BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 1685 (Gomez)
Version: June 14, 2016
Hearing Date: June 28, 2016
Fiscal: Yes
Urgency: No
TH
SUBJECT
Vehicular Air Pollution: Civil Penalties
DESCRIPTION
This bill increases from $500 to $37,500 the maximum civil
penalty that may be imposed upon a person who violates specified
provisions of California's Vehicular Air Pollution Control
statute, or any order, rule, or regulation of the California Air
Resources Board adopted pursuant to those provisions. This bill
provides that the Board shall adjust the maximum civil penalty
for inflation based on the California Consumer Price Index.
This bill provides certain exceptions to the increased maximum
civil penalty, including violations involving portable fuel
containers or small off-road engines, and provides that
automobile dealers who violate specified provisions of the
statute shall be subject to a civil penalty not to exceed
$10,000. This bill adjusts from per vehicle to per violation
the frequency for which certain penalties may be imposed.
BACKGROUND
On September 3, 2015, representatives of the automaker
Volkswagen (VW) admitted to the U.S. Environmental Protection
Agency (U.S. EPA) and the California Air Resources Board (CARB)
that a large number of their diesel-powered vehicle engines had
been manufactured with a device designed to bypass or defeat
elements of the vehicle's on-board emissions control system.
According to the British Broadcasting Company:
[these] engines had computer software that could sense
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[emissions] test scenarios by monitoring speed, engine
operation, air pressure and even the position of the steering
wheel. When the cars were operating under controlled
laboratory conditions - which typically involve putting them
on a stationary test rig - the device appears to have put the
vehicle into a sort of safety mode in which the engine ran
below normal power and performance. Once on the road, the
engines switched out of this test mode . . . and emitted
nitrogen oxide pollutants up to 40 times above what is allowed
in the US. (Russell Hotten, Volkswagen: The Scandal
Explained, BBC (December 10, 2015)
[as of June 23,
2016].)
Indications of a problem with VW's diesel fleet began surfacing
at least a year earlier when in 2014, "regulators raised
concerns about VW emissions levels, but these were dismissed by
the company as technical issues and unexpected real-world
conditions." (Id.) However, once regulators uncovered the true
cause of these emissions irregularities, they determined that
"482,000 cars in the US only, including the VW-manufactured Audi
A3, and the VW models Jetta, Beetle, Golf and Passat" were
equipped with the device." VW has since "admitted that about 11
million cars worldwide, including eight million in Europe, are
fitted with the so-called defeat device," prompting regulators
in the UK, Italy, France, South Korea, Canada and, Germany, to
open investigations. (Id.) CARB is also now investigating
other manufacturers testing results to see if this problem
extends beyond VW.
The financial cost to VW has been significant. With the company
recalling millions of cars worldwide, it has set aside ?6.7bn
(4.8bn) to cover costs resulting in the company posting its
first quarterly loss for 15 years of ?2.5bn in late October of
last year. However, the costs to VW are likely to escalate
given that the EPA has the power to fine a company up to $37,500
for each vehicle that breaches standards - a maximum fine of
about $18bn." (Id.)
Under existing law, CARB can impose a civil penalty of $500 per
vehicle against an automaker who violates the Board's emissions
standards. This bill would increase that civil penalty amount
to $37,500 per violation.
CHANGES TO EXISTING LAW
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Existing federal law , the Clean Air Act, authorizes the
imposition of civil penalties against any person who violates
specified provisions pertaining to motor vehicle emission and
fuel standards in the amount of $25,000 (now $37,500), as
specified. (42 U.S.C. Sec. 7524.)
Existing law provides that any person who violates any provision
of California's Vehicular Air Pollution Control statute, or any
order, rule, or regulation of the California Air Resources Board
(state board) adopted pursuant to the statute, and for which
violation there is not provided in this part any other specific
civil penalty or fine, shall be subject to a civil penalty not
to exceed $500 per vehicle, portable fuel container, spout,
engine, or other unit subject to regulation. (Health & Saf.
Code Sec. 43016.)
Existing law provides that any person who engages in specified
prohibited transactions shall be liable for a civil penalty not
to exceed $5,000 per vehicle. (Health & Saf. Code Sec. 43154.)
Existing law provides that no new motor vehicle shall be sold in
California that does not meet the emission standards adopted by
the state board, and any manufacturer who sells, attempts to
sell, or causes to be offered for sale a new motor vehicle that
fails to meet the applicable emission standards shall be subject
to a civil penalty of $5,000 for each such action. (Health &
Saf. Code Sec. 43211.)
Existing law provides that any manufacturer or distributor who
does not comply with the emission standards or the test
procedures adopted by the state board shall be subject to a
civil penalty of $50 for each vehicle which does not comply with
the standards or procedures and which is first sold in this
state. The payment of such penalties to the state board shall
be a condition to the further sale by such manufacturer or
distributor of motor vehicles in this state. (Health & Saf.
Code Sec. 43212.)
This bill would increase the above civil penalty amounts to
$37,500 for each action in violation, except as specified.
This bill would specify that violations involving portable fuel
containers or small off-road engines shall be subject to a civil
penalty not to exceed $500 per unit.
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This bill would specify that a dealer who engages in specified
prohibited transactions shall be subject to a civil penalty not
to exceed $10,000 for each such action.
This bill would direct the state board to adjust the above civil
penalty amounts for inflation based on the California Consumer
Price Index.
This bill would provide that for a manufacturer or distributor,
the payment of the penalty shall be a condition for the
continued sale in this state of products regulated by the state
board.
This bill would provide that the state board may order a
manufacturer of motor vehicles to bring its vehicles into
compliance with the emissions configuration to which they were
certified, and that compliance with the order shall be a
condition for the continued sale of motor vehicles by that
manufacturer in this state.
COMMENT
1.Stated need for the bill
The author writes:
By law, California's mobile source civil penalty amounts must
be set at levels that ensure compliance with the law and deter
future violations. To be effective, penalty levels cannot
simply be the cost of doing business. In the 1970s, the
average new car cost around $3,500. Today, the average is
around $33,500, with some models costing tens of thousands of
dollars more. However, the maximum penalty for actions
involving the sale of new motor vehicles that do not meet the
state's emission standards or test procedures has remained
flat for decades, at a woefully inadequate $5,000 per vehicle.
By contrast, the federal maximum penalty amount for analogous
violations is $37,500. Moreover, U.S. EPA is required to
review penalty amounts every four years and adjust them for
inflation.
AB 1685 seeks to remedy this discrepancy and strengthen
California's ability to deter bad actors that violate the
state's strict emissions standards as well as protect public
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health and the environment. Specifically, AB 1685:
increases the maximum penalty for mobile source
violations to $37,500 (equal to the penalty prescribed in
federal law), while retaining the current, lower penalty
amount for smaller, less expensive equipment, like small
off-road engines;
prohibits further sales until the penalty is paid,
consistent with other provisions of existing law;
modernizes the code to reflect that today's new vehicles
may be advertised or sold over the internet, rather than at
a brick-and-mortar establishment exclusively;
allows ARB [California Air Resources Board] to order
manufacturers to bring their vehicles into the emissions
configuration of the ARB certification, and requires
compliance with the order before a manufacturer may
continue selling vehicles in California; and
allows ARB to update its vehicular penalties
periodically for inflation, and exempts this adjustment
from the Administrative Procedures Act, so that penalties
maintain their deterrent effect over time.
1.Disincentivizing noncompliance
This bill would raise the maximum civil penalties that the
California Air Resources Board (CARB) could impose on parties
who violate standards established under California's Vehicular
Air Pollution Control statute. The civil penalties currently
authorized in law - generally either $500 or $5,000 per
noncompliant vehicle - were set by the Legislature in 1975.
Having not been adjusted since that time, California's civil
penalty level is now up to 1/75th the amount that may be imposed
for similar violations under the federal Clean Air Act, and does
not carry the same force to disincentivize parties from engaging
in non-compliant acts. This bill raises the maximum civil
penalty that may be assessed under state law to match its
federal counterpart. Writing in support, the American Lung
Association in California states:
This bill would strengthen California's ability to protect
public health by updating the penalties as a deterrent for air
pollution violations such as those recently perpetrated by
Volkswagen. Largely due to transportation pollution,
California is home to the nation's most polluted cities.
Disadvantaged communities throughout California bear a
disproportionate burden of air pollution and other
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environmental burdens made worse by traffic pollution. AB
1685 would update the decades-old penalty structure for
violating emissions programs as an important deterrent to
cheating on California's emissions standards and certification
tests.
AB 1685 would update the maximum fines able to be imposed on
emission violations to align with the federal penalty level of
$37,500 per vehicle. This would raise the fine up from the
current $5,000 maximum per vehicle that was established
decades ago and reflected a much lower overall vehicle
purchase price. AB 1685 also provides for the maximum fine to
be adjusted over time based on inflation, ensuring a more
reasonable penalty amount remains in place going forward.
Updating the emissions penalties is long overdue and has been
clearly highlighted as insufficient in light of the Volkswagen
emissions cheating scandal.
2.Opposition concerns
Domestic and foreign manufacturers of automobiles, speaking
through their representative trade organizations, have raised
several concerns over how the California Air Resources Board
will assess these enlarged civil penalties. The Alliance of
Automobile Manufacturers (Alliance) summarizes these concerns as
follows:
increasing the penalty for failing to produce a zero emission
vehicle credit (ZEV) from $5,000 to $37,500 results in an
unconscionable penalty of up to $150,000 per vehicle. Such a
dramatic penalty increase for ZEV credits is unwarranted.
(Section 43211)
increasing the current penalties by up to 750 times is
excessive and is not accompanied by any requirement for the
California Air Resources Board (CARB) to update their civil
penalty policy to clearly articulate how the increased
penalties are to be calculated. If penalties are to be
increased, that policy must be revised to provide quantifiable
standards for the calculation of penalties so as to ensure
consistency, transparency, and due process.
requiring payment of a civil penalty as a condition of
continued sale during an appeal unfairly requires up-front
payment of amounts that could later be found excessive.
(Sections 43016, 43154, 43212)
requiring CARB to prohibit sales of an entire fleet of
compliant vehicles when only a small subset cannot be brought
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into compliance is unwarranted and beyond the stated intent of
the bill. (Section 43214)
changing penalties from "per vehicle" to "per action" has an
unclear effect and is concerning to the extent it may be
construed to permit multiple penalties per vehicle, or broaden
the scope of what actions are subject to penalty. (Section
43016, 43154)
Along with the Alliance, manufacturers represented by Global
Automakers argue that the requirement to pay a civil penalty,
even if the penalty amount is contested and is under review by
an appellate body, as a condition for the continued sale of
motor vehicles by a manufacturer or distributor is overly
punitive. As stated by the Alliance, a manufacturer who is
assessed a penalty for one non-compliant product line would
potentially be prohibited from selling any other motor vehicles,
even in compliant product lines, unless they first paid the
assessed penalty to the ARB. The Committee may wish to consider
the extent to which compliant product lines offered by a
manufacturer or distributor ought to be impacted by disputes
over penalties concerning non-compliant product lines, and
whether parties ought to be given an opportunity to request the
stay of a penalty assessment while appealing that assessment,
which is typically available (though not necessarily granted) to
litigants appealing a judgment in civil litigation.
Support : American Lung Association in California; Bay Area Air
Quality Management District; Breathe California; CALPIRG;
California Air Pollution Control Officers Association; Clean
Power Campaign; Coalition for Clean Air; Environment California;
Natural Resources Defense Council; Sierra Club California
Opposition : Alliance of Automobile Manufacturers; Global
Automakers
HISTORY
Source : Author
Related Pending Legislation : None Known
Prior Legislation : AB 2922 (DeSaulnier, Ch. 687, Stats. 2008)
specified that violations of California Air Resources Board
rules or regulations that are subject to a $500 penalty include
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those relating to portable fuel containers, spouts, engines, and
other units subject to regulation under the Board's authority to
control vehicular air pollution.
Prior Vote :
Senate Transportation and Housing Committee (Ayes 7, Noes 4)
Senate Environmental Quality Committee (Ayes 4, Noes 2)
Assembly Floor (Ayes 48, Noes 29)
Assembly Appropriations Committee (Ayes 14, Noes 6)
Assembly Transportation Committee (Ayes 10, Noes 5)
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