BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA, JR. BUILDING CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY CENTRAL VALLEY AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA FRIDAY, MARCH 28, 2003 8: 30 A. M.

JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 ii APPEARANCES BOARD MEMBERS Dr. Alan Lloyd, Chairperson Dr. William Burke Mr. Joseph Calhoun Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Professor Hugh Friedman Mr. Matthew McKinnon Mrs. Barbara Riordan Supervisor Ron Roberts STAFF Ms. Catherine Witherspoon, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Mike Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Walsh, General Counsel Ms. Analisa Bevan, Manager, ZEV Implementation Section, MSCD Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Craig Childers Mr. Bob Cross, Chief, MSCD Mr. Tom Jennings, Senior Staff Counsel PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 iii APPEARANCES CONTINUED STAFF Mr. Jack Kitowski, Chief, On Road Controls Branch, MSCD Mr. Chuck Shulock, Program Specialist, MSCD ALSO PRESENT Mr. Tim Carmichael, Coalition for Clean Air Mr. Tod Dipaola, Kirsch Foundation Mr. Tom Dowling, Self Mr. Greg Hanssen, PEVDC Mr. Doug Korthof, Self Mr. William Korthof, Self Mr. Bill Mason, Self & PEVDC Mr. Charlie Peters, Clean Air Performance Mr. Jerry Pohorsky, The Pohorsky Group Ms. Lisa Rosen, Energy Efficiency Mr. Dan Santini Ms. Sandra Spellliscy, PCL Mr. V. John White, Sierra Club PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 iv INDEX PAGE 03 2 4 1 Staff Presentation 2 Mr. Charlie Peters 10 Mr. Doug Korthof 13 Mr. V. John White 16 Mr. William Korthof 25 Ms. Lisa Rosen 28 Mr. Jerry Pohorsky 31 Mr. Greg Hanssen 35 Mr. Bill Mason 38 Mr. Tom Dowling 41 Mr. Dan Santini 44 Mr. Todd Dipaola 48 Ms. Sandra Spelliscy 52 Mr. Tim Carmichael 57 Discussion and Q& A 60 Adjournment 143 Reporter's Certificate 144 PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. The meeting of 3 the California Air Resources Board is now in session. And 4 would you please come to order. This is a continuation of 5 yesterday's item on the low emission vehicle program.

6 And we will continue on that program.

7 Ms. Witherspoon, do you want to say anything at 8 this time?

9 EXECUTIVE OFFICER WITHERSPOON: Yes, Dr. Lloyd.

10 We thought It might be useful for the Board, before we get 11 into this morning's testimony to summarize some of the 12 comments that you heard yesterday.

13 In particular, the specific numerical proposals 14 relating to the post 2009 model year targets for ZEVs.

15 And so if you'll indulge the staff for a moment, we're 16 going to present a chart comparing those different 17 proposals and explain some of the significance of them.

18 We will of course come back to this at the close of 19 testimony as ask you get into a broader discussion.

20 And we also will have copies available of this 21 chart for members of the audience at the back table. I 22 believe those copies are either being made now or will 23 shortly be available.

24 CHAIRPERSON LLOYD: I see it. We just got one 25 board member who is not here. I know Mr. Calhoun is here.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 2 1 Dr. Burke, I think, is on his way. Dr. Friedman will not 2 be here. And Supervisor Patrick. So we've just got one 3 board member missing. So it's probably fine to go ahead.

4 EXECUTIVE OFFICER WITHERSPOON: Shall we proceed?

5 CHAIRPERSON LLOYD: I think to proceed as long so 6 you've something for Dr. Burke.

7 EXECUTIVE OFFICER WITHERSPOON: We will be 8 revisiting it again when we get to the Board discussion 9 later.

10 CHAIRPERSON LLOYD: I think it would be helpful.

11 Do my colleagues agree? Because I think it's  certain 12 of the proposal has ramifications which need to fully 13 understand before we take a vote, give us some chance to 14 talk about it.

15 Thank you.

16 EXECUTIVE OFFICER WITHERSPOON: Mr. Shulock is 17 going to present the comparison.

18 VEHICLE PROGRAM SPECIALIST SHULOCK: Good 19 morning, Mr. Chairman and members.

20 Could we bring the slide up, please.

21 ( Thereupon an overhead presentation was 22 Presented as follows.)

23 VEHICLE PROGRAM SPECIALIST SHULOCK: What we'd 24 like to do is walk you through some of what you heard 25 yesterday to try and frame the issues a little bit so you PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 3 1 can have them in your mind as you're going through the 2 rest of the testimony this morning. As Ms. Witherspoon 3 indicated, this will be revisited before you begin your 4 final discussion, but we thought it would be helpful to go 5 through this now.

6 What this shows are the various proposals that 7 have been discussed with respect to the 2009 and beyond 8 time period. So the proposals  our original staff 9 proposals an approach that increases that 10 fold for the 10 various phases. The Cal ETC proposal, this is what Dave 11 Modisette spoke to. The Union of Concerned Scientists 12 that was presented by Jason Mark and then the South Coast 13 Air Quality Management District Proposal.

14 And what we show for each of these is for three 15 different time periods 2005 through 2008, 2009 through 11 16 and 2012 through 14. What would be the number of fuel 17 cells equivalent vehicles that would be required for each 18 of those in those time frames. We also then have a 19 cumulative total and then some other issues that I'll get 20 into in a second.

21 Looking just at the numbers, on our staff 22 proposal, as you know doubt recall, we recommended 250 23 vehicles in that initial timeframe with the latter time 24 frames, the later time frames to be determined by your 25 board based upon  or following input from the technical PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 4 1 advisory panel.

2 The 10X proposal, as we describe it here, simply 3 starts with that 250 number and multiplies it by 10 fold 4 each time. The rationale for this approach, as we 5 discussed yesterday, and I recognize it wasn't 6 particularly persuasive to Board Member Calhoun it seemed.

7 But anyway the rationale that we had was that these appear 8 to be the developmental phases that are followed in 9 technical developments of this type.

10 The same logic underlies the DOE proposal, which 11 is not up here, but, you know, similar in some ways. But 12 the same logic of progression through stages underlies the 13 DOE proposal which was put together in careful 14 consultation with the automakers.

15 So the logic behind this is really based on this 16 notion of a progression through the various stages. On 17 the Cal ETC proposal the recommended 500 vehicles in that 18 initial period, a total of 2,800. And the next one 19 22,400.

20 The rationale behind that is also a progression 21 based on a different approach. Looking at theirs, it 22 looks  it appears that what they do is just double the 23 number each year. So if you take individual years, it 24 goes for 400 to 800 to 1,600. So it's a similar kind of 25 ramping up, just expressed on a year by year basis rather PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 5 1 than ours in groupings. But it's not, at least as far as 2 we can determine, it's not based on the same kind of stage 3 logic that would be behind the 10X.

4 The Union of Concerned Scientists proposal again 5 starts with 500, then goes to 5,000 and 30,000. The 6 rationale behind that, as expressed by the presenter, was 7 statements from the automakers that indicate that there 8 were numbers in this ball park or ever greater perhaps 9 that have been expressed in public statements from the 10 automakers.

11 And so this, as we would describe it, I think, is 12 saying well this is what we've been told in some of these 13 public statements. So here's a progression that would hue 14 to that.

15 The South Coast proposal has much larger numbers,

16 as you can see, 4,500 or so in that initial period, 32,000 17 and 54,000 as the time moves out. The way that one works 18 or the logic behind it is in everything else that you've 19 seen there's the ZEV portion and the AT PZEV portion. And 20 they sort of  you move the line in between. So if you 21 reduce the ZEV, then you increase the AT PZEV.

22 And there's a back filling going on. So there's 23 sort of a fixed percentage requirement that's divvied up 24 between ZEVs and AT PZEVs. What the South Coast proposal 25 does is it looks back at our 2001 proposal and says there PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 6 1 was a ZEV piece and there was an At PZEV piece. Rather 2 than having the them either or trade off, let's do both.

3 So although it's not shown here, one thing to 4 bear in mind that that's a two percent gold requirement 5 plus an AT PZEV requirement that's based on filling up 6 another two percent.

7 So there's, in the South Coast proposal, there 8 are also much larger numbers of AT PZEVs than would be 9 implied by any of these other proposals.

10 So that's how they work through their stages.

11 One thing that struck us as we looked at the cumulative 12 total is that those first three are somewhere in the same 13 ballpark. Again, they have different rationales and 14 follow different purposes, but they arrive at similar 15 places. The South Coast proposal, obviously, comes up 16 with much larger numbers.

17 A couple of other issues that also differ across 18 the proposals to keep in mind, one of which is the 19 treatment of battery electric vehicles. In our original 20 staff proposal, it was fuel cells only. But as we 21 discussed in our presentation yesterday, we now would 22 recommend that up to 50 percent of the target there could 23 be met by other types of vehicles. And in the 10  I 24 guess on the 10 fold proposal that's not explicit, but at 25 least from our standpoint we would probably recommend that PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 7 1 there be some sort of sharing allowed.

2 In the Cal ETC proposal that would allow up to 3 100 percent substitution by BEVs. So there's no minimum 4 floor requirement explicitly expressed. I do believe that 5 in Dave Modisette's testimony he said you may want to do 6 something like that. But in the proposal as it's written 7 it's a 100 percent substitution. The Union of Concerned 8 Scientists proposal also likewise would allow substitution 9 up to 50 percent maintaining the rest as fuel cell 10 vehicles.

11 And then the South Coast proposal has a hard 12 number of 2,000 full function EV's by 2008. So that one 13 actually has a direct requirement for battery vehicles 14 rather than just allowing them to substitute in as an 15 option.

16 Another dimension to be aware of is the treatment 17 of plug in hybrids in gold. Under our staff proposal,

18 that would not be included. Under the 10X, at least as we 19 have described that, it would not be included. On Cal ETC 20 very clearly that's been one of their recurring issues.

21 So in their proposal they did include that.

22 The Union of Concerned Scientists, we weren't 23 sure looking at the printed material whether that was 24 included or not. South Coast district, no, they did not 25 include it.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 8 1 One other piece of information on this table just 2 to again frame the discussion is when and if do the 3 various proposals return to the red line and the red line 4 volume in that 2015 through 2017 timeframe, it would be 5 73,000 vehicles, a little under 25,000 vehicles per year 6 for 2005, 15, 16 and 17. So the red line volume is about 7 73,000.

8 As you go through the discussion later on today,

9 there will be some policy issues. And again just to frame 10 them to have them in your mind, first of all, is clearly 11 just what are the numbers. And then underneath that,

12 what's the rationale  what's the approach that would 13 support the choice of any of the options here for the 14 numbers. So that's going to be one of them.

15 Second is this issue of BEV substitution. Is 16 there BEV substitution allowed? And if so, what 17 constraints or factors would you want to take into account 18 on that.

19 As I mentioned, another issue is if and when 20 these proposals return to the redline, the timing of the 21 ramp up in the outer years.

22 If we receive more proposals this morning, we'll 23 squeeze them onto this table and have an updated version 24 for you.

25 When you begin the policy discussion, we're not PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 9 1 sure if there will be separate numbers put forward or if 2 people will just be speaking off of these. But if there 3 is, in deed, another proposal, we'll incorporate it and 4 have that before you.

5 So that concludes, from my standpoint, the 6 summary. I don't know if Catherine has any other 7 information to provide.

8 EXECUTIVE OFFICER WITHERSPOON: There were, of 9 course, other issues yesterday. But we think that we'll 10 hold those all until the Board discussion. They go off in 11 different directions. And this was more just to frame the 12 major issue before you. So we'd recommend you go to the 13 public comment now. And we'll come back to the rest 14 later.

15 CHAIRPERSON LLOYD: Thank you.

16 Let's do that.

17 There were a number of people who I called last 18 night who did not step forward. I just want to check with 19 those again just in case they were here.

20 Raymond Cernota?

21 Glynda Lee Hoffman?

22 David Muerle?

23 Hew Hesterman?

24 Paulette Jaeger?

25 MichaelMora?

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 10 1 Shauna Wilson?

2 Bill Smith was testifying, I don't see him back 3 this morning.

4 Kurt Rasmussen?

5 Bernadette Del Chiaro?

6 I think she was going to come back today, but 7 maybe she's not here just yet.

8 So we will pickup with, I see, Charlie Peters.

9 And then Tim Carmichael, Doug Korthof.

10 MR. PETERS: Good morning, Chairman Lloyd and 11 Committee. I'm Charlie Peters, Clean Air Performance 12 Professionals. We're a coalition of motorists that is 13 actually worldwide. And we're quite concerned with how 14 all this impacts the public. How much we're going to have 15 to pay and how this is going to work.

16 I'm here to see if I can get a little advice on 17 remediation and see if I can share a couple of issues that 18 I think might have a possibility of getting some 19 consideration.

20 I have a very complex proposal here. It's a 21 pretty large print. It's one piece of paper.

22 CHAIRPERSON LLOYD: Charlie, we have  again,

23 just to remind people we're going to be on three minutes 24 here.

25 MR. PETERS: Yes, sir. It says CAPP supports a PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 11 1 smog check inspection and repair audit, a gasoline oxygen 2 cap and elimination of the dual fuel cafe credit to cut 3 car impact over 50 percent in one year, a smog check audit 4 to cut toxic car impact in half in one year, an oxygenate 5 waiver would stop a $ 10 billion refinery welfare program 6 coming from the federal tax reduction of 52 cents per 7 gallon of ethanol used. That, by the way, is coming 8 straight out of our transportation funds.

9 The third issue is about a third of the gasoline 10 used on new cars is allowed by the renewable fuel credit.

11 From the $ 900 per car cost of the ethanol gasoline system.

12 And there's not one E85 pump in the State of California 13 that I'm aware of.

14 So we talk about things like global warming and 15 toxic impact, and all of these things. And I would say to 16 you that, in my humble opinion, of course that would take 17 miracle because it doesn't appear as though those folks in 18 Washington would support. Is there someway of pulling off 19 a miracle in those three small items we think that that 20 could very significantly improve how the public is treated 21 and so on.

22 There has been a very interesting legal issue 23 going on with consumer unfair competition lawsuits that 24 the Attorney General is now involved in, that anybody who 25 gets any action whatsoever from any regulatory agency in PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 12 1 the state of California can be sued by any consumer with a 2 group of lawyers.

3 So far the Attorney General has stepped in, the 4 California Bar Association has stepped in. And I have a 5 huge concern there because I have a gentlemen by the name 6 of Mr. Cruz in southern California who came here when he 7 was seven years old because both of his parents passed 8 away. His mother was a U. S. citizen. His father was a 9 Mexican citizen. He has U. S. citizenship today.

10 CHAIRPERSON LLOYD: Charlie, can you help link 11 what you're saying to our deliberations? That would be 12 helpful for us.

13 MR. PETERS: Absolutely. Here is a copy of the 14 court actions to remove this guy from business in the 15 straight of California. He was Triple A certified. He 16 was CAPP certified. He was smog certified. He had an 17 eight bay, seven hoist  the reason was he didn't 18 appropriately mitigate the outcome.

19 At best, there's possibly $ 300 worth of money 20 involved in this whole process. And California eliminates 21 small business people just straight up and basically says 22 you have no opportunity to do business in California.

23 This is a person who maintained cars, keeps them from 24 becoming broken, sets standards. He's impacting the air.

25 And we just put him out of business, and I am trying to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 13 1 find out how to appropriately mitigate an issue like this.

2 CHAIRPERSON LLOYD: Charlie, your time is up.

3 MR. PETERS: Thank you very much.

4 CHAIRPERSON LLOYD: Thank you. We appreciate it.

5 I guess I was looking from a different list here 6 than I should have. John White. I saw John make a 7 fleeting appearance. And then Doug Korthof, and William 8 Korthof.

9 John, do you want to?

10 MR. DOUG KORTHOF: Dough Korthof from Seal Beach.

11 I first want to say that I think everybody is in favor of 12 clean air. Everybody agrees on this. The only question 13 is how to get there. So I think we have everybody here 14 honestly on that footing. I wan to also point out in 15 response to Dr. Burke's observation that there are only 16 two or three supporters of the staff report.

17 In fact, a lot of people due to the wording 18 listed themselves of the staff report when they meant to 19 say supporters of the ZEV mandate. So yesterday, during 20 the whole thing, not one person supported the staff 21 recommendation. That is, if it meant cutting down on 22 battery powered electric vehicles, no one outside the 23 automakers.

24 Now, some want  so I just wanted to point that 25 out. Some want you to buy the fuel cells. Perhaps fuel PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 14 1 cell vehicles will become practical sometime in the 2 future. Perhaps not. It's an economic and an 3 infrastructure problem. But solar electric roof top 4 systems and battery electric vehicles allow us to live oil 5 free right now. So I wanted to support and extend Tom 6 Gauge's point That we need to cut down on gasoline 7 consumption. Not everyone has to do so.

8 Please let those of us that choose to do so 9 enable us to do it, please.

10 The only good faith effort so far in this 11 marketing was Toyota. They actually sold a car to 12 somebody who wanted to buy. Everybody else played games.

13 During a magical six month window they abandoned 14 the tricks and devices and honestly offered an EV to those 15 willing to spend the money. That's free market. And no 16 one else did that.

17 Voluntary, does not work with these automakers.

18 They bully the drivers. They confiscate our cars.

19 They've taken out two of our cars and they won't give them 20 back. They're going to do something else with them.

21 They're going to break them up. This is not what we want.

22 And they're gaming the system with PZEV credits.

23 They're laughing at you when you say require PZEV credits,

24 multiple PZEV credits. They laugh at you. These thinks 25 are multiplying like quarks and masons, blue quarks, queen PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 15 1 quarks.

2 They did the letter of the memorandum of 3 understanding nothing more. They did not create. They 4 laughed at us. They said we did not create a viable 5 program. All we did was put a certain amount of the cars 6 on the road and then we took them back.

7 Remember when Volkswagen's multiplied in the 60s,

8 because they put them out and everybody bought one, and 9 they didn't breakdown. That's the way these should be.

10 Instead, they put them out, everybody loves them and they 11 take them back. That's not productive.

12 So I propose three things. First of all, get rid 13 of the PZEV system, this system of multiple, hard to 14 understand permission. Get rid of all that.

15 Very simple program, enable one dealer, not 16 everybody, just one EV to come out during this blackout 17 period. Just one EV. Give us one, like the Toyota EV 18 Plus. They can open that line. They've told me. The 19 line is there. We can open it. We just don't have to 20 because CARB's not making us. That's the second point.

21 Sell the car to anybody who wants to buy it.

22 Give us the free market, for once, please. Enable other 23 manufacturers to fulfill their ZEV requirements by buying 24 ZEV credits to supply the RAV4 EV to those of low income 25 in areas that are impacted by bad air.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 16 1 There are so many people when I drive down the 2 streets of Los Angeles. I was pulled over on the 10 3 freeway by somebody who said how do I get one of those.

4 When I pulled into a gang area, the gang members came 5 over. Were they going to shoot me? No, they said how is 6 that electric? How can I get one?

7 When I was driving the street, they guys with 8 bandannas came over next to me, pull up next to me. I 9 figured oh, here I am. I'm dead. There's the uzi, right?

10 No. Hey, what's that man? It's electric.

11 These they all know. And when I tell them that 12 you can't have it because they oil companies are stopping 13 it, they know what I mean. They know that the oil 14 companies are conspiring with the auto companies to stop 15 us from getting electric cars. They believe it, whether 16 it's true or not.

17 CHAIRPERSON LLOYD: Can you wrap up because 18 you've gone three minutes, three and a half minutes.

19 MR. DOUG KORTHOF: Thank you, sir.

20 CHAIRPERSON LLOYD: Thank you very much. And we 21 appreciate that.

22 John White, William Korthof, Lisa Rosen.

23 MR. WHITE: Mr. Chairman and Members, good 24 morning. My name is John White. And I'm proud to be here 25 representing the Sierra Club.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 17 1 And I have had the honor and the privilege of 2 appearing before this Board on this issue going back to 3 the original adoption. And I want to reflect a little bit 4 on sort of where we've come and where we still need to go.

5 First of all though, I'd like to really thank the 6 Board and the staff for a terrific process under very 7 difficult and trying circumstances. I think we have had,

8 speaking as a member of the environmental community, very 9 very good opportunities to present our views, good 10 opportunities to hear from the Board what it was thinking 11 as it was developing its plans, particularly the staff.

12 You have, as you know, the best staff in the 13 world on these subjects. And they have performed 14 admirably. Even when we disagreed, it's been a good open 15 honest straightforward thing. I also note that the Board 16 members have themselves put an enormous amount of time 17 into this.

18 I've tried not to burden all of you with as many 19 meetings as I might have liked to have. But I know you 20 all have met and thought and deliberated, spent time in 21 Detroit, spent time with the manufacturers, really 22 struggled to make this thing work.

23 And Mr. Chairman, your leadership is very much 24 appreciated in the overall calm and deliberate manner that 25 you bring to bear on quite contentious and difficult PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 18 1 issues.

2 I wish our friends in the auto industry had been 3 really as engaged in this process in a constructive way as 4 I wish they had been. I think there has been too much 5 litigation and too much of an attempt to really avoid the 6 debate here in California.

7 People have gone to Court and sought to impede 8 the flexibility that you have sought to give them under 9 the most unusual interpretations.

10 This is the law that I put up here.

11 ( Thereupon an overhead presentation was 12 Presented as follows.)

13 MR. WHITE: Section 43018 of the California Clean 14 Air Act. It was pass in 1988, and it gave this Board and 15 this staff the authority, under which it has proceeded.

16 And some of the issues that we're talking about I wanted 17 to touch on that are still  that have been raised in the 18 last couple of days. I know you've had a lot of 19 presentations. I don't want to take a lot of time.

20 On the issue of the hybrids, and the AT PZEVs.

21 The rationale that my friend and colleague Roland Hwang 22 put together about the link to the zero fuel cell platform 23 is very important. But let's remember that the hybrids 24 also give us upstream emission reductions NMOG and toxics.

25 And those are very important reductions that we don't have PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 19 1 another way to get. And they're very consistent with the 2 statute.

3 The second thing is I'm surprised that, you know,

4 we have so much PR floating around on these issues with 5 our friends from General Motors, with all of the  I 6 remember they were very much involved with PR at the time 7 we did the ZEV mandate with the electric vehicle and 8 making a lot of statements in the press and so forth, and 9 raising people's expectations.

10 They have done that with fuel cells. And we're 11 glad to see their enthusiasm. But they also have a hybrid 12 presentation they've given their shareholders. I'd like 13 to leave with the Board an excerpt from the annual report 14 of General Motors regarding the hybrid vehicles that 15 they're offering.

16 And that one of the reasons, in addition to fuel 17 savings, is low pollution. So the rationale for hybrids 18 isn't fuel economy, at least in California. It's 19 pollution. And you're on firm ground here along with the 20 link to zero.

21 On the remaining issues before you, I know that 22 it is a difficult decision. And I know there's a lot of 23 disappointing among the supporters of battery electrics at 24 the changes you're making with regard to the hybrid 25 compliance in the near term. And there's good reason for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 20 1 people to want fresh credits. There's good reason to want 2 things to have turned out differently with respect to the 3 credits.

4 But, in fact, to think they've turned out as they 5 have, these adjustments you're making, we think on 6 balance, with respect to the hybrid near term make sense.

7 However, two things trouble us about the proposal 8 as it's before you. And I say that knowing that many of 9 the criticism level against the auto industry about 10 marketing of battery electrics and so forth have a lot of 11 truth in them. And yet we've also seen the recent 12 experience with Toyota, and, you know, there are some 13 lessens here. And I think the success of the ZEV mandate 14 is why we're here to talk about hybrids being so doable.

15 We wouldn't be there without the battery electric 16 vehicles having given us the hybrids. We wouldn't be 17 talking about electric drive with fuel cells without that 18 platform. So those are a very important platform and 19 there's future opportunities to fill into the fleet with 20 them, which your rule apparently is going to provide for.

21 But two things remain missing. One is the role 22 of the independent expert panel needs to be carefully 23 narrowed and constrained and not be given a policy making 24 role and not taking the job of this board. This is your 25 decision to set numbers as their helpfulness to give you PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 21 1 independent advice on key technical matters.

2 Conflicts are going to be important to watch with 3 those people. And the role of the fuel cell partnership 4 is going to need to be opened up and made a little more 5 accountable. There's got to be more governance and 6 participation by the NGOs. So you've got to narrow that 7 responsibility some.

8 And the second thing is that we just have to 9 have, as my colleagues have pointed out, commitments for 10 zero after 2008. Now, with those numbers my friend Jason 11 Mark has a very modest proposal, more modest than the one 12 that we put forward. And I leave that to your good wisdom 13 what the actual numbers should be.

14 But if you look at what we're seeing around the 15 world, Japan and the EC, and some of the other 16 presentations the automakers are making, you're well 17 within safe grounds to get into the health five figures in 18 the next decade.

19 So you pick the numbers, but be sure there's 20 numbers there or this mandate dies today. And I don't 21 think that's what you want. So we would commend all of 22 the fine work that your staff has done and the comments of 23 other folks on the record. But I think those are the two 24 points that I really wanted to emphasize.

25 And also really to thank you all for the work PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 22 1 that you've done and for the staff's work as well. And we 2 have disagreements still that I'm sure we'll end up with,

3 but we're committed to working with you going forward to 4 make this a continuing success as we go forward into the 5 next round.

6 Thank you.

7 CHAIRPERSON LLOYD: Thank you, John. Thank you 8 for your real constructive hope over again these months,

9 and helping us  reminding us of our mission and what we 10 need to do.

11 Thank you very much.

12 BOARD MEMBER BURKE: Mr. Chairman.

13 CHAIRPERSON LLOYD: Yes, Dr. Burke.

14 BOARD MEMBER BURKE: Before Mr. White leaves, I'd 15 like for him to know that two years ago  I'm not big 16 into demonizing industry, because we all make a living one 17 way or another. And I absolutely am not into demonizing 18 the legal process, because we all  that's what America's 19 about is we all have justice under the system.

20 Two years ago, a major car manufacturer came to 21 South Coast and said to us, the largest concentration of 22 automotive pollution in the state of California is in the 23 South Coast district. We think that this should be a test 24 area to control emissions from cars.

25 And we should have  we have, our engineers PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 23 1 have, some creative ideas on how to do that. We are 2 willing to give you $ 200 million to operate this test 3 project. Dr. Wallerstein approached CARB and approached 4 Mike. Mike says no, you can't take the money. You can't 5 do the project, because the ZEV mandate is going to work 6 and we're going to make sure it works.

7 Now, here we are this morning losing in court,

8 losing the momentum of our ZEV mandate, and I don't have 9 $ 200 million. You know, that's a tragedy, because we 10 don't know what we might have found to be able to do in 11 these last two years to enhance the efforts of CARB if, in 12 fact, that experimental project had been established.

13 And all my friends who are driving electric cars 14 and all those companies in South Coast who have electric 15 fleets might today be adding augmentation to that instead 16 of having to travel all this way to fight for what 17 currently is less than gross.

18 So, you know, everybody has a position here. You 19 know, I don't think the car companies are without fault or 20 without merit. You know, and I know the consumers and the 21 agencies are not without fault or without merit.

22 So I just wanted to let you know that some things 23 have happened that, you know, the public may not be aware 24 of.

25 MR. WHITE: Mr. Chairman, may I respond. Dr.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 24 1 Burke, I think it's important for me to be understood at 2 least, that I don't think this

3 BOARD MEMBER HUGH FRIEDMAN: Excuse me, John.

4 I'm having a little trouble hearing you.

5 MR. WHITE: I'm sorry. I was just going to say,

6 I actually don't think this is a dire situation in the way 7 you describe. I think we're gaining more than we're 8 losing. We are making a mid course adjustment and we are 9 moving forward in ways that we could have never 10 envisioned.

11 When we did this in 1990, there wasn't any PZEV.

12 There wasn't any SULEV. We were arguing about ULEV and 13 TLEV, okay. And we've made that happen. So I think the 14 program in emission's terms has been successful. I also 15 think that the adjustment you're making today, if you make 16 the right ones, and if you keep the commitment to zero and 17 allow some of these accelerated improvements and hybrids 18 to occur, is going to lead us to success, but you have to 19 keep the path clear. And at the same time, we have to be 20 open to dialogue. I think the fact is we've got more 21 consensus now than we had four years ago, in the last 22 discussion here.

23 Now, some of the parties aren't here. Some of 24 them are in court or offering side deals. But in the end,

25 overall progress is being made provided we don't lose PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 25 1 sight of the need to still set the ambitious goals.

2 So I'm not as unhappy as it may sound except that 3 we're trying to make things work better, and I think this 4 Board has shown a lot of creativity and imagination in 5 making us move forward.

6 CHAIRPERSON LLOYD: Thank you.

7 We have William Korthof, LIsa Rosen, Jerry 8 Pohorsky.

9 MR. WILLIAM KORTHOF: William Korthof. I live in 10 Pomona in the South Coast Air Quality District. And let's 11 see I'm a RAV4 electric vehicle driver right now as well.

12 I work at AC Propulsion for two years. I 13 presently run a solar installation business. And I wanted 14 to speak today to strongly oppose the staff 15 recommendations, because I think they're a significant 16 step backward for the ZEV mandate, and the progress that's 17 been underway for 13 years now.

18 The proposed revisions would result in the ZEV 19 blackout, but not just a ZEV blackout but pretty much an 20 end to the ZEV program as we know it. And the only ZEVs 21 that will happen in the future, will have to come from 22 third party sources.

23 We're not going to have a meeting in eight year's 24 time where the car companies decide that they want to 25 start building fuel cell vehicles in quantities. Once we PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 26 1 look at the costs and say gee for $ 500,000 or $ 400,000 or 2 $ 200,000 we could build these expensive laboratory 3 experiments on wheels. It just isn't going to happen.

4 So if we put off the idea of actually building 5 vehicles that are actually going to be marketable, that 6 consumers actually want to be driving. If we put that off 7 until some nebulous date in the future, it's just not 8 going to happen. And the press is already in that CARB is 9 playing to pull the plug. This sets a bad precedent for 10 regulatory continuity.

11 CHAIRPERSON LLOYD: Nothing has happened until 12 this Board acts.

13 MR. WILLIAM KORTHOF: That's correct, but the 14 press is already in on this. The press has already voiced 15 the story that the staff proposal is to eliminate the ZEV 16 component of the ZEV mandate to basically make zero zero 17 emission vehicles.

18 So unless this Board makes a decision in this 19 hearing or in the next hearing or very soon that the 20 requirements for zero emission vehicles is solid and 21 intact and that's still the intent of the program with 22 serious numbers of vehicles, that's not what the public is 23 going to see. The story is already out that ZEVs are 24 done.

25 So we have to  if they're not done, we need to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 27 1 make some change in course.

2 CHAIRPERSON LLOYD: That's the purpose of this 3 hearing.

4 MR. WILLIAM KORTHOF: From my perspective and 5 from people that I contact, customers, ZEVs are market 6 ready. Now is the time. I don't have a second vehicle.

7 I have a RAV4 EV and that's my only car. I drive 8 approximately up to 3,000 miles a month. So I'm actually 9 a very high mileage driver. I drive all over the LA 10 basin.

11 As I say, I don't have a second vehicle. And my 12 routine is not a regular commute pattern, with a known 13 start and endpoint. So I know if I can make it work for 14 myself, there's quite a range of commuters with regular 15 patterns that are going to be able to make it work.

16 I wanted to comment on the ZEV market demand.

17 The RAV4, as Toyota pointed out, if you just took their 18 data in their own quote from their presentation, they 19 marketed 300 units in the first in the retail market.

20 They essentially closed down the fleet market 21 during that time window, so we know that there's a 22 capability for them to market 300 vehicles at the price of 23 a brand new Lexus SUV. So, you know, down the road if we 24 said well, that was one manufacturer selling at a limited 25 number of dealerships, with a limited number of sales PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 28 1 people that were motivated at a high, essentially a luxury 2 car price, using 1996 technology vehicles, 1996 battery 3 technology.

4 You add that to the fleet market for postal 5 vehicles that Ford has demonstrated that they can place 6 vehicles into the postal service, those are EPac compliant 7 vehicles, an aggressive marketing program could meet both 8 Ford's desire to place vehicles for it's cafe purposes,

9 it's desire to get some alternative fuel vehicles onto the 10 road, and also the postal

11 CHAIRPERSON LLOYD: Can you summarize, please.

12 MR. WILLIAM KORTHOF: As I see it, there's a 13 demand for at least 1,000 vehicles per year. Without a 14 mandate that forces production quantities that are in that 15 rough order of magnitude, the market for ZEVs will not be 16 satisfied. And the ability For the market to mature and 17 grow will not be met. So I propose at least 1,000 18 vehicles per year of production, approximately, of 19 placement credits through 2006 to 2010 timeframe. So the 20 way to get there would be, I propose

21 CHAIRPERSON LLOYD: Thank you.

22 Lisa Rosen. Jerry Porhorsky, and Ed Heustis.

23 MS. ROSEN: Thank you. I'm pleased to be here 24 and appreciate your patience.

25 As the complexity of this measure grows to nearly PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 29 1 200 pages, the probability of more lawsuits and loopholes 2 increases. Don't for any measure that you can't fully 3 understand. Clarity and simplicity are not just virtues,

4 they're essential for any kind of fair legal enforcement.

5 I believe that the success of the battery 6 electric program is not just the numbers on the road which 7 are small, but that it's been a catalyst to driving all 8 kinds of automotive development and progress. And how 9 many of these programs will continue if the force driving 10 it is gutted.

11 As the electric vehicles are removed from 12 service, the benefits of the program are lost. Demand 13 grows when people who see one want one.

14 I spoke to sales people who'd sold 50 or more of 15 these vehicles, and the sales grew slowly. They were 16 fueled by word of mouth. The sales people that I talked 17 to commented that there was in deed a marketing program,

18 but it seemed to have nothing whatsoever to do with the 19 actual sales and placements they made. That particular 20 market as grown by word of mouth and presentations at 21 public functions, environmental things. Those were the 22 only sources of customers that they noted.

23 But it was as if the cars were going out and 24 selling themselves. If there were no cars of this kind,

25 they can't go out and sell themselves.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 30 1 One of the sales people in fact went so far as 2 part of her MBA program to go and design, redesign her own 3 marketing program that she felt might more effectively 4 address the actual markets out there.

5 I did note and think passing that none of the 6 manufacturers seemed willing to embark on a Corvette like 7 program in which a company supports a high quality product 8 that loses money for them in order to enhance the 9 company's image and provide a vehicle to people who are 10 really hardcore enthusiasts, which is what we seem to have 11 here.

12 The sales people that I talked to indicated that 13 particularly given the mad rush at the end to buy 14 vehicles, which wasn't reflected, I believe, in Mary 15 Nickerson's figures. Her figures did not reflect the last 16 four weeks of sales. I believe and these sales people 17 certainly believe that they could double their sales to 18 members of the general public, not to mention any kind of 19 fleet sales, which weren't included, if they had another 20 year of program to go.

21 And there was also the comment not only from 22 those sales but from a Gem salesperson that we ended up 23 talking to that if there is no mandate requiring it, no 24 one is going to engage in production.

25 CHAIRPERSON LLOYD: Can you summarizes, please.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 31 1 MS. ROSEN: I'm thinking of the Alchemists during 2 the middle ages and their pursuit of transmuting base 3 metal into gold. I think that you can do it. In the end 4 human being technology did concur that and they produced 5 gold in linear accelerators. But I think that the pursuit 6 of the fuel cell is rather like that.

7 My proposals would be to stick with a flexible 8 result driven mandate. Anytime, you specify a number of 9 particular technologies that you have to produce, I think 10 you're going to blunder into more lawsuits.

11 I think, though, that if you have a policy that 12 favors existing technology that already works, you're more 13 likely to get results. And I think battery electrics do 14 that.

15 CHAIRPERSON LLOYD: Thank you.

16 MS. ROSEN: And I believe you could also 17 encourage one manufacturer or set it up so that one 18 manufacturer could meet the mandate for all of them if 19 they cooperated as they have in the fuel cell process.

20 Thank you.

21 CHAIRPERSON LLOYD: Thank you.

22 Jerry Pohorsky, Ed Heustis, Greg Hanssen, Bill 23 Mason.

24 MR. POHORSKY: Good morning, Dr. Lloyd and staff 25 members and board members. I'm Jerry Pohorsky, a PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 32 1 professional problem solver, and I have a solution to your 2 problem.

3 In the interests of time, I've cut my testimony 4 in half. However, you've been provided with the rest of 5 the story.

6 While I'm a delighted EV1 driver today, my 7 delight will change to disappointment in July when my 8 lease expires. This is happened to many EV drivers 9 already, and that's why I'm calling EVs an endangered 10 species. Actually, we're all endangered by the toxic 11 fumes that come from petroleum powered vehicles.

12 ( Thereupon an overhead presentation was 13 Presented as follows.)

14 MR. POHORSKY: I'm going to skip over this slide.

15 How can we make sure ZEVs survive. Let's strengthen the 16 mandate. CARB said that 10 percent of new cars sales must 17 be ZEVs. Looking at this the other way, this means that 18 90 percent of new cars sold will still be polluting the 19 air. Weakening the mandate, drives that number closer to 20 100 percent.

21 My proposal eliminates the need for an 22 alternative compliance path and gives you real numbers of 23 ZEVs that are easy to understand and easy to enforce. ZEV 24 credits should be reserved for vehicles that have either 25 zero emissions or a category known as ILEV, Inherently Low PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 33 1 Emission Vehicles.

2 This is the same standard used to determine which 3 single occupant vehicle's are allowed to use the carpool 4 lanes during commute hours. There is a list of qualified 5 ILEVs on your web site. This list includes natural gas 6 and propane powered vehicles from most of the major auto 7 makers. And this is the alternative compliance path.

8 None of the current production hybrids or PZEVs 9 are in the ILEV category.

10  o0o

11 MR. POHORSKY: It seems that most of the recent 12 changes to the mandate have been designed to ease the 13 burden on the automakers. While this helps maximize their 14 profitability, it has also resulted in the endangered 15 species problem that we're facing today.

16 Please, reevaluate your priorities. You're part 17 of the Environmental Protection Agency, not the Corporate 18 Profit Protection Agency. The automakers should be held 19 in contempt of CARB.

20 The public deserves the right to be able to go 21 into any dealer's showroom and order a zero emissions 22 vehicle. The process should not be anymore difficult or 23 intimidating than ordering any other new car or truck.

24  o0o

25 MR. POHORSKY: We all know that affordable fuel PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 34 1 cell vehicles are at least a decade away, and that the EV 2 is already developed to a satisfactory degree. I'm 3 perfectly happy with my 1997 EV1. GM doesn't need to 4 spend another dime developing it. All they need to do is 5 keep collecting the monthly payments.

6 Which would you prefer? Would you rather see me 7 driving a ZEV for two more years or should I just lineup 8 at the gasoline pump like everybody else with a PZEV.

9  o0o

10 CHAIRPERSON LLOYD: Can you bring this to a 11 conclusion.

12 MR. POHORSKY: I'm working on it. Even if ZEV 13 credits were issued for release the MOA vehicles, it 14 appears a significant shortfall of ZEVs could occur if the 15 mandate required the full 10 percent in the near term.

16 And I'm not talking 2005, I'm talking now.

17 Some of this shortfall could be met with natural 18 gas, propane and ILEV hybrid cars that I recommended. So 19 what I'm saying is any hybrid should be either propane 20 hybrid or natural gas hybrid. We don't need any gasoline 21 hybrids, because none of the manufactures have even 22 started making a plug in hybrid yet. You might as well 23 start them out with a clean full. Why make them use 24 gasoline?

25  o0o

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 35 1 MR. POHORSKY: Okay. Here's my 10 percent. If 2 you want to look behind I've got it there. The top two 3 percent could be either fuel cells or BEVs, alternate 4 compliance path. Any mix works for me. Two percent, keep 5 it Gold. The next four percent could be either gold. You 6 could fill the whole six percent up with gold if you want.

7 If you can't do that, okay, give me some CNG cars. Honda 8 has one. They're working with fuel maker of Canada for a 9 home fueling device.

10 Bronze category, this is the propane. So on your 11 ILEV list, there's a bunch of propane cars in there.

12 They're not getting any ZEV credits. Rather than See 13 hybrids or PZEVs get credits, forget that noise, let's get 14 some of these other clean technologies that are already 15 acknowledged by you as being clean enough to go into the 16 carpool lane.

17 CHAIRPERSON LLOYD: Thank you. I've got to cut 18 you off please. We've got you on time.

19 Thank you very much. We've got the proposal.

20 Maybe staff can take a look at that.

21 Ed Heustis?

22 Greg Hanssen, Bill Mason, Tom Dowling, Dan 23 Santini.

24 MR. HANSSEN: Good morning, Dr. Lloyd and 25 distinguished members of the Board. My name is Greg PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 36 1 Hanssen. I'm with the Production Electric Vehicles 2 Drivers Coalition. We represent over 200 people who are 3 driving or at least recently drove production electric 4 vehicles in California, and some beyond.

5 I had some cute stories about my EV1 which I just 6 lost on Wednesday, and my efforts to save the EV1. We had 7 80 people trying to write letters to save the EV1 to 8 extend the leases and keep the cars on the road without 9 warrantee, but GM turned us down. I also had some stories 10 about my RAV4, which was  or at least the trials And 11 tribulations of trying to obtain my RAV4, but I'm going to 12 skip over that and go right to our proposal from the 13 Production EV Drivers Coalition.

14 We've got basically three things that we'd like 15 to see in this resolution this afternoon. Many of these 16 are in line with things that members of the Board have 17 suggested, and proposals that have been made by our 18 colleagues in the environmental community on the 19 utilities.

20 First and foremost, we agree with staff's 21 proposal to split the alternate compliance path between 22 battery technologies and fuel cell technologies. We 23 believe the goal should be to have 3,000 to 5,000 battery 24 technology vehicles on the road during this 2001 to 2008 25 timeframe.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 37 1 We believe that this split between battery 2 technology and fuel cell technology must be a requirement.

3 There must a floor requirement for battery technology and 4 for a fuel cell technology. I don't think there's any 5 doubt that fuel cell technology will continue rolling on.

6 But for those of us who drive EVs, we have grave concerns 7 about whether battery technology will continue.

8 We see a huge market for full function battery 9 electric vehicles, which can share the same platform with 10 fuel cell vehicles, city electric vehicles and plug in 11 hybrid vehicles. And we believe all should be considered 12 in this battery requirement within the compliance path.

13 Second, we'd like to see additional credits for 14 pre 2001 vehicles to be brought back on to the record.

15 This is MOA vehicles, out of state vehicles and other used 16 vehicles, because we have a definite shortfall of 17 blackout, if you will, between 2003 and 2005 or 6, even 18 with a battery requirement. And anything that can be done 19 to encourage these vehicles to stay on the road would be 20 very helpful. I think credits within this ultimate 21 compliance path might be able to achieve that.

22 Finally, I think there should be some sort of 23 additional credits, maybe a multiplier credit of say 20 24 percent or so for vehicles that are offered for sale or 25 for open lease. So we can avoid the problem that many of PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 38 1 our drivers have had of having their vehicles taken from 2 them.

3 We're not going to require people to sell 4 vehicles. Of course, it's their discretion. But we'd 5 like to have an incentive for companies like Toyota who 6 have made the RAV4 available for sale and open lease. I 7 should also point out that in our goal to try and 8 encourage all the automakers in to the alternate 9 compliance path, perhaps having this battery section could 10 encourage automakers like Toyota and Nissan because they 11 will have already placed a portion of their battery 12 technology requirement with vehicles that came out in 2001 13 and 2002.

14 So I'm sorry we didn't get to speak last night 15 and get our proposal up along side everyone else's. I 16 think whether it's 500 fuel cell vehicles or 250 fuel cell 17 vehicles, and how you split it between there, we're not 18 really concerned. Our main goal is 3,000 to 5,000 battery 19 technology vehicles in this timeframe, 2001 to 2008.

20 CHAIRPERSON LLOYD: Thank you, Greg for the 21 specific comments. We appreciate it.

22 Bill Mason, Tom Dowling, Dan Santini.

23 MR. MASON: Good morning. I'm Bill Mason. I'm 24 speaking this morning as a retired automotive engineer and 25 also as co chairman of the PEVDC.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 39 1 There's been a lot of discussion about grid 2 connected hybrids. As Greg said, we support these 3 vehicles as a viable pure ZEV technology. I'd like to 4 remind staff and also point out to the Board that in 5 addition to the excellent work that's been going on at UC 6 Davis for a number of years by Andy Frank and his people,

7 there's a rich history of very good plug in hybrid 8 development work in the past.

9 In 1995, Mitsubishi placed two plug in hybrids 10 with ARB for a 30 month evaluation. These were plug in 11 hybrids with a gasoline fueled APU and lead acid 12 batteries.

13 These were followed by three or four more 14 advanced prototypes with a CNG fueled APU and lithium ion 15 batteries of Mitsubishi's own design and manufacture.

16 Now, Automotive News in December of 1994, almost nine 17 years ago, one of the lead articles was entitled, " Volvo 18 Plans to Sell a Hybrid Electric Car in the United States 19 in 1997 or 1998."

20 Volvo's hybrid was also grid connected, had a 21 gasoline fueled APU and nickel metal hydride batteries.

22 Plug in hybrids have a substantial and credible 23 development history. And with regard to Volvo, that 24 experience is now owned by Ford Motor Company.

25 The alternative compliance path must be PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 40 1 technology neutral. Battery electric vehicles must be 2 required in the alternative path, not just an option. I'm 3 afraid that regardless of how you try to set the ratio to 4 encourage battery electric vehicles, the automakers will 5 spend more money than doing the BEVs, to do  to, you 6 know, avoid doing something that they don't want to do.

7 It took several months for the 2001 amendments to 8 become law. And when they did ARB was promptly sued by GM 9 and Daimler Chrysler. In my opinion, the lack of BEV 10 development in the last two years was due to lawsuits and 11 the refusal of most manufacturers to do anything. I don't 12 think you should blame technology and the market.

13 In closing, I believe that the pure ZEV portion 14 of the ZEV mandate needs to recognize that it is highly 15 unlikely that any one technology will ever replace the ICE 16 fueled by gasoline. It won't be all fuel cells. It won't 17 be all BEVs. Each technology will have a role to play.

18 I also believe that the pure ZEV program is not 19 about manufacturers being able to make a business case or 20 being able to easily market a new technology. The pure 21 ZEV program is an investment in the manufacturers and 22 California's futures. And for that reason, I don't think 23 you should hesitate to require BEVs in the alternative 24 compliance path, not just make them an option.

25 Thank you.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 41 1 CHAIRPERSON LLOYD: Thank you very much Bill. We 2 appreciate it.

3 Tom Dowling Dan Santini, Todd Dipaola.

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

6 MR. DOWLING: Good morning, Dr. Lloyd and members 7 of the Board and staff. I'm intending to address 8 specifically the Toyota RAV4 program. My position is that 9 it was an evidence of strong retail demand that there were 10 many reasons why there were dropouts and their could have 11 been a lot more sales, if Toyota were prepared to do that.

12  o0o

13 MR. DOWLING: Toyota says we tried, but retail 14 demand was very low. The Buyers and potential buyers 15 disagree with that. We do want to give sincere thanks to 16 Toyota. They did quite a few right. They did things that 17 no one else had done before. But there were a lot of 18 other things that could have been done.

19 Strong retail demand is still there. And we very 20 need ZEVs in the marketplace now. I won't read that, but 21 that's a quote from Toyota's web site, about sales being 22 very low as the reason for discontinuing the program.

23 They couldn't make a business case for continuing sales at 24 those volumes.

25 We don't believe that's the real reason

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 42 1  o0o

2 MR. DOWLING:  that they discontinued the 3 program. They never expected or said they were going to 4 sell more RAV4 EVs than they did. They sold everyone that 5 they could make. We're not even addressing here the fleet 6 demand which is significant additional to the retail 7 demand.

8 What they did is they filled their quota. They 9 got more multipliers for 2002 deliveries than for 2003 10 deliveries. So when they had gotten enough they quit,

11 because CARB wasn't requiring them to make anymore.

12  o0o

13 MR. DOWLING: So their stated reason doesn't seem 14 to be the real reason.

15 I'm going to skip this in the interests of time.

16 But we want to thank Toyota for a lot really good things 17 they did do.

18  o0o

19 MR. DOWLING: What they could have done  one of 20 the big things, is they could have integrated the rebates.

21 They didn't do that. What it looked to the retail buyer 22 was this was a $ 42,000 car. Yes, there were Lowenthal 23 funds and so forth, but Toyota did not pass those on 24 directly. They made the buyer jump through hoops. Fill 25 out forms. Wait for their money, pay sales tax as if it PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 43 1 were a $ 42,000 car. And that turned off a lot of buyers.

2 That's the reason for dropouts.

3 Not every Toyota dealer was a RAV4 EV dealer, and 4 their marketing campaign, such as it was, didn't make that 5 clear. People would show up at other dealers and be 6 steered to other cars and be told the RAV4 EV didn't exist 7 and so forth.

8 I live in Folsom and I know that happened at the 9 Folsom Toyota dealer was not a RAV4 dealer. Toyota didn't 10 help very much with DMV issues. One big thing they caused 11 a lot of people to drop out was the charging 12 infrastructure.

13 The RAV4 EV is the small paddle inductive 14 chargers. The worst of all possible words really. The 15 least available public infrastructure.

16 CHAIRPERSON LLOYD: Can you just summarize,

17 please?

18 MR. DOWLING: Yes, sir. Toyota didn't help with 19 that at all. So there were many things that caused the 20 buyers to drop out, potential buyers to drop out that 21 could have been taken care of.

22  o0o

23 MR. DOWLING: Spotty availability was very 24 important. All along in all these programs, you can get 25 them if you're there at the right time. But if you're not PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 44 1 there at the right time, you can't get them. So the main 2 thing  another thing is the performance sales too.

3 There could be better performance and other features in 4 ZEVs that would help a lot.

5 CHAIRPERSON LLOYD: Thank you.

6 MR. DOWLING: Thank you.

7 CHAIRPERSON LLOYD: Dan Santini, Todd Dipaola,

8 Sandra Spelliscy.

9 ( Thereupon an overhead presentation was 10 Presented as follows.)

11 CHAIRPERSON LLOYD: National Labs, I'd give you 12 more than three minutes normally, Dan. I apologize, but 13 that's all we have.

14 MR. SANTINI: I'm Dan Santini from the Technology 15 Assessment Section of Argon National Laboratory. I have 16 discussed my presentation ideas with Tien Hwang of the 17 Office of Freedom Car and Vehicle Technologies at the 18 Department Of Energy. And Tien felt that it was advisable 19 for me to share my ideas as a scientist with the Board.

20 I have participated in the past with the Electric 21 Power Research Institute study of electric hybrid 22 vehicles. And Dr. Phil Patterson has supported that in 23 kind contribution to that study. So the Department Of 24 Energy, and myself as a scientist working for them, are 25 greatly interested in what the technologies are of PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 45 1 interest to CARB and whether those technologies have the 2 potential to spill over and benefit the nation as a whole.

3 And that is the position I'd like to speak to from today.

4 I don't know if anybody else has used the term 5 grid connectable in describing a grid connected hybrids 6 that you may have been discussing. But one of my 7 perspectives is that these hybrids may or may not run on 8 gasoline that would be up to the consumer at least 9 depending on the regulatory environment of a particular 10 state.

11  o0o

12 MR. SANTINI: In the EPRI working group study, we 13 looked at grid independent hybrids such as are sold today.

14 And then the possibility of having a variant of  two 15 variants of the hybrids. One with all electric range 16 capability up to 20 miles or actually 20 miles or better,

17 and then 60 miles, dictated to a certain extent by CARB 18 intentions.

19 I was quite fascinated with our results for the 20 hybrid with a 20 mile grid connected capability. And as a 21 scientist, I think there's some interesting potentials for 22 that technology for the country.

23 First I note that it could be charged without 24 infrastructure modification. Infrastructure modification 25 is a big issue with hydrogen fuel cell vehicles for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 46 1 example. It provides greater gasoline fuel economy than 2 the straight grid connectable  or the straight grid 3 independent hybrid.

4 It could be an option if the power train systems 5 are developed properly, then you could have multiple 6 options in your hybrid power train. One of which might 7 allow you have grid collectability. And you would get 8 your added fuel economy as a result, and be able to use 9 electricity instead of oil.

10 These technologies could provide the possibility 11 for judiciary timing and relocating of emissions in urban 12 areas. I'll discuss that a little more.

13 The grid collectability provides you the option 14 and capability of adding green house gas reductions if you 15 charge your

16 CHAIRPERSON LLOYD: Dan, can you summarize there 17 please.

18 MR. SANTINI: Okay. I think the key point that I 19 need to make here is that such a technology with the 20 energy storage capabilities of the HEV 20' s has a 21 potential for providing an enabling bridge for the 22 hydrogen fuel cell vehicle technology as scientists 23 looking at the attributes of fuel cell vehicles. We are 24 recognizing the benefits of larger amounts of energy 25 storage that might have been previously considered. And PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 47 1 in looking at the HEV 20 grid, the energy storage 2 capability that we came up with, it would be complimentary 3 to the energy storage capabilities that are being 4 considered now for the hydrogen fuel cell vehicles.

5 CHAIRPERSON LLOYD: Thank you very much.

6 MR. SANTINI: And I have a couple of slides that 7 embellish other points.

8 CHAIRPERSON LLOYD: We have that, Dan which we 9 very much  let me just ask you one point. Will this 10 technology be part of the freedom car program?

11 MR. SANTINI: The freedom car program has 12 developed a set of goals. And the goals, however, are 13 subject to reevaluation. There is reevaluation going on 14 with respect to the power train energy storage goals. We 15 will be presenting a paper on the fuel cell attributes,

16 including cold start, getting out of the driveway and so 17 forth, if the future transportation technology conference.

18 And our emphasis with DOE is that you think about 19 power train technologies that have a fairly significant 20 amount of energy storage capability. If you have those

21 if the DOE works with other organizations to develop that 22 capability, that would be a natural to fit into hybrids in 23 the interim such as, you know, an HEV 20.

24 CHAIRPERSON LLOYD: Thanks very much.

25 Tod Dipaola, Sandra Spelliscy, Tim Carmichael.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 48 1 MR. DIPAOLA: Thank you, Chairman Lloyd and Board 2 Members. My name is Dipaolo. I'm a public policy 3 associate the Steve and Michelle Kirsch Foundation. The 4 foundation was founded in 1999 with the mission of 5 improving our world through strategic union and advocacy.

6 We're a 501( c)( 3) charity. And we both fund and 7 advocate for environmental initiatives that clean our air.

8 And the foundation as well as our founder, Steve Kirsch,

9 has a long history of a commitment to clean vehicles and 10 the ZEV Program.

11 First, I'd like to thank this Board. As a result 12 of your vision and the ZEV Program's aggressive approach 13 to promoting zero emission vehicles over the past 13 14 years, we've reaped the benefit of battery electric 15 vehicles, the mass commercialization of hybrid vehicles 16 and fuel cell vehicles. These technologies owe their 17 birth and entirety to CARB's foresight in setting high 18 goals and resolve and seeing them through.

19 The ZEV mandate has altered the course of 20 worldwide automotive technology. It has changed 21 automotive history for the better and turned concept cars 22 into environmental reality. Based on the program's track 23 record of success and prospects for stimulating further 24 automotive innovation, the Kirsch Foundation feels 25 anything less than a fervent push forward would be PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 49 1 regrettable.

2 Therefore, I'm hear today to relay our concerns 3 regarding CARB staff's proposed amendments to the ZEV 4 Program. While a few of the provisions of staff's most 5 recent proposal could really benefit the program and 6 resolve pending legal issues, most of its changes erode 7 the program's potential to drive clean vehicle technology.

8 In a January letter to the Board, the Foundation 9 and many of our environmental colleagues expressed our 10 concern regarding the direction of the program's 11 modifications and outlined three necessary components we 12 required to support the proposal.

13 These included significant numbers of non NEV 14 vehicles, non NEV ZEVs between 2008 and 2005 and 2012,

15 increased incentives for plug in hybrids, and stronger 16 requirements for conventional hybrids. While staff did a 17 commendable job revising hybrid classifications the issue 18 of plug in hybrid incentives and larger numbers of ZEVs 19 have not been adequately resolved.

20 In addition, several new and disappointing 21 modifications arose when the latest proposal was made 22 public. Specifically, we were disappointed in a few key 23 elements, which included only requiring 250 total ZEVs to 24 be produced in the next five years. CARB has shown itself 25 to be a worldwide leader in clean vehicle technology PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 50 1 development.

2 Right now, however, the Japanese government is 3 poised to require 50,000 fuel cell vehicles on the road by 4 2010, which does not compare favorably with staff's 5 proposed 250 fuel cell vehicles by 2008.

6 We're especially disappointed with no plans for a 7 program post 2008. Under the current proposed rules the 8 program would essentially sunset  would go into effect 9 in 2005 and sunset three years late in 2008.

10 Also, the credits for non California fuel cell 11 vehicles is also disappointing. In fact, California could 12 see no fuel cell vehicles to 2008 and all of them could be 13 placed elsewhere in the United States.

14 Also and end to the programs technology neutral 15 approach is something else we found to be very 16 disconcerting. In the past, CARB has pushed the ZEV 17 program forward with an idea of pushing a diversity of ZEV 18 technologies. Choosing only fuel cell vehicles could 19 essentially set the program up for defeat when we look at 20 regulations again in 2008 or at another point, if 21 technology is not advanced significantly.

22 Also, we'd like to see further incentives for 23 plug in hybrid vehicles. The Commercial success of 24 hybrids has shown us a lot about consumer's acceptance of 25 them and we'd like to see it pushed to the next level by PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 51 1 providing enough incentives to encourage an automaker to 2 actually take that path.

3 CHAIRPERSON LLOYD: Todd, can you wrap up there.

4 I think we've read the rest of it. I think you've got the 5 gist of it there, but we appreciate your specific 6 suggestions there.

7 MR. DIPAOLA: I'll wrap up. Essentially, the 8 Kirsch Foundation as opposed to the current staff 9 proposals as proposed. We would like to see a return to 10 the 2001 amendments that the Board passed just two years 11 ago. And we think that amend the regulation every two 12 years creates an incentive for companies to generate 13 results conducive to further charges.

14 We believe the trading needs to occur between 15 automakers and other companies earning credits and that's 16 what the program has been designed for. So we at the 17 Kirsch Foundation urge you to stay the course and affirm 18 the path you set just two years ago. We urge you not to 19 weaken a program that's brought so much positive change to 20 California.

21 Thank you.

22 CHAIRPERSON LLOYD: Thank you for Todd.

23 Sandra Spelliscy and Tim Carmichael.

24 MS. SPELLISCY: Good morning, Mr. Chairman and 25 members. Sandra Spelliscy with the Planning And PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 52 1 Conservation League. I'm going to speak in bullets this 2 morning. I want to move very quickly.

3 And I appreciate the opportunity to be here 4 today. I think I have a little bit different perspective 5 than maybe you've heard from some of the others in this 6 hearing. The Planning and conservation league is opposed 7 to the staff proposal. We urge you to reject it and to 8 maintain the guiding principle of your 2001 decision,

9 which was to see significant numbers of zero emission 10 vehicles on the road in California in this decade.

11 I see two major problems with the staff proposal.

12 The first is that it gives up too quickly on present day 13 ZEV technologies that are providing ZEV miles every day.

14 The staff analysis has a fundamental flaw, I believe,

15 which it turns the assumption of the 2001 decision on its 16 head. That assumption was that we were going to over time 17 build a market for ZEV vehicles in this state with this 18 program.

19 Now, suddenly we are in a position where we are 20 supposed to have had a market appear overnight and because 21 the program has not captured it, suddenly the decision 22 that you made in 2001 does not work. I believe that there 23 are vehicles that we have here today that we should be 24 seeing in fleets. We should be seeing them in the 25 innovative transportation systems that Supervisor PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 53 1 DeSaulnier has been working on and we need to not give up 2 on that goal.

3 The second major problem is that the alternative 4 path in terms of fuel cells in the staff proposal is a 5 recipe for failure that we've already tried. And let me 6 just say I differ from a lot of people here who think the 7 critical flaw in the staff proposal is that there are no 8 numbers after 2009.

9 Because my feeling is that if we do nothing More 10 than have a demonstration program for fuel cells in the 11 next six or seven years and then pick a number for the out 12 years, it will not work and it will not work because 13 people simply won't believe you.

14 We've done that in ' 96. We were there in ' 98.

15 We did in 2000. If we do it again today, we are repeating 16 the same process that we've seen throughout this 17 regulation. We have to have a serious gold portion of the 18 program, now, in order  for people to believe that the 19 out years when I'm not going to be here and probably most 20 of you will not be here, really mean anything in 21 California.

22 Let me switch to a couple comments about process.

23 This process is nothing like the biennial review that we 24 did in 2000, 2001, five months one, single public 25 workshop. The proposal before you today is far too PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 54 1 complicated to have been done this quickly. I think this 2 is why you see so much disagreement about what the staff 3 is proposing.

4 We spent many, many hours talking to the staff 5 about our specific concerns, about the direction they were 6 taking and things that we thought needed to be changed.

7 None of which were ultimately reflected in the staff 8 proposal.

9 I'd hope that there is someway within the 10 structure of the Administrative Procedure Act that this 11 Board could find a system so that there are alternative 12 policy choices laid out for you before you come to the 13 Board hearing. Certainly the staff can say what its 14 preferred alternative is, but for you to be in a situation 15 where you have to make an up or down judgment about the 16 staff proposal, and if you decide not to accept it, have 17 to create sort of from whole cloth from the dais, what the 18 new program should be, is simply not a good way to make 19 public policy.

20 We are in the position of trying to respond to an 21 extremely intricate staff proposal in a very, very small 22 amount of time. We want to layout specific proposals.

23 It's virtually impossible to do that in the few minutes 24 that people are given here. I seriously hope that this 25 Board will think about how to reform its regulatory PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 55 1 process, and it's hearing process to deal with these very,

2 very complicated technical decisions in a better manner 3 than we've seen in the last few months and over the last 4 couple of days.

5 Let me talk very quickly about a couple of 6 mistakes I hope that we can avoid in the future. This is 7 an extremely complicated and complex regulation. It has 8 not aged gracefully over the years. Every time it's come 9 up for review it's gotten more complicated. This time is 10 no exception.

11 It's very difficult to have a successful 12 regulatory program that nobody in the public can really 13 understand, nobody in the press understands. You can't 14 explain to the judges who are interpreting the law. It's 15 not been the best way to go about creating the kind of 16 program we want to create. I hope that we learn from that 17 lesson and in the future try to have simplicity as a 18 guiding force in the regulatory process here.

19 The other problem that we've had with this 20 program is that no successful regulatory program can 21 withstand the kind of constant scrutiny and review and 22 reevaluation that this program has undergone.

23 One of the pillars of regulatory success is to 24 have certainty for the public and for the regulated 25 industries. And the only thing that's been certain about PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 56 1 this program is the certainty that it will constantly 2 change.

3 Again, I hope that we can learn from these 4 lessons, and in the future do a better job.

5 Let me just close with these final words. If you 6 speak to anybody who works on air quality issues in 7 California these days, a recurring theme comes up. That 8 theme is about the mind boggling challenges that we face 9 in getting to the health based standards in California.

10 Despite all the progress that we have made on air quality,

11 we still have places like the South Coast and the Central 12 Valley, where there is no discernable path for reaching 13 healthy air for millions and millions of people.

14 And the reason that this task is so daunting is 15 because we have made all of the easy choices when it comes 16 to air quality in this state. And all we are left with 17 are the very very hard choices.

18 The ZEV Program is one of those very hard 19 choices. This is a tough, tough program. It's a 20 revolutionary program. It pushes the automakers hard, and 21 they don't like it, and they push back hard. And all of 22 us who are involved with this it's tough for us and it 23 makes people uncomfortable.

24 But as you deliberate today on the fate of this 25 program, I urge you to summon all of your political PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 57 1 courage to make the hard choices that you know you need to 2 make on this program, because when it comes to protecting 3 the health of the people of California, there are simply 4 no more easy choices to make.

5 CHAIRPERSON LLOYD: Thank you, Sandy. Tim 6 Carmichael.

7 MR. CARMICHAEL: Good morning, members of the 8 Board and Chairman Lloyd. Tim Carmichael. I'm the 9 Executive Director of the Coalition for Clean Air.

10 It's hard enough going last, but after Sandy's 11 presentation, I'm shaking a little.

12 I'll jump straight in, because I know we're short 13 for time and we're eager to hear your deliberations.

14 There are two numbers that aren't in the staff report that 15 should be in the staff report. The first of those is 1.8 16 million vehicles per year. And that is a very important 17 number for you guys to remember as you consider what to do 18 with this program. That's the number of new cars, light 19 trucks and SUVs sold in California every year, 1.8 20 million.

21 And that's lost when we're talking about 2,500 or 22 500 or even 25,000. 1.8 million new vehicles in 23 California every year.

24 The second number that's not in the staff report 25 and should be in the staff report is 14 billion or some PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 58 1 bigger number. $ 14 billion per year, that's the cost of 2 air pollution, estimated cost of air pollution, in the 3 South Coast air basin.

4 We know that the San Joaquin is suffering 5 significant costs in health care, as well as crop loss.

6 So the number for the state is much bigger than $ 14 7 billion. But that number is not in the staff report.

8 I've got to believe that this Board and the staff 9 working for you recognize that the priority for the agency 10 is the protection of public health. But the staff report 11 highlights the cost savings of this program to the 12 automobile industry without addressing or identifying the 13 costs of air pollution in our society. And that's a 14 mistake in this report and it should not be left out of 15 any future report. Where we're talking about cost to an 16 industry. Let's remember the cost to society of air 17 pollution.

18 I think Sandy and my colleagues from the other 19 organizations have addressed all of our concerns with the 20 proposal.

21 Let me just jump to what we believe the combined 22 effect of all those problems  combined impact of all 23 those problems will be. If you move ahead with the staff 24 proposal today, California will, in effect, relinquish our 25 leadership role in driving zero emission technology for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 59 1 the globe. Many of you probably relish that, and you know 2 think let's pass the torch, enough of this pain.

3 But there are a lot of benefits to being in the 4 leadership position. And it's very important to remember 5 how much popular support there is here in California for 6 this leadership role, for this program.

7 Dr. Burke mentioned Yesterday just basically 8 summarized the numbers of where the people lined up as 9 testifiers. And sure it's 70 something people. It's not 10 the state of California. But I need to remind you and you 11 need to remember, as an agency, you have never received as 12 many letters of support for any program as a strong ZEV 13 Program in California. You have never ever  there's no 14 program that's come close, tens and tens of thousands of 15 support letters for a strong ZEV Program. The popular 16 support is there. The People of California are behind not 17 only a leadership position for zero emission vehicles, and 18 zero emission technology, but for a very strong program.

19 And you need to remember that as deliberate today,

20 remember that the majority of Californians believe in this 21 program and believe we should be leading the globe in 22 these sorts of efforts.

23 With that, thank you very much.

24 CHAIRPERSON LLOYD: Thank you, Tim.

25 Ms. Witherspoon, does staff have any further PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 60 1 comments before I close the record?

2 EXECUTIVE OFFICER WITHERSPOON: Not at this time.

3 CHAIRPERSON LLOYD: We'll now close the record on 4 this agenda item. However, the record will be reopened 5 when the 15 day notice of public availability is issued.

6 Written or oral comments received after this hearing date 7 but before the 15 day notice is issued will not be 8 accepted as part of the official record on this agenda 9 item.

10 When the record is reopened for a 15 day comment 11 period, the public may submit written comments on the 12 proposed changes which would be considered prior to the 13 adoption of the amendments and responded to in the final 14 statement of reasons for the regulation.

15 So, I guess, we're open for discussion at the 16 Board.

17 Mr. McKinnon.

18 BOARD MEMBER McKINNON: Mr. Chairman, I want to 19 start out the way I started yesterday, and that is to be 20 very clear that I don't consider where we've gone in the 21 last 12 years as failure. What has happened in the last 22 12 years in terms of technology development to get closer 23 and closer to zero, it's mind boggling how far we've come.

24 And nothing can take that away. We can't call this a 25 failure.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 61 1 But I have to tell you that I cannot proceed with 2 the staff proposal with no numbers. And I'm very 3 heartened by basically the testimony of the Union of 4 Concerned Scientists and Dave Modisette yesterday. And I 5 think the Union of Concerned Scientists laid out lots of 6 facts and statements by the auto companies about their 7 intentions and what they could do if they wanted to.

8 His numbers, and this really to me is a 9 discussion about numbers. I frankly tend to favor the 10 Modisette proposal, not because it wasn't a good proposal 11 from the Union of Concerned Scientists, but it's sort of 12 taking just a slightly more conservative view at the 13 numbers. I like the Modisette proposal.

14 The only thing I might change about it is in the 15 first 2 or 3 years using the sliding years that Jason 16 described in the Union of Concerned Scientists' format 17 last night.

18 To be specific, I think that silver needs to make 19 it to the gold category. I think it matters. Just 20 instinctively I think that and now we're starting to hear 21 some of the discussion of how it might impact even fuel 22 cell development and what may happen, particularly, and 23 when I say plug in HEV, what I'm talking about is plug in 24 HEV that has the ability to operate on 100 percent 25 electric for some set period of time, to 20 miles or the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 62 1 60 miles. So that essentially a consumer could operate on 2 electric while they were commuting each week. And if they 3 needed to use the car in the gasoline mode to go on a 4 vacation or a longer trip, they could do that.

5 So, I think, yesterday I said something about a 6 car that you could switch on and off. And somebody said 7 well, it does it automatically. I don't mean 8 automatically. I mean that if you choose to use it as an 9 electric vehicle most of the time, you can control that.

10 And I think that that essentially should get gold credit.

11 In terms of the issue of stating the number of 12 Battery Electric Vehicles versus fuel cell vehicles, I 13 personally do not want to prescribe that. I personally 14 think we set out the big numbers and the auto companies 15 are going to make a variety of choices about how many fuel 16 cells they do, how many battery electrics, how many 17 plug in hybrids on down the line, that we, you know, we 18 set the sort of  the major goals and we set a credit 19 scheme that gives them some options, but we don't 20 prescribe 50 percent or 70 percent or whatever.

21 So I think that's sort of kind of my major  the 22 big piece of where I'm at on this.

23 CHAIRPERSON LLOYD: Supervisor DeSaulnier,

24 Supervisor Roberts.

25 BOARD MEMBER DeSAULNIER: Thank you, Mr.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 63 1 Chairman.

2 First, I'd like to thank you and my colleagues.

3 As John White said I know everybody has put a lot of work 4 into this. And I'd like to thank staff. You've had some 5 comments directed your way, but I think you did a great 6 job with a difficult chore. And you've basically tee'd up 7 the issues that Matt's just talked about.

8 And, Catherine, in the category of be careful 9 what you ask for or wish, you've done a great job today,

10 too. And for everyone who's come here and traveled, I 11 hope you appreciate how the Chairman has tried to run the 12 meeting given how difficult a task it is to keep so many 13 different constituencies happy.

14 The great American sage Yogi Berra once said that 15 the toughest thing about predictions is you never know 16 what's going to happen in the future.

17 ( Laugher.)

18 BOARD MEMBER DeSAULNIER: That's not my favorite 19 Yogi, but that's a pretty good one for today.

20 I think we can predict though that over the 21 course of the next 20 years in the timeframe we're looking 22 at that the world is going to change quite a bit. And 23 certainly air quality and auto manufacturing is going to 24 change quite a bit during that time period as well.

25 The issues that staff put in their slide PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 64 1 presentation first beginning with the alternative 2 compliance option and rolling into the BEV. I agree with 3 Matt, although I tend to side with  to go a little 4 higher and do what Jason has suggested, the rationale 5 being, I look at the proposal by the Bush Administration 6 with a little bit of  well, maybe perhaps more than a 7 little bit, but out of courtesy, I'll say a little bit,

8 out of skepticism. I think most of those numbers will in 9 fact end up California numbers.

10 So I would agree with Matt, but I would tend, in 11 terms of the discussion, look at the higher numbers that 12 Jason has suggested. In terms of the question of the 13 plug in hybrids, I agree with Matt that should be in the 14 gold category as has been suggested by Mr. Modisette.

15 The ZEV infrastructures that I've been working on 16 and Chuck and I have had some discussion about, in the 17 resolution there's a paragraph that I think is good, and 18 is acceptable. And I look forward to three months from 19 now coming back to my colleagues with a presentation I 20 think that will be quite positive.

21 In regards to what John White talked about, in 22 terms of the panel, in looking at the resolution, I think 23 that pretty much accomplishes what he was looking for in 24 terms of the conflict of interest and their appropriate 25 role.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 65 1 So with those sort of broad interests, I'd just 2 say I think we've come a long way. And I would say that I 3 can't think of a worse time for this Board and for the 4 State of California to think about weakening in any way 5 what we have started out on  what this Board started on 6 in 1990.

7 From the historical standpoint, this would be the 8 worst time for us to send any kind of message to the State 9 and to the country and to the world that we're going to 10 back off. And to the auto manufacturers, I'd just say 11 that, and to all of us, but particularly to the partners 12 in the auto field, the expression that, " To those who much 13 is given, much is expected." I think that this is 14 something that I would look to you folks without 15 minimizing the difficulty that you have and having a good 16 deal of respect for many of you in terms of the challenges 17 you have, in terms of being worldwide companies that have 18 to be profitable and have to look at technology with a 19 jaundiced eye, but I would call you to continue to partner 20 with us rather than litigate against us.

21 Thank you, Mr. Chairman.

22 CHAIRPERSON LLOYD: Just one clarification before 23 I go to Supervisor Roberts. Both you and Matt suggested 24 that we put plug in hybrids into the gold. You recognize 25 that's going  are you going to say that's forever or for PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 66 1 a period of time, because clearly I think this would be a 2 major policy shift to have something which can operate in 3 non zero mode to put in a zero category.

4 BOARD MEMBER DeSAULNIER: For myself, I'd be open 5 to some suggestion in terms of when that would sunset.

6 BOARD MEMBER McKINNON: Mr. Chairman, I 7 respectfully disagree with you. I think that what you're 8 talking about  people use two different cars to do the 9 same thing. And I think you get the gasoline mode. Am I 10 you know, going to fall on my sword over that, no. I mean 11 if we can work out, you know, a consensus as a board, I'm 12 going to be with that consensus.

13 CHAIRPERSON LLOYD: But you can't disagree that 14 that vehicle can operate in a non zero mode.

15 BOARD MEMBER McKINNON: I cannot. But I will 16 suggest to you that in real life application what happens 17 is that individual climbs into a different vehicle to do 18 something different. And the real effect on the air is 19 equivalent.

20 And I think what we gain out of putting this to 21 gold is it's something that's going to be easier to get to 22 the public. So if that makes it complicated legally or 23 something, then I'm, you know  I could be swung, but I 24 think if we're talking about how it really affects 25 people's lives and how they're really going to use the PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 67 1 vehicles, we get the same effect either way.

2 CHAIRPERSON LLOYD: I'm just concerned that if 3 you throw this open forever, that, in fact, you  Mr.

4 Freeman talking about, you know, the hydrogen are very 5 close to zero. You've heard Honda talking, and 6 rightfully, that they've got vehicles that operate very 7 close to zero.

8 So when we come to maybe 4 decimal points, you 9 know, what is the difference there. And I think we've 10 resisted that argument in the past. I think you're trying 11 to put some encouragement there, which I understand. What 12 I understand is that the credits that we had to date 13 wasn't enough to entice people into that market. And 14 maybe staff is proposing to increase those credits. And 15 clearly if the Board doesn't feel that that's enough, then 16 maybe an interim period I would go with that for a period 17 of time to see how it works.

18 BOARD MEMBER McKINNON: Mr. Chairman, I have no 19 problem with an interim period. I mean, there's some 20 wisdom to that, if it doesn't work the way I think it 21 should work, hey, then we find that out and we can change 22 it. So I can do that.

23 CHAIRPERSON LLOYD: Supervisor Roberts.

24 BOARD MEMBER ROBERTS: Thank you, Mr. Chairman.

25 Good morning. It's nice to see you again. And PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 68 1 thank you for ending it at such an early hour last night.

2 ( Laughter.)

3 CHAIRPERSON LLOYD: I apologize for the way in 4 which it ended.

5 BOARD MEMBER ROBERTS: All of a sudden I looked 6 up and he was gone. I wasn't sure I was sitting here.

7 But it's nice to see you and it's nice to see you in that 8 chair.

9 ( Laughter.)

10 BOARD MEMBER ROBERTS: Mark, I think it was Yogi 11 that also said, " This is like deja vous all over again."

12 ( Laughter.)

13 BOARD MEMBER ROBERTS: And having been on this 14 Board for 8 years now, there's a little bit of that that 15 I'm feeling today. But in spite of that, I think 16 there's's a couple points.

17 Let me deal, first, with the issue that you just 18 discussed with. I like what both of my colleagues have 19 said about introducing the HEV into the gold. And I like 20 it for a limited time though. I don't know what that 21 limited time is. And, Mr. Chair, if you could just 22 suggest something, but I think there should be a limit on 23 that, just as we've done with other things. But if we can 24 give that a little stimulus, that would be

25 CHAIRPERSON LLOYD: I think we'd look to staff PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 69 1 for some guidance there, I think.

2 BOARD MEMBER ROBERTS: Okay. I think that would 3 be good.

4 We talked about the correspondence. I have to 5 share with you, I did receive a lot of letters. There was 6 one of them that caught my attention in particular,

7 because it was addressed to Supervisor Ron Roberts. And 8 it was asking me to read this letter. And after I read 9 this letter would I please contact Supervisor Roberts to 10 let him know how I felt.

11 ( Laughter.)

12 BOARD MEMBER ROBERTS: I'm not going to tell you 13 who sent it. It was another elected official. I just 14 want the world to know I did have a thorough discussion 15 with Supervisor Roberts on this issue.

16 ( Laughter.)

17 BOARD MEMBER ROBERTS: Again, you know, there's 18 something unfair that's also happened here. And I'm not 19 sure if it really was the press or if it's people 20 interpreting the press. But in my reading of everything I 21 received, the staff has not recommended getting rid of the 22 ZEV Program.

23 Can I say that again? The staff has not 24 recommended getting rid of the ZEV Program. The staff 25 didn't recommend going to zero. The staff said we need to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 70 1 determine a number, but we don't know what that number is 2 yet and clearly it was not a zero number.

3 For those of you who took that and continued to 4 hammer away on that, that isn't part of the 5 recommendations I got. And if it was something reported 6 in the press, I must have missed it. Maybe I'm not 7 properly educated. But that's not what I brought away 8 from what the staff's effort was.

9 This staff is, has been and will be, I think,

10 committed to having a zero emission vehicle. This Board 11 is committed to a zero emission vehicle period.

12 Having said that, we've got to find something 13 that works. We've got to find something from a cost 14 standpoint and a performance standpoint that is 15 competitive.

16 Perhaps because, like some of my colleagues, I've 17 been here for a number of years. I can remember some of 18 the earlier hearings and having some speakers come in with 19 new batteries now that hold the promise that everything 20 will be good, you know, just give us a couple more days.

21 I mean, we thought we were going to be somewhere 22 different with respect to battery technology, with respect 23 to performance, with respect to costs than we are today.

24 That's why we're having this hearing. We don't have the 25 range that I can remember that was a goal and not only PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 71 1 that was a prediction. We don't have that. We don't have 2 the costs where we want it.

3 But we still want a zero emission vehicle. I 4 want that. I don't think there's anybody up here and 5 there's probably few people in this room that don't want 6 that. And we have a lot of  it's not just  you know,

7 the economics and to want to make money isn't just the car 8 makers. I mean we've seen a steady stream of people who 9 are vested in this in all sorts of ways.

10 I thought there's one great company out there 11 that I haven't  that don't come here though that's very 12 heavily invested in electric transportation, and I think 13 is going to play a significant role in getting people from 14 our train depo into their office buildings downtown, and 15 that's Segue Way.

16 I don't know how many of you have seen these, but 17 I tried one of these out recently. This is a little 18 electric scooter. And we've got people actually riding 19 those from the train depo and they go right onto the 20 elevator, and up to their offices. Now, they're pretty 21 expensive. And Segue Way is not here saying you've got to 22 have us mandate it so we can sell these things. Guess 23 what? Click on Amazon. com and you can buy one. It's real 24 simple. And they cost about $ 5,000 a piece. I can't 25 believe anybody is buying these things. You know what,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 72 1 it's something that people want.

2 And what we keep talking about is, yes, there are 3 people that want certain things. I've got friends that 4 still like vinyl records. And they insist that we ought 5 to have vinyl records. God bless them. And I've got a 6 lot of vinyl records. But what we have to come up with is 7 something we want to come up with, something that is going 8 to be there, and it's going to be cost competitive, and 9 it's to have the performance.

10 In the last several years, if they've taught us 11 anything, we're not reaching any of the goals that we had 12 hoped for, aspired for, dreamed for. We set all kinds of 13 numbers. By God if setting numbers would have done it, we 14 ought to be there. We've set numbers. We've set more 15 numbers than anybody around.

16 And the fact of the matter is our setting numbers 17 doesn't solve chemical and physical problems that need to 18 be solved to bring these products to market.

19 So what do we do?

20 Let me  you know, I can only speak for myself.

21 Maybe I am once again naively impressed with the 22 technology. And I was one of the, probably the earliest 23 ones in the state to have one of the EV1' s. I had it for 24 some time. I drove it. I experienced it. I know what 25 the shortcomings are from a performance standpoint. And,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 73 1 Matt, you're right, there are days I had to go home and 2 change cars.

3 Okay, that EV1. I live one and a half miles from 4 where I work. It isn't about  you know, it's about your 5 whole day. And there still were days when I had to go 6 home drop that off, get a car that, you know, that old gas 7 guzzler and get out there.

8 We've got to have better performance. And I know 9 that there are people in the world that can get by on a 10 car even if it only has 20 miles range. But if we're 11 talking about mass markets, if we're talking about some 12 day getting the air as clean as we possibly can, we've got 13 to get to zero emission vehicles.

14 There's one other thing I want to notice. In San 15 Diego, the one thing we're proud of is that every single 16 year the air has gotten cleaner. And what we need to do,

17 you've got to keep that long view. There's got to be a 18 curve there that every year that this state we're going to 19 make the air cleaner.

20 And the mix may change, and the strategies may 21 change, you know, but the grand finale has to be the air 22 has to be cleaner every single year. And you know what 23 we're getting there. We have cleaner air now than we had 24 50 years ago in San Diego and I'm very proud of that. And 25 we're going to keep going.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 74 1 And I don't remember who it was that put that 2 chart up, and they kind of showed where the curves are and 3 then they had to blowup the bottom of it so we could 4 see  I mean, we're down, you know, the world is very 5 different.

6 We still want a zero emission vehicle. And I 7 said earlier, I may be a little naive, but to me I'm 8 asking what is out there, what is the promise, what looks 9 good, what starts to respond to a whole plethora of 10 problems, in addition to air quality, that might make it 11 the technology of the future?

12 I am very impressed with the fuel cell's 13 potential. I don't know if they'll ever get the cost down 14 where it's going to make any sense. You couldn't begin to 15 market it there. But I also know that good research isn't 16 just about putting numbers of things out, although I think 17 you need numbers  to do need some numbers in here.

18 But good research is based on a commitment that 19 you build and you analyze and you build again and you 20 analyze and you build again and you're committed to 21 improving a product in all its aspects. And it isn't a 22 requirement that we necessarily put out 50 of one kind of 23 vehicle this year and, you know, another 50 next year.

24 What it really requires you to put out some 25 things that you have a very good research project that in PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 75 1 the testing and the follow up and everything you can do to 2 improve that so that the next model that you bring out is 3 going to be a lot better, and you know where you're going.

4 If we look ahead, I don't  you know, it's very 5 hard to set a number. And I mentioned something yesterday 6 about being arbitrary. And any time you start to look to 7 the future you're going to be a little bit arbitrary. And 8 if you don't think so, God I'd like to have you as an 9 advisor.

10 But we want to get to a zero emission vehicle. I 11 think we can get there not with the staff's 12 recommendation, but with an adjustment to that and I like 13 that second column. And I like having some of the 14 credits. By the second column I'm talking about the one 15 that says 10X over it, and with the changes that we talked 16 about, Mr. Chairman.

17 I hope that we can have most importantly a 18 partnership with the major stakeholders here that is going 19 to drive the successful research that we need, the 20 successful development that we need, and that we're in a 21 position to continue to monitor this thing, and to see not 22 only how it's going to be able to make adjustments. If we 23 can do that, you know, that number that we're looking at,

24 if we're successful, it will look pretty small and 25 somebody will say that you didn't set the number high PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 76 1 enough.

2 But you know what, if the research isn't 3 successful, it doesn't make any difference what that 4 number is, you're not going to make it. So to some 5 extent, setting the numbers, I think, is of interest. But 6 what should be more fundamental is how do we forge that 7 partnership to get the results so that, you know, I would 8 like to see my family and the people in our neighborhood 9 all driving zero emission vehicles, and I don't care if 10 they propel those with rubber bands, as long as they're 11 not polluting. And whatever technology works is fine with 12 me. And if there's a bunch of choices, that's even 13 better.

14 But I think as I sit here now, I want to see if 15 there's a way to stimulate that investment in the hydrogen 16 research and the hydrogen development.

17 CHAIRPERSON LLOYD: Thank you, Supervisor. I 18 think both your technical and historical perspective is 19 most appreciated.

20 Mrs. Riordan.

21 BOARD MEMBER RIORDAN: Thank you, Mr. Chairman.

22 Tim Carmichael reminded us today of something that I took 23 to heart and that was the number of new vehicles that are 24 sold here in California. And that is a substantial 25 number.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 77 1 But I'm going to take you one step further, Tim 2 and tell you that we need to also research the number of 3 new vehicles sold throughout the world, because I think of 4 what we're doing here today in California, but there's a 5 much bigger market. There are many, many countries 6 besides other states that are going to follow us. And if 7 you see the bigger picture and understand that the 8 automotive industry and all of those who have associated 9 industries and companies, this is a big future market.

10 And we should not stumble in saying we can't reach some 11 numbers that seem realistic to us.

12 Our staff report was excellent and I do thank 13 you. I do think you're conservative and cautious. And 14 we, the policymakers, are a little bit more optimistic and 15 pushing. And I think to say to a whole number of 16 partnerships out there, and they can be fuel cells, they 17 can be batteries, they can be a whole host of things, we 18 need to do better in terms of defining some numbers into 19 our future and setting some goals.

20 May I say that the Electric Transportation 21 Coalition numbers seem very reasonable to me, and I am 22 certainly very supportive of that. And I also believe 23 that if we do include the HEVs that are the plug ins, that 24 this is a good thing. There is probably some element of 25 timing there, and a sunset perhaps if they are given PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 78 1 quote, " the gold credit." That I would look to staff to 2 give me some sense of what number of years out we would 3 want to do that.

4 I absolutely believe in the free marketplace and 5 believe that there are going to be a number of you who are 6 sitting in the audience in your associated industries that 7 are going to need to sort out which is the avenue for the 8 best results. And there could be a whole host of them.

9 And so I'd like to leave that a little bit free for you to 10 have that opportunity to work with what you think will be 11 best for whatever product you develop.

12 And so that, Mr. Chairman, is my, I guess,

13 summation. And I'm ready to support the staff, what I 14 would call, and amendment to the staff report, which would 15 include the California Electric Transportation Coalition's 16 numbers.

17 CHAIRPERSON LLOYD: And that would be  are you 18 saying that would  is that having a mandatory thing or 19 did I understand you to give some flexibility on whether 20 you have batteries or the technology?

21 BOARD MEMBER RIORDAN: Because I'm a free market 22 person, I sort of like flexibility.

23 CHAIRPERSON LLOYD: Ms. D'Adamo.

24 BOARD MEMBER D'ADAMO: This was what I was 25 waiting for, some actual discussion of, you know, honing PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 79 1 these proposals down. Just to make sure I'm 2 understanding. Mrs. Riordan, you're suggesting that we 3 look more closely at the Cal ETC proposal?

4 BOARD MEMBER RIORDAN: ( Mrs. Riordan nods head.)

5 BOARD MEMBER D'ADAMO: I'm unclear about the 6 sunset provision. I've got a couple of questions on the 7 sunset provision on plug in hybrids. I also would like to 8 have a discussion and am interested in particular in the 9 Chairman's point of view on BEVs. That's something I want 10 to push for as much as possible. The ratio is important.

11 I don't know that we can decide here today what that ratio 12 is. But I think that we ought to have some discussion 13 about how to get there.

14 Also, I am interested in including in the mix 15 some mechanism for credit for re lease or, in fact,

16 increase credit for an open lease. I guess it's called an 17 open lease or an increased credit for sale. And I would 18 like to be as flexible as possible on the issue of BEVs,

19 but I am concerned about being gamed. Because last time 20 when we were here, we knew that we were being pretty 21 generous with the Neighborhood Electric Vehicles since 22 they were already under way.

23 As I recall, a lot of us were pretty reluctant to 24 cut back too far on the credit. In the end though I think 25 we ended up getting gamed. So I don't know the answer to PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 80 1 that question about how do we somehow include BEVs in the 2 mix, plug in hybrids, generous credits for re release 3 without getting gamed.

4 BOARD MEMBER DeSAULNIER: I can tell you some 5 more Yogi Berra lines, if you'd like.

6 ( Laughter.)

7 BOARD MEMBER D'ADAMO: Well, maybe, Mr. Cackette,

8 since they're conferencing over there, do you have any 9 suggestions?

10 DEPUTY EXECUTIVE OFFICER CACKETTE: I think that 11 one of the underlying issues as you discuss these broader 12 points is that we have to go back and look at the absolute 13 values of credits, the relative values of credits. And 14 I'm not sure that we can do that, you know, in 5 minutes 15 here.

16 So, you know, there's issues for example like on 17 the plug in hybrids. When they were in silver, we bumped 18 the number way up to make them look attractive, even 19 though they're only in silver. You put them in gold, you 20 may have over incentivized them. And we need to go back 21 and look at how that plays against BEVs if you decide to 22 put BEVs in there and against fuel cell vehicles.

23 So it's going to take a little bit of thought.

24 Also, how we would, you know, do the challenge you just 25 put out, should the Board decide that, on re lease PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 81 1 credits. We want to make it rich and inviting, but not 2 result in the gaming situation, so that's a balance. And 3 we'll need to look at that.

4 CHAIRPERSON LLOYD: That's exactly what I was 5 checking with Ms. Witherspoon on whether, in fact, they 6 could look at that now or whether they would need some 7 time to further examine the ramifications of that.

8 DEPUTY EXECUTIVE OFFICER CACKETTE: One other 9 item is we still have a list of issues we'd like to share 10 with you, if you finish this part of the discussion. And 11 I just want to remember that one of them is travel and 12 that affects these numbers by approximately 70 percent.

13 So again it's important to figure out what you'd like us 14 to do in that case.

15 BOARD MEMBER D'ADAMO: On the travel, is that 16 just limited to the fuel cell?

17 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, that's 18 an issue as to whether it's limited to fuel cell, and how 19 we structure it if it's to include other vehicles or not 20 and for how long. And as the New York people said,

21 there's a problem even on the fuel cells that if the 22 numbers get too big, they travel in a way that makes the 23 credits large in New York, which essentially wipes out 24 their ability to get silver vehicles. Sort of glutts 25 credits there, so we need to think about that a little bit PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 82 1 too. But we'll bring that up maybe after you've done that 2 and it could be a refinement whatever you decide here on 3 the numbers.

4 CHAIRPERSON LLOYD: Dr. Burke.

5 BOARD MEMBER BURKE: Well, I read the Yogi Berra 6 quote book, too. My favorite was, " That restaurant is so 7 busy that nobody ever goes there anymore."

8 ( Laughter.)

9 BOARD MEMBER BURKE: But the one, I guess,

10 that  I have the book  woudl deal with this is, " That 11 was such a good decision I don't how I made it."

12 ( Laughter.)

13 BOARD MEMBER BURKE: South Coast obviously has an 14 interesting stake in this issue. My seatmate described to 15 Tim Carmichael how we should keep a global image of this 16 decision today. And it's very difficult for those of us 17 who live in the highest density of the problem to keep a 18 global issue. Because we live with it on a day to day 19 basis as do a great number of people in the state of 20 California. But we are probably the highest impact.

21 My concern here is not with the science 22 particularly. My concern here was with the process. This 23 has been worked on by staff in the past few months. And 24 my comments yesterday were not alleviated. The people 25 that I would think that would support this proposal were PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 83 1 at best neutral on this proposal, were at best neutral.

2 Now, if it is, in fact, the plugging in of some 3 numbers or having some PZEVs as you're asking, it would 4 seem that in our process, that would have been 5 accommodated, but it wasn't.

6 I was touched by, and I can't remember which 7 board member said it yesterday, the difficulty of changing 8 something as complex and compound as this issue from the 9 dais. It's really difficult. And it takes almost solemn 10 like  Solomon like attitude here. And, you know, as 11 much as I'd like to believe it I don't think I'm Solomon.

12 So if I were a dictator instead of board member,

13 I would say, you know, you've got a real good start here,

14 why don't you go back and work with it another month or 2 15 come back and sit down and talk to me about it.

16 I'm not dictator. I am board member. I love Ron 17 Roberts comments, you've got to get something that works,

18 because that's what it's all about.

19 So what I'm going to do is listen to the rest of 20 my colleagues who are like Solomon and see what they say.

21 I'm waiting for yours, Professor, I'll sit back and wait 22 for your comments. But it's a very difficult decision 23 here and one in which makes me even more hesitant because 24 I remember sitting here 2 years ago. And we struggled

25 no it wasn't here, it was in the other building. But we PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 84 1 struggled and struggled and took all that testimony and 2 listened to all these people and we were adamant in our 3 decision. I mean absolutely adamant in our decision. And 4 here we are 2 years later saying well, you know, we've got 5 to be adamant in this decision.

6 It's really an interesting process to be involved 7 with, I'm glad I'm here, but I'm not glad I'm here.

8 CHAIRPERSON LLOYD: Supervisor Roberts had a 9 comment.

10 BOARD MEMBER ROBERTS: Just a quick one. There's 11 something that needs to be corrected, I think, since we're 12 discussing it. And you continue to put it on the screen.

13 The math is not correct for that third column. It doesn't 14 add up to 30,200. Just because we're getting into a 15 discussion, I'd like to see it a little closer.

16 CHAIRPERSON LLOYD: You're right.

17 BOARD MEMBER ROBERTS: I think it's about 25,700.

18 And so those don't follow in quite the same pattern. And 19 just because it might have some bearing on what people are 20 thinking here.

21 CHAIRPERSON LLOYD: Yes. By the way, just before 22 Professor Friedman and I guess Mr. Calhoun speaks, I would 23 like to comment something on the process that Dr. Burke 24 brought up and also rather a point that Sandy brought up.

25 As you know, I have the privilege of serving the Governor PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 85 1 here on a daily basis, as long as he wants me to, as long 2 as he's there.

3 And believe me I think we've given access to 4 people as much as possible. The fact that the staff 5 proposed this change indicates different inputs. We've 6 had tremendous detailed discussions with the affected 7 industry. I think we've had excellent dialogue with the 8 industry but each of those are different, because we're in 9 different stages of the process.

10 It wasn't our idea to come back today, that was 11 because of the lawsuit. And I'm not debating the merits 12 of the lawsuit. The fact that it was there, we are in a 13 democracy and people have a right to take what action they 14 want.

15 But that was not the desire at that time. The 16 fact is we are back here. But also I feel that during the 17 process we learned information, during that time. And you 18 know I think as a public body, I don't think it would be 19 responsible not to take the information into account as we 20 came back here.

21 But you're right, Dr. Burke, this is tremendously 22 complicated. I've sat down with staff and gone through 23 some of these issues and it really is very tough, as we 24 continue to see now.

25 But I think what we're seeing is the fact of

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 86 1 two things I would like to just say on that. One is that 2 as staff has indicated, we're not sacrificing air quality.

3 In fact, we're probably increasing that. The other piece 4 about that is that we have a timeframe on this. So the 5 more time we take on this before we go ahead and get 6 another program under way, we are losing precious time, so 7 we can't get these vehicles on the road as fast as 8 possible.

9 So we're caught and staff is caught  we're all 10 caught on that issue. If we had another 6 months, it 11 would be great. But we've heard from many of the people 12 out here we need to go faster, harder and try to get the 13 regulations out there and try to provide some surety for 14 industry, who was working very hard on this. That's what 15 we're trying to do.

16 So believe me, again I'm just speaking on behalf 17 of staff in this case, it's a tough job.

18 Professor Friedman, Mr. Calhoun?

19 I'm just going to take a pit stop.

20 BOARD MEMBER HUGH FRIEDMAN: You don't want to 21 hear what I have to say, is that it.

22 ( Laughter.)

23 BOARD MEMBER HUGH FRIEDMAN: Well, Yogi Berra 24 wasn't it he who said that, " It ain't over till it's 25 over", or until the lady sings or something. So we'll PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 87 1 see when we hear some singing here.

2 First of all, I certainly endorse what my friend 3 and neighbor from San Diego said about what I consider 4 rather an unfortunate take on all the publicity that's 5 preceded this hearing to the extent that it's been seen in 6 headlines have been seen as staff proposing to pull the 7 plug on the ZEV mandate or in any way undermining it,

8 other than trying to make it square with what we now 9 understand to be reality.

10 This ZEV mandate, which is so noble and which is 11 it so important for our futures and particularly for the 12 futures of our children and grandchildren and their 13 health, was a prediction to begin with in 1990. It was 14 crystal balling, but it was a determination to get some 15 science going and to require those who make vehicles and 16 sell them in this state to begin to make and sell an 17 increasing number of vehicles that were not emitting the 18 pollution that can choke us.

19 And we've then had to monitor as we go along this 20 work in progress, and learn from the experiences, good and 21 bad, that have presented themselves. And I wasn't here 10 22 years ago, but I can sympathize with these of you who were 23 and have had to go through this at it stage by stage.

24 I think the staff proposal is a good basic 25 proposal in maintaining the 2001 requirements basically,

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 88 1 but fixing them in light of the legal issues resulting 2 from the lawsuit, and providing an alternative path which 3 tries to incentivize a number of the other technologies 4 that seem promising.

5 I have a sense that we're with the fuel cell 6 about where everybody was in 1990 with the battery. Maybe 7 a little less optimistic about the fuel cell. Apparently,

8 everybody was predicting the battery was just around the 9 corner. And even when I came into this four or five years 10 ago and was in Michigan and in battery factors and other 11 places, it was just a matter of mass production, and we're 12 going to have much longer life, and much cheaper in terms 13 of cost at fairly small volumes.

14 But that said, I do think that the staff proposal 15 is too modest. I think that we need to require much more 16 and a specific quantity, at least as a target. And then 17 that will be subject to an earlier, before it kicks in, to 18 a technology advisory panel assessment to give us 19 guidance, not to set the policy, but to help us understand 20 where we are technologically.

21 I personally would prefer to see more zero 22 emission vehicles mandated between now and 2008, but I'm 23 satisfied that with the questions about cost and what 24 would be made in the near term for zero, a good 25 satisfactory demonstration of numbers, such as 250, and I PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 89 1 think that's a minimum, and I think it should not 2 personally  I'm troubled that that would include 3 transportation or travel credits.

4 I think we need in this state, my sense is we 5 ought to require 250 for this state. And not to take away 6 from New York or Massachusetts, but you know, I don't like 7 the notion that we could end up with very few here. I 8 don't think that would really happen. But I think it's 9 our responsibility to make sure it doesn't happen. Maybe 10 I'm misunderstanding that issue, but that's my sense of 11 it.

12 Because the trade off is, even though it's a very 13 low number, it should be enough, I'm told, and I'll accept 14 those who know better, that 250 will be enough in these 15 short term years to demonstrate and to allow people to 16 experiment, the manufacturers, and to develop.

17 And with it the trade off and the benefit we get 18 is we are, as I understand it, we are significantly 19 increasing the mandate on the near zero emission, the 20 volume, the number, the PZEV the AT PZEV. And we're 21 driving and continuing to force technology there, and 22 we're going to get a lot more emission reductions, which 23 we sorely need in the state in the next few years from 24 mobile sources.

25 So if my understanding is correct that that's PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 90 1 what we're doing with the staff proposal, then I can live 2 with it until 2009. And that's when I join my colleagues 3 here in feeling that there is, as I said earlier in some 4 questions during the testimony, I don't have any 5 reluctance to pick a number that has some sound basis 6 based among other things on automaker CEO announcements 7 and pronouncements as to what they expect and see their 8 vision, what their plan is for many many more, many more 9 fuel cell vehicles than we're talking about here, assuming 10 that that's the vehicle of choice, the fuel cell, than 11 these numbers.

12 And I'm content with the staff on, I guess, the 13 medal standards, if you will, or a precedent of 10 times 14 multiples of 10. And I could live with either the first 15 column or the second column of the Cal ETC proposal.

16 They're very close in numbers. And I wouldn't draw a line 17 in the sand on either in terms of choosing between them.

18 I am concerned though about giving the automakers 19 the full freedom and choice to pick the ZEV technology.

20 My concern is that they'll all go for the fuel cell, and 21 that we won't see anymore battery electric. And that, at 22 least, is on the road. There are people who have made 23 them, people who buy them, swear by them, love them, dream 24 about keeping them, and are sorely disappointed, because 25 in some cases, they can't.

PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 91 1 And so I, too, think that those that have been 2 sold and made we ought to see what we can do legally and 3 appropriately to if not restore them to make sure that any 4 additionals that are leased or sold do what we can to try 5 and cajole, or if it's permitted and legal, require that 6 they be available, so that they can be available on the 7 long term for those who want to buy them.

8 It may well be that that was an inhibiting factor 9 in marketing them to begin with, it seems to me. Why 10 invest in something if you can't keep it if you like it.

11 So again there are questions. There will always 12 be lingering doubts, despite Toyota's, I'm sure, good 13 faith statements on the RAV4, EV RAV4. And despite GM's 14 earlier assurances on the EV1, there will always be 15 lingering doubts whether in fact there could have been a 16 better college try to market these, and they could have 17 been provable successes if sold in great volume.

18 I realize there are infrastructure issues and 19 other things, but I'd like to do more to see is there some 20 way we could do more on the electric vehicle, the battery 21 electric. By that I mean within these numbers to either 22 incentivize or to mandate up to a certain percentage.

23 Finally, I don't feel as strongly that plug in 24 hybrids should be gold. I think they should be as close 25 to gold as we can have. I call them tarnished gold or PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 92 1 fools gold.

2 ( Laughter.)

3 BOARD MEMBER HUGH FRIEDMAN: All of them.

4 Platinum. Give them something heavy. But when they're 5 not being driven in battery mode, they're gasoline 6 vehicles. And they may not even be low emission gasoline 7 vehicles, like SULEV or ULEV. During the time I can't 8 quarrel when they're being driven in battery mode when 9 that switch is on or up or whatever, they're entitled to 10 that kind of credit. But the fact is they can also be 11 driven a different way.

12 I really am concerned about keeping faith with 13 this mandate as others have said. And I believe that I've 14 benefited greatly from the testimony I've heard. I came 15 here to listen and I've listened. And I had some 16 inquiries from the press and I didn't want to talk or 17 comment because I hadn't made my mind up. This is the 18 forum. This is the process.

19 I mean it's flawed. It's not perfect. But you 20 have talented staff, very thoughtful hard working staff 21 give you a proposal, pieces of which they run by some of 22 us, but they can't run by very many of us because of the 23 obvious legal constraints. And they get bits and pieces 24 of feedback. They hold workshops. They get input from 25 all the constituent interests and the stakeholders, and PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 93 1 then they fashion something. And then it's out there for 2 comment. And then it's revised in light of the responses 3 and comments from the interests, affected interests.

4 And then it's further out there in the public,

5 and we have it, and we are, as we will report shortly, we 6 are available at least most of us to try to make ourselves 7 available to all of the interests who want to talk to us.

8 And we listen and we hear. And, of course, there are very 9 differing and conflicting tugs and pulls.

10 And out of that we then come to a 2 day meeting.

11 We listen to people that we've not heard from before and 12 people we've heard a lot from before.

13 It is complicated. And I'm glad I have people 14 explaining it, because even though I've been a lawyer for 15 40 plus years, if I had to read this for the first time,

16 particularly if I were someone like an aboriginal or from 17 Mars who just landed, I'd read that and I'd say this is 18 not as Rousseau so said in the state of nature. This is 19 incredible. How could the human mind come up with this 20 kind of a complex entangled scheme.

21 ( Laughter.)

22 CHAIRPERSON LLOYD: But would it put you to 23 sleep?

24 ( Laughter.)

25 BOARD MEMBER HUGH FRIEDMAN: But the scheme makes PETERS SHORTHAND REPORTING CORPORATION ( 916) 362 2345 94 1 sense. It makes sense given what we're trying to 2 accomplish. It makes as much sense as about anything else 3 I can think of.

4 So with that, I'll listen to you with what Mr.

5 Calhoun has to say.

6 CHAIRPERSON LLOYD: I did hear you say

7 BOARD MEMBER CALHOUN: I was a little worried 8 there for a few minutes. I wasn't sure you were going to 9 finish the statement.

10 CHAIRPERSON LLOYD: But in the back, I was able 11 to hear you, so I was not ignoring you.

12 Mr. Calhoun.

13 BOARD MEMBER CALHOUN: Thank you, Mr. Chairman.

14 I guess I'd like to echo something Ron Roberts said 15 earlier, and that is about the impression that was had by 16 a lot of people concerning the staff report.