BILL ANALYSIS Ó AB 1685 Page 1 ASSEMBLY THIRD READING AB 1685 (Gomez) As Amended April 11, 2016 Majority vote ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Transportation |10-5 |Frazier, Bloom, |Linder, Baker, Kim, | | | |Brown, Chu, Daly, |Mathis, Melendez | | | |Dodd, Gomez, Medina, | | | | |Nazarian, O'Donnell | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Chang, | | | |Bonilla, Bonta, |Gallagher, Jones, | | | |Calderon, Daly, |Obernolte, Wagner | | | |Eggman, Eduardo | | | | |Garcia, McCarty, | | | | |Holden, Quirk, | | | | |Santiago, Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Updates civil penalties for violations of California Air Resources Board (ARB) regulations, orders, or rules, to AB 1685 Page 2 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 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 AB 1685 Page 3 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. FISCAL EFFECT: According to the Assembly Appropriations Committee, unknown additional penalty revenue, which would be deposited into the Air Pollution Control Fund. 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. 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. In California, an application for certification must be submitted to, and approved by, both the ARB and U.S. EPA concurrently. On September 3, 2015, representatives of Volkswagen (VW) admitted to the U.S. EPA and ARB that a large number of their AB 1685 Page 4 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 manufacturers. It was pointed out federal penalties are substantially higher that state penalties for non-compliance and that the penalties were set in the 1970 and are not 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 this bill 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, this bill would modernize statutes to allow penalties to be extended to manufacturers outside of the state to better reflect AB 1685 Page 5 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. Please see the policy committee analysis for full discussion of this bill. Analysis Prepared by: Victoria Alvarez / TRANS. / (916) 319-2093 FN: 0002875