BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1685

                                                                    Page  1


          1685 (Gomez)

          As Amended  August 18, 2016

          Majority vote

          |ASSEMBLY:  |48-29 |(May 12, 2016) |SENATE: |26-13 |(August 24,      |
          |           |      |               |        |      |2016)            |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |

          Original Committee Reference:  TRANS.

          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).

          The Senate amendments:

          1)Provide for penalties "up to" or "not to exceed" specified  
            maximum limits.

          2)Provide that fines for certain dealer violations shall not  
            exceed $10,000 for each action.

          3)Provide that fines for manufacturers who fail to meet the  


                                                                    AB 1685

                                                                    Page  2

            requirements to produce a specified percentage of their new  
            motor vehicle sales as zero-emission vehicles be limited to  

          4)Make related, technical changes.

          AS PASSED BY THE ASSEMBLY, 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.


                                                                    AB 1685

                                                                    Page  3

          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.

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.

          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)  


                                                                    AB 1685

                                                                    Page  4

          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  

          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  

          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: