BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 1156
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: cedillo
VERSION: 4/5/10
Analysis by: Jennifer Gress FISCAL: yes
Hearing date: May 4, 2010 URGENCY: YES
SUBJECT:
Funding for heavy-duty diesel trucks
DESCRIPTION:
This bill appropriates $10 million from the Air Quality
Improvement Fund to provide grants to heavy-duty diesel truck
owners to comply with regulations adopted by the Air Resources
Board (ARB) to reduce emissions from those vehicles.
ANALYSIS:
Air Resources Board (ARB) Regulations for On-Road Heavy-Duty
Diesel Trucks
Existing law charges ARB with primary responsibility for the
control of mobile source air pollution, including the adoption
of rules for the reduction of harmful vehicle emissions and the
specification of vehicular fuel composition. In the past two
years, ARB has adopted two significant regulations to reduce
emissions and public exposure to diesel particulate matter
(diesel PM), oxides of nitrogen (NOx), and other air
contaminants from heavy-duty diesel vehicles.
Drayage Truck Regulation. In the spring of 2009, ARB adopted
the In-Use On-Road Diesel-Fueled Heavy-Duty Drayage Trucks,
referred to as the drayage or port truck rule, by setting
emission standards for in-use, heavy-duty diesel-fueled vehicles
that transport cargo to and from California's ports and
intermodal rail facilities. The rule establishes different
compliance standards and deadlines for different model-year
trucks and will be implemented in two phases, as described in
the following table:
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SB 1156 (CEDILLO) Page 2
| | |
| Truck Engine | Emission Requirement Schedule |
| Model Year | |
|-------------------+----------------------------------------------|
| | |
| 1993 and older |Prohibited by December 31, 2009 |
| | |
|-------------------+----------------------------------------------|
| |Phase 1: By December 31, 2009, reduce PM |
| |emissions by 85% |
| 1994 - 2003 | |
| |AND |
| | |
| |Phase 2: By December 31, 2013, meet 2007 |
| |engine standards |
|-------------------+----------------------------------------------|
| |Phase 1: By December 31, 2011, reduce PM |
| |emissions by 85% |
| 2004 | |
| |AND |
| | |
| |Phase 2: By December 31, 2013, met 2007 |
| |engine standards |
|-------------------+----------------------------------------------|
| |Phase 1: By December 31, 2012, reduce PM |
| |emissions by 85% |
| 2005 - 2006 | |
| |AND |
| | |
| |Phase 2: By December 31, 2013, meet 2007 |
| |engine standards |
|-------------------+----------------------------------------------|
| | |
| 2007 and newer | Not applicable, fully compliant |
| | |
------------------------------------------------------------------
Truck and Bus Regulation. In December 2008, ARB adopted the
In-Use On-Road Diesel Vehicle Regulation to reduce emissions
from existing on-road diesel vehicles operating in California.
The regulation establishes a variety of compliance options, but
in general, it requires trucks and buses to meet performance
requirements between 2011 and 2023. By January 1, 2023, all
vehicles must have a 2010 model year engine or equivalent.
Air Quality Improvement Program (AQIP)
SB 1156 (CEDILLO) Page 3
AB 118 (N??ez), Chapter 750, Statutes of 2007, established the
AQIP, which is a voluntary incentive program administered by ARB
to fund clean vehicle and equipment projects, research on
biofuels production and the air quality impacts of alternative
fuels, and workforce training. Each fiscal year, ARB adopts a
Funding Plan that establishes priorities for the funding cycle,
describes the projects ARB intends to fund, and sets funding
targets for each project. About 80 percent of AQIP funds for
the 2009-10 fiscal year will be used to support vehicle and
equipment deployment projects for what ARB considers to be the
next generation of advanced technology vehicles and equipment
just reaching commercialization, including hybrid trucks and
buses.
This bill appropriates $10 million from the Air Quality
Improvement Fund to ARB for purposes of providing grants to
heavy-duty diesel truck owners to comply with regulations
intended to reduce emissions from those vehicles.
COMMENTS:
1.Purpose . According to the author, this bill is intended to
address the economic hardships truck drivers face complying
with ARB standards by appropriating $10 million dollars for
the purposes of providing grants to truckers in order to
retrofit their vehicles. Currently, there is incentive money
available in many areas of the state but none to cover the
immediate cost of retrofitting to help meet compliance
standards.
The author affirms that emissions from diesel trucks have
adverse effects on human health and lead to 4,500 premature
deaths per year. By large majorities, Californians support
clean air laws and reducing air pollution saves the state
billions of dollars per year in reduced hospitalizations and
emergency room visits, health care costs, and lost work days
due to illness.
At the same time, these laws sometimes impose hardships on
small businesses and others who, in a tough economy, may not
have the financial resources necessary to comply with
regulations. Rather than weaken the laws by relaxing the
standards or delaying their implementation, this bill provides
additional funding to help small- and medium-size trucking
businesses retrofit or replace their trucks.
SB 1156 (CEDILLO) Page 4
In doing so, this bill will allow more truckers to stay in
business regardless of their ability to pay to comply with the
rules, helping to ensure that the state experiences the
economic benefits derived from maintaining goods movement
businesses such as drayage trucking, while simultaneously
advancing clean air efforts.
2.Need ? The problem this bill seeks to address is unclear.
With regard to port trucks, ARB contends that there are
currently a sufficient number of drayage trucks in compliance
with the drayage truck rule to meet the freight movement needs
at the state's ports and rail yards. When ARB initially
designed the drayage truck rule, it estimated that about
20,000 trucks would need to comply in order to support goods
movement operations in the state. With the global recession
and the corresponding reduction in freight movement, ARB now
estimates that only about 14,000 drayage trucks are needed to
support goods movement. Thirteen thousand drayage trucks are
currently in compliance with the rule.
Moreover, due to the state's difficulties issuing bonds in
2008 and 2009, ARB was unable to fund some truck emission
control projects ahead of the January 1, 2010 compliance
deadline and thus extended the deadline to April 30, 2010 to
allow more truck owners to take advantage of bond funding.
About 4,500 trucks applied for the extension, of which 2,500
are expected to obtain the financing needed to comply.
Other than port trucks, all other heavy-duty diesel trucks
eligible for funding under this bill are subject to the bus
and truck rule, which includes different compliance deadlines
for different model-year trucks. The earliest compliance
deadline for that rule is January 1, 2011, by which time
pre-1994 model-year trucks must be equipped with a retrofit
device. Because this rule is not yet in effect, it seems
unlikely that any truck owner subject to this rule has ceased
operations as a result of it. Furthermore, ARB is currently
conducting workshops to invite input on a set of proposals
that would ease some of the requirements of the rule,
including a proposal to delay implementation by two years.
Finally, several financial assistance programs exist to
provide grants, loans and loan guarantees, vouchers, or
rebates to help truck owners with the purchase of cleaner
trucks and equipment. These include the Proposition 1B Goods
Movement Emission Reduction Program and the Carl Moyer
SB 1156 (CEDILLO) Page 5
Memorial Air Quality Standards Attainment Program. These
programs, consistent with all other financial assistance
programs that support clean air efforts, fund emission
reductions that are not otherwise required by law or
regulation. In addition, ARB, in partnership with the
California Pollution Control Financing Authority (CPCFA),
offer Providing Loan Assistance for California Equipment
(PLACE), which is a loan guarantee program to assist equipment
owners with financing upgrades.
There is no question that upgrading a truck, either by
retrofitting or replacing it, can be expensive. The average
cost to retrofit a truck, for example, ranges from $11,000 to
$20,000 per truck. Furthermore, given the current economic
climate, it is likely that many truck owners have struggled to
stay in business over the past few years. It is unclear,
however, whether their difficulties are due to ARB regulations
or to reduced freight activity caused by the global recession.
Equally unclear is whether providing funds to help truck
owners comply with ARB rules will help restore their business
in this environment.
3.Paying for compliance . As a general principle, financial
assistance or incentive programs do not pay for emission
reductions that an existing rule or regulation requires an
equipment owner to achieve. Doing so would be the equivalent
of paying a person to follow the law. Three reasons that make
paying for compliance undesirable concern equity,
cost-effectiveness, and the slippery slope effect.
Equity. Thirteen thousand drayage trucks are already in
compliance with the law, in advance of the deadline. In many
cases, these owners had to upgrade their truck, either by
retrofitting or replacing it, the costs of which were borne in
part by the truck owners. Is it fair now to pay to upgrade
trucks that are not in compliance with the law when so many
paid to comply in advance?
Cost-effectiveness. The resources available to support clean
air efforts are not without limit and should be used in a
cost-effective manner that improve air quality to the greatest
extent possible. Using funds to pay for emission reductions
that are above and beyond the law, as current financial
programs do, will achieve greater emission reductions over the
long-term than paying for compliance.
SB 1156 (CEDILLO) Page 6
Slippery slope. By paying for compliance now, it will be
increasingly difficult to establish regulations that could
impose costs on equipment owners without offering compliance
assistance. Given that resources are limited, demand to pay
for compliance may have the effect of tempering regulatory
efforts to improve air quality.
4.Implementation issues . This bill does not provide much
guidance regarding how ARB would implement compliance
assistance for truck owners, thus making it difficult to fully
assess the implications of the bill for air quality. Some
questions include:
What share of equipment costs should be eligible for
funding under the bill?
Should the share of costs vary according to the
compliance option chosen or by emission reductions achieved
or by some other factor?
Should the program impose a cost-effectiveness standard
or an overall funding cap for each equipment project?
The author states that his intent is to provide ARB the
discretion to determine these program elements.
In addition to the dearth of detail, if bill were to move
forward, it would need a series of amendments to achieve the
author's goal. Some issues include:
Current law requires that AQIP funds be used for
emission reductions not otherwise required by law or
regulation. If this bill moves forward, existing law would
need to be amended to allow AQIP funds to be used to comply
with ARB rules.
The background statement prepared by the author
emphasizes retrofit projects for small businesses. Under
this bill, however, any project that leads to compliance,
including truck replacement, for trucks in any size fleet
would be eligible for funding. To limit this bill to
provide funding only for retrofit devices for trucks in
small fleets (fleets with three or fewer trucks), the
author or committee may wish to amend the bill specifying
these parameters.
SB 1156 (CEDILLO) Page 7
5.Urgency clause . This bill contains an urgency clause. It is
therefore not subject to legislative deadlines and, if passed
by the Legislature and signed by the Governor, would go into
effect immediately. Given that the measure is not subject to
deadlines, the committee may wish to hold this bill to provide
the author more time to work out implementation issues and to
explore alternative policies that would assist truck owners in
a manner that maximizes the emission reduction benefits of the
state's limited financial resources.
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
April 28, 2010)
SUPPORT: None received.
OPPOSED: None received.