BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 600 (Lieu) - Vehicles: alternative fuel conversions.
          
          Amended: April 23, 2013         Policy Vote: T&H 11-0
          Urgency: No                     Mandate: No
          Hearing Date: May 23, 2013      Consultant: Mark McKenzie
          
          SUSPENSE FILE.

          
          Bill Summary: SB 600 would require the California Air Resources  
          Board (ARB) to revise procedures that small volume manufacturers  
          of vehicles must follow for certification of alternative fuel  
          conversion systems.

          Fiscal Impact:  Annual costs of $483,000 (Motor Vehicle Account)  
          for 3 positions at ARB.  This includes one-time staff and  
          workload costs to update the regulatory package and testing  
          procedures for alternative fuel conversion certifications as  
          well as ongoing costs for additional workload.  The increase in  
          workload is based on the assumption that aligning ARB procedures  
          to the less-stringent federal standards and procedures would  
          result in a significant increase in the number of annual  
          certification requests, and a subsequent increase in compliance  
          and enforcement activities.

          Background: Current law charges ARB with primary responsibility  
          for the control of mobile source air pollution, and broadly  
          authorizes it to adopt rules for the reduction of emissions and  
          the specification of fuel composition.  Under this authority,  
          ARB regulates on-road and off-road vehicles, engines, and  
          equipment that are both new and in-use.  Prior to offering a  
          regulated product for sale in California, ARB must certify that  
          the manufacturer's product meets emission standards and  
          requirements.  

          Fuel conversion systems modify vehicles and engines so they can  
          run on different fuels than the ones for which they were  
          originally designed.  Most alternative fuel conversions involve  
          reconfiguring a gasoline or diesel vehicle or engine to operate  
          on an alternative fuel such as natural gas, propane, alcohol, or  
          electricity.  Prior to selling a fuel conversion system, a  
          manufacturer must obtain ARB certification to ensure that the  








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          vehicle, engine, or equipment meets state emission standards.   
          ARB's alternative fuel conversion regulations apply to all  
          vehicles, regardless of age.  If the conversion is done before  
          the legal title has been transferred to a purchaser, the  
          conversion manufacturer is considered the Original Equipment  
          Manufacturer (OEM) and must comply with ARB's new vehicle or  
          engine certification requirements.  Conversions that take place  
          after legal title has been transferred are considered "in-use"  
          conversions and must comply with ARB's alternative fuel retrofit  
          system certification procedures.  

          The federal Clean Air Act prohibits manufacturers from altering  
          a vehicle or engine from its certified configuration.  United  
          States Environmental Protection Agency (US EPA) regulations  
          exempt alternative fuel conversion manufacturers from this  
          prohibition if they can demonstrate that the conversion does not  
          compromise emissions compliance with federal clean air  
          standards.  US EPA amended its alternative fuel conversion  
          regulations in 2011 in an attempt to streamline the compliance  
          process.  Since that time, ARB has received numerous inquiries  
          from alternative fuel conversion system manufacturers regarding  
          state certification requirements.  In response, ARB has held a  
          number of workshops, and in response to comments received, board  
          staff is developing a proposal to change certification  
          procedures for conversions that is aimed at streamlining  
          certification procedures.  ARB expects to complete the  
          rulemaking process by fall of this year.

          Proposed Law: Beginning January 1, 2014, SB 600 would require  
          ARB to do the following when certifying alternative fuel  
          conversion systems for small volume manufacturers of vehicles:
           Use specified US EPA testing procedures.
           Certify to federal tailpipe emissions and On-Board Diagnostics  
            II (ODB-II) standards, as long as they meet or exceed  
            standards to which the original equipment manufacturer (OEM)  
            certified on the original fuel.
           Automatically qualify alternative fuel conversion  
            certifications for after-market certifications on new  
            vehicles, upon request.
           Use commercially available fuel for required emissions  
            testing.
           Conduct evaporative emissions testing only on the added  
            alternative fuel system when certifying a duel-fuel vehicle  
            conversion.








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          The bill would also require ARB to extend the life of a new  
          vehicle or engine certification until the end of the year that  
          follows the vehicle model year.

          Staff Comments: This bill is intended to streamline the ARB  
          process for certifying alternative fuel conversion systems by  
          aligning California's standards to the requirements in federal  
          regulations.  Although this is likely to reduce the time and  
          expense associated with completing the certification process,  
          ARB notes several concerns.  Since fuel system conversions  
          change a vehicle dramatically, ARB's current testing procedures  
          and regulations are structured to ensure that California's  
          stringent emissions standards are met.  This is jeopardized by  
          provisions in the bill that require the use of federal test  
          procedures and specify that certification must only meet federal  
          tailpipe emission standards that meet or improve on the  
          standards to which the OEM certified for the original fuel,  
          rather than the more stringent alternative fuel standards for  
          emissions.  In addition, California's standards require that OBD  
          systems are recalibrated to warn a driver, and record for a smog  
          check technician, that emissions exceed approved levels.  The  
          federal OBD standards do not meet that threshold.

          ARB indicates that they would need three additional positions at  
          a cost of $483,000 annually to comply with the provisions of  
          this bill.  This would include any one-time costs to update the  
          regulatory package and testing procedures for alternative fuel  
          system conversion certifications for both new and in-use  
          conversions, as well as ongoing workload associated with  
          increased certifications.  ARB anticipates the number of annual  
          certifications would double from current levels initially, then  
          increase as the market for alternative fuel conversions matures.  
           The increase in the volume of fuel conversion manufacturers  
          seeking certification in California would also result in an  
          increase in compliance and enforcement activities.

          Recommended Amendments: The bill would require ARB to use  
          specified procedures when certifying alternative fuel conversion  
          systems for small volume vehicle manufacturers by January 1,  
          2014.  Since the new procedures outlined in the bill would have  
          to be incorporated into ARB's regulations, this timeline is not  
          feasible.  Staff recommends that the bill be amended to strike  
          out "2014" on page 2, line 1, and insert: "2015."









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