BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1685


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          Date of Hearing:  April 18, 2016


                        ASSEMBLY COMMITTEE ON TRANSPORTATION


                                 Jim Frazier, Chair


          AB 1685  
          (Gomez) - As Amended April 11, 2016


          SUBJECT:  New motor vehicles:  emission standards:  civil  
          penalties


          SUMMARY:  Updates civil penalties for violations of California  
          Air Resources Board (ARB) regulations, orders, or rules, to  
          bring penalty assessments into alignment with those of the  
          United States Environmental Protection Agency (U.S. EPA).   
          Specifically, this bill:  


          1)Increases civil penalties for violations of certain air  
            quality orders, rules, or regulations adopted by ARB from a  
            maximum amount of $500 to a maximum of $37,500 per action and  
            requires, for violations committed by a manufacturer or  
            distributor, that payment of penalties be a condition for  
            further sales by the manufacturer or distributor. 


          2)Provides that violations involving portable fuel containers or  
            small off-road engines remain subject to civil penalties of  
            $500 per unit.


          3)Expands penalties for selling motor vehicles or engines in the  
            state that do not meet ARB requirements to include businesses  








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            or persons who reside outside the state and includes  
            activities such as advertising and introducing commerce into  
            the state.


          4)Deletes provisions defining an established place of business  
            as a place actually occupied either continuously or at regular  
            periods in order to include internet-based businesses.


          5)Expands penalties from a maximum of $5,000 to $37,000 per  
            action for violations of ARB regulations committed by a  
            manufacturer or distributor and requires that payment of  
            penalties be a condition to further motor vehicle sales by the  
            manufacture or distributor in California.


          6)Increases from $5,000 to $37,500, per action, the penalty for  
            any manufacturer who sells, as specified, any new motor  
            vehicle that fails to meet applicable emissions standards.  


          7)Authorizes ARB to order a manufacturer to bring its vehicles  
            into emissions configuration to which they were certified and  
            compliance with this requirement be a condition of further  
            sale of motor vehicles in California.


          8)Authorizes ARB to adjust the maximum penalties for failure to  
            comply with specified regulations for inflation based on the  
            California Consumer Price Index without the requirement to go  
            through rulemaking procedures.


          9)Makes related, clarifying amendments.


          EXISTING LAW:  









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          1)Requires that persons who violates any ARB order, rule, or  
            regulation, where there is not a penalty described for the  
            specific violation, shall be subject to a civil penalty not to  
            exceed $500 per vehicle, portable fuel container, spout,  
            engine, or other unit subject to regulation and that the  
            penalty be collected by the State Treasurer and deposited into  
            the Air Pollution Control Fund.


          2)Provides that manufacturers or distributors who do not comply  
            with emission standards or test procedures adopted by ARB may  
            be subject to civil penalties of $50 per vehicle that is not  
            in compliance and that no further sales of the vehicles can  
            take place until the penalty is paid.


          3)Prohibits residents or businesses from importing, delivering,  
            purchasing, renting, leasing, acquiring, or receiving a new  
            motor vehicle or vehicle engine for use or resale in the state  
            unless the engine has been certified compliant with ARB  
            standards, as specified, with violations set at $5,000 per  
            vehicle.


          4)Prohibits new vehicles from being sold in California that do  
            not meet the emissions standard adopted by ARB.


          5)Provides penalties of $5,000 per action, for manufacturers who  
            sell, attempt to sell, or offer for sale, a new vehicles that  
            does not meet ARB emission standards.


          6)Requires that any manufacturer or distributor who fails to  
            comply with ARB emissions standards or the test procedures  
            adopted by ARB be subject to a civil penalty of $50 for each  
            vehicle that does not comply with the standards or procedures,  
            and that penalties must be paid as a condition of further sale  








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            by the manufacturer or distributor in California. 


          7)Provides, pursuant to federal law, that violators be subject  
            to civil penalties up to $37,500 per non-compliant vehicle or  
            engine, $3,750 per tampering event or sale of defeat device,  
            and $37,500 per day for reporting and recordkeeping  
            violations. 


          FISCAL EFFECT:  Unknown


          


          COMMENTS:  Both nationally and statewide, the transportation  
          sector is known to be a major contributor of criteria pollutants  
          and climate change emissions.  To address transportation sector  
          emissions, both ARB and U.S. EPA regulations require that, prior  
          to introducing a vehicle for sale, a manufacturer must  
          demonstrate that the vehicle meets certain emissions standards.   
          In California, manufacturers must additionally demonstrate  
          compliance with state air-quality standards and manufacturers  
          who fail to comply are subject to civil penalties and other  
          enforcement actions. 





          As with the federal program, vehicles are not legal for sale in  
          California until they are certified to be compliant with state  
          emissions standards.  To be certified by ARB, a vehicle must  
          demonstrate that its exhaust and emission-control systems are  
          durable and comply with the emission standards for the vehicle's  
          useful life.  This is done through durability and certification  
          testing of the prototype certification vehicles. 









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          In California, an application for certification must be  
          submitted to, and approved by, both the ARB and U.S. EPA  
          concurrently.  ARB's In-Use Compliance Program aims to ensure  
          that manufacturers' vehicles meet emissions standards throughout  
          their useful lives.  The program obtains a limited sample of  
          vehicles from a given test group or engine family and duplicates  
          the manufacturers' vehicle emissions certification tests.



          On September 3, 2015, representatives of Volkswagen (VW)  
          admitted to the U.S. EPA and ARB that a large number of their  
          vehicle engines had been designed and manufactured with a  
          "defeat device" designated to bypass, or render inoperative,  
          elements of the vehicles' emissions control system.  As a  
          result, these vehicles were able to pass emissions tests despite  
          exceeding federal emissions standards by up to 40 times.   
          According to vehicle sales data, there are estimated to be  
          617,000 of these vehicles nationally, 79,400 of which are in  
          California.





          In a joint hearing entitled Volkswagen's "Defeat Device:" Update  
          and Implications for California held by the Senate  
          Transportation and Housing and Environmental Quality Committees  
          on Tuesday March 8, 2016, the Legislature was updated with  
          regard to how the defeat device was discovered, VW's admissions,  
          ARB and U.S. EPA's actions, the status of federal litigation,  
          and the overall effect of the issue on California's air quality,  
          among other things.  In the background paper for the hearing,  
          the Committees encouraged the Legislature to consider creating  
          stronger penalties to discourage non-compliance by automobile  








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          manufacturers, particularly given that federal penalties are  
          substantially higher and that penalties for non-compliance in  
          California were set in the 1970 and have not been indexed to  
          inflation.  The Committees suggested that existing ARB penalties  
          do not provide sufficient deterrent, particularly for egregious  
          actions to circumvent emissions requirements, such as in case of  
          VW.



          To ensure that California's air quality laws and regulations are  
          followed, and to better align fines with federal penalties, the  
          author has introduced AB 1685 which would increase the maximum  
          penalties for mobile source violations.  By increasing ARB's  
          fines, the author believes that overall compliance will be  
          improved.  Specifically, this bill would increase the maximum  
          penalty for mobile source violations from $500 to $37,500, while  
          retaining the current lower penalty amount for smaller, less  
          egregious, violations and violations for lower-value equipment  
          such as off-road engines and fuel containers.  Additionally, AB  
          1685 would modernize statutes to allow penalties to be extended  
          to manufacturers outside of the state to better reflect modern  
          business practices whereby vehicles are advertised and sold over  
          the internet (from locations outside of California).  Lastly,  
          this bill would allow ARB to periodically update mobile source  
          penalties by indexing them to inflation thereby ensuring that  
          penalties maintain their deterrent effect over time. 





          Committee comments:  While increasing penalties will no doubt  
          provide a deterrent to violating state air quality laws and  
          regulations, increasing penalties from what are now $500-$5,000  
          to $37,500  could, if not judiciously applied, be overly  
          punitive.  This concern, was highlighted by the Legislature with  
          the passage of SB 1402 (Dutton), Chapter 413, Statutes of 2010,  
          which required ARB to provide a written explanation prior to  








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          imposing administrative or civil penalties for a violation of  
          air pollution laws and to make those explanations available to  
          the public.  

          In a report developed pursuant to SB 1402, ARB outlined its  
          penalty policy explaining the process by which they work to  
          consistently reach swift and fair resolution of violations.  In  
          their report, ARB notes that to be fair, they take into account  
          the specific circumstances for each enforcement case when  
          reaching a penalty determination.  ARB also notes in the report,  
          that while there is not a "mathematical formula" that is applied  
          when calculating penalties, they do weigh individual  
          circumstances, make comparisons between individual cases, and  
          take into account individual circumstances.  ARB also provides  
          that penalty determinations are designed specifically to prevent  
          harm to the public and the environment and are tailored so as  
          not to create undue financial hardship.  

          ARB's Enforcement Penalty Policy also describes the process  
          whereby ARB's Enforcement Division consistently engages  
          regulated industries and business in developing, understanding,  
          and complying with regulations adopted by ARB.  This ensures  
          that the regulated community is aware of and has the ability to  
          comply with pertinent air quality and emissions-related laws and  
          regulations.



          Related legislation:  ACR 112 (Hadley), thanks ARB for its  
          exemplary work and tenacity in uncovering emissions control  
          defeat devices on certain diesel-fueled VW motor vehicles.  
          ACR 112 is scheduled to be heard in the Assembly Natural  
          Resources Committee on 
          May 2, 2016.

          Previous legislation:  SB 1402 (Dutton), Chapter 413, Statutes  
          of 2010, required ARB to provide a specified written explanation  
          prior to imposing an administrative or civil penalty for a  
          violation of air pollution law, make these explanations  








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          available to the public, annually report specified  
          administrative penalties imposed, and publish a penalty policy  
          pertaining to vehicular air pollution control. 

          AB 1085 (Mendoza), Chapter 384, Statutes of 2009, required the  
          ARB to release all technical data that is used to develop  
          regulations prior to the comment period of any proposed  
          regulation.
           
          SB 163 (Johannessen), Chapter 966, Statutes of 1995, expanded  
          ARB's authority to assess and enforce administrative penalties  
          by allowing them to adopt rules and regulations pertaining to  
          fuel requirements and standards.



          REGISTERED SUPPORT / OPPOSITION:





          Support


          American Lung Association in California


          Bay Area Air Quality Management District


          Breathe California


          Clean Power Campaign


          Coalition for Clean Air









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          Natural Resources Defense Council


          Sierra Club California




          Opposition


          None on file




          Analysis Prepared by:Victoria Alvarez / TRANS. / (916) 319-2093