BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1685| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1685 Author: Gomez (D) Amended: 8/2/16 in Senate Vote: 21 SENATE ENVIRONMENTAL QUALITY COMMITTEE: 4-2, 6/8/16 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 SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 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 AB 1685 Page 2 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. ANALYSIS: 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 AB 1685 Page 3 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 AB 1685 Page 4 through rulemaking procedures. 8) Makes related clarifying amendments. Background 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. AB 1685 Page 5 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 AB 1685 Page 6 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 lives. 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 AB 1685 Page 7 SUPPORT: (Verified 8/8/16) American Lung Association in California Bay Area Air Quality Management District Breathe California California Air Pollution Control Officers Association CALPIRG 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 AB 1685 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 **** END **** AB 1685 Page 9