CALIFORNIA AIR RESOURCES BOARD Please note that this November 5, 1998 Board meeting was recorded in two parts by two court reporters. Part 1 concludes on page 166 and Part 2 begins on page 167 and includes its own Index.

PUBLIC HEARING TO CONSIDER THE " LEV II" ) AND " CAP 2000" AMENDMENTS TO THE ) CALIFORNIA EXHAUST AND EVAPORATIVE ) EMISSION STANDARDS AND TEST PROCEDURES ) FOR PASSENGER CARS, LIGHT DUTY TRUCKS ) 98 12 1 AND MEDIUM DUTY VEHICLES, AND TO THE ) EVAPORATIVE EMISSION REQUIREMENTS FOR ) HEAVY DUTY VEHICLES. ) ___________________________________________)

TRANSCRIPT OF PROCEEDINGS November 5, 1998 9530 Telstar Avenue El Monte, California REPORTED BY: Lynne R. Rutledge CSR No. 11091 Our File No.: 1 49953 APPEARANCES OF BOARD MEMBERS:

Chairman Dunlap Mr. Calhoun Supevisor DeSaulnier Ms. Edgerton Dr. Friedman Mr. Parnell Supervisor Patrick Ms. Rakow Ms. Riordan Supervisor Roberts Supervisor Silva INDEX Proceedings PAGE Call to Order 1 Pledge of Allegiance 1 Roll Call 1 Opening Remarks by Chairman Dunlap 2 AGENDA ITEM:

98 12 1 Public Hearing to Consider the " LEV II" 10 and " CAP 2000" Amendments to the California Exhaust and Evaporative Emission Standards and Test Procedures for Passenger Cars, Light Duty Trucks and Medium Duty Vehicles, and to the Evaporative Emission Requirements for Heavy Duty Vehicles Introductory Remarks by Chairman Dunlap 10 Staff Presentation Mike Kenny 11 Annette Guerrero 13 Jim Schoning 40 Public Coments Kelly Jensen 53 Vic Weiser 60 Till Stoeckenius 65 Kelly Brown 72 Matt Kevnick 87 Charlie Kitz 93 Peter Welch 99 Manuel Cunha 105 Mike Wade 110 Kevin Cullen 114 Sam Leonard 121 William Innes 132 Barbara Kiss 136 Greg Dana 138 Wolfgang Groth 142 Dick Shaw 147 Andy Frank 151 Bruce Bertelsen 157 Roland Hwang 166 1 CHAIRMAN DUNLAP: Will the November meeting 2 of the California Air Resources Board please come to 3 order. Will the audience please rise and join the Board in 4 the Pledge of Allegiance.

5 ( Pledge recited.)

6 CHAIRMAN DUNLAP: Thank you. Ms. Hutchins,

7 will you please call the roles. Ann, will you please call 8 the role.

9 ANN: Calhoun?

10 MR. CALHOUN: Here.

11 ANN: DeSaulnier?

12 SUPERVISOR DESAULNIER: Here.

13 ANN: Edgerton?

14 MS. EDGERTON: Here.

15 ANN: Friedman?

16 DR. FRIEDMAN: Here.

17 ANN: Parnell?

18 MR. PARNELL: Here.

19 ANN: Patrick?

20 SUPERVISOR PATRICK: Here.

21 ANN: Pat Riordan?

22 MS. RIORDAN: Here.

23 ANN: Roberts?

24 SUPERVISOR ROBERTS: Here.

25 ANN: Silva?

1 1 SUPERVISOR SILVA: Here.

2 ANN: Chairman Dunlap?

3 CHAIRMAN DUNLAP: Here.

4 Thank you. What I'd like to do prior to 5 getting into our sole agenda item today is I would like to 6 call up Firoz Razul, who is president and CEO of Ballard

7 Firoz, if I could get you to come forward  who will give 8 us a brief presentation but will also present a fuel cell 9 demonstrator unit to the Board. I'm pleased to have Firoz 10 with us. He's come to us from British Columbia His 11 company is very important to us in the technology area. So 12 welcome.

13 We are pleased to hear what you have to say 14 this morning.

15 FIROZ RAZUL: I'm Firoz Razul, president and 16 chief executive officer of Ballard Power Systems.

17 Mr. Chairman, Members of the Air Resources 18 Board, it is a pleasure to be with such an important body 19 and to be in Southern California on a day when you are once 20 again addressing such critical issues such as the 21 protection of our environment and the restoration of air 22 quality. The California Air Resources Board, under the 23 leadership of John Dunlap, has done so much over the years 24 to improve air quality throughout this region.

25 But more than this, the Air Resources Board,

2 1 through its actions, has had a profoundly positive impact 2 on environmental policy throughout North America and the 3 world, particularly in promoting responsible energy 4 technologies. For that, we all owe you a tremendous debt 5 of gratitude and we will for years to come.

6 At Ballard, our vision is the power to 7 change the world with the support of our strategic 8 partners  the Ford Motor Company, Daimler Benz or soon 9 Daimler Chrysler. The Ballard family in developing fuel 10 cells and fuel cell applications to provide clean, quiet,

11 reliable, and efficient power for a number of markets.

12 Whether you drive a car or ride a bus to work, fuel cell 13 power will take you there. When you turn on the light 14 switch in your kitchen or go to work in the morning, fuel 15 cells will provide the power to homes and hospitals, office 16 buildings and factories. If you need power for your camper 17 or in remote parts of the world, fuel cells will provide 18 it, and they will do it without the harmful emissions 19 produced by traditional combustion agents.

20 The Air Resources Board has led the way in 21 promoting fuel cell technology not just by talking about it 22 but in actively working to educate everyone to the benefits 23 of fuel cells and other clean environmental technologies.

24 As an expression of Ballard's appreciation for your 25 efforts, it is our pleasure to deliver to you and the 3 1 citizens of California a 100 watt Ballard portable 2 fuel cell generator.

3 Everyone should have the opportunity to 4 learn more about clean energy technologies, and we know how 5 much the Air Resources Board is looking forward to using a 6 fuel cell to do so.

7 We are proud of the long meaningful 8 relationship that Ballard has had with the state of 9 California. We are proud to have one of our Ballard family 10 members DBB Fuel Cells in Poway, California. Several years 11 ago, the South Coast Air Quality Management District 12 provided partial funding for our prototype fuel cell 13 busses. And soon after, California gave us a very early 14 opportunity to demonstrate that fuel cell busses can and 15 will be the clean transportation mode for our cities. And 16 today, we are proud to join California in showing everyone 17 that fuel cells are not only the power of the future,

18 they're today's reality.

19 Last month Ballard hosted the world's first 20 round table discussion on fuel cell technology, which was 21 web cast live on the internet to an international audience.

22 We were honored to be joined that day by Secretary Rooney 23 and Lynne Edgerton. Like all of you true champions for 24 clean energy technology including fuel cells, during that 25 meeting Ms. Edgerton stated and I quote, " I'm confident 4 1 that just as the internal combustion engine was the power 2 choice for the 20th century, fuel cells will be the choice 3 for the 21st century." Ms. Edgerton, we couldn't agree 4 more. We are on the cusp of the 21st century today, and 5 Ballard is ready to meet that challenge.

6 Ballard thanks you Mr. Chairman for 7 permitting us to be a part of your legacy here at the Air 8 Resources Board, and we wish you every success in the 9 future. We thank every member of the Board for allowing us 10 to participate in your legacy as one of the most 11 influential and environmental agencies in the world. And 12 we thank you for showing the people of California that fuel 13 cells are more than just a promise. We have indeed the 14 power to change the world.

15 Thank you very much.

16 CHAIRMAN DUNLAP: Thank you. He's going to 17 give us a fuel cell first before you pepper him.

18 Thank you very much. Thank you, and we 19 appreciate your kind words. And I must say, as I've gotten 20 to know you and your company, I've appreciated the fact 21 that you've devoted some time to educate us as to what the 22 potential is worldwide in fuel cells, and it has meant a 23 lot to us to really be able to pull for technology that has 24 such a, we believe, great potential.

25 So with that, if you're willing, can we ask 5 1 you a couple questions? I know Mr. Parnell and Ms.

2 Edgerton would like to ask you a few things.

3 MR. PARNELL: I'm just wondering in view of 4 trying to understand practical applications, where are you 5 in terms of having fuel cells developed and ready to drop 6 into a vehicle such as we saw out front today? Could you 7 expound on that just a bit?

8 FIROZ RAZUL: Mr. Parnell, over the last few 9 years, we have been working to develop the technology to 10 demonstrate that it has the performance that is equivalent 11 or better than existing technology, and I believe Ballard 12 has been able to demonstrate that.

13 The challenge today for us is to maintain 14 that performance and deliver the technology at a lower 15 cost, and this is where our partnerships with the Ford 16 Motor Company and with Dymler Benz or Dymler Chrysler soon 17 has been very important in helping us get those 18 technologies into high volume manufacturing to be able to 19 be competitive with today's technology.

20 So over the next few years, we will be 21 working to start to produce the technology that we have 22 developed, and I'm optimistic it will be in many different 23 applications including automobiles and busses in much less 24 time than most people expect.

25 MR. PARNELL: Thank you very much.

6 1 MS. EDGERTON: Thank you. Thank you so much 2 for all your contributions. They have just been enormous 3 and for the opportunity to participate with you, I thank 4 you as well.

5 Could you give us some numbers for the 6 people of California to look forward to in terms of fuel 7 cell vehicles, light duty vehicles in the future, and can 8 you give us some dates as to what your target dates are for 9 seeing significant numbers of fuel cell vehicles on the 10 road in California? I don't want to put you in a box. I 11 don't want you to say anything you don't feel comfortable 12 saying. But if there are projections that you can make 13 that can be then reported to people in California, I think 14 it would be very exciting for them to hear.

15 FIROZ RAZUL: We are a developer of a 16 component which is a very important part of the power 17 system of the future, which is the fuel cell.

18 Our objective is to have the technology 19 ready early in the 2000 2001 time frame for all the 20 companies to then start to integrate those into design and 21 integrate those into their vehicles. And the design, the 22 development and design of a vehicle varies by manufacturer.

23 It can be as low as three or four years or as high as seven 24 years.

25 And from that point in time, the oil 7 1 companies, once they are comfortable that the technology 2 works to their satisfaction, they will then start to design 3 the fuel cell into their vehicles. So exactly when they 4 decide to announce a car with the fuel cell, I think is 5 really both a, I'm sure, a competitive information on their 6 part and that's a decision they would make. That would not 7 be a decision we would participate in. However, our 8 objective is to be ready for them to make their decision as 9 early as possible.

10 MS. EDGERTON: Is it correct that I've seen 11 data that where Ballard is discussing 100,000 fuel cell 12 vehicles on the road around 2004?

13 FIROZ RAZUL: I think a number of auto 14 companies  there are about six auto companies today that 15 have made some sort of public statement that they intend to 16 have fuel cell vehicles available in the 2004 2005 time 17 frame. I think the numbers vary. One of our projections 18 for preparing a manufacturing facility for this, as far as 19 a supplier for the automotive industry, is in the order of 20 those numbers.

21 But I think that's not a commitment from us.

22 Obviously, we don't put the vehicles on the road, but we 23 certainly are preparing to manufacture in the quantities of 24 between 100,000 and 250,000 ready for automotive companies 25 to be able to use the technology in their vehicles.

8 1 MS. EDGERTON: Let me follow up a little bit 2 because it is relevant to this hearing. Today, obviously,

3 we're adopting standards that would apply from 2004 on,

4 and this is the time frame in which you envision your fuel 5 cells being very increasingly used by the auto companies 6 and comprising in an increasing number of vehicles on the 7 road.

8 With respect to larger vehicles such as 9 sports utility vehicles, would you envision your fuel cell 10 as being able to power them and at very low emissions, near 11 zero emissions?

12 FIROZ RAZUL: The fuel cell is a modular 13 power source. As you are aware, we have busses today 14 running on fuel cells as we have in the city of Chicago and 15 Vancouver. So the size is not an issue. It is a question 16 of the models that the auto companies decide to introduce 17 fuel cells in first. I think that's a decision we haven't 18 heard what vehicles they've selected yet. We will 19 certainly be prepared to put a fuel cell in any size 20 vehicle.

21 MS. EDGERTON: So there is nothing to 22 preclude the auto companies from running sports utility 23 vehicles on fuel cells, selling them at the same price in 24 that time frame?

25 FIROZ RAZUL: I can only speak about the 9 1 technology, and certainly we expect the technology to be 2 ready. I think when and how they introduce the vehicles,

3 as I said, is not in our control.

4 MS. EDGERTON: Thank you.

5 CHAIRMAN DUNLAP: Are we done peppering our 6 friend and colleague? Thank you very much. I appreciate 7 your time. I look forward to keeping abreast in your 8 progress.

9 All right. I'd like to acknowledge we have 10 been joined by, I think, one or two other are Board 11 members; so we have our entire Board here today.

12 Let's move into our sole agenda item 13 98 12 1. It's a public hearing to consider the " LEV II"

14 and " CAP 2000" amendments to the California exhaust and 15 evaporative emission standards and test procedures for 16 passenger cars, light duty trucks, and medium duty vehicles 17 and to the evaporative emission requirements for heavy duty 18 vehicles.

19 The proposal today is regarded as one of the 20 most significant mobile source items for Board 21 consideration this year. The proposed LEV II amendments 22 target emission reductions from light duty vehicles as 23 required under the state implementation plan for ozone 24 attainment. These amendments modify the low emission 25 vehicle program initially adopted by this Board in 1990.

10 1 Also proposed are CAP 2000 amendments to modify motor 2 vehicle certification and in use compliance requirements.

3 At this point, I would like to ask Mr. Kenny 4 to introduce the item and begin the staff's presentation.

5 Mike?

6 MR. KENNY: Thank you, Mr. Chairman and 7 Members of the Board. Good morning.

8 The primary impetus for the proposed 9 amendments comes from the ARB's obligation under the state 10 implementation plan adopted by the Board in 1994. State 11 implementation plan contains mobile source Measure M2 which 12 calls for the adoption of technology based control 13 strategies for light duty vehicles beginning with the 2004 14 model year.

15 The plan specifies for this measure and 16 emission reduction of 25 tons per day of reactive organic 17 gases plus oxides of nitrogen in the South Coast Air Basin 18 in 2010. In addition to Measure M2, SIP recognizes that 19 the greater Los Angeles area, designated as extreme ozone 20 non attainment, may need to rely on the development of 21 further technology measures to meet an additional 75 tons 22 per day of reactive organic gases plus oxides of nitrogen 23 emission reduction.

24 This has been commonly referred to in the 25 past as our black box. The proposed amendments are 11 1 intended to achieve emission reduction targets of M2 and 2 over two fifths of the emission reductions in that black 3 box. The proposed LEV II amendments are a comprehensive 4 set of modifications. They include the application of 5 passenger car exhaust emission standards to most sport 6 utility vehicles, pickup trucks and minivans; and lower 7 exhaust standards for all light duty vehicles.

8 Other amendments include evaporative 9 emission standards, more stringent requirements for the 10 phase in of cleaner vehicles, additional mechanisms for the 11 generation of zero emission vehicle credits, and numerous 12 technical modifications. Also proposed are CAP 2000 13 amendments that consist of streamlining the current motor 14 vehicle certification requirements while strengthening the 15 in use compliance requirements.

16 Extensive research and test programs were 17 conducted to determine the technological feasibility of the 18 proposed LEV II exhaust and evaporative emission 19 standards. These involved over 4,000 hours of testing 20 time. The results of staff's testing indicate that the 21 LEV II standards are technologically feasible. The 22 estimated emission benefits for the proposed adoption of 23 these standards are 51 tons per day oxides of nitrogen and 24 6 tons per day of reactive organic gases in the South Coast 25 Air Basin by 2010.

12 1 The estimated cost effectiveness of the 2 staff's proposal averages approximately $ 1 per pound of 3 pollutant reduced. Annette Guerrero of the LEV II team 4 will now provide the background for the staff's proposal 5 and present staff's recommendation for the Board's action.

6 Annette?

7 ANNETTE GUERRERO: Could I have someone dim 8 the lights, please. Thanks.

9 Thank you, Mr. Kenny. Good morning,

10 Chairman Dunlap and Members of the Board. Welcome to our 11 mobile source test facility here in El Monte.

12 Today I will be presenting staff's proposed 13 revisions to California's low emission vehicle program. As 14 mentioned in the opening remarks, the proposal before you 15 today is one of the most significant mobile source items 16 for Board consideration this year. It achieves large 17 emission reductions and implements on schedule Measure M2 18 of the SIP. It is also probably the most complex as it 19 affects every mobile source regulation. In our 20 presentation today, I will describe for you the key 21 elements of our proposal.

22 I'll start with some brief background and 23 some review of the regulations, present the key elements of 24 the emission proposal, present the results of our 25 technological feasibility and cost analysis, and summarize 13 1 the environmental impact and cost effectiveness of LEV II.

2 And lastly, I'll explain some of the outstanding issues.

3 To begin, I'd like to give you some 4 background and some review of the current regulations.

5 As Mr. Kenny mentioned in his opening 6 remarks, the primary impetus for this Board item comes from 7 mobile source Measure M2 of the SIP, in which the Board 8 committed to reduce reactive organic gas or ROG, plus 9 oxides of nitrogen ( NOx) emissions by 25 tons per day in 10 the South Coast Air Basin. This green box here.

11 The SIP also requires us to make significant 12 progress in reducing emissions by another 75 tons per day.

13 This is the so called black box. As I will demonstrate 14 later, the proposed LEV II amendments are expected to 15 achieve the NOx emission reduction goals of Measure M2 and 16 also provide significant NOx emission reductions which will 17 further shrink the black box. In addition to the 18 reductions to the South Coast Air Basin, this proposal 19 would also achieve needed statewide emission reductions for 20 NOx, carbon monoxide, and also fine particulate matter.

21 Today's proposal is an evolution of the 22 original Low Emission Vehicle, or LEV I Program, that was 23 adopted by you in 1990. The key elements of California's 24 LEV Program include the introduction of four increasingly 25 stringent emission categories  transitional low emission 14 1 vehicle or TLEV, low emission vehicle or LEV, ultra low 2 emission vehicle or ULEV, and finally zero emission vehicle 3 or ZEF.

4 In addition, considerable compliance 5 flexibility is built into the program for the introduction 6 of low emission vehicles. A manufacturer may choose which 7 portion of its fleet is certified to each of these 8 standards as long as the average hydrocarbon exhaust 9 emissions of its entire fleet meets a fleet average 10 requirement. The only required percent phase in is that 11 10 percent of the fleet must be certified as ZEVs in 2003.

12 The original LEV Program has completed its 13 fourth model year of implementation, is on schedule, and 14 meeting emission reduction and cost targets. Currently, 43 15 percent of the ' 98 model year vehicles are certified as 16 TLEVs, another 26 percent of the fleet is certified as 17 LEVS, and Honda introduced the first gasoline powered ULEV 18 this past model year as well. The LEV I Program will be 19 fully implemented by 2003.

20 The original enhanced evaporative 21 regulations were also adopted by the Board in 1990.

22 Evaporative emissions are hydrocarbon vapors that escape 23 mainly from the vehicle fuel and evaporative control system 24 into the atmosphere and can originate from the on board 25 canister, permeation through hoses, joints, and plastic 15 1 fuel tanks, and other sources. The enhanced regulations 2 require that motor vehicles be designed to more effectively 3 control the three types of fuel evaporative emissions

4 diurnal, hot soak, and running loss.

5 Diurnal emissions occur when a vehicle is 6 parked and are caused by daily ambient temperature changes.

7 Hot soak emissions occur immediately after a 8 fully warmed up vehicle is stationary with the engine 9 turned off and are due to high under hood temperatures.

10 Running loss emissions occur when the fuel 11 heats up during driving and can originate from numerous 12 sources.

13 Staff will only be proposing modifications 14 to the diurnal plus hot soak emission standards in the 15 evaporative proposal today.

16 With that brief background, I will now 17 explain the key exhaust and evaporative elements of the 18 LEV II proposal, beginning with exhaust and followed by the 19 evap proposal.

20 Staff is proposing three major modifications 21 to the LEV tailpipe regulations. The first is a 22 requirement that sport utility vehicles, pickup trucks, and 23 minivans meet the same emission standard as cars. The 24 second is lower tailpipe standards for all light and 25 medium duty vehicles. The third provides partial ZEF 16 1 credits for near zero emitting vehicles.

2 Perhaps the most defining element of LEV II 3 is the proposal that sport utility vehicles, pickup trucks,

4 and minivans be required to meet the same emission 5 standards as cars. The current trend toward the use of the 6 sport utility vehicles and pickup trucks for personal 7 transportation, coupled with their ever increasing 8 popularity representing nearly half of new vehicle sales,

9 has greatly altered the usage patterns of this vehicle 10 segment and increased their impact on air quality. It is 11 now the norm for these vehicles to be used for personal 12 transportation.

13 However, under current regulations, these 14 vehicles have separate, less stringent emission standards 15 because they have been traditionally used for work purposes 16 and had more rigorous duty cycles. This trend has a 17 substantial impact on air quality because, although these 18 vehicles are used as passenger cars, SUVs and light trucks 19 emit one and a half to two and a half times the emissions 20 per mile as a passenger car, as you can see from this 21 chart.

22 The medium light trucks in the red bar of 23 this chart include the Jeep Grand Cherokee, the Chevy 24 Blazer, Ford Explorer, and all minivans. The vehicles 25 included in the bar on the right hand side of the chart are 17 1 the Ford F150 pickup truck, the Ford Expedition, the Dodge 2 Ram 1500 pickup truck, and the Chevy Suburban.

3 For this reason, staff is proposing that 4 most trucks included in this chart  that is, trucks under 5 8,500 pounds gross vehicle weight  be subject to the same 6 emission standards as cars.

7 The second element of the LEV II proposal is 8 lower emission standards and increased durability 9 requirements for passenger cars and light trucks. Some of 10 the new standards in the LEV II proposal are listed in this 11 table in green. Two of the more important standards staff 12 is proposing include a 75 percent reduction in NOx for LEVs 13 and ULEVs to .05 grams per mile, and a new emission 14 category, super ultra low emission vehicle or SULEV.

15 All of these emission categories include 16 increased durability requirements to 120,000 miles or,

17 optionally, 150,000 miles. You'll notice that staff is 18 proposing to retain the current TLEV standards to allow 19 manufacturers additional flexibility for their more 20 difficult to control vehicles. Diesel vehicles would 21 likely certify to the TLEV standard. Because the new SULEV 22 category contains some additional features, I'll discuss 23 that later in the presentation. Also not listed on this 24 table are the special standards being proposed for 25 medium duty work trucks under 8,500 pounds GVW.

18 1 Another element of the LEV II exhaust 2 proposal is the new flexible implementation schedule where 3 a manufacturer can choose the standards category to which a 4 vehicle may certify as long as the emissions of their 5 entire product line meet a fleet average NMOG requirement.

6 In other words, as long as the manufacturer meets the two 7 curves on this chart, it can tailor its implementation to 8 its own product schedule. As you can see from this chart,

9 the fleet average and NMOG requirement would decline from 10 LEV I levels in 2003 through 2010.

11 There are two separate curves because the 12 ZEF requirement is linked only to passenger cars and the 13 lightest trucks. The second less stringent curve has been 14 established for heavier light trucks and sport utility 15 vehicles because zero emission vehicles are not required in 16 this class.

17 There are several other compliance 18 flexibility options available to a manufacturer when 19 implementing LEV II. For example, fleet average credit 20 trading is allowed between passenger cars and light trucks.

21 In addition, manufacturers may continue to sell LEV I 22 vehicles through the 2006 model year. Truck models used 23 principally for work are provided with a less stringent 24 tailpipe standard, and an optional TLEV standard is 25 provided which recognizes the low emission deterioration 19 1 rates of diesel engines.

2 The first element of the evaporative 3 proposal is lower emission standards. The proposed 4 standards represent a 50 to 75 percent reduction from 5 current standards, depending on vehicle category. Today,

6 using certification data, approximately 20 percent of the 7 ' 99 model year cars have certified evaporative emission 8 levels lower than the staff's proposed standards. For 9 example, one of the largest vehicles, the Chevy Suburban,

10 can already comply with the proposed standards in its 11 category.

12 The second element is the increased 13 durability requirement from 10 years or 100,000 miles to 15 14 years or 150,000 miles. We are proposing this because 15 there are concerns that significant evaporative emission 16 deterioration may occur for vehicles more than 10 years 17 old. Current data show that more than 20 percent of the 18 California vehicle fleet is between 10 and 15 years old.

19 The proposal would require manufacturers to demonstrate 20 that the evaporative emission components remain durable as 21 the vehicles become old.

22 The last element of the evaporative proposal 23 is the implementation schedule. The proposed 24 implementation schedule is phased in over three years,

25 starting in the 2004 model year. In the first year, 40 20 1 percent of the manufacturer's vehicle fleet would be 2 required to comply with the proposed evaporative standard 3 with 100 percent compliance being required by the 2006 4 model year. At the manufacturers' request, an optional 5 alternative phase in schedule has been added to allow 6 compliance flexibility to a manufacturer.

7 I'll move now to the next section of our 8 presentation, which covers the technological feasibility of 9 the standards. First I'll discuss the tailpipe, followed 10 again by the evap.

11 With industry generally conceding that the 12 proposed tailpipe standards can be met by passenger cars 13 and the lightest trucks, staff focused its resources on 14 demonstrating that the proposed standards are feasible for 15 sport utility vehicles and heavier trucks. Staff used the 16 lowest emitting vehicle currently available in this sector,

17 the Ford Expedition.

18 Staff installed advanced catalyst systems 19 with air injection on several Expeditions that were 20 obtained from catalyst suppliers, such as the one shown 21 here. The catalysts were aged to simulate 50,000 miles of 22 use, using the procedure that Ford uses to ensure that even 23 work trucks that are loaded with cargo or used for towing 24 will comply with emission standards in use. It's also 25 important to note that testing was conducted using 21 1 California Phase II cleaner burning gasoline to demonstrate 2 the feasibility of the proposed standards.

3 Staff was able to conduct seven tests using 4 these advanced catalysts which demonstrate that the Ford 5 Expedition can meet the proposed LEV II standards. The 6 average of the seven tests is compared to the proposed 7 LEV II standard in this slide. Staff could not modify 8 vehicle software so that the computer control of the fuel 9 and air matched the characteristics of the advanced 10 catalysts. Manufacturers will have over five years to 11 perform this optimization, and we believe this will result 12 in emissions well below the LEV II standards.

13 This list identifies some of the available 14 technologies that could be used by industry to lower 15 emissions further. They include use of individual cylinder 16 fuel control, retarded spark timing at startup, hydrocarbon 17 traps, and many others shown. Many of these are now in use 18 on selected models.

19 Based on our test results, staff concludes 20 that the proposed standards are feasible. This is 21 especially true given what expert automotive engineers can 22 achieve given their available resources and experience and 23 given that more than five years' lead time remains before 24 implementation begins. The flexible phase in provisions we 25 have provided provide eight years before the more difficult 22 1 to control models must comply. Based on their successful 2 track record and meeting the tough standards this Board has 3 adopted, we have no doubt the auto manufacturers will be 4 able to comply.

5 Also, as a historical note, automobile 6 manufacturers testified they were uncertain they could meet 7 the LEV or ULEV standards when adopted by the Board in 8 1990; yet today, ULEV compliant models are being sold in 9 California.

10 Turning now to the proposed evap standards,

11 feasibility was demonstrated by vehicle modification and 12 testing by ARB staff and through information and data 13 gathered from automotive manufacturers. The ARB test 14 programs involved more than testing of 20 vehicles. Shown 15 here is a vehicle placed in our evaporative test facility 16 enclosure which is located directly behind the back wall of 17 this room.

18 When a vehicle is tested, the enclosure is 19 completely sealed so that the evaporative test is conducted 20 on the whole vehicle. This is important to note because 21 the measured evaporative emissions include both non fuel 22 and fuel emissions. Examples of non fuel sources include 23 paint, sealants, interior trim, adhesives, and tires; while 24 fuel evaporative emissions result from canister losses and 25 the permeation of hydrocarbon vapors through fuel hoses,

23 1 joints, and plastic fuel tanks.

2 One of our test programs was conducted to 3 investigate potential methods of reducing evaporative 4 emissions from fuel sources. Total vehicle evaporative 5 emissions were reduced to .3 grams per test on average,

6 well below the proposed passenger car standard of .5 grams 7 per test. The average fuel and non fuel evaporative 8 emissions were estimated to be .1 and .2 respectively. As 9 you can see, the non fuel emissions are a substantial 10 portion of the whole vehicle evaporative emissions. Thus,

11 appropriate allowances in the proposed standards are 12 provided for these emissions.

13 I would like to note that the modification 14 made on the vehicles to reduce the evaporative emissions 15 were not production intended; however, they are analogous 16 to modifications that can be used by manufacturers on 17 production vehicles. For example, while our fuel hoses 18 were wrapped to reduce permeation vapors in the test 19 program, manufacturers could use low permeation hoses or 20 reduce the length of the hoses to meet the standards.

21 To further illustrate the viability of fuel 22 source emission reductions, a ' 98 Toyota Camry was modified 23 with production low permeation fuel hoses, better sealing 24 hose connections, and a low permeation fuel pump gasket.

25 Other modifications included the addition of a hydrocarbon 24 1 filter to capture engine breathing losses and a better 2 sealed fuel cap. With these evaporative system 3 improvements, the vehicle tested at .23 grams per test.

4 This is less than half the proposed standard.

5 Beside the improved technologies used in the 6 Camry study, staff has also identified a number of other 7 improvements to the fuel and evaporative systems that can 8 be used to reduce evaportive emissions. Many of these 9 potential technologies are already being used in production 10 vehicles today, although they may not be used concurrently 11 on the same vehicle to achieve the lowest possible 12 evaporative emission levels as a system. The types of 13 technologies include improvements aimed at reducing 14 permeation emissions from the fuel tank, evaporative losses 15 from the canister, and design modifications to reduce the 16 number of permeation sources.

17 Although the evaporative feasibility 18 demonstration as published in the staff report is 19 considerably robust, manufacturers continue to have 20 concerns regarding the evaporative data used to set the 21 stringency level of the proposed standards. To address 22 these concerns, staff conducted additional testing after 23 the publication of the staff report.

24 First, the Toyota Camry study was conducted 25 to address industry's concern that we did not use 25 1 production type components to demonstrate feasibility. In 2 that study, staff used production improvements to reduce 3 the evaporative emissions, and the vehicle evaporative 4 emissions were reduced sufficiently to comply with the 5 proposed standard with headroom.

6 A second industry concern was that there was 7 insufficient non fuel data to represent the different 8 vehicle models. As mentioned earlier, non fuel emissions 9 result from paint, interior trim, adhesives, and tires.

10 Since non fuel emissions are measured as part of the whole 11 vehicle evaporative emissions, an allowance in the proposed 12 standard is given for these emissions. Staff tested six 13 additional vehicles, and the test results were consistent 14 with the existing data set. Including industry 15 information, the non fuel emission data set covered 21 16 vehicle models and was used to ensure adequate non fuel 17 allowance in the proposed standards.

18 Finally, industry continued to comment that 19 the evaporative emission variability is so high that it's 20 difficult to duplicate emission results from one vehicle to 21 another. In response, five Toyota Corollas were recently 22 brought in for testing. The Corolla model was chosen 23 because it already complies with the proposed standard.

24 The test results showed that variability from vehicle to 25 vehicle was relatively low, and the headroom allowed in the 26 1 proposed standard more than sufficiently accounts for this 2 variability. This and previously described test programs 3 demonstrated that the proposed evaporative standards are 4 technologically feasible, especially given the lead time of 5 more than five years.

6 I'd now like to discuss some of the special 7 features of our proposed SULEV standard. In the past few 8 years, the ZEF requirement has been successful in spawning 9 a large variety of extremely low emission vehicle 10 technologies that are capable of achieving emissions very 11 close to the power plant emissions that occur from charging 12 battery powered electric vehicles.

13 Staff believes that allowing these 14 exceptionally clean vehicles to fulfill a portion of the 15 ZEF requirement would promote the continued development and 16 commercialization of high performance, battery powered 17 electric and zero emitting fuel cell vehicles while also 18 encouraging advanced technology vehicles with the potential 19 for extremely low emission performance.

20 For this reason, staff is proposing that 21 SULEVs that meet certain additional criteria would be 22 eligible to receive a partial ZEF allowance. The proposal 23 before you today provides additional flexibility to vehicle 24 manufacturers in meeting the ZEF requirements and will also 25 encourage development of a variety of near zero emission 27 1 technologies. It is important to note, however, that staff 2 is not proposing any revisions to the 10 percent ZEF 3 requirement.

4 In order to receive a partial ZEF allowance,

5 a manufacturer must meet a rigorous set of criteria which 6 are predicated on achieving equivalent emission performance 7 to a zero emitting vehicle. Here are some examples of how 8 the calculation works. In the first row, the gasoline 9 powered SULEV that meets OBD, warranty, and emission 10 standards at 150,000 miles and has zero evaporative 11 emissions but with no zero emission vehicle range would 12 receive a partial ZEF allowance of .2.

13 A natural gas SULEV meeting the same 14 baseline requirements would receive an allowance of .4 15 because it uses a cleaner fuel.

16 The gasoline hybrid SULEV with a 20 mile 17 all electric range capable of off vehicle recharging would 18 receive a partial ZEF allowance of .6.

19 A fuel cell vehicle with an on board 20 methanol reformer which has no NOx emissions could receive 21 a ZEV allowance of .7, while a stored hydrogen fuel cell 22 vehicle which is emission free could be eligible for the 23 full partial ZEF allowance of 1.

24 Finally, even though I've highlighted the 25 key elements of LEV II, there are several technical 28 1 amendments worthy of note. Staff has worked extensively 2 with industry to achieve consensus on these items. The 3 amendments include a substantial streamlining of the motor 4 vehicle certification process which reduces the 5 manufacturer's cost of compliance, a face lift to the smog 6 index label, protocol for vehicles utilizing direct ozone 7 reduction technologies, and updates to the test procedures 8 for ZEVs and hybrid electric vehicles.

9 One of the more unique modifications 10 concerns the protocol for direct ozone reduction 11 technologies. Staff is proposing to grant credits to 12 vehicles equipped with technologies that directly eliminate 13 atmospheric ozones. One such technology that would qualify 14 for credits consists of a catalyst coating applied to the 15 vehicle radiator  this so called " smog eating radiator"

16 Premair. Under the proposed protocol, a vehicle system 17 that is shown to effectively reduce atmospheric ozone, is 18 durable, and can be monitored by the on board diagnostic 19 system would be eligible to receive credit towards meeting 20 the hydrocarbon emission standards.

21 Now that I've discussed the technological 22 feasibility, I'd like to talk about the results of our cost 23 analysis. Our analysis includes our estimate of the 24 incremental retail cost per vehicle of the ULEV II exhaust 25 standards, the cost per vehicle of the evaporative 29 1 proposal, and finally the cost savings for CAP 2000.

2 Staff's cost methodology is the same as used 3 in other recent rule makings and includes variable,

4 support, investment, and dealership costs. Based on 5 staff's analysis, the average incremental cost of the ULEV 6 II compared to a ULEV I ranges from $ 71 for passenger cars 7 to $ 209 for a light heavy duty truck just under 8,500 8 pounds GVW. Staff focused on the incremental cost of a 9 ULEV because we anticipate that declining fleet average 10 requirements will call for nearly all vehicles to be ULEVs 11 by 2010.

12 Comparisons of 1990 estimates for the LEV I 13 program with actual costs for a 1998 model complying with 14 the LEV II standard has shown our cost estimation 15 methodology to be reliable.

16 This same cost methodology was used to 17 determine the cost of compliance of the evaporative 18 standards. The retail cost for evaporative standards is 19 estimated to be $ 25 per vehicle.

20 Although I have only briefly mentioned this 21 proposal early in the presentation, it is worthy of note at 22 this time because of the potential cost savings to 23 manufacturers. Staff has been working closely with US EPA 24 and the automotive industry to develop a streamlined motor 25 vehicle certification process coupled with an enhanced 30 1 in use compliance emission testing program commonly known 2 as CAP 2000. The goal of this program is to divert the 3 significant resources presently devoted to pre sale 4 certification and redirect them toward in use compliance in 5 order to provide greater assurance that the vehicles are 6 actually complying with the standards in use.

7 Based on staff's analysis, the potential 8 cost savings attributable to certification streamlining 9 range from a minimum of $ 36 million per year to a maximum 10 of approximately $ 57 million per year to the automotive 11 industry. With annual California sales in excess of 12 1.7 million vehicles, this amounts to an average reduction 13 of approximately $ 28 per vehicle.

14 Thus, the net cost impact of the proposed 15 ULEV II exhaust and evaporative standards minus the cost 16 savings for CAP 2000 would be about $ 107 per vehicle 17 averaged over a manufacturer's entire product line,

18 Finally, I'm going to discuss the air 19 quality benefits and cost effectiveness of the LEV II 20 proposal.

21 To estimate the emission benefits of LEV II,

22 staff used the emission inventory model EMFAC7G which was 23 approved by the Board earlier this year. The methodology 24 was performed for vehicles in the South Coast Air Basin 25 because this was the target for SIP Measure M2 and the 31 1 black box.

2 Based on our analysis, the total estimated 3 exhaust and evaporative emission reductions from LEV II for 4 passenger cars and light duty trucks and medium duty 5 vehicles are 7 tons per day ROG and 51 tons per day NOx in 6 the South Coast Air Basin in 2010. You can also see from 7 this chart that, as more of the vehicle fleet is turned 8 over, the benefits continue to increase to 20 tons per day 9 ROG and 130 tons per day NOx in 2020.

10 We are pleased to have developed a proposal 11 that exceeds the emission reduction commitment of SIP 12 Measure M2. As shown in the chart, we fall slightly short 13 of achieving the required ROG reductions shown in the blue 14 bar on the left but exceed the NOx emission reduction 15 commitment shown in the blue bar on the right.

16 The extra NOx emission reductions will help 17 make up shortfalls we have encountered in implementation of 18 other SIP measures and contribute to reducing the size of 19 the black box. Even with these reductions, we will still 20 have to search for additional reductions to meet our SIP 21 commitments.

22 Finally, staff estimates that the average 23 cost effectiveness of the exhaust and evaporative proposal 24 including CAP 2000 savings is approximately $ 1.00 per pound 25 of ROG plus NOx reduced with the range being approximately 32 1 $. 50 to $ 1.39. This is very cost effective. Industrial 2 measures, for example, typically are about $ 5.00 per pound 3 of emissions reduced.

4 This slide shows the cost effectiveness of 5 LEV II compared to other mobile source measures adopted by 6 the Board. As you can see, the cost effectiveness of 7 LEV II, shown on the right, compares very favorably to 8 other mobile source control measures.

9 There are several areas where staff was 10 unable to reach consensus with industry and other affected 11 interests. The main issues concern additional compliance 12 flexibility, the proposal for extended warranty 13 requirements, and the proposed evaporative standards. I 14 will discuss each of these concerns separately.

15 The auto manufacturers submitted an 16 alternative tailpipe proposal they maintain is more 17 feasible than the proposal before you today. This proposal 18 contains additional emission categories and less stringent 19 standards in almost every category, than those being 20 proposed by staff. In some cases, the standards proposed 21 by the auto industry are more than three times higher than 22 those proposed by staff, especially standards concerning 23 sport utility vehicles.

24 The automotive industry contends that their 25 proposal achieves the emission reduction goals of SIP 33 1 commitment Measure M2 and also contributes to the mobile 2 source emission reductions needed for the black box.

3 However, their proposal falls short of staff's proposal by 4 approximately 7 tons per day. This loss more than doubles 5 in 2020 as the fleet turns over.

6 Staff examined their proposal to determine 7 whether further modifications to our proposed emission 8 standards could be made that would accommodate the auto 9 industry's concerns while still maintaining the emission 10 reductions for LEV II. However, staff was unable to 11 further modify the LEV II proposal without seriously 12 impacting the emission reductions of LEV II.

13 A major reason for this is the flexibility 14 that is already built into the LEV II regulations. All of 15 the modifications considered by staff were affected by 16 these flexibilities and, if utilized, would further dilute 17 the emission reductions anticipated by our proposal. Based 18 on our demonstration of technological feasibility and 19 cost effectiveness, it is staff's conclusion that, given 20 the large amount of emission reductions needed to 21 demonstrate attainment of the ozone air quality standards 22 and the importance of further reducing ambient 23 concentrations of fine particulates, acceptance of the auto 24 industry proposal would adversely impact our ability to 25 achieve our air quality goals.

34 1 Nonetheless, staff did respond to many of 2 the auto industry's requests by including a provision 3 allowing 4 percent of the heavier trucks to certify to 4 laxer standards, a 150,000 mile only TLEV standard that 5 allows diesel vehicles to continue to participate in the 6 program while they pursue improved emission reduction 7 technology, an additional year for phasing in the standards 8 combined with a more flexible means of calculating the 9 phase in rate each year, a more gradual decline in the 10 fleet average NMOG for the truck category, and less 11 stringent in use compliance standards for the first two 12 years that a vehicle meets the new standards. This reduces 13 the risks of recall.

14 We believe the availability of these 15 flexibilities makes the changes advocated by the auto 16 industry unnecessary. In addition, staff worked with 17 industry during the comment period and is proposing further 18 modifications which are set forth on the table in the back 19 of the room.

20 Another issue of concern to independent 21 vehicle repair facilities is the proposed 150,000 mile 22 warranty requirements for SULEVs eligible for a partial ZEV 23 allowance and the eight year, 100,000 mile, high cost parts 24 warranty for vehicles certifying to the optional 150,000 25 mile standards. The aftermarket parts industry is 35 1 concerned that an increase in warranty requirements would 2 shift business away from independent repair facilities 3 towards the dealership.

4 However, staff believes that any shift from 5 the independents to dealerships would be slight, although 6 we do share the concerns of these small business owners and 7 have committed to work with them over the next 18 months to 8 address these issues. Staff believes that society will 9 significantly benefit from increased warranty requirements 10 because vehicles will be more durable and the number of 11 vehicles with malfunctions that go unrepaired will be 12 substantially reduced. This will have a significant,

13 positive impact on cost to consumers and air quality.

14 In general, the automotive industry has 15 commented that the proposed evaporative standards are too 16 stringent and that numerically higher evaporative standards 17 would be more appropriate. Their argument focuses on three 18 main issues.

19 First, industry contends that the in use 20 compliance risk of the proposed evaporative standards is 21 high. Evaporative emissions may occur at many point 22 sources in the fuel and evaporative system, which could 23 increase the likelihood of unanticipated problems in the 24 field. This may potentially result in the failure of the 25 evaporative standards in use.

36 1 Secondly, industry contends that existing 2 data on non fuel evaporative emission levels are sparse and 3 do not comprehensively represent all the different types of 4 vehicle models. Since an allowance in the proposed 5 standards is given for these emissions, industry argues 6 that the sparse data set does not allow an accurate 7 assessment of the non fuel allowance.

8 Finally, industry contends that, because 9 many of the potential technologies to reduce fuel 10 evaporative emissions are already being used on production 11 vehicles, few improvements can be made to further reduce 12 evaporative emissions.

13 The ARB test program shows that the proposed 14 evaporative standards are technologically feasible by 15 modifying the vehicle to use the best evaporative emission 16 components. However, to alleviate manufacturer concerns of 17 in use recall risk, it would be reasonable to provide 18 in use recall flexibility that allows manufacturers to 19 correct minor unanticipated mistakes and failures that 20 could occur with new evaporative designs during the early 21 years of introduction. This would give the manufacturers 22 time to conduct accelerated field tests to verify that 23 their designs are durable. This modification is described 24 in the 15 day handout; however, staff will be making 25 further modifications to that language.

37 1 Secondly, the current non fuel data set used 2 to determine the allowance in the proposed standards 3 consists of data from 21 vehicle models and represents 4 vehicles from the major manufacturers. Staff believes that 5 the data set is broad enough to give a representative 6 profile the majority of non fuel emission levels expected 7 on the vehicles.

8 Thirdly, staff's research shows that 9 practically no single vehicle has all of the best available 10 technologies in the fuel and evaporative system; therefore,

11 further reductions of evaporative emissions are possible as 12 confirmed in staff's test programs. Furthermore, some 13 models already comply with the proposed evaporative 14 standards, and 20 percent of current model year cars have 15 certified emission levels below the standards.

16 Finally, a technology review of the proposed 17 standards in the year 2000 will resolve any remaining data 18 issues.

19 Since the public release of the staff 20 report, staff has been continually dialoging with industry 21 to find additional consensus on the proposal. In response 22 to comments from industry, staff is proposing the following 23 additional modifications to the original proposal which 24 will be released for a 15 day public comment period 25 following this hearing:

38 1 ( 1) To allow a .02 gram per mile NOx credit 2 for current clean sport utility vehicles and heavier trucks 3 that meet the LEV I PC standards before 2004.

4 ( 2) The adoption of a less stringent in use 5 evaporative standard for the first three years of a 6 proposed standard. As I noted earlier, the text in the 7 handout will be further modified.

8 ( 3) To allow manufacturer to certify to a 9 lower partial ZEF SULEV exhaust standard to offset 10 evaporative emissions above the zero evap standard.

11 ( 4) To sunset the optional TLEV NOx and PM 12 standards, and in 2007 replace them with lower standards.

13 Staff is also proposing several technical 14 and clarifying amendments based on comments received from 15 industry and others, subsequent to the release of the staff 16 report.

17 In conclusion, staff believes that the 18 proposal before you today is not only technologically 19 feasible, but it is the most cost effective approach to 20 achieving our air quality goals. It reflects changes from 21 the original proposal to address many of industry's 22 concerns. Staff, therefore, recommends that the Board 23 adopt our proposal.

24 That concludes our presentation, and we'd 25 like to answer questions you have at this time.

39 1 CHAIRMAN DUNLAP: Okay. Thank you. I 2 particularly appreciate the fluid nature of the tailend of 3 the proposal. Mike, for you and Tom, getting back to us 4 about some of the changes that have been in that period.

5 What I think I'd like to do is ask 6 Mr. Schoning, Jim, would you please address the process 7 prior to today by which this item came before us and share 8 any concerns or comments you may have with the Board.

9 MR. SCHONING: Thank you, Mr. Chairman. I'd 10 be pleased to. As you heard from staff in some detail,

11 this measure stems from the fact that in 1990 California 12 adopted the most stringent emission and exhaust regulations 13 ever for light and medium duty vehicles in the 14 low emission program. Several developments since then,

15 such as the increasing population growth in vehicle miles 16 traveled and particularly changes in consumer taste 17 available and emission control technology, staff has 18 reached the conclusion that it is time for more stringent 19 vehicle emission standards.

20 You'll hear many opinions from witnesses 21 today, both pro and con, on the feasibility and 22 cost effectiveness of the proposal before you. The issues 23 are large, and they will have a comparable impact on the 24 future of California's air quality and its business 25 climate. My job here is to discuss how staff has worked 40 1 with stakeholders to bring the item.

2 A total of two workshops were conducted.

3 Staff aired their initial LEV II and CAP 2000 proposals in 4 a public workshop on December 9 and 10 of last year,

5 attended by more than 100 persons who listened to 6 presentations, in some cases made their own presentations 7 to ARB staff response to the initial proposal.

8 In attendance were the automobile 9 manufacturers  Ford, General Motors, Chrysler,

10 Volkswagen, Isuzu, Volvo, Mazda, Honda, Mitsubishi, Toyota,

11 Nissan, Mercedes Benz, Suzuki, Rolls Royce, Land Rover,

12 Porsche, BMW, and Subaru  as well as their 13 associations  the American Auto Manufacturers 14 Association, Association of International Automobile 15 Manufacturers, and Engine Manufacturers Association.

16 Other manufacturers present included Navstar 17 and Cummins. And other trade associations that sent 18 representatives were Manufacturers of Emission Control 19 Association, MECA, Western States Petroleum Association,

20 the Western Propane Gas Association, and the American 21 Petroleum Institution.

22 Research and development manufacturing and 23 consulting businesses were also represented by Inglehard 24 Corporation, Abacas Technologies, MCO Technology, Arcada 25 Southwest Research Institute, Methanex, Pureberg, and AC 41 1 Propulsion.

2 Environmental organizations in attendance 3 included the Natural Resource Defense Council, Coalition 4 for Clean Air and the Union of Concerned Science.

5 Since then  and that initial workshop and 6 continuing until this very hearing today, staff has met 7 with individual manufacturers and related trade 8 associations on each of the major components of the 9 proposal solicited, additional details relevant to 10 technological feasibility, and cost effectiveness.

11 Staff discussed the proposal many times with 12 the auto manufacturers and the trade associations just 13 mentioned as well as the Association of Industry and 14 Government for Emissions Research, Cummins, and with the 15 California Automotive Task Force comprised of the 16 after market repair and auto parts industries, service 17 station, repair shop owners, equipment manufacturers,

18 automotive teachers, and parts wholesale.

19 Staff met with environmental organizations 20 often, including Natural Resources Defense Council, the 21 Coalition of Air of Concerned Scientist, and Sierra Club.

22 And members of the California Environmental Dialogue also 23 met with the staff.

24 In addition, staff held focused meetings on 25 components of the proposal. Public meetings specifically 42 1 on the CAP 2000 proposal was held last April 28. Staff 2 continued meeting with an informal working group which was 3 formed, which included the United States Environmental 4 Protection Agency and the auto manufacturers.

5 As you heard from staff, they worked closely 6 with the Society for Automotive Engineers to develop the 7 hybrid electric vehicle test procedures, held at least 13 8 conference calls with the related SAE subcommittee in 9 addition to meeting with Toyota, Honda, Subaru and Nissan.

10 Final focused area was the evaporative 11 emissions component, and staff again met with the auto 12 manufacturers and their associations, AAMA and AIAM.

13 Altogether from December of last year, at 14 present staff recorded over 65 separate meetings with 15 interested and involved stakeholders.

16 A second public workshop was held on July 22 17 of this year. More than 150 persons signed in. The 18 purpose of this workshop was to obtain input on changes 19 staff made in response to input they received from the 20 initial proposal previous December. While all of the 21 stakeholders who attended the December workshop attended 22 this workshop, and associations who were not recorded as 23 attending the December workshop included Fiat, Renault,

24 Lamberguini, ARCO, Chevron, Gilbarco Inc., Artech,

25 Specialty Equipment Manufacturers Association, CSMI, Arrow 43 1 Environment, researchers from the University of California,

2 Partnerships for a New Generation Vehicle, Basch, Swedish 3 Office of Science and Technology, California Trucking 4 Association, the Advanced Lead Acid Battery Consortium, Cal 5 Start, the Auto Parts and Service Alliance, Separate 6 Energy, Los Angeles Department of Water and Power,

7 San Diego Gas and Electric, Edison EV, California 8 Electrical Vehicle Transportation, Coalition Methanol 9 Institute, the Automobile Club of California, Pansonic,

10 Samsung, California Manufacturers Association, South Coast 11 Air Quality Management District, and the San Diego Air 12 Pollution Control District as well as the California State 13 Energy Commission.

14 Staff evaluated all comments, in particular 15 those regarding technological feasibility and 16 cost effectiveness issues. Staff has continued to receive 17 and evaluate proposals following distribution of the staff 18 report.

19 Staff report itself was published 20 September 11, was mailed to more than a thousand 21 individuals, and was posted on our internet site. It was 22 downloaded more than 400 times at last count. And I would 23 share with you also what we received in the way of letters 24 and telephone calls. Our public information office has 25 logged some 847 calls with all but one supporting the 44 1 proposal. ARB has received a total of 4,394 letters of 2 support and some 238 letters of opposition.

3 As your ombudsman with a special charge in 4 federal statute to look to the interest of small business,

5 I would be remiss if I did not tell you that you will hear 6 the concerns today of the after market repair and parts 7 industries as to the possible detrimental impact upon their 8 ability to continue as our partners, depending upon how the 9 warranty aspect of the measure affects them. I know you'll 10 hear further testimony in that regard.

11 But in conclusion, we find staff has 12 conducted extensive outreach and assured participation by 13 the full spectrum of affected and interested parties.

14 CHAIRMAN DUNLAP: Thank you, Mr. Schoning.

15 I appreciate that overview.

16 What I'd like to do at this point is ask my 17 Board member colleagues if they have any questions of this 18 staff relative to the presentation. We will remind them,

19 as well as the audience, that we have some 45 people that 20 have signed up to testify; so I would ask the Board to 21 focus the early questions on essential points, and I'll 22 allow you during the course of give and take with the 23 witnesses that you can develop your questions further 24 there.

25 So we will start with Mr. Calhoun. Joe?

45 1 MR. CALHOUN: I'd like to focus my question 2 on technological feasibility. Since the inception of the 3 emission control, as best as I can remember, always had 4 different standards for trucks. And so it's important to 5 focus on the  I think, it's important to focus on the 6 technological feasibility. It's my understanding that you 7 chose a Ford truck primarily because it has the best 8 technology available; is that correct?

9 MR. CACKETTE: Yes.

10 MR. CALHOUN: You show an average of the 11 test results for seven vehicles. There were more testing,

12 obviously, than that, were there not?

13 MR. CACKETTE: Yes.

14 MR. CALHOUN: How many tests did you run 15 altogether?

16 CHAIRMAN DUNLAP: For the court reporter,

17 just introduce yourself.

18 STEVE ALBU: Steve Albu with the Air Board.

19 With the optimized system, we ran a total of 26 tests.

20 MR. CALHOUN: When you say the optimized 21 system, how many did you run altogether?

22 STEVE ALBU: That's a difficult question to 23 answer. I think something in the area of 180 tests,

24 developmental tests.

25 MR. CALHOUN: And you selected 7 tests out 46 1 of that 180?

2 STEVE ALBU: No, not at all. What we had to 3 do

4 MR. CALHOUN: Out of the optimized vehicles,

5 you select 7 tests; is that correct?

6 STEVE ALBU: Out of the 26 tests, we 7 selected 7 that represented the best fuel targeting that we 8 could achieve since we did not have the ability to modify 9 the fuel control to match the new catalyst. And I can 10 explain that later maybe as testimony goes forth.

11 MR. CALHOUN: And the average results as 12 presented in the chart  now, did you take into 13 consideration the fact that the manufacturers will need a 14 design level so that as call for  I'm not sure what you 15 call it. But a lot of the factors that were taken into 16 consideration  drivability, fuel economy  were those 17 things taken into consideration? How did you consider that 18 during the course of the testing?

19 STEVE ALBU: We definitely did. We targeted 20 about .035 NOx level which is what industry agreed was the 21 appropriate level to provide headroom to meet a .05 NOx 22 standard. And what we did was we performed the best tests 23 we could achieve in the about six month time period we had 24 to develop this vehicle, and then we provided the air 25 injection system. We provided preconditioning procedures 47 1 that achieved the lowest emissions possible without better 2 fuel control. And then we also listed, on the slides you 3 saw in the presentation, another 12 or so technologies that 4 can still be used in the industry in the eight years 5 remaining for the toughest vehicles to actually meet the 6 standards.

7 In fact, this is the first time really that 8 staff has ever taken a component like a catalyst system and 9 aged it. Back in LEV I, for example, we used unaged 10 components that had no real durability development on 11 them. We projected much further as to what could be done.

12 In this instance, we have actually used aged 13 components, although we did not have a proper fuel system.

14 It was just somehow available to us. We still demonstrated 15 emissions at the standard, and we also provided additional 16 explanations of how industry could improve upon those 17 results. One of the most effective things they can do is 18 just simply have fuel control that we would have liked to 19 have had.

20 MR. CALHOUN: How soon after the 21 introduction will manufacturers have to meet the ULEV 22 standard, the vehicle we are talking about? In the next 23 year?

24 STEVE ALBU: The standards begin phasing in 25 2004, and we expect the industry will typically certify the 48 1 passenger cars in the " T2" category which are the trucks,

2 primarily, will do the minivans, compact pickups first.

3 And we would expect vehicles like the Ford Expedition, the 4 F150 pickups, they're probably done in 2007.

5 MR. CALHOUN: We will hear from the 6 manufacturers later on.

7 STEVE ALBU: Sure.

8 CHAIRMAN DUNLAP: Matter of fact, Joe, they 9 are in the first five witnesses or so.

10 STEVE ALBU: We will be happy to respond to 11 those comments when they come up.

12 CHAIRMAN DUNLAP: One of the things that the 13 Board is going to be looking for is for you to explain some 14 main arguments that we may have some selective test data,

15 and we want to clear that up and talk about what we've done 16 to make it so the people can see clearly the depth and 17 breadth of what you've tried to do relative to what you've 18 proposed today.

19 Any other Board member questions?

20 MS. EDGERTON: Yes, I'd like to ask 21 questions.

22 CHAIRMAN DUNLAP: Sure, Ms. Edgerton.

23 MS. EDGERTON: I'd like to confirm that my 24 understanding of some key points is correct because we have 25 a lot of letters here from Californians who are concerned 49 1 that they may not be able to have the kind of vehicles they 2 want starting in 2004. It's my understanding from your 3 report that the staff feels confident that there will be no 4 reduction in the variety and performance of sports utility 5 vehicles and light duty trucks being offered in California 6 as a result of this proposal.

7 The only change will be that there will be 8 somewhere in the nature of $ 200 added to the cost of 9 producing the vehicle to pay for the catalyst, and that may 10 well be less because it doesn't happen until 2004; is that 11 correct?

12 STEVE ALBU: Well actually, you're correct.

13 There is virtually no reason  there is absolutely no 14 reason why there should be any loss of vehicle types.

15 Every vehicle model currently being sold now should still 16 be available. All we did, as I say again, was replace the 17 catalyst with one that was the same size, same 18 configuration as currently on the Expedition. We improved 19 the air injection system. We added an air injection 20 system, and then we outlined a number of other technologies 21 that could be added to the vehicle.

22 The catalyst increase in cost is around $ 50.

23 The rest of the components could go up to $ 200 when you 24 talk about adding in the cost of development, the 25 facilities and so forth, dealership costs. So no, there 50 1 should be no loss in vehicles. Ownership should be just 2 the same as it is today.

3 MS. EDGERTON: When you put it on the test 4 vehicles, the Ford Expedition, there is no loss in 5 performance?

6 STEVE ALBU: None at all.

7 MS. EDGERTON: Thank you.

8 MR. CACKETTE: I want to point out that that 9 car is sort of a worst case vehicle. So if the potential 10 is shown on that vehicle, then it should be even easier on 11 the other ones. And I think you can see that. We have a 12 mid size car out there, the Mitsubishi Galante, which meets 13 the 2004 standards right now in production.

14 CHAIRMAN DUNLAP: When you say worst case,

15 you mean generally category because of weight and that kind 16 of thing, not that it's a bad vehicle or anything?

17 MR. CACKETTE: Right. It's actually the 18 best technology, but it's in the most difficult 19 compliance type vehicle.

20 CHAIRMAN DUNLAP: We just

21 MR. CACKETTE: Thank you for correcting me.

22 I want to get out of here alive.

23 MS. EDGERTON: It is important to reassure 24 the public, particularly since we have so many people 25 relying on these vehicles, that they will still be 51 1 available and fully performing. Thank you.

2 CHAIRMAN DUNLAP: And I don't want to have 3 anymore back and forth on that right now because we are 4 going to hear from Ford themselves, and I don't want to 5 preempt their discussion.

6 If there is nothing else, I offer up that we 7 get another witness list. So what I'll do is  where are 8 we having people cue up, Shelby? Over on this side?

9 Okay. We have 45 witnesses, and I'll ask them  I'll call 10 off ten names or so. If you'll take your seat in the box 11 over there with Mr. Weiser.

12 Vic, raise your hand so they can see where 13 you are. There is Vic. Kelly Jensen, California Chamber 14 of Commerce. Vic Weiser, second up, from CCEEB. Mr. Till 15 Stoeckenius from Environ Corp. Kelly Brown from Ford.

16 Matt Kevnick from Toyota. Charlie Kitz from Chrysler.

17 Kevin Cullen from General Motors. Sam Leonard from General 18 Motors.

19 Sam, I'll let the two of you kind of tag 20 team together. I'll call you up at the same time.

21 Barbara Kiss from the American Automobile 22 Manufacturers Association. Greg Dana from the Association 23 of International Auto Manufacturers. Wolfgang Groth from 24 Volkswagen. Dick Shaw, Ram Products. Andy Frank,

25 Professor Frank from UC Davis. And Bruce Bertelsen. And 52 1 the last one will be Roland Hwang, Janet Hathaway, et 2 cetera.

3 So if I could get you all to move your way 4 towards that end of the room. Kelly, we will ask you to 5 come forward. Give me just a second for people to settle 6 down. The other witnesses, as seats open up, if you could 7 gravitate towards that side of the room, I would be 8 grateful.

9 I have a timer here that I used it, I think,

10 once in the four years I've been chairman. I prefer not to 11 use it today, but I'm going to ask witnesses to limit their 12 comments under five minutes. And if we get some people 13 droning on and if you're repetitive, I'm going to clip your 14 wings. So I don't want to hear the same argument over and 15 over. Suffice it to say, you can say, " As the previous 18 16 witnesses said, we feel this way," and leave it brief.

17 Kelly, you're up first. Welcome.

18 KELLY JENSEN: Thank you, Mr. Chairman and 19 Members. Kelly Jensen, representing the California Chamber 20 of Commerce and a new coalition called the Californians for 21 Realistic Vehicle Standards, a coalition with over 60 22 individuals who have engageed to write letters to the Board 23 and express their opposition to the LEV II staff proposal.

24 We believe that the staff proposal is 25 arbitrary and illogical and could have lasting impacts on 53 1 the economy. It's arbitrary because it requires standards 2 that go far beyond the Federal Clean Air Act. It's 3 illogical because it requires a full size truck hauling 4 heavy equipment to meet the same standards as a passenger 5 car half its size. Because it is not possible to achieve 6 the standards proposed by the staff proposal without 7 reducing weight, pay load, and towing capacity, there will 8 be a reduction in full size vehicles available to 9 consumers.

10 Fewer full size vehicles mean consumers will 11 lose the ability to haul loads and tow boats or they could 12 be forced to purchase more expensive, larger vehicles that 13 are not subject to the new emission standards. The only 14 way for industry to meet the new standards would require 15 25 percent of vehicles sold in California to run on 16 alternative fuels at an increased cost of $ 7,000 per 17 vehicle. This would affect all consumers, not just 18 light truck users.

19 In fact, the California Trade and Commerce 20 Agency estimates the cost of the staff proposal on 21 California business and individuals would equal 22 $ 1.87 billion over a five year period. That's over 23 $ 350 million a year. The California Chamber and the 24 coalition support an industry alternative that preserves 25 the functionality of full size vehicles and provides 54 1 90 percent of the desired emission reductions without the 2 cost to consumers.

3 Full size utility vehicles are the 4 commercial workhorses of California economy. This 5 statement is illustrated by members of our coalition who 6 have opposed the staff proposal. They include the Heating 7 and Air Conditioning Contractors' Association, the 8 California Building Industries Association, the San Joaquin 9 Farm Bureau, auto makers, and many individual businesses.

10 One letter of opposition sent to the Board by the Berry 11 Petroleum Company speaks directly about the impact of the 12 staff proposal on their company.

13 Berry Petroleum has over 45 pickup trucks in 14 its operation. They state that any added cost to new 15 vehicles would require the company to keep their vehicles 16 longer because it would be more cost effective to repair 17 rather than replace older vehicles. The letter concludes 18 with this comment, " The pickup is the lifeblood of 19 thousands of businesses, large and small, in California.

20 Boosting the price and forcing owners to keep their pickups 21 longer would only increase air emissions in California."

22 California is at an economic crossroads.

23 Taxpayers and businesses will be asked by the next 24 administration to invest in our schools and rebuild our 25 infrastructure. We welcome that challenge. But at the 55 1 same time, we are in an uncertain economic time. The 2 chamber believes that this staff proposal is the type of 3 rigid policy that will stifle economic growth and jobs.

4 Unless the economy continues to grow, there will be little 5 money to improve our schools and rebuild our 6 infrastructure.

7 Please keep that in mind as you thoughtfully 8 consider all the recommendations that you'll hear today.

9 And on a personal note, we just want to, from myself, I 10 want to congratulate the Chairman on his leadership 11 throughout the many years and look forward to working with 12 you in the future.

13 CHAIRMAN DUNLAP: If I could maybe ask a 14 question. One of the things  and I think you know 15 this  that we are concerned about is that you're 16 concerned. I mean, you're generally known throughout 17 before this Board unless their issue has really got our 18 attention. Having said that, I have a couple issues 19 relative to the statistics you cited. I just want to 20 understand their origin, and I've had a chance to read some 21 of the offhand pieces and other materials that you guys 22 have been putting out.

23 You talk about this 25 percent factor of the 24 larger sports utility vehicles being produced having to be 25 alternative fueled and the cost associated with that. I'm 56 1 a bit confused about that, and I kind of want to 2 understand. And I'm asking more for a dialect for you,

3 Tom, with Kelly on this point.

4 Kelly, where do those statistics come from?

5 What are your beliefs surrounding that?

6 KELLY JENSEN: I guess it comes from two 7 sources and sort of an overview of consumer choice. You 8 know, it's estimated and industry tells us that to produce 9 these vehicles is going to cost $ 7,000 more. It's clearly 10 not the consumer choice in California to drive an 11 alternative fuel vehicle. So we believe that anytime when 12 you take 25 percent of a product out of the supply or out 13 of the demand, you impact consumer choice which leads to 14 higher prices across the board. You have 25 percent of 15 your product sitting on the shelf that nobody wants to buy.

16 Clearly, there is going to be less supply which leads to 17 higher cost.

18 CHAIRMAN DUNLAP: I was in a very low 19 chair. Not that I needed to be towering above, I just was 20 lower. So excuse me. This is my last meeting. Indulge 21 me.

22 Tom, what is your feeling? Would we be, in 23 effect, voting for going off the fuel neutral position we 24 have and pushing people somewhere in the fleet that is 25 intentional? Is that where this is taking us?

57 1 MR. CACKETTE: No. We are absolutely 2 convinced there will be no model unavailability out of 3 this. If the statistic Mr. Jensen provides, that a quarter 4 of the vehicles or models would be unavailable, I guess I 5 would be the 61st member of his coalition. We don't see 6 it. We believe that the feasibility of the standards has 7 been proven on these larger trucks with gasoline, not with 8 alternative fuels. And I think it's important that, to my 9 knowledge, the issue of we can only do it with alternative 10 fuels, it would cost $ 7,000, has never come up in any of 11 the many workshops and interactions that Mr. Schoning 12 outlined for you.

13 CHAIRMAN DUNLAP: Is there something hidden 14 in the averaging scheme for the fleet and the breakdown 15 between what they do and what category that maybe we are 16 missing?

17 MR. CACKETTE: Well, I think the point would 18 be made if in fact one believed  and I think some of the 19 testimony will lead to that, that it is infeasible to meet 20 these standards for certain kinds of vehicles. And if it 21 is infeasible, then I guess it wouldn't be available. We 22 just soundly disagree with that because we think we have 23 demonstrated that the standards can be met, especially 24 given there are eight years of compliance time left for the 25 hardest to control vehicles.

58 1 But we do have other provisions,

2 flexibilities in the rule, which allow  you've got these 3 four categories of standards. And if you've got a tough to 4 control vehicle, then you tend to certify it in one of the 5 more lax categories and make one of the easier to control 6 ones in super type categories. That kind of averaging 7 helps. The slow phase in we have helps, which means you 8 get the full eight years versus five years to make those 9 vehicles comply.

10 And I just point out in 1990, when this 11 Board heard the LEV I Program, that the manufacturers got 12 up and testified a little bit differently than I think they 13 are going to testify today, and that was basically they 14 could do the TLEVs. But they had no idea how they were 15 going to do a LEV or ULEV car, but they would give their 16 best effort at it. And what you see today is for $ 100 17 incremental price, we have LEVs and now some ULEVs being 18 sold commercially exactly eight years later after the Board 19 adopted that standard.

20 I think the burden of proof here there has 21 been more evidence presented as the feasibility than there 22 was eight years ago, and I would expect the manufacturers 23 will end up responding exactly the same way.

24 CHAIRMAN DUNLAP: Kelly, not to quibble with 25 you about statistics and areas of concern because I too 59 1 would share if we were pushing people to that high of a 2 price jump and we are going to limit choices. I would be 3 worried about that as well. So we will let you off the 4 hook as well.

5 KELLY JENSEN: Clearly, there is a 6 disconnect between what the staff is recommending on cost 7 and what the industry is telling me. I think it's your 8 responsibility to sort of remedy that. And whether or not 9 the technology is out there, it may or may not be 10 responsible to, you know, leap forward on something that 11 just isn't there. And it would impact the economy in such 12 a devastating way.

13 CHAIRMAN DUNLAP: We will take that cue and 14 get to that as we go through. Thank you. Any other 15 questions?

16 We will go to Vic. Vic, we want to 17 acknowledge your compliant behavior, being over there in 18 the box before anybody else.

19 VIC WEISSER: There were no other seats.

20 You're so popular, John.

21 CHAIRMAN DUNLAP: Welcome. Glad to have you 22 with us.

23 VIC WEISSER: Thank you, Mr. Chairman and 24 Members of the Board. This is an honor for me to be before 25 you, and this is an incredibly important issue and one that 60 1 will surely set the legacy of this Board and the state of 2 California in years to come. I'm Vic Weisser. I'm the 3 president of the California Council for Environmental and 4 Economic Balance, CCEEB.

5 CCEEB is a coalition of organized labor and 6 family owned businesses like Chevron, Disney, Lockheed. We 7 cover most of the major players in California. And I think 8 it's really important that we make a special 9 acknowledgement to the incredible advances that we have 10 seen in the emission reduction technology over the last two 11 decades. It's astounding what the auto manufacturers and 12 the petroleum providers have enabled us to do in terms of 13 attacking the emission control problem.

14 So you might ask well, why do you need to go 15 further? And the answer is what Willy Sutton said when 16 asked why he robs banks. And the answer is because that's 17 where they keep the money. Well, the answer  the reason 18 why you have to go after these cars is that that's where 19 the emissions are. 50, 60, in some areas over 70 percent 20 of the emission pie is made up from mobile sources.

21 If we have any hope to achieve our emission 22 goals, we need to aggressively and smartly go after 23 reducing those sources. We still face an enormous problem,

24 particularly in the south coast area, in meeting existing 25 standards. And a vast majority of the state will face 61 1 enormous hurdles in meeting the new standards recently 2 established by the US EPA.

3 The truth is is that we have done as a 4 society virtually all the easy and less expensive things,

5 and that the things that we pick now we really need to be 6 smart. We can't go after these things with a shotgun. We 7 really have to do rifle shots. We have to work and think 8 smarter. We also need to go after every ton because every 9 ton counts. We can't just say oh, it's a couple tons here 10 or a couple tons there because somewhere in society we need 11 to make up those tons.

12 And it's been CCEEB's perspective that each 13 source, each sector of industry and society including the 14 public, needs to bear a proportionate responsibility to 15 reduce their emissions. We think that you ought to be 16 going after those reductions in the most cost effective 17 manner possible and, whenever possible, rely on market 18 forces to get there. But every part of California, every 19 part of this nation and ultimately the world is going to 20 have to take responsibility for those emissions that they 21 produce.

22 I presented you a letter from CCEEB that 23 outlines our position, which is supportive of the staff 24 proposal. We recognize and concur with the need of the 25 magnitude of reductions that the staff is proposing in this 62 1 rule making. We support reducing emissions from future 2 light duty trucks and SUVs. It's been the phenomenal 3 success of the SUVs that has thrown our movement toward 4 achieving our goals in somewhat danger.

5 We need something to do to reduce emissions 6 from that very popular class of vehicles. We agree that 7 vehicles designed for personal transportation should meet 8 the same emission standards. We support your efforts to 9 improve the durability of vehicle emission systems by 10 extending the useful life definition for cars and trucks.

11 Frankly, many, many people think you should have gone 12 further than that which the staff has proposed, but we are 13 glad you're moving in the right direction.

14 We believe that the proposed super ULEV 15 standard will encourage and assist manufacturers to 16 introduce cleaner vehicles, and we support your efforts to 17 ensure that there is no net increase in particulate 18 emissions from vehicles put into the California fleet.

19 Lastly, we believe that it's important that 20 consumers be aware of the differences in emission 21 performance of all the new cars, and we urge you to try to 22 improve the sticker that now appears on cars in a variety 23 of mostly unintelligible fashions.

24 Lastly, I want to wave in front of you a 25 letter which you've also received in testimony, a letter 63 1 signed by well over 20 members of the California 2 Environmental Dialogue, a group Jim Schoning made reference 3 to. This is a group of business leaders and 4 environmentalists and government leaders that we got 5 started about two or three years ago in the silly belief 6 that environmentalists and businesses could actually sit 7 down and talk about something and agree on something. And 8 I think it's noteworthy that one of the two major issues 9 that this group decided was important enough to engage 10 their efforts are mobile source emission reductions.

11 And this group has come together with a 12 series of principles that we think might be helpful for you 13 in terms of, A, showing you our support of what you're 14 doing and, B, guiding the efforts. I'm going to conclude 15 by recognizing the heavy burden that the Chairman and 16 Members have in facing this. This is not an easy issue.

17 You're going to hear a lot of people with a lot of 18 different opinions, and I suspect some of the words that 19 you're going to hear will approach, if not exceed, what I 20 understand as rhetoric.

21 I would urge the Board to have their antenna 22 out when they hear buzz words. Buzz words like arbitrary,

23 unnecessary, negligible, costly. Arbitrary in terms of 24 staff proposal is a word that, to me, makes little sense.

25 Arbitrary means without standard, without reference point.

64 1 Hundreds of hours, thousands of hours, hundreds of pages,

2 thousands of pages  this is not arbitrary. This is a 3 reasoned approach. You might not agree with it, but it's 4 certainly not an arbitrary approach.

5 Unnecessary? As I said, we need every pound 6 of cost effective emission reductions that we can get.

7 Negligible? No. Six tons is not 8 negligible. Eight tons is not negligible.

9 And costly? Yes, it is costly. There is no 10 free lunch in reducing emissions, and every Californian and 11 every business doing business in California is going to 12 have to pay more to ensure that this golden state goes 13 forward with a future that we can actually see.

14 And with that, thank you very much.

15 CHAIRMAN DUNLAP: Thank you, Vic. Any 16 questions? All right.

17 Till Stoeckenius.

18 TILL STOECKENIUS: Thank you very much,

19 Mr. Chairman, for struggling with that. I'm a senior 20 meteorologist from Environ Corporation, and I came here 21 today at the request of the American Automobile 22 Manufacturers' Association to present to you the results of 23 some research we have recently completed for them, and I 24 have some overheads. What I want to talk to you today 25 about is  I'm going to do this much more quickly than I 65 1 had intended  some research we did examining comparison 2 of ozone concentrations in Southern California on weekends 3 versus weekdays.

4 And why this is important is that we have 5 different patterns of emissions on weekends and weekdays.

6 And in particular, we have lower morning NOx emissions on 7 weekends. So it's interesting to see what happens to ozone 8 on weekends.

9 Before I get into those results, let me just 10 give you a very quick background on the ozone formation 11 process. As you all know, it's combination of hydrocarbons 12 and NOx in the presence of sunlight which produces ozone.

13 This is not a simple first order process. It's rather 14 complicated, and strange things can happen. In particular,

15 what's most important here is the hydrocarbon to NOx ratio.

16 At low ratios, reducing hydrocarbons will 17 reduce ozone, but reducing NOx will actually increase 18 ozone. This is well known from modeling theoretical 19 studies. On the other end at high ratios of hydrocarbons 20 to NOx, you see NOx will reduce ozone. This is illustrated 21 on the next slide where we have what is commonly referred 22 to as an ECMA diagram.

23 The curved lines here look like boomerangs,

24 represent lines of constant ozone concentrations, and they 25 are plotted against NO concentration on the left at the " Y"

66 1 axis on the left and hydrocarbon concentrations on the " X"

2 axis on the bottom. Ozone increases as you go up the plot 3 from the lower left corner to the upper right. And what 4 you're seeing here is that at high hydrocarbon to NOx 5 ratios, such as in the Bay area and other locations in 6 California, when you decrease ozone  I don't think we 7 have a pointer  as you decrease the NOx concentration,

8 you can actually go to higher ozone concentrations. It's 9 not until you've gone over this line of maximum ozone 10 formation that the decreases in NOx will actually result in 11 decreases in ozone.

12 We go to the next slide now. What we have 13 done here is taken advantage of sort of an experiment of 14 opportunity. We are looking at the change in ozone in 15 response to the changes in emissions between weekdays and 16 weekends. And what characterizes weekends, on the next 17 slide, is the significantly lower morning NOx 18 concentrations. This is the result, of course, of the lack 19 of a commute on weekend mornings. So we see large NOx 20 reductions in the mornings on the order of 30 to 50 percent 21 in the ambient data. At the same time, we're seeing 22 hydrocarbon reductions but not as large, only on the order 23 of about 20 percent.

24 And what happens then is that the 25 hydrocarbon to NOx ratio increases significantly on 67 1 weekends as compared to weekdays. At the same time, we 2 find that the ozone concentrations, the peek concentrations 3 in the afternoon, actually increase on the weekends. And 4 this leads us to some speculation about where we are on 5 that ECMA diagram that I showed previously.

6 On the next slide, here is what is going on 7 by day of week  Monday on the left, Sunday on the right.

8 The NOx concentrations  that's the top line  they build 9 up gradually but not significantly over the course of the 10 week. Then on Saturday, and especially so on Sunday, the 11 NOx decreases dramatically.

12 We go to the next slide. The result of this 13 reduction in NOx on weekend mornings is an increase in 14 weekend ozone concentrations. We've reduced NOx a lot on 15 weekend mornings. The hydrocarbons have come down only a 16 little bit. Ratio goes way up.

17 And on the next slide, you can see what 18 happens with ozone. Here we are in Azusa, a site with very 19 high ozone concentrations in the basin. This is 1986 on 20 the left; 1996 on the right. The top two lines are the 21 Saturday and Sunday concentrations of ozone, daily maximum 22 one hour concentrations. Bottom two lines are Tuesdays and 23 Wednesdays. You see that, after 1989 at this site the 24 concentrations of ozone on average have been significantly 25 higher on weekends. We can go to the next slide.

68 1 CHAIRMAN DUNLAP: Sir, I want you to relate 2 this back to what we are considering. Do you like the 3 regulatory proposal staff has, or it's going to hurt your 4 scenario? What do you want? You want us to be smarter. I 5 respect that. What is the bottom line?

6 TILL STOECKENIUS: The bottom line here is 7 to show you what is happening in a real world experiment 8 where you are reducing NOx. We know the LEV II standards 9 are very NOx heavy in terms of amount of emission 10 reductions that are occurring. Here is a case that we 11 experience every week, where we are reducing NOx 12 significantly, and look what is happening to ozone. This 13 is a correlation. It's not a cause and effect 14 relationship, but it is rather compelling. And that's why 15 I came here today to present it.

16 CHAIRMAN DUNLAP: What would you have us do 17 relative to this proposal?

18 TILL STOECKENIUS: I'm not here to suggest 19 one way or the other, sir, on what you would do here today.

20 CHAIRMAN DUNLAP: Just be aware of what is 21 happening, what we are pushing to the weekends, and perhaps 22 our regulatory actions are taking us somewhere that is 23 inadvertent.

24 TILL STOECKENIUS: That's correct.

25 CHAIRMAN DUNLAP: In conclusion, you wanted 69 1 us  is that it?

2 TILL STOECKENIUS: That is my conclusion. I 3 think you made it very well.

4 CHAIRMAN DUNLAP: I appreciate your taking 5 the time. If you can leave this, I'll ask staff get copies 6 of this. If you don't mind, leave it with us and we will 7 have a chance to peruse it. Okay.

8 I guess this gentleman has come some 9 distance to be with us. Mr. Kenny, any message? Any 10 interpretive message relative to the regulatory proposal?

11 MR. KENNY: Well, I think what he's 12 basically trying to propose to the Board is that the 13 Board's present proposal is before the Board today from the 14 staff, which does have a fair amount of NOx reductions in 15 it is, in their view, inappropriate, and we would disagree.

16 Actually, if you'd like to have some discussion about the 17 science, we do have technical experts here who can provide 18 responses to that.

19 CHAIRMAN DUNLAP: We will come back. Tom,

20 I'll just ask you guys to facilitate on this presentation 21 toward the end of the witnesses. Mr. Calhoun?

22 MR. CALHOUN: Mr. Chairman, I've discussed 23 this extensively with Dr. Holmes and a few others, and 24 there are other reports out which intended to show the same 25 things. So what I've encouraged our staff to do  I'm not 70 1 sure who is right or who is wrong here. There is a lot of 2 uncertainty, at least some questions. Let me put it that 3 way. So what I've encouraged our staff to do is get 4 together with the other interested stakeholders  like 5 EPA, the environmentalists, and the auto people  and take 6 a real good look at this.

7 NOx control is needed for other purposes.

8 What impact does the NOx control have on? If it adversely 9 effects ozone and you still need it for NOx, what is the 10 end game like? And I think this is something we need to 11 take a look at, and that's what I've encouraged our staff 12 to do.

13 CHAIRMAN DUNLAP: Joe, I think that the 14 Board certainly sat through  I can remember three or four 15 times in the last four years we have had presentations 16 about transport, time of day, emissions, inventories, work 17 that's been going on that Supervisor Patrick worked on in 18 the San Joaquin Valley. So there is a lot of action here,

19 and it's positive.

20 We are learning more all the time. But 21 having said that, I mean, we have a regulatory proposal 22 before us that is reducing emissions, and it's going to do 23 that, we believe. That's why we are talking about it. At 24 the same time, if there are inadvertent or consequences 25 that we are not sure of, we need to get those on the table 71 1 and deal with them. So that's why I'm going to ask staff 2 at the end to talk about this a bit. But this should not 3 drive  I don't want this kind of technical discussion to 4 drive deliberation today on the merits of this regulatory 5 proposal. Good point, Joe. We'll come back.

6 Kelly Brown from Ford, Matt Kevnick from 7 Toyota, and Charlie Kitz from Chrysler, and Sam Leonard and 8 his colleague Kevin Cullen I'll ask to come up. Kelly?

9 KELLY BROWN: You don't want us all up here 10 at once, I assume. It would be a cozy scene.

11 CHAIRMAN DUNLAP: By the way, I'll 12 acknowledge I've appreciated  and I'll say the same to 13 Sam  how seriously you all are taking this. I know this 14 is a big market for you, and I certainly will subscribe to 15 the best motives relative to your advocacy. I know you're 16 worried about this, and you've devoted a lot of time and 17 attention to that, and we respect that.

18 KELLY BROWN: Thank you. If somebody could 19 dim the lights, whoever the chief engineer of lighting is.

20 Mr. Chairman and Members of the Board, my 21 name is Kelly Brown. I'm director of vehicle environmental 22 engineering for Ford Motor Company. Ford is committed to a 23 role of providing continued reductions in emissions. And 24 before we go on to the rest of the discussions here this 25 afternoon, one of the unfortunate things that always 72 1 happens at a hearing is, when you still have problems with 2 the rule even though they may be minor compared to the 3 large number of areas you agree with the staff, you spend 4 all your time focusing on the negative. And I thought 5 before we do that, I'd spend a little time focusing on the 6 positive.

7 Ford was the first company to produce 8 vehicles that met California's super ultra low emission 9 vehicle standards. Shown here is a 1997 natural gas F250 10 pickup truck and also the Econolines, many of which are in 11 service in the state of California. Ford has been a leader 12 in sales of vehicles that operate on cleaner fuels, such as 13 CNG and also on ethanol.

14 Beginning with the 1999 model year, Ford 15 voluntarily made all of its sport utilities comply with the 16 low emission vehicle standards, not only in the state of 17 California and the states that have adopted them, but 18 across the US and Canada. So trucks, like shown here the 19 Explorer, the Expedition the much touted Expedition  the 20 staff did a really nice job on the tires on the ones out 21 there. I wish they would have gotten the ding out of the 22 bumper  and the Navigator, all are low emission vehicles 23 across the country. And as you've heard and you'll 24 probably continue to hear throughout the day, we have all 25 been flattered and have the dubious honor of the staff 73 1 picking our vehicles, because they are so much cleaner, as 2 their test bed for this rule making. And in fact, if I 3 didn't fear for my life, I'd probably say we are probably 4 the biggest cause of why we're here today.

5 Further, the 1999 Ford Windstar is certified 6 as a ULEV in California and also will be sold that way 7 across the US and Canada. Even though we produce some of 8 the cleanest vehicles available today, Ford continues to 9 look towards the challenges of doing even more in 10 California. And as I mentioned, we agree with the 11 overwhelming portion of what the staff has put forth and,

12 in some cases, we have even suggested going further from 13 the staff's suggestion.

14 However, since California vehicles have the 15 highest or the toughest emission standards in the world,

16 it's important, before setting those standards, that ARB 17 realizes what these technology levels are and evaluate the 18 amount of incremental benefits and risks where we are in an 19 unknown area. And you've also heard today we are going to 20 be dealing, and we are dealing, a lot in the area of 21 unknowns. Yes, the Ford Expedition is very clean. A few 22 years back, I don't think anybody, even the staff, would 23 have predicted that we would have gotten it down to those 24 low levels. We did so, by the way, without regulation.

25 Those are well  they are certified at about a quarter of 74 1 the level required by the standards they're certified to.

2 To take on some of the concerns that we had,

3 we worked with some of our competitors to try and develop a 4 proposal. It was addressed by the staff in their staff 5 report and briefly here this morning. I'm not going to go 6 through all of these numbers, but this is a cleaned up copy 7 of several literations. We have gone back and forth with 8 the staff as an industry to try and come to an area where 9 we felt comfortable that we wouldn't have product 10 disruptions and we wouldn't have severe consequences if we 11 failed to develop the needed technology to make up the 12 shortfalls from where we are today to where the staff would 13 like us to be. And I won't go through that. We can go 14 through it again if you want, but I think the staff 15 outlined their comments.

16 All I can say is we tried to make in this 17 latest document the fewest number of changes we could to 18 the staff proposal and still felt comfortable that, even 19 though there is a considerable unknown in some of these 20 numbers, that it was something we could go forward with.

21 CHAIRMAN DUNLAP: Kelly, could I offer a 22 suggestion?

23 KELLY BROWN: Sure.

24 CHAIRMAN DUNLAP: And I know you want to 25 paint a picture here, I'm sure, and talk about your 75 1 position. But I would be grateful if you would focus on 2 the three or four key issues that remain as you see it so 3 we can have a robust discussion about that.

4 But again, I don't want to shortchange you 5 relative to talking about a bigger vision. So if you can 6 focus on those key things, we will have a back and forth on 7 that, and I think it will be productive.

8 KELLY BROWN: I'll skip through these then 9 and highlight that we, even with the industry proposal, we 10 would achieve all of the requirements of the M2 box and 11 also 59 tons per day or a majority of what is required out 12 of the black box, and that was not just assigned to us but 13 assigned to everybody.

14 Also  and I think this is a key point,

15 Mr. Chairman, that we agree that all of the passenger cars 16 in the white part of the pie, all of the trucks in the blue 17 part of the pie  including our Expedition or, excuse me,

18 our Explorer, Mountaineer, our Villager, our Windstar,

19 minivans, Ranger pickup trucks  agree with the staff and,

20 in fact, have suggested further tightening.

21 The area of concern I think with all the 22 manufacturers that operate is in the yellow area, and it 23 comprises about 15 percent of the total vehicles. And even 24 there, we are not saying do nothing. We are saying we 25 can't go quite as far quite as fast as what the staff has 76 1 said.

2 CHAIRMAN DUNLAP: Can I ask, Kelly, on that 3 point

4 KELLY BROWN: This isn't coming off my time,

5 is it?

6 CHAIRMAN DUNLAP: No. Talk to us about

7 and I think the staff, I would hope they are perceived as 8 fair on this  the 15 percent number. Why do you think

9 obviously, I know that's the toughest nut to crack for you 10 guys, but why do you think it can't be done? Talk a bit 11 about some of the barriers that you're having in seeing 12 your way there.

13 KELLY BROWN: First of all, I've learned in 14 the years I've done this  the first time I testified 15 before this Board, Barry Nichols had your job  I've 16 learned to stop saying never. It's not in my vocabulary,

17 at least for the day. What I can tell you is today we have 18 very serious concerns about being able to meet the LEV,

19 ULEV, and certainly the super ULEV, especially for the 20 larger trucks to the right that have the biggest trailing 21 tow capability which usually means you put a taller axle 22 and bigger engine and everything on it, more weight, plus 23 the engine operates at higher speeds through the catalyst.

24 Those are our biggest concerns, and it's 25 those features that cause us to drive that. Typically, the 77 1 debate between us and the staff is they say, " We understand 2 that, but people don't use them that way all the time."

3 And our response is, " But if we sell them the vehicle that 4 has that capability, when they do want to use it, it has to 5 perform to that capability." And I think that is where the 6 debate really focuses.

7 CHAIRMAN DUNLAP: So the argument they may 8 not tow the boat every day, but once a month when they do,

9 they need to be able to do it is your argument.

10 KELLY BROWN: Correct. Skip through that.

11 We really did it. This chart here talks  the boxes in 12 the corner show where we would have to get for NOx and 13 hydrocarbons in order to comply. I'm trying to find the 14 arrow. For example, this is the LEV II hydrocarbon. This 15 is the LEV II NOx. In order to comply with that standard,

16 you have to get inside the box. In order to avoid a recall 17 or actually have them perform in use, that is what we have 18 to sign up to.

19 We have internal targets which are generally 20 about up on these kinds of numbers, roughly half of the 21 standard. So for development purposes for a Ford 22 calibrator to have to sign off, if you're signing off to 23 this standard, you wouldn't sign off if the test data were 24 right there. The test data has to be down in the small box 25 that I'll show you.

78 1 This is some of the data the CARB has. This 2 is the first CARB data. Then later data on one of our 3 Expeditions, we tried some using a similar catalyst.

4 Again, we are all around the outside of the box.

5 Eventually, the latest data that Mr. Calhoun and Steve Albu 6 were discussing, they got some. They got a few data points 7 down in the corner of the box here, which would give you 8 some comfort. But for a Ford calibrator, it's still not in 9 the area to have what we call sign off level data, and it's 10 nowhere near the ULEV and SULEV.

11 So what would you say about that? You'd say 12 with some time, we probably have a chance on the Ford 13 vehicles of getting the data down into this part of the 14 box, but it's going to take some work and some effort and 15 there is risk, based on the timetable, that we may not make 16 that.

17 CHAIRMAN DUNLAP: On that point, one of the 18 things that I've been proud of the staff for recommending 19 the Board  and we've embraced it  are these technology 20 review processes, you know, that we go through  we've 21 done it with ZEVs and other things  where every couple 22 years we will take a hard look with you, you know,

23 arm in arm looking at the data, figuring out where we are.

24 How does that set with you, us adopting the 25 proposal like it is, agreeing to this technology review,

79 1 looking at the data with you, assessing where we are at.

2 And if things need to be changed, changing it down the 3 road, but setting a tough standard, which you yourself said 4 you don't say never. But you know what I'm saying, Kelly?

5 Is there a way for us

6 KELLY BROWN: It's a risk, Mr. Chairman. If 7 it was SULEV that's out a few years, I'd say yes. Put that 8 down as a research objective if that's what you want us to 9 shoot for. That gets us working in house. This one here,

10 we are a little closer to being in the box at Ford now.

11 But the timetable, these are the ones you have to do 12 first. So it's a trade off between how much work do you 13 have to do and how much time do you have to do it, and 14 that's what we tried to reflect in our proposal.

15 The balance between us and the staff, we try 16 to push it out a little further and give ourselves in the 17 early part a bigger margin, and we accepted in return a 18 tougher ultimate standard.

19 CHAIRMAN DUNLAP: Okay.

20 KELLY BROWN: Again, here is the example.

21 That is the CARB data where it is now. In the blue box in 22 the corner is where a Ford engineer has to get that in 23 order to get sign off and release the calibration.

24 CHAIRMAN DUNLAP: On that sign off, that's 25 typical practice within Ford. I mean, you guys want that 80 1 below the standard sufficiently so you're protected from 2 recall.

3 KELLY BROWN: We used to have a very bad 4 in use track record, and I think the staff will admit we've 5 cleaned it up a lot, and that is how you do it.

6 CHAIRMAN DUNLAP: So the bottom line for you 7 there, just so I get it, is that you're concerned about 8 going along with this new standard because you can't 9 guarantee you can get there and you're going to put your 10 company at risk if you fail. That's the bottom line;

11 right?

12 KELLY BROWN: Yes. I can't come up here and 13 you'd never have enough data to prove you can't do 14 something. What you can say is we have got the best 15 technology available today sitting right out there with 16 those dirty jet skis behind it.

17 With that I think I'd stop before I get the 18 hook, and I'd like the opportunity to answer your 19 questions.

20 CHAIRMAN DUNLAP: Okay. All right. I have 21 a handle on what is at issue with your company, a big 22 ticket issue.

23 Ron, do you have a question?

24 SUPERVISOR ROBERTS: Just a quick question.

25 The problem with the largest trucks that you referred to,

81 1 you went through that quickly, and I'm unsure what will 2 those  what are some examples of largest trucks you're 3 having problems with?

4 KELLY BROWN: The larger vehicles, not just 5 because they're large, because of the capabilities they 6 have like trailer tow. When people order trailer tow, they 7 get a heavier suspension. It adds weight to the vehicle.

8 They get a different rear axle ratio so that you can tow 9 heavy loads so you can get the big trailer moving from a 10 dead stop. That causes the engine to operate at a higher 11 speed and put more exhaust flow through the catalyst. So 12 it's tougher to get the efficiency under that operation.

13 We also have to protect the catalyst from 14 temperature, and that's why we worry a little bit about 15 using the air strategy, the air injection strategy, that 16 the staff would use. I wouldn't say we'd rule it out, but 17 that would be our last resort because, when you put that in 18 too, you run the risk of aging the catalyst faster. In 19 order to achieve any of these standards, you have to keep 20 the catalyst at almost brand new condition. When we age 21 it, we have to make sure that, when it's out at 120,000 22 miles, it's still almost as efficient as when it was new.

23 When we first put catalysts on vehicles, we 24 were happy if it was 80 percent at 50,000 miles. Now we 25 have to be in the high 90' s or else we fail. So not 82 1 insulting the catalyst is the biggest risk we have.

2 CHAIRMAN DUNLAP: Mr. Parnell?

3 MR. PARNELL: Kelly, about the argument that 4 in the event you meet the standards that staff has proposed 5 on some vehicles, that will push the marketing into heavier 6 vehicles so that the job can actually be done  do you 7 have any comment about that, whether it changes the dynamic 8 of what actually happens in the market and how that might 9 affect air quality?

10 KELLY BROWN: You mean if we don't offer the 11 types of vehicles like an Expedition, how many people would 12 go to a bigger vehicle? Is that the question?

13 MR. PARNELL: I'm not talking about not 14 offering, but I think it was suggested by Kelly earlier, or 15 who testified? I think it was the Chamber's testimony 16 that, in the event these cars had to meet the standard, it 17 could affect the performance and, therefore, you may push 18 people who might otherwise buy these cars into bigger 19 heavier vehicles and thus affect overpowering.

20 Do you have a sense of that?

21 KELLY BROWN: To me, we learned a lesson 22 about drivability. If it doesn't drive right, we just 23 won't release it. The bigger risk would be that you'd 24 limit trailer tow. If the full trailer tow package caused 25 you to put in, I think we put on 373 axle. If you couldn't 83 1 calibrate that and you drop the axle ratio down to do that,

2 you'd restrict the amount of trailer tow. And one of the 3 things that has happened through the years as we did that 4 on cars, people went to light trucks, as we called light 5 trucks used to be up to 6,000 pounds. Then it got moved to 6 8,500.

7 Some people, if you do take away an axle or 8 something that it's what they need to get their trailer 9 tow, you might move somebody out of an F150 or 250 into a 10 F350 or something like that, a much bigger truck. They 11 keep chasing it. That has happened.

12 CHAIRMAN DUNLAP: Dr. Friedman?

13 DR. FRIEDMAN: Mr. Brown, you showed us by 14 your overlays the progressive improvement that you're 15 achieving. I need to know about the time course between 16 what currently exists, a couple of points in the lower 17 optimal box, and the one before that? What is the duration 18 between those?

19 KELLY BROWN: Of the data set, most of these 20 were run pretty quickly. Probably in the last six to eight 21 months, Steve?

22 STEVE ALBU: About six to eight months.

23 DR. FRIEDMAN: So in the last six months,

24 improvement between the next to the last and the last?

25 KELLY BROWN: We didn't go through our full 84 1 development and all that and make sure it was okay and the 2 catalyst temperatures were all right. We were trying to 3 work with the staff.

4 CHAIRMAN DUNLAP: Supervisor Roberts?

5 SUPERVISOR ROBERTS: Kelly, one more 6 question. The Chamber made a statement that the vehicle 7 costs could increase by as much as $ 7,000 per year. Is 8 that something you would strongly associate yourself with?

9 That number, is that something that you're wondering where 10 they got it?

11 KELLY BROWN: I think and it's always risky 12 to guess what somebody elses number is

13 SUPERVISOR ROBERTS: I'm wondering if 14 somehow you would have made that same projection?

15 KELLY BROWN: I would hope if we got up to 16 $ 7,000 on gasoline powered products, and I realize there 17 may be a different board when we have to come back and ask 18 them to fix some things that you might do today  it 19 wasn't a shot. It's a risk. It's a fear in my mind.

20 CHAIRMAN DUNLAP: So how are we looking,

21 Kelly?

22 KELLY BROWN: I'll call you in a couple of 23 years. I lost my train of thought now.

24 SUPERVISOR ROBERTS: The question is how,

25 representing your company, do you associate yourself 85 1 strongly with that $ 7,000?

2 KELLY BROWN: The $ 7,000 would be a good 3 cost, not necessarily price, but a good cost for the 4 natural gas vehicles that I showed in there. It's mainly 5 tank cost. We are trying to promote those sales; so we 6 don't charge all that. We take some of that out of our 7 profit, but the natural gas SULEV pickup trucks, $ 6,000 to 8 $ 8,000 is probably a good tank price.

9 SUPERVISOR ROBERTS: I guess maybe as I 10 understand this, this was a suggestion as to what it might 11 cost us to not necessarily go to natural gas but to use a 12 regular gas. Would you expect that it's going to cost 13 $ 7,000 a unit?

14 KELLY BROWN: On gasoline? I don't know 15 what  if I was going to spend $ 7,000 on gasoline, I think 16 I'd put it into something else.

17 SUPERVISOR ROBERTS: Okay.

18 CHAIRMAN DUNLAP: Okay. Kelly, I think 19 that's it. Thank you. I appreciate it. Sorry to make you 20 readjust there, but it helped us focus.

21 KELLY BROWN: Thank you and good luck on 22 your last hearing.

23 CHAIRMAN DUNLAP: Thank you. Matt Kevnick 24 from Toyota, and then I'm going to  not that we are 25 dragging or anything, but we need to pick it up a little 86 1 bit. I've got a few witnesses that have got some time 2 pressure. I'm going to ask for some of the others to yield 3 to them. So I'm going to ask Manuel Cunha and I think 4 Peter Welch if they are around close to come up here. I'll 5 let them get up there because of time pressure.

6 MATT KEVNICK: Understood. I'll be brief,

7 Mr. Chairman.

8 CHAIRMAN DUNLAP: Okay.

9 MATT KEVNICK: My name is Matt Kevnick. I 10 am a certification regulatory manager for Toyota out of 11 Ann Arbor office, but I'm speaking on behalf of AMA and 12 AIM. And I'd like to address a few comments regarding the 13 LEV II evaporative emission proposal.

14 We appreciate the opportunity to continue to 15 work with staff through the development of this evap 16 proposal and would very much appreciate the opportunity to 17 continue to do that. And I'd also like to publicly thank 18 CARB with tongue and cheek also for giving Toyota the 19 recognition of having outstanding systems.

20 They have used, as we heard this morning,

21 the Camry and vehicles as part of their benchmarking study 22 for determining evap standards. But the message I'd like 23 to bring today, which is analogous to this picture, is that 24 while today's evap proposal affects more than just two or 25 three star performers, it affects our full product lineup 87 1 as well as the rest of the class, our competitors as well.

2 First a little background. And don't panic,

3 I'm not going to go through this chart. What I really 4 liked to point out is that Toyota approves their evap 5 system design from a systems approach, and fundamentally 6 all our systems are alike across our lineup. The main 7 thing I want to say here is that, from technology 8 standpoint, we employ what we feel is probably the best 9 technology capable for these systems.

10 So how good are our systems? This chart 11 here is a representation of the Toyota certification data 12 for 1998 model year. And if you could kind of focus on the 13 left side of the chart, for this is data for the current 14 2 gram enhanced evap system standard. And as is typical,

15 we employ a 50 percent compliance margin or headroom margin 16 and come up with a design target of the 1 gram. The 17 clustered dots you see below that is our actual data from 18 our certification vehicles, and a couple models are pointed 19 out  the SC300 being the bad guy, I guess; and the star 20 performers shown below, the Camry and the Corolla.

21 If you then direct yourself to the right 22 side of the chart, the dark line is the .5 gram standard 23 that CARB is currently proposing. While if we approach it 24 as we do today, the design target is shown by the dotted 25 line. And what you're basically asking us to do is take 88 1 our range of product line of data and compress it into that 2 small area shown below the dotted line in the shaded bar 3 shown as background. And I might point out that the range 4 where if you took an electric vehicle and tested it, that's 5 where those vehicles would fall as well.

6 Some question is why do we have such a 7 difference among our product lineup? Well, the first row 8 identifies several vehicles that we had seen on the 9 previous chart, and second row is the actual numbers. The 10 Corolla and Camry, the star performers; and the bad guy in 11 the far right, the SC300.

12 You begin to look at parameters that might 13 affect evap performance. You start looking at what is 14 different. Well gee, there are some subtle differences,

15 but nothing really strikes us as being significant in terms 16 of things we might want to figure in order to get the bad 17 guys to perform like the star performers. What I really 18 want to say here is, at this point, we are really not sure 19 how to get the rest of our lineup to look at the star 20 performers.

21 But without ignoring the current work that 22 staff had done and throughout discussions, we admit that 23 their data we agree with. There are some potential 24 opportunities for improvement. And this chart kind of goes 25 through some of the things in terms of our systems, where 89 1 we think there may be some opportunity for improving our 2 system. Maybe the big ticket item at the moment that comes 3 out is a carbon impregnated air filter, something that ARB 4 staff had used in their studies. Some of the things we 5 have already adopted into our system, and quite frankly,

6 some of them we just don't see as production feasible.

7 So kind of in summary what I'd like to say 8 is we see ARB staff's work on evap as a good starting 9 point. We don't disagree with the results that have been 10 made public, but we don't think they present all the 11 answers, just as I'm here to say that we don't think we 12 have the answers yet. We don't feel, frankly, that picking 13 one or two star performers is a prudent way to develop 14 standards that will affect the rest of the industry. We 15 will learn more as we gain more experience with developing 16 our systems, and we recognize there are needs to continue 17 to improve our systems.

18 However, today we can't say how we are going 19 to get there. And if I had to venture a guess, trying to 20 fit our product lineup into that small region, as you saw 21 in the other chart, might even suggest we may be forced to 22 limit our vehicle model lineup to the California market.

23 Thank you very much.

24 BARBARA RIORDAN: Let me thank the speaker 25 particularly now of his mindfulness of the time. Are there 90 1 any questions by the Board of this particular speaker?

2 Seeing none

3 MR. CALHOUN: Are you aware of what the 4 staff did in order to meet and develop their evap standard?

5 MATT KEVNICK: You mean the work they had 6 done?

7 MR. CALHOUN: Yes.

8 MATT KEVNICK: We worked kind of closely 9 with them and exchanged information, trying to explain our 10 systems and technology. So we have had a pretty good 11 understanding.

12 MR. CALHOUN: And you agree with the numbers 13 they came up with?

14 MATT KEVNICK: We can accept the numbers.

15 It's a matter of integration, how to apply them to our 16 future product line.

17 MR. CALHOUN: But you're not sure whether or 18 not you can, in fact, meet that number that they propose?

19 MATT KEVNICK: Right. Some of the 20 technologies on the chart that we showed previously 21 suggested. Those bad actor is the kind of thing that staff 22 have employed in some other studies.

23 BARBARA RIORDAN: Mrs. Rakaw?

24 MS. RAKAW: Yes. Your statement regarding 25 the California market, can you tell me approximately what 91 1 percentage of the California market you have? Do you have 2 any idea?

3 MATT KEVNICK: 18 percent.

4 BARBARA RIORDAN: Mr. Roberts?

5 SUPERVISOR ROBERTS: Mr. Kevnick, did you 6 suggest a figure of $ 7,000 additional cost per each vehicle 7 for your company?

8 MATT KEVNICK: No.

9 SUPERVISOR ROBERTS: Did you come up with 10 anything like that?

11 MATT KEVNICK: Quite honestly, no.

12 SUPERVISOR ROBERTS: We will find who did 13 it.

14 BARBARA RIORDAN: Thank you very much.

15 MR. CACKETTE: Can the staff make one 16 comment on this?

17 BARBARA RIORDAN: Yes.

18 MR. CACKETTE: With that chart up there,

19 this data sort of bothered us when we first saw it, and we 20 have gone out and done this additional vehicle modification 21 and testing since the report came out. The two things I 22 want to point out is, where you see the arrow that says 23 Camry at roughly .4 and the one we tested was at .5, we 24 took the absolute best hosing systems and seals we could 25 find and put it on that Camry. It was at .5. And when we 92 1 were done testing, it was at .2.

2 Second thing is we went out and got  just 3 recently last week, we went out and got a Lexus and brought 4 it in. And we were trying to figure out why did the 5 Lexus  it's the same family as the one up there almost at 6 1  and we tested and it came at .3 without any 7 modifications. It looks like it's got a good system. So 8 why they have certification data which I think is what is 9 shown there that was the kind of high flyer did not agree 10 when we got a production model, a rental vehicle and 11 tested. It was much lower, much nearer the standard.

12 So I don't think  there is still some 13 mystery as to why that specific data points so high, but I 14 don't think it is quite as mysterious as we had thought.

15 BARBARA RIORDAN: I appreciate that. Thank 16 you very much. We are going to go on to Mr. Charlie Kitz 17 from Chrysler. And in recognition of time issue,

18 Mr. Welch, you'll be next.

19 Would you like the lights on?

20 CHARLIE KITZ: No, that's fine. I want to 21 thank the Board for the opportunity to represent this very 22 critical issue, and can we have very comprehensive 23 testimony that has been prepared and provided to the 24 staff. I'm not going to go through that in the interest of 25 time today. It's here on the disk. We are going to have 93 1 to flip through quick, but I understand.

2 What is your team, first of all. Let me 3 just state broadly that Chrysler is supportive of the 4 California's air quality, as we understand that. We 5 further recognize the fact that the industry  of Chrysler 6 in particular  is going to have to be a major player in 7 terms of substantial part of clearing that path, and we 8 accept that responsibility willingly.

9 We do indicate, however, as it's been said,

10 that trucks should provide some greater emission reduction 11 and also that trucks should provide greater reduction in 12 the how soon to do that and how it's done. But in 13 principle, we support all of that. In addition, I just

14 I guess we are not there.

15 Let me just continue in the interest of time 16 that there are three things that Chrysler would like to 17 talk about specifically and not comments that are redundant 18 that were said before. First of all and most importantly 19 is that fuel quality must be improved concurrent with the 20 emission reductions. We are saying that for us to be 21 capable of achieving these low emission standards, we have 22 to have the fuels at the same time. That's absolutely 23 critical.

24 We also recognize some flexibility has been 25 provided by the staff, but we believe more is required

94 1 specifically, that we be allowed plus NOx averaging as a 2 sum and also that the optional emission standard be 3 applicable at only 150,000 miles only, not the 50 and 120 4 categories and also to receive supplemental fleet average 5 and credits for those vehicles.

6 So let me just flip right on through to the 7 end of the fuel quality. I'll just do a very quick 8 summary. California has been the leader in the advance 9 fuels, and we recognize that. As we said, further 10 improvements in fuel quality are necessary to enable 11 compliance with either the ARB's proposal or the 12 manufacturers' alternative. Whatever proposal is adopted,

13 we believe fuels are necessary so that we request the Board 14 to fuel equality in aiding manufacturers to comply with the 15 LEV II standards. And also, as we said earlier, that these 16 standards precede or be concurrent with the availability of 17 the timeliness of new standards.

18 I'm going to pass through the rest of the 19 fuel comments. You only want what is very critical. What 20 I wanted to talk about is that cars themselves, that the 21 fuel requirements are the single most important thing in 22 terms of air quality that they've ever achieved.

23 3.5 million vehicles off the road, and we think further 24 improvements, therefore, are very, very critical.

25 They said there is no single measure in our 95 1 history reduced application, but a larger amount in such a 2 brief period of time going on now to a second item. That 3 is partial ZEF credits. As you know, the Air Resources 4 Board has proposed the credits for very low emission 5 technologies to provide flexibility for this ZEV mandate.

6 The proposal allows manufacturers to produce and sell 7 electric vehicle substitutes.

8 Now, we think these are laudable goals and 9 we appreciate the flexibility that they provide but,

10 nonetheless, we should have serious concerns. First of 11 all, the proposal continues sales mandates which requires 12 manufacturers to sell but does not require customers to buy 13 those vehicles. This is a fundamental principle on our 14 part. We cannot pose mandates in any form as this 15 interferes with the free market.

16 The second, none of the proposed vehicle 17 substitutes have any volume sales potential by the 2003 18 timetable that has been established. Specifically, here is 19 a chart that just summarizes will these things have sales 20 potential of a technically feasible and also do they have,

21 more importantly, buyer acceptance. Will people buy these 22 vehicles in the volumes that are projected, and I'm not 23 going to go through all the details.