 19 case to impose reasonable limitations on what the intervening 20 parties may say.

21 BOARD MEMBER RAKOW: That has been my past 22 experience, and I just wondered if it was true in this case.

23 MR. JENNE: Yes, it is.

24 CHAIRPERSON RIORDAN: Thank you very much.

25 I am glad that you worked out the procedure that I PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 47 1 think is a very good beginning.

2 MR. ISOKAWA: I think it is the first step of many,

3 Madam Chair.

4 CHAIRPERSON RIORDAN: Good.

5 I will entertain a motion.

6 Yes, Supervisor Roberts.

7 MS. HUTCHENS: Madam Chairman, you have a witness.

8 You have one witness.

9 CHAIRPERSON RIORDAN: No. Mr. Lockwood testified.

10 Thank you very much.

11 Supervisor Roberts.

12 BOARD MEMBER ROBERTS: Before I do so, and just so 13 I am sure that I am not causing any problems, but before I 14 leave, being a very satisfied owner and driver of a Toyota,

15 of which I am still making payments on that, that does not 16 disqualify me in any way, does it, Kathleen?

17 MS. WALSH: We certainly have no objections.

18 BOARD MEMBER ROBERTS: Then I move Resolution 19 98 15 2 ( sic).

20 CHAIRPERSON RIORDAN: And there is a second by 21 Supervisor Patrick.

22 MR. JENNE: There is a clarification.

23 I believe it is Resolution 98 78, just for 24 clarification.

25 BOARD MEMBER ROBERTS: Sorry. Let us try this PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 48 1 again.

2 Resolution 98 81 is the correct number.

3 Excuse me. It is Agenda Item 98 15 2, on 4 Resolution 98 81.

5 Excuse me.

6 CHAIRPERSON RIORDAN: That is not a problem because 7 I did not even catch it.

8 Thank you very much.

9 Any further discussion on this motion?

10 I will take a voice vote.

11 All those in favor of the motion, signify by saying 12 aye.

13 Opposed, no.

14 The motion is carried.

15 I want to thank everybody for working together on 16 this. Thank you.

17 We will take just a brief break, I think, while we 18 allow staff to change, and why don't we take about a 19 five minute break.

20 ( Thereupon a brief recess was taken.)

21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 49 1 CHAIRMAN RIORDAN: Let me invite my colleagues 2 back to the dais.

3 MS. EDGERTON: Chairwoman Riordan, while people 4 are taking their seats, I wanted to make just one comment.

5 CHAIRMAN RIORDAN: Wait until they sit down.

6 Ladies and gentlemen, if I could have your 7 attention, please, I would like to go back to the agenda. I 8 have a desire to make this be an efficient day.

9 Ms. Edgerton, you had a comment.

10 MS. EDGERTON: Yes. Chairwoman Riordan, I'd like 11 to  I meant to do this at the first of the day, but you 12 got the meeting started so quickly that I didn't have a 13 chance to.

14 I wanted to take this opportunity to thank you for 15 your excellent management of the meeting yesterday and of 16 last month, and tell you how pleased I've been with your 17 handling of it, acting chairwoman, and it's been a real 18 privilege. And good luck with the rest of the day.

19 CHAIRMAN RIORDAN: Thank you.

20 SUPERVISOR DeSAULNIER: Big improvement over the 21 previous.

22 CHAIRMAN RIORDAN: For the audience who may not 23 realize, this is the chairman. I'm but his assistant.

24 MR. DUNLAP: That is not true.

25 By the way, I want to correct Lynn. She is the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 50 1 chairman. The Governor appointed her. She is the one. So 2 there's no acting about it.

3 MS. EDGERTON: What did I say?

4 MR. DUNLAP: She's been keeping me hopping, asking 5 me to work on this or that. I assure you, she's got the 6 reins.

7 Yes, it is an improvement.

8 CHAIRMAN RIORDAN: Thank you.

9 And I have a good group of people working with me.

10 Yesterday was just a marathon is what it was and 11 if you can survive that, I guess we can survive it all.

12 This is agenda Item 98 15 3.

13 I'd like to remind you in the audience that the 14 sign up table is outside the assembly room, for those who 15 wish to testify.

16 And this is a public meeting to consider a 17 proposed determination pursuant to Health and Safety Code 18 section 4383( g) of the comparative ozone forming potential 19 of elevated RVP gasoline containing ten volume percent 20 ethanol.

21 At this point I'd like to ask Mr. Kenny to 22 introduce the item and begin the staff's presentation.

23 Mr. Kenny.

24 MR. KENNY: Thank you, Madam Chairman and members 25 of the Board.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 51 1 Last August, staff presented to the Board a 2 proposal to raise the oxygen cap to three and a half percent 3 by weight to increase the flexibility of refiners in meeting 4 the gasoline requirements in California.

5 Raising the oxygen cap would allow the use of ten 6 volume percent ethanol in gasoline.

7 The Board expressed concerns regarding the 8 potential impacts of raising the oxygen cap, given that a 9 finding on the ozone forming potential had not yet been 10 made.

11 Thus, the Board delayed action on the oxygen cap 12 until a finding on ozone forming potential could be 13 considered.

14 Today we are presenting to you a staff 15 recommendation on a finding pursuant to Health and Safety 16 Code section 43830, subparagraph G, on the ozone forming 17 potential of elevated RVP gasoline containing ten percent 18 ethanol.

19 Health and Safety Code Section 43830, subparagraph 20 G, enacted in 1991 exempts gasoline blends containing ten 21 volume percent ethanol from the RVP standard.

22 This exemption is eliminated if the ARB determines 23 on the basis of independently verifiable automobile exhaust 24 and evaporative emission tests performed on a representative 25 fleet of automobiles that the ethanol blend would result in PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 52 1 a net increase in the ozone forming potential of the total 2 emissions, excluding the emissions of oxides and of 3 nitrogen, when compared to the total emissions, excluding 4 emissions of oxides and nitrogen from the same automobile 5 fleet using gasoline that meets all applicable 6 specifications for Phase 2 reformulated gasoline established 7 by this Board.

8 That's the longest sentence I think I've ever 9 read.

10 Accordingly, staff has evaluated the ozone forming 11 potential of ethanol gasoline and will be presenting their 12 recommendation regarding the Health and Safety Code 13 provision for your consideration.

14 Staff's recommendation is based on the results of 15 an extensive 12 vehicle test program conducted by the ARB in 16 consultation with an ethanol work group composed of 17 representatives of the ethanol industry, the automobile 18 industry, the oil refining industry, the US EPA, ARB staff 19 and other interested parties.

20 This program cost over a million dollars in 21 equipment and resources.

22 In addition, the staff also reviewed other test 23 programs. The findings from these test programs support the 24 findings from our own test program.

25 At this time, I'd like to introduce Mr. Jose PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 53 1 Gomez, who will give the staff's presentation.

2 MR. GOMEZ: Thank you, Mr. Kenny.

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

5 Today I will present to you the staff's 6 recommendation on the finding of the ozone forming potential 7 of gasoline containing ten percent ethanol and having a one 8 psi increase in Reid Vapor Pressure, or RVP, compared to a 9 fully complying gasoline.

10 I will provide a brief summary of the events 11 leading up to this regulation.

12 I will describe the current regulatory 13 requirements for Reid Vapor Pressure and oxygen in gasoline.

14 I will discuss our evaluation of the ARB test 15 program data and summarize other supporting evidence on the 16 effects of RVP and oxygen on exhaust and evaporative 17 emissions.

18 I will briefly outline the key issues considered 19 during the evaluation process.

20 And I will present staff's recommendation on the 21 proposed finding of the ozone forming potential of gasoline 22 with ten percent ethanol having a one psi RVP increase.

23 Last spring the staff, at the request of the 24 gasoline refining industry, began assessing ways to provide 25 additional compliance flexibility in the reformulated PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 54 1 gasoline program.

2 As part of that assessment, we considered several 3 options, including adding an evaporative model, adjusting 4 some of the cap limits, including raising the oxygen cap,

5 updating the exhaust predictive model, and eliminating the 6 wintertime oxygen requirements in the areas that have 7 attained the federal CO standard.

8 Last August the staff presented for your 9 consideration two proposals. One, to remove the minimum 10 oxygen content requirement in areas that have attained the 11 federal CO standard. The second proposal was to raise the 12 oxygen content cap to 3.5 weight percent.

13 The other flexibility options considered were 14 delayed until technical issues can be resolved.

15 At the August Board hearing, the Board approved 16 the proposal to remove the minimum wintertime oxygen content 17 requirement in areas that are in attainment for the federal 18 CO standard.

19 However, the Board delayed raising the oxygen cap 20 until they consider the ozone forming potential of gasoline 21 containing 3.5 weight percent oxygen, or more specifically 22 ten volume percent ethanol with a one psi RVP increase.

23 On the Board's direction, we evaluated the 24 ozone forming potential of gasoline with ten volume percent 25 ethanol and having the one psi RVP increase and will be PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 55 1 presenting our recommendation to you today.

2 Now I will provide a brief summary of the 3 regulatory requirements for RVP oxygen in gasoline.

4 The Board has a long history of regulating 5 gasoline properties that are released through vehicle 6 emissions. Regulation of gasoline properties began in 1971 7 when the volatility, or RVP, of the gasoline was limited to 8 nine pounds per square inch during the summer months.

9 Controlling gasoline volatility is critical to reducing 10 evaporative emissions from gasoline used in vehicles, as 11 well as the gasoline distribution system.

12 Over the years the Board has continued to lower 13 the volatility of gasoline.

14 In 1971 the Board limited the RVP to nine psi,

15 which resulted in a 730 ton per day reduction in evaporative 16 hydrocarbon emissions from motor vehicles and the 17 distribution and marketing of gasoline.

18 In 1992 the Board lowered the RVP limit to 7.8 19 psi, which reduced the VOC emissions by another 220 tons per 20 day.

21 The Board lowered the RVP limit further to 7.0 psi 22 in 1996 as part of the cleaner burning gasoline regulations,

23 which achieved an additional 110 tons per day of VOC 24 emissions. The 110 tons per day reduction in evaporative 25 VOC emissions accounts for about 60 percent of the VOC PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 56 1 benefits gained from the cleaner burning gasoline program.

2 As you can see, controlling gasoline volatility 3 has been a major component of our emission control program.

4 It has resulted in a total reduction of over a thousand tons 5 per day of VOCs from motor vehicles and the storage and 6 distribution of gasoline.

7 While evaporative emissions have been greatly 8 reduced, they continue to significantly contribute to the 9 total emissions from gasoline motor vehicles. This graph 10 shows the projected contribution of evaporative emissions to 11 the total gasoline motor vehicle inventory. The relative 12 contribution of the evaporative emissions to the total 13 increases from the current 30 percent to about 35 percent by 14 2005.

15 The California reformulated gasoline regulations 16 set limits on other properties besides RVP. Depending on 17 the compliance option used, most properties can vary up to 18 the cap limits. However, the RVP level was fixed because of 19 its importance to evaporative emissions. Development of an 20 evaporative model will be necessary before RVP is allowed to 21 vary.

22 One of the other properties regulated under the 23 California reformulated gasoline program is oxygen. The 24 plan for oxygen content is 1.8 to 2.2. However, refiners 25 can certify alternative gasoline formulations with the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 57 1 oxygen content from zero to 2.7 weight percent through the 2 use of the predictive model.

3 Ethanol, as well as other oxygenates, can be used 4 to meet the oxygen content requirement, but because the 5 current oxygen content cap precludes the use of ten percent 6 ethanol, ethanol blends do not qualify for an RVP exemption.

7 Adding ethanol to gasoline will increase the 8 volatility of the resulting gasoline blends. As can be seen 9 here, blending ten percent ethanol will increase the Reid 10 vapor pressure of the resulting gasoline blend by 11 approximately one pound per square inch. This impact on 12 volatility has emissions implications. It also presents 13 practical challenges to the use of ethanol gasoline.

14 Prior to the introduction of the federal 15 reformulated gasoline program in 1995 and our reformulated 16 gasoline requirements in 1996, ethanol had been used 17 primarily to improve the octane of gasoline and to reduce CO 18 emissions.

19 However, since the reformulated gasoline programs 20 were implemented, most refiners have chosen not to use 21 ethanol to meet the oxygen content requirements.

22 Historically about five to ten percent of the California 23 gasoline had been blended with ethanol.

24 Recently, some refiners have started to use some 25 ethanol in producing cleaner burning gasoline.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 58 1 Historically, the Legislature provided an RVP 2 exemption to gasoline blends that contained ten percent 3 ethanol. The initial exemption was enacted into law in 1981 4 and renewed in 1986 and again in 1988.

5 The current exemption was codified into law in 6 1991. This exemption is conditioned on the ethanol blends 7 having equal or lower ozone forming potential than the 8 fully complying gasoline.

9 State law requires that gasoline that contains ten 10 percent ethanol be exempt from the Board's RVP limit unless 11 the Board determines that ozone forming potential of the 12 total emissions excluding oxides of nitrogen will increase 13 compared to complying gasoline.

14 Last August the Board delayed raising the oxygen 15 cap to 3.5 weight percent, which would have allowed the use 16 of ten volume percent ethanol. The Board was concerned that 17 without the Board's finding on the ozone forming potential,

18 the RVP of ten volume percent ethanol blends would increase,

19 which would result in increased emissions.

20 The state law requires that the finding on the 21 ozone forming potential be made based on independently 22 verifiable data from a representative fleet of vehicles.

23 It further requires that the comparison be based 24 on the total emissions of each fuel, excluding NOx, tested 25 on the same representative fleet.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 59 1 Now I will describe our evaluation of the 2 ozone forming potential of gasoline containing ten percent 3 ethanol with one psi RVP increase compared to complying 4 gasoline.

5 We relied on the recently completed ARB test 6 program designed to meet the criteria of state law to 7 conduct our assessment of the ozone forming potential of 8 gasoline containing ten percent ethanol with a one psi 9 average increase.

10 We also reviewed other studies such as those 11 conducted by Auto/ Oil and other evaluations of the data,

12 such as the US EPA complex model.

13 I will now describe the ARB test program, discuss 14 our analysis of the data and present the results of our 15 evaluation.

16 In late 1995 we established a work group to help 17 us define the scope of the test program. Participants in 18 the work group include the ethanol industry, the oil 19 refining industry, the automotive industry, the US EPA and 20 other interested parties.

21 We held numerous meetings during the test program 22 development and consulted with the work group or its 23 technical subcommittee during the duration of the program.

24 The ARB expended more than $ 1 million in funds and 25 resources on this program.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 60 1 The test program provided for testing to occur in 2 two phases. Phase 1 involved testing 12 vehicles for 3 exhaust emissions and six for evaporative emissions. The 4 testing was deemed necessary and the Phase 1 data would 5 allow refinement, if appropriate, of the test protocol for 6 Phase 2.

7 The test gasoline blends were made from the same 8 base gasoline. The complying fuel was oxygenated with 11 9 volume percent MTBE, and had a target RVP of seven psi. The 10 ethanol blend was oxygenated with ten percent ethanol,

11 resulting in an RVP eight psi.

12 We tested 12 1990 through 1995 model year vehicles 13 for exhaust emissions. Six of these vehicles were also 14 tested for evaporative emissions.

15 All test samples collected were speciated to allow 16 determination of the ozone forming potential of the 17 emissions.

18 This test program is one of the largest single 19 data sets on speciated hydrocarbon emissions of gasoline 20 containing ten percent ethanol and having a one psi RVP 21 increase collected to date.

22 The test vehicles represent the types of vehicles 23 most operated in California. These vehicles represent 70 24 percent of the vehicle miles traveled. All the vehicles 25 tested have three way catalyst and fuel injection. These PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 61 1 control technologies were introduced in 1981 and used in 2 virtually all 1996 and newer model year vehicles.

3 The test vehicles represent normal and moderate 4 emitting vehicles from 1986 and newer model year. These 5 vehicles account for about 32 percent of the reactive 6 organic gas emissions, 42 percent of the CO emissions and 48 7 percent of the NOx emissions in the light duty motor vehicle 8 emissions inventory.

9 We measured exhaust emissions using two test 10 procedures, the federal test procedure representing normal 11 driving conditions, and a test procedure representing more 12 severe driving conditions for off cycle emissions, referred 13 to here as the REP05 test procedure.

14 We also measured evaporative emissions for two of 15 the three evaporative modes, hot soak and diurnal. Running 16 loss tests were not performed because the test facility was 17 unavailable at the time.

18 Running loss emissions were calculated using an 19 ARB draft evaporative model, which is based on the US EPA 20 complex model.

21 The test procedures are standardized efforts to 22 represent different elements of the real world conditions 23 motor vehicles encounter.

24 To evaluate the ozone emissions impact of these 25 fuels, the individual test modes must be combined.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 62 1 As mentioned, the FTP represents normal driving 2 and the REP05 severe driving. We combined them in 3 proportion to their driving activity.

4 We also combined the exhaust and evaporative 5 emission differences between the two fuels using the 6 inventory.

7 Throughout the test program we kept the work group 8 informed of our progress and provided the preliminary data 9 as it became available.

10 The final data set was released last May. We 11 analyzed the data and shared the results of our analysis 12 with the work group in July and again in October.

13 We also held a workshop on the ozone forming 14 potential determination in October.

15 We received suggestions from some of the work 16 group stakeholders.

17 We also received comments from other 18 representatives of the ethanol industry.

19 We considered all comments and input provided and 20 published the final report in November.

21 I will now summarize the results of our analysis 22 of the test data.

23 This table summarizes key results from the test 24 program for the exhaust and evaporative mass emissions. As 25 expected, the ten percent ethanol gasoline with the one psi PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 63 1 RVP increase had lower CO emissions compared to the combined 2 gasoline.

3 It also had slightly lower exhaust potency weight 4 of toxics. However, it had increased exhaust NMOG and NOx 5 emissions compared to the complying gasoline.

6 With respect to evaporative emissions, as expected 7 the one psi higher RVP of the ten percent ethanol blend 8 resulted in large increases in evaporative mass emissions of 9 NMOG and potency weighted toxics.

10 The percent changes for evaporative emissions 11 shown here include the calculated emissions for running 12 losses.

13 This table shows the results for combined exhaust 14 and evaporative emissions, including the calculated running 15 loss emissions difference.

16 The combined emissions increased for all 17 pollutants except for CO.

18 The ozone forming potential of the total 19 emissions, excluding oxides of nitrogen, increased by 17 20 percent.

21 This increase incorporates the benefits to the 22 ozone forming potential from the lower CO emissions of the 23 ten percent ethanol blend.

24 As shown in the column labeled likelihood, our 25 statistical evaluation provides a high level of confidence PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 64 1 that the ozone forming potential of the ten percent ethanol 2 blend with one psi higher RVP is greater than that of the 3 complying gasoline.

4 As a sensitivity check we also calculated the 5 ozone forming potential assuming there is no difference in 6 running loss emissions between the two test fuels.

7 We note that this is an unrealistic assumption 8 because loss emissions will increase with increased RVP.

9 In this case the ozone forming potential of the 10 total emissions, excluding NOx, but including CO, increased 11 by six percent for the ten percent ethanol gasoline with a 12 one psi RVP increase, compared to the complying gasoline.

13 Again, our statistical evaluation shows that there 14 is a 96 percent likelihood that the observed results are 15 directionally correct.

16 Based on the results of this test program, we 17 conclude that ten percent ethanol gasoline for the one psi 18 RVP increase results in higher ozone forming potential than 19 complying gasoline.

20 To further evaluate the impacts of our RVP in 21 oxygen on emissions we reviewed the existing database,

22 including the studies shown here. I will now briefly 23 describe these studies and summarize the general findings of 24 our review of the existing data.

25 Of the studies reviewed, the Auto/ Oil program is PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 65 1 the most extensive research effort looking at the effects of 2 fuel properties on motor vehicle emissions.

3 This was a multiyear $ 40 million effort that 4 evaluated multiple fuel properties in two vehicle fleets, an 5 older fleet and a current fleet.

6 The older vehicles were pre 1995 model year. The 7 current technology vehicles, similar to those in our test 8 program, represent 1998 technology.

9 Each vehicle test fleet consisted of roughly 20 10 vehicles.

11 Auto/ Oil also conducted an evaluation of the fuel 12 effects on high emitter vehicles.

13 Automotive Testing Laboratories conducted two test 14 programs for the ARB looking at the effect of oxygen on RVP 15 and emissions. These studies used the fleet of vehicles 16 ranging from 1973 to 1991 model year.

17 The American Petroleum Institute study consisted 18 of 11 vehicles tested on several fuels, including four that 19 vary RVP and oxygen. The vehicles tested in this study were 20 1981 to 1989 model years.

21 Our evaluation of the substantial database on the 22 effects of RVP on emissions shows that increasing RVP only 23 by one psi will result in large increases in evaporative gas 24 emission.

25 Also the data show that increasing RVP has a small PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 66 1 effect on exhaust hydrocarbon, CO and NOx emissions.

2 These data also show that adding oxygen only 3 improves combustion and primarily reduce CO emissions.

4 The data also show that adding oxygen increases 5 NOx emissions and has a small effect in reducing exhaust 6 hydrocarbon emissions.

7 The effect of oxygen appears to be less pronounced 8 in new technology vehicles such as low emission vehicles and 9 ultra low emission vehicles.

10 The data review also provide information on the 11 relative reactivity of the exhaust and evaporative 12 emissions. The data show that evaporative emissions are 30 13 to 40 percent less reactive than exhaust emissions and that 14 the reactivity is not significantly affected by the type of 15 oxygenate used.

16 In summary, the existing data show that the 17 increase in evaporative gas emissions from gasoline with a 18 one psi RVP increase cannot be offset by the lower 19 reactivity of the evaporative emissions and the exhaust 20 benefits from the higher oxygen content of ten percent 21 ethanol blends. This finding is consistent with the results 22 of our test program.

23 We further evaluated the effects of RVP and oxygen 24 by reviewing the available emissions models. Both the US 25 EPA and ARB have approved models that predict emissions as a PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 67 1 function of fuel properties.

2 The EPA complex model has both exhaust and 3 evaporative components. EPA exhaust model contains a high 4 emitter component and the normal emitter component. The EPA 5 model is based on data for a 1990 technology vehicle fleet.

6 The ARB predictive model currently only addresses 7 exhaust emissions. As in the regulations, the RVP is fixed 8 as seven psi in the ARB model.

9 We used the EPA complex models to predict the 10 emissions difference for a gasoline with 3.5 weight percent 11 oxygen or ten percent ethanol, and a one psi increase in RVP 12 compared to a complying gasoline.

13 The results show that evaporative emissions 14 increased by 40 percent and exhaust hydrocarbon emissions 15 increased by three percent.

16 The combined exhaust and evaporative emissions 17 increased by 14 percent.

18 This is consistent with the results of the ARB 19 test program where we found an 18 percent increase in 20 hydrocarbons.

21 Finally, we sought peer review of our evaluation.

22 We followed the formal Cal EPA process for obtaining peer 23 review of our analyses. This peer review process was 24 established pursuant to last year's Senate Bill 1320.

25 The peer review was conducted by Dr. Don Lucas PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 68 1 with the University of California Berkeley, and Lawrence 2 Berkeley National Laboratory, who specializes in 3 combustion generated pollutants and the development of 4 measurement diagnostic procedures.

5 Dr. Lucas was elected by the chancellor's office 6 of the University of California to perform the peer review.

7 The peer review found that the staff's conclusions 8 on the ozone forming potential of ten percent ethanol 9 gasoline on the one psi RVP increase appears correct and is 10 justified by the information presented.

11 The peer review also found that the assumptions 12 made in the staff's evaluation are reasonable and that the 13 emissions are calculated in a consistent manner.

14 Now I will briefly highlight the key issues raised 15 and considered in our evaluation.

16 In the process of our evaluation of the 17 ozone forming potential, we considered several issues raised 18 primarily by the representatives of the ethanol industry.

19 Concern was expressed that the test fleet is not 20 representative of the in use fleet.

21 As I noted, the vehicles tested represent 22 emissions technology going back to 1991 and used in 23 virtually all vehicles after 1985. These types of vehicles 24 represent a very high percentage of the vehicle miles 25 traveled today. They also represent a significant portion PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 69 1 of the emissions from motor vehicles. Also, results of the 2 Auto/ Oil test program show that older vehicles have 3 directionally similar response to changes in oxygen and RVP 4 as the vehicles tested in the ARB test program.

5 Concern was expressed that no high emitting 6 vehicles were tested. The definition used by US EPA and ARB 7 for high emitter vehicles that emit is that at least two 8 times the standard. Generally these vehicles have faulty 9 emission control systems or other mechanical problems that 10 cause such high emissions. The Auto/ Oil test program tested 11 high emitters and found them to be highly unstable. The 12 Auto/ Oil study accounted for the test to test the 13 variability of these vehicles and concluded that the 14 response to oxygen and RVP is consistent with that of 15 normal emitting vehicles.

16 The high emitters used by the US EPA in developing 17 their model also shows that high emitters have large 18 variability in their emissions.

19 This graph illustrates the variation in the data 20 for normally high emitters. The graph on the left is 21 hydrocarbons and on the right is NOx.

22 From the EPA database we plotted the average 23 difference in the emission between two fuels that differ in 24 oxygen content and RVP. The error bar is the 95 percent 25 confidence interval about the average.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 70 1 You can see that the data for high emitter 2 vehicles have large variation. With such high variation it 3 is difficult to isolate fuel effects from vehicle effects.

4 In conclusion, the results from these test 5 programs for older vehicles and for high emitters are 6 directionally consistent with the results of the ARB test 7 program.

8 We believe that the emissions response in the 9 fleet of vehicles tested in the ARB test program is 10 reasonably representative of the response in the overall 11 fleet.

12 Concern was expressed that the number of vehicles 13 tested was inadequate to provide statistically sound 14 results.

15 Our analysis showed that the data provides 16 statistically significant results. The statistical analysis 17 shows that the likelihood that the directional change in the 18 emissions is real and is greater than 90 percent.

19 Therefore, we conclude that further testing is unlikely to 20 change the results of the evaluation.

21 It was suggested that the way we included the CO 22 emissions in our analysis undercounted this contribution to 23 ozone forming potential.

24 We accounted for CO consistent with the ARB's CO 25 inventory in determining the appropriate weight for CO's PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 71 1 contribution to ozone forming potential.

2 Ambient air quality measurements of CO and 3 hydrocarbon and tunnel studies support the CO to hydrocarbon 4 ratios in the inventory, which are used in our analysis.

5 It was suggested that the use of total 6 hydrocarbons in the determination of ozone forming potential 7 is inappropriate.

8 The ARB analyses used the measure NMOG data to 9 calculate ozone forming potential.

10 The total hydrocarbon inventory was used to 11 generate an NMOG emissions inventory. The NMOG inventory is 12 then used to combine the exhaust and evaporative emissions.

13 It was suggested that including running loss 14 emissions in the analysis was inappropriate because they 15 were not measured in the test program.

16 At the start of the test program the work group 17 agreed that running loss emissions would be calculated 18 rather than measured because the facilities that were 19 required were unavailable.

20 We used the calculated values for running loss 21 from an ARB drop model, which is based on the US EPA 22 evaporative model.

23 As I showed you earlier, we also conducted a 24 sensitivity analysis by assuming the difference in running 25 loss emissions between the two fuels to be zero.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 72 1 Even under this case, the ten percent ethanol 2 gasoline with one psi RVP increase had greater ozone forming 3 potential than the complying gasoline.

4 It was suggested that the urban airshed models are 5 the best way to determine ozone formation.

6 It is unnecessary to conduct urban airshed 7 modeling to make the required finding of the ozone forming 8 potential. When the net reactivity adjusted NMOG emissions 9 increase, the models will show a directional increase in 10 ozone concentration.

11 We included the comments on our analyses of the 12 test data as part of the information provided for peer 13 review. We also provided our response to those comments for 14 review.

15 With respect to the issues raised, the peer review 16 report concurs with staff's analysis and assumptions.

17 As I mentioned, the peer review found that the 18 staff's conclusion on the ozone performing potential of ten 19 percent ethanol gasoline with one psi RVP appears correct 20 and is justified by the information presented.

21 Now I would like to briefly describe our plan for 22 future activity on providing additional compliance 23 flexibility.

24 We plan to continue the assessment started last 25 spring to evaluate ways to provide additional flexibility in PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 73 1 the cleaner burning gasoline program, while maintaining the 2 substantial emission benefit from the program.

3 We will continue to evaluate the feasibility of 4 updating the current exhaust predictive model and the 5 development of an evaporative model.

6 An evaporative model is needed before flexibility 7 on the RVP limit can be provided.

8 We will also consider the benefits offered by the 9 use of ten percent ethanol gasoline plans and will evaluate 10 how to properly credit such benefits.

11 To conclude, the staff's evaluation of the 12 ozone forming potential of ten percent ethanol gasoline with 13 a one psi RVP increase meets the requirements of state law.

14 The results show the high degree of certainty that 15 ten percent ethanol gasoline with one psi RVP increase has 16 greater ozone forming potential compared to complying 17 gasoline, and thus should not be exempt from the RVP 18 standard.

19 The ARB test program results are consistent with 20 existing data, and the independent peer review of the 21 staff's evaluation of the ozone forming potential concurs 22 with staff's finding and recommendation.

23 Staff recommends that the Board make the finding 24 that gasoline containing ten percent ethanol with one psi 25 RVP increase increases ozone forming potential compared to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 74 1 complying gasoline.

2 The proposed finding would preserve the emissions 3 benefits gained by the cleaner burning gasoline program.

4 The finding does not prohibit the use of ethanol 5 in gasoline and it allows the Board to consider raising the 6 oxygen cap to allow ten percent ethanol in gasoline without 7 increasing emissions.

8 We recognize that ten percent ethanol blends offer 9 additional benefits and are committed to work with 10 interested parties to explore ways to properly credit such 11 benefits to the use of the ethanol, while preserving the 12 emission benefits of the reformulated gasoline program.

13 This concludes my presentation. I thank you for 14 your time.

15 CHAIRMAN RIORDAN: Thank you very much.

16 Let me ask, there's an important component to 17 this. Well, actually there are two important components.

18 First is our ombudsman's program, and I'd like you 19 to comment about the process that this item has gone through 20 before coming to the Board.

21 MS. MEAD: Thank you. For the record my name is 22 Kathleen Mead. Madam Chairman, members of the Board.

23 Although this item is not a regulatory item, the 24 outcome of your decision on the item could change current 25 regulations affecting stakeholders concerned with oxygenates PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 75 1 and gasoline fuel production, therefore the process by which 2 it comes to you for approval is important.

3 The item was initiated, as you heard, in October 4 1995 when a technical working group was established to 5 develop and oversee a test program to determine the 6 ozone forming potential of the gasoline containing ten 7 percent ethanol.

8 Invitations to participate were sent to the 9 American Automobile Manufacturers Association, California 10 Renewable Fuels Council, Western States Petroleum 11 Association, General Motors Corporation and Ford Motor 12 Company.

13 Each of these organizations became active members 14 of the working group along with California Rice Industry 15 Association, the Renewable Fuels Association, Arco, Chevron,

16 Parallel Products, Sierra Club, Communities for Better 17 Environment, California Energy Commission, California 18 Department of Food and Agriculture and US EPA.

19 To develop the test protocol, staff conducted 20 three working group meetings on November 1st, 17th and 21 December 6th of 1995, and distributed a draft test plan for 22 comment in May of 1996.

23 The plan was finalized in September ' 96 and 24 testing began.

25 To keep the work group informed of the testing PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 76 1 status, staff provided the work group with six status 2 reports. They were issued in November of 1996, March, June 3 and November of 1997, and March and May of this year.

4 Each report was accompanied by preliminary data in 5 electronic format.

6 After each update, staff fielded phone calls from 7 the Renewable Fuels Association, Sierra Club, American Lung 8 Association, WSPA, and other interested parties.

9 Last May the final data set was distributed to the 10 working group and made available on ARB's Web site.

11 Staff provided a preliminary assessment of the 12 data on June 10th of this year and held a work group meeting 13 on July 15th and October 22nd to discuss the data analysis.

14 A public workshop was held on October 27th of this 15 year. 1700 stakeholders were notified by mail. They 16 included representatives of gasoline and diesel interests,

17 refiners, petroleum product trade groups, petroleum product 18 vendors, government agencies, consultants, oxygenate trade 19 groups, organization of vehicle users, environmental 20 advocates and private citizens.

21 In addition, the workshop notice was posted on 22 ARB's Web site.

23 30 persons participated in the workshop 24 representing the National Corn Growers Association,

25 Renewable Fuels Association, WSPA, Exxon, Tosco, Mobile,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 77 1 Toyota, Methanex, Sierra Club, South Tahoe Public Utility 2 District, California Department of Food and Agriculture,

3 California Energy Commission and other interested 4 stakeholders.

5 As you heard from staff, an independent peer 6 review of the technical analysis was conducted by Dr. Don 7 Lucas of the University of California Berkeley and Lawrence 8 Livermore National Laboratory.

9 On November 17th staff mailed the final report and 10 analysis of the test data, today's Board hearing notice and 11 the proposed finding to over 400 aforementioned 12 stakeholders.

13 This information was also available on ARB's Web 14 site.

15 In conclusion, staff conducted an effective 16 outreach to stakeholders to identify all potential issues 17 and promote participation by all parties interested in the 18 recommendation before you today.

19 CHAIRMAN RIORDAN: Thank you very much.

20 Mr. Kenny, any other comments that you might have?

21 All right. There is, I think, another important 22 component of this and that is the peer review. I'd like to 23 invite Dr. Don Lucas from the University of California at 24 Berkeley to come forward, please, to the podium. We welcome 25 you.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 78 1 Give us your name and maybe even a better title of 2 who you represent.

3 DR. LUCAS: Good morning. My name is Donald 4 Lucas. I'm a staff scientist at the Lawrence Berkeley 5 National Laboratory and a researcher in the School of Public 6 Health at UC Berkeley. I have a PhD in physical chemistry 7 from UC Berkeley. My research interest includes 8 combustion generated air pollutants and developing new 9 diagnostic methods to measure those pollutants.

10 I've served as a reviewer for the US EPA,

11 Department of Energy, State of California, University of 12 California, and the Health Effects Institute.

13 I'm also an investigator and one of the authors on 14 the recent MTBE report requested by Senate Bill 521, an 15 assessment of the human health and environmental risks and 16 benefits of MTBE gasoline.

17 We reviewed previous data on the combustion 18 byproducts of MTBE in laboratory and vehicle studies and 19 performed laboratory experiments in a flow reactor.

20 I was asked to review the ARB report presented 21 today.

22 My work was performed under the interagency 23 agreement No. 98 004 where the University agrees to provide 24 peer scientific review of scientific work conducted by state 25 agencies.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 79 1 I also read previous studies relating to the 2 subject and the comments and reviews made by other 3 interested parties and the subsequent responses of the ARB 4 staff.

5 These comments were often very valuable and they 6 helped clarify how the work was done and how the analysis 7 was performed.

8 As described in the staff presentation, the 9 results indicate that the fuel containing ethanol produces 10 more hydrocarbons, NOx and toxics with lower emissions and 11 CO. The ozone forming potential is higher for the ethanol 12 blend, compared to the MTBE fuel.

13 This is an important study with valuable data 14 collected in a well controlled and documented manner.

15 Proper calibration, validation and quality control 16 methods are reported.

17 This is a significant point, because while there 18 are many comments and critiques of the conclusions, there is 19 little criticism of the data itself.

20 While it is a good study, it's not perfect. As a 21 laboratory experimental scientist, I don't think that any 22 experimental program can be perfect.

23 For example, the inclusion of running losses is 24 crucial, and I don't think there was much value in analyzing 25 the results without including running loss data.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 80 1 Unfortunately, there were no direct measurements 2 of running losses. The emissions were estimated from the 3 hot soak emissions, which is the best measurement to use,

4 since the conditions producing the emissions are most 5 similar.

6 It is my opinion that the methods used to combine 7 the test data with inventory amounts to determine the 8 expected changes in emissions are consistent and reasonable 9 for all pollutants.

10 The calculation of the ozone forming potential 11 including effects from CO in the exhaust, while complicated,

12 appear correct.

13 There have been many comments directed to the 14 number of vehicles tested as they are representative of the 15 vehicle fleet.

16 The number of vehicles to test is fairly easy to 17 answer, since robust statistical methods can be used to 18 determine if the results are significant.

19 In this study the 12 vehicles tested resulted in 20 near certain probability that the ethanol fuel blend has a 21 higher ozone forming potential, that no additional testing 22 of vehicles of this type is needed.

23 The question about what is a representative 24 vehicle fleet is much harder to answer. The composition of 25 the fleet can be measured by many different parameters,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 81 1 changes with time, and is complicated by a complex testing 2 procedure that itself requires a long time.

3 The vehicles tested here are representative of the 4 significant fraction of the current fleet. However, the 5 entire fleet is not covered, and I don't know what it would 6 take to cover, say, 90 or 99 percent of the emissions or 7 vehicle types in this fleet.

8 Other reviewers suggest that high emitters should 9 be tested, and the ARB report addressed this issue.

10 For example, in the Auto/ Oil study quoted 11 previously on high emitters, mass emissions of hydrocarbons,

12 CO and NOx were not significantly different in comparisons 13 of normal and higher emitters, and possible fuel effects 14 were masked by uncontrolled variations in the engine.

15 It might be impossible to obtain repeatable and 16 reliable data from high emitting vehicles, and the number of 17 vehicles that would be needed for statistically significant 18 results cannot be estimated accurately.

19 The ARB report also reviewed previous testing 20 programs that examined the effect of different fuels on 21 emissions and the modeling results using EPA's and ARB 22 models.

23 While direct comparisons cannot be made, these 24 studies yield results similar in direction and magnitude and 25 tend to support the conclusions reached by the ARB staff.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 82 1 In summary, I believe that the work performed in 2 this study is of high quality. The conclusions reached by 3 the ARB staff appear correct and are justified by the data 4 analysis performed. The emissions are calculated in a 5 consistent and defendable manner and the assumptions made in 6 reaching the conclusions are reasonable.

7 Thank you.

8 CHAIRMAN RIORDAN: Dr. Lucas, thank you very much.

9 This was an added component that I think is a very 10 important one in terms of peer review. I think it is a good 11 thing and I hope in the future we can continue to use our 12 university systems as we did today, because it lends 13 credence to the staff report.

14 I'm going to ask if you would be available 15 throughout the balance of the testimony, if you can remain 16 through this item.

17 DR. LUCAS: Certainly.

18 CHAIRMAN RIORDAN: Thank you.

19 Let me ask the Board members if there are any 20 questions of Dr. Lucas at this time?

21 I don't believe there are. And so I appreciate 22 your being here and thank you very much.

23 We have a number of witnesses, and I am going to 24 ask some consideration for you to keep to about a 25 five minute presentation.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 83 1 If you have written testimony, obviously that's 2 made a part of the record. I would appreciate it if you 3 didn't read your testimony, but rather sort of directly told 4 us what your issues are.

5 I'm going to ask that we use the timing system 6 that is at the podium. Green light obviously means 7 everything is fine, keep going. When you see the yellow 8 light, you know you're about one minute from the end. And 9 of course the red light means I would like a conclusion.

10 So let us begin. Mr. Bob Dinneen from Renewable 11 Fuels Association, followed by Dr. Gary Witten, from Systems 12 Application International. Come forward, please.

13 Give us your name for the record and who you 14 represent.

15 MR. DINNEEN: Good morning, Madam Chairman, Board 16 members and staff. My name is Bob Dinneen. I am the 17 legislative director for the Renewable Fuels Association.

18 We are the national trade association for the domestic 19 methanol industry.

20 I have represented approximately 55 21 ethanol producing facilities across the country, including 22 two right here in California that are producing ethanol from 23 waste products.

24 Now, as my title suggests, I'm not a technical 25 person. The technical comments on behalf of the association PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 84 1 are going to be made by Dr. Whitten, but I do have some 2 quick points to make, and I hope to be as sensitive as I can 3 to your time restraints.

4 The first question I have, point I would have, is 5 really with regard to process. And I think that the process 6 that has been involved here with regard to your 7 determination on the ozone forming potential of ethanol 8 fuels is incomplete.

9 I give you great credit, the staff great credit,

10 for acting to lift the oxygen cap. It's a good first step,

11 frankly, given the unanimous support by the Legislature for 12 legislation to lift the cap that was evidenced during the 13 last assembly. That step is probably long overdo. But it 14 is a good step.

15 The cap has stifled competition here in California 16 among oxygenates. The cap has resulted in essentially an 17 MTBE program only. Other areas of the country that have 18 implemented clean fuels programs in the absence of a cap 19 have had a competitive oxygenate market and have not had 20 many of the problems that are being visited upon your 21 clean burning gasoline program.

22 But the determination that's being made today in 23 relation to that cap is woefully inadequate.

24 The staff seems intent now, after seven years of 25 largely ignoring this issue, of focusing just on the narrow PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 85 1 question of what is the ozone impact attributable to a 2 one pound waiver.

3 It seems to me that the more valuable question for 4 the ARB to analyze is where is the ozone equivalency between 5 ethanol and MTBE? There's a great deal of scientific 6 consensus right now that there are indeed benefits to the 7 use of ethanol. The ARB finally today in its presentation 8 recognized that that is the case, that there are benefits to 9 increased oxygen content, reduced carbon monoxide emissions,

10 increased exhaust VOC reductions and reduced reactivity.

11 These benefits have been ignored in the current predictive 12 model.

13 Now, it may be, frankly, that ultimately a one 14 pound waiver is not appropriate, that it will lead to 15 increased ozone formation. I don't believe, based upon what 16 you have before you, that that determination can be made,

17 but let's say just that that is certainly possible.

18 I would suggest to you, though, that it is equally 19 true that the one pound penalty that is now imposed on 20 refiners that want to utilize ethanol in this clean burning 21 program is also inappropriate. And making a finding today 22 on just that one half of the equation, just the one pound 23 waiver is inappropriate, prejudices whatever the Board or 24 the staff might do later on to determine what indeed is that 25 ozone equivalency.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 86 1 I would say also, I think this is an important 2 point, that the process lacks some context. Merely adding 3 up VOC emissions, even trying to do ozone forming VOC 4 emissions, just adding them up, doing a counting process,

5 ignores what happens to those emissions in the atmosphere.

6 We do believe, and we think that there's a great 7 consensus, that urban airshed modeling studies are indeed 8 the best way to evaluate the relative ozone forming 9 potential of competing fuels.

10 The RFA provided staff with a number of urban 11 airshed modeling studies showing the relative equivalency of 12 ethanol and MTBE, and those were largely dismissed.

13 The most comprehensive urban airshed modeling 14 studies that have ever been done on this issue suggest there 15 is essentially no difference between ethanol with volatility 16 increase and MTBE. Lot of technical reasons for that, but 17 that's what the urban airshed modeling studies show.

18 Now, there are a couple that show that there's a 19 slight increase. But when you're talking about one or two 20 part per billion benefit from ethanol, as most of the urban 21 airshed studies show, or part per billion detriment from 22 ethanol, as one urban airshed study shows, you're talking 23 about less than one percent difference in 120 part per 24 billion standard.

25 Now, we're in the Christmas season, so maybe it's PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 87 1 appropriate that the ARB engage in an exercise that is 2 essentially counting angels on the head of a pin, but I'd 3 suggest to you that in the process you're losing the saving 4 grace of ethanol and the program is suffering as a result.

5 The second point I want to make is that I do 6 believe that the test program itself is flawed.

7 CHAIRMAN RIORDAN: Mr. Dinneen.

8 MR. DINNEEN: Yes.

9 CHAIRMAN RIORDAN: See the red light there?

10 MR. DINNEEN: I do.

11 CHAIRMAN RIORDAN: We've got to make a conclusion 12 very soon.

13 MR. DINNEEN: I will. I have more extensive 14 comments, and I'll try to submit those to the record. I 15 appreciate your indulgence.

16 Like I said, We do have the some concerns about 17 the way the test program has been conducted, the number of 18 vehicles, things of that nature.

19 Maybe just one concluding comment, and I'll let 20 Dr. Whitten address some of those technical things.

21 A concluding comment would be this. You've got 22 the clean burning gasoline program right now that's broken.

23 It's broken not because it's not reducing emissions. It is.

24 It's broken not because of the oxygen standard, because 25 oxygenates in fact help refiners meet the standards that are PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 88 1 required in effect, and oxygenates, particularly ethanol,

2 can provide other environmental and public policy benefits 3 as well.

4 It's broken because the program has been built 5 around MTBE. And unless you find a way to make sure that 6 there's competition in the market, that ethanol can compete 7 effectively in this market, it's going to continue to cause 8 problems, lawsuits, consumer complaints, refiner angst about 9 liability with regard to MTBE, water contamination. These 10 are serious problems that are facing this program and 11 threatens the integrity of this important program.

12 There are areas of the country which ethanol is 13 used in this the program quite effectively. American 14 Lung

15 CHAIRMAN RIORDAN: Mr. Dinneen.

16 MR. DINNEEN: I know.

17 CHAIRMAN RIORDAN: I am going to be  I'm going 18 to start taking time from your witness and I don't want to 19 do that.

20 MR. DINNEEN: I apologize.

21 My final point, look, if you figure out a way to 22 make ethanol work in this program, if you engage in a 23 process such that we can identify where between a one pound 24 penalty and one pound waiver the actual science is, I think 25 your program will be the better for it.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 89 1 That's all.

2 CHAIRMAN RIORDAN: Thank you very much.

3 Dr. Gary Whitten, followed by Bob Heckert,

4 followed by Dr. Al Jessel and Rick Best.

5 DR. WHITTEN: Good morning, Madam Chairman, Board 6 members. My name is Gary Whitten. I'm chief scientist at 7 Systems Applications Internation.

8 I've been studying smog forming chemistry for 9 about 25 years. I have a PhD in atmospheric and gas phase 10 chemistry.

11 This morning I would like to go over the issue of 12 using methanol in place of MTBE.

13 First of all, what was expected, the main thing is 14 reduction in CO and the fact that it can play a role in the 15 ozone forming.

16 Second part of it is that they used the urban 17 airshed model that  and the existing regulatory and other 18 mass submissions models, that the one pound waiver can be 19 justified.

20 The third item I want to talk about is the 21 representativeness of the 12 vehicle fleet that was tested 22 and how it could come to a evaluate  come up with a number 23 that says it's really only less than ten percent of the 24 total mobile exhaust hydrocarbons.

25 I've given you a little handout sort of like PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 90 1 slides to go along with this.

2 First issue is carbon monoxide. We've known that 3 carbon monoxide emissions changes due to oxygen in gasoline 4 can mitigate the ozone problem since at least 1988. And I 5 testified before US Congress on that issue at that time.

6 And that was part of the history of where the 7 one pound waiver has come from on a national scale.

8 Using the urban airshed model, we found an 9 interesting surprise most recently, that carbon dioxide in 10 the atmosphere accounts for as much as 11 percent of the 11 ozones that are formed every day in urban atmosphere. So 12 this is a very important ingredient in that 10 percent, 11 13 percent is making that much of a difference.

14 The new test data, the very comprehensive data on 15 these 12 cars, shows us that carbon monoxide can be reduced 16 as much as ten percent by the little extra oxygen that's 17 seen in ethanol compared to MTBE.

18 The urban airshed model run that we did actually 19 consisted of about a ten different sensitivity runs, testing 20 the sensitivity of the various parts of the mobile emissions 21 inventory like running loss emissions and exhaust emissions 22 and diurnal emissions and all of those kinds of things, so 23 that we can then combine those sensitivities to come up with 24 an overall evaluation.

25 The modeling run that we used was recently put PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 91 1 together by the South Coast Air Quality Management District 2 and the ARB working together on the so called 1997 AQMP.

3 Part of that modeling looked into predictions of 4 ozone in the Los Angeles basin for the year 2000. It's 5 based  one of the important simulations in that AQMP was 6 based on 1987 meteorology. On the second day of that 7 simulation you saw about a 148 parts per billion for the 8 year 2000. So this looks like it's giving a result that's 9 what we might expect for that to happen on a smoggy day.

10 By using the models that predict the various 11 emissions changes, this urban airshed model suggests that a 12 one pound waiver can be justified.

13 But it's important also to know that notice, note 14 that when you do an urban airshed model for over a couple of 15 days, you see areas of the basin where maybe some of the 16 ozone goes up a little bit and some ozone goes down a little 17 bit and there's two criteria that we used to say that there 18 was no difference in ozone, and one was the highest one hour 19 peak, which is where the standards have been set up until 20 this year, and where the urban airshed model is used in the 21 State Implementation Plan to show attainment. So that 22 one hour maximum is an important criteria.

23 The second one is the pending standard of eight 24 hours, and the urban airshed model can be used for that.

25 And you got a little different result between one and the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 92 1 other.

2 But the emissions inventory was adjusted using,

3 first of all, the Air Resources Board predictive model,

4 which is for exhaust emissions. It's based on some 7,000 5 federal test procedure tests, costing millions and millions 6 of dollars to prepare that data, and it's a statistically 7 optimized rendition of those 7,000 data points.

8 The new 12 car vehicle tests represents an 9 increase of less than one percent to that database.

10 And so if some 56 new data points, even though 11 they are very expensive, and they do provide information on 12 speciated hydrocarbons, that we did not really have very 13 well before.

14 Also it has information on aggressive driving that 15 we didn't have before.

16 It's a very valuable test, but again it does 17 contribute less than one percent to the total database for 18 the predictive model.

19 And the second model that we used was the one that 20 the ARB proposed for evaporation increases due to RVP. This 21 suggests that the increases are also less than what was 22 observed on the 12 vehicle fleet, but it's actually only six 23 cars that were tested for evaporative emissions.

24 I'm quite troubled by the idea that these six cars 25 and evaporative emissions and only 12 cars in exhaust PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 93 1 emissions are expected to represent the 30 million cars that 2 are going to be burning this gasoline in California.

3 CHAIRMAN RIORDAN: Dr. Whitten, as you can see,

4 we've got a red light there, so you want to draw it to 5 close.

6 DR. WHITTEN: I'll make one last very brief point 7 on the representativeness.

8 We've claimed that it's less than ten percent.

9 The ARB claims it's over 32 percent or 32 percent of the 10 total emissions.

11 You can arrive at the 32 percent by taking cars 12 that emits say up to 800 milligrams per mile. And if you 13 take cars that only emit only 400 milligrams per mile, the 14 number is more like ten percent.

15 And during the flexibility hearings SAI did a 16 reestablishment of the predictive model, splitting it at the 17 400 milligram point, and we found that the most important 18 change of this dual model where you had a high emitter model 19 about 400, and one below, most important change was that it 20 gave more credit, more reduction to oxygen in a fuel and it 21 was coming from the vehicles that were above 400 milligrams 22 per mile emissions test.

23 And this fleet that was tested, the highest single 24 vehicle was only 300 milligrams.

25 So none of the vehicles of the 12 are represented PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 94 1 by not necessarily high emitters, but certainly above the 2 400 milligram mark, which has been a common standard in 3 California since 1977.

4 CHAIRMAN RIORDAN: Okay. Thank you very much.

5 Are there any questions for this witness?

6 Thank you, Dr. Whitten.

7 Mr. Bob Heckert.

8 MR. HECKERT: Thank you, Madam Chair, and seasons 9 greetings. My name is Bob Heckert. And I am the 10 communications manager for the California Rice Promotion 11 Board.

12 And I'd like to come here today to relay some 13 thoughts that the rice industry association had had over 14 this matter, as well as individual growers.

15 What I'm hearing on the countryside is they'd like 16 to see a delay in today's decision, so that a couple of 17 things might happen first.

18 Before I suggest what those might be, you should 19 know that the California rice industry has invested heavily 20 in at least one ethanol plant and probably two in the not 21 too distant future. We see these as the best opportunity to 22 utilize or divert rice straw from burning practices, which 23 has come before this Board enumerable times, as my friend,

24 Mr. Kenny, knows.

25 And therefore we have a keen interest in trying to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 95 1 develop this burning alternative.