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 SB 600 (Lieu) Page 1 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. SB 600 (Lieu) Page 2 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." SB 600 (Lieu) Page 3