BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                       AB 1685|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
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                                    THIRD READING 

          Bill No:  AB 1685
          Author:   Gomez (D) 
          Amended:  8/2/16 in Senate
          Vote:     21 

           AYES:  Wieckowski, Hill, Leno, Pavley
           NOES:  Gaines, Bates
           NO VOTE RECORDED:  Jackson

           SENATE TRANS. & HOUSING COMMITTEE:  7-4, 6/21/16
           AYES:  Beall, Allen, Leyva, McGuire, Mendoza, Roth, Wieckowski
           NOES:  Cannella, Bates, Gaines, Galgiani

           SENATE JUDICIARY COMMITTEE:  5-2, 6/28/16
           AYES:  Jackson, Hertzberg, Leno, Monning, Wieckowski
           NOES:  Moorlach, Anderson


           ASSEMBLY FLOOR:  48-29, 5/12/16 - See last page for vote

           SUBJECT:   Vehicular air pollution:  civil penalties

          SOURCE:    Author
          DIGEST:   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  


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          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.


          Existing law:
          1) Requires that persons who violate any California Air Resources  
             Board (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.  
             (Health and Safety Code §43016)

          2) 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. (HSC §43151)

          3) Prohibits new vehicles from being sold in California that do  
             not meet the emissions standard adopted by ARB. (HSC §43211)

          4) Provides penalties of $5,000 per action, for manufacturers who  
             sell, attempt to sell, or offer for sale, a new vehicle that  
             does not meet ARB emission standards. (HSC §43211)

          5) 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. (HSC §43212)

          6) Provides, pursuant to federal law, that violators be subject to  
             civil penalties up to $37,500 per non-compliant vehicle or  


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             engine, $3,750 per tampering event or sale of defeat device,  
             and $37,500 per day for reporting and recordkeeping violations.  
             (42 U.S. Code §7524; 69(30) Federal Register 7121 [Feb. 13,  
             2004]; 73(239) Federal Register §75340 [Dec. 11, 2008]; 78(215)  
             Federal Register §66643 [Nov. 6, 2013])

          This bill: 

          1) Increases civil penalties for violations of certain air quality  
             orders, rules, or regulations adopted by ARB from a maximum  
             amount of $50 per vehicle, or $500 or $5,000 per action,  
             depending on the provision, to a maximum of $37,500 per vehicle  
             or action, as specified.

          2) Authorizes, for violations committed by a manufacturer or  
             distributor, that payment of penalties may be a condition for  
             further sales by the manufacturer or distributor in the state  
             of vehicle models that are alleged or found to be in violation  
             by the state board.

          3) Specifies that violations involving portable fuel containers or  
             small off-road engines retain maximum civil penalties of $500  
             per unit.

          4) Expands prohibitions for commerce in new motor vehicles or  
             engines in the state that do not meet ARB requirements to  
             include businesses or persons who reside outside the state.

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

          6) Authorizes ARB to order a manufacturer to bring its vehicles  
             into compliance with the emissions configuration they were  
             certified to meet, and specifies that compliance with this  
             order may be a condition of further sale of motor vehicles in  
             California of vehicle models that are alleged or found to be in  
             violation by the state board.

          7) 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  


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             through rulemaking procedures.

          8) Makes related clarifying amendments.

          1) Federal and state air quality laws. The federal Clean Air Act  
             and its implementing regulations are intended to protect public  
             health and environmental quality by limiting and reducing  
             pollution from various sources. Under the Clean Air Act, the  
             United States Environmental Protection Agency (US EPA)  
             establishes National Ambient Air Quality Standards (NAAQS) that  
             apply to outdoor air throughout the country.  These federal  
             standards exist for several air pollutants due to their  
             negative impact on public health when above specified  
             thresholds, including ozone, particulate matter (PM), nitrogen  
             oxides (NOx), sulfur oxides, carbon monoxide, and lead. US EPA  
             reviews each NAAQS at five-year intervals to ensure that the  
             standards are based on the most recent scientific information.

             Regions that do not meet the national standards for any one of  
             the standards are designated nonattainment areas.  The Clean  
             Air Act sets deadlines for attainment based on the severity of  
             nonattainment and requires states to develop comprehensive  
             plans, known as the state implementation plan, to attain and  
             maintain air-quality standards for each area designated  
             nonattainment for an NAAQS.

             California has some of the most severe air pollution problems  
             in the country.  In particular, the South Coast and San Joaquin  
             air basins, which contain over half of the state's population,  
             are extreme nonattainment regions (the highest degree of  
             severity) for ozone pollution and are both nonattainment  
             regions for PM.

          2) Why transportation emissions standards matter.  Nationally and  
             statewide, the transportation sector is responsible for a major  
             fraction of air pollution, especially NOx (including NO and  
             NO2), which contributes to both ozone and PM formation.  People  
             who live and work in closer proximity to roadways are  
             especially exposed to and impacted by this pollution.  


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             Nationwide, approximately 16% of U.S. housing units (including  
             48 million people) are located within 300 feet of a major  
             highway, railroad, or airport, and the affected population is  
             disproportionately economically disadvantaged and non-white.

             Ground-level ozone (or tropospheric ozone) is a primary  
             component of smog and is formed from the reaction of NOx with  
             volatile organic compounds in sunlight. Ozone has a number of  
             negative health effects including irritated respiratory system,  
             reduced lung function, aggravated asthma, and inflammation and  
             damage of the lining of the lungs.  Active children are at  
             highest risk from ozone exposure.

             PM can be directly emitted or can be formed in the atmosphere  
             when gaseous pollutants such as sulfur dioxide and NOx react to  
             form fine particles.  Very fine particulate matter is  
             particularly dangerous since it burrows deep into the lungs  
             where it can enter the bloodstream and harm the heart and other  
             organs. Fine particulate pollution poses an especially critical  
             health danger for children, the elderly, and people with  
             existing health problems.  Exposure to PM 2.5 (i.e., particles  
             or droplets that are 2.5 ?m or less in diameter) is also linked  
             to cardiovascular disease.  A 2010 ARB analysis based on  
             scientific assessments by US EPA reported that approximately  
             9,000 people in California are estimated to die prematurely  
             each year as a result of exposure to fine particle pollution.

             In addition, the specialized cancer agency of the World Health  
             Organization, the International Agency for Research on Cancer,  
             classified outdoor air pollution, and PM as a major component  
             of outdoor air pollution, as carcinogenic to humans. 

          3) US EPA and ARB vehicle testing requirements.  To address  
             transportation sector emissions, the federal Clean Air Act  
             authorizes the US EPA to establish and regulate standards for  
             hydrocarbons, carbon monoxide, NOx, and PM from mobile sources  
             of pollution.  Because of its pre-existing vehicle-emission  
             standards and motor vehicle air pollution problems, California  
             is also authorized under the Clean Air Act to implement  
             separate stricter state mobile emission standards.  State law  
             assigns ARB with primary responsibility for control of  
             mobile-source air pollution.  Both US EPA and ARB regulations  


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             require that, prior to introducing a vehicle for sale, a  
             manufacturer must demonstrate that the vehicle meets certain  
             federal and state emissions standards. In particular,  
             manufacturers must demonstrate that its vehicle's exhaust and  
             emission-control systems are durable and comply with the  
             emission standards for the vehicle's useful life.  Only after  
             going through this "certification of conformity" (COC) process  
             are vehicles legal for sale. Manufacturers that fail to comply  
             are subject to civil penalties and other enforcement actions.   
             The current maximum federal penalty for violating the Clean Air  
             Act through the sale of new vehicles without a valid COC is  
             $37,500 per violation.

             In California, applications for certification must be  
             concurrently submitted to and approved by both the ARB and US  
             EPA.  By obtaining and testing a limited sample of vehicles  
             from a test group or engine family, and attempting to duplicate  
             the manufacturers' vehicle emissions certification tests, ARB's  
             In-Use Compliance Program aims to ensure that manufacturers'  
             vehicles meet emissions standards throughout their useful  

          4) The Volkswagen case and its lessons.  As described in the  
             background paper of the Joint Oversight Hearing by the Senate  
             Transportation and Housing and Environmental Quality Committees  
             (Volkswagen's "Defeat Device:" Update and Implications for  
             California, March 8, 2016), a 2014 study by academic  
             researchers, followed by an expanded 2015 investigation by ARB  
             and US EPA of discrepancies between emissions during stationary  
             tests and while driving, led to admission by Volkswagen that  
             several of their "clean diesel" engines had been designed with  
             software-based "defeat devices" to bypass key elements of the  
             emissions control systems.  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.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


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          SUPPORT:   (Verified  8/8/16)

          American Lung Association in California
          Bay Area Air Quality Management District
          Breathe California
          California Air Pollution Control Officers Association
          Clean Power Campaign
          Coalition for Clean Air
          Environment California
          Natural Resources Defense Council
          Sierra Club California

          OPPOSITION:   (Verified8/8/16)

          Alliance of Automobile Manufacturers
          Global Automakers

          ARGUMENTS IN SUPPORT:   According to the author, "AB 1685 makes  
          long overdue and common sense adjustments to California's mobile  
          source violation penalty amounts - bringing them into equivalence  
          with federal law, ensuring compliance with the state's strict  
          clean air and emissions standards, protecting competitors that  
          abide by the rules, and safeguarding public health and safety."

          ARGUMENTS IN OPPOSITION:   Two trade organizations representing  
          domestic and foreign manufacturers of automobiles have raised  
          several concerns over the size of the increased maximum civil  
          penalty and how ARB will assess these penalties.

          The Alliance of Automobile Manufacturers (Alliance) states that  
          increasing the current penalties by up to 750 times is excessive  
          and is not accompanied by any requirement for ARB to update their  
          civil penalty policy to clearly articulate how the increased  
          penalties would be calculated. They state that if penalties are to  
          be increased, that policy must be revised to provide quantifiable  


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                                                                       Page 8

          standards for the calculation of penalties so as to ensure  
          consistency, transparency, and due process. Some per vehicle  
          penalties change to per violation penalties, which raises the  
          possibility of multiple penalties per vehicle. In addition,  
          according to the Alliance, 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.  
          Last, the increase in maximum civil penalties from $5,000 to  
          $37,500 also applies to manufacturers who fail to produce a zero  
          emission vehicle (ZEV) credit and could result in an unwarranted  
          penalty of up to $150,000 per vehicle.

          The Global Automakers have some overlapping concerns with the  
          Alliance, including that the requirement to pay a civil penalty as  
          a condition for the continued sale of motor vehicles by a  
          manufacturer or distributor, even if the penalty amount is  
          contested and is under review by an appellate body, is overly  
          punitive. In addition, because the sale of a target percentage of  
          ZEVs is not a tailpipe emissions standard per se, and compliance  
          with ZEV targets relies on factors outside manufacturers' control,  
          they should not be subject to such punitive penalties for failing  
          to sell the requisite number of ZEVs in the state.

          ASSEMBLY FLOOR:  48-29, 5/12/16
          AYES:  Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown,  
            Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh,  
            Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia,  
            Gatto, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden,  
            Irwin, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian,  
            O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Santiago, Mark  
            Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon
          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Chávez, Dahle, Beth Gaines, Gallagher, Gray, Grove, Harper,  
            Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes,  
            Melendez, Obernolte, Olsen, Patterson, Salas, Steinorth, Wagner,  
            Waldron, Wilk
          NO VOTE RECORDED:  Burke, Hadley, Jones-Sawyer

          Prepared by:Dan Brumbaugh / E.Q. / (916) 651-4108
          8/10/16 15:53:10
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